ACIT,CORPORATE CIRCLE-6(2), CHENNAI V. SHRI VELAYUTHAM SUNDARAMOORTHY, CHENNAI

ITA 2685/CHNY/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0263 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 20-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDARARAJAN
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Deemed dividend
• Section: 2(22)(e)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI ., # , # ( BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 2685/CHNY/2019 / ASSESSMENT YEAR : 2012-13 ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2), CHENNAI. VS. SHRI. VELAYUTHAMSUNDARAMOORTHY, L 604, METROZONE, NO. 44, PILLAIYARKOIL STREET, ANNA NAGAR, CHENNAI 600 040. [PAN: BCFPS 5842G] ( / APPELLANT) ( )*, /RESPONDENT ) /. I.T.A. NO. 2805/CHNY/2019 / ASSESSMENT YEAR : 2012-13 ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2), CHENNAI. VS. SHRI. T. PADMAKUMAR, R 203, METROZONE, NO. 44, PILLAYARKOIL STREET, ANNA NAGAR, CHENNAI 600 040. [PAN: AIZPP 5293M] ,- / APPELLANT BY : SHRI . A. SUNDARARAJAN, ADDL. CIT )*,- /RESPONDENT BY : SHRI . M. KARUNAKARAN , ADVOCATE - /DATE OF HEARING : 10.03.2020 - /DATE OF PRONOUNCEMENT : 02.06.2020 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: :-2-: ITA NOS: 2685 & 2805/CHNY/2019 THE REVENUE FILED THESE APPEALSAGAINST THE COMMON ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-15, CHENNAI, I N ITA NOS. 159 &160/2017-18/CIT(A)-15 DATED 10.07.2019 FOR ASSESSM ENT YEARS 2012-13, IN THE ABOVE CONNECTED CASES WITH THE FOLLOWING COMMON GROUNDS: 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO TH E LAW AND FACTS OF THE CASE. 2.THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ISSUE UNDER CONSIDERATION WAS STILL PENDING BEFORE THE HON'BLE SUPREME COURT IN T HE CASE OF M/S. NATIONAL TRAVEL SERVICES VS CIT (89 TAXMANN.COM 332 (SC)) AND BEFOR E THE HON'BLE MADRAS HIGH COURT IN THE CASE OF M/S. SUBHAVARSHAINFOTECH VS. D CIT AGAINST THE TRIBUNAL ORDER VIDE ITA NOS. 2365/CHNY/2016 AND 2805/CHNY/2016 DAT ED 05.12.2018. 2.1 THE LD. CIT(A) OUGHT TO HAVE NOTED THAT THE ORD ER OF THE TRIBUNAL IN THE CASE OF M/S. SUBHAVARSHAINFOTECHVS DCIT IN CROSS APPEALS VI DE ITA NO. 2365/CHNY/2016 AND ITA NO. 2805/CHNY/2016 DATED 05.12.2018 CONFIRMING THE ADDITION IN THE HANDS OF THE M/S. SUBHAVARSHAINFOTECH WAS NOT ACCEPTED BY TH E ASSESSEE AND THAT THE APPEAL IS STILL PENDING BEFORE THE HON'BLE MADRAS HIGH COU RT. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASID E AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE FACTS IN BRIEF ARE THAT THERE WAS A TRANSFER OF FUND OF RS.7.54 CRORES FROM M/S SYMBIOTIC INFOTECH LTD. TO A FIRM NAMELY, M/ S S UBHAVARSHAINFOTECH. THE THREE SHAREHOLDERS IN THE COMPANY OF M/ S SYMBIOTIC INFOTECH LTD., NAMELY MR.S. SUNDARAMOORTHY, MR.T. PADMAKUMAR AND MR.J . SELVAKU MAR, WERE ALSO PARTNERS IN THE FIRM, M/S SUBHAVARSHAINFOTECH. OUT OF THE FU ND TRANSFERRED OF RS. 7.54 CRORES, THE FIRM - M/S SUBHAVARSHAINFOTECHTRANSFERRE D RS.4.54 CRORES TO THE ABOVE THREE PARTNERS AND THE REMAINING RS.3 CRORES TO SMT. PRIYA RACHEL, WIFE :-3-: ITA NOS: 2685 & 2805/CHNY/2019 OF THE ONE OF THE PARTNERS/SHAREHOLDERS CLOSE FRI END AND THEREFORE TO A THIRD PARTY. BY OBSERVING THAT IT WAS A DEEMED DIVIDEND U /S 2(22)(E), THE ASSESSING OFFICER ADDED THE ENTIRE FUND RECEIVED OF RS.7.54 C RORES IN THE HANDS OF M/ S SUBHAVARSHAINFOTECH. ON THE FIRMS APPEAL, THE CIT( A) DELETED THE ADDITION OF RS.3 CRORES, WHICH WAS TRANSFERRED TO A THIRD PARTY BUT CONFIRMED THE ADDITION OF RS.4.54 CRORES WHICH WAS TRANSFERRED TO THE ABOVE T HREE PARTNERS . ON FURTHER APPEAL BY BOTH THE FIRM AND THE DEPARTMENT, THE HON BLE ITAT, CHENNAI UPHELD THE ADDITION OFTHE AO IN THE HANDS OF THE FIRM - M /S SUBHAVARSHAINFOTECH. THE FIRM ACCEPTED THE ITATS ORDER PARTLY TO THE EXTENT OF CONFIRMATION OF THE ADDITION OF RS.4.54 CRORES, BUT APPEALED AGAINST TH E ITATS DECISION IN RESPECT OF THE CONFIRMATION OF THE ADDITION OF RS.3 CRORES GIV EN TO THE THIRD PARTY. THE FIRMS APPEAL IS PENDING BEFORE THE HONBLE HIGH CO URT OF MADRAS. 2.1 WHILE THE ABOVE ADDITION WAS CONTESTED IN APPEA L IN THE ITAT, THE AO RE- OPENED AND ASSESSED ONE-THIRD OF RS.7.54 CRORES IN THE HANDS OF THE ABOVE THREE PARTNERS ON PROTECTIVE BASIS. OUT OF WHICH ,THE APP EALS IN RESPECT OF TWO PARTNERS NAMELY, MR.S.SUNDARAMOORTHY AND MR.T.PADMAKUMAR ARE DEALT WITH IN THIS ORDER. THE AO HAS MADE THE AFORESAID PROTECTIVE ASS ESSMENT IN THE HANDS OF THE ABOVE TWO PARTNERS RELYING THE CASE OF MADHUR HOUSI NG AND DEVELOPMENT COMPANY (CA NO 3961 OF 2013) SC , WHICH UPHELD THE DECISION OF THE HONBLE HC OF DELHI IN THE CASE OF CIT VSANKITECH P LTD (ITA N O. 462 OF 2009). AGGRIEVED, :-4-: ITA NOS: 2685 & 2805/CHNY/2019 THE ABOVE ASSESSEES FILED APPEALS BEFORE THE CIT(A) . BEFORE THE CIT(A), THE ASSESSEES HAVE, INTER ALIA,SUBMITTED THAT, SINCE TH EHONBLE ITAT, CHENNAI HAS ALREADY CONFIRMED THE ADDITION OF DEEMED DIVIDENDTO THE EXTENT OF RS.4.54 CRORES IN THE HANDS OF THE FIRM, M/S SUBHAVARSHAINF OTECHAND THE FIRM HAS ALSO ACCEPTED THE ITATS DECISION, FURTHER ADDITIONOF TH E SAME AMOUNT IN THE HANDS OF THE FIRMS PARTNERS AMOUNT TO DOUBLE ADDITION AND T HEREFORE, THE IMPUGNED ADDITIONS SHOULD BE DELETED. WITH REGARD TO THE AD DITION OF RS.3 CRORES CONFIRMED BY THE HONBLE ITAT, CHENNAI IN THE HANDS OF THE FIRM, THE FIRM HAS NOT ACCEPTED THE ITATS DECISION AND HAS CONTESTED IN APPEAL BEFORE THE HONBLE HIGH COURT OF MADRAS, ON THE GROUND THAT THE SAID A MOUNT WAS NEITHER RECEIVED BY THE FIRM NOR BY THE PARTNERS.THE ASSESSEES HAVE POINTED OUT THAT THE AFORESAID DECISION WAS MENTIONED BY THE APEX COURT IN THE CASE OF NATIONAL TRAVEL SERVICES VS. CIT AND HAS REFERRED THE EARLIE R DECISION OF THE APEX COURT IN THE CASE OF MADHUR HOUSING & DEVELOPMENT COMPANY TO A LARGER BENCH OF THE SUPREME COURT. 2.2 AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, T HE LD. CIT(A) HELD, INTER ALIA, THAT THE AR HAS FURNISHED A COPY OF APPEAL FILED BY THE FIRM - M/S SUBHAVARSHAINFOTECH BEFORE THE HONBLE HIGH COURT A GAINST THE DECISION OF HONBLE ITAT, CHENNAI AS MENTIONED ABOVE IN WHICH O NLY THE CONFIRMATION OF ADDITION OF RS.3 CRORES GIVEN TO THIRD PARTY HAS BE EN CONTESTED IN APPEAL. AFTER :-5-: ITA NOS: 2685 & 2805/CHNY/2019 CONSIDERING THE ARS SUBMISSION, I AM CONVINCED THA T, SINCE THE HONBLE ITAT, CHENNAI HAS ALREADY CONFIRMED THE ADDITION OF RS.4. 54 CRORES IN THE HANDS OF THE FIRM - M/S SUBHAVARSHAINFOTECHAND THE SAME HAS BEEN ACCEPTED BY FIRM, FURTHER ADDITION OF THE SAME AMOUNT IN THE HANDS OF THE TWO PARTNERS CLEARLY AMOUNTS TO DOUBLE ADDITION. BESIDES, SINCE THE ISSUE UNDER CON SIDERATION HAS NOT REACHED FINALITY IN THE APEX COURT, I AM OF THE CONSIDERED OPINION THAT AS OF NOW, IN VIEW OF THE HONBLE ITAT CHENNAIS DECISION OF THE CONFI RMATION OF ADDITION OF RS.4.54 CRORES, THE ADDITION IN THE HANDS OF THE APPELLANTS - MR.S.SUNDARAMOORTHY AND MR.T.PADMAKUMARON A PROTECTIVE BASIS BY THE AO CLEA RLY AMOUNTS TO A DOUBLE ADDITION AND THEREFORE, IS UNFAIR AND UNREASONABLE, WHICH DESERVES TO BE DELETED. ACCORDINGLY, THELDCIT(A) DELETED THE ADDITION OFDE EMED DIVIDEND U/S 2(22)(E) THE HANDS OF THE TWO APPELLANTS,MR.S.SUNDARAMOORTHY AND MR.T.PADMAKUMAR ARE DELETED. 3. THE LD. DR SUBMITTED THE CASES ON THE LINES OF G ROUNDS OF APPEAL, SUPRA. PER CONTRA, THE LD. AR SUBMITTED ON THE SAME LINES SUBMITTED BEFORE THE LD. CIT(A) AND RELIED ON THEM. 4. WE HEARD THE RIVAL SUBMISSIONS. THE RELEVANT IS SUE TO BE CONSIDERED HERE IS, WHETHER THE ADDITION OF DEEMED DIVIDEND U/S 2(22)(E ) OF RS.4.54 CRORES ALREADY CONFIRMED BY THE HONBLE ITAT, CHENNAI IN THE HANDS OF THE FIRM M/S :-6-: ITA NOS: 2685 & 2805/CHNY/2019 SUBHAVARSHAINFOTECHCAN NOW BE CONSIDERED ALSO IN TH E HANDS OF THE ABOVE PARTNERS PROTECTIVELY.WE HAVE GONE THROUGH THE ORD ER OF THIS TRIBUNAL IN THE CASE OF M/S SUBHAVARSHAINFOTECHVS. DCIT IN CROSS APPEALS VIDE ITA NO.2365/CHNY/2016 AND 1TA NO.2805/CHNY/2016 DATED 5 -12-2018. THE RELEVANT PORTION IS EXTRACTED AS UNDER: 13. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT A SUM OF RS. 7,54,00,000/- WAS RECEIVED BY THE ASSESSEE AS ADVANCE FROM MIS. S YMBIOTIC INFOTECH P. LTD. THERE IS ALSO NO DISPUTE THAT THE SAID COMPANY HAD TWO DIFFERENT ACCOUNTS IN THE BOOKS OF THE ASSESSEE, ONE FOR TRADING ADVANCES AND OTHER FOR NON-TRADING LOANS/ ADVANCES, AND THE SUM OF RS. 7,54,00,000/- W AS NOT A TRADING ADVANCE. IT IS ALSO NOT DISPUTED THAT MIS. SYMBIOTIC INFOTEC H P. LTD. HAD ACCUMULATED PROFITS OF RS. 28,09,06,827/- AS ON 31.03.2012. ASS ESSEE HAD RELIED ON A JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN. T HE CASE OF PRINTWAVE SERVICES P. LTD (SUPRA). LOWER AUTHORITIES HAD TAKEN A VIEW THAT THE SAID JUDGMENT APPLIED ONLY TO COMPANIES AND NOT TO PARTNERSHIP FI RMS, WHO WERE THE RECIPIENTS OF LOANS/ADVANCES. WE ARE OF THE OPINION THAT THIS VIEW TAKEN BY THE ID. COMMISSIONER OF INCOME TAX (APPEALS) CANNOT BE FAULTED. HONBLE SUPREME COURT IN THE CASE OF NATIONAL TRAVEL SERVICES (SUPR A) WHILE REFERRING A SIMILAR ISSUE TO A LARGER BENCH HAD EXPRESSED SERIOUS DOUBT ON THE VIEW TAKEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANK ITECH PVT. LTD (2012) 340 ITR 14 AND THE JUDGMENT OF THEIR LORDSHIP IN MADHUR HOUSING AND DEVELOPMENT CO. (SUPRA). HERE BEFORE US, ADMITTEDLY , THE SHAREHOLDERS WERE THE SAME AS THE PARTNERS OF THE ASSESSEE FIRM AND T HE FACTS ARE VERY SIMILAR TO THE ONE BEFORE HONBLE APEX COURT IN NATIONAL TRAVE L SERVICES (SUPRA). 14. COMING TO THE QUESTION OF RELIEF GIVEN TO THE A SSESSEE FOR THE SUM OF RS. 3,00,00,000/ - GIVEN BY THE ASSESSEE FIRM TO SMT. P RIYA RACHEL, IT IS AN ADMITTED POSITION THAT SMT. PRIYA RACHEL WAS THE WIFE OF ONE OF FRIENDS OF A PARTNERS. OR IN OTHER WORDS, ASSESSEE COULD NOT HAVE ADVANCED TH E LOAN OF RS. 3,00,00,000/- :-7-: ITA NOS: 2685 & 2805/CHNY/2019 , SHE WAS NOT CLOSELY RELATED TO ONE OF THE PARTNER S. NO DOUBT, ID.AUTHORISED REPRESENTATIVE ARGUED THAT SUCH LOAN GIVEN TO SM. P RIYARACHERL DID NOTINDIVIDUALLY BENEFIT ANY PARTNERS OR FIRM AND HE NCE SECTION 2(22) (E) OF THE ACT WOULD NOT APPLY. HOWEVER, WE ARE OF THE OPINION THAT SUCH A NARROW DEFINITION TO THE WORD INDIVIDUAL BENEFIT CANNOT BE GIVEN. THE BENEFIT WILL INCLUDE DIRECT OR INDIRECT THINGS. PARTNER WHOSE FR IENDS WIFE RECEIVED THE ADVANCE HAD INDIRECTLY BENEFITED FROM THE ADVANCE R ECEIVED BY THE ASSESSEE FROM M/S. SYMBIOTIC INFOTECH P. LTD. WE ARE THEREFO RE OF THE OPINION THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) FELL IN ERROR IN GIVING RELIEF OF RS. 3,00,00,000/- TO THE ASSESSEE. IN THESE CIRCUMSTANC ES, WE DISMISS THE GROUNDS 6 TO 10 OF THE ASSESSEE AND ALLOW THE APPEAL OF THE REVENUE. 4.1 ON RECEIPT OF THE ABOVE ORDER, THE FIRM, M/S SUB HAVARSHAINFOTECHHAS ACCEPTED THE ITATS DECISIONTO THE EXTENT OF RS.4.5 4 CRORES AND THEREFORE IT REACHED FINALITY . WITH REGARD TO THE ADDITION OF R S.3 CRORES CONFIRMED BY THE HONBLE ITAT, CHENNAI, SUPRA , IN THE HANDS OF THE FIRM, THE FIRM HAS NOT ACCEPTED THE ITATS DECISION AND HAS CONTESTED IN A PPEAL BEFORE THE HONBLE HIGH COURT OF MADRAS WHICH IS PENDING NOW . IN SUCH FACTS AND CIRCUMSTANCES, THE LD CIT(A) S DECISION SINCE THE ISSUE UNDER C ONSIDERATION HAS NOT REACHED FINALITY IN THE APEX COURT, I AM OF THE CONSIDERED OPINION THAT AS OF NOW, IN VIEW OF THE HONBLE ITAT CHENNAIS DECISION OF THE CONFI RMATION OF ADDITION OF RS.4.54 CRORES, THE ADDITION IN THE HANDS OF THE APPELLANTS - MR.S.SUNDARAMOORTHY AND MR.T.PADMAKUMARON A PROTECTIVE BASIS BY THE A O CLE ARLY AMOUNTS TO A DOUBLE ADDITION AND THEREFORE, IS UNFAIR AND UNREASONABLE, WHICH DESERVES TO BE :-8-: ITA NOS: 2685 & 2805/CHNY/2019 DELETED. DOES NOT REQUIRE ANY INTERFERENCE AND HEN CE THE REVENUES ABOVE APPEALS ARE DISMISSED. 5. IN THE RESULT, THE REVENUES ABOVE APPEALS ARE DISMISSED. ORDER PRONOUNCED ON TUESDAY, 02 ND DAY OF JUNE, 2020 AT CHENNAI. SD/- ( !.. # ) ( DUVVURU R.L REDDY ) % & / JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) & /ACCOUNTANT MEMBER /CHENNAI, 3 /DATED: 02 ND JUNE, 2020 JPV -) 5676 /COPY TO: 1. , / APPELLANT 2. )*, /RESPONDENT 3. 9 ) ( /CIT(A) 4. 9 /CIT 5. 6) /DR 6. < /GF