RAKESHKUMAR WADHAWAN, MUMBAI V. ACIT- CC 5(4), MUMBAI

ITA 3025/MUM/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1556 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 09-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Deemed owner of house property; Principle of natural justice; Earning of tax free income; Corroborative evidences; Rule 8D
• Section: 143(3); 142(1); 14A; 143(2); 2(A); 13

Judgement Text

ITA No.3025/Mum/2018 A.Y. 2013-14 Shri Rakesh Kumar Wadhawan Vs. ACIT, CC-5(4) 1 IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.3025/Mum/2018 (A.Y. 2013-14) Shri Rakesh Kumar Wadhawan, Thar & Co., 203, Capri Building, Opp. HDIL Towers, Anant Kanekar Marg, Bandra (E), Mumbai – 400 051 Vs. ACIT, Central Circle 5(4) Room No. 1927, 19 th Floor, Air India Building, Nariman Point, Mumbai – 400 021 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAEPW7656G Appellant .. Respondent Appellant by : None Respondent by : Smt. Mahita Nair Date of Hearing 10.08.2022 Date of Pronouncement 29.08.2022 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal of the assessee is directed against the order of the ld. CIT(A)-53, Mumbai which in turn arises from the order passed by the A.O. u/s 143 for A.Y. 2013-14. The assessee has raised the following grounds before us: “(1) The learned CIT(A) has erred in law and on facts in upholding the order passed by the Assessing Officer u/s 143(3) of the Income-tax Act 1961 which is bad in law and against the principle of natural justice. ITA No.3025/Mum/2018 A.Y. 2013-14 Shri Rakesh Kumar Wadhawan Vs. ACIT, CC-5(4) 2 (2)(a) The Learned CIT(A) has erred in law & on facts in partly upholding the disallowance made u/s 14A of the Income Tax Act, 1961 in the order of Income Tax passed by the Assessing Officer u/s 143(3) of the Income Tax Act 1961 which is invalid and bad in Law. (b) The Learned CIT (A) has erred in directing the learned AO to re- compute the quantum of disallowance of direct interest expenses under rule 8D(2)(i) being interest on overdraft bearing No CA 1407/3216 directly relatable to his investment to the tune of Rs.29,46,83,950/- in shares of Privilege Healthcare Services Pvt. Ltd. (c) The Learned CIT (A) has erred in law & on facts in enhancing disallowance u/s Rule 8D(2)(iii) to the tune of Rs.23,52,851/-, being 50% of administrative expenses aggregating to Rs.47,05,703/- as considered by the Ld CIT(A) for earning the exempt income, which is bad in law. (3) The Learned CIT (A) has erred in law & on facts in upholding imposition of interest under section 234D of the Act in the order of Income Tax passed by the Assessing Officer u/s 143 (3) of the Income Tax Act 1961 which is bad in law. (4) The Learned CTT (A) has erred in law & on facts in upholding the Learned AO's action of disallowing society charges to the tune of Rs 3,07,326/- which is bad in law. (5) The Learned CIT (A) has erred in law & on facts in upholding the Learned AO's action of disallowing construction charges to the tune of Rs.2,19,835/- which is bad in law. (6)(a) The Learned CIT (A) has erred in law & on facts in upholding the Learned AO's action of making addition of Deemed Let Out Property (Net) to the tune of Rs.1,80,600/- u/s 23(4) of the IT Act, 1961, which is bad in law. (b) In this connection, the Learned CIT (A) has further erred in law & on facts in upholding the Learned AO's action of in not accepting the decision of the Hon'ble Mumbai Tribunal in the case of M/s C.R. Developments Pvt. Ltd V/s JCIT-8 (1) (OSD), Mumbai Pronounced on 13-05.2015. (c) The Learned CIT(A) has erred in law & on facts in upholding the Learned AO's action of relying on the decision of Hon'ble Delhi high Court in the case of Ansal Housing & Leasing Co Ltd (2013). (7) The Appellant craves leave to add to and/ or amend and/ or delete and/ or modify and/ or alter the aforesaid grounds of appeal as and when the occasion demands. (8) All the aforesaid grounds of appeal are independent, in the alternative and without prejudice to one another.” 2. This case was listed for hearing for more than 13 times but no one has attended from the side of the assessee, therefore, the appeal filed by ITA No.3025/Mum/2018 A.Y. 2013-14 Shri Rakesh Kumar Wadhawan Vs. ACIT, CC-5(4) 3 the assessee is adjudicated after hearing the ld. D.R and after taking into consideration the material on record. 3. The fact in brief is that return of income declaring total income of Rs.11,56,600/- was filed on 28.09.2013. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 03.09.2014. The assessment u/s 143(3) of the Act was completed on 31.03.2016 and total income was assessed at Rs.3,95,53,686/- after making various additions. The further relevant fact of the case are discussed while adjudicating the various grounds of appeal filed by the assessee as under: Ground No. 1: Order passed by the A.O u/s 143(3) is bad in law and against the principle of natural justice: 4. On a perusal of the material on record we find that sufficient opportunity have been given by the A.O by issuing of notices u/s 143(2) and 142(1) of the Act and thereafter the assessment under section 143(3) was completed on the last day i.e 31.03.2016 which was initiated by issuing of notice u/s 143(2) of the Act on 03.09.2014. Even during the course of appellate proceedings before the ld. CIT(A), various submission made by the assessee were considered before deciding the appeal of the assessee. Therefore, we don’t find any merit in this ground of appeal of the assessee and the same stand dismissed. Ground No. 2(a) to 2(c): 5. During the course of assessment on verification of the detail filed by the assessee the A.O noticed that assessee has made investment in the equity shares of various private limited companies to the amount of ITA No.3025/Mum/2018 A.Y. 2013-14 Shri Rakesh Kumar Wadhawan Vs. ACIT, CC-5(4) 4 Rs. 8,76,62,70,208/-. The A.O has computed disallowance u/s 14A r.w.rule 8D to the amount of Rs.4,44,16,024/-. During the course of appellate proceedings before the ld. CIT(A) the assessee filed detailed submission. The ld. CIT(A) stated that assessee was in receipt of tax free dividend of shares of Indian Companies besides the assessee had share in the profit loss from partnership firm M/s Bassein Industrial Development Corporation (BIDC). The ld. CIT(A) further stated that assessee was having substantial opening investment of Rs.876.72 crores as on 01.04.2011 and having closing investment of Rs.902.85 crores as on 31.03.2012 in shares of its group and other companies. The ld. CIT(A) has also observed that assessee was not maintaining separate accounts for the purpose of exempt income and had a mixed pool of fund which were utilized for the business and investment activities carried out by the assessee. The ld. CIT(A) has further stated that all the essential elements for invoking the provision of Sec. 14A were present in the case of the assessee and A.O had duly recorded his satisfaction for rejecting the claim of nil disallowance u/s 14A made by the assessee. After taking into consideration the detail filed by the assessee the ld. CIT(A) directed the assessee to furnish working of interest of overdraft account to the assessing officer who will verify the same and make further disallowance under rule 8D(2)(ii) accordingly. As regards disallowance of Rs.4,44,18,371/- made by the A.O under Rule 8D(2)(iii) the ld. CIT(A) stated that same was far in excess of the actual administrative expenses debited by the assessee to the profit and loss account. The assessee had debited administrative expenses aggregating to Rs.73,48,067/- including rent, rates and taxes, society charges, electricity charges, legal expenses, professional fees, bank charges, printing and stationery expenses, audit fees and miscellaneous expenses, ITA No.3025/Mum/2018 A.Y. 2013-14 Shri Rakesh Kumar Wadhawan Vs. ACIT, CC-5(4) 5 which were found to be attributable to the business as well as investment activities carried on by the assessee. Therefore, the ld. CIT(A) held that it was considered fair and reasonable to treat 50% of the said administrative expenses i.e Rs.36,74,034/- as relatable to the earning of exempt income. In other words the CIT(A) held that disallowance of administrative expenditure under Rule 8D(2)(iii) will come to Rs.36,74,034/- as against Rs.4,44,18,371/- made by the A.O. To sum up the ld. CIT(A) has directed the A.O to compute the quantum of disallowance of direct expenses under Rule 8D(2)(i) as mentioned above in para 5.3.4 of the order of the ld. CIT(A) and the disallowance under Rule 8D(2)(iii) was determined at Rs.36,l74,034/- as against Rs.4,44,18,371/- made by the assessing officer. After taking into consideration the detailed finding of the ld. CIT(A) has elaborated above we don’t find any infirmity in the decision of ld. CIT(A), therefore, the ground nos. 2(a) to 2(c) of the assessee stand dismissed. Ground No. 3: Imposition of interest u/s 234D of the Act: 6. After perusal of the material on record and hearing the ld. D.R it is observed that ld. CIT(A) had discussed this issue at para no. 6.1 to 6.3 of his order and stated that charging of interest is consequential to the assessed income and it was mandatory. Before the ld. CIT(A) neither the assessee has made any submission nor explained that charging of interest u/s 234D was not in accordance with law. Looking to the finding of the ld. CIT(A) and material on record we don’t find any error in the decision of ld. CIT(A), therefore, this ground of appeal of the assessee stand dismissed. ITA No.3025/Mum/2018 A.Y. 2013-14 Shri Rakesh Kumar Wadhawan Vs. ACIT, CC-5(4) 6 Ground No. 4: Disallowing society charges to the amount of Rs.3,07,326/-: 7. During the course of assessment the A.O has asked the assessee to furnish the detail of society charges of Rs.3,07,326/- claimed in the profit and loss account. However, the assessee has failed to furnish the required detail, therefore, the A.O has disallowed the same even during the course of appellate proceedings before the ld. CIT(A) the assessee has failed to explain the nexus of this payment with the business of the assessee and no documentary evidences were furnished, therefore, considering the detail facts and finding of ld. CIT(A) we don’t find any merit in the appeal of the assessee, this ground of appeal of the assessee also stand dismissed. Ground No. 5: Disallowance of construction charges of Rs.2,19,835/- 8. During the course of assessment the A.O noticed from profit and loss account that assessee has claimed construction expenses amounting to Rs.2,19,385/-. The A.O has considered such expenses of capital nature, therefore, assessee was asked to explain his claim of these expenses being revenue nature along with supporting evidences. However, the assessee failed to make any explanation, therefore, the A.O disallowed such expenses by treating the same of capital nature. During the course of appellate proceedings before the ld. CIT(A) the assessee failed to furnish any detail and supporting evidences in support of its claim, therefore, addition made by the A.O was sustained. Considering the facts and finding of the ld. CIT(A) this ground of appeal of the assessee also stand dismissed. ITA No.3025/Mum/2018 A.Y. 2013-14 Shri Rakesh Kumar Wadhawan Vs. ACIT, CC-5(4) 7 Ground No. 6: Addition on account of deemed let out property to the amount of Rs.1,80,600/- u/s 23(4) of the Act: 9. During the course of assessment the A.O observed that assessee was the owner of 13 properties, however he had offered rental income in respect of 10 properties only. Therefore, in respect of 3 properties for which no rent has been offered under the head income from house property, the A.O has computed deemed rent to the amount of Rs.1,80,600/- and added to the total income of the assessee. During the course of appellate proceedings before the ld. CIT(A) the assessee has neither submitted any detail in support of his claim nor filed any detail to the query of the ld. CIT(A) that the properties have been shown as investment and not as stock-in-trade. Therefore, we don’t find any error in the decision of ld. CIT(A) and this ground of appeal of the assessee also stand dismissed. 10. In the result, the appeal of the assessee stand dismissed. Order pronounced in the open court on 29.08.2022 Sd/- Sd/- (PAVAN KUMAR GADALE) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 29.08.2022 PS: Rohit ITA No.3025/Mum/2018 A.Y. 2013-14 Shri Rakesh Kumar Wadhawan Vs. ACIT, CC-5(4) 8 आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अिीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंतधि आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अिील) / Concerned CIT 5. तिभागीय प्रतितनतध, आयकर अिीलीय अतधकरण, अहमदाबाद / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्यातिि प्रति //True Copy// (Asst. Registrar) ITAT, Mumbai