TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 193
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....tucky Fried Kitchen restaurants in India. These franchisees operate these restaurants under sub license arrangement that in turn has a license arrangement with Kentucky Fried Chicken International Holdings Incorporation and Pizza Hut International LLC. 3. The facts for assessment year 2001 - 02 shows that assessee has made a payment of INR 1,500,000/- to Mezbaan Hoteliers Private Limited ( related party) for obtaining rent-free accommodation for its managing director. Mezbaan Hoteliers Pvt Ltd has entered into lease agreement with Mrs. Surendra Judge for that property for rent of INR 240,000/- per annum being INR 20,000 per month. There is substantial difference in security deposit. It is clear thus, that, Mezbaan Hoteliers Pvt Limited obtained lease of property from Mrs Surendra Judge for Rs. 2,40,000/- p.a. by paying security deposit of Rs. 50,000/- , which in turn Mezban Hoteliers rented out to the appellant assessee for Rs. 15,00,000/- per annum with security deposit of Rs. 50,00,000/. The learned assessing officer disallowed entire amount of lease rent and further made an addition of INR 600,000 on account of national interest at rate of 12% on security deposit of INR 5,000,....
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....such, no penalty can be levied in such cases. All these grounds are titled as ground number 7, 8, 9, 10 and 11 raised as additional grounds. 8. At time of hearing learned counsel submitted that relevant facts are already on record and no new facts are required to be investigated. The above grounds goes to root of matter and therefore same may kindly be admitted and adjudicated placing reliance on decision of honourable Supreme Court in case of National thermal Power Corp 229 ITR 383 (SC). 9. The learned departmental representative vehemently submitted that above grounds should not be admitted at this stage, as they have never been raised either before learned assessing officer or before first appellate authority. Therefore, such a new plea cannot be raised by assessee now. He further submitted that said these additional ground fresh facts are required to be investigated. Assessment record by required to be examined afresh in order to decide this additional ground. Because of facts already on record or placed before learned CIT (A), these additional grounds cannot be decided. Since fresh facts are to be investigated to decide these additional grounds, such additional grounds are ....
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....ce of opinion but it is a clear case of disallowance on facts itself which has been upheld by concurrent authorities. He therefore submitted that these additional grounds should not be admitted at all and penalty levied by learned AO and confirmed by learned CIT - A for all these 3 years deserves to be confirmed. 11. On merits of case learned counsel submitted that assessee has claimed lease rent as allowable under a bona fide belief, which was further substantiated by valuation certificate obtained from an independent registered valuer. She further referred to valuation certificate which is referred at page number 48 in para 27 of order of coordinate bench. She further submitted that it is not case that no explanation has been given by assessee, but explanation supported by valuation certificate is on record and claim of assessee is bona fide. She further stated that all agreements and relevant documents have been filed and no specific default or fact has been found incorrect or false by AO. She further stated that AO has allowed rental payments made in other years. She heavily relied on decision of honourable Supreme Court in Reliance Petroprodcuts Pvt Ltd 322 ITR 158 stating th....
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....ssessee cannot be invited with penalty. She further stated that when issue is debatable and two views were possible as regards to fair market value of rental payment, thus no penalty could be levied on such an issue. 13. On another issue of alleged personal expenditure of INR 7500/- and INR 59,102/- for assessment year 2001 - 02 and 2004 - 05 , respectively, on which penalty has been levied, she submitted that for assessment year 2001 - 02, appellant has incurred an expenditure of INR 7 500/- on account of car accessories for employees of company as per company policies which were treated as perquisites in hands of employees. The learned assessing officer disallowed above expenditure. For assessment year 2004 - 05 appellant has incurred certain expenditure on account of house maintenance and computer maintenance for employees of company, these expenses were incurred as per staff welfare and maintenance expenditure and was claimed as revenue expenditure allowable u/s 37 of income tax act. The coordinate bench also confirmed action of learned assessing officer and did not allow claim of expenditure of assessee. Therefore, penalty is also levied on this expenditure. On these issues,....
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.... assessee is nature and complexity of accounts resulted into reference for special audit u/s 142 (2A). On basis of special audit notice, u/s 148 read with section 147 of act was issued on 28/11/2005. The assessee filed its return of income stating that original return filed on 31/10/2001 may be treated as return in response to notice for reopening of assessment. Thus assessment u/s 143 (3) read with section 147 of income tax act was passed on 29/12/2006 wherein several disallowances were made. One of disallowance on which penalty is levied is disallowance of lease rent paid to Mezbaan Hoteliers Pvt Ltd of INR 1,500,000 and further addition of INR 600,000 on account of unclaimed interest from related parties Mezbaan Hoteliers Pvt Ltd for interest free security deposit for rent of property of Rs. 50,00,000/-. 16. The brief fact of above issue shows that there is a lease agreement existing between Mrs. Surendra judge and MEzbaan Hoteliers private limited dated 01/06/2000 for rent for use of house situated at S - 137, Punchsheel Park, New Delhi 17 for annual rent of INR 240,000/- [ Rs. 20,000/- p.m.] . The assessee entered into sub lease agreement with Mezbaan hoteliers private limite....
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....nch-consolidated order for assessment year 2002 - 03, 2003 - 04 and 2006 - 07 at page number 1 - 10 of paper book. However, order of coordinate bench for assessment year 2001 - 02 was not placed in paper book. Thus while deciding issue, we do not have privilege of looking at order of CIT appeal and coordinate bench for impugned assessment year 2001 - 02, for which penalty has been levied and confirmed by lower authorities. However, facts are identical as we could catch from order for assessment year 2002 - 03 placed at page number 68 of paper book. At para number 41 facts are culled out which are identical to facts for assessment year 2001 - 02. It shows that assessee has paid rent of INR 1,500,000, which was disallowed by learned assessing officer, learned CIT - A confirmed disallowance of only INR 900,000 holding that reasonable rent would be INR 50,000 of property. On appeal before coordinate bench in para number 46 coordinate bench held that reasonable rent cannot be allowed of INR 50,000 as held by learned CIT - A when reasonable rent could only be INR 20,000 per month which is paid by recipient of rent from assessee to Surendra judge. Thus, original disallowance made by AO o....
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....fication in the whole transaction that security deposit paid to the related party is hundred times higher than the security deposit paid by the related party to the person from who is the original owner of the property. Thus, the addition is not confirmed on the estimate but on the sound logic that the transaction is sham. Even in the penalty proceedings, the assessee failed miserably to justify that why the rent was paid 6 times higher and interest free securities deposit are hired by hundred times for the same property. Before us, there is no justification coming forth from the assessee. No decisions cited by the learned authorised representative match the startling facts of the present case where the rent is paid 6 times higher than the actual rent and interest free security deposit is hundred times higher of the same property. Thus, reliance on all these decisions by the learned authorised representative is rejected. Further, the argument of the learned counsel that there is a difference of opinion on the issue of the above disallowance is also devoid of any merit for the reason that the learned assessing officer, the learned CIT appeal and the coordinate bench has reached at t....
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..... The honourable Karnataka High Court in para number 63 in Commissioner of Income-tax v. Manjunatha Cotton & Ginning Factoryjavascript:void(0); [2013] 35 taxmann.com 250 (Karnataka)/[2013] 218 Taxman 423 (Karnataka)/[2013] 359 ITR 565 (Karnataka)/[2013] 263 CTR 153 (Karnataka) has held as under:- p) Notice under Section 274 of Act should specifically state grounds mentioned in Section 271(l)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income (q) Sending printed form where all ground mentioned in Section 271 are mentioned would not satisfy requirement of law. Further, in 73 taxmann.com 241 honourable Karnataka High Court in CIT vs SSA emeralds Meadows has also held that when tribunal has allowed appeal filed by assessee holding that notice issued by AO u/s 274 read with section 271 (1) (c) of income tax act 1961 to be bad in law as it did not specify which Limbaugh of section 271 (1) (c) rd of act, penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The tribunal while allowing appeal of assessee has relied on decision of division bench ....