KIRAN MEHTA,MUMBAI vs. ASSTT. CIT,CENTRAL CIRCLE-34, MUMBAI

आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

Kiran Mehta. 28.03.14 for AY 2010-11 on the grounds mentioned herein below:- 1. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in enhancing the appellant income without providing the sufficient opportunity of being heard to the appellant, which is in violation of principles of natural justice.

2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in enhancing the appellant income by Rs.9,00,000/-by re-computing the value of perquisite for rent free accommodation at Rs.22,50,000/- instead of Rs.13,50,000/- as offered by the appellant, without considering the facts and circumstances of the case.

5. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in enhancing the appellant income by Rs. 12,90,00,000/- on account of alleged renovation and furnishing of the three flats, without considering the facts and circumstances of the case.

6. The appellant craves leave to add, amend, alter or delete the said ground of appeal.

Kiran Mehta. 3. As per the facts of the present case, assessee is individual and derives income from salary, house property, business income, capital gains and other sources. The return of income was filed on 15.10.10 declaring total income at Rs. 2,21,15,693/-. Subsequently, the case was selected for scrutiny and after serving statutory notice and seeking reply, order of assessment u/s 143(3) was passed by AO on 29.12.11 thereby making addition at an assessed income of Rs. 6,51,15,693.

Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties dismissed the appeal of the assessee. Now before us, the assessee has preferred the appeal by raising the above grounds.

Ground No. 1 to 2. 4. Since both the grounds raised by the assessee are inter- connected and inter related andrelates to challenging the order of Ld. CIT(A) in enhancing the assessee’s income without providing sufficient opportunity of being heard to the assessee,

Kiran Mehta. therefore, we thought it fit to dispose of the same by this common order.

by the assessee in para no. 4 and 5 ofits detailed order. The operative portion of the order of Ld. CIT(A) is contained in para no.

5. (5.1 to 5.2) of its order and the same is reproduced below:-

5. I have gone through the submissions of the appellant as also varioussupporting documentary evidences submitted by the appellant. I have also considered the findings of the A.O. in the assessment order. While making the addition of Rs. 4,30,00,000/- in the assessment, the A.O. has relied upon the valuation report of Approved Valuer for determining value of furnishings and renovations of the aforesaid flats. The said valuation report was found to be necessary for Kiran Mehta. adjudicating the appeal. Accordingly, vide this office letter no. CIT(A)-39/ Remand Report! 2013-14 dated 27.09.2013, the A.O. was asked to provide the copy of the approved valuer's report in which approximate cost of furnishing and renovating the flat of the appellant is determined at Rs. 4,30,00,000/-.

5.1 The A.O. vide his office letter no. ACIT/ CC-34/ Remand Report! 2013-14 dated 01.10.2013 submitted the copy of the Approved Valuer's report.

5.2 During the appellate proceedings, the appellant has submitted that it has offered the value of perquisites as per Rule 3 of Income Tax Rules at Rs. 35,29,368/- i.e., Rs. 13,50,000/- for flat and Rs. 21,79,268/- for furniture. While arriving at the said amount of Rs. 35,29,368/-, the appellant has considered the amount of salary at Rs. 90,00,000/- per annum, however, salary as per the resolutionpassed in the AGM of Varun Industries Ltd. dated 27' September,2008 is of Rs. 1,50,00,000/-, copy of the resolution has been submitted by the appellant himself. Similarly, as per the payment slip as well as Form 16 also, the appellant's salary is Rs. 1,50,00,000/- per annum. The appellant himself has stated that the value of perquisite has been calculated as per Rule 3 of Income Tax Rules. However, the appellant failed to Kiran Mehta. appreciate the fact that as per Rule 3(1) of Income Tax Rules, 1962, the salary for the purpose of Rent free accommodation is inclusive of any taxable allowance, bonus, commission etc. However, in the case of appellant, while calculating value of perquisite as per Rule 3, only basic salary of Rs. 90,00,000/- per annum has been considered ignoring the amount of other allowances of Rs. 60,00,000/-. Thus, the calculation of value of perquisites, itself, is factually incorrect. Since the salary for the purpose of valuation of perquisites as per Rule 3 is of Rs. 150 lacs, the value of taxable perquisite in respect of rent free accommodation comes to Rs. 22.50 lacs (15 % of Rs. 150 lacs) as against offered by the appellant at Rs. 13.50 lacs. Hence, to this extent i.e. Rs. 9 lacs (Rs. 22.50 lacs - Rs. 13.50 lacs) addition made is "enhanced". The fact of enhancement has been discussed with the appellant at the hearing held on 27.11.2013, but no clarification was forthcoming from the appellant in this regard. A letter dated 23.01.2004 was issued to the appellant on this ground, but there has been no reply to the said notice/letter. The appellant has also offered Rs. 21,79,268/- as perquisite in respect of cost of furniture of rent free accommodation provided by VIL i.e. 10% of Rs. 2,17,92,677/- shown as cost of furniture by VIL in its books of accounts. The same is found to be Kiran Mehta. correct and hence, accepted. Accordingly, there will not be any addition on account of perquisite value of furniture. In the assessment, addition has been made at Rs. 4,30,00,000/- on account of value of perquisite in respect of cost of furniture on the basis of valuation report of the approved valuer. I find that no addition can be made on account of perquisite value of cost of furniture as the appellant had correctly offered to tax Rs. 21,79,268/- (i.e. 10% of Rs. 2,17,92,677/-) in this respect. Since value of perquisite in respect of rent free accommodation is increased by Rs. 9 lacs from the returned value of Rs. 13.50 lacs ( as has been explained in the para 6 of my order), only to that extent addition can be made in the hands of the assessee as value of perquisite. Thus, the balance addition made on account of perquisite is deleted.

After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and submissions made by Ld. DR, we find that AO while making additions had relied upon the valuation report of Approved Valuer for determining value of furnishings and renovations of the aforesaid flats in question. During the appellate proceedings,

Kiran Mehta. the assessee had submitted that it has offered the value of perquisites as per Rule 3 of Income Tax Rules at Rs. 35,29,368/- i.e., Rs. 13,50,000/- for flat and Rs. 21,79,268/- for furniture. While arriving at the said amount of Rs. 35,29,368/-, the assessee had considered the amount of salary at Rs. 90,00,000/- per annum, however, salary as per the resolution passed in the AGM of Varun Industries Ltd. dated 27.09.2008 wasRs. 1,50,00,000/-, copy of the resolution has been submitted by the assessee himself. In addition to above, as per the pay slip as well as Form 16, assessee’s salary wasRs. 1,50,00,000/- per annum. The assessee himself had stated that the value of perquisite had been calculated as per Rule 3 of I.T. Rules. However, the assessee had failed to appreciate the fact that as per Rule 3(1) of Income Tax Rules, 1962, the salary for the purpose of Rent free accommodation is inclusive of any taxable allowance, bonus, commission etc. Thus the calculation of the value of perquisite itself was factually incorrect. Since the salary for the purpose of valuation of perquisites as per Rule 3 wasRs. 150 lacs, the value of taxable perquisite in respect of rent free accommodation comes to Rs. 22.50 lacs. As per record, the fact of enhancement Kiran Mehta. was discussed with the assessee on 27.09.11 and in this respect, a letter dated 23.01.04 was issued to the assessee and after providing due opportunity and discussion, the order was passed. Moreover, there is no rebuttal by the assessee to the findings of Ld. CIT(A) and even no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these grounds raised by the assessee stands dismissed.

Ground No. 3 to 5. 6. Since all the grounds raised by the assessee are inter- connected and inter related andrelates to challenging the order of Ld. CIT(A) in enhancing the appellant income by making an addition on account of alleged Unexplained Expenditure incurred by assessee without considering the facts and circumstances of Kiran Mehta. the case,therefore we thought it fit to dispose of the same by this common order.

by the assessee in para no. 6 of its detailed order. The operative portion of the order of Ld. CIT(A) is contained in para no.

6. (6.1 to 6.4) of its order and the same is reproduced below:-

In connection with the appeal filed by you for A.Y 2010-11 you are required to submit the following:- i) The Profit and Loss A/c., Balance Sheet as on 21.3.2010 in respect of your business wherefrom you have declared a profit of Rs. 29,46,113/-may be submitted. The capital account may also be submitted. So also the capital account balance sheet and profit and loss for earlier two years may be submitted. ii) It is noticed that the assessee has three flats in Vardhaman Apartments, Byculla i.e. flat no. 1901, 1902 and 1903. It is seen that flat no. 1904 is owned by Varun Industries Ltd., The complete details and documentary evidence in respect of the other three flats purchased, alongwith proof of payment and source thereof may be furnished. iii) The details of expenditure incurred on renovation and furnishing of flat no. 1901, 1902 and 1903 may be furnished and it may be explained where Kiran Mehta. the same is accounted for. The source of expenditure incurred may be furnished. In case the amount of expenditure incurred on renovation and furnishing comes at a rate lesser than 13,230/- per sq.ft it may be explained why such renovation and furniture cost should not be adopted at Rs. 13,230 per sq.ft. i.e the rate given by the Registered Valuer and not challenged by you. Also you are required to show cause why the differential amount should not be added to your income as unexplained expenditure under s. 69C of the Act. iv) A factual submission has been made that the appellant is drawing a salary of Rs. 90 lacs per annum and therefore the corresponding per~~; te value of rent free accommodation being flat no. 1 94 comes toRs. 13,50,000/- (i.e 15% of Rs. 90,00,000/-). It is noticed that the salary as written in the submissions are factually incorrect. As per the documents on record it is seen that as per resolution passed in 12th AGM of Varun Industries Ltd., dated 23 September, 2008, the salary is of Rs. 1,50,00,000. It is noticed that as per payment slip as well the salary shown is Rs. 1,50,00,000/-; the same figure of Rs. 1,50,00,000/- is shown in Form 16 as well. Further, as per Rule 3(1) of Income Tax Rules, 1961, salary for the purpose of computation of rent free housing accommodation is inclusive of any taxable allowance, bonus, commission Kiran Mehta. etc. Thus on this parameter as well salary for the purpose of rent free accommodation comes to Rs. 1,50,00,000. This apparent discrepancy may be explained. v) You are required to submit break-up of expenditure of each of the four flats, incurred towards cost offlat, registration and car parking, electrical, furniture and fixtures and other items of expenditures incurred for the financial years 2004-05 to 2009-10 vi) It is noted that as per the report of the Approved Valuer the cost of renovation offlat and furniture offlat no. 1904 is Rs. 4,30,00,000/-. The Registered Valuer Shri Durga Singh Deora as per report dated 7th August, 2009 has given detailed break-up of such cost with measurement and site map. It is seen that the report of the Registered Valuer's has been accepted, implying that it has been accepted that a total expenditure of Rs. 4,30,00,000/- on renovation, furniture of flat no. 1904 has been incurred. It may be clarified as to what is the expenditure as shown in the books of Varun Industries Ltd., in this regard. In case there is a difference you are required to show cause as to why the differential sum if any, should not be brought to tax as unexplained expenditure under s. 69C in the hands of the appellant.

Kiran Mehta. 6.2 On the date fixed for hearing i.e. 12-02- 2014, the appellant asked for adjournment of two weeks and accordingly, the hearing was fixed for 24.02.2014. Again on 24.02.2014, the appellant sought adjournment and accordingly, the hearing was posted for 04.03.2014. However, on 04.03.2014, neither any one appeared on behalf of the assessee nor the details called for were submitted. Further, till the date of passing the order, there is no further communication from the appellant's side. It appears that the appellant has nothing further to say inthe matter and he is not in a position to sort out the inconsistencies Alloted anddetails called for as above. In spite of giving a number of opportunities, the appellant did not submit any further details.

6.3 The appellant has not submitted any details till the date of passing of this order in spite of specific directions being given. It is the claim of the appellant that except flat no. 1904, rest three flats on the 19th floor of Vardhaman heights are owned by him. However, no details with regard to these three flats purchased such as purchase agreement, proof of payment and source thereof were submitted by the appellant in spite of specific opportunity given. The appellant has also not submitted the details of expenditure incurred on renovation and furnishing of Kiran Mehta. flat no. 1901, 1902 and 1903, details as to where these expenses have been debited and source of such expenditure. Further, it is also noted that no where during the appellate proceedings, the appellant has challenged the valuation adopted by the A.O. of Rs. 4,30,00,000/- as being determined by the Approved Valuer. This clearly implies that the appellant has accepted that a total expenditure of Rs. 4,30,00,000/- has been incurred towards renovation and furnishing of the flat no. 1904 which is owned by the employer. The appellant was also asked to clarify as to what is the expenditure which has been shown in the books of the company M/ s. Varun Industries Limited, in this regard. However, neither books of accounts of the company were produced nor the details with regard to quantum and booking of such expenditure in the books of the company were submitted. The appellant was also directed to furnish the Profit and Loss Account, Balance Sheet and Capital Account in respect of his business from where he has declared a profit of Rs. 29,46,113/- in his return of income for current year as well as earlier two years. However, no documents were submitted by the appellant and hence, claim of the appellant could not be verified.

6.4 The appellant is owner of three flats at Vardhaman Apartment i.e. flat no. 1901, 1902 and Kiran Mehta. 1903. He was required to submit copies of Agreement of the three flats along with source of purchase thereof and the treatment of the same in his books of accounts. The appellant was also asked to submit complete details of repairs and renovation and furniture work and source of such expenditure in respect of flat no. 1901, 1902 and 1903. However, till the date of passing of this order, neither any one has appeared on behalf of appellant nor any documentshave been submitted. Even during the appellate proceedings, though the appellant has kept on arguing that the cost of furnishing and renovation in respect of flat no. 1904 is Rs.2,17,92,677/-, no supporting documents were submitted by the appellant in this respect. It was also not made clear that whether this cost is in respect of one flat or the entire unit of four flats. At one place while giving the break up of expenditure of Rs. 2,17,92,677/-, the appellant mentioned that the same is in respect of flat no. 1904, however, in his submission, the appellant has stated that the said detail is in respect of entire unit of 4 flats and only 10% of the same is required to be added as value of perquisites. Inspite of specific opportunities granted, none of the specific details as sought for have been furnished. A conclusion which can be drawn in such circumstances is that the appellant is not in a position to explain the Kiran Mehta. source of investment in respect of the aforesaid three flats. Not only the investment in the said flats remains unexplained, but also the appellant has no explanation in respect of the expenditure incurred on furnishing and renovation of the said flats. In this respect, support is drawn from the case of Ravi Prakash Khemka vs. CIT (2007) 295 ITR 33 (Mad), wherein the Hon'ble Madras High Court held that in spite of persistent requests by authorities below to produce original share certificates supposed to have been issued in the year 1995-96, there being no response from the assessee, the authorities below rightly came to the conclusion that a sum of Rs. 10 lakhs represented unexplained investment warranting addition under s.

Kiran Mehta. Therefore, since the cost of renovation and furnishing of flat no. 1904 has been valued at Rs. 430 lacs which has not been challenged by the appellant, same cost is adopted in respect of the remaining three flats i.e. Flat no. 1901, 1902 and 1903. Accordingly, addition comes to Rs. 1290 lacs. Hence, Enhancement on this account is made at Rs. 12,90,00,000/-.

After having gone through the orders passed by Ld. CIT(A), we find that Ld. CIT(A) had rightly concluded its findings on account of enhancement of income of assessee as made by the AO.We find that all the circumstantial evidences are not in favour of the assessee. Moreover, there is no rebuttal by the assessee to the findings of Ld. CIT(A) and even no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Thus, we find no infirmity in the order under challenge. The same is hereby Kiran Mehta. upheld. Resultantly, these grounds raised by the assessee stands dismissed.

Ground No. 6 8. This ground raised by the assessee is general in nature, thus requires no specific adjudication.