CHANDRAMANI L. TIWARI, MUMBAI v. ITO 11(2)(2), MUMBAI

ITA 2033/MUM/2012 | 2007-2008
Pronouncement Date: 24-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 203319914 RSA 2012
Assessee PAN AABPT0004E
Bench Mumbai
Appeal Number ITA 2033/MUM/2012
Duration Of Justice 1 year(s) 3 month(s) 27 day(s)
Appellant CHANDRAMANI L. TIWARI, MUMBAI
Respondent ITO 11(2)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 24-07-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 24-07-2013
Date Of Final Hearing 15-07-2013
Next Hearing Date 15-07-2013
Assessment Year 2007-2008
Appeal Filed On 27-03-2012
Judgment Text
INCOME TAX APPELLATE TRIBUNAL MUMBAI - C BENCH. . .. . . .. . / !'# !'# !'# !'# ' ' ' ' BEFORE S/SH. B.R. MITTAL JUDICIAL MEMBER & RA JENDRA ACCOUNTANT MEMBER ./ ITA NO.2033/MUM/2012 $ $ $ $ % % % % / ASSESSMENT YEAR-2007-08 SHRI CHANDRAMANI L. TIWARI 52 SHARMISHTHA TARANGAN SAMTA NAGAR THANE (W)- 400606 VS. ITO 11(2)-2 MUMBAI. PAN: AABPT0004E ( &' / APPELLANT ) ( ()&' / RESPONDENT ) &' &' &' &' * * * * ' ' ' ' / APPELLANT BY : SHRI M. SUBRAMANIAN ()&' + * ' / RESPONDENT BY : SHRI MOHIT JAIN (DR) $ $ $ $ + ++ + - - - - / DATE OF HEARING : 17-07-2013 ./% + - / DATE OF PRONOUNCEMENT : -07-2013 $ $ $ $ 1961 + ++ + 254(1) ' '' ' 0 0 0 0 '1 '1 '1 '1 ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) PER RAJENDRA A.M. CHALLENGING THE ORDER DT.17-01-2012 OF THE CIT(A)-3 MUMBAI ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: (1) THE LEARNED ITO AND ALSO CIT(APPEAL) ERRED IN ESTIMATING INCOME FROM HOUSE PROPERTY OF RS. 49 000/-. (2) THE LEARNED ITO AND ALSO CIT(APPEAL) ERRED IN DISAL LOWING EXPENDITURE ON ADHOC BASIS VIZ; INTEREST PAI D ON LOAN STAFF WELFARE VEHICLE EXPENSES SUNDRY EXP ENSES & ELECTRICITY EXPENSES TOTALING TO RS. 2 51 8 93/- UNDER BUSINESS INCOME. 2. THE FIRST GROUND OF APPEAL IS ABOUT ESTIMATION OF I NCOME FROM HOUSE PROPERTY AMOUNTING TO RS. 49 000/-.DURING THE ASSESSMENT PROCEEDINGS ASSESSIN G OFFICER(AO)FOUND THAT THE ASSESSEE OWNED TWO RESIDENTIAL FLATS. HE DIRECTED HE ASSESSEE TO E XPLAIN AS TO WHY INCOME FROM ONE OF THE HOUSE PROPERTIES SHOULD NOT BE CONSIDERED AS DEEMED LET O UT PROPERTY. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HE HELD THAT THE FAIR RENT ESTIMAT ED AT RS. 1000/- PER MONTH BY THE ASSESSEE WAS WITHOUT ANY BASIS. HE HELD THAT ANNUAL LETTING VALU E OF THE PROPERTY(ALV) WAS TO BE DETERMINED AS PER THE PROVISIONS OF SEC.23(1)(A) OF THE ACT.RELYI NG UPON THE DECISION OF PALM BEACH PROPERTY DEVELOPERS P. LTD.(ITA NO. 5626/MUM/2002- 26.10.200 4) HE HELD THAT THE RENTAL VALUE OF THE PROPERTY COULD BE CONSIDERED AS A COMPARABLE RENT O F THE SIMILARLY SITUATED PROPERTY WAS MORE THAN MUNICIPAL RATABLE VALUE FOR RENT AS PER RENT C ONTROL ACT. THE AO CONSIDERED THE LOCALITY OF THE AREA WHERE PROPERTY WAS SITUATED AND ESTIMATED RENT AT RS. 6 000/- PER MONTH AS FAIR AND REASONABLE RENT OF THE HOUSE PROPERTY OWNED BY THE ASSESSEE. IN ABSENCE OF ANY DETAILED FILED BY THE ASSESSEE HE ESTIMATED MUNICIPAL TAXES OF THE PR OPERTY AT RS.2 000/-.FINALLY THE AO DETERMINED ALV AT RS. 72 000/- AND AFTER ALLOWING DEDUCTION OF ESTIMATED MUNICIPAL TAX (RS. 2000/-)AND 30% OF STANDARD DEDUCTION(RS.21 000/-)COMPUTED INCOME F ROM HOUSE PROPERTY AT RS.49 000/-. 2 ITA NO.2033/MUM/2012 (AY-2007-08) SHRI CHANDRAMANI L.TIWARI. 2.1. ASSESEE PREFERRED AN APPEAL BEFORE THE FIRST APPELL ATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R HE HELD THAT AO HAD TAKEN INTO CONSIDERATION LOCALITY OF THE PROPERTY THAT THE CLAIM MADE BY TH E ASSESSEE FOR OPTING MUNICIPAL VALUATION OF THE PROPERTY FOR ARRIVING AT ALV COULD NOT BE CONSIDERE D THAT APPELLANT WAS NOT ABLE TO FURNISH THE MUNICIPAL RATABLE VALUE OF THE SAID PROPERTY THAT THERE WAS NO ALTERATION WITH THE AO EXCEPT TO ESTIMATE THE FAIR MARKET RENT OF THE PROPERTY.HE UP HELD THE ORDER OF THE AO. HE FURTHER NOTICED THAT ASSESSEE DID NOT FURNISH ANY DETAILS OF MUNICI PAL TAX PAID BY HIM. 2.2. BEFORE US AR SUBMITTED THAT ESTIMATED ALV WAS ON HI GHER SIDE THAT IT WAS VERY SMALL HOUSE PROPERTY. DR SUBMITTED THAT IN ABSENCE OF ANY DETAI L AO AND FAA WERE COMPELLED TO ESTIMATE THE HOUSE PROPERTY INCOME THAT THEIR ESTIMATION WAS BA SED ON REASONABLE GROUND THAT BOTH THE AUTHORITIES HAD ALLOWED STANDARD DEDUCTION AND ESTI MATED MUNICIPAL TAXES WHILE CALCULATING THE HOUSE PROPERTY INCOME. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.IT IS FOUND THAT THE ASSESSEE DID NOT FURNISH ANY DETAILS BEFORE THE AO OR THE FAA. BEFORE US ALSO DETAILS OF MUNICIPAL TAXES/MUNICIPAL VALUATION OF PROPERTY WER E NOT FILED.IN THESE CIRCUMSTANCES IN OUR OPINION FAA WAS FULLY JUSTIFIED IN CONFIRMING THE E STIMATED THE ALV OF THE PROPERTY IN QUESTION. WE FIND THAT AO HAD ALLOWED ESTIMATED MUNICIPAL TAX AS WELL AS STANDARD DEDUCTION OF RS.21 000/- WHILE COMPUTING THE HOUSE PROPERTY INCOME AND HIS ACTION WAS UPHELD BY THE FAA. IN OUR OPINION THEREFORE THE ORDER OF THE FAA DOES NOT S UFFER FROM ANY INFIRMITY. UPHOLDING HIS ORDER WE DECIDE GROUND NO.1 AGAINST THE ASSESSEE. 3. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF EXPE NDITURE ON AD-HOC BASIS.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT ASSESSEE HAD CLAIMED EXPENSES ON ACCOUNT OF INTEREST PAID ON LOAN STAFF WELFARE VEHICLE EXPENSES BUSINESS PR OMOTION EXPENSES ETC.HE MADE SOME INQUIRY ABOUT THE ABOVE REFERRED EXPENSES. 3.1. HE FOUND THAT ASSESSEE HAD PAID INTEREST ON LOAN AM OUNTING TO RS. 11.19 LACS AND HAD RECEIVED INTEREST OF RS. 4.28 LACS. HE FURTHER FOUND THAT AS SESSEE HAD GIVEN INTEREST FREE LOAN OF RS. 2 LACS T O G. SECURITIES PVT. LTD. IN WHICH HE WAS A DIRECTOR. AFTER OBTAINING EXPLANATION OF THE ASSESSEE IN THIS REGARD AO HELD THAT ASSESSEE HAD NOT FURNISHE D NEXUS SHOWING FUND USED FOR GIVING INTEREST FREE LOAN THAT THE INTEREST BEARING BORROWED FUND HAD BEEN USED FOR GIVING INTEREST FREE LOAN TO SISTER CONCERN. WORKING OUT INTEREST RATE AT 12% H E DISALLOWED INTEREST OF RS. 24 000/-. 3.1.1. DURING THE ASSESSMENT PROCEEDINGS AO DIRECTED THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF STAFF WELFARE (RS.30 405/-) VEHICLE EXPENSES (RS.1 79 082/-)TELEPHONE EXPENSES (RS.7 71 762/-) BUSINESS PROMOTION EXPENSES (RS. 20 599/-) CONVEYAN CE EXPENSES (RS.30 405/-) SUNDRY EXPENS -ES(RS.34 352/-) ELECTRICITY CHARGES (RS.3 63 558/- ). HE FOUND THAT ASSESSEE DID NOT FILE THE DETAILS OF EXPENDITURE INCURRED BY HIM UNDER VARIOUS HEAD. SO HE HELD THAT THE NATURE OF EXPENSES WAS SUCH THAT PERSONAL ELEMENT COULD NOT BE RULED OUT.H E DIRECTED THE ASSESSEE TO PRODUCE LOG-BOOK OF VEHICLES USED BY HIM BUT SAME WAS NOT PRODUCED.OUT OF THE TOTAL EXPENDITURE INCURRED UNDER VARIOUS ABOVE MENTIONED HEADS 20% WAS DISALLOWED B Y THE AO. 3.2. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING HIS SUBMISSIONS FAA HELD THAT ASSESSEE HAD ADVANCED INTEREST FREE LOANS TO I TS LOSS MAKING COMPANY FROM THE INTEREST BEARING FUNDS THAT DISALLOWANCE MADE BY THE AO ON A CCOUNT OF INTEREST HAD TO BE UPHELD. HE FURTHER HELD THAT DISALLOWANCE OF 20% OF EXPENSES O F STAFF WELFARE BUSINESS PROMOTION CONVEYANCE TELEPHONE ETC. WAS REASONABLE AS THE SA ME WAS NOT FULLY VERIFIABLE. 3.3. BEFORE US AR SUBMITTED THAT ADHOC DISALLOWANCE WAS MADE BY THE AO AND UPHELD BY THE FAA WITHOUT ANY BASIS.HE REFERRED TO PAGES NO. 14 T O 37 OF THE PAPER BOOK.DR SUPPORTED THE ORDER OF THE FAA. 3.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AS FAR AS ISSUE OF INTEREST IS CONCERNED WE ARE OF THE OPINION THAT THE AO AND THE FAA WERE JUSTIFIED IN DISALLOWANCE/UPHOLDING THE DISALLOWANCE. ASSESSEE HAD USED BORROWED FUND FOR ADVANCING THE I NTEREST FREE LOAN TO A COMPANY WHERE THE HE WAS A DIRECTOR.WHILE CALCULATING THE INTEREST AO HA D TAKEN A REASONABLE RATE.FAA HAS RIGHTLY CONFIRMED HIS ORDER.WE ARE NOT INTERESTED IN DISTUR BING HIS ORDER. 3 ITA NO.2033/MUM/2012 (AY-2007-08) SHRI CHANDRAMANI L.TIWARI. AS FAR AS OTHER EXPENSES ARE CONCERNED AFTER CONSI DERING THE RIVAL SUBMISSIONS WE ARE OF THE OPINION THAT MATTER NEEDS FURTHER VERIFICATION ESPE CIALLY IN LIGHT OF THE DOCUMENTS RELIED UPON BY THE AR. THEREFORE IN THE INTEREST OF JUSTICE MATTER IS BEING RESTORED TO THE FILE OF THE AO WITH REGARD TO THE EXPENSES DISALLOWED UNDER THE HEADS T ELEPHONE EXPENSES BUSINESS PROMOTION EXPENSES CONVEYANCE EXPENSES SUNDRY EXPENSES ELE CTRICITY CHARGES & VEHICLE ETC. AO IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE. ASSESSEE IS DIRECTED TO FILE THE NECESSARY DOCUMENTS BEFORE THE AO TO SUBSTANTIA TE HIS CLAIMS. GROUND NO.2 IS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. AS A RESULT APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 2 3 $2 4 5 + 0 1 6 + ! 78 . ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JULY 2013 . '1 + ./% ' 9 :$ 24 ! 2013 / + 0 ? SD/- SD/- ( . @ @ @ @ . . B.R.MITTAL ) ( !'# !'# !'# !'# / RAJENDRA ) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER / MUMBAI :$ /DATE: 24 TH JULY 2013 SK '1 '1 '1 '1 + ++ + ( A ( A ( A ( A B'A% B'A% B'A% B'A% / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / C D 4. THE CONCERNED CIT / C D 5. DR C BENCH ITAT MUMBAI / AE0 ( $ . . . 6. GUARD FILE/ 0 F )A ( //TRUE COPY// '1$ /BYORDER G / 7! DY./ASST.REGISTRAR /ITAT MUMBAI