In case of investment accrued interest is liable to taxed and in case of addition by AO the addition cannot be made on estimate basis

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH `F’: NEW DELHI)

BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND

SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER

ITA No.1775/Del./2010

(Assessment Year: 2004-05)

Shri Rajesh Goyal,

39A, Ring Road,

 Lajpat Nagar,

New Delhi.

(PAN/GIR No.AANPG2548J)

(Appellant)

Vs.

ITO, Ward 12(2),

New Delhi.

 (Respondent)

Assessee by: Shri Suresh Anand, CA

Revenue by: Smt. Renuka Jain Gupta, Sr. DR

ORDER

PER U.B.S. BEDI, J.M.

This appeal of the assessee is directed against the order passed by the CIT(A)- XV, New Delhi, dated 18.02.2010 relevant to assessment year 2004-05 whereby assessee raised four issues, but two were not pressed and surviving issues/grounds No.2 & 5 are as under:

“2. That the CIT(A) has erred in law, on facts and in the circumstances of the case, in making addition of Rs.2,20,000/- on account of secured interest.

5. That the CIT(A) has erred in law, on facts and in the circumstances of the case, in taking addition of Rs.1,50,000/- on account of low household expenses.

2. As regards first issue, Assessing Officer made addition of Rs.2,20,000 on account of accrued interest by IVP’s. The Assessing Officer has held that investment in the asset was the income of the assessee and therefore, interest income accrued thereon was income. In order to arrive at such conclusion on the basis of the facts that in the  statement of affairs of the assessee on 31.3.2004, the assessee has shown IVPs as his asset forming the part of the assessee’s investment.

3. Assessee took up the matter in appeal and it was argued before the first appellate authority that Assessing Officer has erred while making an addition of Rs.2,20,000/- on account of accrued interest on IVPs as the said interest has been considered in the returns of income of Sahil Goyal and Mrs. Sonal Goyal in the said assessment year which has duly been assessed by the Assessing Officer at the time of assessment. Assessee’s AR filed copy of computation and the order of the Assessing Officer in these two cases and submitted that said accrued interest has rightly been considered. Therefore, same cannot be considered and taxed again which may be deleted.

4. CIT(A) while considering but not accepting the plea of the assessee has concluded to dismiss this ground of appeal of the assessee as under:

“I have considered the submissions of the appellant, the findings of the Assessing Officer and the facts on record. Perusal of the details filed by the appellant show that in the case of Smt. Sonal Goyal vide order dated 30.01.06 the interest income of Rs.1,10,000/- on IVP has been assessed by the Department for assessment year 2004-05. Similarly, in the case of Sahil Goyal interest on IVP of Rs.1,10,000/- has been shown the computation of income filed with the return of income for assessment year 2004-05. Since the interest income has already been shown by Smt. Sonal Goyal and Shri Sahil Goyal in the return of income and has been assessed by the Department, the appellant has submitted that it cannot be taxed again in his hands. Perusal of the assessment order shows that the Assessing Officer has observed that since the appellant has shown IVP of Rs.2,20,000/- in his statement of affairs on 31.3.04, therefore, the interest income has to be taxedm in the hands of the appellant. There is no infirmity in the findings of the Assessing Officer. The appellant has not been able to bring on record on the basis of facts as to how the accrued interest was taxable in the hands of Sonal Goyal and Sahil Goyal. This ground is dismissed.”

5. Still aggrieved, assessee has come up in further appeal and it was submitted that by mistake assessee has shown IVPs on the asset side in the statement of affairs as on 31.3.2004 whereas accrued interest on these IVPs has already been offered by the children of the assessee in their respective returns which has duly been assessed by the concerned Assessing Officer and evidence to this effect has been filed before the CIT(A). Therefore, addition is not called for because same income cannot be assessed at two places. Therefore, addition made by the Assessing Officer and confirmed by the CIT(A) should be deleted.

6. Ld.DR. submitted that assessee has himself shown the IVPs as his asset in the statement of affairs as on 31.3.2004 filed with the return of income. So, it is part of the assessee’s investment and interest accrued thereon has to be considered as income of the assessee which has rightly been assessed by the Assessing Officer. Therefore, the action of the Assessing Officer has justifiably been confirmed by the CIT(A). Therefore, order of the CIT(A) on this count should be upheld.

7. We have heard both the sides, considered the material on record as well as documentary evidence furnished by the assessee before lower authorities and copies placed in the paper book filed before us. It is a fact that assessee in his statement of affairs has shown IVPs as his asset forming part of assessee’s investment as on 31.3.2004. Therefore, interest accrued for the period under consideration has rightly been taxed by the Assessing Officer and CIT(A) was justified in confirming the action of the Assessing Officer. As such, since no infirmity or flaw was found in the order of Assessing Officer as addition was called for which has correctly been made/confirmed  Therefore, while agreeing with the finding of CIT(A), we uphold his action and dismiss the appeal of the assessee in this regard.

8. As regards other issue, Assessing Officer made addition of Rs.1,50,000/- in the hands of the assessee on account of low household drawings. Assessing Officer observed that drawing of Rs.30,000/- in the year by the assessee were very low considering the status of the assessee. While making addition of Rs.1,50,000/-, Assessing Officer observed as under:

“During the year the assessee has shown drawings for household purposes at Rs.30,000/-. The assessee was asked to justify the same. It has been explained the expenditure on transportation, electricity, telephone etc. is borne by the employer. The assessee lives in own house and there is no element of rent involved. Further, it has been stated that most of the time free meals are provided by the company and thus the requirements of the assessee for household purposes is very limited. Also, it has been explained that apart from the drawings of the assessee an amount of Rs.50,000/- and Rs.90,000/- is withdrawn from HUF of the assessee and by his son. To substantiate the assessee has filed a copy of cash book statement. From the details filed it has been noticed that the family of the assessee consist of himself, wife, daughter and son. The claim of the assessee that amounts withdrawn from HUF and by his son are also utilized for the purposes of household drawing cannot be accepted in view of the fact that the entry to this effect have been passed towards the fag end of the financial year whereas the assessee has been maintaining day to day cash book as other entries have duly been reflected in this statement on their respective date of occurrence. Though it has been claimed that foreign traveling and medical expenditure has been borne by the employer but complete details have not been provided as to the extent of the expenditure incurred and reimbursed by the employer. It is pertinent to mention here that in the assessment year 2003-04 the assessee had shown such drawings at Rs.60,000/- and during the course of assessment proceedings a further amount of Rs.60,000/- has been held by the then Assessing Officer as having been incurred for the purposes of household drawings and no information is brought on record that the assessee has agitated the action of the Assessing Officer before the appellate authority. Looking into the facts of the case, the status of the assessee and increasing inflation rate, I consider it reasonable to estimate the monthly expenditure of the assessee at Rs.15,000/-. This would result in an addition of Rs.1,50,000/- (180,000-1,30,000) in the hands of the assessee.

9. Assessee took up the matter in appeal and filed written submissions before the CIT(A) in which it has been stated as under:

“It has been stated that the appellant’s working as a whole time Director in Haryana Milk Foods Ltd. All the expenses on telephone, electricity and car running and maintenance are met by the employer. The appellant’s family lives in the house owned by his HUF and there was no rent payment. The family consists of wife, one daughter and one son (in USA).The appellant has also contended that -

“The conclusion of Assessing Officer is without bringing any material on record and based on conjectures and surmises. The Revenue should bring on record material from which it could be concluded that expenditure were in fact made by the assessee. If this was not done, no amount could be added (CIT vs.Daya Chand Jain 98 I.T.R. 280 (All.).

10. CIT(A) while considering but not accepting the plea of the assessee has concluded to dismiss this ground of appeal of the assessee as under:

“I have considered the submissions of the appellant, the findings of the Assessing Officer and the facts on record. Perusal of form 16 filed by the assessee shows that the assessee has a gross total income of Rs.10.50 lakhs. The wife of the assessee and daughter aged 21 year is staying with the assessee. The assessee is showing household expenditure of Rs.2500/- p.m. Even though his telephone, electricity and car running expenses are paid by the employer, food, clothing, education of children and other such expenses have to be borne by the assessee. A person drawing above Rs.10.00 lakhs as annual salary charges has to maintain a reasonable standard of living. Keeping the above facts in view, I am inclined to agree with the Assessing Officer that the household expenses have been shown on the lower side. The addition on account of low drawings of Rs.90,000/- made by the Assessing Officer considering the status of the appellant is justified. Since the appellant has not been able to substantiate or justify the low drawing, this ground of appeal is dismissed.”

11. Still aggrieved, assessee is in further appeal and while reiterating the submissions as made before lower authorities, it was pleaded for deletion of the impugned addition made by the Assessing Officer and confirmed by the CIT(A). It was further submitted that Assessing Officer has made the addition purely on estimate basis when cogent reasons were given for low household withdrawals. So, addition was not called for. If at  all, it has to be considered it is on higher side which should be suitable reduced.

12. Ld.DR relied on the order of authorities below and pleaded for its confirmation.

13. We have heard both the sides, considered the material on record and find that Assessing Officer made the impugned addition and CIT(A) confirmed the same , but inadvertently mentioned about addition of Rs.90,000/- instead of Rs.1,50,000. Since addition is on estimate basis and assessee has also given some basis for low withdrawals such as getting facilities from employer, free of cost etc, therefore, assessee deserves part relief. As such, we are of the view that it would meet the ends of justice, if the addition made and confirmed by the CIT(A) is restricted to Rs.90,000/- instead of Rs.1,50,000/-. So, assessee gets relief of Rs.60,000/-.

14. As a result, the appeal of the assessee gets partly accepted.

 Order pronounced in open court on

                                            (S.V. MEHROTRA)           (U.B.S. BEDI)

                                    ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: February, 2012

SKB

Copy of the order forwarded to:-

1. Appellant

2. Respondent

3. CIT

4. CIT(A)-XV, New Delhi.

5. CIT(ITAT)                                                                                        Deputy Registrar, ITAT