KETAN V. PAREKH,MUMBAI vs. ASST CIT CEN CIR 40, MUMBAI

We heard the parties and perused the record. The AO noticed that the assessee did not withdraw any money towards household expenses. In the earlier year, the AO had estimated the household expenses at Rs.40,000/- per month. Accordingly the AO estimated the household expenses at Rs.50,000/-. per month and accordingly added a sum of Rs.6,00,000/- u/s 69C of the Act towards unexplained expenditure. It is also pertinent to note that the accountant of the assessee who represented before the AO also agreed to the addition.

Before Ld CIT(A), the assessee contended that the domestic expenses have been met by the family members and the similar explanation given by him in the earlier years have been accepted by the Tribunal. Though the assessee contended that his accountant did not agree for the addition, yet the Ld CIT(A) noticed from the order sheet noting forwarded by the AO that the accountant of the assessee had agreed for the addition. Accordingly, the Ld CIT(A) agreed with the estimation of Rs.6,00,000/-. The Ld CIT(A) also noticed that the family members of the assessee had withdrawn a sum of Rs.3,20,000/- towards household expenses. Accordingly he gave set off of the above said amount and accordingly confirmed the balance amount of Rs.2,80,000/-.

The Ld A.R submitted that the AO has made the addition on estimated basis without bringing any material on record to support his estimate. He further submitted that the provisions of sec. 69C mandate that the incurring of expenditure should be proved by the AO. He submitted that the mother of the assessee has expired during the year and hence there shall be corresponding reduction of domestic expenditure. He further submitted that the co-ordinate benches of Tribunal has held in AY 2004-05 to 2007-08 have held that the amount withdrawn by the family members would be sufficient and hence no separate addition is required in the hands of the assessee. The Ld CIT(A) has also deleted identical additions made in AY 2008-09 for identical reasoning. Accordingly he submitted that the addition confirmed by the Ld CIT(A) should also be deleted.

On the contrary, the Ld D.R submitted that the assessee’s authorised representative has agreed to this addition before the AO. He further submitted that the assessee’s family members have withdrawn funds aggregating to Rs.4,98,500/- in the year relevant to AY 2004-05 and further the legal and professional charges have been incurred by the assessee. Hence the co- ordinate bench held that the drawings made by the family members were sufficient. The year under consideration, being AY 2009-10, the estimate of Rs.6.00 lakhs made by the AO would be reasonable considering the inflationary trend.

We notice that the family members of the assessee has shown drawings of Rs.4,98,500/- in AY 2004-05; Rs.3.00 lakhs, Rs.4.45 lakhs, Rs.4.30 lakhs respectively in AY 2006-07, AY 2007-08 and AY 2008-09. During the year under consideration, they have shown withdrawals of Rs.3,20,000/-. Though the Ld A.R has contended that the provisions of sec. 69C cannot be invoked for making estimate, yet the fact remains that the assessee could not convincingly prove that the withdrawals of Rs.3,20,000/- made during the year under consideration was sufficient to meet family expenses. Hence we are of the view that the AO was justified in estimating the quantum of domestic expenses. Now the question that arises is whether the amount of Rs.6.00 lakhs estimated by the AO would be justified.

We notice that the Ld CIT(A), by following the decision rendered by co- ordinate bench of Tribunal in the earlier years, has accepted the withdrawals of Rs.4,30,000/- made in AY 2008-09 to be sufficient. The Ld A.R submitted that the mother of the assessee has expired during the year under consideration. Since the AO has estimated the addition without bringing any material on record, we are of the view that the acceptance given by the accountant of the assessee to the proposed addition would not take away the right of the assessee to contest the addition. Considering factual aspects relating to the year under consideration, we are of the view that the quantum of household expenses may be determined at Rs.4,00,000/-. Since the family members have shown withdrawals to the tune of Rs.3,20,000/-, we are of the view that the addition may be restricted to Rs.80,000/- and in our view, the same would put this issue at rest. Accordingly we modify the order passed by Ld CIT(A) and direct the AO to restrict the addition to Rs.80,000/-. We order accordingly.

In the result, the appeal filed by the assessee is partly allowed. Order has been pronounced in the Court on 20.2.2017.