K.Khumaravelu, Coimbatore V. ACIT, Coimbatore

ITA 1475/CHNY/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0703 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2013
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 28-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 30-08-2011
• Court: TRIBUNAL
• Department Lawyers: S DAS GUPTA SR
• Assessee Lawyers: S VENUGOPALAN
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D B ENCH C HENN AI BEFORE SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER AND SHRI S.S.GODARA , JUDICIAL MEMBER .. ITA NO. 1475 /MDS./ 20 11 ASSESSMENT YEAR: 200 7 - 08 SHRI K.KHUMARVELU, 16/17 PUTHIAVAR NAGAR, AVARAMPA LAYAM ROAD, COIMBATORE 641 044. VS. ACIT, COMPANY CIRCLE IV(1), COIMBATORE. PAN AJTPU 2074 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. VENUGOPALAN, C.A. RESPONDENT BY : SHRI S. DASGUPTA, SR. A.R DATE OF HEAR ING : 28 . 0 2 .13 DATE OF PRONOUNCEMENT : 28 . 0 2 .13 O R D E R PER ABRAHAM P GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVANCE IS THAT CIT(A) CONFIRMED AN ADDITION OF ` 3,98,05 9/ - MADE BY ASSESSING OFFICER UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). ITA . 1475 /MDS/ 11 2 2. FACTS APROPOS ARE THAT ASSESSEE WAS HOLDING MORE THAN 10% OF THE SHARES IN A COMPANY CALLED M/S. KONGU PRINT PACK PVT. LTD. THE SAID COMPANY HAD AD VANCED A LOAN OF ` 3,98,059/ - TO THE ASSESSEE. ASSESSEE WAS A MANAGING DIRECTOR OF THE SAID COMPANY. ASSESSEE WAS PUT ON NOTICE AS TO WHY SEC. 2(22)(E) SHOULD NOT BE APPLIED AND WHY SUCH AMOUNT SHOULD NOT BE CONSIDERED AS DEEMED DIVIDEND IN HIS HAND . ASSESSEE REPLIED BY FILING A COPY OF RENTAL AGREEMENT BETWEEN THE ASSESSEE AND THE SAID COMPANY AND ALSO A CASH FLOW STATEMENT AND STATEMENT OF AFFAIRS. AS PER ASSESSEE, LOAN WAS RAISED BY HIM BY PLEDGING HIS PROPERTY AND SUCH LOAN AMOUNT WAS UTILIZED B Y THE COMPANY FOR ITS BUSINESS PURPOSES. AS PER ASSESSEE , THE LOANS WERE REPAID FROM HIS INDIVIDUAL ACCOUNT. HOWEVER, ASSESSING OFFICER WAS NOT IMPRESSED. ACCORDING TO HIM, THERE WAS NOTHING TO PROVE THAT LOANS RAISED WERE UTILIZED BY THE COMPANY. HE TH EREFORE APPLIED SEC. 2(22)(E) OF THE ACT AND MADE AN ADDITION ` 3,98,059/ - . 3. APPEAL OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS NOT SUCCESSFUL. AS PER LD. CIT(A) THE TRANSACTIONS IN THE LEDGER ACCOUNT OF THE ASSESSEE IN THE COMPANY CLEARLY SHOWED THAT SAID ITA . 1475 /MDS/ 11 3 COMPANY HAD ADVANCED MONEY TO THE ASSESSEE AND LATER SUCH AMOUNTS WERE RETURNED BY THE DIRECTOR. THERE WAS NOTHING IN SUCH LEDGER TO SHOW THAT ASSESSEE HAD OBTAINED ANY LOANS FROM THE BANK, WHICH WAS ADVANCED BY HIM TO THE ASSESSEE COMPANY. IN THIS VIEW OF THE MATTER, HE CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. NOW BEFORE US, LD. A.R STRONGLY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMITTED THAT THERE WAS A RUNNING LEDGER ACCOUNT IN THE NAME OF THE ASSESSEE IN THE BOOKS OF M/S. KONGU PRINT PACK PVT. LTD. THEREFORE, ACCORDING TO HIM SEC.2(22)(E) COULD NOT HAVE BEEN APPLIED. PER CONTRA LD. D.R. SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 5. WE HAVE PERUSED THE ORDERS, HEARD THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUG H THE PERSONAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. KONGU PRINT PACK PVT. LTD. RENT WAS DUE FROM THE SAID COMPANY TO THE ASSESSEE. THERE WAS AN OPENING DEBIT BALANCE OF ` 7,72,809.84 . THE ACCOUNT WAS A CONTINUING ONE, WITH TRANSACTIONS BOTH WA YS. A T THE END OF THE YEAR, THE BALANCE CAME DOWN TO ` 1,67,858.21. S UBMISSION OF ASSESSEE WAS THAT HE HAD GIVEN A COLLATERAL AS SECURITY, HIS OWN ITA . 1475 /MDS/ 11 4 IMMOVABLE PROPERTIES FOR LOANS RAISED BY THE COMPANY HAS NOT BEEN REBUTTED BY ANY OF THE AUTHORITIES BEL OW . WHEN THE COMPANY HAD RAISED THE LOANS USING THE SECURITY OF THE ASSESSEE AND PLEDGING THE PROPERTY OF THE ASSESSEE, IT DEFINITELY MEANS THAT SUCH LOANS ALSO HAVE A BEARING WHILE CONSIDERING APPLICATION OF SEC. 2(2 2)(E) OF THE ACT. THERE IS NO FI NDING BY ANY OF THE LOWER AUTHORITIES THAT THE S AID COMPANY WAS HAVING CUMULATIVE RESERVES, WHICH WARRANTED APPLICATION OF SEC. 2(22)(E) OF THE ACT. WE ARE, IN SUCH CIRCUMSTANCES, OF THE OPINION THAT ADDITION WAS NOT CALLED FOR. THE ADDITION STANDS DELETE D. 6 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AF TER CONCLUSION OF HEARING ON 28 TH FEBRUARY , 2013 . SD/ - SD/ - (S.S.GODARA) ( ABRAHAM P GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED 28 TH FEBRUARY , 2013 . K S SUNDARAM COPY TO: ASSESSEE / AO / CIT (A) / CIT / D.R. / GUARD FILE ITA . 1475 /MDS/ 11 5