THE ACIT,CIRCLE - 4(1), Visakhapatnam V. Sri P.Raja Rao, Visakhapatnam

ITA 245/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2044 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-01-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 12-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Keywords: Deemed dividend

Judgement Text

ITA NO.243 & 245/VIZAG/2013 SRI GANTA SRINIVASA RAO & SRI P. RAJA RAO, VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.243/VIZAG/2013 ( / ASSESSMENT YEAR: 2001-02) ACIT CIRCLE - 4(1) VISAKHAPATNAM VS. SRI GANTA SRINIVASA RAO VISAKHAPATNAM [PAN: ADYPG4435G ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.245/VIZAG/2013 ( / ASSESSMENT YEAR: 2001-02) ACIT CIRCLE - 4(1) VISAKHAPATNAM VS. SRI P. RAJ A RAO VISAKHAPATNAM [PAN: AATPP2493B ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SMT. D. KOMALI KRISHNA, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 05.02.2016 / DATE OF PRONOUNCEMENT : 19.02.2016 ITA NO.243 & 245/VIZAG/2013 SRI GANTA SRINIVASA RAO & SRI P. RAJA RAO, VSKP 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 12.2.2013 & 13.2.201 3 FOR THE ASSESSMENT YEAR 2001-02. SINCE, THE FACTS ARE IDEN TICAL AND ISSUES ARE COMMON, THESE APPEALS ARE CLUBBED, HEARD TOGETHER A ND DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. ITA NO.243/VIZAG/2013: 2. THE FACTS ARE IN BRIEF THAT THE ASSESSEE HAD FIL ED A RETURN OF INCOME BY DECLARING TOTAL INCOME OF ` 1,12,008/-. THE CASE OF THE ASSESSEE WAS REOPENED AND ASSESSMENT WAS COMPLETED BY INVOKING DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') AND ADDITION OF ` 46,16,144/- WAS MADE. IN THE ASSESSMENT ORDER, THE A.O. HAS NOTED THAT THE ASSES SEE IS A PARTNER WITH 45% INTEREST IN THE FORM M/S. PRATYUSHA ASSOCIATES AND ALSO DIRECTOR IN M/S. PRATYUSHA SHIPPING PVT. LTD. HAVING A SUBSTANT IAL INTEREST. THE A.O. HAS NOTED FURTHER THAT THE COMPANY HAD SHOWN ACCUMU LATED RESERVES AND SURPLUS OF ` 145.53 LAKHS AS ON 31.3.2001 AND HAS ALSO ADVANCED LOAN OF ` .111.77 LAKHS TO THE FIRM PRATYUSHA ASSOCIATES ON 3 1.3.2001. ITA NO.243 & 245/VIZAG/2013 SRI GANTA SRINIVASA RAO & SRI P. RAJA RAO, VSKP 3 THE A.O. AFTER CONSIDERING THE OPENING AND CLOSING BALANCE ARRIVED AT ` 1,02,58,099/- AS LOAN GIVEN BY THE COMPANY TO THE FIRM AND ASSESSED 45% OF THE SAME AT ` 46,16,144/- IN THE HANDS OF THE ASSESSEE, AS HE HELD 45% SHARES IN THE FIRM. ON APPEAL CIT(A) CON FIRMED THE ORDER OF THE A.O. ON FURTHER APPEAL, THE ITAT HAS CONFIRMED THE ORDER OF THE AUTHORITIES BELOW. THEREAFTER, THE A.O. HAS INITIA TED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. IT IS SUBMITTED BEFORE T HE A.O. THAT PENALTY WAS IMPOSED BASED ON THE BASIS OF INFORMATION AND O THER PARTICULARS FURNISHED BY THE ASSESSEE AND THEREFORE THE ASSESSE E NEITHER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS AND SUB MITTED THAT PROCEEDINGS MAY BE DROPPED. 3. HOWEVER, THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE REJECTED THE EXPLANATION GIVEN BY T HE ASSESSEE AND OBSERVED THAT THE ASSESSEE HAS CONCEALED THE INCOME TO THE EXTENT OF ` 46,16,144/- U/S 2(22)(E) OF THE ACT BY FURNISHING I NACCURATE PARTICULARS IN THE RETURN OF INCOME. ACCORDINGLY, PENALTY WAS IMPOSED U/S 271(1)(C) OF THE ACT. 4. ON APPEAL, CIT(A) DELETED THE PENALTY IMPOSED BY THE A.O. BY OBSERVING THAT THE PENALTY IS IMPOSED BY THE A.O. B ASED ON THE INFORMATION OR PARTICULARS RELATING TO IMPUGNED TRA NSACTION OR FORM THE ITA NO.243 & 245/VIZAG/2013 SRI GANTA SRINIVASA RAO & SRI P. RAJA RAO, VSKP 4 ANNUAL REPORT AND OTHER DETAILS FILED BY THE ASSESS EE AND THE ISSUE WHETHER THE TRANSACTION WOULD AMOUNT TO ADVANCE AND CONSTITUTE DEEMED DIVIDEND IS AN INTERPRETATIVE ONE. WITH THE ABOVE OBSERVATION, THE PENALTY IMPOSED BY THE A.O. WAS DELETED. THE R EVENUE CARRIED MATTER IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUN SEL FOR THE ASSESSEE HAS SUBMITTED THAT BASED ON THE ANNUAL REPORT AND O THER PARTICULARS SUBMITTED BY THE ASSESSEE, A.O. CAME TO A CONCLUSIO N THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS NOT AN ADVANCE AND IT I S A DEEMED DIVIDEND BY FOLLOWING THE DEEMED FICTION, AS PER THE SECTION 2(22)(E) OF THE ACT. IN FACT THE ASSESSEE NEITHER CONCEALED THE INCOME N OR FILED INACCURATE PARTICULARS. THEREFORE, SECTION 271(1)(C) OF THE A CT IS NO APPLICATION IN THIS CASE AND SUPPORTED THE ORDER PASSED BY THE COM MISSIONER. 5. ON THE OTHER HAND, THE LD. D.R. HAS SUPPORTED T HE ORDER OF THE A.O. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE IS A PARTNER IN THE FIRM M/S. PRATYUSHA AS SOCIATES AND HE IS ALSO DIRECTOR IN M/S. PRATYUSHA SHIPPING PRIVATE LT D. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT M/S. PRATYUSHA SH IPPING PVT. LTD. HAS SHOWN ACCUMULATED RESERVES AND SURPLUS OF ` 145.53 LAKHS AS ON ITA NO.243 & 245/VIZAG/2013 SRI GANTA SRINIVASA RAO & SRI P. RAJA RAO, VSKP 5 31.3.2001 AND HAS ALSO ADVANCED LOAN OF ` 111.77 LAKHS TO FORM M/S. PRATYUSHA ASSOCIATES ON 31.3.2001 WHERE ASSESSEE IS HAVING SUBSTANTIAL INTEREST OF 45% IN THE FIRM. ACCORDINGLY, A.O. HAS COME TO A CONCLUSION THAT THE AMOUNT RECEIVED BY M/S. PRATYUSHA ASSOCIAT ES, TO EXTENT OF THE ASSESSEES INTEREST 45% AMOUNTING TO ` 46,16,144/- AS A DEEMED DIVIDEND BY INVOKING THE PROVISIONS OF SECTION 2(22 )(E) OF THE ACT. THE ASSESSEE HAS SUBMITTED BEFORE THE A.O. THAT IT IS O NLY AN ADVANCE RECEIVED NOT A DEEMED DIVIDEND. HE FURTHER SUBMITT ED THAT IN ANY CASE NO PENALTY CAN BE LEVIED FOR THE REASON THAT ASSESS EE HAS FILED AUDIT REPORT, ANNUAL REPORT AS WELL AS ALL OTHER DETAILS AND PENALTY PROCEEDINGS MAY BE DROPPED. HOWEVER, THE A.O. HAS NOT ACCEPTED AND PENALTY WAS LEVIED. ON APPEAL CIT(A) DELETED THE PENALTY LEVIE D BY THE A.O. ON THE GROUND THAT WHETHER IT IS AN ADVANCE OR DEEMED DIVI DEND ONLY AS A MATTER OF INTERPRETATION, THEREFORE, PENALTY CANNOT BE LEVIED. WE FIND THAT THE CASE OF THE ASSESSEE IS THAT THE AMOUNT RE CEIVED FROM THE COMPANY BY M/S. PRATYUSHA ASSOCIATES IS ONLY AN ADV ANCE NOT DEEMED DIVIDEND. HE ALSO SUBMITTED THAT ANNUAL REPORT AND OTHER DETAILS WERE FURNISHED BEFORE THE A.O. THEREFORE, ASSESSEE NEIT HER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS. BY VIRTUE OF DEEMING FICTION, NO PENALTY CAN BE LEVIED. WE FIND THAT THERE IS A MERI T IN THE ARGUMENT OF THE LD. COUNSEL AND WE ARE OF THE OPINION THAT WHEN THE ASSESSEE ITA NO.243 & 245/VIZAG/2013 SRI GANTA SRINIVASA RAO & SRI P. RAJA RAO, VSKP 6 MAKES A CLAIM BY SUBMITTING ALL THE DETAILS IF THE A.O. HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE AND MADE AN ADDITION BY I NVOKING DEEMED PROVISIONS U/S 2(22)(E) OF THE ACT, IT CANNOT BE SA ID THAT THE ASSESSEE HAS NEITHER CONCEALED THE INCOME NOR FILED INACCURA TE PARTICULARS. 7. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS 322 ITR 158 HAS OBSERVED THAT WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN OF INCOME ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE IS NO QUE STION OF INVOKING PENALTY U/S 271(1)(C) OF THE ACT. MERE MAKING A CL AIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF WILL NOT AMOUNT TO FU RNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH AS CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE P ARTICULARS. 8. IN THE PRESENT CASE, THE ASSESSEE FILED ALL THE DETAILS AND HE MADE CLAIM I.E. THE AMOUNT RECEIVED BY HIM IS AN ADVANCE . ACCORDING TO THE ASSESSING OFFICER THE AMOUNT RECEIVED BY THE ASSESS EE IS A DEEMED DIVIDEND BY VIRTUE OF DEEMED PROVISIONS OF LAW I.E. 2(22)(E) OF THE ACT. THUS, WE FIND THAT THE ASSESSEE NEITHER CONCEALED T HE INCOME NOR FILED INACCURATE PARTICULARS. THE ABOVE JUDGEMENT OF THE HONBLE SUPREME COURT SQUARELY APPLIES TO THE FACTS OF THE CASE. WE FIND NO JUSTIFIED ITA NO.243 & 245/VIZAG/2013 SRI GANTA SRINIVASA RAO & SRI P. RAJA RAO, VSKP 7 REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD . COMMISSIONER. THEREFORE, THE APPEAL FILED BY THE ASSESSEE IS DISM ISSED. ITA NO.245/VIZAG/2013: 9. THE FACTS AND ISSUES IN THIS APPEAL ARE SIMILAR. THE REASONING GIVEN IN THE ABOVE CASE SQUARELY APPLIES TO THE PRE SENT CASE ALSO. THEREFORE, THIS APPEAL FILED BY THE REVENUE IS ALSO DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19TH FEB16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 19.02.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT CIRCLE-4(1), VISAKHAPAT NAM 2. / THE RESPONDENT SHRI GANTA SRINIVASA RAO, PLOT NO.1, SECTOR-1, MVP COLONY, VISAKHAPATNAM. 3. / THE RESPONDENT SRI P. RAJA RAO, D.NO.1-84-16/1 /1, PLOT NO.231/4, MVP COLONY, VISAKHAPATNAM 3. ) / THE PRINCIPAL CIT-2, VISAKHAPATNAM 4. ) ( ) / THE CIT(A), VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM