Shri Ashok kalubhai Dhamelia, Surat V. The Income tax Officer,Ward-2(3), Surat

ITA 1786/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0410 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K PANDEY
• Assessee Lawyers: MANOJ MAKHANIA
• Keywords: Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTA NT MEMBER SRI ASHOK KALUBHAI DHAMELIA, 11, SURBHI VIHAR SOC, BOMBAY MARKET, PUNA ROAD, SURAT- 395010 PAN NO. AHDPD3071E (APPELLANT) VS INCOME TAX OFFICER, WARD 2(3), ROOM NO. 118, AAYKAR BHAVAN, MAJURA GATE, SURAT- 395002 (RESPONDENT) REVENUE BY: SRI A.K.PANDEY, SR. D.R. ASSESSEE BY: SRI MANOJ MAKHANIA DATE OF HEARING : 11-3-2013 DATE OF PRONOUNCEMENT : 22 -3-2013 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A), VALSAD DATED 23-02-2010. 2. THE FIRST GROUND OF THE ASSESSEE RELATES TO CONF IRMING THE FOLLOWING DISALLOWANCES BY LD. CIT(A). (I) KARIGAR MAJDOORI EXPENSES (II) MISC. EXPENSES AND ITA NO. 1786/AHD/2010 A.Y.:-2006-07 I.T.A NO.1786/AHD/2010 A.Y. 2006-07 PAGE NO ASHOK KALUBHAI DHAMELIA VS. ITO 2 (III). TELEPHONE EXPENSES. DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFFIC ER MADE AN ADDITION OF RS. 7,32,059/- BEING 20 % OF THE FOLLOWING EXPENSE S:- CONVEYANCE EXPENSES 6,718 FACTORY EXPENSES 5,744 KARIGAR MAJOORI EXPENSES 36,41,151 MISCELLANEOUS EXPENSES 2,428 TELEPHONE EXPENSES 4,254 TOTAL 36,60,295 AS HE FOUND THAT ALL THESE PAYMENTS WERE MADE IN CA SH AND NO BILL WAS AVAILABLE WITH THE ASSESSEE. IN APPEAL LD. CIT(A) DELETED THE DISALLOWANCES MADE OUT OF CONVEYANCE EXPENSES FACTORY EXPENSES AN D MISC. EXPENSES. THOUGH THE ASSESSEE HAS TAKEN A GROUND IN RESPECT O F MISC. EXPENSES ALSO BUT THAT IS NOT REQUIRED TO BE TAKEN AS DISALLOWANCE ON ACCOUNT OF MISC. EXPENSES HAS ALREADY BEEN DELETED BY THE LD. CIT(A). SO NOW BEFORE US ONLY TWO DISALLOWANCES IN RESPECT OF TELEPHONE EXPENSES AND KARIGAR MAJDOORI EXPENSES REMAINED TO BE DECIDED. AS FAR AS TELEPHO NE EXPENSES ARE CONCERNED, LD. CIT(A) CONFIRMED THE ACTION OF THE A SSESSING OFFICER ON THE GROUND THAT PERSONAL USE OF TELEPHONE BY THE PARTNE RS OR PROPRIETOR OF THE FIRM CANNOT BE RULED OUT. WE FEEL DISALLOWANCE TO THE EXTENT OF 20 % EXPENSES OF THESE EXPENSES IS ON HIGHER SIDE AND RE STRICT THIS DISALLOWANCE TO 10 % EXPENSES CLAIMED. THE A.O. IS ACCORDINGLY DIR ECTED TO RE-CALCULATE THE DISALLOWANCES. I.T.A NO.1786/AHD/2010 A.Y. 2006-07 PAGE NO ASHOK KALUBHAI DHAMELIA VS. ITO 3 3. AS FAR AS KARIGAR MAJDOORI EXPENSES ARE CONCERNE D, LD. CIT(A) HAS DEALT THIS ISSUE AS UNDER:- 6.2 THE ASSESSEES LABOUR INCOME DURING THE YEAR W AS RS. 38,53,854/- AND THEREFORE, THE MAJOORI EXPENSES OF RS. 36,41,151/- WAS VERY MUCH ON THE HIGHER SIDE. IN FACT IT SEEMS THAT THE TURNOVER WAS DELIBERATELY SHOWN BELOW RS. 40 LAKH IN ORDER T O AVAIL OF THE BENEFIT OF SEC. 44AB, AND SO THAT HE DID NOT HAVE TO MAINTAIN REGULAR BOOKS OF ACCOUNT. IT HAS ALSO BEEN ARGUED THAT THE RELEVANT DETAILS AS ALSO COPIES OF LEDGER ACCOUNTS ETC. WERE FURNISHED BEFORE THE AO AND COPIES OF THE SAME HAVE ALSO BEEN ENCLOSED TO THE W RITTEN SUBMISSION. IT IS INTERESTING TO NOTE THAT VIDE LETTER DTD. 17- 11-2008, THE ASSESSEE HAD INFORMED THE AO THAT HIS BOOKS OF ACCOUNT WERE KEPT IN HIS OFFICE AT 11, SURBHI VIHAR SOCIETY, OPP: RENUKA BHAVAN, BO MBAY MARKET, PUNA ROAD, SURAT AND YET, THE SAME WAS NOT PRODUCED BEFORE THE A.O. THE DETAILS OF KARIGAR MAJOORI EXPENSES FURNISHED W AS ONLY IN THE FORM OF LEDGER ACCOUNTS WHERE MONTHLY PAYMENTS WERE SHOWN. THE FORWARDING LETTER TO THE AO DID NOT MENTION THE FUR NISHING OF ANY SALARY/WAGES REGISTER. THE AO THEREFORE WAS FULLY JUSTIFIED IN OBSERVING THAT SUCH EXPENSES WHICH WAS QUITE SUBSTA NTIAL AS COMPARED TO THE TOTAL RECEIPT IN THE FORM OF LABOUR INCOME WAS NOT FULLY VERIFIABLE. HOWEVER, I AM OF THE VIEW THAT I T WOULD BE FAIR AND JUST IF THE DISALLOWANCE IS REDUCED TO 10 % I.E. TH E SUM OF 3,64,115. THE ASSESSEE THEREFORE WOULD GET A RELIEF OF AN EQU IVALENT SUM OF RS. 3,64,115. 3.1 THE ASSESSING OFFICER HAS MADE AN ADDITION OF R S. 7,28,230/- OUT OF KARIGAR MAJDOORI EXPENSES TO BE EXCESSIVE AND BEING NON-VERIFIABLE LD. CIT(A) THOUGH AGREED WITH THE ASSESSING OFFICER THA T NO EVIDENCE HAS BEEN PRODUCED BEFORE HIM IN SUPPORT OF INCURRING THESE E XPENSES BY THE ASSESSEE AND REMAINED UNVERIFIABLE BUT HE REDUCED THIS DISAL LOWANCE TO 10 % OF THE TOTAL EXPENSES INCURRED BY THE ASSESSEE UNDER THIS HEAD THUS GIVING A RELIEF OF RS. 3,64,115/- TO THE ASSESSEE. KEEPING IN VIEW TH E FACT THAT LD. CIT(A) WHILE GIVING RELIEF TO THE ASSESSEE OF 3,64,115/- HAS OVERLOOKED THE VARIOUS DOCUMENTS AND EVIDENCES PLACED IN THE PAPER BOOK LI KE KARIGARI MAJDOORI I.T.A NO.1786/AHD/2010 A.Y. 2006-07 PAGE NO ASHOK KALUBHAI DHAMELIA VS. ITO 4 SALES INVOICES AND EXPENDITURE VOUCHERS TO SHOW THA T ASSESSING OFFICER WAS NOT CORRECT IN MAKING DISALLOWANCE WE ARE OF THE CO NSIDERED OPINION THAT ENDS OF JUSTICE WILL BE MET IF THIS DISALLOWANCE IS RESTRICTED TO RS. 3 LACS ONLY. THIS GROUND IS PARTLY ALLOWED. 4. SECOND GROUND OF THE ASSESSEE RELATES TO ADDITIO N OF RS. 78,000/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS. THE ASSESSIN G OFFICER DURING ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEES FAM ILY OF 4 MEMBERS HAS SHOWN WITHDRAWALS FOR MEETING HOUSEHOLD EXPENSES TO THE EXTENT OF RS, 42,000/- FOR THE ENTIRE YEAR. THE A.O. TOOK THE VI EW THAT SUCH WITHDRAWALS WERE SIMPLY NOT SUFFICIENT TO MEET DAY TO DAY EXPEN SES OF THE FAMILY ESPECIALLY CONSIDERING THE ASSESSEES STATUS AND TH E LOCATION OF THE FAMILYS RESIDENCE. HE THEREFORE ESTIMATED THE ANNUL HOUSE HOLD EXPENSES AT RS. 1,20,000/- AND ASKED THE ASSESSEE TO EXPLAIN WHY TH E DIFFERENTIAL SUM OF RS.78,000/- SHOULD NOT BE ADDED TO THE TOTAL INCOM E OF THE ASSESSEE. THE ASSESSEE FAILED TO FURNISH ANY EXPLANATION THEREFOR E THE ASSESSING OFFICER WAS LEFT WITH NO OPTION BUT TO MAKE THE ADDITION OF RS. 78,000/- TO THE TOTAL INCOME OF THE ASSESSEE. BEFORE LD. CIT(A) THE CONT ENTION OF THE ASSESSEE WAS THAT ASSESSEE HAS THREE SCHOOL GOING CHILDREN W HOSE TUITION EXPENSES WAS VERY LOW AND THEY LIVED A VERY SIMPLY LIFE. NO OTHER EXPENSE WAS INCURRED DURING THE YEAR. IT WAS FURTHER CONTENDED THAT HOUSEHOLD EXPENSES ESTIMATED AT RS. 10,000/- PER MONTH BY THE A.O. WAS ARBITRARY AND BASED ON MERE SURMISES AND CONJECTURES. RELYING ON THE DEC ISION OF GOVIND RAM VS. ACIT THE ASSESSEE REQUESTED LD. CIT(A) TO DELETE T HIS ADDITION. HOWEVER LD. CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE A SSESSING OFFICER BY PLACING RELIANCE ON THE NATIONAL SURVEYS AND OBSER VED AS UNDER:- I.T.A NO.1786/AHD/2010 A.Y. 2006-07 PAGE NO ASHOK KALUBHAI DHAMELIA VS. ITO 5 10. NATIONAL SURVEYS HAVE REVEALED THAT THE HIGHER PERCAPITA HOUSEHOLD INCOME IS EARNED BY THE FAMILIES OF SURAT . THE AVERAGE ANNUAL PERCAPITA HOUSEHOLD INCOME IN SURAT HAS BEEN PEGGED AT RS. 4.5 LACS APPROXIMATELY. THIS ALSO MEANS THAT WITH HIGHER MONEY SUPPLY AND HIGHER DISPOSABLE INCOME, THERE WOULD BE A HIGHER DEMAND LEADING TO HIGHER PRICES AND CONSEQUENTLY, A HIGHER COST OF LIVING. IF THE ARS CONTENTION IS TO BE BELIEVED, THAT THE ASSESSEES FAMILY COMPRISED ONLY FOUR MEMBERS AND WITHDRAWALS OF APPROXIMATELY RS. 42,000/- WERE SUFFICIENT, IT WOUL D MEAN AN EXPENDITURE OF ONLY RS. 3,500 FOR THE WHOLE FAMILY PER MONTH AND RS. 875 PER INDIVIDUAL MEMBER. WHAT MUST NOT BE FORGOT TEN IS THAT THERE ARE CERTAIN UNAVOIDABLE AND INEVITABLE EXPENSES WHI CH A FAMILY HAS TO INCUR. 10.1 I AM OF THE VIEW THAT SUCH WITHDRAWALS WERE GR OSSLY INSUFFICIENT TO MEET ALL THE EXPENSES OF THE FAMILY OF FOUR MEMB ERS. EVEN IF THE ASSESSEE MAY HAVE BEEN LIVING IN A MODEST LOCALITY, AND LEADING A SIMPLE LIFE; THE ASSESSEE WOULD NECESSARILY HAVE HA D TO INCUR EXPENSES ON ACCOUNT OF MUNICIPAL TAXES ON THE RESIDENTIAL PR OPERTY, ON SERVANTS, ON GAS, WATER AND ELECTRICITY, REPAIRS TO THE FLAT, DAILY PROVISIONS, MEDICAL TREATMENT, CLOTHINGS, LAUNDRY, NEWSPAPERS, ON TRANSPORT, EDUCATION OF THE CHILDREN AND MOST IMPORTANTLY, ON SOCIAL AND RELIGIOUS OCCASIONS WHICH ARE QUITE NUMEROUS. THER EFORE, TO WHICHEVER COMMUNITY ANY PERSON MAY BELONG OR WHICHE VER RELIGIOUS TENET HE MAY FOLLOW, HE NECESSARILY HAS TO INCUR TH E AFORESAID EXPENSES FOR HIS VERY SURVIVAL AND ALSO THE SURVIVA L OF HIS FAMILY MEMBERS. 10.2 THE ESTIMATE MADE BY THE AO WAS VERY REASONABL E. THE POINT THAT EVERY APPELLATE AUTHORITY HAS TO NECESSARILY C ONSIDER IS THAT INCOME-TAX PROCEEDINGS ARE NOT COVERED OR INFLUENCE D BY THE STRICT RULE OF EVIDENCE AS UNDER THE EVIDENCE ACT. IT IS FOR THIS REASON THAT THERE ARE A LOT OF DEEMING PROVISIONS IN THE INCOME -TAX ACT, AND CONSEQUENTLY, SEVERAL FACTORS ARE ASSUMED OR PRESUM ED AND ON THE BASIS OF SUCH PRESUMPTIONS AND ASSUMPTIONS, CONCLUS IONS ARE ALLOWED TO BE DRAWN REGARDING THE CORRECT AND TRUE INCOME O F AN ASSESSEE. IN THE CASE OF HOUSEHOLD WITHDRAWALS, THE ASSUMPTION R EGARDING INADEQUACY IS DRAWN ON THE BASIS OF EXPENDITURE THA T ANY ORDINARY MIDDLE-CLASS FAMILY IS LIKELY TO INCUR IN COURSE OF THE YEAR. THEREFORE, SIMPLY BECAUSE THE AO DID NOT BRING ANY MATERIAL EV IDENCE ON RECORD I.T.A NO.1786/AHD/2010 A.Y. 2006-07 PAGE NO ASHOK KALUBHAI DHAMELIA VS. ITO 6 TO SHOW THAT HOUSEHOLD EXPENSES HAD BEEN INCURRED F ROM OUT OF UNACCOUNTED INCOME THE ADDITION CANNOT BE DELETED. THE PRESUMPTION MADE BY THE AO AND ESTIMATION MADE WAS VERY MUCH RE ALISTIC. IN FACT, IT IS A VERY CONSERVATIVE ESTIMATE. GIVEN TH E STANDARD OF LIVING OF ANY ORDINARY MIDDLE-CLASS FAMILY, AND THE COST OF L IVING IN SURAT, THE ESTIMATION MADE BY THE AO WAS VERY MUCH ON THE LOWE R SIDE. I HAVE THEREFORE NO HESITATION IN CONFIRMING THE ADDITION OF THE SUM OF RS. 78000/- 5. THE ABOVE FINDING OF THE LD. CIT(A) HAS REMAINED UNCONTROVERTED BY THE ASSESSEE AS NO MATERIAL HAS BEEN PLACED ON RECO RD TO REBUT IT, THEREFORE, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF THE ASSESSEE IS DISM ISSED. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R.MEENA) ( D.K.TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 22/03/2013 AK / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# I.T.A NO.1786/AHD/2010 A.Y. 2006-07 PAGE NO ASHOK KALUBHAI DHAMELIA VS. ITO 7 STRENGTHENED PREPARATION & DELIVERY OF ORDERS IN TH E ITAT 1) DATE OF TAKING DICTATION 14-03-2013 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE N.A. 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 18-03-2013 4) DATE OF CORRECTION 20-03-2013 5) DATE OF FURTHER CORRECTION XXXX 6) DATE OF INITIAL SIGN BY MEMBERS 20-03-2013 7) ORDER UPLOADED ON 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) ORDER SENT TO BENCH CLERK 22-03-2013