ITO 21(1)(4), MUMBAI V. PREMLATA L. SINGH, MUMBAI

ITA 110/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75331 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 05-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL BAGARIA
• Assessee Lawyers: PARMINDER
• Keywords: Principle of natural justice
• Section: 142(1); 144

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL C CC C BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.110/MUM/2012 110/MUM/2012 110/MUM/2012 110/MUM/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2007-08) ITO 21(1)(4), C-10, 6 TH FLOOR, R. NO. 606, PRATYAKSHAKAR BHAVAN, BKC, BANDRA(E), MUMBAI-400051 % % % % / VS. PREMLATA L. SINGH, 204, ALPA BUILDING, ST. FRANCIS RAOD, VILE PARELE(W) MUMBAI-400056 #' ! ./ ( ./ PAN/GIR NO. :BAYPS6844R ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SMT. PARMINDER # # # # . / . / . / . / / REVENUE BY : SHRI SATISH R. MODY & SHRI RAHUL BAGARIA % % % % . .. . -! -! -! -! / DATE OF HEARING : 16 TH JANUARY 2014 01& 01& 01& 01& . .. .-! -! -! -! /DATE OF PRONOUNCEMENT: 22 ND JANUARY 2014 ' 2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31.10.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) F OR THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ADDITION ON A CCOUNT OF RENT OF ` 44,47,752/- MADE BY THE A.O. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANC E OUT OF SALARY, WAGES, OTHER EXPENSES, TELEPHONE AND CONVEYANCE EXP ENSES TO ` 16,52,000/- AS AGAINST THE TOTAL ADDITION OF ` 38,7 6,119/- MADE BY THE A.O. ITA NO.110/M/2012 PREMLATA L. SINGH 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ADMITTING NEW EVIDENCE, WIT HOUT REMANDING THE MATTER TO THE FILE OF THE A.O FOR VER IFICATION AS PER RULE 46A. 3. FIRST WE TAKE UP GROUND NO. 1 & 3 TOGETHER REGAR DING DELETING THE ADDITION MADE ON ACCOUNT OF RENT PAID BY CONSIDERIN G THE NEW EVIDENCE BY CIT(A). WE HAVE HEARD THE LD. D.R AS WELL AS LD. A.R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 144 OF THE INCOME TAX ACT AS NOBODY H AS APPEARED BEFORE THE A.O DESPITE NOTICES ISSUED BY THE A.O U/S 143(2 ) AND 142(1) OF THE INCOME TAX ACT. ON APPEAL, THE CIT(A) HAS NOTED THE FACT THAT THE ASSESSEE IS A SENIOR CITIZEN AND 70 YEARS OLD LADY WHO IS NOT KEEPING WELL. THE ASSESSEE ALSO INFORMED DURING THE ASSESSMENT PR OCEEDINGS THAT DUE TO HER OLD AGE AND ILL HEALTH SHE WAS UNABLE TO COM PLY THE NOTICE WITHIN THE SHORT PERIOD OF TIME. THUS, THE CIT(A) FOUND TH AT THERE WAS A SUFFICIENT AND BONAFIDE REASONS FOR NOT COMPLYING THE NOTICES ISSUED BY THE A.O. IT WAS ALSO OBSERVED BY THE CIT(A) THAT THE TIME GIVEN TO THE ASSESSEE WAS INSUFFICIENT IN LOOKING INTO THE FACTS OF ASSESSEE S AGE AND HEALTH CONDITION. ACCORDINGLY, THE CIT(A) ASKED THE ASSESS EE TO PRODUCE THE LEASE AGREEMENT AS PER WHICH THE RENT HAS BEEN PAID TO NA FED. THE ASSESSEE PRODUCED THE SAME AND AFTER EXAMINING THE LEASE AGR EEMENT AS WELL AS OTHER RELEVANT RECORD/DETAILS THE CIT(A) FOUND THAT THERE IS NO JUSTIFICATION FOR DISALLOWING THE RENT PAYMENT OF ` 4,47,752/- CL AIMED BY THE ASSESSEE. THE GRIEVANCE OF THE REVENUE ON THIS ISSUE IS AGAIN ST CONSIDERATION OF THE LEASE AGREEMENT BY THE CIT(A) WITHOUT AFFORDING OPP ORTUNITY TO THE A.O. ITA NO.110/M/2012 PREMLATA L. SINGH 3 4. IT IS TO BE NOTED THAT THE LEASE AGREEMENT IS NO T A FRESH DOCUMENT FILED BY THE ASSESSEE BEFORE THE CIT(A) BUT THIS AG REEMENT IS IN EXISTENCE FOR LAST 3 YEARS AND THE ASSESSEE HAS BEEN PAYING R ENT ON THE BASIS OF SAID AGREEMENT. FURTHER THE SAID DOCUMENT HAS BEEN PRODU CED BY THE ASSESSEE AS PER THE DIRECTIONS OF THE CIT(A) THEREF ORE, THERE IS NO VIOLATION OF RULE 46A WHEN ON EXAMINATION IT WAS FOUND BY THE CIT(A) THAT THE AGREEMENT IS WITH A GOVERNMENT UNDERTAKING AND THE PAYMENT OF RENT IS AFTER DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE TH ROUGH CHEQUES. THEREFORE, WE DO NOT FIND ANY MERIT OR SUBSTANCE IN THE OBJECTION RAISED BY THE REVENUE REGARDING VIOLATION OF RULE 46A OF T HE INCOME TAX RULE. THE CIT(A) HAS DECIDED THE ISSUE AFTER CONSIDERING AND EXAMINING OF THE RELEVANT RECORD. THE RELEVANT PART OF THE FINDING O F THE CIT(A) IN PARA 4.3 AT PAGE NO. 6 TO 7 OF THE IMPUGNED ORDER IS AS UNDE R: 4.3 EVEN IN EXPARTE ASSESSMENT, THE A.O HAS NOT FOLLOWE D THE PRINCIPLES OF BEST JUDGMENT ASSESSMENT WHEREIN THE A.O CANNOT IGNORE THE MATERIAL AVAILABLE BEFORE HIM AND PROCEE D PENALIZE THE ASSESSEE BY DISALLOWING THE EXPENDITURE WITHOUT CONSIDERING THE GROUND REALITIES OF THE BUSINESS. THE PRINCIPLE S OF BEST JUDGMENT REQUIRE THE AO TO MAKE INTELLIGENT AND WEL L- GROUNDED ESTIMATES AND SUCH ESTIMATES SHOULD BE BASED ON ADE QUATE AND RELEVANT MATERIALS. IN BEST JUDGMENT, THE ASSESSING OFFICER DOES NOT HAVE ABSOLUTE AND ARBITRARY POWERS TO ASSESS AT ANY FIGURE HE LIKES. HE CANNOT IGNORE PRINCIPLES OF NATURAL JU STICE, EQUITY AND GOOD CONSCIENCES WHEN THE DETAILS ARE AVAILABLE BEF ORE THE ASSESSING OFFICER. THE AO HAS NOT FOUND ANY MATERIA L TO SUGGEST THAT NO RENT WAS PAYABLE IN THE BUSINESS RUN BY THE APPELLANT OR THAT THE RENT CLAIMED WAS EXCESSIVE AS COMPARED TO EARLIER YEARS. THE AO COULD HAVE COMPARED THE GP & NP RATES OF THE ASSESSEE OF LAST 3 YEARS AND THEN ONLY SHOULD HAVE ARRIVED AT A CONCLUSION FOR DISALLOWING ANY EXPENDITURE WHICH IN HIS OPINION WAS EXCESSIVE AND WITHOUT PROOF. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE LD. AR WAS REQUIRED THE PRODUCE THE LEASE AGREEMENT AS BEEN PAID TO NAFED AND THE DETAI LS OF TDS ITA NO.110/M/2012 PREMLATA L. SINGH 4 DEDUCTED ON RENT PAID. IT IS NOTED THAT THE RENT HA S BEEN PAID TO NAFED AS PER THE TERMS OF THE LEASE AGREEMENT DATED 16. 1O.2OO4. THE ASSESSEE HAS BEEN PAYING THE RENT AS P ER THIS AGREEMENT SINCE LAST 3 YEARS. EVEN OTHERWISE THE RE NT PAID THIS YEAR IS 34% OF THE RECEIPTS AS AGAINST 44% OF RECEI PTS IN THE IMMEDIATELY PRECEDING YEAR. SINCE NAFED IS A CENTRA L GOVERNMENT UNDERTAKING AND THE PAYMENT HAVE BEEN MA DE BY THE ASSESSEE BY CHEQUES ONLY AND TDS HAS BEEN DULY MADE, THEREFORE, THERE IS NO JUSTIFICATION FOR DISALLOWIN G THE RENT OF RS.44,47,752/- CLAIMED BY THE APPELLANT ONLY ON GRO UND THAT THE APPELLANT DID NOT RESPOND, WHEN THE CIRCUMSTANCES S HOW THAT THE AO DID NOT AFFORD AN SUFFICIENT AND EFFECTIVE OPPOR TUNITY ALSO. THUS THE ADDITION MADE BY AO IS AGAINST THE PRINCIP LES OF NATURAL JUSTICE. EVEN ON MERITS IT IS NOT SUSTAINABLE IN VI EW OF THE DISCUSSIONS MADE ABOVE THEREFORE THE DISALLOWANCE O F RS 44,47,752 IS DIRECTED TO BE DELETED. 5. IT IS MANIFEST FROM THE FINDING OF THE CIT(A) TH AT THE PAYMENT OF RENT HAS BEEN MADE TO THE GOVERNMENT UNDERTAKINGS AND AS PER THE LEASE AGREEMENT DATED 16.10.2004. THE RENT PAYMENT HAS BE EN MADE BY THE ASSESSEE THROUGH CHEQUES AND AFTER DEDUCTION OF TAX AT SOURCE. THEREFORE, WE DO NOT FIND ANY ERROR OR SCOPE OF ANY DOUBT IN T HE CLAIM OF RENT PAID BY THE ASSESSEE TO THE GOVERNMENT UNDERTAKINGS. ACCORD INGLY, WE UPHOLD THE IMPUGNED ORDER OF THE CIT(A) QUA THIS ISSUE. 6. GROUND NO. 2 REGARDING DISALLOWANCE OF SALARY, W AGES, TELEPHONE CONVEYANCE AND OTHER EXPENSES. WE HAVE HEARD THE LD . D.R AS WELL AS LD. A.R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. SINCE THE RELEVANT DETAILS AND RECORD WERE NOT PRODUCED BEFORE THE A.O THEREFORE, THE A.O DISALLOWED 50% OF THE SALARY, WAGES AND OTHER EXPEN SES AND 20% OF CONVEYANCE AND TELEPHONE EXPENSES. ON APPEAL, THE C IT(A) HAS NOTED THAT THE TURNOVER FOR THE ASSESSMENT YEAR 2006-07 W AS OF ` 95.85 LAKHS AND EXPENDITURE OTHER THAN RENT WAS ` 45.25 LAKHS W HICH IS 47.2% OF THE TURNOVER WHEREAS FOR THE ASSESSMENT YEAR UNDER CONS IDERATION, THE ITA NO.110/M/2012 PREMLATA L. SINGH 5 TURNOVER OF THE ASSESSEE IS ` 131.85 LAKHS AND THE EXPENDITURE ON THE SIMILAR HEAD AT ` 82.64 LAKHS WHICH IS 62.67% OF TH E TURNOVER. THUS, THE CIT(A) OBSERVED THAT THERE IS AN INCREASE IN THE EX PENDITURE ON ALL THE HEADS EXCLUDING THE RENT BY 15.47% AND HENCE, THE D ISALLOWANCE WAS RESTRICTED TO 20% OF THE EXPENDITURE OF ` 82.84 LAK HS. THE GRIEVANCE OF THE REVENUE IS AGAINST THE RESTRICTION OF THE DISALLOWA NCE FROM 50% TO 20% BY CIT(A). WE NOTE THAT THERE IS NO BASIS FOR DISALLOW ANCE OF 50% OF THE EXPENSES BY THE A.O WHEREAS THE CIT(A) HAS TOOK THE RATIO OF TURNOVER AND EXPENDITURE AND COMPARE THE SAME FROM THE EARLIER Y EARS AND ACCORDINGLY DISALLOW 20% OF THE EXPENDITURE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHEN THE ASSESSEE HAS NOT CHALLENGED THE SAME. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JANUARY 2014 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 22 ND JANUARY 2014 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI