A.Palanisamy, CHENNAI V. ITO, Tiruppur

ITA 1607/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73629 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: R KUMAR
• Keywords: Depreciation; Deemed to accrue or arise in india; Additional evidence; Deemed dividend
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI (BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ) .. I.T.A. NO.1607 /MDS/13 ASSESSMENT YEAR : 2007-08 A.PALANISAMY, 31,MAIN ROAD, AVINASHI 641 654. PAN : AFTPP 2167 D (APPELLANT) V. INCOME TAX OFFICER, WARD I (3), TIRUPUR. (RESPONDENT) APPELLANT BY : SHRI R.KUMAR, ADVOCATE RESPONDENT BY : SHRI S.DAS GUPTA, JCIT, D.R DATE OF HEARING : 12.12.13 DATE OF PRONOUNCEMENT : 17.01.14 O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A) DATED 3 1.05.2013 IN ITA NO.178/10-11 PASSED UNDER SECTIONS 147, 143(3 ), READ WITH SECTION SEC. 250 OF THE ACT. ITA NO.1607/MDS/13 2 2. THE ASSESSEE HAS RAISED TEN ELABORATE GROUNDS I N HIS APPEAL, HOWEVER, THE CRUXES OF THE ISSUE ARE THAT:- (I) THE LD. CIT ERRED BY CONFIRMING THE ADDITION MA DE BY THE LD. ASSESSING OFFICER FOR `. 16,20,000/- AS DEEMED DIVIDEND U/S. 2 (22)(E) OF THE ACT WITHOUT CONSIDERING THE BUSINESS NEXUS OF AGREEMENT FOR SALE DATED 01.03.2006 FOR PURCHASE OF LAND BY THE COMPANY. (II) THE LD. ASSESSING OFFICER AND LD. CIT(A) HAD ERRED IN ARRIVING AT THE ACCUMULATED PROFIT OF THE COMPANY AT `. 2,79,92,304/- BECAUSE THERE WOULD BE NO ACCUMULATIVE PROFIT IF THE DEPREC IATION IS CALCULATED UNDER THE INCOME TAX ACT INSTEAD OF THE COMPANIES A CT AS SHOWN IN THE STATEMENT OF ACCOUNTS OF THE COMPANY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL, RESIDENT IN INDIA, ENGAGED IN THE BUSIN ESS OF BUS TRANSPORT AND REAL ESTATE. THE ASSESSEE FILED HIS RETURN OF INCOME ON ITA NO.1607/MDS/13 3 01.10.2007 DISCLOSING AN INCOME OF `. 19,580/- WHICH WAS PROCESSED U/S. 143(1) OF THE ACT . SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S. 147 R.W. S 143(3) OF THE ACT WHEREIN LD. ASSESSING OFFICER MADE AN ADDITION TOWARDS DEEMED INCOME FOR `. 16,20,000/- INVOKING SEC.2(22)(E) OF THE ACT. THE ASSESSEE HAD SUBMITTED BEFORE THE LD. ASSESSING OFF ICER THAT HE HAD ENTERED INTO AN SALE AGREEMENT WITH M/S.VISHNUKUMAR TRADERS PVT LTD., (VKTPL) FOR THE SALE OF AGRICULTURAL LAND SI TUATED AT SF.NO.2 PUDHUPALAYAM VILLAGE, AVINASHI AND THEREBY RECEIVED THE SUM OF `. 16,20,000 AS ADVANCE. THEREFORE, IT WAS SUBMITTED T HAT THIS AMOUNT CANNOT BE TREATED AS LOAN RECEIVED FROM THE COMPANY FOR INVOKING SEC.2(22)(E) OF THE ACT. LD. ASSESSING OFFICER RE JECTED THE SUBMISSION OF THE ASSESSEE BY OBSERVING AS UNDER:- 1) THIS ARGUMENT WAS NEVER PUT FORTH AT ANY TIME IN THE COURSE OF THE SCRUTINY PROCEEDINGS IN THE CASE OF THE COMPANY. H ENCE, THIS ONLY APPEARS TO BE AN AFTERTHOUGHT TO COVER UP THE TRANSACTION WHICH C LEARLY FALLS WITHIN THE MISCHIEF OF SEC.2(22)(E). 2) THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BO OKS OF THE COMPANY DOES NOT BEAR ANY NARRATION WHATSOEVER INDICATING THAT THE P AYMENT IS ADVANCE FOR PURCHASE OF LAND. ITA NO.1607/MDS/13 4 3) THE PURPORTED SALE AGREEMENT IS NOT REGISTERE D AND THEREBY LACKS EVIDENTIARY VALUE. 4). IN THE PURPORTED AGREEMENT, THERE IS AN ENDO RSEMENT DATED 28.11.2009 THAT THE AGREEMENT IS CANCELLED SINCE THE LAND IS TO BE ACQUIRED BY THE HIGHWAYS DEPARTMENT. THE ADVANCE IS AGREED TO BE REPAID IN INSTALLMENTS. FROM THE FIELD INFORMATION, IT IS GATHERED THAT THE PROCESS OF ACQ UISITION OF THE LANDS IN THE VICINITY OF THE SUBJECT LAND WAS INITIATED YEARS AG O AND IT IS NOT A RECENT DEVELOPMENT AS MADE OUT BY THE ASSESSEE. THEREAFTER, FOLLOWING THE DECISION LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF LD. CIT VS.P K ABU BACKE R [2003] 259 ITR 509 (MDS.) LD. ASSESSING OFFICER INVOKED THE SEC.2 (22)(E) OF THE ACT AND MADE ADDITION IN THE HANDS OF THE ASSESSEE `. 16,20,000/- AS DEEMED DIVIDEND. THE LD. CIT(A) ALSO FOLLOWED THE DECISION OF THE LD. ASSESSING OFFICER FOR THE SAME REASONS POINTED OUT BY THE LD. ASSESSING OFFICER. 4. BEFORE US, THE LD. A.R. REITERATED HIS SUBMISSI ONS BEFORE THE REVENUE ON EARLIER OCCASIONS AND FOR THE FIRST TIME POINTED OUT THAT THE COMPANY FROM WHICH THE ASSESSEE HAD TAKEN ADVAN CE DID NOT HAVE ACCUMULATED PROFITS WHEN THE PROFITS ARE COMPU TED BY CLAIMING ITA NO.1607/MDS/13 5 DEPRECIATION IN ACCORDANCE WITH THE INCOME TAX ACT. THE LD. A.R. ALSO SUBMITTED THAT THE COMPUTATION MADE BY THE AUD ITOR OF THE COMPANY BEFORE US THOUGH THEY WERE NOT PRODUCED BEF ORE THE REVENUE ON EARLIER OCCASIONS. LD. D.R VEHEMENTLY A RGUED BY STATING THAT THE ADDITIONAL EVIDENCE MAY NOT BE TAKEN ON RE CORD AND FINDINGS OF THE REVENUE MAY BE CONFIRMED. 5. AFTER HAVING HEARD BOTH SIDES AND PERUSING THE MATERIALS ON RECORD PLACED BEFORE US, WE ARE OF THE CONSIDERED V IEW THAT THE CLAIM OF THE LD. A.R. REQUIRES TO BE EXAMINED WITH RESPEC T TO THE ISSUE OF ACCUMULATED PROFITS OF THE COMPANY. THE LD. A.R. PL ACED THE DECISION OF THIS BENCH IN ITA NO.966/MDS./2013 DATED 17.10.2 013 WHEREIN IT WAS HELD THAT NORMAL CHARGE OF DEPRECIATION AS PER INCOME TAX ACT IS REQUIRED TO BE CONSIDERED FOR CALCULATING ACCUMU LATED PROFITS FOR PURPOSE OF DETERMINATION OF DEEMED DIVIDEND U/S. 2( 22)(E), FOLLOWING THE DECISION OF LD. CIT VS. YASIN HOTELS (P) LTD . REPORTED IN 121 TTJ(CHENNAI) 713. THEREFORE, IN THE INTEREST OF JUSTICE WE REMIT THE ISSUE BACK TO THE FILE OF THE LD. ASSESSING OFF ICER FOR FRESH CONSIDERATION TO DECIDE THE ISSUE IN THE LIGHT OF T HE ABOVE DECISIONS OF ITA NO.1607/MDS/13 6 THE TRIBUNAL. SINCE THE MATTER IS SENT BACK, WE R ESTRAINED FROM ADDRESSING THE OTHER GROUND RAISED BY THE ASSESSEE AT THIS STAGE AND THE ASSESSEE IS AT LIBERTY TO RAISE THE GROUND AT A NY STAGE LATER. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 17 TH JANUARY, 2014 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (A .MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI. DATED THE 17 TH JANUARY, 2014 . K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE