2016 (9) TMI 550 - AT - Income Tax

Addition household expenses and deposit in PPF account - Held that - In the present case, the contention of the assessee that his wife alongwith his son was residing with his father-in-law who was a retired railway official and spending the money for household expenses has not been rebutted. The assessee also explained that his son was pursuing B.com from Government College, Kalka and nominal course fee was amounting to ₹ 3,000 p.a. The assessee had shown the household expenses in his wife and son at ₹ 48,000/- which appears to be reasonable because the other expenses relating to kitchen and miscellaneous expenses were met out by her father who was a retired railway officer. The assessee was living alone at his work place in Sonepat and was getting the breakfast and lunch from the canteen of the company where he was working. Therefore, the expenses amounting to ₹ 60,000/- for his household needs appear to be reasonable. The assessee also explained before the ld. CIT(A) that a rent of ₹ 1,44,000/- was paid and an amount of ₹ 70,000/- was deposited in his PPF account. Another sum of ₹ 8,712/- was paid to M/s Navin Chand Navin Kumar. In this manner, total household expenses were shown at ₹ 3,30,712/-. The assessee also explained the total funds amounting to ₹ 3,77,000/- were available with him, therefore, the addition made by the AO and sustained by the ld. CIT(A) on account of household expenses and deposit in PPF account was not justified

Summary

Issues:
1. Sustenance of addition on account of low household expenses
2. Sustenance of addition on account of deposit in PPF account

Issue 1: Sustenance of addition on account of low household expenses

The Assessing Officer (AO) made an addition of ?3,49,000 to the taxable income of the assessee on account of low household expenses. The AO estimated household expenses at ?30,000 per month based on the assessee's family details, leading to the addition. The assessee contended that his wife and son resided with his father-in-law, a retired railway official, who covered their expenses. The son was pursuing B.com with a nominal fee. The assessee's detailed breakdown showed reasonable expenses, and he had sufficient funds to cover them. The ld. CIT(A) upheld the addition citing the late submission of explanations and questionable legal validity of received funds. However, the Tribunal found the explanations credible and the expenses reasonable, deleting the addition.

Issue 2: Sustenance of addition on account of deposit in PPF account

The AO added ?70,000 to the assessee's income due to a cash deposit in the PPF account without corresponding bank withdrawals. The assessee explained that the deposit was legitimate and supported by available funds. The ld. CIT(A) upheld the addition based on doubts regarding the source of funds. However, the Tribunal found the explanations satisfactory and the funds adequately explained, leading to the deletion of the addition.

In conclusion, the Tribunal partially allowed the appeal by the assessee, overturning the additions made by the AO and sustained by the ld. CIT(A) regarding low household expenses and the deposit in the PPF account. The Tribunal found the assessee's explanations credible and the expenses reasonable, leading to the deletion of the additions.