2015 (5) TMI 641 - AT - Income Tax

Disallowance of office expenses - CIT(A) restricting the claim to 40 per cent. of the gross receipts - Held that - Admittedly, the assessee engaged himself in drafting documents and sale of stamps (both judicial and non-judicial) receiving fees for drafting the documents and also receiving commission on sale of stamps. No doubt, the assessee has to employ some personnel for carrying out his professional duties. However, claiming 60 per cent. of the total receipts as expenditure without furnishing any details may not be correct. This Tribunal is of the considered opinion that the assessee is expected to maintain records for writing the documents and sale of stamp papers. Therefore, the total receipt on document writing and sale of stamp papers could be ascertained only if the assessee is maintaining proper records. Though the commission on sale of stamps can be ascertained from the Government/Governmental agency from whom the assessee bought stamp papers, but the fees for writing documents can only be ascertained from the material/documents are maintained by the assessee. Similarly for the expenditure incurred by the assessee, the assessee has to produce books and vouchers. Without maintaining any books or record, the assessee is claiming 60 per cent. as expenditure. This Tribunal is of the considered opinion that in the absence of any material available on record, inflation of expenditure cannot be ruled out. Therefore, the Assessing Officer has rightly restricted the expenditure to 40 per cent. of the gross receipts. The Commissioner of Income-tax (Appeals) has rightly confirmed the same. - Decided against assesse. Addition with regard to opening cash balance - CIT(A) allowed part relief - Held that - The assessee claimed ₹ 5 lakhs as opening cash balance in the cash flow statement filed before the Assessing Officer. The assessee himself claims that this includes an amount of ₹ 66,369 in the bank account. Though the assessee claims that a sum of ₹ 2.83 lakhs was from accumulated savings, no material is available on record to suggest that the assessee has no accumulated savings. The assessee being a stamp vendor has to purchase the stamps from the State Government or from the treasury maintained by the State Government. Therefore, he has to naturally maintain books of account. It is unfortunate that the assessee, even though engages in purchase and sale of stamps, did not maintain any proper books of account. In such circumstances, the claim of the assessee regarding the opening cash balance to the extent of ₹ 5 lakhs may not be justified. The Commissioner of Income-tax (Appeals), however, has accepted the plea of the assessee to the extent of ₹ 1 lakhs and confirmed the addition to the extent of ₹ 3,33,631. This Tribunal does not find any infirmity in the order of the lower authority - Decided against assesse. Agricultural income - Held that - It is not known how the agricultural land was acquired by the assessee s wife. Ifthe assessee purchased the agricultural land by investing his own funds in the name of his wife, then the income earned from such agricultural land can also be claimed as part of his total income. But it is not the case of the assessee that he invested funds for purchasing land in the name of his wife. The case of the assessee is that the land belongs to his wife. Therefore, the agricultural income, if any, may be considered only in the hands of the assessee s wife and not in the hands of the assessee. However, the income of the assessee s wife can also be considered for making investment in the joint name of the assessee and his wife during the respective financial years under consideration. The fact remains that the assessee does not claim that any agricultural land stands in his name. Therefore, the agricultural income said to be claimed cannot be part of his total income and so it cannot be considered for opening cash balance. At the best, as observed earlier, it can be considered for making joint investment in the name of his wife and himself, therefore, this Tribunal does not find any infirmity in the order of the lower authority - Decided against assesse. Disallowance of household expenses - Held that - No doubt, while examining the assessee admitted that his monthly expenditure is ₹ 10,000 only. It is also a fact that the assessee has paid capitation fee for his son for the engineering admission. The assessee is also continuously paying fees for his son and incurring other expenditure. Taking into consideration all the expenditure incurred by the assessee as admitted in the statement recorded under section 132(4) of the Act, this Tribunal is of the considered opinion that the Assessing Officer has rightly estimated the household expenses at ₹ 2 lakhs per annum. Therefore, this Tribunal does not find any infirmity in the order of the lower authority ; the same is confirmed.- Decided against assesse. By-product ottupal ascertained from the seized records - Held that - The issue regarding ottupal is not arising out of the orders of the Assessing Officer and the Commissioner of Income-tax (Appeals). The assessee has not raised this ground before the Commissioner of Income-tax (Appeals) also. Since the lower authority has not considered this issue, this Tribunal is of the considered opinion that the assessee cannot raise this issue before this Tribunal for the first time - Decided against assesse. Loan received from Shri Thomas, an non-resident Indian - Held that - In this case, the genuineness of the transaction to the extent of ₹ 7 lakhs was not proved. Therefore, this Tribunal, is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly confirmed the addition. Accordingly, this Tribunal do not find any infirmity in the order of the Commissioner of Income-tax (Appeals). - Decided against assesse. Addition of ₹ 2 lakhs as unexplained - held that - When the assessee claims in the statement under section 132(4) that he received a sum of ₹ 2 lakhs, according to learned senior counsel it has to be treated as such as no contrary evidence is available on record. In this case, there is no contrary material available on record. Therefore, the Commissioner of Income-tax (Appeals) ought to have deleted the entire addition of ₹ 2 lakhs. This Tribunal is of the considered opinion that the addition of ₹ 2 lakhs sustained by the Commissioner of Income-tax (Appeals) is not correct in view of the answer to question No. 28 in the statement recorded under section 132(4) of the Act from the assessee. Accordingly, the order of the Commissioner of Income-tax (Appeals) is modified and the Assessing Officer is directed to delete the entire addition of ₹ 20 lakhs. - Decided in favour of assesse. Unaccounted cash found of ₹ 65,000 in the bank account - Held that - Noinvestigation was made by the authorities and no material was brought on record to establish that the assessee s son could not have earned that money. In the absence of any material, this Tribunal is of the considered opinion that the assessee could have received ₹ 65,000 from his son. Because of close relationship between father and son no documentary evidence could be expected in view of the smallness of the amount. Therefore, this Tribunal is of the considered opinion that addition of ₹ 65,000 said to have been received from the assessee s son is not justified. Accordingly addition of ₹ 65,000 is deleted. - Decided in favour of assesse. Addition of ₹ 93,167 found in the bank account - Held that - The Assessing Officer made addition on the ground that no material evidence was produced to support the contention of the assessee that the assessee has received ₹ 93,167 from his son. As we have discussed earlier for the assessment year 2006-07, the assessee s son was an earning member of the family and in view of the close relationship between the father and son no documentary evidence could have been produced. In the absence of any evidence on record to show that the assessee s son was not earning any income, this Tribunal is of the considered opinion that rejection of claim of the assessee that he has received ₹ 93,167 from his son may not be justified. Accordingly, the addition deleted - Decided in favour of assesse. Cash received from his son to the extent of ₹ 2,75,000 - Held that - During the proceedings before the Commissioner of Income-tax (Appeals), the assessee explained that ₹ 4 lakhs was transferred by cheque on November 13, 2008. An amount of ₹ 90,000 was transferred on April 8, 2008, by way of cheque. The Commissioner of Income-tax (Appeals) by taking into consideration all these transactions by way of cheques restricted the addition to the extent of ₹ 2,75,000. In the absence of any material this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly restricted the addition to the extent of ₹ 2,75,000.- Decided against assesse. Cash received from the assessee s daughter - Held that - no material is available on record to suggest that the assessee s daughter was an earning member of the family. Even during the course of statement recorded under section 132(4), the assessee never referred about his daughter. Therefore, the claim of the assessee that he received from his daughter is without any substance. Therefore, this Tribunal is of the considered opinion that the lower authority has rightly made the addition - Decided against assesse Withdrawl from the HSBC bank account for meeting marriage expenses - Held that - merely because the assessee s son withdrew the money from bank after the marriage, it does not mean that the same would not have been used for meeting the marriage expenses. This Tribunal is of the considered opinion that the amount withdrawn after the marriage might have been used for settling the marriage expenses. Therefore, the addition of ₹ 1,75,000 is not justified. Accordingly, the Assessing Officer is directed to delete the addition - Decided in favour of assesse.

Summary

Issues Involved:

1. Disallowance of office expenses
2. Opening cash balance
3. Agricultural income
4. Household expenses
5. Ottupal (specific to assessment year 2005-06)
6. Addition of Rs. 12 lakhs from a non-resident Indian (specific to assessment year 2005-06)
7. Addition of Rs. 2 lakhs as unexplained (specific to assessment year 2006-07)
8. Addition of Rs. 65,000 found in the bank account (specific to assessment year 2006-07)
9. Addition of Rs. 93,167 found in the bank account (specific to assessment year 2007-08)
10. Addition of Rs. 3,50,000 said to be received from Shri Thomas (specific to assessment year 2007-08)
11. Addition of Rs. 2,75,000 cash received from the assessee's son (specific to assessment year 2009-10)
12. Addition of Rs. 1,40,000 cash received from the assessee's daughter (specific to assessment year 2009-10)
13. Addition of Rs. 1,75,000 withdrawn from HSBC bank account for marriage expenses (specific to assessment year 2009-10)

Detailed Analysis:

1. Disallowance of Office Expenses:
The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) to restrict the office expenses to 40% of the gross receipts. The assessee, a licensed document writer, failed to provide detailed records or evidence for claiming 60% of the gross receipts as expenses. The Tribunal found no infirmity in the lower authority's order, confirming the disallowance for all assessment years under appeal.

2. Opening Cash Balance:
The Tribunal confirmed the disallowance of the opening cash balance claimed by the assessee. The assessee could not substantiate the claimed opening cash balance of Rs. 5 lakhs. The Commissioner of Income-tax (Appeals) allowed Rs. 1 lakh and confirmed the addition of Rs. 3,33,631. The Tribunal found no infirmity in this order.

3. Agricultural Income:
The Tribunal upheld the rejection of the assessee's claim of agricultural income. The assessee could not provide evidence of agricultural activity or income. The Tribunal noted that the agricultural income, if any, should be considered in the hands of the assessee's wife, not the assessee, as the land belonged to his wife. The Tribunal confirmed the lower authority's order.

4. Household Expenses:
The Tribunal confirmed the estimation of household expenses at Rs. 2 lakhs per annum. Despite the assessee's claim of Rs. 1 lakh, the Tribunal found the estimation justified based on the assessee's son's educational expenses and other family maintenance costs.

5. Ottupal (Assessment Year 2005-06):
The Tribunal did not entertain the issue of ottupal as it was not raised before the Commissioner of Income-tax (Appeals) and was not part of the assessment order. The Tribunal ruled that it could not consider new issues at the second appeal stage.

6. Addition of Rs. 12 Lakhs from a Non-Resident Indian (Assessment Year 2005-06):
The Tribunal confirmed the addition of Rs. 7 lakhs out of Rs. 12 lakhs claimed to be received from a non-resident Indian, Shri Thomas. The assessee could not substantiate the genuineness of the transaction for Rs. 7 lakhs. The Tribunal found no infirmity in the lower authority's decision.

7. Addition of Rs. 2 Lakhs as Unexplained (Assessment Year 2006-07):
The Tribunal deleted the addition of Rs. 2 lakhs, accepting the assessee's explanation that it was received from his son. The Tribunal found no contrary evidence on record to dispute the assessee's claim.

8. Addition of Rs. 65,000 Found in the Bank Account (Assessment Year 2006-07):
The Tribunal deleted the addition of Rs. 65,000, accepting the assessee's claim that it was received from his son. The Tribunal noted the close relationship and the smallness of the amount, finding the addition unjustified.

9. Addition of Rs. 93,167 Found in the Bank Account (Assessment Year 2007-08):
The Tribunal deleted the addition of Rs. 93,167, accepting the assessee's claim that it was received from his son. The Tribunal found no evidence to suggest that the assessee's son was not earning income.

10. Addition of Rs. 3,50,000 Said to be Received from Shri Thomas (Assessment Year 2007-08):
The Tribunal confirmed the addition of Rs. 3,50,000, finding no evidence of withdrawal from Shri Thomas's bank account. The Tribunal ruled that the assessee could not substantiate the availability of funds for the claimed loan.

11. Addition of Rs. 2,75,000 Cash Received from the Assessee's Son (Assessment Year 2009-10):
The Tribunal confirmed the addition of Rs. 2,75,000, finding no material evidence to support the assessee's claim. The Tribunal upheld the lower authority's decision.

12. Addition of Rs. 1,40,000 Cash Received from the Assessee's Daughter (Assessment Year 2009-10):
The Tribunal confirmed the addition of Rs. 1,40,000, finding no evidence that the assessee's daughter was an earning member. The Tribunal upheld the lower authority's decision.

13. Addition of Rs. 1,75,000 Withdrawn from HSBC Bank Account for Marriage Expenses (Assessment Year 2009-10):
The Tribunal deleted the addition of Rs. 1,75,000, accepting the assessee's explanation that the funds were withdrawn after the marriage to settle expenses. The Tribunal found the addition unjustified.

Conclusion:
The appeals for the assessment years 2003-04, 2004-05, and 2005-06 were dismissed, while the appeals for the assessment years 2006-07, 2007-08, and 2009-10 were partly allowed. The Tribunal's order was pronounced on January 9, 2015.