SACHIN S. TEREDESAI, MUMBAI V. ITO 26(2)(4), MUMBAI

ITA 6244/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75516 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 25-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Unexplained expenditure
• Section: 69; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 6244/MUM/2013 (ASSESSMENT YEAR: 2010-11) SHRI SACHIN S. TEREDESAI INCOME TAX OFFICER - 26(2) (4) FLAT NO. 1333, BLDG. NO. 17 DR. K.G. MITTAL AAYURVE DIC ANNAPURAN SADAN, OLD MHB VS. HOSPITAL, 6TH FLOOR, COLONY, GORAI ROAD BORAVILI (W), MUMBAI 400091 CHARNI ROAD, MUMBAI PAN - ABIPT2930P APPELLANT RESPONDENT APPELLANT BY: SHRI ADITYA AJGAONKAR RESPONDENT BY: MS. SONIA KUMAR DATE OF HEARING: 29.01.2014 DATE OF PRONOUNCEMENT: 13.02.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-28, MUMBAI AND IT PERTAINS TO A.Y. 2010-11. 2. FOLLOWING GROUNDS WERE URGED BEFORE THE TRIBUNAL: - 1. THE LEARNED CIT (APPEALS) HAS ERRED I CONFIRMIN G THE ADDITION AMOUNTING TO RS.66,480/- AS UNEXPLAINED EXPENDITURE , WHICH REPRESENTS CAR LOAN INSTALMENTS PAID FROM BANK ACCO UNT OF THE APPELLANT WHICH WERE REIMBURSED TO THE APPELLANT BY THE APPELLANTS BROTHER, WHO WAS ACTUALLY USING THE VEH ICLE. 2. THE LEARNED CIT (APPEALS) HAS ERRED I CONFIRMING THE ADDITION OF RS.1,47,794/- AS UNDISCLOSED INCOME ESTIMATING THE HOUSEHOLD EXPENDITURE OF THE APPELLANT AT RS.3,00,000/- FOR T HE YEAR. 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STAT ED IN BRIEF. THE ASSESSEE IS A SALARIED EMPLOYEE. FOR THE YEAR UNDER CONSIDERATION HE DECLARED TOTAL INCOME OF ` 1,32,891/-. WHEN THE CASE WAS SELECTED FOR SCRUTINY THE AO NOTICED THAT THE ASSESSEES EXPENDI TURE IS MORE THAN THE INCOME EARNED IN THIS YEAR AND HENCE IT HAS TO BE T REATED AS UNEXPLAINED EXPENDITURE AND ACCORDINGLY CALLED UPON THE ASSESSE E TO FURNISH THE DETAILS. ITA NO. 6244/MUM/2013 SHRI SACHIN S. TEREDESAI 2 THOUGH THE ASSESSEE FURNISHED A RECONCILED STATEMEN T TO SUBMIT THAT THERE IS NO EXCESS EXPENDITURE, THE AO PROCEEDED ON THE F OOTING THAT THE EXPLANATION OF THE ASSESSEE IS WITHOUT ANY BASIS AN D ACCORDINGLY MADE AN ADDITION OF ` 92,185/- UNDER SECTION 69 OF THE ACT REFERABLE TO U NEXPLAINED EXPENDITURE AND ALSO FOR LOW WITHDRAWALS HE ESTIMAT ED THE HOUSEHOLD EXPENSES AT ` 25,000/- AS AGAINST ` 12,600/- PER MONTH DECLARED BY THE ASSESSEE AND MADE A FURTHER ADDITION OF ` 1,47,794/-. 4. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THA T A SUM OF ` 66,480/- REPRESENTS THE AMOUNT PAID DURING THE YEAR FROM HIS ACCOUNT WITH KONKAN PRANTH SAHAKARI BANK TOWARDS PAYMENT OF CAR LOAN AND THE SAME WAS REIMBURSED BY HIS BROTHER, WHO WAS USING T HE CAR FOR RUNNING AS A TOURIST TAXI, AND THEREFORE AT LEAST TO THIS EXTE NT THERE IS NO CASE FOR MAKING ADDITION UNDER SECTION 69 OF THE ACT. AS REG ARDS THE ESTIMATE OF HOUSEHOLD EXPENDITURE ON THE GROUND THAT THE ASSESS EE WAS MAINTAINING A CAR, PAYING LIC AND STAYING IN HIS OWN FLAT, THE AS SESSEE SUBMITTED THAT THE AO OVERLOOKED THE FACT THAT THE CAR WAS USED BY HIS BROTHER WHO WAS MAINTAINING IT AND HIS BROTHER HAS ALSO GIVEN A CON FIRMATION LETTER TO THIS EFFECT; HE ALSO FAILED TO NOTICE THAT THE ASSESSEE WAS NOT ACTUALLY STAYING IN A FLAT BUT HE WAS STAYING IN A 220 SQ.FT. ROOM, PURCH ASED BY HIM IN 2004, MAINLY OUT OF THE LOAN TAKEN FROM UNION BANK OF IND IA, AT GORAI ROAD, BORIVALI (W). THE PLACE OF STAY, THE TOTAL COST ON THE ROOM AND OTHER MATERIAL CIRCUMSTANCES WOULD CLEARLY INDICATE THAT IN THE YE AR UNDER CONSIDERATION THE ASSESSEE WOULD NOT HAVE MAINTAINED HIS LIFE STY LE BEYOND HIS MEANS AND THUS THE ARBITRARY ESTIMATE OF ` 25,000/- PER MONTH IS WITHOUT ANY BASIS. THE LEARNED D.R., HOWEVER, CONFIRMED THE ACTION OF THE AO WITHOUT GIVING ANY REGARD TO THE EXPLANATION OF THE ASSESSEE. IN H IS OPINION, MERE FILING OF CONFIRMATION LETTER FROM THE BROTHER DOES NOT ESTAB LISH ASSESSEES CLAIM THAT HIS BROTHER WAS REPAYING THE CAR LOAN INSTALMENTS A ND HE FURTHER OBSERVED THAT THE ASSESSEE WAS NOT ABLE TO SATISFACTORILY DE MONSTRATE THAT THE ESTIMATE OF HOUSEHOLD EXPENDITURE IS INCORRECT. 5. FURTHER AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEF ORE THE TRIBUNAL. THE LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASS ESSEE, SUBMITTED THAT THE ITA NO. 6244/MUM/2013 SHRI SACHIN S. TEREDESAI 3 CAR LOAN INSTALMENTS WERE PAID BY ASSESSEE THOROUGH BANK ACCOUNT AND IT WAS REIMBURSED BY HIS BROTHER, WHO WAS ACTUALLY UTI LISING THE CAR. NO ATTEMPT WAS MADE BY THE AO TO CALL FOR FURTHER DETA ILS WITH REGARD TO THE FACTUM OF USE OF CAR AS TAXI BY HIS BROTHER. HE ALS O SUBMITTED THAT SECTION 69 OF THE ACT IS APPLICABLE ONLY WHEN ANY INVESTMEN T IS NOT RECORDED IN THE BOOKS OF ACCOUNT WHEREAS IN THE INSTANT CASE THE CA R WAS PURCHASED IN THE NAME OF THE ASSESSEE AND THE INSTALMENTS WERE PAID THROUGH BANK ACCOUNT AND HENCE THE ADDITION MADE UNDER SECTION 69 OF THE ACT HAS NO LEGS TO STAND. WITH REGARD TO THE ESTIMATE OF HOUSEHOLD EXP ENDITURE, THE LEARNED COUNSEL SUBMITTED THAT THE AO ASSUMED THAT THE ASSE SSEE IS LIVING IN A FLAT AND ALSO MAINTAINING A CAR WHEREAS THE FACT REMAINS THAT HE WAS LIVING IN A SINGLE ROOM TENEMENT ADMEASURING 220 SQ.FT. WHICH I S FAR OFF FROM THE MAIN CITY OF MUMBAI AND EVEN FOR A SUM OF ` 5,00,000/- THE ASSESSEE HAD TO TAKE 20 YEAR LONG TERM LOAN WHICH IN ITSELF INDICATES TH E LIFE STYLE OF THE ASSESSEE. THUS THE ARBITRARY ESTIMATE ON HOUSEHOLD EXPENDITUR E HAS NO BASIS. 6. ON THE OTHER HAND, THE LEARNED D.R. STRONGLY RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. IT WAS SUBMITTED THA T THOUGH SECTION 69 IS NOT APPLICABLE, THE FACT REMAINS THAT THE ASSESSEE INCURRED CERTAIN EXPENDITURE AND THE REIMBURSEMENT WAS NOT PROVED AN D HENCE THE EXCESS EXPENDITURE OVER INCOME WAS CORRECTLY BROUGHT TO TA X, THOUGH UNDER A WRONG PROVISION. IT WAS FURTHER SUBMITTED THAT THE ESTIMA TE OF HOUSEHOLD EXPENDITURE IS ALSO REASONABLE IN THE CIRCUMSTANCES OF THE CASE. 7. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND ALSO PERUSED THE RECORD. AS REGARDS GROUND NO. 1, IT IS NOT IN DISPU TE THAT THE CAR LOAN INSTALMENTS WERE PAID BY THE ASSESSEE FROM THE BANK ACCOUNT MAINTAINED BY HIM WHEREAS SECTION 69 COMES INTO PICTURE ONLY WHEN THE ASSESSEE MAKES INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. UNDER THESE CIRCUMSTANCES I AM OF THE FIRM VIEW THAT THE ADDITI ON MADE UNDER SECTION 69 OF THE ACT HAS NO LEGS TO STAND AND, THEREFORE, I D IRECT THE AO TO DELETE THE SAID ADDITION. EVEN OTHERWISE THE ASSESSEE HAS FURN ISHED AN EXPLANATION WITH REGARD TO THE NATURE OF USE OF CAR ALONGWITH T HE CERTIFICATE TO PROVE THAT THE AMOUNT WAS REIMBURSED BY HIS BROTHER AND THE AO HAS NOT MADE ANY ITA NO. 6244/MUM/2013 SHRI SACHIN S. TEREDESAI 4 FURTHER INVESTIGATION IN THAT REGARD BEFORE PROCEED ING TO MAKE AN ADDITION, BY SUMMARILY REJECTING THE EXPLANATION, AND EVEN ON THAT COUNT THE ADDITION DESERVES TO BE DELETED. I DIRECT THE AO ACCORDINGLY . 8. AS REGARDS GROUND NO. 2, THE TAX AUTHORITIES PROCEE DED ON THE FOOTING THAT THE ASSESSEE WAS MAINTAINING LAVISH LIFE STYLE , I.E. HE HAS MAINTAINED A CAR AND STAYED IN A SOCIETY IN HIS OWN FLAT BUT THE FACT REMAINS THAT HE LIVED IN A 220 SQ.FT. ROOM IN GORAI, WHICH IS FAR FROM TH E MAIN CITY OF MUMBAI AND MERELY BECAUSE IN MUMBAI EVEN FLATS CONSISTING OF C HAWLS FORM SOCIETY, IT DOES NOT INDICATE THE LIFE STYLE. IN FACT THE CASE OF THE ASSESSEE THAT THE CAR WAS USED BY HIS BROTHER FOR RUNNING IT ON HIRE WAS NOT PROVED TO BE FALSE. UNDER THESE CIRCUMSTANCES I AM OF THE VIEW THAT NO CASE WAS MADE OUT FOR MAKING AN ARBITRARY ESTIMATE OF 25,000/- PER MONTH TOWARDS HOUSEHOLD EXPENDITURE. THEREFORE, THE IMPUGNED ADDITION OF ` 1,47,794/- IS HEREBY DELETED AND I DIRECT THE AO ACCORDINGLY. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH FEBRUARY, 2014. SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: FEBRUARY, 2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 28, MUMBAI 4. THE CIT 26, MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.