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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI PRAMOD KUMAR&
O R D E R
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the Assessee is directed against the order dated 20.05.2015 passed by the Commissioner of Income Tax (Appeals) – 3, Ahmedabad under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) arising out of the order dated 12.02.2013 passed by the Income Tax Officer, Ward – 3(1), Ahmedabad for Assessment Year 2010-11 with the following grounds: “1.1 The order passed u/s.250 on 20-5-2015 for A.Y. 2010-11 by CIT(A)-3, Abad upholding the addition/disallowances towards alleged bogus purchases, cessation of liability u/s 41(1) and ad hoc disallowance out of expenses by AO is wholly illegal, unlawful and against the principles of natural justice.
Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 2 - 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned additions.
2.1 The Ld.CIT(A) has grievously erred in law and on facts in not admitting the additional evidence under Rule 46A though there was sufficient cause for failure to produce the same before AO and it was not disputed in remand proceedings by AO.
2.2 That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have rejected the claim of admitting the additional evidence under Rule 46A though there was sufficient cause for failure to produce the same before AO.
3.1 The Ld.CIT(A) has grievously erred in law and on facts in confirming the following additions/disallowances:
(a) Bogus purchases Rs.9,27,747 (b) Cessation of liability u/s 41(1) Rs.5,38,172 (c) 10% out of salary, wages & admn. exp. Rs.4,77,266 (d) Out of HH Exp. Rs.1,50,000 3.2 That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have confirmed the above said additions/disallowances.
It is, therefore, prayed that the additions/disallowances upheld by the CIT(A) may kindly be deleted.”
2. The assessee engaged in the business of erection and maintenance of Mobile Towers as proprietor of Alpesh Electroc Co., filed its return of income on 15.10.2010 declaring total income of Rs.9,61,701/- for A.Y. 2010-11. The Assessee maintains regular books of accounts with purchase-sales invoices etc which are subjected to audit u/s 44AB as per audit report dated 30.09.2010.
Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 3 - 3. Ground Nos. 1.1, 1.2, 2.1 & 2.2 At the time of hearing of the instant appeal the Learned Counsel appearing for the assessee submitted before us that he does not want to proceed with the said grounds of appeals hence, the same are dismissed as not pressed.
4. Ground No.3.1 (a) The assessee has challenged the confirming of addition in respect of the allegation of bogus purchases to the turn of Rs.9,27,747/-.
5. During the course of assessment proceeding, the assessee was told to submit the books of accounts for F.Y. 2009-10 along with all ledgers, cash books, register for purchase and sales, with bills/vouchers and other relevant documents in respect of his return filed. In response whereof, the assessee furnished the copy of accounts along with the details of bills before the Learned AO but only in respect of two parties namely Silicon Technologies and Saikrupa Electricals could not be produced since the same were taken out for VAT returns by the Accountant. It was found by the Learned AO that purchases to the turn of Rs.9,27,747/- were shown to have been made from these two parties on the last date of financial year which was neither reflected in the closing stock of the assessee. The Learned AO ultimately held this as inflated purchase and added the said amount to the total income of the assessee. In appeal, the same was confirmed by the Learned CIT(A). Hence the instant appeal before us.
During the appellate proceeding, the assessee submitted before the Learned CIT(A) that the assessee categorically submitted that during the course of hearing before the Learned AO, the bills particularly in respect of goods purchases from M/s. Saikrupa Electricals amounting to Rs.6,15,897/- Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 4 - and also from M/s Silicon Technologies of Rs.1,98,450/- and Rs.1,13,400/- respectively were submitted in originals but according to the Learned AO three bills were found to be missing, hence the appellant prayed for some time to produce the said purchase bills in respect of the above transactions. It was further submitted by the appellant that it had purchased the goods worth Rs.6,15,897/- from M/s. Saikrupa Electronics by and under the Bill No.SKE/59/09-10 dated 31.03.2011. Since sufficient time was not provided to the assessee, the assessee was not able to collect those bills from the Accountant and submit the same before the authorities below. However, the details of those transactions, the date of purchase goods, the parties from whom goods were purchased, the amount paid for such transactions were again being submitted before the first appellate authority. However, since those additional evidences were not submitted along with initial submission made before the first appellate authority, the Learned CIT(A) questioned the veracity of the same and finally addition made by the Learned AO was confirmed.
6. Heard the respective parties, perused the relevant materials available on record. We practically find no reason for not taking into consideration those particulars provided by the assessee before the first appellate authority for adjudication of the matter by him. We, thus found it fit and proper to send the issue to the file of the Learned CIT(A) to deal it afresh on the basis of the additional evidences so placed before it earlier as well as the additional evidence which the assessee may choose to file at the time of hearing of the matter and to pass order upon affording an opportunity of being heard to the assessee in accordance with law. Hence, this ground of appeal is allowed for statistical purposes.
Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 5 - 7. Ground No.3.1 (b) The assessee has challenged the addition made by the authorities below to the tune of Rs.5,38,172/- on account of cessation of liability u/s 41(1) of the Act.
8. During the course of assessment proceeding, it was found that the assessee has shown an amount of Rs.5,38,172/- as outstanding current liabilities towards the creditor namely Shri Mohamad Jamil Ahmedkhan. The Creditor, however, stated before the authorities below that no such amount was outstanding from the appellant at the end of relevant year. When the assessee was confronted with such statement he also stated that no outstanding liabilities is pending in the name of this particular creditor as the case made out by the Revenue. The Learned AO held the creditor as not a genuine one and added the amount to the income of the assessee. During the appellate proceeding the assessee submitted before the authorities below. 5.1 During appellate proceedings, the appellant discussed the case and made written submissions, the relevant parts of which are reproduced as under :-
"...To start with, I, respectfully submit on behalf of the above appellant, that the appellant being proprietor of Alpesh Electric Co.. who has taken up the educational qualification as diploma, in electrical, and started doing the business commencing with effect from financial year 2006-07. The books of accounts of the appellant firm is subject to audit and the audited copies of accounts along with Form No. 3CD and 3CB were submitted together with P&L A/c. with the return of income, for the year under consideration, thereby disclosing total income at Rs.9,61,701/- as on 15/10/2010. The case of the appellant has been selected for scrutiny, and notices under section 143(2) and 142(1) of the Act had been issued. During the course of assessment proceedings, one of the points raised by the Assessing Officer was that, as per Schedule - C, in the copy of the balance-sheet, it had been reflected the current liability of an amount of Rs.5,38,172/- which was shown against one of the creditors, whose name is Shri Mohammed Jamil Ahmedkhan. To clarify this, the A.O. had issued a summons on Shri Mohammed Jamil Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 6 - Ahmedkhan and recorded the statement as on 07/01/2013 in respect of the above said amount. During the course of recording the statement of Shri Mohammed Jamil Ahmedkhan, he has stated that he had done the work, for the appellant, during financial year 2009-10, and received the said amount, in cash and at present there is no amount outstanding. These are the words, being narrated by the A.O., and the same had been extracted from the assessment order under consideration. On perusal of the statement recorded, it is very clear that while recording the statement, during the course of assessment proceedings, it was not brought to the notice of Shri Mohammed Jamil Ahmedkhan, about the necessity of the statement, and its purpose, and also the reason for recording the statement. On perusal of the said statement recorded, it is quite clear that the educational qualification of Shri Mohammed Jamil Ahmedkhan, is very low, and due to this reason, he has neither asked the reasons for recording the statement nor has made known to him, the reasons for recording the statement. Considering these, no weight-age, can be given to such statement being recorded keeping away the appellant, and also not providing an opportunity, of being cross- examined Shri Mohammed Jamil Ahmedkhan, before him. Thus, in the face of law, the statement recorded by the A.O., cannot be taken as sacrosanct and, therefore, the document so made, cannot be enforceable at law.
In furtherance to the above, I may mention here that, the statement which is under dispute, had been recorded on 07/01/2013, which is after a laps of about one and half years after its payment. Based on the statement so recorded, the Assessing Officer, by applying the provisions of Section 41(1) of the Act, added the said amount as the income of the appellant, holding that, it amounts to cession of liability. In this connection, I may state that deduction under sec .41(1) applies in a case, where an allowance, or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability being incurred by the assesses and subsequently, during any previous year he has obtained either in cash or in any other manner, any amount in respect of such loss or expenditure or trading liability by way of remission or cessation thereof. Here, in this case, the appellant made the payment to Shri. Mohammed Jamil Ahmedkhan, as per confirmation of account dated 1sl April. 2010, a Xerox copy of which is enclosed as (Annexure-A ).
Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 7 - 3. In view of the facts as stated above, it is to mention here that Shri Mohammed Jamil Ahmedkhan is a small contractor, and had business relation with the appellant, as a sub-contractor, and used to supply materials, as per requirements. The appellant had to reimburse the value of the materials so purchased, by Shri Mohammed Jamil Ahmedkhan as per the requirements, either by cash or by cheques, based on the circumstances. According to (Annexure-A). the appellant had paid of the outstanding liabilities, as on 31/03/2010. during the subsequent year. The Assessing Officer, during the course of assessment proceedings, recorded the statement of Shri Mohammed Jamil Ahmedkhan and that of the appellant as on 07/01/2013. and 04/02/2013 respectively. In that statement, both these persons were stated that no amount is outstanding in the form of liability. As stated by me. these two persons thought the amount out-standing at the end of the accounting year, relevant to assessment year under consideration had been fully paid and there remains nothing to be collected at present or to be paid, therefore, they genuniously gave their statement, that no amount is outstanding. Based on this, the A.O., has made the addition of Rs.5,38.172/- in the case of the appellant.
To make it abundantly clear. I draw your kind attention to Schedule 'C' under the head balance sheet as on 31st March, 2010 wherein, the appellant had shown under the head ' Current Liabilities, standing in the name of Mohammed Jamil Ahmedkhan, an amount of Rs.5,38,172/- as per enclosure, as (Annexure- B). Thus, the appellant had a/ready been mentioned that the said amount shown below current liabilities had been paid as per details as depicted as per (Annexure-A) attached. In addition to this, I may further to submit that the accounts of the appellant, is subject to audit, and the copy of the audited accounts, had already been filed along with the return of income, and the assessment had been completed under section 143(3) of the I. T. Act, there-by accepting the books of accounts submitted by the appellant. Thus, the accounts maintained and copy of which furnished, had been accepted fully and truly, thus the addition, made at Rs.5,38,172/- in the case of the appellant, is totally incorrect, and requires to be deleted, to secure law and justice.
While dealing with this amount of addition, it is necessary to draw your kind attention, to Para 4.3, of the assessment order, which is reflected at page No. 2. In that Para, the A.O. has mentioned that " in view of the specific denial of the creditor of not having any outstanding Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 8 - with the assesses, as well as this fact had been confirmed /accepted by the assesses, in the statement so recorded as on 04/02/2013. It is clear, that the amount of Rs.5,38,172/- had been paid in toto by the assesses, during the F.Y.2009-10 relevant to assessment year 2010-11, and the outstanding, ceased to be operative, accordingly, the liability of Rs.5,38,172/- is a cession of liability, ceased to be operative, while the said amount, had been added back to the total income of the assessee under sec. 41(1) of the Act, without considering these facts, the A.O., wrongly added, the said amount to the income of the appellant. "
In this connection, I may mention here that, Section 41(1) expressly stipulates that, unless the liability is finally extinguished and there is no possibility of its revival in future, it cannot be said that the liability has ceased, as per the decision of the Hon'ble Delhi High Court , reported in the case of Commissioner of Income tax v. Bharatpur Nutritional Products Ltd., in 356 ITR 285 (Delhi). As per section 41, profit chargeable to tax, (1) where -an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability, incurred by the assessee, and subsequently during any previous year the assessee has obtained , whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession, and accordingly chargeable to income tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not."
The aforesaid section was elucidated and examined by the Supreme Court in the case of Polyflex (India) P. Ltd.. v. C.I.T. (2002) 257 ITR 343 (SC). The Supreme Court in the said case observed that, section 41(1) of the Act consists two steps. Firstly, it has to be examined whether the assessee had claimed and allowed deduction in respect of any loss, expenditure or trading liability in any earlier year. This is the first step requires examination whether during the period relevant to the assessment year the assessee (i) has obtained any amount in respect of such loss or expenditure, or (ii) obtained any benefit in respect of such trading liability by way of remission or cessation thereof. It was held that the section draws a distinction between allowance or deduction made by the assessee on account of loss and expenditure and allowance Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 9 - or deduction claimed by the assessee in respect of trading liability. The distinction between the two. It was held, is material and relevant in view of the specific language of the section. It was observed that the law makers have intendedly dealt with the two allied concepts; expenditure and trading liabilities separately and specifically. The expressions " remission or cessation " apply only to the trading liability and not to cases of loss or expenditure. It has been accordingly held that, in case of loss or expenditure where payment has been made either in cash or by any other manner whatsoever, the amount has to be included in the taxable income of the year in which the payment is received. It does not matter whether or not there is cessation or remission of liability in such cases. In the case of the appellant, the sub. Contractor, had been given the payment for his work incorporated, and as such the provisions of section 41 does not apply, in the case of the appellant. The addition of Rs. 5,38,172/- made in the case of the appellant, therefore, requires to be deleted.
"In short, what this provision means is that if an assessee has been allowed a deduction in the computation of its total income of any liability on account of loss or expenditure and if subsequently, the liability of the assessee on account of such loss or expenditure is remitted or ceases, that part of the liability which is remitted or ceases shall be treated to be the income of the assessee of the previous year in which such remission or cessation takes place. " Thus the addition made by the Ld. A.O., at Rs. 5,38,772/- in the case of the appellant, may kindly be deleted to protect law and justice.......".
Heard the respective parties, perused the relevant materials available on record. The authorities below has relied upon the statement made by the creditor which was recorded on 07.01.2013 i.e. after the impugned payment has been made by the assessee. The assessee paid that amount to the creditor in the subsequent years as it appears from the records particularly at Page 17 of the Paper Book that the balance amount of Rs.5,38,173/- has been confirmed in the ledger account of the said Shri Mohamad Jamil Ahmedkhan as on 01.04.2011. Section 41(1) expressly stipulated that unless the liabilities finally extinguished and there is no possibility of its revive in future it cannot be said Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 10 - that liability has been ceased. We take the inspiration from the judgment passed by the Hon’ble Delhi High Court in the matter of CIT-vs-Bharatpur Nutritional Products Ltd. reported in 356 ITR 285 (Delhi) along with the judgment passed in the matter of CIT-vs-Silver Cotton Mills Ltd. reported in 254 ITR 728 (Gujarat). Therefore, when there is no evidence of liabilities ceased in the year under consideration before the authorities below, we find no justification in making addition of the impugned amount on the ground of cessation of liability by the authorities below. Hence, the same is hereby deleted.
Ground No.3.1 (c) Upon verification of the records, during the course of assessment proceedings, it was found that the assessee has shown a huge amount of expenses under various heads. The assessee was requested to produce the books of accounts whereupon the assessee produced some of those bills and vouchers of expenses. It was further found that the assessee has debited an amount of Rs.15,26,800/- on account of salary and wages expenses and an amount of Rs.32,45,862/- on account of administrative expenses. Since no cash book was produced by the assessee, neither the bills and vouchers for verification of the same, the Learned AO disallowed Rs.4,77,266/- being 10% of such expenses. It is the case of the assessee that the assessee is maintaining the books of accounts on mercantile basis and it is subjected to audit, thus the income is ascertained only when the work is completed in the system followed by the assessee. The payment was also taken as a part of work-in-progress as and when incurred before receipt of the contract amount. Presumably the work-in-progress would be adjusted only when, the contract is completed. In that view of the matter, there could not have been any requirement of disallowance as submitted by the Learned AR at the time of hearing of the matter, particularly when the books of accounts has not been rejected by the Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 11 - authorities below. On this count, the addition based on estimation without having any basis not sustainable in the eye of law as argued by the Learned AR. He also relied upon the judgment passed in the matter of Sargam Cinema- vs-CIT reported in 328 ITR 513 (SC). On the other hand Learned DR relied upon the order passed by the authorities below.
Heard the respective parties, perused the relevant materials available on record and also the judgment relied upon by the Learned Counsel appearing for the assessee. It appears from the records that the Learned AO has disallowed 10% of the salary, wages and administrative expenses on ad hoc basis. The assessee has also produced required bills and records time to time before the authorities below towards the expenses to salary and wages of Rs.15,26,800/- and towards administrative expenses of Rs.32,45,862/-. The assessee, as we find from the record is also maintaining the mercantile system of accounts. The books of accounts of the assessee was, however, not been rejected by the authorities below while making addition. The assessee’s case is this that the assessee has debited the amount of Rs.15,26,800/- being salary and wages in the trading account and the administrative expenses of Rs.32,45,862/- to the P&L account. Thus we find that merely because some bills were not produced by the assessee in support of those expenses, in the absence of rejection of books of accounts by the Learned AO, addition of 10% of the said amount on estimation basis is not permissible in the eye of law when there was no suppression or understatement have been made by the assessee before authorities below. We, further, find that while making addition 10% of the expenses, no defect has been pointed out by the Learned AO in regard to the method of accounting of the assessee. Hence addition on estimation basis in the absence of rejection of books by the authorities below is according to us not maintainable in view of the judgment passed by the Hon’ble Apex Court in Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 12 - the matter of Sargam Cinema-vs-CIT reported in 328 ITR 513 (SC). The addition is, thus deleted.
Ground No.3.1(d) The addition in respect of household expenses to the tune of Rs.1,50,000/- has also been challenged by the assessee before us.
During the course of assessment proceeding, it was found that the assessee has made withdrawal for household expenses of Rs.1,18,647/-. Since the assessee has claimed deduction u/s 80C, 80D & 80G of Rs.1,00,000/-, Rs.3,956/- and Rs.1,00,000/- respectively, explanation was called for whereupon the assessee informed the Learned AO that the total income of the family is of Rs.3,42,000/-; the father being agriculturists earning Rs.1,50,000/-, mother earning Rs.84,000/- from Graha Udyog and the wife is also earning tuition fees of Rs.1,08,000/- per annum. However, the assessment was finalized by making addition of Rs.3,25,309/- as unexplained household expenses with the following observation: “8.2 The explanation furnished by the assessee is not acceptable because the assessee has not furnished the details of the withdrawal made by the family members in respect of house hold expenses, The facts stated by the assessee have also not been confirmed by the family members. Therefore, the same has no evidential value. Further, the statement on oath was recorded on 04/02/2013 of the assessee, in reply to the question No. 2 regarding the details of family, assessee has stated that the family consist of, father, mother, wife, daughter and son. Children are in the age group of 2 to 8 years. It is specifically mentioned by the assessee that there is no separate income of these family members and entire house hold expenses are being met by the assessee. In reply to the Q.No.8 assessee stated that the house hold expenses is about Rs. 15,000 p.m. which is been incurred by the assessee. Therefore, the earlier submission made by the assessee regarding house hold withdrawal and family member's contribution, is contrary to the facts mentioned ,in the statement recorded on oath. The evidential value of the statement recorded on oath is more than the Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 13 - submission made during the course of assessment proceedings. The house ' hold expenses of Rs.15,000/- is also on the lower side considering the size of family and locking to the standard of living. Assessee has invested Rs.2,03,956/- which has been claimed as deduction in the I.T. Return. The house hold expense is estimated at Rs.2,40,000/-.considering the economic scenario prevailing and size, and life style of the assessee. Therefore, the total withdrawal works out to Rs.4,43,956/- (including investment made) out of which the assessee has shown withdrawal of Rs.1,18,647/-. Therefore, the unexplained house hold expenses would be of Rs.3,25,309/-. Hence, the amount of: Rs.3,25,309/- is added to the total income of the assessee being low house hold expenses.”
During the appellate proceeding, the assessee submitted the following before the Learned CIT(A): “9.1 During appellate proceedings, the appellant discussed the case and made written submissions, the relevant parts of which are reproduced as under :-
".....17. The last grounds of appeal in this case is, against addition made in respect of house-hold expenses, which amounts to Rs.3,25,309/-. The A.O., has stated at page-5 of the assessment order that, the appellant had withdrawn from the capital account an amount of Rs.1,18,647/-, for house-hold expenses. The A.O., thereafter requested the appellant to justify the house-hold expenses, particularly, when the appellant had claimed deductions under sections: 80C, 80D & 80G, amounting to Rs.7,00,000/-, Rs.3,956/-, and Rs.7,00,000/- respectively. According to the A.O., the appellant had filed his written reply dated 05/12/2012 in which the sources of income to meet with the house-hold expenses, have been explained, the same is reproduced, here in below, being shown by the A.O., in the assessment order, especially on page No. 6.
Member Activity Income (Rs.) Father Agricultural 1,50,000/- Mother Making of Achar, Papad 84,000/- Wife Tuition fees of teaching primary students 1,08,000/- Total 3,42,000/- Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 14 - 18. As per the assessment order, the appellant had stated that the investment, have been made partly from withdrawals from proprietary firm, and rest from the income received from family members. Further, the appellant had mentioned reply to question No.8, that the house hold expenses would be about Rs. 75,000/- per month, the same had been incurred by the appellant. Thus, the A.O., has stated that thus the earlier submission made by the appellant is contrary to the facts mentioned above. The A.O. stated in the assessment order that, the house-hold expenses shown is at lower side, keeping the size of the family and the standard of living. According to the information, the appellant had invested an amount of Rs.2,03,956/- "and claimed deduction in the I.T. return filed. The A.O., thereafter, estimated the house - hold expenses of Rs.2,40,000/- considering the economic scenario prevailing and size and life style of the appellant. Accordingly, the total withdrawal worked out at Rs.4.43.956/- (including investment made) against which the appellant had shown withdrawal of Rs. 7,78,647/- Considering all these, the A 0 estimated the shortfall of Rs.3,25,309/- and added the same amount to the total income of the appellant stating the A O. that the appellant had shown low house-hold expenses.
From the facts as narrated above, I may bring to your honour that the appellant had withdrawn an amount of Rs. 1,78.647/- against which the appellant had claimed deduction of Rs.2.03,956/- in respect of deduction under sections 80C. 80D and 80G of the Act which is also reflected at page-6. of the assessment order. As per the appellant he informed the A.O. that the house hold expenses are at Rs.15.000/-per month while the A.O.. has estimated it at Rs.20.000/-. according to which it comes to Rs.2.40,000/-. Considering this, the A.O. added with the income of the appellant. an amount of Rs. 3,25,309/-.
In this connection, I may submit on behalf of the appellant that for the purpose of residence, the appellant possess his own house His father is an agriculturist, and earns income from agriculture, amounting to Rs. 1,50,000/- per year. His mother is working in Graha Udyog and earns yearly income about Rs.84,000/-. Similarly, his wife is providing tuition to small children, for which she earns an amount of Rs 7,08,000/- per year sitting at home. When we makes the total of the above Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 15 - income earned, it comes to Rs.3,42,000/- per annum. As per the determination of expenses made by the A.O., the appellant is in need of money against which the income earned by the family members comes to Rs.3,42,000/-. Thus, there is no shortage in the house-hold expenses. However, the A.O. has added an amount of Rs.3,25,309/- which is without the consideration of the said amount being earned, by the family members. Further, the A.O. had not found any discrimination in the information provided by the appellant, at the time of hearing in respect of the amount of Rs.3,42,000/-.
Now looking to the members of the family, I may say that as per the information available, his father, mother and wife have no habit of spending money out- side the home. Also the kids of the appellant being aged about 8 years and 2 years have no extra expenses to be incurred. Thus the house-hold expenses estimated by the A.O. is fully abnormal, requires to be reduced. In view of the facts as mentioned above. I request your honour, on behalf of the appellant, to delete the addition made at Rs.3,25,309/- on account of household expenses, to secure law and justice, thereby accepting the returned income by the appellant, at Rs.9,61,701/- ......."
Taking into consideration the size of the appellant family and in the absence of the evidence that the family income has been produced by the appellant since withdrawal shown is on the lower side lump sum disallowance of Rs.1,50,000/- has been made by the Learned CIT(A).
Heard the respective parties, perused the relevant materials available on record. It appears from the records that while replying the question no.8 put to the assessee it was stated by the assessee that the household expenses were at Rs.15,000/- whereas the same has been estimated at Rs.20,000/- i.e. Rs.2,40,000/- per annum by the Learned AO.
Ashish Haribhai Patel. Vs. ITO Assessment Year 2010-11 - 16 - We have gone through the explanation given by the assessee and also the source of income of the family members to meet the household expenses appears to be genuine though the same has, however, not been taken into consideration by the authorities below while considering the issue. We also do not find any reason as to why household expenses to the tune of Rs.15,000/- as claimed by the assessee has not been considered in affirmative taking into consideration of the status and life style of the family of the assessee which again according to us seems to be genuine and hence we find not reason of the impugned addition of Rs.1,50,000/- on account of unexplained household expenses. The addition is, therefore, deleted.