2020 (11) TMI 944 - AT - Income Tax

Disallowance of godown rent - assessee has neither filed copy of rent agreement in support of tenancy nor filed a confirmation in support of the claim - CIT(A) noted that the confirmation has been filed without the details of PAN No., complete address and identity of the person, thus confirmed addition - HELD THAT - The entire claim of payment of rent cannot be denied when the assessee is utilizing godown for his business purposes. Though the godown has been owned by the father of the assessee however the liability to pay rent cannot be denied merely because of relationship between the tenant and the landlord being son and father. Thus without conducting any enquiry either by the AO or by the CIT(A) through remand report, the disallowance of the entire claim of godown rent is not justified. Once the assessee has produced the confirmation of the godown rent payment, the same cannot be rejected without conducting a proper enquiry. Hence, in the facts and circumstance of the case, this issue is remanded to the record of the AO to conduct a further enquiry and verify the claim by examining the recipient of the claim. Disallowance of bonus to staff - assessee has failed to establish the claim when neither the bonus register nor the bills and vouchers were produced by the assessee - CIT(A) has granted part relief and restricted and allowed the claim of the expenditure partly - HELD THAT - CIT(A) has accepted the fact that the department has accepted the claim of bonus paid to the staff in the earlier year. Once the bonus paid to the staff in the earlier year is accepted then the claim for the year under consideration cannot be restricted based on the criteria of the amount paid in the earlier year. Therefore, the restriction of the claim by the CIT(A) is not based on a proper criteria or some reasonable basis. Accordingly, the disallowance of ₹ 30,326/- is set aside and the claim of the assessee is allowed.

Summary

Issues:
1. Disallowance of godown rent
2. Disallowance of bonus to staff

Disallowance of Godown Rent:
The assessee claimed &8377;1,80,000/- as godown rent, but the AO disallowed it due to lack of supporting evidence like a rent agreement or confirmation. The CIT(A) upheld the disallowance citing incomplete details in the confirmation provided by the landlord. However, before the Tribunal, the AR argued that the confirmation contained full details of the landlord, including the address. The Tribunal noted that the rent was paid to the assessee's father, and since the father is not an income tax assessee, details like PAN were not necessary. The Tribunal emphasized that the relationship between the tenant and landlord being son and father does not justify denying the rent claim. Therefore, the issue was remanded to the AO for further verification and a proper enquiry to determine the validity of the claim.

Disallowance of Bonus to Staff:
The assessee claimed &8377;90,326/- as bonus to staff, but the AO disallowed it as the identity of the workers could not be verified from the ledger produced. The CIT(A) partially allowed the claim, restricting it to &8377;60,000/-. Before the Tribunal, the AR argued that the claim had been accepted in the previous year, and the restriction by the CIT(A) was not justified. The Tribunal agreed, noting that if the bonus was accepted in the earlier year, it should not be restricted based on the previous amount. Consequently, the disallowance of &8377;30,326/- was set aside, and the full claim was allowed.

In conclusion, the Tribunal partially allowed the appeal, remanding the issue of godown rent disallowance for further verification and allowing the full claim of bonus to staff, setting aside the restriction imposed by the CIT(A).