ACIT, Chandigarh V. Sh. Gurmeet Singh, Chandigarh

ITA 262/CHANDI/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4477 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: A K JINDAL
• Keywords: Deemed dividend
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.262/CHD/2013 ASSESSMENT YEAR: 2009-10 THE ACIT, VS SHRI GURMEET SINGH, CIRCLE 3 (1), SCO 67, SECTOR 20-C, CHANDIGARH. CHANDIGARH. PAN: ADYPS-3630D (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JYOTI KUMARI RESPONDENT BY : SHRI A.K.JINDAL DATE OF HEARING : 08.10.2013 DATE OF PRONOUNCEMENT : 18.10.2013 ORDER PER T.R.SOOD, AM THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 03.12.2012 PASSED BY THE LD. CIT(APPEAL S) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE AC T'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. 'WHETHER ON FACTS AND CIRCUMSTANCES THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.35,40,370/- MADE U/S 2( 22)(E) OF THE INCOME TAX ACT, 1961 IN VIEW OF THE BOMBAY HIGH COURT DECI SION IN THE CASE OF WALCHAND & CO. (P) LIMITED VS. CIT (1993) 204 ITR 1 46.' 2. THE APPELLANT CRAVES TO ADD OR AMEND ANY GROUND/GRO UNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 3. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CA NCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED T HAT M/S GURMEET SINGH & CO. WHICH WAS BEING RUN AS PROPRIET ORY 2 CONCERN, WAS TAKEN OVER BY M/S GSCO INFRASTRUCTURE PVT. LTD. AS PER THE AGREEMENT DATED 01.04.2008, SALE CONSIDE RATION OF RS. 18,38,47,002/- WAS DETERMINED AND ALL ASSETS AN D LIABILITIES WERE ACQUIRED BY THE COMPANY. THE COMPANY ALLOTTED EQUITY SHARES TO THE ASSESSEE AMOUNTING TO RS. 18,35,00,00 0/- AND BALANCE OF RS. 3,47,002/- WERE SHOWN AS UNSECURED L OANS. THE ASSESSEE, DURING THE YEAR HAD FILED RETURN DECLARIN G INCOME OF RS. 3,07,860/- ON RECEIPTS OF RS. 38,48,230/- UNDER SECTION 44AD OF THE ACT. THE ASSESSING OFFICER WONDERED TH AT IF THE WHOLE BUSINESS OF THE PROPRIETORY CONCERN WAS TAKEN OVER BY THE PRIVATE LIMITED COMPANY, HOW COULD ASSESSEE EARN IN COME FROM BUSINESS. ON FURTHER ENQUIRY, IT WAS NOTICED THAT ASSESSEE WAS HOLDING MORE THAN 50% VOTING POWER IN THE SAID COMP ANY. THEREFORE, ACCORDING TO ASSESSING OFFICER, THE AMOU NT OF RS. 38,48,230/- WHICH WAS RECEIVED AS AWARD, WAS GIVEN TO THE ASSESSEE BY THE COMPANY WHICH WOULD ATTRACT PROVISI ONS OF SECTION 2(22)(E) FOR DEEMED DIVIDEND. ACCORDINGLY, ASSESSEE WAS ASKED TO EXPLAIN WHY THIS AMOUNT OF AWARD SHOULD NO T BE TREATED AS DEEMED DIVIDEND. THE ASSESSEE DID NOT G IVE ANY EXPLANATION AND ASSESSING OFFICER ADDED THE SUM OF RS. 35,40,370/- I.E. (RS. 38,48,230/- - RS. 3,07,860/-) WHICH WAS THE AMOUNT OF INCOME DECLARED BY THE ASSESSEE UNDER SECTION 44AD OF THE ACT. 4. ON APPEAL, ASSESSEE MADE THE FOLLOWING SUBMISSIO NS : 'IT IS A MATTER OF FACT THAT THE BUSINESS OF GURMEE T SINGH & CO., A PROPRIETARY CONCERN OF APPELLANT, HAD BEEN TAKEN OVER AS A GOING CONCERN BY M/S. GSCO INFRASTRUCTURE PUT. LTD. DURIN G THE YEAR, THE COURT IN AN ARBITRATION CASE, AWARDED AN AMOUNT OF RS. 38,42,230/-, THE DETAIL OF WHICH IS AS UNDER:- 3 10,00,000/ - CREDITED IN SBIA/C. NO. 9037 ON 22.08.2008 26,09,537 / - CREDITED IN PSB A/C. NO. 1525 ON 08. 1 1.2008 2,03,701/ - TDS 8,853/ - BANK CHARGES 26,139/ - SALES - TAX DEDUCTED BY DEPARTMENT 38,48,230/- TOTAL CALCULATION AND NECESSARY EVIDENCE IS ENCLOSED AT P AGE 17-20 FIRST OF ALL, WE SUBMIT THAT IT IS WRONG TO HOLD TH AT THE AMOUNT HAS BEEN RECEIVED BY SHRI GURMEET SINGH . ACTUALLY WHEN THE BUSINESS OF GURMEET SINGH & CO. WAS TAKEN OVER BY GSCO INFRA STRUCTURE PVT. LTD., BOTH THE ABOVE REFERRED BANK ACCOUNTS WE RE ALSO TAKEN OVER BY THE SAID COMPANY. THE AMOUNT OF AWARD RECEI VED HAS BEEN SHOWN AS INCOME IN THE BOOKS OF GSCO INFRASTRUCTURE PVT LTD. AND HAS BEEN ASSESSED AS SUCH. THE SAME IS EVIDENCED FR OM THE DETAIL OF WORK DONE, COPY ENCLOSED AT P. B. PAGE: 4-5 WHICH S HOWS THAT AN AMOUNT OF RS. 36,09,53?'/- HAS BEEN SHOWN AS INCOME ON ACCOUNT OF ARBITRATION AWARD. ALSO ENCLOSED IS A CO PY OF BALANCE SHEET ,SCHEDULE OF CURRENT ASSETS AND DETAIL OF BAN K ACCOUNTS OF GSCO INFRASTRUCTURE PUT. LTD. (REFER PAGE 6-8 ), AND BAN K STATEMENT OF PB & SIND BANK (REFER PAGE 9-13) AND STATE BANK OF INDIA (REF ER PAGE 14- 16) TO PROVE THAT BOTH THESE BANK ACCOUNTS ARE DULY REFLEC TED IN THE BOOKS OF ABOUESAID COMPANY WHICH MEANS THAT RS. 36,09,537//- HAS ALREADY BEEN RECEIVED BY GSCO INFRASTRUCTURE PVT LTD. SINCE THE AMOUNT HAS NOT BEEN RECEIVED BY THE APPELLANT THEREFORE IT IS WRONG TO TREAT THE SAID AMOUNT AS DEEMED DIVIDEND. AS REGARDS THE AMOUNT OF RS. 8,853/- (BANK CHARGES ) AND RS. 26,139/~ (SALES-TAX) IS CONCERNED, IT HAS NO EFFECT ON PROFI T & LOSS ACCOUNT OF THE COMPANY BECAUSE IN CASE, INCOME IS INCREASED BY THE SAID AMOUNT, IN THAT CASE, GSCO INFRASTRUCTURE PVT. LTD., WILL BE ENTITL ED TO DEDUCTION OF THESE AMOUNTS AS EXPENDITURE. THE ONLY DIFFERENCE WHICH R EMAINS IS ON ACCOUNT OF TDS OF RS. 2,03,701/-. THE SAID AMOUNT W AS NOT SHOWN AS INCOME BY GSCO INFRASTRUCTURE PVT. LTD., BECAUSE TH E COMPANY WROTE TO THE CONCERNED DEPARTMENT AND THE SAID DEPARTMENT REFUSE D TO CHANGE THE PAN FROM PROPRIETORSHIP TO THAT OF COMPANY-COPY OF LETT ER RECEIVED FROM CONCERNED DEPARTMENT IS ENCLOSED AT PAGE 21, SO THE ASSESSEE DECIDED TO CLAIM THE SAID AMOUNT IN INDIVIDUAL RETURN. CONSIDE RING THE FACT THAT TDS CAN BE CLAIMED ONLY IF RECEIPT IS SHOWN AS INCO ME, THE ASSESSEE DISCLOSED 8% OF GROSS RECEIPT AS INCOME AND CLAIMED TDS. ACTUALLY THE ASSESSEE SHOULD HAVE AT BEST SHOWN THE AMOUNT OF TD S AS INCOME AND CLAIMED THE AMOUNT OF TDS. IN THESE CIRCUMSTANCES FIRST OF ALL, WE SUBMIT THAT THE AMOUNT OF TDS I.E. RS. 2,03,701 /- CANNOT BE TREATED AS ADVANCE FOR THE PU RPOSE OF SECTION 2 (22) (E) AS NO MONEY HAS BEEN RECEIVED BY THE APPELLANT FROM GSCO INFRASTRUCTURE PVT. LTD. ALTERNATIVELY, IT IS SUBMI TTED THAT AN AMOUNT OF RS. 3,47,002/- WAS RECOVERABLE BY THE APPELLANT FRO M GSCO INFRASTRUCTURE PVT. LTD.AND HAS BEEN SHOWN AS UNSEC URED LOAN BY THE CO(REFER PAGE 6). IN CASE THE AMOUNT OF RS. 2,03,70 1 /- IS TO BE TREATED AS ADVANCE, EVEN IN THAT CASE, THE AMOUNT WILL HAVE TO BE ADJUSTED AGAINST THE AMOUNT RECOVERABLE BY THE APPELLANT FRO M THE SAID COMPANY. CONSIDERING THAT EVEN AFTER ADJUSTMENT OF THE AMOUN T OF RS. 2,03,701/-, AN AMOUNT OF RS. 1,43,301/- (3,47,002 -2,03,701) IS STILL RECOVERABLE FROM GSCO INFRASTRUCTURE PVT. LTD, IT BECOMES CLEAR THAT NO LOAN OR ADVANCE HAS BEEN GIVEN BY GSCO INFRASTRUCTURE TO THE APPELLANT WHICH COULD BE TREATED 4 AS DEEMED DIVIDEND .IN VIEW OF THE ABOVE , IT IS PR EYED THAT THE ADDITION MADE BY A.O. IS UNJUSTIFIED AND BE DELETED.' 5. THE LD. CIT(APPEALS) WAS SATISFIED WITH THE ABOV E SUBMISSIONS AND ALLOWED THE APPEAL OF THE ASSESSEE. 6. BEFORE US LD. DR FOR THE REVENUE STRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFICER. 7. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE S UBMITTED THAT SHRI GURMEET SINGH WAS EARLIER RUNNING A PROPR IETORY CONCERN KNOWN AS M/S GURMEET SINGH & CO. IN WHICH C ONTRACTS WERE BEING EXECUTED. IT WAS DECIDED THAT BUSINESS BE CONVERTED INTO A PRIVATE LIMITED COMPANY AND W.E.F. 01.04.200 8, ASSETS LIABILITY OF BUSINESS OF M/S GURMEET SINGH & CO. WE RE TAKEN OVER BY THE PRIVATE LIMITED COMPANY. IN THE MEANTI ME, AN ARBITRATION AWARD WAS RECEIVED BY THE ERSTWHILE PRO PRIETORY CONCERN M/S GURMEET SINGH & CO. AMOUNTING TO RS. 38,48,230/-. THIS AMOUNT WAS DEPOSITED IN TWO BANK ACCOUNTS WHICH WERE IN THE NAME OF M/S GURMEET SINGH & CO. B UT WHICH HAVE BEEN TAKEN OVER AND DULY INCORPORATED IN THE B OOKS OF COMPANY AND IN THIS REGARD, HE REFERRED TO VARIOUS DOCUMENTS IN THE PAPER BOOK. FURTHER, A SUM OF RS. 2,03,701/ - WAS ON ACCOUNT OF TDS, CREDIT FOR WHICH WAS TAKEN BY THE A SSESSEE IN INDIVIDUAL CAPACITY. AGAINST THE ACQUISITION OF AS SETS OF PROPRIETORY CONCERN, HE SUBMITTED THAT THERE WAS OU TSTANDING LOAN DUE TO ASSESSEE BY THE COMPANY AMOUNTING TO RS . 3,47,002/- AND THEREFORE, AT BEST THIS AMOUNT CAN B E SAID TO BE THE PAYMENT TOWARDS THIS LOAN. 5 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. THE AWARD AMOUNT WAS RECEIVED BY THE ASSESSEE AND T HE CHEQUES WERE RECEIVED ACCORDINGLY IN THE NAME OF M/ S GURMEET SINGH & CO. WHICH WERE DEPOSITED IN THE BANK ACCOUN TS OF M/S GURMEET SINGH & CO. HOWEVER, FROM THE PERUSAL OF B ALANCE SHEET OF M/S GSCO INFRASTRUCTURE PVT. LTD., IT BECO MES CLEAR THAT THESE BANK ACCOUNTS HAVE BEEN INCORPORATED IN THE BOOKS OF COMPANY BECAUSE THE BANK BALANCE OF TWO BANK ACC OUNTS IN THE NAME OF M/S GURMEET SINGH & CO. HAVE BEEN INCOR PORATED IN THE BANK BALANCE OF THE COMPANY UNDER THE HEAD CURRENT ASSETS & LOANS & ADVANCES IN SCHEDULE H. THEREFO RE, IT CANNOT BE SAID THAT THE AMOUNT RECEIVED ON ACCOUNT OF ARBITRATION AWARD WAS GIVEN TO THE ASSESSEE IN THE FORM OF LOAN. HOWEVER, WE FURTHER FOUND THAT THIS CANNOT BE APPLI ED IN RESPECT OF TDS AMOUNTING TO RS. 2,03,701/-. THE RE ASON FOR THIS IS THAT THE AMOUNT HAS NOT BEEN DEBITED IN THE NAME OF SHRI GURMEET SINGH IN THE BOOKS OF COMPANY EVEN WHI LE SHOWING THE INCOME IN THE HANDS OF COMPANY IN RESPE CT OF THE AWARD. THE NET AMOUNT SHOWN IS RS. 36,09,537/- WHE REAS THE TOTAL AWARD MONEY IS RS. 38,48,230/-. THEREFORE, T HIS AMOUNT HAS TO BE ASSESSED IN THE HANDS OF SHRI GURMEET SIN GH I.E. THE ASSESSEE BECAUSE IT HAS BEEN ADJUSTED TOWARDS TAX L IABILITY OF SHRI GURMEET SINGH IN HIS INDIVIDUAL CAPACITY WHICH MEANS, HE HAS ENJOYED THESE FUNDS. THOUGH WE FIND FORCE IN TH E SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THIS AMOUNT CANNOT BE TREATED AS DEEMED DIVIDEND BUT IN OUR OPI NION, WHEN THE MONEY HAS BEEN ENJOYED BY THE ASSESSEE IN HIS I NDIVIDUAL 6 CAPACITY ON ACCOUNT OF CREDIT OF THE TDS, THE SAME HAS TO BE TREATED AS INCOME UNDER SECTION 28(IV) OF THE ACT W HICH DEALS WITH THE VALUE OF ANY BENEFIT OR PERQUISITE WHETHER CONV ERTIBLE INTO MONEY OR NOT ARISING FROM BUSINESS. SINCE, THIS BENEFIT HAS AROSE OUT OF THE BUSINESS CARRIED ON IN THE NAME OF SHRI GURMEET INFRASTRUCTURE PVT. LTD., THIS HAS TO BE TR EATED IN THE HANDS OF THE ASSESSEE IN THE CAPACITY OF DIRECTOR A ND/OR SUBSTANTIAL SHAREHOLDER. 9. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH OCTOBER,2013. SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH OCTOBER.,2013. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH