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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI S RIFAUR RAHMAN
Present for: Assessee by : Shri Vimal Punmiya, C.A. Revenue by : Ms. Madhu Malti Ghosh, CIT D.R. Date of Hearing : 05 . 09 . 2023 Date of Pronouncement : 26 . 10 . 2023 O R D E R Per : Kuldip Singh, Judicial Member: Since common question of law and facts have been raised in both the inter-connected appeals, the same are being disposed of by way of composite order to avoid repetition of discussion.
The appellant, Shri Om Prakash Adukia (hereinafter referred to as ‘the assessee’) by filing the present appeals, sought to set aside the impugned orders even dated 31.03.2023 passed by Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as the CIT(A)] qua the assessment years 2016-17 & 2017-18 on identically worded grounds except the difference in the amount of addition/disallowance (for the sake of brevity grounds are taken from A.Y.2016-17) inter-alia that:- “1. (a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the action of the learned Assessing Officer (AO) of denying to the appellant exemption u/s. 10(13A) of the Income Tax Act, 1961 (Act) in respect of House Rent Allowance (HRA) amounting to Rs.5,37,080/-, and doing so is wrong and contrary to the facts of the case, provisions of the Act and the Income Tax Rules, 1962 (Rules) made thereunder.
(b) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in denying the exemption in respect of HRA as aforesaid on the reasoning that rent receipt in not sufficient to claim exemption respect of HRA and rent agreement is required to be submitted to substantiate the claim of such exemption based on assumptions and presumptions and without pointing out any specific provision under the Act and or Rules prescribing necessity of rent agreement for claiming exemption of HRA, and doing so is wrong and contrary to the provisions of the Act and Rules made thereunder.
1 (c) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred denying the aforesaid exemption in respect of HRA by concluding that the appellant is making contradictory submissions in respect of availability of rent agreement without appreciating that the appellant had no occasion to contest the learned AO's claim of requirement of rent agreement for claiming exemption of HRA in absence of any show cause notice issued by the learned AO for denial of such exemption.
2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the action of the learned AO of disallowing a sum of Rs.90,280/-, being interest expenditure claimed as deduction u/s. 57 of the Act, which is wrong and contrary to the provisions of the Act.
3. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in not appreciating that the learned A.O had failed to follow the cardinal principle of natural justice by not issuing a show cause notice and providing the appellant with opportunity of being heard before making the impugned disallowances and that such failure on part of the learned AO cannot be covered in the likes of "adequate opportunity" as the learned Commissioner seems to have done (please refer paragraph no. 8.3 on page no. 13 and paragraph no. 9.1.3 on page no. 16 of the impugned appellate order).
As this stints at the root of the appellant's fundamental right, the lapse on the part of the Learned A.O / Learned Commissioner of Income Tax (Appeals) is liable to be declared null & void ab initio. The appellant craves leave to amend, alter or modify any of the above ground(s) of appeal and/ or add any new ground(s) of appeal at or before the time of hearing.”
Briefly stated facts necessary for consideration and adjudication of the issues at hand are : on the basis of search and seizure operation carried out in case of Jatia Group and its related groups at their business and residential premises on 17.04.2018, notice under section 153A of the Income Tax Act, 1961 (for short ‘the Act’) was issued and in response thereto the assessee filed a return of income declaring total income of Rs.41,21,020/- and Rs.41,46,410/- for A.Y. 2016-17 & 2017-18 respectively. Necessary notices were issued. The Assessing Officer (AO) noticed from the perusal of computation of income that the assessee has claimed deduction of Rs.5,37,080/- & Rs.5,53,200/- on account of house rent allowance (HRA) in excess of 10% of the salary for A.Y. 2016-17 & 2017-18 respectively. Declining the contentions raised by the assessee the AO proceeded to make the addition of Rs.5,37,080/- & Rs.5,53,200/- for A.Y. 2016-17 & 2017-18 respectively.
The AO also noticed from the computation of income that the assessee has deducted interest payable on loan amounting to Rs.90,280/- & Rs.80,521/- for A.Y. 2016-17 & 2017-18 respectively for which no detail has been furnished as to when and for what purpose these loans were taken. Consequently the AO proceeded to make the addition of Rs.5,37,080/- & Rs.5,53,200/- for A.Y. 2016-17 & 2017-18 respectively and thereby framed the assessment under section 153A read with section 143(3) of the Act.
The assessee carried the matter before the Ld. CIT(A) by way of filing appeals who has partly allowed the appeals for A.Y. 2016-17 & 2017-18. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeals.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Ground No.1 of & 1867/M/2023 7. Undisputedly the assessee has claimed exemption to the tune of Rs.5,37,080/- & Rs.5,53,200/- for A.Y. 2016-17 & 2017-18 respectively on account of HRA in excess of 10% of his salary. It is also not in dispute that to prove this issue the assessee has not produced any supporting evidence qua this claim like rent agreement etc. It is also not in dispute that before the Ld. CIT(A) as referred in para 9.1.2 of the impugned order the assessee has not filed any submissions and decided the appeal on the basis of statement of facts.
In the backdrop of the aforesaid undisputed facts and circumstances of the case the Ld. A.R.s for the parties to the captioned appeals stated that the issue is required to be examined in the light of the rent agreement by the AO. Now the assessee has brought on record the entire evidences viz. copy of balance sheet of Smt. Urmila Devi Adukia for A.Y. 2015-16, copies of monthly rent receipts issued by lanlord to the assessee, copy of bank statement of landlord for F.Y. 2015-16, sample copy of society bill issued in the name of landlord, sample copy of electricity bill issued in the name of landlord, share certificate issued by Society of rented property in name of the landlord, purchase agreement of rented flat in name of the landlord and statement showing nexus of investment in fixed deposits and corresponding loans on which interest expenditure was incurred and claimed as deduction along with supporting documents which are required to be examined and verified by the AO. To examine and decide the issue once for all and to stop the multiplicity of the proceedings, we are of the considered view that the issue is required to be examined by the AO afresh in the light of the aforesaid documents by providing opportunity of being heard to the assessee. So ground No.1 of both the appeals raised by the assessee is allowed for statistical purposes.
Ground Nos.2 & 3 of & 1867/M/2023 9. The assessee has claimed deduction of Rs.90,280/- & Rs.80,521/- for A.Y. 2016-17 & 2017-18 respectively on account of interest expenditure under section 57 of the Act. It is not in dispute that except the details furnished by the assessee qua the parties from whom he has availed of the loan, no evidence has been brought on record as to when and for what purpose these loans were taken. However, before the Ld. CIT(A) the assessee furnished the complete details as sought for by the AO which is extracted in para 8.2 of the composite order passed by the Ld. CIT(A) for various assessment years, but the same has not been examined having been filed at belated stage which certainly amounts to not providing an adequate opportunity of being heard. It is surprising that when the Ld. CIT(A) at the time of authoring the impugned order got the complete details he should have decided the matter by examining the same. The assessee has raised specific ground No.3 that adequate opportunity has never been given to comply with the mandate of principle of natural justice so the details brought on record by the assessee by way of submissions are required to be examined and verified and for the sake of convenience this issue is also remitted back to the AO to decide afresh after providing opportunity of being heard to the assessee. So ground No.2 & 3 raised by the assessee for A.Y. 2016-17 & 2017-18 are allowed for statistical purposes.
In view of what has been discussed above aforesaid appeals filed by the assessee are allowed for statistical purposes to be decided by the AO afresh after providing adequate opportunity of being heard to the assessee. Order pronounced in the open court on 26.10.2023.