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आदेश/Order
Per Annapurna Gupta, Accountant Member:
All the above appeals have been preferred by the same assessee against the separate orders of the Commissioner of Income Tax (Appeals)-5, Ludhiana all dated 31.03.2021 ,74,77 to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 2 of 13 relating to assessment years 2012-13, 2013-14, 2016-17 to 2018-19, passed u/s 250(6) of the of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
It was common ground that the issue involved in all the appeals was identical and arose in the backdrop of identical set of facts. All the appeals were therefore taken up together for hearing.
Briefly outlining the backdrop in which the present appeals arose, Ld.Counsel for the assessee pointed out that a search action u/s 132 of the Act had taken place in the case of one Shri Surinder Singh Bindra at his residential premises on 01-11-2017, during the course of which certain documents relating to his mother Smt.Harbhajan Kaur, the assessee, were found and seized. On the basis of the same, jurisdiction u/s 153C of the Act was assumed by the Assessing Officer (AO) of the assessee to assess income for six years prior to the year of search. For the search year jurisdiction was assumed to assess the income u/s 143(3) Act. Thereafter orders were passed and the solitary addition made in all the cases pertained to that on account of undisclosed household expenses. Ld.Counsel for the assessee stated that his argument in the appeals pertaining to orders framed u/s 153C of the Act was common, challenging the jurisdiction of to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 3 of 13 the AO to make the addition .While in the appeal pertaining to the search year his arguments were confined to the merits of the case alone. He therefore begin by making arguments in the appeals pertaining to orders passed u/s 153C of the Act in ITA Nos.73, 74, 77,& 78/Chd/2021.
Ld.Counsel for the assessee stated that he would be basing his arguments on the facts relating to the appeal in pertaining to A.Y. 2012-13, being the base year, the facts in the remaining appeals being identical.
We shall therefore be dealing with the appeal in A.Y. 2012-13 and our decision rendered therein will apply mutatis mutandis to the appeals in ITA Nos.74, 77 & 78/Chd/2021 pertaining to A.Ys. 2013-14, 2016-17 & 2017- 18 respectively.
The Ld.Counsel for the assessee drew our attention to the facts relating to the issue as mentioned in the assessment order, that during search Shri Surinder Singh Bindra gave details of the family members (total 14) residing in House No.219-H, BRS Nagar, Ludhiana and also the institutions from which the children were perusing their education/degree. The AO also mentioned about the servants/drivers of the family and that three cars, seven ACs and six LCD/LEDs were found at the time of search. The statement of Sh. Surinder Singh to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 4 of 13 Bindra recorded on 20.11.2017 regarding the amount of expenses on different household/kitchen items during the Financial Year 2010-11 and as on that date was also reproduced by the AO. It was also mentioned that Sh.
Surinder Singh Bindra in his written submissions dated 23.12.2019 had stated that the household expenses of the joint family were taken care by his mother Smt. Harbhajan Kaur, the assessee. In the reply, it was also stated by Sh.
Surinder Singh Bindra that there were sufficient household drawings for day to day kitchen expense. The detail of electricity expense and source of payment for assessment year 2012-13 to 2018-19 was also filed. The AO considered the reply and held that after taking into consideration the life style of the family and entirety of facts, it was fair & reasonable to make addition @Rs.25000/- per month in the hands of the assessee, being the head of the family, on account of low household withdrawals. Accordingly, an addition of Rs.3,00,000/- was made on this point.
Aggrieved by the same the assessee carried the matter before the Ld.CIT(A) who after considering the totality of the facts and circumstances restricted the addition to Rs.1,50,000/-. The findings of the Ld.CIT(A) are as under: ,74,77 to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 5 of 13
The facts of the case, the basis of addition made by the AO and the arguments of the AR during the course of appellate proceedings have been considered. The AR has submitted that all the members are living as a joint family and maintaining a common kitchen and during the course of search, no incriminating material with regard to incurring of household expenses was found. It is further submitted that during the assessment, the detail of household drawing and other expenses were submitted to the AO who as per the AR, has not pointed out any mistake or error. It is also submitted that the AO has made the addition on estimated basis by simply estimating the certain expenses over and above the household drawing of the joint family. It is also contended that there was no evidence of incurring of household expense over and above, the amount disclosed/explained during the assessment and the onus was upon the AO to show that a particular amount was incurred for the purpose of household. A perusal of the assessment order shows that the AO has not mentioned anything how he arrived at the figure of Rs. 25,000/- per month, added to the income of the assessee in the absence of any working about the total yearly/monthly household expenses of the family and the corresponding drawing shown for this purpose. It is however relevant to mention here that the chart reproduced by the Assessing Officer in the assessment order which was signed on 20.11.2017 by Sh. Surinder Singh Bindra about the household expenses during his statement, shows various expenses some of which are said to have been borne by the assessee as the head of the family. Under the facts and the circumstances of the case, after taking into account, the totality of facts, the addition of Rs. 3,00,000/- made by the AO on this issue is restricted to Rs. 1,50,000/- and the appellant gets relief of the balance amount.
Aggrieved by the same the assessee has come up in appeal before us raising the following effective:
“2. That the CIT (A) has erred in confirming the addition on account of the undisclosed household expenses amounting Rs. 1,50,000/- without any basis. 3. That the Ld. C!T(A) has failed to appreciate that no incriminating evidence was found during the course of search relating to the part additions as confirmed by the Worthy CIT(A).
,74,77 to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 6 of 13
4. That the Ld. CIT (A) has erred in not considering and ignoring the submissions and facts as filed before the CIT (A) as well as before the assessing officer.” 8. Before us the solitary argument of the Ld.Counsel for the assessee against the impugned addition was vis a vis Ground No.3, that since the assessment had been framed u/s 153C of the Act, the same could have been done only on the basis of some incriminating material and in the present case the addition being made of household expenses, was a mere estimation by the AO without any incriminating material regarding the same in his possession. He, therefore, contended that in the absence of any incriminating material the impugned addition could not have been made as per law.
The Ld. DR, on the other hand countered by stating that the jurisdiction u/s 153C of the Act could have been assumed by the AO only on the basis of some incriminating material and since the assessee had not challenged the jurisdiction, therefore, he was precluded from now taking a stand that there was no incriminating material. The Ld. DR stated before us that if the assessee had challenged the jurisdiction only then it would have been considered and argued by the Department whether there was any incriminating material or not, but the Ld.Counsel for the assessee having not so challenged, she stated at bar that she did not wish to to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 7 of 13 comment or state anything on the availability of any incriminating material or not.
We have heard the contentions of both the parties and have also carefully gone through the orders of the authorities below. Undoubtedly, the assessments in the impugned years before us have been framed u/s 153C of the Act in consequence to search action undertaken on the son of the assessee. It is settled law that any addition made u/s 153C of the Act has to be based on some incriminating material found.
The Hon’ble Apex Court in the case of CIT vs Sinhgad Technical Education Society in Civil Appeal No.11080 of 2017 dated 29.08.2017 has laid down that for addition to be made u/s 153C of the Act, the seized material has to pertain to the assessment year in question and have correlation document wise with the AY.
On going through the order of the AO we do not find mention of any incriminating material relating to household expenses to have come in his possession to show that the same were being incurred from undisclosed sources. Except for the fact that the son of the assessee stated that household expenses were taken care of by his mother, the assessee, and the fact that nature of certain expenses incurred were brought to light as being incurred on children’s education, servants, to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 8 of 13 cars maintained etc., nothing else finds mention in the order of the AO or even the CIT(A), showing that household expenses were incurred by the assessee way beyond her disclosed sources. The AO we find has deduced from the facts before him that the assessee’s family has a certain lifestyle which is not justified by the expenses stated to have been incurred by it and accordingly estimated household expenses from undisclosed sources as being to the extent of Rs 25,000/- per month. There is no mention as to how he arrived at the conclusion of undisclosed expenses being to the tune of Rs.25,000/- per month, which fact is affirmed by the LD.CIT(A) also when he states that there was no basis for the estimation made by the AO. We find that the son of the assessee, the searched person, had given details of various household expenses and justified the source of the same ,giving details and source of payments of various expenses, but there is no mention in the orders of the authorities below as to how the expenses stated to have been incurred did not justify the lifestyle of the assessee. It is but evident that there was no incriminating material pertaining to and justifying the addition made in the present case.
Even the Ld. DR had not brought before us any incriminating material to justify the addition. In view of the to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 9 of 13 said fact and considering the settled legal position that the addition u/s 153C of the Act can only be made only on the basis of incriminating material, we hold that the addition made in the present case of undisclosed household expenses is not tenable in law and direct the same to be deleted.
The contention of the Ld. DR that the jurisdiction u/s 153C of the Act can be assumed by the AO only on coming in possession of some incriminating material relating to the assessee and since the assessee has not challenged it, and has in fact accepted it, it goes without saying that there was incriminating material against the assessee which has been accepted and admitted by the assessee also. This argument of the Ld. DR is equivalent to putting the cart before the horse.
The absence or presence of incriminating material is a question of fact and cannot be subjected to derivation or presumption. It has to be demonstrated factually whether there was any incriminating material or not. The Ld. DR having foregone this right before us and the facts before us demonstrating that there was not incriminating material, we are left with no option but to hold that the said additions could not have been made as per law.
No arguments on the merits of the case were made before us which in any case is merely an academic exercise since we to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 10 of 13 have deleted the addition on the legal ground raised before us as above.
The appeal of the assessee is allowed in above terms.
The appeals of the assessee in 77 & 78/Chd/2021 are also allowed in above terms
Now taking up the appeal for assessment year 2018-19 in The grounds raised are identical as in A.Y. 2012-13 dealt with us above as under:
“2. That the CIT (A) has erred in confirming the addition on account of the undisclosed household expenses amounting Rs. 1,50,000/- without any basis.
3. That the Ld. C!T(A) has failed to appreciate that no incriminating evidence was found during the course of search relating to the part additions as confirmed by the Worthy CIT(A).
4. That the Ld. CIT (A) has erred in not considering and ignoring the submissions and facts as filed before the CIT (A) as well as before the assessing officer.”
The Ld.Counsel for the assessee pointed out that the impugned year was the search year and the assessment had not been framed u/s 153C of the Act but was a regular assessment framed u/s 143(3) of the Act. He, therefore, contended that his arguments in the present case on identical addition made were confined to the merits of the case only and in this regard he relied upon his submissions made before the CIT(A). He stated that he was not pressing Ground No. 3 to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 11 of 13 raised before us. The same is therefore dismissed as not pressed.
The Ld. DR, on the other hand, relied upon the order of the Ld.CIT(A).
We have considered the contentions of both the parties.
The findings of the Ld.CIT(A) in the impugned year are identical to that in the assessment year 2012-13 dealt with in reproduced above. On going through the same we find that the Ld.CIT(A) had reduced the addition made by the AO of Rs.3 lacs to Rs.1,50,000/- by noting that it was a mere estimation of the AO with no basis at all and, therefore, in the facts and circumstances, the addition of Rs.1,50,000/- was justified.
We have held in the preceding year appeals above that there was no incriminating material justifying the addition and even the Ld.CIT(A) has noted absence of any basis for making the same. We have also noted that the son of the assessee had given details of all household expenses, stated to be incurred by his mother the assessee, and also justified sources for incurring the same. That the AO has given no basis for finding the expenses to be on the lower side and merely resorted to estimation. Even the LD. CIT(A) ,we find, to 79/Chd/2021 A.Ys. 2012-13,2013-14, 2016-17 to 2018-19 Page 12 of 13 has resorted to estimation without any basis while reducing the quantum of addition from Rs.3 lacs to Rs. 1.50 lacs. With either of the Revenue authorities failing to justify the basis of holding that the assessee had incurred household expenses from undisclosed sources and both of them resorting to mere estimation , We see no reason to uphold the addition made in the impugned year on account of undisclosed household expenses amounting to Rs.1,50,000/- and direct deletion of the same.
Grounds of appeal Nos. 2 & 4 are allowed.
The appeal filed by the assessee in ITA No.79/Chd/2021 is partly allowed accordingly.
In the result,
The appeals in 74, 77 and 78/Chd/2021 are allowed in above terms. The appeal in is partly allowed. Order pronounced on 30 th June, 2021.