DCIT 17(2), MUMBAI V. VIRENDRA B GALA, MUMBAI

ITA 1907/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3192 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2015
• Appeal Filed By: Department
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 20-03-2014
• Court: TRIBUNAL
• Department Lawyers: AGAINST PASSED
• Keywords: Additional evidence; Corroborative evidences; Deemed dividend; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F MUMBAI. BEFORE SHRI SHAILENDRA KUMAR YADAV , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ITA NO 1907 /MUM/201 4 ASSESSMENT YEAR: - 2007 - 08 . DY. COMMISSIONER OF INCOME TAX - 17(2), ROOM NO. 217, 02 ND FLOOR, PIRAMAL CHAMBERS, MUMBAI - 400 012. V. VIREND RA B. GALA 95 - 22C, MAHAVIR BUILDING COMPOUND BHANDARKAR ROAD, MATUNGA, C.R., MUMBAI 4000019. PAN/GIR NO. AAA PG9747J APPELLANT RESPONDENT ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER PASSED BY THE C OMMISSIONER OF I NCOME T AX (A PPEALS ) - 29,MUMBAI (HEREINAFTER CALLED THE CIT(A)) DATED 25.12.2013, FOR THE ASSESSMENT YEAR 2007 - 08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEALS IN THE MEMO OF APPEAL FILED : - REVENUE BY SMT ABANI KANTA NAYAK ASSESSEE BY SHRI REEPAL G.T R ALSHWAL A DATE OF HEARING 09.09.2015 DATE OF PRONOUNCEMENT 28 .0 9 .2015 2 ITA NO 1907/MUM/2014 ASSESSMENT YEAR: - 2007 - 08. PAGE 2 OF 7 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10,00,000/ - MADE BY THE AO AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) WITHOUT APPRECIATING THE FACT THAT THE INTEREST FREE AMOUNT OF RS. 10,00,000/ - ADVANCED TO THE ASSESSEE BY THE COMPANY, IN WHICH THE ASSESSEE IS 50% SHAREHOLDER, WAS NEITHER A TRADE ADVANCE IN NORMAL COMMERCIAL EXPEDIENCY, BECAUSE NO SUPPORTING DOCUMENTS EXISTS, NOR THE PREMISES WERE GIVEN TO THE SAID COMPANY ON LEAVE AND LICENCE. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 26.07.2007, DECLARING TOTAL INCOME OF RS. 13,29,47,187/ - . TH E RETURN WAS PROCESSED U/S 143(1 ) OF THE INCOME TAX ACT ,1961(HEREINAFTER CALLED THE ACT) . THE CASE WAS RE OPENED U/S 147/148 OF THE ACT FOR THE REASON THAT THE DEEMED DIVIDEND U/S 2( 22)(E) OF THE ACT OF RS. 10,00,000.00 HAS ESCAPED ASSESSMENT. THE ASSESSEE IN THE BALANCE SHEET OF HIS PROPRIETARY CONCERN M/S MAHAVIR CONSULTANCY H AS SHOWN OUTSTANDING INTERES T FREE LOAN OF RS. 10 LAC FROM M/S MAHAV IR DWELLERS P. LTD AS AT 31 ST MARCH 2007. THE ASSESSEE IS A DIRECTOR IN M/S MAHAVIR DWELLERS PVT. LTD AND HOLDS 50% SHARES. THE SAID COMPANY M/S MAHAVIR DWELLERS P. LTD. IS HAVING RESERVE AND SURPLUS IN ITS BALANCE SHEET AMOUNTING TO RS. 17 , 06 , 499/ - AS ON 31.03.2007. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE SAID COMPANY M/S MAHAVIR DWELLERS PVT. LTD, IS DOING MONEY LENDING BUSINESS AND LOAN WAS GIVEN OUT OF COMMERCIAL EXPEDIENCY FOR BUSINESS PURP OSES. THE ASSESSEE RELIED UPON THE DECISION OF IN THE MUMBAI BENCH OF TRIBUNAL IN TH E CASE OF N H SECURITIES LTD. V . DCIT (2007) 11 SOT 302 (MUM) AND THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF S.A BUILDERS V . C IT (2007) 288 ITR 1 (SC). THE ASSES SING OFFICER TREATED IT AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT BECAUSE THE ASSESSEE IS 50% SHARE HOLDER IN M/S MAHAVIR 3 ITA NO 1907/MUM/2014 ASSESSMENT YEAR: - 2007 - 08. PAGE 3 OF 7 DWELLERS PVT. LTD. AND RESERVE AND SURPLUS OF M/S MAHAVIR DWELLERS PVT. LTD. AS ON 31.03.2007 WAS RS. 17 , 06 ,499/ - . THE ASSESSING OF FICER HELD THAT NO INTEREST HAS BEEN CHARGED BY THE SAID M/S MAHAVIR DWELLERS PVT. LTD AND THE SAID COMPANY IS AL SO NOT REGISTERED AS MONEY LENDE R/NBFC AND THERE IS NO COMMERCIAL EXPEDIENCY/BUSINESS PURPOSE FOR T HE SAID LOAN AND HENCE RS.10,00,000.00 WAS B ROUGHT TO TAX AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL TO THE CIT(A) AND CONTENDED THAT THE FUNDS HAVE BEEN OBTAINED BY THE ASSESSEE TOWARDS BUSINESS PURPOSE AND THE SAID COMPANY INTENDED TO BUY OFFICE PREMISES AT KALINA, SANTACRUZ (E) , MUMBAI. THE ASSESSEE SUBMITTED THAT THE SAID COMPANY MAHAVIR DWELLERS P RIVATE LI MITED IS USING THE OFFICE OF THE ASSESSEE SINCE ITS INCORPORATION AND THE SAID COMPANY WANTED THE OFFICE FOR ITS BUSINESS EITHER ON LEAVE OR LICENSE BASIS OR OUTRIGHT PURCHASE. SINCE, THE ASSESSEE HAS ALREADY BOOKED THE OFFICE PREMISES AT 4 TH AND 5 TH FLOO R WITH KALAMBOLI STRUCTURALS & ROOFINGS P. LTD. VIDE AGREEMENT DATED 10.10.2006 AGAINST WHICH T HE ASSESSEE HAS MADE TOTAL PAYMENT OF RS. 1,86,68,440/ - FOR BOTH THE FLOORS INCLUDING STAMP DUTY AND REGISTRATION CHARGES AS AGAINST THE TOTAL CONSIDERATION OF RS. 7,21,60,200/ - FOR BOTH THE FLOORS . THE ASSESSEE SUBMITTED THAT THE SAID COMPANY M/S MAHAVIR DWELLERS PVT. LTD DID NOT HAVE ITS OWN OFFICE AND WAS FUNCTIONING FROM THE BUSIN ESS PREMISES OF THE ASSESSEE , THE SAID COMPANY THOUGHT IT FIT TO TAKE AT LEAST ONE FLOOR ON LEAVE AN D LICENSE BASIS FROM THE ASSESSEE . SINCE THE POSSESSION OF THE OFFICE PREMISES WAS TO BE RECEIVED ON OR BEFORE 31.12.2008, THE ASSESSEE HAS MADE TOTAL PAYMENT OF RS. 2,81,28,440/ - FOR BOTH THE FLOORS AS ON 31.03.2008 AGAINST THE TOTAL COST OF RS. 7,58,28,640/ - WHICH 4 ITA NO 1907/MUM/2014 ASSESSMENT YEAR: - 2007 - 08. PAGE 4 OF 7 INCLUDED STAMP DUTY AND REGISTRATION CHARGES ALSO. THE ASSESSEE HAS TAKEN ADVANCE FROM THE SAID COMPANY M/S MAHAVIR DWELLERS PVT. LTD. AS DEPOSIT FOR GRANTING THE OFFICE PREMISES ON LEAVE AND LICENCE BASIS. THE POSSESSION WAS TO BE RECEIVED IN DECEMBER 2008, NO FORMAL AGREEMENT OF LEAVE AND LICENCE WAS ENTERE D INTO AS AT 31.03.2007 WITH M/S MAHAVIR DWELLERS PVT. LTD AND THE AMOUNTS WERE SHOWN AS LOAN IN THE BALANCE SHEET. SINCE THE POSSESSION OF THE SAID PREMISE WAS NOT RECEIVED EVEN TILL MARCH 2009, THE SAID COMPANY M/S MAHAVIR DWELLERS PVT. LTD IN THE MONTH OF SEPTEMBER 2008 HAS ASKED FOR THE REFUND OF THE MONEY AND THE SAID COM PANY BOOKED THEIR OWN OFFICE FOR A TOTAL CONSIDERATION OF RS. 2.50 CRORE S VIDE AGREEMENT DA TED 21.11.2008 AND THE ASSESSEE STARTED REFUNDING THEIR MONEY FROM 17.11.2008 ONWARDS AND AS ON 12.10.2009, THE ASSESSEE HAD TO REPAY THE BALANCE AMOUNT OF RS. 96,70,000/ - AS ON THAT D ATE WHICH WAS COMPLETED ON 12.10 .2009. THE ASSESSEE RECEIVED THE POSSES SION OF THE SAID TWO FLOORS ON 5 TH JANUARY 2012 AS AGAINST THE PROMISED DATE OF DECEMBER 2008. THE ASSESSEE HAS ALSO SUBMITTED THAT THE CIT(A) - 34, HAS IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09, DELETED THE SIMILAR ADDITION MADE U/S 2(22)(E) O F THE ACT BASED UPON THE SAME FACTS AND CIRCUMSTANCES OF THE CASE AFTER CALLING FO R THE REMAND REPORT FROM THE ASSESSING OFFICER SIMILARLY FOR ASSESSMENT YEAR 2009 - 10, THE CIT(A) HAS DELETED THE ADDITION. THE CIT(A) FOR THE IMPUGNED ASSESSMENT YEAR AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION OF RS. 10 LAC U/S 2(22)(E) OF THE ACT AFTER CONSIDERING THE FACT THAT ASSESSEE HAS RECEIVED THE AMOUNTS OF RS. 10 LAC DURING THE ASSESSMENT YEAR ON ACCOUNT OF BUSINESS EXPEDIENCY AS M/S MAHAV IR DWELLERS PVT. LTD. HAS TAKEN BUSINESS PREMISES ON LEAVE AND LICEN S E 5 ITA NO 1907/MUM/2014 ASSESSMENT YEAR: - 2007 - 08. PAGE 5 OF 7 BASIS FROM THE ASSESSEE FOR HIS BUSINESS PURPOSE WHICH WAS DULY REFLECTED IN THEIR BALANCE SHEET AS ON 31.03.2007. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD . DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER . 6. THE ASSESSEE RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE CIT(A) HAS ALREADY DECIDED THE ISSUE IN ASSES SMENT YEAR 2008 - 09 AND 2009 - 10 IN FAVOUR OF THE ASSESSEE. THE ASSESSEE ALSO SUBMITTED THAT MUMBAI BENCH OF TRIBUNA L IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE ISSUE INVOLVED IN THE PRESENT A PPEAL IS SQUARELY COVERED BY THE SAID DECISION OF ITAT IN APPEAL NO. ITA NO. 5615/MUM/2012 DATED 29 TH JUNE 2015 . THE ASSESSEE ALSO SUBMITTED THAT THIS AMOUNT OF RS. 10 LAC WHICH WAS RECEIVED DURING THE ASSESSMENT YEAR 2007 - 08 WAS ALSO CONTINUED TO BE REC EIVE FURTHER ADDITIONAL AMOUNTS IN ASSESSMENT YEAR 2008 - 09 AND ASSESSMENT YEAR 2009 - 10 . THE CIT(A) IN ASSESSES OWN CASE HAS CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER AND THE ASSESSING OFFICER IN HIS R EMAND REPORT FINALLY CONCLUDED AS UNDER WHICH HAS FOUND REFERENCE ALSO IN ITAT APPEAL ORDERS IN APPEAL NO ITA NO.5615/MUM/2012 DATED 29 TH JUNE 2015 FOR ASSESSMENT YEAR 2008 - 09 AS UNDER: 15. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND FURNISHED CERTAIN ADDITIONAL EVIDENCES IN SUP PORT OF HIS CONTENTION THAT THE TRANSACTION WAS PURELY FOR COMMERCIAL REASONS AND THE AMOUNT WAS TAKEN FOR THE PURCHASE OF OFFICE 6 ITA NO 1907/MUM/2014 ASSESSMENT YEAR: - 2007 - 08. PAGE 6 OF 7 PREMISES. THE ADDITIONAL EVIDENCE WERE TRANSMITTED TO THE AO CALLING FOR HIS REMAND REPORT BY THE LD. CIT(A). 15.1 AFTER VER IFYING THE DETAILS SUBMITTED BY THE ASSESSEE ALONG WITH THE DO CUMENTARY EVIDENCES, THE AO IN HIS REMAND REPORT FINALLY CONCLUDED: THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND THE SEQUENCE OF EVENTS NARRATED HAVE BEEN DULY VERIFIED WITH THE SUPPORTING EVIDENCES SUCH AS COPIES OF AGREEMENTS,BANK STATEMENTS,LEDGER ACCOUNTS , LEDGER ACCOUNTS IN BOOKS OF MAHAVIR DWELLERS PVT. LTD ETC. , AND SAME IS FOUND CORRECT. 16. AFTER CONSIDERING THE FACTS AND SUBMISSIONS AND THE RE MAND REPORT , THE LD. CIT(A) OBSERVED THAT THE LOANS GIVEN BY THE COMPANY TO THE ASSESSEE IS A NORMAL COMMERCIAL TRANSACTION AND ACCORDINGLY DELETED THE ADDITION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD . WE HAVE OBS ERVED THAT THE ASSESSEE HAS RECEIVED RS. 10 LAC DURING THE ASSESSMENT YEAR AS ADVANCE FROM M/S MAHAVIR DWELLERS PVT. LTD TOWARDS THE LEAVE AND LICENSE DEPOSIT FOR OFFICE PREMISES OF THE ASSESSEE AND THE STATEMENT HAS BEEN MADE BEFORE US BY THE LD AR OF T HE ASSESSEE THAT THESE AMOUNTS WERE FURTHER RECEIVED IN CONNECTION WITH THE SAME AGREEMENT FOR OFFICE PREMISES IN ASSESSMENT YEARS 2008 - 09 AND 2009 - 10. THE ISSUE HAS ALREADY BEEN CONSIDERED AT LENGTH BY THE CIT(A) AND ALSO BY MUMBAI BENCH OF TRIBUNAL FOR ASSESSMENT YEAR 2008 - 09 IN APPEAL NO ITA NO 5615/MUM/2012 WHEREBY THE MATTER IS DECIDED IN FAVOUR OF THE ASSESSEE. EVEN REMAND REPORT HAS BEEN CALLED FROM THE 7 ITA NO 1907/MUM/2014 ASSESSMENT YEAR: - 2007 - 08. PAGE 7 OF 7 ASSESSING OFFICER BY CIT(A) FOR ASSESSMENT YEAR 2008 - 09 WHEREB Y THE ASSESSING OFFICER HAS CONS IDERED AT LENGTH SUPPORTING EVIDENCE SUCH AS COPIES OF AGREEMENT, LEDGER ACCOUNTS, BANK STATEMENTS , LEDGER ACCOUNT IN THE BOOKS OF MAHAVIR DWELLERS PRIVATE LIMITED AND THE ASSESSING OFFICER F OUND IT TO BE CORRECT AND ARRIVED AT CONCLUSION IN FAVOUR OF TH E ASSESSEE . WE , THEREFORE, HOLD THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF MUMBAI BENCH OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09 IN ITA NO 5615/MUM/2012 DATED 29 TH JUNE 2015 AND HENCE WE RESPECTFULLY FOLLOW THE DECISION O F CO - ORDINATE BENCH AND WE UPHOLD THE DECISION OF THE CIT(A) WHO HAS DELETE D THE ADDITION OF RS.10,00,000.00 MADE BY THE ASSESSING OFFICER. WE ORDER ACCORDINGLY. 8 . IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED AS INDICATED ABOVE . ORDER PRONOUNCED IN THE OPEN COU RT ON THIS 28 TH DAY OF SEPTEMBER 2015. SD/ - SD/ - ( SHAILENDRA KUMAR YADAV ) (RAMIT KOCHAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER ) MUMBAI DATED 28 - 0 9 - 2015 SKS SR. P.S, COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI