P.Sumanth, Hyderabad v. Dy.CIT, Central Circle-5,, Hyderabad

ITA 1121/HYD/2014 | 2004-2005
Pronouncement Date: 30-09-2016

Appeal Details

RSA Number 112122514 RSA 2014
Assessee PAN AHHPP4992N
Bench Hyderabad
Appeal Number ITA 1121/HYD/2014
Duration Of Justice 2 year(s) 3 month(s) 26 day(s)
Appellant P.Sumanth, Hyderabad
Respondent Dy.CIT, Central Circle-5,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Bench Allotted A
Tribunal Order Date 30-09-2016
Date Of Final Hearing 01-09-2016
Next Hearing Date 01-09-2016
Assessment Year 2004-2005
Appeal Filed On 04-06-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A HYDERABAD BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER I.T.A. NOS. 1121 & 1122/HYD/2014 ASSESSMENT YEARS: 2004-05 & 2005-06 P. SUMANTH HYDERABAD [PAN: AHHPP4992N] VS DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-5 HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI C.S. SUBRAHMANYAM AR FOR REVENUE : SHRI A. SITA RAMA RAO DR DATE OF HEARING : 01-09-2016 DATE OF PRONOUNCEMENT : 30-09-2016 O R D E R PER B. RAMAKOTAIAH A.M. : THESE TWO APPEALS ARE BY ASSESSEE AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I HYDER ABAD DATED 05-03-2013. THE ONLY ISSUE IN BOTH THE APPEALS IS TH E DISALLOWANCE OF EXEMPTION CLAIMED BY ASSESSEE U/S. 10(13A) OF THE INCOME TAX ACT [ACT] IN RESPECT OF HRA RECEIVED BY HIM. 2. BRIEFLY STATED ASSESSEE IS AN INDIVIDUAL. SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED U/S.132 OF THE ACT IN ICOMM TELE GROUP OF CASES. WARRANT OF AUTHORISATION WAS EXECUTED IN THE CASE I.T.A. NOS. 1121 & 1122/HYD/2014 P. SUMANTH :- 2 -: OF ASSESSEE. SUBSEQUENTLY THE ASSESSING OFFICER (AO ) ISSUED NOTICE U/S.153A OF THE ACT. IN RESPONSE ASSESSEE FILED RETUR N OF INCOME DECLARING TOTAL INCOME OF RS.8 33 850/- FOR AY. 2004- 05 AND RS.22 35 660/- FOR AY. 2005-06 AS ADMITTED IN THE ORI GINAL RETURN OF INCOME. IN HIS RETURN ASSESSEE CLAIMED EXEMPTION OF RS. 3 12 000/- RS.2 99 500/- U/S.10(13A) IN RESPECT OF HRA RECEIVED BY HIM FROM HIS EMPLOYER. THE AO FOUND THAT IN THE BALANCE SHEETS AS AT THE END OF THE RELEVANT PREVIOUS YEARS THE AMOUNT OF RENT WAS SHOWN AS OUTSTANDING LIABILITY. AO REJECT ED THE CLAIM OF ASSESSEE HOLDING THAT THE RESIDENTIAL PREMISES OCCUPIED BY ASSESSEE WAS OWNED BY A FAMILY MEMBER VIZ. ASSESS EE'S SISTER AND THAT THE PREMISES WAS ALSO OCCUPIED BY ASSESSEE'S PARE NTS. 3. ASSESSEE FILED APPEAL BEFORE THE CIT(A). BEFORE TH E CIT(A) ASSESSEE SUBMITTED INFORMATION IN SUPPORT OF HIS CLAIM FOR EXEMPTION U/S.10(13A). ASSESSEE FURNISHED THE FOLLOW ING: 1. RENT RECEIPT ISSUED BY THE OWNER SMT. P.KAVITHA; 2. COPIES OF REGD. SALE DEED DOCUMENTS SHOWING PURCHASE OF THE HOUSE IN THE NAME OF SMT.P. KAVITHA; 3. COPIES OF RETURNS OF INCOME FILED BY THE HOUSE OWNER SMT.P.KAVITHA FOR AY. 2004-05 AND 2005-06 WHEREIN SHE ADMITTED RENTAL INCOME FROM ASSESSEE AND PAID TAXES THEREON; 4. ADDRESS OF THE PROPERTY; 5. BREAKUP OF SALARY OF ASSESSEE SHRI P. SUMANTH AS D ETAILED HEREUNDER; I.T.A. NOS. 1121 & 1122/HYD/2014 P. SUMANTH :- 3 -: PER MONTH AY. 2004 - 05 AY. 2005 - 06 BASIC 65 000 65 000 HRA 26 000 26 000 OTHER ALLOWANCES 6 717 6 717 TOT AL 97 717 97 717 4. ASSESSEE ALSO SUBMITTED TO CIT(A) THAT HE WAS NOT DRA WING SALARY REGULARLY AND DRAWALS WOULD DEPEND ON THE AVA ILABILITY OF FUNDS IN THE COMPANY (ICOMM TELE) AND AS SUCH ASSESS EE WAS KEEPING THE RENTS AS OUTSTANDING AND PAYABLE. ASSESSEE ALSO FILED COPIES OF I.T RETURNS FILED BY SMT.P.KAVITHA FOR AYS. 2004-05 AND 2005-06 (PLACED FROM PAGES 1 TO 4 OF PAPER BOOK). ASSESSEE ALSO FILED CONFIRMATION FROM SMT.P.KAVITHA FOR RECEIPT OF RE NT COPY OF ACCOUNT EXTRACT FROM ASSESSEE'S BANK ACCOUNT IN LDBI BA NK BANJARA HILLS HYDERABAD SHOWING PAYMENT OF RS.14 28 0/- TO MUNICIPAL CORPORATION OF HYDERABAD ON 02-09-2004 CO PY OF ACCOUNT EXTRACT FROM ASSESSEE'S BANK ACCOUNT IN LDBI BA NK BANJARA HILLS HYDERABAD SHOWING PAYMENT OF RS.5 95 000/- ON 08-06-2006 AND COPY OF ACCOUNT EXTRACT FROM ASSESSEE' S BANK ACCOUNT IN UTI BANK BEGUMPET HYDERABAD SHOWING P AYMENT OF RS. L 00 000/- ON 08-06-2006. 5. LD. CIT(A) FORWARDED THE EVIDENCE FILED BY ASSESS EE TO AO FOR HIS REPORT. THE AO SUBMITTED A REPORT IN WHICH HE CONFI RMED THAT ASSESSEE WAS RESIDING AT THE RESIDENCE IN DD COLONY AHOBIL MUTT ROAD HYDERABAD (OWNED BY ASSESSEE'S SISTER). AS REG ARDS THE ACTUAL PAYMENTS MADE BY ASSESSEE TOWARDS RENT THE AO RE PORTED THAT ASSESSEE WAS ALLOTTED A PLOT B-33 IN EMAR MGP LTD A ND THAT THE PAYMENTS OF RS.5 95 000/- AND RS.L 00 000/-MENTION ED ABOVE WERE PAID BY ASSESSEE TO EMAR MGF LTD. THE AO REPORTED THAT LATER ON ASSESSEE REQUESTED EMAR MGF LTD. TO CHANGE THE PLOT IN I.T.A. NOS. 1121 & 1122/HYD/2014 P. SUMANTH :- 4 -: THE NAME OF HIS SISTER (VIDE LETTER DATED 15-07-2008) AND THAT THE SAID PLOT WAS REGISTERED IN HIS SISTER'S NAME ON 31-03 -2010. AO COMMENTED THAT EXEMPTION U/S.10(13A) IS AVAILABLE WHE N EXPENDITURE IS ACTUALLY INCURRED ON RENT. HE STATED THAT ASSESSEE DID NOT INCUR EXPENDITURE ON RENT DURING THE RELEVANT PREVIOUS YEAR AND PAYMENT CLAIMED TOWARDS RENT WERE MADE AS PART PAYM ENTS FOR PURCHASE OF PLOT IN ASSESSEE'S NAME. THE CIT(A) CALLED UPON ASSESSEE FOR COMMENTS ON THE REPORT SUBMITTED BY THE AO. ASSESSEE REITERATED HIS STAND THAT HE WAS IN ACTUAL OCC UPATION OF THE PREMISES OWNED BY HIS SISTER AND THE AO DID NOT DIS PUTE THE SAME NOR THE PAYMENTS ACTUALLY MADE. ASSESSEE SUBMITTE D THAT HE PAID ADVANCES FOR PURCHASE OF PLOT AND WHEN HIS SISTE R WANTED THAT PLOT HE REQUESTED THE OTHER PARTY TO TREAT THE ADVANCE AS PAID BY MRS. KAVITHA. ASSESSEE SUBMITTED THAT WHEN THE PAYMENT W AS NOT IN DISPUTE THE MODE OF PAYMENT IS NOT RELEVANT. ASSESS EE FURTHER SUBMITTED THAT THE WORD USED IN SEC.10(13A) IS 'INCURRED' AND NOT 'PAID'. ASSESSEE ALSO SUBMITTED THAT THE REQUIREMENT IS T HAT THE EMPLOYER IS REQUIRED TO KNOW WHETHER ASSESSEE IS INCU RRING THE EXPENDITURE ON RENT. SUCH A REQUIREMENT IS FULFILLED I F A RECEIPT FROM LAND LORD IS PROVIDED AND A DECLARATION IS GIVE N. ASSESSEE PLEADED THAT THE DEDUCTION MAY BE DIRECTED TO BE ALLOWE D. 6. LD. CIT(A) OPINED THAT RENT SHOULD BE REGULARLY PAI D. SHE ALSO OBSERVED THAT THE PROPERTY WAS PURCHASED BY ASSESSEE'S FATHER IN THE NAME OF SMT.P.KAVITHA IN THE YEAR 1991 AND HE HAS B EEN LIVING IN THE SAID PROPERTY WITH HIS FAMILY INCLUDING HIS S ON ASSESSEE. SHE CONCLUDED THAT THE CLAIM OF PAYMENT OF RENT IS ONLY A PLOY INTRODUCED BY ASSESSEE FOR CLAIMING EXEMPTION U/S.10( 13A). SHE OBSERVED THAT WHEN THE CLAIM OF PAYMENT ITSELF IS SHROUD ED IN I.T.A. NOS. 1121 & 1122/HYD/2014 P. SUMANTH :- 5 -: DOUBT THE OTHER ARGUMENT THAT SMT.P.KAVITHA FILED HER RETUR NS AND THE MEANING OF THE WORD 'INCURRED' ARE IRRELEVANT. S HE CONFIRMED THE DISALLOWANCE MADE BY THE AO. 7. IT WAS SUBMITTED THAT THE DECISION OF THE CIT(A) IS N OT CORRECT BOTH ON FACTS AND IN LAW. AO ALSO AGREED THAT THE PROP ERTY BELONGS TO ASSESSEE'S SISTER AND THAT ASSESSEE WAS LIVING IN TH AT PROPERTY. ASSESSEE PASSED ON MONIES EQUALING THE RENT PAYABLE TO HIS SISTER BY FOREGOING THE AMOUNTS OF ADVANCE DEPOSITED BY HIM W ITH EMAR MGF LTD. THUS MONEY EQUAL TO THE LIABILITY TOWARDS REN T HAS IRRETRIEVABLY BEEN TRANSFERRED FROM ASSESSEE TO HIS SI STER. IT IS NOBODY'S CASE THAT THE PAYMENTS WERE SHAM OR THAT THE MONI ES WERE RE-ROUTED BACK TO ASSESSEE. ASSESSEE DID NOT CAM OUFLAGE FACTS NOR CHANGED HIS STAND AT ANY TIME. MORE IMPORTANTLY TH E FILING OF RETURNS OF INCOME BY ASSESSEE'S SISTER WAS DONE MUCH EARLIER TO THE SCRUTINY OF ASSESSEE'S CLAIM BY THE DEPARTMENT. AS AL READY SUBMITTED BY ASSESSEE BEFORE THE CIT(A) THE REQUIREMEN T IS THAT ASSESSEE SHOULD HAVE INCURRED EXPENDITURE TOWARDS RE NT. ASSESSEE HAS ALSO FURNISHED EXPLANATION FOR NON-PAYMENT RENT RE GULARLY FOR THE REASON THAT HE WAS NOT DRAWING SALARY REGULARLY AND THE SAME DEPENDED ON AVAILABILITY OF FUNDS IN THE EMPLOYER-CO MPANY. 8. LD. DR RELIED ON THE ORDERS OF AO/CIT(A). 9. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE DOCUMENTS ON RECORD WE ARE SATISFIED THAT THE CLAIM OF ASSESSEE IS ALLOWABLE ON THE FACTS OF THE CASE. THERE IS NO DISP UTE THAT ASSESSEE DOES NOT OWN THE BUILDING IN WHICH HE STAYS THE RENT WAS PAID TO ANOTHER PERSON WHO OWNS THE BUILDING. EVEN THO UGH SHE IS I.T.A. NOS. 1121 & 1122/HYD/2014 P. SUMANTH :- 6 -: SISTER OF ASSESSEE IT ACT DOES NOT PRESCRIBE ANY ASSE SSMENTS OF FAMILY INCOMES AS A UNIT AND EACH INDIVIDUAL MEMB ER IS SEPARATELY ASSESSED. SO PAYMENT OF RENT TO A FAMILY MEMBER IS NOT PROHIBITED BY LAW. WITH REFERENCE TO PAYMENTS ALSO TH ERE IS NO DISPUTE ABOUT AMOUNT BEING SHOWN AS LIABILITY AND BEIN G DISCHARGED AS AND WHEN ASSESSEE DREW SALARY FROM THE COMPANY. THIS SATISFIES THE CONDITION INCURRED. WE ARE NOT I N AGREEMENT WITH REASONING OF LD. CIT(A) IN DENYING THE CLAIM. LD. CIT(A) SHOULD HAVE EXAMINED AND ALLOWED THE CLAIM AS ASSESS EE SATISFIED THE CONDITIONS PRESCRIBED FOR THE CLAIM OF HRA. WE D IRECT THE AO TO ALLOW THE EXEMPTION U/S. 10 AS CLAIMED IN BOTH THE YEARS. THE GROUNDS ARE ALLOWED. 10. ASSESSEE HAS RAISED AN ADDITIONAL GROUND THAT THER E IS NO INCRIMINATING MATERIAL TO MAKE A DISALLOWANCE IN THE ORDER U/S. 143(3) R.W.S. 153A. SINCE WE ALLOWED THE CLAIM ON MERITS THERE IS NO NEED TO ADJUDICATE THE GROUND WHICH IS ACADEMIC IN NATURE. CONSEQUENTLY THE ADDITIONAL GROUND RAISED IS NOT ADMITT ED. 11. IN THE RESULT BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD DATED 30 TH SEPTEMBER 2016 TNMM I.T.A. NOS. 1121 & 1122/HYD/2014 P. SUMANTH :- 7 -: COPY TO : 1.P. SUMANTH C-10 & 11 2-2-20-21A DURGABAI DESHM UKH COLONY HYDERABAD. 2. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-5 HYDERABAD. 3. CIT(APPEALS)-I HYDERABAD 4. CIT-(CENTRAL) HYDERABAD. 5. D.R. ITAT HYDERABAD. 6. GUARD FILE.