Abid Rasool Khan, Hyderabad, Hyderabad V. DCIT, Circle-1(1), Hyderabad, Hyderabad

ITA 1636/HYD/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4259 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-09-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 05-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Keywords: Deemed dividend
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER I.T.A. NO. 1636/HYD/2016 ASSESSMENT YEAR: 2011-12 SHRI ABID RASOOL KHAN, HYDERABAD [PAN: AAUPK5038J] VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS, AR FOR REVENUE : SHRI K. RAVI KIRAN, DR DATE OF HEARING : 12-09-2018 DATE OF PRONOUNCEMENT : 10-10-2018 O R D E R PER S. RIFAUR RAHMAN, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)1, HYDERABAD, DATED 06-09-2016, FOR THE AY. 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DI RECTOR OF M/S. AK GLOBAL BUSINESS VENTURES PVT. LTD., FILED H IS RETURN OF INCOME ON 15-12-2011 FOR THE AY. 2011-12 DETERMIN ING THE TOTAL INCOME OF RS. 56,81,590/-. SUBSEQUENTLY, NOTICE WAS ISSUED U/S. 148 OF THE INCOME TAX ACT [ACT]. THE ASS ESSING OFFICER COMPLETED THE ASSESSMENT PROCEEDINGS U/S. 14 3 R.W.S. ITA NO. 1636/HYD/2016 :- 2 -: 147 ON 18-02-2015, DETERMINING THE TOTAL INCOME AT RS. 70,52,049/-. AGGRIEVED WITH THE ABOVE ASSESSMENT ORDE R, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE DULY U PHOLDING THE ORDER OF THE ASSESSING OFFICER BY STATING AS UNDER: AS PER SECTION 2(22)(E) IT IS VERY ESSENTIAL THAT THERE IS A LOAN / ADVANCE OR ANY PAYMENT HAS BEEN RECEIVED BY A PERSO N, WHERE HE IS HAVING MORE THAN 10% INTEREST IN THE SHAREHOLDING A ND THE COMPANY IS CLOSELY HELD. THE APPLICANT'S CASE FALLS IN THE SAME SCENARIO. NOT ONLY THE COMPANY IS A CLOSELY HELD, HAVING MORE THA N 10% SHAREHOLDING, CONTINUOUS FINANCIAL TRANSACTIONS IS CONDUCTED AND SUBMITTED BY THEM. THE APPLICANT HAS ACCEPTED THE FACT MONIES WERE REC EIVED BY THE ASSESSEE FROM THE PRIVATELY HELD COMPANY AND ALSO W ERE REPAID OR ADJUSTED TO THE COMPANY'S ACCOUNT. THIS GIVING AND TAKING OF FUNDS FROM THE COMPANY, ON THE WHOLE, TANTAMOUNT TO LOANS & ADVANCES. ONLY ISSUE IS REGARDING THE QUANTUM OF TRANSACTIONS /PAYMENT/LOAN. THE ASSESSING OFFICER HAS TAKEN RS.13,70,469 WHILE APPLICANT SAYS ITS NOMINAL TRANSACTION AND EFFECTIVE TRANSACTION A MOUNTING TO RS.3,12,000/-. THE APPLICANT HAS NOT MADE ANY RECON CILIATION STATEMENT REGARDING THIS. IT IS PERTINENT TO NOTE, THE BANK STATEMENT PROVIDED CONFIRM MANY TRANSACTIONS, THIS IS TO BE T AKEN IN LIGHT OF THAT APPLICANT IS MAJOR SHAREHOLDER, OTHERS BEING HIS FA MILY MEMBER. THE APPLICANT ACCEPTS THE FINANCIAL TRANSACTION, IN THI S BACKGROUND, THESE HAVE BEEN CORRECTLY TAKEN AS 'DEEMED DIVIDEND' BY T HE ASSESSING OFFICER. AS PER SECTION 8(A), THIS RECEIPT FROM THE COMPANY BECOMES IN NATURE OF DEEMED DIVIDEND, IS TAXABLE. RELIANCE IS PLACED ON: A. CIT V. K. SRINIVASAN [1963] 59 ITR 788 (MAD.), W HEREIN IT WAS HELD THAT PAYMENTS TOWARDS PERSONAL LIABILITIES OF SHARE HOLDER, COVERS NOT ONLY ADVANCES AND LOANS TO SHAREHOLDER BUT ANY OTHE R PAYMENTS BY THE COMPANY ON BEHALF OF OR FOR THE INDIVIDUAL SHAR EHOLDER, SUCH AS PAYMENTS OF SHAREHOLDER'S PERSONAL EXPENSES, INCOME -TAX DUES, INSURANCE PREMIUM, ETC., TO THE EXTENT OF THE ACCUM ULATED PROFITS OF THE COMPANY. ITA NO. 1636/HYD/2016 :- 3 -: B. ITO VS KALYAN M GUPTA (2007)111 TTJ(MUMBAI)1005 C. MRS. REKHA MODI V. ITO (2007) (13 SOT 512) D. M. AMARESWARA RAO V. DY.CIT (2016) 157 ITD 657 ( VISAKHA)(TRIB) 4. AGGRIEVED WITH THE ORDER OF LD.CIT(A), THE ASSESSE E PREFERRED THE PRESENT APPEAL BEFORE US RAISING THE FO LLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE HON'BLE CIT (A) IS ERRONEOUS I N LAW AS WELL AS FACTS OF THE CASE. 2. THE HON'BLE CIT(A) OUGHT TO HAVE HELD THAT THE A SSESSING OFFICER ERRED IN INITIATION OF PROCEEDINGS U/S.147 OF THE I T ACT AND THEREFORE THE SAME OUGHT TO HAVE BEEN QUASHED. 3. THE HON'BLE CIT(A) ERRED IN CONFIRMING THE CONCL USION OF THE ASSESSING OFFICER THAT THE AMOUNT OF RS.13,17,469/- CONSTITUTED DEEMED DIVIDEND U/S.2(22)(E) OF THE IT ACT AND THER EFORE, THE SAME IS LIABLE TO BE DELETED. 4. ANY OTHER GROUND WILL BE RAISED AT THE TIME OF H EARING. 4.1. GROUND NOS. 1 AND 4 ARE GENERAL IN NATURE. GRO UND NO. 2 IS NOT PRESSED. HENCE, GROUND NOS. 1, 2 & 4 ARE D ISMISSED AS NOT PRESSED/GENERAL IN NATURE. ONLY GROUND NO. 3 I S BEING ADJUDICATED HERE UNDER. 5. LD.AR BROUGHT TO OUR NOTICE AT PG. 11 OF THE PAPER BOOK, SUBMITTED BEFORE US THAT WHICH IS LEDGER EXTRACT OF THE TRANSACTIONS WITH ASSESSEE, MAINTAINED BY M/S. AK GLOBA L BUSINESS VENTURES PVT. LTD., (FORMERLY KNOWN AS M/S. A & K PROPERTY INVESTMENT PVT. LTD). AS PER THE LEDGER EXTRACT, THERE IS AN OPENING BALANCE OF RS. 48,38,154/- WHICH THE A SSESSEE ITA NO. 1636/HYD/2016 :- 4 -: OWES TO THE COMPANY AND THE CLOSING BALANCE OF RS. 13,70,469.47/- AT THE END OF THE ASSESSMENT YEAR, THE ASSESSEE OWES TO THE COMPANY. THE SAME CLOSING BALANC E AMOUNT WAS TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT BY THE ASSESSING OFFICER. CONSIDERING THE FACT THAT D URING THIS ASSESSMENT YEAR, THE ASSESSEE HAS NOT TAKEN ANY LOA N OR ADVANCES FROM THE COMPANY. HE SUBMITTED THAT ASSESSEE H AS REPAID THE ADVANCES WHICH WERE TAKEN IN THE PREVIOUS ASSESSMENT YEAR AND THE SAME WAS UTILISED FOR THE PURPO SE OF BUSINESS BY THE COMPANY. THEREFORE, IT CLEARLY INDIC ATES THAT THE ASSESSEE HAS NOT TAKEN ANY FRESH ADVANCES FROM THE COMPANY WHICH NECESSITATED THE ASSESSING OFFICER TO MAK E ADDITION U/S. 2(22)(E) OF THE ACT. THERE ARE CERTAIN TRANSACTIONS DURING THE YEAR WHICH IS NOTHING BUT REPAY MENTS OF ADVANCES. OTHER THAN THAT, THE ASSESSEE HAS NOT TAKEN ANY FRESH ADVANCES FROM THE COMPANY. IN THAT PROCESS, HE RELIED ON THE FOLLOWING CASE LAW: I. CIT VS. GAYATRI CHAKRABORTY [94 TAXMANN.COM 244] (CALCUTTA); II. ITO VS. S.V. MOHAN REDDY IN ITA NO. 483/HYD/2016 & C.O.NO. 32/HYD/2016, DT. 24-01-2018; 6. AT THE SAME TIME, LD.DR OBJECTED TO THE SUBMISSIONS O F THE LD.AR AND RELIED ON THE ORDERS OF THE REVENUE AUTH ORITIES. ITA NO. 1636/HYD/2016 :- 5 -: 7. CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD. WE NOTICED THAT NO DOUBT THE ASSESSEE HAS SUBSTANTIAL INTER EST IN THE COMPANY AND ALSO HAS TAKEN ADVANCES FROM THE COMPANY DURING THE PREVIOUS YEAR I.E., AY. 2010-11 TO THE EXTENT OF RS. 48,38,154/-. BUT DURING THIS ASSESSMENT YEAR, THE ASSESSEE HAS REPAID THOSE ADVANCES, BUT HAS NOT TAKE N ANY FRESH LOAN OR ADVANCES FROM THE COMPANY. IN TURN, THE ASSESSEE HAS REPAID THE ADVANCES TAKEN FROM THE COMPAN Y TO THE EXTENT OF RS. 34.68 LAKHS. THERE ARE CERTAIN TRANS ACTIONS IN THE LEDGER ACCOUNTS SUBMITTED BY THE ASSESSEE TO THE EX TENT OF RS. 3,12,000/-. WE NOTICED THAT ONE PAYMENT OF RS. 75,000/- WAS PAID TO MR. GOPINATH ARCHITECH HUDA HEIG HTS ON BEHALF OF THE ASSESSEE AND THERE ARE THREE PAYMENTS OF RS. 25,000/-, RS. 2,00,000/- AND RS. 10,000/- AS AMOUNT TRANSFERRED. THESE THREE PAYMENTS ARE FOLLOWED BY CERTA IN BANK TRANSFERS BY THE ASSESSEE TO THE COMPANY WHICH CAN BE TREATED AS FUNDS ADJUSTMENT AND CANNOT BE TREATED AS LOA N TAKEN BY THE ASSESSEE. ONLY ARCHITECT PAYMENT MADE BY THE COMPANY ON BEHALF OF THE ASSESSEE TO THE EXTENT OF RS. 75,000/- MAY BE TREATED AS ADVANCES, WHICH WILL FALL U/S. 2(22)(E). OTHERWISE, THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 13,17,469/- IS NOTHING BUT CLOSING BALANCE OF RUNNING ACCOUNT MAINTAINED BY THE COMPANY. THERE AR E NO FRESH LOANS OR ADVANCES TAKEN BY THE ASSESSEE DURING THIS ASSESSMENT YEAR. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 13,17,469/- CAN NOT BE TREATED AS DEEMED DIVIDEND AS THERE IS NO FRESH LOA N TAKEN BY THE ASSESSEE. IF AT ALL THE DEEMED DIVIDEND PROVISION CAN BE ITA NO. 1636/HYD/2016 :- 6 -: INVOKED, IT CAN BE ONLY TO THE EXTENT OF RS. 75,000/- . THEREFORE, THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2018 SD/- SD/- (P. MADHAVI DEVI) (S. RIF AUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT M EMBER HYDERABAD, DATED 10 TH OCTOBER, 2018 TNMM ITA NO. 1636/HYD/2016 :- 7 -: COPY TO : 1. SHRI ABID RASOOL KHAN, C/O. B. NARSING RAO & CO. , CHARTERED ACCOUNTANTS, PLOT NO. 554, ROAD NO. 92, J UBILEE HILLS, HYDERABAD. 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), HYD ERABAD. 3. CIT(APPEALS)-1, HYDERABAD. 4. PR.CIT-1, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.