Business expenditure disallowance not justified if based merely on conjecture and surmise and not on any material

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Business expenditure disallowance not justified if based merely on conjecture and surmise and not on any material





S.P. Kapur, J.M. & V. Dongzathang, A.M.

ITA No. 4016 / Del / 1981; Asst. yr. 1978 – 79

11th December, 1982

(1982) 01 CCH 3661 DelTrib

(1983) 16 TTJ 0175

Counsel appeared:

K.R. Manjani, for the Appellant : R.N. Dave, for the Appellant


S.P. KAPUR, J.M. :

The appeal is by the assessee, an individual. The assessment year involved is 1978 – 79 and the previous year ended on 31st March 1978.

  1. The assessee is aggrieved on the following scores :

“(I) Addition of Rs. 13,000 in lieu of insufficient house hold expenses;

(ii) Addition of Rs. 12,000 on account of alleged travelling conveyance and stamp duty; and

(iii) Charging of interest under section 217 of the IT Act, 1961.”

  1. We have heard Shri. K.R. Manjani, the ld. Advocate for the assessee as also Shri. R.N. Dave, the ld. Senior departmental representative at length. We have also perused very carefully the orders of the lower authorities as also the paper-book since placed on our file for and on behalf of the assessee.
  2. As regards first addition viz. Rs. 13,000 in lieu of insufficient house-hold expenses, the reasoning of the Income-tax Officer reads as under :

” The assessee has simply estimated the house-hold expenses at Rs. 17,000 and other expenses like capital expenditure on air-conditioners and income-tax / CDS paid. In my view. The house-hold expenditure of Rs., 17,000 which is simply a guess work of the assessee are not relied in the face of the circumstances told to me that the assessee’s house property is located at Gorakhpur and he had been visiting there. The mere fact that the assessee requires two air-conditioners in one particular year goes on to prove that is house-hold expenses can not be to the tune of Rs. 17,000. Other facts can merely be out of common sense. As such I estimate his house, hold expenses to be less than Rs. 30,000.”

  1. The above reasoning is based on no material but is based on conjectures and surmises and does not stand to reason. There is no material to doubt that the assessee who had shown house-hold expenses at Rs. 17,000 was living beyond this declared and shown expenditure. As claimed by the assessee before us, Rs. 17,000 cannot be held to be insufficient as house-hold expenses for a single person. There is no material on record to warrant any other inference, hence, the addition made and sustained by the lower authorities at Rs. 23,000 is knocked off. The assessee succeeds on this issue.
  2. As regards the other issue viz. Addition of Rs. 12,000 the reasoning of the ITO is as under :

” The assessee is to maintain his office and has to incur expenses on travelling, conveyance, stamp duty, etc., etc. On that account, I add a sum of Rs. 12,000.”

  1. The above reasoning is also based on conjectures and surmises and not on any material on record. It is not understood as to how the assessee has to incur expenses on stamp duty, etc., etc. The addition made and sustained on the above is also knocked off, since there is no reason and warrant for sustaining the same. On this issue also the assessee succeeds.
  2. As regards charging of interest u/s 217 of the Act, the assessment order is silent and we leave it on that. If any interest is chargeable, the assessee should have been heard on the issue. The assessee claimed before us through his learned counsel that he has already paid advance-tax at Rs. 14,400 while the tax payable works out to Rs. 13,860. The ITO is directed to look into this aspect of the issue viz. Charging of interest u/s 217 of the Act and if any interest is to be charged, the assessee will be afforded a proper opportunity of explaining his case.
  3. In the net result, the appeal succeeds and stands allowed.

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