The validity of the assessing officer's cash flow statement and the requirement for reasonable consideration of domestic expenses in income tax assessment.

Radhakrishnan, J.

The assessee is a partner of M/s. Don Bosco Industries, M/s. Right Stationary Products and M/s. Don Bosco Card Centre. The business as well as residential premises of the assessee were searched under Section 132 of the Income-tax act on 4.1.1996 and assessing officer issued “notice under Section 158 BC calling upon the assessee to file return of income for the block period from 1.4.1985 to 4.1.1996. Notice was served on the assessee on 29.8.1996. Since the assessee did not file any return of income. Notice under Section 142(1) was issued on 23.9.1996 directing the assessee to produce books of accounts on 15.10.1996. The case was later reposted on 10.12.1996 as the assessee himself had made a request for further time to file return.

2. The assessee later filed a cash flow statement for the block period from 1.4.1985 to 1.4.1996 relating to all the firms and partners. In the statement produced the assessee has declared only Rs.3.10.200/- as the total expenditure associated with domestic and personal expenses, which, in the opinion of the assessing authority, was on the lower side. The assessing officer found that in the sworn statement recorded on 5.1.1996 the assessee has admitted that the total expenditure for house-hold purposes was Rs.6,500/- per month. After holding detailed discussions with the assessee and his authorized representative, the assessing officer himself prepared a cash flow statement for the period from 1.4.1985 to 4.1.1996 at Rs.19,61,495/- as against Rs.18.20.182/- shown by the assessee. Therefore the assessing officer arrived at the unexplained income at Rs.1,41,310/-. The assessing officer also calculated income-tax on the said unexplained income at 60% and made a demand of Rs.84,786/- as payable by the assessee.

3. The Tribunal has not accepted the said order stating that the computation of the domestic expenses at Rs.3,99,000/- for the block period appears to be motivated because the explanation offered by the assessee was not accepted. It is not known from the order of the Tribunal how it was motivated. No acceptable explanation is given by the Tribunal for rejecting the order passed by the assessing authority. Assessing officer prepared a cash flow statement after consultation with the representative of the assessee. In the circumstances we are of the view that the Tribunal is in error in rejecting the cash flow statement prepared by the assessing officer. In the circumstances. We are inclined to set aside the order of the Tribunal and remand the case to the Tribunal for fresh consideration. The Tribunal will call for records including statement of the assessee for considering reasonable domestic expenses and pass appropriate orders without any delay.

A copy of this judgment under the seal of the High Court and signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal. Cochin Bench.