Sairang Estates P. Ltd., Nashik V. ITO, Ward-2(1)(3), Baroda

ITA 332/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8499 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-01-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 12-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: SARKAR SHARMA
• Keywords: Wrong claim
• Section: 143(2); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, HONBLE JUDICIAL MEMBER AND SHRI WASEEM AHMED HONBLE ACCOUNTANT MEMBER ITA.NO.332/AHD/2018 / ASSTT.YEAR : 2014-15 SAIRANG ESTATES P.LTD. 07, A-TOWER PADMAVISHWA APPT., OPP: GOVINDA APPT., NR.WISDOM HIGH SCHOOL D-14, RAMESHWAR NAGAR NASHIK 422 013 PAN : AABCB 2571 K VS ITO, WARD - 2(1)(3) BARODA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI SARKAR SHARMA, AR REVENUE BY : SHRI L.P. JAIN, SR.DR / DATE OF HEARING : 20/01/2020 / DATE OF PRONOUNCEMENT: 21/01/2020 !'/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.CIT(A)-2, VADODARA DATED 27.12.2017 PASSED FOR THE ASSESSMENT YEAR 2014-15. 2. ASSESSEE HAS TAKEN MAINLY TWO GROUNDS. IN THE F IRST GROUND OF APPEAL, ASSESSEE AGITATES ADDITION OF RENT EXPENSES OF RS.4 ,50,000/-. ITA NO.332/AHD/2018 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A REAL-ESTATE DEVELOPER. IT HAS E-FILED ITS RETURN OF INCOME ON 25.9.2014 DECLA RING TOTAL INCOME AT RS.NIL. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT BY ISSUANCE OF NOTICE UNDER SECTION 143(2) ON 1.9.2015 . DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS PAID RS.4.50 LAKHS TO THREE COMPANIES VIZ. GOKUL ORGANIZERS P.LTD., SHREEJI ARCADE P.LTD., AND SHRIDHAR REALITY P.LTD. OF RS.1.50 LAKHS EACH AS RENT EXPENSES FOR THE PREMISES HIRED AT VA SHU NIVAS, ALKAPURI ROAD, BARODA. ON VERIFICATION OF DETAILS, IT WAS A SSUMED BY THE AO THAT THERE WERE SOME GROUP CONCERNS OF THE ASSESSEE OPERATING FROM THAT PREMISES, AND THEREFORE, EXPENSES INCURRED WAS BOGUS TO REDUCE IT S INCOME. THE LD.AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN THE SAME WITH SUPPORTING DETAILS. IT WAS EXPLAINED BY THE ASSESSEE THAT THE ASSESSEE IS UNDERTAKING PROJECT IN LARGE SCALE, AND SINCE IT REQUIRES TO AT TRACT PROSPECTIVE MIDDLE CLASS AND HIGH-END INVESTORS, IT WAS NECESSARY FOR THE AS SESSEE TO SET UP AN IDLE OFFICE PREMISES IN THE POSH AREA OF THE CITY, AND T HEREFORE, FOR ADMINISTRATIVE AND MARKETING NECESSITY SPACE AT VASU NIWAS ALKAP URI WAS HIRED AT RS.37,500/- PER MONTH. THIS WAS FOR BUSINESS NECE SSITY AND THEREFORE THE EXPENSES REQUIRED TO BE ALLOWED. THE EXPLANATION O F THE ASSESSEE DID NOT FIND FAVOUR FROM THE AO. HE MADE THE IMPUGNED ADDITION. BEFORE THE FIRST APPELLATE AUTHORITY ALSO, THE ASSESSEE DID NOT SUCC EED, HENCE, THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE CONTE NDED THAT THERE IS NO DISPUTE THAT RENTED PREMISES WAS NOT OCCUPIED BY TH E ASSESSEE, NOR SUCH PREMISES CAPABLE OF FETCHING SUCH AMOUNT OF RENT. REVENUE AUTHORITIES HAVE ALSO NOT DISPUTED NECESSITY OF SUCH LOCATION LOOKIN G TO THE SIZE OF PROJECT UNDERTAKEN BY THE ASSESSEE COMPANY. THEREFORE, ADD ITION MADE BY THE ITA NO.332/AHD/2018 3 REVENUE IS NOT JUSTIFIED. ON THE OTHER HAND, THE L D.DR SUPPORTED ORDERS OF THE REVENUE AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE RECORD CAREFULLY. THE CASE OF THE ASSESSEE IS THAT THE PROJECT UNDERT AKEN BY IT WAS ON LARGE SCALE, AND IN ORDER TO ATTRACT PROSPECTIVE CUSTOMERS AND I NVESTORS, IT REQUIRED A PRIME LOCATION IN POSH AREAS, AND THEREFORE, IT HAD TO LO OK FOR SUCH LOCATION WHICH IS IDLY SUITED FOR ITS BUSINESS ACTIVITIES. THE PREMI SES IN QUESTION WAS FOUND TO BE PROPER AND THE ASSESSEE HIRED THE SAME AND INCUR RED THE RENTAL EXPENSES. THE LOWER AUTHORITIES HAVE DENIED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT SOME OF GROUP CONCERNS WERE SITUATED IN THE SAME PR EMISES, AND THEREFORE, THE CLAIM OF THE ASSESSEE WAS BOGUS, AND ACCORDINGLY RE JECTED. WE FIND THAT LOWER AUTHORITIES HAVE NOT DISPUTED THE QUANTUM OF RENT PAID BY THE ASSESSEE NOR BUSINESS REQUIREMENT OF THE ASSESSEE. ADDITION MADE BY THE DEPARTMENT ON THE ASSUMPTION THAT SOME OF THE GROUP OF CONCERN S OF THE ASSESSEE ALSO SITUATED IN THAT PREMISES, AND THEREFORE, IT WAS A DIVERSION OF FUNDS AND AS SUCH A BOGUS CLAIM. BEFORE BOTH THE AUTHORITIES, T HE ASSESSEE HAS EXPLAINED THE BUSINESS EXIGENCY FOR HIRING SUCH PREMISES AND PAYMENT OF RENT. TODAYS COMPETITIVE BUSINESS ENVIRONMENT EASY ACCESSABILITY IS ONE OF THE PRIME FACTORS REQUIRED FOR ATTRACTING CUSTOMERS, AND THER EFORE, REASONING GIVEN BY THE ASSESSEE FOR INCURRING SUCH RENTAL INCOMES CANN OT BE SIMPLY BRUSHED ASIDE. WHILE DENYING THE CLAIM OF THE ASSESSEE, REVENUE HA S NOT FACTORED IN THE BUSINESS EXIGENCIES AS EXPLAINED BY THE ASSESSEE. W E ARE NOT CONVINCED WITH NARROW CONSIDERATION OF THE REVENUE AUTHORITIES IN REJECTING CLAIM OF THE ASSESSEE. THEREFORE, WE DELETE THE IMPUGNED ADDITI ON OF RS.4,50,000/- INCURRED BY THE ASSESSEE TOWARDS RENTAL EXPENSES, A ND ALLOW CLAIM OF THE ASSESSEE. ITA NO.332/AHD/2018 4 6. GROUND NO.2: IN THIS GROUND, GRIEVANCE OF THE A SSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF R S.59,000/- IN RESPECT OF THE FOLLOWING PARTIES: I) SHRI BADRINARAYAN TRUST : RS.5000/- II) SHRI BALKRISHNAN TRUST : RS.16,000/- III) BALAJI TRUST : RS.28,000/- IV) SHREE GANGA FAMILY TRUST : RS.10,000/- 7. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD T HAT THE ASSESSEE TOOK SUBSTANTIAL AMOUNTS FROM THESE TRUSTS. FOR EXAMPLE , IN THE CASE OF BALAJI TRUST, THE ASSESSEE HAS SHOWN FRESH LOAN OF RS.66,0 5,000/- FROM THIS PARTY. THE ASSESSEE HAS SHOWN COMPLETE DETAILS AS REQUIRED UNDER SECTION 68 OF THE ACT. THE LD.CIT(A) HAS ACCEPTED THE EXPLANATION OF THE ASSESSEE EXCEPT RS.28,000/-. THIS ADDITION OF RS.28,000/- HAS BEEN CONFIRMED ON THE GROUND THAT A SUM OF RS.25,000/- WAS FOUND TO BE DEPOSITED IN CASH IN THE ACCOUNT OF BALAJI TRUST ON 7.1.2014. THEREFORE, THE LD.CIT(A) CONSTRUED THAT THIS CASH MUST HAVE BEEN GIVEN BY THE ASSESSEE, WHICH HAS BEE N INTRODUCED IN THIS TRUST. SIMILAR IS THE FINDING WITH REGARD TO OTHER CREDITO RS; FOR EXAMPLE FROM SHREE GANGA FAMILY TRUST, ASSESSEE HAS RECEIVED FRESH LOA N OF RS.7,12,000/-. THE LD.CIT(A) DISBELIEVED EXPLANATION OF THE ASSESSEE QUA ONLY RS.10,000/-. AFTER CONSIDERING ORDER OF THE LD.CIT(A) WE ARE OF THE VIEW THAT REASONS ASSIGNED BY THE LD.CIT(A) ARE NOT JUSTIFIABLE. ONC E ASSESSEE HAS DEMONSTRATED GENUINENESS OF THE TRANSACTION, CREDIT-WORTHINESS O F THE CREDITORS AND IDENTIFIED CREDITORS FOR SUBSTANTIAL AMOUNT OF RS.6 6 LAKHS, THEN TO DISBELIEVE RS.28,000/- ON GROUND THAT EQUAL AMOUNT WAS FOUND T O BE DEPOSITED IN THE ACCOUNT OF CREDITORS IN CASH IS A VERY ERRONEOUS RE ASONING. THEREFORE, WE ARE OF THE VIEW THAT THE LD.CIT(A) WAS NOT JUSTIFIED TO PARTIALLY CONFIRM THE CASH ITA NO.332/AHD/2018 5 CREDIT FROM THE ALLEGED CREDITORS. WE ALLOW THIS G ROUND OF APPEAL, AND DELETE ADDITION OF RS.59,000/-. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 21 ST JANUARY, 2020 AT AHMEDABAD. SD/- SD/- (WASEEM AHMED ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER