DCIT, CHENNAI V. Harshad V Doshi, CHENNAI

ITA 2060/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7759 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 14-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 16-10-2015
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: G BASKAR
• Keywords: Deemed dividend; Commercial expediency

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I.T.A.NO S . 2060 AND 2061 /MDS/2015 / ASSESSMENT YEAR :200 7 - 0 8 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1), CHENNAI 600 034. VS. M/S. HARSHAD V. DOSHI, 3H, CENTURY PLAZA, NO. 560, ANNA SALAI, TEYNAMPET, C HENNAI 600 018. [PAN: A ADPD7995E ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI P. RADHAKRISHNAN , JCIT / RESPONDENT BY : SHRI G. BASKAR , ADVOCATE / DATE OF HEARING : 1 4 . 0 3 .201 6 / DATE OF P RONOUNCEMENT : 18 . 0 3 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDER S OF THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) I , CHENNAI BOTH DATED 3 1 . 07 .201 5 RELEVANT TO THE ASSESSMENT YEAR 200 7 - 0 8 . SINCE THE APPEAL PREFERRED BY THE REVENUE IN I.T.A. NO. 2060/MDS/2015 IS WITH REGARD TO LEVY OF INTEREST UNDER SECTION 234A(3) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT], WHICH IS CONSEQUENTIAL IN NATURE TO THE QUANTUM OF INCOME DETERMINED, WE PROCEEDED TO DECIDE THE APPEAL IN I.T.A.NO. 2061/MDS/2015, I.T.A. NO S . 2060 & 2061 /M/ 1 5 2 WHICH IS PREFERRED BY THE REVENUE AGAINST THE DELETION OF QUANTUM ADDITION OF .2,48,01,300/ - MADE UNDER SECTION 2(22)(E) OF THE ACT. I.T.A. NO. 2061/MDS/2015 2. BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE IS THE MANAGING DIRECTOR OF M/S. DOSHI HOUSING ( P) LTD. THE ASSESSEE FILED HIS RETURN OF INCOME ON 28.02.2008, WHICH WAS PR OCESSED UNDER SECTION 143(1) OF THE ACT ON 20.10.2008. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED BASED ON CERTAIN REASONS AVAILABLE ON RECORD. NOTICE UNDER SECTION1 47 OF THE ACT WAS ISSUED ON THE ASSESSEE ON 02.11.2011. FURTHER, NOTICE UNDER SECTION 142(1 ) OF THE ACT WAS ALSO ISSUED ON 10.09.2012 . ON PERUSAL OF THE FINANCIALS/SCHEDULES AND THE RETURN OF INCOME FILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS NOTICED FROM THE SCHEDULE OF S. CREDITORS THAT THE ASSESSEE, WHO IS THE MANAGING DIRECTOR OF DHL [H AVING SUBSTANTIAL SHAREHOLDING IN THE COMPANY] HAS OBTAINED ADVANCES DURING THE YEAR TO THE TUNE OF .3,47,35,095/ - FROM DHL IN RESPECT OF 2 PROPERTIES PURCHASED IN HIS NAME. AS THE ADVANCES IN THIS REGARD ARE GIVEN BY THE COMPANY IN WHICH PUBLIC ARE NOT S UBSTANTIALLY INTERESTED, THE ASSESSEE BEING THE MAJORITY SHARE HOLDER IN DHL, WHICH POSSESSED ACCUMULATED PROFITS (EXCLUDING CAPITALIZED PROFITS) DURING THE FINANCIAL YEAR 2006 - 07 WHEN THE ABOVE ADVANCES WERE GIVEN TO THE ASSESSEE (WHICH WERE UTILIZED FOR ACQUIRING THE LANDS IN HIS NAME), THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY SECTION 2(22)(E) OF THE ACT SHOULD NOT BE APPLIED. THE AR OF THE ASSESSEE HAS FILED DETAILED I.T.A. NO S . 2060 & 2061 /M/ 1 5 3 SUBMISSIONS AND ALSO RELIED ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 IN I.T.A. NO. 1367/MDS/2009 DATED 25.04.2010, WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE. SINCE THE DEPARTMENT HAS PREFERRED AN APPEAL AGAINST THE ORDER OF THE TRIBUNAL FOR THE ASSESS MENT YEAR 2006 - 07, IN ORDER TO KEEP ALIVE OF THE ISSUE, THE SUM OF .2,48,01,300/ - ADVANCED BY DHL TO THE ASSESSEE IN PURCHASE OF VANAGARAM PROPERTY HAS BEEN TREATED AS DEEMED DIVIDEND SINCE THE SAME WAS ACQUIRED IN HIS OWN NAME, A SUM OF .2,48,01,300/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. ON APPEAL, THE LD. CIT(A), BY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 IN I.T.A. NO. 1367/MDS/2009 DATED 25.04.2010, DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION IN QUANTUM. 4. AGGRI EVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, BOTH PARTIES HAVE AGREED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSES SEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 IN I.T.A. NO. 1367/MDS/2009 DATED 25.04.2010. I.T.A. NO S . 2060 & 2061 /M/ 1 5 4 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE ORDER OF THE COORDINATE B ENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 IN I.T.A. NO. 1367/MDS/2009 DATED 25.04.2010 [(2011) 130 ITD 137] , WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE AGAINST THE REVENUE AND HEAD - NOTE IS REPRODUCED AS UNDER: SECTION 2(2 2) OF THE INCOME - TAX ACT, 1961 - DEEMED DIVIDEND - ASSESSMENT YEAR 2006 - 07 - ASSESSEE, MANAGING DIRECTOR OF A COMPANY DHL, WAS HAVING SUBSTANTIAL HOLDING OF SHARES IN IT - IN ADDITION TO BEING MANAGING DIRECTOR OF DHL, ASSESSEE WAS ALSO PARTNER IN VARIOUS CONSTRUCTION FIRMS - DHL WAS A COMPANY WHICH WAS ENGAGED IN BUSINESS OF PROPERTY DEVELOPMENT - DURING RELEVANT ASSESSMENT YEAR, DHL GAVE CERTAIN ADVANCE TO ASSESSEE - ASSESSEE WAS QUERIED AS TO WHY PROVISIONS OF SECTION 2(22)(E) SHOULD NOT BE APPLIED AND A BOVE SUMS BE CONSIDERED AS DEEMED DIVIDEND IN HIS HANDS - RESPONSE OF ASSESSEE WAS THAT ALL ADVANCES RECEIVED WERE FOR ACQUIRING LAND WHICH WAS TO BE DEVELOPED BY DHL AND DECISION TO HOLD OWNERSHIP DIFFERENT FROM THAT OF SAID COMPANY, WAS A PURE BUSINESS D ECISION, FOR REDUCING COST OF REGISTRATION AS PER TAMIL NADU STAMP ACT, 1974 - ASSESSING OFFICER REJECTED ASSESSEE'S EXPLANATION AND HELD THAT ASSESSEE HAVING GAINED FROM ADVANCES RECEIVED FROM DHL, WHICH WERE ALL CREDITED INTO HIS PERSONAL BANK ACCOUNT, S ECTION 2(22)(E) WAS CLEARLY ATTRACTED - ON APPEAL, COMMISSIONER (APPEALS) DELETED ADDITION MADE BY ASSESSING OFFICER - ON REVENUE'S APPEAL, IT WAS NOTED THAT IF DHL ITSELF HELD OWNERSHIP OF LAND AS WELL AS DEVELOPMENT RIGHTS THEREIN, ON SALE OF FLATS OR PR OPOSED FLATS, ULTIMATE CUSTOMER WOULD HAVE HAD TO PAY STAMP DUTY ON BOTH COST OF LAND AND PROPOSED CONSTRUCTION COST OF FLAT - WHETHER IN VIEW OF ABOVE, THERE WAS MUCH STRENGTH IN ARGUMENT OF ASSESSEE THAT AS A PRUDENT BUSINESS PERSON DHL WOULD HAVE, WITH AN INTENTION TO KEEP ITS COSTS DOWN, AND TO REMAIN COMPETITIVE, DECIDED TO HOLD LAND IN NAME OF ASSESSEE - HELD, YES - WHETHER IN THAT PROCESS, EVEN THOUGH ASSESSEE HAD DERIVED SOME BENEFIT ON ACCOUNT OF CAPITAL GAINS WHEN ULTIMATE TRANSFER OF UNDIVIDED SH ARE IN LAND WAS MADE TO CUSTOMER BY DHL, YET IT WOULD NOT IN ANY WAY CHANGE COLOUR OF TRANSACTION WHICH CLEARLY WAS MOTIVATED BY BUSINESS CONSIDERATION AND COMMERCIAL EXPEDIENCY - HELD, YES - WHETHER, THEREFORE, COMMISSIONER (APPEALS) WAS JUSTIFIED IN DELE TING IMPUGNED ADDITION MADE UNDER SECTION 2(22)(E) - HELD, YES. I.T.A. NO S . 2060 & 2061 /M/ 1 5 5 7. BEFORE US, THE REVENUE COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL OR FILED ANY HIGHER COURT DECISION HAVING MODIFIED OR REVERSED THE ABOVE DECISION OF THE TRIBUNAL . THE LD. C IT(APPEALS) HAS RIGHTLY FOLLOWED THE ABOVE DECISION AND WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS). ACCORDINGLY, T HE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. T HE ADDITION MADE UNDER SECTION 2(22)(E) OF THE ACT WAS DIRECTED TO BE DELETED BY THE LD. CIT(A) AND WE HAVE CONFIRMED THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE, THE LEVY OF INTEREST UNDER 234A(3) OF THE ACT ARE CONSEQUENTIAL IN NATURE TO THE QUANTUM OF INCOME DETERMINED AND THEREFORE, CANNOT SURVIVE. THUS, THE APPEAL FILED BY THE REVENUE IN I.T.A. NO. 2060/MDS/2015 IS DISMISSED. 9 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 18 TH MARCH , 20 16 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDD Y ) JUDICIAL MEMBER CHENNAI, DATED, THE 18 . 0 3 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.