T.Naga Prasad, Visakhapatnam V. THE ACIT, Visakhapatnam

ITA 191/VIZ/2015

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7356 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 17-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SIVA PRASAD KJD SRINIVAS
• Section: 148; 143(3); 2(22)(e)

Judgement Text

आयकर अपीऱीयअधिकरण, विशाखापटणम पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्ि ू रु आर एऱ रेड्डी, न्याययक सदस्य एिं श्री एस बाऱाक ृ ष्णन, ऱेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON‟BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON‟BLE ACCOUNTANT MEMBER आयकर अऩीऱ सं./ I.T.A. No.191/Viz/2015 (ननधधारण वषा / Assessment Year :2004-05) T. Naga Prasad, Visakhapatnam. PAN: ABXPT 9042 R Vs. Assistant Commissioner of Income Tax, Circle-4(1), Visakhapatnam. (अऩीऱधथी/ Appellant) (प्रत्यथी/ Respondent) अऩीऱधथी की ओर से/ Appellant by : Sri Siva Prasad for KJD Srinivas प्रत्यधथी की ओर से / Respondent by : Sri SPG Mudaliar, Sr. AR स ु नवधई की तधरीख / Date of Hearing : 25/04/2022 घोषणध की तधरीख/Date of Pronouncement : 14/07/2022 O R D E R PER DUVVURU RL REDDY, Judicial Member : This appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-2 ( in short Ld. CIT (A), Visakhapatnam in appeal ITA No.0021/13-14/363/ACIT C-4(1) Vsp/2014-15, dated 27/02/2015 arising out of the order 2 passed U/s. 143(3) r.w.s 254 of the Income Tax Act ( in short “Act”) for the AY 2004-05. 2. Brief facts of the case are that the assessee is an individual and Chairman for Vikas Educational Institutions Ltd (VEIL). The assessee filed his return of income for the AY 2004-05 on 12/09/2005 admitting total income of Rs. 2,03,500/-. The return was processed summarily and subsequently the case was reopened by issuing notice u/s. 148 of the Act. The Assessing Officer (in short AO), based on the submissions made by the assessee, it was noticed that the assessee has obtained a loan amount of Rs. 1,01,83,381/- from the company, which was assessed as deemed dividend U/s. 2(22)(e) of the Act, the assessee being a 25% share holder in VEIL, and assessee being a beneficial holder of the shares. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition made by the AO. Subsequently, the Revenue went on appeal to ITAT against the order of the Ld. CIT(A) and the Hon‟ble ITAT vide its order in ITA No.281 & 282/V/2010, dated 6/9/2011 set-aside the order of the Ld. CIT(A) and directed the Assessing Officer to determine the accumulated profits in accordance with law in order to decide the 3 quantum of deemed dividend. The AO therefore issued necessary notices to the assessee and in response the assessee‟s Authorized Representative appeared and furnished the required details. The AO then considering the submissions made by the Assessee‟s Representative the AO passed an order U/s. 143(3) r.w.s 254 of the Act assessing the loan amount of Rs. 1,01,83,381/- as deemed dividend U/s. 2(22)(e) of the Act. Aggrieved by the order of the Ld. AO, assessee preferred an appeal before the Ld. CIT (A)-2, Visakhapatnam. During the appellate proceedings, the submissions of the assessee‟s Representative were considered by the Ld.CIT (A) and accordingly the Ld. CIT(A) computed the accumulated profits at Rs. 99,01,419/- and directed the AO to examine the claim made by the assessee with respect to tax challans and other submissions as detailed in para 5.7 and 5.8 of the order of the Ld. CIT(A). The Ld. AO as directed by the Ld. CIT(A) passed a consequential revision order U/s. 143(3) r.w.s 254 of the Act assessing the total income at Rs. 51,54,210/-. Aggrieved by the consequential order of the Ld. AO dated 30/06/2016, the assessee is in appeal before us. 3. The assessee has raised the following grounds of appeal: 4 “1. The CIT(A) ought to have allowed the appeal of the assessee in toto, keeping in view of the f acts of the case, the assessee is entitled to the relief of Rs. 1,01,83,381/-. 2. Any other grounds those may be prayed at the time of hearing.” However, we note that a consequential order has been passed by the Ld. AO on 30/06/2016 granting relief of Rs. 52,32,671/-. 4. Additionally, the assessee filed a petition for admission of additional grounds as below: “1. The Ld. AO was not justified in reopening the case U/s. 148 and af ter elapse of 1380 days (almost 4 years) from the end of the financial year and that too without having cogent reasons and base or valid/sound proof as the payments were made in the AY 2005-06. Hence, assessment proceedings based on the notice U/s. 148 are not maintainable. 2. The payments were cleared during the AY 2005-06, if at all, the issue of deemed dividend is to be considered it was in the AY 2005-06, and not in the AY 2004-05 hence reopening of the assessment for the AY 2004-05 is not justified.” 5. Ground No.2 of the original grounds of appeal is general in nature and need not be adjudicated. 6. The Ld. AR submitted that the undisclosed income admitted during the search operations should not be used for computation 5 of accumulated profits of the company. The Ld. AO before the Ld. CIT(A) and before us relied on the decision of the Delhi Bench of the Tribunal in the case of Promod Kumar Dang vs. JCIT, ITAT, Delhi „A‟ Bench (2006) 6 SOT 301 (Del.). The Ld. AR pleaded that the accumulated profits of the company computed in accordance with the ratio laid down in Promod Kumar Dang (supra) works out to (-) Rs.40,47,636/-. The Ld. AR pleaded that there is no accumulated profits and hence the provisions of section 2(22)(e) of the Act cannot be applied in the instant case. 7. Per contra, the Ld. DR submitted that the undisclosed income admitted by the assessee in search proceedings has been considered the financial statements of VEIL and included as part of reserves and surplus of the company. The Ld. DR therefore contended that the company had sufficient accumulated profits and therefore the provisions of section 2(22)(e) of the Act are attracted. The Ld. DR relied on the following case laws and pleaded that the orders of the lower authorities shall be sustained. (i) DCIT vs. Sh. Anuj Nagpal, ITA No.3840/Del/2011, dated 13/7/2012. [ITAT, Delhi Bench decision]. (ii) NCK Sons Exports (P.) Ltd vs. ITO, reported in 102 ITD 311 (Mum.). (iii) Empee Holdings Ltd vs. DCIT reported in [2019] 112 taxmann.com 319 (Chennai. Trib.) 6 8. We have heard both the sides and gone through the materials available on record and the order of the Authorities below. Section 2(22)(e) of the Act is extracted herein below for convenience: “2(22)(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) 5 made after the 31st day of May, 1987 , by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern, in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for- the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits;” 9. From the plain reading of the section, it is noted that the accumulated profits to the extent available in the books of account shall be considered for the purpose of determining the deemed dividend U/s. 2(22)(e) of the Act. The reliance placed by the Ld. AR in the case of Promod Kumar Dang vs. JCIT (supra) has been rightly distinguished by the Ld. CIT(A) and cannot be applied to the instant case. However, we also find that the assessee has included the undisclosed income in its books of account resulting an increase in the accumulated profits of the company. The Ld. CIT(A) has rightly computed the accumulated profits for the purpose of section 2(22)(e) of the Act subject to 7 verification of certain tax challans as detailed in para 5.7 and 5.8 of the CIT(A)‟s order. We also note that the Ld. AO has rightly considered the directions of the Ld. CIT(A) and passed the consequential order revising the order passed U/s. 143(3) r.w.s 254 of the Act. In view of the above discussions, we find that there is no infirmity in the order of the Ld. CIT(A) as well as the Ld. AO while passing the consequential order. This ground of the assessee is therefore dismissed. 10. With respect to issue raised in additional grounds of appeal regarding reopening of the case U/s. 148 of the Act, we find from the record that the Ld. AO has rightly given the reasons for such reopening and reopening is well within the period as prescribed under the Act. Therefore, this ground raised by the assessee is dismissed. 11. Since, the Ground No.1 of the original grounds of appeal is adjudicated, second ground raised by the assessee in the additional grounds of appeal needs no separate adjudication. 12. In the result, appeal of the assessee is dismissed. 8 Pronounced in the open Court on the 14 th July, 2022. Sd/- Sd/- (एस बाऱाक ृ ष्णन) (द ु व्ि ू रु आर.एऱ रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) ऱेखा सदस्य/ACCOUNTANT MEMBER न्याययकसदस्य/JUDICIAL MEMBER Dated 14.07.2022 OKK - SPS आदेश की प्रतिलिपि अग्रेपिि/Copy of the order forwarded to:- 1. ननधधाररती/ The Assessee – T. Naga Prasad, D.No. 7-5-107, Pandurangapuram, Visakhapatnam. 2. रधजस्व/The Revenue – The Assistant Commissioner of Income Tax, Circle-4(1), Visakhapatnam. 3. The Chief Commissioner of Income Tax, Visakhapatnam. (ii) Commissioner of Income Tax-2, Visakhapatnam. (iii) Pr. CIT 4. आयकर आय ु क्त (अऩीऱ)/ The Commissioner of Income Tax (Appeals)-2, Visakhapatnam. 5. ववभधगीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, ववशधखधऩटणम/ DR, ITAT, Visakhapatnam 6 .गधर्ा फ़धईऱ / Guard file आदेशधन ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam