ITO, Bangalore V. Shri. Debashish Mitra, Bangalore

ITA 1533/BANG/2010

• Counselvise Citation: 153321114 RSA 2010
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-11-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 29-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P H NARGUNDKAR
• Keywords: Deemed dividend
• Section: 143(3); 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N.K SAINI, ACCOUNTANT MEMBER AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1533 &1534/BANG/2010 (ASST. YEARS 2004-05 & 2005-06) THE INCOME-TAX OFFICER, WARD-11(1), BANGALORE. . APPELLANT VS. SHRI DEBASHISH MITRA, 369, 8 TH A MAIN, 4 TH BLOCK, KORAMANGALA, BANGALORE-35. . RESPONDENT APPELLANT BY : SHRI P.H NARGUNDKAR RESPONDENT BY : NONE DATE OF HEARING : 21-11-2011 DATE OF PRONOUNCEMENT : 14 -12-2011 O R D E R PER SMT. P MADHAVI DEVI, JUDICIAL MEMBER THESE APPEALS ARE FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEARS ARE 2004-05 AND 2005-06. THE APPE ALS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) - I, ITA NO.1533 & 1534/B/10 2 BANGALORE DATED 12.10.2010. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S 147 OF THE OF THE INCOM E-TAX ACT, 1961. 2. IN BOTH THE APPEALS, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.10 LAKHS AND RS.72,12,700/- FOR THE ASST. YEARS 2004-05 AND 2005-06 RESPECTIVEL Y MADE BY THE AO U/S 2(22)(E) OF THE INCOME-TAX ACT ON ACCOUNT OF DE EMED DIVIDEND. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND ALSO A DIRECTOR IN A COMPANY CALLED M/S CALYPSO FOODS PVT. LTD. HE IS THE MANAGING DIRECTOR OF THE COMPANY AND ALSO A BENEFICIAL OWNER OF SHARES HAVING NOT LESS THAN 10% OF THE VOT ING POWER. DURING THE ASST. PROCEEDINGS U/S 143(3) READ WITH S EC. 147 OF THE ACT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA D RECEIVED AN ADVANCE OF RS.10 LAKHS DURING THE FINANCIAL YEAR 20 03-04 AND RS.72,12,700/- DURING THE FINANCIAL YEAR 2004-05. T HEREFORE, ASSESSEES EXPLANATION AS TO WHY THE SAID AMOUNT SH OULD NOT BE CONSIDERED AS DEEMED DIVIDEND WITHIN THE MEANING OF SEC. 2(22)(E) OF THE INCOME-TAX ACT WAS CALLED FOR AND THE ASSESSEE SUBMITTED ITS CONTENTION STATING THAT THE LOAN RECEIVED BY THE AS SESSEE WAS FOR THE PURPOSE OF ACQUISITION OF SHARES OF THE COMPANY AND IT IS A MERE BOOK ITA NO.1533 & 1534/B/10 3 ENTRY ONLY AND THUS, THE PROVISIONS OF SEC. 2(22)(E ) ARE NOT APPLICABLE AS HELD BY THE HONBLE HIGH COURTS OF BOMBAY AND MADRAS IN THE CASES OF CIT VS. JAMNADAS KHIMJI KOTHARI, 92 ITR 10 5 AND GOVINDRAJULU NAIDU VS, CIT, 90 ITR 13 RESPECTIV ELY. IT WAS FURTHER SUBMITTED THAT EVEN IF IT IS TO BE CONSIDER ED AS DEEMED DIVIDEND, THEN THE LOANS AND ADVANCES SHOULD BE RE STRICTED TO THE EXTENT OF ACCUMULATED PROFITS ONLY. 4. THE LEARNED AO WAS HOWEVER NOT CONVINCED WITH TH E CONTENTION OF THE ASSESSEE AND OBSERVED THAT THE AS SESSEE HELD MORE THAN 10% OF THE SHARES AND VOTING POWER OF THE COMP ANY AND, THEREFORE, THE ENTIRE AMOUNT IS TO BE DEEMED AS DIV IDEND U/S 2(22)(E) OF THE INCOME-TAX ACT, AS THE ACCUMULATED PROFITS O F THE COMPANY AVAILABLE FOR THE YEAR ENDING WAS THE MUCH MORE THA N LOAN ADVANCED TO THE ASSESSEE. HE ACCORDINGLY MADE THE ADDITION. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A). THE CIT(A) AFTER CONSIDERING THE ASSESSEES CONTENT IONS HELD THAT THE LOANS AND ADVANCES ARE TO BE CONSIDERED AS DEEMED D IVIDEND. U/S 2(22)(C) OF THE ACT. HOWEVER AS REGARDS THE QUESTI ON AS TO WHETHER THE ENTIRE SUM ADVANCED IS TO BE CONSIDERED AS DEEM ED DIVIDEND OR ITA NO.1533 & 1534/B/10 4 NOT, HE HELD THAT FROM EXPLANATIONS (2) TO SEC. 2(2 2)(E) OF THE ACT, THE ACCUMULATED PROFITS SHALL INCLUDE ALL PROFITS OF TH E COMPANY UP TO THE DATE OF PAYMENT. HE, THEREFORE DIRECTED THE AO TO COMPUTE THE PROFIT UP TO THE DATE OF PAYMENT OF LOAN IN THE RESPECTIVE YEARS TO SEE WHETHER THE ENTIRE ADDITION OF RS.10 LAKHS AND RS. 72,12,700 FOR THE ASST. YEARS 2004-05 AND 2005-06 RESPECTIVELY IS JUS TIFIED OR NOT. 6. AGGRIEVED BY THIS DIRECTION OF THE CIT(A) TO THE AO , THE REVENUE IS IN APPEAL BEFORE US. 7. IN SPITE OF SERVICE OF NOTICE, NONE APPEARED FOR THE ASSESSEE. AFTER HEARING THE LEARNED DR EX-PARTE QUA THE ASSES SEE, WE FIND THAT THE CIT(A) HAS PROPERLY APPRECIATED THE LEGAL POSIT ION AND HAS GIVEN A DIRECTION TO THE AO IN ACCORDANCE WITH LAW. AS PER EXPLANATION (2) TO SEC. 2(22)(E), THE ACCUMULATED PROFITS SHALL INC LUDE ALL PROFITS UP TO THE DATE OF PAYMENT OF LOAN. THE CIT(A) HAS ONLY D IRECTED THE AO TO VERIFY THE DETAILS AND ALSO TO COMPUTE THE PROFIT U P TO THE DATE OF PAYMENT AND THEN CONSIDER THE PROFITS AVAILABLE UP TO THE DATE OF PAYMENT ONLY TO BE DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF T HE CIT(A) WHICH IS ITA NO.1533 & 1534/B/10 5 IN ACCORDANCE WITH LAW. WE UPHOLD THE SAME. HENCE, REVENUES APPEALS ARE ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DEC, 2011. SD/- SD/- (N.K SAINI) (P MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 14/12/2011 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.