2014 (1) TMI 587 - AT - Income Tax

ITAT limits addition due to discrepancies, stresses importance of seized materials

The ITAT directed the assessing officer to limit the addition to Rs.20,000, being 50% of the original addition, due to discrepancies in tabulating ... Addition made towards low withdrawals – Withdrawals made for domestic expenses – Held that:- The tax authorities have estimated the amount of addition, uniformly at ₹ 40,000/- in all the years - the tax authorities have not given any basis for arriving at the figure of ₹ 40,000 - Both the assessing officer and the learned CIT(A) have tabulated the withdrawals made by the assessee and his family members and we notice that there is some difference in each of the tabulation - the assessee also could not bring any material on record to show that the withdrawals made by him and his family members are sufficient to meet the domestic expenses - the assessing officer directed to restrict the addition 50% of the additions made by the assessing officer – Decided partly in favour of Assessee. Issues:Addition of Rs.40,000 towards low withdrawals for domestic expenses in assessment years 2003-04 to 2007-08.Analysis:The assessee appealed challenging the orders passed by CIT(A)-IV, Hyderabad regarding the addition of Rs.40,000 made in all the years for low withdrawals for domestic expenses. The assessing officer added the amount considering it low for a family of four members after a search and seizure operation. The assessee argued that there was no incriminating material to prove insufficiency of withdrawals and cited a Delhi special bench decision for support. The department contended that the CIT(A) had considered the arguments and upheld the addition. The ITAT noted that the special bench decision emphasized seized materials, unlike the present case where additions were made in both pending and completed assessments. The tax authorities had not provided a basis for the uniform addition of Rs.40,000 in all years. Both the assessing officer and CIT(A) had discrepancies in tabulating withdrawals, and the assessee failed to prove sufficiency of withdrawals. Consequently, the ITAT directed the assessing officer to limit the addition to Rs.20,000, being 50% of the original addition, to resolve the dispute effectively.The judgment highlighted the importance of seized materials in determining additions and distinguished the present case from the special bench decision. It emphasized the lack of basis for the uniform addition of Rs.40,000 in all years and discrepancies in tabulating withdrawals. The ITAT, in the absence of evidence proving sufficiency of withdrawals, opted to estimate the addition at Rs.20,000, aiming to achieve justice and partially allowed the appeals of the assessee.