Shri Chirag Dharampal Nandwani, Surat V. The Income tax Officer,Ward-3(3), Surat

ITA 3709/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1765 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 14-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R N VEPARI
• Keywords: Opportunity of being heard; Set aside
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.3709/AHD/2008 A. Y.: 2005-06 SHRI CHIRAG DHARAMPAL NANDWANI, PROP. CHIRAG CREATIONS, 503, SAKRUTI APARTMENT, BHATAR ROAD, SURAT VS THE INCOME TAX OFFICER, WARD 3(3), AAYAKAR BHAVAN, OPP. NEW CIVIL HOSPITAL, MAJURA GATE, SURAT PA NO. ADRPN 9706 C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI R. N. VEPARI, AR RESPONDENT BY SHRI MUDIT NAGPAL, SR. DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II , SURAT DATED 29 TH SEPTEMBER, 2008 FOR ASSESSMENT YEAR 2005-06. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. 3. ON GROUND NO.1, THE ASSESSEE CHALLENGED THE ADDI TION OF RS.6,20,260/- ON ACCOUNT OF UNVERIFIABLE PURCHASES. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO WHILE VERIFYING THE PUR CHASES ISSUED NOTICE U/S 133(6) OF THE IT ACT FROM SOME OF THE PA RTIES. FROM THE REPLY RECEIVED AND DETAILS FURNISHED BY THE ASSESSE E, IT WAS SEEN THAT ITA NO.3709/AHD/2008 SHRI CHIRAG DHARAMPAL NANDWANI VS ITO, WARD 3(3), SURAT 2 IN THE CASE OF 3 PARTIES NAMELY M/S. NAJME TEXTILES , M/S. SADGURU FABRICS AND M/S. NILESHKUMAR PRAVINKUMAR THERE WER E VARIATION IN THE VALUE OF THE PURCHASES SHOWN BY THE ASSESSEE IN THE PURCHASES THAT WERE CLAIMED TO HAVE BEEN MADE BY HIM. THE EXP LANATION OF THE ASSESSEE WAS CALLED FOR IN WHICH IT WAS EXPLAINED T HAT SOME PROPRIETARY CONCERNS OF THE FAMILY MEMBERS WERE ENG AGED IN THE SAME LINE OF BUSINESS. AS A RESULT THEREOF, THE SAI D PARTIES HAVE MIXED UP ENTRIES OF PURCHASES AND PAYMENTS. THE ASS ESSEE HOWEVER, DID NOT SUBMIT THE EXTRACT FROM THE BOOKS OF ACCOUNTS OF THE SISTER CONCERNS AND DID NOT FILE RECONCILIATION OF THE PURCHASES. THE AO, THEREFORE, TREATED THE SUM OF RS.6,20,260/- AS UNVERIFIABLE PURCHASES AND MADE THE ADDITION. IT WAS SUBMITTED B EFORE THE LEARNED CIT(A) THAT GOODS HAD BEEN ACTUALLY PURCHAS ED WHICH WERE SUPPORTED BY DOCUMENTARY EVIDENCES. IN ORDER TO REC ONCILE THE DIFFERENCE, THE ASSESSEE HAS SUBMITTED THAT IN THE CASE OF M/S. NAJME TEXTILES PURCHASES OF RS.6,43,629/- HAD BEEN SHOWN BY THE ASSESSEE FROM THE SAID PARTY, WHEREAS THE PARTY HAD SHOWN SA LES OF RS.5,61,207/-, RESULTING IN A DIFFERENCE OF RS.82,4 22/-. IT WAS SUBMITTED THAT THIS AMOUNT REPRESENTS 3 BILLS WHICH HAD NOT BEEN ACCOUNTED BY THE SAID PARTY IN THEIR ACCOUNTS. IN T HE ACCOUNT OF THE ASSESSEE IT WAS MISTAKENLY TAKEN IN THE ACCOUNTS OF SISTER CONCERN M/S. DEEPEE SILK MILLS. WITH REGARD TO M/S. SADGURU FABRICS, SOME RELEVANT BILLS WERE OUTSTANDING AT THE END OF THE Y EAR WHICH HAS BEEN PAID IN THE SUBSEQUENT YEAR. THESE WERE NOT ENTERED INTO BY THE SAID PARTY AND WERE ACCOUNTED FOR IN THE SUBSEQUENT YEAR . THE ASSESSEE HAS MADE THE PAYMENT BY ACCOUNT PAYEE CHEQUES. IN T HE CASE OF M/S. NILESHKUMAR PRAVINKUMAR THE SAID PARTY HAS SHO WN EXCESS ITA NO.3709/AHD/2008 SHRI CHIRAG DHARAMPAL NANDWANI VS ITO, WARD 3(3), SURAT 3 SALES OF RS.4,38,909/- AS COMPARED TO THE PURCHASES ACCOUNTED FOR BY THE ASSESSEE. IT WAS CONTENDED THAT INSTEAD OF A CCOUNTING FOR SUCH SALES IN THE NAME OF THE SISTER CONCERN OF THE ASSE SSEE, IT ENTERED THEM IN THE ACCOUNTS OF THE ASSESSEE IN THEIR BOOKS . IT WAS SUBMITTED THAT COMPLETE VERIFICATION WAS MADE AND PAYMENTS HA VE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES. QUANTITY DETAILS OF INCOMING AND OUTGOING WERE MAINTAINED. THEREFORE, ADDITION WAS U NJUSTIFIED. THE LEARNED CIT(A) ON CONSIDERATION OF THE ABOVE FACTS NOTED THAT THE ASSESSEE FILED COPIES OF ACCOUNTS OF THE PARTIES WH ICH ARE OF SISTER CONCERNS AND IT WOULD NOT BE DIFFICULT FOR THE ASSE SSEE TO MANUFACTURE THE ENTRIES TO SUIT THE REQUIREMENT OF THE AO OR TO MEET HIS OBJECTION. SINCE, NO RECONCILIATION WAS SUBMITTED BEFORE THE A O, THEREFORE, ADDITION WAS CONFIRMED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND F ILED THE STATEMENT OF RECONCILIATION IN ALL THE 3 CASES. AS REGARDS M/S. NAJME TEXTILES, THE GOODS WERE SOLD THROUGH BILLS NO.668, 669 AND 670 ALL DATED 03-12-2004 FOR A TOTAL SUM OF RS.82,422/- AND THE PAYMENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES. DETAI LS OF THE SAME ARE MENTIONED AT PAGE 2 OF THE PAPER BOOK. ALL ENTRIES OF PURCHASES AND PAYMENTS ARE REFLECTED IN THE COPY OF THE ACCOUNTS OF M/S. NAJME TEXTILES (PB-11) AND PAYMENTS ARE ALSO R ECORDED IN THE BOOKS OF ACCOUNTS (PB- 12 AND 13). IT WAS FURTHER S UBMITTED THAT THROUGH MISTAKE M/S. NAJME TEXTILES HAD SHOWN THE P URCHASES IN THE CASE OF M/S. DEEPEE SILK MILLS. THEREFORE, ADDITION IS MERELY MADE FOR THE MISTAKE IN THE ENTRY. AS REGARDS M/S. SADGURU F ABRICS, IT WAS ITA NO.3709/AHD/2008 SHRI CHIRAG DHARAMPAL NANDWANI VS ITO, WARD 3(3), SURAT 4 EXPLAINED THAT DIFFERENCE WAS OF RS.98,929/-. COPY OF THE ACCOUNTS OF THE PARTY IS FILED TO SHOW THAT TOTAL DEBIT FOR THE PURCHASES WAS RS.1,80,811/- IN THE YEAR AND PAYMENTS HAVE BEEN MA DE OF RS.80,686/- UP TO 31-3-2005 AND FURTHER PAYMENT WAS MADE OF RS.1,00,118/- UP TO 31-3-2006 (PB- 14 AND 15). ALL THE PAYMENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES WHICH ARE REFLEC TED IN THE BANK ACCOUNTS. IT IS POSSIBLE THAT THE PARTIES HAVE DEBI TED THESE BILLS IN SUBSEQUENT YEAR. COPY OF THE BANK ACCOUNT IS ALSO F ILED AT PAGE 16 TO 18 OF THE PAPER BOOK. IN THE CASE OF M/S. NILESHKUM AR PRAVINKUMAR, THE ASSESSEE HAS SHOWN LESS PURCHASES BECAUSE THAT PARTY HAS SHOWN SALES OF RS.12,38,558/-, BUT ACTUAL PURCHASES MADE BY THE PARTY IS RS.7,94,679/- AND THE DIFFERENCE OF RS.4,3 8,909/- WAS THE AMOUNT OF THE SALES MADE TO M/S. DEEPEE SILK MILLS, ANKIT FASHION AND POOJA TRADERS. COPIES OF THE ACCOUNTS OF THE PA RTIES ARE FILED AT PB -19 TO 26 AND THE COPY OF THE ACKNOWLEDGEMENT OF THE RETURN IS FILED AT PB-27. THESE PARTIES HAVE REFLECTED THE PU RCHASES IN THEIR ACCOUNTS, COPIES OF WHICH ARE FILED AT PB-28 TO 46. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO FOR RECONCILIATIO N AND VERIFICATION OF THESE ENTRIES. THE LEARNED DR ALSO SUGGESTED THAT S INCE NO DETAILS WERE FILED BEFORE THE AO, THEREFORE, MATTER MAY BE RESTORED TO THE AO FOR RECONCILIATION AND VERIFICATION. 5. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF T HE VIEW THE MATTER REQUIRES VERIFICATION AT THE STAGE OF THE AO . THE ASSESSEE DID NOT FILE COPIES OF THE ACCOUNTS OF THE PARTIES BEFO RE THE AO AND NO RECONCILIATION WAS FILED TO RECONCILE AND THE DETAI LS WERE FILED BEFORE ITA NO.3709/AHD/2008 SHRI CHIRAG DHARAMPAL NANDWANI VS ITO, WARD 3(3), SURAT 5 THE LEARNED CIT(A) BUT THE SAME HAVE NOT BEEN PROPE RLY APPRECIATED. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO WR ITTEN SUBMISSIONS AND THE DOCUMENTS FILED IN THE PAPER BOOK NOTED ABO VE WOULD PRIMA FACIE PROVE THAT THERE IS NO DIFFERENCE IN THE PURC HASE ACCOUNT. THE ASSESSEE EXPLAINED THROUGH EVIDENCE AND MATERIAL ON RECORD THAT WHATEVER PURCHASES HAVE BEEN MADE BY THE ASSESSEE F ROM THE 3 PARTIES HAVE BEEN PROPERLY RECORDED IN THE BOOKS OF ACCOUNTS BUT BECAUSE OF SOME ENTRIES MADE BY THE SELLERS IN THE ACCOUNT OF THE SISTER CONCERNS OR WRONG ENTRIES HAVE BEEN POSTED I N THEIR ACCOUNTS LED TO THE DIFFERENCE IN THE ACCOUNTS. THE EVIDENCE S FILED IN THE PAPER BOOK SUPPORT THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE DIFFERENCE IS RECONCILABLE. BOTH THE PARTI ES, THEREFORE, RIGHTLY SUGGESTED THAT THE MATTER MAY BE RESTORED TO THE FI LE OF THE AO FOR RECONCILIATION AND VERIFICATION OF THE DETAILS. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THI S ISSUE TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THIS ISSUE BY VE RIFYING THE ABOVE ENTRIES EXPLAINED IN THE PAPER BOOK BY GIVING REASO NABLE SUFFICIENT OPPORTUNITY OF BEING HEARD. THE ASSESSEE IS DIRECTE D TO PRODUCE COPY OF THE SAME PAPER BOOK AS FILED BEFORE THE TRIBUNAL BEFORE THE AO FOR VERIFICATION AND RECONCILIATION. THE ASSESSEE MAY A LSO ADDUCE SUFFICIENT EVIDENCE BEFORE THE AO FOR VERIFICATION AND RECONCILIATION OF THE ENTRIES. IN THE RESULT, THIS GROUND OF APPEAL O F THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE ADDI TION OF RS.60,260/- ON ACCOUNT OF HOUSEHOLD EXPENSES. THE A SSESSEE IN THE ASSESSMENT YEAR HAS SHOWN HOUSEHOLD EXPENSES FOR HI MSELF AND FOR ITA NO.3709/AHD/2008 SHRI CHIRAG DHARAMPAL NANDWANI VS ITO, WARD 3(3), SURAT 6 HIS FAMILY MEMBERS FOR RS.59,794/-. THE AO CONSIDER ING THE SIZE OF THE FAMILY AND STANDARD OF LIVING ESTIMATED ANNUAL HOUSEHOLD EXPENSES AT RS.1,20,000/-. THE AO NOTED THAT THE AS SESSEE HAS SHOWN WITHDRAWAL OF RS.5,000/- IN HIS INDIVIDUAL CA PACITY AND TOTAL FAMILY WITHDRAWAL IS SHOWN AT RS.59,794/-. THE FAMI LY OF THE ASSESSEE CONSISTS OF 5 ADULT MEMBERS. ACCORDINGLY, THE AO ES TIMATED THE HOUSEHOLD EXPENSE AT RS.1,20,000/- AND MADE THE ADD ITION OF RS.60,206/-. IT WAS SUBMITTED BEFORE THE LEARNED CI T(A) THAT THE ASSESSEE IS UNMARRIED AND ENTIRE HOUSEHOLD EXPENSES WERE BORNE BY HIS PARENTS AND HIS FAMILY CONSISTS OF 4 MEMBERS ON LY. THE LEARNED CIT(A) NOTED THAT NATIONAL SURVEY HAVE REVEALED THA T THE HIGHEST PER CAPITAL HOUSEHOLD INCOME IS EARNED BY THE FAMILIES OF SURAT AND THE AVERAGE PER CAPITA HOUSEHOLD INCOME AT SURAT HAS BE EN PEGGED AT RS.4.5 LACS APPROXIMATELY. THE LEARNED CIT(A) NOTED THAT THE ASSESSEES FAMILY IS OF 4 MEMBERS AND THE PER MONTH WITHDRAWAL WOULD BE RS.1250/- PER INDIVIDUAL MEMBER WHICH IS H IGHLY INSUFFICIENT CONSIDERING THE SOCIAL STATUS AND THE AMENITIES PRO VIDED IN THEIR HOUSE. THE LEARNED CIT(A) NOTED THAT EVEN IF THE AS SESSEE IS UNMARRIED BUT THE FACTS AND CIRCUMSTANCES WOULD SHO W THAT ADDITION HAS BEEN RIGHTLY MADE BY THE AO. THIS GROUND WAS AC CORDINGLY DISMISSED. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT EXCESSIVE ADDITION IS MADE ON THE SAME. THE AS SESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF SAREES IN THE NAME OF M/S. CHIRAG CREATION. SINCE THE ASSESSEE IS DOING BUSINE SS ACTIVITIES, THEREFORE, EVEN IF THE ASSESSEE IS UNMARRIED, SOME PERSONAL ITA NO.3709/AHD/2008 SHRI CHIRAG DHARAMPAL NANDWANI VS ITO, WARD 3(3), SURAT 7 EXPENDITURE IS REQUIRED TO MEET OUT DAY TO DAY EXPE NSES. THE ASSESSEE HAS HOWEVER, SHOWN RS.5,000/- FOR HIS PERS ONAL EXPENSES WHICH IS HIGHLY INSUFFICIENT. THE ASSESSEE HAS 4 FA MILY MEMBERS AND ONLY WITHDRAWAL IS SHOWN AT RS.59,794/-. THE AUTHOR ITIES BELOW WERE, THEREFORE, JUSTIFIED IN ESTIMATING THE HOUSEHOLD EX PENSES CONSIDERING PER CAPITA INCOME OF THE PERSONS LIVING IN SURAT AN D THEIR STANDARD OF LIVING. HOWEVER, CONSIDERING THE FACT THAT THE ASSE SSEE IS UNMARRIED, THE ESTIMATION OF HOUSEHOLD EXPENSE AT RS.1,20,000/ - IS EXCESSIVE WHICH IS MODIFIED TO RS.1,00,000/- ONLY. RESULTANTL Y, THE ADDITION IS MAINTAINED IN A SUM OF RS.40,206/-. THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. ON GROUND NO.3, THE ASSESSEE CHALLENGED THE DISA LLOWANCE OF RS.10,000/- OUT OF VARIOUS EXPENSES. THE AO NOTED T HAT THE EXPENSES WERE NOT SUPPORTED BY PROPER VOUCHERS; THE REFORE EXPENSES CANNOT BE SUBJECTED TO VERIFICATION. ADDIT ION OF RS.10,000/- WAS MADE FOR NON-BUSINESS AND PERSONAL PURPOSE. NOT HING WAS PRODUCED BEFORE THE LEARNED CIT(A). ACCORDINGLY, TH E ADDITION WAS CONFIRMED. SAME IS THE POSITION BEFORE US AND NO MA TERIAL OR EVIDENCE WAS PRODUCED. NO FURTHER ARGUMENT HAS BEEN MADE AS TO HOW THIS ADDITION IS UNJUSTIFIED. ACCORDINGLY, WE D O NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE A UTHORITIES BELOW. THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 9. NO OTHER POINT IS ARGUED OR PRESSED. ITA NO.3709/AHD/2008 SHRI CHIRAG DHARAMPAL NANDWANI VS ITO, WARD 3(3), SURAT 8 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-03-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 18-03-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD