M/s. Autofin Ltd, Hyderabad V. Income Tax Officer, Ward-1(1), Hyderabad

ITA 57/HYD/2014

• Counselvise Citation: 5722514 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.57/HYD/2014 ASSESSMENT YEAR 2009-2010 M/S. AUTOFIN LTD., SECUNDERABAD. PAN AACCA9402F VS. THE INCOME TAX OFFICER WARD 1(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. K.A. SAIPRASAD FOR REVENUE : MR. RAJAT MITRA DATE OF HEARING : 29.01.2015 DATE OF PRONOUNCEMENT : 25.03.2015 ORDER PER B. RAMAKOTAIAH, J.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-II, HYDERABAD DATED 23.10.2013. THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO THE DISALLOWANC E MADE BY THE A.O. INVOKING THE PROVISIONS OF SECTION 40A(2) ON THE RENT PAID BY THE COMPANY TO THE DIRECTORS, AS CONFIRMED BY THE LD. CIT(A). 2. ASSESSEE IS AN AUTHORISED DEALER FOR SALES AND SERVICE OF TATA CARS. IN THE COURSE OF SCRUTINY ASS ESSMENT, THE A.O. NOTICED THAT THE COMPANY HAD TAKEN LAND BELONG ING TO THREE DIRECTORS AND PAID RENT OF RS.79,23,600 IN TH E YEAR. ALL THE DIRECTORS FALL UNDER THE CATEGORY OF SPECIFIED PERSONS UNDER SECTION 40A(2)(B). A.O. NOTICED THAT FOR A TOTAL OF RS.2820 SQ. YARDS LEASED BY THE ASSESSEE, THEY WERE PAID AN AM OUNT OF RS.79,23,600 @ RS.230 PER SQ. YARD. ON LOCAL ENQUIR IES, A.O. 2 ITA.NO.57/HYD/2014 M/S. AUTOFIN LTD., SECUNDERABAD CONCLUDED THAT THE RENTAL VALUE OF ADJACENT AREA WA S AROUND RS.100 PER SQ. YARD PER MONTH AND THEREFORE, HE RES TRICTED THE FAIR VALUE OF LEASE RENT PER ANNUM TO RS.33,84,000 AND EXCESS RENT OF RS.45,39,600 WAS DISALLOWED. 3. BEFORE THE LD. CIT(A), ASSESSEE CONTENDED THAT THE PROPERTY IS ON THE MAIN HIGHWAY AND RENT PER SQ. FE ET WORKS OUT TO RS.23 WHICH IS FAIR AND REASONABLE BASED ON THE PRESENT VALUE OF THE LAND AT RS.5000 PER SQ. FEET. IT WAS F URTHER CONTENDED THAT A.O. HAS NOT GIVEN ANY AUTHENTIC INF ORMATION ABOUT THE FAIR RENT IN THE LOCALITY AT RS.100 PER S Q. YARD AND THEREFORE, WITHOUT GIVING AN OPPORTUNITY TO THE ASS ESSEE HAS RESTRICTED THE AMOUNT. THE LD. CIT(A), HOWEVER, NOT ICED THAT ENQUIRY REPORT AS MADE OUT BY INSPECTOR OF INCOME T AX (ITI) NOTED THAT M/S. MALIK MOTORS PAID RS.6,00,000 PER M ONTH FOR 6000 SQ. YARDS WHEREAS, M/S. MODI HYUNDAI PAID RS.9 ,00,000 FOR 6000 SQ. FEET AND FOR BUILDING ALSO. BASED ON T HE INSPECTORS REPORT, THE LD. CIT(A) CONCURRED WITH A .O. AND CONFIRMED THE DISALLOWANCE. 4. BEFORE US, LD. COUNSEL FILED ADDITIONAL EVIDENC ES IN THE FORM OF SALE DEED TO SUBMIT THAT A.O. HAS TAKEN THE AREA OF LEASED LAND FROM MR. GOWTHAM CHAND JAIN AT 400 SQ. YARDS WHEREAS, THE TOTAL AREA LEASED OUT BY MR. GOWTHAM C HAND JAIN WAS 833 SQ. YARDS AND IN SUPPORT FILED LEASE D EED DATED 20 TH APRIL, 2008. IT WAS FURTHER SUBMITTED THAT THE REP ORT OF ITI WAS NOT PROVIDED TO ASSESSEE AND NO OPPORTUNITY WAS GIVEN EITHER BY THE A.O. OR BY THE LD. CIT(A), WHILE ACCE PTING COMPARABLE PRICES. IT WAS FURTHER SUBMITTED THAT NE ITHER THE ASSESSEE NOR THE INDIVIDUAL DIRECTORS HAVE GOT ANY BENEFIT AS THE LEASE RENT PAID TO THE LAND WAS NOT ASSESSED AS INCOME FROM HOUSE PROPERTY. THE ENTIRE RENT WAS OFFERED AS INCOME IN 3 ITA.NO.57/HYD/2014 M/S. AUTOFIN LTD., SECUNDERABAD THE INDIVIDUAL HANDS WHICH WAS ALSO TAXED AT THE SA ME TAX RATE. IN VIEW OF THIS, IT WAS SUBMITTED THAT DISAL LOWANCE UNDER SECTION 40A(2) DOES NOT ARISE IN THE FACTS OF THE C ASE. IT WAS FURTHER SUBMITTED THAT ASSESSEE IS WIDELY BENEFITED BY ACQUIRING DIRECTORS LAND AND ADDING ITS OWN LAND L OCATED ADJACENT TO THE LEASE LAND TO CONSTRUCT BUILDING WI TH CELLAR + GROUND FLOOR + TWO FLOORS FOR BUSINESS USE AND THIS ASPECT WAS NOT CONSIDERED BY THE A.O. 5. LEARNED D.R. HOWEVER, RELIED ON THE ORDERS OF T HE REVENUE AUTHORITIES AND SUBMITTED THAT IT WAS ASSES SEE WHO SUBMITTED THE AREA OF LEASE AND THEREFORE, THE MIST AKE IF ANY, CANNOT BE ATTRIBUTED TO THE A.O. HE SUPPORTED THE O RDERS OF A.O. AND LD. CIT(A) IN INVOKING THE PROVISIONS OF S ECTION 40A ON THE TRANSACTION. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND EXAMINED THE RECORD. THERE IS NO DISPUTE WITH REFER ENCE TO THE FACT THAT ASSESSEE HAS TAKEN LEASE OF TOTAL 3253 SQ . YARDS AS AGAINST 2820 SQ. YARDS RECORDED BY THE A.O. IN ARRI VING AT THE DISALLOWANCE. ASSESSEE HAS FILED AN AFFIDAVIT MENTI ONING AREA LEASED OUT AND ALSO SALE DEEDS TO SUBMIT THAT AREA OF 833 SQ. YARDS GIVEN BY MR. GOWTHAM CHAND JAIN WAS WRONGLY N OTED AS 400 SQ. YARDS BEFORE THE A.O. WHICH MISTAKE CARRIED BEING IN THE ORDER OF THE LD. CIT(A). ASSESSEE FILED ADDITIO NAL EVIDENCE WHICH REQUIRE EXAMINATION BY THE A.O. 7. COMING TO THE ISSUE OF ADOPTING THE FAIR RENTAL VALUE IT IS NOT CLEAR FROM THE ITI REPORT HOW HE AR RIVED AT THE RENTAL VALUES. EXCEPT HIS REPORT THERE IS NO SUPPOR TING EVIDENCE IN THE FORM OF LEASE DEEDS OR AREA MAPS SO AS TO EXAMINE WHETHER LEASE RENTS RECORDED BY HIM ARE REA SONABLE 4 ITA.NO.57/HYD/2014 M/S. AUTOFIN LTD., SECUNDERABAD OR REPRESENT FAIR RENT OF THE AREA. IN FACT, THE I NSPECTORS REPORT EXTRACTED BY THE LD. CIT(A) IN THE ORDER DOES NOT E VEN INDICATE WHETHER THERE IS ANY SIMILARITY OR DISSIMILARITY BE TWEEN ASSESSEES PROPERTY AND THE PROPERTYS VALUES HE HA S ENQUIRED. MOREOVER, IT IS ALSO CONTENTION THAT ASSESSEE WAS N OT GIVEN ANY OPPORTUNITY DURING THE ASSESSMENT PROCEEDINGS NOR T HERE IS ANY OPPORTUNITY BY THE LD. CIT(A). IN VIEW OF THIS, WE ARE OF THE OPINION THAT WHOLE EXERCISE CONDUCTED BY THE A.O. R EQUIRES RE- ADJUDICATION. A.O. SHOULD EXAMINE THE EXTENT OF LAN D LEASED AND THEN ESTABLISH THAT THE RENT PAID BY ASSESSEE I S FAIR RENT OR NOT. MOREOVER, A.O. ALSO SHOULD GIVE DUE OPPORTUNIT Y TO THE ASSESSEE IF ANY ENQUIRES ARE CAUSED BY HIM IN THIS REGARD. WITH THESE OBSERVATIONS, WE SET ASIDE THE ORDER OF THE A .O. AND LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE A. O. TO CONSIDER THE ADDITIONAL EVIDENCE FILED BEFORE US AND ALSO TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO JUSTIFY THE CLAIMS M ADE THEREIN. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT O N 25.03.2015. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 25 TH MARCH, 2015 VBP/- COPY TO : 1. M/S. AUTOFIN LTD., SECUNDERABAD. C/O. CH. PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, STREET NO.1, ASHOKNAGAR, HYDERABAD 500 020. 2. THE INCOME TAX OFFICER, WARD 1(1), HYDERABAD 3. CIT(A)-II, HYDERABAD. 4. CIT-I, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD 6. GUARD FILE