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I. T. A. No. 1138/KB of 197879, decided on 8^thApril, 1979.

‑‑‑ S. 4(2‑E)‑‑Deemed income‑Assessee, unless held to have expended impugned amount on his own-self, no amount, held, can be added as deemed income.

---S. 4(2‑E)‑Deemed income‑Approval of Inspecting; Assistant Com missioner‑Assessing Officer failing to obtain prior approval of Inspect ing Assistant Commissioner, no addition, held, could be made as deemed income.

A. A. Gangat, C. A. for Appellant.

S. M. Sibtain, D. R. for Respondent.

‑The facts giving rise to this second appeal briefly are these. The Income‑tax Officer while framing the assessment of the appellant for the charge year 1976‑77 found that he had shown Rs. 7,500 as personal expenses. He was of the view that the expenses were under‑stated. He called for the explanation of the assessee, who pleaded that they were reasonable. He, however, did not produce the personal expenditure statement. Looking to the assessee's standard of living the extent of his income of the year (Rs. 1,09,026, and in appreciation of the fact that prices of basic commodities had gone up considerably, the Income‑tax Officer discarded the assessee's explanation and made an addition of Rs. 25,000, on. account of low personal expenses. The assesses assailed this addition by carrying an appeal before the Appellate Assistant Commis sioner. His stand before the first appellate authority was that the assessment was illegal because no approval of the Inspecting Assistant Commissioner for addition of Rs. 25,000 was obtained as contemplated by section 4(2‑E) of the Act. Alternatively, it was urged that the expenses shown were sufficient for his needs. The learned Appellate Assistant Commis sioner repelled the assessee's contentions and upheld the addition. It seems appropriate to reproduce his order, in extenso. It reads as under:‑

"I have perused the records and do not contribute to what Mr. Gangat says, because the said section refers to expenditure incurred. In the instant case no such expenditure has been shown as incurred. The question before the assessing officer was the personal expenses shown at a minimum amount although the appellant was enjoying a very good status in society being a Director of a renowned company. Therefore, section 4(2‑E) is not at all attracted in this case, and therefore the Income‑tax Officer was not bound to seek permission from the Inspecting Assistant Commissioner. As an alternative, it was contended that the appellant was an old man of over 70 years. He was staying with a son and incurring no expenditure of his own on maintenance of his family. His wife was since dead and all the children were grown‑up and accordingly married. This explanation was also submitted before the assessing officer but it was found unsatisfactory. This being the case I shall maintain the addition made by the Income‑tax Officer which I find proper and in order."

We have heard the parties' Representatives. Mr. Gangat, the learned Authorised Representative of the appellant repeated the same arguments before us which were made before the first appellate authority. Additionally submitted that the appellant lives in his own property and its taxes were separately paid and were not included in the account of personal expenses shown.

2. The learned Appellate Assistant Commissioner, in our opinion, has fallen into an error. The case patently falls under section 4(2‑E) inasmuch as the Income‑tax Officer was of the opinion that the assessee had, in fact, spent Rs. 32,500 on his personal expenses. But by having shown his personal expenses at Rs. 7,500 only he had suppressed the actual expenditure of Rs. 25,000. It is because of the deeming provision made under clause (2‑E)

of section 4 that the assessing officer treated the undisclosed amount of expenditure as an income of the assessee and added it accordingly. Unless, therefore, it is held that the assessee had expended the sum of Rs. 32,500 on his own-self, no amount can be added as a deemed income under section 4(2‑E) off the Act. The contention of the learned Authorised Representative of the appel lant is, therefore, well founded and since assessing officer had admittedly failed to obtain the prior approval of the Inspecting Assistant Commissioner, the addition of Rs. 25,000 as deemed income of the assessee of the relevant adds previous year, was, improper and illegal. The Income‑tax Officer gets the jurisdiction of making such addition under section 4(2‑E) only upon obtaining the prior approval of the Inspecting Assistant Commissioner. Since he did not do so, he did not acquire the jurisdiction to make the impugned addition of Rs. 25,000. In this view of the matter we would vacate the order of the learned Appellate Assistant Commissioner and annul the order of the Income‑tax Officer on this issue.

3. In the result, the appeal succeeds and is allowed accordingly.

Appeal allowed.

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