Shri Yogendra Ratilal Sheth, Bhavnagar V. The ACIT, Circle-2, Bhavnagar

CO 249/AHD/2014

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3167 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; Deemed dividend

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO.1791/AHD/2014 & CROSS OBJECTION NO.249/AHD/2014 (IN I.T.A. NO.1791/AHD/2014) ( / ASSESSMENT YEAR : 2008-09) ACIT, CIRCLE 2, BHAVNAGAR # VS. SHRI YOGENDRA RATILAL SHETH, PROP: OF SHAH CONSTRUCTION CO., VORA BAZAR, MANIYAR STREET, BHAVNAGAR 364 001 $ # % & # PAN/GIR NO. : AHGPS 8315 P ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) & CROSS OBJECTOR ASSESSEE BY : SHRI K. MADHUSUDAN, SR.D.R. REVENUE BY : SHRI TUSHAR P. HEMANI, A.R. ) *+,- / DATE OF HEARING 25/10/2017 ./01+,- / DATE OF PRONOUNCEMENT 27/10/2017 2# O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ALONG WIT H CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME ITA NO. 1791/AH D/2014 & CO NO.249/AHD/2014 (IN ITA NO.1791/AHD/2014) ASST.YEAR 2008-09 - 2 - TAX(APPEALS)-XX, AHMEDABAD, DATED 24/03/2014 FOR TH E ASSESSMENT YEAR (AY) 2008-09, ON THE FOLLOWING GROUNDS: I. THE LD.CIT(A)-XX, AHMEDABAD ERRED IN FACTS AND CIRC UMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.43,25,50 4/- MADE BY THE AO ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) PARTI CULARLY WHEN PRIMA FACIE PART OF THE FUNDS WERE UTILIZED BY THE ASSESSEE FOR ITS PERSONAL EXPENSES. II. THE LD.CIT(A) FAILED TO APPRECIATE THAT THE BAL ANCE FUNDS OF RS.43,25,504/ WERE USED FOR THE ADVANTAGE OF THE PR OPRIETARY CONCERN OF THE ASSESSEE IF NOT FOR THE PERSONAL EXP ENSES OF THE ASSESSEE. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- IN THIS CASE, ASSESSEE IS ENGAGED IN CIVIL CONSTRU CTION ACTIVITY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED FROM THE AUDIT REPORT THAT THE ASSESSEE HAD TAKEN LOAN OF RS .97,10,630/- FROM SUNDERLAND DEVELOPERS PVT. LTD. DURING THE YEAR UND ER CONSIDERATION. FURTHER, THE ASSESSEE, VIDE HIS SUBMISSION DATED SE PTEMBER 28, 2010 HAD STATED THAT HE IS ALSO THE DIRECTOR OF SUNDERLAND D EVELOPER PVT. LTD. DURING F.Y. 07-08. AGAINST THIS, THE ASSESSEE VIDE NOTICE U/S.142(1) OF THE ACT DATED 20/10/2010, WERE ASKED TO FURNISH THE DET AILS OF HIS SHAREHOLDING (IN %) IN THE ABOVE COMPANY. WITH RESP ECT TO THIS, THE ASSESSEE VIDE HIS SUBMISSION DATED 30/10/2010 SUBMI TTED THAT HE WAS HOLDING 15% OF SHARES (1500 EQUITY SHARES OF RS 10 EACH) OF SUNDERLAND DEVELOPER PVT. LTD. DURING F.Y. 07-08. FURTHER, HE ALSO FURNISHED THE BALANCE SHEET OF SUNDERLAND DEVELOPER PVT. LTD., AC CORDING TO WHICH THE ITA NO. 1791/AH D/2014 & CO NO.249/AHD/2014 (IN ITA NO.1791/AHD/2014) ASST.YEAR 2008-09 - 3 - 'ISSUED, SUBSCRIBED & PAID-UP CAPITAL' OF THE COMPA NY STOOD AT RS.1,00,000(10,000 EQUITY SHARES OF RS.10 EACH). A NOTICE U/S.142(1) WAS GIVEN THE FOLLOWING SHOW-CAUSE: 'AS PER THE AUDIT REPORT, YOU HAD TAKEN THE LOAN OF RS.97,10,630/- FROM SUNDERLAN DEVELOPERS PVT LTD DURING FY'07-08. FURTH ER, YOU HAVE ALSO STATED IN YOUR SUBMISSION DATED 30.10.2010 THAT YOU HAD HELD 15% OF SHARES OF SUNDERLAND DEVELOPER PVT LTD. DURING FY 0 7-08. IN VIEW OF THIS, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE CLEAR ATTRACTED. YOU ARE HEREBY GIVEN A SHOW-CAUSE WHY THE ADDITION SHOULD NOT BE MADE TO YOUR TOTAL INCOME AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. YOU ARE ALSO REQUESTED TO PRODUCE THE BALA NCE SHEETS OF SUNDERLAND DEVELOPER PVT. LTD. ON FOLLOWING DATES F OR WORKING OUT THE EXACT QUANTUM OF ADDITION: DATE AMOUNT LENT 18/04/07 10,00,000 14/05/07 26,00,000 16/05/07 2,00,000 21/06/07 2,00,000 16/08/07 70,000 21/08/07 8,00,000 22/08/07 50,000 05/09/07 10,000 17/09/07 5,00,000 20/09/07 2,50,000 24/09/07 5,00,000 08/10/07 1,00,000 19/10/07 1,00,000 17/12/07 1,50,000 20/12/07 75,000 11/01/08 35,000 17/01/08 3,00,000 28/01/08 50,000 11/03/08 30,00,000 KINDLY NOTE THAT IF YOU DO NOT PRODUCE BALANCE SHEE TS OF SUNDERLAND DEVELOPER LTD AS ON ABOVE DATES, DECISION AS DEEMED FIT SHALL BE TAKEN WHILE WORKING OUT TOTAL QUANTUM OF ADDITION U/S 2(2 2)(E) OF THE ACT.' ITA NO. 1791/AH D/2014 & CO NO.249/AHD/2014 (IN ITA NO.1791/AHD/2014) ASST.YEAR 2008-09 - 4 - 2.2 AGAINST THE ABOVE SHOW-CAUSE, THE ASSESSEE REPL IED AS UNDER: 'WITH REFERENCE TO ABOVE, I AM IN RECEIPT OF YOUR A BOVE MENTIONED NOTICES REQUIRING ME TO FILE A REPLY OF YOUR SHOW C AUSE NOTICE TO BE FILED OF YOUR SHOW CAUSE NOTICE TO MAKE ADDITION ON QUANT UM WITHIN THE MEANING OF SECTION 2(22)E OF INCOME TAX ACT 1961. I N CONNECTION, WE WOULD LIKE TO STATE AS UNDER: 1. THE TRANSACTION CARRIED OUT DURING THE YEAR IN PROC EEDINGS ARE OF RELATED TO BUSINESS ONLY. DURING THE YEAR UNDER REV IEW, MR. YOGENDRA R. SHETH (PROP. M/S. SHAH CONSTRUCTION CO. ) HAS AGREED AND ENTERED INTO AN MOU WITH SUNDERLAND DEVELOPERS PVT. LTD. WHEREBY MR. YOUGENDRA R. SHETH SHALL MAKE ALL NECES SARY EFFORTS TO EXPAND THE BUSINESS OPERATIONS OF SUNDERLAND DEVELO PERS PVT. LTD. AND IN CONSIDERATION COMPANY SHALL ADVANCE M/S. SHA H CONSTRUCTION CO. TO MEET ITS PROJECT RELATED WORKIN G CAPITAL REQUIREMENTS ON DAY TO DAY BASIS. 2. IN ANY CASE THIS TRANSACTION ARE IN THE NATURE OF C URRENT ACCOMMODATION ADJUSTMENT ACCOUNT AND THEREFORE THE SAME ARE NEITHER LOAN NOR ADVANCE AS CONTEMPLATED U/S.2(22)( E) OF THE 'ACT'. 3. RELIANCE IS PLACE ON FOLLOWING AUTHORITIES:- NH SECURITIES LTD V. DCIT(2007) 11 SOT 302(BOM) ACIT V. GLOBAL AGENCIES (P) LTD. (2005) 87 TTJ 1086 (DEL) CIT V. NAGINDAS M. KAPADIA (1989) 177 ITR 393 (BOM) CIT V. CREATIVE DYEING & PRINTING (P) LTD. 318 ITR476 DEL COPIES OF THE AUTHORITIES ARE FILED HEREWITH FOR YO UR KIND REFERENCE. 2.3 AGAINST THE ABOVE REPLY, THE ASSESSEE VIDE NOTI CE U/S.142(1) OF THE ACT DATED 13/12/2010 WAS ASKED TO FURNISH FOLLOWING DETAILS: 1. PLEASE FURNISH COPY OF MOU SIGNED BY YOU WITH SU NDERLAND DEVELOPERS PVT. LTD. ITA NO. 1791/AH D/2014 & CO NO.249/AHD/2014 (IN ITA NO.1791/AHD/2014) ASST.YEAR 2008-09 - 5 - 2. PLEASE EXPLAIN IN DETAIL, ALONG WITH THE RELEVAN T EVIDENCES, FOLLOWING CONTENTION PUT FORWARD BY YOU, VIDE YOUR SUBMISSION DATED 09/12/2010 FILED IN THIS OFFICE: '2. IN ANY CASE THIS TRANSACTION ARE IN THE NATURE OF CURRENT ACCOMMODATION ADJUSTMENT ACCOUNT AND THEREFORE THE SAME ARE NEITHER LOAN NOR ADVANCE AS CONTEMPLATED U/S.2(22)( E) OF THE ACT.' 2.4 BUT IN A PERIOD OF TWO DAYS ASSESSEE FAILED TO FURNISH THE ABOVE DETAIL. THEREAFTER, ADDITION OF RS.56,29,080/- WAS MADE. 3. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A), WHO PARTLY ALLOWED THE A PPEAL OF THE ASSESSEE. 4. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. IT IS A FACT THAT LD.AO ASKED THE ASSESSEE TO FURNISH CERTAIN DETAILS THAT TO WITHIN TWO DAYS. HOWEVER, THE ASSESSEE FAILED TO FU RNISH THE DETAILS. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASS ESSEE HAS MADE THE WRITTEN SUBMISSION WITH THE ADDITIONAL EVIDENCES IN THE FORM OF COPY OF MOU OF THE APPELLANT WITH SUNDERLAND DEVELOPERS PVT . LTD. DTD.05/04/2007 AND A COPY OF RESOLUTION PASSED BY S UNDERLAND DEVELOPERS PVT. LTD. UNDER RULE-46A FOR ADMISSION O F THE AFORESAID DOCUMENTS. 4.2 THEREFORE, A COPY OF THE WRITTEN SUBMISSION ALO NG WITH THE ADDITIONAL EVIDENCES AND THE REQUEST FOR ADMISSION OF THE ADDITIONAL EVIDENCES WAS FORWARDED TO THE AO BY LD.CIT ON DTD. 23/09/2013 CALLING ITA NO. 1791/AH D/2014 & CO NO.249/AHD/2014 (IN ITA NO.1791/AHD/2014) ASST.YEAR 2008-09 - 6 - FOR HIS COMMENTS. BUT IN THE REMAND REPORT, THE AO HAS NOT GIVEN ANY COMMENTS THAT THE APPELLANT HAD NOT WORKED ACCORDIN G TO THE TERMS AND CONDITIONS OF THE MOU WITH SDPL OF THE NICOLAS. NEI THER ANY RECORD HAVE BEEN BROUGHT ON RECORD STATING THAT THE FINANC IAL SUPPORT GIVEN BY THE SDPL TO THE APPELLANT WAS ONLY LOANS AND NOT TH E FINANCE FOR EXPANDING THE BUSINESS OF THE SDPL. IT HAS NOT BEEN CONTENDED THAT THE FINANCIAL TRANSACTIONS WERE NOT IN CONNECTION WITH THE MOU BETWEEN THE TWO PARTIES REFERRED ABOVE. IN SUPPORT OF THE CONTE NTION, THE APPELLANT HAS ALSO PROVIDED COPIES OF THE WORK ORDERS GIVEN BY NI CHOLAS PIRAMAL TO SDPL AND THE LEDGER ACCOUNT COPIES OF THE NICHOLAS PIRAMAL FROM THE BOOKS OF SDPL WHICH CLEARLY ESTABLISHES THE BUSINES S CARRIED OUT BETWEEN THE SDPL AND NICHOLAS PIRAMAL IN VIEW OF TH E MOU. 5. WE ARE OF THE CONSIDERED OPINION, THE NATURE OF TRANSACTIONS AND DECISIONS OF VARIOUS COURTS, THE SAME CANNOT BE TER MED AS LOANS AND ADVANCES AND THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WAS RIGHTLY DELETED EXCEPT TO THE AMOUNT OF RS.83,733/-. FOLLOW ING AMOUNTS WHICH HAVE BEEN TAKEN BY THE APPELLANT FROM SDPL FOR ITS PERSONAL REQUIREMENTS/NEEDS WHICH CANNOT BE SAID TO BE IN RE LATION TO THE FINANCIAL SUPPORT. DATE DESCRIPTION AMOUNT 01/04/2007 LIC PREMIUM RS.13,000/- 29/06/2007 LIC PREMIUM RS.10,733/- 28/01/2008 BANK RS.50,000/- 31/03/2008 LIC PREMIUM RS.10,000/- TOTAL RS.83,733/- ITA NO. 1791/AH D/2014 & CO NO.249/AHD/2014 (IN ITA NO.1791/AHD/2014) ASST.YEAR 2008-09 - 7 - 6. WE DO NOT FIND ANY AMBIGUITY IN THE ORDER PASSED BY THE LEARNED CIT. THEREFORE, APPEAL FILED BY THE DEPARTMENT IS D ISMISSED. 7. SO FAR CO IS DELAY BY 12 DAYS AND LD. AR HAS FIL ED AN AFFIDAVIT ALONG WITH AN APPLICATION FOR CONDEMNATION OF DELAY . THEREFORE, WE CONDONE THE DELAY. LD. AR STATED THAT HE DOES NOT WANT TO PRESS THE C O. THEREFORE, CO IS DISMISSED AS NOT PRESSED. 8. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IN ITA NO.1791/AHD/2014 FOR ASST. YEAR 2008-09 IS DISMISSE D AND CROSS OBJECTION NO.249/AHD/2014 (IN ITA NO.1791/AHD/2014) FOR ASST. YEAR 2008-09 IS ALSO DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 27/10/2017 SD/- SD/- ( ) 3 4 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 27/10/2017 PRITI YADAV, SR.PS ITA NO. 1791/AH D/2014 & CO NO.249/AHD/2014 (IN ITA NO.1791/AHD/2014) ASST.YEAR 2008-09 - 8 - !'#$ %$' # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 56, ) 7, / CONCERNED CIT 4. ) 7, 3!4 / THE CIT(A)-XX, AHMEDABAD. 5. 89:,56 !-!561 ! / DR, ITAT, AHMEDABAD 6. :;<* # GUARD FILE. & ' / BY ORDER, (8,, //TRUE COPY// (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 26/10/2017 (DICTATION-PAD 4 PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27/10/2017 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. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 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