M.Rajkumar, CHENNAI V. ITO, CHENNAI

CO 38/CHNY/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0949 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 16-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2014
• Court: TRIBUNAL
• Department Lawyers: T BANUSEKARC A
• Assessee Lawyers: S DASGUPTA
• Keywords: Gift; Business expenditure; Deemed dividend
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.451 /MDS./2014 ( !' #' / ASSESSMENT YEAR :2009-10) & C.O NO.38/MDS./2014 INCOME TAX OFFICER, BUSINESS WARD II(3), NEW BLOCK, 4 TH FLOOR, 121,MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI-34. VS. SRI M.RAJKUMAR , PLO NO.143A, NO.22,4 TH STREET, RAGHAVAN COLONY, JAFFERKHANPET, CHENNAI 600 083. PAN ADIPR 3197 A ( / APPELLANT ) ( / RESPONDENT/ CROSS OBJECTOR ) $% & ' / APPELLANT BY : MR.S.DAS GUPTA, JCIT ,D.R ()$% & ' / RESPONDENT BY : MR.T.BANUSEKAR,C.A * + & ,- / DATE OF HEARING : 16.04.2015 .# & ,- /DATE OF PRONOUNCEMENT : 12.06.2015 ITA NO.451MDS/2014 C.O.NO.38/MDS./2014 SHRI M.RAJKUMAR 2 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS)(CENTRAL)-I, CHENNAI DATED 27.1 1.2013 IN ITA NO.168/2013-14, PASSED UNDER SECTION 143(3) READ W ITH SECTION 250 OF THE INCOME TAX ACT,1961. 2.1 THE REVENUE HAS RAISED THREE ELABORATE GROUNDS IN ITS APPEAL, HOWEVER, THE CRUX OF ISSUES IS STATED HEREIN BELOW FOR OUR CONSIDERATION:- I) THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT (A) FOR HAVING RESTRICTED THE ADDITION TO ` 97,595/- AS AGAINST ` 28,60,253/- MADE BY THE A.O U/S.2(22)(E) OF THE ACT . 2.2. THE ASSESSEE HAS RAISED FIVE ELABORATE GROUND S IN ITS CROSS OBJECTIONS AND THEY ARE CONCISED HEREIN BELOW FOR O UR CONSIDERATION:- I) THE LD.CIT(A) HAD FAILED TO CONSIDER THAT THE ASSESSEE IS NOT THE BENEFICIAL OWNER IN RESPECT OF THE SHARES THAT ARE GIFTED TO HIS ITA NO.451MDS/2014 C.O.NO.38/MDS./2014 SHRI M.RAJKUMAR 3 MINOR DAUGHTER AND THEREFORE PROVISIONS OF SECTION 2(22)(E) OF THE ACT CANNOT BE INVOKED. II) THE LD.CIT(A) HAD ERRED IN SUSTAINING THE ADDITION U/S.2(22)(E) OF THE ACT FOR ` 97,595/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL HOLDING MORE THAN 20% STAKE IN M/S.DISHA INTERIORS (P) LTD., AND ALSO ONE OF THE DIRECTORS OF THE ABOVE SAID COMPANY. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-1 0 ON 18.11.2009 ADMITTING HIS INCOME AS ` 11,75,400/-. THE RETURN WAS INITIALLY PROCESSED U/S.143(1) OF THE ACT AND THE CASE WAS SE LECTED FOR SCRUTINY PURSUANT TO AIR INFORMATION WHEREIN IT WAS REVEALED THAT THE ASSESSEE HAD MADE PAYMENTS FROM HIS CREDIT CARD AMO UNTING TO ` 14,35,525/-. FINALLY THE ASSESSMENT U/S.143(3) WAS COMPLETED ON 22.12.2011 WHEREIN THE LD. ASSESSING OFFICER MADE A N ADDITION U/S.2(22)(E) OF THE ACT FOR ` 28,60,253/-. THE LD. ASSESSING OFFICER MADE THE AFORESAID ADDITION DUE TO THE FOLLOWING RE ASONS:- I) THE ASSESSEE HAD RECEIVED LOAN FROM M/S.DISHA I NTERIORS (P) LTD., FOR ` 28,60,253/-. ITA NO.451MDS/2014 C.O.NO.38/MDS./2014 SHRI M.RAJKUMAR 4 II) THE LOAN AMOUNT OF ` 28,60,253/- WAS PAID TO THE BANK AGAINST UTILIZATION OF CREDIT CARD. III) THE ASSESSEE HAD MORE THAN 20% STAKE IN M/S.D ISHA INTERIORS (P) LTD. IV) M/S.DISHA INTERIORS (P) LTD., HAD RESERVES AND SURPLUS TO THE TUNE OF ` 69,32,956/-. 4. ON APPEAL, THE LD. CIT (A) SUSTAINED THE ADDITI ON FOR ` 97,595/-. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED HERE IN BELOW:- 9. I HAVE GONE THROUGH THE ASSESSMENT ORDER, THE GROUNDS OF APPEAL, THE ASSESSING OFFICERS REPORT AND THE ARS REPLY TO TH E A.OS REPORT. ON PERUSAL OF THE A.OS REPORT, WHEREIN ASSESSING OFFI CER CLEARLY INDICATED THAT THE APPELLANT HAS 50% STAKE IN THE COMPANY IN WHICH THE APPELLANT IS A DIRECTOR, ASSESSING OFFICER HAS COME TO THIS CONC LUSION AFTER VERIFYING FORM 20B, 23B AND FORM 23AC, SUBMITTED TO THE REGIS TRAR OF COMPANIES. ASSESSING OFFICER FOUND THAT THE APPELLANT IS HOLDI NG 5000 SHARES OUT OF THE TOTAL PAID UP SHARES OF 10000. ASSESSING OFFICE R ALSO NOTICED THAT FORM 20B FILED FOR THE PERIOD ENDING ON 31.3.2009 DID NO T SHOW THE TRANSFER OF SHARES (NOT EVEN ONE) TO M/S.R.SHWETA. SINCE THESE FINDINGS OF THE A.O ARE BASED ON FACTS, THE CONTENTIONS OF THE A.R IN T HIS REGARD ARE THEREFORE NOT ACCEPTED. IN OTHER WORDS, THE PROVISIONS OF SE CTION 2(22)(E) OF THE ACT ITA NO.451MDS/2014 C.O.NO.38/MDS./2014 SHRI M.RAJKUMAR 5 ARE APPLICABLE AS IT IS PROVED BEYOND DOUBT THAT TH E APPELLANT IS HAVING 50% OF THE SHARES IN THE COMPANY. THUS THIS GROUND OF APPEAL IS DISMISSED. 9.1. HOWEVER, THE AR CONTENDED THAT THE AMOUNT OF RS.28,60,253/- WHICH WAS TREATED AS DEEMED DIVIDEND U/S.2(22)(E) OF THEA CT BY THE ASSESSING OFFICER WAS GIVEN TO THE DIRECTOR IN THE ORDINARY C OURSE OF THE BUSINESS AND HENCE THE PROVISIONS OF SECTION 2(22)(E) ARE NOT AP PLICABLE. APPELLANT FURTHER STATED THAT THE ABOVE SAID AMOUNT HAS BEEN UTILIZED FOR MAKING CREDIT CARD PAYMENT, LABOUR EXPENDITURE, SITE EXPEN SES, TRAVEL EXPENSES ETC. INCURRED FOR THE PURPOSE OF BUSINESS. IN THIS REGARD, I HAVE PERUSED THE CREDIT CARD PAYMENT DETAILS BILLS/VOUCHER. ON E XAMINATION OF THE SAME, IT WAS NOTICED THAT THE SAID AMOUNT WAS UTILIZED TO MEET THE BUSINESS EXPENSES LIKE CREDIT CARD PAYMENTS, PURCHASE/EXPENS ES AT SITE, LABOUR WELFARE, EXPENSES IN CONNECTION WITH TRAVEL STAY AN D ACCOMMODATION ETC. IT IS ALSO SEEN THAT THE APPELLANT BEING A WORKS CO NTRACT SERVICE PROVIDER, THE SAME IS LABOUR ORIENTED, AND THE EXPENSES ARE O F RECURRING NATURE AND TO BE PROVIDED IMMEDIATELY. ON VERIFICATION, IT WA S FOUND THAT OUT OF THE TOTAL AMOUNT OF RS.28,60,253/-, THE APPELLANT COULD SUBSTANTIATE THE EXPENSES RELATED TO BUSINESS TO THE TUNE OF RS.27,6 2,658/- ONLY AND THE BALANCE OF RS.97,595/- (RS.28,60,253 RS.27,62,658 ) NOT SPENT FOR THE BUSINESS AND HENCE THE SAME WARRANTS FOR DISALLOWAN CE U/S. 2(22)(E) OF THE ACT. THEREFORE, OUT OF THE SAID AMOUNT OF RS.2 8,60,253/- GIVEN TO THE ITA NO.451MDS/2014 C.O.NO.38/MDS./2014 SHRI M.RAJKUMAR 6 APPELLANT, AN AMOUNT OF RS.27,52,658/- IS IN THE OR DINARY COURSE OF THE BUSINESS AND HENCE THE PROVISIONS OF SECTION 2(22) (E) ARE NOT APPLICABLE. HENCE THE BALANCE OF RS.97,595/-(RS.28,60,253 RS. 27,62,658) IS TREATED AS THE AMOUNT SPENT NOT FOR THE PURPOSE OF BUSINESS. AS A RESULT, OUT OF THE TOTAL ADDITION OF RS.28,60,253/-, AN AMO UNT OF RS.97,595/- IS CONSIDERED FOR THE PURPOSE OF SEC. 2(22)(E) OF THE ACT AND THE BALANCE AMOUNT OF RS.27,62,658/- IS TREATED AS HAVING BEEN UTILIZED FOR THE PURPOSE OF BUSINESS AND HENCE ON WHICH THE PROVISI ONS OF S. 2(22)(E) ARE NOT APPLICABLE. THIS GROUND OF APPEAL IS PARTLY ALL OWED. 5. BEFORE US THE LD. A.R. SUBMITTED THAT THE ASSES SEE WAS NOT THE BENEFICIAL SHARE HOLDER OF THE COMPANY BECAUSE HE H AD GIFTED THE SHARES TO HIS MINOR DAUGHTER AND THEREFORE, PROVISI ONS OF SECTION 2(22)(E) OF THE ACT WOULD NOT BE APPLICABLE. HE FUR THER SUBMITTED THAT THE ADVANCE GIVEN BY THE COMPANY WAS ONLY FOR THE B USINESS PURPOSE OF THE COMPANY AND THE SAME WAS SPENT FOR THE BUSIN ESS OF THE COMPANY. IT WAS THEREFORE PLEADED THAT THE ADDITIO N SUSTAINED BY THE LD. CIT (A) MAY BE DELETED. LD. D.R ON THE OTHER HA ND RELIED UPON THE ORDER OF THE LD. ASSESSING OFFICER. ITA NO.451MDS/2014 C.O.NO.38/MDS./2014 SHRI M.RAJKUMAR 7 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY P ERUSED THE MATERIALS AVAILABLE ON RECORD. SINCE NO MATERIALS A RE BROUGHT BEFORE US TO ESTABLISH THAT THE ASSESSEE HAS GIFTED THE SH ARES TO HIS MINOR DAUGHTER THE CONTENTION OF THE ASSESSEE THAT HE IS NOT THE BENEFICIAL SHARE HOLDER OF THE COMPANY IS NOT ACCEPTABLE. FUR THER IT APPEARS THAT THIS IS A PLEA TAKEN BY THE ASSESSEE TO ESCAPE FROM THE CLUTCHES OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. T HEREFORE, THIS GROUND RAISED BY THE ASSESSEE IS NOT ACCEPTABLE AND HENCE DISMISSED. HOWEVER, ON PERUSING THE ORDER OF THE LD. CIT (A) W E ARE CONVINCED THAT THE ASSESSEE HAD UTILIZED THE AMOUNT RECEIVED FROM THE COMPANY FOR THE BUSINESS PURPOSE OF THE COMPANY. MOREOVER, THERE IS NOTHING ON RECORD TO SUGGEST THAT THE AMOUNT OF ` 97,595/- IS SPEND BY THE ASSESSEE FOR HIS INDIVIDUAL BENEFITS. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT THOUGH THE LD. CIT (A) WAS JUS TIFIED IN GRANTING RELIEF TO THE ASSESSEE TO THE EXTENT OF ` 27,52,658/-, SUSTAINING THE ADDITION OF ` 97,595/- IS NOT WARRANTED. ACCORDINGLY WE HEREBY DE LETE THE ADDITION SUSTAINED BY THE LD. CIT (A). THUS TH E APPEAL OF THE REVENUE IS HELD AGAINST IT AND THE FIRST GROUND OF THE CROSS OBJECTIONS OF THE ASSESSEE IS HELD AGAINST THE ASSE SSEE WHILE AS THE ITA NO.451MDS/2014 C.O.NO.38/MDS./2014 SHRI M.RAJKUMAR 8 SECOND GROUND OF THE CROSS OBJECTION IS DECIDED IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D AND CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 12 TH JUNE, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 12 TH UNE, 2015. K S SUNDARAM. & (,/0 1 0#, /COPY TO: 1. $% /APPELLANT 2. ()$% /RESPONDENT 3. * 2, ( ) /CIT(A) 4. * 2, /CIT 5. 05 (,6! /DR 6. 7' 8+ /GF