2018 (8) TMI 1054 - AT - Income Tax

Addition u/s 69 - undisclosed investment - cash paid for purchase of new car - proof of source of cash - Held that - it appears that the small withdrawals made by the assessee were considered by the AO towards household expenses - considering the totality of facts I am of the view that when the assessee and his wife had withdrew a sum of Rs. 7.72 lacs from the various banks account from 1.4.2013 to 3.11.2013. The said withdrawal was sufficient to explain a payment of Rs. 2.68 lacs for the purchase of the car particularly when it is not brought on record that the said amount was used elsewhere. - Additions deleted - Decided in favor of assessee.

Summary

Issues Involved:

1. Liability to be assessed at an income of Rs. 12,11,160/-.
2. Addition of Rs. 2,68,000/- as undisclosed investment under Section 69 of the Income Tax Act, 1961.
3. Charging of interest under Sections 234B and 234C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Liability to be Assessed at an Income of Rs. 12,11,160/-:

The appellant denied liability to be assessed at an income of Rs. 12,11,160/-. The initial return of income filed by the assessee was Rs. 9,43,160/-. The assessment was selected for scrutiny, and during the proceedings, discrepancies were noted in the payments made for the purchase of a new car. The Assessing Officer (AO) observed that the total cash payment made by the assessee for the car was Rs. 5,93,000/- whereas the assessee claimed it to be Rs. 5,43,000/-. An additional Rs. 50,000/- was added to the income. Furthermore, the AO added Rs. 2,25,000/- due to the unverified sale of the old car. The total assessed income thus increased, leading to the appellant’s denial of the liability to be assessed at Rs. 12,11,160/-.

2. Addition of Rs. 2,68,000/- as Undisclosed Investment under Section 69:

The AO made an addition of Rs. 2,68,000/- under Section 69 of the Income Tax Act, 1961, treating it as an undisclosed investment. The AO questioned the source of cash payment of Rs. 5,43,000/- for the car purchase. The assessee explained the source as withdrawals from bank accounts, including Standard Chartered and HDFC Bank. However, the AO did not accept the explanation, attributing the withdrawals to household expenses instead. The AO allowed Rs. 50,000/- as a valid withdrawal for the car purchase but disallowed the remaining Rs. 2,68,000/-.

The CIT(A) deleted the additions of Rs. 50,000/- and Rs. 2,25,000/-, accepting the assessee's explanation for these amounts. However, the CIT(A) upheld the addition of Rs. 2,68,000/-, agreeing with the AO’s view that the withdrawals were for household expenses.

Upon appeal, the Tribunal considered the totality of the facts, including the withdrawals made by both the assessee and his spouse, totaling Rs. 7,71,900/- from various bank accounts. The Tribunal found that the withdrawals were sufficient to explain the payment of Rs. 2,68,000/- for the car, particularly in the absence of evidence showing the amount was used elsewhere. Consequently, the addition of Rs. 2,68,000/- was deleted.

3. Charging of Interest under Sections 234B and 234C:

The appellant contested the charging of interest under Sections 234B and 234C of the Income Tax Act, 1961. However, the judgment does not provide detailed reasoning or a separate ruling on this specific issue. The primary focus was on the addition of Rs. 2,68,000/- and the overall assessed income.

Conclusion:

The Tribunal ruled in favor of the assessee, allowing the appeal and deleting the addition of Rs. 2,68,000/- made by the AO under Section 69. The Tribunal acknowledged the withdrawals made by the assessee and his spouse as sufficient to cover the car payment, thus rejecting the AO's assumption that the withdrawals were solely for household expenses. The appeal was allowed, and the final assessed income was reduced accordingly.