Shri Prakashbhai Prahladbhai Gami, Surat V. Income Tax Officer, Ward-2(3)(3), Surat

ITA 15/SRT/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9381 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 08-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA SRDR
• Assessee Lawyers: MANISH J SHA
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA NO. 15/SRT/2018 (AY 2012-13) (H EARING IN VIRTUAL COURT) SHRI PRAKASHBHAI PRAHLADBHAI GAMI, GANGAKRUPA BUILDING, B/H RAMDEEV COMPLEX, PUNA VILLAGE, DIST. SURAT, PAN : ADSPP 6520 F VS INCOME TAX OFFICER WARD-2(3)(3), AAYKAR BHAVAN, MAJURA GATE, SURAT-395001 ASSESSEE / APPELLANT REVENUE /RESPONDENT ASSESSEE BY SHRI MANISH J SHA, A.R REVENUE BY MS. ANUPAMA SINGLA SR-DR DATE OF HEARING 16.07.2021 DATE OF PRONOUNCEMENT 16.07.2021 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), CIT(A) SURAT DATED 02.10.2017 FOR ASSESSMENT YEAR (AY) 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE C.I.T.(APPEALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.2,59,397/- MADE BY THE ASSESSING OFFICER BY ESTIMATING THE HOUSEHOLD EXPENSES OF THE ASSESSEE. 2.THE C.I.T.(APPEALS) ERRED IN LAW AND IN FACTS IN CONFIRMING THE ADDITION OF RS.4,20,000/- MADE BY THE ASSESSING OFFICER UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY BY INVOKING PROVISIONS OF SECTION 22 AND 23 OF THE IT ACT, 1961 WITHOUT APPRECIATING THE FACTS AND LAW OF THE CASE PROPERTY. 3. THE C.I.T.(APPEALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.9.91,300/- BEING AD HOC 20% OF SALARY EXPENSES ITA NO. 15/SRT/2018 SH. PRAKASHBHAI P. GAMI 2 CLAIMED BY THE ASSESSEE WITHOUT APPRECIATING THE FACTS AND LAW OF THE CASE PROPERLY. 2. FACTS IN BRIEF ARE THAT ASSESSEE IS INDIVIDUAL AND ENGAGED IN THE BUSINESS OF DIAMOND JOB WORK FOR CUTTING & POLISHING OF DIAMONDS. THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13 DECLARING TAXABLE INCOME OF RS.12,33,850/-. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE ADDITION ON ACCOUNT OF LOW HOUSEHOLD EXPENSES OF RS.2,59,397/-. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS. 4,20,000/- UNDER INCOME FROM HOUSE PROPERTY BY INVOKING THE PROVISIONS OF SECTION 22 AND 23 OF INCOME TAX ACT. THE ASSESSING OFFICER ALSO MADE THE ADDITION ON ACCOUNT OF INCOME FROM HOUSE PROPERTY WITH REGARD TO RESIDENTIAL HOUSE IN MUMBAI. THE ASSESSING OFFICER TREATED THE NOTIONAL RENTAL VALUE @ RS.50,000/- PER MONTH THEREBY ESTIMATED ACTUAL RENTAL VALUE OF RS.6 LAKH. THE ASSESSING OFFICER AFTER GRANT IN 30% STATUTORY DEDUCTION BROUGHT REMAINING OF RS.4,20,000/- AS INCOME FROM HOUSE PROPERTY. THE ASSESSING OFFICER FURTHER DISALLOWED RS. 9,91,300/- BEING 20% OF THE TOTAL SALARY EXPENSES OF RS.49,81,500/-, CLAIMED BY THE ASSESSEE. ON APPEAL BEFORE LD CIT(A), ALL THE ADDITIONS / DISALLOWANCES MADE BY THE ASSESSING OFFICER WERE UPHELD. FURTHER AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFORE TRIBUNAL. ITA NO. 15/SRT/2018 SH. PRAKASHBHAI P. GAMI 3 3. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE (AR) FOR THE ASSESSEE AND THE LEARNED SENIOR DEPARTMENTAL (SR DR) FOR THE REVENUE. GROUND NO. 1 RELATES TO ADDITIONS ON ACCOUNT OF LOW HOUSE HOLD EXPENSES. THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSING OFFICER ESTIMATED THE HOUSEHOLD EXPENSE @ RS.60,000/- PER MONTH. THE FAMILY OF ASSESSEE CONSIST OF HIMSELF, HIS WIFE AND TWO CHILDREN. THE LD. AR FOR THE ASSESSEE SUBMITS THAT ASSESSEE HAS SHOWN HOUSEHOLD EXPENSE OF RS.3.00 LAKH PER ANNUM. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ESTIMATION OF ASSESSING OFFICER @ RS.60,000/- PER MONTH IS ON HIGHER SIDE AND THE HONBLE TRIBUNAL MADE CONSIDER IT TO BE AT RS.40,000/- PER MONTH WHICH WOULD BE REASONABLE TO MEET THE ENDS OF JUSTICE. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMITS THAT THE LD. CIT(A) WHILE CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS ALREADY GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE AND REDUCE THE HOUSEHOLD EXPENSE TO THE EXTENT OF RS.50,000/- PER MONTH ON THE BASIS OF SIMILAR EXPENSE ESTIMATED IN ASSESSMENT YEAR 2009-10 AND NO FURTHER APPEAL WAS FILED BY THE ASSESSEE. 5. IN REJOINDER SUBMISSION, THE LD. AR OR THE ASSESSEE FAIRLY AGREED THAT IN ASSESSMENT YEAR 2009-10, THE LD CIT(A) ESTIMATED SIMILAR EXPENSES @ RS. 50,000/- PM AND NO FURTHER APPEAL WAS FILED. THE LD AR FOR THE ASSESSEE SUBMITS THAT THE TRIBUNAL MAY TAKE DECISION AS PER ITS DISCRETION. ITA NO. 15/SRT/2018 SH. PRAKASHBHAI P. GAMI 4 6. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND CONSIDERING THE FACT THAT IN ASSESSMENT YEAR 2009-10 ON SIMILAR HOUSEHOLD EXPENSES THE LD. CIT(A) ESTIMATED RS.50,000/- PER MONTH, WHICH WAS NOT CHALLENGED BY THE ASSESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES AND FAIR ACCEPTANCE BY LD. AR OF THE ASSESSEE THAT NO FURTHER APPEAL WAS FILED AGAINST THE ESTIMATION OF HOUSEHOLD EXPENSES @ RS.50,000/- IN ASSESSMENT YEAR 2009-10, WE DO NOT FIND ANY JUSTIFICATION FOR FURTHER INTERFERENCE. IN THE RESULT, THIS GROUND OF APPEAL IS DISMISSED. 7. GROUND NO.2 RELATES TO ADDITION ON ACCOUNT OF RS.4,20,000/- ON ACCOUNT OF INCOME FROM HOUSE PROPERTY. THE LD AR FOR THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2013-14 IN ITA NO.3129/AHD/2016 DECIDED ON 04.06.2021. 8. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUBMITS THAT THE GROUND NO.2 IS COVERED AGAINST THE ASSESSEE, THEREFORE IT MAY BE DISMISSED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND FIND THAT SIMILAR GROUND WAS ALSO RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2013-14 WHEREIN THE TRIBUNAL HAD PASSED THE FOLLOWING ORDERS:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO MADE ADDITION UNDER SECTION 23(A) BY TAKING VIEW THAT ASSESSEE HAS TWO RESIDENTIAL HOUSE, ONE AT SURAT AND ITA NO. 15/SRT/2018 SH. PRAKASHBHAI P. GAMI 5 ANOTHER AT MUMBAI. THE4 ASSESSEE HAS NOT OFFERED ANY INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY FOR TAXATION, IN RESPECT OF RESIDENTIAL PROPERTY IN MUMBAI. THE ASSESSEE IS RESIDING IN SURAT AND CARRYING ITS BUSINESS ACTIVITIES FROM SURAT. IN RESPONSE TO THE SHOW CAUSE NOTICE, BEFORE THE AO, THE ASSESSEE STATED THAT HE IS FREQUENTLY VISITING MUMBAI AND USED THIS HOUSE FOR STAYING AT MUMBAI, THUS THE PROPERTY IS USED FOR BUSINESS PURPOSE FOR STAYING AT MUMBAI. THE AO AFTER CONSIDERING THE REPLY OF ASSESSEE HELD THAT THE ASSESSEE IS CARRYING ITS BUSINESS ACTIVITY FOR CUTTING AND POLISHING OF DIAMOND, THE FACTORY OF ASSESSEE IS LOCATED AT SUIRAT. THE ROUGH DIAMONDS ARE PROCURED THROUGH ANGADIAS AND FINISHED PRODUCTS ARE ALSO SENT THROUGH ANGADIAS. THE AO HAS NOT ACCEPTED THE PLEA OF THE ASSESSEE ABOUT USE OF THIS HOUSE PROPERTY FOR BUSINESS PURPOSE. THE AO ESTIMATED THE NOTIONAL RENTAL INCOME @ RS.50,000/- PER MONTH AND AFTER ALLOWING 30% STATUTORY STANDARD DEDUCTION FOR REPAIR AND MAINTENANCE TREATED RS.4.20 LAKHS AS INCOME FROM HOUSE PROPERTY . THE LD. CIT(A) CONFIRMED THE ACTION OF LD. AO BY TAKING VIEW THAT HOUSE PROPERTY LOCATED AT LOKHANDWALA COMPLEX, MUMBAI IN A VERY DECENT AND HIGH CLASS SOCIETY. THEREFORE, RS.50,000/- PER MONTH IS REASONABLE. BEFORE US, THE LD. AR OF THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE ABOUT THE USE OF HOUSE PROPERTY FOR THE PURPOSE OF BUSINESS, EXCEPT MAKING SELF-SERVING STATEMENT THAT PROPERTY IS BEING USED FOR BUSINESS PURPOSE AS AND WHEN THE AS VISITS THE MUMBAI. THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CIT VS. RASIKLAL BALABHAI (SUPRA). THE FACTS OF THE SAID CASE ARE ABSOLUTELY DIFFERENT. IN THE SAID CASE, THE QUESTION BEFORE THE HONBLE COURT WAS THAT IF THE TRIBUNAL WAS JUSTIFIED BY HOLDING THAT ANNUAL LETTING VALUE OF GODOWN OWNED BY ASSESSEE USED FOR THE PURPOSE OF BUSINESS CARRIED ON BY HIM IN PARTNERSHIP. CLEARLY IN THE SAID CASE THE HOUSE PROPERTY WAS IN THE SHAPE OF GO-DOWN. GO-DOWN CAN ONLY BE USED FOR BUSINESS PURPOSE. ON THE CONTRARY THE HOUSE PROPERTY IN THE PRESENT CASE IS A RESIDENTIAL PROPERTY SITUATED IN RESIDENTIAL AREA. THUS, THE CASE LAW RELIED BY LD. AR FOR THE ASSESSEE IS NOT HELPFUL TO THE ASSESSEE. HENCE, WE AFFIRMS THE ORDERED PASSED BY LD. CIT(A). IN THE RESULT, GROUND NO.1 OF THE APPEAL IS DISMISSED . ITA NO. 15/SRT/2018 SH. PRAKASHBHAI P. GAMI 6 10. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2013-14 (SUPRA) THIS GROUND NO.2 IS DISMISSED. 11. GROUND NO.3 RELATES TO AD HOC DISALLOWANCE @ 20% OF SALARY EXPENSES. THE LD. AR OF THE ASSESSEE SUBMITS THAT ON SIMILAR DISALLOWANCES IN ASSESSMENT YEAR 2013-14 WAS MADE BY ASSESSING OFFICER. ON APPEAL, THE DISALLOWANCE WAS RESTRICTED TO 10%, ON FURTHER APPEAL BEFORE THE TRIBUNAL THE 10% DISALLOWANCE WAS CONFIRMED. THE LD. AR SUBMITS THAT SIMILAR ORDER MAY BE FOLLOWED FOR THE YEAR UNDER CONSIDERATION. 12. ON THE OTHER HAND THE LD DR FOR THE REVENUE SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NOTED THAT SIMILAR DISALLOWANCE WAS MADE BY ASSESSING OFFICER IN ASSESSMENT YEAR 2013-14, ON APPEAL, THE DISALLOWANCE WAS RESTRICTED TO 10% BY LD. CIT(A) AND ON FURTHER APPEAL THE TRIBUNAL CONFIRMED THE DISALLOWANCE MAY BE RESTRICTED TO 10% BY PASSING THE FOLLOWING ORDER:- 9. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDERS LOWER AUTHORITIES. DURING THE ASSESSMENT, THE AO NOTED THAT THE ASSESSEE HAS DEBITED A TOTAL EXPENSES OF RS.50,76,800/-.RS.45,85,100/- ON ACCOUNT OF CUTTING AND ASSORTING AND RS.4,91,700/-, ON LASER SALARY OF TOTALLING TO RS.50,76,800/-. ALL THE PAYMENTS WERE MADE IN CASH. COMPLETER DETAILS OF PAYMENTS AND PROOF OF PAYMENT OF EXPENSES, HAS NOT BEEN FURNISHED EXCEPT ITA NO. 15/SRT/2018 SH. PRAKASHBHAI P. GAMI 7 NAME AND SALARY REGISTER. NO OTHER DETAILS LIKE ADDRESS, IDENTITY OR OTHER DETAILS WERE FURNISHED. THE AO WAS OF THE VIEW THAT IN ABSENCE OF COMPLETE DETAILS, HE IS UNABLE TO VERIFY THE VERACITY EXPENSES. THEREFORE, ISSUED SHOW CAUSE NOTICE ON THE 20% EXPENSES SHOULD NOT BE DISALLOWED BEING UNVERIFIABLE. THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE STATED THAT WORKERS ARE NOT PERMANENT EMPLOYEES OF THE UNIT AND AS PER THE PRACTICE IN THE DIAMOND TRADE THE WORKERS MAY NOT WORK WITH THE INDUSTRY FOR MORE THAN A WEEK OR A MONTH OR A YEAR AND SO IT IS NOT PRACTICAL TO MAINTAIN DETAILED RECORD OF ALL THE WORKERS. THE EXPLANATION FURNISHED WAS NOT ACCEPTED THE AO. THE LD. AO ACCORDINGLY DISALLOWED 20% OF THE TOTAL EXPENSE. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE MADE SIMILAR SUBMISSION AS MADE BEFORE US. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND CONSIDERING THE EARNING OF BETTER NET PROFIT (NP) DURING THE YEAR COMPARED TO IMMEDIATELY PRECEDING YEAR, ALTHOUGH THE GROSS PROFIT (GP) RATIO) WAS SLIGHTLY LOWER IN THIS YEAR. THE LD. CIT(A) HELD THAT IN THE PAST, THE GROSS PROFIT RATIO HAS BEEN ACCEPTED BY THE DEPARTMENT. THEREFORE, ON HIS OVERALL OBSERVATION, THE LD. CIT(A) TOOK HIS VIEW THAT IT IS TO BE FAIR AND REASONABLE FOR BOTH THE PARTIES, IF THE ADDITIONS ARE SUSTAINED @ 10% OF THE EXPENSES. THUS, THE LD. CIT(A) ALLOWED 50% RELIEF TO THE ASSESSEE. BEFORE US, THE LD. AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) IS ON HIGHER SIDE AND IT MAY BE REDUCED FURTHER. IN OUR VIEW, THE LD. CIT(A) AFTER CONSIDERING THE PAST PRACTICE AND NET PROFIT RATIO FOR THE YEAR UNDER CONSIDERATION GENEROUSLY ACCEPTED THE CONTENTION OF THE ASSESSEE IN SUSTAINING THE 10% OF THE DISALLOWANCE. IN OUR VIEW, THE LD. CIT(A) HAS TAKEN REASONABLE VIEW, WHICH WE AFFIRM. IN THE RESULT, GROUND NO.2 OF THE ASSESSEE IS DISMISSED . 14. CONSIDERING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2013-14, THE DISALLOWANCE OF EXPENSES OF SALARY EXPENSES IS RESTRICTED TO 10% OF THE TOTAL EXPENSES OF RS.49,81,500/-. ITA NO. 15/SRT/2018 SH. PRAKASHBHAI P. GAMI 8 15. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER ANNOUNCED AT THE TIME OF HEARING OF APPEAL ON FRIDAY, 16 TH JULY 2021 IN THE VIRTUAL COURT HEARING. SD/- SD/- ( DR ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER SURAT, DATED: 16/07/2021 DKP. SR.P.S. O.S COPY TO: 1. APPELLANT-SHRI HARISH K. JODHWEANI, 10, SHREEJI PARK, CHHAPRA RD. NAVSARI 2. RESPONDENT- ITO, WD-2, AAYKAR BHAVAN, NAVSARI 3. CIT(A)-VALSAD 4. CIT 5. DR 6. GUARD FILE TRUE COPY/ BY ORDER ASSISTANT REGISTRAR, ITAT, SURAT TRUE COPY/