Vinod Kumar Rajpaul, Gurgaon V. ACIT, New Delhi

ITA 175/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7140 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU SENIOR
• Assessee Lawyers: A K SRIVASTAVA
• Keywords: Principle of natural justice; Deemed to accrue or arise in india; Deemed dividend
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.175/DEL./2014 (ASSESSMENT YEAR : 2007-08) SHRI VINOD KUMAR RAJPAUL, VS. ACIT, PROP. VIRAJ ESTATES, CIRCLE 33 (1), 63, SUKHCHAIN MARG, NEW DELHI. DLF PHASE I, GURGAON 122 001 (HARYANA) (PAN : AAGPR1612K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.K. SRIVASTAVA , CA REVENUE BY : SHRI SHRAVAN GOTRU, SENIOR DR DATE OF HEARING : 12.07.2016 DATE OF ORDER : 18.07.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, SHRI VINOD KUMAR RAJPAUL, PROP. VIRA J ESTATES (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORD ER DATED 11.11.2013 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XXI, NEW DELHI QUA THE ASSESSMENT YEAR 2007-08 ON T HE GROUNDS INTER ALIA THAT :- ITA NO.175/DEL./2014 2 1. LD. ASSESSING OFFICER HAS PASSED ASSESSMENT ORDER WHICH IS ERRONEOUS, IS AGAINST THE PROVISIONS OF INCOME TAX ACT, 1961 AND IS ALSO AGAINST FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE IS ILLEGAL AND BAD IN LAW. 2. THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN MAKING ADDITION OF RS.21,75,000/- U/S 2(22)(E) OF T HE INCOME TAX ACT, 1961 WITHOUT ADJUSTING THE ALREADY PAID AMOUNT BY THE ASSESSEE TO THE PAYEE COMPANY, WHICH IS AGAINST THE LAW OF NATURAL JUSTICE AND IS BAD IN LA W. 3. THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN INVOKING SECTION 2(22)(E) OF THE INCOME TAX ACT, 19 61 WITHOUT CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE ASSESSEE RESERVES TO MAKE ANY ADDITION, DELETION OR ALTERNATION TO THE GROUNDS OF APPEAL BE FORE ITS DISPOSAL. 2. BRIEFLY STATED THE FACTS OF THIS CASE ARE : PURS UANT TO THE NOTICES ISSUED UNDER SECTION 142(1) AND 143(2) OF T HE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) DURING THE SCRUTINY PROCEEDINGS, SHRI SANDEEP KUMAR, CA/AR OF THE ASSESSEE PUT IN AP PEARANCE, FILED NECESSARY DETAILS AND ALSO DISCUSSED THE CASE . ASSESSEE IS INTO THE BUSINESS OF TRADING AND DEVELOPMENT OF REAL EST ATE AND HAS ALSO EARNED INCOME FROM HOUSING PROPERTY, CAPITAL GOODS AND OTHER SOURCES. FROM THE SCRUTINY OF CREDIT ENTRIES ACCOU NT NO.CCSDL- 5/2000 MAINTAINED WITH CORPORATION BANK, IT IS NOTI CED THAT THERE IS AN ENTRY DATED 31.05.2006 FROM M/S. DIVYA VIDHI HOM ES PVT. LTD. AMOUNTING TO RS.21,75,000/- WHICH WAS SQUARED UP DU RING THE YEAR UNDER CONSIDERATION. THIS AMOUNT WAS ADVANCE/LOAN GIVEN TO ITA NO.175/DEL./2014 3 ASSESSEE BY M/S. DIVYA VIDHI HOMES PVT. LTD. SQUARE D UP DURING THE YEAR. ASSESSEE WAS CALLED UPON TO FURNISH BALA NCE SHEET OF M/S. DIVYA VIDHI HOMES PVT. LTD. FROM WHICH IT WAS NOTICED THAT THE COMPANY HAD RS.27,70,698/- AND RS.38,23,748/- A S ACCUMULATED PROFIT IN RESERVE AND SURPLUS OF LIABIL ITIES SIDE IN BALANCE SHEET AS ON 31.03.2006 AND AS ON 31.03.2007 RESPECTIVELY INDICATING SUBSTANTIAL INTEREST OF THE ASSESSEE IN M/S. DIVYA VIDHI HOMES PVT. LTD. AS DIRECTOR. ASSESSEE WAS CALLED U PON TO EXPLAIN AS TO WHY PROVISIONS CONTAINED U/S 2(22)(E) BE NOT INVOKED AND THE LOAN/ADVANCE TAKEN FROM M/S. DIVYA VIDHI HOMES PVT. LTD. BE TREATED AS DEEMED INCOME IN THE INTEREST OF ASSESSE E. ASSESSEE FURNISHED REPLY THAT M/S. DIVYA VIDHI HOMES PVT. LT D. HAD NOT ADVANCED ANY LOAN TO THE ASSESSEE RATHER HAD REFUND ED ONLY SHARE APPLICATION MONEY WHICH WAS GIVEN IN EXCESS BY MIST AKE AND WAS SUBSEQUENTLY ADJUSTED. FINDING THE EXPLANATION FUR NISHED BY THE ASSESSEE NOT TENABLE, AO MADE AN ADDITION OF RS.21, 75,000/- ON ACCOUNT OF DEEMED DIVIDEND IN THE HANDS OF ASSESSE E AND ASSESSED THE TOTAL INCOME AT RS.2,75,91,130/-. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY FILING AN APPEAL WHO HAS DISMISSED THE APPEAL. FEELING AGG RIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO.175/DEL./2014 4 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED ORDER CONTENDED INTER ALIA THAT THE ASSESSEE HAS MADE TOT AL CONTRIBUTION OF RS.92,40,000/- ON ACCOUNT OF SHARE APPLICATION MONE Y WHICH WAS REFUNDED TO THE ASSESSEE DURING THE CURRENT YEAR DU E TO NON- ISSUANCE OF SHARES; THAT M/S. DIVYA VIDHI HOMES PVT . LTD. HAD WRONGLY ISSUED A CHEQUE OF RS.21,75,000/- IN THE NA ME OF M/S. VIRAJ ESTATES, WHICH WAS RETURNED TO THE COMPANY, B UT HAS BEEN WRONGLY TREATED AS REFUND OF THE SHARE APPLICATION MONEY BY THE LOWER REVENUE AUTHORITIES; THAT AT THE MOST EXCESS AMOUNT OF RS.3,35,000/- (RS.21,75,000/- MINUS RS.18,40,000/-) MAY BE TREATED AS DEEMED DIVIDEND AS THE ASSESSEE HAD OPEN ING SHARE APPLICATION MONEY OF RS.18,40,000/-. HOWEVER, ON T HE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY THE LOWER R EVENUE AUTHORITIES. 6. UNDISPUTEDLY, ASSESSEE IS A DIRECTOR HAVING SUB STANTIAL INTEREST IN M/S. DIVYA VIDHI HOMES PVT. LTD. THAT A SSESSEE HAS OPENING BALANCE OF SHARE APPLICATION MONEY OF RS.18 ,40,000/- IN M/S. DIVYA VIDHI HOMES PVT. LTD. AND FURTHER CONTRI BUTED ITA NO.175/DEL./2014 5 RS.74,00,000/- AS SHARE APPLICATION IN THE COMPANY; THAT ASSESSEE HAS RECEIVED AN AMOUNT OF RS.21,75,000/- FROM THE C OMPANY ON 31.05.2006 CREDITED IN THE ACCOUNT OF M/S. VIRAJ ES TATES BUT SAME WAS RETURNED BY M/S. VIRAJ ESTATES ON 05.02,.2007. 7. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, THE SOLE QUESTION ARISES FOR DETERMINATIO N IN THIS CASE IS :- AS TO WHETHER M/S. DIVYA VIDHI HOMES PVT. LTD. HAS ADVANCED LOAN OF RS.21,75,000/- TO THE ASSESSEE AND HAS BEEN RIGHTLY TREATED AS DEEMED DIVIDEND IN THE HANDS OF ASSESSEE BY THE AO BY INVOKING PROVISIONS CONTAINED U/S 2(22)(E) OF THE ACT. 8. BARE PERUSAL OF THE COPY OF LEDGER ACCOUNT AND S HARE APPLICATION MONEY ACCOUNT OF ASSESSEE IN THE BOOKS OF M/S. DIVYA VIDHI HOMES PVT. LTD., AVAILABLE AT PAGE 12 OF THE PAPER BOOK, GOES TO PROVE THAT THE ASSESSEE HAS OPENING BALANCE OF RS.18,40,000/- ON ACCOUNT OF SHARE APPLICATION MONE Y IN M/S. DIVYA VIDHI HOMES PVT. LTD. AND IN TOTAL CONTRIBUTE D RS.92,40,000/- AS SHARE APPLICATION MONEY IN M/S. D IVYA VIDHI HOMES PVT. LTD. DURING THE YEAR UNDER ASSESSMENT WH ICH IS SHOWN TO HAVE BEEN REFUNDED TO HIM DUE TO NON-ALLOTTING OF THE SHARES OF THE ASSESSEE. 9. AO HAS INVOKED THE PROVISIONS CONTAINED U/S 2(22 )(E) OF THE ACT MERELY ON THE GROUND THAT IN THE SHARE APPLICAT ION ACCOUNT IN ITA NO.175/DEL./2014 6 THE BOOKS OF M/S. DIVYA VIDHI HOMES PVT. LTD., THER E IS NO SUCH AMOUNT OF RS.21,75,000/- ON ACCOUNT OF SHARE APPLIC ATION MONEY EITHER RECEIVED FROM THE ASSESSEE OR PAYMENT TO THE ASSESSEE AND THUS TREATED THE SAME AS DEEMED DIVIDEND U/S 2(22)( E). NO DOUBT, THE ASSESSEE HAS MAINTAINED TWO ACCOUNTS : ONE SHAR E APPLICATION MONEY ACCOUNT AND ANOTHER LOAN ACCOUNT VIS--VIS M/ S. DIVYA VIDHI HOMES PVT. LTD. BUT WHEN THESE FACTS ARE EXAM INED IN THE LIGHT OF THE FACT THAT M/S. VIRAJ ESTATES IS THE PR OPRIETORSHIP CONCERN OF SHRI VINOD KUMAR RAJPAUL, ASSESSEE, BOTH ARE ON E AND THE SAME ENTITY FOR BUSINESS TRANSACTION AND WHEN BOOKS OF A CCOUNT HAS NOT BEEN DISPUTED BY THE AO, IT CANNOT BE SAID THAT THE AMOUNT OF RS.21,75,000/- HAS BEEN RECEIVED BY THE ASSESSEE AS DEEMED DIVIDEND. 10. MOREOVER, PERUSAL OF THE LEDGER ACCOUNT OF SHAR E APPLICATION MONEY OF ASSESSEE MAINTAINED BY M/S. DIVYA VIDHI HO MES PVT. LTD. GOES TO PROVE THAT THE ASSESSEE WAS HAVING OPE NING BALANCE OF RS.18,40,000/- AND THEREAFTER HE HAS CONTRIBUTED RS .74,00,000/- AS SHARE APPLICATION MONEY WHICH WAS UNDISPUTEDLY RETU RNED TO HIM ON ACCOUNT OF NON-ALLOTMENT OF THE SHARE MEANING TH EREBY AMOUNT OF RS.18,40,000/- OF ASSESSEE WAS LYING AVAILABLE W ITH M/S. DIVYA VIDHI HOMES PVT. LTD. AND AS SUCH OUT OF AMOUNT OF RS.21,75,000/- RECEIVED BY THE ASSESSEE ON 31.05.2006 AND RETURNED ON 05.02.2007 ITA NO.175/DEL./2014 7 TO M/S. DIVYA VIDHI HOMES PVT. LTD., AT THE MOST AM OUNT OF RS.3,35,000/- CAN BE TREATED AS DEEMED DIVIDEND. T HIS FACT HAS BEEN ADMITTED BY THE ASSESSEE DURING THE COURSE OF ARGUMENT AND HAS NOT BEEN CONTROVERTED BY LD. DR FOR THE REVENUE . 11. SO, WHEN THE ASSESSEE HAD DEPOSITED RS.18,40,00 0/- AS SHARE APPLICATION MONEY IN M/S. DIVYA VIDHI HOMES PVT. LT D. AS ON 31.03.2006 BUT WAS PAID RS.21,75,000/- BY THE COMPA NY, OUT OF WHICH RS.3,35,000/- WAS IN EXCESS, THE ENTIRE AMOUN T CANNOT BE TREATED AS DEEMED DIVIDEND MERELY BECAUSE OF THE FA CT THAT ASSESSEE HAS MAINTAINED TWO ACCOUNTS WHO HAS OTHERWISE PLACE D BEFORE THE AO STATEMENT OF COMBINED ACCOUNT WHICH HAS NOT BEEN DISPUTED BY THE AO. CONSEQUENTLY, QUESTION FRAMED TO ADJUDICAT E THE CONTROVERSY AT HAND IS PARTLY ANSWERED IN FAVOUR OF THE ASSESSEE. 12. SO IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE WAS PAID AMO UNT OF RS.21,75,000/- AS AGAINST SHARE APPLICATION MONEY O F RS.18,40,000/- THE EXCESS AMOUNT OF RS.3,35,000/- I S ORDERED TO BE TREATED AS DEEMED DIVIDEND. SO, THE PRESENT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 18 TH DAY OF JULY, 2016. SD/- SD/- (N.K. SAINI) (KULDIP SING H) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 18 TH DAY OF JULY, 2016/TS ITA NO.175/DEL./2014 8 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-19, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.