Shri Vishnubhai A. Patel, Baroda V. The Income Tax Officer, Ward-1(1)(2), Baroda

ITA 2069/AHD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7971 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 09-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P MAURYA
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2069/AHD/2016 (ASSESSMENT YEAR: 2012-13) VISHNUBHAI A PATEL, 20/A, BHAVANPURA SOCIETY, NIZAMPURA, BARODA- 390002 V/S INCOME TAX OFFICER, WARD- 1 (1)(2), BARODA (APPELLANT) (RESPONDENT) PAN: ABTPP3619A APPELLANT BY : SHRI SAKAR SHARMA, AR RESPONDENT BY : SHRI R. P. MAURYA, SR. D.R. ( )/ ORDER DATE OF HEARING : 13 -12-201 7 DATE OF PRONOUNCEMENT : 18-12-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-I, BARODA DATED 20.05.2016 PERTAINING TO A.Y. 2012-13. ITA NO. 2069 /AHD/2016 . A.Y. 2012-13 2 2. THE ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUNDS O F APPEAL. GROUND NO. 1 RELATES TO THE ADDITION OF RS. 5,49,700/- ON ACCOUN T OF SHORT TERM CAPITAL GAIN. THE SECOND GROUND RELATES TO THE ADDITION OF RS. 12 ,50,000/- MADE BY INVOKING PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND THE T HIRD GROUND RELATES TO THE DISALLOWANCE OF RS. 2,29,500/- BEING AMOUNT CLAIMED AS EXPENSE AGAINST COMMISSION INCOME. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT FOR T HE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED THE RETURN OF INCOME ON 30.03.2013 D ECLARING TOTAL INCOME OF RS. 11,40,390/- AND AGRICULTURAL INCOME OF RS. 81,490/- . THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY N OTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS SHOWN INCOME FROM SHORT TERM CAPITAL GAIN AT RS. 4,480/-. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF IM MOVABLE PROPERTY SOLD. THE ASSESSEE FILED NECESSARY DETAILS ON PERUSAL OF WHIC H THE A.O. FOUND THAT THE AGRICULTURAL LAND WAS PURCHASED ON 16.06.2011 FOR A CONSIDERATION OF RS. 23,45,520/- WHICH WAS SOLD ON 21.12.2011 FOR A CON SIDERATION OF RS. 23.50 LACS. 5. THE ASSESSEE WAS ONCE AGAIN ASKED TO FURNISH THE PU RCHASE DEED AND THE SALE DEED. ON PERUSAL OF THE DEED OF PURCHASE, THE A.O. NOTICED THAT THE SAID LAND WAS PURCHASED FOR RS. 17 LACS ON WHICH STAMP DUTY A ND REGISTRATION CHARGES WERE PAID AT RS. 1,00,300/-. THE A.O. FURTHER NOTIC ED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE INCURRED AT RS. 5,45,220/-. ON ENQUIRY, THE ASSESSEE CLAIMED THAT HE HAS INCURRED EXPENDITURE OF RS. 5,4 5,220/- ON SOIL EXCAVATION, ITA NO. 2069 /AHD/2016 . A.Y. 2012-13 3 COMPOUND WALL & CONSTRUCTED SHED. NECESSARY BILL WA S SUBMITTED WHICH WAS NOT FOUND TO BE GENUINE BY THE A.O. THE A.O. FURTHE R NOTICED THAT THE CLAIM OF PAYMENT OF RS. 5,45,220/- WAS NOT REFLECTED IN THE BANK ACCOUNT FURNISHED BY THE ASSESSEE. THE A.O. ACCORDINGLY TREATED THE ALLE GED PAYMENT TO PATEL ENTERPRISES AS BOGUS AND DISALLOWED THE CLAIM OF EX PENDITURE OF RS. 5,45,220/- AND RE-COMPUTED THE SHORT TERM CAPITAL GAIN. 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 7. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE REITERAT ED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. THE LD. COUNSEL ONCE AGAIN D REW OUR ATTENTION TO THE INVOICE OF PATEL ENTERPRISE WHICH IS EXHIBITED AT P AGE 8 OF THE PAPER BOOK. THE LD. COUNSEL ALSO REFERRED TO THE SALE DEED EXHIBITE D AT PAGES 27 TO 44 OF THE PAPER BOOK. IT IS THE SAY OF THE LD. COUNSEL THAT T HE INVOICE OF PATEL ENTERPRISE AND THE SALE DEED CLEARLY SHOW THAT THE ASSESSEE HA D INCURRED CERTAIN EXPENDITURE TOWARDS SOIL EXCAVATION, COMPOUND WALL & CONSTRUCTED OF SHED AND OTHER MISC. REPAIRING WORK AND PRAYED FOR THE D ELETION OF THE ADDITION. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O . 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT THE ASSESSEE HAS FURNISHED I NVOICE FROM PATEL ENTERPRISE FOR RS. 7 LACS. IT IS EQUALLY TRUE THAT THE ASSESSE E COULD NOT ESTABLISH THE GENUINENESS OF THIS INVOICE INASMUCH AS THE CLAIM O F THE PAYMENT TO PATEL ENTERPRISE IS NOT FOUND IN THE BANK ACCOUNT OF THE ASSESSEE. FURTHER, A PERUSAL OF THE SALE DEED SHOWS THAT THERE IS NO MENTION OF ANY COMPOUND WALL, SHED. THEREFORE, THE CLAIM OF THE ASSESSEE OF THE AFORESA ID CONSTRUCTION REMAINS UNSUBSTANTIATED. IN OUR CONSIDERED OPINION, THE ASS ESSEE HAS GROSSLY FAILED IN ITA NO. 2069 /AHD/2016 . A.Y. 2012-13 4 DEMONSTRATING THE EXPENSES INCURRED ON THE SAID PIE CE OF LAND AND THEREFORE, THERE IS NO ERROR IN THE FINDINGS OF THE A.O. WE, D ECLINE TO INTERFERE. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 9. FACTS RELATING TO GROUND NO. 2 SHOW THAT ON VERIFIC ATION OF THE LEDGER ACCOUNT, THE A.O. NOTICED THAT THE ASSESSEE HAS RECEIVED INT EREST FREE LOANS/ADVANCES AMOUNTING TO RS. 15.50 LACS FROM DHRUV PACKAGING PV T. LTD. THE A.O. FURTHER FOUND THAT THE ASSESSEE IS HOLDING 50% SHARES IN DH RUV PACKAGING PVT. LTD. AND THE PROVISIONS OF SECTION 2(22)(E) SQUARELY APPLY O N THE FACTS OF THE CASE. THE ASSESSEE WAS ASKED TO JUSTIFY WHY THE LOAN TAKEN FR OM DHRUV PACKAGING PVT. LTD. SHOULD NOT BE TREATED AS DEEMED DIVIDEND IN TH E HANDS OF THE ASSESSEE. THE ASSESSEE EXPLAINED THAT THE SAID AMOUNT WAS TAK EN AS DIRECTORS REMUNERATION AND WAS ADJUSTED BY THE COMPANY AT THE END OF THE YEAR AND THEREFORE IT IS OUTSIDE THE AMBIT OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 10. THIS EXPLANATION OF THE ASSESSEE DID NOT FIND ANY F AVOUR WITH THE A.O. WHO WAS OF THE FIRM BELIEF THAT PROVISIONS OF SECTION 2(22) (E) OF THE ACT SQUARELY APPLY AND ACCORDINGLY MADE ADDITION OF RS. 12.50 LACS AFT ER DEDUCTING THE REPAYMENT OF RS. 3 LACS FROM THE LOAN AMOUNT OF RS. 15.50 LAC S. 11. THE ASSESSEE WAS UNSUCCESSFUL BEFORE THE FIRST APPE LLATE AUTHORITY. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE COPIES OF THE LEDGER ACCOUNT IN THE BOOKS OF DHRUV PACKAGING PVT. LTD. W HICH ARE EXHIBITED AT PAGE 10 & 12 OF THE PAPER BOOK. IT IS THE SAY OF THE LD . COUNSEL THAT THE COMPANY HAS DEBITED THE ACCOUNT OF THE ASSESSEE 15.50 LACS AS TEMPORARY LOAN AND THEN RS. 6 LACS WAS ADJUSTED TOWARDS DIRECTORS REMUNERA TION. THE LD. COUNSEL FURTHER POINTED OUT THAT THE COMPANY WAS HAVING ANOTHER ACC OUNT OF THE ASSESSEE AND ITA NO. 2069 /AHD/2016 . A.Y. 2012-13 5 IF THE SAID ACCOUNT IS CONSIDERED ALONG WITH THE AC COUNT TREATED AS LOAN THEN THE CORRECT AMOUNT OF DEBIT BALANCE IN THE SAID COMPANY WOULD BE RS. 7,40,402/-. THE LD. COUNSEL STATED THAT THE DEEMED DIVIDEND SHO ULD BE RESTRICTED TO THIS AMOUNT. PER CONTRA, THE LD. D.R. SUPPORTED THE FIND INGS OF THE A.O. 12. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. ON PERUSAL OF EXHIBIT 12 OF THE PAPER BOOK, THERE REMAINS NO D ISPUTE THAT THE COMPANY HAS GIVEN 15.50 LACS AS TEMPORARY LOAN TO THE ASSESSEE. OUT OF THIS RS. 6 LACS HAVE BEEN ADJUSTED TOWARDS DIRECTORS REMUNERATION. THE BALANCE OF RS. 9.50 LACS IS NOTHING BUT DEEMED DIVIDEND IN THE HANDS OF THE ASS ESSEE U/S. 2(22)(E) OF THE ACT. WE FIND THAT THERE WAS AN OPENING CREDIT BALAN CE OF RS. 3,60,600/- WHICH WAS NOT RECEIVED BY THE ASSESSEE DURING THE YEAR UN DER CONSIDERATION. THEREFORE, THE OPENING BALANCE HAS TO BE DEDUCTED F ROM THE AMOUNT OF RS. 9,50,000/- AND THE BALANCE OF RS. 5,89,400/- REMAIN S TO BE ADDED AS DEEMED DIVIDEND. WE, ACCORDINGLY MODIFY THE FINDINGS OF TH E LD. CIT(A) AND DIRECT THE A.O. TO RESTRICT THE ADDITION TO RS. 5,89,400/- U/S . 2(22)(E) OF THE ACT. GROUND NO. 2 IS PARTLY ALLOWED. 13. FACTS RELATING TO GROUND NO. 3 SHOW THAT THE ASSES SEE HAS RECEIVED AS COMMISSION OF RS. 5,51,500/- AND HAS CLAIMED EXPENS ES OF RS. 2,29,500/- AS LEGAL AND PROFESSIONAL FEES. ON FINDING NO SUPPORTI NG BILLS/VOUCHERS, THE A.O. DISALLOWED THE CLAIM OF EXPENDITURE OF RS. 2,29,500 /-. 14. THE ASSESSEE AGITATED THE DISALLOWANCE BEFORE THE L D. CIT(A) BUT WITHOUT ANY SUCCESS. ITA NO. 2069 /AHD/2016 . A.Y. 2012-13 6 15. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE COMMISSION EARNED BY HIM AT RS. 5,51,000/- COULD NOT HAVE BEEN POSSIBLE UNLESS THE ASSESSEE HAD INCURRED CERTAIN EXPENDITURE. IT IS THE SAY OF THE LD. COUNSEL THAT EVEN IF PROPER BILL/VOUCHERS ARE NOT AVAILABLE, THE ENTIRE EXPENDI TURE CANNOT BE DISALLOWED. THE LD. D.R. SUPPORTED THE ASSESSMENT ORDER. 16. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CON TENTIONS OF THE LD. COUNSEL. WE FIND SOME FORCE IN THE SUBMISSIONS MADE BY THE L D. COUNSEL. THE ASSESSEE MUST HAVE INCURRED SOME EXPENDITURE FOR EARNING THE COMMISSION OF RS. 5,51,000/-. IN ABSENCE OF ANY SUPPORTING DOCUMENTAR Y EVIDENCE, WE THINK THAT 10% OF THE COMMISSION INCOME BE ALLOWED AS EXPENDIT URE. IN OTHER WORDS, WE DIRECT THE A.O. TO ALLOW THE EXPENDITURE OF RS. 50, 000/- AND THE BALANCE OF RS. 1,79,500/- REMAINS SUSTAINED. THE ASSESSEE WILL GET A RELIEF OF RS. 50,000/- ON THIS ACCOUNT. GROUND NO. 3 IS PARTLY ALLOWED. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18- 12- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY A CCOUNTANT MEMBER AHMEDABAD: DATED 18 /12/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. ITA NO. 2069 /AHD/2016 . A.Y. 2012-13 7 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD