Renuka Kumar, CHENNAI V. ACIT, CHENNAI

ITA 1590/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4277 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YAMUNA
• Assessee Lawyers: S SRIDHAR
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1590/MDS/2016 ' (' / ASSESSMENT YEAR : 2009-10 SMT. RENUKA KUMAR, 6, HABIBULLAH AVENUE, 3 RD STREET, CHENNAI - 600 006. PAN : ALUPK 1386 L V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 4(4), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE ,-*+ . / / RESPONDENT BY : SMT. YAMUNA, JCIT 0 . 1$ / DATE OF HEARING : 09.05.2017 2!( . 1$ / DATE OF PRONOUNCEMENT : 22.06.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI , DATED 29.03.2016 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2 I.T.A. NO.1590/MDS/16 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ADDITION OF ` 3 CRORES UNDER SECTION 2(22)(E) OF THE INCOME-TAX A CT, 1961 (IN SHORT 'THE ACT'). 3. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSEE IS A DIRECTOR IN MARTECH PERIPHER ALS PVT. LTD., HOLDING 99% OF THE SHARES. FOR THE PERIOD 01.04.20 08 TO 31.03.2009, AN OUTSTANDING BALANCE OF ` 3 CRORES WAS DUE TO MARTECH PERIPHERALS PVT. LTD. FROM THE ASSESSEE. A CCORDING TO THE LD. COUNSEL, A DEBIT SHOULD HAVE BEEN MADE FROM CUR RENT ACCOUNT OF SHRI SHARAD KUMAR. HOWEVER, INADVERTENTLY IT WAS D EBITED TO THE ACCOUNT OF THE ASSESSEE. THEREFORE, ACCORDING TO T HE LD. COUNSEL, THE MONEY INADVERTENTLY DEBITED TO THE ACCOUNT OF T HE ASSESSEE CANNOT BE A REASON FOR HOLDING THAT THERE WAS DEEME D DIVIDEND. 4. REFERRING TO THE ASSESSMENT ORDER, MORE PARTICUL ARLY PAGE 3, THE LD.COUNSEL SUBMITTED THAT THE INSTRUCTION OF SH RI SHARAD KUMAR, THE MANAGING DIRECTOR, WAS EXTRACTED BY THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER. THIS CANNOT BE IGNORED BY TH E ASSESSING OFFICER WHILE COMPUTING THE TAXABLE INCOME. AT THE BEST, ACCORDING TO THE LD. COUNSEL, THE PAYMENT MIGHT HAVE BEEN MAD E FOR THE BENEFIT OF SHRI SHARAD KUMAR AND HE ALSO REPAID THE AMOUNT TO THE 3 I.T.A. NO.1590/MDS/16 COMPANY, THEREFORE, NO PART OF AMOUNT HAS TO BE CON STRUED AS DEEMED DIVIDEND IN THE HANDS OF THE PRESENT ASSESSE E. THE LD.COUNSEL FURTHER SUBMITTED THAT THE ABOVE SAID SU M OF ` 3 CRORES IS REPAYMENT OF LOAN BY M/S MARTECH PERIPHERALS PVT . LTD. TO SHRI SHARAD KUMAR THROUGH THE PRESENT ASSESSEES ACCOUNT . THERE WAS A JOURNAL ENTRY IN THE LEDGER OF M/S MARTECH PERIPH ERALS PVT. LTD. IN THE ACCOUNT OF SMT. RENUKA KUMAR ON 07.03.2009. TH IS FACTUAL ASPECT HAS BEEN IGNORED BY THE ASSESSING OFFICER SI MPLY OBSERVING THAT IT IS NOT ACCEPTABLE. WHEN THE BOOKS OF ACCOU NT CLEARLY DEMONSTRATE THAT THERE WAS LEDGER TRANSFER, ACCORDI NG TO THE LD. COUNSEL, THE ASSESSING OFFICER CANNOT IGNORE THE SA ME SO LIGHTLY. 5. ON THE CONTRARY, SMT. YAMUNA, THE LD. DEPARTMENT AL REPRESENTATIVE, SUBMITTED THAT M/S MARTECH PERIPHER ALS PVT. LTD. PRESENTED A CHEQUE ON 06.03.2009 IN FAVOUR OF THE P RESENT ASSESSEE AND THE CHEQUE WAS REALIZED IN THE ACCOUNT OF THE ASSESSEE IN KOTAK MAHINDRA BANK ON 07.03.2009. REF ERRING TO THE CONTENTION OF THE ASSESSEE THAT THE PAYMENT WAS SUP POSED TO BE MADE BY DEBITING CURRENT ACCOUNT OF SHRI SHARAD KUM AR, THE LD. D.R. SUBMITTED THAT THE AMOUNT WAS IN FACT DEBITED TO THE ACCOUNT OF THE PRESENT ASSESSEE. THE LD. D.R. SUBMITTED THAT EVERY ENTRY IN 4 I.T.A. NO.1590/MDS/16 THE BOOKS OF ACCOUNT WERE MADE CAREFULLY, THEREFORE , THE ASSESSEE NOW CANNOT CLAIM THAT INSTEAD OF DEBITING TO SHRI S HARAD KUMARS ACCOUNT, IT WAS DEBITED IN THE ACCOUNT OF THE ASSES SEE. 6. ON A QUERY FROM THE BENCH THAT WHEN THE INSTRUCT IONS WERE ISSUED SAID TO BE ISSUED BY SHRI SHARAD KUMAR TO DE BIT HIS ACCOUNT AND ISSUE CHEQUE IN FAVOUR OF THE ASSESSEE, HOW IT CAN BE DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE, THE LD. D.R. SUBMITTED THAT THE AMOUNT HAS BEEN INVESTED BY THE ASSESSEE, THERE FORE, IT CANNOT BE SAID THAT THE PAYMENT WAS MADE TO THE MANAGING D IRECTOR SHRI SHARAD KUMAR, HENCE THE ASSESSING OFFICER HAS RIGHT LY REJECTED THE EXPLANATION OF THE ASSESSEE. ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HAS RIGHTLY BROUGHT THE PAYMENT O F ` 3 CRORES FOR TAXATION AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEES ACCOUNT WAS DEBITED WITH A SUM OF ` 3 CRORES. THE ASSESSEE AND SHRI SHARAD KUMAR ARE SHAREHOLDERS. IN FACT, THE A SSESSEE WAS HOLDING 99% SHARES. SHRI SHARAD KUMAR IS THE MANAG ING DIRECTOR. FROM THE INSTRUCTION, WHICH WAS REPRODUCED AT PAGE 3 OF THE ASSESSMENT ORDER, IT IS OBVIOUS THAT SHRI SHARAD KU MAR INSTRUCTED 5 I.T.A. NO.1590/MDS/16 ONE SHRI SENTHIL KUMAR TO DEBIT HIS ACCOUNT AND ISS UE CHEQUE IN FAVOUR OF THE PRESENT ASSESSEE FOR A SUM OF ` 3 CRORES. THEREFORE, IT IS OBVIOUS THAT INSTRUCTION WAS ISSUED BY SHRI SHAR AD KUMAR FOR WHOSE BENEFIT THE AMOUNT WAS PAID TO SMT. RENUKA KU MAR, THE PRESENT ASSESSEE. THE QUESTION ARISES FOR CONSIDER ATION IS WHEN SHRI SHARAD KUMAR, THE MANAGING DIRECTOR, INSTRUCTE D TO DEBIT HIS ACCOUNT AND PAY THE AMOUNT TO SMT. RENUKA KUMAR, CA N THERE BE ADDITION IN THE HANDS OF THE PRESENT ASSESSEE? THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE AMOUNT WAS PAI D AS PER INSTRUCTION OF SHRI SHARAD KUMAR, THE MANAGING DIRE CTOR, AT THE BEST, WE CAN SAY THE PAYMENT WAS MADE FOR THE BENEF IT OF SHRI SHARAD KUMAR AND NOT FOR THE PRESENT ASSESSEE. THE REFORE, THERE CANNOT BE ANY ADDITION IN THE HANDS OF THE ASSESSEE . 8. MERELY BECAUSE THE ASSESSEE MADE INVESTMENT BY U SING THE FUNDS RECEIVED FROM COMPANY, IT CANNOT BE CONSTRUED THAT THE ASSESSEE HAS TAKEN ADVANTAGE FROM THE COMPANY. SHR I SHARAD KUMAR HAPPENS TO BE THE MANAGING DIRECTOR, HIS ACCO UNT OUGHT TO HAVE BEEN DEBITED. UNFORTUNATELY, INSTEAD OF DEBIT ING SHRI SHARAD KUMARS ACCOUNT, THE ACCOUNT OF THE PRESENT ASSESSE E WAS DEBITED. THAT CREATED CONFUSION IN THE MINDS OF THE ASSESSIN G OFFICER. THIS 6 I.T.A. NO.1590/MDS/16 TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CLAI M OF THE ASSESSEE THAT INSTEAD OF DEBITING SHRI SHARAD KUMARS ACCOUN T, THE ACCOUNT OF THE ASSESSEE WAS DEBITED APPEARS TO BE BONAFIDE, TH EREFORE, THE OUTSTANDING AMOUNT OF ` 3 CRORES CANNOT BE CONSTRUED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. HENCE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDERS OF THE AUTHORITIES BELO W. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET AS IDE AND THE ADDITION OF ` 3 CRORES IS DELETED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 22 ND JUNE, 2017 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 22 ND JUNE, 2017. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-8, CHENNAI 4. PRINCIPAL CIT, CHENNAI-4, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.