The ACIT, 3(1), Bhopal V. Shri Zaheer Qureshi, Bhopal

ITA 220/IND/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1515 (ITAT-INDORE)
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 20-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Deemed dividend

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 402/IND/2012 A.Y. 2008-09 ZAHEER QURESHI BHOPAL PAN AABPO 0609G :: APPELLANT VS ASSTT.COMMISSIONER OF INCOME TAX 3(1) BHOPAL :: RESPONDENT ITA NO. 220/IND/2012 A.Y. 2008-09 ASSTT.COMMISSIONER OF INCOME TAX 3(1) BHOPAL :: APPELLANT VS ZAHEER QURESHI BHOPAL :: RESPONDENT DEPARTMENT BY SHRI R.A. VERMA ASSESSEE BY SHRI H.P. VERMA ALONG WITH MISS SAKSHI VERMA DATE OF HEARING 21.1.2013 DATE OF PRONOUNCEMENT 31.1.2013 2 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE AS WELL AS THE REVENUE ARE AGGRIEVED BY THE IMPUGNED ORDER DATED 25.1.2012 PASSED BY THE LEARNE D FIRST APPELLATE AUTHORITY, BHOPAL. IN THE APPEAL OF THE A SSESSEE, THE FIRST GROUND RAISED IS THAT THE LEARNED CIT(A) ERRE D IN SUSTAINING THE ADDITION OF RS.2,93,731/-, BEING DEEMED DIVIDEN D U/S 2(22)(E) OF THE ACT, WITHOUT ACCEPTING THE EXPLANATION OF TH E ASSESSEE. 2. DURING HEARING, WE HAVE HEARD SHRI H.P. VERMA AL ONG WITH MISS SAKSHI VERMA, LEARNED COUNSEL FOR THE ASSESSEE AND SHRI R.A. VERMA, LEARNED SENIOR DR. THE CRUX OF ARGUMEN TS ON BEHALF OF THE ASSESSEE IS THAT THE AMOUNT OF RS.2,93,731/- WAS IN FACT THE AMOUNT OF INVESTMENT MADE BY THE COMPANY IN PUR CHASE OF SIP BUT DUE TO INADVERTENT MISTAKE, THE SAID SIP WA S ALLOTTED IN THE NAME OF ONE OF THE DIRECTORS I.E. THE ASSESSEE AND THE SAID AMOUNT WAS RETURNED BACK AT THE END OF THE YEAR, TH EREFORE, IT WAS PLEADED THAT NO ADDITION WAS REQUIRED. ON THE OTHER HAND, THE ADDITION WAS DEFENDED BY THE LEARNED SR. DR BY SUBMITTING THAT THE AMOUNT SO RECEIVED FROM THE COMPANY IS CLE ARLY IN THE NATURE OF LOANS AND ADVANCES, THEREFORE, IS TO BE T REATED AS DEEMED DIVIDEND. THE ADDITION WAS DEFENDED. 3 3. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHO RITIES BELOW. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ONE O F THE DIRECTORS OF M/S S.S. CROP CARE LIMITED, BHOPAL, HAVING 26% OF S HARES WITH EQUAL VOTING RIGHTS. DURING THE PREVIOUS YEAR, IN THE ACCOUNT OF THE ASSESSEE, IN THE BOOKS OF THE COMPANY AN AMOUNT OF RS. 3,31,000/- WAS DEBITED. HOWEVER, THE MUTUAL FUND W AS IN THE NAME OF THE ASSESSEE, CONSEQUENTLY THE AMOUNT OF AD VANCE WAS REFUNDED TO THE COMPANY. THE ASSESSING OFFICER TRE ATED THIS AMOUNT AS ADVANCE/LOAN HOLDING THE SAME AS DEEMED D IVIDEND U/S 2(22)(E) OF THE ACT. THE THRUST OF ARGUMENTS O N BEHALF OF THE ASSESSEE IS THAT DUE TO INADVERTENT MISTAKE, THE SI PS WERE ALLOTTED IN THE NAME OF THE ASSESSEE AND AT THE END OF THE YEAR, THE AMOUNT OF INVESTMENT WAS RETURNED TO THE COMPAN Y BUT THE FACT REMAINS THAT THERE WAS CREDIT BALANCE IN THE B OOKS OF THE COMPANY AND IN FACT THE ASSESSEE GAVE ADVANCE OF RS .37,269/- TO THE COMPANY. AFTER REALISING THE MISTAKE OF WRONG A LLOTMENT, THE AMOUNT WAS RETURNED VIDE CHEQUE NO. 677445 ON 31.3. 2008. IDENTICAL OBSERVATION HAS BEEN MADE IN THE IMPUGNED ORDER UPON THE SUBMISSIONS OF THE ASSESSEE. IT WAS FURTHER EX PLAINED THAT THE REMAINING AMOUNT OF RS. 64,464/- WAS RETURNED O N 6.8.2007 4 WHICH IS INCLUDED IN THE SUM OF RS.3,94,464/- WHICH RELATES TO PURCHASE OF IMMOVABLE PROPERTY I.E. RS. 3,30,000/-. IN VIEW OF THESE FACTS, WE FIND FORCE IN THE ARGUMENT OF THE A SSESSEE, THEREFORE, THE ADDITION SO MADE UNDER THE DEEMING P ROVISION IS DELETED. 4. THE NEXT GROUND PERTAINS TO CONFIRMING THE ADDIT ION OF RS.19,66,144/- OUT OF THE TOTAL ADDITION OF RS.31,6 4,387/-, TREATING THE SAME AS DEEMED DIVIDEND U/S 2(22)(E) O F THE ACT. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE AMOUNT OF RS. 18,30,000/- WAS GIVEN TO THE ASSESSEE BY THE CO MPANY FOR PURCHASE OF A SHOP/OFFICE SPACE FOR WHICH RESOLUTIO N WAS PASSED ON 21 ST MAY, 2007(PAGE 32 OF THE PAPER BOOK). IT WAS PLEAD ED THAT SUCH INCREASE APPEARS IN THE LEDGER ACCOUNT (PAPER BOOK PAGE 33). IT WAS ARGUED THAT THE DEAL DID NOT MATURE BE CAUSE OF AN OBJECTION BY ONE SMT. HARSHITA BACHANI, TENDERS WER E CANCELLED AND FRESH TENDERS WERE INVITED. THIS AMOUNT WAS CLA IMED TO BE RETURNED TO THE COMPANY. ON THE OTHER HAND, THE LEA RNED SENIOR DR DEFENDED THE ADDITION BY STATING THAT THE ASSESS EE RECEIVED ADVANCES FROM THE COMPANY ON VARIOUS DATES AND IS A DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. THE ADDITION WAS DEFENDED. 5 4.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF RECORD WE FIND THAT THE ADDITION OF RS.19,66,144/- IS SUMMARISED AS UND ER :- SL.NO. DATE PARTICULARS AMOUNT RS. 1 22.5.2007 PURCHASE OF PROPERTY 3,30,000 2 3.1.2008 -DO- 15,00,000 3 25.6.2007 FOREIGN TOUR LESS EXPENSES INCURRED 5,83,243 6,18,220 4 28.7.2007 34,977 5 5.7.2007 PETTY EXPENSES 64,464 6 12.12.2007 NSC 36,703 7 ADDED TO THE INCOME 19,66,144 DURING HEARING, THE LEARNED COUNSEL FOR THE ASSESSE E EXPLAINED THAT THE AMOUNT OF RS. 18,30,000/- WAS GIVEN TO THE ASSESSEE BY THE COMPANY FOR PURCHASE OF SHOP. IT IS NECESSARY TO MENTION THAT FOR PURCHASE OF SHOP TWO PAYMENTS I.E. RS. 3,3 0,000/- (ON 22.5.2007) AND RS. 15 LACS (ON 3.1.2008) WERE PAID TO THE ASSESSEE. WE HAVE ALREADY DEALT WITH THE AMOUNT OF RS. 3,30,000/- WHILE DISPOSING OF GROUND NO. 1 (SUPRA). THE ENTRY OF RS.18,30,000/- IS APPEARING AT PAGE 33 OF THE PAPER BOOK. SINCE THE DEAL DID NOT MATERIALISE, THEREFORE, THIS AMOUN T WAS ALSO RETURNED TO THE COMPANY AS THE AMOUNT OF RS.3,94,4 64/- WAS RETURNED ON 22.5.2007, RS. 10 LACS ON 28.2.2008 AND RS. 5,27,680/- ON 1.3.2008. THE TOTAL OF THESE AMOUNTS COMES TO 6 RS.19,22,144/-. FOR CANCELLATION OF DEAL, OUR ATTE NTION WAS INVITED TO CERTAIN DOCUMENTS OUT OF THEM SOME ARE G OVERNMENT DOCUMENTS. IT WAS EMPHATICALLY PLEADED BY THE LEARN ED COUNSEL THAT THIS EXPLANATION WAS CONVENIENTLY IGNORED BY T HE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. WE FURTHER NOTE THAT THE LEARNED CIT(A) WHILE DISPOSING OF THE APPEAL BEFORE HIM GAVE CERTAIN RELIEF TO THE ASSESSEE FOR THE AMOUNT FOR P URCHASE OF FOREIGN CURRENCY AND DELETED THE ADDITION TO THE EX TENT OF RS.11,98,243/- AND CONFIRMED THE IMPUGNED ADDITION. SINCE THE ASSESSEE COMPANY IS MANUFACTURER OF CHEMICALS FOR T HE GERMAN COMPANY M/S BAYER, THE ASSESSEE IN THE CAPACITY OF THE DIRECTOR WENT ON FOREIGN TOUR TO EXPLORE THE POSSIBILITY OF MANUFACTURING OF OTHER CHEMICALS AND TO ASSESS THE POSSIBILITY OF MA RKET OF THE PRODUCT IN FOREIGN COUNTRIES. OUT OF THE TOTAL AMOU NT OF RS. 6,15,000/- FOR FOREIGN TOUR, THE BALANCE AMOUNT OF RS. 34,977/- WAS RETURNED AND RS.5,83,243/- (PAPER BOOK PAGE 33) WAS INCURRED ON SUCH BUSINESS TRIP. THE AMOUNT OF RS.36 ,703/- FOR NSC ON 12.12.2007 AND THE BALANCE AMOUNT OF RS. 34, 977/- OUT OF FOREIGN TRIP WERE REFUNDED ON 20.12.2007 (RS. 44 ,000/-) AND RS. 27,680/- ON 28.2.2008 OUT OF RS.5,27,680/- AS R S. 5 LACS WAS PAID FOR IMMOVABLE PROPERTY, THEREFORE, NOTHING REM AINS. LEGAL 7 FICTIONS ARE CREATED ONLY FOR A DEFINITE PURPOSE/LI MITED PURPOSE, FOR WHICH THEY ARE CREATED AND SHOULD NOT BE EXTEND ED BEYOND THEIR LEGITIMATE FIELD. THE RATIO LAID DOWN IN STA TE OF BOMBAY VS. PANDURANG VINAYAK CHAPALKAR (1953) SCR 773, BENGAL IMMUNITY COMPANY LIMITED VS. STATE OF BIHAR; 6 STC 446, 534 (SC); CIT VS. ELPHINSTONE SPINNING & WEAVING MILLS CO.; 40 ITR 14 2, 154 (SC); RAJPUTANA TRADING CO. LTD. VS. CIT; 72 ITR 286, 288 (SC); KULDEEP SINGH VS. GANPATLAL JT 1995 (9) SC 157; STA TE OF TAMIL NADU VS. AROORAN SUGARS LTD. (1997) 1 SCC 326, 336; CIT VS. AMARCHAND N. SHROFF; 48 ITR 59 (SC); CIT VS. SAKARL AL BALABHAI; 86 ITR 2, 8 (SC); HINDUSTAN VACCUM GLASS LTD. VS. C IT; 155 ITR 711, 718(SC); DR. BALIRAM WAMAN HIRAY VS. MR. JUSTI CE B. LENTIL; 176 ITR 1, 27 (SC); KRISHNAKUMAR DEVI; 173 ITR 561 AND GULABCHAND MOTIYAL; 174 ITR 117, 122 (MP); CIT VS. SHRI SHAKTI TRADING COMPANY; 207 ITR 442 (BOM); LIC VS. CIT; 21 9 ITR 410 (SC) SUPPORTS OUR VIEW. SINCE THE COMPANY NEITHER G AVE ADVANCES NOR LOANS TO THE ASSESSEE, THEREFORE, SECTION 2(22) (E) IS NOT ATTRACTED MORE SPECIFICALLY SINCE THE ASSESSEE IS M D OF THE COMPANY AND WAS EXPECTED TO DEAL WITH ON BEHALF OF THE COMPANY, SUCH AMOUNTS CANNOT BE SAID TO BE ADVANCED IN INDIVIDUAL CAPACITY. THIS ADDITION WAS UNJUSTIFIED . IT IS DELETED. 8 5. SO FAR AS CHARGING OF INTEREST IS CONCERNED, IT IS CONSEQUENTIAL IN NATURE. 6. THE LAST GROUND FOR INITIATION OF PROCEEDINGS U/ S 271(1)(C) IS CONCERNED, IT IS PRE-MATURE, THEREFORE, REQUIRES NO ADJUDICATION AT THIS STAGE. 7. NOW WE SHALL TAKE UP APPEAL OF THE REVENUE (ITA NO. 220/IND/2012) WHEREIN THE ONLY GROUND RELATES TO DE LETION OF ADDITION OF RS. 11,98,243/- OUT OF THE TOTAL ADDITI ON OF RS.31,64,387/- MADE BY THE ASSESSING OFFICER AS DEE MED DIVIDEND U/S 2(22)(E) OF THE ACT ON THE GROUND THAT THE ADVANCE OF RS. 6,15,000/- TAKEN BY THE ASSESSEE FOR PURCHASE O F FOREX AND RS. 5,83,243/- SPENT ON FOREIGN TOUR ARE NOT COVERE D BY SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES, ORDERS OF THE AUTHORITIES BELOW AND HAVE ALSO GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. A SIMILAR ISSUE HAS BEEN DEALT WITH BY US EXHAUSTIVELY WHILE ADJUDICATING UPON THE APPE AL OF THE ASSESSEE WHEREIN WE HAVE CONFIRMED THE ACTION OF TH E LEARNED CIT(A) IN DELETING THE ADDITION OF RS. 11,98,243/-. WE MAY NOTE THAT THE ADVANCE, IN QUESTION, WAS NOT GIVEN BY THE COMPANY TO 9 THE ASSESSEE IN HIS INDIVIDUAL CAPACITY BUT IN THE CAPACITY OF A DIRECTOR OF THE COMPANY ONLY WITH A VIEW TO UNDERT AKE FOREIGN TOUR FOR THE PURPOSE OF BUSINESS OF THE COMPANY. S INCE THE FACTS OF THE CASE AND THE ARGUMENTS OF THE PARTIES ARE TH E SAME, FOR THE REASONS GIVEN IN PARAS 4 AND 4.1 (SUPRA), WE HOLD T HAT THE ADVANCE OF RS. 6,15,000/- TAKEN BY THE ASSESSEE FOR PURCHASE OF FOREX AND RS. 5,83,243/- SPENT ON FOREIGN TOUR OUT OF THE SAME, CANNOT BE SAID TO BE DEEMED DIVIDEND AND AS SUCH SE CTION 2(22)(E) OF THE INCOME TAX ACT, 1961 DOES NOT COME IN PLAY. WE ARE, THEREFORE, IN AGREEMENT WITH THE FINDINGS OF T HE LEARNED CIT(A) AND CONFIRM THE SAME. IN THIS VIEW OF THE M ATTER, THIS GROUND OF THE REVENUE STANDS DISMISSED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 3 1 ST JANUARY, 2013. SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 31 ST JANUARY, 2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-2122 10