SH. JOGESH CHANDER GUPTA,PHAGWARA vs. THE ADDL. COMMISSIONER OF INCOME-TAX, PHAGWARA

13-Asr-2015 Shri Jogesh Chander Gupta, Phagwara 3 Facts of the case are that household expense of the family were estimated at Rs. 40,000 per month by the assessing officer and after reducing the withdrawals made by the assessee at Rs. 240,000, addition of Rs. 240,000 was made which was also sustained by the Id. CIT(A).

During the course of the assessment proceedings, the issue of household expenses was taken up and detailed explanation was filed by the assessee. The facts of the case are that household expenses were contributed by the assessee as well as his son Sh. Ashish Gupta and the total of the household expenses work out to Rs.288,000 and not Rs. 240,000 which actually represents the withdrawal made by the assessee alone [point (a) at page no. 9]. The above fact is mentioned in para no. 4.2 at page no. 4 of the assessment order also. It is pertinent to mention that the expenses on electricity are not included in the figure of household withdrawals as stated in the submission dated 1/11/2011 filed with the assessing officer read with the capital account of the assessee. The assessing officer had taken the figure of Rs. 240,000 i.e. the amount that would be available after excluding the educational expenses and opined that this amount is absurd for meeting the expenses of food, grocery, clothes, shoes, entertainment, servants, medical needs and social obligations keeping in view the size of family of 5 adults and two children. The face that the withdrawals made during the assessment years 2005-06 and 2006-07 are in line with that shown during this year has also not been appreciated by the assessing officer. In view of 13-Asr-2015 Shri Jogesh Chander Gupta, Phagwara 4 the accepted history of the case (and the principal of consistency, even after making adjustments for passage of time, the withdrawals made by the assessee for household e^ senses during the year under consideration (excluding electricity expenses etc.) were quite sufficient. The assessing officer still estimated the monthly expenses at Rs. 40,000 and made an addition of Rs. 240,000 after reducing the amount withdrawn at Rs. 240,000. The assessing officer also referred to the decision of the Hon'ble Punjab & Haryana High Court in the case of Vidya Sagar Oswal vs. CIT reported at 108 ITR 861 stating that not only did the Punjab & Haryana High Court uphold the addition but also confirmed the levy of penalty u/s 271(l)(c) [1st para at page no. 6 of 143(3)].

It is submitted that unless the household expenses are ridiculously low, no interference/ addition can be made. Attention is drawn to the decision of the ITAT, Amritsar Bench, Amritsar in the case of Parmod Seghal vs. ACIT wherein while dealing with disallowance out of household expenses it was held that unless the withdrawals were totally absurd, the onus was on the revenue to prove that these were on the higher side than claimed. If a reasonably placed person was to claim that household expenses of a family of 3/4 persons was Rs. 4,000 or 5,000 for the entire year that it could lead to a rebuttable presumption that the version for not correct. Since in the present case, the cash withdrawals were Rs. 240,000, there was nothing absurd with the level of household expenses shown by the assessee particularly in view of the past history 13-Asr-2015 Shri Jogesh Chander Gupta, Phagwara 5 of the case and the revenue was not justified to apply its own estimate of household expenses. The decision of the jurisdictional ITAT which is binding in nature is fully applicable to this case should have been followed by the Id. CIT(A). We also draw your attention to the decision of the ITAT Jaipur 'B' Bench in the case of Rohitash Yadav vs. ITO reported wherein it was held that in the absence of any evidence, no towards household expenses could be made on the basis of suspicion, word "has incurred" as used in section 69C places onus on the revenue which cannot be discharged merely on the basis of presumption. Copy of the decision enclosed at page no. 45 to 49 [please see page no. 46]. Also it has been held by the ITAT, Amritsar Bench in the case of Anil Kumar, Anup Kumar & Soma Devi vs. ACIT reported at 77 TTJ 560 that where the assessing officer had not given any cogent reason estimating the household expenses at a higher figure, the addition could not be sustained. In the present case also there was no basis / logic for treating the monthly household expenses at Rs. 40,000 per month. The case relied upon by the assessing officer in the assessment order i.e. Vidya Sagar Oswal vs. CIT reported at 108 ITR 861 (Punjab & Haryana High Court) relates to penalty proceedings and thus it was incorrect to state that the addition was confirmed by the said authority. In that case the household expenses shown for the entire year were Rs. 2,000 and were debited at the end of the year. These were ridiculously low and could be a subject matter of penalty. This finding is also in consistent with the view expressed by the jurisdictional ITAT in the decision of Parmod Seghal 13-Asr-2015 Shri Jogesh Chander Gupta, Phagwara 6 (supra). The facts of the present case are entirely different as the household expenses are reasonable and cannot be doubted particularly in view of the past accepted history of the case. Reliance thus placed by the assessing officer on the judgment in the case of Vidya Sagar Oswal (supra) was not justified. Also, benefit of disallowance out of car and telephone expenses made at Rs. 26,013 (Rs.13,702 + Rs.8,091 + Rs.4.220) in the computation should have been allowed (enclosed at page no. 31 & 32).

The addition of Rs. 240,000 towards household expenses was totally unjustified. The above submissions were before the Ld. CIT(A) but these were not even fully discussed. This is evident from para no. 5.2, 5.3 & 5.4 at page no. 5 & 6 of the impugned order. The specifics of the case have not beer, considered in the right perspective. The relevant facts that emerge are summarized below; a) Much lower household expenses had been accepted in the earlier assessment years while framing assessment u/s 143(3). These set up a benchmark of household expenses of the assessee and the revenue should have followed the principle of consistency. b) There was no basis of estimation of household expenses at Rs. 40,000 per month. In any case the withdrawals made were sufficient keeping in view the fact that disallowances of certain personal expenses (telephone and car) been made in the computation income and electricity expenses had also been paid separately.

13-Asr-2015 Shri Jogesh Chander Gupta, Phagwara 7 c) Even the decision of the jurisdictional ITAT which was binding was not specifically discussed keeping in view the fact that the withdrawals for household expenses were not absurd and as such the assessing officer did not have the right to substitute the same with his own estimate. d) Every family has its own way/ standard of living and expense incurred by a family towards household expenses cannot be doubted in the absence of evidence. e) At worst the shortfall could be attributed to SI Ashish Gupta, son of the assessee who had withdrawn Rs. 48,000 and was an independent income tax assessee. It is humbly prayed that addition of Rs. 240,000 made by the Assessing Officer and sustained by the Id CIT(A) towards household expenses may kindly be deleted.