Sushma Bansal, Mohali V. DCIT, C-6(1), Mohali

ITA 1494/CHANDI/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2985 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 22-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KUMAR KHANNA
• Assessee Lawyers: AKSHUN GUPTA
• Keywords: Deemed dividend
• Section: 2(22)(e); 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B CHANDIGARH BEFORE SHRI N.K.SAINI, VICE PRESIDENT & SHRI RAJPAL YADAV, VICE PRESIDENT ./ ITA NO. 1494/CHD/2019 / ASSESSMENT YEAR :2012-13 SMT. SUSHMA BANSAL, H.NO. 1708, PHASE-3B2, MOHALI. VS. THE DCIT, CIRCLE 6(1), MOHALI.. ./ PAN NO: AGWPB7593B / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI AKSHUN GUPTA, CA ! / REVENUE BY : SHRI ASHOK KUMAR KHANNA, ADDL. CIT ' # $ / DATE OF HEARING : 19.11.2020 %&'( $ / DATE OF PRONOUNCEMENT : 19 .11.2020 / ORDER PER RAJPAL YADAV, VP THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAI NST THE ORDER OF THE LD. CIT(A) DATED 04.10.2019 PASSED FOR ASSESSMENT YEAR 2012-13. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 307230/- OU T OF TOTAL ADDITION OF RS. 31,98,948/- WHICH WAS ADDED BY THE AO WITH THE AID OF SECTION 2(22)(E) OF THE INCOME TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE H AS FILED HER RETURN OF INCOME ON 19.07.2012 DECLARING A TAXABLE INCOME OF RS. 23,20,000/-. THIS RETURN WAS PROCESSED U/S 143 (1) OF THE ITA NO. 1494/CHD/2019 A.Y. 2012-13 PAGE 2 OF 6 INCOME TAX ACT. THEREAFTER, LD. AO HAS ISSUED A NO TICE U/S 148 OF THE INCOME TAX ACT TO REOPEN THE ASSESSMENT. TH E CASE OF THE AO IS THAT ASSESSEE HAS SHAREHOLDING OF 15.46% OF M /S SARASWATI AGRO CHEMICALS (INDIA) PVT. LTD. SHE HAD RECEIVED AN ADVANCE OF RS. 31,98,948/- FROM M/S SARASWATI AGRO CHEMICALS (INDIA) PVT. LTD. SINCE THE SHAREHOLDING OF THE ASS ESSEE WAS MORE THAN 10%, THEREFORE, IN THE OPINION OF THE AO, THIS ADVANCE DESERVES TO BE TREATED AS DEEMED DIVIDEND IN THE HA NDS OF THE ASSESSEE WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. THE LD. AO, ACCORDINGLY, MADE AN ADDITION OF RS. 31,98, 948/-. 4. DIS-SATISFIED WITH THE ADDITION, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEE R AISED THREE FOLD SUBMISSIONS, NAMELY ; I) THE AO HAS INADVERTENTLY CONSIDERED THE OPENING BALANCE IN THE ADVANCES II) THE ACTUAL ADVANCE TAKEN WITHIN SIX YEAR IS RS . 3,07,230/- ONLY. III) THE AO HAS APPLIED SECTION 36(1)(III) IN THE HANDS OF THE COMPANY FOR THIS ADVANCE. IN OTHER WORDS, THE AO SOUGHT TO DISALLOW INTEREST EXPENSES ON THIS ADVANCE IN THE HANDS OF THE COMPANY. IV) THE AO HAS OVERLOOKED THE FACT THAT ACTUAL AMO UNT OF ADVANCE RECEIVED DURING THE YEAR WAS ADJUSTED IN TH E FOLLOWING YEAR AGAINST DIVIDEND AND THUS COVERED BY EXCEPTION TO SECTION 2(22)(E) AND HAD OUGHT TO BE N OT CONSIDERED AS DEEMED DIVIDEND. 5. APART FROM THE ABOVE PROPOSITION, THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS WHICH HAS BEEN EXTRACTED BY THE LD. FIRST ITA NO. 1494/CHD/2019 A.Y. 2012-13 PAGE 3 OF 6 APPELLATE AUTHORITY IN PARAGRAPH NO. 6.2 OF THE IMP UGNED ORDER. THE ASSESSEE HAS TABULATED THE ADVANCE OUTSTANDING AS ON 31.03.2012 AND DEMONSTRATED THAT ONLY RS. 3,07,230/ - WAS ACTUALLY TAKEN DURING THIS YEAR. 6. THE LD. FIRST APPELLATE AUTHORITY THOUGH GONE T HROUGH THE RECORD CAREFULLY AND PROPOUNDED THE FUNDAMENTAL ASP ECTS OF THE CONDITIONS REQUIRED TO BE FULFILLED FOR TREATING AN Y ADVANCES AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT BUT FAILED TO CONSIDER THE THIRD FOLD OF THE CONTENTIONS RAISED BY THE APP ELLANT. THE LD. CIT(A) HAS HELD THAT LOAN AND ADVANCES PERTAINING T O EARLIER YEARS CANNOT BE ADDED TO THE LOANS AND ADVANCES REC EIVED DURING THIS YEAR FOR WORKING OUT THE ALLEGED DEEMED DIVIDE ND AND ACCORDINGLY, LD. FIRST APPELLATE AUTHORITY HAS CONF IRMED THE ADDITION OF RS. 3,07,230/-. 7. SHRI AKSHUN GUPTA, LD. COUNSEL FOR THE ASSESSEE WHILE IMPUGNING THE ORDERS OF REVENUE AUTHORITIES CONTEND ED THAT THOUGH AO HAS WORKED OUT THE DEEMED DIVIDEND OF RS. 31,98,948/- BUT THIS WAS AN AMOUNT WHICH CONTAINS O PENING BALANCE OF EARLIER YEARS. THE LD. CIT(A) HAS SCALE D DOWN THIS AMOUNT TO RS. 3,07,230/- WHICH IS THE ADVANCE TAKEN DURING THIS YEAR. THE AMOUNT EXCLUDED BY THE CIT(A) HAS N OT BEEN CHALLENGED BY THE REVENUE IN FURTHER APPEAL, THEREF ORE, THE SUBJECT MATTER OF THIS APPEAL IS, WHETHER THE SUM O F RS. 3,07,230/- CAN BE TREATED AS A DEEMED DIVIDEND IN T HE HANDS OF ITA NO. 1494/CHD/2019 A.Y. 2012-13 PAGE 4 OF 6 THE ASSESSEE OR NOT. 8. THE LD. COUNSEL, THEREAFTER, TOOK US THROUGH PA RA 2.6.1 OF THE CIT(A)S ORDER AND CONTENDED THAT ASSESSEE HERS ELF HAS NOT DENIED THE APPLICABILITY OF SECTION 2(22)(E) OF THE ACT. THE CONDITIONS WHICH ARE REQUIRED TO BE FULFILLED FOR A TTRACTING THIS SECTION ARE PARTLY AVAILABLE. THEREFORE, HE DID NO T WISH TO ARGUE ON THOSE ISSUES. HE STRAIGHT AWAY TOOK US THROUGH S UB-CLAUSE (3) OF SECTION 2(22)(E) AND CONTENDED THAT IF ANY DIVID END IS BEING PAID BY THE COMPANY IS SET OFF BY THE COMPANY AGAIN ST WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREAT ED AS A DIVIDEND WITHIN THE MEANING OF SUB-CLAUSE (E) TO TH E EXTENT TO WHICH IT IS SET OFF, THEN IT WILL NOT INCLUDE IN TH E ALLEGED DEEMED DIVIDEND. HE, THEREAFTER, TOOK US THROUGH PARAGRAP H NUMBER 6.2.5 ON PAGE 5 OF THE CIT(A)S ORDER AND SUBMITTED THAT THIS ADVANCE REQUIRES TO BE EXEMPTED UNDER SUB-CLAUSE (I II) OF SECTION 2(22). HE READ OVER THIS SUB-PARA OF THE S UBMISSIONS MADE BEFORE THE LD. FIRST APPELLATE AUTHORITY. ON THE STRENGTH OF THE ABOVE, HE SUBMITTED THAT ADDITION CONFIRMED BY THE CIT(A) BE DELETED. 9. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER S OF THE REVENUE AUTHORITIES. 10. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. SUB-CLAUSE (III) OF SECTION 2(22) HAS A DIRECT BEARING, THEREFORE, IT IS IMPERATIVE U PON US TO TAKE NOTE OF THIS SUB-CLAUSE WHICH READ AS UNDER : ITA NO. 1494/CHD/2019 A.Y. 2012-13 PAGE 5 OF 6 2.22 .. BUT DIVIDEND DOES NOT INCLUDE I) X X X II) X X X III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUB-CLAUSE (E), TO THE EXTENT TO WHICH IT IS SET OFF. 11. IN ORDER TO EXAMINE THE CLAIM OF THE ASSESSEE, WE TAKE NOTE OF THE SUBMISSIONS MADE BY HER BEFORE THE LD. FIRST APPELLATE AUTHORITY WHICH READ AS UNDER : (5) M/S SARASIVATI AGRO CHEMICALS INDIA PVT. LTD. HAS D ECLARED DIVIDEND ~@\ RS.4 PER SHARE AND HAVE DEPOSITED DIVIDEND DISTRIBUTION TAX. THE LEDGER ACCOUNTS OF THE FOLLOWING YEARS ALONGWITH COPIES OF CHALLAN OF DIVI DEND TAX AND ITR ARE ENCLOSED TO EVIDENT FACTS ABOUT DIVIDEND AND DIVIDEND DISTRIBUT ION, TAX. THE ADVANCE OF RS.307230/- STANDS ADJUSTED BY THE DIVIDEND AMOUNT OF RS. 1853320/-. THUS, HERE AGAIN TREATING THIS AMOUNT AS DEEMED DIVIDEND SHALL BE UNLAWFUL. ONCE AGAIN, DOUBLE TAXATION CANNOT BE THERE. SHAREHOLDER SHALL BE PAYI NG TAX ON DEEMED DIVIDEND AND COMPANY HAD PAID DIVIDEND DISTRIBUTION TAX. IN FACT , EXCEPTION (HI) TO SECTION 2(22) IS VERY CLEAR IN THIS REGARD. IT STATES DIVIDEND DO ES NOT INCLUDE ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS DIVIDEND WITHI N THE SUB-CLAUSE (E), TO THE EXTENT TO WHICH IT IS SO SET OFF. (6) IN VIEW OF THE ABOVE SUBMISSION, IT IS PRAYED THE IMPUGNED ADDITION OF RS.3198948/- MAY PLEASE BE DELETED. 12. ON DUE CONSIDERATION OF THE ABOVE FACTS THAT A SSESSEE THOUGH HERSELF DID NOT DISPUTE ABOUT HER SHAREHOLDI NG MORE THAN 10% IN M/S SARASWATI AGRO CHEMICALS (INDIA) PVT. LT D., SHE HAS ALSO NOT DISPUTED THAT SHE TOOK A LOAN OF RS. 3,07, 230/- DURING THIS YEAR AND THE CIT(A) HAS ALSO CONFIRMED THE ADD ITION TO THIS EXTENT ONLY. HER CASE IS THAT THE COMPANY HAS DIST RIBUTED THE DIVIDEND @ RS. 4/- PER SHARE AND HAS DEPOSITED DIVI DEND DISTRIBUTION TAX. THIS AMOUNT OF RS. 3,07,230/- HA S BEEN ADJUSTED WITH THE DIVIDEND AMOUNT DISTRIBUTED BY TH E COMPANY, ITA NO. 1494/CHD/2019 A.Y. 2012-13 PAGE 6 OF 6 THEREFORE, WITHIN THE MEANING OF SUB-CLAUSE (3) OF SECTION 2(22) THIS ADJUSTED AMOUNT IS TO BE EXCLUDED FROM THE DEE MED DIVIDEND UNDER SUB-CLAUSE (E) OF SECTION 2(22). A PERUSAL OF THE IMPUGNED ORDER OF LD. FIRST APPELLATE AUTHORITY WOU LD INDICATE THAT THIS ASPECT HAS NOT BEEN CONSIDERED BY THE LD. CIT(A). WE FIND FORCE IN THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE AND ALLOW THE APPEAL OF THE ASSESSEE. THE ADDITION CON FIRMED BY THE CIT(A) IS DELETED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON 19 TH NOVEMBER,2020. SD/- SD/- ( N.K. SAINI) ( RAJPAL YADAV) / VICE PRESIDENT / VICE PRESIDENT DATED : 19 TH NOVEMBER,2020. POONAM &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 5# / GUARD FILE &) ' / BY ORDER, 6 ! / ASSISTANT REGISTRAR