1997 (8) TMI 89 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 5,81,000 on account of difference in household expenses for the block assessment period.
2. Estimation of household expenditure by the AO.
3. Justification for the addition made by the AO.

Summary:

Issue 1: Addition of Rs. 5,81,000 on account of difference in household expenses for the block assessment period

The appeal challenges the order dated 30th Sept., 1996, passed by the Dy. CIT(Asstt.), Spl. Range 45, Ahmedabad u/s 158BC r/w s. 143(3), which included an addition of Rs. 5,81,000 made by the AO due to a difference in household expenses for the period from 1st April, 1985 to 26th Sept., 1995. The assessee objected to this addition, claiming it was made without proper basis and without a specific show-cause notice.

Issue 2: Estimation of household expenditure by the AO

The AO estimated household expenditure for the block period at Rs. 7,10,000 against the disclosed expenditure of Rs. 1,29,000, resulting in an addition of Rs. 5,81,000. The assessee argued that the AO's estimation was erroneous, citing totalling mistakes and incorrect withdrawal figures. The correct withdrawals should have been Rs. 1,70,000, reducing the addition to Rs. 5,40,000.

Issue 3: Justification for the addition made by the AO

The assessee contended that there was no justification for even the reduced addition of Rs. 5,40,000. The AO's estimate was based on the possession of electronic goods and other household items, which the assessee had already disclosed. The AO failed to provide evidence of unexplained expenditure or high living standards that would justify such an estimate. The Tribunal noted that the AO did not establish the existence of unexplained expenditure for the relevant years and that the assessee's disclosed household expenses were reasonable given his circumstances.

Conclusion:

The Tribunal concluded that the AO's addition of Rs. 5,81,000 (which should have been Rs. 5,40,000) lacked adequate supporting material and was not justified. Therefore, the addition was directed to be deleted, and the appeal was allowed.