DEVENDRA RAJNIKANT LADHANI, MUMBAI V. ACIT, CC,- 3,THANE, THANE

ITA 1824/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6913 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 06-10-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Document seized; Additional evidence; Deemed dividend; Documents seized
• Section: 132; 143(3); 153A; 2(22)(e); 234B; 250; 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, AM & Ms. KAVITHA RAJAGOPAL, JM आयकरअपीलसं./ I.T. A. No. 1824/Mum/ 2020 (निर्धारणवर्ा / Assess ment Year: 2014-15) Devendra Rajnikant Ladhani, 1, Om Bunglow, Opp- Rishi Vihar Complex, Bolinj Road, Virar(W), Distt-Palghar, Maharashtra-401303 बिधम/ Vs. ACIT Cen. Cir – 3, 6 th floor, Ashar IT Park, Wagle Industrial Estate, Roade No. 16Z, Thane (W), Maharashtra-400 604 स्थायीलेखासं./जीआइआरसं./PAN N o . ABFPL5079C (अपीलाथी/Appellant) : (प्रत्यथी / Respondent) अपीलाथीकीओरसे/ Appellant by : Shri Subodh Ratnaparkhi, Ld. AR प्रत्यथीकीओरसे/Respondent by : Shri Prabhat Kumar Gupta, Ld. DR सुनवाईकीतारीख/ Date of Hearing : 28.02.2022 घोषणाकीतारीख / Date of Pronouncem ent : 15.03.2022 आदेश / O R D E R Per Kavitha Rajagopal, Judicial Member: The present appeal has been filed by the assessee for the Assessment Year (AY) 2014-15 as against the impugned order of the Ld. Commissioner of Income Tax (Appeals) – 11, Pune dated 2 I . T . A . N o . 1824/ M u m / 2 0 2 0 Devendra Rajnikant Ladhani 23.03.2020 u/s 250 of Income Tax Act. The following are the grounds raised by the assessee:- 1. The Hon. CIT(A) erred in not admitting the additional evidences produced u/r 46A of the I.T. Rules, 1962, to support the argument that the provisions of section 2(22)(e) were not attracted in respect of the business advance by M/s. MAAD Realtors & Infra Ltd. to M/s. D.M. Logistic Pvt. Ltd. thereby denying the appellant opportunity to support his arguments, which action being not as per law may kindly be overruled and the Hon. CIT(A) may be directed to admit the additional evidences and consider the same in deciding the merits of the addition. 2. The Hon. CIT(A) erred in upholding the addition of Rs. 19,61,500/- u/s 2(22)(e) of the I. T. Act, 1961 as deemed dividend on account of advance by M/s. MAAD Realtors & Infra Ltd. to M/s. D.M. Logistic Pvt. Ltd. not appreciating that the said advance was towards acquisition of developable FSI and therefore being a trade advance was outside the ambit of section 2(22)(e) of the I. T. Act, 1961 and therefore the addition was not justified. 3. The appellant craves leave to add, alter, amend and/or vary the above grounds of appeal at any time before the decision of the appeal. 2. The brief summary of the facts are that the assessee is one of the director of the MAAD Group of companies which is engaged in the business of construction of residential and commercial buildings and also buying and selling of land, FSI in area surrounding Virar and Nalasopara. Following a search and seizure action u/s 132 of the Act in MAAD Group of companies on 31.07.2014, the assessee‟s residential premise was also 3 I . T . A . N o . 1824/ M u m / 2 0 2 0 Devendra Rajnikant Ladhani subjected to search. The assessee filed the return of income subsequent to notice issued u/s 153A for the relevant assessment year and declared Rs. 84,53,689/- as total income excluding declaration made on account of cash found. After the completion of the assessment by the AO u/s 143(3) r.w.s. 153A, the total income was determined to the tune of Rs. 2,54,47,115/- as against the returned income of Rs. 1,65,47,850/- which was on the basis of seized documents from the office of MAAD Realtors and Infra Ltd, indicating loans given to D. M. Logistic Pvt. Ltd., in which the assessee being substantial share holder in both the concerns, the AO treated it as deemed dividend of the assessee u/s 2(22)(e) of the I.T. Act. 3. Aggrieved by the above, the assessee was in appeal before the Ld. CIT(A) on the addition of Rs. 88,99,265/- u/s 2(22)(e) of the Act and the interest charged u/s 234A, 234B & 234C of the Act. The Ld. CIT(A) confirmed the addition of 50% only to the extent of Rs. 39,23,000/- as deemed dividend u/s 2(22)(e) of the Act only for the year under consideration and directed to assess 50% of deemed dividend for FY 2011-12 and 2012-13 for the advance of Rs. 66,48,503 and Rs. 72,27,028/- respectively. The Ld. CIT(A) also confirmed the interest payable u/s 234A, 234B & 234C and also rejected the admission of additional evidence on the ground that the documents to be produced as additional evidence does not explain or certify the claim made by the assessee as they were not relied upon during the assessment proceedings. 4 I . T . A . N o . 1824/ M u m / 2 0 2 0 Devendra Rajnikant Ladhani 4. In this factual background, the Ld. AR submitted that the additional evidence may be adduced before the AO and stated that the assessee was on a misconception that section 2(22)(e) of the Act would not be attracted in the present case. The Ld. AR denied the fact that it was not assessee‟s borrowal money and relied on the decision of Hon‟ble Bombay High Court in the case of „Smt Prabhavati S. Shah Vs. Commissioner of Income Tax (1998) 231 ITR 1 (Bom) with regard to adducing additional evidence before Ld. CIT(A). 5. The Ld. DR on the other hand, contends that the assessee has not filed any affidavit stating that he has misunderstood the provision of Section 2(22)(e) of the Act and insisted the Ld. AR to file an affidavit for the same. The Ld. AR in reply to this, stated that it has been taken up before the AO and is thus reflected in para 7.4 of AO‟s order. The Ld. AR prayed that the matter be remanded back to Ld. CIT(A) for fresh consideration with the direction to permit the assessee to adduce the specified additional documentary evidence. 6. We have considered the rival submission and perused the material placed on record. Before adjudicating the ground of appeal, it is pertinent to decide on the issue of condonation of delay of 50 days in filing the appeal. The assessee reasoned the delay for the Covid protocol for which there was no objection by the Ld. DR in condoning the delay. We are thereby condoning the delay of 50 days as per the request of the Ld. AR. 5 I . T . A . N o . 1824/ M u m / 2 0 2 0 Devendra Rajnikant Ladhani 7. The pre-dominant issue that has to be decided in the present appeal is whether the Ld. CIT(A) has erred in not admitting the additional evidence produced u/s 46A of the I.T. Rules, 1962, to substantiate the fact that Section 2(22)(e) of the Act does not apply to the assessee‟s present case and subsequently to decide on the issue that the addition u/s 2(22)(e) has to be deleted or upheld. 8. We are of the considered opinion that the first ground of appeal has to be decided primarily on the basis of the facts of the case and the authorities to be relied on. The balance sheet of MAAD Realtors & Infra Ltd and M/s D. M. Logistics Pvt. Ltd. seized during the search proceedings reflected loan of Rs. 1,77,98,531/- borrowed by M/s D. M. Logistics Pvt. Ltd. from M/s MAAD Realtors & Infra Ltd. on 31.03.2014 when the assessee is a director holding 22.75% share in M/s MAAD Realtors & Infra Ltd. and 50% share in M/s D. M. Logistics Pvt. Ltd. The AO concluded that the assessee being share holder holding 50% share in M/s D. M. Logistics Pvt. Ltd. an amount totaling of Rs. 88,99,265/- (50% of the impugned loan) as deemed dividend in the hands of the assessee and balance 50% in the hands of the other share holder /director Shri Mukesh Sonar. This was further reduced by the Ld. CIT(A) to the extent of Rs. 39,23,000/- as the actual payment by M/s MAAD Realtors & Infra Ltd. to M/s D. M. Logistics Pvt. Ltd. during the previous year relevant to AY 2014-15 and on addition of 50% of the said amount was added by the Ld. CIT(A) to the tune of Rs. 6 I . T . A . N o . 1824/ M u m / 2 0 2 0 Devendra Rajnikant Ladhani 19,61,500/- with the direction to reopen the earlier assessment years to account the balance amount determined by the AO. The assessee before the Ld. CIT(A) contended that he had misinterpreted the provision of section 2(22)(e) and had sought for an opportunity to produce additional evidence to substantiate his claim which was mentioned as a business transaction between both the companies and the impugned loan was only on advance by M/s MAAD Realtors & Infra Ltd. to M/s D. M. Logistics Pvt. Ltd. for the purpose of acquisition of agricultural land at some village from one Shri Dilip Kishor Kansaw and other for the purpose of buying developable FSI to the extent of 30,000 Sq. ft after conversion of land for non-agriculture purpose after obtaining the necessary sanction from the local authorities. The consideration was fixed for Rs. 700 per Sq. Ft. It was contended that the payment made by M/s MAAD Realtors & Infra Ltd. to M/s D. M. Logistics Pvt. Ltd. is towards acquisition of the said FSI as per the MOU between both the companies. It was further contended that M/s MAAD Realtors & Infra Ltd. has also made direct payment to the land owner Shri Dilip Kansaw and M/s D. M. Logistics Pvt. Ltd. could not execute conveyance deed from land owners owing to unexplained reasons. As the additional evidence pertains to the said transaction which according to the Ld. AR is a business transaction was not accepted by the Ld. CIT(A) since it was not taken up before the AO. The Ld. AR relied on a catena of judgments which state that keeping in view the complexity and specialization of tax law, there might be situation the assessee may not be aware of certain provision and 7 I . T . A . N o . 1824/ M u m / 2 0 2 0 Devendra Rajnikant Ladhani such ignorance has been treated as a proper explanation in certain situation. While considering the decision of the jurisdictional Bombay High Court in the case of Smt. Prabhavati S. Shah‟s case (1998) 231 ITR 1 (Bom), a new dimension to the provision relating to admission of additional evidence before Ld. CIT(A) was considered. The Hon‟ble Bombay High Court rejected the contention of Ld. CIT(A) and held that under section 250(4), the Ld. CIT(A) was empowered to make such further inquiry as he thinks fit and such power being quasi judicial power, it was incumbent on him to exercise the same if the facts and circumstances justify. 9. In „Smt. Mohindar Kaur Vs Central Govt. (1976) 104 ITR 120‟, “Section 250(5) confers power upon Ld. CIT(A) to permit the appellant to raise a fresh point which has not been even touched by rule 46A. The Court finally held that Rule 46A is not ultra virus section 250 or 251 of the Act. On the contrary, it gives a right to the appellant to produce additional evidence which was earlier not available to him.” 10. Though in the present case, the additional evidence was available with the assessee he was prevented by adducing the same due to wrong interpretation of the provision. We are of the considered opinion that the assessee may be given an opportunity to be heard before the Ld. CIT(A) and the Ld. CIT(A) is directed to consider the additional evidence and adjudicate the matter in the light of those evidences produced by complying with the procedures enumerated in Rule 46(A)(3) of the Income Tax 8 I . T . A . N o . 1824/ M u m / 2 0 2 0 Devendra Rajnikant Ladhani Rules 1962. Since the second ground of appeal has to be adjudicated afresh based on the additional evidence before the Ld. CIT(A), it becomes infructuous. The matter is remanded back to the Ld. CIT(A) with the above observation. 11. In the result, the appeal filed by the assessee is allowed for statistical purposes. Orders pronounced in the open court on 15.03.2022. Sd/- Sd/- (Om Prakash Kant) (Kavitha Rajagopal) Accountant Member Judicial Member मुंबई Mumbai;ददनांकDated : 15.03.2022 Sr.PS. Dhananjay आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) 4. आयकरआयुक्त/ CIT- concerned 5. दवभागीयप्रदतदनदध, आयकरअपीलीयअदधकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER, .उि/सहधयकिंजीकधर (Dy./Asstt.Registrar) आयकरअिीिीयअनर्करण, मुंबई/ ITAT, Mumbai