Asstt. Commissioner of Income Tax, Ludhiana V. M/s Color Crafts Pvt. Ltd., Ludhiana

ITA 1248/CHANDI/2011

• Counselvise Citation: 124821514 RSA 2011
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: ASHOK KUMAR GOYAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1248/CHD/2011 ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE-V, V M/S COLOR CRAFTS PVT.LTD., LUDHIANA. A-5, LINK ROAD, LUDHIANA. PAN: AAACC-6627J (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT.JAISHREE SHARMA ASSESSEE BY : SHRI ASHOK KUMA R GOYAL DATE OF HEARING : 07.02.2012 DATE OF PRONOUNCEMENT : 22.2.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.10.2011 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. (A) THAT THE LD. CIT(A)-II LUDHIANA HAS ERRED I N LAW AND ON FACTS IN DELETING THE ADDITION OF RS.44,53,253/- MADE U/S 2(22)(E) OF THE IT ACT,1961. (B) THAT THE LD. CIT(A)-II LUDHIANA HAS ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE ADDITION CAN BE MADE IN THE CASE OF THE SHAREHOLDER THUS FAILING TO APPRECIATE THE CORRECT ESSENCE OF SECTION 2(22)(E) OF THE INCOME-TAX ACT,1961. 2 2. THAT THE ORDER OF THE CIT(A)-II LUDHIANA BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE AO AND LD. 'AR' , ON THE OTHER HAND, CONTENDED THAT THE CASE IS SQUARELY COV ERED BY THE SPECIAL BENCH DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF ACIT V M/S BHAUMIK COLOUR PVT.LTD. (ITA NO.5030/MUM/04) DATED 19.11.2008. 4. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS AND THE RELEVANT RECORDS. THE FACTS OF THE CASE ARE, THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BU SINESS OF MANUFACTURING OF CORRUGATED BOXES. DURING THE CURR ENT YEAR UNDER CONSIDERATION, ASSESSEE COMPANY SHOWN M/S SAN TOSH BOX FACTORY P.LTD. AS SUNDRY CREDITORS AMOUNTING TO RS.10,98,091/- IN THE BALANCE SHEET AS ON 31.3.2008 , COPY OF ACCOUNT OF THE SAID PARTY WAS FILED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. ASSESSEE EXPLAINED THAT THE RE WERE REGULAR TRANSACTIONS WITH THE AFORESAID COMPANY. IT WAS FURTHER EXPLAINED THAT THE SAID COMPANY ORDERED FOR SUPPLY OF SPECIALLY MANUFACTURED PACKING BOXES AND AGAINST WHICH THERE WAS CREDIT BALANCE OF THE SAID CONCERN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE BUT DUE TO SOME DISPUTES, O RDERED WAS NOT EXECUTED AND THERE WAS NO SALE. 5. LD. CIT(A), ON APPRECIATION AND CONSIDERATION OF THE CASE LAWS ADJUDICATED THE ISSUE IN FAVOUR OF THE AS SESSEE 3 VIDE PARA 4 OF THE APPELLATE ORDER. LD. CIT(A) CONS IDERED THE FOLLOWING CASE LAWS WHILE ADJUDICATING THE ISSUE IN QUESTION: I) MADURA COATS (P) LTD. (2005) 274 ITR 609 (AAR) II) RAKESHWARLAL SANWARMAL V CIT (1980) 14 CTR (S.C) 372 III) CIT V H.K.MITTAL (1996) 219 ITR 420 (ALL) IV) HARISH CHANDRA GOLECHA V CIT (1981) 132 ITR 30 (RAJ) V) CIT V RAJ KUMAR SINGH & CO. (2007) 295 ITR 9 (ALL) VI) CIT V HOTEL HILLTOP (2009) 313 ITR 116 (RAJ) VII) ACIT V BHAUMIKCOLOUR (P) LTD. (2009) 27 SOT (MUM-TRIB) 270 VIII) SEAMIST PROPERTIES (P) LTD V ITO (2005) 95 TTJ (MUM-TRIB) 201 IX) DCIT V NATIONAL TRAVEL SERVICES (2009) 31 SOT 76 (DEL) X) MTAR TECHNOLOGIES 9P) LTD V ACIT (2010) 39 SOT 465 (HYD) 6. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE REPR ODUCED HEREUNDER : 4. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER AS WELL AS THE SUBMISSIONS MADE BY THE COUNSEL FOR THE APPELLANT. THE BRIEF FACTS OF THE CASE AS STATED IN THE AT ORDER ARE THAT THE ASSESSEE COMPANY HAS 18 SHAREHOLDERS AS ON 31.3.2007 AND 31.3.2008 AND OUT OF THEM, SMT.SANTOSH MALHOTRA HOLDS 53.42% OF THE SHAR ES. THERE IS ANOTHER COMPANY BY THE NAME OF M/S SANTOSH BOX FACTORY PVT.LTD. IN WHICH THE ABOVE PERSON HOLD S 34.98% OF THE SHARES. DURING THE YEAR UNDER CONSIDERATION THE APPELLANT COMPANY HAS RECEIVED VARIOUS AMOUNTS OF MONEY ON DIFFERENT DATES FROM M/ S SANTOSH BOX FACTORY PVT.LTD. AND THE SAME ARE TABLE D ON PAGE 2 OF THE ASSESSMENT ORDER. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTED 4 THAT THE AMOUNT HAVE BEEN RECEIVED AGAINST BUSINESS TRANSACTIONS AND THEREFORE THE PROVISIONS OF SECTIO N 2(22)(E) ARE NOT ATTRACTED TO SUCH TRANSACTIONS. ON THE OTHER HAND, THE AO HAS FOUND THAT THERE ARE NO BUSI NESS TRANSACTIONS BETWEEN THE ASSESSEE AND ABOVESAID PAR TY AND ACCORDINGLY HE HAD CONCLUDED THAT THE PROVISION OF SECTION 2(22)(E) ARE ATTRACTED AND HE HAS MADE AN ADDITION OF RS.44,53,235/- BEING THE ACCUMULATED PROFITS AS PER THE BALANCE SHEET OF M/S SANTOSH BOX FACTORY PVT.LTD. ON THE OTHER HAND, THE LD. 'AR' H AS VEHEMENTLY ARGUED THAT THE PROVISIONS OF SECTION 2(22)(E) COULD ONLY BE APPLICABLE IN THE HANDS OF T HE SHAREHOLDER WHO IS THE BENEFICIAL AS WELL AS THE REGISTERED OWNER OF SHARES IN THE COMPANY EVEN THOU GH THE AMOUNT IS ADVANCED BY A COMPANY TO A CONCERN IN WHICH THE SHAREHOLDER HAS A SUBSTANTIAL INTEREST. T HIS CONTENTION OF THE COUNSEL OF THE APPELLANT IS WELL FOUNDED AS THE PROVISIONS OF SECTION 2(22)(E) ARE APPLICABLE TO THE SHAREHOLDER ONLY. THE VARIOUS DECISIONS RELIED UPON BY THE LD. 'AR' IN HIS WRITTE N SUBMISSIONS ARE DIRECTLY IN SUPPORT OF THE CASE OF THE APPELLANT. THUS, UNDER THE ABOVE CIRCUMSTANCES, I A M INCLINED TO HOLD THAT THE PROVISIONS OF SECTION 2(2 2)(E) COULD ONLY BE APPLIED TO THE SHAREHOLDER AND THE APPELLANT COMPANY NOT BEING A SHAREHOLDER IN M/S SANTOSH BOX FACTORY LTD., AND THUS THE ADDITION CAN NOT BE SUSTAINED IN THE HANDS OF THE APPELLANT BEING LE GALLY INCORRECT. HENCE, THE ADDITION IS HEREBY DELETED. HOWEVER, THE AO IS DIRECTED TO TAKE SUITABLE ACTION IN THE CASE OF BENEFICIARIES/SHAREHOLDERS. 7. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS AND FACT-SITUATION OF THE CASE. HAVING REGARD TO THE FI NDINGS OF THE LD. CIT(A), AND FACTS OF THE CASE, WE DONT FIN D ANY INFIRMITY IN HIS ORDER. HENCE, FINDINGS OF THE CIT (A) ARE UPHELD. 5 8. GROUND NO. 1 IS DECIDED IN FAVOUR OF THE ASSESSE E AND AGAINST THE REVENUE. 9. GROUND NOS. 2 & 3 ARE GENERAL IN NATURE AND NEED NO ADJUDICATION. 10. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSI ONS, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEB.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22 ND FEB.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH