Appeal Details
Counselvise Citation
171623514 RSA 2014
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-06-2015
Appeal Filed By
Assessee
Bench Allotted
B
Assessment Year
2005-2006
Appeal Filed On
01-09-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: KOLKATA [BEFORE HON BLE SHRI B.P.JAIN, AM] I.T.A NO.1716/KOL/2014 ASSESSMENT YEAR: 2005 - 06 SHRI KUNWAR LAL BOTHRA V S I.T.O., WARD - 35(3) KOLKATA . KOLKATA (APPELLANT) ( RESPONDE NT) (PAN: AEIPB 7270 B) FOR THE APPELLANT : SHRI S.M.SURANA, ADVOCATE FOR THE RESPONDENT : SHRI SANJAY, SR.DR, ADDL. C.I.T. DATE OF HEARING : 04 .06 .2015. DATE OF PRONOUNCEMENT: 04 .06 .2015. ORDER PER SHRI B.P.JAIN, AM : THI S APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF LD.CIT(A) - XX, KOLKATA DATED 28 - 05 - 2014 FOR ASSESSMENT YEAR 2005 - 06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. FOR THAT THE ORDER OF THE LD. CIT(A) IS ARBITRARY, ILLEGAL AND BAD IN LAW. 2. FOR T HAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.503760/ - MADE BY THE AO BY APPLYING THE PROVISION OF SEC.2(22)(E). 3. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.5,20,76 0/ - WHEN THERE WAS NO LOAN OR ADVANCE BUT THE ASSESSEE MAINTAINED A CURRENT ACCOUNT CONTINUING FROM EARLIER YEARS WHEREIN SOME TIMES THERE WAS CREDIT BALANCE AND SOMETIMES THERE WAS DEBIT BALANCE IN THE NAME OF THE ASSESSEE AND SUCH DEBIT AND CREDIT WAS FU RTHER CHARGED BY APPLICABLE MARKET RATE OF INTEREST. 4. FOR T HAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION OF RS.5,03,760/ - WAS NOT JUSTIFIED. 5. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) ERRED IN CONFIRMING THE ADDITI ON. 6. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE CIT(A) BE MODIFIED AND THE ASSESSEE BE GIVEN THE RELIEF PRAYED FOR. 5. FOR THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND BEFORE OR AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO FOUND THAT THE ASSESSEE HAD TAKEN A LOAN OF RS.10,00,000/ - FROM M/S. SPECTRUM AUTOMOTIVE PVT. LTD. IN WHICH THE ITA NO 17 16/KOL/2014 SHRI KUNWAR LAL BOTHRA A.YR. 2005 - 06 2 ASSESSEE WAS HOLDING 14% SHARES OF THE COMPANY, THEREBY THE PROVISIONS OF SECTION 2(22)(E) OF THE I .T.ACT, 1961 WAS ATTRACTED. THE STATEMENT OF LOAN CONFIRMATION RECEIVED FROM M/S. SPECTRUM AUTOMOTIVE PVT. LTD. WAS PERUSED BY THE AO THOUGH THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS HAVING A NORMAL CURRENT ACCOUNT FORM YEAR TO YEAR BASIS WITH THE COMPA NY ON EACH TRANSACTION, INTEREST WAS BEING CHARGED. ONLY THERE WAS A DEBIT BALANCE OF RS.8,70,827/ - IN THE BOOKS OF THE COMPANY BUT THE DEBIT BALANCE WAS LIQUIDATED WITHIN A PERIOD OF 3 MONTHS. THEREFORE, THE PROVISION OF SECTION 2(22)(E) IS APPLICABLE IN THE INSTANT CASE. AO ACCORDINGLY TREATED THE AMOUNT OF RS.5,03,760/ - AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT THE LD. CIT(A) CONFIRMED THE ACTION OF AO. 4. THE LD. COUNSEL FOR THE ASSESSEE SHRI S.M.SURANA, ADVOCATE RELIED UPON T HE DECISION OF ITAT, KOL KATA BE NCH IN THE CASE OF ITO V S PRATAP SINGH KOTHARI IN ITA NO .1699/KOL/2012 DATED 30 TH APRIL, 2012 AND THE DECISION OF HON BLE PUNJAB AND H ARYANA HIGH COURT IN THE CASE OF CIT VS SURAJ DEV DADA (2014) 367 ITR 0078 AND ARGUED THAT THE ISSUE IS COVERED SIN CE THE ASSESSEE HAS NOT DERIVED ANY BENEFIT OUT OF THE FUNDS OF THE COMPANY BY WAY OF LOAN OR ADVANCES AND HAS NOT EVADED ANY TAX. HE ARGUED THAT THERE WAS A CREDIT BALANCE ONLY FOR 10 DAYS AND THEREFORE FOLLOWING THE DECISION OF THE HON BLE PUNJAB AND HAR YANA HIGH COURT IN THE CASE OF CIT VS. SURAJ DEV DADA (SUPRA) THE ADDITION MAY BE DELETED. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AT THE OUTSET I WILL REPRODUCE THE DECISION OF THE HON BLE PUNJAB AND HAYAMNA HIGH COURT S DECISION IN THE CASE OF CIT VS. SURAJ DEV DADA (SUPRA) AS UNDER : - ' 4 . I HAVE GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AND REPL Y SUBMITTED BY THE COUNSEL OF THE APPELLANT . I AM OF THE CONSIDERED OPINION THAT SECTION 2(22) (E) OF THE ACT IS A DEEMING PROVISION WHICH ASSUMES EXISTENCE OF CERTAIN FACTS IF THE CONDITIONS SPECIFIED IN A PARTICULAR SECTION ARE F ULFILLED. WE AGREE THAT THESE PROVISIONS AR E TO BE CONSTRUED STRICTLY. THIS LEGAL FICTION HA S TO BE CARRIED OUT TO L O GICAL ENDS AND NOT TO ILLOGICAL LENGTH. THE COPY OF ACCOUNT OF THE APPELLANT IN THE ITA NO 17 16/KOL/2014 SHRI KUNWAR LAL BOTHRA A.YR. 2005 - 06 3 BOOKS OF THE COMPANY C LEARLY SHOWS THAT THE APPELLANT HAS RUNNING CURRENT ACCOUNT WITH THE COMPANY AND IN FACT THE APPELLANT HAD B E EN ADVANCING MONIES TO THE COMPANY AS AND WHEN REQUIRED FOR THE PURPOSE OF BUSINESS OF THE COMPANY. IT WAS ONLY FOR 55 DAYS IN BETWEEN THE EAR THAT BALANCE OF THE APPEL L ANT I N BOOKS OF ACCOUNT TURNED CREDIT . IT IS B EYOND DO UBT THAT THIS SECTION CAN BE INVOKED T O CURTAIL THE MISUSE OF THE FUNDS BELONGING TO A PRIVATE LIMITED COMPANY BY ITS SHAREHOLDERS BUT NOT WHEN THERE IS RUNNING CURRENT ACCOUNT OF THE APPELLANT WITH THE COMPANY AND THE APPELLANT HAS IN FACT FOR MOST OF TH E TIME LENT THE MONEY TO THE COMPANY. THIS SECTION HAD BEEN INSERTED TO STOP THE MISUSE OF THE TA X ING PROVISIONS BY THE ASSESSEES BY TAKING THE FUNDS OUT OF THE CO MPANY BY WAY OF LOANS OR ADVANCES INSTEAD OF DIVIDENDS AND THUS AVOID TAX BUT IN THIS CAS E W HERE THERE IS N O SUCH INTENTION OF THE APPELLANT AND HE HAD IN FACT ADVANCED MONEY TO THE COMPANY , CREDIT IN THAT ACCO UNT FOR SOME DA Y S CANNOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22) (E). IT IS EVIDENT FACT THAT THE APPELLANT IN REAL SENSE NOT DE RIVED ANY BENEFIT FROM THE FUNDS OF THE COMPANY AND THEREFORE, BY NO STRET CH OF IMAGINATION IT CAN BE SAID THAT THE COMPANY HAS DISBURSED OR G I VEN DIVIDEND TO . ITS S HA REHOLDER / DIRECTOR IN THE G UISE OF LOAN. IT WILL BE TRAVEST Y OF LAW TO APPLY THE PROVISION S OF SECTION 2(22)(E) O F T HE ACT T O THE FACT S O F TH E PR ESE NT CASE W HETH E R IN FAC T THE P E RSON CONCERNED HAS NOT GAINED ANY BENEFIT F R O M T HE F U N D S OF TH E CO MPAN Y AN D ON E H AS T O C O N S ID E R THE TOT A LI TY O F T HE FAC T S AND CIR C UM S T A N CES O F THE CA SE BEFO R E APP L Y I NG T H E PR OV I S I ON S OF T H I S SEC TI O N. HENCE, TH E P ROV ISI ONS O F SECT I O N 2( 2 2) (E) COU LD NOT B E IN V OKED WHE N THERE I S A G E N U IN E B U S IN ESS TR A N S ACTIO N B E T W E E N TH E T WO EN T IT I ES AND F UN DS OF T HE APPELLAN T D I R E CT O R WE R E IN F AC T L Y I NG W I TH T HE CO MP A N Y FOR M OS T O F TH E TIM E . I 6.1. FROM THE PERUSAL OF THE SAID ORDER OF THE HON BLE PUNJAB AND HARYANA HIGH COURT I AM OF THE VIEW THAT THE ASSESSEE IN THE PRESENT CASE HAS NOT DERIVED ANY BENEFIT FROM THE FUNDS TAKEN FROM THE COMPANY AND HAS NOT EVADED ANY TAX AND THE CRED IT BALANCE AS STATED ABOVE HAS BEEN ONLY FOR 10 DAYS. THEREFORE THE PROVISIONS U/S 2(22)(E) OF THE ACT IS NOT APPLICABLE IN THE PRESENT CIRCUMSTANCES AND FACTS OF THE CASE. ACCORDINGLY THE AO IS NOT JUSTIFIED IN TREATING THE SAME AS DEEMED DIVIDEND U/S 2(2 2)(E) OF THE ACT. THUS THE ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED. 7.1 IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDE R PRONOUNCED IN THE OPEN COURT ON 0 4 .06 .2015. SD/ - [ B.P.JAIN ] ACCOUNTANT MEMBER DATE : 04 .06 .2015. R.G.(.P.S.) ITA NO 17 16/KOL/2014 SHRI KUNWAR LAL BOTHRA A.YR. 2005 - 06 4 C OPY OF THE ORDER FORWARDED TO: 1 . S HRI KUNWAR LAL BOTHRA, 9A, LAL BAZAR STREET, 2 ND FLOOR, BLOCK - A, MERCANTILE BUILDING, KOLKATA - 700001. 2 I.T.O., WARD - 35(3), KOLKATA. 3 . CIT(A) - XX, KOLKATA 4. CIT - KOLKATA. 5. CIT - DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES
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