TMI Blog2018 (3) TMI 1752X X X X Extracts X X X X X X X X Extracts X X X X ..... the fair market value of the goods in which the payment is made. AO has to place on record material showing the fair market value of the goods. In the present case, the AO did not conduct any inquiry or verification into the reasonableness of the expenditure with reference to fair market charges payable under similar conditions. In CIT vs. Superior Crafts [ 2012 (4) TMI 476 - DELHI HIGH COURT] has approved the action of the Tribunal in deleting the similar addition/disallowance, dismissing the appeal filed by the Department. In ITO vs. Mayur Agarwal , [ 2010 (4) TMI 1061 - ITAT AGRA] it was held that u/s 40A(2)(b), the AO is bound to show as to how the rent paid to a relative is excessive. In ACIT vs. Bombay Real Estate D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in, This is assessee s appeal for Assessment Year 2011-12, raising the following grounds: 1. That having regard to the fact and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the addition of ₹ 10,00,000/- fully as made by Ld. AO on account of alleged suppression of income and has further erred in sustaining the same to the extent of ₹ 2,00,000/- by wrongly observing that the assessee has agreed for this addition during the course of assessment and this observation was made by Ld. CIT(A) without giving opportuntiy of hearing. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in sustaining the action of Ld. AO in making addition of ₹ 2,00,000/- on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO. 4. The ld. Counsel for the assessee has contended that the ld. CIT(A) failed to appreciate that u/s 40A (2)(a) of the IT Act, it is the onus of the AO to prove expenditure to be excessive and such onus was not discharged by the AO, rather, the AO only observed that the WDV of the machinery was low; and that the evidence brought on record was illegally not considered by the ld. CIT(A). 5. On the other hand, the ld. DR has duly strongly supported the impugned order. It is stated that the AO has observed that the rent was paid to persons covered u/s 40A(2)(b) of the Act. 6. Heard. It is true that the AO observed that the payments were made to the persons covered u/s 40A(2)(b) of the IT Act. But that is why section 40A(2)(a) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held, inter alia, that for invoking the provisions of section 40A(2), the onus lies on the AO that the payment is excessive or unreasonable having regard to the fair market value of the goods; and that the Revenue has to place on record evidence as regards excessiveness or unreasonableness. 11. In Jagdamba Rollers Flour Mill Ltd. Vs. ACIT , 117 ITD 260, (Nagpur ) (TM), it was held that disallowance u/s 40A(2) can be made only if payment is made to a person specified in section 40A(2)(b) and it is found to be excessive or unreasonable having regard to the market value of the goods, services or facilities for which the payment is made; and that in the absence of inquiry by the AO, as contemplated by the provisions of section 40A(2)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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