Gadgil Holdings Pvt. Ltd., Pune V. Income-tax Officer, Ward - 1(4), Pune

ITA 1455/PUN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2329 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 09-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Keywords: Deemed dividend
• Section: 143(3); 2(22)(e)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1455/PUN/2017 / ASSESSMENT YEAR : 2014-15 GADGIL HOLDINGS PVT. LIMITED, PNG HOUSE, 4 TH FLOOR, 694, NARAYAN PETH, LAXMI ROAD, PUNE 41130. PAN : AALCS9660G. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD 1(4), PUNE. . / RESPONDENT ASSESSEE BY : SHRI M.R. BHAGWAT. REVENUE BY : SHRI M.K. VERMA. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) PUNE 1 DATED 29.0 3.2017 FOR THE ASSESSMENT YEAR 2014-15. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE AN INVESTMENT COM PANY AND ITS BUSINESS ACTIVITIES COMPRISE OF SHARE INVESTMENT, COMMODITY DERIVATIVES, LOANS ETC. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME ON 19.11.2014 FOR A.Y. 2014-15 DECLARING TOTAL INCOME AT RS.6,52,690/-. TH E CASE WAS / DATE OF HEARING : 11.06.2019 / DATE OF PRONOUNCEMENT: 20.06.2019 2 ITA NO.1455/PUN/2017 SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAM ED U/S 143(3) OF THE ACT VIDE ORDER DATED 29.11.2016 AND THE TOTAL INCOME BEFORE SET OFF OF BROUGHT FORWARD LOSSES WAS DETERMINED AT RS.1,13,40,566/- AND THE TOTAL INCOME AFTER SET OFF OF BROUGHT FORWARD LOSS WAS DETERMINE D AT RS.66,34,187/- AGGRIEVED BY THE ORDER OF AO, ASSESSEE CA RRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 29.03.2017 (IN APPEAL N O.CIT(A), PUNE-1/10539/2016-17) GRANTED PARTIAL RELIEF TO THE ASSE SSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE ADDITION OF RS.26,60,211/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT TO ASSESSEES TOTAL INCOME EVEN THOU GH ON FACTS THE PROVISION OF THE SAID SECTION WERE NOT APPLICABLE I N COMPANYS CASE. 2. THE ADDITION OF RS.26,60,211/- BE DELETED AND TH E TOTAL INCOME OF THE COMPANY BE REDUCED TO THAT EXTENT 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHE R. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE BALANCE-SHEET OF THE ASSESSEE, AO NOTICED THAT ASSESSEE HAD TAKEN UNSECURED LOAN FROM FOUR C DIAMONDS PVT. LTD (NOW KNOWN AS GADGIL DIAMONDS PVT. LTD.). ON PERUSING THE SHAREHOLDING PATTERN OF FOUR C DIAMONDS PVT. LTD, AO NOTICED THAT ASSESSEE WAS ITS HOLD ING COMPANY HOLDING 99% SHARES AND ALSO HAVING SUBSTANTIAL INTEREST AND ASSESSEE HAD TAKEN LOAN AGGREGATING TO RS.4,82,18,050/-. AO ALSO NOTICE D THAT FOUR C DIAMONDS PVT. LTD WAS HAVING ACCUMULATED PROFITS AND AS IT HAD ADVANCED AMOUNTS TO ASSESSEE WAS OF THE VIEW THAT PR OVISIONS OF SEC.2(22)(E) WERE APPLICABLE. ASSESSEE WAS ASKED TO SHOW CA USE AS TO WHY THE PROVISIONS OF SEC.2(22)(E) OF THE ACT SHOULD NOT BE APPLIE D. THE SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND ACCEPTABLE TO THE AO. AO 3 ITA NO.1455/PUN/2017 HELD THAT LOANS AND ADVANCES TO THE EXTENT OF RS.26,60,2 11/- GIVEN BY FOUR C DIAMONDS PVT. LTD (NOW KNOWN AS GADGIL DIAMONDS PV T. LTD.) TO ASSESSEE TO BE DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AN D HE ACCORDINGLY MADE ITS ADDITION. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY OBS ERVING AS UNDER : 10.I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AS WELL AS REPLY OF THE APPELLANT. IN THIS CASE, IT IS SEEN THAT REPLY OF T HE APPELLANT THAT THE ACCOUNT WAS I N THE NATURE OF CURRENT ACCOUNT CANNOT BE ACCEPTED. LOAN ACCOUNT DOES NOT MEAN THAT THE AMOUNT IS REQUIRED TO BE MA I NTAINED AT STATIC LEVEL . EVEN IN LOAN ACCOUNT FRESH BORROWINGS AND REPAYMENT S ON TIME TO TIME CAN TAKE PLACE AND I F THAT HAPPENS CHARACTER OF THE LOAN ACCOUNT WILL N OT CHANGE TO CURRENT ACCOUNT . IN THIS CASE, FROM THE PERUSAL OF LEDGER ACCOUNT OF GADGIL DIAMONDS PVT. LTD. IN APPELLANT'S BOOKS, IT IS SEEN THAT CERTAIN PETTY EXPENSES HAVE BEEN ROUTED TH R OUGH THE ACCOUNT BUT OVERALL THE FEATURES OF THE ACCOUNT ARE IN NATURE OF LOAN ONLY. THEREFORE , ON TOTALITY OF FACTS, THE ADDITION OF RS.26,60,211/- U/S 2(22)(E) OF THE I.T. ACT, 1961 IS UPHELD AND THE GROUND IS DISMISSED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE ISSUE IS COVERED IN ASSESSEES FAVOUR BY THE DECISION OF PUNE TRIBUNAL IN ASSESSEES OW N CASE IN A.Y. 2013-14 IN ITA NO.2367/PUN/2017 ORDER DATED 18.12.2018 . HE PLACED ON RECORD THE COPY OF THE AFORESAID DECISION. HE THEREAFTER SUBMITT ED THAT THE PARTIES INVOLVED IN THE PRESENT CASE ARE THE SAME A S THAT IN EARLIER YEAR AND THE FACTS ARE ALSO SIMILAR. HE THEREFORE RELYING ON THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2013-14 SUBMITTED THAT THE ISSUE BE DECIDED AS IN EARLIER YEAR. LD. D.R. ON THE OTHER HAND DID NOT CONTROVERT THE SUBMISSIONS MADE BY LD.A.R. BUT HOWEVER S UPPORTED THE ORDER OF LOWER AUTHORITIES. 4 ITA NO.1455/PUN/2017 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO ADDITIONS MADE U/S 2(22)(E) OF THE ACT. WE FIND THAT IDENTICAL ISSUE OF DEEMED DIVIDEND OF THE TRANSACTIONS WITH THE SAME PARTIES AROSE IN ASSESSE ES OWN CASE IN A.Y. 2013-14. THE ISSUE WAS DECIDED BY THE TRIBUNAL (IN IT A NO.2367/PUN/2017 ORDER DATED 18.12.2018) IN ASSESSEES FAVOUR BY OBSERVING AS UNDER : 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO ADDITION MADE U/S 2(22)(E) OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS A HOLDING COMPANY OF FOUR C DIAMONDS PVT. LTD., AS IT HOLDS M ORE THAN 99% OF ITS SHARES. IT IS ASSESSEES CONTENTION THAT IT HAS RUN NING ACCOUNT WITH ITS SUBSIDIARY IN THE NATURE OF CURRENT ACCOUNT WITH FO UR C DIAMONDS PVT. LTD., AND THE ACCOUNT IS HAVING TRANSACTIONS OF RECEIPTS AND PAYMENTS OF MONEY. THE COPY OF THE LEDGER ACCOUNT OF FOUR C DIAMONDS P VT. LTD., PLACED IN PAPER BOOK SHOWS THAT AS ON 01.04.2012 ASSESSEE WAS TO RECEIVE RS.3.92 CRORES FROM FOUR C DIAMONDS PVT. LTD., AND THERE AR E FREQUENT TRANSACTIONS OF RECEIPTS AND PAYMENTS TILL 27.10.2012 AND AS ON THAT DATE THE ASSESSEE WAS TO RECEIVE RS.1.89 LAKHS. THEREAFTER, THE NET B ALANCE TURNED INTO AS CREDIT BALANCE AND AT THE YEAR END, THE TOTAL AMOUN T DUE TO FOUR C DIAMONDS PVT. LTD. BY THE ASSESSEE WAS TO THE EXTEN T OF RS.4.82 CRORES. THE LEDGER ACCOUNT THUS SHOWS TRANSACTIONS TO BE IN THE NATURE OF A CURRENT ACCOUNT. I FIND THAT HONBLE PUNJAB AND HARYANA HIG H COURT IN THE CASE OF CIT VS. SURAJ DEV DADA (SUPRA) HAS HELD THAT WHEN T HE ASSESSEE WAS HAVING A RUNNING ACCOUNT WITH THE SHAREHOLDER COMPA NY, THE PROVISIONS OF SEC.2(22)(E) OF THE ACT ARE NOT APPLICABLE. I FURTH ER FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL OF KOLKATA IN THE CASE OF ITO VS. GAYATRI CHAKRABORTY (SUPRA) HAS HELD THAT THE LOAN ACCOUNT IS DIFFERENT FROM A CURRENT ACCOUNT WITH A SHAREHOLDER AND WHEN THE TRANSACTIONS ARE IN THE NATURE OF CURRENT ACCOUNT, THE PROVISIONS OF SEC.2(22)(E) OF THE ACT ARE NOT APPLICABLE. I FURTHER FIND THAT THE DECISION OF KOLKATA TRIBUNAL IN THE C ASE OF ITO VS. GAYATRI CHAKRABORTHY (SUPRA) HAS BEEN UPHELD BY HONBLE KOL KATA HIGH COURT VIDE ORDER DT.03.05.2018 IN ITA NO.160 OF 2016 WHEREIN I T HAS HELD THAT WHEN THERE ARE TRANSACTIONS BETWEEN A SHAREHOLDER AND A COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED AND THE FOR MER HAS SUBSTANTIAL STAKE, CREATE MUTUAL BENEFITS AND OBLIGATIONS, THEN THE PR OVISION OF TREATING ANY SUM RECEIVED BY THE SHAREHOLDER OUT OF ACCUMULATED PROFITS AS DEEMED DIVIDEND WOULD NOT APPLY. BEFORE ME, REVENUE HAS NO T PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. I THEREFORE FOLLOW ING THE DECISION OF KOLKATA TRIBUNAL IN THE CASE OF CIT VS. GAYATRI CHAKRABORTY (SUPRA) WHICH HAS BEEN UPHELD BY THE HONBLE KOLKATA HIGH COURT AND ALSO T HE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS . SURAJ DEV DADA (SUPRA) HOLD THAT NO ADDITION U/S 2(22)(E) OF THE A CT IS CALLED FOR IN THE PRESENT CASE. I THEREFORE DIRECT THE DELETION OF AD DITION MADE BY THE AO. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 7. BEFORE US, NO DISTINGUISHING FEATURE IN THE FACTS OF THE P RESENT CASE OR THAT OF EARLIER YEAR BEEN POINTED OUT BY REVENUE. FUR THER REVENUE HAS ALSO NOT PLACED ANY MATERIAL TO DEMONSTRATE THAT THE OR DER OF TRIBUNAL IN 5 ITA NO.1455/PUN/2017 ASSESSEES OWN CASE IN EARLIER YEAR HAS BEEN SET ASID E / STAYED OR OVERRULED BY HIGHER JUDICIAL FORUM. IN VIEW OF THE AFORESAID FACTS, WE FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNA L IN ASSESSEES OWN CASE FOR EARLIER YEAR I.E., A.Y. 2013-14 AND FOR SIMILAR REA SONS HOLD THAT NO ADDITION U/S 2(22)(E) OF THE ACT IS CALLED FOR IN THE P RESENT CASE. WE THEREFORE DIRECT THE DELETION OF ADDITION MADE BY THE AO. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 20 TH DAY OF JUNE, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 20 TH JUNE, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-1, PUNE. PR. CIT 1, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.