AQUA PROOF WALL PLAST PVT. LTD. (IN THE MATTER OF GERARD VEIGAS FINVEST PVT. LTD. SINCE AMALGAMATED), Mumbai V. D.C.I.T. CENT. CIR. 5(1), Mumbai

ITA 1636/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6922 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 13-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Keywords: Search and seizure; Deemed dividend
• Section: 143(3); 153A; 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM ITA NO. 1636 /MUM/ 2018 (ASSESSMENT YEAR: 2008 - 09 ) AQUA PROOF WALL PLAST PVT. LTD. 4 TH FLOOR, SILVER METROPOLIS BUILDING, WESTER EXPRESS HIGHWAY, GOREGAON (E), MUMBAI - 400 063 VS. DY. CIT, CENTRAL CIRCLE 5(1), AIR INDIA BUILDING, NARIMAN POINT, MUMBAI PAN/GIR NO. AABCP 8906 G ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : NONE RESPONDENT BY : SHRI S. K. BEPARI DATE OF HEARING : 18.10.2018 DATE OF PRONOUNCEMENT : 03.01 .2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 53, MUMBAI (LD.CIT(A) FOR SHORT) DATED 18.10.2017 AND PERTAINS TO THE ASSESSMENT YEAR (A.Y.) 2008 - 09. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT ADDITION MADE U/S 2(22)(E) OF THE ACT BY THE ASSESSING OFFICER, WHILE PASSING ASSESSMENT ORDER U/S. 153A R.W.S. 143(3) OF THE ACT, IS UNSUSTAINABLE AND BAD IN LAW. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION MADE BY THE ASSESSING OFFICER U/S. 2(22)(E) OF THE ACT OF RS. 47,05,175/ - . 3. BRIEF FACTS OF THE CASE ARE AS UNDER: I T WAS NOTED BY THE ASSESSING OFFICER (A.O. FOR SHORT) THAT THE ASSESSEE HAD RECEIVED LOAN OF RS.65,48,877/ - FROM M/S. ANAND RATHI CAPITAL ADVISORS PVT. LTD. DURING 2 ITA NO. 1636/MUM/2018 THE CURRENT YEAR. THE ASSESS E E C OMPA NY IS THE SHAREHOLDER OF M/S. ANAND RATHI CAPITAL ADVISO RS. PVT. LTD. HAVING HOLDING MORE THAN 10% OF THE SHARES. AFTER ALLOWING OPPORTUNITY TO THE ASSESSEE , THE ADDITION U/S.2(22)(E) OF THE A CT OF RS.47,05,175/ - WAS MADE BY THE A.O. 4. BEFORE THE LD. CIT(A) , IT WAS SUBMITTED THAT LENDING MONEY WAS A SUBSTAN TIAL PART OF THE BUSINESS OF M/S. ANAND RATHI CAPITAL ADVISORS PVT. LTD. THE INTEREST INCOME OF RS.34,03,328/ - OUT OF TOTAL INCOME OF RS.34,92,045/ - WAS REFLECTED IN THE PROFIT & LOSS A/C OF M/S. ANAND RATHI CAPITAL ADVISORS PVT. LTD. THE LOAN AND ADVANCES WERE RS.4,14,97,610/ - OUT OF TOTAL FUND OF RS.9,30,60,075/ - . THUS THE LOAN OR ADVANCE MADE TO A SHAREHOLDER OR THE SAID CONCERN BY A COMPANY IN THE ORDINARY COURSE OF THE BUSINESS AND THE LENDING OF MONEY WAS SUBSTANTIAL PART OF THE BUSINESS OF THE COMPAN Y. IT WAS THEREFORE ARGUED THAT PROVISIONS OF SECTION 2(22)(E) OF THE ACT DID NOT APPLY IN THE FACTS OF THE CASE. RELIANCE WAS PLACED ON THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE O F CIT V PARE PL A STICS LT D . (2011) 332 ITR 63 (BHC). 5. T HE LD. CIT(A) DID NOT AGREE WITH T HE ASSESSEES CONTENTION THAT THE AMOUNT WAS ADVANCED IN THE NORMAL COURSE OF BUSINESS AND H ENCE, IT CANNOT BE TREATED AS DEEMED DIVIDEND. THE LD. CIT(A) FURTHER NOTED THE FOLLOWING GROUND : 5.3 ON A WITHOUT PREJUDICE BASI S, IT WAS ALSO ARGUED THAT THE REGULAR RETURN OF INCOME WAS FILED ON OR BEFORE THE DUE DATE AND WAS PROCESSED U/S,143(L)(A) OF THE ACT/COMPLETED U/S. 143(3) OF THE ACT AND AS SUCH NO ASSESSMENT WAS PENDING ON THE DAY OF SEARCH. ONCE NO ASSESSMENT WAS PENDI NG THE COMPLETED ASSESSMENT SHALL NOT ABATE. HOWEVER, IT IS NOTED THAT NO SUCH GROUND OF APPEAL IS FILED IN THIS APPEAL AND HENCE IS NOT CONSIDERED. 3 ITA NO. 1636/MUM/2018 6. THE LD. CIT(A) DID NOT ADJ UDICATE UPON THE CHALLENGE TO JURISDICTION. HENCE, HE CONFIRMED THE ADDITION U/S. 2(22)(E) BY HOLDING THAT THOUGH THE SAID COMPANY WAS INVOLVED IN LENDING BUSINESS, THE IMPUGNED AMOUNT WAS NOT ADVANCED IN ORDINARY COURSE OF BUSINESS. FOR THIS, HE NOTED THAT ONLY A JOURNAL ENTRY HAS BEEN PASSED FOR INTEREST RECEIVED AND IN THE SUBSEQUENT YEAR NO INTEREST HAS BEEN PAID. 7. I HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) AND PERUSED THE RECORDS. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE. THE NOTICE SENT HAS RETURNED UNSERVED . HENCE, I PROCEEDED TO ADJU DICATE THE ISSUE BY HEARING THE LD. DR AND PERUSING THE RECORDS. 8. I NOTE THAT THE AMOUNT IN THIS CASE HAS BEEN ADDED P URSUANT TO SEARCH AND SEIZURE ACTION IN THE ASSESSMENT FRAMED U/S. 153A. IT IS UNDISPUTED THAT THE ORIGINAL RETURN WAS DULY SUBMITTED A ND COMPLETED. NO INCRIMINATING MATERIAL WAS FOUND. HENCE, AS PER THE RATIO FROM THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. [2015] 58 TAXMANN.COM 78 (BOM) DE HORS INCRIMINATING MATERIAL FOUND IN S EARCH, ADDITION U/S. 153A CANNOT BE SUSTAINED WHEN NO ASSESSMENT WAS PENDING AT THE TIME OF SEARCH. 9. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSE SSEE. 10. SINCE THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE ON JURISDICTIONAL GROUND, THE ADJUDICATION ON MERITS IS NOT BEING UNDERTAKEN, BEING ONLY OF ACADEMIC INTEREST. 4 ITA NO. 1636/MUM/2018 11. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 3 . 0 1 . 2 0 1 9 S D / - (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI ; DATED : 0 3 . 0 1 . 2 0 1 9 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI