DCIT, CIR-10(1), KOLKATA, Kolkata V. M/s Magnum Clothing (P) Ltd., Kolkata

ITA 1408/KOL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4488 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 23-11-2015
• Court: TRIBUNAL
• Department Lawyers: UDAY KUMAR SARDAR
• Assessee Lawyers: S L KOCHAR
• Keywords: Deemed dividend

Judgement Text

I.T.A. NO. 1408/KOL./2015 ASSESSMENT YEAR: 2003-2004 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1408 /KOL/ 2015 ASSESSMENT YEAR: 2003-2004 DEPUTY COMMISSIONER OF INCOME TAX,................. ......................APPELLANT CIRCLE-10(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. MAGNUM CLOTHING (P) LIMITED,.................. ......................RESPONDENT 133, CANNING STREET, KOLKATA-700 001 [PAN: AABCR 7243 Q] APPEARANCES BY: SHRI UDAY KUMAR SARDAR, JCIT, D.R., FOR THE DEPARTMENT SHRI S.L. KOCHAR, ADVOCATE, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JULY 26, 2016 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 21, 2016 O R D E R THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA DAT ED 02.09.2015, WHEREBY HE DELETED THE ADDITION OF RS.47,05,000/- M ADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESESE ON ACCO UNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961. 2. THE ASSESEE IN THE PRESENT CASE IS A COMPANY, WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GARMENTS. THE RETU RN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE ON 17.11.2003 DECLARING TOTAL INCOME OF RS.2,10,760/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICE R THAT THE ASSESSEE HAS RECEIVED ADVANCES OF RS.25,06,000/- AND RS.21,99,00 0/- FROM M/S. MAGNUM FASHIONS PVT. LIMITED AND M/S. MAGNUM COTTON PVT. LIMITED RESPECTIVELY. SINCE THE ASSESSEE-COMPANY WAS HOLDIN G MORE THAN 10% I.T.A. NO. 1408/KOL./2015 ASSESSMENT YEAR: 2003-2004 PAGE 2 OF 4 EQUITY SHARES OF THE SAID COMPANIES AND THE ACCUMUL ATED PROFITS OF THE SAID COMPANIES AT THE RELEVANT TIME WERE TO THE EXT ENT OF RS.46,02,484/- AND RS.45,15,477/- IN THE CASE OF M/S. MAGNUM FASHI ONS PVT. LIMITED AND M/S. MAGNUM COTTON PVT. LIMITED RESPECTIVELY, THE A SSESSING OFFICER HELD THAT THE PROVISIONS OF SECTION 2(22)(E) WERE CLEARL Y APPLICABLE TO THE ADVANCES RECEIVED BY THE ASSESSEE FROM THE SAID COM PANY. IN THIS REGARD, THE EXPLANATION OFFERED BY THE ASSESSEE THAT THE SA ID ADVANCES HAVING BEEN RECEIVED AGAINST SALE OF ITS FLATS, THE PROVIS IONS OF SECTION 2(22)(E) WERE NOT ATTRACTED, WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AND RELYING ON THE ASSESSMENT ORDER PASSED IN ASSESSEE S CASE FOR A.Y. 2002- 03, WHEREIN THE SIMILAR ADVANCES WERE TREATED BY HI M AS DEEMED DIVIDEND UNDER SECTION 2(22)(E), HE PROCEEDED TO ADD THE TOT AL ADVANCES OF RS.47,05,000/- RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION TO ITS TOTAL INCOME BY TREATING THE S AME AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). 3. THE ADDITION MADE BY THE ASSESSING OFFICER ON AC COUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) WAS CHALLENGED BY T HE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND PERUSING THE R ELEVANT MATERIAL ON RECORD, THE LD. CIT(APPEALS) DELETED THE SAID ADDIT ION FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 2 OF HIS IMPUGNED OR DER:- I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT IN THE MATTER AND PERUSED THE MATERIAL EVIDENCE ON RECORD. I FIND THAT THE ERSTWHILE CIT(A)-X EXERCISING JURISDICTION OVER THE APPELLANT CONSIDERED THAT THERE WAS NO OCCASION FOR SECTION 2(22)(E) OF THE ACT BEING ATTRACTED IN THE CASE OF THE APPELLANT FOR AY 2002-03 AND FOR WHICH NECESSARY APPEAL EFFEC T HAD ALSO BEEN GIVEN BY THE CONCERNED AO THE THEN CIT(A)-X, K OLKATA HAD PASSED AN ORDER IN APPEAL NO. 56/CIT(A)-X,WARD-10(2 )/05-06 ON 04.04.2006 ACCEPTING THE CONTENTION OF THE APPEL LANT THAT THE APPELLANT HAD NOT RECEIVED ANY LOAN/ADVANCE THA T COULD COME WITHIN THE PROPOSITION AS LAID DOWN UNDER THE PROVISIONS OF SEC. 2(22)(E). THE FACTUAL SITUATION STILL PERSI ST IN THIS YEAR FOR WHICH THERE IS NO LOGISTICS ON THE PART OF THE AO TO HARP ON THE ISSUE FOR WHICH HE HAD ALREADY PASSED AN ORDER IN FAVOUR OF THE APPELLANT IN THE EARLIER YEAR. SUCH BEING THE C ASE, I FIND THAT THERE IS NO CAUSE FOR ME TO DIFFER WITH THE FI NDING OF THE ERSTWHILE CIT(A), FACTS REMAINING THE SAME FOR THE AY 2003-04. I.T.A. NO. 1408/KOL./2015 ASSESSMENT YEAR: 2003-2004 PAGE 3 OF 4 THE AO HAS NOT BROUGHT ON RECORD ANY FINDING TO THE CONTRARY IN THE MATTER WITH ANY PALPABLE MATERIAL, UNDER SUC H FACTS AND CIRCUMSTANCES, THE ACTION OF THE AO IS NOT ENDORSAB LE FROM MY END FOR WHICH THE SAME IS TREATED AS NOT TENABLE AN D THE ADDITION MADE IN THIS GROUND BY THE AO IS DIRECTED TO BE DELETED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLV ED IN THIS APPEAL OF THE REVENUE RELATING TO THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) IS SQUARELY COVERED IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF THE TRIBUNAL DA TED 19.04.2016 PASSED IN ASSESSEES OWN CASE FOR A.Y. 2002-03 IN ITA NO. 1352/KOL/2006, WHEREIN THE SIMILAR ADDITION MADE BY THE ASSESSING OFFICER WAS HELD TO BE NOT SUSTAINABLE BY THE TRIBUNAL FOR THE FOLLOWING R EASONS GIVEN IN PARAGRAPH NO. 10 OF ITS ORDER:- 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. BEFORE US LD. AR SUB MITTED PAPER BOOK WHICH IS RUNNING PAGES 1 TO 38 AND STATE D THAT RELIED ON THE ORDER OF THE LD. CIT(A). ON THE OTHER HAND LD. DR RELIED IN THE ORDER OF AO. FROM THE AFORESAID DI SCUSSION, WE FIND THAT THE AO HAS TREATED THE ADVANCE RECEIVE D BY THE ASSESSEE AGAINST A SALE OF PROPERTIES AS DEEMED DIV IDEND BECAUSE ASSESSEE WAS HOLDING THE EQUITY SHARES OF T HE COMPANY, CARRYING VOTING RIGHTS MORE THAN 10%. HOWE VER FROM THE FACTS OF THE CASE WE FIND THAT THE MONEY R ECEIVED BY THE ASSESSEE WAS REPRESENTING THE SALE OF THE FL ATS AND THEREFORE WE CONCLUDE THAT THE ADVANCE RECEIVED BY THE ASSESSEE WAS NOT ON RETURNABLE BASIS. THE ADVANCE REPRESENTING AGAINST THE CONSIDERATION FOR THE SALE OF THE FLATS IS OUT OF THE PURVIEW OF THE PROVISIONS OF SE CTION 2(22)(E) OF THE ACT. IN HOLDING SO WE ARE PUTTING O UR RELIANCE IN THE DECISION OF HON'BLE BOMBAY HIGH COU RT IN THE CASE OF CIT- V. NAGINDAS M KAPADIA (1989) 177 ITR 3 93 (BOM) WHEREIN HON'BLE COURT HAS HELD THAT ONLY THE PAYMENTS AND ADVANCES TO THE EXTENT OF ACCUMULATED PROFITS COULD BE TREATED AS LOANS OR ADVANCES WITHIN THE ME ANING OF SEC.2(22)(E) AND THIS WAS WHAT THE TRIBUNAL HAD DON E AND, I.T.A. NO. 1408/KOL./2015 ASSESSMENT YEAR: 2003-2004 PAGE 4 OF 4 THEREFORE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT O NLY RS.28,500 AND RS.10,000 COULD BE TREATED AS DEEMED DIVIDEND IN THE ASSESSMENT YEARS 1968-69 AND 1969-7 0. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATI ON AS WELL AS ALL THE MATERIAL FACTS RELATING THERETO ARE SIMILAR FOR A.Y . 2002-03, I RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR A.Y. 2002-03 A ND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND UND ER SECTION 2(22)(E). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 21, 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 21 ST DAY OF SEPTEMBER, 2016 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-10(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. MAGNUM CLOTHING (P) LIMITED, 133, CANNING STREET, KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKA TA; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.