M/s Subash Dabas, New Delhi V. ACIT, New Delhi

CO 221/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2923 (ITAT-DELHI)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 15-06-2016
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.2398/DEL/2016 ASSESSMENT YEAR: 2008-09 ACIT, CENTRAL CIRCLE-18, NEW DELHI. VS SUBHASH DABAS, PROP. TIRUPATI CONSTRUCTION CO., C/O TIRUPATI BLDGS. & OFFICES PVT. LTD., PLOT NO.3, DWARKA CITY CENTRE, SECTOR-10, DWARKA, NEW DELHI. PAN: AAGPD6947F CO NO.221/DEL/2016 (ITA NO.2398/DEL/2016) ASSESSMENT YEAR: 2008-09 SUBHASH DABAS, PROP. TIRUPATI CONSTRUCTION CO., C/O TIRUPATI BLDGS. & OFFICES PVT. LTD., PLOT NO.3, DWARKA CITY CENTRE, SECTOR-10, DWARKA, NEW DELHI. PAN: AAGPD6947F VS. ACIT, CENTRAL CIRCLE-18, NEW DELHI,. (APPELLANT/CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SHRI MAHAVIR SINGH, ADVOCATE REVENUE BY : MS NIDHI SRIVASTAVA, CIT, DR DATE OF HEARING : 21.08.2019 DATE OF PRONOUNCEMENT : 02.09.2019 ORDER PER R.K. PANDA, AM: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 22 ND FEBRUARY, 2016 OF THE CIT(A)-27, NEW DELHI RELATING TO ASSESSMENT YEAR 2008-09. ITA NO.2398/DEL/2016 CO NO.221/DEL/2016 2 THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS AGAINS T THE APPEAL FILED BY THE REVENUE. FOR THE SAKE OF CONVENIENCE, THESE WERE H EARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE REVENUE IN THE GROUNDS OF APPEAL HAS CHALLEN GED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.15,18,06,000/ - MADE BY THE ASSESSING OFFICER U/S 68 OF THE IT ACT ON ACCOUNT OF UNSECURE D LOANS AND RS.78,05,000/- MADE BY THE ASSESSING OFFICER U/S 2(22)(E) OF THE I T ACT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS THE PROPRIETOR OF M/S TIRUPATI CONSTRUCTION COMPANY ENG AGED IN THE BUSINESS OF CIVIL CONTRACTORS. A SEARCH U/S 132 OF THE IT ACT WAS UN DERTAKEN AT THE BUSINESS PREMISES AND RESIDENTIAL PREMISES OF THE ASSESSEE O N 14 TH SEPTEMBER, 2010. THE CASE OF THE ASSESSEE WAS CENTRALIZED U/S 127 OF THE ACT, VIDE ORDER DATED 18 TH OCTOBER, 2012. IN RESPONSE TO NOTICE U/S 153A, THE ASSESSEE SUBMITTED THAT THE ORIGINAL RETURN FILED U/S 139(1) ON 27 TH SEPTEMBER, 2008 DECLARING TOTAL INCOME OF RS.4,09,98,148/- BE TREATED AS RETURN IN RESPONSE T O NOTICE U/S 153A. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTED THAT THE ASSESSEE HAS RECEIVED UNSECURED LOAN OF RS.15,18,06,000/- FR OM 20 PARTIES AS PER PARA 4 OF THE ASSESSMENT ORDER. SINCE THE ASSESSEE, ACCORDIN G TO THE ASSESSING OFFICER, FAILED TO DISCHARGE THE THREE INGREDIENTS OF THE PROVISION S OF SECTION 68 OF THE ACT AND NO REPLY WAS RECEIVED IN RESPONSE TO NOTICE U/S 133(6) , THE ASSESSING OFFICER HELD THAT THE UNSECURED LOAN OF RS.15,18,06,000/- REMAINED UN EXPLAINED. APPLYING THE ITA NO.2398/DEL/2016 CO NO.221/DEL/2016 3 PROVISIONS OF SECTION 68 OF THE IT ACT, THE ASSESSI NG OFFICER MADE THE ADDITION OF RS.15,18,06,000/-. 4. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASS ESSEE IS THE DIRECTOR AND SHAREHOLDER OF THE COMPANY, NAMED TIRUPATI CONSTWEL L PVT. LTD. HAVING MORE THAN 10% SHARE OF THIS COMPANY. SINCE THE COMPANY HAS G RANTED LOANS AND ADVANCES TO THE ASSESSEE TO THE TUNE OF RS.78,05,000/-, THE ASS ESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE TREATED AS DEEMED DIVIDEND AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE IT ACT. THE REPLY OF THE ASSESSEE THAT THE COMPANY IS DOING BUSINESS WITH THE ASSESSEE AND IN ORDER TO FACILITATE PAYMENTS TO THE PARTIES AND TO CARRY OUT BUSINESS FOR THE COMPA NY, HE HAD TRANSFERRED THE FUNDS TO HIMSELF AND MADE THE PAYMENTS TO VARIOUS PARTIES AND THAT NO PAYMENT HAS BEEN MADE FOR THE INDIVIDUAL BENEFIT OF THE DIRECTOR WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT IT IS AN AFTERTHOUGHT TO ESCAPE THE IMPOSITION OF DEEMED DIVIDEND TAX. REJECTING THE VARIOUS EXPLANATIONS G IVEN BY THE ASSESSEE AND DISTINGUISHING THE VARIOUS DECISIONS CITED BEFORE H IM, THE ASSESSING OFFICER MADE ADDITION OF RS.78,05,000/- TO THE TOTAL INCOME OF T HE ASSESSEE UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE IT ACT. THE ASSESSING O FFICER ALSO MADE ADDITION OF RS.76,000/- BEING 1/5 OF THE EXPENSES OF REPAIR AND MAINTENANCE AND DEPRECIATION ON MOTOR CAR ON ESTIMATE BASIS BEING FOR PROBABLE P ERSONAL USE. 5. IN APPEAL, THE LD.CIT(A) DELETED THE ADDITION OF RS.15,18,06,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT. HE ALSO D ELETED AN AMOUNT OF RS.60 LAKHS ITA NO.2398/DEL/2016 CO NO.221/DEL/2016 4 OUT OF RS.78,05,000/- MADE BY THE ASSESSING OFFICE R U/S 2(22)(E) OF THE IT ACT. HE, HOWEVER, SUSTAINED THE ADDITION OF RS.76,000/- MADE BY THE ASSESSING OFFICER. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS:- 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING RS.15,18,06,000/-W HICH WAS ADDED TO THE INCOME OF THE ASSESSEE U/S 68 ON ACCOUNT OF UNSECUR ED LOANS. 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN DELETING RS. 15,18,06,000/- RECEIVED BY THE ASSESSEE AS UNSECURED LOAN, WITHOUT APPRECIATING THE FACT THAT THE ASSESS EE HAS FAILED TO PROVE THE CREDITWORTHINESS OF THE LOANS GIVERS/PROVIDERS. 3. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN DELETING OF RS. 15,18,06,000/- BY IGNOR ING THE FACT THAT THE AO HAS CLEARLY COMMENTED IN THE REMAND REPORT THAT THE PER USAL OF BANK STATEMENT SHOWED CIRCULATORY TRANSACTIONS, TYPICAL OF ENTRY B USINESSES AND LOAN GIVERS DONT HAVE THE CAPACITY TO ADVANCE SUCH LOANS. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING RS. 60,00,000/ -(OUT OF RS.78,05,000/-) BY TREATING AS DIRECTORS REMUNERATION WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE AS DEEMED DIVIDEND U/S 2(22)(E). 5. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN ACCEPTING THE ASSESSEE PLEA OF TREATING RS. 60,00,000/- AS DIRECTORS REMUNERATION WITHOUT REALIZING THE FACT THAT THE AS SESSEE NEVER TOOK THIS GROUNDS IN ASSESSMENT PROCEEDINGS AND THE DEPARTMEN T NEVER GOT THE CHANCES/OPPORTUNITY TO REBUT OR EXAMINE THE CLAIM O F THE ASSESSEE. 6. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS OF THE CASE IN ADMITTING ADDITIONAL EVIDEN CES UNDER RULE 46A OF INCOME TAX RULES. 7. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS BY NEITHER CONDUCTING HER OWN INDEPENDENT AND EFFECTIVE INQUIRY NOR GIVING A DIRECTION AS PER SUBSECTION 4 OF SECTION 2 50, INCOME TAX ACT AND IGNORING HONBLE DELHI HIGH COURTS JUDGMENT IN THE CASE OF THE COMMISSIONER OF INCOME TAX - II VS M/S JANSAMPARK A DVERTISING AND MARKETING (P) LTD. ITA NO.2398/DEL/2016 CO NO.221/DEL/2016 5 8. (A) THE ORDER OF THE LD. CIT(APPEALS) IS ERRONEO US AND NOT TENABLE IN LAW AND ON FACTS. (B) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING O F THE APPEAL. 6.1 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N THE CROSS OBJECTION:- 1. THAT THE APPEAL IS NOT MAINTAINABLE, PARTICULAR LY IN VIEW OF BOARDS INSTRUCTIONS ISSUED FROM TIME TO TIME. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ADDITION OF RS. 18,05,000/- PAID TO THE APPELLANT BY THE PAYER COMPANY, TREATING SAME A S DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT, 1961. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF TH E HEARING OF THE APPEAL. 6.2 THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONA L GROUND IN THE CROSS OBJECTION:- THE LD. CIT (A) HAS ERRED IN LAW AS WELL ON FACTS IN CONFIRMING ADDITIONS MADE BY THE LD.A.O. IN ASSESSMENT ORDER DATED 28/03 /2013 IN THE CIRCUMSTANCES WHERE EARLIER ASSESSMENT STOOD ALREAD Y COMPLETED AS RETURN OF INCOME FILED ON 27/09/2008 ATTAINED FINALITY ON 30/ 09/2009 AND NO INCRIMINATING MATERIAL WAS FOUND DURING SEARCH AND SEIZURE OPERATION CONDUCTED ON 14/09/2010 TILL 20/11/2010 IN VIEW OF JUDGEMENT OF THE HON'BLE HIGH COURT OF DELHI IN CASE OF CIT VS KABUL CHAWLA. 7. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS PURELY LEGAL AND N O FRESH FACTS ARE REQUIRED TO BE INVESTIGATED AND, THEREFORE, IN VIEW OF THE DECISIO N OF THE HON'BLE SUPREME COURT IN THE CASE OF NTPC LTD. VS. CIT, 229 ITR 383 (SC), THE ADDITIONAL GROUND SHOULD BE ADMITTED. ITA NO.2398/DEL/2016 CO NO.221/DEL/2016 6 8. AFTER HEARING BOTH THE SIDES AND CONSIDERING THE FACT THAT ALL MATERIAL FACTS NECESSARY FOR ADJUDICATION OF THE ADDITIONAL GROUND ARE ALREADY ON RECORD AND NO NEW FACTS ARE REQUIRED TO BE INVESTIGATED AND THE A DDITIONAL GROUND IS A LEGAL GROUND, THEREFORE, THE SAME IS ADMITTED FOR ADJUDIC ATION. 9. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AND NO ADDITION HAS BEEN MADE IN THE ASSESSMENT ORDER ON THE BASIS OF A NY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA, REPORTED IN 380 ITR 573 , NO ADDITION COULD HAVE BEEN MADE FOR THE IMPUGNED A SSESSMENT YEAR. REFERRING TO THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNA L IN ASSESSEES OWN CASE VIDE ITA NO.2330/DEL/2016 AND CO NO.223/DEL/2016, ORDER DATED 30 TH JULY,2019 FOR ASSESSMENT YEAR 2007-08, HE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES TH E APPEAL FILED BY THE REVENUE WAS DISMISSED. HE ACCO RDINGLY SUBMITTED THAT THIS BEING A COVERED MATTER THE APPEAL FILED BY THE REVE NUE SHOULD BE DISMISSED AND THE CO FILED BY THE ASSESSEE SHOULD BE ALLOWED. 10. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED O N THE ORDER OF THE ASSESSING OFFICER. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AND CIT(A). WE HAVE ALSO CONSIDERED THE ITA NO.2398/DEL/2016 CO NO.221/DEL/2016 7 DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASSES SEE. WE FIND FROM THE BODY OF THE ASSESSMENT ORDER THAT THERE IS NO MENTION OF ANY IN CRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH CONDUCTED IN THE BUSINE SS AND RESIDENTIAL PREMISES OF THE ASSESSEE ON 14 TH SEPTEMBER, 2010. BOTH THE ADDITIONS MADE BY THE A SSESSING OFFICER WHICH ARE SUBJECT MATTER OF CHALLENGE BY TH E REVENUE ARE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH. WE, THEREFORE, FIND MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE IN THE ORDER PASSED U/ S 143(3)/153A IN A COMPLETED ASSESSMENT. WE FIND THE COORDINATE BENCH OF THE TRI BUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, VIDE ITA NO.2330/DEL/2016 AND CO NO.223/DEL/2016, ORDER DATED 30 TH JULY, 201 9, WHILE DISMISSING THE APPEAL FILED BY THE REVENUE AND ALLOWING THE CO FILED BY THE ASSESS EE HAS OBSERVED AS UNDER:- 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. WE FIND THAT IN THE CASE OF THE ASSESSEE SEARCH UNDER SECTION 132 OF THE ACT WAS CONDUCTED ON 14/09/2010 AND CONSEQUENTLY, NOTICE UN DER SECTION 153A OF THE ACT WAS ISSUED, WHICH WAS DULY COMPLIED BY THE ASSE SSEE ON 21/01/2013. THE ASSESSEE SUBMITTED THAT ASSESSMENT UNDER SECTION 14 3(3) OF THE ACT WAS ALREADY COMPLETED ON 31/12/2008 AT TOTAL INCOME OF RS.5,92,80,820/- PURSUANT TO EARLIER SEARCH INITIATED ON 01/06/2006. THE ASSESSING OFFICER IN THE PRESENT ASSESSMENT PROCEEDINGS MADE ADDITION OF RS.1,42,69,262/- ON ACCOUNT OF DEEMED DIVIDEND UNDE R SECTION 2(22)(E ) OF THE ACT. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE TH E LD. CIT(A) AND FILED DETAILED SUBMISSIONS CHALLENGING THE LEGALITY OF TH E ASSESSMENT AS WELL AS MERIT OF THE ADDITION . THE LD. CIT(A) PARTLY ALLOW ED THE AMOUNT OF RS.60 LAKH RECEIVED BY THE ASSESSEE AS SALARY AND UPHELD THE BALANCE AMOUNT OF RS.82,69,262/-. 9. IN VIEW OF THE DECISION OF THE HON'BLE DELHI H IGH COURT IN THE CASE OF KABUL CHAWLA(SUPRA), IF THE TWO CONDITIONS OF NO IN CRIMINATING MATERIAL AND COMPLETED ASSESSMENTS ARE SATISFIED, NO ADDITION WO ULD HAVE BEEN MADE IN THE ASSESSMENT PROCEEDING UNDER SECTION 153A OF THE ACT . IN THE INSTANT CASE, ITA NO.2398/DEL/2016 CO NO.221/DEL/2016 8 SEARCH HAS BEEN CONDUCTED ON 14/09/2010 AND THE ASS ESSMENT FOR THE YEAR INTO CONSIDERATION WAS COMPLETED ON 31/12/2008 UNDER SEC TION 143(3) OF THE ACT. FURTHER, IN THE IMPUGNED ASSESSMENT COMPLE TED THERE IS NO REFERENCE OF ANY INCRIMINATING MATERIAL FOR MAKING ADDITION UNDE R SECTION 2(22)(E) OF THE ACT. IN VIEW OF BOTH THE CONDITIONS BEING SATISFIED , WE ARE OF THE CONSIDERED OPINION THAT NO ADDITION COULD HAVE BEEN MADE IN TH E INSTANT ASSESSMENT IN VIEW OF THE DECISION OF THE HON'BLE DELHI HIGH COUR T IN THE CASE OF KABUL CHAWLA (SUPRA). ACCORDINGLY, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. 12. SINCE, ADMITTEDLY, IN THE INSTANT CASE, NO ASSE SSMENT WAS PENDING ON THE DATE OF SEARCH SINCE THE PERIOD FOR ISSUE OF NOTICE U/S 143(2) HAD ALREADY EXPIRED AND THE ADDITION IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH, THEREFORE, IN VIEW OF THE DECISION OF THE H ON'BLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA (SUPRA), WE HOLD THAT NO ADDITION COULD HAVE BEEN MADE IN THE INSTANT CASE FOR THE IMPUGNED ASSESSMENT YEAR. WE, THEREFORE, ALLOW THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. ACCORDIN GLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CO FILED BY THE ASSESS EE IS ALLOWED. 13. IN THE RESULT, APPEAL FILED BY THE REVENU E IS DISMISSED AND THE CO FILED BY THE ASSESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 0 2.09.2019. SD/- SD/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED:02 ND SEPTEMBER, 2019 ITA NO.2398/DEL/2016 CO NO.221/DEL/2016 9 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI