I.T.O.8(3)(4), MUMBAI V. UNIX CONNECTION PVT. LTD., MUMBAI

ITA 2881/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78782 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-09-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 27-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Keywords: Deemed dividend
• Section: 147; 148; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 2881/MUM/2012 ( / ASSESSMENT YEAR: 2005-06) INCOME-TAX OFFICER-8(3)-4 ROOM NO. 202, 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020 VS. UNIX CONNECTION P. LTD. B-37, GIRIRAJ INDUSTRIAL ESTATE, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI-400 093 ! ' ./PAN/GIR NO. AAACU 3557 F ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#&' / APPELLANT BY : SHRI PITAMBAR DAS $%!#&' / RESPONDENT BY : NONE ( )*&+, / DATE OF HEARING : 08.04.2014 -./&+, / DATE OF PRONOUNCEMENT : 30.04.2014 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-18, MUMBAI (CIT(A) FOR SH ORT) DATED 10.02.2012, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .144 R/W S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEA R (A.Y.) 2005-06 VIDE ORDER DATED 18.11.2010. 2. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE- RESPONDENT WHEN THE APPEAL WAS CALLED OUT FOR HEARING, NOR ANY ADJOURNMENT APPLICA TION STANDS RECEIVED. IN FACT, IT WAS OBSERVED BY THE BENCH THAT NO LEGAL AUTHORITY OR PO WER OF ATTORNEY IN FAVOUR OF ANY 2 ITA NO. 2881/MUM/2012 (A.Y. 2005-06) ITO VS. UNIX CONNECTION P. LTD. COUNSEL HAS BEEN FILED, EVEN AS THE APPEAL WAS FILE D ON 27.04.2012, I.E., NEARLY TWO YEARS AGO. UNDER THE CIRCUMSTANCES, IT WAS CONSIDERED ONL Y PROPER TO PROCEED TO DECIDE THIS APPEAL AFTER HEARING THE PARTY BEFORE US. 3. THE PRINCIPAL ISSUE ARISING IN THIS APPEAL IS TH E MAINTAINABILITY OR OTHERWISE IN LAW THE ANNULLING OF THE REASSESSMENT BY THE LD. CIT(A) VIDE THE IMPUGNED ORDER BY UPHOLDING THE ASSESSEES CHALLENGE TO THE REOPENING OF THE ASSESSMENT U/S.148. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE ES RETURN OF INCOME FOR THE YEAR, FILED ON 30.12.2005 AT AN INCOME OF RS.1.23 LACS, W AS PROCESSED U/S. 143(1) OF THE ACT ON 28.02.2006. SUBSEQUENTLY, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IN THE CASE OF M/S. UNICORN CONNECTORS (P.) LTD. FOR A.Y. 2006-07, IT WAS FOUND THAT BOTH, I.E., THE SAID COMPANY AS WELL AS THE ASSESSEE, HAD A COMMON SUBST ANTIAL SHAREHOLDER IN SHRI UDAY B. DESAI; HIS SHAREHOLDING IN THE TWO COMPANIES BEING AS UNDER: 1. UNICORN CONNECTORS P. LTD. 40% 2. UNIX CONNECTIONS P. LTD. (ASSESSEE) 20% THE BOOKS OF THE ASSESSEE-COMPANY REFLECTED A CREDI T OF RS.13,735/- AS AT THE RELEVANT YEAR-END (I.E., 31.03.2005) FROM M/S. UNICORN CONNE CTORS P. LTD., WHOSE ACCUMULATED PROFIT BY THAT DATE WAS RS.9,60,128/-. ACCORDINGLY, THE LOAN RECEIVED FROM THE SAID COMPANY DURING THE YEAR WAS LIABLE TO BE CONSIDERED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. NOTICE U/S.148 WAS, THEREFORE, ISSUED AND THE ASSESSMENT FRAMED BY SUBJECTING THE SAID AMOUNT TO TAX AS DEEMED DIVIDEND U/S. 2(22 )(E) R/W S. 56 OF THE ACT. THE ASSESSEE CONTESTED THE ASSESSMENT IN APPEAL, AMONG OTHERS, O N THE GROUND OF NON-MAINTAINABILITY OF THE REOPENING; ADDITION/S TO THE RETURNED INCOME HAVING BEEN EFFECTED ON REASSESSMENT U/S.68 OF THE ACT AS WELL. THE LD. CIT(A) OBSERVED THAT THE DECISION BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ASST. CIT VS. BHAUMIK COLOUR P. LTD. [2009] 118 ITD 1 (MUM) (SB) WAS DELIVERED ON 19.11.2008 , WHILE THE NOTICE U/S.148 WAS ISSUED IN THE INSTANT CASE ON 18.03.2010 , I.E., SUBSEQUENT THERETO. THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND AS MADE IN THE INSTANT CASE WAS NOT TENABL E IN VIEW OF THE POSITION OF LAW AS EXPLAINED BY THE TRIBUNAL IN THE SAID CASE. ACCORDI NGLY, THE REOPENING WAS HELD BY HIM AS 3 ITA NO. 2881/MUM/2012 (A.Y. 2005-06) ITO VS. UNIX CONNECTION P. LTD. BAD IN LAW, AND THE ASSESSMENT, CONSEQUENTLY, AS BA D IN LAW. AGGRIEVED, THE REVENUE IS IN APPEAL. 4. WE HAVE HEARD THE PARTY BEFORE US, AND PERUSED T HE MATERIAL ON RECORD AS WELL AS THE RELEVANT CASE LAW. IN OUR VIEW, THE ASSESSEE DE SERVES TO SUCCEED, THOUGH FOR A REASON DIFFERENT FROM THAT WHICH PREVAILED WITH THE LD. CI T(A). THE DECISION IN THE CASE OF BHAUMIK COLOUR P. LTD. (SUPRA) BY THE TRIBUNAL RAISING A LEGAL ISSUE, STOO D APPEALED AGAINST BY THE REVENUE BEFORE THE HONBLE HIGH COUR T, WHICH STOOD ADMITTED BY IT SINCE. AS SUCH, IT CANNOT BE SAID THAT THE ASSESSING OFFIC ER (A.O.) COULD NOT ENTERTAIN OR HOLD A HONEST BELIEF THAT THE ASSESSEE WAS LIABLE TO BE AS SESSED IN RESPECT OF DEEMED DIVIDEND U/S.2(22)(E) R/W S. 56 OF THE ACT AND, THEREFORE, T HAT INCOME TO THAT EXTENT HAD ESCAPED ASSESSMENT. FOR ALL WE KNOW, THE HONBLE COURT MAY WELL HAVE UPHELD THE REVENUES STAND. SO HOWEVER, THE HONBLE COURT HAS VIDE ITS D ECISION DATED 22.03.2010 (SO THAT IT WOULD HAVE BEEN ADMITTED PRIOR THERETO, OR AS ON 18 .03.2010) IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT. LTD. [2010] 324 ITR 263 (BOM) CLARIFIED THAT THE DEEMED DIVIDEND COULD ONLY BE ASSESSED IN THE HANDS OF THE SHARE-HOLDER, I.E., FOR WHOSE BENEFIT THE LOAN OR ADVANCE IS GIVEN OR CONSIDERED AS GIVEN , AS SHRI UDAY B. DESAI IN THE INSTANT CASE. THAT IS, A SUM ADVANCED COULD BE DEEMED AS DI VIDEND U/S.2(22)(E) ONLY IN CASE OF A PERSON WHO IS A SHAREHOLDER OF THE PAYER COMPANY, B OTH REGISTERED AS WELL AS BENEFICIAL, CONFIRMING THE VIEW AS TAKEN BY THE TRIBUNAL IN THE CASE OF BHAUMIK COLOUR P. LTD. (SUPRA). THE SAID AMOUNT, THEREFORE, CANNOT BE CONS IDERED AS THE INCOME OF THE DEBTOR OR THE RECIPIENT CONCERN OR COMPANY, AS THE ASSESSEE I N THE INSTANT CASE AND, ACCORDINGLY, THERE COULD BE NO ESCAPEMENT FROM ASSESSMENT QUA THE SAME. IT IS WELL SETTLED THAT A DECISION BY THE HONBLE HIGH COURT OR THE APEX COURT CLARIFIES THE LAW AS IT ALWAYS STOOD, I.E., OPERATES RETROSPE CTIVELY. THE DECISION BY A HIGH COURT, AS EXPLAINED BY THE APEX COURT IN ACIT VS. SAURASHTRA KUTCH STOCK EXCHANGE LTD. [2008] 305 ITR 227 (SC), WOULD, THEREFORE, RENDER A DECISI ON INCONSISTENT THEREWITH AS LIABLE FOR RECTIFICATION, EVEN WHERE RENDERED SUBSEQUENTLY. AS SUCH, IT CAN BE ON THE BASIS OF THE SAID DECISION, SETTLING THE LAW IN THE MATTER, AT L EAST IN-SO-FAR AS THE PROVINCE OF 4 ITA NO. 2881/MUM/2012 (A.Y. 2005-06) ITO VS. UNIX CONNECTION P. LTD. MAHARASHTRA IS CONCERNED, SAID THAT THE VIEW ENTERT AINED BY THE A.O. IS WITHOUT ANY BASIS IN LAW. ACCORDINGLY, THE REOPENING OF THE ASSESSMEN T ON THAT GROUND PER SECTION 148 IS BAD IN LAW, SO THAT THERE WAS NO VALID ASSUMPTION O F JURISDICTION IN THE FIRST PLACE. WE, THEREFORE, ENDORSE THE IMPUGNED ORDER. WE DECIDE AC CORDINGLY. 5. THE REVENUES ONLY OTHER GRIEVANCE IS IN RESPECT OF THE NON-DISPOSAL OF THE ASSESSEES APPEAL BY THE FIRST APPELLATE AUTHORITY ON MERITS, I.E., QUA THE ADDITION/S EFFECTED IN ASSESSMENT. THIS HAS BEEN FOR THE REASO N THAT HE HAS HELD THE IMPUGNED ASSESSMENT AS BAD IN LAW, RENDERING THE SAID CONSID ERATION AS INFRUCTUOUS. HIS SAID DECISION HAVING BEEN UPHELD BY US, WE ARE EQUALLY O F THE VIEW THAT THERE IS, THEREFORE, NO INFIRMITY IN HIS ORDER IN THIS REGARD. WE DECIDE AC CORDINGLY. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . 1/+2)& 1&+3 ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 30, 201 4 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER ( 4* MUMBAI; 5 DATED : 30.04.2014 )6 ROSHANI , SR. PS !' # $%&' (!'% COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 7+ 8 9 / THE CIT(A) 4. ( 7+ / CIT - CONCERNED 5. :);<$6+6=> ,=>/ ( 4* / DR, ITAT, MUMBAI 6.