Smt. Bhavnaben Hitesh Shah, Ahmedabad V. The Dy.CIT, Ahmedabad Circle-1, Ahmedabad

ITA 2668/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8144 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 01-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 2668/AHD/2014 (ASSESSMENT YEAR: 2008-09) SMT. BHAVNABEN HITESH SHAH 202/203, SHYAMAK COMPLEX, POLYTECHNIC ROAD, POLYTECHNIC, AHMEDABAD V/S DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AGDPS4189F APPELLANT BY : SMT. URVASHI SHODHAN, AR RESPONDENT BY : SHRI PRASOON KABRA, SR. D.R. ( )/ ORDER DATE OF HEARING : 20 -11-201 7 DATE OF PRONOUNCEMENT : 22 -11-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)- III, AHMEDABAD DATED 13.08.2014 PERTAINING TO A.Y. 2008-09. ITA NO. 2668 /AHD/2014 . A.Y. 2008-09 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 8,00,000/- U/S. 2(22)(E) OF THE ACT. 3. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FIL ED ON 30.07.2008 DECLARING TOTAL INCOME OF RS. 7,08,050/- WHICH WAS REVISED ON 24.07.2009 DECLARING TOTAL INCOME AT RS. 7,08,050/- THE RETURN WAS PROCESSED U /S. 143(1) OF THE ACT ON 06.08.2010. 4. THE A.O. CAME TO KNOW THAT IN ONE AQUAFIL POLYMERS CO. PVT. LTD. IN WHICH THE ASSESSEE IS HOLDING 99.78% OF SHARES, THE ASSES SEE HAS TAKEN AN ADVANCE SUM OF RS. 8,00,000/-. THE A.O. WAS OF THE OPINION THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT SQUARELY APPLY ON SUCH ADVANCE RECEIVED BY THE ASSESSEE FROM AQUAFIL POLYMERS CO. PVT. LTD. IN WHICH SHE HA S SUBSTANTIAL SHAREHOLDING. TAKING A LEAF OUT OF THE FACTS FOUND IN THE CASE OF AQUAFIL POLYMERS CO. PVT. LTD., NOTICE U/S. 148 OF THE ACT WAS ISSUED AND SER VED UPON THE ASSESSEE. 5. THE ASSESSEE WAS CONFRONTED WITH THE REASONS FOR TH E REOPENING THE ASSESSMENT AND WAS ASKED TO EXPLAIN WHY THE PROVISIONS OF SECT ION 2(22)(E) OF THE ACT SHOULD NOT BE APPLIED ON ADVANCES RECEIVED FROM AQU AFIL POLYMERS. IT WAS EXPLAINED THAT THE ASSESSEE IS THE LAND LADY OF THE PREMISES WHERE AQUAFIL POLYMERS IS DOING ITS BUSINESS. IT WAS EXPLAINED TH AT THE SAID ADVANCE WAS RECEIVED BY THE ASSESSEE TO CARRY OUT REPAIR WORKS IN THE OFFICES. IT WAS EXPLAINED THAT DUE TO SOME TECHNICAL REASONS, THE R EPAIR WORKS COULD NOT BE CARRIED OUT AND, THEREFORE, THE ADVANCE RECEIVED WA S RETURNED BACK. IT WAS STRONGLY CONTENDED THAT THE PROVISIONS OF SECTION 2 (22)(E) OF THE ACT DO NOT APPLY ON THE FACTS OF THE CASE. ITA NO. 2668 /AHD/2014 . A.Y. 2008-09 3 6. THE EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FA VOUR WITH THE A.O. WHO WENT ON TO MAKE THE ADDITION OF RS. 8,00,000/- U/S. 2(22)(E) OF THE ACT. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL THAT THE ADVANCES GIVEN BY AQUAFIL POLYMERS TO THE ASSESSEE WERE WELL SUPPORTED BY THE BOARD RESOLUTION OF THE COMPANY AND IT WAS MEANT FOR REPA IRS AND RENOVATION PURPOSES. THE LD. COUNSEL STRONGLY CONTENDED THAT T HE TRANSACTION WAS OF A COMMERCIAL NATURE AND, THEREFORE CANNOT BE TREATED AS A DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. 9. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE REVENUE AUTHORITIES. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE ASSESSEE IS HAVING SUBSTANTIAL INTEREST IN THE SAID COMPANY AQUAFIL POLYMERS CO. PVT. LTD.. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS OWNER OF THE PREMISES FROM WHERE THE SA ID COMPANY IS DOING ITS BUSINESS. THE PROVISIONS OF SECTION 2(22)(E) READS AS UNDER:- (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS RE PRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DA Y OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WH O IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE O F DIVIDEND WHETHER WITH OR WITHOUT A LIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHARE HOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS' A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE, REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, ITA NO. 2668 /AHD/2014 . A.Y. 2008-09 4 OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOL DER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFIT S; [EXPLANATION 3.- FOR THE PURPOSES OF THIS CLAUSE,- (A) CONCERN MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY; (B) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INT EREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY TIME DURING THE PR EVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE IN COME OF SUCH CONCERN;]. 11. AS MENTIONED ELSEWHERE, THE ASSESSEE HOLDS 99.78% S HARES IN THE SAID COMPANY AND THE ASSESSEE HAS RECEIVED ADVANCE OF RS. 8,00,0 00/-. EXCEPT FOR THE COPY OF THE BOARD RESOLUTION, THE ASSESSEE COULD NOT FURNIS H ANY DOCUMENTARY EVIDENCES TO DEMONSTRATE THAT THE SAID ADVANCE WAS TAKEN FOR REPAIR/RENOVATION WORK. THE ASSESSEE IS HOLDING 99.78% SHARES AND IS ALSO A DIRECTOR IN AQUAFIL POLYMERS CO. PVT. LTD. THIS MEANS THAT THE ASSESSEE WAS JUDGING FOR HER OWN CAUSE WHEN THE AFOREMENTIONED BOARD RESOLUTION WAS PASSED. THEREFORE, THE SAID BOARD RESOLUTION DOES NOT CARRY OUT ANY WEIGHT AGE. 12. IN OUR CONSIDERED OPINION, IN ABSENCE OF ANY EVIDEN CE TO SHOW THAT THE SAID ADVANCE WAS MEANT FOR REPAIR/RENOVATION WORK, WE DO NOT FIND ANY REASON WHY THE SAID ADVANCE SHOULD NOT BE TREATED AS DEEMED DI VIDEND U/S. 2(22)(E) OF THE ACT. WE DECLINE TO INTERFERE. APPEAL FILED BY THE A SSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 - 11- 20 17 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY AC COUNTANT MEMBER AHMEDABAD: DATED 22/11/2017 RAJESH