Shri Ajit H. Shah, 92, Pushpak, 31, Altamount Road, Mumbai - 400026 Vs. ITO 11(2)(1) Mumbai
June, 26th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "J", MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND
SHRI SANJAY GARG, JUDICIAL MEMBER
Assessment Year: 2006-07
Shri Ajit H. Shah, ITO 11(2)(1)
92, Pushpak, 31, Mumbai
Mumbai - 400026
Assessee by : Shri Madhur Agrawal, A.R.
Revenue by : Shri B. Yadagiri, D.R.
Date of Hearing : 23.06.2014
Date of Pronouncement : 23.06.2014
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order
of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as
CIT(A)] dated 21.12.10 relevant to assessment year 2006-07. The assessee has
taken the following grounds of appeal:
"1. The learned CIT(A) has failed to appreciate that the rates at
which the compensation has been paid to the owners are below
the market rates & the A.O. has not compared the prevailing
market rates with the rates paid by the appellant. Therefore the
addition of Rs.50,000/- is uncalled for.
2. The learned CIT(A) has failed to appreciate the facts properly &
has erred in confirming the addition made by the A.O. &
enhancing the addition on account of sale of Rishi Leasing shares.
2 ITA No.1911/M/2011
Shri Ajit H. Shah
3. The learned CIT(A) has failed to reconcile the details of
speculation submitted before it & without appreciating the facts
confirmed the addition made by the A.O."
2. Vide ground No.1, the assessee has contested the disallowance of
Rs.50,000/- paid on account of compensation for the use of premises from
where the assessee is running a sonography centre admeasuring 300 sq. ft. The
assessee claimed that the said expenditure was paid in accordance with the
agreement with the owners of the premises who happened to be the relatives of
the assessee. The compensation as per agreement was paid at the rate of 35%
of the total receipts of the assessee less electricity charges. The Assessing
Officer (hereinafter referred to as the AO) found that the compensation paid at
the rate of 35% of the receipts which came out at Rs.4,76,420/- was on higher
side. He therefore disallowed Rs.50,000/- out of the said expenditure under
section 40A(2)(b) being excessive payment paid to the relatives.
The ld. CIT(A) confirmed the said addition made by the AO. The
assessee is thus in appeal before us.
3. We have heard the ld. representatives of both the parties and have also
gone through the records. A perusal of the assessment order reveals that the
AO has not made any exercise to ascertain the market rental rates of the
property similar to that of assessee. There was no comparable before the AO
to hold that the compensation paid on account of rent was excessive. The
assessee had not been paying a fixed rate of compensation but it was only on
the basis of certain percentage of his total receipts. In our view, without
holding that what should have been the reasonable rent/compensation for the
property, the disallowance made by the AO of Rs.50,000/- out of
compensation on adhoc basis and in the absence of any evidence on the file
3 ITA No.1911/M/2011
Shri Ajit H. Shah
that the compensation paid by the assessee was excessive, is not sustainable.
Accordingly, the same is ordered to be deleted.
4. Vide ground No.2, the assessee has agitated the confirmation of the
addition made by the AO and further enhancement of the same by the ld.
CIT(A) on account of sale of "Rishi Laser Shares". The AO observed that the
transaction relating to the sale of 200 shares of "Rishi Laser" for a sum of
Rs.21,768/- was not recorded by the assessee in his statement of capital gains.
He therefore added the said amount into the total income of the assessee under
the head "short term capital gains".
In first appeal, it was contended by the assessee before the ld. CIT(A)
that though the assessee had sold 200 shares on 31.01.06, however the assessee
had only 100 shares with him. Therefore he had to purchase 200 shares on
03.02.06 through `Kantilal Chaganlal Securities Pvt. Ltd.'
The ld. CIT(A) however observed that the assessee could not establish
conclusively that he had purchased the shares for selling/delivering the same as
agreed vide agreement dated 31.01.06. He observed that in the facts and
circumstances of the case, the sale of total number of 300 shares by the
assessee was doubtful especially when the availability or purchase of any share
was not established through evidence. He therefore held that not only the
capital gains on account of sale of 300 shares of "Rishi Laser" but also the
entire receipts there from were liable to be taxed, as the investment in the said
shares had not been identified. He therefore directed the AO to calculate the
tax liability accordingly.
5. Before us the ld. A.R. of the assessee has submitted that though the
assessee had agreed to sell the 200 shares but the assessee had only 100 shares
with him. He therefore purchased from the market another 200 shares which
4 ITA No.1911/M/2011
Shri Ajit H. Shah
were sold as per the contract note dated 31.01.06. In our view, the entire
matter needs reconsideration at the hands of the AO. We therefore restore this
issue to the file of the AO with a direction that the assessee will demonstrate
through plausible evidence before the AO regarding the above said sale and
purchase of the shares. Thereafter the AO will decide the same after proper
appreciation of evidence in accordance with the law.
6. The ld. A.R. of the assessee has made a statement at bar that he does not
press the ground No.3. The same is accordingly dismissed being not pressed.
7. In the result, the appeal of the assessee is partly allowed for statistical
Order pronounced in the open court on 23.06.2014.
(D. Karunakara Rao) (Sanjay Garg)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 23.06.2014.
* 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.