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Income Tax Appellate Tribunal, ALLAHABAD BENCH, ALLAHABAD
Before: SHRI VIJAY PAL RAO
O R D E R
PER SHRI VIJAY PAL RAO, JUDICIAL MEMBER:
This appeal by the assessee is directed against the order dated 21.11.2017 passed by Commissioner of Income Tax (Appeals), Gorakhpur for the assessment year 2014-15.The assessee has raised the following grounds:
“1. That on the facts and in the circumstances of this case, where audited books of accounts by C.A. have been maintained duly audited U/s 44 AB of IT Act, whether the Learned CIT(A)was legally justified in confirming addition on account of godown rent paid for the prosperity of the business @ 15000/- pm totaling Rs. 180000/- p.a. to Shri Ganesh Gupta S/o Late. Shri Ram LaganGupta, resident of Azad Nagar, Maharajganj during Previous Year 2013- 14 relevant for A.Y. 2014-15.
2. That on the facts and in the circumstances of this case whether the Learned CIT(A) was legally justified in confirming addition of Rs. 180000/- in respect of godown rent paid as above when the same expense was duly debited in audited Trading and Profit & Loss A/c and also the Assessment Year: 2014-15 Prahalad Prasad Gupta same amount was duly debited in P.&L. A/c in A.Y. 2013-14 duly accepted by the department and copy of same was duly produced before Learned CIT(A).
That the Learned CIT(A) Findings regarding confirmation of addition of Rs.180000/- p.a. in respect of godown rent is not proper as copy of godown rent with confirmatory letter from landlord Ganesh Gupta was filed in which name, parentage, address, amount of rent per month date-wise with signature on revenue stamp was filed before CIT(A) along with applications Under Rule 46A of Income Tax Rules.
4. That on the facts and in the circumstances of this case, whether the Learned CIT(A) was legally justified in confirming addition on account of household expenditures disclosed at Rs.102000/- estimated atRs.180000/- by ITO and addition made of Rs.78000/- and confirming by CIT(A) at Rs.50000/- without sound reasoning.
5. That an application U/s 154(1A) of I.T. Act has been filed on 11/12/2017 and hearing has also been made by Learned CIT(A) on 18/12/2017 regarding deletion of godown rent paid but no order has been received by appellant till today.
6. That on the facts and circumstances of this case, the Ld. CIT(A) was not legally justified in confirming addition of Rs.30326/- in respect of bonus paid to staff which was debited in audited P.&L. A/c 7. That the Learned CIT(A) did not give any findings regarding charge of interest U/s 234A, 234B and234C when the additions made/ confirmed were never anticipated and charge of interest is illegal and against provisions of law & is liable to be deleted.
That on the facts and in the circumstances of this case, the additions made and confirmed by Learned CITA) are arbitrary and excessive.”
Ground No. 1 to 5 are regarding disallowance of godown rent. The assessee has claimed Rs.1,80,000/- on account of godown rent. The AO asked the assessee to submit the copy of the ledger account along with the bills and vouchers in support of the claim. In response to that the assessee filed only copy of the ledger account of godown rent showing the monthly rent of Rs.15,000/- total amounting to Rs.1,80,000/-. The AO disallowed the claim of godown rent on the ground that the assessee has neither filed copy of rent agreement in support of tenancy nor filed a confirmation in support of the claim.
3. The assessee challenged the order of the AO before the CIT(A) and also filed a confirmation from the landlord regarding the receipt of godown rent. The CIT(A) noted that the confirmation has been filed without the details of PAN No., complete address and Assessment Year: 2014-15 Prahalad Prasad Gupta identity of the person. Accordingly, the CIT(A) has confirmed the addition / disallowance made by the AO.
Before the Tribunal, the AR of the assessee has submitted that the assessee produced the confirmation which contains the full details of the landlord including the address and therefore the finding of the CIT(A) is contrary to the record produced by the assessee. He has referred to the confirmation filed before the CIT(A) and submitted that the amount was paid to the father of the assessee who has given all the details in the said confirmation. The ld. AR has also referred to the trading and profit and loss account as on 31.03.2014, 31.03.2013 and submitted that the department has accepted the godown rent for the AY 2013-14. Thus the ld. AR has submitted that once the AO has accepted the claim of godown rent for the AY 2013-14 then the same cannot be denied for the year under consideration. On the other hand, the ld. DR has submitted that the confirmation produced by the assessee is without the details of PAN No., complete address and identity of the person, therefore, in the absence of recipient, an income tax assessee, such a confirmation cannot be accepted. Thus in the absence of any supporting evidence of actual payment of rent, the claim is not allowable. He has relied upon the orders of the authorities below.
Having considered the rival submissions as well as the relevant material on record, it is noted that the claim of godown rent of Rs.1,80,000/- was disallowed by the AO for want of any supporting evidence and particularly the rent agreement. From the confirmation of the rent received, it is noted that the rent was paid by the assessee to his father and, therefore, the identity of the father of the assessee cannot be disputed. Further when the father of the assessee is not an income tax assessee then the question of giving of details of PAN number does not arise. However, since it is a payment to the father of the assessee and transaction between the close relatives, therefore, the correctness of the claim of Rs.1,80,000/- needs to be further verified. The entire claim of payment of rent cannot be denied when the assessee is utilizing godown for his business purposes.
Assessment Year: 2014-15 Prahalad Prasad Gupta Though the godown has been owned by the father of the assessee however the liability to pay rent cannot be denied merely because of relationship between the tenant and the landlord being son and father. Thus without conducting any enquiry either by the AO or by the CIT(A) through remand report, the disallowance of the entire claim of godown rent is not justified. Once the assessee has produced the confirmation of the godown rent payment, the same cannot be rejected without conducting a proper enquiry. Hence, in the facts and circumstance of the case, this issue is remanded to the record of the AO to conduct a further enquiry and verify the claim by examining the recipient of the claim. Needless to say, the assessee be given a proper opportunity of hearing.
Ground no. 6 relates to disallowance of bonus to staff. The assessee has claimed Rs.90,326/- under the head ‘bonus to staff’. The AO asked the assessee to submit a copy of account along with the bills and vouchers in support of the claim. The assessee produced the copy of the ledger only which was considered by the AO and found that the identity of the name and address of the workers cannot be verified from the ledger account, therefore, the assessee has failed to establish the claim when neither the bonus register nor the bills and vouchers were produced by the assessee.
On appeal, the CIT(A) has granted part relief and restricted and allowed the claim of the expenditure to Rs.60,000/- as against Rs.90,326/- made by the AO.
8. Before the Tribunal, the ld. AR of the assessee has submitted that the department has accepted the claim of bonus of Rs.60,450/- in the earlier year and, therefore, the claim of bonus paid to the staff cannot doubted in the year under consideration. He has referred to the order of the CIT(A) and submitted that the CIT(A) has restricted the claim only to the amount of bonus which was paid in the preceding year which is not a proper basis of disallowance in the claim of the assessee. On the other hand, the ld. DR has relied upon the order of the CIT(A) and submitted that the CIT(A) has granted the substantial relief to the assessee by allowing the claim to the extent of Rs.60,000/- by considering the fact that in the preceding year that the claim of the bonus was allowed.
Assessment Year: 2014-15 Prahalad Prasad Gupta 9. Having considered the rival submissions and careful perusal of the record, it is noted that the CIT(A) has restricted the claim of the assessee on account of bonus paid to the staff to Rs.60,000/- as against claim of Rs.90,326/-. The finding of the CIT(A) in para 4 is as under:
“4Bonus to Staff- The assessee has shown the payment to bonus to staff Rs. 90326/- for this year which has been disallowed by AO because assessee was not able to produce the bonus register and unable to justify the basis of payment. The assessee has shown bonus to staff of Rs. 60450 for early year and as per his submission the same has been accepted by the department. The matter has been examined and found that the appellant has not having the details of bonus register but on the same time bonus given to the employees is a fact of the various concerns working anywhere. The department has accepted Rs. 60450/- in the earlier year and there is no justification given by appellant to increase in this year therefore the claim of expenditure is restricted to Rs.60,000/-in place of 90326/- and the AO is directed to calculate accordingly.”
Thus the CIT(A) has accepted the fact that the department has accepted the claim of bonus paid to the staff in the earlier year. Once the bonus paid to the staff in the earlier year is accepted then the claim for the year under consideration cannot be restricted based on the criteria of the amount paid in the earlier year. Therefore, the restriction of the claim by the CIT(A) is not based on a proper criteria or some reasonable basis. Accordingly, the disallowance of Rs.30,326/- is set aside and the claim of the assessee is allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open Court on 27/11/2020.