Prime Infoinvest Limited , Hyderabad V. Income Tax Officer, Ward-16(2), Hyderabad

ITA 197/Hyd/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3244 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 18-02-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 12-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Share purchase agreement; Deemed dividend
• Section: 143(3); 2(22)(e); 22

Judgement Text

ITA NO 197 OF 2019 PRIME INFOINVEST LTD HYDERABAD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.197/HYD/2019 ASSESSMENT YEAR: 2013-14 PRIME INFOINVEST LTD HYDERABAD PAN AACCP7172K VS. INCOME TAX OFFICER WARD-16(2) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI P. MURALI MOHANA RAO REVENUE BY : SRI SUNIL KUMAR PANDEY,DR DATE OF HEARING: 18/02/2021 DATE OF PRONOUNCEMENT: 22/02/2021 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2013-14 AGAIN ST THE ORDER OF THE CIT (A)- 1, GUNTUR, DATED 14.11.20 16. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY FILED ITS E-RETURN OF INCOME FOR THE A.Y 2013-14 ON 29.3.2013 ADMITTING NIL INCOME UNDER THE NORMAL PROVISIONS OF THE I.T. ACT AND AN INCOME OF RS.2,62,063/- UNDER THE MAT PROVIS IONS. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS RECEIVED LOANS TO TH E TUNE OF RS.49,50,000/- DURING THE FINANCIAL YEAR 2012-13 FR OM M/S. TEJDEEP ENGG. ENTERPRISES (P) LTD WHEREIN THE ASSES SEE HAS SHAREHOLDING OF 15.13%. HE ALSO OBSERVED THAT M/S.T EJDEEP ENGG ENTERPRISES (P) LTD HAS ACCUMULATED PROFITS OF RS.1 ,50,30,047/- ITA NO 197 OF 2019 PRIME INFOINVEST LTD HYDERABAD PAGE 2 OF 5 AS ON 31.3.2013 WHICH INCLUDED PROFIT OF RS.47,60,8 77/- DURING THE YEAR. THEREFORE, THE ASSESSEE WAS ASKED TO EXPL AIN AS TO WHY THE PROVISIONS OF SECTION 2(22)(E) SHOULD NOT BE AP PLIED TO THE LOAN RECEIVED FROM M/S. TEJDEEP ENGG. ENTERPRISES (P) LT D. THE ASSESSEE FILED A REPLY STATING THAT THE PROVISIONS OF SECTION 2(22)(E) DO NOT APPLY TO THIS TRANSACTION AS THE ASSESSEE HA S RECEIVED A SUM OF RS.49,50,000/- FROM TEJDEEP ENGG. ENTERPRISE S (P) LTD NOT AS A LOAN BUT TOWARDS SALE CONSIDERATION ON SALE OF 66,000 EQUITY SHARES OF M/S. VICTORIA STEEL ENTERPRISES LTD AT A FACE VALUE OF RS.10/- EACH. IN SUPPORT OF THE SAME, A COPY OF THE SHARE PURCHASE AGREEMENT ENTERED INTO BY BOTH THE PARTIES WAS ALSO SUBMITTED. THE AO, HOWEVER, WAS NOT SATISFIED WITH THE SAID EXPLANATION OF THE ASSESSEE. HE OBSERVED THAT THE L EDGER A/C OF M/S TEJDEEP ENGG. SHOWED AN OPENING BALANCE OF RS.7 3,02,470/- AND DURING THE YEAR, THE ASSESSEE HAD PAID AN AMOUN T OF RS.20.00 LAKHS AND RECEIVED RS.49,50,000/- AND SUBS EQUENTLY, THE ASSESSEE HAD REPAID AN AMOUNT OF RS.15,00,000/- . THEREFORE, THE AO WAS OF THE OPINION THAT IT IS A RUNNING A/C AND IT IS NOT FOR SALE OF SHARES. FURTHER, IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE LEDGER A/C OF TEJDEEP ENGG IS GROUPED UNDER UN SECURED LOANS. THEREFORE, HE HELD THAT THE AMOUNTS WERE RE CEIVED BY THE ASSESSEE AS LOANS AND THEREFORE, IT IS DEEMED DIVID END IN THE HANDS OF THE ASSESSEE AS PER THE PROVISIONS OF SECT ION 2(22)(E). HE ACCORDINGLY, BROUGHT THE SUM OF RS.49,50,000/- TO T AX U/S 2(22)(E) OF THE ACT. AGGRIEVED, THE ASSESSEE PREFER RED AN APPEAL BEFORE THE CIT (A), WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (A) ERRED IN SUSTAINING THE ADD ITION OF RS.49,50,000/- MADE UNDER SECTION 2(22)(E) OF TH E ACT. 2. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE AMOUNT OF RS.49,50,000 RECEIVED BY THE ASSESSEE IS ITA NO 197 OF 2019 PRIME INFOINVEST LTD HYDERABAD PAGE 3 OF 5 TOWARDS SALE OF SHARES BY THE ASSESSEE TO M/S. TEJD EEP ENGG.ENTERPRISES (P) LTD. 3. THE LEARNED CIT (A) ERRED DISBELIEVING THE DOCUM ENTS PRODUCED SUCH AS SHARE PURCHASE AGREEMENT ETC., MER ELY BECAUSE NO SHARES WERE TRANSFERRED BY THE APPELLANT AS ON THE DATE OF HIS ORDER. 4. THE LEARNED CIT (A) HAVING OBSERVED THAT THE AMO UNT RECEIVED IS TOWARDS ADVANCE FOR SALE OF SHARES, ERR ED IN TREATING THE AMOUNT OF RS.49,50,000 AS AN AMOUNT RECEIVED TOWARDS LOAN ADVANCE AS STIPULATED IN SECT ION 2(22)(E). 5. THE APPELLANT MAY, ADD OR ALTER OR AMEND OR MODI FY OR SUBSTITUTE OR DELETE AND/OR RESCIND ALL OR ANY OF T HE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI P. MU RALI MOHAN RAO REITERATED THE SUBMISSIONS OF THE ASSESSE E MADE BEFORE THE AUTHORITIES BELOW AND DREW OUR PARTICULA R ATTENTION TO THE SHARE PURCHASE AGREEMENT BETWEEN THE ASSESSEE AND M/S TEJDEEP ENGG. ENTERPRISES (P) LTD WHICH IS PLACED A T PAGES 47 TO 49 OF THE PAPER BOOK WHICH IS DATED 12.9.2012. HE A LSO DREW OUR ATTENTION TO PAGE NO.50 OF THE PAPER BOOK WHEREIN T HE DETAILS OF THE INVESTMENT AS ON 31.3.2013 ARE SHOWN AND ALSO T O PAGE 51 WHICH IS A CONFIRMATION FROM M/S. TEJDEEP ENGG ENTE RPRISES (P) LTD, CONFIRMING THE PAYMENT OF AMOUNT OF RS.49,50,0 00/- ON 12.9.2012 THROUGH RTGS FOR PURCHASE OF EQUITY SHARE S OF M/S VICTORIA STEEL ENTERPRISES (P) LTD. FURTHER, HE DRE W OUR ATTENTION TO PAGE NO.43 OF THE PAPER BOOK WHICH IS THE LEDGER A/C OF THE TEJDEEP ENGG. ENTERPRISES (P) LTD WHEREIN THE PAYME NTS OF A TOTAL OF RS.49,50,000/- THROUGH BANK OF BARODA CHEQUES AR E REFLECTED AND TO PAGE NOS. 44 TO 46 WHICH IS THE A/C OF THE A SSESSEE IN BANK OF BARODA WHEREIN THE TRANSFER OF FUNDS IS REF LECTED. THUS, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, IT IS A GENUINE TRANSACTION OF SALE OF SHARES AND NOT A LOAN AND TH E AO AND THE ITA NO 197 OF 2019 PRIME INFOINVEST LTD HYDERABAD PAGE 4 OF 5 CIT (A) HAVE ERRONEOUSLY HELD THE CONTENTION OF THE ASSESSEE TO BE AN AFTERTHOUGHT. HE, THEREFORE, PRAYED THAT THE ADD ITION MADE UNDER SECTION 2(22)(E) BE DELETED. 4. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE, IN ITS BOOKS OF ACCOUNT, HAD SHOWN A SUM OF RS.49,5 0,000/- AS UNSECURED LOANS FROM M/S. TEJDEEP ENGG ENTERPRISES (P) LTD AND THEREFORE, THE AO AND THE CIT (A) HAVE RIGHTLY TREA TED IT AS DEEMED DIVIDEND SINCE THE COMPANY HAD ACCUMULATED PROFITS AS ON 31.3.2013 AND THE ASSESSEE IS A SUBSTANTIAL SHAR EHOLDER I.E. 15.13% OF M/S. TEJDEEP ENGG ENTERPRISES (P) LTD. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS ENTERED IN TO A SHARE PURCHASE AGREEMENT WITH M/S. TEJDEEP ENGG. ENTERPR ISES (P) LTD, AND HAS RECEIVED CONSIDERATION AS ON THE DATE OF AG REEMENT, AND THE TRANSACTIONS ARE ALSO DULY REFLECTED IN THE BAN K STATEMENT OF THE ASSESSEE. EXCEPT FOR THE REASON THAT THE ASSESS EE HAS SHOWN THE SAME AS AN UNSECURED LOAN IN ITS BOOKS OF ACCOU NT, THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE AO THAT THIS I S NOT A GENUINE SALE TRANSACTION. THE ASSESSEE HAS STATED T HAT SUBSEQUENTLY, THE TRANSACTION WAS COMPLETED AND THE SHARES WERE ALSO TRANSFERRED TO TEJDEEP ENGG. ENTERPRISES LTD. THEREFORE, WE DEEM IT FIT AND PROPER TO DIRECT THE AO TO VERIFY T HIS CONTENTION OF THE ASSESSEE AND IF THE CONTENTION OF THE ASSESSEE IS FOUND TO BE CORRECT, THEN THE ADDITION U/S 2(22)(E) CANNOT BE M ADE. THEREFORE, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FO R STATISTICAL PURPOSES. ITA NO 197 OF 2019 PRIME INFOINVEST LTD HYDERABAD PAGE 5 OF 5 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2021. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 22 ND FEBRUARY, 2021. VINODAN/SPS COPY TO: 1 PRIME INFOINVEST LTD, C/O P MUARLI & CO. C.AS, 6- 3-655/2/3 SOMAJIGUDA, HYDERABAD 500082 2 ITO WARD 16(2) HYDERABAD 500004 3 CIT (A)-1 GUNTUR 4 PR. CIT IV HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER