Shri Damji K. Raychana Prop. of M/s. Vaishnodevi Cake Plaza, 2-A, Kapeesh, M.G. Road, Mulund (W), Mumbai 400 080 Vs. ITO Ward 23(2)(2), Pratyakshkar Bhavan, Bandra Kurla Complex, Mumbai.
May, 22nd 2014
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "D", MUMBAI
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
Assessment Year: 2008-09
Shri Damji K. Raychana ITO Ward 23(2)(2),
Prop. of M/s. Vaishnodevi Cake Pratyakshkar Bhavan,
Plaza, Bandra Kurla Complex,
2-A, Kapeesh, Vs. Mumbai.
Mumbai 400 080
Assessee by : Shri Rahul K. Hakani & Ms. Neelam Jadhav, A.R.
Revenue by : Shri Om Prakash Meena, D.R.
Date of Hearing : 13.05.2014
Date of Pronouncement : 21.05.2014
Per Sanjay Garg, Judicial Member:
The present appeal has been filed by the assessee against the order of the
Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)]
dated 24.05.12 relevant to assessment year 2008-09. There is a delay of 26
days in preferring the present appeal. The assessee has moved an application
for condonation of delay explaining the reasons for the above delay of 26 days.
The application is duly supported with the affidavit of the applicant/assessee.
In view of the reasons mentioned therein and also in view of the short period of
the delay, the delay in preferring the application is hereby condoned and the
appeal is heard on merits. The assessee has taken the following grounds of
"1. The Ld. CIT(A) erred in confirming the disallowance of
Rs.1,20,000/- out of total disallowance of Rs.3,60,000/- being rent paid
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Shri Damji K. Raychana
to Chandrabala D. Raychana for the exclusive use of shop (tenanted
premises), without appreciating the fact that, the Assessee does not have
any other shop and entire amount was incurred wholly and exclusively
for the purpose of the business. Hence, the disallowance may be
2. Without prejudice to above, the Ld. CIT(A) has not given any
comparables to arrive at the conclusion that the Rs.3,60,000/- is higher
than the market rates and thus he has erred in allowing only
Rs.2,40,000/- out of Rs.3,60,000/- paid as rent for the use of the shop.
Hence the disallowance may be deleted.
3. The Ld. CIT(A) erred in confirming the disallowance of
Rs.19,359/- being rent paid (on behalf of Chandrabala D. Raychana)
directly to the landlord for the tenanted premises.
4. The Ld. CIT(A) erred in confirming the adhoc disallowance of
Rs.15,000/- without appreciating the fact that the expenses were
incurred wholly and exclusively for the purpose of the business."
Ground Nos.1 to 3:
2. Ground numbers 1 to 3 relate to confirmation of disallowance out of rent
paid for the use of shop by the assessee to his wife. The assessee claimed to
have paid a rent of Rs.3,60,000/- for the use and occupation of the shop for his
business purpose as a subtenant of his wife who is the first tenant of the
business premises. Apart from that the assessee claimed a sum of Rs.19,359/-
being the license fee paid by the assessee on behalf of his wife to the landlord
of the shop. The Assessing Officer (hereinafter referred to as the AO),
however, disallowed the above said rent and license fee observing that the
assessee had not been able to substantiate the tenancy of the said property with
any documents from his wife to himself.
3. In the first appeal, the ld. CIT(A), after appreciation of the evidence on
the file produced before him, observed that the wife of the assessee was the
tenant of the said shop. She had also offered the rent income of the shop in her
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Shri Damji K. Raychana
return of income. He further observed that the fact being that the assessee did
not have any other business premises and the business could not have been run
without using the shop in question. Therefore, the payment of rent to the wife
was justified. However, he observed that the assessee had not been able to
justify the quantum of the amount paid as rent to the wife. Considering the
overall facts and circumstances of the case, he held that a sum of Rs.20,000/-
per month i.e. Rs.2,40,000/- per annum was sufficient payment as rent for the
use of tenanted premises of his wife. He therefore allowed the deduction of
Rs.2,40,000/- and confirmed the remaining disallowance on this issue. The
assessee is thus in appeal before us against the confirmation of disallowance of
remaining amount of Rs.1,20,000/-.
4. We have heard the ld. representatives of both the parties and also have
gone through the records. The contention of the ld. A.R. has been that the ld.
CIT(A), while holding that the rent at the rate of 20,000/- per month, was
justified has not given any comparables to arrive at that conclusion. He has
further stressed that the payment of Rs.3,60,000/- (as a rent of the shop) was
paid by the assessee wholly and exclusively for the purpose of his business.
On the other hand, the ld. D.R. has relied upon the findings of the lower
5. We have considered the rival submissions of the ld. representatives of
the parties. It is an admitted fact that the assessee has not substantiated the
payment of rent with any document in the shape of rent agreement, lease deed
etc. He has also not given any comparable instance of any other property/shop
in question in the vicinity. The assessee has merely relied upon his own oral
version without any documentary proof etc. Though, the assessee has
contended that the ld. CIT(A) while making the disallowance has not given
instance of any comparable, however it may be observed that the initial burden
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Shri Damji K. Raychana
was upon the assessee to justify the payment of the amount of rent. If the
assessee would have been able to justify the quantum of amount of payment
with any evidence, then the burden could have been shifted on the Revenue.
However, in the case in hand the assessee has failed to furnish any evidence
regarding the annual rental value of the property in question and the ld. CIT(A)
in such circumstances has considered the payment of Rs.20,000/- per month by
the assessee to his wife as justified rent of the shop in question. Hence, we do
not find any infirmity in the order of the ld. CIT(A) in this respect. So far the
payment of Rs.19,359/- as license fee is concerned, the ld. CIT(A) observed
that the assessee had not furnished any receipt of payment and it would not
have been difficult for the assessee to produce the receipt of the payment of
license fee. Moreover, the payment of license fee was the liability of the wife
of the assessee and not of the assessee. Accordingly, the disallowance in this
respect is also held to be justified. We therefore upheld the findings of the ld.
CIT(A) relating to issues taken by the assessee vide ground Nos.1-3.
6. The AO, during the assessment proceedings, noticed that the assessee
had claimed a sum of Rs.49,842/- on account of car insurance, car loan interest
and car expenses. The AO observed that the nature of the assessee's business
was such that it did not require much travelling for procuring business. He
therefore disallowed 20% of the above expenditure which was worked out at
Rs.9,968/-. The AO further noticed that the assessee had debited sundry
expenses of Rs.50,901/- in the P & L account. The assessee had failed to
prove the said expenditure with bills, vouchers etc. Hence, he disallowed a
sum of Rs.10,000/- out of the said expenditure. The AO further noticed that
the assessee has debited credit card expenses of Rs.58,181/- which the assessee
had failed to justify with the proof of authentic bills. He therefore disallowed a
sum of Rs.10,000/- out of credit card expenses also.
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7. In the first appeal, the ld. CIT(A), taking into consideration the
submissions of the assessee and the overall facts and circumstances of the case,
restricted the total disallowance out of the above said motor car expenses,
sundry expenses and credit card expenses to the total of Rs.15,000/- only. The
assessee has thus agitated the disallowance of Rs.15,000/- confirmed by the ld.
8. After hearing the ld. representatives of the parties, we are of the view
that since the assessee had not been able to substantiate the claim of
expenditure with cogent and convincing evidence and nature of the business of
the assessee being a shop keeper the disallowance of Rs.15,000/- confirmed by
the ld. CIT(A) was justified. We accordingly do not find any reason to
interfere with the findings of the ld. CIT(A) and the same are hereby upheld.
9. In the result, the appeal of the assessee is hereby dismissed.
Order pronounced in the open court on 21.05.2014.
(P.M. Jagtap) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 21.05.2014.
* Kishore, Sr. P.S.
Copy to: The Appellant
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR "C" Bench
//True Copy// [
Dy/Asstt. Registrar, ITAT, Mumbai.