2020 (10) TMI 352 - AT - Income Tax

Addition on account of low household expenses - HELD THAT - AO has neither pointed out any and cogent and convincing reason nor pointed out any evidence on record to justify his action. In the remand report AO has justified the addition in question only on the ground that his predecessor has made the said addition. As pointed out in the case of Sh. Dinesh Kumar Kaushal 2016 (3) TMI 234 - ITAT DELHI has deleted the addition made on account of low household expenses in the similar set of facts by following the ratio laid down in the case of C. Velukuty 1965 (12) TMI 32 - SUPREME COURT CIT(A) has wrongly affirmed the action of AO in making addition purely on ad hoc basis without assigning any cogent reason and referring any evidence. Hence, respectfully following the decision of the Delhi Bench of the Tribunal discussed above, we set aside the findings of the Ld. CIT(A) and allow this ground of appeal of the assessee and direct the AO to delete the addition. Addition of cash deposits in the bank account - Assessee has contended before the Ld. CIT(A) that during the year relevant to the assessment year under consideration, the assessee was a partner in M/s S.D. Marketing Co. having 60% share, besides proprietor of two concerns - HELD THAT - Assessee withdrew money from the accounts of the said concerns from time to time in connection with the business of the said concerns - authorities below have not examined this aspect in order to verify the contention of the assessee - authorities below have not controverted the plea of the assessee that the assessee had personal cash balance of ₹ 1,06,758/- as on 01- 04-2012. Assessee has discharged the onus of explaining the credit entries in question, however, the authorities below have rejected the explanation without assigning any cogent reason or rebutting the contention of the assessee. The facts of the case and the evidence on record suggest that the CIT(A) has sustained the addition without considering the explanation given by the assessee - action of the Ld. CIT(A) is not in accordance with the settled principles of law - we direct the AO to delete the addition. - Decided in favour of assessee.

Summary

Issues:
1. Assessment order passed under section 144 of the Income Tax Act, 1961 challenged before the Ld. Commissioner of Income Tax(Appeals).
2. Partial allowance of appeal by Ld. CIT(A) leading to further appeal before the Appellate Tribunal ITAT Chandigarh.
3. Challenges to additions made on account of low household expenses and unexplained cash deposits in the bank account.

Analysis:
1. The Assessee, engaged in trading, challenged the assessment order under section 144 of the Income Tax Act, 1961 before the Ld. CIT(A) for the A.Y. 2013-14. The AO made various additions to the total income, including on account of additional profit, increase in capital account, and low household expenses. The Ld. CIT(A) partly allowed the appeal, confirming certain additions, leading to the Assessee's further appeal before the ITAT Chandigarh.

2. The Assessee raised effective grounds challenging the additions, particularly focusing on the addition of &8377; 6,00,000 for low household expenses and &8377; 1,03,000 for unexplained cash deposits in the bank account. The Ld. Counsel for the Assessee argued that the additions were made on an ad hoc basis without sufficient justification, citing discrepancies in treatment compared to the previous assessment year and relevant case law supporting the Assessee's position.

3. The ITAT Chandigarh analyzed the contentions and evidence presented by both parties. Regarding the addition for low household expenses, the ITAT noted the lack of adequate reasoning by the AO for estimating expenses significantly higher than the previous year without new evidence. Citing relevant case law and principles, the ITAT set aside the Ld. CIT(A)'s decision and directed the AO to delete the addition. Similarly, for the unexplained cash deposits, the ITAT found that the Ld. CIT(A) failed to consider the Assessee's explanations and relevant evidence, leading to the decision to set aside the addition and direct the AO to delete it.

In conclusion, the ITAT Chandigarh allowed the Assessee's appeal for the assessment year 2013-14, highlighting the importance of providing cogent reasoning and considering all relevant evidence in making additions to the Assessee's income.