Shri Sagarmal Sethi, Burhanpur V. The DCIT, Khandwa

ITA 328/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0039 (ITAT-INDORE)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-08-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 29-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: R TARWALA
• Keywords: Gross profit estimation; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE (S.M.C.-I) BENCH : INDORE BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER PAN NO. :AFBPS4864A I.T.A.NO. 328/IND/2009. A.Y. : 2004-05 SHRI SAGARMAL MADHOLAL SETHI, DY. CIT, POST. PHOPNAR VS. KHANDWA DISTRICT BURHANPUR PAN NO. :ACHRS5188A I.T.A.NO. 329/IND/2009. A.Y. : 2004-05 SHRI SUBHASHCHAND SETHI, DY. CIT, POST. PHOPNAR VS. KHANDWA DISTRICT BURHANPUR APPELLANT BY : SHRI MANJEET SACHDEVA, ADV. AND SHRI R.TARWALA, C.A. RESPONDENT BY : SMT.APARNA KARAN, ADDL. CIT DR 2 2 O R D E R BOTH THESE APPEALS OF DIFFERENT ASSESSES ARE DISPOS ED OF THROUGH THIS COMMON CONSOLIDATED ORDER HAVING THE SAME ISSUES. I.T.A.NO.328/IND/2009: (SHRI SAGARMAL SETHI ) : 2. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) II, INDORE, DATED 12 TH MARCH, 2009, FOR ASSESSMENT YEAR 2004-05. 3. I HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AND THE FINDINGS OF THE AUTH ORITIES BELOW. 4. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE ADDI TION OF RS. . 35,000/- ON ACCOUNT OF GROSS PROFIT ADDITION. 5. THE A.O. NOTED THAT THE ASSESSEE DERIVES INCOME FROM KIRANA BUSINESS. THE GROSS PROFIT SHOWN UNDER THE YEAR IN APPEAL IS 8.37 % AS AGAINST 12% AND MORE IN THE PRECEDING YEAR. THE A.O . NOTED THAT CONSIDERING THE NATURE OF ITEMS DEALT WITH BY THE A SSESSEE, THERE IS NO SCOPE OF MAINTENANCE OF QUANTITATIVE DETAILS. THE ADDITIO N OF RS. 35,000/- WAS, ACCORDINGLY, MADE TO COVER THE LOW GROSS PROFIT. TH E LD. COMMISSIONER CONFIRMED THE ADDITION BECAUSE THE ASSESSEE DID NOT APPEAR BEFORE HIM TO REBUT THE FINDINGS OF THE A.O. 3 3 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IT IS AN AD HOC ADDITION AND A.O. HIMSELF HAS NOTED THAT IN KIRANA BUSINESS, QUANTITATIVE DETAILS CANNOT BE MAINTAINED. THEREFORE, THE ENTIRE ADDITION IS UNJUSTIFIED. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT THERE IS A FALL IN GROSS PROFIT RATE AS COMPARED TO EARLIER YEARS AND THE ASSESSEE FAILED TO EXPLAIN THE ISSUE BEFORE THE LD. CIT(A). THEREFORE, THE ADDITION HAS BEEN RIGHTLY MAINTAINED. 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE ADDITION IS CLEARLY UNJUSTIFIED. THE A.O. HAS NOT P OINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. BY MERE FALL IN GROSS PROFIT RATE AS COMPARED TO THE EARLIER YEAR BY ITSELF IS N O GROUND TO REJECT THE BOOK RESULT. IN THE KIRANA BUSINESS, QUANTITATIVE DETAIL S COULD NOT HAVE BEEN MAINTAINED AS ADMITTED BY BOTH THE PARTIES. THEREFO RE, THERE WAS NO MATERIAL OR EVIDENCE ON RECORD TO JUSTIFY AD HOC ADDITION IN THE MATTER. I, ACCORDINGLY, SET-ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND D ELETE THE ADDITION. GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. ON GROUND NO. 3, THE ASSESSEE CHALLENGED THE ADD ITION OF RS. 1,42,000/- FOR HOUSE HOLD EXPENSES. 4 4 10. THE A.O. NOTED THAT THE ASSESSEE HAS SHOWN WIT HDRAWALS AT RS. 37,700/- FOR HOUSE HOLD EXPENSES IN RESPECT OF HIS FAMILY CONSISTING OF SELF, WIFE AND MOTHER. THE ASSESSEE HAS EXPLAINED THAT HE IS HAVING AGRICULTURAL INCOME. THEREFORE, HOUSE HOLD EXPENSES ARE SUFFICI ENT TO MEET OUT HIS DAY TO DAY NEED. THE A.O., HOWEVER, NOTED THAT EVEN CLASS IV EMPLOYEES WOULD REQUIRE RS. . 7000/- PER MONTH. THEREFORE, THE ASSE SSEE BEING A BUSINESSMAN HAVING TURNOVER OF LAKHS WOULD REQUIRE MORE HOUSE H OLD WITHDRAWALS AND, ACCORDINGLY, ESTIMATED HIS EXPENSES AT RS. 15,000/- PER MONTH AND MADE THE ADDITION OF RS. 1,42,300/-. THE LD. CIT(A) CALLED F OR SPECIFIC DETAILS OF VARIOUS HEADS FROM THE ASSESSEE. BUT THE ASSESSEE D ID NOT APPEAR BEFORE HIM AND NO DETAILS WERE FILED. THEREFORE, THE ADDITION WAS CONFIRMED. 11. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE A.O. HAS ACCEPTED AGRICULTURAL INCOME OF THE ASSESSEE AT RS. 4 LAKHS. THEREFORE, THE ADDITION IS CLEARLY UNJUSTIFIED. 12. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED T HAT THE LD. CIT(A) GAVE SPECIFIC NOTICE TO THE ASSESSEE TO FILE SEVERAL DET AILS ON ACCOUNT OF HOUSE HOLD 5 5 EXPENSES, WHICH WERE NOT FILED BEFORE HIM. THEREFOR E, THE APPEAL OF THE ASSESSEE IS LIABLE TO BE DISMISSED. 13. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE DID NOT FILE SPECIFIC DETAILS CALLED FOR BY THE LD. CIT(A) BEFORE HIM AT THE APPELLATE STAGE. THE ASSESSEE HAS SHOWN MEAGER WITHDRAWAL OF RS. 37,700/ - AND MAINLY CLAIMED OTHER HOUSE HOLD EXPENSES INCURRED OUT OF AGRICULT URAL INCOME FOR WHICH NO MATERIAL OR EVIDENCE IS PRODUCED BEFORE THE AUTHORI TIES BELOW. HOWEVER, IT IS A FACT THAT THE A.O. HAS ACCEPTED AGRICULTURAL INCO ME OF THE ASSESSEE IN A SUM OF RS. 4 LAKHS. THEREFORE, IT COULD BE REASONABLE T O INFER THAT SOME HOUSE HOLD EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE OU T OF AGRICULTURAL INCOME. HOWEVER, IN THE ABSENCE OF ANY MATERIAL OR EVIDENCE D ON RECORD, IT IS DIFFICULT TO BELIEVE THAT ENTIRE HOUSE HOLD EXPENSE S WERE MADE OUT OF AGRICULTURAL INCOME. CONSIDERING ALL THE FACTS NOTE D ABOVE, IT WOULD BE REASONABLE AND APPROPRIATE TO ESTIMATE THE ADDITION ON ACCOUNT OF HOUSE HOLD EXPENSES AT RS. 75,000/- AS AGAINST THE ADDITION M ADE BY THE ASSESSING OFFICER AT RS. 1,42,300/-. THUS, THE ADDITION IS M ODIFIED AND RESTRICTED TO RS. 75,000/- IN ALL. THIS GROUND OF APPEAL OF THE ASSE SSEE IS PARTLY ALLOWED. 6 6 14. AS A RESULT, THE I.T.A.NO. 328/IND/2009 IS PART LY ALLOWED. I.T.A.NO. 329/IND/2009 ( SHRI SUBHASHCHAND SETHI ): 15. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II, INDORE, DATED 12 TH MARCH, 2009, FOR ASSESSMENT YEAR 2004-05, CHALLENG ING THE ADDITION OF RS. 1,84,200/- ON ACCOUNT OF HOUSE HOLD EXPENSES . 16. THE PRESENT ASSESSEE IS SON OF SHRI SAGARMAL SE THI, WHO IS IN APPEAL IN I.T.A.NO. 328/IND/2009. THE A.O. NOTED THAT THE CAP ITAL ACCOUNT OF THE ASSESSEE IS FILED TO SHOW PROFIT DURING THE YEAR AM OUNTING TO RS. 5,66,830/- HAS BEEN ADDED TO THE OPENING BALANCE AND NO AMOUNT HAS BEEN DEBITED IN THE ABOVE ACCOUNTS. MEANING THEREBY, NO WITHDRAWALS HAVE BEEN MADE BY THE ASSESSEE FOR HOUSE HOLD EXPENSES . THE DETAILS WERE CALLED FROM THE ASSESSEE IN WHICH IT WAS EXPLAINED THAT HE HAS NOT MAINTAINED ANY REGULAR BOOKS OF ACCOUNT AND HE HAS WITHDRAWN MONEY FOR EXP ENSES FORM THE SHOP OF SHRI SAGARMAL, WHO IS HIS FATHER. AGRICULTURAL I NCOME WAS ALSO SHOWN. HE HAS IN HIS FAMILY, HIS WIFE & TWO SONS. THE A.O. NO TED FROM THE BOOKS OF M/S.SAGARMAL THAT THE ASSESSEE HAS WITHDRAWN AN AMO UNT OF RS. 34,100/- ONLY TO MEET OUT HOUSE HOLD AND PERSONAL EXPENSES. THE REPLY OF THE 7 7 ASSESSEE, HOWEVER, EXPLAINED THAT HE HAS INCURRED A N AMOUNT OF RS. 75,000/- TOWARDS THE EDUCATION OF HIS SON ONLY AND ALSO MADE FOLLOWING EXPENSES :- (I) LIFE INSURANCE PREMIUM RS. 39,530/- (II) INCOME TAX INSTALMENT RS. 4,000/- (III) HOUSE TAX PAID TO NAGAR NIGAM RS. 1,809/- RS. 45,339/- 17. APART FROM THAT TDS MADE BY THE DEDUCTORS ON T HE INTEREST INCOME OF THE ASSESSEE AMOUNTING TO RS. 13,633/- AND RS. 3 28/- DEDUCTED BY BANK OF INDIA ARE ALSO EXPENSES, WHICH HAVE NOT BEEN SHOWN IN THE CAPITAL ACCOUNT. THUS, THE SAME REMAINED AT RS. 13,961/-. THE A.O. F URTHER ESTIMATED HOUSE HOLD EXPENSES AT RS. 7,000/- PER MONTH AND MADE ADD ITION OF RS. 84,000/-. THUS, ALL THE HOUSE HOLD EXPENSES CONSISTING OF ED UCATION EXPENSES, LIC PREMIUM PAYMENT, TDS AND HOUSE HOLD EXPENSES WERE TAKEN AT RS. 2,18,300/- AND BY GIVING BENEFIT OF RS. 34,100/-, A DDITION OF RS. 1,84,200/- WAS MADE. SIMILARLY, THE LD. CIT(A) CALLED FOR SPEC IFIC COMMENTS OF THE ASSESSEE. HOWEVER, THE ASSESSEE DID NOT APPEAR BEFO RE HIM TO EXPLAIN THE CASE. THE ADDITION WAS CONFIRMED AND THE APPEAL OF THE ASSESSEE WAS DISMISSED. 8 8 18. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSION MADE BEFORE THE A.O. AND SUBMITTED THAT ALL THE EXP ENSES WERE INCURRED OUT OF AGRICULTURAL INCOME. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHOR ITIES BELOW AS SUBMITTED ABOVE. 19. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE ADDITION IS ON EXCESSIVE SIDE, BECAUSE OF THE AGRIC ULTURAL INCOME ACCEPTED BY THE ASSESSING OFFICER AT RS. 4 LAKHS. IT IS NOT IN DISPUTE THAT THE ASSESSEE SPENT RS. 75,000/- ON ACCOUNT OF EDUCATIONAL EXPENS ES OF HIS SON, PAYMENT TO LIC IN A SUM OF RS. 45,339/- IS ALSO NOT DISPUTED. TDS DEDUCTED AT RS. 13,961/- IS ALSO NOT DISPUTED. IT IS ALSO NOT IN DI SPUTE THAT THESE AMOUNTS HAVE NOT BEEN DEBITED TO THE CAPITAL ACCOUNT OF THE ASSE SSEE. THE HOUSE HOLD EXPENSES ARE ESTIMATED AT RS. 7,000/- PER MONTH WO ULD BE REASONABLE AND PROPER CONSIDERING THE FINDING GIVEN IN THE CASE OF HIS FATHER SHRI SAGARMAL. THUS, THE AUTHORITIES BELOW WERE JUSTIFIED IN ESTIM ATING HOUSE HOLD EXPENSES IN A SUM OF RS. 2,18,300. HOWEVER, AUTHORITIES BELO W HAVE NOT GIVEN ANY BENEFIT TO THE ASSESSEE OUT OF AGRICULTURAL INCOME IN A SUM OF RS. 4 LAKHS. IT IS ALSO A FACT THAT THE ASSESSEE HAS NOT PRODUCED A NY SPECIFIC EVIDENCE TO 9 9 SHOW THAT THESE EXPENDITURE WERE MEANT OUT OF AGRIC ULTURAL INCOME. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES, IT WOULD BE REASONABLE TO EXTEND SOME BENEFIT OUT OF AGRICULTUR AL INCOME TO THE ASSESSEE TO MEET HOUSE HOLD EXPENDITURE. I, ACCORDINGLY DIRE CT THE AUTHORITIES BELOW TO GIVE BENEFIT OF RS. 68,300/- TO THE ASSESSEE TO MEE T OUT THE HOUSE HOLD EXPENDITURE OUT OF AGRICULTURAL INCOME. RESULTANTLY , THE ADDITION IS MODIFIED AND RESTRICTED TO RS. 1.50 LAKHS IN ALL ON ACCOUNT OF HOUSE HOLD EXPENSES. ACCORDINGLY, THE ORDERS OF THE AUTHORITIES BELOW AR E MODIFIED TO THE ABOVE EXTENT AND ADDITION ON ACCOUNT OF HOUSE HOLD EXPEND ITURE IS RESTRICTED TO RS. 1.50 LAKHS. 20. AS A RESULT, THE I.T.A.NO. 329/IND/2009 IS PART LY ALLOWED. 21. CONSEQUENTLY, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. T HIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 21ST AUGUST, 2009. SD/- BHAVNESH SAINI JUDICIAL MEMBER DATED :21 ST AUGUST, 2009. CPU*198