2015 (9) TMI 1357 - AT - Income Tax

Estimation of profit from the sale of Audio and Video Cassettes - CIT (A) estimated sale of video cassette at 6 lac, audio cassette at 2 lac which was in confirmity with the statement of the assessee recorded at the time of search - Held that - We agree with the finding of the CIT (A) that no justification was given by the A.O. for enhancing the sale of video album as well as audio album. CIT (A) has also reduced the estimate of profit from sale of each copy of video and audio album. Assessing Officer has estimated the profit from sale of each video album at ₹ 8 while from sale of audit album at ₹ 3. The CIT (A) estimated the profit from sale of video album at ₹ 5/- and audio album at ₹ 3/-. We have considered the arguments of both the sides and perused the order of lower authorities. The CIT (A) has pointed out from the statement of the assessee that the estimate of the profit by the A.O. was excessive. The A.O. has not given any proper basis or justification for the estimation of profit from sale of each cassette by assessee. We find that the CIT (A) has referred to the statement of the assessee and has considered the cost of production of each video/audio cassettes, packing charges of each cassette and also the sale price and then estimated the profit at ₹ 5 per video cassettes and ₹ 3 per audio cassettes. After considering the facts of the case and the arguments of both the sides we are of the opinion that the estimate of income from production and sale of video /audio cassette by the CIT (A) is quite fair and reasonable. We therefore, uphold the same and reject the appeal filed by the assessee as well as Revenue on this count. Addition for low withdrawal of Household expenses - Held that - CIT (A) has estimated the household expenditure of the same amount for all the five years i.e. for A.Y. 2002-03 to 2006-07. In our opinion with the increase in cost of living the estimation of same household expenditure for a period of 5 years cannot be said to be justified. We therefore, uphold the order of the CIT (A) so far as the issue of household expenditure is concerned for A.Y. 2002-03 & 2003- 04. In our opinion, it would be fair and reasonable to estimate the household expenditure at ₹ 11,000/- per month i.e. ₹ 1,32,000/- per annum for A.Y. 2004-05 and 2005-06 and for A.Y. 2006-07 at ₹ 12,000/- per month i.e. ₹ 1,44,000/- per annum. We agree with the submission of the Ld. Counsel that the set off of the addition made to the business income is to be allowed while considering the addition for less household expenditure. Accordingly, we direct the A.O. to work out the availability of the cash with the assessee and if the availability of cash is sufficient to incur the household expenditure as estimated above then no addition is to be made in respect of the household expenses. Addition u/s. 69 - CIT(A) deleted the additions - Held that - No infirmity in the above finding of the CIT (A). Admittedly the property under consideration is in the name of Smt. Geetaben Parmar and Smt. Maniben Parmar. Both are assessed to Income tax. Therefore, the CIT (A) has held that the addition for the same cannot be made in the name of the assessee who is a different assessee. He has directed the A.O. to verify these facts from the record and delete the addition after verification. In our opinion the finding of the CIT (A) does not require any modification and the same is upheld and this ground of the Revenue s appeal is rejected. - Decided against revenue. Unexplained investment in the payment of Insurance Premium - CIT (A) deleted the addition - Held that - A.O. has recorded that out of 5 amounts of ₹ 45,000/- considered by the A.O. for making the addition, there were only 2 payments of ₹ 45,000/- each as the Insurance Premium. The other three were welcome letter in respect of certain policies. He has also recorded the finding that these two payments of ₹ 45,000/- each were already recorded in the books of Smt. Gitaben. Here also the CIT (A) has directed the A. O. to verify these facts and then delete the addition.We do not find any infirmity in the above directions of the CIT (A) the same is sustained and this ground of the revenue is rejected. - Decided against revenue. Unexplained investment in movable assets - CIT (A) deleted the addition - Held that - After considering the facts of the case and the arguments of both the sides we agree with the contention of the Ld. Counsel that the separate addition cannot be made for the income and application of such income. However, whether the enough cash is available for investment in those assets needs verification at the hand of the A.O. We therefore set aside the order of the Authorities below on this point and restore the matter back to the file of the A.O. We direct him to verify the availability of cash with the assessee and if cash available with the assessee is more than the assets found then no addition would be made for unexplained investment in assets. We also direct him to allow adequate opportunity of being heard to the assessee while re-adjudicating this issue.- Decided in favour of revenue by way of remand. Addition u/s. 69 for unexplained cash and jewellery - CIT (A) deleted the addition - Held that - CIT (A) has not deleted the addition made by the A.O. in respect of cash found and seized during the course of search but has only directed the A.O. to consider the availability of cash with the assessee, after considering the income in the preceding year. We do not find any infirmity in the above direction of the CIT (A). In fact, while considering the unexplained investment in the movable asset for A.Y. 2005-06 we have decided the issue with a similar direction. We therefore, uphold the direction of the CIT (A) with regard to cash found and seized during the course of search.- Decided against revenue. Unexplained investment in jewellery - CIT (A) deleted the addition - Held that - The total jewellery found with the assessee was 1064.650 gms. As per the instruction of the CBDT vide instruction No.1916, considering the members in the family jeweler upto 1400 gms should not be seized. This fact has not been disputed by the Revenue before us. But the only argument advanced by the Ld. D.R. was that above instruction of the CBDT was with regard to the seizure of the gold ornaments and not with regard to the explanation of the gold ornaments in the assessment proceedings. We agree with the Ld. D.R. that the above instruction was with regard to the seizure of the gold ornament but a consistent view is taken by the Tribunal that such instruction should also be considered while considering whether the ornament is unexplained or not. The above instruction of the CBDT is based upon the probability of the availability of the gold ornament with a married lady and unmarried lady considering customs prevailing in our country. Such probability would be equally applicable while considering such gold ornaments during assessment proceedings. Therefore, in our opinion CIT (A) has rightly considered the above circular and deleted the above addition made by Assessing Officer. Estimation of household expenditure - Held that - The Revenue has accepted the order of CIT (A) while the assessee is in appeal against the addition sustained. We have already discussed this issue in assessee s own case for A.Y. 2002-03 to 2006-07. For the detailed discussion therein we hold that the household expenditure disclosed by the assessee was less considering the facts of the case and number of family members. In fact we have estimated the higher household expenditure than what is estimated by the CIT (A) in the immediately preceding year. However, as the Revenue is not in appeal, therefore, we uphold the order of CIT (A) in this regard and reject assessee s ground of appeal which was against the addition sustained for low household expenses. - Decided against assessee. Reduction in the estimate of income by the CIT (A) - Held that - Admittedly the assessee has not maintained the regular books of account for all the years under consideration. Therefore, the business profit disclosed by the assessee from the business of production of audio-video cassettes and the video shooting is not verifiable and therefore, result shown by the assessee as per Profit and loss account is rightly rejected by the A.O. by invoking provisions of Sec. 145 of the Act. After considering the facts of the case and the argument of the sides in our opinion the estimation of profit by the CIT (A) is quite fair and reasonable. Therefore, we do not find any justification to interfere with the same. Accordingly the assessee s appeal for A.Y. 2002-03 to 2005-06 C.O. for A.Y. 2006-07 and appeal for A.Y. 2007-08 & 2008-09 are rejected. The Revenue s ground No.,1 in both the years i.e. A.Y. 2005-06 and 2006-07 are also rejected.- Decided against revenue. Unexplained investment in respect of immovable property - CIT(A) deleted the addition - Held that - So far as investment of ₹ 1 lac is concerned it was explained by the Ld. Counsel that the same is already reflected in the Balance Sheet. Morevoer, the assessed income of the assessee in this year and in the preceding year is much more than to finance for the investment of ₹ 1 lac. So far as the addition of ₹ 10,01,000/- is concerned it was reiterated by the Ld. Counsel that no asset was acquired by the assessee and therefore the question of any unexplained investment does not arise. The photocopy of the loose paper was also produced before us and from the said loose paper we are unable to agree with the A.O. that there was any unexplained investment by the assessee to the tune of ₹ 10,01,000/-. As per the assessee the above loose paper only reflected the total of ₹ 73,000/-. How the Assessing Officer has worked out the investment of ₹ 10,01,000/- from the said loose paper is not at all clear. In view of the above we uphold the order of the CIT (A) in this regard - Decided against revenue.

Summary

Issues Involved:
1. Estimation of profit from the sale of audio and video cassettes.
2. Addition for low withdrawal of household expenses.
3. Addition for unexplained investment in property.
4. Addition for unexplained investment in insurance premiums.
5. Addition for unexplained investment in movable assets.
6. Addition for unexplained cash and jewelry.
7. Estimation of income from the business of production and sale of audio/video cassettes and video shooting.

Detailed Analysis:

1. Estimation of Profit from the Sale of Audio and Video Cassettes:
The primary issue was the estimation of profit from the sale of audio and video cassettes. The CIT (A) reduced the profit estimation made by the Assessing Officer (A.O.), who had estimated the sale of video CDs at 9 lakh copies with a profit of Rs. 8 per copy and audio cassettes at 3 lakh copies with a profit of Rs. 3 per copy. The CIT (A) revised these figures to 6 lakh video cassettes at Rs. 5 profit per copy and 2 lakh audio cassettes at Rs. 3 profit per copy, based on the assessee's statements and cost considerations. The Tribunal upheld the CIT (A)'s revised estimation as fair and reasonable.

2. Addition for Low Withdrawal of Household Expenses:
The A.O. had estimated higher household expenditures than disclosed by the assessee. The CIT (A) reduced these estimates but maintained a consistent amount for all years. The Tribunal agreed with the CIT (A) for the years 2002-03 and 2003-04 but increased the estimates for subsequent years, considering the rising cost of living. The Tribunal directed the A.O. to verify the availability of cash and ensure no addition if the cash was sufficient to cover the estimated expenses.

3. Addition for Unexplained Investment in Property:
For the unexplained investment in properties, the CIT (A) deleted the additions made by the A.O., noting that the investments were reflected in the balance sheets of Smt. Geetaben H. Parmar and Smt. Maniben Parmar, who were assessed separately. The Tribunal upheld this deletion, directing the A.O. to verify the records.

4. Addition for Unexplained Investment in Insurance Premiums:
The CIT (A) deleted the addition for unexplained insurance premium payments, noting that the payments were reflected in the books of Smt. Geetaben H. Parmar and Smt. Maniben Parmar. The Tribunal upheld this deletion, directing the A.O. to verify the facts.

5. Addition for Unexplained Investment in Movable Assets:
The A.O. had added Rs. 5,88,355 for unexplained investment in movable assets. The CIT (A) sustained this addition due to a lack of specific source explanations. The Tribunal agreed with the assessee's argument that the income from previous years should cover these investments and directed the A.O. to verify the availability of cash before making any additions.

6. Addition for Unexplained Cash and Jewelry:
The A.O. made additions for unexplained cash and jewelry seized during a search. The CIT (A) directed the A.O. to consider the availability of cash from previous years' income and deleted the addition for jewelry, as the total weight was within the permissible limits per CBDT instructions. The Tribunal upheld these directions.

7. Estimation of Income from the Business of Production and Sale of Audio/Video Cassettes and Video Shooting:
For the years 2007-08 and 2008-09, the A.O. had estimated higher profits than disclosed by the assessee. The CIT (A) reduced these estimates, which the Tribunal found reasonable and upheld. The Tribunal also upheld the CIT (A)'s estimation of household expenses for these years.

In conclusion, the Tribunal upheld the CIT (A)'s revised estimations and deletions of additions, directing the A.O. to verify the records and ensure no double additions. The appeals by the assessee and the Revenue were largely dismissed, affirming the CIT (A)'s decisions.