SHYAM SUNDER KEDIA,MUMBAI V. THE DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE-46, KOLKATA, KOLKATA

ITA 629/KOL/2025

AI Insights

The case involves an appeal by Shyam Sunder Kedia against the order of the Commissioner of Income-tax (Appeals), which had dismissed his appeal concerning the assessment order passed under section 143(3) of the Income Tax Act. The primary contention was that the assessee's income was taxed twice under the head 'business income', and certain expenses were disallowed without proper basis. The Tribunal examined the issues of double taxation of income, adhoc disallowances on car-related expenses, and the addition of notional interest on unsecured loans. The Tribunal found that the lower authorities had erred in their assessments and rectifications, leading to the decision to allow the appeal and direct the deletion of the contested additions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772530 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2021-2022
• Other Referred Cases: PCIT Vs Shapoorji Pallonji & Co. Ltd, CIT Vs HDFC Bank Ltd, CIT Vs. Reliance Utilities & Power Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSANTA SAHA
• Assessee Lawyers: RAKESH JOSHI
• Keywords: Set aside; Business income; Notional interest
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM ITA No.629/KOL/2025 (Assessment Year:2021-22) Shyam sunder Kedia A/1091, Ivy Tower, Vasant Valley complex, film city Road, Malda East, Mumbai-400 097 Vs. The DCIT 3, Government Place West, Government Place, BBD Bagh, Kolkata-700 001, West Bengal (Appellant) (Respondent) PAN No. ACJPA3626P Assessee by : Shri Rakesh Joshi, AR Revenue by : Shri Susanta Saha, DR Date of hearing: 31.07.2025 Date of pronouncement: 28.08.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals), ADDL/ JCIT (A) Indore (hereinafter referred to as the “Ld. CIT(A)”] dated 20.02.2025 for the AY 2021-22. 02. At the outset, the ld. Counsel for the assessee stated that the ld. CIT (A) dismissed the appeal of the assessee on the ground that this appeal has been filed against the intimation u/s 143(1) of the Act dated 08.07.2022, whereas the contention raised by the assessee are against the assessment order passed u/s 143(3) of the Act. Thus, ld CIT(A) dismissed the appeal of the assessee without considering the merits of the case. Printed from counselvise.com Page | 2 ITA No.629/KOL/2025 Shyam Sunder Kedia; A.Y. 2021-22 03. The ld. Counsel for the assessee, on the other hand, submitted that in this case an intimation u/s 143(1) dated 08.07.2022 was passed ld. AO, CPC by processing the return filed by the assessee on 14.02.2022. The ld. AR submitted that the assessee has declared a total income of ₹1,61,820/-, however, while processing the return of income, the ld. AO/CPC has wrongly added a sum of ₹3,43,70,994/- under the head business income by overlooking the fact that the assessee has already declared the said amount of income under the appropriate heads of income in the return of income itself while filing the return of income. The ld. AR while referring to the order passed by the CPC u/s 143(1) of the Act which is available from page no.1 to 27 of the Paper Book submitted that the assessee has offered the said income under the various heads as per detail below: - 04. The ld. AR therefore prayed that the ld. AO /CPC has wrongly brought to tax the same income again which has already offered to tax in the return of income. The ld. AR submitted that the ld. AO / CPC noted that these amounts were credited to the Profit and Loss account but not shown under the business income while filing the return of Printed from counselvise.com Page | 3 ITA No.629/KOL/2025 Shyam Sunder Kedia; A.Y. 2021-22 income. The ld. AR submitted that the assessee has filed a rectification application to the ld. AO / CPC but, in the meantime the case of the assessee was selected for complete scrutiny under Computer Assisted Scrutiny Selection (CASS) and hence, CPC transferred the rectification right to the ld. AO. 05. The ld. AR further submitted that in the assessment order passed, the ld. AO started the computation of income by taking into amount the income as determined by CPC in the intimation issued u/s 143(1) of the Act instead of taking into account the income as per the income tax return thereby ignoring the rectification application and also did not grant any opportunity of hearing to the assessee. 06. The ld. AR further submitted that the ld. AO also disallowed a sum of ₹12,63,469/- on adhoc basis which is aggregate of disallowances made in respect of Car leased rent and repairs and maintenance. The Car leased rent was disallowed Rs. 11,90,934/- @50% of ₹ 23,81,868/- while the repairs and maintenance was disallowed Rs. 72,535/- being @ 50% of ₹ 1,45,078/- on the ground that the said expenses were not used for the purpose of business as the personal use cannot be ruled by ignoring the detail submission by the assessee. The ld. AR further submitted that the ld. AO has also made an addition of ₹35,20,200/- on account of notional interest which was calculated at the rate of 12% on unsecured loans given to Amra Abid Khan and advance to HBS Group company. The ld. AR submitted that the assessee has sufficient interest free funds amounting to ₹58.85 crores as is evident from the audited balance sheet filed which is available in page no. 28 to 35 of the Paper Book and accordingly, submitted that these unsecured loans/ advances were made out of interest free funds available with the assessee and Printed from counselvise.com Page | 4 ITA No.629/KOL/2025 Shyam Sunder Kedia; A.Y. 2021-22 therefore, no notional disallowance of interest is called for and may kindly be deleted. 07. The ld. AR submitted that the assessee has filed an appeal against the appellate order of ld. CIT (A) which has upheld the order of the ld. AO on the ground that grounds raised by the assessee are against the assessment framed u/s 143(3) whereas appeal was filed against order passed u/s 143(1) of the Act. The ld. AR submitted that, while filing the appeal a typographical mistake has happened that instead of mentioning Section 143(3), it was wrongly mentioned as section 143(1) of the Act on account of which the ld. CIT (A) summarily rejected and dismissed the appeal of the assessee. 08. The ld. DR on the other hand submitted that the appeal was rightly dismissed by the ld. CIT (A) when the appellate authority noticed that appeal was filed mentioning wrong section and therefore, the appeal of the assessee may be dismissed. 09. The grounds of appeal no. 1 to 7 are not pressed and accordingly not adjudicated. 010. After hearing the rival contentions and perusing the materials available on record, we find that there are three effective issues involved in this appeal (i) Addition of the same income twice i.e. first assessee suo motto offered to tax, the amount of income of ₹3,43,70,994/- as extracted (supra) and the ld. AO /CPC by adding the said amount again under the head “income from business”. (ii) Adhoc addition of 50% of expenses under the head motor car lease and motor car maintenance of ₹12,63,469/- and (iii) Addition of notional interest of ₹35,20,200/- in respect of interest free loans granted by the assessee during the year. Printed from counselvise.com Page | 5 ITA No.629/KOL/2025 Shyam Sunder Kedia; A.Y. 2021-22 011. Since these issues are apparent from the records before us which are either on account of double taxation of same incomes and also disallowances on estimated basis. Therefore, in our opinion, the restoration of these issues to the file of the ld. AO or ld. CIT (A) would unnecessarily involve wastage of time and resources of the department and would also be against the policy of the Govt of India not to litigate small issues. Therefore, we are not inclined to restore this appeal to either of the authorities below and all these issues are being adjudicated at this level as all the facts are available before us and no verification of facts is required to be done at the level of the ld. AO whatsoever as under: i. So far as the first issue is concerned which is raised in the ground no. 7 , we find that the assessee has suo motto declared and offered the amount of incomes in respect of dividend, saving bank interest, income from partnership, interest, LTCG, STCG and director remuneration under various heads of income such as house property, other sources, Profit and gain from business and profession , capital gain, salary, etc. We have examined the income tax return filed by the assessee and also various schedules under which these amounts of income were offered to tax. However, the ld. AO / CPC wrongly noted that these amounts as shown in the profit and loss account were not assessed to tax under the head income from business and profession and thus made addition under the head from business and profession which has resulted into double taxation of the same income which in our opinion is not permissible under the Act. Therefore, we set aside the Printed from counselvise.com Page | 6 ITA No.629/KOL/2025 Shyam Sunder Kedia; A.Y. 2021-22 order of the ld. CIT (A) and direct the ld. AO to delete the addition of ₹3,43,70,994/-. The ground no. 7 is allowed. ii. So far as adhoc addition of ₹50% motor car lease and motor car maintenance is concerned which is raised in ground no. 8, we find that the ld. AO has not given any finding in the assessment order passed u/s 143(3) of the Act and only noted that the assessee has not offered any proper explanation or clarification or submission with regard to log book to prove that these expenses were wholly and exclusively incurred for the purposes of the business of the assessee and thus, the personal use of car by the assessee as well as use by the employees could not be denied and accordingly, disallowed 50% of the total expenses under the head car lease rental which comes to ₹11,90,934/- and 50% of repair and maintenance of cars which comes to ₹72,535/-, and addition was made to the income of the assessee accordingly. In our opinion, the addition is based upon the presumptions and surmises and is purely conjuncture of the ld. AO. Therefore, we are inclined to set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. The ground no. 8 is allowed. iii. The third issue raised in ground no. 9 is against the addition/disallowance of notional interest of Rs. 35,20,200/-. We observe from the balance sheet filed by the assessee that the capital of the assessee as on 31.03.2021 was ₹55,.85 crores, while opening balance as on 01.04.2020 was 57.96 crores as per the audited balance sheet. The loan and advances were granted to two Printed from counselvise.com Page | 7 ITA No.629/KOL/2025 Shyam Sunder Kedia; A.Y. 2021-22 concerns namely; ₹1,93,35,000/- to Amra Abid Khan and ₹ 1,00,00,000/- to HBC group companies advanced free of interest. According to the ld. AO, since the assessee has advanced interest free funds, he calculated the notional interest at the rate of 12% Per Annum thereby making an addition of ₹35,20,200/- to the income of the assessee by ignoring the fact that the assessee has huge interest free funds available in the business which were far more than the amount of unsecured loans/ advances made free of interest. Therefore, the order passed by the ld. AO is wrong and cannot be sustained. The case of the assessee find support from the decision of PCIT Vs Shapoorji Pallonji & Co. Ltd (2024)164 taxmann.com708(SC), CIT Vs HDFC Bank Ltd(2024) 366ITR505(Bom) and CIT Vs. Reliance Utilities Utilities & Power Ltd. (2009) 313ITR 340(Bom).Accordingly, we set aside the order of the ld. CIT (A) and direct the ld. AO to delete the addition. The ground no. 9 is allowed. 012. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 28.08.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 28.08.2025 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 8 ITA No.629/KOL/2025 Shyam Sunder Kedia; A.Y. 2021-22 Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "