2016 (1) TMI 1434 - AT - Income Tax

Tribunal allows assessee's appeal on cash addition, dismisses Revenue's appeal, directs seized cash for advance tax.

The Tribunal allowed the assessee's appeal regarding the addition of Rs. 77,200 due to cash found at the residence, considering family circumstances. ... Addition on account of cash found at the residence of assessee - search and seizure operation conducted at the residence of the assessee - undisclosed income - HELD THAT:- Addition sustaining cash was properly explained by the assessee and there was case made out to the extent that there were several members in the family who would require the medical assistance at any time. The fact that ₹ 2,00,000/- was surrendered by the assessee should be in support of the assessee and hence the said addition of ₹ 77,200/- is allowable and AO as well as CIT(A) has overlooked the said factor Gold jewellery seizure - CIT(A) has rightly directed the AO restricting the same as to the balance after giving the benefit of 1500 grams only and while giving the appeal effect, the value of the jewellery may be worked out. Addition on account of undeclared business income - CIT(A) has justified its finding by stating that AO has come to the conclusion on the basis of the seized documents which was not challenged by the assessee at any point of time. Addition on account of low drawings made by the assessee for household expenses to the extent of ₹ 3,00,000/- are properly dealt by the CIT(A). Issues Involved:1. Addition of Rs. 77,200 on account of cash found at the residence of the assessee.2. Addition of Rs. 39,37,792 on account of unexplained investment in jewellery.3. Addition of Rs. 88,900 on account of undeclared business income.4. Addition of Rs. 3,00,000 on account of low drawings for household expenses.5. Adjustment of seized cash towards advance tax liability.Detailed Analysis:1. Addition of Rs. 77,200 on account of cash found at the residence of the assessee:The assessee contested the addition of Rs. 77,200, arguing that this amount was part of the past savings of an eight-member family, including super senior citizens who might need cash for medical emergencies. The CIT(A) upheld the addition, reasoning that no documentary evidence was provided to support the explanation. However, the Tribunal found that the explanation was reasonable given the family circumstances and allowed the addition of Rs. 77,200, noting that the Rs. 2,00,000 was already surrendered by the assessee.2. Addition of Rs. 39,37,792 on account of unexplained investment in jewellery:The jewellery worth Rs. 39,37,792 was found during a search but not seized. The assessee claimed it belonged to nine family members and referred to CBDT Instruction No. 1916, which allows certain exemptions. The CIT(A) provided a rebate for 1500 grams of jewellery based on the instruction, but the balance was added to the income. The Tribunal upheld the CIT(A)'s decision, directing the AO to restrict the addition after giving the benefit of 1500 grams and work out the value of the jewellery accordingly.3. Addition of Rs. 88,900 on account of undeclared business income:The AO added Rs. 88,900, determining a profit rate of 10% instead of the 8% claimed by the assessee under Section 44AD, as the assessee did not provide evidence of being involved in construction work. The CIT(A) upheld this addition, agreeing with the AO's assessment based on seized documents. The Tribunal also upheld this decision, noting that the AO's conclusion was justified and not challenged by the assessee.4. Addition of Rs. 3,00,000 on account of low drawings for household expenses:The AO added Rs. 3,00,000, estimating household expenses at Rs. 25,000 per month, as no withdrawals were made from the bank account. The CIT(A) deleted this addition, stating it was an ad hoc estimation without any incriminating evidence. The Tribunal agreed with the CIT(A), finding no basis for the AO's estimation and upholding the deletion of the addition.5. Adjustment of seized cash towards advance tax liability:The CIT(A) directed the adjustment of seized cash of Rs. 2,00,000 towards advance tax liability, which was contested by the Revenue. The Tribunal found that the CIT(A)'s direction was appropriate and dismissed the Revenue's appeal on this ground.Conclusion:The Tribunal allowed the assessee's appeal regarding the addition of Rs. 77,200 but dismissed the appeals concerning the jewellery, undeclared business income, and low drawings for household expenses. The Revenue's appeal was dismissed entirely. The order was pronounced on January 15, 2016.