KEDAR NATH MODI VS COMMISSIONER OF INCOME-TAX
1993 P T D 1492
[200 I T R 685]
[Delhi High Court (India)]
Before B.N. Kirpal and P.K Bahri, JJ
KEDAR NATH MODI
versus
COMMISSIONER OF INCOME-TAX
I.T.R. No. 290 of 1981, decided on 28/10/1992.
Income-tax---
----Income---Unexplained expenditure---Holiday in Kashmir for a month with family and servants---Estimated expenses---Failure to explain source-- Addition as income from other sources---Can be sustained---Such expenditure can be deemed to be income of assessee--Indian Income Tax Act, 1961, S.69-C.
The assessee went to Kashmir for a holiday with his wife, five children and two servants and remained there in a house boat for more than a month. The total expenses including air travel, expenses on car and driver and food were shown at Rs. 1,863 in the books of account of the company and that company indicated in a letter that all the expenses of the assessee and his family during their stay in Kashmir were incurred by the assessee himself. Since, during the month, the assessee had withdrawn only Rs. 1,500 and his wife Rs. 600, the Income-tax Officer held that he assessee must have met the holiday expenses out of his income from undisclosed sources. The only plea of the assessee was that the entire trip was financed within the monthly drawings of the assessee and his family members. The Income-tax Officer estimated the expenses and added Rs. 10,000 to his income as income from undisclosed sources. The Appellate Tribunal, on appeal, after taking into account the withdrawals of all the members of the family, reduced the addition to Rs.5,000. The Tribunal rejected the assessee's application for reference but the High Court called for a reference:
Held affirming the decision of the Appellate Tribunal, that the implication of holding that the expenses were more than the drawings of the assessee and members of his family was that his explanation was rejected, and thereafter it was a question of estimating the expenses. What could be the expenses was always a question of fact. The conclusion of the Tribunal was based on the facts on record and the addition had been made with the assessee's explanation not having been accepted. The provisions of section 69-C of the Income Tax Act, 1961, were applicable.
S.K. Aggarwal for the Assessee.
Mr. Rajendra and R.N. Verma for the Commissioner.
JUDGMENT
B.N. KIRPAL, J.---In respect of the assessment year 1964-65, in pursuance of an order passed under section 256(21 by the Allahabad High Court, the Income-tax Appellate Tribunal has stated the case and referred the following two questions to this Court:
"(1)Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in sustaining an addition of Rs. 5,000 to the total income of the assessee for the alleged unaccounted expenditure incurred by the assessee during holiday in Kashmir?
(2)Whether, on the facts and in the circumstances of the case, section 69-C of the Income Tax Act, 1961, was applicable to the instant case?"
Briefly stated, the facts are that, pursuant to the reopening of the assessment under section 147(a) of the Income Tax Act, 1961, the Income-tax Officer added a sum of Rs. 10,000 on an estimated basis as representing the income of the assessee from undisclosed sources. According to the Income-tax Officer, the assessee with his wife, five children and two servants, went to Kashmir in May, 1963, and remained there for more than a month. The total expenses which were shown in the books of account of M/s. Modi Spinning & Weaving Co. Ltd. including air travel, expenses on car and expenses on driver and food were indicated at Rs. 1,863. That company had filed a letter indicating that all the expenses of the assessee and his family during their stay in Kashmir were incurred by the assessee himself. The Income-tax Officer found from the assessment records of the assessee and his wife that they had withdrawn only Rs. 1,500 and Rs. 600, respectively, during the month and, therefore, the assessee must have met the holiday expenses from out of his income from undisclosed sources. Considering the standard of living of the assessee and his status and the fact that he and his family had stayed in a house-boat and had made their own arrangement of food for a period of more than a month, the Income-tax Officer estimated the expenses of the assessee at Rs:10,000 which was added to his income as income from undisclosed sources.
Appeal to the Appellate Assistant Commissioner having failed, the assessee filed a second appeal to the Income-tax Tribunal. The Tribunal partially allowed the appeal and held as follows:
"The facts stated by the Income-tax Officer and the Appellate Assistant Commissioner in their orders on this point were not disputed before us. The only plea is that the entire trip was financed within the monthly drawings of the assessee and his family members. From the figures stated in paragraph 7 of the Appellate Assistant Commissioner's order, it is seen that the monthly drawings of the assessee and hid family members amounted in all to Rs.2,750. Even if we accept the assessee's explanation that this was utilised for the Kashmir trip, and also take into account the amount of Rs.1,863 sustained by us under the head `perquisite' above, yet it would only partially cover the probable expenses of the holiday trip for a period of one month for 10 persons in Kashmir and their stay in a house-boat. There is absolutely no evidence for the alleged savings out of the monthly drawings as contended by the assessee. However, we feel that the addition of Rs.10,000 made by the ,Income-tax Officer is rather high and excessive. In our view, it would be fair and reasonable to estimate the expenses for the Kashmir trip at Rs.10,000 and after deducting the two amounts of Rs.1,863 retained under 'perquisite' above and the monthly drawing of Rs.2,750, from the said amount, to sustain an addition of Rs.5,000 only in round sum as for the unexplained portion of such expenses. Accordingly, we reduce the addition under this head to Rs.5,000."
Thereafter, when the Income-tax Tribunal did not allow the application under section 256(1), the Allahabad High Court directed the reference of the aforesaid two questions to this Court.
It has been contended by learned counsel for the assessee that it was for the Income-tax Department to show that the assessee had incurred any expenditure in excess of Rs.2,750 and, therefore, the addition of Rs.5,000 was uncalled for.
The questions which have been referred are essentially questions of fact. In the instant case, seeing the size of the family and the fact that it had gone on a holiday to Kashmir for one month and had stayed in a house-boat and made its own arrangement for boarding, the Income-tax Officer concluded that the expenses which were disclosed by the assessee were very low. This was obviously, a conclusion of fact which was upheld by the Income-tax Tribunal. The implication of holding that the expenses of the assessee and members of his family were more than Rs.2,750 obviously was that the explanation of the assessee was rejected. Thereafter, it was a question of estimating the expenses of the assessee. What could be the expenses is always a question of fact and the Tribunal had been lenient in the present case and has upheld the addition of only Rs.5,000 instead of Rs.10,000 which was added by the Income-tax Officer. The conclusion of the Tribunal is based on the facts on the record and an addition has been made with the explanation of the assessee not having been accepted, it is obvious that the provisions of section 69-C would be applicable.
We, therefore, answer the questions of law in the affirmative and in favour of the department.
There will be no order as to costs.
M.BA./2402/T Reference answered.