CHANDMALL SARAWGI CHARITABLE TRUST, A- BLOCK, MAHABIR MARKET, H.B.ROAD, FANCY BAZAR, GUWAHATI - 781001,GUWAHATI vs. INCOME TAX OFFICER, WARD 2(3)/ EXEMPTIONS AAYAKAR BHAWAN, G.S.ROAD, CHRISTAIN BASTI, GUWAHATI - 781005, GUWAHATI

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ITA 3/GTY/2018Status: DisposedITAT Guwahati18 December 2019AY 2011-122 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 13(1)(c)(ii) read with Section 13(2)(b) was not sustainable as the property was let out to a firm in which the trustee was a partner, and the firm was paying rent. The consequential disallowance under Section 11(2) was also set aside.

What were the facts?

The assessee trust's trustee was found to be residing in the trust's property without paying rent, leading to a disallowance. Another disallowance was made under Section 11(2) as a consequence of the first issue.

What were the issues?

Whether the trustee residing in the trust's property without paying rent attracts disallowance under Section 13(1)(c)(ii) and Section 13(2)(b). Whether a consequential disallowance under Section 11(2) is valid.

Which sections of the Income-tax Act were involved?

Section 13(1)(c)(ii),Section 13(2)(b),Section 11(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, GAUHATI BENCH “E” COURT AT KOLKATA

Before: Shri S.S.Godara & Dr. A.L.Saini

PER BEMCH:- This assessee’s appeal for assessment year 2011-12 arises against the Commissioner of Income Tax (Appeals)-2, Guwahati’s order dated 27.10.2017 passed in case No. Guwa-87/2014-15/15 involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

2.

The sole substantive issue(s) that arises for our apt adjudication in the instant lis is that of correctness of the lower authorities action invoking sec. 13(1)(c)(ii) r.w.s. 13(2)(b) disallowance of ₹4,47,980/- on the ground that the assessee’s trustee, Shri Ganpat Rai Sarawgi was found to have been residing in the trust’s residential property without paying any rent. The Revenue’s case as per both the lower authorities’ action is that Shri Sarawgi has not paid any rent much less than adequate rent u/s. 13(1)(c)(b) of the Act, and therefore,

ITA No.03/Gau/2018 Assessment Year: 2011-12 Chandmall Sarawgi Charitable Trust Vs. ITO Wd-2(3) (Ex) Page 2 the impugned disallowance has been rightly made in assessee’s case. We find no merit in Revenue’s foregoing arguments. We notice that the assessee’s residential property in question had been let out to a firm M/s Bimal Auto Agency for the past very many assessment years on payment of rent. Mr. Sarawgi happens to be partner of said firm. That being the case, we see no reason to sustain the impugned disallowance since it does not turn as a case of his payment of rent since the above firm has been regularly paying the rent. We accordingly accept the assessee’s former substantive ground.

3.

Coming to latter substantive ground regarding amount of ₹ 5 lac disallowed u/s. 11(2) of the Act it emerges that the same is mere consequential in nature for the reason that the lower authorities had gone by their findings on the foregoing issue and made the impugned disallowance in expenditure to cover up shortfall in application of income. We hold that this latter substantive ground must also follow suit to the former one. We order accordingly.

4.

This assessee’s appeal is allowed. Order pronounced in the open court 18/12/2019 (A.L.Saini) (S.S.Godara) (Accountant Member) Judicial Member) Kolkata, *Dkp "दनांकः- 18/12/2019 कोलकाता/। आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:- 1. अपीलाथ"/Appellant-Chandmall Sarawgi Charitable Trust, A-Block, Mahabir Market, H.B. Road, Fancy Bazar, Guwahati-781001

2.

""यथ" /Respondent-ITO Ward-2(3), Exemptions Aayakar Bhawan, G.S.Road, Christian Basti, Guwahati-005 3. संबं*धत आयकर आयु-त / Concerned CIT Guahati 4. आयकर आयु-त- अपील / CIT (A) Guahati 5. 0वभागीय "3त3न*ध, आयकर अपील"य अ*धकरण, / DR, ITAT, Guahati 6. गाड7 फाइल / Guard file. By order/आदेश से, // Sr. Private Secretary, Head of Office/DDO आयकर अपील"य अ*धकरण, गूवाहाठ" ।

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