ITAT disallows Fake Claim for Deduction as Rent paid to Mother was an afterthought [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has disallowed a fake claim for deduction because it was proved that the rent paid to mother was nothing, but an afterthought to claim tax deduction.

The assessee, a salaried employee, claimed deduction on interest on borrowed capital at Rs.8,27,014/- under s.24 of the Act under the head ‘income from house property’. During the proceedings, the Assessing Officer noted that the assessee has not derived any income from house property for the purposes of annual value contemplated under section 23 of the Act and accordingly raised query allowability of deduction of interest against the self-occupied house property whose annual value was declared at nil in the return of income by the assessee.

In response, the assessee submitted that he owns a residential property at Shilaj Railway Crossing alongwith his mother as a co-owner. The assessee claims to have let out the co-owned property to her mother at a rent of Rs.30,000/- per month in cash. The assessee further claimed that he has occupied a property situated at Vastrapur belonging to her mother at Rs.42,000/- per month.

Diving deeply into the facts of the case, the Tribunal observed that the assessee, at first instance, has not declared rental income while filing the return of income duly verified under s.140 of the Act.

“The omission to disclose the so-called rent income derived from mother in the return of income is not explained. Needless to say, a person filing the return of income requires to verify the contents of the return to be true and any falsification in such verification has serious consequences under Chapter XXII of the Act. Thus, the income claimed to have been received and not declared in the return cannot be seen in a light-hearted banner. The assessee has conveniently revised the computation to introduce the source of rental income from mother who also happens to be co-owner of the same property.”

The Tribunal said that “The receipt has been shown to be in cash to shun any possibility of verification. Thus, no trail is available to verify the correctness of the version of the assessee in a reasonable manner. Thus, one has to rely only on the preponderance of probabilities. The version of the assessee is prima facie improbable having regard to the ground realities. The assessee neither satisfies the condition from exclusion from the ambit of Section 23(2) of the Act nor satisfies its case for inclusion under s.23(3) of the Act on facts. The lower authorities have rightly questioned the veracity of claim of property being actually let out. The affidavit filed was clearly bald and a self-serving document. No cross examination of the deponent of the affidavit has been offered therein.”

“It is also difficult to comprehend such a claim of the assessee on the touch-stone of societal value prevalent and ethos in Indian society. The case of the assessee towards claim of rent from mother for occupation of his house clearly appears be eyewash to merely put the property in the bracket of Section 23(3) of the Act with a view to claim deduction of full interest costs without any restriction applicable to self-occupied house. The assessee has referred to the decision of the co-ordinate bench in Smt. Tupur Chatterji (supra) which does not appear to be any assistance to the case of the assessee in hand in view of altogether different factual matrix,” the Tribunal said.