Mr. Jagdish Madan, New Delhi V. ACIT, New Delhi

ITA 4451/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0214 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-03-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 06-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI RAMCHANDRAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH D DD D : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI C.L.SETHI, JM AND SHRI BEFORE SHRI C.L.SETHI, JM AND SHRI BEFORE SHRI C.L.SETHI, JM AND SHRI BEFORE SHRI C.L.SETHI, JM AND SHRI B.C.MEENA B.C.MEENA B.C.MEENA B.C.MEENA, AM , AM , AM , AM ITA NO. ITA NO. ITA NO. ITA NO.4451/DEL/2010 4451/DEL/2010 4451/DEL/2010 4451/DEL/2010 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 1999 1999 1999 1999- -- -2000 2000 2000 2000 SHRI JAGDISH MADAN, SHRI JAGDISH MADAN, SHRI JAGDISH MADAN, SHRI JAGDISH MADAN, PROP. M/S MADAN PAPERS, PROP. M/S MADAN PAPERS, PROP. M/S MADAN PAPERS, PROP. M/S MADAN PAPERS, 2/259, SUBHASH NAGAR, 2/259, SUBHASH NAGAR, 2/259, SUBHASH NAGAR, 2/259, SUBHASH NAGAR, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 027. 110 027. 110 027. 110 027. PAN NO. PAN NO. PAN NO. PAN NO.AFNPM9345Q. AFNPM9345Q. AFNPM9345Q. AFNPM9345Q. VS. VS. VS. VS. ASSTT.COMMISSIONER OF INCOME TAX, ASSTT.COMMISSIONER OF INCOME TAX, ASSTT.COMMISSIONER OF INCOME TAX, ASSTT.COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -27(1), 27(1), 27(1), 27(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YOGESH JAGIA, ADVOCATE. RESPONDENT BY : SHRI RAVI RAM CHANDRAN, SR.DR. ORDER ORDER ORDER ORDER PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI, J , J, J , JM : M : M : M : THE ASSESSEE IS IN APPEAL AGAINST THE LEARNED CIT(A)S O RDER DATED 24.8.2010 PERTAINING TO THE AY 1999-2000. 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE FOLLOW ING TWO ADDITIONS MADE BY THE AO AND FURTHER UPHELD BY THE C IT(A):- (I) `50,000/- ON ESTIMATED BASIS ON ACCOUNT OF VALUATION O F CLOSING INVENTORY. (II) DISALLOWANCE OF `36,000/- U/S 40A(2)(B) OF THE IT ACT ON ACCOUNT OF RENT PAID FOR THE PREMISES OBTAINED ON LEA SE FROM ASSESSEES WIFE. 3, WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA-4451/DEL/2010 2 4. IN THIS CASE, THE VALUATION OF CLOSING STOCK HAS BEEN INCREASED BY THE AO ON ESTIMATED BASIS IN THE ABSENCE OF CERTAIN DET AILS SOUGHT FOR BY THE AO. HERE, THE AO HAS NOT POINTED OUT THE BA SIS OF WORKING OUT THE ADDITION OF `50,000/-. THE CIT(A) HAS TREATED T HE ADDITION OF `50,000/- TO BE ON ACCOUNT OF OVERALL INCREASE IN TH E CLOSING STOCK HELD BY THE ASSESSEE. 5. AFTER CONSIDERING THE FACTS OF THE CASE AND HEARING BOTH THE PARTIES, WE FIND THAT THIS ADHOC ADDITION TO THE VALU E OF CLOSING STOCK WITHOUT IDENTIFYING A PARTICULAR CLOSING STOCK IS NOT JUSTIFIED. WE, THEREFORE, DELETE THE SAME. 6. NOW, WE COME TO THE ADDITION OF `36,000/- U/S 40A (2)(B) OF THE ACT. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE PAID RENT OF ONE PROPERTY, NAMELY, SHARDA PURI PROPERTY TAKEN ON LEA SE FROM HIS WIFE. THE ASSESSEE WAS ASKED TO PROVIDE THE JUSTIFICATION OF REN T PAID TO WIFE. THE ASSESSEE WAS ALSO REQUIRED TO SHOW CAUSE WHY THE AMOUNT OF `36,000/- OUT OF THE TOTAL RENT PAID TO WIFE SHOULD NOT BE DISALLOWED. AFTER HEARING THE ASSESSEE, THE AO DISALLOWED THE SAME A T `36,000/- WHICH HAS BEEN CONFIRMED BY THE LEARNED CIT(A). 7. AFTER HEARING BOTH THE PARTIES AND THE FACTS OF TH E CASE, WE FIND THAT THE AO HAS NOT BEEN ABLE TO POINT OUT AS TO HO W THE RENT OF `72,000/- PAID BY THE ASSESSEE TO WIFE WAS EXCESSIVE AND UNREASONABLE WITHIN THE MEANING OF SECTION 40A(2)(B) OF THE ACT. THE AO HAS ALSO NOT GIVEN THE BASIS FOR WORKING OUT THE SAM E AT `36,000/- DISALLOWED U/S 40A(2)(B) OF THE ACT. IT IS NOT IN DISP UTE THAT ASSESSEES WIFE HAS OFFERED THE RENTAL INCOME RECEIVED FROM THE ASSESSEE TO TAX AS WOULD BE CLEAR FROM HER INCOME TAX RETURN PLACED AT PAGES 35 TO 39 OF THE PAPER BOOK. IN THE ABSENCE OF VALID BASIS, WE ARE NOT INCLINED TO ITA-4451/DEL/2010 3 UPHOLD THE ORDERS OF THE AUTHORITIES BELOW IN THIS RE SPECT. THE DISALLOWANCE OF `36,000/- MADE BY THE AO IS THUS DELET ED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 11 TH MARCH, 2011. SD/- SD/- (B.C.MEENA (B.C.MEENA (B.C.MEENA (B.C.MEENA) )) ) (C.L.SETHI (C.L.SETHI (C.L.SETHI (C.L.SETHI) )) ) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 11.03.2011. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR ITA-4451/DEL/2010 4