2019 (5) TMI 748 - AT - Income Tax

Addition of cash balance - search u/s 132 - claim of assessee in respect of the opening balance of ₹ 53,000/- - saving some amount as assessee is a government employee and has been drawing his salary - HELD THAT - As perused the materials available on record and gone through the orders of the authorities below. After considering totality of the facts, there is likelihood of saving some amount, therefore, looking to the smallness of the amount, we direct the A.O. to delete this addition. Addition towards unexplained household expense - assessee has been residing with his brother and the expenses were made jointly - HELD THAT - The contention of the assessee is that he has been residing with his brother and the expenditure was incurred for household expenses jointly. This fact is not verified by the authorities below. Further, the addition has been made on adhoc estimate basis. Considering all we restrict the addition to the extent of 50%. Ground of the assessee is partly allowed.

Summary

Issues involved:
1. Addition of cash balance
2. Addition of unexplained household expenses

Issue 1: Addition of cash balance
The appellant filed 7 appeals against the CIT(A)'s order for assessment years 2004-05 to 2010-11. The appellant challenged the addition of cash balance of ?53,000 and ?1,33,000 in the balance sheet and cash book, respectively. The assessing officer rejected the cash book as incomplete and added the amount under section 69 of the Income Tax Act. The appellant argued that the opening cash balance was an estimate due to a bank withdrawal and not unexplained income. The tribunal found the likelihood of savings and directed the AO to delete the addition.

Issue 2: Addition of unexplained household expenses
During assessment, the appellant failed to provide details of family members, household expenses, and sources of income. The AO estimated household expenses from ?1,20,000 to ?3,00,000 for different assessment years due to lack of evidence on expenses incurred. The CIT(A) upheld the AO's decision, stating that the lifestyle and standard of living indicated the need for estimation. The tribunal partially allowed the appeal, restricting the addition to 50% for lack of verification on joint expenses and adhoc estimation.

The tribunal addressed each ground of appeal for different assessment years, directing the AO to delete 50% of the additions made on account of low household expenses. The appeals were partly allowed, and the orders were pronounced on 09.05.2019.