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Shri Hiren B. Parmar and Smt. Geetaben H. Parmar. Versus Assistant Commissioner of Income Tax, Central Circle 1 (4) , Ahmedabad.

2015 (9) TMI 1357 - ITAT AHMEDABAD

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 O .....

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or 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 pr .....

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iod 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 th .....

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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 a .....

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ents 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 bot .....

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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 .....

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ed 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 .....

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ing 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 f .....

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on 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 rej .....

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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/- .....

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er 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. - 131/2011, 132/2011, 133/2011, 134/2011, 657/2011, 658/2011, 659/2011, 241/2011, 242/2011, 243/2011, 244/2011, 85/2012, 86/2012, 87/2012, 88/2012, 89/2012, 90/2012, 139/2012, 140/2012, C.O.76/2012.In 140/12 - Dated:- 4-9-2015 - SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMB .....

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ed 1-12-2011 for A.Ys. 2002-03 to 2008-09. IT(SS) A No.131 to 134/2011 Assessee s as well as Revenue s appeals in the case of Shri Hiren B. Parmar for Assessment Years 2002-03 to 2008-09. 2. The Ground No.1 which is common in all the years in the appeals by the Revenue as well as by the Assessee is with regard to estimation of profit from the sale of Audio and Video Cassettes by the assessee. The CIT (A) has partly allowed the ground and therefore, the Revenue is in appeal against the addition d .....

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and valuables. The investigation wing of the Income Tax Department subsequently initiated proceedings u/s. 132A of the Income Tax Act, 1961. As consequence of action u/s.132A conducted by the investigation wing of the Income Tax Department notices under section 153A were issued and served upon the assessee for A.Y. 2002-03 to 2007-08. The Assessee estimated the profit from the production and sale of audio and video cassettes for various years. His observation and the working is reproduced below .....

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sold thereof are taken as 9,00,000 copies on the basis of material gathered as a result of action u/s. 132A of the I.T. Act. Similarly production of audio is estimated at 125 and number of copies sold thereof are taken as 3,00,000 copies on the basis of material gathered as a result of action u/s. 132A of the I.T.Act. Accordingly, profit earned by the assessee from these activities i.e. production of audio and video albums are worked out as under:- Album No. of copies sold Profit from each copy. .....

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sment years stands as under on prorata. Sr.No. Period A.Y. Profit 1 15-01-02 to 31-03-02. 2002-03 2,00,000 2 01-04-02 to 31-03-03 2003-04 22,57,000 3 01-04-03 to 31-03-04 2004-05 22,57,000 4 01-04-04 to 31-03-05 2005-06 22,57,000 5 01-04-05 to 10-09-06 2006-07 11,29,000 Total. 81,00,000 4. On appeal, the CIT (A) reduced the estimate of income by the Assessing Officer his observation and estimate of profit is reproduced below for ready reference:- The A.O. has not given any details of sale price, .....

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de by the A.O. is not correct. He has to take into consideration the fact as recorded in the statement of the appellant dated 14-8-2007 recorded u/s. 131 (1A), wherein, in reply to question No.9 the appellant has started that he had produced 5 to 6 lacs CDs of video albums and the cost of each blank CD was around ₹ 8 and copying charges was about ₹ 0.50 and it was sold by him to Shiv Video at the rate of about ₹ 16 per copy. Similarly, in respect of the audio album, he had spec .....

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e of ₹ 16 per copy = ₹ 96,00,000/- Audio cassettes - 2 lakh copies at the rate of ₹ 12 per copy = ₹ 24,00,000/- As against the above, the appellant has stated the cost of blank cassette at about ₹ 9 and that copying charges of ₹ 0.50. The appellant has also explained that other expenses like packing, label etc. are to be considered and considering this in the statement of the appellant recorded on 27-11-2009, the appellant had stated that the profit on each vi .....

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e at ₹ 3/-.The profit over the period therefore is worked out as under: On 6 lakh video cassette at the rate of 5/- = ₹ 30,00,000/- On 2 lakh audio cassette at the rate of 3/- = ₹ 6,00,000/- ₹ 36,00,000/- The assessee has shown the income from sale of audio and video cassettes in different years as under:- Financial Year Net income as per P & L Account 2002-03 50,750 2003-04 1,54,944 2004-05 8,46,238 2005-06 19,25,003 As stated by the appellant and even artiest Farida .....

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me of ₹ 16,75,000/- is to be taxed in the hands of the appellant in the earlier years on the basis of the period during which the appellant has carried out this activity. As stated by the A.O. himself the business was started in January,2002 and, therefore, the Income during the A.Y. 2003-04 to 2004-05 is to be disturbed as under:- Assessment Year Amount (Rs.) 2003-04 3,73,600/- 2004-05 3,73,600/- 2005-06 8,50,000/- The A.O. is directed to recompute the income after taking into considerati .....

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io and video cassettes between the A.Y. 2003-04, 2004-05 and 2005-06. In A.Y.2002-03 the Assessing Officer has estimated the income of ₹ 1 lac from video shooting business which the assessee was carrying out at the relevant time. Assessee had disclosed the income from video shooting business in that year at ₹ 50,912/-. On appeal, the CIT (A) sustained the estimate of ₹ 1 lac from video shooting business in A.Y. 2002-03. The Revenue is not in appeal but the assessee alone is in .....

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y the assessee is not available. In the above circumstances estimate of income of ₹ 1 lac from video shooting business is quite fair and reasonable and the same was rightly upheld by the CIT (A). 6. For Assessment Year 2003-04 to 2006-07, the dispute is with regard to the estimation of income from production and sale of audio and video cassettes. Assessing Officer has estimated the sale of video CD at 9 lac with the profit of ₹ 8 per copy. Similarly, he estimated the sale of audio ca .....

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IT (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. 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 .....

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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 reas .....

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Household Expenditure Estimated by A.O. Household Expenditure Estimated by CIT (A). 2002-03 48,000 1,38,000 1,20,000 2003-04 48,000 1,48,000 1,20,000 2004-05 66,500 1,66,500 1,20,000 2005-06 62,000 1,62,000 1,20,000 2006-07 62,000 1,62,000 1,20,000 9. We have heard both the parties and perused the material placed before us. The contention of the Ld. Counsel for the assessee was twofold. (1) Household expenditure disclosed by the assessee is reasonable. (2) If a higher household expenditure is es .....

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s of both the sides we are of the opinion that the household expenditure disclosed by the assessee is not sufficient. In A.Y. 2002-03 the assessee claims to have incurred household expenditure only of ₹ 4000/- per month which cannot be adequate considering the size of the family. However, at the same time we agree with the CIT (A) that the estimate of household expenditure by the A.O. is excessive. However, we find that the CIT (A) has estimated the household expenditure of the same amount .....

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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 .....

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he property in the name of Smt. Geetaben H. Parmar and Maniben Parmar. CIT (A|) deleted the addition with the following findings:- 6.2. I have considered the assessment order and the above submissions. The appellant has produced copy of balance sheet and Profit and Loss Account of Geetaben Parmar and Maniben Parmar, wherein, the investment in above property is reflected. The P.A. No. of these ladies is as under: Gitaben Parmar AOHPP 6393 J Maniben Parmar AWGPP 8582 L It is also stated that the a .....

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ration 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. 14 .....

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T (A) on this point and reject the Revenue s ground of appeal. 15. Another ground of the Revenue s appeal for A.Y. 2004-05 is with regard to the deletion of addition of ₹ 2,25,000/- made by the A.O. for unexplained investment in the payment of Insurance Premium. CIT (A) deleted the addition with the following finding:- 7.2. I have considered the assessment order and the above submissions. On perusal of the details submitted along with the submissions by the appellant, it is noticed that th .....

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oks and that she is being assessed with the same Ward. The addition of these two amounts is, therefore, not justified and is deleted. The A.O. may consider the facts in the case of Gitaben if he finds it necessary. The P.A. No. of Gitaben is already stated in the earlier para. Further, the following amounts are not reflecting any payment but it is in the nature of acknowledgement/welcome letter of the above said two policies as can be seen from the copies thereof submitted with the appellant s w .....

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ier. Therefore, the addition with reference to the said two amounts is also deleted. The last amount of policy No.50728168 stated in the assessment order being payment of ₹ 45,000/- is also a welcome letter in respect of Policy No.00782236 in the name of Ruthvi Hirenbhai Parmar and it is stated by the appellant that the said payment is reflected in the books of Maniben Parmar, appellant s second wife. The addition is therefore, not actual payment and that the actual payment in respect of t .....

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urance 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. 17. 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. 18. For Assessment Year 2005-06 in the assessee .....

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2,61,000/- Furniture 29-01-2005 ₹ 3,455/- Total cost/investment ₹ 5,88,355/- 19. The CIT (A) sustained the addition on the ground that the assessee has not explained the source of acquisition of each and every asset. At the time of hearing before us the contention of the Ld. Counsel was limited to the extent that there cannot be separate addition for the income as well as the application of income. He stated that year after year substantial business income is estimated and the acqui .....

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assessee is not able to explain the specific source for acquisition of each and every asset, the CIT (A) was fully justified in sustaining the addition. 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 .....

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ds one is with regard to the deletion of the addition of ₹ 3 lac which was made by the A.O. u/s. 69 of the Income Tax Act for unexplained investment in the property of Smt. Maniben Parmar and Smt. Gitaben Parmar. The identical issue is considered by us for A.Y. 2003-04 and for the detailed discussion in paragraph -13 the order of the CIT (A) on this point is sustained. 21. The only other ground in the Revenue s appeal or A.Y. 2005-06 is with regard to the deletion of addition of ₹ 3, .....

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n, if he finds it necessary. In respect of other payment he has recorded the finding that it is only the welcome letter in respect of other policies. In this regard also he has directed the A.O. to consider the details and after verification delete the addition. We do not find any infirmity in this direction of the CIT (A). Therefore, we uphold the order of the CIT (A) in this regard and reject the Revenue s ground against the deletion of ₹ 3,95,000/- in respect of Insurance premium. 22. T .....

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sh of ₹ 23,00,000/- and gold jewellery worth ₹ 8,50,609/-. The assessee vide show cause notice was requested to explain the source of seized cash and gold jewellery. In response to the same, M/s. Y.C. Anarkat & Associates, CAs., authorized representative of the assessee vide its letter dt. 27-11-2009 have tried to explain the jewellery seized by quoting CBDT s Instruction No.1916 dt. 11-05-1994. In this context, it needs to be mentioned that though in this instruction CBDT has ta .....

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come Tax Act,1961. Penalty proceedings u/s. 271(1)(c) of the Income Tax Act, 1961, are initiated for default committed within the meaning of that section. As regards to cash seized the assessee has stated that the total cash balance is as per books of accounts of himself, his wife and his family members etc. As mentioned earlier the result shown by the assessee in profit and loss account are totally rejected by invoking provisions of Section 145 of the Income Tax Act,1961. As stated earlier, boo .....

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dered the assessment order and the above submissions. In so far as the jewellery found is concerned, the appellant has explained that the weight of jewellery found was 1064.650 gms. As against which the jewellery as per the Circular, which could be considered was 1400 gms. The various benches of ITAT, Ahmedabad has considered this issue and held that the assessee should be given credit for the jewellery held as per the Circular . Accordingly, as the jewellery found is less than the weight envisa .....

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lained 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. 25. With regard to the unexplained investment in jewellery CIT (A) deleted the addition by observing as under: 6.3. In so far as cash found is concerned, it is noticed that the appellant has not furnished the cash flow statement. The quantum of unaccounted cash could be deter .....

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ected that while giving effect to the instant appellate order, to prepare cash flow statement and then determine the unaccounted cash, if any. The cash available with other family members of the appellant on the basis of records should also be considered by the Assessing Officer, while doing this exercise. This issue is disposed of accordingly. 26. 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 .....

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at 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 .....

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of various immovable assets purchased during the previous year relevant to assessment year under consideration. In response to this specific query, assessee vide letter dated 25-08-2009 provided the details of assets acquired during the various years. These details reveal that during the year under consideration, assessee had made purchases of immovable assets as detailed herein under:- Nature of assets Property in the name of Date of acquisition. A.Y. Cost/Investment. Shop No.19, Rajkot. Shri H .....

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1,000/- in the aforesaid assets is brought to tax in the assessee s hands u/s.69 of the Income Tax Act,1961, are initiated for default committed within the meaning of that section. 28. The CIT (A) set aside this matter back to the file of Assessing Officer with the following finding:- 7.2. I have considered the assessment order and the above submissions. It is noticed that payment of ₹ 13,61,000/- comprises of 2 figures. The first amount is of ₹ 5,50,000/- for investment in shop as p .....

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e shop premises. The Assessing Officer is directed that while giving effect to the instant appellate order, verify this point and if it so, then restrict the addition to ₹ 2,61,000/- (Rs.8,11,000 - ₹ 5,50,000).The Assessing Officer is directed to pass a speaking order on this point. 29. The ground of the Revenue is misconceived wherein they have mentioned that the CIT (A) has reduced the addition from ₹ 13,61,000/- to ₹ 2,61,000/-. The CIT (A) has only set aside the matte .....

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e of audio/video cassettes and video shooting. For A.Y. 2007-08, the assessee disclosed the income of ₹ 1,04,423/-and for A.Y. 2008-09 at ₹ 2,07,550/-. Assessing Officer rejected the trading result disclosed by the assessee on the ground that the assessee did not produce any books of account and accordingly he estimated the profit at ₹ 3 lac and ₹ 5 lac respectively for A.Y. 2007-08 and 2008-09. 31. On appeal, the CIT (A) upheld the rejection of books of account but he re .....

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see. Thus this ground of the assessee is dismissed. 32. The only other ground in the assessee s appeal in both the assessment years is against the estimation of household expenditure. The assessee had disclosed the household expenditure of ₹ 96,000/- for A.Y. 2007-08 and ₹ 95,000/- for A.Y. 2008-09. The Assessing Officer made addition of ₹ 1,25,000/- for low withdrawal of household expenditure in A.Y. 2007-08 and ₹ 1,50,000/- in A.Y. 2008- 09. On appeal, the CIT (A) estim .....

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ted 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. Smt. Geetaben H. Parmar. -A.Y. 2002-03 to 2008-09. 33. The only ground in the assessee s appeal/C.O. for all the years is against estimation of income from the business of production .....

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(A). 2002-03 79,256 1,50,000 1,20,000 2003-04 80,077 1,75,000 1,20,000 2004-05 1,43,925 2,50,000 2,00,000 2005-06 2,40,718 3,50,000 3,00,000 2006-07 2,40,539 4,00,000 3,00,000 2007-08 2,10,824 4,00,000 3,00,000 2008-09 2,28,008 4,50,000 3,00,000 34. The assessee has challenged the addition sustained by the CIT (A) in all the years either by way of appeal or by way of Cross objection. The Revenue has challenged the reduction in the estimate of income by the CIT (A) only in A.Y. 2005-06 and 2006- .....

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. 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. 36. The only other ground in the Reve .....

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me taxc Act,1961. Accordingly, penalty proceedings u/s. 271(1) (c) of the Income Tax Act,1961 are initiated for default committed within the meaning of that section. During the course of assessment proceedings, the assessee was specifically asked to furnish the details as well as clarification in respect of some calculation appearing on page No.130 of the Annexure A-5 seized during the course of search, with regard to purchase of property in the joint names ofSAmt. Maniben H. Parmar and Smt. Gee .....

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f appellant. So far as addition ofRs.1,00,000/- is concerned, it is the contention of the appellant that it is reflected in balance sheet and that therefore, the source thereof is reflected in the books. Apart from this, the income shown by the appellant from year to year is adequate to make investment in such property. Hence, the addition of ₹ 1,00,000/- is not justified. The same is deleted. So far as the addition ofRS.10,01,000/- is concerned, the contention of the appellant is that the .....

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fter considering the facts of the case and the arguments by both the sides we do not find any infirmity in the order of CIT (A). 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 .....

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