TMI Blog2013 (12) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 13-12-2013 - Shri I. C. Sudhir And Shri Shamim Yahya,JJ. For the Petitioner : Sh. K. Sampat, Advocate For the Respondent : Ms. Nidhi Srivastava, Sr. D.R. ORDER Per Shamim Yahya: AM These cross appeals by the Revenue and Assessee emanate out of order of the Ld. CIT(A) and pertain to asstt. year 2008-09. 2. The ground raised in the Assessee's Appeal is that on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in reducing the disallowances of the rent of guest house to the extent of 50% only of the total claim which being erroneous must be deleted with directions for total relief. 3. The grounds raised in the Revenue's appeal read as under:- i) Whether the Ld. CIT(A) under the facts and circumstances of the case and in law was correct in restricting the disallowance of Rs. 18,00,000/- out of total disallowance of Rs. 36,00,000/- made by the Assessing Officer on account of rent paid. ii) Whether the Ld. CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs. 46,90,790/- made by the AO on account of commission paid to M/s Keyser India Pvt. Ltd. iii) Whether the Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08, while the Inspector visited the property only on 13.12.2010 and had given a report on the basis of hearsay without any evidentiary value. However, the AO has rejected the above contention of the appellant and has disallowed the rent debited at RS.36 lacs. 4. Before the Ld. CIT(A) assessee filed written submissions alongwith application under Rule 46A and paper book. Ld. CIT(A) obtained remand report from the Assessing Officer and further rejoinders from the assessee. Ld. CIT(A) noted that assessee took the guest house on rent vide lease agreement dated 9.3.2006 for a period of three years at a monthly rent of Rs. 3 lacs. That at the time of entering into the agreement, the premises belonged to M/s Sonia Co. Pvt. Ltd. which had different Directors and that the shares of the above company were acquired by the Directors of the assessee company at a later stage; that the rent was fixed at an arm's length basis and hence should be allowed as business expenditure. It was pointed out that the rent was paid through account payee cheques and has been duly shown by M/s Sonia Co. Pvt. Ltd. in its accounts and that the above company is regularly assessed to income tax. That iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the rent agreement was entered at arm's length. Further the Department had regularly allowed the same. He further submitted that the Report of the Inspector without proper visit and anonymous hearsay cannot be basis after rejecting the assessee's claim. Hence, he claimed that the entire expenditure of rent was genuine and properly explained and should be allowed as such. 9. Ld. Departmental Representative on the other hand relied upon the orders of the Assessing Officer and argued that the amount of rent paid was not allowable on the facts and circumstances of the case. 10. We have carefully considered the submissions and perused the records. We find that the assessee has paid rent of Rs. 3 lacs per month for guest house taken on rent by the assessee for use as guest house, in-house training of the staff and conference etc. Assessing Officer has disallowed the same on the basis of Report of Income Tax Inspector. The said Income Tax Inspector could not get into the campus of the guest house. He obtained information from nearby people and concluded that the premises was not being used for the purpose claimed by the assessee. The Assessing Officer has also noted that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has accepted this contention. He was of the opinion that Assessing Officer could have caused proper enquiry in this regard. It is not the case of the Ld. CIT(A) has himself conducted the said enquiry. We find that powers and duties of the Ld. CIT(A) are co-terminus with that of Assessing Officer. In such situation, if the CIT(A) was of the opinion that matter needed proper enquiry or even a survey he should have got the same done. Without getting the same done, Ld. CIT(A) has deleted the part of the disallowance. Assessing Officer has also not examined the watchman who was produced by the assessee for examination. In our considered opinion, the matter has not been properly enquired into. In our considered opinion, interest of justice will be served, if the matter is remitted to the file of the Assessing Officer to consider the issue afresh. We hold and direct accordingly. Needless to add that the assessee should be granted adequate opportunity of being heard. 10.4 In this regard, we place reliance of the Hon'ble Apex Court decision in the case of Kapurchand Shrimal vs. CIT,131 ITR 451 wherein it was that it is the jurisdiction as well as duty of the Appellate Authority to correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for more than 10 years after the business of the later company was taken over by the assessee. That the same had been accepted by the Department consistently from year to year; that further as per the tripartite arrangement between M/s Kayser Automative Systems GmbH, Germany, M/s Kayser India Pvt. Ltd. and the assessee company, the above payment has been made on account of technical and commercial facilities taken over and utilized by the assessee from M/s Kayser India Pvt. Ltd. from the year of such takeover. That it is also pointed out that both M/s Kayser India Pvt. Ltd. and the assessee company are private limited companies falling under the same tax bracket and hence there is no case of loss of revenue in the matter. The details of requirements under section 40A(2)(b) were also produced by the assessee during assessment proceeding and the same has not been disputed by the Assessing Officer. 14. Considering the above facts and circumstances of the case, CIT(A) held that the estimated disallowance made by the AO cannot be justified. Accordingly, the impugned addition of Rs. 46,90,790/- was deleted. 15. Against the above order the Revenue is in appeal before us. 16. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd any other case of similar standing in an identical situation from whose example he could show that there was an extra consideration attached in the subject case, over and above the commercial consideration as professed. We further note that assessee's submissions that M/s Keysar India P Ltd. and the assessee company are private limited companies falling under the same tax bracket and hence there is no case of loss of revenue in the matter. 17. We further note that AO has held that 40% of the commission payment is excessive and not allowable. We do not find any basis whatsoever in this disallowance percentage. In our considered opinion, ld. CIT(A) has passed the cogent order which does not need any interference on our part. Accordingly, we affirm the same. 18. Apropos deletion of addition of Rs. 33,50,000/- made by the AO on account of deemed income u/s. 2(22)(e) of the I.T. Act. In this case as per the assessment order, the assessee company has received Rs. 33,50,000/- from M/s Sonia Co. Pvt. Ltd. during the year under consideration. It is observed by the AO that Sh. Kapil Gupta and Smt. Deepali Gupta, Directors of the assessee company hold substantial shares in the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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