Anilbhai Chunilal Bhayani Vs ITO (ITAT Rajkot)
ITAT finds that both AO and CIT (A) have not satisfied with the explanation given by the assessee about the usage of the properties for the business purpose, and estimation of the rental value of the properties. The ld.AO rejected the claim of the assessee on the ground that no business activities carried out by the assessee at these premises and estimated the rental value of the property on hypothetical basis. The ld.CIT(A) also confirmed the observation of the AO, but reduced the rental value of the properties by holding that value determined by the AO was on the higher side. A perusal of the assessment order would indicate that the ld.AO has rejected the contentions of the assessee regarding user of these buildings and land for the purpose of business simply for the reason that the assessee failed to submit any evidence demonstrating the fact that these premises were used for any business purpose. In the case of Anilbhai Chunilal Bhayani, the ld.AO at page no.6 of the assessment order has observed that there is no letter head provided by the assessee showing the fact that address of its shops/godowns is being displayed on the letter-head of JC & Co. In other words, the ld.AO was expecting that the assessee should produce some secondary evidence in the shape of letter head, electricity bills showing that the premises were used for the purpose of business. To our mind, these reasoning are fallacious. The assessee has been pleading that premises has been used for business purpose. The AO should have deputed someone to inspect the sites. By simply sitting in the office, he just assigned the reason that I don’t agree with your submission. This type of simple denial of the claim is not sustainable in the eyes of law. The statement of facts made by the assessee has to be rejected on the basis of some investigation. The AO has rejected the statement of facts on the ground of insufficiency of evidence produced by the assessee. To some extent for an ideal situation, the assessee could be asked to produce more evidence, but pleadings cannot be rejected simply for insufficiency without investigating or inspecting site in such circumstances. We have accepted the claim of the assessee that it has been engaged in transportation business. We have allowed transportation expenses. Considering this aspect, we are of the view that the ld.Revenue authorities are not justified in rejecting the claim of the assessee that house properties were used for the purpose of business. This claim was rejected without making any investigation. Therefore, we reverse the finding of both the authorities and direct the AO not to assess house property income.
FULL TEXT OF THE ITAT JUDGEMENT
Above two appeals by the assesseees against the orders of the ld.CIT(A), Jamnagar of even dated 24.08.2017 for the assessment year 201314. Since grounds in both the appeals are identical, except variation in quantum additions, therefore, for the sake of convenience, we dispose of both the appeals by this common order.
2. The grounds raised by the assessees in the appeals reads as under:
“1. Ld. AO erred in law as well as on facts in disallowing entire transportation expenses of Rs.16,76,190/- incurred against the transport income of Rs.18,12,123/- and taxing the entire income without allowing any expenditure and Ld. CIT(A) erred in confirming the same.
2. Ld. CIT(A) erred in law as well on facts in denying the fact that the property are used for business purpose and confirming addition under the head income from House Property by determining fair market rentable rent on estimation basis.
3. Id. CIT(A) erred in law and in fact in confirming disallowance of Interest Expense of Rs.1,79,154/- stating that appellant has not established that borrowed funds are utilized for purpose of business or any interest income received on funds advanced out of only borrowed funds.”
ITA No.364/RJT/2017 (Shri Ashwinbhai Chunilal Bhayani)
“1. Ld. AO erred in law as well as on facts in disallowing entire transportation expenses of Rs.16,90,417/- incurred against the transport income of Rs.18,82,619/- and taxing the entire income without allowing any expenditure and Ld. CIT(A) erred in confirming the same.
2. Ld. CIT(A) erred in law as well on facts in denying the fact that the property are used for business purpose and confirming addition under the head income from House Property by determining fair market rentable rent on estimation basis.
3. Ld. CIT(A) erred in law and in facts in confirming disallowance of Interest Expense of Rs.4,97,284/- stating that appellant has not established that borrowed funds are utilized for purpose of business or any interest income received on funds advanced out of only borrowed funds.”
3. As could seen in the grounds of appeals reproduced above, grounds raised in these appeals are identical except variation in the quantum of amounts. Therefore, we take the facts from ITA No.363/Ahd/2017 in the case of Anilbhai Chunilal Bhayani.
4. Brief facts of the cases are that assessees are having income from freight charges from transport business. In the case of Anil Chunilal Bhyani, return of income has been filed declaring total income at rs.4,64,370/-26.10.2013 and in the case of Shri Ashwin Chunilal Bhayani of Rs.3,44,750/-on 26.10.2013. Both the returns were processed under section 143(1) of the Act, and thereafter, they were selected for scrutiny assessment and notices under sections 143(2) were issued and served upon the assessee. During the assessment proceedings it was noticed by the AO that the assessee has claimed an expenses of Rs.16,76,190/- [in the case of Shri Anil Chunilal Bhayani] and Rs.16,90,458/- in the case of Shri Ashwin Chunilal Bhayani from operating of trucks having registration no.GJ-10X-8741 and GJ-10X-8748 respectively. The AO further noticed that these trucks were not shown in their respective balance sheets for the year under consideration, and therefore, he doubted the authenticity of the claim. It was explained by the assessees that the same were taken on hire basis, and therefore, they were not shown in the balance sheets. The assessees have filed bills/vouchers related to support the expenses claimed by them. However, the ld.AO did not satisfy with the explanation of the assessee for the reason that assessee has not furnished contract agreement and payment of hire charges to the owner of the truck. He further observed that on perusal of the cash and bank book, there were no entries demonstrating any payment made towards hire charges, therefore, assessee failed to prove expenses towards hire charges paid to the owners, accordingly, the ld.AO made respective additions.
5. Assessees went in appeal before the first appellate authority. Before the ld.CIT(A) it was submitted that similar income and expenditure claimed for assessment year 2012-13 and in the past years were accepted by the Department. Before the ld.CIT(A) assessee has submitted copy of the truck operating agreement with JC & Co, along with supporting bills/vouchers to prove their claim. The assessee has also given point wise detailed reply in tabular form, which the ld.CIT(A) has noticed in his impugned order from page no.12 to 15, and they read as under:
