Shri Murarilal Agrawal, Surat V. The Dy.CIT.,Cent.Circle-2, Surat

CO 134/AHD/2012

• Counselvise Citation: [2016] 119 COUNSELVISE.COM (IT) 3382 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 17-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RASESH SHAH
• Keywords: Peak credit; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.1132/AHD/2012 (REVENUE) AND CO NO.134/AHD/2012 AY 2008-009 (ASSESSEE) ( / ASSESSMENT YEAR : 2007- 08) THE DY.CIT CENTRAL CIRCLE-2 SURAT / VS. SHRI MURARILAL RATANLAL AGRAWAL C/O. BRIJWASI DEVELOPERS PVT.LTD. 102, PLATINUM APARTMENTS BRIJWASI ESTATE NR. GATWAY, HOTEL PARLE POINT, SURAT 395 003 $ ./ ./ PAN/GIR NO. : ABKPA 5609 G ( $& / APPELLANT ) .. ( '($& / RESPONDENT AND CROSS OBJECTOR ) $&) / APPELLANT BY : SHRI SANJAY KUMAR, SR.DR '($&*) / RESPONDENT BY : SHRI RASESH SHAH, AR +* / DATE OF HEARING 14/07/2016 ,-./* / DATE OF PRONOUNCEMENT 27/07/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-II, AHMEDABA D DATED ITA NO.1132/AHD/2012(BY REVENUE) AND CO NO.134/AHD/2012 (BY ASSESSEE) DCIT VS. SHRI MURARILAL RATANLAL AGRAWAL ASST.YEAR 2007-08 - 2 - 28/03/2012 FOR THE ASSESSMENT YEAR (AY)2007-08 AND THE ASSESSEE IS IN CROSS OBJECTION THEREOF. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- 2.1. ASSESSEE IS AN INDIVIDUAL AND HAVING INCOME FR OM SALARY AND OTHER SOURCES. ASSESSEE FILED HIS RETURN OF INCOME FOR A Y 2007-08 ON 23/03/2007 DECLARING TOTAL INCOME OF RS.3,08,760/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S 'THE ACT') VIDE ORDER DATED 17/12/2009 AND THE TOTAL INCOME WAS DE TERMINED AT RS.3,08,760/-. SUBSEQUENTLY, THE CASE WAS REOPENE D BY ISSUING NOTICE U/S.148 OF THE ACT DATED 28/03/2011 AND THEREAFTE R THE ASSESSMENT WAS FRAMED U/S.143(3) R.W.S.147 OF THE ACT VIDE ORDER D ATED 27/12/2011 AND THE TOTAL INCOME WAS DETERMINED AT RS.67,71,800/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (AO), ASSESSEE CARRI ED THE MATTER BEFORE THE LD.CIT(A), WHO VIDE ORDER DATED 23/03/2012 (IN APPEAL NO.CIT(A)- II/CC.2/305/2010-11) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUND:- 1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND OF RS.36,55,477/ - BY WORKING OUT THE PEAK DEBIT BALANCE AND THEREBY CONFIRMING THE A DDITIONS OF ITA NO.1132/AHD/2012(BY REVENUE) AND CO NO.134/AHD/2012 (BY ASSESSEE) DCIT VS. SHRI MURARILAL RATANLAL AGRAWAL ASST.YEAR 2007-08 - 3 - RS.27,31,295/- OUT OF TOTAL ADDITION OF RS.63,96,77 2/- MADE BY THE ASSESSING OFFICER. 2.2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN HIS CROSS OBJECTION NO.134/AHD/2012 FOR AY 2007-08:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN TREATING BUSINESS ADVANCES AS DEEMED DIVIDEND AND THEREBY ERRED IN PARTLY SUSTAINING THE ADDITION TO THE EXTENT RS./27,31,295/- OUT OF TOTAL ADDITION OF RS.63,96,7 72/- AS DEEMED DIVIDEND U/S.2(22)(A) OF THE ACT. 2. EVEN OTHERWISE, ON THE FACTS AND IN CIRCUMSTANC ES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN NOT C ONSIDERING RS.9,91,614/- WHICH RELATES TO A.Y. 2008-09 AS REDU CTION OUT OF CURRENT PEAK DEBIT BALANCE OF RS.27,31,295/- IN COM PUTING DEEMED DIVIDEND FOR THE YEAR UNDER CONSIDERATION. 2.3. BEFORE US, AT THE OUTSET, LD.AR SUBMITTED THAT HE DOES NOT WISH TO PRESS CROSS OBJECTION FILED BY THE ASSESSEE AND THE REFORE THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED AS N OT PRESSED. 3. WE SHALL NOW TAKE UP THE REVENUES APPEAL IN ITA NO.1132/AHD/2012. THE SOLITARY ISSUE IS WITH RESPE CT TO THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. ITA NO.1132/AHD/2012(BY REVENUE) AND CO NO.134/AHD/2012 (BY ASSESSEE) DCIT VS. SHRI MURARILAL RATANLAL AGRAWAL ASST.YEAR 2007-08 - 4 - 3.1. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS , AO NOTICED THAT ASSESSEE HAS TAKEN SUBSTANTIAL AMOUNT OF LOANS AND ADVANCES FROM BRIJWASI DEVELOPERS PVT.LTD., A COMPANY IN WHICH PU BLIC ARE NOT SUBSTANTIALLY INTERESTED AND IN WHICH THE ASSESSEE WAS HAVING SUBSTANTIAL INTEREST AS HE WAS HOLDING 55.21% OF SHARES. ON PERUSING THE LEDGER ACCOUNT OF THE ASSESSEE, AS APPEARING IN THE BOOKS OF ACCOUNTS OF BRIJWASI DEVELOPERS PVT.LTD., AO NOTICED THAT ASSESSEE HAD R ECEIVED PAYMENTS FROM THE COMPANY AND THE NET DEBIT BALANCE WAS RS.6 3,96,772/-. THE ASSESSEE WAS ASKED TO SHOW-CAUSE AS TO WHY THE AMOU NT RECEIVED BY HIM NOT BE TREATED AS DEEMED DIVIDEND. THE SUBMISSIONS OF THE ASSESSEE OF THE AMOUNT BEING TAKEN FOR THE BUSINESS PURPOSE AND WAS NOT A LOAN WAS NOT FOUND ACCEPTABLE TO THE AO IN VIEW OF HIS OBSERVATION THAT ASSESSEE HAS NOT UNDERTAKEN ANY BUSINESS WITH BRIJW ASI DEVELOPERS P.LTD. NOR HAD ASSESSEE PRODUCED ANY EVIDENCE TO T HAT EFFECT. AO THEREFORE ON THE BASIS OF THE NET DEBIT BALANCE WOR KED OUT THE AMOUNT OF RS.63,96,772/- WHICH WAS ADDED TO THE INCOME OF AS SESSEE AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WHO AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 6. I HAVE CONSIDERED THE WORKING GIVEN BY THE A.O. IN THE ASSESSMENT ORDER AND ALSO THE ARGUMENTS OF THE LEARNED A.R. I HAVE ALSO PERUSED THE FINDINGS GIVEN BY THE UNDERSIGNED IN PARA-18 OF THE APPELLATE ORDER ITA NO.1132/AHD/2012(BY REVENUE) AND CO NO.134/AHD/2012 (BY ASSESSEE) DCIT VS. SHRI MURARILAL RATANLAL AGRAWAL ASST.YEAR 2007-08 - 5 - FOR A.Y.2008-09 IN APPEAL NO.CIT(A)-II/CC.2/165/201 0-11 DATED 26.05.2011. AFTER CONSIDERING ALL THE RELEVANT CASE LAWS, BASIS OF THE ADDITION MADE BY THE ASSESSING OFFICER, AS HAS BEEN DONE IN THE PRESENT ASSESSMENT ORDER AND WORKING FURNISHED BY THE LEARN ED A.R., IT IS HELD THAT ONCE THE DEBIT BALANCE IS BROUGHT TO TAX U/S.2 (22)(E) OF THE I.T.ACT ON THAT DATE BALANCE WILL HAVE TO BE TAKEN AS NIL B ECAUSE THE CHARACTER OF LOAN AMOUNT AFTER BRINGING TO TAX WILL NOT REMAI N SAME AS LOAN. ANY REPAYMENT AFTER THAT DATE, BY THE LOANEE TO THE COM PANY WILL REMAIN CREDIT BALANCE WITH THE COMPANY AND FURTHER, THE AD VANCE IF ANY, MADE BY THE PVT. LTD. CO., THE INCREMENTAL INCREASE IN T HE DEBIT (LOAN BALANCE) CAN ONLY BE BROUGHT TO TAX FURTHER BY APPLYING PROV ISIONS OF SECTION 2(22)(E) OF THE ACT. IT HAS BEEN HELD IN THE APPELL ATE ORDER FOR A.Y.2008- 09 THAT THE PEAK DEBIT BALANCE ON ANY DAY DURING TH E ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR, FURTHER INCREASED BY INCREMENTAL OR NET LOAN MADE BY THE COMPANY TO THE SHARE HOLDER, CAN B E BROUGHT TO TAX U/S.2(22)(E) OF THE I.T.ACT. FOLLOWING THE DECISION , IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING AGGRE GATE AMOUNT OF PAYMENT ON EACH OF 5 ROUNDS OF LOAN/ADVANCE WHICH W ORKS OUT TO RS.63,96,772/- AS AGAINST PEAK LOAN OR ADVANCE AMOU NT OF RS.27,31,295/- WORKED OUT ON 07.07.2006. AFTER 07.0 7.2006, RS.32,00,000/- WAS CREDITED IN THE ACCOUNT OF THE A PPELLANT ON 08.07.2006 WHICH WAS AVAILABLE AS CREDIT WITH THE C OMPANY FOR PAYING BACK, TO THE SHARE HOLDER AND THE SAME WAS REPAID F ROM 21.07.2006 TO 17.08.2006 WHICH RESULTED IN THE DEBIT BALANCE OF S AME AMOUNT OF RS.27,31,295/-. THEREAFTER, RS.1,50,000/- WAS AGAIN CREDITED ON 08.09.2006. RS.13,00,000/- WERE CREDITED FROM 02.10 .2006 TO 03.10.2006 AGAINST WHICH PAYMENT OF RS.28,665/- AND RS.9,00,000/- WERE MADE ON 27.09.2006 AND 06.10.2006 RESPECTIVELY . AS ON 31.03.2007, THE NET DEBIT BALANCE OF RS.4,64,182/- REMAINED BUT THE PEAK AMOUNT OF RS.27,31,295/- HAS TO BE TAXED U/S.2 (22)(E) OF THE ACT BEING DEEMED DIVIDEND. ACCORDINGLY, THE ADDITION OF RS.36,65,477/- [RS.63,96,772 - RS.27,31,295] IS DELETED AND THE ADDITION OF RS.27,31,295/- IS SUSTAINED. THUS, GROUND OF APPEAL NO. 1.2 IS ALLOWED. ITA NO.1132/AHD/2012(BY REVENUE) AND CO NO.134/AHD/2012 (BY ASSESSEE) DCIT VS. SHRI MURARILAL RATANLAL AGRAWAL ASST.YEAR 2007-08 - 6 - 7 . REGARDING GROUND OF APPEAL NO. 1.1, IT IS OBSER VED THAT THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE BEFORE THE ASSESSING OFFICER OR DURING THE APPELLATE PROCEEDINGS THAT THE LOAN/ADVANCE MAD E BY THE BRIJWASI DEVELOPERS P.LTD. MADE TO THE APPELLANT WAS IN THE NATURE OF BUSINESS TRANSACTION OR FOR ANY BUSINESS PURPOSE. IT IS ALSO OBSERVED THAT THE APPELLANT HAS NOT UNDERTAKEN ANY BUSINESS TRANSACTI ON WITH THE SOURCE COMPANY. IN THE APPELLATE PROCEEDINGS OF A.Y.2008-0 9, THE LEARNED A.R. OF THE APPELLANT ADMITTED THAT THE LOAN ADVANCED BY BRIJWASI DEVELOPERS P.LTD. TO THE APPELLANT WAS LOAN/ADVANCE WHICH WAS REPAYABLE BY THE SHARE HOLDER AND THE SAME WAS NOT FOR ANY BUSINESS PURPOSE OR TRADE ADVANCE TO MEET ANY BUSINESS TRANS ACTION SO THE LOAN ADVANCED BY A PRIVATE LIMITED COMPANY I.E. BRIJWASI DEVELOPERS P.LTD., HAS TO BE TREATED -AS DEEMED DIVIDEND WITHIN THE PR OVISIONS OF SECTION 2(22)(E) OF THE ACT AND THE GROUND OF APPEAL NO. 1. 1 IS DISMISSED. 8. REGARDING GROUND NO.1.3, IT IS OBSERVED THAT THE ADDITION OF RS.9,91,614/- WAS MADE IN THE ASSESSMENT YEAR 2008- 09 AND OPENING NEGATIVE BALANCE OF RS.4,64,182/- AS ON 01.04.2007 WHICH WAS CLOSING BALANCE OF 31.03.2007, WAS NOT CONSIDERED FOR WORKI NG OUT THE LOAN/ADVANCE AMOUNT BY THE PRIVATE LIMITED COMPANY TO THE APPELLANT SHARE HOLDER HENCE, NO CREDIT CAN BE ALLOWED AGAINS T THE ADDITION OF PRECEDING YEAR. A SEPARATE ADDITION WAS MADE BY WO RKING OUT THE DEEMED DIVIDEND OF RS.9,91,614/- IN A.Y. 2008-09 BY WORKING OUT THE PEAK DEBIT BALANCE AND INCREMENTAL DEBIT. HENCE, T HE GROUND OF APPEAL NO.1.3 IS DISMISSED. 3.2. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE I S IN APPEAL BEFORE US. 3.2. BEFORE US, LD.DR SUPPORTED THE ORDER OF AO. L D.AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND LD.CIT(A). ITA NO.1132/AHD/2012(BY REVENUE) AND CO NO.134/AHD/2012 (BY ASSESSEE) DCIT VS. SHRI MURARILAL RATANLAL AGRAWAL ASST.YEAR 2007-08 - 7 - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO TH E PARTIAL RELIEF GRANTED BY THE LD.CIT(A) TO THE ADDITION MADE UNDER THE DE EMED DIVIDEND U/S.2(22)(E) OF THE ACT. WE FIND THAT WHILE DECIDIN G THE ISSUE, LD.CIT(A) HAS GIVEN A FINDING THAT ASSESSEE HAS NOT FURNISHED ANY EVIDENCE EITHER BEFORE THE AO OR BEFORE HIM TO SUPPORT ITS CONTENTI ON THAT THE LOANS MADE BY BRIJWASI DEVELOPERS PVT.LTD. TO THE ASSESSEE WER E IN THE BUSINESS OF TRANSACTION OR THE AMOUNT WAS ADVANCED FOR ANY BUSI NESS PURPOSE. HE HAS FURTHER GIVEN A FINDING THAT ASSESSEE HAS NOT U NDERTAKEN ANY BUSINESS TRANSACTION WITH THE COMPANY. WE FURTHER FIND THAT THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS HEL D THAT THE PEAK DEBIT BALANCE ON ANY DAY DURING THE ACCOUNTING YEAR FURTH ER INCREASED BY INCREMENTAL OR NET LOAN MADE BY THE COMPANY TO THE SHAREHOLDER CAN BE BROUGHT TO TAX U/S.2(22)(E) OF THE ACT. HE THEREAF TER AFTER WORKING OUT THE VARIOUS PEAK BALANCE HAD UPHELD THE ADDITION TO THE EXTENT OF RS.27,31,295/- AND DIRECTED THE DELETION OF ADDITIO N OF RS.36,65,477/-. BEFORE US, NEITHER THE ASSESSEE NOR THE REVENUE CO ULD CONTROVERT THE FINDINGS OF LD.CIT(A). IN VIEW OF THE AFORESAID FA CTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). THU S, THIS GROUND OF REVENUE IS DISMISSED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DI SMISSED. ITA NO.1132/AHD/2012(BY REVENUE) AND CO NO.134/AHD/2012 (BY ASSESSEE) DCIT VS. SHRI MURARILAL RATANLAL AGRAWAL ASST.YEAR 2007-08 - 8 - 6. IN THE RESULT, REVENUES APPEAL AND ASSESSEES C ROSS OBJECTION ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 27/07/2016 SD/- SD/- () () (RAJPAL YADAV) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 27/ 07 /2016 3..,.../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-II, AHMEDABAD 5. 89:'56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<=+ / GUARD FILE. / BY ORDER, (8' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 14.7.16 (DICTATION-PAD 8- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18.7.16/26.7.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.27.7.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.7.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER