Assistant Commissioner Income-tax, V. Deepesh M. Kotecha, Jalgaon

ITA 1803/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0519 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Deemed dividend; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1803/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2008-09 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 2, JALGAON ....... / APPELLANT ' /VS. DEEPESH M. KOTECHA, PADAM, TAPI NAGAR, BHUSAWAL, DISTT.-JALGAON PAN : ABPPK2142P / RESPONDENT ASSESSEE BY : SHRI SANKET JOSHI REVENUE BY : SHRI P.L. KUREEL / DATE OF HEARING : 25-10-2016 / DATE OF PRONOUNCEMENT : 04-11-2016 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, NASHIK DATED 23-0 7-2014 FOR THE ASSESSMENT YEAR 2008-09. 2 ITA NO. 1803/PN/2014, A.Y. 2008-09 THE ONLY ISSUE RAISED BY THE DEPARTMENT IN APPEAL IS DELE TING THE ADDITION OF ` 2,03,52,655/- MADE U/S. 2(22)(E) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 31-07-2008 DECLARING TOTAL INCOME OF ` 2,48,90,249/-. THE ASSESSMENT IN THE CASE OF ASSESSEE WAS COMPLETED U/S. 143(3) ON 29-1 1-2010. THE ASSESSEE HAS SUBSTANTIAL SHARE HOLDING IN M/S. TAPI PREST RESSED PRODUCTS PVT. LTD., A COMPANY IN WHICH PUBLIC IS NOT SUB STANTIALLY INTERESTED. DURING THE COURSE OF SCRUTINY ASSESSMENT IN THE CASE OF M/S. TAPI PRESTRESSED PRODUCTS PVT. LTD. IT WAS NOTICED T HAT THE COMPANY HAD ADVANCED LOANS TO THE TUNE OF ` 1,85,19,346/- TO THE ASSESSEE. REASSESSMENT PROCEEDINGS WERE INITIATED AND A CCORDINGLY NOTICE U/S. 148 WAS ISSUED TO THE ASSESSEE. DURING THE COURSE OF REASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS RECEIVED LOAN OF ` 2,03,52,655/- FROM THE AFORESAID COMPANY ON VARIOUS DATES DURING THE FINANCIAL YEAR 2007-0 8. THE ASSESSING OFFICER HELD THAT THE COMPANY IS HAVING SUFFICIENT ACCUMULATED PROFITS FROM WHICH THE ASSESSEE HAS WITHDRAWN AMOUNT, THEREFORE, DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE ATTRACTED. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 20-03-2013 PASSED U/S. 143(3) R.W.S. 148 INTER ALIA MADE AD DITION OF ` 2,03,52,655/- U/S. 2(22)(E) OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION U/ S. 3 ITA NO. 1803/PN/2014, A.Y. 2008-09 2(22)(E) OF THE ACT BY HOLDING THAT THERE IS NO DEBIT BALANCE OF THE ASSESSEE/APPELLANT IN THE BOOKS OF THE COMPANY. NOW, THE DEPARTMENT IS IN APPEAL AGAINST THE FINDINGS OF COMMISSIONER OF INCOME T AX (APPEALS). 3. SHRI P.L. KUREEL REPRESENTING THE DEPARTMENT SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION U/S. 2(22)(E) BY ACCEPTING CONTENTIONS OF THE ASSE SSEE. THE ASSESSEE DURING THE FIRST APPELLATE PROCEEDINGS HAD SUBM ITTED THAT THE ASSESSEE HAD SUFFICIENT BALANCE IN HIS ACCOUNT AND THE ACC OUNT OF HIS LATE FATHER AS IS APPEARING IN THE BOOKS OF THE COMPANY. THE OVERALL BALANCE THAT IS CONSIDERING BOTH THE ACCOUNTS HAVE SUFFICIE NT BALANCE. A PERUSAL OF THE ACCOUNT EXTRACTS OF THE ASSESSEE AND HIS FATHER IN THE BOOKS OF COMPANY WOULD SHOW THAT THE ASSESSEE HAS ALRE ADY RECEIVED ` 1,98,97,204/- FROM THE ACCOUNT OF HIS LATE FATHER. THE CO MMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONSIDERING THE ABOVE FIGURES TWICE. THE EXTRACT OF ACCOUNTS SHOW THAT THERE IS CRED IT TRANSFER OF ` 43,62,500/- ON 03-07-2007 AND ` 1,55,34,704/- ON 04-07-2007 FROM THE ACCOUNT OF LATE SHRI M.K. KOTECHA TO THE ACCOUNT OF AS SESSEE. THUS, THE ASSESSEE HAS RECEIVED THE BENEFIT OF HIS FATHERS CR EDIT BALANCE IN COMPUTING LOAN ADVANCES BY THE COMPANY TO THE ASSESSE E. THE ASSESSEE HAS PLACED ON RECORD MEMORANDUM OF UNDERSTAN DING DATED 15-03-2007 BETWEEN THE ASSESSEE, HIS MOTHER SMT. PADMA VATI MOTILAL KOTECHA, AND HIS SISTER SMT. ANITA RAHUL KATARIA. IF THE T RANSFER OF CREDIT BALANCE FROM THE ACCOUNT OF FATHER TO THE ACCOUNT OF ASSESSEE IS CONSIDERED, THE DEEMED DIVIDEND U/S. 2(22)(E) WOULD BE ` 4,74,62,762/-. THE LD. DR REFERRED TO THE CALCULATIONS MADE IN THE STATE MENT OF FACTS 4 ITA NO. 1803/PN/2014, A.Y. 2008-09 FILED BY THE DEPARTMENT. THE COMMISSIONER OF INCOME TAX (A PPEALS) HAS GIVEN RELIEF TO THE ASSESSEE BY MERGING THE ACCOUNTS OF ASSESSEE AND HIS LATE FATHER. THERE IS NO SCIENTIFIC BASIS FOR SUCH AN ALYSIS AND NO COGENT INFERENCE CAN BE DRAWN FROM SUCH ANALYSIS. TH E LD. DR PRAYED FOR SETTING ASIDE THE FINDINGS OF COMMISSIONER OF INC OME TAX (APPEALS) ON THE ISSUE. 4. ON THE OTHER HAND SHRI SANKET JOSHI APPEARING ON BE HALF OF THE ASSESSEE VEHEMENTLY DEFENDED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION MADE U/S. 2(22)(E) OF THE ACT. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS MADE ADDITIO N U/S. 2(22)(E) OF THE ACT BY CONSIDERING ACCOUNT EXTRACT OF THE A SSESSEE ALONE IN THE BOOKS OF THE COMPANY. THE ASSESSING OFFICER IGNORED THE ACCOUNT OF HIS FATHER LATE SHRI M.K. KOTECHA IN THE BOOKS OF THE COMPANY. SHRI M.K. KOTECHA EXPIRED ON 26-05-2006. THE EN TIRE AMOUNT STANDING TO THE CREDIT OF LATE SHRI M.K. KOTHECHA IN THE BOOKS OF THE COMPANY BELONG TO ASSESSEE, EXCEPT ` 2.10 CRORES WHICH HAS BEEN PAID TO SMT. PADMAVATI MOTILAL KOTECHA IN TERMS OF MOU DATE D 15-03-2007. WHILE ARRIVING AT THE AMOUNT RECEIVABLE FROM T HE ASSESSEE IN THE BOOKS OF COMPANY ACCOUNTS OF ASSESSEE AND HIS FAT HER HAVE TO BE CONSIDERED SIMULTANEOUSLY AFTER REDUCING ` 2.10 CRORES PAID TO SMT. PADMAVATI MOTILAL KOTECHA. IF BOTH THE ACCOUNTS IN THE BO OKS OF THE COMPANY ARE CONSIDERED TOGETHER THEN THERE IS NO AMOU NT RECEIVABLE BY THE COMPANY FROM THE ASSESSEE DURING THE FINANCIAL YEAR 2 007-08. THE LD. AR PRAYED FOR DISMISSING THE APPEAL OF THE DEPARTMENT A ND UPHOLDING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). 5 ITA NO. 1803/PN/2014, A.Y. 2008-09 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS HAVING SUBSTANT IAL SHARE HOLDING IN THE COMPANY M/S. TAPI PRESTRESSED PRODUCTS PV T. LTD. IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED. THE ASSESSIN G OFFICER INVOKED THE PROVISIONS OF SECTION 2(22)(E) ON THE GROUND TH AT THE ASSESSEE HAS RECEIVED ADVANCE OF ` 2,03,52,655/- FROM THE AFORESAID COMPANY AND THE COMPANY HAS SUFFICIENT ACCUMULATED PROFITS AND RESERVES. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDER : .IT IS EVIDENT THAT IF THE FATHER'S ACCOUNT IS CONSOLIDATED WITH THE ACCOUNT OF THE APPELLANT, THEN THERE IS NO DEBIT BALANCE AND HENCE NO LOAN HAS BEEN RECEIVED BY THE APPELLANT. ON PERUSAL OF THE ASSESSMENT ORDER, REMAND REPORT A ND THE SUBMISSION OF THE APPELLANT, IT HAS BEEN NOTICED THAT IT IS UN DISPUTED FACT THAT THE FATHER OF THE APPELLANT, MR. M. K. KOTECHA EXPIRED ON 25/6/2006. IT IS ALSO A FACT THAT IN THE REMAND REPORT, THE A.O. HAS CONFIRMED THAT THE NET BALANCE AS ON 1/4/2007 IN THE BOOKS OF TPPPL IN THE NAME OF LATE SHRI M.K. KOTECHA WAS ` 4,52,61,219/-. THE A.O. HAS FURTHER MENTIONED IN THE REMAND REPORT IN PARA 3 THAT THIS AMOUNT IS DIS TRIBUTED FROM THE SAID ACCOUNT OF THE FATHER AS UNDER A) PADMAVATI KOTECHA ` 2,10,00,000 B) TRANSFERRED TO M.K. KOTECHA CURRENT A/C. ` 1,93,907 C) OTHERS ` 213 D) MRS. ANITA RAHUL KOTECHA ` NIL E) DIPESH MOTILAL KOTECHA : REMAINING AMOUNT ` 2,40,77,099 _______________ ` 4,52,61,219 THIS IS A MAXIMUM AMOUNT (I.E. ` 2,40,77,099/-), WHICH CAN BE CREDITED TO THE ACCOUNT OF THE ASSESSEE AS PER HIS OWN SUBMISSI ON BEFORE APPELLATE AUTHORITY IF AT ALL CONSIDERED.' 5.7 THEREFORE, IT IS EVIDENT THAT THE AMOUNT OF ` 2,40,77,099/- BELONGED TO THE APPELLANT AS ON 1/4/2007 AND THE AMOUNT RECE IVED BY HIM DURING 6 ITA NO. 1803/PN/2014, A.Y. 2008-09 F.Y. 2007-08 IS ` 2,03,52,655/- AS HELD BY THE A.O. THEREFORE, IF THI S AMOUNT OF ` 2,40,77,099/- RECEIVED BY THE APPELLANT FROM HIS DE CEASED FATHER IS CONSIDERED THEN THERE IS NO DEBIT BALANCE IN THE NAME OF THE APPELLANT IN THE BOOKS OF THE COMPANY TPPPL. IN VIE W OF THE ABOVE FACTS, THE A.O. IS NOT JUSTIFIED IN MAKING ADDITION OF ` 2,03,52,655/- ON ACCOUNT OF DEEMED DIVIDEND IN THE HANDS OF THE APPELLANT U/ S. 2(22)(E) OF THE ACT. THE ADDITION OF ` 2,03,52,655/- IS THEREFORE DELETED. THE A.O. IS DIR ECTED ACCORDINGLY. GROUND NOS. 1 AND 2 ARE ALLOWES. 6. THE CONTENTION OF THE ASSESSEE IS THAT NO AMOUNT IS RECEIVABLE IF ACCOUNTS OF ASSESSEE AND HIS FATHER ARE CONSIDERED TOGE THER. THE LD. DR HAS POINTED THAT THE SUBSTANTIAL AMOUNT STANDING TO THE CREDIT OF SHRI M.K. KOTECHA, FATHER OF ASSESSEE IN THE BOOKS OF COM PANY HAVE ALREADY BEEN TRANSFERRED TO THE ACCOUNT OF ASSESSEE ON 03-07-2007 AND 04-07-2007 AND THE COMMISSIONER OF INCOME TAX (APPEALS) H AS GIVEN THE BENEFIT OF SOME AMOUNT TWICE TO THE ASSESSEE. DURING THE PROCEEDINGS BEFORE COMMISSIONER OF INCOME TAX (APPEALS) REM AND REPORT WAS SOUGHT FROM THE ASSESSING OFFICER. THE COMMIS SIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE REMAND REPORT AND THE REPLY OF THE ASSESSEE THEREON AND THE ACCOUNTS OF THE ASSES SEE AND HIS FATHER IN THE BOOKS OF ACCOUNT TO THE COMPANY ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND DELETED THE ADDITION. WE CONCUR IN PRINCIPLE WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) THAT THE AMOUNTS STANDING TO THE CREDIT OF ASSESSEE AND HIS FATHER IN THE BOOKS OF COMPANY ARE TO BE TAKEN TOGETHER. HOWEVER, IN VIEW OF CONTENTIONS OF LD. DR THAT CREDIT BALANCE IN THE ACCOUNT OF THE FATHER OF THE ASSESSEE HAS BEEN C ONSIDERED TWICE, WE DEEM IT APPROPRIATE TO REMIT THE FILE BACK TO ASSESSIN G OFFICER FOR THE LIMITED PURPOSE TO VERIFY AND ASCERTAIN WHETHER THE AMOU NT STANDING TO 7 ITA NO. 1803/PN/2014, A.Y. 2008-09 THE CREDIT OF SHRI M.K. KOTECHA IN THE BOOKS OF COMPANY HA S BEEN CONSIDERED TWICE FOR DETERMINING THE AGGREGATE CREDIT BALA NCE IN THE ACCOUNT OF ASSESSEE IN THE BOOKS OF COMPANY. THE ASSES SING OFFICER AFTER VERIFICATION OF SAME SHALL PASS ORDER IN ACCORDANCE WIT H LAW, AFTER AFFORDING OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, THE 04 TH DAY OF NOVEMBER, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 04 TH NOVEMBER, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-II, NASHIK 4. ' / THE CIT-II, NASHIK 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE