Rohit Jainendra Jain, New Delhi V. ACIT, Central Circle-5, New Delhi

ITA 1368/DEL/2019

AI Insights

The case involves an appeal by Rohit Jainendra Jain against the order of the Commissioner of Income Tax (Appeals)-XXIV, New Delhi, which confirmed a penalty of Rs. 3,22,773 on additions of Rs. 13,64,574 deemed as dividend income under Section 2(22)(e) of the Income Tax Act, 1961. The Assessing Officer had treated the loans/advances received by the assessee as deemed dividend, making them taxable. The Tribunal, after considering the facts and circumstances, concluded that the penalty was improperly imposed as the provisions of Section 2(22)(e) were applied without any concealment or malafide by the assessee.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 121626 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-11-2022
• Assessment Year: misc
• Appeal Filed On: 18-05-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.1368/DEL/2019 Assessment Year 2011-12 Rohit Jainendra Jain, S-518, Greater Kailash, Part-I, New Delhi. Vs. ACIT, Central Circle-5, New Delhi. TAN/PAN: AAMPJ3039N (Appellant) (Respondent) Appellant by: None Respondent by: Shri S.M. Singh, Sr.DR Date of hearing: 17 11 2022 Date of pronouncement: 25 11 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: Th e cap tio n ed ap peal h as b een fil ed b y th e Assessee ag ain st th e o rd er o f th e Co mmiss io n er o f In co me Tax (Ap peals)-XXIV, New Delh i [‘CIT( A)’ in sh o rt] d a te d 1 7 .1 2 .2 01 8 arisi n g fro m th e assess men t o rd er d ated 2 8 .0 3 .20 14 p assed by th e Assessin g Officer (AO) u n d er Sect io n 1 4 3(3 ) of th e In co me Tax Act, 1 9 6 1 (th e Act) co n cern in g AY 20 1 0-1 1 . 2 . Th e assess ee in th e in s tan t ap p eal h a s ch al len g ed th e a ctio n o f th e CIT(A) in co n fir min g th e p en alty o f Rs.3 ,2 2 ,7 7 3 /- on ad d itio n s o f Rs .1 3 ,6 4 ,5 7 4 /- on acco un t o f d eemed d iv i d en d u n d er Sect io n 2 (22 )(e) of th e Ac t. Th e As sessin g Offic er al leg ed th at assesse e h as o b tain ed lo an s/ad v an ces in v io lat io n of Sec tio n I.T.A. No.1368/Del/2019 2 2 (2 2)(e) o f th e Act an d acco rd in g ly t h e lo an s/ad v ances amo u n t o f Rs.1 3 ,6 4 ,5 7 4 /- was d eemed to b e tax ab le in co me in th e h and s o f th e sh areh o ld er-assessee . Th e ad d itio n s were mad e in th e q u an tu m p ro ceed in g s an d the p en alty was i mp o sed u nd er Sectio n 2 7 1 (1 )(c) o f th e Ac t o n su ch ad d itio n s. Th e CIT(A) co n firmed th e p en al ty imp o sed b y th e Assessin g Officer. 3 . Wh en th e ma tt er was cal led fo r h ea rin g , n o n e ap peared fo r th e asses see . It is s een th at s ev eral o p p o rtu n ities were g i v en in th e p ast wh ich re ma i n ed u n av ailed . A cco rd in g ly , th e ma tt er was p ro ceed ed ex-p a rte. 4 . Th e si mp le q u est i o n th at ar ises fo r co n sid eration i s w h eth er p en alty can b e imp o sed b y in v ok in g Sectio n 2 7 1 (1 )(c) o f th e Act o n lo an s an d ad van ces tak en b y th e assesse e an d regard ed as d eemed d iv id en d ch arg eab le to tax b y v irtu e o f Sec tio n 2 (2 2)(e) o f th e Act . 5 . Th e Sectio n 2 (2 2 )(e) o f th e Act crea t es leg a l fic tio n whereb y lo an s/ad v an ces re ceiv ed b y an assessee are d ee med as tax ab le in co me in th e h an d s o f th e re cip ien t ass essee in cert ain circu ms tan ce s as sp eci fied th ere in . In v iew o f Sectio n 2 (2 2)(e) o f th e Act, lo an s/ad v an ces amo u n t u n d er co n sid eratio n arti fic ial ly p artak e th e ch arac ter o f d iv id en d an d b ro u gh t to tax as d eemed d iv id en d . Need less to say , th e a fo resaid p ro v isio n s o f Sect io n 2 (2 2)(e) h as bro ugh t a d eemin g an d u n n atu ral co n cept o f trea tin g th e rep ay ab le lo an s/ad v an ces as tax a b le in co me in th e h an d s o f th e b o rro wer in co mp let e d ep artu re with u sag e o f trad e an d also o p eratio n o f o rd in ary p ro v isio n s. Ad mi tted ly , th e rel ev an t fac ts co n cern in g th e iss u e were also mad e av ai lab le to the Assessin g Officer . Th u s, n o co n ceal men t o f an y ‘p articu lars’ o f an y fact p er I.T.A. No.1368/Del/2019 3 se can b e reck o n ed . Th e ass essee h a s si mu l tan eo u sly clai med th a t th e afo resa id ad v an ces h av e b een receiv ed in th e cou rse of o rd in ary b u sin ess an d th u s no t su scep tib le to p ro v isio n o f Sect io n 2 (2 2)(e) o f th e Act. M ere reje ct io n o f th e ex p lan ati o n o f th e assesse e can n o t b e g ro u nd to in v o k e p en alty in ev ery c ase. Th u s, wh ile th e p ro v isio n s o f Sec tio n 2 (2 2 )(e) h av e b een ap p lied , th e issu e is n o t en tire l y free o f an y d eb ate. As n o ted , Sectio n 2 (2 2 )(e) o f th e Act is o n ly a d ee min g p ro visio n o f l aw an d is n o t th e su b stan tiv e p ro v isi o n . Su ch d eemin g fi ct io n seek s to d isp lace th e mean in g o f lo an s/ ad v an ces as co mmo n ly u nd ersto o d and atte mp ts to trea t it as tax ab le in co me . Th e fi c tio n is th u s in th e leag u e o f ex tra-o rd in ary and an o rd in ary tax p ay er may n o t n ecessari ly u n d erstan d th e co mp lex i ty o f su ch fi ctio n al p ro v isio n . Th u s, in th e ab sen ce o f an y p ercep tib l e ma la fid e, th e Assessin g Officer in o ur v iew was n o t ju s ti fied in in v o k in g th e p ro v isio n s of Se ct io n 2 7 1 (1 )(c) o f th e Act. We th u s se e n o merit in th e ac tio n o f th e Rev en u e fo r imp o s in g p en alty . Th e o rd er o f th e CIT(A) is th u s set asid e an d th e Asse ssin g Offi cer is d ir ected to d e let e th e p en alty . 6 . In th e resu l t, th e a p p eal o f th e asses s ee is a l lo wed ex -parte. Order pronounced in the open Court on 25/11/2022. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /11/2022 prabhat