The ITO,Vapi Ward-1, Vapi V. Shri Dilipbhai Babubhai Shah, Vapi

ITA 1071/AHD/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9710 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 14-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 15-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Assessee Lawyers: K N BHATT
• Keywords: Deemed dividend

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO.1071/AHD/2012 / ASSESSMENT YEAR: 2006-2007 ITO, VAPI WARD - 1 VAPI. VS SHRI DILIPBHAI BABUBHAI SHAH 103/H/II, SUPUSHP CHANOD COLONY, VAPI. PAN : AJLPS 5047 B ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI D.C. MISHRA, SR.DR ASSESSEE BY : SHRI K.N. BHATT / DATE OF HEARING : 14/07/2015 / DATE OF PRONOUNCEMENT: 14/07/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LEARNED CIT(A) DATED 21.2.2012 PASSED FOR THE ASSTT .YEAR 2006-07. 2. IN THE FIRST GROUND OF APPEAL, THE REVENUE HAS P LEADED THAT LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 15,50,000/- WHICH WAS ADDED BY THE AO WITH THE AID OF SECTION 2(22)(E) OF THE INCOME TAX ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL. HE HAS FILED HIS RETURN OF INCOME ON 29.7.2007 DECLARI NG TOTAL INCOME AT RS.4,05,347/- AND AGRICULTURAL INCOME OF RS.3,25,40 0/-. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESS EE WAS HOLDING SHARES TO THE EXTENT OF 50% OF SHARES HELD IN THE F OLLOWING COMPANIES: ITA NO.1071/AHD/2012 2 A) SUDEEP MOTORS PVT. LTD. B) DAKLE PLASTIC PVT. LTD. C) DAKLE REINFORCED PLASTIC P. LTD. THE ASSESSEE IS ALSO DIRECTOR IN THESE COMPANIES. THE DAKLE PLASTICS PVT. LTD. (DPPL FOR SHORT) AND DAKLE REINFORCED P LASTIC PVT. LTD. (DRPPL FOR SHORT) HAD GIVEN LOAN OF RS.5.00 LAKHS AND RS.10.00 LAKHS RESPECTIVELY TO M/S.SUDEEP MOTORS PVT. LTD. THE L EARNED AO CONSTRUED THAT THE ASSESSEE BEING A DIRECTOR OF THE SAID COMP ANIES, AND HOLDING 50% OF THE SHARES IN ALL THREE COMPANIES, HAS A COM MON INTEREST IN ALL THREE COMPANIES, THEREFORE, THE PROVISION OF SECTIO N 2(22)(E) OF THE ACT WOULD ATTRACT FOR TREATING THE LOANS ADVANCED TO M/ S.SUDEEP MOTORS BY THE OTHER TWO COMPANIES, AS A DEEMED DIVIDEND IN TH E HANDS OF THE ASSESSEE. HE, ACCORDINGLY, MADE ADDITION OF RS.15, 50,000/- UNDER SECTION 2(22)(E) OF THE ACT. 4. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY HAS DELETED THE ADDITION BY FOLLOWING THE DECISION OF THE SPECIAL B ENCH OF THE ITAT IN THE CASE OF ACIT VS. BHAUMIC COLOUR PVT. LTD., (200 9) 120 TTJ (MUM) (SB) 865 = 118 ITD 1 (SB). 5. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECI AL BENCH OF THE ITAT WHEREIN IT HAS BEEN HELD THAT IN ORDER TO ATTRACT S ECTION 2(22)(E) UPON THE ASSESSEE, THE ASSESSEE SHOULD BE REGISTERED SHA RE HOLDER, HOLDING MORE THAN 10% OF THE VOTING SHARES, AND HE SHOULD H AVE AVAILED LOAN/ADVANCES FROM THE COMPANY. FACTS IN THE CAS E OF BHAUMIC COLOUR PVT. LTD. ARE THAT THIS COMPANY WAS ENGAGED IN THE BUSINESS OF PENCIL PAINTS. IT TOOK AN INTEREST BEARING LOAN OF RS.9.00 LAKHS FROM M/S.UMESH PENCILS PVT. LTD. (UPPL). IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THOUGH BCPL IS NOT A SHAREHOLDER OF UP PL, BUT ONE COMMON ITA NO.1071/AHD/2012 3 SHAREHOLDER I.E. NARMADABEN NANDLAL TRUST IS THE CO MMON SHARE HOLDER IN BCPL AND UPPL. IT WAS HOLDING MORE THAN 10% OF THE TOTAL SHARES IN BOTH THESE COMPANIES. THEREFORE, ACCORDING TO THE AO, THE LOAN OF RS.9.00 LAKHS TAKEN BY BCPL FROM UPPL IS TO BE TREA TED AS DEEMED DIVIDEND. THE CIT(A) SET ASIDE THE ACTION OF THE A O AND THE TRIBUNAL UPHELD THE ACTION OF THE CIT(A). IDENTICAL FACTS A RE AVAILABLE IN THE PRESENT CASE. MOREOVER, THE ASSESSEE HAS NOT TAKEN LOANS. IT IS THE COMPANY, WHERE, THE ASSESSEE IS A DIRECTOR, WHO TOO K THE LOAN. AFTER LOOKING TO THE ORDER OF THE CIT(A) IN LIGHT OF THE SPECIAL BENCHS DECISION, WE DO NOT SEE ANY REASON TO INTERFERE IN IT. 6. IN THE NEXT GROUND OF APPEAL, THE GRIEVANCE OF T HE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN DELEING THE ADDITION OF RS.3,25,400/-. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS DISCLOSED AGRICULTURE INCOME OF RS.3,25,400/-. THE LEARNED A O HAS ASSESSED IT AS INCOME FROM OTHER SOURCES ON THE GROUND THAT THE AS SESSEE FAILED TO PRODUCE SALE BILLS, DETAILS OF EXPENDITURE ETC. ON APPEAL, THE CIT(A) HAS SET ASIDE THE ACTION OF THE AO AND ACCEPTED THE AGR ICULTURE INCOME IN THE HANDS OF THE ASSESSEE. 8. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV E, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE LEARNED CIT(A) H AS RECORDED A FINDING THAT THE ASSESSEE IS HAVING ANCESTRAL AGRICULTURE L AND. HE HAS SHOWN AGRICULTURE INCOME FROM THE LAST MORE THAN 20 YEARS . THE ASSESSEE HAS PRODUCED COPIES OF FORM NO.7/12. THE LEARNED CIT(A ) ASSUMED THAT THE AGRICULTURE LAND HOLDING WOULD GIVE RISE TO AGR ICULTURE INCOME TO THIS EXTENT. 9. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED T HAT THE ASSESSEE IS HAVING 80 ACRES OF LAND, OUT OF WHICH, THE GENER ATION OF AGRICULTURE INCOME OF RS.3,25,400/- CAN EASILY BE EXPECTED. WE DO NOT HAVE ANY ITA NO.1071/AHD/2012 4 HESITATION IN ACCEPTING THIS ARGUMENT, BUT, ON RECO RD THE ASSESSEE FAILED TO DISCLOSE THE QUANTUM OF LAND OWNED BY HIM. EVEN IF WE GO BY ESTIMATE, THEN ALSO, IF THE ASSESSEE DEMONSTRATES T HE OWNERSHIP OF LAND, THEN ONE CAN ESTIMATE THE AGRICULTURE INCOME FROM THAT LAND. A REFERENCE TO THE COPIES OF FORM 7/12 IS BEING MADE BY THE LD.FIRST APPELLATE AUTHORITY, BUT, NEITHER THE COPIES ARE PR ODUCED BEFORE US NOR QUANTITY OF LAND IS BEING NOTICED BY THE CIT(A). F ACED WITH THIS SITUATION, WE DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE TO THE FILE OF AO FOR RE-ADJUDICATION WITH DIRECTION THAT IF THE ASSE SSEE SUBMITS DETAILS OF OWNERSHIP OF THE LAND, THEN, EVEN IN THE ABSENCE OF SALE BILLS, EXPENDITURE VOUCHERS ETC. THE LD.AO WOULD WORK OUT THE AGRICULTURE INCOME ON AN ESTIMATE BASIS. THE ASSESSEE WILL BE AT LIBERTY TO PRODUCE ANY DETAILS IN SUPPORT OF HIS CLAIM. THE OBSERVATI ONS MADE BY US WILL NOT IMPAIR OR INJURE THE CASE OF THE AO, AND WILL N OT CAUSE ANY PREJUDICE TO THE DEFENCE/EXPLANATIONS OF THE ASSESSEE. 10. IN VIEW OF THE ABOVE DISCUSSION, THE GROUND NO. 2 IS ALLOWED FOR STATISTICAL PURPOSE. 11. IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 14 TH JULY, 2015 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 14 /07/2015