MAHENDRA L. JAIN, MUMBAI V. ITO 32(2)(3), MUMBAI

ITA 2678/MUM/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4557 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 08-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K DHONDIAL J
• Assessee Lawyers: DEVENDRA KOTHARI
• Keywords: Salary income; Opportunity of being heard; Difference of opinion; Deemed dividend; Change of opinion
• Section: 143(3); 148

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI , ! ' , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.2678/MUM/2015 ASSESSMENT YEAR: 2007-08 MAHENDRA L. JAIN, 10, SHANTINATH APTS, S.V. ROAD, BORIVALI(WEST), MUMBAI-400092 / VS. INCOME TAX OFFICER-32(2)(3), PRATYAKASH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA EAST MUMBAI-400051 / ASSESSEE / REVENUE P.A. NO. AABPJ4681K $ % & / ASSESSEE BY SHRI DEVENDRA KOTHARI $ % & / REVENUE BY SHRI A.K.DHONDIAL JCIT-DR / DATE OF HEARING 07/01/2016 & / DATE OF ORDER: 07/01/2016 & / O R D E R THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 06/02/2015 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO NOT C ONSIDERING THE FACTS AND RELATED JUDICIAL PRONOUNCEMENTS AS TH E LOAN ITA NO.2678/MUM/2015 MAHENDRA L. JAIN 2 TAKEN BY THE ASSESSEE IS NOT FALLING WITHIN THE PRO VISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961(HEREIN AFTER THE ACT) AND FURTHER ERRED IN CONSIDERING THE QUANTUM O F ACCUMULATED PROFIT AS ON THE LAST DATE OF CORRESPON DING PREVIOUS YEAR INSTEAD OF ACCUMULATIVE PROFIT AT THE TIME OF GRANTING LOAN FOR THE PURPOSES OF DEEMED DIVIDEND. 2. DURING, HEARING OF THIS APPEAL, THE LD. COUNSEL FOR THE ASSESSEE, SHRI DEVENDRA KOTHARI, ADVANCED ARGUM ENTS, WHICH IS IDENTICAL TO THE GROUND RAISED BY FURTHER SUBMITTING THAT WHILE FARMING THE ORIGINAL ASSESSMENT, THE ASS ESSEE WAS DIRECTOR AS WELL AS SHARE HOLDER OF THE COMPANY AND REOPENING WAS MADE MERELY ON THE BASIS OF CHANGE OF OPINION. IT WAS EXPLAINED THAT IT WAS INITIAL YEAR OF THE COMPANY OF WHICH MONEY LENDING WAS THE MAIN ACTIVIT Y OF THE COMPANY. IT WAS CONTENDED THAT ALMOST 65.98% OF TH E TOTAL ASSET WAS LOAN AND NET PROFIT WAS RS.1,75,451/-, WH ICH INCLUDES INTEREST OF RS.1,33,900/-, BY EXPLAINING T HAT ALMOST 76.3% OF THE INCOME WAS FROM INTEREST. THE CRUX OF THE ARGUMENT IS THAT AT THE RELEVANT TIME, MONEY LENDIN G WAS THE MAIN BUSINESS OF THE COMPANY, THEREFORE, DEEMED DIV IDEND IS TO BE TAKEN INTO ACCOUNT AT THE TIME OF TAKING LOAN . IT WAS EXPLAINED THAT THE LD. ASSESSING OFFICER HAS TAKEN ACCUMULATED PROFIT INTO CONSIDERATION ON THE LAST D AY OF ACCOUNTING YEAR. ON THE OTHER HAND, THE LD. DR, SH RI A.K.DHONDIAL, DEFENDED THE CONCLUSION BY PLACING RE LIANCE UPON THE FINDING CONTAINED IN THE ASSESSMENT ORDER AS WELL AS IN THE ORDER OF THE LD. FIRST APPELLATE AUTHORIT Y. ITA NO.2678/MUM/2015 MAHENDRA L. JAIN 3 2.1. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED, ASSESSING THE TOTAL INCOME AT RS.8,00,53 0/- AGAINST THE RETURNED INCOME OF RS.7,85,530/-, ON 30/11/2009. THE ORIGINAL ASSESSMENT WAS REOPENED W ITH THE ISSUANCE OF NOTICE U/S 148 OF THE ACT ON 26/03/2012 ON THE REASONS OF ESCAPEMENT OF INCOME OF RS.1,40,656/- ON ACCOUNT OF SECTION 2(22)(E) OF THE ACT. THE LD. AS SESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT ON 14/12/2012 ASSESSING THE TOTAL INCOME AT RS.9,41,184/- MAKING ADDITION OF RS.1,40,656/- U/S 2(22)(E) OF THE ACT. THE ASSESSMENT ORDER WAS AFFIRMED BY TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER DATED 06/02/2015. IT IS NOTED THAT FOLLOWING DOCUME NTS WERE FILED BY THE ASSESSEE BEFORE THE LD. COMMISSIONER O F INCOME TAX (APPEALS), WHICH WERE ALSO FILED DURING ASSESSM ENT PROCEEDINGS. I. COMPUTATION OF TOTAL INCOME WHERE ASSESSEE SHOWN INCOME FROM SALARY FROM M/S AABHUSHAN FOREX PVT. LT D. II. COPY OF SALARY CERTIFICATE FROM M/S AABHUSHAN FOREX PVT. LTD. SIGNED BY MR. MAHENDRA L. JAIN AS DIRECTO R SUBMITTED TO THE ASSESSING OFFICER ALONG WITH LETTE R DATED 23/11/2009 III. RELEVANT ANNEXURE-3 OF FORM 3CD IN RESPECT TO CLAUS E 18 GIVING PARTICULARS OF PAYMENT MADE TO PERSON ITA NO.2678/MUM/2015 MAHENDRA L. JAIN 4 SPECIFIED UNDER SECTION 40A(2B). WHERE PAYMENT MADE TO COMPANY AS INTEREST OF LOAN TAKEN IS REPORTED & ALSO RELATION OF THE ASSESSEE AS DIRECTOR OF THE COMPANY STATED. IV. RELEVANT ANNEXURE 4 OF FORM 3CD IN RESPECT OF CLAUS E 24 WHERE PARTICULARS OF LOAN TAKEN DURING THE YEAR REPORTED. AND THE LOAN TAKEN FROM THE COMPANY WAS CLEARLY SHOWN IN THE SAID ANNEXURE. V. ANNEXURE-B FORMING PART OF BALANCE SHEET WHERE THE LOAN TAKEN FROM THE COMPANY IS STATED AS UNSECURED LOAN AT S.N.1. VI. COPY OF LOAN CONFIRMATION IN RESPECT OF LOAN TAKEN FROM COMPANY & SUBMITTED DURING THE COURSE OF PROCEEDING . IF THE TOTALITY OF FACTS ARE ANALYZED, IT IS OBSERV ED THAT OUT OF THE TOTAL ASSET OF RS.28,94,456/-, THE ASSESSEE TOO K A LOAN OF RS.19,09,833/- WHICH IS APPROXIMATELY 65.98% OF THE TOTAL ASSET WAS LOANS. SIMILARLY, THE NET PROFIT BEFORE T AX WAS RS.1,75,451/- WHICH INCLUDES INTEREST RECEIVED OF RS.1,33,900/- WHICH IS 76.32%, AS IS EVIDENT FROM B ALANCE SHEET AND PROFIT & LOSS ACCOUNT. IN SUCH A SITUATIO N, IT CAN BE SAID THAT MONEY LENDING WAS BROADLY THE BUSINESS OF THE ASSESSEE AT THE RELEVANT TIME, THEREFORE, IN VIEW O F THE DECISION IN REKHA MODI VS ITO (2007) 13 SOT 512 (DE L.), CIT VS PARLE PLASTICS LTD. (2011) 196 TAXMAN 62 (BOM.) AND JAYANT H. MODI VS JCIT (2012) 28 TAXMAN.COM 252 (MU M. ITA NO.2678/MUM/2015 MAHENDRA L. JAIN 5 TRIB.), THE LD. ASSESSING OFFICER IS DIRECTED TO EX AMINE THE CASE OF THE ASSESSEE AFRESH AND DECIDE IN ACCORDANC E WITH LAW. NEEDLESS TO MENTION HERE THAT DUE OPPORTUNITY OF BEING HEARD BE PROVIDED TO THE ASSESSEE. THE ASSESSEE IS ALSO AT LIBERTY TO FURNISH EVIDENCE, IF ANY, IN SUPPORT OF HIS CLAIM. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES ONLY. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN T HE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 07/01/2016. SD/- (JOGINDER SINGH) ! ' / JUDICIAL MEMBER MUMBAI; DATED : 07/01/2016 F{X~{T? P.S / ! & $ )!*+ ,&+-* / COPY OF THE ORDER FORWARDED TO : 1. '#$%& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. ) ) * ( '#$ ) / THE CIT, MUMBAI. 4. ) ) * / CIT(A)- , MUMBAI 5. -./ ' , ) '#$ ' 1 , / DR, ITAT, MUMBAI 6. /2 3$ / GUARD FILE. & / BY ORDER, (-# ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI