2017 (4) TMI 288 - AT - Income Tax

House Rent Allowance (HRA) exemption u/s 10(13A) - assessee was claiming loss from self occupied property and also claiming exemption u/s.10(13A) - Held that - The assessee could not produce any evidence arising in the normal course of happening of transaction of hiring of premises such as leave and license agreement, letter to society intimating about her tenancy, payment through bank, cash payments backed with known sources, electricity bill payments through cheque, water bill payments through cheque , some correspondence coming during that period of alleged tenancy to prove that transaction of hiring of premises was genuine and was happening during the said period. The assessee was in-fact staying in her own flat at Tropicana with her husband which is emanating from various evidences which are on record such as ration card, bank statements, return of income filed with Revenue etc which is also in consonance with normal human conduct of Indian married women living with her husband and daughter in a residential flat owned by the assessee jointly with husband , the assessee also did not bring any cogent evidence to substantiate that she had taken the residential flat at Neha Apartment on rent from her mother. The mother of the assessee has also not filed return of income since last six assessment years and said rental income was not brought to tax in the hands of mother of the assessee . The assessee could also not able to bring on record any cogent evidence to prove that her un-married sister Ms Vimla was living at Bhayander. The whole arrangement of rent payment by the assessee to her mother is a sham transaction which was undertaken by the assessee with the sole intention to claim exemption of HRA u/s 10(13A) of 1961 Act in order to reduce tax liability and hence in our considered view, exemption u/s 10(13A) of the Act cannot be allowed to the assessee as the payments towards rent are not genuine payment . The evidences on record are speaking loudly which is just opposite to what the assessee is contending.- Decided against assessee

Summary

Issues Involved:
1. Disallowance of House Rent Allowance (HRA) exemption under Section 10(13A) of the Income Tax Act, 1961.

Detailed Analysis:

1. Disallowance of HRA Exemption:

The assessee, a chartered accountant working as a Senior Finance and Accounts Executive, claimed HRA exemptions under Section 10(13A) of the Income Tax Act, 1961, for the assessment years 2009-10 to 2011-12. The Assessing Officer (AO) disallowed these claims, leading to appeals before the Commissioner of Income Tax (Appeals) [CIT(A)] and subsequently the Income Tax Appellate Tribunal (ITAT).

The AO observed that the assessee claimed both HRA exemption and deductions for a self-occupied property under Section 80C, raising doubts about the genuineness of the HRA claim. The assessee stated that she paid rent in cash to her mother, who owned a different property, while her own property was claimed as self-occupied. The AO's investigation, including a report from a Ward Inspector, revealed that the assessee was actually residing in her own property, not the rented one, leading to the conclusion that the HRA claim was not genuine.

The CIT(A) upheld the AO's decision, noting that the assessee failed to provide substantial evidence to prove she was living in the rented property. The assessee's arguments, including the necessity of living with her sick mother and the lack of formal rental agreements due to family relations, were rejected. The CIT(A) emphasized that the assessee's own property was significantly larger and more suitable for her family, making the claim of living in a smaller rented property less credible.

Before the ITAT, the assessee reiterated her claims, providing affidavits and rent receipts as evidence. However, the ITAT found these documents insufficient, emphasizing the lack of corroborative evidence such as bank withdrawals, leave and license agreements, or any formal communication with the housing society about her tenancy. The Tribunal also noted that the assessee's mother had not filed income tax returns for the relevant years, further questioning the legitimacy of the rental payments.

The ITAT concluded that the entire arrangement appeared to be a sham transaction aimed at claiming HRA exemption illegitimately. The Tribunal highlighted the improbability of the assessee living separately from her husband and daughter in a smaller rented property while owning a larger, more suitable property nearby. The Tribunal dismissed the appeals, affirming the disallowance of HRA exemptions for all the assessment years in question.

In summary, the Tribunal upheld the AO's and CIT(A)'s findings that the assessee's claim for HRA exemption was not genuine and was rightly disallowed under Section 10(13A) of the Income Tax Act, 1961.

Conclusion:

The appeals filed by the assessee for the assessment years 2009-10 to 2011-12 were dismissed, confirming the disallowance of HRA exemptions under Section 10(13A) of the Income Tax Act, 1961.