ACIT, CHENNAI V. Geetha Jyothi Vyas, CHENNAI

ITA 1677/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0850 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 29-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R VENKATESH
• Keywords: Fair market value
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO. 1677/MDS/2012 ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE XIII, ROOM NO. 608, 6 TH FLOOR, 121, N.H. ROAD, CHENNAI 600 034. VS. SMT. GEETHA JYOTHI VYAS, FLAT NO. 34: AKASH GANGA, 19, FLOWERS ROAD, KILPAUK CHENNAI 600 050. [PAN:ADEPV6702F] (APPELLANT) (RESPONDENT) A PPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI R. VENKATESH, CA DATE OF HEARING : 07.02.2013 DATE OF PRONOUNCEMENT : 20.02.2013 ORDER PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) XII, CHENNAI DATED 15.02.2012 IN ITA NO. 301/2010-11 FOR THE ASSESSMENT YEAR 2008-09 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 [IN SHORT THE ACT]. 2. IN THE COURSE OF HEARING, IT HAS BEEN POINTED O UT BY THE REVENUE THAT THERE IS DELAY OF 96 DAYS OF FILING THE APPEAL. THE DR CONTENDS THAT AN AFFIDAVIT HAS BEEN FILED IN SUPPORT OF THE PETITION SEEKING CONDONATION OF DELAY. THE ASSESSEE DOES NOT REBUT THE ABOVE STATEM ENT OF THE APPELLANT I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1677 1677 1677 1677/M/12 /M/12 /M/12 /M/12 2 AND THE SOLEMN AFFIRMATIONS IN THE AFFIDAVIT ABOVE SAID. ACCORDINGLY, WE CONDONE THE DELAY AND PROCEED TO DECIDE THE APPEAL ON MERITS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL HAVING INCOME FROM BUSINESS OF TRADING, RENT AND MAINTENAN CE OF SERVERS, CAPITAL GAINS AND OTHER SOURCES. ON 29.09.2008, SHE HAD FILED HER RETURN DISCLOSING INCOME OF ` .70,54,620/-. IN THE COURSE OF SCRUTINY, THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE HAD STATED TO HAV E OWNED VARIOUS PROPERTIES I.E. ONE IN BANGALORE AND OTHERS IN CHEN NAI. SHE CLAIMED THAT THE BANGALORE PROPERTY AS SELF OCCUPIED AND THOSE IN CH ENNAI WERE TREATED AS VACANT IN THE PREVIOUS YEAR RELEVANT TO THE IMPUGNE D ASSESSMENT ORDER. THE ASSESSEE HAD DECLARED ANNUAL LETTING VALUE OF THE V ACANT PROPERTY AS ` .11,302/-. ACCORDINGLY, SHE COMPUTED AN AMOUNT OF ` .1,32,638/- AS LOSS OF HOUSE PROPERTY. IN THE ASSESSMENT ORDER DATED 30.12 .2010, THE ASSESSING OFFICER DISALLOWED TOTAL AMOUNT OF ` .1,40,550/- BY OBSERVING THAT SINCE THE ASSESSEES PROPERTIES WERE SITUATED IN PRIME COMMER CIAL AREA, THE ENTIRE LOSS HAS TO BE ADDED IN THE TOTAL INCOME. 4. SIMILARLY, IN HER PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAD DEBITED SUMS OF ` .14.25 LAKHS AND ` .13,37,451/- UNDER THE HEADS SALARY AND SALARY AND ALLOWANCES RESPECTIVELY. HER CLARIFICATION IN SUPPORT WAS THAT THE FIRST HEAD AMOUNT HAD BEEN PAID TO MR. DEEPAK J. VYAS, MR . KAPIL J. VYAS, [SONS] MRS. RINKU D. VYAS, MRS. KIRTAN K. VYAS [DAUGHTER-I N-LAWS]. QUA THE SECOND I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1677 1677 1677 1677/M/12 /M/12 /M/12 /M/12 3 HEAD, SHE STATED THAT THE AMOUNTS HAD BEEN PAID TO ENGINEERS. ON THIS, THE ASSESSING OFFICER VERIFIED THE AMOUNTS AND IN VIEW OF SECTION 40A(2)(A) OF THE ACT, HE NEGATED ASSESSEES CONTENTION THAT AL L PAYEES WERE FAMILY MEMBERS ABOVE SAID WERE DULY QUALIFIED. PER ASSESSI NG OFFICER, THE ASSESSEE HAD CLAIMED, 3 OUT OF 4 PAYEES/FAMILY MEMB ERS WERE HOLDING PG DIPLOMAS IN IT, BUT IN THE ASSESSMENT PROCEEDINGS, NO PROOF HAD BEEN SUBMITTED. HENCE, HE HELD THAT THE AFORESAID FAMILY MEMBERS OF THE ASSESSEE HAD RENDERED NO SERVICE SINCE THERE WAS OT HER TECHNICAL STAFF ALREADY EMPLOYED BY THE ASSESSEE. IN LIGHT THEREOF, THE ASSESSING OFFICER DISALLOWED AND ADDED BACK THE ENTIRE AMOUNT OF ` .14.25 LAKHS IN ASSESSEES TOTAL INCOME. 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL. WE F IND THAT THE CIT(A) HAS DELETED BOTH ADDITIONS. QUA THE ADDITION ON LOS S OF ANNUAL LETTING OUT OF VACANT PROPERTY, THE CIT(A)S FINDINGS READ AS UNDE R: A) DISALLOWANCE OF INTEREST ON VACANT PROPERTY - R S.L,40,550: THE ASSESSEE IN HER RETURN OF INCOME CLAIMED A LOSS OF RS.1,40,5 50/- ON ACCOUNT OF INTEREST PAID FOR CONSTRUCTING A HOUSE WHICH WAS VACANT DURI NG THE FINANCIAL YEAR RELEVANT TO A.Y. 2008-09. THE ASSESSING OFFICER IN HIS ORDER DISBELIEVED THE ASSESSEE'S CLAIM THAT THE PROPERTY WAS REMAINING VA CANT DURING THE ENTIRE FINANCIAL YEAR 2007-08. FOR THIS PURPOSE, THE ASSES SING OFFICER NOTED THAT THE ASSESSEE HAS NOT FURNISHED ANY PROOF TO SHOW THAT T HE PROPERTY WAS REMAINING VACANT. ON THE OTHER HAND THE ASSESSEE SUBMITTED THAT THE P ROPERTY WAS NOT LET OUT TO ANY PERSON DURING THE F.Y.2007-08. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE ALSO ESTIMATED THE ANNUAL LETTING VALUE AT RS.11,302/- AND SUBMITTED THAT LOSS UNDER THE HEAD HOUSE PROPERTY MAY BE RESTRICTED TO RS.L,32,638/- (I.E. RS.L,40,550 - RS. L1,302). I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1677 1677 1677 1677/M/12 /M/12 /M/12 /M/12 4 I HAVE CONSIDERED THE ABOVE SUBMISSIONS. THE ASSESS EE HAS CLEARLY EXPLAINED THAT THE PROPERTY WAS NOT LET OUT. WHEN S OMETHING HAS NOT HAPPENED IT IS VERY DIFFICULT TO PROVE THAT THE THI NG HAS NOT HAPPENED. IT IS POSSIBLE ONLY TO PROVE THE THINGS WHICH HAVE HAPPEN ED. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN ASKING THE AS SESSEE TO PROVE THAT THE PROPERTY WAS NOT LET OUT. THE EXISTENCE OF THE PROP ERTY AND THE EXPENSES OR LOSSES OF RS.L,40,550/- WAS NOT SUSPECTED BY THE AS SESSING OFFICER. HENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING T HE ASSESSEE'S CLAIM OF LOSSES OF RS.L,40,550/- UNDER THE HEAD 'HOUSE PROPERTY'. T HE ASSESSING OFFICER IS DIRECTED TO ALLOW THE BENEFIT TO THE ASSESSEE TO TH E EXTENT OF RS.L,32,638/-. THE ASSESSEE PARTIALLY SUCCEEDS IN HER APPEAL. IN THE SAME TUNE, THE FINDINGS DELETING THE ADDITIO N UNDER SECTION 40A(2)(A) OF THE ACT READ AS UNDER: B) DISALLOWANCE U/S 40A(2)(A) OF THE ACT - RS.14. 25.000: THE ASSESSEE IS ENGAGED IN TRADING ACTIVITY. DURING THE FINANCIAL Y EAR THE ASSESSEE CLAIMED TO HAVE EMPLOYED HER TWO SONS AND DAUGHTER-IN-LAWS IN HER BUSINESS AND PAID SALARIES OF RS.14,25,000/-. THE ASSESSING OFFICER I N HIS ORDER FELT THAT THE PAYMENTS MADE TO THESE PERSONS ARE NOT ONLY EXCESSI VE AND UNREASONABLE BUT ALSO THE PERSONS ARE RELATED PERSONS AND HENCE DISA LLOWED THE ENTIRE PAYMENT OF RS.14,25,000/- U/S.40A(2)(A) OF THE ACT AND ADDE D TO THE TOTAL INCOME. THE DETAILS OF THE PAYMENTS ARE 1. MR. DEEPAK J. VYAS ` . 3,15,276/- 2. MR. KAPIL J. VYAS ` . 3,79,596/- 3. INKU D. VYAS `. 2,16,942/- 4. SMT. KIRAN K. VYAS `. 3,83,196/- TDS `. 1,21,590/- PROFESSIONAL TAX PAID `. 8,400/- TOTAL `. 14,25,000/- BEFORE THE UNDERSIGNED THE ASSESSEE EXPLAINED THAT ALL THE ABOVE FOUR PERSONS, ARE THOUGH RELATED TO THE ASSESSEE ARE HIG HLY QUALIFIED PERSONS AND HAVE BEEN ASSIGNED VARIOUS SPECIALIZED ACTIVITIES I N CARRYING OUT THE BUSINESS OF THE ASSESSEE. THE DETAILS FURNISHED BY THE ASSES SEE ARE AS UNDER:- 1. MR. DEEPAK J VYAS - HE IS A. B.A~ M.SC.(IT), PG DIPLOMA IN TELECOM TECHNOLOGY AND P.G. DIPLOMA IN (IT). HE HA S BEEN EMPLOYED AS SENIOR MANAGER - TECHNICAL AND MARKETIN G. HE WAS LOOKING AFTER THE TECHNICAL ASPECTS OF INSTALLATION S AND ONSITE RESOLUTIONS, OVER LOOKING KEY CUSTOMERS ACCOUNTS AN D MANAGING INTERNATIONAL CUSTOMERS ETC. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1677 1677 1677 1677/M/12 /M/12 /M/12 /M/12 5 2. MR. KAPIL J VYAS - HE IS A GRADUATE IN B.A.(ECON OMICS), DIPLOMA IN APPAREL MANUFACTURING TECHNOLOGY AND P.G.(IT). H E IS WORKING AS A MANAGING MARKETING. HE IS LOOKING AFTER THE SALES AND CUSTOMER ACCOUNTS, MAINTAINING COMPANY SALES TARGET, EXPLORI NG NEW BUSINESS OPPORTUNITIES AND NEW CUSTOMERS AND CORRESPONDENCE WITH VENDORS AND CUSTOMERS. 3. SMT. RINKU D VYAS - SHE IS A DEGREE HOLDER IN HO ME SCIENCE AND POST GRADUATE(IT). SHE HAS BEEN EMPLOYED AS MANAGER ADMINISTRATION, LOOKING AFTER THE OFFICE STAFF AND OFFICE FACILITIES, CO- ORDINATION WITH VENDORS, INTERNATIONAL VISITORS AND HOTEL CORRESPONDENCE. 4. SMT. KIRAN K VYAS - SHE IS A GRADUATE IN B.A. AN D DIPLOMA HOLDER IN FASHION TECHNOLOGY. SHE IS EMPLOYED AS MANAGER ( HR). SHE IS LOOKING AFTER THE STAFF WELFARE, INCENTIVES, OVERAL L HR RELATED ACTIVITIES AND MAINTENANCE OF ACCOUNTS ETC. THE ABOVE EXPLANATIONS HAVE BEEN CONSIDERED CAREFUL LY. ALL THE ABOVE FOUR PERSONS ARE WELL QUALIFIED AND HAVE BEEN ASSIGNED D IFFERENT TASKS OF THE ASSESSEE'S BUSINESS. FURTHER, THE ASSESSEE IS A LAD Y AND HAS TO DEPEND ON OTHERS FOR DAY TO DAY BUSINESS ACTIVITIES. SINCE, T HE ABOVE MENTIONED FOUR PERSONS ARE QUALIFIED PEOPLE AND LOOKING AFTER THE DAY TO DAY BUSINESS AFFAIRS OF THE ASSESSEE, PAYMENT OF SALARY IS NOT UNCOMMON OR PROHIBITED. SINCE THESE PEOPLE ARE QUALIFIED IN THE NATURE OF THE CHA RGE UNDERTAKEN BY EACH OF THEM, THE ABOVE PAYMENT OF SALARIES CANNOT BE CONSI DERED AS EXCESSIVE OR UNREASONABLE. HENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DI SALLOWING THE ABOVE PAYMENT OF SALARIES TO THE ABOVE MENTIONED FOUR PERSONS (WH O ARE RELATED TO THE ASSESSEE) U/S. 40A(2)(A) OF THE ACT. THE ADDITION M ADE BY THE ASSESSING OFFICER ON THIS ACCOUNT IS DELETED. IN THIS BACKDROP, THE REVENUE IS IN APPEAL. 6. IN THE COURSE OF HEARING, THE DR VEHEMENTLY ARG UED THAT THE CIT(A) HAS WRONGLY INTERFERED IN THE WELL REASONED FINDING S OF THE ASSESSING OFFICER QUA BOTH ADDITIONS. BY REITERATING VARIOUS PLEADING S RAISED IN THE GROUNDS, HE PRAYED FOR ACCEPTANCE OF THE APPEAL. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1677 1677 1677 1677/M/12 /M/12 /M/12 /M/12 6 7. ON THE OTHER HAND, THE AR REPRESENTING ASSESSEE HAS FILED WRITTEN SUBMISSION IN SUPPORT OF THE ORDER OF THE CIT(A) AN D PLACED RELIANCE ON THE REASONS CONTAINED THEREIN. 8. WE HAVE HEARD RIVAL CONTENTIONS AND ALSO GONE T HROUGH THE FINDINGS OF THE ASSESSING OFFICER, CIT(A) AS WELL AS THE GROUND S RAISED. IN VIEW OF THE VARIANCE IN PLEADINGS OF THE PARTIES QUA VALIDITY O F THE CIT(A)S ORDER, THE ISSUE WHICH ARISES FOR OUR CONSIDERATION IS AS TO W HETHER THE LOWER APPELLATE AUTHORITY HAS RIGHTLY INTERFERED QUA ADDITIONS MADE BY THE ASSESSING OFFICER PERTAINING TO ANNUAL LETTING VALUE OF THE ASSESSEE S HOUSE PROPERTY AND THAT UNDER SECTION 40A(2)(E). IN THIS REGARD, WE NOTICE THAT QUA THE ISSUE OF ANNUAL LETTING VALUE, THE PRIME REASON ADOPTED BY THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER IS THAT THE ASSESSEE HAD FAILED TO LEAD ANY EVIDENCE THAT HER PROPERTY IN QUESTION HAD REMAINED VACANT IN THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR. THE CIT(A), WHILST UP SETTING THE ABOVE SAID FINDINGS HAS OBSERVED THAT THE ASSESSING OFFICER HA D ERRED IN HOLDING THAT THE PROPERTY IN QUESTION HAD REMAINED VACANT FOR THE RE ASON THAT THE ASSESSEE COULD NOT HAVE BEEN ASKED TO LEAD NEGATIVE EVIDENCE . AFTER GIVING OUR THOUGHTFUL CONSIDERATION, WE ALSO HOLD THAT THE CIT (A) HAS RIGHTLY DELETED THE ADDITION. WE FIND FROM THE ASSESSMENT ORDER THAT IN PRINCIPLE, THE ASSESSING OFFICER NOWHERE STATED THAT THERE IS ANY MATERIAL C ONTRARY ON RECORD TO DISPEL THE STATEMENT OF THE ASSESSEE QUA PROPERTY HAVING R EMAINED VACANT. IN THIS VIEW OF THE MATTER AND MORE SO, WHEN THERE IS NO RE CEIPT SHOWN BY THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1677 1677 1677 1677/M/12 /M/12 /M/12 /M/12 7 ASSESSEE FROM PROPERTY IN QUESTION, IT CAN BE VALID LY IMPLIED THAT THE SAME HAD REMAINED VACANT THROUGHOUT THE YEAR. THEREFORE, WE AFFIRM THE FINDINGS OF THE CIT(A) AND DECIDE THE GROUND RAISED BY THE REVE NUE IN FAVOUR OF THE ASSESSEE. 9. NOW, WE COME TO DISALLOWANCE MADE UNDER SECTION 40A(2)(A)(1) (SUPRA). A PERUSAL OF THE ABOVE PROVISION MAKES IT CLEAR THAT DURING ASSESSMENT PROCEEDINGS, IF AN ASSESSING OFFICER IS SATISFIED THAT ANY EXPENDITURE INCURRED FOR MAKING PAYMENT TO CLOSE RE LATION IS EXCESSIVE OR UNREASONABLE AS COMPARED TO FAIR MARKET VALUE OF TH E SERVICES IN QUESTION, HE MAY INVOKE THE SAME AND DISALLOW THE EXCESSIVE A MOUNT. A PERUSAL OF THE ASSESSMENT ORDER MAKES IT CLEAR THAT NOWHERE, THE A SSESSING OFFICER HAS COMPLETED THIS VITAL EXERCISE SO AS TO REACH TO THE DISALLOWANCE ON THE BASIS ANY COGENT MATERIAL AVAILABLE ON RECORD. HENCE, WE HOLD THAT THE ASSESSING OFFICER FELL IN ERROR IN INVOKING THE PROVISION ITS ELF LEADING TO DISALLOWANCE IN QUESTION WHICH HAS BEEN RIGHTLY DELETED BY THE CIT( A). 10. CONSEQUENTLY, THE REVENUES APPEAL STANDS DIS MISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 20 TH OF FEBRUARY, 2013 AT CHENNAI. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 20.02.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.