DAMJI K RAYCHANA, MUMBAI V. ITO WD 23(2)(2), MUMBAI

ITA 5439/MUM/2012

• Counselvise Citation: 543919914 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-05-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 29-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 5439/M/2012 ASSESSMENT YEAR: 2008 - 09 SHRI DAMJI K. RAYCHANA PROP. OF M/S. VAISHNODEVI CAKE PLAZA, 2 - A, KAPEESH, M.G. ROAD, MULUND (W), MUMBAI 400 080 PAN: AAAPR5801L VS. ITO WARD 23(2)(2), PRATYAK S HKAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI . (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAHUL K. HA KANI & MS. NEELAM JADHAV, A.R. REVENUE BY : SHRI OM PRAKASH MEENA, D.R. DATE OF HEARING : 13.05.2014 DATE OF PRONOUNCEMENT : 21.05.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] DATED 24.05.12 RELEVANT TO ASSESSMENT YEAR 2008 - 09. THERE IS A DELAY OF 26 DAYS IN PREFERRING THE PRESENT APPEAL. THE ASSESSEE HAS MOVED AN APPLICATION FOR CONDONATION OF DELAY EXPLAINING THE REASONS FOR THE ABOVE DELAY OF 26 DAYS. THE APPLICATION IS DULY SUPPORTED WITH THE AFFIDAVIT OF THE APPLICANT/ASSESSEE. IN VIEW OF THE REASONS MENTIONED THEREIN AND ALSO IN VIEW OF THE SHORT PERIOD OF THE DELAY, THE DELAY IN PREF ERRING THE APPLICATION IS HEREBY CONDONED AND THE APPEAL IS HEARD ON MERITS. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1,20,000/ - OUT OF TOTAL DISALLOWANCE OF RS.3,60,000/ - BEING RENT PAID I TA NO . 5439/M/2012 SHRI DAMJI K. RAYCHANA 2 TO CHANDRABALA D. RAYCHANA FOR THE EXCLUSIVE USE OF SHOP (TENANTED PREMISES), WITHOUT APPRECIATING THE FACT THAT, THE ASSESSEE DOES NOT HAVE ANY OTHER SHOP AND ENTIRE AMOUNT WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. H ENCE, THE DISALLOWANCE MAY BE DELETED. 2. WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) HAS NOT GIVEN ANY COMPARABLES TO ARRIVE AT THE CONCLUSION THAT THE RS.3,60,000/ - IS HIGHER THAN THE MARKET RATES AND THUS HE HAS ERRED IN ALLOWING ONLY RS.2,40,000/ - OUT OF RS.3,60,000/ - PAID AS RENT FOR THE USE OF THE SHOP. HENCE THE DISALLOWANCE MAY BE DELETED. 3. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.19,359/ - BEING RENT PAID (ON BEHALF OF CHANDRABALA D. RAYCHANA) DIRECTLY TO THE LANDLORD FOR THE TENANTED PREMISES. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE OF RS.15,000/ - WITHOUT APPRECIATING THE FACT THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF THE BUSINESS. GROUND NO S .1 TO 3: 2. GROUND NUMBERS 1 T O 3 RELATE TO CONFIRMATION OF DISALLOWANCE OUT OF RENT PAID FOR THE USE OF SHOP BY THE ASSESSEE TO HIS WIFE. THE ASSESSEE CLAIMED TO HAVE PAID A RENT OF RS.3,60,000/ - FOR THE USE AND OCCUPATION OF THE SHOP FOR HIS BUSINESS PURPOSE AS A SUBTENANT OF HIS WI FE WHO IS THE FIRST TENANT OF THE BUSINESS PREMISES. APART FROM THAT THE ASSESSEE CLAIMED A SUM OF RS.19,359/ - BEING THE LICENSE FEE PAID BY THE ASSESSEE ON BEHALF OF HIS WIFE TO THE LANDLORD OF THE SHOP. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO), HOWEVER, DISALLOWED THE ABOVE SAID RENT AND LICENSE FEE OBSERVING THAT THE ASSESSEE HAD NOT BE EN ABLE TO SUBSTANTIATE THE TENANCY OF THE SAID PROPERTY WITH ANY DOCUMENTS FROM HIS WIFE TO HIMSELF. 3. IN THE FIRST APPEAL, THE LD. CIT(A) , AFTER A PPRECIATION OF THE EVIDENCE ON THE FILE PRODUCE D BEFORE HIM, OBSERVED THAT THE WIFE OF THE ASSESSEE WAS THE TENANT OF THE SAID SHOP. SHE HAD ALSO OFFERED THE RENT INCOME OF THE SHOP IN HER I TA NO . 5439/M/2012 SHRI DAMJI K. RAYCHANA 3 RETURN OF INCOME. HE FURTHER OBSERVED THAT THE FACT BEING THAT TH E ASSESSEE DID NOT HAVE ANY OTHER BUSINESS PREMISES AND THE BUSINESS COULD NOT HAVE BEEN RUN WITHOUT USING THE SHOP IN QUESTION. THEREFORE, THE PAYMENT OF RENT TO THE WIFE WAS JUSTIFIED. HOWEVER, HE OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO JUSTIFY THE QUANTUM OF THE AMOUNT PAID AS RENT TO THE WIFE . CO NSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, HE HELD THAT A SUM OF RS.20,000/ - PER MONTH I.E. RS.2,40,000/ - PER ANNUM WAS SUFFICIENT PAYMENT AS RENT FOR THE USE OF TENANTED PREMISES OF H IS WIFE. HE THEREFORE ALLOWED THE DEDUCTION OF RS. 2,40,000/ - AND CONFIRMED THE REMAINING DISALLOWANCE ON THIS ISSUE. THE ASSESSEE IS THUS IN APPEAL BEFORE US AGAINST THE CONFIRMATION OF DISALLOWANCE OF REMAINING AMOUNT OF RS.1,20,000/ - . 4. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND ALSO HAVE GONE THROUGH THE RECORDS. THE CONTENTION OF THE LD. A.R. HAS BEEN THAT THE LD. CIT(A), WHILE HOLDING THAT THE RENT AT THE RATE OF 20,000/ - PER MONTH, WAS JUSTIFIED HAS NOT GIVEN ANY COMPARABLES TO ARRIVE AT THAT CONCLUSION. HE HAS FURTHER STRESSED THAT THE PAYMENT OF RS.3, 6 0,000/ - (AS A RENT OF THE SHOP) WAS PAID BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF HIS BUSINESS . ON THE OTHER HAND, THE LD. D.R. HAS RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE PAYMENT OF RENT WITH ANY DOCUMENT IN THE SHAPE OF RENT AGREEMENT, LEASE DEED ETC. HE HAS ALSO NOT GIVEN ANY COMPARABLE INSTANCE OF ANY OTHER PROPERTY/SHOP IN QUESTION IN THE VICINITY. THE ASSESSEE HAS MERELY RELIED UPON HIS OWN ORAL VERSION WITHOUT ANY DOCUMENTARY PROOF ETC. THOUGH , THE ASSESSEE HAS CONTENDED THAT THE LD. C IT(A) WHILE MAKING THE DISALLOWANCE HAS NOT GIVEN INSTANCE OF ANY COMPARABLE, HOWEVER IT MAY BE OBSERVED THAT THE INITIAL BURDEN I TA NO . 5439/M/2012 SHRI DAMJI K. RAYCHANA 4 WAS UPON THE ASSESSEE TO JUSTIFY THE PAYMENT OF THE AMOUNT OF RENT. IF THE ASSESSEE WOULD HAVE BEEN ABLE TO JUSTIFY THE QUANTU M OF AMOUNT OF PAYMENT WITH ANY EVIDENCE, THEN THE BURDEN COULD HAVE BEEN SHIFTED ON THE REVENUE. HOWEVER, IN THE CASE IN HAND THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE REGARDING THE ANNUAL RENTAL VALUE OF THE PROPERTY IN QUESTION AND THE LD. CIT(A) IN SUCH CIRCUMSTANCES HAS CONSIDERED THE PAYMENT OF RS.20,000/ - PER MONTH BY THE ASSESSEE TO HIS WIFE AS JUSTIFIED RENT OF THE SHOP IN QUESTION. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN THIS RESPECT. SO FAR THE PAYMENT OF RS .19,359/ - AS LICENSE FEE IS CONCERNED, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HA D NOT FURNISHED ANY RECEIPT OF PAYMENT AND IT WOULD NOT HAVE BEEN DIFFICULT FOR THE ASSESSEE TO PRODUCE THE RECEIPT OF THE PAYMENT OF LICENSE FEE. MOREOVER, THE PAYMENT OF LICENSE FEE WAS THE LIABILITY OF THE WIFE OF THE ASSESSEE AND NOT OF THE ASSESSEE. ACCORDINGLY, THE DISALLOWANCE IN THIS RESPECT IS ALSO HELD TO BE JUSTIFIED. WE THEREFORE UPHELD THE FINDING S OF THE LD. CIT(A) RELATING TO ISSUES TAKEN BY THE ASSESSEE VI DE GROUND NOS.1 - 3. GROUND NO.4 6. THE AO, DURING THE ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE HAD CLAIMED A SUM OF RS.49,842/ - ON ACCOUNT OF CAR INSURANCE, CAR LOAN INTEREST AND CAR EXPENSES. THE AO OBSERVED THAT THE NATURE OF THE ASSESSEES B USINESS WAS SUCH THAT IT DID NOT REQUIRE MUCH TRAVELLING FOR PROCURING BUSINESS. HE THEREFORE DISALLOWED 20% OF THE ABOVE EXPENDITURE WHICH WAS WORKED OUT AT RS.9,96 8 / - . THE AO FURTHER NOTICED THAT THE ASSESSEE HAD DEBITED SUNDRY EXPENSES OF RS.50,901/ - IN THE P & L ACCOUNT. THE ASSESSEE HAD FAILED TO PROVE THE SAID EXPENDITURE WITH BILLS, VOUCHERS ETC. HENCE, HE DISALLOWED A SUM OF RS.10,000/ - OUT OF THE SAID EXPENDITURE. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS DEBITED CREDIT CARD EXPENSES OF RS. 58,181/ - WHICH THE ASSESSEE HAD FAILED TO JUSTIFY WITH THE PROOF OF AUTHENTIC BILLS. HE THEREFORE DISALLOWED A SUM OF RS.10,000/ - OUT OF CREDIT CARD EXPENSES ALSO. I TA NO . 5439/M/2012 SHRI DAMJI K. RAYCHANA 5 7. IN THE FIRST APPEAL, THE LD. CIT(A), TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE AND THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, RESTRICTED THE TOTAL DISALLOWANCE OUT OF THE ABOVE SAID MOTOR CAR EXPENSES, SUNDRY EXPENSES AND CREDIT CARD EXPENSES TO THE TOTAL OF RS.15,000/ - ONLY. THE ASSESSEE HAS THUS AGITATED THE DISALLO WANCE OF RS.15,000/ - CONFIRMED BY THE LD. CIT(A). 8. AFTER HEARING THE LD. REPRESENTATIVES OF THE PARTIES, WE ARE OF THE VIEW THAT SINCE THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTANTIATE THE CLAIM OF EXPENDITURE WITH COGENT AND CONVINCING EVIDENCE AND NATU RE OF THE BUSINESS OF THE ASSESSEE BEING A SHOP KEEPER THE DISALLOWANCE OF RS.15,000/ - CONFIRMED BY THE LD. CIT(A) WAS JUSTIFIED. WE ACCORDINGLY DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) AND THE SAME ARE HEREBY UPHELD. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.05. 201 4 . SD/ - SD/ - ( P.M. JAGTAP ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.05. 201 4 . * KISHORE , SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.