Income Tax Appellate Tribunal - Jaipur
Om Prakash Agarwal, Jaipur vs Acit, Jaipur on 24 November, 2016
vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
Jh dqy Hkkjr] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k
BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA Nos. 721 to 726/JP/2015
fu/kZkj.k o"kZ@Assessment Years : 2005-06 to 2010-11
Om Prakash Agarwal, cuke A.C.I.T.,
2509, Kanwatiyon Ka Khurra, Vs. Central Circle-1,
Ramganj Bazar, Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AATPA 4869 Q
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj l@
s Assessee by : Shri Manish Agarwal (CA)
jktLo dh vksj ls@ Revenue by : Shri Ranjan Kumar (CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 16/11/2016
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 24/11/2016
vkns'k@ ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
All these appeals filed by the assessee are against the two separate orders dated 23/07/2015 passed by the ld CIT(A), Alwar for the A.Ys. 2005-06 to 2010-11. Given that these appeals contain identical facts and common set of grounds of appeal, the same were taken up for hearing together and are being disposed off by this consolidated order. The grounds taken by the assessee in the appeal of A.Y. 2005-06 is as under:-
2 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT "1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in upholding an addition of Rs.
22,800/- on account of undisclosed debtors arbitrarily by completely ignoring the fact that while making the addition, the Ld. AO has considered only the debtors and ignored the creditors, thereby ignoring the source of funds in the hands of assessee. Thus, the addition of Rs. 22,800/- deserves to be deleted.
1.1 That the Ld. AO has further erred in not considering the amount of closing balance of debtors as opening balance while working out the additional debtors created during the year.
2. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in sustaining the addition of Rs. 50,000/- on account of undisclosed / unexplained house hold expenses arbitrarily, without considering the drawings made by the assessee. Hence the addition so made based on estimates deserves to be deleted.
2.1 That the addition of Rs. 50,000/- has been made by merely estimating the household expenses of the assessee without any material found as a result of search for the year under appeal."
Similar grounds of appeal have been taken by the assessee in the cases of assessment years 2006-07 to 2010-11 with only variation of figures in respective years.
2. The brief facts of the cases are that a search and seizure operation u/s 132 of Income Tax Act, 1961(in short the Act) was carried out on 3 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT 24.08.2009 at the business and residential premises of Sh. Damodar Das Agarwal, of whom the assessee is one of the employees and during the course of search, certain loose papers/documents were found and seized. The assessee's name was included in the search warrant and was confronted with these loose papers/documents and he admitted that these loose papers/documents belong to him and he was involved in money lending business. Thereafter, notice u/s 142(1) was issued to assessee on 11.05.2011 in response to which return of income was filed wherein certain additional income is offered which is tabulated as under:
Assessment Additional income
Year offered
2005-06 1,68,400.00
2007-08 22,175.00
2008-09 1,95,400.00
2009-10 10,249.00
2010-11 11,658.00
Total 4,07,882.00
Thereafter, the assessments were completed u/s 143(3) r.w.s. 153A of the Act by making additions to the tune of Rs. 45,43,730/- on account of undisclosed debtors and further addition of Rs. 8,00,000/- was made on account of undisclosed/unexplained house hold expenses. 2.1 The 1st ground of the appeal for the A.Y. 2005-06 is against upholding the addition of Rs. 22,800/- on account of undisclosed debtors.
4 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT The Assessing Officer has observed that since the amount of income offered on the basis of these entries in seized papers was found to be not correct vide order sheet entry dated 20.10.2011, the A/R of the assessee was asked to prepare person wise copy of account and total amount of outstanding debtors at the year end so as to exactly determined the correct amount of undisclosed investment in debtors. The assessee thereafter on 25.11.2011 filed copies of person wise accounts and also details of outstanding debtors at the year end. For the year under consideration, such debtors were worked out by the AO amounting to Rs 191,200. Since the amount received in cash from creditors remained unverified and unexplained as the assessee has failed to disclose names, address and other identity, the entire amount of net outstanding balance of debtors at the year end was considered as undisclosed investment of the assessee and taxed accordingly. Here it may be a point of mention that on such advances assessee has also earned interest but the interest so earned is treated as reinvested which is reflected in outstanding debtors and thus amount of addition made included as new debtors during the year and amount of interest earned during the year as reinvested in the debtors. For the year ending 31.3.2005, such amount of debtors is of Rs 191,200 as calculated above and the same is assessed as 5 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT undisclosed debtors and addition was made to the declared income instead of Rs. 168,400 declared by the assessee in his return of income u/s 153 A of the IT Act.
3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who had partly allowed the appeal by observing as under:-
"4.7 Having considered the submissions made and evidence placed on record, I find that there is no dispute with regard to the fact that the entries/transactions found to have been recorded in Ex-1 to 3 of AS-1 pertain to money lending transactions of the appellant which were not disclosed in the books of accounts. The appellant has recorded the amount of money given to various persons and the amount of interest being charged on these loans and also the amounts returned back by the borrowers. All these transactions were collated by the appellant and a computerized chart of inflows and outflows of funds, year wise has been prepared. 4.8 The argument taken by the appellant is that while calculating the peak, the maximum of debit and credit amount is to be considered as whatever comes into the business in cash is duly available and from that only payment is to be made. So peak is the maximum of what comes and what goes as it shows the maximum of 6 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT undisclosed and unaccounted amount. It is to be noted that this proposition cannot be treated as proposition of law. These are only the inferences which can be drawn based upon the normal probabilities. These inferences can also be displaced by any material on record which may indicate to the contrary. The basic idea behind the peak credit theory is to avoid double addition and to bring only the actual income of the assessee to suffer tax, where there are a large number of unexplained credit and debit entries. However, this theory would apply only in the case of a undisclosed bank account, where deposits of cash are found alongwith cash withdrawals. Therefore, it is important to understand the facts of each case before computing the peak credits. This method of computing peak credit in my opinion would not be appropriate in case of a unaccounted money lending business where cash payments recorded are meant for giving fresh loans/advances. Therefore, unlike a bank account the future cash receipts cannot be explained on account of earlier cash withdrawals.
4.9 Based on a careful examination of the same, I find that AO has been reasonable & just in arriving at the conclusion that while computing the peak credits, the same methodology as is adopted in the case of a undisclosed bank account wherein cash deposits and withdrawals have been made cannot be adopted in this case. Further, in this case it has been clearly established by the AO that the loans and 7 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT advances given to various persons during the year amounting to Rs. 1,91,200, which were outstanding as on 31-03-2005. This balance outstanding at the end of the year is nothing but represents the peak balance of an unaccounted asset. Therefore, the question of not considering the peak amount raised by the appellant does not appear to be logical and rational. However, on the ground raised by the appellant regarding not giving credit for the amount declared, I find that appellant has already declared an income of Rs. 1,68,400 in the return filed in pursuance to the notice issued u/s 153 A of the IT Act as additional income for the year under consideration. Therefore, credit needs to be given for an amount of Rs. 1,68,400/- which has already been declared. Accordingly, I confirm only an addition of Rs. 22,800 made by the AO on this ground."
4. Similar factual matrix is present and identical findings have been given by the ld. CIT(A) in the orders of A.Ys. 2006-07 to 2010-11 and the assessee is in appeal before us in respect of all these years.
5. The ld AR of the assessee has submitted that under these grounds of appeal, the assessee has challenged the action of Ld. CIT(A) in sustaining the addition made by Ld. AO on account of undisclosed debtors without appreciating the fact that during the year under appeal, 8 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT there were no undisclosed debtors. The additions so sustained in every year are tabulated as under:
A.Y. Amount
2005-06 1,91,200.00
2006-07 1,70,625.00
2007-08 3,51,000.00
2008-09 12,30,600.00
2009-10 19,32,445.00
2010-11 6,67,860.00
Total 45,43,730.00
Brief facts pertaining to these grounds of appeal are that, during the course of search at residential premises of Sh. DamodarDas Modi at D-32, Subhash Marg, C-Scheme, Jaipur, who is engaged in the money lending business contain loose papers were found and seized which were marked as "Annexure AS-1, Exhibit 1 to 3" containing some transactions of credit and debit entries in the names of various persons which the assessee admitted as belonging to his money lending activity. Based on these entries assessee has worked out additional undisclosed income by arranging the entries of incoming or outgoing figures noted and wherever there was shortfall of cash the same was taken as unexplained and accordingly Rs. 4,07,882/- was offered as additional income in various assessment years as tabulated above based on the entries found noted in the seized papers. The necessary working of fund flow as submitted by 9 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT assessee during the course of assessment proceedings is placed in paper book.
During the course of assessment proceedings the Ld. AO asked the assessee to record the entries found noted in the seized papers of all the debtors and creditors and submit the year-wise closing balances which are submitted and find place in the paper book. From the perusal of the respective pages, the Hon'ble Bench would observe that these papers contained the closing balances of both the debtors and creditors and the final balance outstanding in the shape of the closing balances (in all the years it is the debit) i.e. the undisclosed funds of the assessee involved in money lending business not recorded in the regular books of accounts. However, the Ld. AO deliberately and intentionally ignore this working and pick the balances of debtors outstanding at the year end and by making his own theory on whims and fancies has made the additions on yearly basis by alleging that the amounts are the additions to the undisclosed debtors made by the assessee for respective assessment years. While doing so, he has also made a serious error of fact that the credit of the opening balance was given to the closing balance by ignoring the closing balance taken in preceding assessment year. All this 10 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT has been tabulated and explained before the Ld. CIT(A) who also failed to appreciate the same before confirming the additions.
The precise working of the same as submitted before the Ld. CIT(A) in the written submissions made in all the assessment years is as under:
As per Assessing Officer As per Books of Accounts Balance as on Balance as on Balance as on Balance as on A.Y. 1st day of the last day of the 1st day of the last day of the year year year year 2005-06 - 1,91,200.00 - 21,200.00 2006-07 1,91,200.00 3,61,825.00 21,200.00 36,425.00 2007-08 2,95,825.00 6,46,825.00 36,425.00 32,925.00 2008-09 5,51,825.00 17,82,425.00 32,925.00 97,875.00 2009-10 10,56,775.00 29,89,220.00 97,875.00 95,065.00 2010-11 27,31,620.00 33,99,480.00 95,065.00 79,680.00 From the perusal of the table above, it is evident that Ld. AO has adopted pick and choose method as per his sweet will even without taking the pain of considering the amount of closing balance which has been made basis for making addition in immediately preceding assessment year.
It can be seen that the Ld. AO has denied the benefit of peak credit theory to assessee merely by distinguishing the case where transactions are related to cash creditors/debtors with the case where the transactions occur in the bank account of an assessee and has held that the peak credit theory can be applied only in the latter case and not the
11 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT prior one. The said observation of the Ld. AO has been upheld by the Ld. CIT(A) in a mechanical manner and without application of mind to the submissions made before him. The Ld. CIT(A) has held that the peak credit theory is not a proposition of law but is only an inference drawn on probabilities and therefore, the peak credit theory need not be followed. In this regard it is submitted that the purpose of peak credit theory has been completely ignored by the Ld. CIT(A), which is to avoid double taxation of the same income, inasmuch as the same goes beyond the charging section of the Act itself. Therefore, before arriving at the taxable income, necessary adjustments have to be made so as to arrive at the correct taxable income and to avoid considering same income twice for taxation. Further, the application of peak credit theory has been upheld in various judicial pronouncements. Accordingly the assessee has prepared the cash flow statement of the debtors and creditors and offered the maximum peak amount in a particular year.
It is well established law in this regard that where the debit and credit both are unexplained the credit and debit entries have to be set off against each other to the extent possible and only the peak of credit (negative or positive) can be considered as undisclosed. Peak credit is applicable where complete records of unaccounted transaction was not 12 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT found and it is not possible to work out the exact quantum of undisclosed income. Thus, if the Ld. AO alleges that the benefit of peak credit theory cannot be allowed to assessee, then he had the burden to prove that the inflow of cash through various credit entries was applied elsewhere and was not utilized for the purpose of re-introduction. However, the Ld. AO without discharging the onus lying upon him, has cryptically observed that the peak credit theory cannot be applied to the case of assessee by drawing a hypothetical and imaginative distinction between the cases of cash deposit / withdrawal in bank account and the cases of entries of cash advances and receipt back, which action of Ld. AO is completely baseless, against law and thus deserves to be struck down.
Further, the Ld. AO has observed that the identity of the creditors is not proved and that, the amount received in cash from creditors remained unverified and unexplained as the assessee has failed to disclose names, address and other identity and having observed so, he held the entire amount of net outstanding balance of debtors at the year end as undisclosed investment of the assessee without giving credit for the credit balance available with assessee. In this regard, it is submitted that the Ld. AO has clearly taken a double stand in as much as he has accepted the debtors found mentioned on the seized papers as existing 13 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT and made out of undisclosed income of assessee while on the other hand he does not accept the creditors found mentioned on the same papers claimed as source by assessee being working as money lender, meaning thereby that the Ld. AO has capriciously and without any basis accepted only part of the entries appearing on the seized papers which showed investment in debtors and allowed him to make illegitimate additions; and he has rejected the other part of the entries appearing on the same papers which constituted source of funds for assessee. In this regard, it is humbly submitted that the Ld. AO has committed a gross error in relying upon the seized documents partially, accepting only the debit entries and ignoring the credit entries without any basis in view of the well established law that a seized document has to be read as a whole and cannot be broke into parts as per the convenience or sweet will of the Assessing Officer. In this regard, reliance is placed on the following case laws:
Glass Lines Equipments Co. Ltd. V/s CIT 253 ITR 454 (Guj.):
Interpretation of documents - Documents must be read as a whole. It is a well settled canon of interpretation that a document has to be read as a whole" it is not permissible to accept a part and ignore the rest of the document.
14 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT 22 TW 684 Hissaria Brothers V/s ACIT (Jpr.):
Held that the seized document has to be read in its entirety and the parties are not allowed to read only that part which is suitable to it.
21 Tax World 213 Lal Chand Agarwal V/s ACIT:
In no case AO can be allowed to consider a part of a particular document as true being favourable revenue and other part of the very document as false since that is favourable to assessee - Duality of the approach of AO is not fair -
Thus, in view of the above, it is submitted that when on the seized papers debtors as well as creditors both were appearing, there was no justification for the AO to accept only the debtors as genuine and holding the creditors as non-genuine, more particularly when the debit / credit entries both were borne out of the seized papers and not as out of the details submitted by assessee during assessment proceedings. Thus, the credit entries could not have been doubted in any manner and the closing balance of advances as reduced by credits received deserves to be considered for computing additional income.
Further from the perusal of table at page 3 of this written submission, the Hon'ble Bench would observe that increase in the value of closing balance of advances (net of credits) is much lower than by the amount of additional undisclosed investment in debtors declared by 15 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT assessee in the return of income, thus no separate addition was called for in this regard.
In the circumstances it is submitted that computation of undisclosed income by following the peak credit theory is recognized and accepted method where precise and accurate information are not available and accordingly the additional income declared by assessee deserves to be accepted and the additions made in various assessment years deserves to be deleted.
Without prejudice to above and in the alternative it is submitted that while computing the additional undisclosed income for respective assessment years assessee has considered the positive peak only and ignored the negative peak which at the most could be the additional undisclosed funds utilized for making further advances. The same has not been offered in the return of income filed for the sole reason that certain transaction recorded do not contain any date and therefore has to be considered for pertaining to year of search. Therefore if at all any addition is to be made, the same could not be exceeded by the amount of negative peak on year to year basis which is tabulated as under:
A.Y. Negative
Cumulative Year-wise
2005-06 21,200.00 21,200.00
2006-07 36,425.00 15,225.00
16 ITA 721 to 726/JP/2014
Om Prakash Agarwal Vs ACIT
2007-08 58,425.00 22,000.00
2008-09 4,37,775.00 3,79,350.00
2009-10 88,624.00 -
2010-11 1,64,273.00 -
4,37,775.00
In the circumstances it is submitted that in the event the Hon'ble Bench has proceeded to confirm the additions based on the positive and negative peaks, the addition that could have been made should be restricted to Rs. 4,37,775/- for various assessment years as per the table given herein above.
6. At the outset, the ld. CIT DR has vehemently supported the order of the Assessing Officer.
7. We have heard the rival contentions of both the parties and perused the material available on the record. It is not in dispute that the assessee is engaged in the business of money lending. It is also not in dispute that the entries/transactions in Ex.1 - 3 of Annexure AS-1 of the seized documents found during the course of search pertains to money lending transactions of the appellant and which were not disclosed earlier in the books of accounts and offered to tax. These entries/transactions relates to money advanced to various persons by the assessee and the amount returned back by the said borrowers or amount borrowed by the assessee for further lending to its borrowers. These seized documents 17 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT contain the name of various debtors and creditors to whom the money has been advanced and taken on credit by the assessee. The assessee has prepared a cash flow statement considering the entries relating to the debtors and creditors and offered the maximum peak amount as worked out for respective years in its return of income filed subsequent to issuance of notice u/s 153A of the Act. The AO has considered the entire amount of outstanding debtors at the year-end as assessee's undisclosed investment in the form of debtors. The AO has not given credit for entries pertaining to the creditors and also disregarded the peak amount offered to tax by the assessee for the respective assessment years. The reason for not giving appropriate credit for the entries relating to the creditors as stated by the AO was that the assessee has not proved the identity of the creditors. The AO therefore accepted the debtors details as mentioned in the seized documents but at the same time, has not accepted the creditors details also found mentioned in the same set of seized documents. The Hon'ble Gujarat High Court in the case of Glass Lines Equipment Co. Ltd. vs. CIT (253 ITR 454) has held that "it is a well settled canon of interpretation of documents that a document has to be read as a whole and it is not permissible to accept a part and ignore the rest of the document." In 18 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT light of the same, in the instant case, we are of the view that the AO was not correct in accepting only the debit entries in respect of the debtors and ignoring the credit entries in respect of the creditors found recorded in the same set of seized documents especially when the particulars of both the debtors as well as creditors are clearly visible along with date and amount in the said seized documents. In respect of applicability of peak theory, it is noted that there is nothing on record which can help determine the real income which has accrued to the assessee in respect of his money lending business in terms of agreements, contracts etc. with the borrowers and lenders which can throw light on the rate of interest charged /paid by the assessee, duration of loans /advances, repayment, etc. In such circumstances, application of the peak credit theory is the most reasonable and appropriate basis for determining the real income in the hands of the assessee. From perusal of the various entries found recorded in the seized documents and the cash flow statements prepared by the assessee, it is observed that in terms of amount advanced to various debtors, repayment thereof to the assessee, amount received from the creditors and its repayment by the assessee, the assessee has tried to establish the necessary linkage in terms of outflow and inflow of funds. It is also not the case of the Revenue that inflow of funds through 19 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT various credit entries was applied elsewhere by the assessee other than his money lending business. Also, where necessary linkage in terms of inflow and outflow of funds are established, it is immaterial whether these transactions are happening in physical form or routed through the banking channel. Accordingly, we do not see any infirmity in applying the peak credit theory in the facts of the present case. In light of this discussion, we set aside the matter to the file of the AO to apply the peak credit theory after taking into consideration both the debtors and creditors entries found recorded in the seized documents. Similarly, given that for all these years, the facts are pari-materia, our above findings and directions shall apply equally in respect of rest all years under consideration. The grounds of appeal no. 1 and 1.1 for all these years are thus, allowed for statistical purposes.
8. The 2nd ground of the assessee's appeal for the A.Y. 2005-06 is against sustaining the addition of Rs. 50,000/- on account of undisclosed/unexplained house hold expenses. The Assessing Officer has observed that page Nos.10,11,25,26,27,37,39,41,43,45,47,48,50,51, 53,55,57,59,61,63 of Exhibit -1 of Annexure AS1 also belongs to him and these papers are related with the normal house hold expenditure incurred by him month wise. The month wise total of the above transaction is 20 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT given below. Page No 63 out of the above pages showing house hold expenses of June-2009 is scanned for clarity of facts. The page gives clear entries of monthly expenditure and source of expenditure relevant to various months of Feb 2008 to June 2009. For FY 2008-09, total expenditure according to this annexure AS-1 Ex 1 is of Rs 191099. House hold drawings of the assessee are therefore estimated on the basis of this Annexure at Rs 2 lacs in AY 2009-10. Assessee's family consisted six members including two school going children and this estimation is quite reasonable and supported with the entries in seized papers. He further observed that no such details are, however, available for the year under consideration. No / balance sheet is drawn/furnished nor any capital account is furnished claiming that / such accounts are not maintained by the assessee. Taking help of undisclosed house hold expenditure in AY 2009-10 at Rs. 2 lacs, expenditure for the year under consideration is estimated at Rs.50000 over and above the income disclosed. Addition of Rs 50,000/- is accordingly made on this count.
9. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who had dismissed the appeal of the assessee on this ground by observing as under:-
21 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT "5.3 I have perused the assessment order as well as submissions made by the appellant and find that an addition of Rs. 50,000/- has been made by the A.O. on account of unexplained household expenses. During the course of search certain incriminating documents were found pertaining to the household expenses and based on that evidence, A.O. has made the addition of Rs. 50,000/-
on account of household expenses. The appellant has stated that an amount of Rs. 1,30,000/-, which is the salary received has been used for meeting household expenses. Considering the fact that the family consists of his parents, wife and two children, the household expenses have been reasonable estimated by the A.O. Therefore, addition of Rs. 50,000/- made by the A.O. on this account is confirmed."
10. Now the assessee is in appeals before us. The ld AR of the assessee has submitted that these grounds of appeal relate to the addition made by Ld. AO on account of undisclosed household expenses on estimate basis as tabulated below:
A.Y. Amount
2005-06 50,000.00
2006-07 75,000.00
2007-08 1,00,000.00
2008-09 1,25,000.00
2009-10 2,00,000.00
2010-11 2,50,000.00
Total 8,00,000.00
22 ITA 721 to 726/JP/2014
Om Prakash Agarwal Vs ACIT
Brief facts pertaining to these grounds of appeal are that, during the course of search certain papers were seized which were alleged to contain details of normal house hold expenditure incurred by assessee in the year under appeal, as reproduced at page 9 of the assessment order, and total expenditure recorded on the said pages was of Rs. 1,91,099/-, none of which related to the year under appeal. The Ld. AO after referring to the seized papers estimated the house hold expenditure for various assessment years and no credit was given to the declared expenditure made the addition of the entire amount.
In this regard it is submitted that assessee's family consists of himself, his wife, two children and parents. Assessee's father is a retired government employee and having pension income which was utilized for household purpose. Besides, assessee's mother is also assessed to tax and having made withdrawal. Assessee has received salary which was fully utilized in household expenses which fact could not be ignored. The drawings as claimed looking to the fact that assessee's family is pure vegetarian and teetotaler and living in the self-owned house, are most reasonable and sufficient to meet out day to day family needs.
23 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT Therefore, in light of the facts and circumstances of the case and in light of the submissions made above, it is humbly prayed that the additions made in various assessment years towards the household expenses and sustained by the Ld. CIT(A) on assumptions and presumptions deserves to be deleted.
11. At the outset, the ld. CIT DR has vehemently supported the order of the Assessing Officer.
12. We have heard the rival contentions of both the parties and perused the material available on the record. Firstly, it is noted that as per documents seized during the search referred as Exhibit - 1 of Annexure AS1 belonging to the appellant, household expenditure of Rs 191,099 was incurred during the financial year 2008-09. Based on the said seized documents, the AO estimated Rs 2 lacs as undisclosed household expenditure for AY 2009-10 and for other years, an estimation was made by AO ranging from Rs 50,000 for AY 2005-06 to Rs 2,50,000 for AY 2010-11. Therefore, it is clear that except for AY 2009-10 in respect of which documents were found during the course of search, no documents are found in respect of any of the other years and the AO has only made an estimation without any underlying documents. The basis of 24 ITA 721 to 726/JP/2014 Om Prakash Agarwal Vs ACIT estimation which ranges from Rs 50,000 to Rs 2,50,000 is also not clear from the records.
13. Further, the assessee has contended that the household expenditure has been incurred out of his salary withdrawals. Though both AO and ld CIT(A) has taken cognizance of the said contentions of the assessee, however no credit/setoff has been given. As against the total addition of Rs 8,00,000 made by the AO towards undisclosed household expenditure, the assessee has reported in his return of income, an amount of Rs 8,92,000 as salary income for all the respective years taken together, besides income from other sources. We therefore find force in the said contention of the ld AR and are of the view that necessary credit should be available in respect of salary income already offered to tax and no addition is thus called for in respect of undisclosed household expenditure. The entire addition in the hands of the assessee on account of undisclosed household expenditure for AY 2005-06 and all subsequent years under appeal are hereby deleted. Ground no. 2 and 2.1 for all the years under appeal are thus allowed. In the result, the appeals filed by the assessee for all the years are partly allowed for statistical purposes.
25 ITA 721 to 726/JP/2014
Om Prakash Agarwal Vs ACIT
Order pronounced in the open court on 24/11/2016
Sd/- Sd/-
¼dqy Hkkjr½ ¼foØe flag ;kno½
(Kul Bharat) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 24th November, 2016
*Ranjan
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Om Prakash Agarwal, Jaipur.
2. izR;FkhZ@ The Respondent- The ACIT, Central Circle-1, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 721 to 726/JP/2015) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar