Sh. Manoj Jain , Chandigarh vs Assessee
- CitationITA No. 1029/Chd/2013
Ratio decidendi
The rule this decision rests on
The Tribunal held that where the Commissioner (Appeals), in deciding a question on an addition to capital account, relies on the assessee's withdrawals as the source and uses them to estimate household expenditure, the assessee has not been subjected to enhancement requiring fresh notice, because the sources of the addition were explained by the assessee and the appellate authority merely examined those sources in the course of the appeal. Where the assessee's own capital and bank records show that practically no cash was withdrawn from the firm, and the claimed withdrawals from the wife's account are not substantiated and relate to a different address, no credit can be given for those withdrawals against the addition. An estimate of household expenditure set against withdrawals must be reasonable; where the estimate adopted by the appellate authority appears excessive on the facts, the Tribunal may reduce it and direct the Assessing Officer to make the correspondingly reduced addition.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
(Appellant) (Respondent)
Appellant By : Shri Ajay Jain Respondent By : Shri Manjit Singh
Date of hearing : 22.12.2014 Date of Pronouncement : 12.01.2015
ORDER
PER T.R.SOOD, A.M.
The appeal filed by the assessee is directed against the order dated
8.8.2013 of C IT(A), Chandigarh.
2. In this appeal assessee has raised the following grounds:-
Ground
1. That the order of Learned Commissioner of Income (appeal) is bad & against the fact of case.
2. That the Learned Commissioner of Income (appeal) has erred in confirming the addition of Rs. 6 lakhs on account of household expenses without appreciating the fact that the assessee has already withdrawn sufficient amount from his capital account for meeting household expenses & his wife has also utilized her salary Income for meeting household expenses. Further the Learned CIT(A) has erred in making addition without 2
appreciating the fact that the assessing officer has accepted sources / withdrawal for household expenses & no addition on account of household expenses has been made by assessing officer.
3. That the learned commissioner of Income Tax (appeal) has erred in confirming the addition of Rs. 6 lakhs out of total addition of Rs. 10 lakhs made by assessing officer on account of addition to capital account without appreciating the fact that all additions in capital account has been made out of withdrawal form saving account & withdrawal account shown in Books of accounts & same has been verified by assessing officer in remand proceedings.
3. After hearing both the parties we find that assessee had filed a
return of Rs. 9,59,510/- and Assessing Officer made various additions
amounting to Rs. 7,22,93,666/- on account of sundry creditors for which
no evidence was available in addition to the capital account, difference in
receipts, addition in capital account and cash credits in the form of
various credit entries in the bank accounts.
4. On appeal, various submissions were made and various issues were
remanded and the Assessing Officer accepted the explanations of the
assessee on all the issues. However, Ld. CIT(A) while adjudicating the
issue regarding addition of Rs. 10 lakhs to the capital, gave onl y part
credit vide para 6.3 which is as under:-
"6.3 I have considered the submission of the Ld. Counsel. The Ld. Counsel has filed a copy of his capital account, withdrawal account, ledger account and the bank account. The Assessing Officer was asked to verify the contention of the appellant that the deposits had been made out of withdrawal and the Assessing Officer has verified the capital account with reference to savings bank statement and has 3
reported vide his letter no. 10213 dated 14.03.2013 that the credits in capital account were explained. It is, however, seen that the amount of addition to the capital account almost tallies with the withdrawals made and in that situation, no amount out of withdrawals will be left for household expenses. It appears that the appellant might have utilized part of the withdrawals for household purposes, but he is trying to cover up the addition to the capital account out of withdrawals. The appellant has not explained the source of amount spent towards household purposes. The amount for household expenses is estimated at Rs. 50,000/- per month and so the amount for the whole year would be Rs. 6,00,000/-. Hence, out of the addition to capital account of Rs. 10,00,000/-, only Rs. 4,00,000/- is treated as explained out of withdrawals and rest of the withdrawals of Rs. 6,00,000/- is treated to have been spent towards household purposes. The addition of Rs. 6,00,000/- is accordingly confirmed. Ground of appeal No. 5 is partly allowed.
5. Before us, Ld. Counsel for the assessee submitted that issue of
withdrawal was not there before the CIT(A) and, therefore, this would
amount to enhancement for which no proper notice was sent.
Alternativel y, he submitted that assessee has shown proper withdrawals
and in this regard he referred to the copy of the capital account available
at pages 13 & 14 of the paper book. Further, assessee's wife was also
working and she has also withdrawn a sum of Rs. 1,80,000/-.
6. On the other hand, Ld. DR submitted that it is not a case of
enhancement because CIT(A) has not accepted the source of cash as
explained by the assessee. Further, the assessee has not shown any
withdrawal from his account and the withdrawal of the assessee cannot be
accounted for because she was living in Panchkula as becomes clear from
the address given in the salary certificate.
4
7. We have considered the rival submissions carefull y and in our
opinion it is not a case of enhancement because assessee has explained the
sources of addition to the capital by withdrawals from various accounts.
The Ld. C IT(A) has simpl y observed that out of these withdrawals some
amount was required for household expenses also. As far as contention of
the Ld. Counsel for the assessee that assessee has made several
withdrawals, we find the same is not correct because perusal of the copy
of the account at pages 13 & 14 shows that practicall y no cash has been
withdrawn from the firm by the assessee. The debit reflects on account of
TDS, payment on account of installment and transfer to his capital
account. Even some of rupees withdrawn on 4.7.2008 had already been
taken credit of by the assessee. Apart form this cash of onl y Rs. 11,000/-
Rs. 5,000/- and Rs. 3,000/- is shown to have been withdrawn on
25.7.2008, 29.7.2008 and 7.3.2009.
8. We also find force in the submissions that assessee's wife is living
at a different address, therefore, no credit can be given from her
withdrawals and further her withdrawals were not substantiated before us.
However, at the same time the estimate of withdrawals at Rs. 6 lakhs
seems to be on very higher side and we reduce the same to Rs. 3 lakhs.
Accordingl y, we set aside the order of Ld. CIT(A) and direct the
Assessing Officer to make addition of Rs. 3 lakhs on this account.
9. In the result, appeal of the assessee is partl y allowed.
Order pronounced in the Open Court on 12.01.2015
Sd/- Sd/-
(BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 12 t h January, 2015 rkk
Copy to: The Appellant, The Respondent, The C IT, The CIT(A), The DR 5
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