ACIT, CHENNAI V. Manav Menon, Mumbai

ITA 167/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8246 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 21-01-2015
• Court: TRIBUNAL
• Assessee Lawyers: S S PHADKAR
• Keywords: Deemed dividend
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.510 /MDS./2013 ( !' #' / ASSESSMENT YEAR :2007-08) MR.MANAV MENON , C-3,ANMOL CREST, 3,LOCK STREET, KOTTUR GARDENS, KOTTURPURAM, CHENNAI 600 085. VS. COMMISSIONER OF INCOME TAX IV, AAYAKAR BHAVAN, CHENNAI 600 034. PAN AAKPM 2725 N ( / APPELLANT ) ( / RESPONDENT ) ./ I.T.A.NO.167 /MDS./2015 ( !' #' / ASSESSMENT YEAR :2007-08) ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-20, AAYAKAR BHAVAN, CHENNAI 600 034. VS. MR.MANAV MENON, C-3,ANMOL CREST, 3,LOCK STREET, KOTTUR GARDENS, KOTURPURAM, CHENNAI 600 085 PAN AAKPM 2725 N ( / APPELLANT ) ( / RESPONDENT ) ASSESSEE BY : MR.S.S.PHADKAR, ADVOCATE REVENUE BY : MR.MILIND MADHUKAR BHUSARI, CIT, D.R ITA NO.510 /MDS/2013 ITA NO.167 /MDS/2015 MR.MANAV MENON 2 $ % & '( / DATE OF HEARING : 05.11.2015 )# & '( /DATE OF PRONOUNCEMENT : 06.01.2016 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER:- THE APPEAL NO.510/MDS./2013 IS FILED BY THE ASSES SEE, AGGRIEVED BY THE ORDER OF THE LD. CIT-IV, CHENNAI D ATED 03.02.2012 IN C. NO.1321(1)/263/CIT-IV/10-11 PASSED U/S. 263 OF THE ACT AND THE OTHER APPEAL NO.167/MDS./2015 IS FILED BY THE R EVENUE, AGGRIEVED BY THE ORDER OF THE LD. CIT(A)-IV, CHENNA I DATED 09.10.2014 IN ITA NO.253/12-13 PASSED U/S. 143(3) R .W.S 263 & 250 OF THE ACT. SINCE BOTH THE APPEALS RELATE TO THE CO MMON ISSUE OF ADDITION MADE U/S.2(22)(E) OF THE ACT, FOR THE SAKE OF CONVENIENCE THE BOTH THE APPEALS ARE HEARD TOGETHER AND DISPOSED OF F BY THIS COMMON ORDER. 2. THE CONCISED GROUNDS RAISED IN THE APPEALS ARE L ISTED HERE-IN-BELOW FOR ADJUDICATION. ITA NO.510 /MDS/2013 ITA NO.167 /MDS/2015 MR.MANAV MENON 3 2.1 ASSESSEES APPEAL : I) THE ASSESSEE HAS RAISED TEN GROUNDS IN ITS APPEA L, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD. CIT H AS ERRONEOUSLY DIRECTED THE LD. ASSESSING OFFICER TO M AKE ADDITION OF ` 56,47,009/- INVOKING SECTION.2(22)(E) OF THE ACT. 2.2 REVENUES APPEAL : (II) THE REVENUE HAS RAISED THREE GROUNDS IN ITS A PPEAL; HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD. CIT ( A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD. ASSE SSING OFFICER IGNORING THE FACT THAT THE ASSESSEE HAD BOR ROWED ` 2 LAKHS FROM M/S.FOOT CANDLE FILMS PVT LTD., ON 09.03 .2007. 2.3 SINCE ADJUDICATION OF THE REVENUES APPEAL WILL CONSEQUENTIALLY ASSIST IN ADJUDICATING THE ASSESSEE S APPEAL, FOR THE SAKE OF CONVENIENCE WE PROCEED TO ADJUDICATE THE REVENUES APPEAL FIRST. ITA NO.510 /MDS/2013 ITA NO.167 /MDS/2015 MR.MANAV MENON 4 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL & IS A DIRECTOR IN M/S.FOOT CANDLE FILMS PVT LTD., ENGAGED IN THE BUSINESS OF AD FILM PRODUCTION, FILED HIS RETURN OF INCOME ON 31.10.2007 FOR THE A.Y 2007-08 ADMITTING INCOME AS ` 1,07,59,810/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSME NT WAS COMPLETED ON 16.12.2009 ACCEPTING THE RETURNED INCO ME. SUBSEQUENTLY THE LD. COMMISSIONER OF INCOME TAX OBS ERVED THAT THE ASSESSEE HAD OBTAINED LOAN OF ` 56,47,009/- FROM M/S.FOOT CANDLE FILMS PVT. LTD., IN WHICH THE ASSESSEE IS A DIRECTO R AND HAVING SUBSTANTIAL INTEREST. IT WAS ALSO OBSERVED BY THE L D. CIT THAT THE ABOVE STATED LOAN WAS UTILIZED BY THE ASSESSEE FOR CONSTRUCTION OF HIS RESIDENTIAL HOUSE. SINCE THIS ISSUE WAS NOT CONSID ERED BY THE LD. ASSESSING OFFICER WHILE PASSING HIS ORDER U/S.143(3 ) ON 16.12.2009, THE LD. CIT INVOKING HIS POWER U/S.263 OF THE ACT, DIRECTED THE LD. ASSESSING OFFICER TO REVISE THE ASSESSMENT AND TO I NVOKE SECTION- 2(22)(E) OF THE ACT AND THEREBY INCLUDE THE AMOUNT OF ` 56,47,009/- AS DEEMED DIVIDEND FOR THE RELEVANT ASSESSMENT YEAR 20 07-08 IN THE HANDS OF THE ASSESSEE. WHILE DOING SO, THE LD. CIT PROVIDED SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEA RD AND DISCUSSED ITA NO.510 /MDS/2013 ITA NO.167 /MDS/2015 MR.MANAV MENON 5 THE ISSUE IN DETAIL IN HIS ORDER. THEREAFTER, THE L D. ASSESSING OFFICER PROVIDED SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. HOWEVER, THE ASSESSEE DID NOT CO-OPERATE WITH THE L D. ASSESSING OFFICER IN HIS PROCEEDINGS. THEREFORE, FOLLOWING T HE DIRECTION OF THE LD. CIT THE LD. ASSESSING OFFICER MADE ADDITION OF ` 56,47,009/- IN THE HANDS OF THE ASSESSEE INVOKING THE PROVISIONS O F SECTION.2(22)(E) OF THE ACT. AGGRIEVED BY THE ORDERS OF THE LD. ASS ESSING OFFICER, THE ASSESSEE WENT ON APPEALS BEFORE THE LD. CIT (A). ON APPEAL, THE LD. CIT(A) DELETED THE ADDITIONS MADE TOWARDS DEEMED DI VIDEND U/S.2(22)(E) OF THE ACT WITH THE FOLLOWING OBSERVAT IONS:- 11. I HAVE GONE THROUGH THE ASSESSMENT ORDER, TH E SUBMISSIONS MADE DURING THE APPELLATE PROCEEDINGS AND PERUSED THE MA TERIAL ON RECORD INCLUDING DOCUMENTARY EVIDENCES RELATING TO THE REC EIPT OF LOANS BY THE APPELLANT WHICH CLEARLY SHOW THAT THE LOAN AMOUNT W AS NOT RECEIVED DURING F.Y 2006-07 RELEVANT TO THE INSTANT A.Y 2007-08 BUT BROUGHT FORWARD DEBIT BALANCES FROM THE ASSESSMENT YEAR 2006-07 AND WERE BUILT UP OVER A PERIOD OF 6 ASSESSMENT YEAR COMMENCING FROM A.Y 200 1-02. ITA NO.510 /MDS/2013 ITA NO.167 /MDS/2015 MR.MANAV MENON 6 12. AS PER CIT VS.P.K.BADIANI, 76 ITR 369 BOM.,SEC. 2(22)(E) REQUIRES THE DETERMINATION OF TWO FACTORS- (1) WHETHER THE PAYMENT IS A LOAN AND (2) WHETHER AT THE DATE WHEN TE PAYMEN T IS MADE, THERE WERE ACCUMULATED PROFITS AND THAT THESE TWO FACTORS ARE TO CORRELATED AND THE RE SULT MUST BE ASCERTAINED AT THE DATE OF EACH SUCH PAYMENT. THE CRUCIAL SECON D DETERMINATIVE FACTOR STATED SUPRA, IS NOT SATISFIED WHEN CORRELATED TO T HE FACTS OF THE INSTANT ASSESSEES CASE, IN AS MUCH AS NO LOAN IS UNDISPUTE DLY ADVANCED IN THE A.Y 2007-08 AND WERE ONLY BROUGHT FORWARD DEBIT BAL ANCES. IT COULD AT BEST HAVE BEEN ADDED ONLY DURING THE A.YS DURING WH ICH EACH SUCH PAYMENT WAS MADE BY WAY OF LOAN TO THE EXTENT OF AC CUMULATED PROFITS AVAILABLE IN THOSE ASSESSMENT YEARS/ AS SUCH THERE IS NO SCOPE FOR TREATING THE BROUGHT FORWARD DEBIT BALANCES AS DEEM ED DIVIDEND U/S.2(22)(E) FOR A.Y 2007-08. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE RE VENUE IS IN APPEAL BEFORE US IN ITA NO.167/MDS./15 AND THE ASSE SSEE AGGRIEVED BY THE ORDER OF THE LD. CIT U/S.263 IN ITA NO.510/M DS./15 IS IN ITA NO.510 /MDS/2013 ITA NO.167 /MDS/2015 MR.MANAV MENON 7 APPEAL BEFORE US. IT IS WORTHWHILE TO MENTION HERE THAT THE APPEAL OF THE ASSESSEE WAS DISMISSED IN LIMINE FOR WANT OF PROSECUTION BY THE TRIBUNAL VIDE ORDER DATED 5.6.2013, HOWEVER, IT WAS RESTORED BY THE TRIBUNAL VIDE ORDER DATED 21.08.15 IN MP NO.81/MDS. /15. 5.1 REVENUES APPEAL THE CLAIM OF THE REVENUE BEFORE US IS THAT, THE A SSESSEE HAS BORROWED ` 2 LAKHS FROM M/S.FOOT CANDLE FILMS PVT LTD., TOWARD S HIS HOUSING LOAN DURING THE RELEVANT ASSESSMENT YEA R AND THEREFORE, AT LEAST TO THAT EXTENT SECTION. 2(22)(E) OF THE AC T WOULD BE APPLICABLE AND THE SAME HAS TO BE TREATED AS DEEMED DIVIDEND I N THE HANDS OF THE ASSESSEE. THE LD. A.R. RELIED ON THE DECISION OF THE LD. CIT(A). 5.2 CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND BOTH THE APPEALS OF THE REVENUE AND THE ASSESSEE, WE ARE OF THE CONSIDERED VIEW THAT THE ENTIRE ISSUE IS REQUIRED T O BE LOOK AT AFRESH BY THE LD. ASSESSING OFFICER TO ASCERTAIN THE CORRE CT AMOUNT OF LOAN BORROWED BY THE ASSESSEE FROM M/S. FOOT CANDLES PVT LTD DURING THE RELEVANT ASSESSMENT YEAR., AND ALSO TO VERIFY THE E XACT AMOUNT OF ITA NO.510 /MDS/2013 ITA NO.167 /MDS/2015 MR.MANAV MENON 8 RESERVES AND SURPLUS HELD BY M/S. FOOT CANDLES PVT LTD., AT THE TIME OF EXTENDING SUCH LOAN TO THE ASSESSEE FOR ARRIVING AT A DECISION ON THE APPLICABILITY OF SECTION 2(22)(E) OF THE ACT IN THE CASE OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR. THEREFO RE, WE HEREBY REMIT BACK THE MATTER TO THE FILE OF LD. ASSESSING OFFICER FOR DENOVO CONSIDERATION. 6. IN THE RESULT, THE APPEALS OF ASSESSEE AS WELL A S THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 06 TH JANUARY,2016 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 06 TH JANUARY, 2016 K S SUNDARAM. & *'+, - ,#' /COPY TO: 1. ./ /APPELLANT 2. *0./ /RESPONDENT 3. $ 1' ( ) /CIT(A) 4. $ 1' /CIT 5. ,4 *'5! /DR 6. ' 6% /GF