Swati Kkatyal vs Assistant Commissioner of Income Tax, Delhi

“1.

That the Learned Assessing Officer, Assessment Unit ("Ld. AO") has erred on facts and in law in determining the total income of the Appellant at INR 15,92,63,896/-as against the returned income of INR 6,49,38,680/- by making unwarranted and arbitrary additions aggregating to INR 9,43,25,216/- on account of disallowance of various allowances and alleged adjustments relating to long-term capital gains and investments, vide order dated 26.12.2022 passed u/s 143(3) of the Income Tax Act, 1961 ("Act").

2.

That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre ("Ld. CIT (A)") has gravely erred in passing a non-speaking, cryptic and mechanical appellate order, in as much as the Ld. CIT(A) has merely mechanically confirmed the additions made by the Ld. AO without considering with the detailed submissions, evidences and legal contentions raised by the Appellant.

3.

Addition on account of disallowance of House Rent Allowance ("HRA") amounting to INR 25,49,499/- claimed under the head "Salary".

3.1

That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the action of the AO in disallowing the HRA amounting to INR 25,49,499/- claimed by the Appellant under the head "Salary" on wholly untenable, presumptive and extraneous grounds, despite the Appellant having furnished all primary evidences to substantiate the claim including the duly executed rent agreement, rent receipts, bank statements evidencing payment of rent and the PAN details of the landlord and Form 16.

3.2

That on the facts and circumstances of the case and in law, the Ld. CTT(A) has erred in upholding the finding of the AO that payment of rent in lump sum is "unusual" and that the rent agreement was not notarised, without appreciating that the said findings are wholly subjective, legally irrelevant and devoid of any statutory basis.

3.3

That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in mechanically upholding the said disallowance by alleging that ownership documents of the rented property were not furnished even though at no stage during the assessment or appellate proceedings, the Appellant was ever called upon to produce any ownership proof of the landlord thereby violating the principles of natural justice.

3.4

That on the facts and circumstances of the case and in law, the Ld. CTT(A) has further erred in proceeding on an unfounded presumption that payment of rent to a relative is per se bogus, ignoring settled law that HRA cannot be disallowed merely on the ground of relationship when genuineness of payment and incurrence of expenditure are duly established.

4.

Addition amounting to INR 4,28,400/- on account of disallowance of other allowances claimed under the head "Salary".

4.1.

That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the action of the AO in disallowing various expenses including fuel expenses, meal vouchers, newspaper/periodical reimbursement and mobile expenses by wrongly holding that the same did not form part of salary and were therefore not allowable under the Income tax Act, without appreciating that these allowances were paid as part of the Appellant's employment remuneration and were duly disclosed in the return of income.

4.2.

That on the facts and circumstances of the case and in law, the Ld. CIT(A) and the AO erred in ignoring the fact that the said expenses were incurred by the Appellant in the course of her employment and were supported by third-party invoices, bills and statements and not by any self-generated documents, as alleged and there was no finding recorded that the expenses were false, inflated or not actually incurred.

5.

Unjustified Addition of INR 1,22,57,043/-on account of undisclosed long-term capital gains.

5.1

That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the action of the AO in making an addition of INR 1,22,57,043/- on account of alleged undisclosed long-term capital gains, despite the fact that the entire transaction relating to preference shares was duly disclosed by the Appellant and the resultant capital gains were already offered to tax in accordance with the provisions of the Act.

5.2.

That on the facts and in law, the Ld. AO and the 1d. CIT(A) have erred in not appreciating that the Appellant had already offered the capital gains arising from the transfer of preference shares to tax under the head short-term capital gains instead of long-term capital gains due to inadvertent error, however, no prejudice or loss to the Revenue was caused as short term capital gain were offered at higher tax rate of 30 percent.

5.3

That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the AO in arbitrarily adopting the cost of acquisition of the shares as NII while computing the capital gain, despite the Appellant having furnished the evidence of acquisition including purchase receipt, share allotment letters, bank statement and share transfer certificates which clearly prove the genuineness of purchase of shares and establish the acquisition of the shares at a determinable cost.

5.4

That on the facts and circumstances of the case and in law, the Ld. AO has also erred in disallowing 50% of the share transfer expenses amounting to INR 7,78,6857- on a purely ad-hoc basis by grossly ignoring the explanation offered by the Appellant that the cost was related to merchant banker and other financial institutions which facilitated the sale of shares and which is contrary to the settled principles governing computation of capital gains under section 48 of the Act.

5.5

That on the facts and circumstances of the case and in law, the Ll. CIT(A) has further erred in law in sustaining the adoption of NIL cost of acquisition solely on the ground that independent valuation reports or FEMA approvals were not furnished even though such requirements were never sought by the authorities and anyways are not mandated under the Act for determination of cost in the facts of the present case and despite the existence of direct documentary evidence evidencing acquisition and transfer of the shares...

6.

Addition of INR 7,87,97,966/- on account of investment made in United Kingdom of Great Britain and Northern Island.

6.1

That on the facts and circumstances of the case and in law, addition of INR 7,87,97,966/- made under section 69 of the Act is wholly without jurisdiction, bad in law and void ab initio as the Ld. AO had made the said addition without issuing any proper, specific or valid show cause notice in respect of the impugned investments thereby violating the mandatory principles of natural justice.

6.2

Without prejudice to legal ground above, the 1.d. CIT(A) has erred in confirming the action of the AO in treating the investments made by the Appellant in the United Kingdom of Great Britain and Northern Ireland as unexplained investments under section 69 of the Act on an erroneous allegation that the source of investment was not explained despite the Appellant having furnished complete details explaining the nature and source of the transaction.

6.3

That on the facts and circumstances of the case and in law, the Ld. AO and Ld. CTT(A) have failed to appreciate that the impugned investments arose pursuant to a rollover arrangement of existing holding of Appellant, wherein the Appellant transferred shares held in the existing company (i.e. Vision Topco Ltd. UK) and in part consideration thereof, received shares in the another group company (technically termed as rollover) namely Project Vision Topco Limited and no fresh or independent investment was made by the Appellant.

6.4

That the Ld. CIT(A) has erred in law and on facts in mechanically upholding the addition by fundamentally misconstruing the transaction as a merger and by confirming the addition on the alleged non-furnishing of confirmations from foreign entities, merger scheme documents and RBI/FEMA approvals, which were wholly irrelevant to the nature of the rollover transaction under consideration.

Other grounds

7.

That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred on facts and in law by initiating penalty proceedings u/s 271AAC(1) and 270A of the Act.

Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant.

The Appellant craves leave to add, alter, delete, rectify and modify the above grounds of appeal, at any time before or at, the time of hearing, of the appeal, so as to enable the Honourable Income-tax Appellate Tribunal to decide this appeal according to law.”

Prescient Healthcare Group (UK) Ltd 2nd Floor, CP House 97-107 Uxbridge Road Ealing, London W5 5TL United Kingdom Tel: +44 (0)20 8832 7900 Fax: +44 (0)20 8043 0303 Email: [email protected] www.prescienthg.com

23 November 2022

To whom it may concern

Swati KKatyal, Director in Prescient Healthcare Group Private Limited, was holding 14,100 shares of Vision Topco Limited, UK provided to her as part of the 'Employee Stock Option Plan'. During Financial Year 2020-2021, 50% of the above shares were rolled over and converted into the shares of new company, viz. Project Vision Topco Limited

Yours faithfully, Andrew McMeeking Group Finance Director

Registered in England No. 2619610