2023 (6) TMI 563 - AT - Income Tax

Addition on account of low household withdrawals - HELD THAT - Tax Authorities have failed to take into consideration assessee s claim that the assessee was living in house owned by his father who pays electricity bills and other maintenance. Assessee s wife is also an income-tax payee who has withdrawn a sum out of her capital account. Bench is of the considered opinion that house-hold expenditure on the basis of low withdrawals for an individual have to be considered in the light of the family as a unit. No justification to take the withdrawals of the assessee alone to conclude that the same are on the lower side and presuming expenditure as to what he would be expending on the family as a unit. Addition thus made AO deserved to be deleted in the whole which ld. CIT(A) has failed to do. Decided in favour of the assessee. Addition u/s 40A(3) - genuineness of the payee/transactions wasnot fully established - HELD THAT - When assessee is not buying the plot/building for the purpose of private needs, but as part of the business activity of raising construction on the plot and selling them, the payment of Rs. 2,80,000/- cash is questionable. There is no force in the contention that as this amount is not shown in the P L A/c and forms part of the stock, the same cannot be disallowed u/s 40A(3) - as this amount forms part of the cost of construction the same is required to be shown in the P L A/c and justified to be made for business exigency. Thus, the Bench is not inclined to interfere in the finding of tax authorities below. Decided against the assessee. Unexplained cash deposited in bank - reasonable show cause notices assessee failed to bring evidence - HELD THAT - CIT(A) but failed to consider the evidence and plea taken before Ld. CIT(A), that the deposits were from the prior withdrawals. Therefore, the issue deserve to be restored to the files of Ld. CIT(A) to verify the fact of deposits being from the prior withdrawals and benefit the assessee.

Summary

Issues Involved:
1. Excessive cost of construction.
2. Low household withdrawals.
3. Cash payment for purchase of land/building.
4. Unexplained cash deposits in the bank.
5. Unverifiable expenses debited in Profit and Loss account.

Summary of Judgment:

1. Excessive Cost of Construction:
The learned AO added Rs. 22,54,805/- to the total income due to the excessive cost of construction. The CIT(A) sustained the addition, but the Tribunal noted that the CIT(A) should have considered the evidence provided by the assessee, such as the Government Approved Valuer's report. The Tribunal restored this issue to the CIT(A) for fresh consideration, allowing the assessee to present relevant evidence.

2. Low Household Withdrawals:
The learned AO added Rs. 1,72,855/- due to low household withdrawals. The CIT(A) partially reduced this amount. The Tribunal found that the tax authorities failed to consider the assessee's claim regarding his living arrangements and his wife's contributions. The Tribunal deleted the addition, deciding in favor of the assessee.

3. Cash Payment for Purchase of Land/Building:
The learned AO added Rs. 2,60,000/- under Section 40A(3) of the Act for cash payment. The Tribunal found the assessee's explanation unsustainable and noted that the payment was part of the business activity. The Tribunal upheld the addition, deciding against the assessee.

4. Unexplained Cash Deposits in Bank:
The learned AO added Rs. 13,00,000/- for unexplained cash deposits. The CIT(A) confirmed the addition, but the Tribunal noted that the CIT(A) did not verify the evidence provided by the assessee. The Tribunal restored this issue to the CIT(A) for fresh verification, allowing the assessee to present evidence of prior withdrawals as the source of deposits.

5. Unverifiable Expenses Debited in Profit and Loss Account:
The assessee did not press this ground during the hearing, and it was disposed of as not pressed.

Conclusion:
The appeal was partly allowed, with issues 1 and 4 restored to the CIT(A) for fresh consideration, issue 2 decided in favor of the assessee, and issue 3 decided against the assessee. The Tribunal pronounced the order in open court on 15th May 2023.