Jakson Generators Pvt. Ltd., Delhi V. CIT, New Delhi

ITA 1940/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81620 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-05-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Deemed dividend
• Section: 143(3); 153A; 263; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH D DD D : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO. .. .1940/DEL/2013 1940/DEL/2013 1940/DEL/2013 1940/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2004 2004 2004 2004- -- -05 0505 05 M/S JAKSON GENERATORS M/S JAKSON GENERATORS M/S JAKSON GENERATORS M/S JAKSON GENERATORS PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., 47, SHARDANAND MARG, 47, SHARDANAND MARG, 47, SHARDANAND MARG, 47, SHARDANAND MARG, DEL DEL DEL DELHI HI HI HI 110 006. 110 006. 110 006. 110 006. PAN : AAACJ0511C. PAN : AAACJ0511C. PAN : AAACJ0511C. PAN : AAACJ0511C. VS. VS. VS. VS. COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, DELHI CENTRAL DELHI CENTRAL DELHI CENTRAL DELHI CENTRAL- -- -I, I,I, I, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIPIN JAIN, CA. RESPONDENT BY : MS. SULEKHA VERMA, CIT-DR. ORDER ORDER ORDER ORDER PER ABY T. VARKEY, JM PER ABY T. VARKEY, JM PER ABY T. VARKEY, JM PER ABY T. VARKEY, JM : : : : THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDE R OF LEARNED COMMISSIONER OF INCOME TAX, CENTRAL-1, NEW DE LHI UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (HEREIN AFT ER THE ACT) DATED 15 TH MARCH, 2013 FOR THE AY 2004-05. 2. THE GROUND OF APPEAL IS AS FOLLOWS :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE COMMISSIONER OF INCOME TAX, CENTRAL-1 , NEW DELHI, HAS ERRED AND IS NOT JUSTIFIED IN SETTING A SIDE THE ASSESSMENT ORDER HOLDING THAT THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERE ST OF THE REVENUE. THE ORDER DATED 15.03.2013, PASSED U/S 263 O F THE IT ACT, 1961, IS BAD IN LAW. IT IS PRAYED THAT THE SAME IS VACATED. 3. AT THE TIME OF HEARING BEFORE US, THE LEARNED COU NSEL FOR THE ASSESSEE POINTED OUT THAT IF WE LOOK AT THE CONCLUSION I N THE ORDER ITA-1940/D/2013 2 UNDER SECTION 263, IT WOULD BE SEEN THAT THE CIT HAS GIVEN DIRECTION TO TAKE REMEDIAL ACTION IN THE CASE OF M/S JAKSON & COMPA NY AND SHRI MAHESH KUMAR GUPTA. HOWEVER, IF SOME INCOME HAD ESCAP ED ASSESSMENT IN THE CASE OF SOME OTHER ASSESSEE, HOW THE ASSESSMENT ORDER OF THE ASSESSEE CAN BE SET ASIDE UNDER SECTION 263. HE, THEREFORE, SUBMITTED THAT THE ORDER OF LEARNED CIT P ASSED UNDER SECTION 263 MAY BE QUASHED. 4. LEARNED CIT-DR POINTED OUT THAT THE ASSESSEE M/S ANKI TECH PVT.LTD. AND M/S JAKSON & COMPANY ALL ARE RELATED CON CERNS AS WOULD BE EVIDENT FROM THE DETAILS OF THE SHAREHOLDERS OF THE SE THREE COMPANIES GIVEN IN THE ORDER OF LEARNED CIT. THAT T HE LOANS HAVE BEEN GIVEN BY THOSE COMPANIES TO THE ASSESSEE AND THEREFORE, APPLICABILITY OF SECTION 2(22)(E) NEEDS TO BE EXAMINED IN APPROPRI ATE CASE. THIS VITAL ASPECT WAS NOT CONSIDERED BY THE ASSESSING OFFICER A ND THEREFORE, LEARNED CIT RIGHTLY HELD THE ASSESSMENT ORDER TO BE ERR ONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. THE FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SEC TION 143(3) AT AN INCOME OF `34,05,892/- ON 31 ST JULY, 2006. SUBSEQUENTLY, THERE WAS A SEARCH AT THE ASSESSEES PREMISES UNDER SECTION 132(1) ON 10.02.2010 AND NOTICE UNDER SECTION 153A WAS ISSUED ON 12.11.2010. THE SEARCH ASSESSMENT WAS COMPLETED UNDER SECTION 153A R EAD WITH SECTION 143(3) ON 16.12.2011 AT AN INCOME OF `31,57 ,720/-. THEREAFTER, THE CIT ISSUED NOTICE UNDER SECTION 263 O N THE GROUND THAT THE DEBIT BALANCE, IN THE LIST OF SUNDRY DEBTORS, IN T HE NAME OF M/S JAKSON & COMPANY AND M/S ANKITECH PVT.LTD. IS MUCH MOR E THAN THE GOODS SOLD TO THEM. IN RESPONSE TO THE SHOW CAUSE NOTIC E, IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT THE TRANSACT IONS WITH M/S ITA-1940/D/2013 3 JAKSON & COMPANY AND M/S ANKITECH PVT.LTD. DO NOT REL ATE TO SALE TRANSACTION, RATHER, THEY ARE LOANS AND ADVANCES GIVE N AND RECEIVED BACK ON DAY TO DAY BASIS. THE CIT THEREAFTER EXAMINE D THE APPLICABILITY OF SECTION 2(22)(E) IN THE CASE OF THE ASSESSEE RELATING TO THOSE TRANSACTIONS OF LOANS AND ADVANCES GIVEN AND TAKEN BY THE ASSESSEE. IT WAS CONTENDED BY THE ASSESSEE THAT SECTION 2( 22)(E) IS ALSO NOT APPLICABLE IN RESPECT OF LOAN GIVEN TO BOTH THE COMPANIES BECAUSE THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN ANY OF THE ABOVE COMPANIES. THE CIT AT PAGE 4 OF HIS ORDER HAS G IVEN THE DETAILS OF SHAREHOLDING PATTERN OF THE ASSESSEE, M/S JAKSON & COMP ANY AND M/S ANKITECH PVT.LTD. WHICH CLEARLY SHOWS THAT THE ASSESSE E IS NOT THE SHAREHOLDER IN EITHER M/S JAKSON & COMPANY OR M/S ANKIT ECH PVT.LTD. AFTER CONSIDERING ALL THE FACTS FINALLY, THE CIT SET ASIDE THE ORDER OF THE ASSESSING OFFICER AND DIRECTED THE ASSESSING OFFICER TO TAK E NOTE OF THE CHARGEABILITY OF DEEMED DIVIDEND IN THE HANDS OF M/S JAKSON & COMPANY AND MAHESH KUMAR GUPTA. THE RELEVANT PORTIO N OF THE ORDER OF LEARNED CIT READS AS UNDER:- 11. THUS, CONSIDERING THE FACTS OF THE CASE, I AM SATI SFIED THAT THE ORDER PASSED BY THE A.O. IS ERRONEOUS IN SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HENCE THE SAME IS SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO TAK E NOTE OF THE CHARGEABILITY OF DEEMED DIVIDEND IN THE HAND OF M/S JAKSON & CO. AMOUNTING TO RS.1,72,15,824/- AND TAK E REMEDIAL ACTION IN THE CASE OF SHRI MAHESH KUMAR GUPT A, WHO HOLDS 43.19% SHARES IN M/S JAKSON GENERATOR PVT.LTD. AND ALSO CONTROLLED M/S JAKSON & CO. BY HOLDING 30% OF PROFIT SHARING. THIS AMOUNT WOULD BE CONSIDERED FOR T HE PURPOSE OF DEEMED DIVIDEND IN RESPECT OF LOAN ADVAN CED BY THE ASSESSEE COMPANY TO M/S JAKSON & CO.. 6. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES AN D THE FACTS OF THE CASE, WE ARE UNABLE TO UPHOLD THE ABOVE FINDI NG OF THE CIT. THE CIT CAN EXERCISE HIS JURISDICTION UNDER SECTION 263 IF THE ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE IS ERRONEOUS AND PREJUDICIAL TO THE ITA-1940/D/2013 4 INTEREST OF THE REVENUE. IN THIS CASE, THE ASSESSING OFFI CER DID NOT FIND THE ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE TO BE ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE IN ITIALLY, HE INITIATED THE PROCEEDINGS FOR PRESUMED SUPPRESSION OF SALES TO M/S JAKSON & COMPANY AND M/S ANKITECH PVT.LTD. WHEN IT WAS EXPLAI NED THAT THE DEBIT BALANCE IN THE ACCOUNT OF THOSE TWO COMPANIES I S NOT ON ACCOUNT OF SALE OF GOODS BUT ON ACCOUNT OF LOAN TRANSACTION, H E EXAMINED THE APPLICABILITY OF SECTION 2(22)(E) RELATING TO THOSE LOAN TRANSACTIONS. HE WAS SATISFIED THAT NO DEEMED DIVIDEND UNDER SECTION 2( 22)(E) IS CHARGEABLE IN THE HANDS OF THE ASSESSEE BECAUSE ASSESSEE IS NOT A SHAREHOLDER IN EITHER OF THE COMPANIES. THEREFORE, T HERE WAS NO UNDER-ASSESSMENT IN THE HANDS OF THE ASSESSEE. THUS, THE OR DER OF THE ASSESSING OFFICER IN THE CASE OF THE ASSESSEE CAN NEITHER B E SAID TO BE ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REV ENUE. IN THE ABOVE CIRCUMSTANCES, IN OUR OPINION, THE CIT WAS NOT JUSTIFIE D IN SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER. FURTHER, IF IN THE OPINION OF THE CIT SOME DEEMED DIVIDEND IS CHARGEABLE IN THE CASE OF M/S J AKSON & COMPANY OR MAHESH KUMAR GUPTA, THE CIT WAS REQUIRED TO GIVE THE NOTICE IN ACCORDANCE WITH LAW TO THOSE PERSONS AND THE N PASS APPROPRIATE ORDERS IN THEIR CASE. WHILE SETTING ASIDE THE CASE OF THE ASSESSEE, HE CANNOT GIVE DIRECTION TO MODIFY THE ASSESSMENT ORDER OF OTHER ASSESSEES. WE ARE, THEREFORE, UNABLE TO UPHOLD TH E ORDER OF LEARNED CIT PASSED UNDER SECTION 263. THE SAME IS QUASH ED. 7. BEFORE WE PART WITH THE MATTER, WE MAY CLARIFY T HAT WE HAVE NOT EXPRESSED ANY OPINION ABOUT THE TAXABILITY OR OTHERWI SE OF THE DEEMED DIVIDEND IN THE HANDS OF M/S JAKSON & COMPANY AND MAHE SH KUMAR GUPTA. WE HAVE QUASHED THE ORDER OF THE CIT ON THE LIMITED POINT THAT THE ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVE NUE AND BY PASSING ITA-1940/D/2013 5 ORDER UNDER SECTION 263 IN THE CASE OF THE ASSESSEE, THE CIT CANNOT ISSUE DIRECTION TO MODIFY ASSESSMENT OF OTHER ASSESSEES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 22 ND AUGUST, 2014. SD/- SD/- ( (( (G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL) )) ) (ABY T. VARKEY (ABY T. VARKEY (ABY T. VARKEY (ABY T. VARKEY) )) ) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 22.08.2014 VK COPY FORWARDED TO: - 1. APPELLANT : M MM M/S JAKSON GENERATORS PVT.LTD., /S JAKSON GENERATORS PVT.LTD., /S JAKSON GENERATORS PVT.LTD., /S JAKSON GENERATORS PVT.LTD., 47, SHARDANAND MARG, DELHI 47, SHARDANAND MARG, DELHI 47, SHARDANAND MARG, DELHI 47, SHARDANAND MARG, DELHI 110 006. 110 006. 110 006. 110 006. 2. RESPONDENT : COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, DELHI CENTRAL DELHI CENTRAL DELHI CENTRAL DELHI CENTRAL- -- -I, NEW DELHI. I, NEW DELHI. I, NEW DELHI. I, NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR