2022 (8) TMI 189 - AT - Income Tax

Disallowance u/s 14A - CIT(A) has restricted the disallowance to the amount of exempt income - HELD THAT - We notice that the decision so rendered by learned CIT(A) is supported by the decision rendered in the case of M/s Marg Ltd 2020 (10) TMI 102 - MADRAS HIGH COURT . Accordingly, we confirm the order passed by learned CIT(A) on this issue. Disallowance of yatch expenses - As assessee could not prove that these expenses are related to business carried on by it, hence, the Assessing Officer disallowed it - HELD THAT - The only connection between the assessee and yatch expenses is the MOU claimed to have been entered by assessee with VPPL. However, it appears that the assessee has not furnished copy of MOU before the tax authorities. We are unable to understand as to how the assessee could share profit and loss through MOU. In any case, there should not be any doubt that it is the responsibility of the assessee, to prove that the MOU has created binding legal liability upon the assessee. Accordingly, in the interest of natural justice, we are of the view that the assessee may be provided with one more opportunity to present copy of MOU and explain its claim before learned CIT(A). Accordingly, we set aside the order passed by learned CIT(A) on this issue and restore the same to this file for adjudicating them afresh. Disallowance of travelling and car expenses - AO examined these expenses and came to the conclusion that certain expenses are not related to the business and further details relating to certain items were not furnished thus disallowed 10% of travelling expenses - HELD THAT - Before us also, no detail was furnished by the assessee to contradict the findings given by the AO on the deficiencies discussed above. Accordingly, we have no other option, but to confirm the disallowance made by the AO on this issue. Addition of deemed rental income on unsold properties - AO noticed that the assessee is in possession of certain unsold finished flats accordingly, he assessed deemed rental income from those unsold flats - HELD THAT - We notice that the assessee has relied upon a decision rendered in the case of C.R Developments (P) Ltd 2015 (5) TMI 1161 - ITAT MUMBAI and also case of CIT vs. Neha Builders 2006 (8) TMI 105 - GUJARAT HIGH COURT However, we notice that the Ld CIT(A) has confirmed the addition without discussing anything on the above said case laws. In our view, the Ld CIT(A) should have dealt with the above said case laws relied upon by the assessee before confirming the addition. Accordingly, we are of the view that this issue requires fresh examination at the end of Ld CIT(A). Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh in accordance with law. Disallowance of depreciation on motor car - AO noticed that the assessee has shown three cars as its assets, but they stood in the name of three persons, who are employees of a sister concern - HELD THAT - There should not be any doubt that for claiming depreciation on an asset, it has to be proved that the assessee is the owner of the asset. Merely disclosing an asset as its asset in its books of account will not be sufficient to prove the ownership. Hence, in the instant case, it is imperative for the assessee to prove that, it is in fact the owner of the vehicles, though they are standing in the name of some remotely connected persons. We notice that the assessee has not furnished enough details to prove ownership except stating that it is shown as its own asset in the books of accounts, which is not sufficient. Accordingly, we are of the view that the assessee may be provided with one more opportunity to prove ownership. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of Ld CIT(A) for examining it afresh.

Summary

Issues:
- Validity of reopening assessment for A.Y. 2011-12
- Disallowance under section 14A of the Act for A.Y. 2014-15
- Disallowance of yatch expenses for A.Y. 2014-15
- Disallowance of travelling and car expenses for A.Y. 2014-15
- Addition of deemed rent for A.Y. 2014-15
- Disallowance of depreciation on car for A.Y. 2014-15
- Assessment of deemed rental income for A.Y. 2016-17

Validity of Reopening Assessment for A.Y. 2011-12:
The assessee challenged the validity of the assessment reopening, but as no representation was made before the CIT(A), it proceeded ex-parte. The ITAT decided to provide the assessee with an opportunity for a fair hearing, setting aside the CIT(A)'s order and restoring the issues for adjudication.

Disallowance under Section 14A of the Act for A.Y. 2014-15:
The AO disallowed a substantial amount under section 14A due to investments made by the assessee. The CIT(A) upheld the disallowance but limited it to the actual exempt income earned. The ITAT affirmed the CIT(A)'s decision based on a precedent from the Delhi High Court.

Disallowance of Yatch Expenses for A.Y. 2014-15:
The ITAT found that the assessee failed to prove the business relevance of claimed yatch expenses. As the MOU supporting the expenses was not provided, the ITAT decided to remand the issue back to the CIT(A) for further examination and a fair opportunity for the assessee to present the required documentation.

Disallowance of Travelling and Car Expenses for A.Y. 2014-15:
The AO disallowed a portion of these expenses due to lack of business connection and insufficient details. The CIT(A) confirmed the disallowance, which the ITAT upheld as the assessee failed to provide contradictory evidence, leading to the confirmation of the disallowance.

Addition of Deemed Rent for A.Y. 2014-15:
Deemed rental income from unsold properties was added based on a decision by the Delhi High Court. The ITAT decided to remand the issue back to the CIT(A) for a fresh examination, emphasizing the need for a discussion on relevant case laws relied upon by the assessee.

Disallowance of Depreciation on Car for A.Y. 2014-15:
The disallowance of depreciation on cars not registered in the name of the assessee was confirmed by the CIT(A). The ITAT directed the assessee to provide sufficient evidence to prove ownership, remanding the issue back to the CIT(A) for further examination and a fair opportunity to establish ownership.

Assessment of Deemed Rental Income for A.Y. 2016-17:
The ITAT restored the issue of deemed rental income assessment for A.Y. 2016-17 to the CIT(A) for a fresh examination, aligning with the decision taken for the same issue in the A.Y. 2014-15 appeal. The appeals for A.Y. 2011-12 and 2016-17 were treated as allowed for statistical purposes, while the appeal for A.Y. 2014-15 was partly allowed for statistical purposes.