JCIT (OSD) CEN. CIR-XX, KOLKATA, Kolkata V. M/s G. P. Property Develpers Pvt. Ltd., Kolkata

ITA 1515/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99882 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 19-10-2012
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Keywords: Additional evidence; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI WASEEM AHMED , AM] I.T.A NO.1515/KOL/2012 ASSESSMENT YEAR: 2007-08 JOINT COMMISSIONER OF INCOME-TAX (OSD) VS. M/S. G. P. PROPERTY DEVELOPERS (P) LTD. C.C-XX, KOLKATA. (PAN: AACCG7587K) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 23.09.2015 DATE OF PRONOUNCEMENT: 16.10.2015 FOR THE APPELLANT: SHRI NIRAJ KUMAR, CIT, DR FOR THE RESPONDENT: SHRI RAVI TULSIYAN, FCA ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A), CENTRAL-III, KOLKATA IN APPEAL NO.145/CC-XX/CIT(A)C-III/11-12/KOL DATED 18. 07.2012. ASSESSMENT WAS FRAMED BY JCIT(OSD),CC-XX, KOLKATA U/S. 143(3)/153A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2007- 08 VIDE ITS ORDER DATED 16.12.2011. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY AO ON ACCOUNT OF LOANS AND ADV ANCES TREATING THE SAME AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. FOR THIS, REVEN UE HAS RAISED FOLLOWING FOUR GROUNDS: I. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. (CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,45,00,000/- U/S.2(22)(E BY ACCEPTI NG APPELLANTS SUBMISSION WITHOUT EXAMINING THE SAME OR WITHOUT GIVING OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE SAME THUS VIOLATING THE PROVISIONS OF RULE 46A(3) O F THE I.T. RULES . 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A) ERRED IN ADJUDICATING BY ADMITTING ADDITIONAL EVIDENCES WITHOUT RECORDING TH E REASONS FOR ADMISSION OF ADDITIONAL EVIDENCES IN WRITING AS PER THE PROVISIO N OF RULE 46A(2) OF THE I. T. RULES. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD, CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,45,00,000/- U/S.2(22)(E) BY ACCEPT ING APPELLANTS SUBMISSION WITHOUT GETTING IT EXAMINED THAT THE LOAN OR ADVANCE WAS I NTEREST BEARING ONE AND IN FACT THE ASSESSEE FAILED TO SUBMIT DETAILS OF THE LOAN OR AD VANCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,45,00,000/- U/S.2(22)(E) ON THE FA CTS WHICH WERE NOT THERE BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. 4. THAT THE DEPARTMENT PRAYS BEFORE THE HONBLE BEN CH THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THE ORDER OF THE AO BE RESTORED. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE TOOK A INTEREST BEARING LOAN OF RS.1.5 CR. FROM ARJUN ASSOCIATES PVT. LTD. ON 15.02.2007 @ 9.5 % FOR PURCHASE OF FLAT AT DELHI. THE 2 ITA NO.1515/K/2012 G. P. PROPERTY DEVELOPERS (P) LTD. AY 2007-08 AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE P ROVISIONS OF SECTION 2(22)(E) OF THE ACT BE NOT APPLIED AS, ACCORDING TO THE AO THIS LOAN IS A GRATUITOUS LOAN. THE ASSESSEE EXPLAINED BEFORE HIM THAT THIS IS AN INTEREST BEARI NG LOAN AND MOREOVER, THIS ASSESSEE IS NOT A SHAREHOLDER IN ARJUN ASSOCIATES PVT. LTD. HENCE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WILL NOT APPLY IN THIS CASE. BUT AO WAS NO T CONVINCED THE REPLY GIVEN BY ASSESSEE AND HE NARRATED THE FOLLOWING FACTS: 1. SMT. SUNITA KUMAR WAS OWNING 49.98% OF TOTAL S HARES IN BOTH THE COMPANIES. SHE WAS ALSO ONE OF THE DIRECTORS IN BOTH THE COMPANIES. 2. LOAN TRANSACTION DID NOT TAKE PLACE IN THE ORDIN ARY COURSE OF BUSINESS OF EITHER PARTY. LOAN WAS TAKEN BY THE ASSESSEE TO EARN INCOME FROM HOUSE PROPERTY, WHILE AS PER THE TAR OF M/S. ARJUN ASSOCIATES P. LTD. FORWARDING LOAN D ID NOT FORM A PART OF ITS BUSINESS. 3. LOAN WAS FORWARDED TO SRI ARJUN KUMAR, PROMOTER- DIRECTOR IN BOTH THE COMPANIES, AS AN ADVANCE FOR PURCHASE OF A HOUSE PROPERTY WHICH W AS NOT TRANSFERRED TO THE ASSESSEE DURING THE YEAR. 4. ENTIRE TRANSACTION WAS COLLUSIVE IN NATURE. SRI ARJUN KUMAR BEING ONLY SON OF SMT. SUNITA KUMAR & SRI NARESH KUMAR, THE OTHER PROMOTER -DIRECTOR WITH 49.98% SHAREHOLDING IN BOTH THE COMPANIES. HE, ACCORDINGLY, ASSESSED THE SUM OF RS.1.45 CR. AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE C IT(A). 4. THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER, THE PAPER BOOK PRODUCED BEFORE ME AND THE SUBMISSIONS FILED BY THE ASSESSEE. I FIND THAT SIN CE M/S. ARJUN ASSOCIATES HAD ADVANCED THE LOAN AT AN INTEREST RATE OF 9.5%, THE SAID LOAN IS OUTSIDE THE PURVIEW OF DEEMED DIVIDEND U/S. 2(22)(E) IN VIEW OF THE DECISION OF THE CALCUTTA HI GH COURT IN THE CASE OF PRADIP KUMAR MALHOTRA (SUPRA) BEING THE JURISDICTIONAL HIGH COUR T WHEREIN IT HAS BEEN HELD THAT IN THE CASE OF NON-GRATUITOUS LOAN, SECTION 2(22)(E) CANNO T APPLY SINCE SUCH LOAN IS GIVEN FOR THE BENEFIT OF THE LENDER COMPANY AND NOT FOR THE BENEF IT OF THE SHAREHOLDER. IN THIS CASE, SINCE INTEREST IS CHARGEABLE ON THE LOAN GIVEN BY M/S. AR JUN ASSOCIATES PVT. LTD. THE SAID LOAN IS CLEARLY A NON-GRATUITOUS LOAN AND IN VIEW OF THE DE CISION OF THE CALCUTTA HIGH COURT IN PRADIP KUMAR MALHOTRA (SUPRA), THE SAID LOAN IS OUT SIDE THE PURVIEW OF SECTION 2(22)(E) AND CANNOT BE TREATED AS DEEMED DIVIDEND. OTHERWIS E ALSO, THE SAID ADITION COULD NOT HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE SINCE THE AS SESSEE IS NOT A SHAREHOLDER OF THE LENDER COMPANY. DEEMED DIVIDEND CAN ONLY ARISE IN THE HAN DS OF THE SHAREHOLDER AND NOT ANY OTHER PERSON. THIS VIEW IS FULLY SUPPORTED BY THE DECISION OF THE DELHI HIGH COURT IN CIT VS. ANKITECH (P) LTD. & ORS. (242 CTR 129), DECISION OF THE BOMBAY SPECIAL BENCH OF THE ITAT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME-TAX V. BHAUMIK COLOUR P. LTD. (313 (AT) ITR 146, BOMBAY HIGH COURT IN THE CASE OF COMMISSIO NER OF INCOME-TAX V. UNIVERSAL MEDICARE PRIVATE LIMITED (324 ITR 263), ETC. AS CIT ED BY THE ASSESSEE IN ITS SUBMISSION . ON THE BASIS OF THE ABOVE, THE ADDITION MADE BY THE AO IS DELETED SINCE THE SAID AMOUNT CAN NEITHER BE TREATED AS DEEMED DIVIDEND NOR CAN ANY A DDITION ON THAT ACCOUNT BE MADE IN THE HANDS OF THE ASSESSEE. THEREFORE, THIS GROUND OF A PPEAL IS ALLOWED. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 3 ITA NO.1515/K/2012 G. P. PROPERTY DEVELOPERS (P) LTD. AY 2007-08 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS OF THE CASE THAT FOR P URCHASE OF FLAT BY ASSESSEE FROM SHRI ARJUN KUMAR IN DELHI WAS ARRANGED THROUGH A BANK LO AN FROM DEUTSCH BANK FOR RS.3 CR. OUT OF TOTAL CONSIDERATION OF RS. 4 CR. THIS FLAT WAS PURCHASED BY ASSESSEE TO LET OUT KEEPING IN VIEW THE MAIN OBJECT OF THE ASSESSEE COM PANY AS CONTAINED IN THE MEMORANDUM AND ARTICLES OF ASSOCIATION. OUT OF THE ABOVE RS.3 CR. LOAN BY BANK, A SUM OF RS. 1,57,20,227/- WAS DISBURSED DURING THE RELEVANT YEA R UNDER CONSIDERATION AND FOR MEETING OUT THE SHORTFALL ASSESSEE TOOK A LOAN OF RS.1.45 C R. FROM ARJUN ASSOCIATES PVT. LTD. THIS LOAN WAS ADVANCED BY ARJUN ASSOCIATES PVT. LTD. FOR INTEREST @ 9.5 %. THE ASSESSEE ALSO PAID INTEREST TO ARJUN ASSOCIATES PVT. LTD. DURING THE RELEVANT FY RELEVANT TO THIS AY FOR A SUM OF RS.1,69,829/-. ARJUN ASSOCIATES PVT. LTD. I S IN THE BUSINESS OF MONEY LENDING AS SPECIFIED IN THE MEMORANDUM & ARTICLES OF ASSOCIATI ON. THE ASSESSEE BEFORE AO AS WELL AS CIT(A) CLAIMED THAT THIS BEING A INTEREST BEARIN G LOAN IS A NON-GRATUITOUS LOAN AND NOT A GRATUITOUS LOAN AS HELD BY AO. EVEN THE ASSESSEE H AS PROVIDED SHAREHOLDING PATTERN OF THE ASSESSEE COMPANY AS WELL AS THE LENDER COMPANY ARJU N ASSOCIATES PVT. LTD. BEFORE THE AO AND BEFORE CIT(A) ALSO. NOW THE REVENUE HAS ALLEGE D THAT THE SHAREHOLDING PATTERN IS FILED FOR THE FIRST TIME BEFORE CIT(A) AND ON THE BASIS O F WHICH, THE CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE. WE FIND FROM THE ASSESSMENT ORDER, T O WHICH LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION, THAT THE SHAREHOLDING PATTERN W AS AVAILABLE BEFORE THE AO FROM WHERE HE CAME TO KNOW THAT SHRI NARESH KUMAR AND SMT. SUN ITA KUMAR IS HOLDING SHARE @ 49.98% EACH. THE RELEVANT SHAREHOLDING PATTERN REA DS AS UNDER: (I) M/S. G. P. PROPERTY DEVELOPERS P. LTD. (ASSESS EE-COMPANY) NAME OF THE SHAREHOLDER NO. OF SHARES HELD % 1. SRI NARESH KUMAR 2499 49.98 2. SMT. SUNITA KUMAR 2499 49.98 3. SRI ARJUN KUMAR 2 0.04 (II) M/S. ARJUN ASSOCIATES PVT. LTD. (DURING PY 200 6-07 UPTO 28.03.2007) NAME OF THE SHAREHOLDER NO OF SHARES HELD % 1. SRI NARESH KUMAR 1 0.1 2. SMT. SUNITA KUMAR 19811 99.8 3. SRI ARJUN KUMAR 1 0.1 ON AND FROM 29.03.2007, THE SHAREHOLDING WAS AS FOL LOWS: NAME OF THE SHAREHOLDER NO OF SHARES HELD % 1. SRI NARESH KUMAR 19811 49.998 2. SMT. SUNITA KUMAR 19811 49.99 3. SRI ARJUN KUMAR 1 0.004 4 ITA NO.1515/K/2012 G. P. PROPERTY DEVELOPERS (P) LTD. AY 2007-08 6. FROM THE ABOVE SHAREHOLDING PATTERN IT IS CLEAR THAT ASSESSEE COMPANY IS NOT A SHAREHOLDER OF THE LENDER COMPANY ARJUN ASSOCIATES PVT. LTD. AND IN FACT NEITHER OF THE TWO COMPANIES ARE REGISTERED SHAREHOLDERS OF EACH O THER. ONLY ONE SHAREHOLDER SMT. SUNITA KUMAR IS THE ONLY COMMON SUBSTANTIAL SHAREHOLDER OF THE TWO COMPANIES. FURTHER SHRI NARESH KUMAR AND SHRI ARJUN KUMAR IS THE COMMON SHA REHOLDER OF THE TWO COMPANIES BUT DOES NOT HAVING SHAREHOLDING EXCEEDING 10% IN THE L ENDER COMPANY ON THE DATE OF RECEIPT OF LOAN. IN VIEW OF THE ABOVE FACTS, IT IS EVIDENT LY CLEAR THAT ASSESSEE IS NOT A SHAREHOLDER IN ARJUN ASSOCIATES PVT. LTD., BEING THE LENDER COMPAN Y, HENCE THE PROVISIONS OF SECTION 2(22)(E) I.E. DEEMED DIVIDEND IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE, SINCE DEEMED DIVIDEND COULD BE ASSESSED ONLY IN THE HANDS OF THE PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF ANY OTHER PE RSON OTHER THAN A SHAREHOLDER. THIS VIEW OF OURS IS FORTIFIED BY THE DECISION OF SPECIA L BENCH OF THIS TRIBUNAL MUMBAI BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOUR PVT. LTD. (2009 ) 313 ITR 146 (AT) AND ALSO OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HOTEL HILLTOP (2009) 313 ITR 116 (RAJ.). 7. FURTHER, WE FIND THAT THIS LOAN GRANTED BY NARES H KUMAR & CO. PVT. LTD. WAS IN LIEU OF CHARGE OF INTEREST @ 9.5%, WHICH GOES TO CONFIRM THAT THE SAME IS A NON-GRATUITOUS LOAN AND IT IS FOR THE EARNING OF INTEREST BEING IN THE BUSINESS OF MONEY LENDING. THIS ISSUE IS ALSO COVERED BY HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF PRADIP KR. MALHOTRA 338 ITR 538. IN VIEW OF THE ABOVE, WE ARE OF THE CONSI DERED VIEW THAT THERE IS NO DOUBT THAT THIS LOAN TRANSACTION DOES NOT COME WITHIN THE PURV IEW OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT AND HENCE, CIT(A) HAS RIGHTLY DELETED THE A DDITION AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. 9. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16.10.2 015 SD/- SD/- (WASEEM AHMED) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 16TH OCTOBER, 2015 JD. SR. P.S 5 ITA NO.1515/K/2012 G. P. PROPERTY DEVELOPERS (P) LTD. AY 2007-08 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT JCIT(OSD), CC-XX, KOLKATA. 2 RESPONDENT M/S. G. P. PROPERTY DEVELOPERS (P) LTD ., 9B, WOOD STREET, KOL-16. 3 . THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .