ACIT, Trichur V. Sri.E.A.Johny, Trichur

ITA 23/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77436 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: K NARAYANAN
• Keywords: Deemed dividend

Judgement Text

1 ITA NO. 23/COCH/2014 C.O.NO.21/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 23/COCH/2014 (ASSESSMENT YEAR 2007-08) A.C.I.T., CIR.1(1) VS SHRI E.A. JOHNY THRISSUR IMMATTY HOUSE CHALAKUDY, THRISSUR PAN : ACFPJ5498N (APPELLANT) (RESPONDENT) C.O. NO.21/.COCH/2014 (ARISING OUT OF I.T.A NO. 23/COCH/2014) (ASSESSMENT YEAR 2007-08) SHRI E.A. JOHNY VS A.C.I.T., CIR.1(2) CHALAKUDY THRISSUR (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI K.K. JOHN, SR.DR RESPONDENT BY : SHRI K NARAYANAN DATE OF HEARING : 30-04-2014 DATE OF PRONOUNCEMENT : 09-05-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, KOCHI DATED 18-10-2013 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE FILED THE CROSS OBJECTION. 2 ITA NO. 23/COCH/2014 C.O.NO.21/COCH/2014 2. SHRI K.K JOHN, THE LD.DR SUBMITTED THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT AN AMOUNT OF RS.61,26,000 NEEDED TO BE TAXED AS DIVIDEND. ACCOR DINGLY, THE ASSESSING OFFICER HAS TAKEN 1/6 TH VALUE OF THE DEEMED DIVIDEND U/S 2(22)(A) OF THE A CT. LIKEWISE, AN AMOUNT OF RS. 14,88,429 WAS FOUND TO B E ADVANCED TO PARTNERSHIP FIRM IN WHICH 9 DIRECTORS OF THE COMPAN Y INCLUDING THE PRESENT ASSESSEE WERE PARTNERS. THEREFORE, THE ASSESSING O FFICER FOUND THAT THE AMOUNT ADVANCED TO PARTNERSHIP FIRM WAS HIT BY PROV ISIONS OF SECTION 2(22)(A) OF THE ACT. ACCORDINGLY, THE ADDITION WAS MADE U/S 2(22)(A) OF THE ACT. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(A ) FOUND THAT THE ASSESSEE IS NOT A DIRECTOR OF THE COMPANY HOLDING S UBSTANTIAL INTEREST, THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) ARE N OT APPLICABLE. ACCORDINGLY, THE LD.DR SUBMITTED THAT THE ADDITION WAS NOT MADE U/S 2(22)(E) OF THE ACT BUT IT WAS SPECIFICALLY MADE U/ S 2(22)(A) OF THE ACT. THEREFORE, THE ORDER OF CIT(A) HOLDING THAT SECTION 2(22)(E) IS NOT APPLICABLE IS NOT JUSTIFIED. 3. WE HEARD SHRI K NARAYANAN, THE LD.REPRESENTATIVE FOR THE ASSESSEE ALSO. THE LD.REPRESENTATIVE SUBMITTED THAT THE DIS ALLOWANCE WAS MADE U/S 2(22)(A); HOWEVER, THE CIT(A) FOUND THAT SECTION 2( 22)(E) IS NOT APPLICABLE. THE LD.REPRESENTATIVE, VERY FAIRLY CONCEDED THAT TH E CIT(A) HAS NOT 3 ITA NO. 23/COCH/2014 C.O.NO.21/COCH/2014 CONSIDERED THE APPLICABILITY OF SECTION 2(22)(A) OF THE ACT. ON A QUERY FROM THE BENCH, WHEN THE ASSESSING OFFICER DISALLOW ED THE CLAIM OF THE ASSESSEE U/S 2(22)(A) AND THE CIT(A) HELD THAT SECT ION 2(22)(E) IS NOT APPLICABLE WITHOUT CONSIDERING THE APPLICABILITY OF SECTION 2(22)(A), HOW THE ORDER OF CIT(A) WOULD STAND IN THE EYES OF LAW, THE LD.REPRESENTATIVE VERY FAIRLY SUBMITTED THAT THE MATTER MAY BE REMANDED BA CK TO THE FILE OF THE CIT(A) TO CONSIDER THE APPLICABILITY OF SECTION 2(2 2)(A) OF THE ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSING OFFICER FOUND THAT THE DIFFERENCE IN VALUE OF SALE OF SHOP AND THE ADV ANCE MADE TO PARTNERSHIP FIRM WOULD HIT BY SECTION 2(22)(A) OF T HE ACT, AND THEREFORE, HE MADE THE ADDITION. HOWEVER, THE CIT(A) FOUND THAT THE ASSESSEE IS NOT SUBSTANTIAL SHARE HOLDER IN THE COMPANY, THEREFORE, SECTION 2(22)(E) IS NOT APPLICABLE. ADMITTEDLY, IT IS NOT THE CASE OF THE REVENUE THAT THE ADDITION HAS TO BE MADE U/S 2(22)(E) OF THE ACT. THE ADDIT ION WAS ADMITTEDLY MADE U/S 2(22)(A) OF THE ACT. THEREFORE, THE CIT(A) IS EXPECTED TO CONSIDER WHETHER THE PROVISIONS OF SECTION 2(22)(A) IS APPLI CABLE OR NOT? SINCE THE CIT(A) FAILED TO CONSIDER THE APPLICABILITY OF SECT ION 2(22)(A) OF THE ACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT( A) HAS TO CONSIDER SECTION 2(22)(A). ACCORDINGLY THE ORDER OF THE CIT (A) IS SET ASIDE AND THE 4 ITA NO. 23/COCH/2014 C.O.NO.21/COCH/2014 ISSUE OF APPLICABILITY OF SECTION 2(22)(A) IS REMIT TED BACK TO THE FILE OF THE CIT(A). THE CIT(A) SHALL CONSIDER THE APPLICABILIT Y OF SECTION 2(22)(A) OF THE ACT AND THEREAFTER DECIDE THE ISSUE IN ACCORDAN CE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 5. THE CROSS OBJECTION FILED BY THE ASSESSEE IS ONL Y TO SUPPORT THE ORDER OF THE CIT(A), THEREFORE, IT BECOMES INFRUCTUOUS. 6. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH MAY, 2014. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 09 TH MAY, 2014 PK/- COPY TO: 1. A.C.I.T., CIR.1(1), RANGE-1, TRICHUR 2. SHRI E.A. JOHNY, IMMATTY HOUSE, CHALAKUDY, THRIS SUR 3. THE COMMISSIONER OF INCOME-TAX, TRICHUR 4. THE COMMISSIONER OF INCOME-TAX(A)-V, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH