S.M. Arshad, Mangalore V. DCIT, Bangalore

ITA 1384/BANG/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9478 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 25-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R KRISHNAN
• Keywords: Deemed dividend
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 138 4/ BANG/20 1 2 (ASSESSMENT YEAR: 20 07 - 08 ) SHRI S.M.ARSHAD, FLAT NO.604, DOOR NO.14 - 2 - 175 - 40, LIGHT HOUSE CONDOMINIUM, LIGHT HOUSE HILL ROAD, MANGALORE - 575001. PA NO.ACZPA0799F VS. APPELLANT DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE, MANGALORE. RESPONDENT APPELLANT BY : SHRI R.KRISHNAN, CA. RESPONDENT BY : SHRI SANJAY KUMAR, CIT(DR) DATE OF HEARING : 25/07/2016 DATE OF PRONOUNCEMENT : 19 /08/2016 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(A) - VI, BANGALORE, DATED 16/08 /2012 FOR THE ASSESSMENT YEAR 2007 - 08. 2. BRIEFLY FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS AN INDIVIDUAL. HE DERIVES INCOME UNDER THE HEAD SALARY AS MANAGING DIRECTOR OF M/S.MOHTISHAM COMPLEXES PVT. LTD. RETURN OF INCOME ITA NO . 1384 /BANG/201 2 PAGE 2 OF 9 FOR THE ASSESSMENT YE AR 2007 - 08 WAS FILED ON 11/04/2008 DECLARING INCOME OF RS.11,87,273/ - . THE SAID RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE INCOME - TAX ACT, 1961 [ THE ACT FOR SHORT] AND THE CASE WAS NOT TAKEN UP FOR SCRUTINY ASSESSMENT. 3. SUBSEQUENTLY, SEARCH A ND SEIZURE OPERATIONS WERE CONDUCTED IN THE RESIDENTIAL PREMISES OF THE ASSESSEE U/S 132 OF THE ACT ON 13/ 0 2/2009. AS A CONSEQUENCE OF SEARCH OPERATIONS, NOTICE DATED 24/ 0 9/2009 U/S 153A WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO SAID NOTICE, RETURN OF I NCOME WAS FILED ON 30/10/2009 DECLARING INCOME AS ORIGINALLY DECLARED U/S 139(1) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER [AO] NOTICED THAT THE ASSESSEE IS A DIRECTOR IN M/S.MOHTISHAM COMPLEXES PVT. LTD., IN WHICH PUB LIC ARE NOT SUBSTANTIALLY INTERESTED, HOLDING 88.26% IN THE SAID COMPANY. THE AO OBSERVED THAT BALANCE - SHEET OF THE SAID COMPANY SHOWN ACCUMULATED PROFIT OF RS.4,11,29,060/ - AS ON 31/03/2006. IT WAS ALSO FOUND THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.1 ,26,86,722/ - ON VARIOUS DATES ON ACCOUNT OF TRANSFER OF MONEY TO ONE CONCERN M/S.MOHTISHAM ENTERPRISES AND TO M/S.MOHTISHAM PROPERTIES OF RS.31,41,258/ - . ON NOTICING THE ABOVE TRANSACTIONS, THE ASSESSEE WAS SHOW CAUSED AS TO WHY ENTIRE AMOUNT OF RS.1,58, 27,980/ - SHOULD NOT BE ASSESSED AS DEEMED DIVIDEND UNDER THE PROVISIONS OF SEC.2(22)(E) OF THE ACT. IN RESPONSE TO SAME, ASSESSEE HAS SUBMITTED THE FOLLOWING EXPLANATION: ITA NO . 1384 /BANG/201 2 PAGE 3 OF 9 ITA NO . 1384 /BANG/201 2 PAGE 4 OF 9 THUS, THE EXPLANATION TENDERED BY THE ASSESSEE WA S THAT THE AMOUNT DRAWN FROM THE COMPANY WA S UTILIZED ONLY FOR THE PURPOSE OF PUTTING UP NILGIRIS AND ENTERTAINMENT CENTRE I.E . AMOEBA. THE SAID EXPLANATION WAS REJECTED BY THE AO. HOWEVER, AFTER REDUCING THE AMOUNT RECEIVED BY THE COMPANY FROM THE ASSESSEE OF RS.34,28,219/ - N ET DIVIDEND OF RS.1,23,99,761/ - WAS TREATED AS DEEMED DIVIDEND AND BROUGHT TO TAX. ITA NO . 1384 /BANG/201 2 PAGE 5 OF 9 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE CIT(A). IT WAS INTER ALIA CONTENDED THAT THE AMOUNTS WITHDRAWN FROM THE COMPANY WAS UTILISED FOR THE PURPOSE O F COMMENCING SUPER MARKET OF NILGIRIS. FURTHER, IT WAS CONTENDED THAT THE PROPERTIES OF THE ASSESSEE WERE PLEDGED WITH BANK FOR OBTAINING LOAN FOR THE COMPANY AND PLACING RELIANCE ON THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KR .MALHOTRA VS. CIT (338 ITR 538) IT CANNOT TERMED AS DEEMED DIVIDEND. THE SAID SUBMISSIONS WERE NOT ACCEPTED BY THE CIT(A) AND HE UPHELD THE ADDITION HOLDING THAT THE FACT THAT SUBSEQUENTLY LOANS WERE REPAID HAS NO BEARING ON THE TAXABILITY OF LOANS RECEIV ED AS DEEMED DIVIDEND, PLACING RELIANCE ON THE DECISION OF THE HON BLE APEX COURT IN THE CASE OF MISS P.SARADA VS. CIT (229 ITR 444). 5. BEING AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US IN THE PRESENT APPEAL RAISING THE FOLLOWING GROUNDS OF APPEAL: ITA NO . 1384 /BANG/201 2 PAGE 6 OF 9 5. LEARNED AUTHORISED REPRESENTATIVE REITERATED THE SAME SUBMISSIONS AS ADVANCED BEFORE THE CIT(A). ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HEARD RIVAL SUBMISSIONS AND CONSI DERED THE MATERIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL IS WHETHER THE AMOUNT WITHDRAWN BY THE TWO CONCERNS M/S.MOHTISHAM ENTERPRISES AND M/S.MOHTISHAM PROPERTIES FROM M/S.MOHTISHAM COMPLEXES PVT. LTD., IN WHICH THE ASSESSEE HAS SUBSTANTIAL INT EREST HOLDING SHARES OF 8 8.26 % , IS TAXABLE AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. THERE IS NO DISPUTE ABOUT FACT THAT THE AMOUNTS WERE WITHDRAWN FROM THE COMPANY FOR THE BENEFIT OF THE CONCERN S IN WHICH HE HAD SUBSTANTIAL INTEREST. IT IS UNDISP UTED FACT THAT THE COMPANY IS HAVING RESOURCES AND SURPLUS OF RS . 4,1129,060/ - . THE P ROVISIONS OF SEC.2(22)(E) CLEARLY STATE THAT WHERE AMOUNT OF LOAN OR ADVANCE IS GRANTED TO A SHAREHOLDER OR A CONCERN IN WHICH HE HAS SUBSTANTIAL INTEREST, SUCH AMOUNT OF LOAN OR ADVANCE IS TAXABLE IN THE HANDS OF THE ITA NO . 1384 /BANG/201 2 PAGE 7 OF 9 SHAREHOLDER AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. IN FACT, THE HON BLE HIGH COURT OF KARNATAKA, IN THE CASE OF BAGMANE CONSTRUCTION (P) LTD. VS. CIT (2015)(277 CTR 338)(KAR) FOLLOWING THE DECISION O F THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. UNIVERSAL MEDICARE (P.) LTD. [2010] 324 ITR 263 HELD THAT WHEN A PAYMENT IS MADE TO ANY CONCERN FALLING UNDER CLAU SE (E) OF SUB - SECTION (2) OF SECTION 2, TAX IS LEVIABLE AS DEEMED DIVIDEND IN THE HANDS OF SHAREHOLDER ONLY AND NOT IN THE HANDS OF CONCERN. THE RELEVANT PARAGRAPH IS REPRODUCED BELOW: 30. IT WAS ALSO CONTENDED ON BEHALF OF THE REVENUE THAT HAVING REGARD TO THE PLAIN WORDS USED IN CLAUSE (E) 'TO ANY CONCERN', WHEN THE AMOUNT IS PAID OR WHEN ANY PAYMENT IS MADE TO A CONCERN, THE TAX IS LEVIED ON THE CONCERN AND NOT ON THE SHAREHOLDERS. AS FAR AS THIS QUESTION IS CONCERNED, THIS COURT FOLLOWING THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. UNIVERSAL MEDICARE (P.) LTD.) [2010] 324 ITR 263/190 TAXMAN 144 HAS CATEGORICALLY HELD THAT WHEN ANY PAYMENT IS MADE BY A COMPANY TO ANY CONCERN, WHICH FALLS UNDER CLAUSE (E), THE TAX IS LEVIABLE ON THE SHAREHOLDER ONLY AND NOT ON THE CONCERN. WE RESPECTFULLY AGREE WITH THE AFORESAID JUDGMENT AND WE DO NOT SEE ANY JUSTIFICATION TO TAKE ANOTHER VIEW OF THIS MATTER. THEREFORE , THE FINDING RECORDED BY THE TRIBUNAL THAT, THESE ADVANCES MADE BY THE BDPL TO THE SISTER CONCERN AS WELL AS TO ITS SHAREHOLDER DO NOT CONSTITUTE DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT, IS LEGAL AND VALID AND DO NOT CALL FOR ANY INTERFERENCE. THUS EVEN A PAYMENT IS MADE TO A CONCERN IN WHICH THE SHAREHOLDER HAS SUBSTANTIAL INTEREST, AMOUNT IS TAXABLE AS DEEMED DIVIDEND ONLY IN THE HANDS OF THE SHAREHOLDER. 7. A S ALL THE CONDITIONS ESSENTIAL FOR INVOKING THE PROVISIONS OF SEC.2(22)(E) OF THE ACT ARE PRESENT, THE PRESENT CASE IS COVERED ITA NO . 1384 /BANG/201 2 PAGE 8 OF 9 BY PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE SUBMISSION OF THE ASSESSEE THAT THE AMOUNTS DRAWN FROM THE COMPANY WERE UTILIZED FOR THE PURPOSE OF PUTTING UP NILGIRIS SUPER MARKET IN THE COMPLEX, IS DE VOID OF ANY MERIT AS NO MATERIAL WAS PLACED BEFORE US IN SUPPORT OF THE CONTENTION CANVASSED. EVEN RELIANCE PLACED BY THE LEARNED COUNSEL FOR ASSESSEE ON THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KR.MALHOTRA (SUPRA) IS NOT APPLI CABLE, AS THE ASSESSEE HAD NOT DEMONSTRATE D BEFORE US WITH EVIDENCE THAT AMOUNTS WITHDRAWN WERE TOWARDS CONSIDERATION OF GUARANTEE GIVEN FOR THE PURPOSE OF OBTAINING LOAN FOR THE PURPOSE OF BUSINESS OF THE COMPANY FROM WHICH THE AMOUNTS WERE WITHDRAWN . T H ERE WAS NO MATERIAL PLACED BEFORE US SHOWING THAT PROPERTIES OF THE ASSESSEE WERE PLEDGED FOR THE PURPOSE OF PROCURING BANK LOAN FOR THE COMPANY. MERE BALD ASSERTIONS WITHOUT CORROBORATIVE EVIDENCE CANNOT BE ACCEPTED. THEREFORE, THE SUBMISSIONS MADE BY L EARNED AR OF THE ASSESSEE ARE DEVOID OF ANY MERIT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST , 2016 S D/ - S D/ - (VIJAY PAL RAO) (INTURI RAMA RAO) JUDICIAL MEMBER A CCOUNTANT MEMBER PLACE : BANGALORE D A T E D : 19 /0 8 /2016 SRINIVASULU, SPS ITA NO . 1384 /BANG/201 2 PAGE 9 OF 9 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE