2021 (2) TMI 936 - AT - Income Tax

Tribunal rules in favor of assessee, overturns Assessing Officer's addition for low household expenses, citing lack of reasonable grounds.

The Tribunal upheld the decision of the CIT(A) and ruled in favor of the assessee, deleting the addition of Rs. 1,00,000 made by the Assessing Officer for ... Addition of low drawings for household expenses - Assessee submitted that the AO has made an addition without any basis but merely on estimation, which is a purely a guess work - Also addition restricted by the Ld. CIT(A) on ad hoc basis - HELD THAT:- CIT(A) has noted that aggregate of cash withdrawal during the year under consideration comes to ₹ 3,52,500/- and after considering this amount of withdrawal the addition made by the Assessing Officer was restricted to ₹ 1.00 lacs as against ₹ 3.00 lacs. Thus, it is clear that more than ₹ 3,50,000/- was withdrawn from the bank account during the year under consideration and it is not the case of NIL withdrawal by the assessee for household expenditure. Thus once the assessee has shown reasonable amount of cash withdrawals from the bank and the income of the other family members of the assessee is also not ruled out then the addition confirmed by Ld. CIT(A) of ₹ 1.00 lacs on account of short withdrawal for household expenditure is not justified and the same is deleted. - Decided in favour of assessee. Issues:1. Addition of Rs. 1,00,000 made by the Assessing Officer2. Justification of the addition based on estimated drawings for household expensesAnalysis:1. The appeal was against the order of the Ld. CIT(A)-Allahabad for the A.Y. 2013-14, where the Assessing Officer had added Rs. 3.00 lacs to the return income of the assessee on account of low drawings for household expenses. The CIT(A) restricted the addition to Rs. 1.00 lacs, granting relief of Rs. 2.00 lacs. The assessee challenged this action, arguing that the addition was arbitrary and not based on reasonable grounds, as it was merely an estimation by the Assessing Officer.2. The Ld. AR of the assessee contended that the Assessing Officer's addition was without proper basis and questioned the authority of the Assessing Officer to make assessments based on estimates. The AR argued that the aggregate income earned by the assessee exceeded the estimated drawings and withdrawals, making the addition unjustified. The AR highlighted that the Assessing Officer's presumption of household expenditure and personal drawings lacked a reasonable basis, being subjective and not objective.3. On the other hand, the Ld. DR argued that there were no withdrawals by the assessee for household expenses, pointing out that the last withdrawal was made on 01.02.2013 with no further withdrawals until 31st March. The Ld. CIT(A) considered the withdrawals made by the assessee from various bank accounts and found that the aggregate cash withdrawal during the relevant financial year was Rs. 3,52,500.4. The Ld. CIT(A) analyzed the facts and submissions, noting that the appellant had earned significant income during the year from various sources. The CIT(A) found that the Assessing Officer's addition of Rs. 3.00 lacs was based on guesswork and reduced it to Rs. 1,00,000. The CIT(A) observed that the appellant had systematically withdrawn Rs. 3,52,500 till February 2013, indicating that the addition made by the Assessing Officer was not entirely correct for the balance of the year. Consequently, the CIT(A) partly allowed the appeal and deleted the addition.5. The Tribunal concurred with the CIT(A)'s findings, noting that the assessee had shown reasonable cash withdrawals from the bank accounts during the year, totaling over Rs. 3,50,000. Considering the facts and circumstances, including the income of other family members, the Tribunal concluded that the addition of Rs. 1,00,000 on account of short withdrawal for household expenditure was not justified and therefore deleted the same, allowing the appeal filed by the assessee.