9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (4) TMI 542 - AT - Income TaxReceipt of rental income from first floor - assessee has not rented the property on the ground floor and observed that the lease deed mentioned property let out in respect of basement and first floor - assessee submitted that there is no first floor constructed on the subject mentioned property at all as it contains only basement, ground floor and open terrace as basement and ground floor had been duly given on rent to the aforesaid tenant and rental income derived thereon had been duly offered to tax, assessee also placed evidence of the schedule of property from the sale deed to prove the aforesaid contention - AO did not agree to the aforesaid contentions and proceeded to add the alleged rental income for the first floor portion and made an addition in the assessment. HELD THAT - Assessee submitted the photographs of the building on record. The assessee also submitted the confirmation from the tenant stating that lease deed had wrongly mentioned the fact of first floor being leased out by way of typographical error. Physical inspection was sought to be carried out by the Inspector of Income Tax on the subject mentioned property who also categorically confirmed that there is no first floor at all in the property. The mezzanine floor was constructed in AY 2012-13 by the assessee which fact is evident from pages D to Q containing the details of amounts spent at construction together with the bills thereon. Assessee also has filed an affidavit before us confirming all the aforesaid facts. When these documents are staring on us, we hold that there cannot be any addition that can be made on account of alleged rental income for first floor when factually there was no first floor at all in the subject mentioned building. Hence, the addition made on account alleged rental income for the first floor which was not in existence is hereby directed to be deleted. Accordingly, ground 1(i) raised by the assessee is allowed. Unexplained cash credit u/s 68 - assessee has shown a receipt from a concern/company but assessee has neither supplied any goods nor rendered any services to the said party and no confirmation was filed from the said party proving the nature and source of credit thereon - HELD THAT - Assessee had duly offered the receipt as its business income for AY 2014-15. We find however that a sum is found credited in the books of the assessee during the year under consideration. It is a fact that no satisfactory explanation has been given by the assessee before the lower authorities and before us also. Hence, the said receipt of money credited of Rs. 1,90,000/- which is found credited in the books of the assessee is to be added as unexplained credit u/s 68 for the year under consideration. However, in order to avoid double taxation, we hereby direct the ld AO to delete the very sum for AY 2014-15 which has been voluntarily offered to tax by the assessee in the return of income for AY 2014-15. Accordingly, ground No. 1(ii) raised by the assessee is disposed of in the above mentioned terms. Disallowance made u/s 40(a)(ia) - assessee paid processing charges and closure charges without deduction of TDS - assessee submitted that the payees have duly included the receipts in their respective hands and paid due taxes and certificate from their Chartered Accountants to this effect were placed on record - CIT(A) had directed the ld AO to verify the aforesaid claim of the assessee in respect of all the payments and if the payees have shown the amount in their income tax returns and paid requisite tax, then the same should not be subject matter of disallowance - HELD THAT - We find that the direction given by the ld CIT(A) is in consonance with 2nd proviso to section 40(a)(ia) of the Act which had got retrospective effect and accordingly we hold that if the payees have included the subject mentioned receipt in their respective returns and paid taxes, then no disallowances should be made in the hands of the assessee u/s 40(a)(ia) of the Act. Accordingly, the ground No. 1(iii) raised by the assessee is allowed for statistical purposes. Addition made in respect of transactions with sister concern of the assessee - HELD THAT - We find that despite the fact that the transaction has been carried out by the assessee with sister concern with a malafide intention of claiming refund of custom duty, the ld CIT(A) had been magnanimous enough to grant deduction of purchase value and disallow only the loss arising out of total purchase and sales transaction with sister concern. Once, the element of malafide intention or fraud is proved beyond doubt, then no further concession need to be given to the assessee. In the instant case, the assessee had already obtained more than eligible relief from the ld CIT(A). Hence, the ground No. 2 raised by the assessee is hereby dismissed. Disallowance of salary u/s 40A(3) - salary paid to employee in cash - addition made as employee is related to the assessee stationed in Delhi and no business exigency of incurrence of the expenditure in cash has been demonstrated by the assessee - HELD THAT - In the instant case, the identity of the payee is established and transaction with employee/Gaurav Babbar is hereby held to be genuine. But in order to make the assessee s case fall under the exception provided in the proviso to section 40A(3) of the Act, the assessee is duty bound to explain that the place where the payee is stationed does not have bank facilities and the assessee had pressing emergency to make the said payment in cash out of business exigencies. In the instant case, it is not in dispute that Gaurav Babbar (payee) is stationed in Delhi where bank facilities are available in every nook and corner of Delhi as rightly observed by the ld CIT(A). Further, the assessee was not able to demonstrate the business exigencies which warranted him to make payment of salary in cash. Hence, the assessee s case does not fall under the ambit of exception provided in proviso to section 40A(3) - assessee s case does not fall under any of the exceptions provided under Rule 6DD of the Income Tax Rules. Hence, the disallowances made u/s 40A(3) of the Act is hereby confirmed. Accordingly, ground No. 3 raised by the assessee is dismissed. Disallowance of 20% of travelling expenditure, telephone expenditure, vehicle and maintenance expenditure, interest and depreciation - HELD THAT - The entire travelling expenses are to be allowed as business expenditure and no disallowance should be made thereon. With regard to disallowance of expenditure on account of telephone and vehicle related expenditure including interest on car loan and depreciation, in our considered opinion, the disallowance should be restricted to 10% as against 20% made by the ld CIT(A) on account of personal element. Partly in favour of assessee.
Issues Involved:
1. Addition of alleged rental income. 2. Addition of unexplained cash credit. 3. Disallowance under Section 40(a)(ia) of the Act. 4. Addition related to transactions with a sister concern. 5. Disallowance under Section 40A(3) of the Act. 6. Disallowance of travelling, telephone, vehicle, interest, and depreciation expenses. Summary: 1. Addition of Alleged Rental Income: The assessee challenged the addition of Rs. 60,75,000/- for alleged rental income from a non-existent first floor. The Tribunal found that there was no first floor on the property, supported by physical inspection and tenant confirmation. The addition was directed to be deleted. 2. Addition of Unexplained Cash Credit: The assessee contested the addition of Rs. 1,90,000/- as unexplained cash credit. The Tribunal upheld the addition for the year under consideration but directed the deletion of the same amount for AY 2014-15 to avoid double taxation, as it was already offered as income in that year. 3. Disallowance under Section 40(a)(ia) of the Act: The assessee disputed the disallowance for non-deduction of tax at source on certain payments. The Tribunal upheld the CIT(A)'s direction to verify if the payees included the receipts in their income and paid taxes. If verified, no disallowance should be made. 4. Addition Related to Transactions with Sister Concern: The assessee challenged the addition related to transactions with M/s. Rovani Foods Pvt. Ltd. The Tribunal found the transactions were done with a malafide intention to claim a customs duty refund. The CIT(A) had already granted significant relief by only disallowing the loss, and the Tribunal dismissed the ground. 5. Disallowance under Section 40A(3) of the Act: The assessee contested the disallowance of Rs. 2,50,000/- paid in cash as salary. The Tribunal upheld the disallowance, noting the payee was in Delhi with available banking facilities and no business exigency was demonstrated for cash payment. 6. Disallowance of Travelling, Telephone, Vehicle, Interest, and Depreciation Expenses: The assessee disputed the disallowance of 20% of these expenses. The Tribunal allowed the entire travelling expenses as business expenditure and reduced the disallowance for telephone and vehicle-related expenses to 10%, considering the personal element. Conclusion: The appeal was partly allowed for statistical purposes, with specific directions on each issue as detailed above. The order was pronounced on 19/01/2024.
|
