Appeal details
Counselvise Citation
[2018] 126 COUNSELVISE.COM (IT) 1515 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 9 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-02-2018
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2012-2013
Appeal Filed On
12-05-2016
Judgement Text
, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1008 / KOL / 2016 ASSESSMENT YEAR :2012-13 M/S SREE KRISHNA GYANODYA FLOUR MILLS PVT. LTD., 15B, EVEREST HOUSE, 46C, CHOWRINGHEE ROAD, KOLKATA-71 [ PAN NO.AAHCS 8774 P ] V/S . PR. COMMISSIONER OF INCOME TAX, CENTRAL, KOLKATA-2 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI RAVI TULSIYAN, FCA /BY RESPONDENT SHRI G. HANGSHING, CIT-DR /DATE OF HEARING 23-01-2018 /DATE OF PRONOUNCEMENT 14-02-2018 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THE ASSESSEE HAS FILED THIS APPEAL DISPUTING THE O RDER OF PR. COMMISSIONER OF INCOME TAX, CENTRAL, KOLKATA-2 PASS ED U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) DATED 16.03.2016 BY THE LD. PR.CIT SET ASIDE THE ASSESSMENT ORDER DA TED 27.03.2014 PASSED U/S. 143(3) OF THE ACT FOR ASSESSMENT YEAR 2012-13 WITH A DIRECTION TO RE-DO THE ASSESSMENT IN RESPECT OF ISSUE MENTIONED THEREIN. SHRI RAVI TULSIYAN, LD AUTHORIZED REPRESENTATIVE AP PEARED ON BEHALF OF ASSESSEE AND SHRI G. HANGSHING, LD. DEPARTMENTAL RE PRESENTATIVE APPEARED ON BEHALF OF REVENUE. ITA NO.1008/KOL/2016 A.Y. 2012-13 M/S SREE KRISHNA GYANODAYA FLOUR MILLS PVT. LTD. VS. PR. CIT CENTRAL KOL-2 PAGE 2 2. THOUGH ASSESSEE HAS RAISED AS MANY AS 7 GROUNDS OF APPEAL, HOWEVER AS PER OUR CONSIDERED VIEW THE SOLE AND SUBSTANTIAL GROUND OF APPEAL IS THAT LD. PR. CIT ERRED IN HOLDING THE ORDER OF ASSESSING OFFICER ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IN THE PR ESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF BASM ATI RICE PRODUCTION AND WIND POWER GENERATION. THE ASSESSEE FOR THE YEAR UN DER CONSIDERATION HAS FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME O F 8,96,310/- ONLY. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D ACCORDINGLY ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT VIDE ORDER DATED 27.03.2014 AFTER MAKING SEVERAL DISALLOWANCES / ADDITIONS TO THE TOTAL INCO ME OF ASSESSEE AT RS. 9,64,630.00 ONLY. SUBSEQUENTLY LD. PR. CIT OBSERVED THAT THE THAT THE RE IS A DEFECT/ERROR IN THE ORDER PASSED BY ASSESSING OFFICER AS NO ADDITION WA S MADE BY HIM ON ACCOUNT OF DEEMED DIVIDEND INCOME U/S 2(22)(E) OF T HE ACT. AS SUCH, ASSESSEE HAS TAKEN A LOAN OF 14.26 CRORES FROM M/S SUBHCHINTAK VANCOM PVT. LTD., (SVPL FOR SHORT). THE ASSESSEE WAS HOLDI NG SHARES IN SUCH COMPANY TO THE TUNE OF 18.63%. AS PER LD. PR. CIT THE LOAN TAKEN BY ASSESSEE ATTRACTS THE PROVISION OF SEC. 2(22)(E) OF THE ACT. ACCORDINGLY, LD. PR. CIT ISSUED SHOW CAUSE NOTICE DATED 03.11.2015 TO TH E ASSESSEE FOR SEEKING CLARIFICATION FOR THE ABOVE STATED ISSUE. IN COMPLI ANCE THERETO, ASSESSEE SUBMITTED THAT IT HAS NOT TAKEN ANY LOAN FROM SVPL DURING THE YEAR. IN FACT, THERE IS A REGULAR ACCOUNT BEING MAINTAINED WITH SV PL AND ACCORDINGLY ON MANY OCCASIONS, THE ASSESSEE HAS TAKEN LOAN / ADVAN CE FROM SVPL AND SIMILARLY ON MANY OCCASIONS IT HAS GIVEN ADVANCE TO SVPL. THEREFORE, THERE IS NO QUESTION OF TREATING THE IMPUGNED LOAN AS DEEMED DIVIDEND INCOME UNDER THE PROVISION OF SECTION 2(22)(E) OF THE ACT. AS SU CH, THE IMPUGNED ADVANCE SHOWN BY THE ASSESSEE REPRESENTS THE CURRENT ACCOUN T TRANSACTIONS. ITA NO.1008/KOL/2016 A.Y. 2012-13 M/S SREE KRISHNA GYANODAYA FLOUR MILLS PVT. LTD. VS. PR. CIT CENTRAL KOL-2 PAGE 3 HOWEVER, LD. PR. CIT DISREGARDED THE CONTENTION OF ASSESSEE AND HELD THE ORDER PASSED BY AO ERRONEOUS IN SO FAR AS PREJUDICI AL TO THE INTEREST OF REVENUE BY OBSERVING AS UNDER:- I HAVE CONSIDERED THESE ARGUMENTS ABOVE ARGUMENT S. I DO NOT AGREE WITH THE A/RS ARGUMENT THAT IF THERE ARE FRE QUENT TRANSACTIONS RESULTING IN SHIFTING BALANCES, THE MONEY RECEIVED BY THE ASSESSEE WOULD NOT BE A LOAN. SECTION 2(22)(E) DOES NOT MAKE ANY SUCH DISTINCTION. I AM OF THE OPINION THAT THE PROVISION OF DEEMED DIVIDEND AS PER SECTION 2(22)(E) WERE APPLICABLE IN THE CASE. IN LIGHT OF THE ABOVE FACTS, I AM OF THE CONSIDERED OPINION THAT THE ASSESSMENT HAS BEEN RENDERED ERRONEOUS AND IS PREJU DICIAL TO REVENUE. I THEREFORE, SET ASIDE THE ASSESSMENT AND DIRECT THE AO TO PASS THE ASSESSMENT AFRESH AS PER LAW AFTER CARRYIN G OUT NECESSARY ENQUIRY AND VERIFICATION ABOUT THE DEEMED DIVIDEND ISSUE IN RESPECT OF AMOUNTS RECEIVED SUBHCHINTAK VANCOM PVT. LTD. THE O RDER SHOULD BE PASSED AFTER GIVING THE ASSESSEE OPPORTUNITY OF BEI NG HERD AND GIVING ITS EXPLANATION IN THE MATTER. AGGRIEVED BY THE ABOVE FINDING OF LD. PR. CIT, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD. AR FOR THE ASSESSEE BEFORE US FILED PAPER BO OK AND WRITTEN SUBMISSIONS WHICH IS RUNNING PAGES 1 TO 67 AND 1 TO 6 (COPY FILED) AND STATED THAT AS PER LEDGER ACCOUNT OF SVPL IN THE BOOKS OF ASSESSEE (PAGE-29 OF THE PAPER BOOK), IT WOULD BE SEEN THAT INITIALLY THERE WAS OPENING CARRIED FORWARD CREDIT BALANCE OF RS.2,82,25,000/- IN THE NAME OF T HE ASSESSEE. THEREAFTER ON SEVERAL DATES DURING THE RELEVANT FINANCIAL YEAR, T HERE WERE REPAYMENTS AS WELL AS TAKING FURTHER AMOUNTS. AT THE END OF THE Y EAR, CREDIT BALANCE STOOD AT RS.1,08,82,25,000/- AND DEBIT BALANCE AT RS.57,04,0 0,000/- AND THE RESULTANT CLOSING CREDIT BALANCE STOOD AT RS.51,78,25,0000/-. HOWEVER, THE LD. PR. CIT HAS TAKEN THE FIGURE AT RS.48,96,00,000/- WITHOUT C ONSIDERING THE OPENING CREDIT BALANCE OF RS.2,82,25,000/-. THUS THE ABOVE AMOUNT WAS REPRESENTING THE CURRENT ACCOUNT AND ACCORDINGLY THE SAME CANNOT BE TREATED AS DIVIDEND INCOME UNDER SECTION 2(22)(E) OF THE ACT. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF LD. PR. CIT. ITA NO.1008/KOL/2016 A.Y. 2012-13 M/S SREE KRISHNA GYANODAYA FLOUR MILLS PVT. LTD. VS. PR. CIT CENTRAL KOL-2 PAGE 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, LD. PR. CIT U/S 263 OF THE ACT HELD THAT THE ORDER OF AO IS ERRONEOUS IN SO FAR AS PREJUDICIAL T O THE INTEREST OF REVENUE ON THE GROUND THAT AO HAS NOT TREATED THE AMOUNT OF LO AN RECEIVED BY THE ASSESSEE FROM SVPL AS DEEMED DIVIDEND INCOME IN PUR SUANCE TO SEC. 2(22)(E) OF THE ACT. AS PER THE ASSESSEE, THE LOAN TAKEN BY ASSESSEE IS REPRESENTING THE CURRENT ACCOUNT TRANSACTION, THEREFORE THE PROVISION OF SEC TION 2(22)(E) OF THE ACT CANNOT BE ATTRACTED TO SUCH LOAN. WE FIND IMPORTANT TO REFER THE LEDGER OF TRANSACTIONS BETWEEN ASSESSEE AND THE SVPL IN THE B OOKS OF ASSESSEE WHICH IS REPRODUCED BELOW:- LEDGER ACCOUNT 1-APR-2011 TO 31-MAR-2012 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 01-4-11 BY OPENING BALANCE 2,82,25,000 25-4-11 INDUSIND BANK CH. NO. BEING THE AMOUNT RECEIVED FROM SUBHCHINTK VANCOM PVT. LT. THROUGH LETTER. RECEIPT 11 50,00,00,000 30-6-11 TO ASPECTIVE VANIAJAYA PVT. LTD. BEING AMOUNTPAID TO SUBHCHINTAK BY ASPECTIVE VANIJYA P LTD. JOURNAL 100 9,00,00,000 15-7-11 TO OCTAL SUPPLIERS PVT.TD. BEING AMT PAID TO SUBHCHINTAK VANCOM BY OCTAL SUPPLIERS ON BEHALF OF SKG JOURNAL 107 19,00,00,000 27-7-11 TO INDUSIND BANK CH. NO. BEING THE AMOUNT PAID TO SUBHCHINTAK VANCOM PVT. LTD. THROUGH LETTER. PAYMENT 45 1,04,0,000 29-9-11 TO ASPECTIVE VANIJYA PVT. LTD. BEING AMOUNT PAID TO SUBHCHINTAK BY APECTIVE VANIJYA P LTD. JOURNAL 115 7,00,00,000 25.10.11 TO OCTAL SUPPLIERS PVT. LTD. BEING AMT. PAID TO SUBHCHINTAK VANCOM BY OCTAL SUPPLIERS ON BEHALF OF SKG JOURNAL 119 21,00,00,000 23-2-12 BY ASPECTIVE VANIJYA PVT. LTD. BEING AAMT. PAID TO ASPECTIVE VANNIJYA BY SUBCHINTAK VANCOM JOURNAL 197 56,00,00,000 TO CLOSING BALANCE 57,04,00,000 1,08,82,2 5,000 51,78,25,000 1,08,82,25,000 1,08,82,25,000 ON PERUSAL OF THE ABOVE LEDGER, IT IS REVEALED THAT THERE ARE SEVERAL TRANSACTIONS BETWEEN ASSESSEE AND SVPL AND ON SOME OCCASIONS, ASSESSEE HAS TAKEN LOAN FROM SVPL AND SIMILARLY ON SOME OCCA SIONS, ASSESSEE HAS GIVEN LOAN / ADVANCE TO SVPL. ITA NO.1008/KOL/2016 A.Y. 2012-13 M/S SREE KRISHNA GYANODAYA FLOUR MILLS PVT. LTD. VS. PR. CIT CENTRAL KOL-2 PAGE 5 THE PURPOSE OF SECTION 2(22)(E) OF THE ACT IS TO TA X THE BENEFIT EXTENDED BY PRIVATE LIMITED COMPANY TO ITS SHAREHOLDERS HOLDING SHARES NOT LESS THAN 10% AS BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENT ITLED TO A FIXED RATE OF DIVIDEND INCOME). THERE IS NO DISPUTE WITH REGARD T O SHAREHOLDING OF THE ASSESSEE. NOW COMING TO THE AMOUNT OF ADVANCE TAKEN BY ASSESSEE, WE NOTE THAT ASSESSEE HAS NOT ONLY TAKEN LOAN / ADVANCE FRO M SVPL, BUT ALSO IT HAS SOMETIME GIVEN ADVANCE TO SVPL. THUS, THERE WAS CHA NGE IN THE BALANCE SHOWN BY ASSESSEE. THUS, IT CANNOT BE TERMED AS ADV ANCE TAKEN BY ASSESSEE AS IT WAS FLUCTUATING DURING THE YEAR. IN HOLDING S O, WE FIND SUPPORT AND GUIDANCE FROM THE ORDER OF CO-ORDINATE BENCH OF THI S TRIBUNAL IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. VS. DCIT REPORTED IN [2009] 28 SOT 383 (BOM), WHEREIN IT WAS HELD AS UNDER:- FROM THE ABOVE IT IS CLEAR THERE IS DISTINCTION BE TWEEN DEPOSITS VIZ-A-VIS LOANS/ADVANCES. SECTION 2(22)(E) ENACTS A DEEMING F ICTION WHEREBY THE SCOPE AND AMBIT OF THE WORD DIVIDEND HAS BEEN ENLAR GED TO BRING WITHIN ITS SWEEP CERTAIN PAYMENTS MADE BY A COMPANY AS PER THE SITUATIONS ENUMERATED IN THE SECTION. SUCH A DEEMING FICTION WOULD NOT BE GIVEN A WIDER MEANING THAN HAT IT PURPORTS TO DO . THE PROVISIONS WOULD NECESSARILY BE ACCORDED STRICT INTERPRETATION AND THE AMBIT OF THE FICTION WOULD NOT BE PRESSED BEYOND ITS TRUE LIMITS . THE REQUISITE CONDITION FOR INVOKING SECTION 2(22)(E) OF THE ACT IS THAT PAYMENT MUST BE BY WAY OF LOAN OR ADVANCES. SINCE THERE IS A CLE AR DISTINCTION BETWEEN THE INTER-CORPORATE DEPOSITS VIZ-A-VZ LOANS /ADVANCES, ACCORDING TO US THE AUTHORITIES BELOW WERE NOT RIGH T IN TREATING THE SAME AS DEEMED DIVIDEND U/. 2(22)(E) OF THE ACT [EMPHAS IS SUPPLIED] SIMILARLY, WE ALSO SUPPORT AND GUIDANCE FROM THE JU DGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRADIP KUMAR MALHOTRA V. CIT 338 ITR 538 (CAL) WHEREIN THE HON'BLE HIGH COURT HELD AS UN DER:- THE PHRASE BY WAY OF ADVANCE OR LOAN APPEARING IN SUB-CLAUSE (E) OF SECTION 2(22) OF THE INCOME-TAX ACT, 1961, MUST BE CONSTRUED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHAREHOLDER EN JOYS SIMPLY ON ACCOUNT OF BEING A PERSON WHO IS THE BENEFICIAL OW NER OF SHARE (NOT BEING SHARE ENTITLED TO A FIXED RATE OF DIVIDEND WH ETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS T HAN TEN PER CENT OF THE VOTING POWER; BUT IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDERATION WHICH IS BENEFICIAL TO THE COMPANY RECEIVED FROM SUCH A SHARE-HOLDER, IN SUCH CASE, SUCH ITA NO.1008/KOL/2016 A.Y. 2012-13 M/S SREE KRISHNA GYANODAYA FLOUR MILLS PVT. LTD. VS. PR. CIT CENTRAL KOL-2 PAGE 6 ADVANCE OR LOAN CANNOT BE SAID TO BE DEEMED DIVIDEN D WITHIN THE MEANING OF THE ACT. THUS, GRATUITOUS LOAN OR ADVANC E GIVEN BY A COMPANY TO THOSE CLAUSES OF SHAREHOLDERS WOULD COME WITHIN THE PURVIEW OF SECTION 2(22) BUT NOT CASES WHERE THE LO AN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDER. [EMPHASIS SUPPLIED] FROM THE FOREGOING DISCUSSION, THERE REMAINS NO DOU BT THAT THE TRANSACTIONS BETWEEN ASSESSEE AND SVPL IS REPRESENTING CURRENT A CCOUNT TRANSACTIONS. THEREFORE, THE PROVISION OF SECTION 2(22)(E) OF THE ACT CANNOT BE ATTRACTED TO SUCH TRANSACTIONS. KEEPING IN VIEW THE ABOVE DISCUS SIONS, AND ALSO BEARING IN MIND THE ENTIRE FACTS OF THE CASE, WE DEEM IT FIT A ND PROPER TO UPHOLD THE GRIEVANCE OF THE ASSESSEE AND QUASH THE IMPUGNED RE VISION ORDER AS DEVOID OF JURISDICTION. THE ASSESSEE GETS THE RELIEF, ACCO RDINGLY. 6. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 14/ 02/2018 SD/- SD/- ($ &) ( &) (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S (- 14 / 02 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S SREE KRISHNA GYANODAYA FLOUR MILLS, PVT. LTD., 15B, EVEREST HOUSE, 46C, CHOW RINGHEE ROAD, KOLKATA-71 2. /RESPONDENT-PR.CIT, C.C, AAYAKAR BHAVAN, POORVA, 11 0, SHANTIPALLY, KOL-107 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 $$3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,
