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2021 (6) TMI 310 - AT - Income TaxAddition towards unexplained expenditure - capitation fee - HELD THAT - Although this assessee draws salary income all along neither the AO nor the CIT(A) have considered his cash in hand in AY. 2010-11 so as to give credit thereof before making the impugned addition. Faced with this situation we deem it appropriate that keeping in mind the assessee s social economic status his salary income drawn in the earlier assessment years and past savings a lumpsum addition of 2.5 lakhs only would be just and proper with a rider that the same shall not be treated as a precedent in any other case. The assessee gets relief of 2.5 lakhs in other words. Necessary computation to follow as per law.
Issues Involved:
1. Addition of ?5,00,000 towards unexplained expenditure. 2. Validity of assessment framed under Section 153C of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Addition of ?5,00,000 towards unexplained expenditure: The assessee's appeal challenges the correctness of the addition of ?5,00,000 as unexplained expenditure made by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO's assessment was based on information from a search and seizure operation conducted on M/s. Arihant Educational Society, which indicated that the assessee had paid ?35,00,000 for his son's admission, out of which ?15,00,000 was capitation fee. The assessee contended that he paid only ?30,00,000, including ?10,00,000 as capitation fee, supported by cash flow statements and other documentary evidence. However, the AO added ?5,00,000 as unexplained expenditure due to discrepancies in the seized documents and the assessee's failure to explain the source of the additional ?5,00,000. During the appeal proceedings, the appellant reiterated that the total fee paid was ?30,00,000, and the additional ?5,00,000 was a typographical error. The CIT(A) called for remand reports from the AO, who maintained that the assessee failed to furnish sources for the additional ?5,00,000. The CIT(A) upheld the AO's addition, citing the appellant's inability to explain the source of the ?5,00,000. 2. Validity of assessment framed under Section 153C of the Income Tax Act, 1961: The assessee did not challenge the validity of the assessment framed under Section 153C. The departmental representative filed the AO's satisfaction note based on the seized material, confirming the payment of ?5,00,000 as capitation fee. Tribunal's Decision: The Tribunal considered the rival pleadings and the seized material indicating the payment of ?5,00,000 as capitation fee. It noted that neither the AO nor the CIT(A) considered the assessee's cash in hand for AY 2010-11, which could explain the source of the additional ?5,00,000. Taking into account the assessee's social and economic status, salary income, and past savings, the Tribunal deemed it appropriate to make a lumpsum addition of ?2,50,000 instead of ?5,00,000. This decision was made with the caveat that it should not be treated as a precedent in other cases. Consequently, the assessee was granted relief of ?2,50,000, and the appeal was partly allowed. Conclusion: The Tribunal partly allowed the assessee's appeal, reducing the addition towards unexplained expenditure from ?5,00,000 to ?2,50,000, considering the assessee's financial background and past savings. The validity of the assessment under Section 153C was not contested by the assessee. The order was pronounced in the open court on 28th May 2021.
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