Appeal Details
Counselvise Citation
[2021] 104 COUNSELVISE.COM (IT) 5923 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 3 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-12-2021
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2009-2010
Appeal Filed On
20-09-2017
Judgement Text
आयकर अपीलीय अधधकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No. 73/PUN/2017 धनधाारण वषा / Assessment Year : 2008-09 Shri Ravi Pichaya, Director in Hextech Engineers India Pvt. Ltd. B-76, MIDC, Ambad, Nashik-422 010 PAN : ACLPP9236E .......अपीलाथी / Appellant बनाम / V/s. The Assistant Commissioner of Income Tax, Circle-1, Nashik. ......प्रत्यथी / Respondent आयकर अपील सं. / ITA No. 2205/PUN/2017 धनधाारण वषा / Assessment Year : 2009-10 Shri Ravi Pichaya, Director in Hextech Engineers India Pvt. Ltd. B-76, MIDC, Ambad, Nashik-422 010 PAN : ACLPP9236E .......अपीलाथी / Appellant बनाम / V/s. The Assistant Commissioner of Income Tax, Circle-1, Nashik. ......प्रत्यथी / Respondent Assessee by : Shri Pramod Shingte Revenue by : Shri Mahesh Jasnani सुनवाई की तारीख / Date of Hearing : 21.12.2021 घोषणा की तारीख / Date of Pronouncement : 21.12.2021 2 ITA No. 73/PUN/2017 ITA No.2205/PUN/2017 A.Ys. 2008-09 & 2009-10 आदेश / ORDER PER BENCH : These two appeals preferred by the assessee emanates from the different orders of the Ld. CIT(Appeals)-1, Nashik dated 15.11.2016 & 04.07.2017 for the assessment years 2008-09 & 2009-10 as per the following common grounds of appeal on record: “1) On the facts and in the circumstances of the case and in law that the re-assessment u/s.147 be held bad in law as reopening is based on the decision of CIT(A) in the case of Zetex Engineers Pvt. Ltd. and which is not accepted by the dept. 2) The learned CIT(A) erred in confirming the addition of Rs.1,00,28,347/- as deemed dividend in the hands of the appellant on the ground that Hextech Engineering Pvt. Ltd. ( Hextech) had given a loan to Zetex Engineers Pvt. Ltd. (Zetex) and the appellant is a common shareholder in both the companies with more than 90% shareholding. 3) The learned CIT(A) was not justified in taxing the above amount of Rs.1,00,28,347/- as deemed dividend in the hands of the appellant as the funds given by the Hextech to Zetex were for the purposes of its business and not as a loan and therefore, the question of taxing any deemed dividend on account of these transactions simply did not arise u/s.2(22)(e). 4) Without prejudice, the learned CIT(A) erred in sustaining the addition of Rs.1,00,28,347/- while it should have been restricted only to the peak amount arising out of the loans given during the FY 2007-08 and not out of the transactions in the past years and secondly, it should have been restricted only to the incremental increase in accumulated profits after deducting the deemed dividend for the earlier years as per the provisions of the Act. 5) Without prejudice, the appellant submits that deemed dividend if any, could be taxed in his hands only in proportion of his shareholding to the total shareholding of Hextech of the accumulated profits of the company and not to the extent of the entire accumulated profits of the company. 6) The learned CIT(A) erred in confirming interest charged u/s.234A/234B/234C as charged by the AO. 7) The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.” 2. At the very outset, the Ld. Counsel for the assessee submitted that issues involved in both these appeals are identical and similar and facts and 3 ITA No. 73/PUN/2017 ITA No.2205/PUN/2017 A.Ys. 2008-09 & 2009-10 circumstances are common. After hearing the submissions of the Ld. Counsel for the assessee, these two appeals are heard together and disposed of vide this consolidated order. 3. The Ld. Counsel for the assessee filed additional ground which reads as follows: “Additional Ground: On the facts and in the circumstances of the case and in law, the assessee submits that notice of reopening u/s.148 dated 03.03.2015 is invalid in law since at that point of time, the addition on account of deemed dividend was already made in the case of Zetex Engineers Pvt. Ltd. and therefore, there was no reason to believe that the income on account of deemed dividend has escaped addition in the hands of assessee. The appellant craves to leave, add, amend, alter, modify and delete any or all the above grounds of appeal before or during the course of hearing.” We would take up grounds of appeal memo as well as additional grounds raised and take up ITA No.73/PUN/2017 for the assessment year 2008-09 as the lead case for adjudication. ITA No.73/PUN/2017 A.Y.2008-09 4. The brief facts in this case are that the assessee is an individual and derives salary income as Director in Hextech Engineers India Pvt. Ltd., Nashik. The return of income was filed on 30.09.2008 declaring total income of Rs.43,63,215/-. The case was reopened by issuing notice u/s.148 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟). The assessee is a director in M/s. Hextech Engineers India Pvt. Ltd. and holding 97.10% of the shares of the company and also shareholder in M/s. Zetex Engineers Private Ltd. holding 99.95% of the shares of the company. The Hextech Engineers India Pvt. Ltd. has given a loan of Rs.2,14,60,905/- to M/s. Zetex Engineers 4 ITA No. 73/PUN/2017 ITA No.2205/PUN/2017 A.Ys. 2008-09 & 2009-10 Pvt. Ltd. as Shri Ravi Pichaya is the common shareholder with more than 90% of shareholding in both the companies, hence the loan up to extent of accumulated profit of Rs.1,00,28,347/- taken by M/s. Zetex Engineers Pvt. Ltd. from M/s. Hextech Engineers India Pvt. Ltd. was considered as deemed dividend u/s.2(22)(e) of the Act and made addition of Rs.1,00,28,347/- and assessed the income at Rs.1,43,91,560/-. 5. That with regard to additional ground, the Ld. Counsel for the assessee submitted that this issue is purely legal in nature and has been dealt with by the Hon‟ble Jurisdictional High Court in favour of the assessee in the case of DHFL Venture Capital Fund Vs. Income Tax Officer in Writ Petition No.2966 of 2012 dated 14 th June, 2013 reported in [2013] 34 taxmann.com 300 (Bombay). In this case, the Hon‟ble Jurisdictional High Court addressing the issue of reopening of assessment u/s.147/148 of the Act, question was whether where Assessing Officer sought to make protective assessment by reopening an assessment on ground that a contingency may arise in future resulting in escapement of income whether that would be wholly impermissible and would amount to rewriting statutory provisions and it was held as yes and the issue answered in favour of the assessee. 6. The entire crux of the decision of the Hon‟ble Jurisdictional High Court in this case was that such exercise of reopening of assessment based on some hypothetical situation or contingency which may arise in future then in such case, this sort of exercise is not legally tenable and hence, it was held in favour of the assessee. However, when we peruse the reasons recorded for reopening of assessment in the present case of the assessee as recorded by the Assessing Officer, we find that there is no scope for any hypothetical or 5 ITA No. 73/PUN/2017 ITA No.2205/PUN/2017 A.Ys. 2008-09 & 2009-10 any contingency in the given reasoning. The entire reasons have been specifically spelled out by the Assessing Officer and reasons have been recorded without any room for any guess work or surmises. This is not at all the case of any hypothetical situation or the case of any future contingency. In that respect, the decision of the Hon‟ble Jurisdictional High Court is factually not applicable in the present facts and circumstances of the case of the assessee. Therefore, the additional ground raised in appeal by the assessee is dismissed. 7. That even in grounds relating to merits also, as evident from the findings of the Ld. CIT(Appeals), the assessee has not at any stage neither before the Assessing Officer nor before the Ld. CIT(Appeals) has explained the commercial expediency of the transaction that as specifically brought out by the findings of the Ld. CIT(Appeals) at Para 5.16 of her order that assessee has not been able to demonstrate through any cogent or credible evidence that this transaction that he had with the M/s. Hextech Engineering Pvt. Ltd. was commercial in nature. Therefore, the Assessing Officer rightly taxed the same as deemed dividend to the extent of accumulated profit of Rs.1,00,28,347/- in the hands of the assessee. The Ld. CIT(Appeals) on this issue has held and observed as follows: “5.14. Any advance or loan given including a running account can be treated as “Deemed Dividend” except in a case where loan/advance made to a shareholder or the said concern by a company in the course of business of money lending. The company is not a money lending company so such advance cannot be considered under exception provided under section 2(22)(e). The argument of the ld. A.R that loans and advances should be treated as normal business transactions cannot come to its rescue, in absence of any documentary evidence to corroborate or substantiate its view. I fail to understand the Commercial transaction embedded in this transaction of drawls of loans and advances by the appellant from the company. It is true that the word commercial transaction is not defined in Income Tax Act. The definition of commercial transaction as per business dictionary is An interaction between two or more parties in which goods, services or something of 6 ITA No. 73/PUN/2017 ITA No.2205/PUN/2017 A.Ys. 2008-09 & 2009-10 value is exchanged for some type of remuneration. In this particular transaction between appellant and company the element of commerce or profit or remuneration is absent. Hence the transaction be termed as commercial transaction as no monetary consideration for the appellant is involved in the same. Hence, the argument of Ld. AR that this is commercial transaction stands dismissed. 5.15 Reference is invited to the decision of Hon’ble ITAT, Mumbai in the case of Smt. Shantadevi Mahavir Prasad Gupta where the addition on deemed dividend under section 2(22)(e) has been upheld holding that the advance given by the appellant to the company are not in nature of loan nor any interest have been charged by the company from the appellant. The Hon’ble Tribunal has upheld the levy of penalty under section 271(1)(c) on the addition deemed dividend in its order ITA No.7733/Mum/2010, AY 2003-04 dated 05.02.2014. 5.16 The reliance of appellant in plethora of cases of jurisdictional High Court namely, Jignesh Shah, Impact Containers, Universal Medicare cannot come its rescue. In all these case the Hon'ble High Court has held that the deemed dividend can assessed only in the hands of shareholders only. In the instant case it is an established fact that M/s Zetex Engineers Pvt. Ltd. has taken a loan of Rs.2,14,60,905/- from M/s Hextech Engineering (I), Pvt. Ltd. And Mr. Ravi Pichaya is the ,common shareholder holding 99.95% and 97.10% shares respectively and at the end of the year M/s Zetex Engineers Pvt. Ltd. has a debit balance of Rs.2,14,60,905/-with M/s.Hextech Engineering (I) Pvt. Ltd. The assessee has not been able to demonstrate through any cogent or credible evidence that this transaction that he had with the M/s. Hextech Engineering Pvt. Ltd. was commercial in nature. The AO has rightly taxed the same as deemed dividend to the extent of accumulated profit of Rs.1,00,28,347/- in the hands of Shri Ravi Pichaya. 5.17. In the facts and circumstances of the case and keeping in view of the above judicial decision of the Hon’ble Delhi High Court, I am of the opinion that the loan to the extent of accumulated profit of Rs.1,00,28,347/- taken by M/s. Zetex Engineers Pvt. Ltd. from M/s. Hextech Engineering (I) Pvt. Ltd. in the AY 2008-09 is liable to be taxed as deemed dividend as per the provision of section 2(22)(e) of the Income Tax Act, 1961 in the hands of the shareholder i.e. the assessee Shri Ravi Pichaya.” 8. That even before us also, the assessee was unable to demonstrate through any materials/evidences on record to substantiate the commercial nature of the transaction or expediency involved in the same. In view thereof, we do not find any infirmity with the findings of the Ld. CIT(Appeals) and the same is therefore, upheld. Thus, grounds on merits raised in appeal memo by the assessee are dismissed. 7 ITA No. 73/PUN/2017 ITA No.2205/PUN/2017 A.Ys. 2008-09 & 2009-10 9. In the result, appeal of the assessee in ITA No.73/PUN/2017 for the assessment year 2008-09 is dismissed. ITA No.2205/PUN/2017 AY.2009-10 10. Both the parties unanimously agreed that issues involved in this appeal along with facts and circumstances are identical and similar to ITA No.73/PUN/2017 for the assessment year 2008-09. Therefore, our decision rendered in ITA No.73/PUN/2017 for the assessment year 2008-09 shall mutatis-mutandis apply in ITA No.2205/PUN/2017 for the assessment year 2009-10 also. In this case also, grounds on merits raised in appeal by the assessee are dismissed. 11. In the result, appeal of the assessee in ITA No.2205/PUN/2017 for the assessment year 2009-10 is dismissed. 12. In the combined result, both the appeals of the assessee are dismissed. Order pronounced on 21 st day of December, 2021. Sd/- Sd/- INTURI RAMA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ददनांक / Dated : 21 st December, 2021 SB 8 ITA No. 73/PUN/2017 ITA No.2205/PUN/2017 A.Ys. 2008-09 & 2009-10 आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : 1. अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The CIT(Appeals)-1, Nashik. 4. The Pr. CIT-1, Nashik. 5. धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गार्ा फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // धनजी सधचव / Private Secretary आयकर अपीलीय अधधकरण, पुणे / ITAT, Pune. 9 ITA No. 73/PUN/2017 ITA No.2205/PUN/2017 A.Ys. 2008-09 & 2009-10 Date 1 Draft dictated on 21.12.2021 Sr.PS/PS 2 Draft placed before author 21.12.2021 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order
