Mr. Manish Mimani, Kolkata V. J.C.I.T. Central Circle-V, Kolakta, Kolkata

ITA 2874/KOL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78243 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-12-2013
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Assessee Lawyers: S K TULSIYAN
• Keywords: Deemed dividend
• Section: 263

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.2874/KOL/2013 #$ %&/ ASSESSMENT YEAR: 2008-09 & ( !( ) (* ) ' / I.T(SS).A NO.59/KOL/2011 #$ %&/ ASSESSMENT YEAR: 2008-09 MR. MANISH MIMANI VS. DEPUTY COMMISSIONER OF IN COME-TAX, (PAN: ABTPM1173K)) C.C. V, KOLKATA (+, /APPELLANT ) (-.+,/ RESPONDENT ) DATE OF HEARING: 02.04.2014 DATE OF PRONOUNCEMENT: 02.04.2014 FOR THE ASSESSEE: SHRI S. K. TULSIYAN, ADVOCATE FOR THE REVENUE: SHRI RAVI JAIN, CIT, DR / ORDER PER SHRI MAHAVIR SINGH, JM : BOTH THESE APPEALS BY ASSESSEE ARE ARISING OUT OF S EPARATE ORDERS OF CIT(A), CENTRAL-I, KOLKATA IN APPEAL NOS. 429/CC-V/CIT(A)C-1/12-13 AND 379/CIT(A), C-I/CC-V/09-10 DATED 29.11.2013 AND 06.01.2011 RESPECTIVELY. ASSESSMENT S WERE FRAMED BY DCIT, C.C-V, KOLKATA U/S. 143(3)/153D/263/153B(B) AND U/S. 143(3)/153B( B)/153D OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2008-09 VIDE HIS SEPARATE ORDERS DATED 11.12.2012 AND 31.12.2009 RESPECTIVELY. 2. THE ONLY COMMON ISSUE IN THESE TWO APPEALS OF AS SESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN TREATING THE LOAN GIVEN AS DEEMED DIVIDEND IN TERM OF SECTION2(22)(E) OF THE ACT. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS AN INDIVIDUAL AND A SUBSTANTIAL SHAREHOLDER IN THE COMPANY GANESH WHEAT PRODUCTS PV T. LTD. AND IN THE IMMEDIATELY PRECEDING YEAR ALSO ASSESSEE WAS A SHAREHOLDER IN PANCHDEEP D ISTRIBUTOR (P) LTD. ALTHOUGH HE DID NOT HAVE SUBSTANTIAL INTEREST IN THAT COMPANY. THE ASSESSEE IN THE IMMEDIATE PRECEDING YEAR RECEIVED CERTAIN LOANS FROM PANCHDEEP DISTRIBUTOR (P) LTD. A ND AS PER THE CLAIM OF ASSESSEE THIS LOAN WAS 2 ITA NO. 2874/K/2013 & IT(SS)A NO. 59/K/2011 MR. MANISH MIMANI, AY 2008-09 RECEIVED IN THE ORDINARY COURSE OF BUSINESS I.E. GR ANTING LOANS, INTEREST PAYMENT ON LENDING OF LOANS AND DID ACTUALLY PAY INTEREST ON THESE LOANS. THE BROUGHT FORWARD CREDIT BALANCE OF THE ASSESSEE IN PANCHDEEP DISTRIBUTOR (P) LTD. AS ON TH E 1 ST DAY OF THE YEAR UNDER APPEAL WAS AT RS.49,07,330/-. PANCHDEEP DISTRIBUTOR (P) LTD. GOT AMALGAMATED WITH GANESH WHEAT PRODUCTS (P) LTD. DURING THE YEAR UNDER APPEAL AND CREDIT BA LANCE OF THE ASSESSEE GOT TRANSFERRED TO THE LATER COMPANY. IN CONSEQUENCE OF SEARCH ON THE PRE MISES OF CONNECTING GROUP CASES THE ASSESSEE WAS ORIGINALLY ASSESSED U/S. 1433)/153(B)/ 153D OF THE ACT VIDE ORDER DATED 31.12.2009 BY THE DCIT, CC-V, KOLKATA. DURING THIS ASSESSMENT , THE AO NOTED THAT THE ASSESSEE COMPANY RECEIVED A LOAN OF RS.31,56,155/- FROM GANESH WHEAT PVT. LTD., WHERE ASSESSEE WAS A REGISTERED SHAREHOLDER OF MORE THAN 10% OF VOTING P OWER. THE AO ALSO OBSERVED THAT THE SAID COMPANY HAS ACCUMULATED PROFITS OF RS.1,05,12,131/- AS ON 03.03.2008 AND THAT COMPANY BEING CLOSELY HELD COMPANY IN WHICH PUBLIC ARE SUBSTANTIA LLY INTERESTED AND THEIR LOAN OF RS.31,56,155/- IS CLEARLY HIT BY THE PROVISION OF S ECTION 2(22)(E) OF THE ACT AND, THEREFORE, THE AO TREATED THIS LOAN AS DEEMED DIVIDEND AND ADDED T O THE TOTAL INCOME OF THE ASSESSEE AND THIS WAS ALSO CONFIRMED BY CIT(A) VIDE APPEAL NO. 379/CI T(A),C-1/CC-V/09-10 DATED 06.01.2011. 4. APART FROM ABOVE, ASSESSMENT WAS FRAMED U/S. 143 (3)/153B(B)/153D DATED 31.12.2009, WHICH WAS REVISED BY CIT, C-1, KOLKATA VIDE ORDER P ASSED U/S. 263 OF THE ACT DATED 30.03.2012 WHEREIN THE CIT OBSERVED THAT ASSESSEE HAS RECEIVED A LOAN OF RS.49,07,330/- FROM PANCHDEEP DISTRIBUTORS (P) LTD.. IT WAS ALSO OBSERVED THAT P ANCHDEEP DISTRIBUTORS (P) LTD. AMALGAMATED WITH GANESH WHEAT PRODUCT PVT. LTD. AS ON 01.04.200 7 AND THUS, THE OPENING BALANCE OF THE LOAN IN THE AMALGAMATED COMPANY GANESH WHEAT PRODUC T PVT. LTD. AND ASSESSED AT RS.48,75,547/-. THE AO NOTED THE DETAILS AS ON 31. 03.2008 AS UNDER: LOANS AND ADVANCES FOR AY 2008-09 NAME OF COMPANY OPENING BAL. 01.04.2007 LOAN TAKEN DURING THE YR. LOAN GIVEN FOR THE YR. REPAYMENT FOR THE YEAR CLOSING BAL. 31.03.2008 GANESH WHEAT PRODUCTS (P) LTD. PANCHDEEP DISTRIBUTOR (P) LTD. GANESH CEREALS (P) LTD. 2,00,000/- 49,07,330/- (-)2,31,783/- 15,45,212/- - - - - 7,00,000/- 25,74,604/- - - (-) 8,29,391/- 49,07,330/- (-)9,31,783/- 48,75,546/- 15,45,212/- 7,00,000/- 25,74,604/- 31, 46,155/- THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE TREATED THE SUM OF RS.30,61,603/- AS DEEMED DIVIDEND AND MADE ADDITION TO THE RETURNED I NCOME BY OBSERVING AS UNDER: IN VIEW OF THE ABOVE, THE DEEMED DIVIDEND U/S. 2(2 2)(E) IN RESPECT OF THE ASSESSEE IS TAKEN AT RS.62,17,758/- (48,75,546 + 15,42,212 2, 00,000). CONSIDERING THE FACT THAT OUT OF THE SAID AMOUNT OF RS.62,17,758/-, AN AMOUNT OF RS.31,56,155/- HAS ALREADY BEEN 3 ITA NO. 2874/K/2013 & IT(SS)A NO. 59/K/2011 MR. MANISH MIMANI, AY 2008-09 CONSIDERED IN THE ORDER DT. 31.12.2009, THE BALANCE AMOUNT OF RS.30,61,603/- IS TO BE ADDED BACK TO THE ASSESSEES TOTAL INCOME DETERMINE D IN THE ORDER DT. 31.12.2009. PENALTY PROCEEDINGS U/S. 271(1)(C) SEPARATELY INITIATED. THE ASSESSEES TOTAL INCOME IS COMPUTED AS UNDER: INCOME AS PER ORDER U/S. 143(3)/153B(B)/153D DT. 3 1.12.09 RS.50,44,180/- ADD: DEEMED DIVIDEND U/S. 2(22)(E) AS DISCUSSED AB OVE - RS.30,61,603/- RS.81,05,783/- AGGRIEVED AGAINST BOTH THE ASSESSMENTS, ASSESSEE HA S FILED SEPARATE APPEALS BEFORE CIT(A) WHO CONFIRMED THE ADDITIONS MADE BY AO. AGGRIEVED, ASS ESSEE PREFERRED APPEALS BEFORE TRIBUNAL. 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THE LOAN, WHICH THE ASSESSEE ACCEPTED FROM PANCHDEEP DISTRIBUTOR (P) LTD. IN THE EARLIER ASSESSMENT YEAR I.E. AY 2007-08 WAS ENDING ON 31.03.2007, CARRIED AN INTEREST FACTO R OF 12% AND SINCE THE LOAN OF RS.49 LAKHS WAS RECEIVED ON VARIOUS DATES, A TOTAL INTEREST LIA BILITY OF RS.7,331.51 ACCRUED IN THE EARLIER YEAR. LD. COUNSEL FOR THE ASSESSEE STATED THAT THI S LOAN ACCEPTED BY THE ASSESSEE FROM PANCHDEEP DISTRIBUTORS PVT. LTD. WAS INTEREST BEARI NG AND IT CANNOT BE CONSIDERED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. LD. COUNSEL FOR THE ASSESSEE STATED THAT FOR THE RELEVANT ASSESSMENT YEAR IT WAS MAINTAINING CURRENT ACCOUNT WITH GANESH WHEAT PRODUCTS PVT. LTD. WHERE PANCHDEEP DISTRIBUTOR (P) LTD. WAS AMALGAMAT ED W.E.F. 01.04.2007 BY VIRTUE OF WHICH THERE WERE EXCHANGE OF FUNDS BETWEEN THE ASSESSEE AND THE SAID COMPANY I.E. GANESH WHEAT PRODUCTS PVT. LTD., WHERE THE ASSESSEE HAD SUBSTANT IAL INTEREST. THE ASSESSEE BEFORE US PRODUCED COMPLETE COPIES OF LEDGER ACCOUNT AND SHOW N US THAT THERE ARE SHIFTING BALANCES, SOMETIMES IN FAVOUR OF ASSESSEE AND AT OTHER TIMES IN FAVOUR OF GANESH WHEAT PRODUCTS PVT. LTD. HE EXPLAINED THAT THIS PATTERN OF PAYMENTS UL TIMATELY ESTABLISHES THAT THE ACCOUNT BETWEEN THE ASSESSEE AND GANESH WHEAT PRODUCTS PVT. LTD. WA S A CURRENT ACCOUNT AND THESE TRANSACTIONS RESULTED IN MUTUAL BENEFIT TO THE ASSESSEE. LD. CO UNSEL FOR THE ASSESSEE BEFORE US REFERRED TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. PARLE PLASTICS LTD. (2011) 332 ITR 63 (BOM). LD. COUNSEL FOR THE ASSESSEE REFERRE D TO THE RATIO OF THE JUDGMENT WHEREIN ANY PAYMENT IS INTERPRETED BY THE HONBLE HIGH COURT AS UNDER: THE OPENING WORDS ANY PAYMENT OCCURRING IN CLAUS E (E) OF SECTION 2(22) OF THE ACT CONTEMPLATES ACTUAL PAYMENT MADE BY THE COMPANY TO THE ASSESSEE FOR BEING TREATED AS A DIVIDEND IN COMPUTING INCOME OF THE ASSESSEE. MORE OVER MAKING OF A PROVISION FOR AN INTEREST WHICH THE ASSESSEE WOULD ULTIMATELY BE REQ UIRED TO PAY TO THE LENDER ON THE MONEY LENT CANNOT BE REGARDED AS A PAYMENT MADE BY THE CO MPANY TO THE ASSESSEE. AS SUCH THE AMOUNT OF RS.32,13,367 WHICH REPRESENTS ONLY THE PR OVISION MADE FOR INTEREST WHICH THE ASSESSEE WAS LIABLE TO PAY TO AMPL BY WAY OF AN INT EREST ON THE OUTSTANDING AMOUNT COULD NOT BE REGARDED AS THE PAYMENT MADE BY AMPL WITHIN THE MEANING OF CLAUSE (II) OF SECTION 2(22)(E) OF THE ACT. ONLY THE AMOUNT OF RS.11,68,1 35 WHICH WAS ACTUALLY RECEIVED BY THE ASSESSEE AS AND BY WAY OF LOAN OR ADVANCE FROM AMPL WOULD FALL WITHIN INCLUSIVE CLAUSE (II) OF THE DEFINITION OF DIVIDEND APPEARING IN S ECTION 2(22)(E) OF THE ACT. 4 ITA NO. 2874/K/2013 & IT(SS)A NO. 59/K/2011 MR. MANISH MIMANI, AY 2008-09 WE FIND SUBSTANCE IN THE ARGUMENTS OF THE ASSESSEE AND SEEMS THAT PRIMA FACIE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT O F HONBLE BOMBAY HIGH COURT IN THE CASE OF PARLE PLASTICS LTD. (SUPRA), BUT FACT IS THAT IN BOTH APPEALS, THE CIT(A) HAS NOT PASSED A SPEAKING ORDER. ONCE THIS IS THE POSITION, WE MUST SET ASIDE THE ISSUE TO THE FILE OF THE CIT(A) FOR ADJUDICATION IN TERM OF THE ABOVE. ACCORDINGLY , BOTH THE APPEALS OF ASSESSEE ARE SET ASIDE TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION. APP EALS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEALS OF ASSESSEE ARE ALLOWED F OR STATISTICAL PURPOSES. 7. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2ND APRIL, 2014 /0 #1( 2 JD.(SR.P.S.) 3 -4 5 4%6- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT SHRI MANISH MIMANI, FLAT NO. 11, 4 TH FLOOR, 32, ROWLAND ROW, KOLKATA -700020 2 -.+, / RESPONDENT DCIT, C.C-V, KOLKATA. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 4<= -# / DR, KOLKATA BENCHES, KOLKATA .4 -/ TRUE COPY, #>/ BY ORDER, ( /ASSTT. REGISTRAR .