DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1, THANE, THANE V. HEMCHAND MURJI GADA, MUMBAI

ITA 2118/MUM/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6598 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 03-10-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 06-06-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; Fair market value
• Section: 148; 191

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 2118/MUM/2023 Assessment Year: 2014-15 DCIT, Circle-1, Thane, Room No. 22, B-Wing 6 th floor, Ashar IT Park, Wagle Industrial Estate, Thane(W)-400604 Vs. Shri Hemchand Murji Gada, B-2, Laxman Nagar Near Aradhana Cinema Panch Pakhadi Kaju Pada, Thane(W)-400602. PAN No. AACPG 2047 B Appellant Respondent Assessee by : Mr. Satya Prakash Singh Revenue by : Mr. P.D. Chogule, CIT-DR Date of Hearing : 04/10/2023 Date of pronouncement : 11/10/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 27.03.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2014-15, raising following grounds: 1. On the facts and circumstances of the case, the Id. CIT (A) has erred in not appreciating the fact that "even if the assessee's contention that the warehousing space is provided to various chemical/petroleum logistics companies is considered, even then the rental payments made to the related parties are way beyond any reasonableness and beyond commercial prudence". 2. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not appreciating the fact that the related party has claimed rental income under the head Income from house property' and thus benefitted by standard deduction slab benefits available to Individual. 3. On the facts and circumstances of the case, the Ld. CIT (A) has erred In not appreciating the fact that the assessee has not provided no such bifurcation of warehouses as discussed by Ld. CIT (A) in Para 5 proceedings before Assessing Officer. 4. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not appreciating the fact that the assessee has neither provided opportunity of bearing heard nor called for remand report/factual report as not such photographs of different types of godowns as stated by Ld. CIT (A) in Para 5.6 of his order. 2. Briefly stated, facts of the case are that engaged in the business of providing warehousing services various companies dealing in chemical, petroleum, food, logistics etc. For the provision of those services, the assessee took warehouses on lease from related as well as unrelated parties. For the assessment year under consideration, t of income on 03.11.2014 declaring total income of Rs.68,86,260/ The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income Act’) were issued and complied with. The Asses that the assessee had warehouses/godowns taken on Assessing Officer has produced a list of those parties along with parties are way beyond any reasonableness and beyond ommercial prudence". 2. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not appreciating the fact that the related party has claimed rental income under the head Income from house property' and thus benefitted by standard deduction slab benefits available to Individual. 3. On the facts and circumstances of the case, the Ld. CIT (A) has erred In not appreciating the fact that the assessee has not provided no such bifurcation of warehouses as discussed by Ld. CIT (A) in Para 5.5 of his order during assessment proceedings before Assessing Officer. 4. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not appreciating the fact that the assessee has neither provided opportunity of bearing heard nor called for remand report/factual report as not such photographs of different types of godowns as stated by Ld. CIT (A) in Para 5.6 Briefly stated, facts of the case are that the assessee was engaged in the business of providing warehousing services various companies dealing in chemical, petroleum, food, logistics etc. For the provision of those services, the assessee took warehouses on lease from related as well as unrelated parties. For the assessment year under consideration, the assessee filed of income on 03.11.2014 declaring total income of Rs.68,86,260/ The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) were issued and complied with. The Assessing Office that the assessee had made lease/rent warehouses/godowns taken on lease/rent from 25 parties. The Assessing Officer has produced a list of those parties along with Shri Hemchand Murji Gada 2 ITA Nos. 2118/Mum/2023 parties are way beyond any reasonableness and beyond 2. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not appreciating the fact that the related party has claimed rental income under the head Income from house and tax 3. On the facts and circumstances of the case, the Ld. CIT (A) has erred In not appreciating the fact that the assessee has not provided no such bifurcation of warehouses as discussed .5 of his order during assessment 4. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not appreciating the fact that the assessee has neither provided opportunity of bearing heard nor called for remand report/factual report as not such photographs of different types of godowns as stated by Ld. CIT (A) in Para 5.6 the assessee was engaged in the business of providing warehousing services to various companies dealing in chemical, petroleum, food, logistics etc. For the provision of those services, the assessee took warehouses on lease from related as well as unrelated parties. For he assessee filed return of income on 03.11.2014 declaring total income of Rs.68,86,260/-. The return of income filed by the assessee was selected for scrutiny tax Act, 1961 (in short ‘the sing Officer observed lease/rent payment for rent from 25 parties. The Assessing Officer has produced a list of those parties along with annual rent paid, area of the warehouse/godown in square f rent per square feet from the chart produced in para 4 of the assessment order. The Assessing Officer noticed that rent paid to 3 related parties namely Daxa H Gada, Hemchand M Gada HUF and Vandan H Gada was excessive as compared to the rent paid t non-related parties. Accordingly, the Assessing Officer asked the assessee as why the excess rent paid to related parties disallowed invoking section 40A(2)(b) of the Act. The assessee explained that there was no straight jacket formul rent. It was submitted that the warehouses/godowns taken on lease from the related party were constructed and used for storage of petroleum/chemicals and hazardous nature which required licenses/permissions from various authorities including Board, Fire Brigade and local Assessing Officer however rejected the contention of the assessee and estimated average rent per square feet annually Rs. 150 and disallowed the excess rent paid observing as under: The contentions of the assessee have been carefully perused. The same is not acceptable for the reasons discussed hereunder. The assessee has given an example of Smt Daxaben H.Gada with a breakup of how the monthly rent of Rs.22,00,000/ perusal of the rent agreement copy, dated 01/04/2013 between Smt Daxaben H.Gada and the assessee no such bifurcation is seen. Further, in the initial submission made during the course of assessment proc 13/08/2016 in which the details of godown rent paid were furnished, it is seen that the rented premises is shown at annual rent paid, area of the warehouse/godown in square f rent per square feet from the chart produced in para 4 of the assessment order. The Assessing Officer noticed that rent paid to 3 related parties namely Daxa H Gada, Hemchand M Gada HUF and Vandan H Gada was excessive as compared to the rent paid t related parties. Accordingly, the Assessing Officer asked the why the excess rent paid to related parties disallowed invoking section 40A(2)(b) of the Act. The assessee explained that there was no straight jacket formul t was submitted that the warehouses/godowns taken on lease from the related party were constructed and used for storage of petroleum/chemicals and hazardous nature which required licenses/permissions from various authorities including Board, Fire Brigade and local body i.e. ‘Gram Panchayat Assessing Officer however rejected the contention of the assessee and estimated average rent per square feet annually 150 and disallowed the excess rent paid by the assessee The contentions of the assessee have been carefully perused. is not acceptable for the reasons discussed The assessee has given an example of Smt Daxaben H.Gada breakup of how the monthly rent of Rs.22,00,000/ perusal of the rent agreement copy, dated 01/04/2013 between Smt Daxaben H.Gada and the assessee no such bifurcation is seen. Further, in the initial submission made during the course of assessment proceedings. dated 13/08/2016 in which the details of godown rent paid were furnished, it is seen that the rented premises is shown at Shri Hemchand Murji Gada 3 ITA Nos. 2118/Mum/2023 annual rent paid, area of the warehouse/godown in square feet and rent per square feet from the chart produced in para 4 of the assessment order. The Assessing Officer noticed that rent paid to 3 related parties namely Daxa H Gada, Hemchand M Gada HUF and Vandan H Gada was excessive as compared to the rent paid to other related parties. Accordingly, the Assessing Officer asked the why the excess rent paid to related parties might not be disallowed invoking section 40A(2)(b) of the Act. The assessee explained that there was no straight jacket formula for charging t was submitted that the warehouses/godowns taken on lease from the related party were constructed and used for storage of petroleum/chemicals and hazardous nature which required licenses/permissions from various authorities including Pollution Panchayat’ etc. The Assessing Officer however rejected the contention of the assessee and estimated average rent per square feet annually at the rate of @ by the assessee, The contentions of the assessee have been carefully perused. is not acceptable for the reasons discussed The assessee has given an example of Smt Daxaben H.Gada breakup of how the monthly rent of Rs.22,00,000/-. On perusal of the rent agreement copy, dated 01/04/2013 between Smt Daxaben H.Gada and the assessee no such bifurcation is seen. Further, in the initial submission made eedings. dated 13/08/2016 in which the details of godown rent paid were furnished, it is seen that the rented premises is shown at 42150 sq.ft. On perusal of the rental agreement copy with Smt Daxaben H.Gada, it is seen that the rented area is not specified whereas on persal of the rent agreements in respect of all the unrelated parties, the area is mentioned clearly. Further in the assessee's submission dated 13/10/2016 the rented area is shown at 162800 sq.feet. discrepancies in the submis assessee's contention that the warehousing space is provided to yarions chemical/petroleum logistics companies considered, even then the rental payments made to the related parties are way beyond any reasonableness. Ke the above facts, it is clear that the assessee has made excess rental payments to related parties. After duly considering the contentions of the assessee with respect to the nature of goods stored, the required licences procured and the monop business contention, the excess rental payments to related parties is re-worked as under S.No. Paid to Amount debited in P&L account Rs. 3 Daxa H Gada 26400000 8 H M Gada HUF 2160000 24 Vandana H Gada 840000 Ironically, if the reconsidered average annual rent at Rs. 150/ per sq.ft is observed, the monthly average rent works out to Rs. 13/- per sq.ft with the contention of the assessee dated 13/10/2006 wherein it is submitted that the average rent charged per square feet is approx Rs.13.5/ H.Gada. Accordingly, the disallowance u/s.40 I.T.Act, 1961 is made at Rs.2,11,42,500/ 3. On further appeal, the assessee submitted before the Ld. CIT(A) that warehouses taken on lease by the assessee were of the four categories, the warehouses of the three categories were constructed warehouses industrial shades. The assessee submitted that the Ld. Assessing 42150 sq.ft. On perusal of the rental agreement copy with Smt Daxaben H.Gada, it is seen that the rented area is not d whereas on persal of the rent agreements in respect of all the unrelated parties, the area is mentioned clearly. Further in the assessee's submission dated 13/10/2016 the rented area is shown at 162800 sq.feet. Thus, there are discrepancies in the submissions of the assessee. Even if the assessee's contention that the warehousing space is provided to yarions chemical/petroleum logistics companies considered, even then the rental payments made to the related parties are way beyond any reasonableness. Keeping in view the above facts, it is clear that the assessee has made excess rental payments to related parties. After duly considering the contentions of the assessee with respect to the nature of goods stored, the required licences procured and the monop business contention, the excess rental payments to related worked as under: Amount debited in account Rs. Sq. Feet as per assessee’s initial submission dated 13.08.2016 Rent per Sq. Ft. per year Avg. Rate per Sq. Ft. after reconsideration Reasonable amount worked out at 26400000 42150 626 150 6322500 2160000 8500 254 150 1275000 840000 4400 191 150 660000 Total Disallowance u/s 40A(2B) Ironically, if the reconsidered average annual rent at Rs. 150/ per sq.ft is observed, the monthly average rent works out to per sq.ft (Rs.150 / 12 months) which is in accordance with the contention of the assessee dated 13/10/2006 wherein it is submitted that the average rent charged per square feet is approx Rs.13.5/- in the case of Smt Daxa H.Gada. Accordingly, the disallowance u/s.40A(2B) of the I.T.Act, 1961 is made at Rs.2,11,42,500/- as above.” On further appeal, the assessee submitted before the Ld. CIT(A) that warehouses taken on lease by the assessee were of the four categories, the warehouses of the three categories were structed warehouses, whereas 4 th category were mainly industrial shades. The assessee submitted that the Ld. Assessing Shri Hemchand Murji Gada 4 ITA Nos. 2118/Mum/2023 42150 sq.ft. On perusal of the rental agreement copy with Smt Daxaben H.Gada, it is seen that the rented area is not d whereas on persal of the rent agreements in respect of all the unrelated parties, the area is mentioned clearly. Further in the assessee's submission dated 13/10/2016 the Thus, there are sions of the assessee. Even if the assessee's contention that the warehousing space is provided to yarions chemical/petroleum logistics companies is considered, even then the rental payments made to the related eping in view the above facts, it is clear that the assessee has made excess rental payments to related parties. After duly considering the contentions of the assessee with respect to the nature of goods stored, the required licences procured and the monopoly business contention, the excess rental payments to related Reasonable amount worked out at Disallowance u/s 40A(2B) 6322500 20077500 1275000 885000 660000 180000 Disallowance u/s 40A(2B) 21142500 Ironically, if the reconsidered average annual rent at Rs. 150/- per sq.ft is observed, the monthly average rent works out to (Rs.150 / 12 months) which is in accordance with the contention of the assessee dated 13/10/2006 wherein it is submitted that the average rent charged per of Smt Daxa A(2B) of the On further appeal, the assessee submitted before the Ld. CIT(A) that warehouses taken on lease by the assessee were of the four categories, the warehouses of the three categories were category were mainly industrial shades. The assessee submitted that the Ld. Assessing Officer while working out the rent per square feet in respect of properties from the Daxa S Gada has not considered open area available along with the constructed area. He submitted that if the open area available with the property is also taken into consideration then the rent payment was justified and in the range of the rent payment made to the unrela also filed photos of the various types of the wa Ld. CIT(A) athough the Ld. CIT(A) has specifically mentioned impugned order that no additional evidence assessee. After considering the submission of the assessee CIT(A) deleted the disallowance of excess rent made by the Assessing Officer mainly for the three reasons. big difference between the different type lease by the assessee and the Assessing Officer the rent by comparing the average rent paid in case of unrelated parties. Secondly in the case of M/s Daxa H Gada, the open space was not taken into consideration and had the same considered difference. Thirdly, made by the assessee were in the same tax bracket and therefore, there was no occasion 4. Before us, the Ld. Counsel of the assessee has filed a Paper Book containing pages 1 to 109 which contains copy of the lease agreement for different types of warehouses by the assessee. Officer while working out the rent per square feet in respect of properties from the Daxa S Gada has not considered open area with the constructed area. He submitted that if the open area available with the property is also taken into consideration then the rent payment was justified and in the range of the rent payment made to the unrelated parties. T photos of the various types of the warehouses before the hough the Ld. CIT(A) has specifically mentioned that no additional evidences were filed by the assessee. After considering the submission of the assessee CIT(A) deleted the disallowance of excess rent made by the Assessing Officer mainly for the three reasons. Firstly big difference between the different types of warehouses taken on lease by the assessee and the Assessing Officer simply disallow the rent by comparing the average rent paid in case of unrelated in the case of warehouse taken on lease the open space was not taken into consideration and had the same considered, there would not have been much the parties to whom lease/rent made by the assessee were in the same tax bracket and therefore, occasion of the evasion of the tax liability Before us, the Ld. Counsel of the assessee has filed a Paper k containing pages 1 to 109 which contains copy of the lease agreement for different types of warehouses by the assessee. Shri Hemchand Murji Gada 5 ITA Nos. 2118/Mum/2023 Officer while working out the rent per square feet in respect of properties from the Daxa S Gada has not considered open area with the constructed area. He submitted that if the open area available with the property is also taken into consideration then the rent payment was justified and in the range ted parties. The assessee rehouses before the hough the Ld. CIT(A) has specifically mentioned in the were filed by the assessee. After considering the submission of the assessee, the Ld. CIT(A) deleted the disallowance of excess rent made by the Firstly, there is a of warehouses taken on simply disallowed the rent by comparing the average rent paid in case of unrelated warehouse taken on lease from the open space was not taken into consideration there would not have been much lease/rent payment was made by the assessee were in the same tax bracket and therefore, evasion of the tax liability. Before us, the Ld. Counsel of the assessee has filed a Paper k containing pages 1 to 109 which contains copy of the lease agreement for different types of warehouses by the assessee. 5. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In the case the assessee has taken on lease warehouses/godown as well as unrelated parties. The Assessing Officer from the list of the lease rent payments paid by the assessee rent paid to the three Hemchand M Gada HUF and Vandan H Gada excessive as compared to the lease rent to the unrelated parties. The Assessing Officer on comparing the lease rent paid to the unrelated parties allowed lease rent @ 150 per square ft. per annum and excessive rent was disallowed which amount Rs.25,60,550/-. The Ld. CIT(A ground that firstly, the Assessing Officer has not compared the fair market value of similar kind of warehouses/godowns. Secondly open area of the warehouse in the case of M/s Daxa H Gada was not taken into consideration and thirdly the persons to whom payments were made 5.1 The issue in dispute in the case of the assessee is therefore, whether the rent paid by excessive or unreasonable having regard to the fair market value of the lease rent of the similar kind of properties in the vicinity area The excessive or unreasonable lease rent paid has been disallowed by the Assessing Officer invoking section 40A(2)(b) of the Act. Before us, the Ld. Departmental Representative (DR) submitted that before We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In the case he assessee has taken on lease warehouses/godown as well as unrelated parties. The Assessing Officer from the list of the lease rent payments paid by the assessee, observed that lease rent paid to the three related parties namely Daxa H Gada, Hemchand M Gada HUF and Vandan H Gada was found to be excessive as compared to the lease rent to the unrelated parties. The Assessing Officer on comparing the lease rent paid to the unrelated parties allowed lease rent @ 150 per square ft. per annum cessive rent was disallowed which amount . The Ld. CIT(A) has deleted the addition on the the Assessing Officer has not compared the fair market value of similar kind of warehouses/godowns. Secondly the warehouse in the case of M/s Daxa H Gada was not taken into consideration and thirdly the persons to whom made also fell into same tax bracket. The issue in dispute in the case of the assessee is therefore, the rent paid by the assessee to three related parties is excessive or unreasonable having regard to the fair market value of of the similar kind of properties in the vicinity area The excessive or unreasonable lease rent paid has been disallowed essing Officer invoking section 40A(2)(b) of the Act. Before us, the Ld. Departmental Representative (DR) submitted that before Shri Hemchand Murji Gada 6 ITA Nos. 2118/Mum/2023 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In the case, he assessee has taken on lease warehouses/godown from related as well as unrelated parties. The Assessing Officer from the list of observed that lease parties namely Daxa H Gada, was found to be excessive as compared to the lease rent to the unrelated parties. The Assessing Officer on comparing the lease rent paid to the unrelated parties allowed lease rent @ 150 per square ft. per annum cessive rent was disallowed which amounted to ) has deleted the addition on the the Assessing Officer has not compared the fair market value of similar kind of warehouses/godowns. Secondly, the the warehouse in the case of M/s Daxa H Gada was not taken into consideration and thirdly the persons to whom same tax bracket. The issue in dispute in the case of the assessee is therefore, the assessee to three related parties is excessive or unreasonable having regard to the fair market value of of the similar kind of properties in the vicinity area. The excessive or unreasonable lease rent paid has been disallowed essing Officer invoking section 40A(2)(b) of the Act. Before us, the Ld. Departmental Representative (DR) submitted that before the Ld. CIT(A) assessee has filed photographs of the different kind of the warehouses which were in the nature of the additional and no remand report has been called for Officer. He submitted that those photographs being clearly in the nature of the additional evidence. However, the Ld. CIT(A) has not considered as same additional evidence which is in vi rules 46A of the Income Further we find that categorized all the warehouses in four categories which are reproduced as under: TYPE 1 - These warehouses are well constructed having heights of 15 to 18 feetaccording to regulatory requirements. The first type of warehouse is used forstorage of inflammable/hazardous chemical Theaforesaid 1st type of warehouse NOC's and Certifications to carry out the said operations, viz., License from Petroleum Pollution Board NOCs from local governing bodies, fire briga Appellant had taken first type of warehouse on rent from Ms. Daxa H Gada. These types ofwarehouses must have necessary fire extinguishers, epoxy coated flooring etc. TYPE 2 - These warehouses heights of 15 to 18 The second type of warehouse is used forstorage of Foods products. The FDA approval for storage is obtained for 2nd type ofwarehouse. The Appellant had taken second type warehouse on rent TYPE 3 - These warehouses are well constructed having heights of 15 to 18 feetaccording to regulatory requirements. The 3rd type of warehouse is used for TYPE 4 - These types of warehouses are in the form of sets which are used to stor the Ld. CIT(A) assessee has filed photographs of the different kind of the warehouses which were in the nature of the additional and no remand report has been called for from Officer. He submitted that those photographs being clearly in the nature of the additional evidence. However, the Ld. CIT(A) has not considered as same additional evidence which is in vi rules 46A of the Income-tax Rules, 1962 (in short ‘the Rules’). Further we find that before the Ld. CIT(A), the assessee has categorized all the warehouses in four categories which are reproduced as under: These warehouses are well constructed having heights of 15 to 18 feetaccording to regulatory requirements. The first type of warehouse is used forstorage of inflammable/hazardous chemical petrochemical products. Theaforesaid 1st type of warehouse gets various Licenses, NOC's and Certifications to carry out the said operations, viz., License from Petroleum Explosive Safety Organization Board Consent сору for storage of PetroleumProducts, NOCs from local governing bodies, fire brigade dept etc. The Appellant had taken first type of warehouse on rent from Ms. Daxa H Gada. These types ofwarehouses must have necessary fire-fighting equipment's like sprinklers, fire extinguishers, epoxy coated flooring etc. These warehouses are well constructed having heights of 15 to 18 feetaccording to regulatory requirements. The second type of warehouse is used forstorage of Foods products. The FDA approval for storage is obtained for 2nd type ofwarehouse. The Appellant had taken second type warehouse on rent These warehouses are well constructed having heights of 15 to 18 feetaccording to regulatory requirements. The 3rd type of warehouse is used for These types of warehouses are in the form of sets which are used to store normal products which does not Shri Hemchand Murji Gada 7 ITA Nos. 2118/Mum/2023 the Ld. CIT(A) assessee has filed photographs of the different kind of the warehouses which were in the nature of the additional evidence from the Assessing Officer. He submitted that those photographs being clearly in the nature of the additional evidence. However, the Ld. CIT(A) has not considered as same additional evidence which is in violation of the tax Rules, 1962 (in short ‘the Rules’). the Ld. CIT(A), the assessee has categorized all the warehouses in four categories which are These warehouses are well constructed having heights of 15 to 18 feetaccording to regulatory requirements. The first type of warehouse is used forstorage of petrochemical products. gets various Licenses, NOC's and Certifications to carry out the said operations, viz., Organization (PESO), PetroleumProducts, de dept etc. The Appellant had taken first type of warehouse on rent from Ms. Daxa H Gada. These types ofwarehouses must have fighting equipment's like sprinklers, fire well constructed having feetaccording to regulatory requirements. The second type of warehouse is used forstorage of Foods products. The FDA approval for storage is obtained for 2nd type ofwarehouse. The Appellant had taken second type of These warehouses are well constructed having heights of 15 to 18 feetaccording to regulatory requirements. These types of warehouses are in the form of sets e normal products which does not require permission or extra facility. TheAppellant had procured the above-mentioned warehouses from various number ofunrelated parties. 5.2 Before us, the Ld. Counsel of the assessee submitted that warehouse taken of lease category i.e. having Petroleum Explosive Safety Organization ( approved, NA approved land for warehouse, Fire NOC, automated water sprinkler for safely, Gram Panchayat NOC, having height of 18 feet , PEB structure the two related parties were of the type structure warehouse with automated water sprinkler for safely, Gram panchayat NOC and height of 15 feet category i.e. RCC structure with Gram of 15 feet , respectively . The b related parties were stated of type height ‘patra’ (iron sheet) warehouse is therefore, that comparison made by the Ld. Assessing Officer for determination of the fair market value of the lease rent warehouses taken from related parties However, we find that the Ld. CIT(A) has also not carried out exercise for exact quantification of the fair market value taken from the related parties godown on lease from unrelated parties in III for internal comparison estimate and presumption that inclusion of purpose of the estimation of the rent would require permission or extra facility. TheAppellant had procured mentioned warehouses from various number ofunrelated parties.” Before us, the Ld. Counsel of the assessee submitted that warehouse taken of lease from M/x Daxa H Gada was of type one Petroleum Explosive Safety Organization ( approved, NA approved land for warehouse, Fire NOC, automated water sprinkler for safely, Gram Panchayat NOC, having height of ture . The other warehouses taken the two related parties were of the type two (II )category i.e. RCC structure warehouse with automated water sprinkler for safely, Gram panchayat NOC and height of 15 feet and type three i.e. RCC structure with Gram Panchayat NOC and height , respectively . The balance warehouses taken from non related parties were stated of type IV category i.e. basic 12 feet sheet) warehouse. The contention of the assesse is therefore, that comparison made by the Ld. Assessing Officer for determination of the fair market value of the lease rent warehouses taken from related parties was not appropriate. However, we find that the Ld. CIT(A) has also not carried out exact quantification of the fair market value taken from the related parties . We note that there was no other godown on lease from unrelated parties in the category III for internal comparison and the ld CIT(A) has merel and presumption that inclusion of open area for the the estimation of the rent would make the lease rent Shri Hemchand Murji Gada 8 ITA Nos. 2118/Mum/2023 require permission or extra facility. TheAppellant had procured mentioned warehouses from various number Before us, the Ld. Counsel of the assessee submitted that from M/x Daxa H Gada was of type one (I) Petroleum Explosive Safety Organization (PESO) approved, NA approved land for warehouse, Fire NOC, automated water sprinkler for safely, Gram Panchayat NOC, having height of taken on lease from category i.e. RCC structure warehouse with automated water sprinkler for safely, and type three (III) NOC and height alance warehouses taken from non- i.e. basic 12 feet . The contention of the assessee is therefore, that comparison made by the Ld. Assessing Officer for determination of the fair market value of the lease rent of was not appropriate. However, we find that the Ld. CIT(A) has also not carried out an exact quantification of the fair market value of godowns there was no other category of type I to has merely relied open area for the make the lease rent comparable to non- assessee, the Assessing Officer with the lease rent of the type any other type one I warehouse taken on lease or any comparison of lease rent paid by other parties for similar kind of warehouse. We further noted that before u has submitted that type one regulatory requirement licenses NOC’s and certificates from the various authorities including license from Petroleum Explosive Safety Organization, Pollution Board Consent copy for Petroleum Products, NOC’s from local governing bodies, fire brigade dept. etc. On perusal of the permissions/certificates book before us, we find that permission to the assessee and not to the owner of the warehouse. On perusal of the lease agreement with M/s Daxa M Gada available on page 19 to 24 of the Paper Book, w mention of any specific facility for storing any chemical/explosive except that the property was constructed permission etc. have extra inbuilt advantage type one category of the warehouse and the paid to related party is Assessing Officer not the Ld. CIT(A) has carried out proper comparison of the fair market value of the lease rent of type of warehouses taken on lease rent from related parties. -related parties, whereas in the case of the the Assessing Officer/CIT(A) was required to compa the lease rent of the type one (I) category of the warehouse with warehouse taken on lease from or any comparison of lease rent paid by other parties for similar . We further noted that before u has submitted that type one(I) category warehouses require regulatory requirement licenses NOC’s and certificates from the various authorities including license from Petroleum Explosive Safety Organization, Pollution Board Consent copy for Petroleum Products, NOC’s from local governing bodies, fire brigade dept. etc. On perusal of the permissions/certificates we find that different authorities the assessee and not to the owner of the warehouse. On perusal of the lease agreement with M/s Daxa M Gada available age 19 to 24 of the Paper Book, we find that there is no mention of any specific facility for storing any chemical/explosive at the property was constructed. If the permission etc. have been taken by the assessee advantage is available to the assessee type one category of the warehouse and the excessive elated party is not justified. In our opinion neither the Assessing Officer not the Ld. CIT(A) has carried out proper comparison of the fair market value of the lease rent of type of taken on lease rent from related parties. Shri Hemchand Murji Gada 9 ITA Nos. 2118/Mum/2023 hereas in the case of the was required to compare category of the warehouse with unrelated party or any comparison of lease rent paid by other parties for similar . We further noted that before us the assessee category warehouses required regulatory requirement licenses NOC’s and certificates from the various authorities including license from Petroleum Explosive Safety Organization, Pollution Board Consent copy for storage of Petroleum Products, NOC’s from local governing bodies, fire brigade dept. etc. On perusal of the permissions/certificates filed in paper thorities have issued the assessee and not to the owner of the warehouse. On perusal of the lease agreement with M/s Daxa M Gada available e find that there is no mention of any specific facility for storing any chemical/explosive f the licenses or itself, then no to the assessee in respect of excessive lease rent not justified. In our opinion neither the Assessing Officer not the Ld. CIT(A) has carried out proper comparison of the fair market value of the lease rent of type of taken on lease rent from related parties. We find that Hon’ble Delhi High Court CIT vs Jansampark 525/2014 held that ld CIT(A) should himself carry out enquiries if AO has failed in doing so. Court is reproduced as under: “42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section 148 stage of appeals, if deemed proper by way of making or causing to be made a "further inquiry" in exercise of the power under approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld.” 5.3 Further, the ITAT being final fact finding autho of true facts is necessary for application of law on the facts of the case and matter cannot Therefore, we set aside the finding of the lower authorities and restore the matter back to the Assess comparison of the lease rent of the type of lease from related parties. The grounds of appeal of the Revenue are accordingly allowed for statistical purposes. Delhi High Court in order dated 11/03/2015 Jansampark advertising and marketing p ltd in ITA that ld CIT(A) should himself carry out enquiries if AO has failed in doing so. The relevant finding of Hon’ble High reproduced as under: “42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter llowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice Section 148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a "further inquiry" in exercise of the power under Section 250(4) approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld.” Further, the ITAT being final fact finding autho of true facts is necessary for application of law on the facts of the cannot be shut due to incomplete facts on record. Therefore, we set aside the finding of the lower authorities and restore the matter back to the Assessing Officer for making proper comparison of the lease rent of the type of warehouse taken on related parties. The grounds of appeal of the Revenue are accordingly allowed for statistical purposes. Shri Hemchand Murji Gada 10 ITA Nos. 2118/Mum/2023 in order dated 11/03/2015 in the case of and marketing p ltd in ITA that ld CIT(A) should himself carry out enquiries if The relevant finding of Hon’ble High “42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter llowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made Section 250(4). This approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld.” Further, the ITAT being final fact finding authority, discovery of true facts is necessary for application of law on the facts of the due to incomplete facts on record. Therefore, we set aside the finding of the lower authorities and ing Officer for making proper warehouse taken on related parties. The grounds of appeal of the Revenue are 6. In the result, the appeal of the Revenue is statistical purposes. Order pronounced in the open Court o Sd/ (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 11/10/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// In the result, the appeal of the Revenue is nounced in the open Court on 11/10/2023. Sd/- Sd/ RAHUL CHAUDHARY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Shri Hemchand Murji Gada 11 ITA Nos. 2118/Mum/2023 In the result, the appeal of the Revenue is allowed for /10/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai