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2018 (9) TMI 863 - AT - Income TaxDisallowance of HRA exemption claimed u/s 10(13A) - notice u/s 142(1) with queries the assessee was asked to justify the claim of deduction/exemption - Held that - We find that neither before the authorities below nor before us the assessee has produced any evidence to show the actual payment of rent. Even if the amount of ₹ 1,07,084 is considered as actual payment of rent by the assessee, the allowable deduction computed by the AO as per the provisions of Rule 2A of the IT Rules comes to ₹ 16,250/- being the excess of 10% of the salary or the actual rent paid whichever is less. Thus the salary of the assessee is undisputedly ₹ 9,08,341/- and 10% of the same comes to ₹ 90,834/-. Thus the excess of ₹ 90,834/- of actual rent paid is an allowable deduction and hence the difference between actual rent paid of ₹ 1,07,084/- and ₹ 90,834/- is ₹ 16,250/-. No error or illegality in the order of the AO restricting the claim of exemption of HRA to ₹ 16,250/-. - Decided against assessee Reopening of assessment - unexplained source of credit card expenditure - return filing under wrong PAN - Held that - In the case in hand, the income as considered escaped assessment in the reasons recorded by the AO was very much part of the salary income which was finally assessed by the AO. As regards the return of income filed by the assessee on 28th July, 2008, admittedly the assessee has filed the said return of income under PAN AJFPG 6152 K whereas the correct PAN of the assessee is AEXPG 3058 D. The assessee had admitted that the return was filed under wrong PAN. AO has recorded in the reasons that as per the record the assessee did not file any return of income, therefore, the non availability of the return of income in the system and with the AO at the time when the AO proposed to initiate the proceedings under section 147/148 of the Act is not in dispute, though in the enquiry conducted by the AO prior to the issue of notice under section 148 the assessee pointed out that he had filed a return of income on 28th July, 2008 but under wrong PAN. We find that the said response of the assessee of filing return of income under wrong PAN will not change the situation and remedy for processing the return of income as by that point of time in the month of March, 2015 all the time limitation of processing the return of income originally filed under wrong PAN were expired. Therefore, the AO had only remedy under the provisions of the Act to issue notice under section 148 to assess the income of the assessee as there was no valid return and the return filed under wrong PAN was a non est return.- Decided against assessee.
Issues Involved:
1. Validity of assessment under sections 147/143(3). 2. Procedure followed by CIT (A) in light of the Supreme Court decision in GKN Drive Shafts India Ltd. vs. ITO. 3. Disallowance of HRA exemption claimed under section 10(13A). 4. Lack of show cause notice before completion of assessment. 5. Right to add, alter, or amend grounds of appeal. 6. Validity of reassessment proceedings when income initially considered escaped was not added. Issue-wise Detailed Analysis: 1. Validity of Assessment under Sections 147/143(3): The assessee initially contested the validity of the assessment under sections 147/143(3). However, during the hearing, the assessee's counsel stated that these grounds were not pressed. Consequently, these grounds were dismissed as not pressed. 2. Procedure Followed by CIT (A) in Light of Supreme Court Decision in GKN Drive Shafts India Ltd. vs. ITO: Similar to the first issue, the assessee did not press this ground during the hearing, leading to its dismissal. 3. Disallowance of HRA Exemption Claimed under Section 10(13A): The primary contention revolved around the disallowance of ?90,834/- claimed as HRA exemption. The AO issued a notice under section 148, and the assessee filed a return declaring a gross salary of ?9,08,341/-. The AO requested evidence supporting the HRA exemption claim but found the provided evidence insufficient. Consequently, the AO recalculated the exemption as per Rule 2A of the IT Rules, allowing only ?16,250/-. The assessee argued that the rent receipts were given to the employer, who verified and allowed the exemption in Form 16A. However, the AO did not conduct any inquiry with the employer. The CIT (A) upheld the AO's decision, and the Tribunal found no error or illegality in the AO's computation, thereby dismissing the assessee's appeal on this ground. 4. Lack of Show Cause Notice Before Completion of Assessment: The assessee claimed that no show cause notice was issued before the assessment's completion. The Tribunal noted that the AO had issued a notice under section 142(1) with specific queries regarding the HRA exemption claim. The assessee failed to provide supporting evidence, leading to the disallowance. The Tribunal found the AO's actions justified and dismissed this ground. 5. Right to Add, Alter, or Amend Grounds of Appeal: The assessee reserved the right to add, alter, or amend any grounds of appeal before or during the hearing. However, this issue was not actively pursued or detailed in the judgment. 6. Validity of Reassessment Proceedings When Income Initially Considered Escaped Was Not Added: The assessee challenged the reassessment proceedings on the grounds that the AO did not make any addition related to the initially considered escaped income of ?3,00,117/- from credit card expenditure. The Tribunal noted that the AO had reopened the assessment to verify the source of credit card payments. The assessee's salary income was assessed, which was considered the source of the credit card expenditure. The Tribunal concluded that the reassessment was valid as the AO assessed the total income, including the salary, which subsumed the credit card expenditure. Additionally, the return filed under the wrong PAN was deemed non est, justifying the AO's issuance of notice under section 148. Consequently, this ground was dismissed. Conclusion: The Tribunal dismissed the assessee's appeal on all grounds, finding no error or illegality in the AO's actions and computations. The reassessment proceedings were upheld as valid, and the disallowance of the HRA exemption was confirmed. The judgment was pronounced in the open court on 04/09/2018.
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