The ACIT, Circle-6,, Ahmedabad v. M/s. Raj Steel Industries, Ahmedabad

IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON' BLE SHRI A.N.PAHUJA A.M. ) I.T.A. NO. 2245/AHD./2010 ASSESSMENT YEAR : 2007-2008 THE A.C.I.T. CIRCLE-6 AHMEDABAD -VS.- M /S. RAJ STEEL INDUSTRIES AHMEDABAD (PAN : AABFR 8750M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.K.DHANESTA D. R. RESPONDENT BY : SHRI TUSHAR P. HEMANI A.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 12.04.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XI AH MEDABAD FOR THE ASSESSMENT YEAR 2007- 08. 2. VARIOUS GROUNDS RAISED IN THIS APPEAL BY THE REV ENUE ARE AS UNDER: 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XVI AHM EDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS. 90 000/- ON ACCOUNT OF GODOWN RENT. 2. THE LD. COMMISSIONER OF INCOME TAX (A)-XVI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.27 00 0/- MADE ON ACCOUNT OF WEIGH- BRIDGE RENT. 3. THE LD. COMMISSIONER OF INCOME TAX (A)-XVI A HMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.5 40 251/- MADE U/S. 40A(2)(B) OF THE ACT. 3. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN GROUND NOS. 1 AND 2 ARE THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER DISALLOWED RS.90 000/- ON ACCOUNT OF GODOWN RENT AND RS.27 000/- ON ACCOUNT OF WEIGHBRIDGE RENT BY INVOK ING THE PROVISIONS CONTAINED IN SECTION 40A(2)(B) OF THE I.T. ACT 1961. 2 ITA NO. 2245-AHD-2010 4. ON APPEAL IN THE IMPUGNED ORDER THE LD. LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE DISALLOWANCE OF GODOWN REN T BY OBSERVING THAT IT IS INCREASED DUE TO HIRING OF DIFFERENT GODOWN NECESSITATED BY THE FOU R-FOLD INCREASE IN APPELLANTS TURNOVER. APART FROM THIS THE LD. LEARNED COMMISSIONER OF INCOME T AX(APPEALS) OBSERVED THAT WHILE MAKING THE ADDITION THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL THAT GODOWN RENT PAID TO VIKLAP P. JOISAR IS EXCESSIVE OR UNREASONABLE AS PER THE PROVISIONS OF SECTION 40A(2)(A) OF THE ACT. IN PARA 4.2 OF THE IMPUGNED ORDER THE LD. LEA RNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE DISALLOWANCE OF RS.27 000/- WHICH MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INCREASE IN WEIGHBRIDGE RENT BY FOLLOWING THE REASO NING GIVEN WHILE DELETING THE DISALLOWANCE OF GODOWN RENT OF RS.90 000/-. 5. AGGRIEVED WITH THE ORDER OF THE LD. LEARNED COMM ISSIONER OF INCOME TAX(APPEALS) DELETING BOTH THE DISALLOWANCES THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING BEFORE US SHRI R.K.DHANE STA LD. D.R. APPEARED ON BEHALF OF THE REVENUE AND POINTED OUT THAT IN THE ASSESSMENT ORDE R THE ASSESSING OFFICER HAS CLEARLY MENTIONED THAT THE ASSESSEE USED TO PAY GROUND RENT @RS.6 000/- PER MONTH TO SHRI VENILAL K. KANTHARA UP TO JUNE 2006 AND FROM JULY 2006 TO MA RCH 2007 RENT WAS PAID TO SHRI VIKAL JOISAR @RS.16 000/- PER MONTH. ON THE BASIS OF THIS COMPARISON HE TOOK THE VIEW THAT THERE IS AN ABNORMAL INCREASE IN THE RENT AND NOW THIS HAS BEEN PAID TO RELATED PERSON AS MENTIONED IN SECTION 40A(2)(B). THEREFORE HE DISALLOWED THE SAM E. HE SUBMITTED THAT THE AREA OF THE GODOWN IS THE SAME. ONLY OWNERSHIP HAS BEEN CHANGED. HE SU BMITTED THAT DUE TO CHANGE IN OWNERSHIP THE RENT CANNOT BE INCREASED. THEREFORE THE PROVIS IONS OF SECTION 40A(2)(B) ARE CLEARLY ATTRACTED. SIMILARLY IN RESPECT OF WEIGHBRIDGE RENT ALSO THE ASSESSING OFFICER OBSERVED THAT RENT HAS BEEN INCREASED FROM RS.6 000/- TO RS.16 000/- DUE TO CH ANGE IN OWNERSHIP IN THE PROPERTY. THEREFORE DISALLOWANCE WAS RIGHTLY MADE BY INVOKING THE PROVI SIONS CONTAINED IN SECTION 40A(2)(B) OF THE I.T.ACT 1961. HE SUBMITTED THAT BEFORE THE ASSESSI NG OFFICER THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO INDICATE THAT INCREASE IN THE GODOWN RE NT IS DUE TO HIRING OF DIFFERENT GODOWN. TO SUM UP HE SUBMITTED THAT THE EXPLANATION WHICH WA S SUBMITTED BEFORE THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WAS NOT SUBMIT TED BEFORE THE ASSESSING OFFICER AND THE 3 ITA NO. 2245-AHD-2010 LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) WI THOUT AFFORDING AN OPPORTUNITY TO THE ASSESSING OFFICER DELETED BOTH THE DISALLOWANCES. 7. ON THE OTHER HAND SHRI TUSHAR P. HEMANI LD. A. R. APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. LEARNED C OMMISSIONER OF INCOME TAX(APPEALS). THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT IN THE A SSESSMENT ORDER THERE IS NO FINDING THAT THE RENT PAID ON ACCOUNT OF GODOWN AND WEIGHBRIDGE IS E XCESSIVE AND UNREASONABLE. THEREFORE ON THIS GROUND THE VIEW TAKEN BY THE LD. LEARNED COMM ISSIONER OF INCOME TAX(APPEALS) BE UPHELD. APART FROM THIS HE POINTED OUT THAT BEFORE THE ASS ESSING OFFICER THE ASSESSEE HAS CLEARLY MENTIONED THE DIFFERENT ADDRESSES AND THE ASSESSING OFFICER ERRED IN HOLDING THAT LAND IS THE SAME. 8. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE STATEMENT OF FACTS FURNISHED B EFORE THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS). IT IS ALSO PERTINENT TO NOTE THAT NEI THER BEFORE THE ASSESSING OFFICER NOR BEFORE THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TH E ASSESSEE HAS FURNISHED THE AREA OF THE LAND ETC. IN CASE IT WAS A DIFFERENT GODOWN THE ASSESSEE OUGHT TO HAVE STATED THE SAME CLEARLY BEFORE THE ASSESSING OFFICER. SINCE THIS WAS NOT DO NE THE ORDER OF LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN RESPECT OF BOTH THE DISALLOW ANCES IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIREC TION THAT THE ASSESSEE SHOULD FURNISH OLD AND NEW RENT AGREEMENTS IN RESPECT OF GODOWN AS WELL AS WEIGHBRIDGE LAND. THE ASSESSING OFFICER WILL EXAMINE THE SAME AND ASCERTAIN THE AREA OF LAN D WHETHER IT IS DIFFERENT THE PREVAILING RATE OF RENT IN THE NEARBY LAND AND RE-ADJUDICATE BOTH THE ADDITIONS AFRESH AFTER BRINGING RECORD THE COMPARABLE CASES AND GIVING NECESSARY OPPORTUNITY O F HEARING TO BOTH THE PARTIES. 9. THE FACTS RELATING TO THE GROUND NO.3 ARE THAT I N THE ASSESSMENT ORDER THE ASSESSING OFFICER DISALLOWED RS.5 40 251/- OUT OF INTEREST EX PENSES UNDER SECTION 40A(2)(B). 10. ON APPEAL IN THE IMPUGNED ORDER THE LD. LEARN ED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE SAME OBSERVING THAT INTERE ST PAID BY THE ASSESSEE @18% TO THE FAMILY MEMBERS IS NEITHER EXCESSIVE NOR UNREASONABLE. 4 ITA NO. 2245-AHD-2010 11. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEF ORE US. 12. WE HAVE HEARD BOTH THE SIDES. THE LD. COUNSEL O F THE ASSESSEE FILED A COPY OF THE DECISION OF THE ITAT AHMEDABAD A BENCH DATED 09.07.10 IN THE CASE OF VIPUL Y. MEHTA-VS- ACIT IN ITA NO. 869/AHD/2010 FOR THE ASSESSMENT YEAR 2007-0 8 WHEREIN IT WAS HELD THAT LOAN TAKEN FROM THE RELATIVES CANNOT BE COMPARED WITH BANK LOAN BEC AUSE LOAN FROM THE RELATIVES ARE WITHOUT SECURITY WHILE LOAN FROM THE BANK IS SECURED. IN T HIS DECISION RELIANCE WAS ALSO PLACED IN THE DECISION OF THE TRIBUNAL IN THE CASE OF OMKARMAL GA URISHANKER VS- ITO REPORTED IN 92 TTJ (AHD.) 223 WHEREIN IT WAS HELD THAT INTEREST PAID T O RELATIVES @24% IS REASONABLE. IT IS ALSO PERTINENT TO NOTE THAT INTEREST PAID BY THE ASSESSE E BEFORE US IS ONLY 18%. KEEPING IN VIEW THE DECISION OF THE ITAT AHMEDABAD A BENCH IN THE CA SE OF VIPUL Y. MEHTA ( SUPRA ) WE ARE OF THE VIEW THAT IT IS NEITHER EXCESSIVE NOR UNREASONA BLE. THEREFORE WE INCLINE TO UPHOLD THE ORDER OF THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEA LS). THIS GROUND OF THE APPEAL IS ACCORDINGLY REJECTED. 13. IN THE RESULT FOR STATISTICAL PURPOSES THE AP PEAL FILED BY THE REVENUE IS TREATED AS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 11-02-11. SD/- SD/- (A.N.PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11/ 02 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED 4) CIT CONCERNED 5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD TALUKDAR/SR.P.S.