2004 (6) TMI 260 - AT - Income Tax

Addition for capital introduced - household expenses - HELD THAT - It appears that entirely a different plea was taken before the CIT(A) regarding sources brought by the assessee as capital. It was not the contention before the AO that this amount was received from wife. In the interest of justice we restore this issue to the file of the AO for deciding afresh after considering the plea and the documentary evidence placed before the CIT(A) regarding the amount having been advanced by his wife. The AO is also directed to verify the creditworthiness of the wife for advancing the impugned amount and whether the wife of the assessee in her return of income and balance sheet has properly reflected the impugned amount of advance to the assessee. We direct accordingly. Household expenses - We have considered the rival contentions and agree with the learned DR that CIT(A) has deleted the addition by wrongly relying on the judgments which are applicable to block proceedings in which additions can be made only with reference to seized material found during the course of search. In the instance case we find that the assessee was partner and managing director of the companies and having a very high status, but no withdrawal has been shown for household expenses. Therefore, we restrict the addition. In the result, the appeal of the Revenue is allowed in part as indicated above.

Summary

Issues Involved: Appeal against CIT(A) order for asst. yr. 1995-96.

Issue 1: Addition based on notings found during search operation
The AO added an amount to the income of the assessee based on notings found during a search operation. The CIT(A) deleted the addition stating lack of evidence of actual expenditure. The ITAT upheld the CIT(A)'s decision, emphasizing the rough estimates on the paper and the absence of corroborative material.

Issue 2: Deletion of addition for capital introduced
The AO made an addition for capital introduced by the assessee, which was later deleted by the CIT(A) based on the submission that the amount was paid by the wife of the assessee as a loan. The ITAT remanded the issue back to the AO to verify the source of the amount and the creditworthiness of the wife.

Issue 3: Deletion of addition towards household expenses
The AO estimated household expenses and added a certain amount to the undisclosed income of the assessee. The CIT(A) deleted the addition, but the ITAT partially allowed the appeal, restricting the addition to a lower amount considering the status of the assessee and lack of withdrawal evidence for household expenses.