Cit v. Vishwanath Sharma

Sushma Chowla, J.M:— The appeal filed by the revenue is against the order of the Commissioner of Income Tax (Appeals) Ludhiana dated 20.03.2013 against the order passed under section 143(3)/153A of the Income-tax Act, 1961 (‘the Act’ for short).

2. The revenue has raised the following grounds of appeal:

1(a). The Ld. CIT(A) has erred both in law and on facts in deleting the addition of Rs. 24,000/- made on account of low household expenses, holding estimation of household expenditure to be reasonable,

1(b). The Ld. CIT(A) has erred both in law and on facts in not appreciating the facts that as discussed in the assessment order that the household expenses shown are not sufficient to meet the expenditure keeping in view the valuable items found in his possession at his premises enjoying high standard of living even if the amount of withdrawals by other family members are taken into consideration.

2(a). The Ld, CIT(A) has erred both in law and on facts in deleting the addition of Rs. 10,70,000/- on account. of unexplained credit entries in the bank account.

2(b). The Ld. CIT(A) has erred both in law and on facts in not appreciating the facts that during the course of assessment proceedings, the assessee failed to prove the genuineness of these credit entries in bank account.

2(c). The Ld. CIT(A) has erred both in law and on facts of the case in deleting the addition of Rs. 10,70,000/- by holding that majority of the entries in the bank account pertain to receipt of salary by the assessee disregarding the fact that assessee in the course of appellate proceedings before the CIT(A) himself claimed that credit entry of Rs. 3 lac is in respect of repayment of loan and another credit entry of Rs. 7,70,000/- is in respect of property sale.

2(d). The Ld. CIT(A) has erred both in law and on facts of the case in deleting the addition of Rs. 10,70,000/- by giving a quite contradictory finding even though such plea was not taken by the assessee before the CIT(A).

2(e). The Ld. CIT(A) has erred both in law and on facts of the case in deleting the addition of Rs. 10,70,000/- even though the assessee had failed to file any evidence.

2(f). The Ld. CIT(A) has erred both in law and on facts in not appreciating the facts that in the remand report submitted, the A.O has specifically objected to the admission of additional evidence at appellate stage under rule 46A.

3. The ld. AR for the assessee pointed out that the issue raised in the present appeal is similar to the issue raised in the hands of the brother of the assessee Shri Yadwinder Kumar Sharma and the issue be decided in line with the said appeal.

4. The ld. DR for the revenue, however placed reliance on the order of the Assessing Officer.

5. We have heard the rival contentions and perused the record. The ground of appeal No. 1 raised by the assessee is in relation to the addition on account of low household expenses.

6. The Assessing Officer had estimated the household expenses on the basis of the size of the family and the related expenses and made an addition of Rs. 24,000/-, which was deleted by the Commissioner of Income Tax (Appeals). The revenue is in appeal against the said addition.

7. We find that similar issue of addition on account of low household withdrawals arose in the case of the brother of the assessee Shri Yadwinder Kumar Sharma in the appeal filed by the revenue vide ITA No. 1131.Chd/2012 wherein the Tribunal vide order dated 11.07.2014 upheld the addition made on account of low household expenses. As admitted by the ld. AR for the assessee, the facts and circumstances of the present case are identical to the facts and circumstances in the case of Shri Yadwinder Kumar Sharma (supra) and in the absence of the assessee having brought on record any evidence to prove the source of meeting its household expenses, we find no merit in the plea of the assessee.

8. During the course of search carried out at the residential premises of the assessee, it was noted that the assessee was enjoying high standard of living and had various immoveable assets installed in his residence. The explanation of the assessee that it was withdrawing a sum of Rs. 5,000/- per month to meet its household expenses in addition to the withdrawals made independently by his brothers and father was not accepted by the Assessing Officer. The Assessing Officer estimated the household expenses at Rs. 7,000/- per month and made an addition of Rs. 24,000/-. The said estimation of the expenses was upheld by the Commissioner of Income Tax (Appeals) in the hands of the assessee. However, the Commissioner of Income Tax (Appeals) deleted the addition in view of the plea of the assessee that there was contribution for household expenses by other family members. We find that in the hands of the other family members i.e the brother of the assessee Shri Yadwinder Kumar Sharma, an addition has already been upheld on account of low household expenses and in view thereof, there is no merit in the order of Commissioner of Income Tax (Appeals) in giving the benefit of telescoping against the withdrawals made by other family members. Rejecting the same, we uphold addition of Rs. 24,000/- in the hands of the assessee.

9. The issue in ground No. 2 raised by the revenue is against the deletion of addition of Rs. 10,70,000/-. The said addition was made in the hands of the assessee on account of non furnishing of the evidence in respect of credit entries in the bank account. The said addition was deleted by the Commissioner of Income Tax (Appeals) in the hands of the assessee.

10. The brief facts of the issue are that there were two credit entries in the bank account against which the assessee failed to give any explanation and sum of Rs. 10,70,000/- was added as income of the assessee.

11. The addition made by the Assessing Officer of Rs. 10,70,000/- was on account of two credit entries i.e on 03.07.2002 of Rs. 3,00,000/- and on 22.10.2002 of Rs. 7,70,000/-.

12. Before the Commissioner of Income Tax (Appeals), the explanation of the assessee was that it had given an advance of Rs. 3,05,000/- to Mr. Sandeep Rai and during the year, the said amount was received from him in two instalments i.e Rs. 3,00,000/- on 08.07.2002 and Rs. 5,000/- on 26.08.2002/-. In the remand report, Assessing Officer stated that the assessee had failed to give any proof of the amount advanced to the said person and in the absence of the same, the said addition is to be upheld.

13. The Commissioner of Income Tax (Appeals), in view of the cash-flow statement, submitted by the assessee accepted the plea of the assessee and deleted the addition of Rs. 3 lacs. The revenue is in appeal against the said deletion of Rs. 3 lacs.

14. We find that similar plea of explanation by way of entries through cash-flow statement arose before the Tribunal in the case of Cit v. Navin Kumar Sharma (supra) and same was not accepted. The assessee during the assessment proceedings had not furnished the said cash flow statement and further has not furnished any proof of having advanced the said loan to the said Shri Sandeep Rai earlier which was repaid during the year under consideration. In the entirety of the abovesaid facts and circumstances, we find no merit in the reliance placed upon entries through cash-flow statement and rejecting the same, we reverse order of Commissioner of Income Tax (Appeals) and uphold the addition of Rs. 3 lacs.

15. Now coming to the second deposit entry of Rs. 7,70,000/- on 22.10.2002 Before Assessing Officer, no explanation was furnished and hence, the addition was made. Before the Commissioner of Income Tax (Appeals), the assessee furnished written submissions stating that the said sum of Rs. 7,70,000/- was received on sale of kothi in village Lohgarh 675 sq. yds. For Rs. 9,00,000/- at ⅓rd share alongwith Shri Dharminder Kumar Sharma and Shri Yadwinder Kumar Sharma. The plea of the assessee before the Commissioner of Income Tax (Appeals) was that at best, income from long term capital gains could be taxed in the hands of the assessee.

16. The Commissioner of Income Tax (Appeals) deleted the addition in totality.

17. We find that similar issue of the assessability of capital gains in the hands of the assessee arose before the Tribunal in the case of ACIT v. Yadwinder Kumar Sharma (supra). The Tribunal has directed the Assessing Officer to verify the claim of the assessee and include the income arising from capital gains on sale of the plots in the hands of the assessee for ⅓rd share. The other ⅓rd share is owned by the assessee before us and in view of our ratio laid down in the hands of co-owner, we direct the Assessing Officer to re-compute the income from long term capital gains in the hands of the assessee after affording reasonable opportunity of hearing to the assessee. Accordingly, we reverse the order of Commissioner of Income Tax (Appeals) in deleting the addition in totality and after accepting the explanation of the assessee that the said amount has been received on the sale of property, we direct the Assessing Officer to compute the income afresh in line with our directions. The ground of appeal No. 2 is thus, partly allowed.

18. In the result, appeal of the assessee is partly allowed.

Order pronounced in the open Court on 8th August, 2014.