2004-VIL-262-ITAT-CTK

Equivalent Citation: TTJ 092, 464,

Income Tax Appellate Tribunal CUTTACK

Date: 25.06.2004

ADDITIONAL COMMISSIONER OF INCOME TAX.

Vs

PRASANT AHLUWALIA.

BENCH

Member(s)  : G. CHOWDHURY., R. C. SHARMA.

JUDGMENT

This is an appeal filed by the Revenue against the order of CIT(A), dt. 13th Dec., 2000, for the asst. yr. 1995-96.

2. Rival contentions have been heard and record perused.

3. The brief facts of the case are that the assessee is a Managing Director of M/s Lotus Chemicals (P) Ltd. and also partners of M/s Kamal Transport and M/s Ores India. A search operation under s. 132(1) was undertaken in the case of the assessee group including assessee's residence and places of business. A paper was found marked as PA-5 at the residence of the assessee on which some jottings were noted. The AO sated that these notings were in the handwriting of the assessee and, therefore, he has to explain why the total of which comes to Rs. 7,55,000, were added in the income of the assessee. It was submitted by the assessee during the course of search itself that this is estimation of expenditure to be incurred for forthcoming period. It was also submitted that he roughly did certain calculations to work out fund requirement for probable expenditure for his mining job of M/s Ores India. The AO did not accept the assessee's contention and added the same in the income of the assessee.

4. By the impugned order, CIT(A) observed that the assessee being a partner of some firms and director in another private limited company, being an experienced person in the line of business, supposed to make budget for difference expenditures to be incurred on the forthcoming period being fag end of the financial year in which all the Government obligations like tax, insurance, fee, etc. are to be effected for smooth running of the business. The CIT(A) further observed that it has not been brought on record by the AO in any manner that this expenditure was actually incurred by the assessee. He, therefore, deleted the same.

5. We considered the rival contentions and find that in the slip of paper the amounts noted were in the round figures which clearly indicate that those were rough estimate. Because it was not actually expended, all the figures were in round figures. The assessee being engaged in the business there are all possibilities that he had estimated the figures while making some planning. No corroborative material has been brought on record by the AO for rejecting the assessee's contention that jotting on the piece of paper was an estimate and not actually expended. As per our considered view, additions based on chit papers and presumption of AO could not be sustained in the absence of any corroborative material or evidence brought on record, supporting it. It is also not the case of Department that out of all the entries found on the loose paper, any one of them was also appearing in the regular books of account so as to persuade us to accept all the entries as genuine. Tribunal, Mumbai, in the case of DA Patel vs. Dy. CIT (2001) 78 TTJ (Mumbai) 969 held that, "Simply because receipt of paper was found during the search at the premises of the assessee he could not be saddled with tax liabilities unless it could conceivably be related to the assessee in some reasonable manner."

6. As no corroborative material has been brought on record by the Department to reject the assessee's contention, we do not find any reason on interfere in the order of the CIT(A) for deleting the impugned addition.

7. The next grievance of the Revenue relates to deletion of addition of Rs. 3 lacs made by the AO in respect of capital introduced by the assessee.

8. Rival contentions have been heard.

9. The assessee submitted that the partner has deposited money out of his income earned from business in the individual capacity done by him. As the assessee has disclosed a sum of Rs. 11,896 towards his income from business, the AO did not agree with the contention of the assessee that amount of Rs. 3 lacs deposited was earned from business in his individual capacity.

10. By the impugned order, the CIT(A) allowed the assessee's claim after accepting his submission that the amount was paid by the wife of the assessee by way of loan vide cheque No. 824581, dt. 8th March, 1995.

11. We have considered the rival contentions.

12. It appears that entirely a different plea was taken before the CIT(A) regarding sources of Rs. 3 lacs 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.

13. The last grievance for the Revenue is deletion of addition of Rs. 1,20,000 towards household expenses.

14. Keeping in view the standard of the assessee and his various sources of income, the AO estimated the household expenses at Rs. 10,000 per month. As no withdrawal was made for such household expenses, he added Rs. 1,20,000 to the undisclosed income of the assessee.

15. It was argued by the learned Departmental Representative that CIT(A) has wrongly relied on the orders of the Tribunal which are applicable in the case of block assessment proceedings under s. 15BA and not to the search cases taking prior to the special procedure for the block assessment brought in the statute book by the Finance Act, 1995, w.e.f. 1st July, 1995.

16. We have considered the rival contentions and agree with the learned Departmental Representative 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, keeping in view the totality of the facts and circumstances, we restrict the addition to Rs. 50,000.

17. In the result, the appeal of the Revenue is allowed in part as indicated above.

 

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