DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1, THANE, THANE vs. HEMCHAND MURJI GADA, MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated 27.03.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2014-15, raising following grounds:

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parties are way beyond any reasonableness and beyond parties are way beyond any reasonableness and beyond parties are way beyond any reasonableness and beyond commercial prudence". ommercial prudence". 2. On the facts and circumstances of the case, the Ld. CIT (A) 2. On the facts and circumstances of the case, the Ld. CIT (A) 2. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not appreciating the fact that the related party has erred in not appreciating the fact that the related party has erred in not appreciating the fact that the related party has claimed rental income under the head Income from house has claimed rental income under the head Income from house has claimed rental income under the head Income from house property' and thus benefitted by standard deduction property' and thus benefitted by standard deduction and tax slab benefits available to Individual. slab benefits available to Individual. 3. On the facts and circumstances of the case, the Ld. CIT (A) 3. On the facts and circumstances of the case, the Ld. CIT (A) 3. On the facts and circumstances of the case, the Ld. CIT (A) has erred In not appreciating the fact that the assessee has has erred In not appreciating the fact that the assessee has has erred In not appreciating the fact that the assessee has not provided no such bifurcation of warehouses as discussed not provided no such bifurcation of warehouses as discussed not provided no such bifurcation of warehouses as discussed by Ld. CIT (A) in Para 5 by Ld. CIT (A) in Para 5.5 of his order during assessment .5 of his order during assessment proceedings before Assessing Officer. proceedings before Assessing Officer. 4. On the facts and circumstances of the case, the Ld. CIT (A) 4. On the facts and circumstances of the case, the Ld. CIT (A) 4. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not appreciating the fact that the assessee has has erred in not appreciating the fact that the assessee has has erred in not appreciating the fact that the assessee has neither provided opportunity of bearing heard nor called for neither provided opportunity of bearing heard nor called for neither provided opportunity of bearing heard nor called for remand report/factual report as not such photographs of remand report/factual report as not such photographs of remand report/factual report as not such photographs of different types of godowns as stated by Ld. CIT (A) in Para 5.6 different types of godowns as stated by Ld. CIT (A) in Para 5.6 different types of godowns as stated by Ld. CIT (A) in Para 5.6 of his order. 2. Briefly stated, facts of the case are that Briefly stated, facts of the case are that the assessee was the assessee was engaged in the business of providing warehousing services to engaged in the business of providing warehousing services engaged in the business of providing warehousing services various companies dealing in chemical, petroleum, food, logistics various companies dealing in chemical, petroleum, food, logistics various companies dealing in chemical, petroleum, food, logistics etc. For the provision of those services, the assessee took etc. For the provision of those services, the assessee took etc. For the provision of those services, the assessee took warehouses on lease from related as well as unrelated parties. For warehouses on lease from related as well as unrelated parties. For warehouses on lease from related as well as unrelated parties. For the assessment year under consideration, t the assessment year under consideration, the assessee filed he assessee filed return of income on 03.11.2014 declaring total income of Rs.68,86,260/-. of income on 03.11.2014 declaring total income of Rs.68,86,260/ of income on 03.11.2014 declaring total income of Rs.68,86,260/ The return of income filed by the assessee was selected for scrutiny The return of income filed by the assessee was selected for scrutiny The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income and statutory notices under the Income-tax Act, 1961 (in short ‘the tax Act, 1961 (in short ‘the Act’) were issued and complied with. The Asses Act’) were issued and complied with. The Assessing Office sing Officer observed that that the the assessee assessee had had made lease/rent lease/rent payment for warehouses/godowns taken on warehouses/godowns taken on lease/rent from 25 parties. The rent from 25 parties. The Assessing Officer has produced a list of those parties along with Assessing Officer has produced a list of those parties along with Assessing Officer has produced a list of those parties along with

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annual rent paid, area of the warehouse/godown in square feet and annual rent paid, area of the warehouse/godown in square f annual rent paid, area of the warehouse/godown in square f rent per square feet from the chart produced in para 4 of the rent per square feet from the chart produced in para 4 of the rent per square feet from the chart produced in para 4 of the assessment order. The Assessing Officer noticed that rent paid to 3 assessment order. The Assessing Officer noticed that rent paid to 3 assessment order. The Assessing Officer noticed that rent paid to 3 related parties namely Daxa H Gada, Hemchand M Gada HUF and related parties namely Daxa H Gada, Hemchand M Gada HUF and related parties namely Daxa H Gada, Hemchand M Gada HUF and Vandan H Gada was excessive as compared to the rent paid to other Vandan H Gada was excessive as compared to the rent paid t Vandan H Gada was excessive as compared to the rent paid t non-related parties. Accordingly, the Assessing Officer asked the related parties. Accordingly, the Assessing Officer asked the related parties. Accordingly, the Assessing Officer asked the assessee as why the excess rent paid to related parties why the excess rent paid to related parties why the excess rent paid to related parties might not be disallowed invoking section 40A(2)(b) of the Act. The assessee disallowed invoking section 40A(2)(b) of the Act. The assessee disallowed invoking section 40A(2)(b) of the Act. The assessee explained that there was no straight jacket formula for charging explained that there was no straight jacket formul explained that there was no straight jacket formul rent. It was submitted that the warehouses/godowns taken on lease t was submitted that the warehouses/godowns taken on lease t was submitted that the warehouses/godowns taken on lease from the related party were constructed and used for storage of from the related party were constructed and used for storage of from the related party were constructed and used for storage of petroleum/chemicals petroleum/chemicals petroleum/chemicals and and and hazardous hazardous hazardous nature nature nature which which which required required required licenses/permissions from various authorities including Pollution licenses/permissions from various authorities including licenses/permissions from various authorities including Board, Fire Brigade and local Board, Fire Brigade and local body i.e. ‘Gram Panchayat Panchayat’ etc. The Assessing Officer however rejected the contention of the assessee Assessing Officer however rejected the contention of the assessee Assessing Officer however rejected the contention of the assessee and estimated average rent per square feet annually at the rate of @ and estimated average rent per square feet annually and estimated average rent per square feet annually Rs. 150 and disallowed the excess rent paid 150 and disallowed the excess rent paid by the assessee by the assessee, observing as under:

The contentions of the assessee have been carefully perused. The contentions of the assessee have been carefully perused. The contentions of the assessee have been carefully perused. The same is not acceptable for the reasons discussed is not acceptable for the reasons discussed is not acceptable for the reasons discussed hereunder. The assessee has given an example of Smt Daxaben H.Gada The assessee has given an example of Smt Daxaben H.Gada The assessee has given an example of Smt Daxaben H.Gada with a breakup of how the monthly rent of Rs.22,00,000/ breakup of how the monthly rent of Rs.22,00,000/-. On breakup of how the monthly rent of Rs.22,00,000/ perusal of the rent agreement copy, dated 01/04/2013 perusal of the rent agreement copy, dated 01/04/2013 perusal of the rent agreement copy, dated 01/04/2013 between Smt Daxaben H.Gada and the assessee no such between Smt Daxaben H.Gada and the assessee no such between Smt Daxaben H.Gada and the assessee no such bifurcation is seen. Further, in the initial submission made bifurcation is seen. Further, in the initial submission made bifurcation is seen. Further, in the initial submission made during during the the course course of of assessment assessment proceedings. proc eedings. dated dated 13/08/2016 in which the details of godown rent paid were 13/08/2016 in which the details of godown rent paid were 13/08/2016 in which the details of godown rent paid were furnished, it is seen that the rented premises is shown at furnished, it is seen that the rented premises is shown at furnished, it is seen that the rented premises is shown at

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42150 sq.ft. On perusal of the rental agreement copy with Smt 42150 sq.ft. On perusal of the rental agreement copy with Smt 42150 sq.ft. On perusal of the rental agreement copy with Smt Daxaben H.Gada, it is seen that the rented area is not Daxaben H.Gada, it is seen that the rented area is not Daxaben H.Gada, it is seen that the rented area is not specified whereas on persal of the rent agreements in respect d whereas on persal of the rent agreements in respect d whereas on persal of the rent agreements in respect of all the unrelated parties, the area is mentioned clearly. of all the unrelated parties, the area is mentioned clearly. of all the unrelated parties, the area is mentioned clearly. Further in the assessee's submission dated 13/10/2016 the Further in the assessee's submission dated 13/10/2016 the Further in the assessee's submission dated 13/10/2016 the rented area is shown at 162800 sq.feet. rented area is shown at 162800 sq.feet. Thus, there are Thus, there are discrepancies in the submis discrepancies in the submissions of the assessee. Even if the sions of the assessee. Even if the assessee's contention that the warehousing space is provided assessee's contention that the warehousing space is provided assessee's contention that the warehousing space is provided to to to yarions yarions yarions chemical/petroleum chemical/petroleum chemical/petroleum logistics logistics logistics companies companies companies is considered, even then the rental payments made to the related considered, even then the rental payments made to the related considered, even then the rental payments made to the related parties are way beyond any reasonableness. Ke parties are way beyond any reasonableness. Keeping in view eping in view the above facts, it is clear that the assessee has made excess the above facts, it is clear that the assessee has made excess the above facts, it is clear that the assessee has made excess rental payments to related parties. After duly considering the rental payments to related parties. After duly considering the rental payments to related parties. After duly considering the contentions of the assessee with respect to the nature of goods contentions of the assessee with respect to the nature of goods contentions of the assessee with respect to the nature of goods stored, the required licences procured and the monop stored, the required licences procured and the monop stored, the required licences procured and the monopoly business contention, the excess rental payments to related business contention, the excess rental payments to related business contention, the excess rental payments to related parties is re-worked as under worked as under: S.No. Paid to Amount Amount Sq. Feet as Rent per Avg. Rate per Reasonable Reasonable Disallowance debited debited in in per Sq. Ft. per Sq. Ft. after amount amount u/s 40A(2B) P&L assessee’s year reconsideration worked out worked out account Rs. account Rs. initial at at submission dated 13.08.2016 3 Daxa H 26400000 26400000 42150 626 150 6322500 6322500 20077500 Gada 8 H M Gada 2160000 2160000 8500 254 150 1275000 1275000 885000 HUF 24 Vandana H 840000 840000 4400 191 150 660000 660000 180000 Gada Total Disallowance u/s 40A(2B) Disallowance u/s 40A(2B) 21142500 Ironically, if the reconsidered average annual rent at Rs. 150/ Ironically, if the reconsidered average annual rent at Rs. 150/ Ironically, if the reconsidered average annual rent at Rs. 150/- per sq.ft is observed, the monthly average rent works out to per sq.ft is observed, the monthly average rent works out to per sq.ft is observed, the monthly average rent works out to Rs. 13/- per sq.ft per sq.ft (Rs.150 / 12 months) which is in accordance (Rs.150 / 12 months) which is in accordance with the contention of the assessee dated 13/10/2006 with the contention of the assessee dated 13/10/2006 with the contention of the assessee dated 13/10/2006 wherein it is submitted that the average rent charged per wherein it is submitted that the average rent charged per wherein it is submitted that the average rent charged per square feet is approx Rs.13.5/ square feet is approx Rs.13.5/- in the case of Smt Daxa of Smt Daxa H.Gada. Accordingly, the disallowance u/s.40 H.Gada. Accordingly, the disallowance u/s.40A(2B) of the A(2B) of the I.T.Act, 1961 is made at Rs.2,11,42,500/ I.T.Act, 1961 is made at Rs.2,11,42,500/- as above.” 3. On further appeal, the assessee submitted before the Ld. On further appeal, the assessee submitted before the Ld. On further appeal, the assessee submitted before the Ld. CIT(A) that warehouses taken on lease by the assessee were of the CIT(A) that warehouses taken on lease by the assessee were of the CIT(A) that warehouses taken on lease by the assessee were of the four categories, the warehouses of the three categories were four categories, the warehouses of the three categories were four categories, the warehouses of the three categories were constructed warehouses structed warehouses, whereas 4th category were mainly category were mainly industrial shades. The assessee submitted that the Ld. Assessing industrial shades. The assessee submitted that the Ld. Assessing industrial shades. The assessee submitted that the Ld. Assessing

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Officer while working out the rent per square feet in respect of Officer while working out the rent per square feet in respect of Officer while working out the rent per square feet in respect of properties from the Daxa S Gada has not considered open area properties from the Daxa S Gada has not considered open area properties from the Daxa S Gada has not considered open area available along with the constructed area. He submitted that if the with the constructed area. He submitted that if the with the constructed area. He submitted that if the open area available with the property is also taken into open area available with the property is also taken into open area available with the property is also taken into consideration then the rent payment was justified and in the range consideration then the rent payment was justified and in the range consideration then the rent payment was justified and in the range of the rent payment made to the unrela of the rent payment made to the unrelated parties. T ted parties. The assessee also filed photos of the various types of the wa photos of the various types of the warehouses before the rehouses before the Ld. CIT(A) athough the Ld. CIT(A) has specifically mentioned hough the Ld. CIT(A) has specifically mentioned hough the Ld. CIT(A) has specifically mentioned in the impugned order that no additional evidence that no additional evidences were filed by the were filed by the assessee. After considering the submission of the assessee, the Ld. assessee. After considering the submission of the assessee assessee. After considering the submission of the assessee CIT(A) deleted the disallowance of excess rent made by the CIT(A) deleted the disallowance of excess rent made by the CIT(A) deleted the disallowance of excess rent made by the Assessing Officer mainly for the three reasons. Assessing Officer mainly for the three reasons. Firstly Firstly, there is a big difference between the different type big difference between the different types of warehouses taken on of warehouses taken on lease by the assessee and the Assessing Officer lease by the assessee and the Assessing Officer simply disallow simply disallowed the rent by comparing the average rent paid in case of unrelated the rent by comparing the average rent paid in case of unrelated the rent by comparing the average rent paid in case of unrelated parties. Secondly in the case of in the case of warehouse taken on lease warehouse taken on lease from M/s Daxa H Gada, the open space was not taken into consideration the open space was not taken into consideration the open space was not taken into consideration and had the same considered and had the same considered, there would not have been much there would not have been much difference. Thirdly, the parties to whom lease/rent lease/rent payment was made by the assessee were in the same tax bracket and therefore, made by the assessee were in the same tax bracket and therefore, made by the assessee were in the same tax bracket and therefore, there was no occasion occasion of the evasion of the tax liability evasion of the tax liability.

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5.1 The issue in dispute in the case of the assessee is therefore, The issue in dispute in the case of the assessee is therefore, The issue in dispute in the case of the assessee is therefore, whether the rent paid by the rent paid by the assessee to three related parties is the assessee to three related parties is excessive or unreasonable having regard to the fair market value of excessive or unreasonable having regard to the fair market value of excessive or unreasonable having regard to the fair market value of the lease rent of the similar kind of properties in the vicinity area of the similar kind of properties in the vicinity area of the similar kind of properties in the vicinity area. The excessive or unreasonable lease rent paid has been disallowed The excessive or unreasonable lease rent paid has been disallowed The excessive or unreasonable lease rent paid has been disallowed by the Assessing Officer invoking section 40A(2)(b) of the Act. Before essing Officer invoking section 40A(2)(b) of the Act. Before essing Officer invoking section 40A(2)(b) of the Act. Before us, the Ld. Departmental Representative (DR) submitted that before us, the Ld. Departmental Representative (DR) submitted that before us, the Ld. Departmental Representative (DR) submitted that before

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the Ld. CIT(A) assessee has filed photographs of the different kind of the Ld. CIT(A) assessee has filed photographs of the different kind of the Ld. CIT(A) assessee has filed photographs of the different kind of the warehouses which were in the nature of the additional evidence the warehouses which were in the nature of the additional the warehouses which were in the nature of the additional and no remand report has been called for and no remand report has been called for from from the Assessing Officer. He submitted that those photographs being clearly in the Officer. He submitted that those photographs being clearly in the Officer. He submitted that those photographs being clearly in the nature of the additional evidence. However, the Ld. CIT(A) has not nature of the additional evidence. However, the Ld. CIT(A) has not nature of the additional evidence. However, the Ld. CIT(A) has not considered as same additional evidence which is in violation of the considered as same additional evidence which is in vi considered as same additional evidence which is in vi rules 46A of the Income rules 46A of the Income-tax Rules, 1962 (in short ‘the Rules’). tax Rules, 1962 (in short ‘the Rules’). Further we find that Further we find that before the Ld. CIT(A), the assessee has the Ld. CIT(A), the assessee has categorized all the warehouses in four categories which are categorized all the warehouses in four categories which are categorized all the warehouses in four categories which are reproduced as under: reproduced as under:

TYPE 1 - These warehouses are well constructed having These warehouses are well constructed having These warehouses are well constructed having heights of 15 to 18 feetaccording to regulatory requirements. heights of 15 to 18 feetaccording to regulatory requirements. heights of 15 to 18 feetaccording to regulatory requirements. The The The first first first type type type of of of warehouse warehouse warehouse is is is used used used forstorage forstorage forstorage of of of inflammable/hazardous inflammable/hazardous chemical chemical petrochemical petrochemical products. products. Theaforesaid 1st type of warehouse Theaforesaid 1st type of warehouse gets various Licenses, gets various Licenses, NOC's and Certifications to carry out the said operations, viz., NOC's and Certifications to carry out the said operations, viz., NOC's and Certifications to carry out the said operations, viz., License from Petroleum License from Petroleum Explosive Safety Organization Organization (PESO), Pollution Board Board Consent сору for storage of PetroleumProducts, PetroleumProducts, NOCs from local governing bodies, fire briga NOCs from local governing bodies, fire brigade dept etc. The de dept etc. The Appellant had taken first type of warehouse on rent from Ms. Appellant had taken first type of warehouse on rent from Ms. Appellant had taken first type of warehouse on rent from Ms. Daxa H Gada. These types ofwarehouses must have Daxa H Gada. These types ofwarehouses must have Daxa H Gada. These types ofwarehouses must have necessary necessary fire fire-fighting fighting equipment's equipment's like like sprinklers, sprinklers, fire fire extinguishers, epoxy coated flooring etc. extinguishers, epoxy coated flooring etc. TYPE 2 - These warehouses These warehouses are well constructed having well constructed having heights of 15 to 18 heights of 15 to 18 feetaccording to regulatory requirements. feetaccording to regulatory requirements. The second type of warehouse is used forstorage of Foods The second type of warehouse is used forstorage of Foods The second type of warehouse is used forstorage of Foods products. The FDA approval for storage is obtained for 2nd products. The FDA approval for storage is obtained for 2nd products. The FDA approval for storage is obtained for 2nd type ofwarehouse. The Appellant had taken second type type ofwarehouse. The Appellant had taken second type type ofwarehouse. The Appellant had taken second type of warehouse on rent warehouse on rent TYPE 3 - These warehouses are well constructed having These warehouses are well constructed having These warehouses are well constructed having heights of 15 to 18 feetaccording to regulatory requirements. heights of 15 to 18 feetaccording to regulatory requirements. heights of 15 to 18 feetaccording to regulatory requirements. The 3rd type of warehouse is used for The 3rd type of warehouse is used for TYPE 4 - These types of warehouses are in the form of sets These types of warehouses are in the form of sets These types of warehouses are in the form of sets which are used to stor which are used to store normal products which does not e normal products which does not

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require permission or extra facility. TheAppellant had procured require permission or extra facility. TheAppellant had procured require permission or extra facility. TheAppellant had procured the above-mentioned warehouses from various number mentioned warehouses from various number mentioned warehouses from various number ofunrelated parties. ofunrelated parties.” 5.2 Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that Before us, the Ld. Counsel of the assessee submitted that warehouse taken of lease warehouse taken of lease from M/x Daxa H Gada was of type one from M/x Daxa H Gada was of type one (I) category i.e. having Petroleum Explosive Safety Organization ( Petroleum Explosive Safety Organization ( Petroleum Explosive Safety Organization (PESO) approved, NA approved land for warehouse, Fire NOC, automated approved, NA approved land for warehouse, Fire NOC, automated approved, NA approved land for warehouse, Fire NOC, automated water sprinkler for safely, Gram Panchayat NOC, having height of water sprinkler for safely, Gram Panchayat NOC, having height of water sprinkler for safely, Gram Panchayat NOC, having height of 18 feet , PEB structure ture . The other warehouses taken taken on lease from the two related parties were of the type the two related parties were of the type two (II )category i.e. RCC category i.e. RCC structure warehouse with automated water sprinkler for safely, structure warehouse with automated water sprinkler for safely, structure warehouse with automated water sprinkler for safely, Gram panchayat NOC and height of 15 feet Gram panchayat NOC and height of 15 feet and type three and type three (III) category i.e. RCC structure with Gram i.e. RCC structure with Gram Panchayat NOC and height NOC and height of 15 feet , respectively . The b , respectively . The balance warehouses taken from non alance warehouses taken from non- related parties were stated of type related parties were stated of type IV category i.e. basic 12 feet i.e. basic 12 feet height ‘patra’ (iron sheet) warehouse sheet) warehouse. The contention of the assesse . The contention of the assessee is therefore, that comparison made by the Ld. Assessing Officer for is therefore, that comparison made by the Ld. Assessing Officer for is therefore, that comparison made by the Ld. Assessing Officer for determination of the fair market value of the lease rent of determination of the fair market value of the lease rent determination of the fair market value of the lease rent warehouses taken from related parties warehouses taken from related parties was not appropriate. was not appropriate. However, we find that the Ld. CIT(A) has also not carried out an However, we find that the Ld. CIT(A) has also not carried out However, we find that the Ld. CIT(A) has also not carried out exercise for exact quantification of the fair market value exact quantification of the fair market value of godowns exact quantification of the fair market value taken from the related parties taken from the related parties . We note that there was no other there was no other godown on lease from unrelated parties in godown on lease from unrelated parties in the category category of type I to III for internal comparison III for internal comparison and the ld CIT(A) has merel has merely relied estimate and presumption that inclusion of and presumption that inclusion of open area for the open area for the purpose of the estimation of the rent would the estimation of the rent would make the lease rent make the lease rent

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comparable to non- -related parties, whereas in the case of the hereas in the case of the assessee, the Assessing Officer the Assessing Officer/CIT(A) was required to compa was required to compare with the lease rent of the type the lease rent of the type one (I) category of the warehouse with category of the warehouse with any other type one I warehouse taken on lease warehouse taken on lease from unrelated party or any comparison of lease rent paid by other parties for similar or any comparison of lease rent paid by other parties for similar or any comparison of lease rent paid by other parties for similar kind of warehouse. We further noted that before u . We further noted that before us the assessee . We further noted that before u has submitted that type one has submitted that type one(I) category warehouses require category warehouses required regulatory requirement licenses NOC’s and certificates from the regulatory requirement licenses NOC’s and certificates from the regulatory requirement licenses NOC’s and certificates from the various authorities including license from Petroleum Explosive various authorities including license from Petroleum Explosive various authorities including license from Petroleum Explosive Safety Organization, Pollution Board Consent copy for storage of Safety Organization, Pollution Board Consent copy for Safety Organization, Pollution Board Consent copy for Petroleum Products, NOC’s from local governing bodies, fire brigade Petroleum Products, NOC’s from local governing bodies, fire brigade Petroleum Products, NOC’s from local governing bodies, fire brigade dept. etc. On perusal of the permissions/certificates filed in paper dept. etc. On perusal of the permissions/certificates dept. etc. On perusal of the permissions/certificates book before us, we find that we find that different authorities thorities have issued permission to the assessee and not to the owner of the warehouse. the assessee and not to the owner of the warehouse. the assessee and not to the owner of the warehouse. On perusal of the lease agreement with M/s Daxa M Gada available On perusal of the lease agreement with M/s Daxa M Gada available On perusal of the lease agreement with M/s Daxa M Gada available on page 19 to 24 of the Paper Book, w age 19 to 24 of the Paper Book, we find that there is no e find that there is no mention of any specific facility for storing any chemical/explosive mention of any specific facility for storing any chemical/explosive mention of any specific facility for storing any chemical/explosive except that the property was constructed at the property was constructed. If the f the licenses or permission etc. have permission etc. have been taken by the assessee itself, then no extra inbuilt advantage advantage is available to the assessee to the assessee in respect of type one category of the warehouse and the type one category of the warehouse and the excessive excessive lease rent paid to related party is elated party is not justified. In our opinion neither the not justified. In our opinion neither the Assessing Officer not the Ld. CIT(A) has carried out proper Assessing Officer not the Ld. CIT(A) has carried out proper Assessing Officer not the Ld. CIT(A) has carried out proper comparison of the fair market value of the lease rent of type of comparison of the fair market value of the lease rent of type of comparison of the fair market value of the lease rent of type of warehouses taken on lease rent from related parties. taken on lease rent from related parties. taken on lease rent from related parties. We find that

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Hon’ble Delhi High Court Delhi High Court in order dated 11/03/2015 in order dated 11/03/2015 in the case of CIT vs Jansampark Jansampark advertising and marketing p ltd in ITA and marketing p ltd in ITA 525/2014 held that ld CIT(A) should himself carry out enquiries if that ld CIT(A) should himself carry out enquiries if that ld CIT(A) should himself carry out enquiries if AO has failed in doing so. AO has failed in doing so. The relevant finding of Hon’ble High The relevant finding of Hon’ble High Court is reproduced as under: reproduced as under:

“42. The AO here may have failed to discharge his obligation to conduct a “42. The AO here may have failed to discharge his obligation to conduct a “42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), proper inquiry to take the matter to logical conclusion. But CIT (Appeals), proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter having noticed want of proper inquiry, could not have closed the chapter having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also llowing the appeal and deleting the additions made. It was also llowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have the obligation of the first appellate authority, as indeed of ITAT, to have the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the ensured that effective inquiry was carried out, particularly in the face of the ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the allegations of the Revenue that the account statements reveal a uniform account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts pattern of cash deposits of equal amounts in the respective accounts pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny preceding the transactions in question. This necessitated a detailed scrutiny preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice of the material submitted by the assessee in response to the notice of the material submitted by the assessee in response to the notice under Section 148 Section 148 issued by the AO, as also the material submitted at the issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made stage of appeals, if deemed proper by way of making or causing to be made stage of appeals, if deemed proper by way of making or causing to be made a "further inquiry" in exercise of the power under a "further inquiry" in exercise of the power under Section 250(4) Section 250(4). This approach not having been adopted, the impugned order of ITAT, and approach not having been adopted, the impugned order of ITAT, and approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld.” consequently that of CIT (Appeals), cannot be approved or upheld.” consequently that of CIT (Appeals), cannot be approved or upheld.” 5.3 Further, the ITAT being final fact finding autho Further, the ITAT being final fact finding autho Further, the ITAT being final fact finding authority, discovery of true facts is necessary for application of law on the facts of the of true facts is necessary for application of law on the facts of the of true facts is necessary for application of law on the facts of the case and matter cannot cannot be shut due to incomplete facts on record. due to incomplete facts on record. Therefore, we set aside the finding of the lower authorities and Therefore, we set aside the finding of the lower authorities and Therefore, we set aside the finding of the lower authorities and restore the matter back to the Assess restore the matter back to the Assessing Officer for making proper ing Officer for making proper comparison of the lease rent of the type of comparison of the lease rent of the type of warehouse taken on warehouse taken on lease from related parties. The grounds of appeal of the Revenue are related parties. The grounds of appeal of the Revenue are related parties. The grounds of appeal of the Revenue are accordingly allowed for statistical purposes. accordingly allowed for statistical purposes.

Shri Hemchand Murji Gada 11 ITA Nos. 2118/Mum/2023

Order pronounced in the open Court o nounced in the open Court on 11/10/2023. /10/2023. Sd/ Sd/- Sd/ Sd/- (RAHUL CHAUDHARY RAHUL CHAUDHARY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 11/10/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai