SHRI D. THOMAS RAJ,ARAKKONAM vs. ITO, VELLORE

आदेश / O R D E R

i. The Ld. CIT(A) has erred in upholding the order of the AO with respect to addition of Rs.4,70,000/- on account of unexplained opening balance. ii. The Ld. CIT(A) has erred in upholding the order of the AO with respect to addition of Rs.1,60,000/- invoking the provisions of Section 68 of the Act. iii. The Ld. CIT(A) has erred in upholding the order of the AO with respect to addition of Rs.1,35,000/- on account of purchase of Tata Sumo vehicle. iv. The Ld. CIT(A) has erred in upholding the order of the AO with respect to addition of Rs.1,38,000/- due to insufficient drawing during the relevant assessment year.

4.1 Ground No.i: Addition of Rs.4,70,000/- :-

The assessee had disclosed opening balance of Rs.4,70,000/- being the amount advanced to Ms. Rachel during the assessment year 2008-09. Since, the assessee was not able to produce the source of the advance, the Ld. AO made the addition of Rs.4,70,000/- in the hands of the assessee for the relevant assessment year. On appeal, the Ld. CIT(A) upheld the order of the learned AO rejecting the plea of the assessee that he had own source of income from part-time preaching activities and receipt of compensation Rs.2,20,000/-. Before us, the Ld. AR submitted that the Revenue had not questioned or rather accepted the source of the advances made during the assessment year 2008-09 and therefore addition cannot be made for the relevant assessment year wherein the amount is only an opening balance. The Ld. DR on the other hand relied on the orders of the Revenue and argued in support of the same.

4.2 I have heard the rival submissions and carefully perused the material available on record. It is not the case of the Revenue, that the assessee has not filed his return of income for the assessment year 2008-09 and not disclosed the advances made for Rs.4,70,000/- to Ms.Rachel in that assessment year. The Ld. AO had made the addition in the relevant assessment year 2011-2012 only for the reason that the source of advances was not established for the assessment year 2008-

During the course of assessment proceedings it was observed by the Ld. AO that the assessee had deposited cash for Rs.1,60,000/- in his bank account viz., SBI, Arakkonam branch on 17.03.2011. Since the assessee could not establish the source of the cash deposit the Ld. AO made addition of Rs.1,60,000/- in the hands of the assessee invoking Section 68 of the Act. On appeal, the Ld. CIT(A) appears to have omitted to adjudicate the issue. Before us, the Ld. AR submitted that the assessee had sufficient source of income for Rs.1,60,000/- since for the relevant assessment year itself he had declared income of Rs.2,20,500/-. It was further submitted that the assessee was engaged in religious activities as preacher and he had received contributions from the devotees for pursuing his activities.

Therefore, the source of cash deposit stands explained. The Ld. DR on the other hand relied on the orders of the Revenue authorities. After hearing both sides, I find merit in the submission of the Ld. AR.

Considering the nature of activities of the assessee and the income declared by him during the relevant assessment year, I am of the considered view that the cash deposit of Rs.1,60,000/- made by the assessee in his bank account is justifiable. Therefore, I hereby direct the Ld. AO to delete the addition of Rs.1,60,000/- made by him invoking the provisions of Section 68 of the Act.

During the course of assessment proceedings, it was noticed by the Ld. AO that the assessee owns a Tata Sumo car. In the sworn statement Q.No.15, the assessee had stated that he had purchased the car for Rs.1,35,000/-. Since the same was not reflected in the balance sheet filed by the assessee, the Ld. AO made the addition of Rs.1,35,000/- . On appeal, the Ld. CIT(A) confirmed the order of the Ld. AO agreeing with his views. At the outset, the Ld. AR submitted before us that the Tata Sumo car was purchased during the earlier assessment years and therefore addition cannot made during the relevant assessment year. The Ld. AR referred to page No.16 of the paper book being the receipt dated 10.04.2008 issued by M/s. New India Assurance Co. Ltd., for insuring the vehicle No.TN 04 C 7027 for Rs.5,130/- in the name of the assessee. The Ld. DR could not controvert to the submission of the assessee. The Ld.A.R further submitted that the assessee had sufficient declared source of income for the purchase of the car in the relevant assessment year when the car was purchased.

After perusing the issue, it is obvious that the assessee had purchased the vehicle before the assessment year 2011-12. Therefore, addition of Rs.1,35,000/- cannot be made in the hands of the assessee for the assessment year 2011-12. Hence, I hereby direct the Ld. AO to delete the addition of Rs.1,35,000/- made in the hands of the assessee towards purchase of Tata Sumo car.

Since the assessee had disclosed only Rs.42,000/- as his drawings for the relevant assessment year, it was opined by the Ld.A.O., that the same would not be sufficient for meeting the expenditure made by the assessee considering his standard of living and life style. Hence, he made an addition of Rs.1,38,000/- towards poor drawings. On appeal, the Ld. CIT(A) confirmed the order of the AO. At the outset, I find that the addition made by the Revenue of Rs.1,38,000/- towards poor drawing is arbitrary and without proper reasoning. Therefore, I hereby direct the AO to delete the addition of Rs.1,38,000/-

Order pronounced on the 15th February, 2017.