UNDER S. 255(4) OF IT ACT, 1961 On account of difference of opinion between Hon ble Members, Bench, Hyderabad, matter has been referred to me for consideration of difference as reflected in following questions: "(i) Whether, in facts and circumstances of case, tax authorities were justified in estimating withdrawals at Rs. 12,000 per month? (ii) Whether it is fit case to award costs of Rs. 20,000, which is equivalent to institution fee paid by assessee for two years under consideration? " facts of case, briefly, are that assessee individual during relevant period was Managing Director, ITC Bhadrachalam Paper Boards Ltd. and submitted returns disclosing incomes at Rs. 14,22,340 and Rs. 16,68,010 f o r asst. yrs. 1996-97 and 1997-98, respectively. AO on scrutiny of cases was not satisfied with household expenses disclosed by assessee at Rs. 73,127 and Rs. 1,03,029 in two returns. Vide order sheet entry dt. 18th Nov., 1998 and show-cause notice dt. 8th Feb., 1999, he asked assessee to give details with sources of expenditure as under: "......... electricity bill, water bill, telephone bill including mobile, food and drinks, gas bill, petrol bill, newspaper bill, household help, maid/house servant, house rental, children school fee and other expenditure, gifts, clothing, footwear, toiletries, doctor/chemists, house furnishing, compact disc, video, books, unexpected expenditure, repairs, other taxes, credit card expenditure, holiday expenditure, religious ceremonies, marriage expenditure." It is further recorded in assessment order that assessee had not maintained books of account recording "day-to-day transactions of his life". Further, with reference to cashflow statements, he held that expenses shown were not acceptable. assessee was found to have withdrawn sum of Rs. 5,000 every month upto September, 1995. But, there was no withdrawals from bank account from October, 1995 to March, 1996. Having in mind status of assessee, household expenses were estimated @ Rs. 12,000 per month at Rs. 1,44,000 and accordingly, Rs. 70,874 and Rs. 40,971 were added on account of low withdrawals by inferring that household expenses were met from unexplained sources. Accordingly, Rs. 70,873 and Rs. 40,971 were added in assessments for two years under consideration. . assessee impugned above assessments before learned CIT(A) but remained unsuccessful and accordingly approached Tribunal for relief. After hearing of matter, there was difference between learned JM and learned AM. learned JM noted that in relevant period, assessee s family consisted of husband and wife as children were staying elsewhere and not dependent on assessee. He also noted that most of expenses such as electricity, water, telephone, gas, etc. of assessee were met by employer company. assessee has further claimed that they were vegetarian and did not believe much in socializing. In opinion of learned JM, appellate authority while upholding addition was obsessed with three facts, i.e.,: (a) assessee stayed at Banjara Hills; (b) He was managing director of reputed company. (c) That family of two will always have floating relatives, guests coming and going. learned JM did not agree with above, which according to him was surmises and conjectures not based on any evidence or investigations carried by Revenue authorities. There was nothing on record to suggest that assessee had floating relatives, guests and incurred expenditure on pets, clubs etc. Learned CIT(A) in opinion of learned JM had decided appeals on strength of assumptions and entire decision was based on surmises and suspicions. learned JM also referred to decision of Hon ble Delhi High Court in case of Yadu Hari Dalmia vs. CIT (1980) 17 CTR (Del) 234: (1980) 126 ITR 48 (Del), wherein it is observed as under: "We would like to make it clear that estimate without details will not be upheld in all circumstances and we would suggest that Department should give some definite basis for arriving at estimate of expenditure whenever it can." He deleted additions and imposed cost of Rs. 20,000 with following observations: "To highlight fallacy in observations of CIT(A), we prefer to take best understandable example of IT officials who are residing at Banjara Hills quarters allotted by Government. We are concerned herein with period beginning from 1st April, 1995 onwards. Before 5th Pay Commission recommendations were implemented, salary of senior-most Government functionary was between Rs. 12,000 to Rs. 15,000 per month and take-home pay was between Rs. 6,000 to Rs. 9,000. If basis as adopted by learned CIT(A) is applied to Government officers who enjoy social status similar or better as compared to managing director of company residing in company provided accommodation, take-home pay of even senior officer may not be sufficient especially when they reside in Banjara Hills area. Obviously, we have not come across any case where such additions are made with regard to Government servant based on social status he enjoys and place where he stays. In this age of nuclear families, floating guests and visitors is not common and to prove that assessee s case is exception, onus is on authority concerned. tax authorities ought to have noticed that managing director of reputed company will hardly find any time for his personal pleasures and most of parties/functions would be on company s account and would have no time and inclination to spend his hard-earned money to eat outside. In fact, our personal experience shows that social status is saddled with disadvantage of attending so many functions/parties and more often than not, one may prefer to eat homefood rather than eating outside. Under these circumstances, it is difficult to appreciate reasons given by AO and first appellate authority to estimate household expenditure at Rs. 12,000, particularly when assessee was provided with rent-free furnished residential accommodation apart from reimbursement of expenditure towards telephone, gas, electricity, water charges, etc. telephone, gas, electricity, water charges, etc. Considering facts and circumstances of case, we are of firm view that addition made by AO presumably, under s. 69C of Act has no legs to stand and we hereby delete addition." Learned AM did not agree with above view. He noted that assessee withdrew Rs. 5,000 each from April, 1995 to September, 1995 towards household expenses and that there was no withdrawal for months of October to March, 1996. This fact was not disputed or disproved before Revenue authorities or before Tribunal. appellant further did not categorically deny that there was no expenditure incurred on household help, guests, personal goods, and personal travel as mentioned by AO in assessment order. household expenses shown at Rs. 73,127 would cover expenses incurred for first six months and it was not believable that there was sufficient cash-in- hand to cover last six months of financial year 1995-96 as there was no withdrawal from bank in above period. Thus, if amount of Rs. 73,127 is taken to have been spent for six months, expenditure per month would work out to more than Rs. 12,000. In above view of matter, estimate of AO as confirmed by CIT(A) was fully justified. On above basis, learned AM upheld addition made in two assessment years under appeal. Having upheld impugned order of Revenue authorities, there was no question of imposing cost on Revenue. learned AM accordingly held "that this is not fit case in which costs are required to be awarded". He accordingly proposed that appeals for both years should be dismissed. In above circumstances, two questions noted above have been referred to me. case was fixed for hearing and accordingly I have heard arguments of Shri Samuel Nagadesi on behalf of assessee and Shri K. Satyanarayana, CIT-Departmental Representative, on behalf of Revenue. learned counsel for assessee submitted that during course of assessment proceedings, AO had asked assessee to furnish details of expenses connected with engagement and marriage of assessee s son, Mr. Rajendra Malliwal. This is evident from detailed questionnaire issued to assessee vide letter dt. 21st Dec., 1999. assessee has furnished all details as per reply dt. 18th Jan., 2000. copy of said reply was filed before me. AO had further asked to furnish head-wise details of expenditure incurred on electricity bills, water bills, etc. Such details were not maintained by assessee and could not be filed. No further questions were asked on alleged low withdrawals. assessee had explained that expenditure like electricity bills, water bills, telephone, gas, etc. were taken care of by assessee s employer. No doubt, questions as raised by AO in assessment order were put to assessee. It was further submitted that provision of s. 69C of IT Act, 1961 under which addition could be made was not at all attracted in this case. There was no material on record on basis of which it could be said that assessee had incurred unexplained expenditure. Before calling upon assessee to explain, there has to be cogent material to hold that assessee had incurred expenditure and therefore, his explanation relating to such expenditure was not satisfactory. burden of proof under s. 69 was on Revenue. same was not discharged and on mere presumption that assessee has incurred expenditure @ Rs. 12,000 per month addition was made. addition is based on surmises and conjectures. learned counsel for assessee also supported proposed order of learned JM relating to cost as according to learned counsel, assessee was forced to pay Tribunal fees of Rs. 20,000 and incurred other incidental expenses for filing appeals to Tribunal challenging totally unjustified additions. Therefore, proposed order of learned JM imposing cost on Revenue was fully justified. learned Departmental Representative supported orders of Revenue authorities as confirmed by learned AM in proposed order. He argued that assessee was managing director staying in posh locality like Banjara Hills and was maintaining good standard of life. He was also not able to explain wherefrom expenses from October, 1995 to March, 1996 were incurred in asst. yr. 1996-97. learned CIT(A) was quite justified in her approach as on certain other points she remanded matter back to AO, as reasonable opportunity was not afforded to assessee. She confirmed addition on account of low household withdrawals on sound grounds. Learned Departmental Representative further submitted that there was no reason to impose cost on Revenue in this case. I have given careful thought to rival submissions. Before commenting o n proposed orders of my learned Brothers, I deem it appropriate to reproduce relevant extract from impugned order of CIT(A) on issue involved before me. These are as under: "5.(i) last ground of appeal pertains to addition of Rs. 70,000 being household expenses. arguments of AO contained in para 7 of assessment order which reads as under: 7. Household expenses Vide this office note sheet entry dt. 18th Nov., 1998, and show-cause notice dt. 8th Feb., 1999, assessee was asked to furnish following details of household expenditure with sources thereof. electricity bill, water bill, telephone bill including mobile, food and drinks, gas bill, petrol bill, newspaper bill, household help, maid/house servant, house rental, children school fee and other expenditure, gifts, clothing, footwear, toiletries, doctor/chemists, house furnishing, compact disc, video, books, unexpected expenditure, repairs, other taxes, credit card expenditure, holiday expenditure, religious ceremonies, marriage expenditure. In response to above, assessee has filed letter dt. 22nd Feb., 1999 mentioning that he has not been maintaining books of account to record day-to-day transactions of his life. Total personal drawings of assessee during previous year were amounting to Rs. 73,127 as per cashflow statement. assessee s above submission is not acceptable in view of fact that break-up of domestic withdrawal of Rs. 73,127 along with source was not furnished. On perusal of bank statement (account No. 5835 with Vysya Bank Ltd.), it is found that assessee has shown cash withdrawal of Rs. 5,000 in every month upto September. Afterwards, it is not known how assessee has managed household expenditure from October, 1995 to March, 1996. Considering status of assessee and other perquisites which he got from M/s ITC Bhadrachalam PF Ltd., I consider that monthly household expenditure should be about Rs. 12,000 per month which works out for year t o Rs. 1,44,000, excluding perquisites received from M/s ITC BPB Ltd. difference of Rs. 70,873 (Rs. 1,44,000- 73,127) is added to total income as unexplained expenditure. (ii) As against above arguments of AO, appellant s contentions are contained at page No. 19 of his written submissions which reads: It is submitted that expenses in respect of electricity, water, telephone and gas were met by employer and assessee offered for tax by way of perquisite value. In this connection, we draw kind attention of learned CIT to enclosed Form No. 16 along with details of salary. Further, conveyance as well as furnished accommodation were provided by employer. assessee submits that on him and his wife, domestic expenditure was very meagre, as both do not socialise and have very simple habits. They do not h v e any vices e.g. smoking, drinking or eating outside. They are purely vegetarian. Children of assessee are all settled and do not depend on them. There were no unexplained expenditure. So far as withdrawals from bank is concerned, assessee was doing so according to his wife s requirement. His wife had cash carried forward from earlier withdrawals which was sufficient to last through year. Hence, there were no withdrawals after September, 1995. Amount drawn in first half of year was for certain contingencies. These contingencies did not arise and surplus cash was enough to meet domestic expenditure. When queried where assessee was living, it is submitted that assessee is living at Road No. 14, Banjara Hills, Hyderabad. assessee had relinquished office of managing director of ITC Bhadrachalam Paper Boards Ltd. on 31st Dec., 1998. (iii) After due consideration of facts, I am more inclined to agree with AO that minimum of Rs. 12,000 is required to run household given, social status of assessee who was managing director of M/s ITC Bhadrachalam Paper Boards Ltd. This is in lieu of following reasons: (a) appellant stays at Banjara Hills where cost of living is much higher in comparison to other locations of Hyderabad. (b) Authorised Representative s arguments are general and not specific and same do not substantiate issues like entertainment expenditure, some miscellaneous club expenses, expenses on account of domestic servants, p e ts , etc. No specific details have been furnished in this regard and reasonable inference drawn by AO is that minimum expenditure of Rs. 12,000 is required for family of 2, which always has floating relatives, guests coming and going. Although appellant is furnished with house and related expenses like electricity, telephone gas, etc., still expenses on books, personal travel, gifts, etc. are always there in case of every house which had not been taken into account while justifying lower withdrawal. addition made of Rs. 70,000 is sustained." Similarly, addition in other assessment year was sustained taking household expenses @ Rs. 12,000 per month. On perusal of queries raised by AO and reply given by assessee, it is evident that AO had asked assessee to explain expenditure incurred on engagement and marriage of his son, Mr. Rajendra Malliwal. assessee was also to give bifurcated details of expenditure incurred under various heads. assessee had given detailed reply as also amounts spent on household expenses with reference to cashflow statement. No further query was raised by AO. No basis whatsoever is given in assessment order or in order of CIT(A) to take average household expenses of assessee @ Rs. 12,000 p e r month, particularly when assessee did not incur any expenditure on accommodation, electricity, water, telephone, gas, car, etc. There is no material to support that any extra expenditure was incurred by assessee on entertainment and miscellaneous items like club expenses or on account of domestic servant. There is no evidence to show that assessee was receiving floating relatives, guests coming and going. estimate of expenditure @ Rs. 12,000 per month is based on surmises as elaborately pointed out by learned JM in his proposed order. I am not repeating all reasons recorded by him. I deem it sufficient to hold that without proper material, inference of expenditure on various alleged items could not be drawn. Thus, onus that lies on Revenue under s. 69C cannot be taken to be discharged in these cases. Having regard to fact that various facilities were provided to assessee by his employer and that only personal expenses were incurred on two persons and stand that his average estimated expenses were approximately Rs. 6,000 per month, could be rejected by Revenue only by bringing some material on record. It was open to AO to question assessee on various doubts arising in his mind as was done for expenses incurred on son s engagement/marriage. But, same approach was not adopted in respect of household and personal expenses. It has been observed that assessee was withdrawing Rs. 5,000 per month from his bank for household and personal expenses but then expenditure for asst. yr. 1996-97 was admittedly shown at Rs. 73,127. Evidently, either assessee had withdrawn more than Rs. 5,000 per month from bank or had some other source of withdrawal which was utilized and thus sufficient cash was left with assessee for months of October, 1995 to March, 1996. If we go by withdrawal of Rs. 5,000 per month as observed by O , total amount should have been Rs. 30,000 and not Rs. 73,127. Therefore, some source of cash available for utilization for household expenses at Rs. 73,127 was definitely there. This was not examined. Therefore, on facts, it is not possible to reject assessee s claim that his wife had sufficient cash with her to last through year. Revenue authorities brought no material on record to show why withdrawal could not be accepted. No comparative case was cited to justify estimated expenditure of Rs. 1,44,000 in two years under appeal. Therefore, on facts and circumstances of case, I am of view that Revenue authorities did not bring sufficient material on record to apply t h e provisions of s. 69C of IT Act and accordingly additions for low household withdrawals in two years were not sustainable. learned JM rightly deleted them in proposed order. I am unable to agree with learned AM that estimate of assessee s household expenses at Rs. 12,000 per month is justified on facts. I agree with view taken by learned JM that additions made in two years are liable to be deleted. As far as question of levy of cost is concerned, cost can be imposed by Tribunal in light of provisions of sub-s. 2(B) of s. 254 of IT Act. Normally, discretion to award cost is vested with Tribunal to check filing of frivolous and unjustified appeals. present appeals filed by Revenue cannot be said to be frivolous appeals to levy heavy cost of Rs. 20,000. AO did enquire into aspect of expenditure incurred by assessee and made addition in bona fide manner by making estimate of household expenses. It is different thing that Tribunal as appellate authority has not agreed with above view. Even then, one of us, learned AM, has held that addition made is fully justified. Revenue authorities were of view that sufficient material to estimate household expenses at Rs. 12,000 per month is available on record. May be Tribunal as per majority does not agree with above view. It is case of difference of opinion and, therefore, I do not see any good reason to agree with learned JM s order that Revenue should be burdened with cost of Rs. 20,000. I agree with learned AM that this is not fit case in which cost should be imposed. I answer above questions referred to me as above. matter should now be placed before regular Bench for disposal of both appeals in accordance with law. *** M.P. MALLIWAL v. JOINT COMMISSIONER OF INCOME TAX