Judgment:
1. The captioned cross-appeals are directed against two orders, one dated November 15, 1989, and the other of October 16, 1990, passed by the Commissioner of Income-tax (Appeals)-I, Kanpur, in respect of the assessment years 1986-87 and 1987-88, respectively. Whereas, in the assessee's appeals, the preliminary common contention which is only for the assessment year 1986-87, is against sustaining an addition of Rs. 50,000 in each of the two assessment years, the Revenue is aggrieved against relief of Rs. 79,500 in respect of the assessment year 1986-87 and Rs. 79,000 for the other year, i.e., 1987-88. The said controversy arises in the context of addition of Rs. 1,29,500 and Rs. 1,29,000 made in the two assessment years on the ground that the assessee's version of withdrawals for household expenses were understated to such extent.
2. The assessee has been assessed in the status of individual and for his household needs in respect of the first year under appeal withdrawals totalled up to Rs. 20,500 and for the latter year amounts withdrawn for the said purpose were of the order of Rs. 21,000.
3. For the assessee, Shri S. K. Garg, the learned Chartered Accountant, submitted a copy of the order dated February 5, 1992, which was passed in cross-appeals filed by the assessee and the Revenue in Income-tax Appeal No. 2135/(All) of 1989 and Income-tax Appeal No. 140/(All) of 1990 in respect of the assessment year 1986-87 in the case of Shri Desh Raj Jain, a brother of the assessee in the present ease, and submitted that on similar facts as prevailing in the present appeal, the Allahabad Bench of the Tribunal dismissed the Revenue's appeal against relief of Rs. 48,500, but accepted the assessee's contention that there was no justification for retaining addition of Rs. 40,000. In the case of Shri Desh Raj Jain in respect of the assessment year 1986-87, the Assessing Officer had made an addition of Rs. 85,000, after noticing various facts such as, that for the assessment year 1985-86, the assessee had withdrawn Rs. 12,000 for his domestic needs and for the assessment year 1986-87 such withdrawals totalled up to Rs. 11,500 only.
4. Shri V. K. Agarwal, Senior Departmental Representative, however, very strongly reacting to Shri S. K. Garg's submission, contended that two sets of facts governing household withdrawals could never be similar and accordingly there could be no precedent. He then next submitted that the Income-tax Officer having brought substantial material and having recorded cogent reasons for making additions, the Commissioner of Income-tax (Appeals) was wrong in giving part relief much less there being any case for vacating the additions sustained.
5. In view of the posture taken by the parties, we allowed Shri V. K.Agarwal, Senior Departmental Representative, to go through the assessments as also the Commissioner of Income-tax (Appeals') orders.
Since the basis of the additions as per Mr. V. K. Agarwal is recorded in the order for the assessment year 1986-87 and it was strongly urged that the Assessing Officer 'S' Conclusions should be given its due consideration, we bring in close focus paragraph 4 of the assessment order dated January 30, 1989 (in respect of the assessment year 1986-87) : "4. The assessee belongs to an important industrial group of this place. He is a director in Messrs. Quality Steel Tubes Ltd. and has interests in Messrs. Quality Industries, Messrs. Quality Steel Products, Messrs. Shri Mahabir Enterprises, Messrs. Shri Mahabir Electronics, Messrs. Jain Overseas (P.) Ltd. and Messrs. Swastik Gears Ltd., etc. The assessee, his wife, his Hindu undivided family and all the children have interests in one or other of the concerns.
The income of the family runs in lakhs. A perusal of the records of the assessee also shows that all the persons receiving considerable amounts of gifts and are surrendered in their returns as income from other sources. The gifts cannot be the source of income and, therefore, it is obvious that the assessee has income which he has not shown. Moreover, the receipts of gifts cannot be a one-way traffic. If he or his family members have received gifts, they must have given also. The , assessee in spite of summons under Section 131 given to him did not attend office so that the facts could be ascertained. A perusal of the records of the family members shows that he has shown petty gifts of Rs. 4,000, to his wife, Smt. Gyatri Devi, Rs. 11,000, his son, Ravi Jain, Rs. 15,500, another son, Rajiv Jain, Rs. 40,000, another son, Vikash Jain, Rs. 13,900, his daughter, Bitu Jain, Rs. 14,000 and his Hindu undivided family Rs. 10,000. His son, Vikas, has also received gifts of Rs. 15,000. These amounts are besides a gift of Rs. 21,100 received by his son, Vikas Jain, Rs. 5,100 from Smt. Rukmni Devi and Rs. 15,000 from Shri Anil Kanodia. Besides these two gifts, all the other gifts have been shown as petty gifts for which there is no evidence. If the gifts are genuine then it speaks of the standard of living enjoyed by Shri Jain because there could not be one-way traffic for gifts and if not then it is Shri Jain's income which has been deposited in the garb of petty gifts. While estimating the expenses the totality of the circumstances has to be seen, A reference in this connection is invited to the Hon'ble Punjab and Haryana High Court's decision in the case of Vidya Sagar Oswal v. CIT [1977] 108 ITR 861 and to the case of K. C. Trunk and Bucket Factory v. CIT [1975] 99 ITR 67 (Gauhati) [FB]. While estimating the expenses, the income of the entire family has to be considered particularly because none of the family members have withdrawn money for household expenses and everybody says that it may be considered in the hands of the father.
Looking to all the facts and circumstances of the case and material available and in the absence of co-operation, I estimate the expenses for household at Rs. 1,50,000 against Rs. 20,500 as shown.
The difference will be added, i.e., Rs. 1,29,500. By merely surrendering the gifts, the assessee cannot get the advantage. The gifts added in different hands were added and the assessee himself has shown the same and no separate addition for income earned outside the books of accounts is being made." 6. In the context of the above, it shall be in the fitness of things if paragraphs 2 and 4 of the Commissioner of Income-tax (Appeals)' order in respect of the same assessment year are also reproduced as follows : "2. The only ground of appeal, in this appeal, relates to an addition of Rs. 1,29,500 on account of low withdrawals. The Assistant Commissioner has stated in the assessment order that the assessee has made total withdrawals for household purposes at Rs. 20,500 for this year against the withdrawals made at Rs. 17,000 in the preceding year. -According to the Assistant Commissioner, the assessee's family members have been surrendering receipt of gifts for assessment which proved that some gifts must have been given, since taking and giving of gifts is a two-way affair and the gifts so given are not reflected in the withdrawals. It has also been observed that the assessee belongs to a prominent industrial group and enjoys a high standard of living. Reliance has been placed on the decision of the Punjab and Haryana High Court in the case of Vidya Sagar Oswal v. CIT [1977] 108 ITR 861 and in the case of K. C. Trunk and Bucket Factory v. CIT [1975] 99 ITR 67 (Gauhati) [FB] for making the impugned addition.
4. I have considered the Authorised Representative's contentions and the facts of the case. There is no dispute about the fact that the appellant belongs to an affluent family and as per the standard of living expected of a person of his status and keeping in view the size of the family, the withdrawals shown appear to be ridiculously low. Although the receipt of gifts by the family members is not a sufficient criteria, this fact cannot be totally overlooked and does give indication that the appellant or his family members have also given some gifts, since giving and taking of gifts cannot be a one-sided affair. The appellant has three dependent sons out of which two are adults and are doing business and one son and one daughter are studying in school and considering this fact, the withdrawals shown are inadequate in view of the standard of living, size of the family and inflationary trend in the economy. The estimate of the Assistant Commissioner, however, appears to be on the higher side and is not supported by any material. Considering the facts and circumstances of the case, the addition is reduced to Rs. 50,000, allowing a relief of Rs. 89,500." 7. At this stage, it may be stated as a fact that in respect of the assessment year 1985-86 disbelieving the assessee's version of withdrawal of Rs. 17,000, addition of Rs. 13,000 was made in the assessment raising the estimated household expenses to Rs. 30,000, but the first appellate authority deleted the addition and his order dated August 29, 1991, a copy of which has been submitted at pages 6 and 7 of the paper book has come to be accepted by the Revenue though it submitted an appeal in respect of the assessment year 1986-87 on January 18, 1990, and in respect of the assessment year 1987-88 on January 7, 1991.
8. Coming to the learned Senior Departmental Representative's submission that the gift factor was not there in respect of the assessment year 1985-86, Shri S. K. Garg, Chartered Accountant, made a statement at the Bar and took personal responsibility for the same, that similar gifts as in the present year had been received by the assessee and his family members in respect of the assessment year 1985-86 and in spite of the same, the first appellate authority had vacated the addition made in that year.
9. The next argument of Shri V. K. Agarwal, learned Departmental Representative, that the facts in the case of Shri Desh Raj Jain could not be compared, we can do no better than to look into the Tribunal's order dated February 5, 1992, and for this purpose paragraphs 2 to 12 are reproduced as follows : "2. The facts of the case are that the assessee, in his individual status, enjoys income from property and salary from Messrs. Quality Steel Tubes Ltd. Besides, in his capacity as karta of the Hindu undivided family, he is a partner in Messrs. Quality Steel Products, partnership firm. In addition, his family members have got diversified business interests. For the sake of reference, his family pedigree is reproduced hereunder : _____________________________|_________________________________ 3. During the year under consideration, the Assessing Officer estimated household expenses of the assessee at Rs. 1 lakh and after considering the withdrawals of Rs. 11,500, as have actually been made, he made an addition of Rs. 88,500. While estimating the domestic expenses at Rs. 1 lakh, the Assessing Officer was governed by the consideration that the assessee belonged to a prominent industrial group and his family members had been receiving gifts from various persons which were being surrendered in their respective assessments. In the year under consideration, the said gifts were Rs. 46,000 which have been surrendered in the hands of the recipient in the following manner : 4. The said gifts were taken as a norm for estimating the standard of living enjoyed by the assessee and the estimate was made for domestic expenses.
5. Aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Kanpur. After recording a finding to the effect that : 'The estimate of the Assistant Commissioner, however, appears to be on the higher side and is not supported by any materials.' he reduced the addition of Rs. 40,000 allowing a relief of Rs. 48,500.
6. Besides the assessee received a sum of Rs. 6,000 as entertainment expenses from Messrs. Quality Steel Tubes (P.) Ltd. As the evidence of the said expenses having been actually incurred were not furnished, the said receipt was treated as income and was subjected to tax under the head 'Salary income'.
7. The Revenue is aggrieved by the relief given by the learned Commissioner of Income-tax (Appeals). The learned Departmental Representative filed before us copies of the assessment orders of the family members of the assessee to demonstrate that the members received gifts aggregating to Rs. 46,000 in this very year and this cannot be a one-way phenomenon if the family members of the assessee, particularly his wife and minor children received gifts on various occasions, the assessee must have given gifts also and must have spent huge sums of money on organising/celebrating the occasions on which such gifts were given/ received. He submitted that the quantum of gifts received by the family members is a sufficient indication that the standard of living enjoyed by the assessee and looking to that factor, the withdrawals made by him at Rs. 11,500 were ridiculously low and the estimate of the Assessing Officer of the assessee's domestic expenses at Rs. 1 lakh was very fair and no interference was called for. He further emphasised that setting aside of assessment for the purpose of making further enquiries will not serve any purpose as the assessee himself was not likely to come forward with any more details and with lapse of time, it may not be possible for the Assessing Officer to collect any more information.
8. In reply, Shri S. K. Garg, appearing on behalf of the assessee-respondent, invited our attention to the comparative statements of withdrawals appearing at page 1 of the paper book which is reproduced hereunder : With reference to the said chart, he submitted that in the immediately preceding year the drawings of the assessee have been accepted at Rs. 12,000 from the stage of the first appellate authority and a statement was made by him that no second appeal has been filed by the Department about the relief allowed to the assessee in the assessment year 1985-86. Shri S. K. Garg also filed a supplementary paper book which contained the assessment orders of Shri Desh Raj Jain, Hindu undivided family, wherein substantial additions have been made in the various assessment years including the assessment year 1986-87. The said Hindu undivided family has shown share income from Messrs. Quality Steel Products at Rs. 15,663 as against which the assessment has been made at a huge figure of Rs. 2,71,724. It was further emphasised that in the absence of any incidence of any unexplained expenditure having been incurred by the assessee in particular, the addition cannot be made by invoking the deeming provision, as such deeming provisions have the effect of creating artificial income and they should, therefore, be construed strictly. Our attention was also drawn to a decision made by our learned brothers in Income-tax Appeals Nos. 1614 and 1612 in the case of D. K. Kanodia, Hindu undivided family. There also the assessee belonged to a prominent industrial group. With reference to the said decision, it was submitted that, in the instant case, the gross income of the assessee was only Rs. 80,018 which was subjected to further outgoings like payment of insurance premium and tax, etc.
In such a case, no prudent person can be expected to spend more than his own income. On the other hand, by virtue of his association with an industrial group (as has been stated by the Assessing Officer) he would have all the temptation and incentives to effect maximum savings instead of spending his income.
9. It was also submitted that the assessee gave all the details with regard to his income in compliance to the querry raised by the Assessing Officer, a copy of which appears at page 19 of the paper book and with reference to the same, it was submitted that the gifts received by the family members was not at all the subject-matter of enquiry and rightly so as the assessee himself did not receive such gifts, etc.
10. It was also pleaded that apart from the assessee and his family members, there was an entity in the name of Desh Raj Jain, Hindu undivided family, also having interest as partner in a firm in whose cases assessments have been made on substantial income, so much so that the said firm as well as Desh Raj Jain, Hindu undivided family, have gone to the Settlement Commission for settlement of their cases. In such a situation, if any expenses had been incurred on the maintenance of the family members, it would not be unusual if such expenditure has been met by the sources of the Hindu undivided family. Therefore, at any rate, the issue of adequacy or otherwise of the withdrawals made by the assessee in the instant case has no bearing on his assessment.
11. We have considered the rival submissions in great detail. It is an undisputed fact that till the immediately preceding year, the withdrawals at Rs. 12,000 as has been determined from the stage of the first appellate authority, were found to be reasonable even by the Department. It is also a fact that as per the assessee's admission as appearing in his letter dated February 16, 1989, he was not paying any house rent and his family consisted of self, wife and one son, Vivek Jain (who was a minor at that time). It is also a fact that apart from relying upon the circumstances that the family members have received substantial gifts which they have surrendered also for the purpose of assessment, no other information or material has been placed on record which could go to show that the assessee incurred expenditure in excess of the withdrawals by him. The statements made by the family members to the effect that for their maintenance they were dependent on their father, i.e., the assessee, is also of no consequence as the said reference could well be taken to be attributable to the Hindu undivided family which was having substantial income by virtue of its partnership in Messrs. Quality Steel Products, as mentioned above. The reliance placed by the assessee on the decision of the Delhi High Court in the case of Yadu Hari Dalmia v. CIT [1980] 126 ITR 48 is also well-founded. Looking to the entirety of the facts and circumstances of the case and particularly the fact that in the immediately preceding year the withdrawals of Rs. 12,000 for domestic expenses were considered as reasonable and over and above the withdrawals made by him for meeting domestic expenses, a sum of Rs. 6,000 was also available to the assessee in the form of receipt from Messrs. Quality Steel Tubes Ltd., which has been treated as income in his hands, we hold that the estimate of domestic expenses as made by the authorities below had no basis whatsoever and there was no occasion to make any addition on this score. In the result, the appeal filed by the Department is dismissed.
12. In the assessee's appeal, objection has been taken to the addition of Rs. 40,000 as has been sustained by the learned Commissioner of Income-tax (Appeals) on account of low withdrawals.
The issue has been examined by us in detail in the appeal of the Department and it has been held that the withdrawals made by the assessee together with a sum of Rs. 6,000 as had become available to him on account of receipt from Messrs. Quality Steel Tubes Ltd. were reasonable and there is no material at least on record to indicate that the assessee incurred the expenditure over and above the said sum. Before parting with the matter, we also feel it necessary to mention that the case of Vidya Sagar Oswal v. CIT [1977] 108 ITR 861 (P & H) as has been repeatedly referred to and relied upon by the Departmental Representative is distinguishable on facts as in that case the income of the assessee was more than Rs. 86,000 and he had spent a paltry sum of Rs. 2,000 only for meeting the domestic expenses. In the present case, the income was Rs. 72,000 (approximately) which was subjected to the outgoing on account of payment of taxes and L. I. P., etc. In such a situation, he is not expected to incur as high an expenditure as Rs. 1,00,000 as estimated by the Assessing Officer or even Rs. 51,500 as estimated by the learned first appellate authority. In this view of the matter, the assessee's appeal on this score is allowed." 10. A reading of the above would show that there can be no scope for arguments that the facts were not different but similar in the assessee's case and those prevailing in Desh Raj Jain's case. While the Allahabad Bench of the Tribunal dismissed the Revenue's appeal against relief given by the Commissioner of Income-tax (Appeals), but accepted the assessee's appeal that the assessee's version of withdrawals which was only to the tune of Rs. 11,500 could not be discarded and addition made without bringing evidence on record, was not sustainable.
11. In the present case also if in the opinion of the Assessing Officer the assessee's version of withdrawals for the two years was low that could give rise to cause of action for making investigation, but the Assessing Officer's opinion as such could not be made the basis for any addition. As far as the gift factor is concerned, we consider the Assessing Officer's approach to be totally erroneous because the fact of receiving gifts could not give rise to a presumption that the assessee was giving gifts also. To repeat even if there could be said to be a valid cause for such thinking it could at best be taken to its logical conclusion by making investigation and bringing legally admissible evidence on record. Therefore, we dismiss the Revenue's appeals in respect of relief given by the Commissioner of Income-tax (Appeals) and those of the assessee's appeals are allowed by lifting the addition sustained for the reason that there was no supporting evidence brought on record to justify the additions :in the assessments.
12. Coming back to the assessee's appeal in respect of the assessment year 1987-88, the other contentions are against confirmation of additions of Rs. 6,000 and Rs. 8,000. The first of such additions represented a claim as reimbursement of expenses incurred on behalf of Messrs. Quality Steel Tubes Ltd. The second addition related to investment in a scooter.
13. As far as the first addition is concerned, a similar addition made in the case of Shri Desh Raj Jain in respect of the assessment year 1986-87 has come to be upheld by the Tribunal vide paragraph 13 of the order dated February 5, 1992, and since we have relied on the said order for deciding the appeals on the main issue, we see no reason to depart from the view taken in the said case on such issue. Therefore, the addition of Rs. 6,000 is confirmed.
14. The other addition of Rs. 8,000 is also upheld for the reasons given by the lower authorities.
15. Before parting, we would like to observe that this shall not be cited as precedent to urge that the Tribunal having vacated the additions made on account of low household withdrawals, the quantum of withdrawals as declared by the assessee have been reasonable. We have vacated the additions because no evidence has been brought on record in support of the additions made and those sustained.
16. In the result, whereas the Revenue's appeals are dismissed, that of the assessee in respect of the assessment year 1986-87 is allowed and he succeeds partly in respect of the assessment year 1987-88.
17. I have carefully gone through the proposed order of my learned senior colleague, the Judicial Member, but I am unable to agree with the conclusion as recorded in paragraphs 10 and 11 (see page 32) of the proposed order. The factual background relating to the controversy on account of additions of Rs. 1,29,500 in the assessment year 1986-87 and Rs. 1,29,000 in the assessment year 1987-88 on account of low household withdrawals made by the Assessing Officer which were reduced to Rs. 50,000 in each of the two assessment years by the Commissioner of Income-tax (Appeals) and against whose order, both the assessee and the Department have filed appeals to the Tribunal, have been given by my learned brother in detail by including the relevant portion of the order of the Assessing Officer relating to the assessment year 1986-87 in paragraph 5 (see page 25) of the proposed order. My learned brother has also reproduced the relevant portion of the Commissioner of Income-tax (Appeals)'s order in paragraph 6 (see page 26) of the proposed order and the relevant portion of the Tribunal's order in the case of Shri Desh Raj Jain, brother of the assessee, in Income-tax Appeal No. 2135/(All) of 1989 and Income-tax Appeal No. 140/(All) of 1990 in respect of the assessment year 1986-87 have also been incorporated in paragraph 9 (see page 27) of the proposed order.
However, after referring to these orders, my learned brother has concluded in paragraph 10 (see page 32) of the proposed order that the facts of the case of the assessee were not different but similar to the case of Shri Desh Raj Jain which is factually incorrect because the family of Shri Desh Raj Jain consisted of self, wife and one son, Vivek Jain (who was minor at the relevant time as recorded in paragraph 11 (see page 31) of the order of the Tribunal in the case of Shri Desh Raj Jain, whereas in the case of the assessee, his family consists of self, wife and four children as recorded in paragraph 3 of the assessment order. Therefore, the withdrawals in both the cases cannot be held to be comparable. Another point of distinction is that in the case of the assessee all the members of the family have stated before the Assessing Officer in their individual assessments that none of these family members has withdrawn any money for household expenses and they have categorically stated that the question of withdrawals should be considered in the case of the assessee whereas in the case of Shri Desh Raj Jain. Messrs. Desh Raj Jain, Hindu undivided family, was having interest as partners in several firms which had substantial income and has gone to the Settlement Commission for settlement of their cases and the Tribunal in this connection has Observed in paragraph 10 (see page 30) of its order in the case of Shri Desh Raj Jain that some expenses on the maintenance of the family could have been incurred by the Hindu undivided family of Shri Desh Raj ]ain. Another point of difference is that in the case of Shri Desh Raj Jain, during the course of arguments before the Tribunal, the learned Departmental Representative (D. R.) has made a specific request that no useful purpose will be served by setting aside the assessment as the assessee was not likely to furnish any details with regard to his household expenses and the Assessing Officer may not be able to collect any further information in this regard and this fact has been recorded in paragraph 7 (see page 29) of the order of the Tribunal while no such prayer was made by the learned Senior Departmental Representative, while arguing the case of the assessee before us.
18. Now coming to the finding of my learned brother in paragraph 11 (see page 32) of the proposed order by which the appeal of the assessee in relation to the additions sustained by the Commissioner of Income-tax (Appeals) on account of low household withdrawals has been allowed while dismissing the appeal of the Department, I am in agreement with the finding recorded in the earlier part of paragraph 11 (see page 32) that the inadequacy of withdrawals gave rise to cause of action for making further investigation and the additions cannot be sustained on the basis of the opinion of the Assessing Officer alone.
However, since the Departmental authorities have not done their duty properly, does it mean that the Tribunal is helpless in this regard and the only course left for the Tribunal is to delete the additions In my humble opinion this approach is not at all correct. The Tribunal is not helpless in such a situation. The Tribunal should not condone the inefficiency of the Departmental authorities but should direct them to make proper inquiries/investigations so as to make a proper assessment in the case of the assessee. The whole purpose of assessment and subsequent appeals in relation to that assessment is to correctly determine the tax liability of the assessee and the Assessing Officer, the learned first appellate authority as well as the Tribunal are all instruments in determining the correct tax liability of an assessee in a particular assessment year. In this case, it will be useful to refer to the observations of the Madras High Court in the case of CIT v.Indian Express (Madurai) Pvt. Ltd. [1983] 140 ITR 705 wherein the High Court has observed that there is no lis between the taxpayer and the Income-tax Department and both are engaged in an administrative act of adjusting the taxpayer's liability. The primary purpose of the Income-tax Act, 1961, is to levy and collect income-tax and as the purpose of the statutory provisions especially those relating to the administration and management of income-tax is to ascertain the tax liability correctly, the various provisions relating to appeal and reference, etc., cannot be equated to a lis or dispute arising between two parties as in a civil litigation. Although the income-tax statute makes the Department and its officers figure as parties in appeal proceedings, they are not in the strict sense what are called by American writers parties to "adversary proceedings" because the very object of the appeal is not to decide a point raised as a dispute but any point which goes into the adjustment of the taxpayer's liability and hence the authorities sitting in appeal in a tax case cannot be regarded as deciding a lis. They are only engaged in an administrative act of adjusting the taxpayer's liability. Even though the appellate authorities exercise quasi-judicial functions, the proceedings before them lack the basic elements of adversary proceedings. In a case where the Revenue is a party, at the same time being an authority vested with the responsibilities of drawing up the assessment and determining the correct tax liability, it would not be in accord with the scheme of the Act to impose restrictions on the ambit and power of the Tribunal by notions such as finality, subject-matter of the appeal, etc.
19. In the present case as has been observed by the Assessing Officer in paragraph 4 of the assessment order relating to the assessment year 1986-87, the assessee belongs to an important Industrial Group of Kanpur being : (a) Director in Messrs. Quality Steel Tubes, Kanpur ; and is also interested in and yet he wants the Departmental authorities to believe that the total household expenses for a full year in relation to himself, his wife and four children were only of the order of Rs. 21,000/20,500 (twenty-one thousand/twenty thousand and five hundred). A perusal of the order indicates that the Assessing Officer did issue summons under Section 131 to the assessee to record a statement in connection with low withdrawals but the assessee ignored the summons and it is not clear as to whether the Assessing Officer has levied any penalty for non-compliance of the summons under Section 131. However, it is clear that the Assessing Officer has not made any further investigation to find out the expenditure incurred by the assessee on account of (i) education of his children ; (ii) electricity bills ; (in) domestic servants ; and (iv) other day-to-day activities and has not brought any material on record for making addition of Rs. 1,29,500 by estimating the household expenditure at Rs. 1,50,000. It is true that such an arbitrary estimate of Rs. 1,50,000 without any supporting evidence, cannot be sustained but this also does not mean that the entire addition has to be deleted simply because the Assessing Officer has failed in his duty to make enquiries/investigations properly in the case. In such a situation, the Supreme Court in the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451 has held that (headnote) : "It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute." 20. Respectfully following the decision of the Supreme Court referred to supra, I will direct that the question of addition on account of low household withdrawals in both the assessment years 1986-87 and 1987-88 should be restored to the file of the Assessing Officer to make proper enquiries/investigations to bring on record the material to justify the amount which the assessee must have spent on account of his household expenditure including the education of his children and then make the additions after giving due and proper opportunity to the assessee to rebut the evidence collected after enquiry and investigations. In the result, the appeals of the assessee as well as the Department on the issue of low household withdrawals are allowed for statistical purposes only.
21. As regards the other grounds of appeal relating to the assessment year 1987-88, wherein the confirmation of addition of Rs. 6,000 and Rs. 8,000 was challenged by the assessee, I am in agreement with the decision of my learned brother wherein the above two additions of Rs. 6,000 as well as Rs. 8,000 were upheld following the decision of the Tribunal in the case of Shri Desh Raj Jain as well as on the basis of reasoning and conclusion of the learned first appellate authority.
22. There being difference of opinion between the Members in respect of Income-tax Appeals Nos. 2160/(All) of 1989, 2757/(All) of 1990, 138/(All) of 1990 and 33/(All) of 1991 which are cross appeals, the following question is referred to the President of the Income-tax Appellate Tribunal in terms of Section 255(4) of the Income-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case, the Judicial Member has been correct in law in holding that in the absence of any material brought on record, the assessee's version of household expenses amounting to Rs. 20,500 and Rs. 21,000 in respect of the assessment years 1986-87 and 1987-88, respectively, could not be discarded and accordingly vacating the related additions sustained by the Commissioner of Income-tax (Appeals) or the Accountant Member is justified in his approach that the question of additions made on account of low household withdrawals in both the assessment years should be restored to the file of the Assessing Officer to make proper enquiries/investigations to bring on record the material justifying the amounts which the assessee must have spent on account of his household expenditure including education of his children and accordingly, setting aside the assessments?" 23. These are the appeals where the learned Members of the Amritsar Bench camping at Allahabad could not agree on the conclusion. They differed on the following point : "Whether, on the facts and in the circumstances of the case, the Judicial Member has been correct in law in holding that in the absence of any material brought on record, the assessee's version of household expenses amounting to Rs. 20,500 and Rs. 21,000 in respect of assessment years 1986-87 and 1987-88, respectively, could not be discarded and accordingly vacating the related additions sustained by the Commissioner of Income-tax (Appeals) or the Accountant Member is justified in his approach that the question of additions made on account of low household withdrawals in both the assessment years should be restored to the file of the Assessing Officer to make proper enquiries/investigation to bring on record the material justifying the amounts which the assessee must have spent on account of his household expenditure including education of his children and accordingly, setting aside the assessments?" 24. The sum and substance of the difference of opinion is as to whether the assessee had disclosed the withdrawals of household expenses in a manner as to justify his status, standard of living and size of the family or whether any further enquiries or investigations are necessary as ordered by the Tribunal.
25. After hearing the parties and after going through the record, I did not find much difficulty in agreeing with the view that the expenses disclosed by the assessee cannot be said to be insufficient or inadequate particularly compared to the household drawings shown in the earlier years and the income assessed of the assessee.
26. The facts of the case are fully recorded in the opinion expressed by the learned Judicial Member wherefrom I find that the assessee belonged to an industrial group of Kanpur. He was a director in Messrs.
Quality Steel Tubes Ltd. and had interest in Messrs. Quality Industries, Messrs. Quality Steel Products, Messrs. Mahabir Enterprises, Messrs. Mahabir Electronics, Messrs. Jain Overseas (P.) Ltd. and Messrs. Swastick Gears Ltd. The assessee family consisted of himself, his wife and four children. The assessee had shown a total withdrawal of Rs. 20,500 for meeting household expenses for the assessment year 1986-87. This was considered to be wholly inadequate by the Assessing Officer not by reference to any expenditure incurred by the assessee outside the account books and not disclosed but by reference only to the status of the assessee, the connections of the assessee with so many industrial concerns describing them as important industrial group. The Assessing Officer also mentioned in paragraph 4 of his order that the assessee, his wife, his Hindu undivided family and all the children have interest in one or other concerns and that the income of the family runs into lakhs. But in paragraph 3 of his order, the Assessing Officer mentioned that "none of the family members is assessed to income-tax". I am unable to understand how when the children had interest in one or the other concerns, they can be without any assessment to income-tax unless the income from the concerned concerns was below the taxable limit in which case their connections with the concerns cannot give as much aura as the Assessing Officer imagined. That apart the Assessing Officer made a further mention that the assessee and his children were receiving considerable amounts of gifts and are surrendering them in their returns as income from other sources. This also shows that they were assessed to income-tax and the earlier observation in paragraph 3 that the family members were not assessed to income-tax, does not appear to be a correct statement. If this is a contradiction, that contradiction in the approach continued throughout the order. The Assessing Officer next referred to the fact that these gifts were surrendered as income. From that the Assessing Officer imagined that the gifts of such a magnitude (here in this case, it amounts to more than Rs. 1 lakh) must not be a one sided affair and the assessee or his family members were receiving gifts, they must also be giving gifts and, therefore, the assessee's status must be so high as to receive such huge amounts of gifts every year, which suggests incurring of expenditure on arranging ceremonies and parties and, therefore, the expenditure shown at Rs. 20,500 for household expenses was wholly inadequate. In other words, the Assessing Officer justified his conclusion that the withdrawals were inadequate by linking them with the imagined expenditure that the assessee must be incurring in arranging parties and ceremonies to receive the gifts. Thereafter, he mentioned the details of the gifts received by the family members and as I said earlier, concluded that the standard of living enjoyed by the assessee must be very high. Another fact that the Assessing Officer has mentioned was that none of the family members withdrew any money for household expenses and every one had stated that it should be considered in the hands of their father. It was looking to these circumstances and the assessee's non-cooperation with the summons issued under Section 131 to explain the discrepancies, the Assessing Officer estimated the household expenses at Rs. 1,50,000 and added the difference of Rs. 1,29,500 as income from other sources. This was how the assessment for 1986-87 was formulated. For the assessment year 1987-88, the expenditure shown was Rs. 21,000 and the estimate made by the Assessing Officer was Rs. 1,50,000 and after reducing the amount shown by way of drawings, the balance of Rs. 1,29,000 was added as income from other sources for that year.
27. On appeal, the Commissioner (Appeals) substantially agreed with the contentions raised by the Assessing Officer but however considered that the estimate was high and reduced it to Rs. 50,000 in each of the years. The Department was in appeal against the relief granted by the Commissioner (Appeals) and the assessee was in appeal against the additions sustained by the Commissioner (Appeals) on appeal. It was how these appeals have come before the Tribunal, two by the assessee and two by the Department.
28. I have briefly stated the reasons that were adduced by the Assessing Officer in support of the estimate. But as I pointed out in the beginning of my opinion the Assessing Officer did not point out any particular expenditure or specific instance of suppression of household expenses incurred. It was only with reference to the imaginary high status of the assessee and the gifts received by the assessee. Without going into the actual points on which my learned brothers have differed, I would like to mention here as my opinion that if reference is made to the income assessed in the hands of the assessee for these two years and the earlier years and the withdrawals shown by the assessee for these years and the earlier years, I find it extremely difficult to say that the income assessed was at all in consonance or consistent with the alleged high status that the assessee was supposed to enjoy.
29. It will be seen from this chart that when the income assessed was as low as Rs. 35,630 and as high as Rs. 65,624, could it be said that the status enjoyed by the assessee was very high and at least whether it reflected in the income shown and assessed. Is it not a wild allegation made by the Department and much fetish made about the status without having regard to the actual income assessed. When the actual income assessed was as low as Rs. 35,630, the household drawings were shown at Rs. 19,000, which was accepted by the Department. For the assessment year 1984-85, when the income assessed was Rs. 42,410, the household drawings were Rs. 15,500 and they were accepted. For the assessment year 1985-86, the income assessed was Rs. 47,189 and household drawings were Rs. 17,000 and they were accepted. For these two years under appeal, the incomes assessed were Rs. 48,182 and Rs. 65,624, i.e., after excluding the additions made on account of alleged low withdrawals and the household drawings shown were Rs. 20,500 and Rs. 21,000. These withdrawals shown are in no way inconsistent with either the household drawings shown by the assessee in the earlier years and accepted by the Department or the income assessed. When a person's income is Rs. 48,182 and Rs. 65,624 would he be expected to spend Rs. 1,50,000 as estimated by the Assessing Officer or Rs. 50,000 as estimated by the Commissioner (Appeals). Is it probable Would anybody burn his fingers by overspending There is no reference in the order of the Assessing Officer to the income assessed nor to the withdrawals shown in the earlier years nor is there a reference to these figures in the opinions expressed by my learned brothers. I am therefore of the opinion that if regard is only had to the income assessed and the past withdrawals accepted by the Department, perhaps this controversy would not have arisen. A person whose income is only Rs. 48,182 could never be expected to incur more than that and if the Department alleges that the assessee did spend more, the onus was on it to show it. This onus the Department has failed to discharge. The learned Accountant Member has said while dealing perhaps with the question of onus in an indirect manner that when the Assessing Officer has made a mistake in making proper investigations and when the additions made by him could not be sustained on that basis and if the Departmental authorities did not do their duty, the Tribunal could not be a helpless spectator and that the only course left to the Tribunal was not to delete the addition. He further pointed out that the Tribunal should not condone the inefficiency of the Departmental authorities but should direct them to make proper enquiries so as to make a proper assessment. He drew support for his view from the observations made by the Madras High Court in the case of CIT v. Indian Express (Madurai) P. Ltd. [1983] 140 ITR 705, wherein the Madras High Court had observed that there is no lis between the taxpayer and the Income-tax Department and both are engaged in an administrative act of adjusting the taxpayer's liability. He also referred to the decision of the Supreme Court in the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451, where the Supreme Court has held that the jurisdiction of an appellate authority extends to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred. In my opinion, the learned Accountant Member has failed to grasp the real purpose of the Tribunal. The Tribunal acting as an appellate authority has to see whether the assessment framed by the Assessing Officer and whether the appellate order appealed against were according to law and properly framed on facts and whether there was sufficient material to support it. When there is no material to support it and when as observed by the learned Accountant Member the additions made by the Assessing Officer could not be sustained, it is not for the Tribunal to start investigations suo motu and supply the evidence for the Department. If the additions are not supported by evidence, the only course open to the Tribunal is to delete the additions pointing out how the additions made could not be sustained for want of adequate supporting material. It is for the Department to gather the material and make proper assessments and the Tribunal is not in that fashion an income-tax authority. Under the income-tax authorities stipulated under the Income-tax Act, the Income-tax Appellate Tribunal is not one of them. It is purely an appellate authority. Therefore, the subject of the appeal before the Tribunal is whether the addition or disallowance sustained was in accordance with law and supported by material. If there is no sufficient material, the addition must be deleted. The Tribunal cannot order further enquiry with a view to sustain the addition. This will amount to taking sides with the parties which is not the function of a judicial authority like the Tribunal. The observations of the Madras High Court are not to the effect that the Tribunal could take upon it investigations which the Departmental authorities have failed to carry out. Nor would the Supreme Court decision referred to above justify such a course because what the Supreme Court said was that if there are any errors in the proceedings, the appellate authority could correct it. There is no mistake or flaw in the proceedings or procedure adopted. Making further investigations is not a part of the procedure. That is substantive. Therefore, the observation made by the Supreme Court is in my opinion not properly appreciated for ordering further investigation into fresh facts. If these two decisions are properly understood in the proper perspective and the withdrawals made this year are perceived in the context of the incomes assessed and the withdrawals made in the earlier years, it could not be said that the withdrawals made in these two years were ridiculously low so as to warrant an estimate. The mere ipsi dixit of the Revenue about the personal expenditure is not enough to sustain an addition. There must be material to support the addition. Mere reference to the status is not enough to sustain an addition though it is sufficient to probe further, which the Departmental authorities have failed to do. Joint families may have income running into lakhs. But that is no consideration to say that the expenditure shown here by way of personal expenditure was low.
30. Furthermore when the assessee and the members of his family were receiving gifts of substantial amounts of Rs. 1,23,400 in the assessment year 1986-87 and about the same amount in the next year and when such amounts were surrendered as income, what does it mean and what does it convey. Does it not mean that the gifts were not real and some money is being brought into the accounts, if at all they are brought into the accounts, in the garb of gifts. If these monies are credited in the books as gifts and then offered as income, one result would follow, namely, that the assessee has some fund outside the accounts from which these monies were being credited in the books in instalments. When the Department accepts these gifts as income, it follows that the existence of the fund was also accepted. Such being the case, how can it be assumed that these gifts were again returned to the donors in some form or the other by arranging functions, ceremonies or parties by incurring further expenditure. This supposition that the assessee was incurring expenditure by way of returning the gifts and also by way of arranging parties, is therefore, an illusion myth. If the gifts were returned as suggested by the Department, then there must have been entries in the books showing the return and no reference was made to such entries. I am therefore of the opinion that the conclusion drawn by the Department from the presence of these gifts that the assessee's standard of living must be very high does not seem to be correct at all. This is on the assumption that the gifts received were credited in the books of account. But if the gifts received were not credited in the books of account and yet offered as income, does it not mean that the income received by way of gifts was available with the assessee for being spent. When that was so where is the need to further estimate the expenditure. Therefore, the inferences built over the factum of gifts do not in my opinion lead to the conclusion or to the only conclusion that the household expenses shown were very low and meagre and necessarily needed some addition therefor. I am, therefore, not in agreement with this view expressed by the learned Officers of the Department or so vociferously urged before me by the learned Departmental Representative.
31. The learned Judicial Member mentioned in his order that the facts of this case were similar to the facts of another case, namely, that of the brother of the assessee Shri Desh Raj Jain. In the case of Shri Desh Raj Jain, who has a wife and three sons, the withdrawals shown were of Rs. 11,500 and when an addition of Rs. 1 lakh was made for identical reasons, the entire addition was deleted at the level of the Tribunal and the withdrawals shown at Rs. 11,500 were accepted. While accepting the withdrawals, the Tribunal dealt with almost all the contentions, that are now. urged in this case. The learned Judicial Member said that since the facts of this case are similar to the case of Shri Desh Raj Jain and following with respect the order of the Tribunal, he would delete the addition sustained by the Commissioner of Income-tax (Appeals). But the learned Accountant Member had said that he would not agree that the case of Shri Desh Raj Jain was comparable to the case of the assessee because there were only three members whereas in the case of the assessee there were four members. But I am unable to agree with the view expressed by the learned Accountant Member because while in the case of Shri Desh Raj Jain, the withdrawals were only Rs. 11,500, the withdrawals in the case of the assessee were Rs. 20,500 in one year and Rs. 21,000 in another year, which were more by nearly Rs. 10,000 than considered adequate in the case of Shri Desh Raj Jain. This substantial increase in the withdrawals was ignored by the learned Accountant Member while it was taken into consideration by the learned Judicial Member. It cannot therefore be said, as held by the learned Accountant Member, that the case of Shri Desh Raj Jain was not comparable to the case of the assessee in so far as the matrix of the matter is concerned. There also the addition was made keeping in view the alleged high status of the assessee and the factum of gifts here also the same.
32. The learned Departmental Representative had tried to justify the order of the learned Accountant Member by making references to various judgments passed by the High Courts and the Supreme Court. I am not referring to them for the reason that I did not find any imperative necessity to refer to them and to discuss them because the principles settled therein are well-settled and they are not applicable to the facts of this case. Here it is a simple case as to whether the Department has brought enough material on record to throw overboard the assessee's explanation that the withdrawals shown in the books of account were adequate and whether it has brought sufficient material to justify their estimate and whether a further investigation should be made at the level of the Tribunal to cover up the inefficiency of the Department. These matters are pure questions of fact which have to be decided with reference to the material available on record and the solutions to them are not to be gathered from the various High Courts decisions, which turn on their peculiar facts. Nor a principle of law involved in these appeals. It is only a matter of appreciation of the evidence and material on record.
33. Having said so much about the aspects which I felt are necessary and relevant and having given my reasons, I am of the opinion that the learned Judicial Member is correct in law in holding that in the absence of any material brought on record, the assessee's version of household expenses could not be discarded and, therefore, the additions made must be held to be without material and should be deleted. I agree with his view.
34. The matter will now go before the regular Bench for decision according to majority opinion.