M/s. J. J. Aluminium Pvt. Ltd., Ahmedabad V. The ACIT, C.C.1(1), Ahmedabad

ITSSA 113/AHD/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3211 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 25-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: ADITI SHETH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER IT(SS)A NO. 113/AHD/2014 (ASSESSMENT YEAR:2011-12) M/S. J. J. ALUMINIUM PVT. LTD. B/2, SHYAM TENAMENT, OPP. SARASWATI SOCIETY, ODHAV ROAD, AHMEDABAD 382415 APPELLANT VS. ASST. COMMISSIONER OF INCOME TAX, C.C.1(1), AHMEDABAD RESPONDENT PAN: AACCJ1495K /BY ASSESSEE : ADITI SHETH, A.R. /BY REVENUE : SHRI VILAS V. SHINDE, SR. D.R. /DATE OF HEARING : 04.05.2017 /DATE OF PRONOUNCEMENT : 18.05.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE CIT(A)-I, AHMEDABADS ORDER DATED 28.01.2014, PASSE D IN CASE NO. CIT(A)- I/CC.1(1)/002/2013-14, UPHOLDING ASSESSING OFFICER S ACTION DISALLOWING ITA NO. 113/AHD/2014 (M/S. J J ALUMINIUM P. LTD. VS . ASST.CIT) A.Y. 2011-12 - 2 - RENT PAYMENT OF RS.3LACS OUT OF RS.4.8 LACS AS EXC ESSIVE, IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 153B(1)(B) OF THE INCOM E TAX ACT, 1961; IN SHORT THE ACT. 2. RELEVANT FACTS ARE IN A NARROW COMPASS. THE ASS ESSEE CLAIMED TO HAVE PAID RENT OF RS.4.80LACS TO ONE OF ITS DIRECTORS D AUGHTER IN LAW MRS. PALLAVI J. KANSARA FOR TAKING ON RENT A PLOT ADMEASURING 963 S Q.MTR. WITH SHED ON ANOTHER PLOT NO.17; WORKING OUT TO RS.41PER SQ.MTR. . THE ASSESSING OFFICER NOTICED IT TO HAVE OBTAINED PERMISSION OF CONSTRUCT ING ADMINISTRATIVE OFFICE THEREUPON. HE FURTHER CAME ACROSS THE FACT THAT TH E ASSESSEE HAD PAID RENT AMOUNT OF RS.1.8 LACS IN PRECEDING ASSESSMENT YEAR. IT WOULD JUSTIFY THAT THE ABOVE CLAIMED RENT WAS NEITHER EXCESSIVE NOR UNREAS ONABLE SO AS TO BE DISALLOWED. THE ASSESSING OFFICER QUOTED ITS FAILU RE IN FILING NECESSARY DETAILS AND DOCUMENTS TO TREAT THE IMPUGNED SUM OF RS.3LACS TO BE EXCESSIVE THAN THE RENT EARLIER PAID OF RS.1.8LACS. HE THUS DISALLOWED THE SAID DIFFERENTIAL AMOUNT. 3. THE CIT(A) AFFIRMS ASSESSING OFFICERS ACTION AS FOLLOWS: 6. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SU BMISSIONS OF THE A.R, OF THE-APPELLANT CAREFULLY. IT IS SEEN THAT THERE W AS NO WRITTEN AGREEMENT BETWEEN THE LAND LADY AND THE APPELLANT FOR THE REN T PAID. THE INCREASE IN RENT HAS NOT BEEN JUSTIFIED BY ANY NEW FACTOR WHICH CAME INTO CONSIDERATION DURING THE YEAR. FROM THE COPY OF ACCOUNTS OF GIDC PLOT IN THE BOOKS OF PALLAVI J KANSARA FILED DURING THE APPELLATE PROCEE DINGS, IT IS SEEN THAT THE PLOT WAS PURCHASED BY PALLAVI J KANSARA FOR APPROXI MATELY RS.11 LAKHS IN F,Y. 2008-09. FOR A PLOT OF LAND COSTING RS. 11 LAK HS ON WHICH THE CONSTRUCTION HAS LAKHS BEEN MADE BY THE APPELLANT T HE FAIR RENT CANNOT BE MORE THAN RS. 1,80,000/- WHICH WAS THE RENT PAID IN THE IMMEDIATELY PRECEEDING YEAR. THE RENT OF RS. 1,80,000/-ITSELF W ORKS OUT TO A RETURN OF ITA NO. 113/AHD/2014 (M/S. J J ALUMINIUM P. LTD. VS . ASST.CIT) A.Y. 2011-12 - 3 - 16.36% ON THE CAPITAL INVESTED. THIS ITSELF IS FAIR LY HIGH RETURN. IN VIEW OF THE ABOVE WITHOUT ANY FURTHER JUSTIFICATION THE INCREAS E IN THE RENT IS NOT BONAFIDE. THE INCREASE IN RENT WITHOUT ANY OTHER RE ASON ALSO DOES NOT APPEAR TO BE BONAFIDE IN VIEW OF THE FACT THAT THE LAND LADY IS THE DAUGHTER IN LAW OF ONE OF THE DIRECTORS OF THE COMPANY. A RENT OF RS. 4,80,000/- ON AN INVESTMENT OF RS. 11 LAKH FOR A VACANT PLOT OF LAND WOULD MEAN A RETURN OF 46.37% ON THE CAPITAL INVESTED WHICH IS INORDINATEL Y HIGH AND EXCESSIVE. THE AO WAS HENCE JUSTIFIED IN HOLDING THAT THE AMOUNT P AID IN EXCESS OF RS. 1,80,000/- WAS NOT FOR BUSINESS CONSIDERATIONS. THE ADDITION MADE BY THE AO IS CONFIRMED. 4. WE HAVE HEARD RIVAL SUBMISSIONS. WE SOUGHT TO K NOW FIRST OF ALL AS TO WHETHER THE ASSESSING OFFICER HAD INVOKED SECTION 4 0A(2)(B) OF THE ACT IN DISALLOWING THE IMPUGNED EXCESSIVE RENTAL PAYMENT O R NOT. MS. SHETH TAKES US TO ASSESSMENT ORDER DATED 06.03.2013 NOWHERE CON TAINING SUCH A STIPULATION. THERE IS FURTHER NO EVIDENCE THAT THE ASSESSEE AND ITS PAYEE LANDLORD COME WITHIN THE SPECIFIED RELATION UNDER T HE ABOVE STATUTORY PROVISION. THE SAME THEREFORE DOES NOT APPLY IN FA CTS OF THE INSTANT CASE. COUPLED WITH THIS, THE LOWER AUTHORITIES HAVE NOWH ERE ANY EFFORT TO DETERMINE MARKET RENT OF THE PROPERTY IN QUESTION S O AS TO DISALLOW THE IMPUGNED ALLEGE EXCESSIVE RATE COMPONENT. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY ARGUES THAT THE ASSESSEE HA S NOT BEEN ABLE TO FILE ANY RENT AGREEMENT IN DOCUMENTARY FORM SO AS TO JUSTIFY THE SAME. WE FIND NO MERIT IN THIS PLEA AS A TENANCY IS IN THE NATURE OF A CONTRACT WHICH CAN BE BOTH ORAL AS WELL AS DOCUMENTARY. IT HAS FURTHER COME O N RECORD THAT THE LOWER AUTHORITIES HAD THEMSELVES ACCEPTED BALANCE RENT OF RS.1.8LACS (SUPRA). THERE IS THUS NO DISPUTE SO FAR AS THE ASSESSEES TENANT- LANDLORD RELATION WITH ITS PAYEE IS CONCERNED. WE ACCORDINGLY CONCLUDE THAT B OTH THE LOWER AUTHORITIES ITA NO. 113/AHD/2014 (M/S. J J ALUMINIUM P. LTD. VS . ASST.CIT) A.Y. 2011-12 - 4 - HAVE ERRED IN DISALLOWING THE EXCESSIVE RENT PAYMEN T IN QUESTION OF RS.3LACS. THE SAME STANDS DELETED. 4. THIS ASSESSEES APPEAL IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 18 TH DAY OF MAY, 2017.] SD/- SD/- ( PRADIP KUMAR KEDIA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD: DATED 18/05/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0