MUKESH THAKURDAS JAISINGHANI, ULHASNAGAR V. DCIT CIR 2, KALYAN

ITA 1803/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8129 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: SUDHIR V HUNNARGIKAR
• Keywords: Salary income; Opportunity of being heard; Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 1803 / MUM/20 16 ( ASSESSMENT YEAR : 2011 - 12 ) SHRI MUKESH THAKURDAS JAISINGHANI, 202, 2 ND FLOOR, RATAN DEEP APARTMENT, SAPNA GARDEN R OAD, SECTOR 17 ULHASNAGAR VS. DCIT CIR 2, KALYAN 421 301 PAN/GIR NO. ADOPJ7369L APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI SUDHIR V HUNNARGIKAR REVENUE BY SHRI RAM TIWARI DATE OF HEARING 28 / 11 /201 7 DATE OF PRONOUNC EME NT 18 / 12 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 3, THANE DATED 01/12/2015 FOR A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S .143(3) OF THE IT ACT. 2. THE FOLLOWIN G GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - (1) (A) FOR THAT ON PROPER CONSTRUCTION OF THE FACTS OF THE CASE AND THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') BOTH THE LEARNED COMMISSIONER OF INCOME TAX (A) - 3, THANE AND THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 2, KALYAN HAVE TOTALLY MISCONSTRUED THE RELEVANT FACTS OF THE CASE OF THE IMPUGNED ASSESSMENT YEAR IN QUESTION (2011 - 12) AND FAILED TO APPRAISE THE EXACT NATURE OF PAYMENT MADE BY DHEERAJ E STATES PRIVATE LIMITED(DEPL) & TO ARRIVE AT THE PROPER DETERMINATION OF THE QUANTUM OF THE DEEMED DIVIDEND WITHIN THE MEANING OF THE ITA NO. 1803/MUM/2016 SHRI MUKESH THAKURDAS JAISINGHANI 2 PROVISIONS OF SECTION 2(22)(E) OF THE ACT AS IT IS PERTINENT TO NOTE THAT THE NATURE OF PAYMENT MADE BY THE COMPANY(DEPL) T HROUGH MUTUAL, OPEN, RUNNING AND CURRENT ACCOUNT TO THE SHAREHOLDER DURING THE CONCERNED RELEVANT YEAR IN ANY CASE CANNOT BE CONSTRUED AS THE PAYMENT IN THE NATURE OF LOANS AND ADVANCES TO BE CONSIDERED AS THE DEEMED DIVIDEND UNDER THE PURVIEW OF THE SECTI ON 2(22)FE) OF THE ACT ON THE FOLLOWING GROUNDS: - (I) THE NATURE OF THE FIRST TYPE OF PAYMENT IS THE REMUNERATION TO THE DIRECTOR OF RS.12,00,000/ - ON ACCOUNT OF INDEBTEDNESS OF THE COMPANY AND IS NOTHING BUT THE PAYMENTS MADE IN THE NATURE OF REGULAR EXPE NDITURE DURING THE ORDINARY COURSE OF BUSINESS TRANSACTIONS OF THE COMPANY, (II) THE NATURE OF OTHER TYPE OF AMOUNT GIVEN BY THE COMPANY (DEPL) TO THE SHAREHOLDER(APPELLANT) IS THE REPAYMENT (AND NOT THE PAYMENT] OF THE AMOUNT OF RS. 7,00 ,000/ - OUT OF THE AMOUNT GIVEN BY HIM TO COMPANY. (ALL THE REQUISITE EVIDENCE CALLED FOR IN THIS REGARD WAS FURNISHED BEFORE THE APPELLATE AUTHORITY AND WAS ALSO AVAILABLE BEFORE ASSESSING AUTHORITY) (B) FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) - 3, THANE FAILED TO CONSIDER THAT A MUTUAL, OPEN, RUNNING AND CURRENT ACCOUNT MAINTAINED BY THE SAID COMPANY AND PAYMENT MADE TO THE APPELLANT EVEN IF THEY ARE RELATED PARTIES UNDER SECTION 2(22)(E) IN THE NORMAL COURSE OF BUSINESS CANNOT BE TREATED AS LOANS OR ADVANCES WITH OUT CONSIDERING THE RECOGNIZED DISTINCTION MADE AS PER ARTICLE 1 AND 19 OF SCHEDULE TO THE LIMITATION ACT, 1963 IN RESPECT OF THE VARIOUS ITEMS OF THE LOANS OR ADVANCES ADOPTED BY THE COURTS TO DETERMINE THE EXACT NATURE OF THOSE TRANSACTIONS (RELIED ON TH E DECISIONS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DURGA PRASAD MANDELIA VS. REGISTRAR OF COMPANIES (1987) 61 COMP.CAS.479 AND PENNWALT INDIA LTD.'S CASE (SUPRA). (C) FOR THAT NOT EVEN CONSIDERING THE BASIC FACTS OF THE LEDGER EXTRACT OF ACCOUNT O F THE APPELLANT - (MUKESH T. JAISINGHANI - LOAN AGAINST PROPERTY) APPARENT FROM THE FACE OF THE ASSESSMENT ORDER ITSELF, PASSED UNDER SECTION 143(3) OF THE ACT BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 2, KALYAN DATED 3 RD MARCH, 2014 (PAGE NO.6/7 OF THE A.OJ AND THE NON APPLICATION OF THE JUDICIAL MIND FOR THE PROPER TREATMENT OF THE ABOVE REFERRED TRANSACTIONS (FY - 2010 - 11) OF (I) RE - PAYMENT (RS.70OOOO/ - )+AMOUNT DEBITED - T.D.S. ON SALARY (RS.279OOO/ - )# TO THE APPELLANT OUT OF THE AMOUNT RECEIVED (RS.600 0000/ - )## BY THE SAID COMPANY AND (II) PAYMENTS (RS.L200OOO/ - )### MADE TOWARDS THE REMUNERATION TO DIRECTOR ON ACCOUNT OF INDEBTEDNESS & THE PURPORTED FINDINGS IN THIS BEHALF HAS BEEN ARRIVED AT BY THE C.I.T.(A) - 3, THANE BY IGNORING THE RELEVANT MATERIALS AND/OR BY TAKING IN TO CONSIDERATION OTHER IRRELEVANT AND/OR EXTRANEOUS MATERIALS AND FINALLY CONCLUDING UPON THE IMPROPER SURMISES ITA NO. 1803/MUM/2016 SHRI MUKESH THAKURDAS JAISINGHANI 3 ADOPTED THE ERRONEOUS AMOUNT AS DEEMED DIVIDEND WITHIN THE PURVIEW OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND SAME IS THEREFORE WHOLLY, ARBITRARY, UNREASONABLE AND PERVERSE. [THE ANALYTICAL REVIEW FOR THE DETERMINATION OF PROPER QUANTUM OF THE QUALIFYING AMOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT - ANNEXURE - I & THE STATEMENT OF DATE WISE DR/CR BALANCE OF THE TRA NSACTIONS (FY - 2010 - 11) ANNEXURE - II FOR EVALUATING THE PROPER ELIGIBLE OF DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT IS ENCLOSED HEREWITH FOR YOUR PERUSAL. (D) FOR THAT THE FINDINGS MADE IN THE APPELLATE ORDER PASSED ON 1ST DECEMBER, 2015 PASSED U/SEC. 250 OF THE SAID ACT (PARA NO.5(IV)(A TO G)/ INDEX PAGE NO.: - 18/19) ARE EXTRANEOUS AND SEEMS NOT TO HAVE BEEN CONCLUDED JUDICIOUSLY: - (I) WHEN ALL THE MATERIAL EVIDENCE CALLED FOR IN THIS REGARD WITHIN THE POWERS OF SEC. 25O OF THE ACT WAS FURNISHED IN THE APPELL ATE PROCEEDINGS, (II) WHEN ALL THE RELEVANT MATERIAL RECORDS IN THIS REGARD WERE ALSO AVAILABLE BEFORE THE ASSESSING AUTHORITY, (HI) WHEN IN FACT THE APPELLANT HAS MADE UP A FIT CASE DURING THE APPELLATE PROCEEDINGS FOR THE DETERMINATION OF PROPER QUANTUM OF THE QUALIFYING AMOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT, (IV) EVEN WITHOUT DEMANDING FOR THE REMAND REPORT OF THE ASSESSING AUTHORITY OR GOING IN TO THE MERITS OF THE PLEA AND FACTS OF THE CASE, AS THE APPELLATE AUTHORITY HAS DENIED THE PROPER OPPORTUNITY OF BEING HEARD IN THIS REGARD BEFORE REJECTING THE SAME, ONLY UPON THE ARBITRARY INFERENCE THAT THE SAID PLEA WAS NOT TAKEN BY THE APPELLANT BEFORE THE ASSESSING AUTHORITY AT THE TIME OF THE SCRUTINY PROCEEDING AND THUS HAVE CAUSED THE TOTAL GR OSS INJUSTICE TO THE APPELLANT. (E) FOR THAT THE ORDER DATED 1 ST DECEMBER, 2015 PASSED U/S 250 OF ACT BY THE C.I.T.(APPEALS) - 3, THANE BEARING I.T.A.NO.: - 1375/13 - 14 FOR THE ASSESSMENT YEAR 2011 - 12 APPEALED AGAINST IS OTHERWISE ERRONEOUS ON FACTS AND/OR IN L AW AND NEEDLESS TO SAY THAT WHILE EXERCISING THE POWERS U/S 246A OF THE ACT, THE APPELLATE AUTHORITY HAS NOT EXERCISED HIS DIRECTION IN ACCORDANCE WITH THE LAW & REASON. (2) THE APPELLANT MOST RESPECTFULLY URGE FOR THE ADMISSION OF THE NEW PLEA AS CONTENDE D BEFORE THE APPELLATE AUTHORITY U/S 254 OF THE ACT TO ASSESS THE CORRECT TAX LIABILITY OF THE APPELLANT. (NATIONAL THERMAL V CIT,229 ITR 383SC) (3) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR MODIFY THE GROUNDS TAKEN HERE. (4) THE SUBSTANTIAL QU ESTIONS OF FACTS & LAW INVOLVED IN THIS APPEAL ARE: (A) WHETHER ON A TRUE AND PROPER CONSTRUCTION OF THE FACTS OF THE CASE AND THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961 THE AMOUNT OF RS. 1900000/ - COMPRISING OF FT) RE - PAYMENT (RS.70OOO O/ - )# TO THE APPELLANT OUT OF THE AMOUNT RECEIVED ITA NO. 1803/MUM/2016 SHRI MUKESH THAKURDAS JAISINGHANI 4 (RS.6000000/ - )## BY THE SAID COMPANY AND (II) PAYMENTS (RS. 12OOOOO/ - )### MADE ON ACCOUNT OF INDEBTEDNESS OF THE SAID COMPANY TOWARDS THE REMUNERATION TO THE DIRECTOR THROUGH THE MUTUAL, OPEN, RUNNING AND C URRENT ACCOUNT IN THE ORDINARY COURSE OF BUSINESS OF THE COMPANY TO THE INTERESTED DIRECTOR (APPELLANT) OF THE SAID COMPANY IS CHARGEABLE TO TAX AS THE DEEMED DIVIDEND WITHIN THE PURVIEW OF SECTION 2(22)(E) OF THE SAID ACT.? (B) WHETHER THE PURPORTED WORKI NG OF THE QUANTUM OF DEEMED DIVIDEND OF RS. 19,00,000/ - WITHIN THE PURVIEW OF SECTION 2(22)(E) OF THE SAID ACT DERIVED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 3, THANE AND DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 2, KALYAN IS CORRECT AND PROPER? (C) W HETHER THE PURPORTED FINDING IN APPELLATE ORDER DATED 1 ST DECEMBER, 2015 PASSED UNDER SECTION 250 OF THE SAID ACT (PARA NO.5(IV)(A TO G)/PAGE NO. 9 AND 10 OF THE APPELLATE ORDER) IS RELEVANT OR EXTRANEOUS WHEN IN FACT ULTIMATELY THE APPELLATE AUTHORITY HAS ARBITRARILY CONCLUDED UPON THE INFERENCE THAT THE SAID PLEA WAS NOT TAKEN BY THE APPELLANT BEFORE THE ASSESSING AUTHORITY AT THE TIME OF THE SCRUTINY PROCEEDING AS THE APPELLANT HAS MADE UP A FIT CASE DURING THE APPELLATE PROCEEDINGS FOR THE DETERMINATION OF PROPER QUANTUM OF THE QUALIFYING AMOUNT OF DIVIDEND U/S 2(22)(E) OF THE ACT. (D) WHETHER THE PURPORTED DECISION OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 3, THANE IS BASED ON PROPER RELEVANT MATERIAL OR HAS BEEN ARRIVED AT BY IGNORING THE RELEVANT MA TERIALS AND/OR BY TAKING IN TO CONSIDERATION OTHER IRRELEVANT AND/OR EXTRANEOUS MATERIALS AND/OR ARE OTHERWISE ARBITRARY, UNREASONABLE AND PERVERSE? 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. SHORT ISSUE IN THIS CASE RELATES TO TREATI NG THE AMOUNT OF RS.19 LAKHS RECEIVED BY THE ASSESSEE FROM M/S. DHEERAH ESTATES PRIVATE LIMITED AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. AT THE OUTSET, LEARNED AR PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN CASE OF BROTHER OF ASSESSEE MR. RAJU THA KURDAS JAISINGHANI DATED 27/07/2016, WHEREIN ISSUE WAS CONSIDERED AND IT WAS HELD THAT AMOUNT SO RECEIVED FROM M/S. DHEERAJ ESTATES PRIVATE. LTD. , WAS NOT IN THE NATURE OF LOANS AND ADVANCES BUT IN THE NATURE OF REMUNERATION RECEIVED AS DIRECTOR OF THE C OMPANY AND REPAYMENT OF LOAN GIVEN BY ASSESSEE. ITA NO. 1803/MUM/2016 SHRI MUKESH THAKURDAS JAISINGHANI 5 5. WE HAD GONE THROUGH THE ORDER OF THE TRIBUNAL AND FOUND THAT EXACTLY SIMILAR ISSUE WAS DECIDED BY TRIBUNAL IN FAVOUR OF ASSESSEE AFTER HAVING FOLLOWING OBSERVATION: - 3. RIVAL CONTENTIONS HAVE BEEN HEARD AN D RECORD PERUSED. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORT HIRING SERVICES UNDER THE NAME AND STYLE M/S RAJU ROADLINES. THE ASSESSEE IS ALSO A PARTNER IN VARIOUS FIRMS, FROM WHERE HE HAD RECEIVED SHARE OF PROFIT, INTEREST ON CAPITAL AND REMUNERATION. BESIDES ABOVE INCOME, HE HAD SALARY INCOME FROM M/S DHEERAJ ESTATES PVT. LTD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD WITHDRAWN AN AMOUNT OF RS.20,00,000/ - FROM THE ACCOUNT OF M/S DHEERAJ ESTATES PVT. LTD., WHERE HE OWNS 25% OF THE TOTAL SHARE HOLDINGS. IN THE COURSE OF ASSESSMENT U/S.143(3) THE AO MADE AN ADDITION OF RS.20,00,000/ - U/S.2(22)(E) OF THE ACT BY OBSERVING THAT ASSESSEE WAS IN RECEIPT OF AMOUNT FROM THE COMPANY IN WHICH HE WAS HAVING 25% OF TOTAL SHARE HOLDING. FROM THE RECORD WE FOUND THAT A SUM OF RS.11,60,000/ - WAS RECEIVED BY ASSESSEE AS A DIRECTOR OF THE COMPANY. THE AMOUNT RECEIVED ON ACCOUNT OF DIRECTORS REMUNERATION WHICH HAVE BEEN DULY OFFERED FOR TAX AS I NCOME CANNOT BE HELD IN THE NATURE OF LOAN SO AS TO ATTRACT PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 4. I ALSO FOUND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE DEPOSITED AN AMOUNT OF RS.75 LAKHS TO M/S DHEERAJ ESTATES PRIVATE LIMITED IN DECEMB ER 2010. THEREFORE, ALL THE PAYMENTS MADE BY M/S DHEERAJ ESTATES PRIVATE LIMITED TO THE ASSESSEE AFTER THE RECEIPT OF RS.75 LAKHS (I.E. RS.9.50 LAKHS) CANNOT BE CONSTRUED AS LOAN/ADVANCE BUT AS AMOUNTS PAID FROM THE SAID RS.75 LAKHS BRINGING IT OUT OF THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. IN VIEW OF THE ABOVE I FOUND THAT AN AMOUNT OF RS.11,60,000/ - WAS PAID ON ACCOUNT OF DIRECTORS REMUNERATION WHICH M/S DHEERAJ ESTATES PVT. LTD. WAS SUPPOSED TO PAY. A SUM OF RS.9.50 LAKHS WAS PAID OUT OF THE AMOUNT OF RS.75 LAKHS DEPOSITED BY THE ASSESSEE WITH DHEERAJ ESTATES PVT. LTD. IN DECEMBER, 2010. TOTAL OF THESE TWO PAYMENTS WORKED TO BE RS.21,10,000/ - (RS.11,60,000 + 9,50,000). THE PAYMENT MADE BY DHEERAJ ESTATES PVT. LTD. TO THE ASSESSED DURING THE YEAR WAS RS.20,00,000/ - , WHICH IS BELOW RS.21.10 LAKHS. ACCORDINGLY, NO ADDITION U/S.2(22)(E) IS WARRANTED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE CASE BEFORE US, FROM THE RECORD WE FOUND THAT OUT OF TOTAL PAYMENT OF RS.19 LAKHS ADDED BY A O U/S.2(22)(E), A SUM OF RS.7 LAKHS ITA NO. 1803/MUM/2016 SHRI MUKESH THAKURDAS JAISINGHANI 6 WAS RECEIVED BY THE ASSESSEE AS REPAYMENT OF THE AMOUNT DEPOSITED WITH THE COMPANY AND A SUM OF RS.12 LAKHS WAS TOWARDS REMUNERATION TO THE DIRECTOR. THE REPAYMENT OF LOAN WAS OUT OF AMOUNT ALREADY GIVEN TO THE COMPANY AND THE AMOUNT RECEIVED IN THE FORM OF REMUNERATION CANNOT BE TREATED AS LOANS AND ADVANCES SO AS TO ATTRACT PROVISIONS OF SECTION 2(22)(E). RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF BROTHER OF ASSESSEE DATED 27/07/2016, VIS - - VI S FACTS OF THE YEAR UNDER CONSIDERATION WE DO NOT FIND ANY MERIT FOR TREATING THE S UM OF RS.19 LAKHS RECEIVED BY ASSESSEE AS DEEMED DIVIDEND U/S.2(22)(E) OF THE IT ACT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. // O RDER PRONOUNCED IN THE OPEN C OURT ON THIS 18 / 12 /2017 S D/ - ( SANDEEP GOSAIN ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 18 / 12 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDE D TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//