Sh. Jaspal Singh Kandhari, Chandigarh V. ACIT, Patiala

CO 2/CHANDI/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8673 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 14-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: K P BAJAJ
• Keywords: Deemed dividend
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES ACHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIA L MEMBER ITA NO. 1037/CHD/2012 ASSESSMENT YEAR:2005-06 THE ACIT, V SHRI JASPAL SINGH KANDHARI, CIRCLE, PROP.M/S TEJA SINGH & SONS PATIALA. 1, KANDHARI VILLA, BHUPINDRA ROAD, PATIALA. PAN NO. ACTPS-4047H & CO NO. 2/CHD/2013 IN ITA NO. 1037/CHD/2012 SHRI JASPAL SINGH KANDHARI, V ACIT, CIRCLE, 177-F,INDUSTRIAL AREA, PATIALA. CHANDIGARH. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI J.S.NAGAR ASSESSEE BY : SHRI K.P.BAJAJ DATE OF HEARING : 05.06.2013 DATE OF PRONOUNCEMENT : 14.06.2013 ORDER PER SUSHMA CHOWLA, JM THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF CIT(A), DATED 27.08.2012 RELATING TO ASSESSMENT YEAR 2005-0 6 AGAINST THE ORDER PASSED UNDER SECTION 143(3)/147 OF THE I.T. A CT, 1961. THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE APP EAL FILED BY THE REVENUE. 2 2. BOTH THE APPEAL FILED BY THE REVENUE AND THE CRO SS OBJECTIONS FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 3. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: IN THE FACTS AND CIRCUMSTANCES OF THE CASE. LD. CI T(A) HAS ERRED IN DELETING THE ADDITION OF RS.59,54,354/-MADE BY THE AO ON A/C OF DEEMED DIVIDEND U/S 2(22)(E), WITHOUT APPRECIATING THAT IN THE ABSENCE OF ANY SPECIFIC PURPOSE FOR ADVANCEMENT OF ABOVE AM OUNT OF ADVANCES TO THE SHAREHOLDER ARE LIABLE TO TAX UNDER THE PROV ISIONS OF SECTION 2(22)(E) OF THE I.T.ACT, 1961 AS DEEMED DIVIDEND. 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ORIGINAL ASSESSMENT IN THE CASE WAS COMPLETED U/S 143(3) OF THE ACT AND THE RETURNED INCOME FILED BY THE ASSESSEE AT RS.14,30,7 90/- WAS ACCEPTED BY THE AO AND THEREAFTER NOTICE U/S 148 WAS ISSUED AFTER RECORDING THE REASONS FOR RE-OPENING U/S 147 OF THE ACT. THE ASS ESSEE IN THE RE- ASSESSMENT PROCEEDINGS WAS REQUIRED TO EXPLAIN AS T O WHY THE AMOUNTS STANDING IN THE IMPREST ACCOUNT IN THE BOOKS OF KAN DHARI BEVERAGES PVT. LTD. MAY NOT BE TREATED AS DEEMED DIVIDEND WIT HIN THE MEANING OF SECTION 2(22)(E) OF THE IT ACT. THE SAID ISSUE WAS ONE OF THE ISSUES RAISED BY WAY OF RE-ASSESSMENT NOTICE. THE REPLY O F THE ASSESSEE DATED 25.10.2010 IS REPRODUCED BY THE AO UNDER PARA 6 OF THE ASSESSMENT ORDER. IN THE SAID REPLY IT WAS EXPLAINED BY THE A SSESSEE THAT THE COMPANY OWED A SUM OF RS.50 LACS TO THE ASSESSEE WH ICH WAS REFLECTED IN THE LOAN ACCOUNT. FURTHER, BY WAY OF IMPREST ACC OUNT, AMOUNTS WERE ADVANCED TO THE ASSESSEE TO THE TUNE OF RS.23,04,50 8/-. THE ASSESSEE FILED BOTH THE COPIES OF ACCOUNT AND IT WAS CLAIMED BY THE ASSESSEE THAT IT IS APPARENT THAT THE AMOUNT GIVEN TO THE ASSESSE E WAS MUCH LESS THAN THE LOAN OWED TO HIM. THIS FACT WAS ALSO EXAMINED AT THE 3 TIME OF ASSESSMENT PROCEEDINGS U/S 143(3). IT IS, THEREFORE, REQUESTED THAT THE PLEA OF THE ASSESSEE MAY KINDLY BE CONSIDE RED AND A FINDING THEREON MAY BE RECORDED. SINCE NO FACILITY WAS ALL OWED TO THE ASSESSEE, THERE CANNOT BE ANY DISALLOWANCE U/S 2(22 )(E). THE AO IN VIEW OF THE PROVISIONS OF SECTION 2(22)(E) OF THE A CT AND IN THE ABSENCE OF ANY SPECIFIC PURPOSE FOR THE ADVANCEMENT OF THE SAID AMOUNT OF ADVANCES TO THE SHAREHOLDERS HELD THE ASS ESSEE LIABLE TO TAX UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND SUM OF RS.59,54,354/- WAS TREATED AS DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT. 5. THE CIT(APPEALS) NOTED THAT THE ASSESSEE HAD CRE DIT BALANCE OF RS.50 LACS IN HIS ACCOUNT WITH THE COMPANY WHILE TH E MAXIMUM DEBIT BALANCE AT ANY POINT OF TIME IN THE IMPREST ACCOUNT WAS RS.43,72,325/- AND FOLLOWING THE RATIO LAID DOWN BY THE MUMBAI BEN CH OF TRIBUNAL IN ANIL KUMAR AGGARWAL V ITO 138 TTJ (MUM) 175, ALLOWE D THE CLAIM OF THE ASSESSEE AND THE ADDITION WAS DELETED. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CI T(APPEALS). THE LD. DR FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE AO. THE LD. AR FOR THE ASSESSEE PLACED RELIANCE ON THE ORDE R OF THE CIT(APPEALS). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE ASSESSEE WAS THE MANAGING DIRECTOR OF M/S KANDHARI BEVERAGES PVT. LT D. IN THE BALANCE SHEET FILED FOR THE YEAR UNDER CONSIDERATIO N I.E. AS ON 31.3.2005 PLACED AT PAGE 9 OF THE PAPER BOOK, THE A SSESSEE HAD SHOWN AN ADVANCE OF INTEREST-FREE LOAN OF RS.50 LACS TO M /S KANDHARI BEVERAGES PVT. LTD. ON THE OTHER HAND, THE ASSESSE E HAD SHOWN SUNDRY 4 CREDITOR OF KANDHARI BEVERAGES P.LTD. AT RS.23,04,5 08/-, WITH OPENING BALANCE OF RS.79,000/-. THE ASSESSEE HAS PLACED ON RECORD THE COPY OF BALANCE SHEET, STATEMENT OF AFFAIRS AS ON 31.3.2004 AND 31.3.2005 AT PAGES 8 & 9 OF THE PAPER BOOK. THE COPY OF LOAN AC COUNT OF THE ASSESSEE I.E. THE IMPREST ACCOUNT WITH KANDHARI BEV ERAGES P.LTD. IS PLACED AT PAGES 11 & 12 OF THE PAPER BOOK. THE ASSE SSEE IS IN RECEIPT OF SALARY FROM THE SAID CONCERN AND FURTHER HAD DRA WN CERTAIN SUMS FROM THE SAID IMPREST ACCOUNT. THE TOTAL WITHDRAWAL S INCLUDING THE OPENING DEBIT BALANCE OF RS.79,000/- DURING THE YEA R WERE RS.59,54,354/- AND CREDIT ON ACCOUNT OF SALARY AND REIMBURSEMENT OF OTHER EXPENSES TOTALED TO RS.36,49,847/-. THE CLOS ING BALANCE AS ON 31.3.2005 WAS RS.23,04,507/-, WHICH HAS BEEN REFLEC TED IN THE STATEMENT OF AFFAIRS FILED BY THE ASSESSEE UNDER TH E HEAD SUNDRY CREDITORS. ON THE OTHER HAND, THE ASSESSEE HAD ADV ANCED A SUM OF RS.50 LACS TO THE SAID COMPANY BY WAY OF INTEREST F REE LOAN WHICH WAS OUTSTANDING THROUGH OUT THE YEAR. AS NOTED BY THE AO AND THE CIT(APPEALS), THE MAXIMUM DEBIT BALANCE IN THE SAID IMPREST ACCOUNT AT ANY POINT OF TIME WAS RS.43,72,325/-, WHICH WAS NOT IN EXCESS OF THE ADVANCE OF RS.50 LACS MADE BY THE ASSESSEE TO M /S KANDHARI BEVERAGES P.LTD. IN VIEW THEREOF, WE FIND NO MERIT IN THE ORDER OF AO IN TREATING THE AMOUNT WITHDRAWN BY THE ASSESSEE UN DER THE IMPREST ACCOUNT AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. UPHOLDING THE ORDER OF THE CIT(APPEALS), WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 8. THE ASSESSEE IN THE CROSS OBJECTION HAS RAISED T HE ISSUE OF RE- ASSESSMENT PROCEEDINGS INITIATED U/S 148 OF THE IT ACT. IN VIEW OF OUR DECIDING THE ISSUE ON MERITS, IN FAVOUR OF THE ASSE SSEE, WE DO NOT ADDRESS THE GROUND OF APPEAL RAISED BY THE ASSESSEE IN ITS CROSS 5 OBJECTION AS THE SAME HAS BECOME INFRUCTUOUS. THE CROSS OBJECTIONS ARE, THUS, DISMISSED AS INFRUCTUOUS. 9. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS O BJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF JUNE, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14 TH JUNE,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH