Sri Tapan Kr. Saha, Malda V. ACIT, CIR-MALDA, Malda

ITA 1286/KOL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5034 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 13-10-2015
• Court: TRIBUNAL
• Department Lawyers: MD S S ALAM
• Assessee Lawyers: M C RATHI
• Keywords: Capital asset; Deemed dividend

Judgement Text

ITA NO.1286/KOL/2015-SRI TAPAN KR.SAHA-A.Y.2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BE NCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM ] I.T.A NO.1286/KOL/201 5 ASSESSMENT YEAR : 2010-1 1 SRI TAPAN KR.SAHA -VS.- A.C.I.T., MALDA CIRCLE MALDA MALDA (PAN:AKQPS1044N) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI M.C.RATHI, FCA FOR THE RESPONDENT : MD.S.S.ALAM, JCIT, SR.DR DATE OF HEARING : 02.03.2016. DATE OF PRONOUNCEMENT : 6.4.2016. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 07.08.2015 OF CIT(A)-JALPAIGURI, RELATING TO AY 2010-11. 2. THE ONLY ISSUE FOR CONSIDERATION IN THIS APPEAL BY THE ASSESSEE IS AS TO WHETHER THE REVENUE AUTHORITIES WAS JUSTIFIED IN MAKING ADD ITION OF RS.10,00,000/- TO THE TOTAL INCOME OF THE ASSESSEE INVOKING THE PROVISION OF SE CTION 2(22)(E) OF THE ACT. 3. THE ASSESSEE IS AN INDIVIDUAL. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESEE HAD RECEIVED A SUM OF RS.1 0,00,000/- FROM A COMPANY BY NAME M/S ABANI RICE MILL PVT. LTD.. THE ASSESSEE WA S A DIRECTOR IN THE SAID COMPANY AND HELD 55% OF THE PAID UP SHARE CAPITAL. THE COM PANY HAD RESERVES OF MORE THAN RS.30,00,000/-. IN THESE CIRCUMSTANCES AO WAS OF TH E VIEW THAT A SUM OF RS.10,00,000/- RECEIVED BY THE ASSESSEE AS LOAN FRO M M/S. ABANI RICE MILL PVT. LTD HAD TO BE TAXED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE U/S 2(22)(E) OF THE ACT. BEFORE AO THE ASSESSEE FILED A XEROX COPY OF T HE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF M/S. ABANI RICE MILL PVT. LTD IN AND BY WHICH A SUM OF RS.10,00,000/- WAS GIVEN AS INTEREST FREE LOAN FOR A TERM OF FIVE YEARS. THE LOAN WAS ITA NO.1286/KOL/2015-SRI TAPAN KR.SAHA-A.Y.2010-11 2 EITHER TO BE REPAID OR ADJUSTED AGAINST THE REMUNER ATION OF THE ASSESSEE AS A DIRECTOR. THE LOAN WAS HOWEVER REPAID BY THE ASSESSEE TO THE COMPANY ON 19.12.2013. TAKING NOTE OF THE AFORESAID EVIDENCE AO BROUGHT TO TAX A SUM OF RS.10,00,000/- AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. 4. BEFORE CIT(A) THE ASSESSEE SUBMITTED HE RECEIVED AN A DVANCE OF RS. 10,00,000/- ON 01/06/2009 FROM THE COMPANY FOR ACQUISITION OF V ARIOUS RICE MILLING PLANT & MACHINERY. ACCORDINGLY MACHINERY WORTH RS. 252861/- WAS ALSO S UPPLIED TO THE RICE MILL DURING THE NEXT FINANCIAL YEAR I.E. IN FY 2010-11. THE SAID PL ANT & MACHINERY WAS DULY IMPORTED BY ABANI ENTERPRLSE (PROP: SRI TAPAN KUMAR SAHA) AND C OPIES OF IMPORT DOCUMENTS AND INVOICES WERE FILED BEFORE CIT(A). IT WAS CONTENDE D THAT THE REMAINING ADVANCE MONEY BEING UNUTILIZED WAS ALSO REFUNDED DURING THE FOLLO WING TWO YEARS. THE SAID ADVANCE WAS MADE UNDER CIRCUMSTANCES WHICH ARE VERY MUCH IN THE ORDINARY COURSE OF BUSINESS AND NOT FOR ANY KIND OF BENEFIT OF THE ASSESSEE. THE ASSE SSEE PLACED RELIANCE ON A DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF BAGMANE CONSTRUCTIONS PVT. LTD., WHEREIN IT WAS HELD THAT 'TRADE ADVANCES WHICH IS IN THE NATUR E OF MONEY TRANSACT TED TO GIVE EFFECT TO COMMERCIAL TRANSACTIONS WOULD NOT FALL WITHIN THE O F THE PROVISIONS OF SECTION 2(22) (E) OF THE I.T. ACT' 1961. 4.1. CIT(A) HOWEVER CONFIRMED THE ORDER OF AO BY OB SERVING AS FOLLOWS :- 5. I HAVE DULY CONSIDERED THE SUBMISSION OF LD. AR OF THE APPELLANT IN THE LIGHT OF ISSUES INVOLVED AND THE CASE LAWS CITED AND NOT INC LINED TO ACCEPT HIS ARGUMENTS. THE LD. AR HAS GIVEN UTMOST IMPORTANCE ON THE RECENT DE CISION OF THE KARNATAKA HIGH COURT WHERE IT HAS BEEN DECIDED THAT ADVANCE GIVEN TO A S HARE HOLDER OR TO ANY SISTER CONCERN AS A CONSIDERATION FOR THE GOODS OR FOR PURCHASE OF A CAPITAL ASSET, CANNOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. IN THIS CASE, AS PER APPELLANT'S OWN ADMISSION, HE HAD RECEIVED RS.10.00 LAKHS ON 01/06/ 2009 FROM THE COMPANY AND CLAIMED TO HAVE SUPPLIED MACHINERY WORTH OF RS.2,52 ,861/- IN THE NEXT FINANCIAL YEAR. THE BALANCE AMOUNT CLAIMED TO HAVE RETURNED IN THE NEXT TWO FINANCIAL YEARS. THIS CANNOT BE TERMED AS 'ADVANCE' IN ANY MANNER. SO FAR AS THE MACHINERY IS CONCERNED, IT IS SEEN FROM THE COPY OF THE BILL THAT SAME WAS PURCHA SED ON 26/04/2008 I.E. MUCH BEFORE TAKING THE SO CALLED ADVANCE FROM THE COMPANY. BASI CALLY, SAID MACHINERY WAS PURCHASED IN THE NAME OF M/S. ABANI ENTERPRISE, PRO PRIETARY CONCERN OF THE APPELLANT ENGAGED IN SAME RICE MILL BUSINESS. IT IS CLEAR THA T THE AR MADE A COOKED STORY THAT THE APPELLANT HAD TAKEN ADVANCE FROM THE COMPANY TO TAK E SHELTER UNDER THE RECENT DECISION OF THE HON'BLE KARNATAKA HIGH COURT. 6. IN VIEW OF THE ABOVE, IT HAS BEEN CLEARLY PROVED THAT THE APPELLANT HAD TAKEN INTEREST- FREE LOAN OF RS.10.00 LAKHS FROM THE COMPANY WHERE HE WAS A MAJOR SHAREHOLDER AND ENJOYED THE SAME FOR ABOUT THREE YEARS. THE AO WAS RIGHT IN TAXING THAT LOAN AS DEEMED ITA NO.1286/KOL/2015-SRI TAPAN KR.SAHA-A.Y.2010-11 3 DIVIDEND AS PER PROVISIONS OF SECTION 2(22)(E) OF T HE ACT. THE ADDITION OF RS.10.00 LAKHS IS CONFIRMED. 5. AGGRIEVED BY THE ORDER OF CIT(A) ASSESSEE HAS P REFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 6. I HAVE HEARD THE SUBMISSIONS OF THE LEARNED COUN SEL FOR THE ASSESSEE, WHO REITERATED THE STAND OF THE ASSESSEE AS WAS PUT FOR TH BEFORE CIT(A). THE EVIDENCE ON RECORD SHOWS THAT THE ASSESSEE IN HIS CAPACITY IS A PROPRIETOR OF M/S. HAQUE ENTERPRISES, IMPORTED PARTS OF RICE MILL MACHINERY OLD AND USED FROM BANGLADESH. A SUM OF RS.2,52,861/- WAS THE COST OF THE PARTS OF R ICE MILL MACHINERY SO IMPORTED BY THE ASSESSEE. THE IMPORT WAS ON 26.04.2008. A SUM O F RS.10,00,000/- RECEIVED BY THE ASSESSEE FROM M/S. ABANI RICE MILL PVT.LTD. ON 01.0 6.2009 MUCH AFTER THE IMPORT OF PARTS OF RICE MILL MACHINERY BY THE ASSESSEE. THERE FORE THE CONCLUSION DRAWN BY CIT(A) THAT A SUM OF RS.10,00,000/- WAS AN ADVANCE FOR THE PURCHASE OF MACHINERY THROUGH THE ASSESSEE WAS RIGHTLY HELD TO BE AN AFTE R-THOUGHT BY CIT(A). THE OTHER CIRCUMSTANCE NAMELY RETURN OF THE REMAINING SUM OF ADVANCE ALSO GOES TO SHOW THAT THE PLEA OF RS.10,00,000/- WAS ADVANCE FOR PURCHASE OF MACHINERY WAS NOT TRUE. BESIDES THE ABOVE SUCH A PLEA WAS NOT PUT FORTH BEF ORE AO BY THE ASSESSEE. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT RS.10,00,000/- W AS GIVEN TO THE ASSESSEE BY M/S. ABANI RICE MILL PVT.LTD. FOR THE PURPOSE OF PURCHAS E OF MACHINERY. IN THE GIVEN CIRCUMSTANCES WE DO NOT FIND ANY INFIRMITY IN THE C ONCLUSIONS ARRIVEDAT BY CIT(A). CONSEQUENTLY APPEAL BY THE ASSESSEE IS DISMISSED. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 6.4.2016. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBER DATED : 6.4.2016. [RG PS] ITA NO.1286/KOL/2015-SRI TAPAN KR.SAHA-A.Y.2010-11 4 COPY OF THE ORDER FORWARDED TO: 1.SRI TAPAN KR.SAHA, C/O M/S. ABANI RICE MILL, VILL & P.O. BULBULCHANDI, DIST. MALDA PIN: 732122 (WEST BENGAL) 2. A.C.I.T., MALDA CIRCLE, MALDA 3. CIT(A)-JALPAIGURI 4. CIT-JALPAIGURI 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRU E COPY BY ORDER A SSTT.REGISTRAR, ITAT, KOLKATA BENCHES