Sh. Arpit Kansal, Patiala v. ITO, Patiala

CO 15/CHANDI/2013 | 2008-2009
Pronouncement Date: 18-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 1521523 RSA 2013
Assessee PAN ARLPK3939Q
Bench Chandigarh
Appeal Number CO 15/CHANDI/2013
Duration Of Justice 4 month(s)
Appellant Sh. Arpit Kansal, Patiala
Respondent ITO, Patiala
Appeal Type Cross Objection
Pronouncement Date 18-10-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 18-10-2013
Date Of Final Hearing 14-10-2013
Next Hearing Date 14-10-2013
Assessment Year 2008-2009
Appeal Filed On 17-06-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA JUDICIAL MEMBER ITA NO. 355/CHD/2013 ASSESSMENT YEAR: 2008-09 THE ITO VS. SHRI ARPIT KANSAL WARD 4 20 NEW LAL BAGH PATIALA PATIALA PAN NO. ARLPK3939Q & C.O NO. 15/CHD/2013 (IN ITA NO. 355/CHD/2013) ASSESSMENT YEAR: 2008-09 SHRI ARPIT KANSAL VS. THE ITO 20 NEW LAL BAGH WARD 4 PATIALA PATIALA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJEET SINGH RESPONDENT BY : SHRI K.P. BAJAJ DATE OF HEARING : 14/10/2013 DATE OF PRONOUNCEMENT : 18/10/2013 ORDER PER T.R.SOOD A.M. THE APPEAL BY THE REVENUE AND CROSS OBJECTIONS BY T HE ASSESSEE ARE DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) PA TIALA DATED 29.01.2013. 2. IN THE REVENUES APPEAL FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT (A) HAS ERRED IN REDUCING THE ADDITION OF RS. 19 73 136 /- TO 5% OF THE TURNOVER I.E. RS. 2 92 294/- MADE BY THE AO ON ACCOUNT OF SUPPRESSION OF SALES FROM LIQUOR AS UNACCOUNTED INCOME WITHOUT APPRECIATING THE FACT T HAT THE ASSESSEE FAILED TO PRODUCE THE SALE BILLS/REGIS TER AND NO SATISFACTORY EXPLANATION FOR NOT RECORDING S ALES ON SEVERAL DAYS WAS GIVEN BY THE ASSESSEE. 2 2. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET AS IDE AND THAT OF THE AO RESTORED. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DU RING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER REJECTED THE BOOK S OF ACCOUNT FOR FAILURE TO PRODUCE THE SALE BILLS AND NON-MAINTENAN CE OF STOCK REGISTER. FURTHER IN RESPECT OF LIQUOR BUSINESS IT WAS OBSE RVED BY HIM THAT ASSESSEE HAS NOT SHOWN ANY SALES OF 24 DAYS DURING THE PERIOD OF FIRST 3 MONTHS THEREFORE ACCORDING TO HIM SALES WERE SUPP RESSED AND HE ESTIMATED SUCH SALES AT RS. 19 73 136/- WHICH WAS C ALCULATED ON THE BASIS OF AVERAGE SALE OF RS. 24 422/- PER DAY. 4. ON APPEAL IT WAS MAINLY SUBMITTED THAT ALL THE SALES WERE MADE IN CASH AND THE MONEY WAS DEPOSITED IN BANK ACCOUNT NO . 8762 WITH PUNJAB & SIND BANK VILLAGE BHUNERHERI. IT WAS FURTHER SUB MITTED THAT THERE ARE DRY DAYS AND WEEKLY OFF DAYS I.E. WHY NO SALES WE RE RECORDED FOR SOME OF THE DAYS. THE LD. CIT(A) AGREED WITH THE SAME AND FOLLOWING THE DECISION OF THE THIRD MEMBER IN THE CASE OF ITO V L AXMI NARAIN RAMSAROOP SHIVHARE REPORTED IN 119 ITD 15 (TM) HE ULTIMATELY DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE GROSS PROFIT AT 5% OF THE TURN OVER. 5. BEFORE US LD. DR CARRIED US THROUGH THE ASSESSM ENT ORDER AND RELIED ON THE OBSERVATION MADE BY THE ASSESSING OFF ICER. 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE SUPPORTED THE IMPUGNED ORDER AND POINTED OUT THAT LD. CIT(A) HAS BASICALLY FOLLOWED THE DECISION OF THIRD MEMBER IN THE CASE OF ITO V L AXMI NARAIN RAMSAROOP SHIVHARE (SUPRA). HE FURTHER SUBMITTED T HAT ALL SALE PROCEEDS WERE DEPOSITED IN THE BANK ACCOUNT THEREFORE NO M ATERIAL WAS THERE TO ESTIMATE THE EXTRA SALES. HE POINTED OUT THAT IN A MONTH FEW DAYS ARE OBSERVED AS DRY DAYS ON WHICH NO LIQUOR CANNOT BE SOLD AS PER EXCISE 3 RULES. IF THESE DAYS ARE CALCULATED ALONG WITH WEE KLY OFF DAYS THEN THE TOTAL 24 DAYS WOULD BE WORKED OUT ON WHICH NO SALES WAS POSSIBLE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE. IT IS UNIVERSALLY KNOWN THAT LIQUOR VENDS HAVE TO FOLLOW THE EXCISE R ULES. THE GOVERNMENT HAS PRESCRIBED CERTAIN DRY DAYS THEREFORE IT I S POSSIBLE THAT ON DRY DAYS AND WEEKLY OFF DAYS THERE WOULD BE NO SALES. HOWEVER SINCE BOOKS OF ACCOUNT HAVE BEEN REJECTED THEREFORE LD. CIT(A ) HAS CORRECTLY ESTIMATED THE GROSS PROFIT. THE LD. CIT(A) HAS DEC IDED THE ISSUE VIE PARA 5.3 WHICH READS AS UNDER:- 5.3 I HAVE CONSIDERED THE SUBMISSION MADE. DURING THE APPELLATE PROCEEDINGS THE APPELLANT SUBMITTED THAT HE IS A LICENSED SELLOR OF LIQUOR REGULATED BY EXCISE LAWS AND NO VIOLATION ON THAT ACCOUNT HAS OCCURRED. PURCHASE AR E SUPPORTED BY BILLS AND THERE CANNOT BE ANY SALE WIT HOUT PURCHASE. THE APPELLANT FURTHER REFERRED TO THE DEC ISION OF HONBLE ITAT IN ITO VS LAXMI NARAYAN RAM SARUP 119 ITD 50 TM AS REFERRED ABOVE. IT IS FURTHER SUBMITTED THAT THE APPELLANT HAS DECLARED GROSS PROFIT AT 3.45% AND IF ADDITION OF 19 73 173 IS MADE THEN THE GROSS PROFIT WOULD BE 37% WHICH IS UNHEARD OF IN THIS LINE OF BUSINESS. HOWEV ER IT IS NOTED THAT THE APPELLANT HAS NOT PRODUCED THE STOCK REGISTER OR THE SALE BILLS. GIVEN THE WIDE FLUCTUATION IN TH E SALES RECORDED ON VARIOUS DATES IT WAS NECESSARY TO PRODU CE THE STOCK REGISTER OR RECONCILE THE PURCHASE AND SALE E NTERED INTO BY THE APPELLANT AND PRODUCE SALES BILL. SINCE THE SAME HAS NOT BEEN DONE IN MY OPINION BOOKS OF ACCOUNTS ARE RIGHTLY REJECTED BY THE A.O. HOWEVER ON THE ISSUE OF ESTIMA TION OF INCOME A RATIONAL BASIS HAS TO BE TAKEN. THE ESTIMA TION OF SUPPRESSED INCOME CAN NOT BE DONE ON CONJECTURES AN D HYPOTHESES. IN MY OPINION IT IS INCORRECT TO ESTIM ATE INCOME AN AVERAGE BASIS FOR THE DAYS ON WHICH NO SALE HAS BEEN RECORDED AS THE A.O. HAS ALSO NOT BROUGHT ON RECORD ANY EVIDENCE OF SALE OUTSIDE THE BOOKS OF A/C. THE APPE LLANT HAS CONTENDED THAT THE GP SHOWN IS 3.45%. THE A.O HAS N OT CITED 4 ANY COMPARABLE CASE. THEREFORE CONSIDERING THE OVER ALL CIRCUMSTANCES IT WILL BE FAIR TO ESTIMATE A REASONA BLE GROSS PROFIT EARNED BY THE APPELLANT OVER AND ABOVE DECLA RED BY APPELLANT. LOOKING INTO THE FACTS OF THE CASE AND S UBMISSION MADE I AM OF THE OPINION THAT THE GROSS PROFIT BE TAKEN AT 5% OF THE TURNOVER I.E. THE GROSS IS INCREASED BY 1.55 %. THE A.O IS ACCORDINGLY DIRECTED TO COMPUTE THE DISALLOWANCE . 8. WE ARE TOTALLY IN AGREEMENT WITH THE ABOVE REASO NING AND THEREFORE WE CONFIRM THE SAME. 9. IN THE RESULT REVENUE APPEAL IS DISMISSED. C.O. NO. 55/CHD/2013 10. IN THE CROSS OBJECTIONS THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ESTIMATION OF INCOME FROM LIQUOR BUSINESS AT 5% AS IN THE COMPARABLE CASE CITED THE RATE OF PROFIT ESTIM ATED WAS 3.11% AGAINST WHICH PROFIT DECLARED BY THE ASSESSEE IS 3.45%. 2. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 2 36 000/- MADE ON ACCOUNT OF ALLEG ED LOW WITHDRAWALS FOR HOUSE HOLD EXPENSE. 11. GROUND NO.1: THIS ISSUE HAS BEEN DECIDED BY US WHILE ADJUDICATING REVENUES APPEAL WHEREIN WE HAVE ALREADY CONFIRMED THE ORDER OF CIT(A) AND THEREFORE THIS ISSUE HAS BECOME INFRUCTUOUS A ND IS THEREFORE DECIDED AGAINST THE ASSESSEE IN VIEW OF OUR DECISION IN REV ENUES APPEAL. 12. GROUND NO.2 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT ASSESSEE HAS 5 SHOWN HOUSEHOLD WITHDRAWALS AT RS. 17 000/-. IT W AS FURTHER FOUND THAT ANOTHER SUM OF RS. 35 000/- WAS WITHDRAWN BY THE AS SESSEES MOTHER THEREFORE TOTAL HOUSEHOLD WITHDRAWALS WERE RS. 52 000/-. IT WAS NOTICED THAT ASSESSEE WAS HAVING FIVE MEMBERS IN THE FAMILY I.E. HIMSELF FATHER MOTHER YOUNGER BROTHER AND ELDER SISTER. THE ASSES SING OFFICER ESTIMATED THE HOUSE HOLD EXPENSE AT RS. 24 000/- AS PER FOLLO WING ESTIMATE:- SL.NO. NATURE OF EXPENDITURE AMOUNT 1 KITCHEN EXPENSES (5 MEMBERS @ 2000/- PER MEMBER) 10 000/- 2 TOILETRIES GROCERIES CLOTHING ETC. 2000/- 3 SOCIALIZATION & ENTERTAINMENT 2000/- 4 PERSONAL EFFECTS 2000/- 5 MEDICINE & HEALTH 2000/- 6 CONVEYANCE EXPENSES 2000/- 7 SERVANT EXPENSES 1000/- 8 FESTIVITIES 2000/- 9 MOBILE / TELEPHONE 1000/- TOTAL MONTHLY EXPENDITURE 24 000/- HE WORKED OUT THE ADDITION AT RS. 2 36 000/- AFTER REDUCING THE WITHDRAWALS SHOWN BY THE ASSESSEE HOWEVER NO SEPA RATE ADDITION WAS MADE BECAUSE MONEY WAS AVAILABLE OUT OF THE OTHER A DDITIONS MADE. 13. ON APPEAL THE LD. CIT(A) CONFIRMED THE ADDITIO N MADE BY THE ASSESSING OFFICER. 14. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT ASSESSING OFFICER HAS MADE ADDITION ON VERY HIGH BASIS AS IN A SMALL TOWN THERE CANNOT BE ANY EXPENSES OF SOCIALIZATION ENTERTAINM ENT AND FESTIVITIES THEREFORE REASONABLE DISALLOWANCE MAY BE SUSTAINED . 15. ON THE OTHER HAND THE LD. DR SUPPORTED HT ORD ER OF ASSESSING OFFICER AND CIT(A). 6 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. WE FIND SOME FORCE IN THE ARGUMENT OF LD. COUNSEL FOR THE ASSESS EE. IT CANNOT BE DENIED THAT HOUSE HOLD EXPENDITURE OF RS. 52 000/- FOR THE WHOLE YEAR FOR FIVE PERSONS IS REALLY VERY LOW AND AT THE SAME TIME THE ESTIMATED HOUSEHOLD EXPENDITURE OF RS. 24 000/- PER MONTH WHICH INCLUDE A SUM OF RS. 2000/- FOR SOCIALIZATION AND ENTERTAINMENT RS. 1000/- FOR SERVANT EXPENDITURE RS. 2 000/- FOR FESTIVITIES SEEMS TO BE UNREASONABL E. THEREFORE CONSIDERING THE OVERALL CIRCUMSTANCES OF THE CASE WE ESTIMATE THE HOUSEHOLD EXPENSE AT RS. 16 000/- PER MONTH. ACCOR DINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OF FICER TO ESTIMATE THE HOUSE HOLD EXPENDITURE AT RS. 16 000/- PER MONTH. FROM THIS HE SHOULD REDUCE THE ACTUAL HOUSEHOLD EXPENSES AND BENEFIT SH OULD ALSO BE GIVEN FOR THE ADDITION MADE ON ACCOUNT OF EXTRA GROSS PROFIT CONFIRMED BY US. 17. IN THE RESULT CROSS OBJECTIONS ARE PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18.10.2 013 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 18 TH OCTOBER 2013 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH