T.Yogish Chandra, Guntur V. THE ACIT, CIRCLE - 1, Guntur

ITA 10/VIZ/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1021 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 07-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A RAMESH KUMAR
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.10/VIZAG/2014 ( / ASSESSMENT YEAR: 2008-09) T. YOGISH CHANDRA GUNTUR VS. ACIT, CIRCLE - 1, GUNTUR [PAN: ABBPT6254H ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM, AR / RESPONDENT BY : SHRI A. RAMESH KUMAR, DR / DATE OF HEARING : 19.05.2016 / DATE OF PRONOUNCEMENT : 26.07.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A), GUNTUR DATED 30.9.2013 FOR THE ASSESSMENT Y EAR 2008-09. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS ENGAGED IN RUNNING A DIGITAL STUDIO IN THE NAME & STYLE OF TULASI DIGITAL STUDI OS AND MANUFACTURING ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 2 OF FILES IN THE NAME OF M/S. TULASI FILING SYSTEMS , AS A PROPRIETOR. THE ASSESSEE IS ALSO RECEIVING REMUNERATION FROM M/S. C HAITANYA PACKAGINGS (P) LTD. AND FILED A RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS.6,30,576/-. THE RETURN FILED BY THE ASSESSEE WA S PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED AS THE ACT) THEREAFTER NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT ON PERUSAL OF THE ACCOMPANYING STATEM ENTS TO THE RETURN OF INCOME, IT IS FOUND THAT M/S. TULASI DIGITAL STU DIO, HAS RECEIVED AN AMOUNT TO THE TUNE OF RS.25,24,796/- AS A LOAN FROM M/S. CHAITANYA PACKAGINGS (P) LTD. DURING THE RELEVANT ASSESSMENT YEAR 2008-09. THE ASSESSEE IS THE PROPRIETOR OF M/S. TULASI DIGITAL S TUDIOS. THE ASSESSEE HAS FILED THE LOAN ACCOUNT COPY OF THIS COMPANY, AS APPEARING IN ITS BOOKS WITH AN OUTSTANDING CREDIT BALANCE OF RS.11,8 7,483.98 AS ON 31.3.2008. THE A.O. HAS FURTHER OBSERVED THAT DURI NG THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE DETAILS OF THE SHAREHOL DING PATTERN OF THE CREDITOR COMPANY M/S. CHAITANYA PACKAGINGS (P) LTD. , WERE CALLED FOR AND PLACED ON RECORD. ON EXAMINATION OF RECORDS OF THE CREDITOR COMPANY M/S. CHAITANYA PACKAGINGS (P) LTD., IT IS NOTICED THAT THE ASSESSEE IS HAVING 25,500 SHARES IN THE CREDITOR CO MPANY OUT OF TOTAL SHAREHOLDING OF THE COMPANY OF 1,95,000 WHICH COMES TO 13%. ON ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 3 DETAILED EXAMINATION OF THE SHAREHOLDING PATTERN OF THE COMPANY, M/S. CHAITANYA PACKAGINGS (P) LTD., IT IS NOTICED THAT T HE COMPANY IS CLOSELY HELD COMPANY CONSISTING OF ASSESSEES FAMILY MEMBER S OR SISTER CONCERNS. IN VIEW OF THE ABOVE, THE A.O. HAS HELD THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE SQUARELY ATTRACTED AND THE ADVANCE/LOAN TAKEN DURING THE YEAR FROM THE CREDITOR COMPANY M/S . CHAITANYA PACKAGINGS (P) LTD. IS TO BE TREATED AS DEEMED DIV IDEND IN THE HANDS OF THE ASSESSEE SHRI YOGISH CHANDRA TULASI SINCE THE A SSESSEE IS THE PROPRIETOR OF M/S. TULASI DIGITAL STUDIOS. IT IS F URTHER OBSERVED THAT ON VERIFICATION OF THE LEDGER FOLIO ACCOUNT IN RESPECT OF CREDITOR COMPANY, IT WAS FOUND THAT THE ASSESSEE AS THE PROPRIETOR OF M/ S. TULASI DIGITAL STUDIOS, BORROWED MONEY AS AN ADVANCE FROM M/S. CHA ITANYA PACKAGINGS (P) LTD. DURING THE FINANCIAL YEAR 2007 -08. IT IS FURTHER OBSERVED THAT THE ACCUMULATED PROFITS AS ON 31.3.20 08 IN THE HANDS OF M/S. CHAITANYA PACKAGINGS (P) LTD., WHICH ADVANCED LOAN TO THE ASSESSEE IS HAVING AN ACCUMULATED PROFITS SHOWN UND ER THE HEAD RESERVES AND SURPLUS IN BALANCE SHEET OF M/S. CHA ITANYA PACKAGINGS (P) LTD. WAS OF RS.48,03,137/- AS ON 1.4.2007. FU RTHER, THE TRANSACTIONS IN THE LEDGER FOLIO ACCOUNT OF M/S. CH AITANYA PACKAGINGS (P) LTD. , IN THE BOOKS OF THE ASSESSEE FOUND TO BE PUR E MONEY BORROWED BY THE ASSESSEE EITHER DIRECTLY OR THROUGH PAYMENT MAD E BY M/S. CHAITANYA ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 4 PACKAGINGS (P) LTD. TO A THIRD PARTY ON BEHALF OF THE ASSESSEE, DULY DEBITED BY THE LENDING CONCERN IN THE ACCOUNT OF TH E ASSESSEE AS AN ADVANCE GIVEN. THUS, ON THE FACE OF IT THIS AMOUNT OF RS.25,24,796/- WAS TAKEN AS A LOAN AND ADVANCE BY THE ASSESSEE FRO M M/S. CHAITANYA PACKAGINGS (P) LTD., IN FINANCIAL YEAR 2007-08 REL EVANT TO THE ASSESSMENT YEAR 2008-09. ACCORDINGLY, THE A.O. HAS ASSESSED AN AMOUNT OF RS.25,24,796/- IN THE HANDS OF THE ASSESS EE AS AN INCOME FROM OTHER SOURCES FOR THE ASSESSMENT YEAR 2008-09. 3. ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE CIT (A). IT WAS SUBMITTED THAT THE TRANSACTION BETWEEN THE ASSESSEE AND M/S. CHAITANYA PACKAGINGS (P) LTD. IS PURELY A BUSINESS TRANSACTI ON AND THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT HAS NO APPLICATION. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HAS CONFIRMED THE ORDER OF THE A.O. BY OBSERVING AS UNDER: I HAVE PERUSED THE SUBMISSIONS MADE BY THE APPELLAN T. THE APPELLANT HAS REFERRED TO BUSINESS TRANSACTIONS BET WEEN M/S. TULASI FILLING SYSTEMS AND M/S. CPPL. HOWEVER, IT IS RELEVANT TO NOTE THAT THE ASSESSING OFFICER HAS TREATED ONLY THE LOAN TAKEN BY M/S. TUL ASI DIGITAL STUDIOS AS DEEMED DIVIDEND AND NOT TRANSACTIONS BETWEEN M/S. T ULASI FILLING SYSTEMS AND M/S. CPPL. IN THE CASE OF M/S. TULASI DIGITAL S TUDIOS, THERE IS NO BUSINESS TRANSACTION BETWEEN IT AND M/S. CPPL, AND THE AMOUNTS RECEIVED ARE CLEARLY LOANS GIVEN TO ACCOMMODATE THE APPELLAN TS CONCERN. SECONDLY, THE APPELLANT HAS STATED THAT THE OUT FLO W TO M/S. CPPL EXCEEDS THE AMOUNTS OF LOANS RECEIVING DURING THE YEAR. TH E ASSESSING OFFICER HAS RIGHTLY POINTED OUT THAT A LOAN EVEN FOR A VERY SHO RT DURATION IS DEEMED DIVIDEND AND SHALL BE TREATED AS SUCH EVEN IT IS RE PAID BEFORE THE END OF THE PREVIOUS YEAR. THE APPELLANT HAS MADE PAYMENTS TO M/S. CPPL TOWARDS REPAYMENT OF AN EARLIER OUTSTANDING LOAN. HOWEVER, THESE REPAYMENTS DO NOT MATERIALLY CHANGE THE FACT THAT F RESH LOANS AMOUNTING ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 5 TO RS.25.25 LAKHS WERE RECEIVED DURING THE YEAR. I N THE CASE OF ITO VS. KALYAN GUPTA (293 ITR 249) IT HAS BEEN HELD THAT F OR THE PURPOSE OF DETERMINATION OF DEEMED DIVIDEND U/S 2(22)(E), REPA YMENT OF AN EARLIER LOAN CANNOT BE ADJUSTED AGAINST ADVANCEMENT OF FRES H LOAN SO AS TO REDUCE LIABILITY WHICH HAS FASTENED ITSELF ON THE E ARLIER LOAN. REPAYMENT DOES NOT REDUCE LIABILITY. KEEPING THE ABOVE IN V IEW, I DO NOT SEE ANY MERIT IN THE ARGUMENT OF THE APPELLANT AND THE ADDI TION OF RS.25,24,796/- ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) IS UPHEL D. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE AMOUNT TAKEN BY THE ASSESSEE AS A BUSINESS ADVANCE, THEREF ORE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT HAS NO APPLICATION. THE ASSESSEE ALSO FILED A LETTER DATED 24.11.2007 SUBMITTING THAT THE ASSES SEE HAS GIVEN A PROPERTY AS SECURITY FOR LOAN TAKEN BY M/S. CHAITAN YA PACKAGINGS (P) LTD. THEREFORE, SECTION 2(22)(E) OF THE ACT HAS N O APPLICATION. THE LD. COUNSEL FOR THE ASSESSEE ALTERNATIVELY SUBMITTED BY RAISING ADDITIONAL GROUND THAT AS THERE IS NO ACCUMULATED PROFIT, PROV ISIONS U/S 2(22)(E) OF THE ACT DO NOT COME INTO PLAY. HE ALSO FILED PAPER BOOK AND RELIED ON THE VARIOUS CASE LAWS 6. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT A DMITTEDLY THERE IS AN ACCUMULATED PROFIT AS ON 1.4.2007 AND IT IS ALSO FACT THAT ASSESSEE HAS BORROWED AN AMOUNT OF RS.25,24,796/-. IT IS A CLEAR CASE OF DEEMED DIVIDEND AS PER SECTION 2(22)(E) OF THE ACT. HE STRONGLY SUPPORTED THE ORDER PASSED BY BOTH THE AUTHORITIES BELOW AND SUBMITTED ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 6 THAT CASE LAWS RELIED BY THE LD. COUNSEL FOR THE AS SESSEE ARE NO APPLICATION TO THE FACTS OF THE CASE. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE IS RUNNING A DIGITAL STUDIO IN THE NAME AN D STYLE OF TULASI DIGITAL STUDIOS AND MANUFACTURING OF FILES IN THE NAME OF TULASI FILING SYSTEMS, AS A PROPRIETOR. THE ASSESSEE COMPANY HA VING A SHARES OF 25,500 OUT OF TOTAL SHAREHOLDINGS OF M/S. CHAITANYA PACKAGINGS (P) LTD. 1,95,000 WHICH COMES TO 13%. M/S. CHAITANYA PACKAG INGS (P) LTD. HAS ADVANCED AN AMOUNT OF RS.25,24,796/- FROM THE ACCUM ULATED PROFITS OF RS.48,03,137/- AS ON 1.4.2007. FROM THE ABOVE IT I S CLEAR THAT AS ON THE DATE OF LOAN ADVANCED BY M/S. CHAITANYA PACKAGINGS (P) LTD. TO M/S. TULASI DIGITAL STUDIO IS HAVING ACCUMULATED PROFIT . IT IS ALSO FACT THAT THE ASSESSEE IS HAVING SHAREHOLDING OF MORE THAN 10% IN THE CREDITOR COMPANY M/S. CHAITANYA PACKAGINGS (P) LTD. AND CRE DITOR COMPANY IS HAVING ACCUMULATED PROFIT OF RS.48,03,137/- AS ON 1 .4.2007 AND THEREFORE, PROVISIONS OF SECTION 2(22)(E) OF THE AC T SQUARELY APPLIES AND THE AMOUNT ADVANCED BY M/S. CHAITANYA PACKAGINGS (P ) LTD. IS A DEEMED DIVIDEND TO THE EXTENT OF LOAN ADVANCE OF RS .25,24,796/-. WE FIND THAT THE A.O. BY TREATING AN AMOUNT OF RS.25,2 4,796/- AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE AND THE SAME WAS CORRECTLY TAXED ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 7 AS INCOME FROM OTHER SOURCES FOR THE ASSESSMENT YEA R 2008-09 AND THE SAME WAS CONFIRMED BY THE LD. CIT(A). 8. SO FAR AS ARGUMENTS OF THE LD. COUNSEL FOR THE A SSESSEE IS CONCERNED, M/S. CHAITANYA PACKAGINGS (P) LTD. ADVA NCED THE AMOUNT AS A BUSINESS ADVANCE. THE ASSESSEE IS FAILED TO ESTA BLISH BEFORE US BY FILING RELEVANT MATERIAL TO SHOW THAT THE AMOUNT AD VANCED TO THE ASSESSEE BY M/S. CHAITANYA PACKAGINGS (P) LTD. IS A BUSINESS ADVANCE. THEREFORE, THIS ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE CANNOT BE ACCEPTED. IN SO FAR AS ANOTHER ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE PROPERTY OF THE ASSESSEE AS GI VEN FOR SECURITY TO M/S. CHAITANYA PACKAGINGS (P) LTD. IS CONCERNED, T HE LD. COUNSEL FOR THE ASSESSEE HAS FILED A LETTER FROM THE MANAGING D IRECTOR OF M/S. CHAITANYA PACKAGINGS (P) LTD. DATED 24.11.2007, WH ICH IS IN MINUTES OF MEETING OF THE BOARD OF DIRECTORS, AS PER THE LETTE R MR. YOGISH CHANDRA HAS REQUESTED THE INDIAN BANK TO GIVE A LOAN TO M/S . CHAITANYA PACKAGINGS (P) LTD. FOR THAT HE IS READY TO GIVE A PERSONAL GUARANTEE AND ALL OTHER PROPERTIES. THE LETTER FILED BY THE A.R. OF THE ASSESSEE, IT IS NOT CLEAR WHETHER M/S. CHAITANYA PACKAGINGS (P) LTD . HAS OBTAINED ANY LOAN FROM THE INDIAN BANK OR NOT. IF SO, WHAT IS T HE AMOUNT? WHETHER MR. TULASI YOGISH CHANDRA, ASSESSEE HAS ACTUALLY ST OOD GUARANTEE ON ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 8 BEHALF OF M/S. CHAITANYA PACKAGINGS (P) LTD. IS NO T CLEAR. THEREFORE, THIS ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE C ANNOT BE ACCEPTED. 9. SO FAR AS ALTERNATIVE GROUND RAISED BY THE ASSES SEE, THOUGH IT IS AN ADDITIONAL GROUND, IT WAS SUBMITTED THAT AS ON 1.4. 2007 THE ASSESSEE COMPANY IS HAVING A LOAN OF RS.56,34,464/- AND THE ACCUMULATED PROFIT OF RS.48,03,137/- MADE IN THIS SCENARIO THE LOAN/AD VANCE OF RS.56,34,464/- WOULD GET UPSET AGAINST THE ACCUMULA TED PROFIT OF RS.48,03,137/-. THIS SHOULD BE ASSESSED AS MUCH AS IN THE ASSESSMENT YEAR 2007-08 BUT NOT ASSESSED BY THE REVENUE. THIS ARGUMENT RAISED BY THE ASSESSEE IS HYPER TECHNICAL AND IT CANNOT BE AC CEPTED. AS PER SECTION 2(22)(E) OF THE ACT ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OF A SHARE HOLDER TO THE EXTENT TO WHICH THE COMPAN Y IN EITHER CASE POSSESS ACCUMULATED PROFIT, DEEMED TO BE A DEEMED D IVIDEND TO THE EXTENT OF ACCUMULATED PROFIT OR LOAN ADVANCED, WHIC HEVER IS LESS. 10. THEREFORE, IT IS CLEAR FROM THE ABOVE THAT AS O N THE DATE OF LOAN ADVANCED TO THE ASSESSEE BY THE M/S. CHAITANYA PACK AGINGS (P) LTD. IT HAS TO BE SEEN WHETHER THERE IS ACCUMULATED PROFIT IN THE HANDS OF THE CREDITOR COMPANY OR NOT. IN THE PRESENT CASE AS ON 1.4.2007, M/S. CHAITAYNA PACKINGS PVT. LTD. IS HAVING ACCUMUL ATED PROFIT OF RS.48,03,137/-. NOT ONLY THAT, THE CREDITOR COMPANY IN ITS LEDGER FOLIO ACCOUNT IT IS CLEARLY MENTIONED THAT THE ASSESSEE A S THE PROPRIETOR OF ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 9 M/S. TULASI DIGITAL STUDIO BORROWED MONEY AS AN ADV ANCE FROM M/S. CHAITANYA PACKAGINGS (P) LTD. DURING THE FINANCIAL YEAR 2007-08. IT IS ALSO FURTHER FOUND THAT FROM THE LOAN ACCOUNT OF TH E ASSESSEE COMPANY, THERE IS AN OUTSTANDING CREDIT BALANCE OF RS.11,87, 483.98 PS. AS ON 31.3.2008. FROM THE ABOVE FACTS, IT IS VERY CLEAR THAT WHEN THE ASSESSEE BORROWED THE MONEY FROM THE M/S. CHAITANYA PACKAGIN GS (P) LTD. THE CREDITOR COMPANY I.E. M/S. CHAITANYA PACKAGINGS (P ) LTD. IS HAVING AN AMOUNT OF RS.48,03,137/- AND OUT OF WHICH LOAN ADVA NCED TO THE ASSESSEE OF RS.25,24,796/-. IT IS CLEARLY A DEEMED DIVIDEND IN THE LIGHT OF SECTION 2(22)(E) OF THE ACT. SO FAR AS VARIOUS CASE LAWS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE IS CONCERNED, WE HAVE GONE THROUGH EACH AND EVERY CASE AND WE FIND THAT THE FACTS INVOLVED IN THOSE CASE LAWS ARE ENTIRELY DIFFERENT FROM THE CASE IN HAND. IN V IEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CI T(A) AND ALSO NO INTERFERENCE IS CALLED FOR. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26 TH JUL16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 26.07.2016 VG/SPS ITA NO.10/VIZAG/2014 T. YOGISH CHANDRA, GUNTUR 10 '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SHRI T. YOGISH CHANDRA, M/S. V. RAO & GOPI, CA, 26-1- 77, 1 ST FLOOR, NAGARAM PALEM, MAIN ROAD, GUNTUR. 2. / THE RESPONDENT THE ACIT, CIRCLE-2(1), GUNTUR 3. ) / THE CIT, GUNTUR 4. ) ( ) / THE CIT(A),GUNTUR 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM