Mr. Naresh Kumar Mahajan, Delhi V. ACIT, New Delhi

ITA 1069/DEL/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2923 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.S. SYAL, VICE-PRESIDENT ITA NOS.7 & 1069/DEL/2017 ASSESSMENT YEAR : 2012-13 NARESH KUMAR MAHAJAN, PROP. M/S PUNEET METAL INDUSTRIES, HOUSE NO.07, BLOCK-06, GEETA COLONY, DELHI. PAN: AAJPM1919P VS. ACIT, CIRCLE-58(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL JAIN, CA DEPTT. BY : MS BEDOBANI, DR DATE OF HEARING : 01.06.2017 DATE OF PRONOUNCEMENT: 02.06.2017 ORDER THESE TWO APPEALS BY THE ASSESSEE ARISE OUT OF THE ORDERS PASSED BY THE CIT(A) IN QUANTUM AS WELL AS PENALTY PROCEEDING S IN RELATION TO THE ASSESSMENT YEAR 2012-13. QUANTUM APPEAL 2. FIRSTLY, I AM TAKING UP THE QUANTUM APPEAL. THE FIRST ISSUE RAISED IS AGAINST THE ENHANCEMENT OF ADDITION OF RS.7,28,379/ - MADE BY THE ITA NOS.7 & 1069/DEL/2017 2 ASSESSING OFFICER U/S 2(22)(E) OF THE INCOME-TAX AC T, 1961 (HEREINAFTER ALSO CALLED `THE ACT) TO RS.18,10,000/- 3. BRIEFLY STATED, THE FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S PUNEET METAL INDUSTRIES ENGAGED I N TRADING OF STEEL AND OTHER METALS. APART FROM THAT, THE ASSESSEE IS ALS O A SHAREHOLDER OF M/S PUNEET METAL PVT. LTD. (PMPL). THE ASSESSING OFFIC ER OBSERVED THAT A SUM OF RS.7,28,379/-WAS SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE AS AN ADVANCE FROM PMPL. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THE SAID AMOUNT BE NOT TREATED AS DEEMED DIVIDEND U/S 2(22)( E) OF THE ACT, THE ASSESSEE SUBMITTED THAT THERE WAS NO ADVANCE RECEIV ED BY HIM FROM PMPL AND THE AMOUNTS IN THIS ACCOUNT WERE ON ACCOUNT OF TRADE TRANSACTIONS. NOT CONVINCED, THE ASSESSING OFFICER MADE ADDITION OF R S.7,28,379/-, BEING THE AMOUNT PAYABLE BY THE ASSESSEE TO PMPL AT THE END O F THE YEAR. THE LD. CIT(A) OPINED THAT THE ADDITION OUGHT TO HAVE BEEN MADE FOR THE AMOUNT RECEIVED BY THE ASSESSEE DURING THE YEAR RATHER THA N THE CLOSING BALANCE. AFTER REJECTING THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT WAS RECEIVED IN THE COURSE OF BUSINESS DEALINGS, THE LD. CIT(A) ADDED RS.18,10,000/- AS ITA NOS.7 & 1069/DEL/2017 3 DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE ASSES SEE IS AGGRIEVED AGAINST THIS ADDITION. 4. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. PAGE NO.13 OF THE PAPER BOOK IS ACCOUNT OF M/S PMPL IN THE BOOKS OF THE ASSESSEE, WHICH RUNS AS UNDER:- PUNEET METAL INDUSTRIES 10578/46, SHANKER GALI NO.2, MOTIAKHAN, NEW DELHI ACCOUNT LEDGER (FROM 1-4-2011 TO 31-3-2012) ACCOUNT: PUNEET METALS PVT LTD. DATE TYPE VCH NO. PARTICULARS NARRATION DEBIT (RS.) CREDIT (RS.) BALANCE (RS.) 4.2011 OPENING BALANCE 6,12,852.00 6,12,852. 00 CR. 6.2011 RCPT DR VIJAYA BANK 240034 17,00,000,00 2312852.00 CR. 6.2011 JRNL DR. PRESSURE & PROCESS BOILERS 71,837.00 23,84,689.00CR 8.2011 JRNL DR MAHINDRA STEEL CORPORATION 56,045.00 2440734.00 CR 9.2011 DR VIJAYA BANK 240034 50,000.00 2 490734.00 CR. 0.2011 DR. SBI 10614912676 60,000.00 255 0734.00 CR 1.2011 JRNL DR. JAIN STEEL CORPORATION 30 ,794.00 2581528.00 CR 2.2011 JRNL CR SIALKOT SHOP 8,296.00 257 3232.00 CR 3.2012 SALE T/182/09-10 CR. SALES 21,08,232.00 4 65000.00 CR 3.2012 JRNL DR. ARNAV JAIN & CO 1, 04,463.00 569463.00 CR 3.2012 JRNL DR SHIVAJEE INDUSTRIES 1,58,916. 00 728379.00 CR TOTAL 21,16,528.00 28,44,907.00 CREDIT BALANCE 7,28,379.00 __________________________ GRAND TOTAL 28,44,907.00 28,44,907.00 ___________________________ 5. IT CAN BE SEEN FROM THE ABOVE ACCOUNT THAT THOUG H THE ASSESSING OFFICER MADE ADDITION FOR THE CLOSING BALANCE AT 7, 28,379/-, THE LD. CIT(A) MADE ENHANCEMENT TO RS.18,10,000/- BY ADDING RECEIP TS OF RS.17 LAC, RS.50,000/- AND RS.60,000/-. THE ASSESSEE CLAIMED THAT THIS SUM OF ITA NOS.7 & 1069/DEL/2017 4 RS.18,10,000/- WAS RECEIVED AS ADVANCE AGAINST THE SALES MADE DURING THE YEAR AMOUNTING TO RS.21,08,232/-. THE LD. CIT(A) R EFUSED TO ACCEPT THE GENUINENESS OF THE SALE ON THE GROUND THAT NO EVIDE NCE OF ACTUAL TRANSPORTATION OF GOODS FROM THE ASSESSEES PREMISE S TO THAT OF PMPL WAS PRODUCED. HERE, IT IS RELEVANT TO NOTE THE ADDRESS OF THE ASSESSEE, WHICH IS 10578/46, SHANKAR GALI NO.2, MOTIAKHAN, PAHAR GANJ, NEW DELHI. IT IS EVIDENCED FROM PAGE 35 OF THE PAPER BOOK, BEING, A COPY OF INVOICE RAISED IN THE NAME OF PMPL FOR A SUM OF RS.21,08,232. ADD RESS OF M/S PMPL GIVEN ON THE SAME INVOICE IS 10578/6, SHANKAR GALI NO.2, MOTIAKHAN, PAHAR GANJ, NEW DELHI. THE LD. AR CONTENDED THAT PMPL IS LOCATED IN THE SAME STREET AND, HENCE, THERE WAS NO NEED OF ANY TRANSPO RTATION OF GOODS THROUGH LORRY. IN MY CONSIDERED OPINION THIS CONTENTION ME RITS ACCEPTANCE AND HAS BEEN WRONGLY REJECTED BY THE LD. CIT(A). WHEN THE ASSESSEES PREMISES AND PREMISES OF PMPL ARE LOCATED IN THE SAME STREET , THERE IS NO REQUIREMENT TO HIRE LORRY FOR CARRYING THE GOODS. THE LD. AR HAS INVITED MY ATTENTION TOWARDS STOCK REGISTER OF PMPL, A COPY AT PAGE 42 OF THE PAPER BOOK, WHICH SHOWS THE CORRESPONDING RECEIPT OF GOOD S FROM THE ASSESSEE. IT CAN BE SEEN FROM THE ACCOUNT OF M/S PMPL IN THE ASS ESSEES BOOKS FOR PRECEDING AND SUCCEEDING YEARS, COPIES PLACED AT PA GES 12 TO 15 OF THE ITA NOS.7 & 1069/DEL/2017 5 PAPER BOOK, THAT SIMILAR TYPE OF TRADE TRANSACTION S WERE CARRIED OUT BETWEEN THE TWO ENTITIES IN THESE YEARS AS WELL. SINCE THE RECEIPT OF RS.18,10,000/- WAS ON ACCOUNT OF ADVANCE FROM THE COMPANY, FOR WHI CH SUPPLY WAS MADE DURING THE YEAR ITSELF, SUCH RECEIPTS OF ADVANCE CA NNOT BE CONSTRUED AS A DIVIDEND U/S 2(22)(E) OF THE ACT. I, THEREFORE, OR DER FOR THE DELETION OF THIS ADDITION. 6. THE SECOND ISSUE RAISED IN THIS APPEAL IS AGAINS T AN ADDITION OF RS.26,12,832/- MADE BY THE CIT (A) BY WAY OF ENHANC EMENT U/S 2(22)(E) OF THE ACT. THE LD. CIT(A) NOTICED THAT APART FROM THE ACCOUNT OF THE ASSESSEE MAINTAINED WITH PMPL AS REPRODUCED ABOVE, THE ASSES SEE WAS ALSO HAVING OTHER TRANSACTIONS WITH PMPL, WHOSE BALANCE WAS SQU ARED UP AT THE END OF THE YEAR. THE ASSESSEE WAS CALLED UPON TO FURNISH A CONSOLIDATED ACCOUNT OF ALL THE TRANSACTIONS. THE ASSESSEE SUBMITTED SUCH A N ACCOUNT, WHOSE COPY IS AVAILABLE AT PAGE 44 ONWARDS OF THE PAPER BOOK, WIT H A COVERING LETTER DATED 21.11.2016. THE LD. CIT(A) SELECTED FOLLOWING ENTR IES FROM THE CONSOLIDATED ACCOUNT FOR MAKING ADDITION U/S 2(22)( E) OF THE ACT :- 08.04.2011 - RS.47,208/- 08.04.2011 - RS.36,000/- ITA NOS.7 & 1069/DEL/2017 6 01.05.2011 - RS.5,78,208/- 28.12.2011 - RS.35,208/- 02.01.2012 - RS.3,65,208/- 10.01.2012 - RS.63,000/- 19.01.2012 - RS.2,25,000/- 20.01.2012 - RS.3,00,000/- 21.01.2012 - RS.4,00,000/- 31.01.2012 - RS.5,00,000/- 03.02.2012 - RS.63,000/- TOTAL - RS.26,12,832/- 7. THE LD. AR SUBMITTED THAT THE LD. FIRST APPELL ATE AUTHORITY DID NOT RAISE ANY QUERY ABOUT THE NATURE OF RECEIPTS WHICH WERE, IN FACT, NOT IN THE NATURE OF DIVIDEND. IT WAS SUBMITTED THAT NONE OF THE ABOV E TRANSACTIONS ATTRACTED THE PROVISIONS OF DEEMED DIVIDEND U/S 2(22)(E) OF T HE ACT. 8. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE COMBINED ACCOUNT WA S FILED BY THE ASSESSEE WITH THE LD. CIT(A) ON 21.11.2016, WHICH HAPPENS TO BE THE LAST DATE OF HEARING AS RECORDED ON THE TITLES OF THE IMPUGNED O RDER. THIS SHOWS THAT THE LD. CIT(A) GOT THE DETAILS AND CLOSED THE HEARING W ITHOUT MAKING ANY FURTHER ENQUIRIES FROM THE ASSESSEE ABOUT THE NATUR E OF TRANSACTIONS. IT WAS OBLIGATORY ON HIS PART TO CONFRONT THE ASSESSEE ABO UT HIS POINT OF VIEW AND ITA NOS.7 & 1069/DEL/2017 7 SEEK EXPLANATION BEFORE MAKING ANY ADDITION, WHICH COURSE OF ACTION HAS NOT BEEN FOLLOWED IN THE INSTANT CASE. IN MY CONSID ERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS SCORE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF LD. CIT(A) FOR DECIDING THIS ASPECT OF THE MATTER AFRESH, AFTER ALLOWING AN OPPO RTUNITY OF HEARING TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PENALTY APPEAL 10. THE LD. CIT(A) IMPOSED PENALTY OF RS.13,66,655 UNDER SECTION 271(1)(C) OF THE ACT PURSUANT TO HIS ORDER IN QUANT UM PROCEEDINGS BY TREATING INCOME OF RS.44,32,832/-, BEING SUM TOTAL OF RS.18,10,000/- AND RS.26,12,832/- TREATED BY HIM AS DEEMED DIVIDEND U/ S 2(22)(E) OF THE ACT, AS CONCEALED INCOME. IN SO FAR AS THE ADDITION OF RS.18,10,000/- IS CONCERNED, THE SAME HAS BEEN DELETED BY ME IN AN EA RLIER PARA. THE OTHER ADDITION HAS BEEN RESTORED TO THE LD. CIT(A) FOR FR ESH ADJUDICATION. IN VIEW OF MY DECISION IN QUANTUM PROCEEDINGS, I SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE LD. CIT(A) FOR DECIDING THE QUESTION OF PENALTY ONLY AFTER ADJUDICATION ON THE ADDITION OF RS.26,12,832/-. MY VIEW IN RESTORING THE APPEAL IS SUPPORTED BY THE JUDGMEN T OF THE HON'BLE ITA NOS.7 & 1069/DEL/2017 8 SUPREME COURT IN MOHD. MOHATRAM FAROOQUI VS. CIT (SC) 2010-TIOL-23- SC-IT . 11. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 0 2 ND JUNE, 2017. SD/- (R.S. SYAL) VICE-P RESIDENT DATED: 02 ND JUNE, 2017. DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI