M/s Jaguars Packaging Pvt. Ltd., Kanpur V. Income Tax Officer-6(1), Kanpur

ITA 274/LKW/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0572 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 16-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MISHRA
• Assessee Lawyers: SWARAN SINIGH
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. T. S. KAPOOR , ACCOUNTANT MEMBER ITA NO. 274/LKW/2016 ASSESSMENT YEAR: 2004 - 05 M/S JAGUARS PACKAGING PVT. LTD. 7/96, TILAK NAGAR KANPUR V. INCOME TAX OFFICER WARD 6(1) KANPUR T AN /PAN : AAACJ9429P (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI SWARAN SINIGH, C.A. RESPONDENT BY: SHRI A. K. MISHRA, D.R. DATE OF HEARING: 07 12 201 7 DATE OF PRONOUNCEMENT: 08 12 201 7 O R D E R PE R SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - II, KANPUR DATED 23/2/2016 CONFIRMING THE PENALTY OF RS.80,000/ - LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 2 . DURING THE COURSE HEARING, THE LD. A.R. OF THE A SSESSEE HAS CONTENDED THAT THE ADDITIONS MADE AFTER INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS NOT SUSTAINABLE IN THE EYES OF LAW IN THE LIGHT OF THE FACT THAT THERE WAS NO FINANCIAL TRANSACTION BETWEEN THE COMPANY AND ITS SHAREHOLDERS. THE REFORE, PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT DESERVES TO BE DELETED. THE LD. A.R. OF THE ASSESSEE FURTHER CONTENDED THAT WHATEVER FINANCIAL TRANSACTIONS WERE U NDERTAKEN, IT WAS BETWEEN TWO COMPANIES IN WHICH CERTAIN COMMON SHAREHOLDERS WERE T HERE. ONE COMPANY DOES NOT HAVE ANY SHAREHOLDING : - 2 - : IN OTHER COMPANY. THEREFORE, PROVISIONS OF SECTION 2(22)(E) OF THE ACT CANNOT BE INVOKED. 3 . THE LD. D.R., ON THE OTHER HAND, PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 4 . HAVING CAREFULLY EXAMINED THE OR DERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS , WE FIND THAT FINANCIAL TRANSACTIONS WERE UNDERTAKEN BETWEEN M/S JAGUARS AGENCIES PVT. LTD. AND M/S JAGUARS PACKAGING PVT. LTD. NONE OF THE COMPANIES WERE HAVING SHAREHOLDING IN ANOTHER C OMPANY. THERE ARE COMMON SHAREHOLDERS IN BOTH THE COMPANIES. FOR THE SAKE OF REFERENCE, WE EXTRACT SHAREHOLDINGS IN BOTH THE COMPANIES AS UNDER: - S.N. NAME OF SHAREHOLDERS M/S. JAGUAR AGENCIES PVT. LTD. M/S. JAGUAR PACKAGING PVT. LTD. NO. OF SHARES AMOUNT % NO. OF SHARES AMOUNT % 1 KAILASH NEWATIA 11000 110000/ - 6.11 100 10000/ - 2% 2 PANKAJ NEWATIA 72500 725000/ - 40.27 1010 101000/ - 20.20% 3 SNEHLATA NEWATIA 25000 250000/ - 13.89 10 1000/ - 0.2% 4 A RCHANA NEWATIA 10500 105000/ - 5.83 1380 138000/ - 27.60% 5. KP NEWATIA HUF 30000 300000/ - 16.67 2450 245000/ - 49% 6. PANKAJ NEWATIA H.U.F. 26000 260000/ - 14.45 50 5000/ - 1% 7. RAGHAV NEWATIA 5000 50000/ - 2.78 - T OTAL 180000 1800000/ - 100% 5000 500000/ - 100% 5 . SINCE THE TRANSACTION WAS UNDERTAKEN BETWEEN BOTH THE COMPANIES AND NONE OF THE COMPANIES IS HAVING SHAREHOLDING IN OTHER COMPANY, PROVISIONS OF SECTION 2(22)(E) OF THE ACT CANNOT BE INVOKED IN : - 3 - : TH E LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS. IN THE CASE OF CIT VS. RAJ KUMAR SINGH AND CO. [2007] 295 ITR 9 (ALLD), THEIR LORDSHIPS OF THE HON'BLE HIGH COURT OF ALLAHABAD HAS CATEGORICALLY STATED THAT CLAUSE (E) OF SECTION 2(22) OF THE ACT AS IT EXISTED P ROVIDED THAT IF THE LOAN RECEIVED BY THE SHAREHOLDERS, IT IS ONLY THEN THAT THE LOAN CAN BE DEEMED TO BE DIVIDEND IN HIS HANDS. SINCE THE ASSESSEE - FIRM WAS NOT THE SHAREHOLDER IN THE COMPANY AND PARTNER OF THE FIRM WERE THE SHAREHOLDERS IN THE BOOKS OF AC COUNT OF THE COMPANY. THEREFORE, THE LOAN ADVANCED BY THE COMPANY TO THE ASSESSEE COULD NOT BE DEEMED TO BE DIVIDEND INASMUCH AS THE LOAN WAS NOT GIVEN TO THE SHAREHOLDER. THIS VIEW WAS ALSO TAKEN BY THE DIFFERENT HIGH COURTS IN NUMBER OF CASES. IN THE LIGHT OF THESE FACTS, EVEN ADDITION ON ACCOUNT OF DEEMED DIVIDEND IS NOT SUSTAINABLE IN THE EYES OF LAW . T HOUGH THE ASSESSEE HAS A GOOD CASE IN HIS FAVOUR, BUT HE DID NOT CHALLENGE THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT PENALTY UNDER SECTION 271(1) (C) OF THE ACT IS NOT LEVIABLE IN THE LIGHT OF THE FACT THAT ADDITION , FOR WHICH PENALTY WAS LEVIED , IS ALSO NOT SUSTAINABLE IN THE EYES OF LAW. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DEL ETE THE PENALTY. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/ - SD/ - [ T. S. KAPOOR ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH DECEMBER , 201 7 JJ: 0712 : - 4 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR