2016 (4) TMI 861 - AT - Income Tax

Addition u/s. 69C towards unexplained expenditure for house hold expenses - Held that - We find that the assessee has shown total drawings of ₹ 35,38,395/-, which included the amounts incurred towards personal expenses of the assessee. This includes withdrawals made by the assessee by cheques for his personal expenses towards rent paid amounting to ₹ 13,80,000/- for residential accommodation and telephone expenses etc. We also find that sum of ₹ 2,82,728/- has been treated as perquisite in the salary income disclosed by the assessee. We also find that the ld.AO had also stated that the assessee had made cash withdrawals of ₹ 50,000/- p.m from the Axis Bank, Mumbai and the same were lying as closing cash balance, among others, which ought to have been incurred towards household expenses. This very fact explains the source for incurring household expenditure, if any, over and above the drawings as reported by the assessee (stated supra). Hence, there cannot be any addition by invoking the provisions of section 69C of the Act. We also find that the ld.AO had not brought any material/evidence on record to prove that the assessee had personal expenses over and above the disclosed sum of ₹ 35,38,395/- towards drawings. We also find that the ld.AO had also not brought any material/evidence to prove that the cash withdrawals made from said Axis Bank, Mumbai have been spent elsewhere by the assessee thereby the said cash is not available to remain as closing cash balance. - Decided against revenue. Unexplained cash credit u/s. 68 - Held that - We find that the wild allegation is made by the ld.AO that the assessee has laundered his unaccounted money/income and the same is brought back in the form of loan. We find from the entries of the bank statement of the loan creditor that no cash was deposited in the account of the loan creditor immediately before issuing the cheques to the assessee. On the contrary, there were other high value transactions reflected in the bank statement of the loan creditor. Hence, the basic allegation that the assessee has laundered his unaccounted income is not prima facie proved by the ld. AO even during the remand proceedings when the ld.AO got the second opportunity to make necessary verification by using his statutory powers vested on him and provided to him in the statute. We find that the facts of the case clearly proved that the assessee had completely discharged his onus by filing all the documentary evidences in support of the loan transaction from M/s. Bright Impex & Agencies Pvt. Ltd in terms of section 68 of the Act. Hence, it is fully covered by the decision of the Hon ble Supreme Court in the case of CIT Vs. Orissa Corporation reported in (1986 (3) TMI 3 - SUPREME Court ). The facts before the Hon ble SC and the facts of the case before us are exactly similar. Hence, the addition made on this count u/s. 68 of the Act based on mere surmises and suspicion is hereby deleted. - Decided against revenue

Summary

Issues:
1. Addition of unexplained expenditure u/s. 69C for household expenses.
2. Addition of received loan as unexplained cash credit u/s. 68.

Analysis:

Issue 1:
The first issue pertains to the addition of unexplained expenditure under section 69C for household expenses. The Assessing Officer (AO) added Rs. 6,00,000 towards unexplained expenditure as the assessee had not withdrawn cash for household expenses despite personal withdrawals. The Commissioner of Income Tax (Appeals) (CIT(A)) deleted this addition. The Tribunal upheld the CIT(A)'s decision, stating that the assessee's total drawings included amounts for personal expenses like rent and telephone bills. The AO failed to provide evidence of additional personal expenses beyond the disclosed sum of Rs. 35,38,395. Moreover, the cash withdrawals from the bank account were available as closing cash balance, indicating a source for household expenses. Thus, the Tribunal dismissed the revenue's appeal on this ground.

Issue 2:
The second issue involves the addition of Rs. 2,50,00,000 as unexplained cash credit under section 68. The AO raised this addition as the assessee received an interest-free loan from a company. The CIT(A) deleted this addition, and the Tribunal upheld the decision. The Tribunal noted that the loan was received through legitimate banking channels, and the lender was a registered Non-Banking Financial Company (NBFC) engaged in lending activities. The loan was repaid through account payee cheques, and all necessary documents were provided to establish the transaction's genuineness. The AO's allegations of money laundering were refuted as the lender's bank statement showed no suspicious transactions. The Tribunal found that the assessee fulfilled the requirements of section 68, and the addition was based on mere suspicion. Citing the precedent set by the Supreme Court in CIT Vs. Orissa Corporation, the Tribunal dismissed the revenue's appeal on this issue.

In conclusion, the Tribunal dismissed the revenue's appeal on both issues, affirming the decisions of the CIT(A) in both instances.