CHANDRA PRAKASH AGARWAL, Jaipur V. ACIT, Jaipur

ITA 218/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5371 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 24-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV PANDEY; DAKSHYANI PANDEY
• Assessee Lawyers: RAJ MEHRA J DHK
• Keywords: Deemed dividend
• Section: 234B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 218/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 SHRI CHANDRA PRAKASH AGARWAL, DIRECTOR RAJASTHAN ALUMINIUM HOUSE (P) LTD. A-20, MGD MARKET,JAIPUR CUKE VS. THE ITO WARD- 5 (1) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAPPA 4498 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY :MISS. DAKSHYANI PANDEY AND SHRI RAJEEV PANDEY, CA FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJ MEHRA, JCIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01/02/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 21/04/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 09-01-2014 FOR THE ASSESSM ENT YEAR 2008-09 WHEREIN THE ASSESSEE HAS RAISED THE GROUNDS AS UND ER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE L D. CIT(A) HAS ERRED IN:- (1.) UPHOLDING THE ASSESSMENT ORDER PASSED U/S 143( 3) OF THE I.T. ACT, 1961 AND NOT HOLDING THE SAME TO BE U NJUST, BAD IN LAW AND NOT FOLLOWING PROVISIONS OF LAW. ITA NO.218/JP/2014 SHRI CHANDRA PRAKASH AGARWAL VS. ITO, WARD- 5 (1 ), JAIPUR . 2 (2) CONFIRMING ADDITION OF RS. 1.50 LACS AS DEEMED DIVIDEND AND NOT FOLLOWING PROVISIONS OF LAW. (3) CONFIRMING ADDITION OF INTEREST U/S 234A, 234B AND 234C. 2.1 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 1 AND GROUND 3 IS CONSEQUENT IAL. HENCE BOTH STAND DISMISSED ACCORDINGLY. 3.1 APROPOS GROUND NO. 2, BRIEF FACTS AND CONTENTIO NS OF THE LD. AR IN THE CASE ARE REFLECTED ON THE ORDER OF THE LD. CIT (A) WHILE CONFIRMING THE DECISION AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE S UBMISSIONS MADE. THE PLEA OF THE A.R. IS NOT ACCEPTABLE IN VIE W OF THE FINDINGS OF THE AO WHICH COULD NOT BE REBUTTED BY THE A.R. B Y ANY EVIDENCE WHATSOEVER. IN THE ASSESSMENT ORDER , THE AO CLEARL Y SHOWS THAT THE APPELLANT HAS CLAIMED ADVANCE SALARY OF RS. 3,00,00 0/- FROM M/S. RAJASTHAN ALUMINUM HOUSE (P) LTD. THE APPELLANT WAS ASKED TO FURNISH ACCOUNT IN THE BOOKS OF THE COMPANY IN WHIC H HE IS DIRECTOR AND FROM THAT ACCOUNT IT HAS BEEN OBSERVED THAT MAN Y ENTRIES IN DEBIT AS WELL AS CREDIT SIDE WERE THERE. THE ASSESS EE WAS ASKED TO EXPLAIN EACH AND EVERY ENTRY IN THAT ACCOUNT ASKED HIM TO SHOW CAUSE AS TO WHY THE AMOUNT RECEIVED FROM M/S. RAJAS THAN ALUMINUM HOUSE (P) LTD. SHOULD NOT BE TREATED AS D EEMED DIVIDEND. THE ASSESSEE VIDE HIS REPLY DATED 10-12-2 06 IN POINT 6 CONFRONTED THAT ASSESSEE HAS RECEIVED ADVANCE SALAR Y FROM COMPANY IN WHICH HE IS DIRECTOR. FURTHER, IN SUB PO INT C OF POINT 6 OF REPLY DATED 10-12-2010 THE ASSESSEE SUBMITTED TH AT ENTRY OF RS. 3,00,000- ON 16-05-2007 IS DEBIT AND IS ADVANCE SAL ARY GIVEN TO THE ASSESSEE WHICH IS BEING DEDUCTED BY CREDIT OF RS. 1 5,000/- PER MONTH. CONSIDERING THE SUBMISSION OF THE ASSESSEE , THE AO WAS OBSERVED THAT RS. 1,50,000/- HAS BEEN RECOVERED BY THE COMPANY FROM THE ASSESSEE AND BALANCE AMOUNT OF RS. 1,50,00 0/- COVERED ITA NO.218/JP/2014 SHRI CHANDRA PRAKASH AGARWAL VS. ITO, WARD- 5 (1 ), JAIPUR . 3 UU2(22)(E) . HENCE, THE SUBMISSION FILED BY THE A.R . FOR THE APPELLANT COULD NOT CONTROVERT THE FINDINGS OF THE AO. IN VIEW OF THESE, THE DISALLOWANCE MADE BY THE AO IS CONSIDERE D TO BE FAIR AND REASONABLE AND DOES NOT CALL FOR ANY INTERFEREN CE. THE ADDITION MADE BY THE AO OF RS. 1.50,000/- IS SUSTAINED. THE APPELLANT FAILS ON THIS GROUND. 3.2 AGGRIEVED, THE ASSESSEE IS BEFORE THE BENCH. 3.3 THE LD. AR OF THE ASSESSEE CONTENDS THAT THE AM OUNT OF RS. 3.00 LACS WAS GIVEN TO THE ASSESSEE ON 16-05-2007 BY CHE QUE AS SALARY ADVANCE. THE MONTHLY SALARY PAID TO THE ASSESSEE HA S BEEN DEBITED TO THIS ADVANCE ACCOUNT WHICH IS REFLECTED BY THE COPY OF A CCOUNT FROM M/S. RAJASTHAN ALUMINUM HOUSE (P) LTD. IT EMERGES THAT T HE ASSESSEE HAS BEEN DEBITED REGULAR SALARY EVERY MONTH. THE LD. AR SUBM ITS THAT SECTION 2(22)(E) CONTEMPLATES AN ADVANCE OR LOAN TO SHAREHO LDER WHICH IS PRO BONO AND GIVEN FOR THE ADVANTAGE OF THE SHAREHOLDER AND NOT FOR THE REGULAR EMPLOYER EMPLOYEE RELATED TRANSACTIONS. THE ASSESSEE'S CASE IS DISTINCT IN NATURE INASMUCH AS THE TRANSACTIONS ARE NOT IN THE CAPACITY OF SHARE HOLDER BUT AS AN EMPLOYEE ON REGULAR PAY ROLE . LIKE OTHER EMPLOYEES ASSESSEE WAS ELIGIBLE TO GET SALARY ADVAN CE. THIS FACT IS REFLECTED BY THE ACCOUNT AS THEREAFTER NO CASH SALA RY HAS BEEN PAID BUT ONLY A DEBIT ENTRY IS MADE. THEREFORE, THE TRANSACT ION IS NOT WITH SHARE HOLDER BUT WITH AN EMPLOYEE AND THERE IS A QUID PRO QUO DUE TO ITA NO.218/JP/2014 SHRI CHANDRA PRAKASH AGARWAL VS. ITO, WARD- 5 (1 ), JAIPUR . 4 RELATIONSHIP OF EMPLOYER AND EMPLOYEE. THIS FACT IS NOT DISPUTED BY THE DEPARTMENT. IN VIEW THEREOF, SALARY ADVANCE IS NOT COVERED IN THE SCOPE OF SECTION 2(22)(E ) OF THE ACT. THE LD. AR PLACED RELIANCE IN THE CASE OF PRADEEP KUMAR MALHOTRA VS. CIT, 338 ITR 538 (CAL.). 3.4 ON THE OTHER HAND, THE LD. DR CONTENDS THAT SEC TION 2(22)(E ) OF THE ACT REFERS TO ANY PAYMENT BY WAY OF ADVANCE WHICH I S INCLUDED AS SALARY ADVANCE. THEREFORE, THE ADDITION HAD RIGHTLY BEEN S USTAINED BY THE LD. CIT(A). 3.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. SECTION 2(22)(E) OF THE ACT WA S INTRODUCED ON THE STATUTE BOOK WITH AN OBJECT TO CURB THE PRACTICE OF EXTENDING INDIRECTLY PECULIAR BENEFITS BY THE COMPANY TO SHARE HOLDERS B Y USING ROUTE OF ADVANCE. THIS IS TO BE BORNE IN MIND THAT IN CASE O F EMPLOYEE DIRECTOR, SALARY ADVANCE THOUGH USES THE WORD ADVANCE BUT DOES NOT FIT IN THE INTENT AND SCOPE OF WORD LOAN AND ADVANCE TO SHAR E HOLDER USED IN SECTION 2(22)(E). FROM THE ACCOUNT OF M/S. RAJASTHA N ALUMINUM HOUSE (P) LTD., IT EMERGES THAT THE ASSESSEE AN EMPLOYEE DIRECTOR RECEIVED ADVANCE SALARY LIKE ANY OTHER EMPLOYEE AND THEREAFT ER MONTHLY SALARY IS ONLY DEBITED TO HIS A/C. IN VIEW OF THESE PECULIAR FACTS AND CIRCUMSTANCE AND RESPECTFULLY RELYING ON THE DECISION OF HON'B LE CALCUTTA HIGH COURT ITA NO.218/JP/2014 SHRI CHANDRA PRAKASH AGARWAL VS. ITO, WARD- 5 (1 ), JAIPUR . 5 IN THE CASE OF PRADEEP KUMAR MALHOTRA VS. CIT (SUPR A),IN MY CONSIDERED VIEW THAT THE SALARY ADVANCE GIVEN TO EMPLOYEE DIRE CTOR WILL NOT FALL WITHIN THE AMBIT OF SECTION 2(22)(E) OF THE ACT. TH EREFORE, THE ADDITION SUSTAINED BY THE LD. CIT(A) IS DELETED. 4.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/04/2016 . SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21 /04/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO:- 1. VIHYKFKHZ@ THE APPELLANT- SHRI CHANDRA PRAKASH AGARWAL, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 5 (1), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 218/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR