Shaym K Borele, Nagpur V. C.I.T -1, Nagpur

ITA 176/NAG/2013

• Counselvise Citation: 17623914 RSA 2013
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: MUKESH AGRAWAL
• Keywords: Principle of natural justice; Deemed dividend
• Section: 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER ITA NO. 176/NAG./2013 ( ASSESSMENT YEAR : 2008-09 ) SHRI SHYAM K. BORELE 402, HARE KRISHNA ENCLAVE RAMDASPETH, NAGPUR 440 010 APPELLANT V/S INCOME TAX OFFICER WARD-1(1), NAGPUR .... RESPONDENT PERMANENT ACCOUNT NUMBER ACJPB6330P ASSESSEE BY : SHRI MUKESH AGRAWAL REVENUE BY : SHRI NARENDRA KANE / DATE OF HEARING 30.03.2015 / DATE OF ORDER 27/5/15 O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE, EMANATING FROM THE IMPUGNED ORDER DATED 28 TH MARCH 2013, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) BY THE LEARNED COMMISSIONER OF INCOME TAX-I, NAGPUR, FOR THE ASSESS MENT YEAR 2008-09. THE ASSESSEE HAS CHALLENGED THE IMPUGNED OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX DIRECTING THE ASS ESSING OFFICER TO SHRI SHYAM K. BORELE 2 TAX A SUM OF ` 7,12,299, AS DEEMED DIVIDEND UNDER SECTION 2(22)(E ) OF THE ACT IN THE HANDS OF THE ASSESSEE. 2. THE LEARNED COMMISSIONER OF INCOME TAX, WHILE INVOK ING HIS JURISDICTION UNDER SECTION 263 OF THE ACT, MENTIONED T HAT THE ASSESSEE IS THE MANAGING DIRECTOR IN THE COMPANY VIZ. M/S. BHAI JI MOTOR PVT. LTD. AS PER THE LEARNED COMMISSIONER OF INCOME TAX, THE ASSESSEE HAD DEBIT BALANCE IN THE SAID COMPANY TO THE TUNE OF ` 70 LAKH. SO, THE OBJECTION WAS THAT, ALTHOUGH THE ASSESSEE HAD SUBSTANTIA L INTEREST IN M/S. BHAIJI MOTOR PVT. LTD., BUT THE ASSESSING OFFIC ER HAD FAILED TO EXAMINE THE APPLICABILITY OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. A SHOW CAUSE NOTICE WAS ISSUED AND IN COMPLIANC E, THE ASSESSEE HAS FURNISHED THE EXPLANATION AS UNDER:- IN RESPONSE THE ASSESSEES COUNSEL SHRI MUKESH AGAR WAL APPEARED/ATTENDED AND FURNISHED WRITTEN SUBMISSION VIDE LETTER DTD. 25-03-2013 STATING THAT THE ASSESSEE HAS GIVE N LOAN TO M/S. BHAJ MOTOR PVT. LTD., A COMPANY IN WHICH HE IS A DIRECTOR AND HOLDS MORE THAN 10% EQUITY SHARES. ASSESSEE IS SUBMITTING HEREWITH LEDGER A/C. OF M/S. BHAJI MOTORS IN HIS BO OKS WHICH CLEARLY SHOWS THAT THERE IS OPENING DEBIT BALANCE O F RS.1,66,02,757/- AND CLOSING DEBIT BALANCE OF RS.2, 59,110/- ON LOAN GIVEN BY HIM TO THE COMPANY. ASSESSEE HAS PREP ARED A LEDGER A/C WITH DAY TO DAY BALANCE FOR THE PERIOD 0 1-04-2007 TO 31-03-2008 THAT CLEARLY SHOWS THAT DURING ENTIRE YE AR THERE HAS BEEN DEBIT BALANCE IN THE A/C OF M/S. BHAJI MOTORS. THE ABOVE ACCOUNT CLEARLY ESTABLISHES THAT ASSESSEE HAS GIVEN LOAN TO THE COMPANY AND NOT TAKEN LOAN, HENCE PROVISIONS OF SEC .2(22)(E) ARE NOT APPLICABLE. SHRI SHYAM K. BORELE 3 3. THE LEARNED COMMISSIONER OF INCOME TAX, HOWEVER, WA S NOT CONVINCED AND HELD AS UNDER:- THE SUBMISSIONS OF THE ASSESSEE ARE VERIFIED WITH R ELEVANT TO THE ASSESSMENT ORDER AND INFORMATION ON RECORD. IT IS A FACT THAT THE ASSESSEE IS A DIRECTOR HOLDING MORE THAN 10% EQ UITY IN THE COMPANY BHAIJI MOTORS PVT. LTD. AND THE BALANCE SHE ET AS ON 31- 03-2008 OF THE ASSESSEE REFLECTS LOAN ADVANCED TO T HE COMPANY OF RS.1,80,49,024/- AND THERE IS NO LOAN OR ADVANCE AS SUCH FROM THE COMPANY TO THE ASSESSEE. BUT ON VERIFICATI ON OF THE LEDGER EXTRACT OF M/S. BHAIJI MOTORS PVT. LTD. IN T HE BOOKS OF THE ASSESSEE WHICH IS AVAILABLE ON RECORD (ANNEXED A) W HICH STARTS WITH AN OPENING DEBIT BALANCE OF RS.1,66,02,757/- S HOWS THAT AS ON 14-06-2007 THE LOAN REPAYABLE BY THE COMPANY TO THE ASSESSEE WORKS OUT TO RS.2,87,701/- AS AGAINST WHIC H THE COMPANY HAS PAID AN AMOUNT OF RS.10,00,000/- SHOWIN G A DEBIT BALANCE OF RS.7,12,299/- THAT MEANS THE COMPANY HAS ADVANCED RS.7,12,299/- TO THE ASSESSEE. THE FINANCIAL OF THE COMPANY ON RECORD SHOWS THAT THE COMPANY HAS ACCUMULATED PROFI TS. ACCORDING TO SECTION 2(22)(E) OF THE I.T. ACT, DIVI DEND INCLUDES ANY PAYMENT BY A COMPANY BY WAY OF ADVANCE OR LOAN TO THE SHARE HOLDER HOLDING NOT LESS THAN 10%, TO THE EXTE NT TO WHICH THE COMPANY POSSESSES ACCUMULATED PROFITS AND AS SU CH THE AMOUNT OF RS.7,12,299/- IS TAXABLE IN THE HANDS OF THE ASSESSEE. THOUGH THE INFORMATION WAS AVAILABLE ON RECORD, FAI LURE ON PART OF THE A.O. TO TAX THE DIVIDEND IN THE HANDS OF THE ASSESSEE HAS RENDERED THE ASSESSMENT ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE. HENCE THE ASSESSMENT IS MO DIFIED AND THE INCOME IS ENHANCED TO THE EXTENT INDICATED ABOV E. THE A.O. IS DIRECTED TO PASS CONSEQUENTIAL ORDER IN THE LIGH T OF THE ABOVE DISCUSSION. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE, SHR I MUKESH AGRAWAL, APPEARED AND PLEADED THAT THE FACTS HAVE NOT B EEN CORRECTLY APPRECIATED BY THE LEARNED COMMISSIONER OF INCOME TAX . THE CORRECT FACTUAL POSITION WAS THAT AS PER THE ACCOUNTS MAINTAINED BY M/S. BHAIJI MOTORS PVT. LTD., THE ASSESSEE WAS ALWAYS HAVING A CRE DIT BALANCE WITH THE SAID COMPANY. EVEN ON THE DATE AS ON 14 TH JUNE 2007, THERE WAS A SHRI SHYAM K. BORELE 4 CREDIT ENTRY OF ` 27,03,413. AFTER THE SAID CREDIT, THE TOTAL CLOSING BALANCE WAS ` 29,91,114. OUT OF THE SAID CREDIT BALANCE, ON THAT VER Y DATE I.E., ON 14 TH JUNE 2007, THE PAYMENT OF ` 10 LAKH WAS MADE TO THE ASSESSEE BY M/S. BHAIJI MOTORS PVT. LTD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO EXPLAINED THAT THE CLOSING CREDIT BALANCE IN THE BOOKS OF M/S. BHAIJI MOTORS PVT. LTD. AS ON 28 TH MAY 2007, WAS ` 2,87,701 AND HENCE, THERE WAS A CREDIT OF ` 27,03,413, BUT THE LEARNED COMMISSIONER OF INCOME TAX HAD WRONGLY MENTIONED THA T THERE WAS A DEBIT BALANCE OF ` 7,12,299. THE LEARNED COUNSEL HAS CATEGORICALLY STATED THAT IT WAS A WRONG MENTIONING OF FACTS BY THE L EARNED COMMISSIONER OF INCOME TAX. HE HAS ALSO MENTIONED TH AT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT Y EAR 2008-09, THE SAID COPY OF ACCOUNT OF M/S. BHAIJI MOTORS PVT. LTD . WAS DULY FURNISHED BEFORE THE ASSESSING OFFICER. IN SUPPORT, AN EVIDENCE IN THE SHAPE OF COVERING LETTER IS AVAILABLE BEFORE ME. THE LEARNED COUNSEL HAS ALSO PLACED RELIANCE ON A DECISION OF SUBRATA PA NI V/S CIT, 114 ITD 677 (KOL.), WHEREIN IT WAS HELD THAT IF TWO VIEWS AR E POSSIBLE AND THE INCOME TAX OFFICER HAD TAKEN ONE VIEW WITH WHICH THE L EARNED COMMISSIONER OF INCOME TAX HAD DISAGREED, IT COULD N OT BE TREATED AS AN ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVEN UE UNLESS THE VIEW OF THE ASSESSING OFFICER WAS LEGALLY UNSUSTAINABLE. SHRI SHYAM K. BORELE 5 5. FROM THE SIDE OF THE REVENUE, THE LEARNED DEPARTMENTAL REPRESENTATIVE, SHRI NARENDRA KANE, APPEARED AND SUP PORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX. 6. I HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND HAVE P ERUSED THE COPY OF THE ACCOUNT FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE. I HAVE ALSO PERUSED THE ASSESSMENT ORDER IN QUESTION WHI CH WAS PASSED UNDER SECTION 143(3) DATED 30 TH DECEMBER 2010. AS PER PARA-3 OF THE ASSESSMENT ORDER, I HAVE NOTED THAT THE LEGAL REPRES ENTATIVE OF THE ASSESSEE HAD ATTENDED THE PROCEEDINGS FROM TIME TO TIM E. THE ASSESSING OFFICER HAS MENTIONED THAT THE BOOKS OF ACC OUNT ALONG WITH THE SUPPORTING BILLS AND VOUCHERS HAVE BEEN VERIFIED AND TEST CHECKED. IT WAS ALSO MENTIONED BY THE ASSESSING OFFICER THAT T HE ENTRIES OF THE BANK STATEMENTS AND CONFIRMATIONS HAVE ALSO BEEN VER IFIED IN THE LIGHT OF THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE. BY T HESE OBSERVATIONS OF THE ASSESSING OFFICER, IT IS APPARENT THAT THE ACC OUNTS HAVE BEEN EXAMINED BY THE ASSESSING OFFICER. NOW, THE NEXT QUES TION IS WHETHER THE LEARNED COMMISSIONER OF INCOME TAX HAS RIGHTLY N OTED THE FACTS OF THE CASE PERTAINING TO THE DAY-TO-DAY POSITION OF THE OU TSTANDING BALANCE OF THE ASSESSEE IN THE BOOKS OF M/S. BHAIJI M OTORS PVT. LTD. THE ACCOUNTS, AS PRODUCED BEFORE ME, REFLECTS THE OPENING CREDIT BALANCE AS ON 1 ST APRIL 2007 OF THE ASSESSEE IN THE BOOKS OF M/S. BHAI JI MOTORS PVT. LTD. WAS ` 1,66,02,757. FURTHER, THIS ACCOUNT HAS ALWAYS REFLECTE D SHRI SHYAM K. BORELE 6 A CREDIT BALANCE THROUGHOUT THE YEAR. AS FAR AS THE ENTRY AS ON 14 TH JUNE 2007 WAS CONCERNED, I HAVE NOTED THAT ON 28 TH MAY 2007, THERE WAS A CREDIT BALANCE OF ` 2,87,701 AND THEN THERE WAS A DEPOSIT OF ` 27,03,413, ON 14 TH JUNE 2007, THROUGH A CHEQUE OF BANK OF MAHARASHTRA, WHICH HAS RESULTED INTO A CREDIT BALANC E OF ` 29,91,114, AS ON 14 TH JUNE 2007. OUT OF THE SAID CREDIT BALANCE, M/S. BHAIJ I MOTORS PVT. LTD. HAD ISSUED A CHEQUE OF ` 10 LAKH ON 14 TH JUNE 2007 OF IDBI BANK, NAGPUR. EVEN AFTER ISSUANCE OF CHEQUE OF ` 10 LAKH, THERE WAS A CREDIT BALANCE REMAINED OF ` 19,91,114. THEREFORE, IT APPEARS THAT UNDER SOME MISTAKEN IMPRESSION THE LEARNED COMMISSION ER OF INCOME- TAX HAD MADE AN OBSERVATION THAT THERE WAS A DEBIT BALAN CE OF ` ` .7,12,299/- IN THE BOOKS OF M/S BHAIJI MOTORS P. LTD. THE EVIDENCE AS PLACED BEFORE THIS BENCH HAS REFLECTED A DIFFERENT PO SITION OF ACCOUNTS. SINCE IT APPEARS TO BE A FACTUAL ERROR WHICH CAN ON LY BE EXAMINED AND IF FOUND CORRECT CAN BE RECTIFIED BY THE OFFICER WHO H AS COMMITTED THE SAME. THEREFORE, IN THE INTEREST OF NATURAL JUSTICE, I DEEM IT PROPER AS WELL AS JUSTIFIABLE TO RESTORE THIS ISSUE BACK TO THE FILE OF LEARNED C.I.T. SO THAT HE CAN REEXAMINE THE STATEMENT OF ACCOUNTS OF THE ASSESSEE IN THE BOOKS OF M/S BHAIJI MOTORS P. LTD. AND VICE-VERS A. IF ON EXAMINATION IT IS FOUND THAT THERE WAS NO ADVANCE BY THE SAID COMPANY TO THE ASSESSEE, THEN NATURALLY THE PROVISIONS OF SECTION 2(22)(E) SHOULD NOT BE INVOKED. THERE IS ONE MORE AS PECT OF THIS ISSUE SHRI SHYAM K. BORELE 7 WHICH HAS ALSO BEEN MENTIONED BEFORE THE BENCH THAT A N EXCEPTION HAS BEEN PROVIDED THAT THE DEEMED DIVIDEND DOES NOT IN CLUDE ANY ADVANCE OR LOAN MADE TO A SHARE HOLDER OF A COMPANY IF IT IS IN THE ORDINARY COURSE OF HIS BUSINESS, WHERE THE LANDING O F MONEY IS SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. SINC E THE MATTER IS HEREBY RESTORED FOR READJUDICATION, THEREFORE, ALL T HE ASPECTS CLAIMING UNJUST INVOCATION OF SECTION 2(22)(E) CAN BE EXAMIN ED AFRESH. WITH THESE DIRECTIONS, THE GROUNDS RAISED BY THE ASSESSEE M AY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF MAY, 2015. SD/ - . .. . . . . . R.C. SHARMA ACCOUNTANT MEMBER SD/ - SD/- MUKUL K. SHRAWAT JUDICIAL MEMBER NAGPUR, DATED: 27 TH MAY, 2015 SHRI SHYAM K. BORELE 8 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY A SSISTANT REGISTRAR ITAT, NAGPUR