ANIL MADHUKAR WAGHADKAR, DOMBIVALI V. ITO WD 3(1), THANE

ITA 2552/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8106 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: NIDHI PATEL
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2552 /MUM/ 2015 ASSESSMENT YEAR: 2011 - 12 MR. ANIL MADHUKAR WAGHADKAR VINDHYACHAL, RL - 119, MIDC RESIDENTIAL ZONE MIDC PHASE I, DOMBIVLI (E ) , THANE - 421203 VS. ITO - 3(1) RANI MENSION, MURBAD ROAD, KALYAN THANE - 421301 PAN NO. AALPW5068K APPELLANT RESPONDENT ASSESSEE BY : MS. NIDHI PATEL. , AR REVENUE BY : MR. RAJESH KUMAR YADAV , DR DATE OF HEARING : 05/10/2017 DATE OF PRONOUNCEMENT : 14/12/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - I , THANE AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CO NFIRMING THE ADDITION OF RS.53,68,793/ - ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) AS THE ADVANCE TO THE SHAREHOLDER - ASSESSEE WAS GIVEN DURING THE COURSE OF BUSINESS OF THE MR. ANIL MADHUKAR ITA NO. 2552/MUM/2015 2 COMPANY FOR THE PURPOSE OF ACQUISITION OF THE SHOWROOM/SHOP AND THE NATURE AND CHAR ACTER OF ADVANCE IS NOT LOANS OR ADVANCE TO THE ASSESSEE AS THE ACCOUNT BETWEEN THE COMPANY AND THE ASSESSEE IS RUNNING, MUTUAL, OPEN AND CURRENT. IT IS ALSO STATED THAT THE TRIBUNAL IS REQUESTED TO DETERMINE AND QUANTIFY THE PROPER ACCUMULATED PROFIT AND DELETE THE UNWANTED ADDITIONS ON ACCOUNT OF DEEMED DIVIDEND OF RS.53,68,793/ - U/S 2(22)(E). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) RECEIVED AIR INFORMATION AND FOUND THAT THE ASSESSEE HAD MADE HUGE CASH DEPOSITS IN HI S SAVINGS BANK ACCOUNT MAINTAINED WITH THE CORPORATION BANK. THE ASSESSEE EXPLAINED BEFORE THE AO THAT THE SAME WAS WITHDRAWN FROM THE BANK ACCOUNT OF THE COMPANY I.E. M/S M.V. WAGHADKAR AND SONS JEWELLERS PVT. LTD., IN WHICH THE ASSESSEE IS MANAGING DIREC TOR AND HOLDING MORE THAN 10% OF TOTAL SHARES OF THE COMPANY. IN THE FINAL AUDITED ACCOUNT FOR THE AY 2011 - 12, THE COMPANY HAS SHOWN OUTSTANDING LOANS OF RS.92,64,000/ - IN THE NAME OF THE ASSESSEE AS ON 31.03.2011. THE AO HELD THAT THE ASSESSEE HAS VIOLA TED THE PROVISIONS OF SECTION 2(22)(E). IN THE BALANCE SHEET OF THE COMPANY AS ON 31.03.2011, THERE WAS ACCUMULATED PROFIT OF RS.56,68,793/ - OUT OF WHICH A SUM OF RS.3,00,000/ - WAS ALREADY ADJUSTED IN AY 2010 - 11. THEREFORE, THE AO MADE ADDITION TO THE TUNE OF BALANCE ACCUMULATED PROFIT OF RS.53,68,793/ - TO THE TOTAL INCOME OF THE ASSESSEE AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. MR. ANIL MADHUKAR ITA NO. 2552/MUM/2015 3 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) FOUND THAT THE ASSESSEE, DURING THE YEAR, H AS WITHDRAWN THE SAID AMOUNT FROM THE OD ACCOUNT OF THE COMPANY, IN HIS CAPACITY AS MANAGING DIRECTOR AND DEPOSITED THE SAME IN HIS PERSONAL BANK ACCOUNT. THESE ADVANCES TO THE TUNE OF RS.98,37,833/ - HA VE BEEN SHOWN IN THE BALANCE SHEET OF THE COMPANY, AS LOAN TO THE DIRECTORS, UP TO AY 2013 - 14. IN ADDITION TO THE ABOVE, THERE WERE SOME OTHER CASH DEPOSITS, MADE BY THE ASSESSEE OUT OF HIS OWN SOURCES. OUT OF THIS AMOUNT, THE ASSESSEE HAD ACQUIRED A S HOP ADMEASURING 389 SQ FT AND OFFICE ADMEASURING 1863 SQ FT IN NEELKANTH TOWERS, OPPOSITE ICICI BANK AT RAM MARUTI ROAD, THANE, FOR A CONSIDERATION OF RS.2 CRORES, BY WAY OF REGISTERED DEED DATED 12.07.2011 . THE LD. CIT(A) THUS HELD THAT THE CASE OF THE ASSESSEE SQUARELY FALLS UNDER THE PURVIEW OF THE PROVISIONS OF SECTION 2(22)(E). THEREFORE, HE CONFIRMED THE ADDITION OF RS.53,68,793/ - MADE BY THE AO U/S 2(22)(E) AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESS EE DRAWS OUR ATTENTION TO THE ORDER OF THE ITAT SMC BENCH, MUMBAI IN THE ASSESSEES OWN CASE FOR THE AY 2010 - 11 AND AY 2012 - 13 (ITA NO. 1812/MUM/2016 AND 2553/MUM/2015). 6. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER PASSED BY THE LD. CIT(A). MR. ANIL MADHUKAR ITA NO. 2552/MUM/2015 4 7. W E HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE SAME ISSUE AROSE BEFORE THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE AY 2010 - 11 AND 2012 - 13. WE PRODUCE BELOW THE ORDER OF THE TRIBUNAL AT LENGTH TO APPRE CIATE THE ISSUE : 21. NEXT ISSUE IS WITH REGARD TO ADDITION OF RS.3,00,000/ - ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT ASSESSEE MADE HUGE CASH DEPOSITS IN HIS SAVI NGS BANK ACCOUNT MAINTAINED IN CORPORATION BANK, DOMBIVALI. WHEN ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF THIS CASH, HE STATED THAT THE SAID AMOUNT WAS WITHDRAWN FROM THE COMPANY. ASSESSING OFFICER NOTICED THAT ASSESSEE WAS A DIRECTOR IN THE COMPANY AND WAS HOLDING MORE THAN 10% OF TOTAL SHARES OF THE COMPANY. ON VERIFICATION OF THE F INAL AUDITED ACCOUNTS OF THE COMPANY FOR A.Y. 2011 - 12, ASSESSING OFFICER NOTICED THAT THE COMPANY HAD SHOWN OUTSTANDING LOAN OF RS.92,64,000/ - WHICH INCLUDED OPENING BALANCE OF RS.3,00,000/ - FROM FY 2009 - 10 IN THE NAME OF DIRECTOR. ASSESSEE WAS THEREFORE ASKED TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 2(22)(E) SHOULD NOT BE INVOKED IN HIS CASE AND THE ADVANCES TO THE EXTENT OF ACCUMULATED PROFIT BE NOT ADDED TO HIS TOTAL INCOME AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT. IN RESPONSE OF THIS QUERY, ASSESSEE STATED THAT THE MONEY WITHDRAWN BY THE DIRECTORS FROM THE COMPANY WAS FOR THE PURPOSE OF MEETING THE EXPENSES FOR AND ON BEHALF OF COMPANY AND THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT ATTRACTED IN THIS CASE. 21.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFICER. MR. ANIL MADHUKAR ITA NO. 2552/MUM/2015 5 21.2 BEFORE US, ID. AUTHORIZED REPRESENTATIVE POINTED OUT THAT OUT OF WITHDRAWAL OF ADVANCES, ASSESSEE HAS PURCHASED PROPERTY ON BEHALF OF ASSESSEE BUT IT WAS REGISTERED INADVERTENTLY IN ASSESSEE'S NAME. HOWEVER, SAME WAS LATER ON CLAIMED TO BE RECTIFIED BY WAY OF VERIFICATION. ACCORDING TO ASSESSEE, BY RECTIFICATION OF PROPERTY HAS BEEN REGISTERED IN THE NAME OF COMPANY WHO HAS ADVANCED THE MONEY TO THE DIRECTOR. SO, THERE WAS NO ISSUE OF INVOKING THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT. ASSESSING OFFICER WAS NOT HAVING ADVANTAGE OF THESE DETAILS OF PURCHASE OF PROPERTY IN QUESTION ON BEHALF OF COMPANY AS ASSERTED BY ASSESSEE BEFORE US. SO, IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE TO ASSESSING OFFICER WITH DIRECTIO N TO DECIDE THE SAME AS PER FACT AND LAW AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. ASSESSEE IS AT LIBERTY TO SHOW THE FACT THAT AMOUNT IN QUESTION WAS ADVANCED TO HIM BY THE COMPANY TO PURCHASE THE PROPERTY ON BEHALF OF COMPANY, WHICH WAS ULTIMATELY REGISTERED IN COMPANYS NAME. 22. AS A RESULT, ASSESSEE' APPEAL FOR A.Y. 2010 - 11 IS PARTLY ALLOWED. THE TRIBUNAL TOOK SIMILAR VIEW FOR A.Y. 2012 - 13. 7.1 WE ARE CONC ERNED HERE WITH THE AY 2011 - 12. AT PARA 7 HEREINBEFORE, WE HAVE PRODUCED THE OR DER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE AY 2010 - 11 AND AY 2012 - 13. FACTS BEING SIMILAR WE FOLLOW THE SAID ORDER OF THE TRIBUNAL AND RESTORE THE MATTER TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. MR. ANIL MADHUKAR ITA NO. 2552/MUM/2015 6 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14/12/2017. SD/ - SD/ - ( D.T. GARASIA ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 14/12/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI