Sh. Kewal Krishan Chhabra, Ludhiana V. ACIT, C-VII, Ludhiana

ITA 1126/CHANDI/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4521 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-04-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 10-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india; Deemed dividend; Set aside
• Section: 271(1)(c); 143(3); 2(22)(e)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , ! '# $ % & '# , BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 1126/CHD/2017 / ASSESSMENT YEARS : 2008-09 SH.KEWAL KRISHAN CHHABRA, 805, RAM NIWAS, BAGH KHAZANHIA, LUDHIANA. THE A.C.I.T., CIRCLE-VII, LUDHIANA. ./PAN NO: AATPC8001G /ASSESSEE BY : SHRI SUDHIR SEHGAL, ADV. / REVENUE BY : SMT.CHANDERKANTA, SR.DR ! ' /DATE OF HEARING : 29.04.2019 #$%& ' /DATE OF PRONOUNCEMENT: 31.05.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [(APPEALS)-1, LUDHIANA (IN SHORT CIT(A)] DATED 8. 2.2017, CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). 2. THE PENALTY IN THE PRESENT CASE HAS BEEN LEVIED ON THE ADDITION MADE TO THE INCOME OF THE ASSESSEE ON ACCO UNT OF ITA NO.1126/CHD/2017 A.Y.2008-09 2 TREATING LOANS/ADVANCES RECEIVED BY HIM AS DEEMED D IVIDEND UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT . 3. 3. BEFORE US, THE ASSESSEE HAS RAISED THE GROUNDS O F APPEAL CHALLENGING THE ORDER OF THE LD.CIT(A) BOTH ON MERITS AND ON LEGAL GROUNDS. THE GROUNDS OF APPEAL READ AS UNDER: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE LEVY OF PENAL TY U/S 271(1)(C) AMOUNTING TO RS. 5,83,282/-. 2. THAT THE WORTHY CIT(A) HAD FAILED TO APPRECIATE THE FACT THAT THE COMPLETE PARTICULARS OF INCOME HAD BE EN FURNISHED AND NEITHER THERE HAS BEEN CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. THAT THE WORTHY CIT (A) HAD IGNORED THE JUDGMENT OF RELIANCE PETROPRODUCTS (P) LTD. AND FURTHER, THE LE VY OF PENALTY IS NOT JUSTIFIED SINCE THE ADDITION U/S 2(2 2)(E) IS ONLY ON ACCOUNT OF DEEMING PROVISIONS AND, AS SUCH, IT IS NOT A CASE OF LEVY OF PENALTY U/S 271(1 )(C). 4. THAT EVEN OTHERWISE, NO PROPER SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFICER FOR CONCEALMENT O F INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND, THUS, SINCE NO PROPER SATISFACTION HAS BEEN RECORDED, THE LEVY OF PENALTY U/S 271(1)(C) IS NOT VALID. 5. THAT EVEN WHILE ISSUING THE SHOW CAUSE NOTICE U/ S 271(1)(C), NO SPECIFIC CHARGE EITHER FOR CONCEALMEN T OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME HAVE BEEN MADE AND ALSO IN THE ORDER U/S 271(1)(C), THE PENALTY HAS BEEN LEVIED ON ACCOUNT OF FURNISHIN G OF INACCURATE PARTICULARS OF INCOME AND, THUS, THE LEV Y OF PENALTY IS NOT VALID. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEAR D OR DISPOSED OFF. ITA NO.1126/CHD/2017 A.Y.2008-09 3 4. FURTHER IT WAS CONTENDED THAT GROUND NO.4 AS ABO VE WAS A LEGAL GROUND WHICH COULD NOT BE RAISED BEFORE THE LD.CIT(A) BUT SINCE THE LEGAL ISSUE WENT TO THE ROO T OF INITIATION OF THE PROCEEDINGS AND FURTHER REQUIRED NO FRESH FACTS TO BE INVESTIGATED OR LOOKED INTO, THE SAME, IT WAS PLEADED, BE ADMITTED. 5. CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSE E, THE ADDITIONAL GROUND RAISED BY WAY OF GROUND NO.4 IS H EREBY ADMITTED FOR ADJUDICATION. 6. BEFORE US, THE LD. COUNSEL FOR ASSESSEE FIRST TO OK UP GROUNDS ON MERITS OF THE CASE RAISED IN GROUND NOS. 1, 2 & 3 ABOVE. THE LD. COUNSEL FOR ASSESSEE FIRST DREW OUR ATTENTION TO THE FACTS RELATING TO THE ADDITION MADE U/S 2(22 )(E) OF THE ACT ON WHICH PENALTY WAS LEVIED. DRAWING OUR ATTENT ION TO THE ASSESSMENT ORDER IN THE PRESENT CASE, PASSED U/ S 143(3) OF THE ACT, WHEREIN THE IMPUGNED ADDITION WAS MADE, IT WAS POINTED OUT THEREFROM THAT THE A.O. HAD NOTED THAT THE ASSESSEE HAD A DEBIT BALANCE OF RS.18,22,923/- IN T HE BOOKS OF M/S CHHABRA WINES LTD., A COMPANY IN WHICH THE ASSESSEE WAS A DIRECTOR HOLDING 51.98% OF SHARES. T HE A.O., THEREFORE, FOUND THAT THE ASSESSEE FULFILLED ALL TH E CONDITIONS FOR TREATING THE IMPUGNED AMOUNT AS DEEMED DIVIDEND U/S ITA NO.1126/CHD/2017 A.Y.2008-09 4 2(22)(E) OF THE ACT AND ACCORDINGLY, MADE THE ADDIT ION IN THE HANDS OF THE ASSESSEE. IT WAS THEREAFTER POINTED O UT THAT THE SAID ADDITION WAS CONFIRMED IN APPEAL BOTH BY T HE LD.CIT(A) AND THE I.T.A.T. ALSO. THEREAFTER THE LD . COUNSEL FOR ASSESSEE CONTENDED THAT NO PENALTY WAS LEVIABLE ON THE IMPUGNED ADDITION SINCE ALL MATERIAL FACTS AND PART ICULARS RELATING TO THE IMPUGNED TRANSACTION HAD BEEN TRULY AND COMPLETELY DISCLOSED BY THE A.O. AND IT WAS ONLY A CASE OF MERE MISTAKE, HAVING NOT RETURNED THE ADVANCE AS DE EMED DIVIDEND. IT WAS CONTENDED THAT HAVING TRULY DISCLO SED THE ENTIRE TRANSACTION, IT WAS EVIDENT THAT THE BONAFID ES OF THE ASSESSEE WAS ALSO PROVED AND, THEREFORE, ALSO NO PE NALTY WAS LEVIABLE. FURTHER IT WAS CONTENDED THAT THE REVENUE HAD NOT DOUBTED THE NATURE OF THE TRANSACTION DISCLOSED BEI NG LOAN/ADVANCE, WHICH ARE CLEARLY NOT IN THE NATURE O F INCOME, AND IT IS ONLY ON ACCOUNT OF DEEMING PROVISION THAT THE SAID AMOUNT ARE SUBJECTED TO TAX. THEREFORE, IT WAS CON TENDED ,IT COULD NOT BE SAID THAT THERE WAS A MALAFIDE INTENTI ON OF THE ASSESSEE TO EVADE TAX AND IT WAS AN INADVERTENT ERR OR WHICH WAS GENUINE AND BONAFIDE. RELIANCE WAS PLACED ON TH E FOLLOWING CASE LAWS IN SUPPORT OF THE ABOVE CONTENT IONS: 1. JASKARAN SINGH VS .INCOME TAX OFFICER ITANO.18/CHD/2017CHD-TRIB ITA NO.1126/CHD/2017 A.Y.2008-09 5 2. INCOME TAX OFFICER VS. PARKASH NARAIN SINGH ITA NO.2691/DEL/2013 DEL-TRIB 3. INCOME TAX OFFICER VS. DR. SHAMSHEER, ITA N0.564/CHENNAI/2011 CHENNAI-TRIB 4. COMMISSIONER OF INCOME TAX VS. RELIANCE PETROPRODUCTS (P) LTD, 322 ITR 158(SC) 5. BRIJESH KUMAR VS. THE INCOME TAX OFFICER ITAN0.701/CHD/2017CHD-TRIB 6. ANIL V. MEHTA VS. INCOME TAX OFFICER, ITA NO.1324/MUM/2013 MUM-TRIB 7. SHANKAR LAI KHANDELWAL VS. DEPUTY COMMISSIONER OF INCOME TAX, ITA NO.878/JP/2013 JAIPUR-TRIB 8. VIKRAM P. MAHURKAR V/S ASSISTANT COMMISSIONER OF INCOME TAX, ITA NO.3195/ADH/2014 AHD-TRIB 7. THE LD. DR, ON THE OTHER HAND, VEHEMENTLY SUPPOR TED THE ORDER OF THE LD.CIT(A). THE LD. DR POINTED OUT THAT DURING ASSESSMENT PROCEEDINGS AND EVEN IN APPELLATE PROCEEDINGS THE ASSESSEE HAD GIVEN AN EXPLANATION O F THE IMPUGNED TRANSACTION TO ESCAPE FROM THE RIGOURS OF THE DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT B Y STATING THAT THE LOANS/ADVANCES HAD BEEN RECEIVED ON ACCOUN T OF SALE OF PROPERTY BY THE ASSESSEE TO THE COMPANY. TH E LD. DR POINTED OUT THAT THIS EXPLANATION OF THE ASSESSEE W AS FOUND TO BE A MERE COVER-UP SINCE THERE WERE CONTRADICTOR Y FACTS EMANATING BETWEEN THE EXPLANATION GIVEN BY THE ASSE SSEE AND THE DOCUMENTS FURNISHED BY HIM TO SUBSTANTIATE HIS ITA NO.1126/CHD/2017 A.Y.2008-09 6 EXPLANATION OUR ATTENTION WAS DRAWN TO THE FINDINGS O THE I.T.A.T. IN ITS ORDER PASSED IN QUANTUM PROCEEDINGS IN ITA NO.104/CHD/2013 DATED 29.4.2015 AT PARA NOS.8 & 9 A S UNDER: 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF T HE ASSESSEE. IT IS NOT IN DISPUTE THE FACTUAL FINDING S RECORDED BY THE AUTHORITIES BELOW WITH REGARD TO APPLICABILITY OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN THE MATTER. DURING THE COURSE OF ARGUMENTS, IT IS NOT DISPUTED THAT CONDITIONS OF SECTION 2(22)(E) OF THE ACT ARE SATISFIED IN THE PRESENT CASE. THE ASSESSEE ALSO PLEADED BEFORE THE AUTHORITIES BELOW THAT SINCE ADVANCE AGAINST THE PROPERTY IS IN THE NATURE OF COMMERCIAL TRANSACTION , THEREFORE, PROVISIONS OF SECTION 2(22)(E) OF THE AC T ARE NOT SATISFIED. THIS IS EXCEPTION PRO VIDED TO PROVISIONS OF SECTION 2(22)(E) OF THE ACT BECAUSE T HE PROVISIONS OF DEEMED DIVIDEND WOULD NOT COVER ANY ADVANCE OR LOAN MADE TO THE SHAREHOLDER BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. THE ASSESSEE EXCEPT PLEADING THAT ADVANCE AGAINST PROPERTY IS IN THE NATURE OF COMMERCIAL TRANSACTION HAS NOT PLEADED BEFORE AUTHORITIES BELOW THAT LENDING OF MONEY IS SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. 9. THE LD. CIT(APPEALS), ON GOING THROUGH THE AGREEMENT TO SELL IN QUESTION SPECIFICALLY FOUND TH AT PART OF THE AMOUNT IS STATED AS ADVANCE AND THAT ASSESSEE IS 1/3 RD OWNER OF THE PROPERTY IN QUESTION. HOWEVER, IN THE AGREEMENT TO SELL, ASSESSEE CLAIMED TO BE OWNER OF THE PROPERTY IN QUESTION. IN THE AGREEMENT TO SELL, IT IS STATED THAT ASSESSEE SHALL RECEIVE THE BALANCE AMOUNT AT THE TIME OF EXECUTION AND REGISTRATION OF THE SALE DEED. HOWEVER, TILL DATE, NO SALE DEED IS EXECUTED BY ASSESSEE IN FAVOU R OF THE ASSESSEE. THEREFORE, THERE IS NO QUESTION O F MAKING FURTHER PAYMENT TO THE ASSESSEE AS ADVANCED AGAINST THE PROPERTY IN QUESTION. THE ITA NO.1126/CHD/2017 A.Y.2008-09 7 OTHER CO-OWNER HAVE NEVER ENTERED INTO ANY AGREEMENT TO SELL WITH THE COMPANY. THERE WAS A DIFFERENCE IN THE PROPERTY NUMBER ALSO AS NOTED BY THE LD. CIT(APPEALS). THEREFORE, LD. CIT(APPEALS) WAS JUSTIFIED IN HOLDING THAT ASSESSEE'S CONTENTION IS AFTER-THOUGHT AND THE ENTIRE TRANSACTION RELATE TO SHAM TRANSACTION. THE FACTUAL DISCREPANCIES HAVE NOT BEEN EXPLAINED DURING THE COURSE OF ARGUMENTS BEFORE US AS WELL. THE LD. CIT(APPEALS) WAS, THEREFORE, JUSTIFIED IN DECIDING THE ISSUE AGAINST THE ASSESSEE. 8. THE LD. DR, THEREFORE, CONTENDED THAT THE EXPLAN ATION OFFERED BY THE ASSESSEE BEING FALSE, THE CIT(A) HAD RIGHTLY HELD THAT THE ASSESSEE HAD CONCEALED THE PARTICULAR S OF INCOME AND PENALTY, THEREFORE, HAD BEEN RIGHTLY CON FIRMED BY THE CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE IS SUE BEFORE US RELATES TO LEVY OF PENALTY U/S 271(1) OF THE AC T FOR CONCEALING/FURNISHING INACCURATE PARTICULARS OF INC OME. THE INCOME WHICH IS SUBJECT MATTER OF PENALTY, ADMITTED LY, IS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE FACT O F THE MATTER IS THAT THE ASSESSEE HAD ACTUALLY RECEIVED LOAN/ADVANCE FROM A COMPANY, BUT THE SAME WAS DEEME D TO BE IN THE NATURE OF DIVIDEND ON ACCOUNT OF FULFILLM ENT OF CERTAIN CONDITIONS SPECIFIED IN THE SECTION ,ONE OF THEM ITA NO.1126/CHD/2017 A.Y.2008-09 8 BEING THE ASSESSEE HAVING SUBSTANTIAL INTEREST IN THE COMPANY. 10. IN THE ABOVE FACTUAL MATRIX ,THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, FOR CONCEALING/FURNISHING INACCURATE PARTICULARS OF INCOME, HAS TO BE ADJUDIC ATED BY US. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASS ESSEE HAD CORRECTLY DISCLOSED ALL PARTICULARS RELATING TO THE DEEMED INCOME. THE ASSESSEE HAD SHOWN THE LOAN/ADVANCE AS RECEIVED FROM THE COMPANY AND THE REVENUE HAD, A CCEPTING THIS FACT AND TAKING INTO CONSIDERATION OTHER FACTO RS, TREATED THE SAME AS DEEMED INCOME OF THE ASSESSEE. SO FAR A S THE BONAFIDES OF THE ASSESSES CLAIM FOR NOT TREATING IT AS INCOME FOR THE PURPOSES OF TAXATION, WE SEE NO REASON TO D OUBT IT. THE TRUE NATURE OF THE AMOUNT WAS NOT INCOME, BUT LOAN/ADVANCE. IT WAS ONLY DEEMED TO BE IN THE NATUR E OF DIVIDEND ON ACCOUNT OF FULFILLMENT OF CONDITIONS SP ECIFIED U/S 2(22)(E) OF THE ACT. THE ASSESSEE IS AN INDIVID UAL WHO, UNLIKE CORPORATE, IS GENERALLY NOT GUIDED AND ASSIS TED BY PROFESSIONALS IN TAX MATTERS, WHICH, AS IS EVIDENT FROM THE ISSUE BEFORE US, ARE HIGHLY COMPLEX TAXING EVEN REC EIPTS WHICH ARE NOT IN THE NATURE OF INCOME . IN SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT HAVING DISCLO SED ALL ITA NO.1126/CHD/2017 A.Y.2008-09 9 PARTICULARS OF THE DEEMED INCOME, THE ASSESSEE HAD INTENTIONALLY NOT RETURNED IT TO TAX. THE BONAFIDES OF THE ASSESSEE THEREFORE CANNOT BE DOUBTED. THE FACT THAT THE ITAT HELD THE EXPLANATION OF THE TRANSACTION BEING COMME RCIAL IN NATURE FOR PURCHASE OF PROPERTY, AS AN AFTER THOUGH T AND SHAM, MAKES NO DIFFERENCE, SINCE THE ITAT ALSO HELD THAT THE EXPLANATION IN ANY CASE WAS OF NO HELP TO THE ASSES SEE AND DID NOT SAVE IT FROM THE RIGORS OF SECTION 2(22)(E) OF THE ACT. THE ITAT HELD THAT MERELY BECAUSE AN ADVANCE IS REC EIVED IN A COMMERCIAL TRANSACTION DOES NOT SUFFICE TO EXEMPT IT FROM BEING TREATED AS DEEMED DIVIDEND, UNLESS AND UNTIL THE ADVANCE IS RECEIVED IN THE COURSE OF MONEY LENDING BUSINESS OF THE COMPANY GIVING THE ADVANCE. THEREFORE THE EXPLANATION DID NOT SAVE IT FROM THE RIGORS OF 2(22 )(E) OF THE ACT, AND THEREFORE IF THE SAME WAS FOUND FALSE ,IT COULD NOT BE SAID THAT THE ASSESSEE HAD MALAFIDELY NOT RETURN ED THE DEEMED INCOME TO TAX. 11. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND HOLD THAT NO PENALTY IS EXIGIBLE IN T HE PRESENT CASE. THE PENALTY SO LEVIED IS DIRECTED TO BE DELET ED. GROUND NOS.1, 2 AND 3 RAISED BY THE ASSESSEE ARE, THEREFOR E, ALLOWED. ITA NO.1126/CHD/2017 A.Y.2008-09 10 SINCE WE HAVE DELETED THE PENALTY LEVIED AND ALLO WED THE ASSESSEES APPEAL ON MERITS, THE LEGAL GROUNDS BECOME ACADEMIC AND, THEREFORE, ARE NOT BEING DEALT WITH. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- $ % & '# (SANJAY GARG) (ANNAPURNA GUPTA) /JUDICIAL MEMBER () /ACCOUNTANT MEMBER +$ /DATED: 31 ST MAY, 2019 * # * ( )* +* / COPY OF THE ORDER FORWARDED TO : 1. , / THE APPELLANT 2. (-, / THE RESPONDENT 3. . / CIT 4. . ( )/ THE CIT(A) 5. */0 ( 1 , ' 1 , 23405 / DR, ITAT, CHANDIGARH 6. 04 6! / GUARD FILE / BY ORDER, / ASSISTANT REGISTRAR