Chandra Ramesh, CHENNAI V. ACIT(OSD), CHENNAI

ITA 273/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5245 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 30-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREENIVASAN
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Bonafide belief; Deemed dividend
• Section: 143(3); 27

Judgement Text

, ' , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY , JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 273/CHNY/2017 / ASSESSMENT YEAR : 2007-08 CHANDRA RAMESH, 2, VIJAYARAGHAVA ROAD, 1 ST STREET, T.NAGAR, CHENNAI. 600 017 [PAN: AAA PR 6582L] VS. ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -V(1), CHENNAI. ( / APPELLANT) ( / RESPONDENT) '( / APPELLANT BY : SHRI. B. RAMAKRISHNAN, FCA +,'( / RESPONDENT BY : SHRI. A REVENUE V SREENIVASAN, JCIT ( /DATE OF HEARING : 24.01.2018 ( /DATE OF PRONOUNCEMENT : 23.04.2018 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI IN ITA NO. 105/C IT(A)-2/15-16 DATED 01.12.2016 PASSED U/S. 271(1)(C) FOR ASSESSMENT YEA R 2007-08. :-2-: ITA NO. 273/CHNY/2017 2. SMT. CHANDRA RAMESH, THE ASSESSEE, RECEIVED RS. ONE CRORE, FROM M/S. CR FINANCE AND SECURITIES PVT LTD., A COMPANY OF W HICH THE ASSESSEE IS SHAREHOLDER HAVING SUBSTANTIAL INTEREST, AS SECURIT Y DEPOSIT FOR THE BUILDING BELONGING TO THE ASSESSEE WHICH HAS BEEN LET OUT TO THE COMPANY FOR ITS BUSINESS. IN THE ASSESSMENT MADE FOR ASSESSMENT YE AR 2007-08 U/S. 143(3) R.W. 147, THE ASSESSING OFFICER ADDED RS. 46,81,475 /- TOWARDS DEEMED DIVIDEND WHICH WAS EQUIVALENT TO THE ACCUMULATED PR OFIT OF THE COMPANY AS ON 31.03.2006. AGAINST THE ASSESSMENT ORDER THE AS SESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO DISMISSED THE APPEAL. THE A SSESSEES APPEAL BEFORE THE HONBLE ITAT WAS DISMISSED, IN LIMINE, FOR NON- PROSECUTION AS THE ASSESSEE DID NOT APPEAR BEFORE THE ITAT FOR HEARING . THEREAFTER, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S . 271(1)(C), HEARD THE ASSESSEES CONTENTIONS AND AFTER CONSIDERING THEM T HE AO WAS SATISFIED TO LEVY PENALTY U/S. 271(1)(C). HE FOUND THAT THE MIN IMUM AND THE MAXIMUM PENALTY IMPOSABLE WORKED OUT AT RS. 18,20,012/- AND RS. 54,60,036/-, RESPECTIVELY. CONSIDERING THE FACTS AND CIRCUMSTAN CES OF THE CASE HE LEVIED THE PENALTY AT RS. 20 LAKHS U/S. 271(1)(C). AGGRIE VED AGAINST THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CI T(A) CONFIRMED THE LEVY AND DISMISSED THE APPEAL. AGAINST THE ORDER OF THE CIT(A), THE ASSESSEE FILED THIS APPEAL PLEADING THAT THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE ASSESSEE HAS CONCEALED INCOME/FURNISHED INACCURATE PARTICULARS OF INCOME, WHEN THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT TH E RENTING OUT OF HER :-3-: ITA NO. 273/CHNY/2017 PROPERTY TO CR FINANCE AND SECURITIES WAS A BONAFIE D BUSINESS TRANSACTION AND HENCE DID NOT ATTRACT THE PROVISIONS OF SECTION 271(1)(C). FURHTER, THE CIT(A) HAS NOT CONSIDERED THE FACT THAT THE TRANSAC TION WAS COVERED BY THE ITAT DECISION IN C.K RANGANATHAN VS ITO, AND THAT W HERE TWO VIEWS ARE POSSIBLE, THERE CANNOT BE A LEVY OF PENALTY U/S. 27 1(1)(C) ETC. 3. THE AR SUBMITTED THAT THE ASSESSEE, AN INDIVIDUA L, DERIVING INCOME FROM BUSINESS OF SHARE BROKING, TRADING IN SHARES, PROFESSIONAL INCOME, LEASED HER PROPERTY AT T.NAGAR TO HER COMPANY CR FINANCE A ND SECURITIES PVT LTD., CARRYING ON BUSINESS OF STOCK BROKING. THE ASSESSE E HAD RECEIVED ONE CRORE AS SECURITY DEPOSIT FOR THE PREMISES BESIDES A RENT OF RS. 5,000 PER MONTH. INVOKING THE PROVISIONS OF SECTION 2(22)(E), THE AO HELD THAT RS. 46,81,470/- WAS TAXABLE. BEFORE THE CIT(A), THE ASSESSEE RELIE D ON THE MADRAS ITAT DECISION IN THE CASE OF C K RAGANATHAN VS ITO IN IT A NO. 2041/MDS/2011 AND HARSHAD DOSHI VS ITO WAS NOT ACCEPTED BY THE CIT(A) . THE ASSESSEE COULD NOT PURSUE THE APPEAL IN THE ITAT ON ACCOUNT OF HER ILL-HEALTH AND HENCE THE ITAT DISMISSED THE APPEAL FOR WANT OF APPEARANCE. IN THIS CASE, THE ASSESSEE IN FACT HAS NOT HIDDEN ANY INCOME OR ANY PARTICULAR S OF INCOME. THE AMOUNT RECEIVED AS SECURITY DEPOSIT WAS ON THE HIGHER SIDE AS A HUGE ANTENNA WAS INSTALLED ON TOP OF THE PREMISES FOR RECEIVING SIGN ALS FROM THE NSE, AS ALL THE TRANSACTIONS ARE ELECTRONICALLY DONE. THIS MIGHT C AUSE DAMAGE TO THE BUILDING STRUCTURE AND HENCE THE HIGHER DEPOSIT WAS TAKEN. BOTH THE SECURITY DEPOSIT :-4-: ITA NO. 273/CHNY/2017 AND THE RENT RECEIVED HAVE BEEN DULY REFLECTED IN T HE RETURN. IN FACT, BASED UPON THIS DISCLOSURE ONLY, THE ASSESSING OFFICER RE -OPENED THE ASSESSMENT U/S. 147. THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF TH AT THIS WAS A BUSINESS TRANSACTION AND THERE WAS NO INTENTION TO DEFRAUD T HE REVENUE. THE PENALTY PROCEEDINGS ARE SEPARATE PROCEEDINGS, THE AO COULD NOT MECHANICALLY CONCLUDED THAT MERELY BECAUSE THERE ARE ADDITIONS T O THE RETURNED INCOME, THE ASSESSEE CONCEALED THE PARTICULARS OF INCOME. RELYING ON THE ITAT DECISION IN THE CASE OF C K RAGANATHAN VS ITO, WHER EIN, THE COMPANY ADVANCED MONEY TO ITS DIRECTOR C K RAGANATHAN FOR C ONSTRUCTION OF A GUEST HOUSE WHICH WAS USED BY THE COMPANY FOR RENTAL BAS IS, THIS WAS HELD TO BE A BUSINESS TRANSACTION. THE MADRAS HIGH COURT IN THE CASE OF CAPLIN POINT LABORATORY LTD., 293 ITR 524 (MAD), WHEREIN THE ASS ESSEE HAD CLAIMED THAT THE INTEREST INCOME ELIGIBLE FOR EXEMPTION U/S. 80H HC AND 80I, WHICH WAS DISALLOWED AND PENALTY WAS LEVIED FOR CONCEALMENT O F THIS ISSUE. MADRAS HIGH COURT HELD THAT THERE IS NO CASE OF CONCEALMENT AS THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT HE WAS ENTITLED TO THE EXEMPTI ON AND HENCE CLAIMED THE SAME. IN SPITE OF POINTING OUT THE FACTS AND THE R ATIOS, THE LD. CIT(A) UNFORTUNATELY CONFIRMED THE APPEAL. FURTHER, THE A R RELIED ON THE DECISIONS OF THE CIT VS FORTUNE HOTELS AND ESTATES PVT LTD, 232 TAXMAN 481 (BOM) AND V KALYANAM VS ITO 327 ITR 477 (MAD) FOR THE PROPOSITI ON RELIED THAT THE MERE REJECTION OF ASSESSEES EXPLANATION WOULD NOT BE A GROUND FOR LEVYING PENALTY. RELYING ON THIS TRIBUNAL DECISION IN THE CASE OF IT O, COMPANY WARD IV(1) VS :-5-: ITA NO. 273/CHNY/2017 LATE DR. SHAMSHEER, DIRECTOR OF M/S. MEDIMARK CONSU LTANTS (INDIA) PVT LTD., IN ITA NO. 564/MDS/2011 FOR ASSESSMENT YEAR 2005-06 DA TED 31.01.2013, THE AR SUBMITTED THAT THIS TRIBUNAL DELETED PENALTY LEV IED U/S. 271(1)(C) ON THE DEEMED DIVIDEND RELYING ON THE GUJARAT HIGH COURT D ECISIONS IN 221 ITR 66, 257 ITR 355 (GUJ) AND HENCE, THE AR SUBMITTED THAT NEITHER THERE IS CONCEALMENT NOR THE ASSESSEE HAS FURNISHED INACCURA TE PARTICULARS AND HENCE, THE PENALTY LEVIED MAY BE DELETED. PER CONTRA, THE DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND RELIED ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS ALKES K PATEL 325 ITR 118 (BO M) AND CIT VS P.K. ABUBUCKER 259 ITR 507 (MAD) AND SUBMITTED THAT IMPU GNED TRANSACTION CLEARLY FALLS WITHIN THE SCOPE OF SECTION 2(22)(E). 4. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. THE FACT REMAINS THAT THE ASSESSEE HAS DISCLOSED TH E RECEIPT OF RENT AND THE SECURITY DEPOSIT FROM THE COMPANY IN THE RETURN, ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS RE-OPENED THE ASSESSMENT AND PROCEEDED TO DETERMINE THE DEEMED DIVIDEND. THE ASSESSEE HAS ALSO DISCLOS ED BONAFIDE BELIEF THAT THE IMPUGNED TRANSACTIONS HAD HAPPENED IN THE ORDIN ARY COURSE OF BUSINESS, RELYING ON THE ITAT DECISION. IN SUCH FACTS AND CI RCUMSTANCES AND ON THE RATIOS ON WHICH THIS TRIBUNAL DELETED THE ADDITION IN THE CASE OF ITA 564/MDS/2011, SUPRA, THE PENALTY LEVIED BY THE AO A ND CONFIRMED BY THE CIT(A) IS NOT JUSTIFIED AND HENCE DELETED. :-6-: ITA NO. 273/CHNY/2017 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 23 RD DAY OF APRIL, 2018 AT CHENNAI. SD/- ( . ' ) (DUVVURU RL REDDY) $% /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) % /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 23 RD APRIL , 2018 JPV (+3454 /COPY TO: 1. '/ APPELLANT 2. +,' /RESPONDENT 3. 6 ( )/CIT(A) 4. 6 /CIT 5. 4+ /DR 6. 9 /GF