DCIT, Bangalore V. Shri. Syed Mateen Aga, Bangalore

ITA 263/BANG/2011

• Counselvise Citation: 26321114 RSA 2011
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 11-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B SARAVANAN
• Assessee Lawyers: R CHANDRASHEKAR
• Keywords: Opportunity of being heard; Deemed dividend; Tax effect; Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NOS.262 & 263/BANG/2011) (ASSESSMENT YEARS : 2005-06 & 2006-07) DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALORE. . APPELLANT. VS. MR. SYED MATEEN AGA, NO.47, EUREKA CHURCH STREET, BANGALORE-560 001 .. RESPONDENT. PAN ACWPA 8235F I.T.A. NO.264/BANG/2011 (ASSESSMENT YEAR : 2006-07) DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALORE. . APPELLANT. VS. MR. SYED TANZEEM AGA, NO.47, EUREKA CHURCH STREET, BANGALORE-560 001 RESPONDENT. APPELLANT BY : SHRI B. SARAVANAN. JCIT (DR) RESPONDENT BY : SHRI R. CHANDRASHEKAR, ADVOCATE. DATE OF HEARING : 01.03.2012. DATE OF PRONOUNCEMENT : 01.03.2012. O R D E R PER SHRI JASON P BOAZ, A.M. : THESE THREE APPEALS ARE PREFERRED BY REVENUE AGAI NST THE CONSOLIDATED ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE D T.28.4.2010. SINCE COMMON ISSUES 2 ITA NOS.262 TO 264/BANG/11 ARE INVOLVED IN ALL THESE THREE APPEALS, THEY ARE B EING HEARD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER. CONDONATION OF DELAY IN FILING THESE APPEALS. 2.1 REVENUE HAS FILED PETITIONS FOR CONDONATION OF DELAY IN FILING THESE THREE APPEALS ALONG WITH FORM NO.36. 2.2 FROM THE FACTS ON RECORD, IT IS OBSERVED THAT T HESE APPEALS WERE DISPOSED OF BY THE CIT(A), BY A CONSOLIDATED ORDER DATED 28.4.2010 WHICH WAS RECEIVED BY THE OFFICE OF THE CIT, BANGALORE-1, BANGALORE ON 20.5.2010. IN T HESE CIRCUMSTANCES THE APPEALS AGAINST THESE ORDERS OUGHT TO HAVE BEEN FILED BEFORE THE TR IBUNAL ON OR BEFORE 19.7.2010. THEY WERE, HOWEVER, FILED ON 11.3.2011, THEREBY LEADING TO A DELAY OF 235 DAYS. REVENUE HAS FILED SEPARATE PETITIONS FOR CONDONATION OF DELAY I N ALL THESE CASES. IT IS SUBMITTED THAT THERE WAS SUFFICIENT CAUSE FOR THE SAID DELAY, AS D URING THE SAID PERIOD, THE CIT CONCERNED ALSO HAD ADDITIONAL WORK AS A MEMBER OF THE DISPUTE RESOLUTION PANEL, BANGALORE AND THE FOLDER RELEVANT TO THIS CASE GOT MISPLACED INADVERT ENTLY WHILE BEING PROCESSED FOR FURTHER APPEAL. IT WAS STATED THAT ONLY SUBSEQUENTLY WHEN THE ORDER OF CIT(A) FOR A.YS. 2004-05 AND 2005-06 DATED 11.1.2011 FOR MR. SYED TANZEEM AG A WERE RECEIVED IN THE CITS OFFICE AND IN WHICH A REFERENCE WAS MADE TO THE CIT(A)S O RDER DATED 28.11.2010, THAT THE MISTAKE WAS REALIZED AND THESE APPEALS WERE FILED I MMEDIATELY THEREAFTER. IT IS, THEREFORE, PRAYED THAT THE DELAY BE CONDONED. 3 ITA NOS.262 TO 264/BANG/11 2.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGL Y PLEADED FOR THE CONDONATION OF DELAY IN FILING THE APPEALS ON THE GROUND THAT THER E WAS SUFFICIENT CAUSE. IN SUPPORT OF HIS CONTENTION, THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE FOLLOWING JUDICIAL DECISIONS IN WHICH IT WAS LAID DOWN BY THE HON'BLE APEX COURT THAT A LIBERAL APPROACH HAS TO BE ADOPTED FOR CONDONING THE DELAY IN FILING OF APPEALS : I) COLLECTOR, LAND ACQUISITION VS. MST. KATIJI & OT HER (1987) 167 ITR 471 (SC) II) STATE OF HARYANA VS. CHANDRAMANI & OTHERS (1996 AIR 1623) III) G. RAMEGOWDA, MAJOR VS. SPECIAL LAND ACQUISITI ON OFFICER (1988 AIR 897). 2.4 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE HAD NO OBJECTION TO THE CONTENTION OF LEARNED DEPARTMENTAL REPRESENTATIVE T HAT THE DELAY IN FILING THESE THREE APPEALS BE CONDONED. 2.5 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES. IN ACCORDANCE WITH THE PRINCIPLES LAID DOWN BY THE HON'BLE APEX C OURT IN THE CASE OF COLLECTOR, LAND ACQUISITION (SUPRA) AND THE OTHER CITED CASES ON TH IS ISSUE, WE, IN THE INTEREST OF SUBSTANTIAL JUSTICE, CONDONE THE DELAY OF 235 DAYS IN FILING THESE THREE APPEALS. THE THREE APPEALS ARE ACCORDINGLY TAKEN UP FOR HEARING. 3.1 IN THE COURSE OF HEARING, THE LEARNED COUNSEL F OR THE ASSESSEE CHALLENGED THE MAINTAINABILITY OF APPEAL IN THE CASE OF MR. SYED T ANZEEM AGA (ITA NO.264/BANG/2011) ON THE GROUNDS OF LOW TAX EFFECT. IT WAS CONTENDED BY THE LEARNED 4 ITA NOS.262 TO 264/BANG/11 COUNSEL THAT AFTER REDUCTION OF THE RETURNED LOSS O F RS.8,31,536 BY THE ASSESSING OFFICERS MAKING AN ADDITION OF RS.10,28,529 THERE TO, THE TAXABLE INCOME CONSEQUENTIALLY COMPUTED WAS RS.1,76,990 AND THE TAX DEMAND RAISED WAS RS.27,282 WHICH WAS LESS THAN THE MONETARY LIMIT FOR RS.3 LAKHS TAX EFFECT FOR F ILING OF APPEALS BEFORE THE TRIBUNAL AS LAID DOWN BY CBDTS INSTRUCTION NO.3 OF 2011. IN T HIS VIEW OF THE MATTER, THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE APPEAL WAS NOT MAINTAINABLE AND WAS LIABLE TO BE DISMISSED. 3.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONG LY REBUTTED THE ARGUMENT OF THE ASSESSEES COUNSEL. HE SUBMITTED THAT CBDTS INSTR UCTION NO.3 OF 2011 WAS VERY CLEAR ON THE COMPUTATION OF TAX EFFECT INVOLVING CASES OF RE TURNED LOSSES CLARIFYING THEREIN THAT IN SUCH CASES NOTIONAL TAX ON DISPUTED ADDITIONS ARE T O BE CONSIDERED. HE DREW OUR ATTENTION TO PARA 4 THEREOF, WHICH READS AS UNDER : 4. FOR THIS PURPOSE, TAX EFFECT MEANS THE DIFF ERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HA VE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INC OME IN RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILLE D (HEREIN AFTER REFERRED TO AS DISPUTED ISSUES). HOWEVER THE TAX WILL NOT INCLU DE ANY INTEREST THEREON, EXCEPT WHERE CHARGEABILITY OF INTEREST ITSELF IS IN DISPUTE. INCASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UNDER DISPUT E, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CASES WHERE RETURNED LO SS IS REDUCED OR ASSESSED AS INCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX O N DISPUTED ADDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QU ANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE APPEALED AGAINST. 5 ITA NOS.262 TO 264/BANG/11 3.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT AS AN ASSESSEE, IS ENTITLED TO CARRY FORWARD LOSSES INCURRED IN A YEAR FOR SET OF AGAINST INCOME OF SUBSEQUENT YEARS, THE CONSEQUENTIAL REDUCTION OF LOSSES HAS A POTENTIAL TAX EFFECT CONSIDERING THEIR AVAILABILITY IN THE SUBSEQUENT YEARS FOR SET OFF AN D THEREFORE THE NOTIONAL TAX ON DISPUTED ADDITIONS ARE ALSO TO BE CONSIDERED. 3.4 AFTER HEARING BOTH THE PARTIES, CONSIDERING THE FACTUAL MATRIX OF THE DISPUTED ADDITION AS PER RECORD AND PERUSING THE RELEVANT PO RTION OF CBDTS INSTRUCTION NO.3 OF 2011, WE ARE OF THE VIEW THAT IN THE INSTANT CASE, THE APPEAL IS MAINTAINABLE SINCE THE NOTIONAL TAX EFFECT IS IN EXCESS OF THE MONETARY LI MIT OF RS.3 LAKHS LAID DOWN BY CBDTS INSTRUCTION (SUPRA). 4. ADDITIONS ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTI ON 2(22)(A). 4.1 IN ALL THE THREE APPEALS, THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEES WERE DIRECTO RS AND SHARE HOLDERS IN M/S. FAIRY FOOD PRODUCTS PVT. LTD. AND HAD RECEIVED ADVANCES/L OANS FROM THIS COMPANY FROM OUT OF ITS ACCUMULATED PROFITS. THE ASSESSING OFFICER ISSUED NOTICES TO THE ASSESSEES ON 22.12.2008 PROPOSING TO TREAT THE AMOUNTS OF LOANS/ ADVANCES AS DEEMED DIVIDENDS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IN THE CASE OF MR. SYED MATEEN AGA, THE ASSESSING OFFICER NOTED THAT THERE WAS NO RESPONSE THERETO IN BOTH ASSESSMENT YEARS 2005-06 AND 2006-07 AND THEREFORE PROCEEDED TO BRING TO TAX IN HIS 6 ITA NOS.262 TO 264/BANG/11 HANDS, THE AMOUNTS OF LOANS/ADVANCES RECEIVED BY HI M AS DEEMED DIVIDENDS UNDER SECTION 2(22)(E). MR. SYED TANZEEM AGA FILED A REPLY STATI NG THAT SINCE HE WAS HOLDING LESS THAN 20% OF THE TOTAL SHARE CAPITAL OF THIS COMPANY, SEC TION 2(22)(E) WAS NOT APPLICABLE IN HIS CASE. THE ASSESSING OFFICER NOTED THAT SINCE THE A SSESSEES SHARE HOLDING WAS 17% I.E. MORE THAN 10%, THE PROVISIONS OF SECTION 2(22)(E) W ERE ATTRACTED AND PROCEEDED TO HOLD THE LOANS/ADVANCES RECEIVED BY THE ASSESSEE AS DEEM ED DIVIDEND AND BROUGHT THE SAME TO TAX IN HIS HANDS. 4.2 AGGRIEVED BY THESE ORDERS OF ASSESSMENT, BOTH T HE ASSESSES TOOK THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDE RING THE APPEALS, DISPOSED THEM OFF BY A CONSOLIDATED ORDER DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDENDS UNDER SECTION 2(22)(E) OF THE A CT, BY HOLDING THAT THESE AMOUNTS WERE ADVANCES FOR BUSINESS TRANSACTIONS AND WERE NE ITHER LOANS NOR ADVANCES. 4.3 AGGRIEVED BY THE ORDERS OF THE CIT(A) DATED 28. 11.2010, ON ACCOUNT OF DELETION OF THE ADDITIONS MADE UNDER SECTION 2(22)(E), REVENUE IS IN APPEAL BEFORE US IN THESE CASES. THE GROUNDS OF APPEAL RAISED IN THE CASE OF MR. SYE D MATEEN AGA (ITA NO.263/BANG/2011 FOR A.Y. 2006-07) ARE AS UNDER : 1. THE ORDER OF THE LEARNED CIT(A), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACT S AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN NOT UPHOLDING THE ADDITION OF RS.1,36,71,617 MADE BY THE ASSESSING OFFICER UNDER SECTION 2(22)(E) OF THE 7 ITA NOS.262 TO 264/BANG/11 I.T. ACT, 1961 ON ACCOUNT OF DEEMED DIVIDEND, HOLDI NG THAT THE AMOUNT RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF ADVANCE FOR PU RCHASES, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES UNDER WHIC H THE ADDITION WAS MADE BY THE ASSESSING OFFICER. 3. THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE ON THE BASIS OF FRESH EVIDENCES FILED DURING THE APPELLATE PROCEEDINGS SUCH AS DETAILS OF LAND HOLDING, AGRICULTURAL INCOME, BUSINESS OF M ANGO PROCUREMENT CONDUCTED FOR THE COMPANY ETC., IN CONTRAVENTION OF RULE 46A OF THE I.T. RULES, 1963, WITHOUT APPRECIATING THAT THE EVIDENCES RELIED UPON WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER IN COURSE OF APPELLATE PROCEE DINGS. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER THE CIT (A) BE REVERSED IN SO FAR AS THE ABOVE MENTIONED ISSUE IS CONCERNED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR TO DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEA RING OF THE APPEAL. IN THE OTHER TWO APPEALS BEFORE US, THE GROUNDS RAI SED ARE IDENTICAL (EXCEPT FOR THE AMOUNTS OF ADDITION) AND THEREFORE THEY WILL BE DEA LT WITH IN UNISON AS UNDER : 4.4 THE GROUNDS OF APPEAL AT SL.NO.1 AND 5 ARE GENERAL IN NATURE AND NO SEPARATE ADJUDICATION IS CALLED FOR. 4.5 THE GROUNDS OF APPEAL AT SL.NOS.2 TO 4 : 4.5.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING WITH THE ADDITIONS MADE BY TH E ASSESSING OFFICER UNDER SECTION 2(22)(E), OF DEEMED DIVIDENDS OUT OF LOANS/ADVANCES TAKEN BY THE ASSESSES AND IN HOLDING THAT THESE AMOUNTS WERE ADVANCES FOR PURCHASES. HE SUBMITTED THAT ADMITTEDLY BOTH ASSESSEES WERE DIRECTORS/SHARE HOLDERS OF M/S. FAIR Y FOOD PRODUCTS PVT. LTD. HAVING 8 ITA NOS.262 TO 264/BANG/11 SUBSTANTIAL INTEREST THEREIN I.E. HOLDING MORE THAN 10% OF SHARES. HE STATED THAT THE ASSESSING OFFICER FOUND THAT THESE AMOUNTS WERE GIV EN AS LOAN/ADVANCES TO THESE TWO ASSESSEES OUT OF ACCUMULATED PROFITS OF THE COMPANY AND THEREFORE CAME TO THE CONCLUSION THAT THESE WERE DEEMED DIVIDENDS AND IN ACCORDANCE WITH PROVISIONS OF SECTION 2(22)(E) BROUGHT TO TAX IN THE ASSESSEES HAND IN THE RELEVAN T PERIOD. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE CIT(A) DE LETED THE SAID ADDITIONS UNDER SECTION 2(22)(E), IN ALL THE THREE APPEALS, ON THE BASIS OF FRESH EVIDENCES, SUBMISSIONS, EXPLANATIONS AND DETAILS FILED BEFORE HIM WITHOUT G IVING ANY OPPORTUNITY TO THE ASSESSING OFFICER TO REBUT THE FRESH EVIDENCES ETC., WHICH IS IN CONTRAVENTION OF RULE 46A OF THE INCOME TAX RULES, 1962 AND WITHOUT APPRECIATING THA T THE SAME EVIDENCES ETC. WHICH WERE NOT FILED BEFORE THE ASSESSING OFFICER IN THE COURS E OF ASSESSMENT PROCEEDINGS. 4.5.2 THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT HE HAS NO OBJECTION IF THE ORDER OF THE CIT(A) DATED 28.4.2010 BE REMITTED BAC K TO THE FILE OF THE ASSESSING OFFICER SO THAT THE ASSESSMENTS CAN BE RE-DONE AFRE SH. 4.5.3 WE HAVE HEARD BOTH THE PARTIES AND PERUS ED THE MATERIAL ON RECORD. AFTER DUE CONSIDERATION OF THE FACTUAL MATRIX OF THE CASE , WE FIND THAT THE CIT(A) DELETED THE ADDITIONS, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E), BY ADMITTING FRESH EVIDENCES, EXPLANATION S AND DETAILS AND ADJUDICATED THEREON, WITHOUT GIVING DUE OPPORTUNITY TO THE ASSESSING OFF ICER UNDER SECTION 46A. THIS ACTION 9 ITA NOS.262 TO 264/BANG/11 BEING IN CLEAR VIOLATION OF THE PRINCIPLES OF NATUR AL JUSTICE, WE SET ASIDE THE ORDERS OF THE CIT(A) DATED 28.4.2010 AND REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO REDO THE ASSESSMENTS AFRESH IN ALL THE THREE APPEALS UND ER CONSIDERATION AFTER AFFORDING REASONABLE AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEES AND TO FURNISH DETAILS/EXPLANATION IN THIS REGARD. 5. IN THE RESULT, THE REVENUES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH, 2012. SD/- SD/- (P. MADHAVI DEVI) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE, DATED:01.03.2012. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - A BENCH. 6. GUARD FILE. (TRUE CO PY) BY OR DER ASSTT. REGISTRAR, ITAT, BANGALORE .