Law: Income Tax Act, 1922

Section: 4,4(2E)

(a) Income-tax Act (XI of 1922)---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. (b) Income-tax Act (XI of 1922)­- ---S. 4(2-E)-Deemed income-Approval of Inspecting; Assistant Com­missioner-Assessing Officer failing to obtain prior approval of Inspect­ing Assistant Commissioner, no addition, held, could be made as deemed income. ORDER MUHAMMAD MAZHAR ALI (PRESIDENT).-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 Commis­sioner. 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 Commis­sioner 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…

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