L.T. Nanwani, CHENNAI V. DCIT, CHENNAI

ITA 3066/CHNY/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1449 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 01-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G SITARAMAN
• Keywords: Opportunity of being heard; Deemed dividend
• Section: 2(22)(e)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI , ! . , ! & BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.3066/CHNY/2016 /ASSESSMENT YEAR: 2012-13 SHRI L.T.NANWANI, 6, A-C, 6 TH FLOOR, BLOCK-VII, RANI MEYYAMMAL TOWERS, R.A.PURAM, CHENNAI-600 028. [PAN: AAEPN 6392 A] VS. THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRLCE-2(2), CHENNAI-34. ( ( /APPELLANT) ( )*( /RESPONDENT) ( + / APPELLANT BY : MR.G.SITARAMAN, CA )* ( + /RESPONDENT BY : MR.AR.V.SREENIVASAN, JCIT + /DATE OF HEARING : 10.06.2019 + /DATE OF PRONOUNCEMENT : 10.06.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI, IN ITA NO.248/CIT(A)- 6/2015-16 DATED 30.08.2016 FOR THE AY 2012-13. 2. SHRI AR.V.SREENIVASAN, JCIT, REPRESENTED ON BEHA LF OF THE REVENUE AND SHRI G.SITARAMAN, CA, REPRESENTED ON BEHALF OF THE ASSESSEE. ITA NO.3066/CHNY/2016 :- 2 -: 3. IN THE ASSESSEES, APPEAL, THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS: 1. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE, IN SUSTAINING THE ADDITION OF RS.78,08 ,456 U/S.2(22)(E). 2. THE CIT(A) ERRED IN IGNORING THE APPELLANT'S SUBMIS SION THAT THE WITHDRAWALS OF RS.78,08,456 FROM THE COMPANY VIZ. M/S.JUBILLEE GRA NITES INDIA PRIVATE LIMITED - IN WHICH HE HAS SUBSTANTIAL INTEREST - WE RE COMMERCIAL TRANSACTIONS, UNDERTAKEN ON BEHALF OF THE COMPANY, AS UNDER : SL.NO. PARTICULARS AMOUNT RS. 1 INVESTMENT IN THE SHARES OF M/S. CHENNAI SPORTS ORGANIZERS PVT. LTD. 40,00,000.00 2 AMOUNT FOR PURCHASE OF PROPERTY 21,82,643.00 3 AMOUNT FOR PURCHASE OF ROCKY LAND (RAW MATERIAL) 16,25,813.00 TOTAL 78,08,456.00 3. HE OVERLOOKED THE FACT THAT THERE WAS NO PAYMENT FO R THE BENEFIT OF THE APPELLANT TO ATTRACT SEC.2(22)(E). 4. THE APPELLANT, THEREFORE, PRAYS THAT THE ADDITION O F RS.78,08,456 U/S.2(22)(E) MAY KINDLY BE DELETED. 4. IT WAS SUBMITTED BY THE LD.AR THAT THE INVESTMEN T IN THE SHARES OF M/S.CHENNAI SPORTS ORGANIZERS PVT. LTD., TO THE EXT ENT OF RS.40.00 LAKHS WAS MADE ON ACCOUNT OF M/S.JUBILLEE GRANITES INDIA PVT. LTD. IT WAS A SUBMISSION THAT NECESSARY RESOLUTION HAS ALSO BEEN PASSED BY M/S.JUBILLEE GRANITES INDIA PVT. LTD. IT WAS A FURTHER SUBMISSI ON THAT IN RESPECT OF THE AMOUNT FOR PURCHASE OF PROPERTY, THE AMOUNT HAD BEE N PAID TO M/S.DLF SOUTHERN HOMES PVT. LTD., DURING THE AYS 2008-09 & 2009-10 AND CONSEQUENTLY, THE SAME COULD NOT BE CONSIDERED FOR DEEMED DIVIDEND FOR THE RELEVANT ASSESSMENT YEAR. 5. IN REPLY, THE LD.DR SUBMITTED THAT NONE OF THESE DETAILS WERE PRODUCED BEFORE THE AO AND THE LD.CIT(A) AND CONSEQ UENTLY, THE SAME ITA NO.3066/CHNY/2016 :- 3 -: CANNOT BE CONSIDERED. IT WAS A SUBMISSION THAT IN RESPECT OF THE AMOUNT OF RS.40.00 LAKHS REPRESENTING THE SHARE INVESTMENT IN THE SHARES, NOTHING HAS BEEN PRODUCED TO SHOW THAT THE INVESTME NT WAS ON BEHALF OF THE M/S.JUBILLEE GRANITES INDIA PVT. LTD., AND THE BOOKS OF M/S.JUBILLEE GRANITES INDIA PVT. LTD., DOES NOT SHOW ANY SUCH IN VESTMENT. THE LD.DR DREW OUR ATTENTION TO PAGE NO.5 OF THE ORDER OF THE LD.CIT(A), WHEREIN, IT HAS BEEN HELD AS FOLLOWS: IT IS CLEAR ON CAREFUL READING OF THE PROVISIONS TH AT THE CONCEPT OF DEEMED DIVIDEND TREATS SPECIFIED SET OF PAYMENTS MADE BY CLOSELY HE LD COMPANIES BY WAY OF LOAN OR ADVANCES TO SHAREHOLDERS HAVING SUBSTANTIAL INTE REST IN THE COMPANY. ANY PAYMENT MADE BY WAY OF LOAN OR ADVANCE, THE RECIPIE NT OF THE AMOUNT IS LIABLE TO BE TAXED ON THE RECEIVED AMOUNT AS A DIVIDEND TO TH E EXTENT COMPANY HAS ACCUMULATED PROFITS, UNDER THE DEEMING PROVISIONS O F SECTION 2(22)(E) OF THE ACT. IN THE CASE OF THE APPELLANT, A SUM OF RS. 40,00,00 0/- HAVE BEEN STATED TO HAVE BEEN INVESTED BY HIM 'ON BEHALF OF THE COMPANY' IN THE SHARES OF M/S. CHENNAI SPORT ORGANIZERS PVT LTD. THIS INVESTMENT DOES NOT APPEAR IN THE BALANCE SHEET OF THE COMPANY M/S. JUBILEE GRANITES INDIA PVT LTD, AN D THE AMOUNT IS SHOWN AS LOAN/ADVANCE TO THE APPELLANT IN ITS BOOKS. DURING THE COURSE OF APPEAL PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE ADMITTE D THAT THE SHARE OF M/S.CHENNAI SPORTS ORGANIZERS PVT LTD, HAVE BEEN IS SUED IN THE NAME OF THE APPELLANT, ' AND NOT IN THE NAME OF M/S. JUBILEE GR ANITES INDIA PVT LTD. FURTHER, WITH REGARD TO ADVANCES MADE FOR PURCHASE OF PROPER TY/ROCKY LAND, ETC., IT WAS ALSO ADMITTED THAT THE AGREEMENTS HAVE BEEN EXECUTE D BY THE APPELLANT IN HIS INDIVIDUAL CAPACITY AND THE NAME OF M/S.JUBILEE GRA NITES INDIA PVT LTD DOES NOT FIGURE THEREIN. THE FACT THAT THE ACCOUNT HAS BEEN SQUARED OFF BY THE APPELLANT IN SUBSEQUENT ASSESSMENT YEAR IS IMMATERIAL FOR THE PU RPOSES OF APPLICATION OF SECTION 2(22)(E) OF THE ACT. THE NATURE OF TRANSACT IONS ENTERED INTO BY THE APPELLANT DOES NOT SUBSTANTIATE THE CONTENTION OF T HE APPELLANT THAT THESE HAD BEEN UNDERTAKEN 'ON BEHALF OF THE COMPANY AND FOR T HE BENEFIT OF THE COMPANY'. IN MY CONSIDERED VIEW, THE FACTS AND CIRCUMSTANCES OF THE CASE CLEARLY ATTRACTS THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 7. COMING TO THE ISSUE OF INVESTMENT IN SHARES TO T HE EXTENT OF RS.40.00 LAKHS, A PERUSAL OF THE ORDER OF THE LD.CI T(A) CLEARLY SHOWS THAT THE INVESTMENT IN THE SHARES OF M/S.CHENNAI SPORTS ORGANIZERS PVT. LTD., IS NOT APPEARING IN THE BALANCE SHEET OF M/S.JUBILL EE GRANITES INDIA PVT. ITA NO.3066/CHNY/2016 :- 4 -: LTD., AND THE AMOUNT HAS BEEN SHOWN AS LOANS/ADVANC ES TO THE ASSESSEE, HEREIN, IN THE BOOKS OF M/S.JUBILLEE GRANITES INDIA PVT. LTD. THIS FINDING OF THE LD.CIT(A) HAS NOT BEEN DISLODGED BY THE ASSESSE E. FURTHER, IT MUST BE SPECIFICALLY MENTIONED HERE THAT NO DETAILS HAVE BE EN PLACED BEFORE THIS APPELLATE FORUM. THEREFORE, THE FACTS ARE AS RECOR DED BY THE LD.CIT(A) ARE CONSIDERED AS ACCEPTED BY THE ASSESSEE. 8. COMING TO THE ISSUE OF PURCHASE OF PROPERTY AND THE ADVANCE OF THE PAYMENT TO THE CREDITORS, IT IS NOTICED THAT NO EVI DENCES HAVE BEEN PRODUCED BEFORE THE AO OR BEFORE THE LD.CIT(A). ALL THE ARGUMENTS BEFORE THE AO AND THE LD.CIT(A) IS IN RESPECT OF THE TRANS ACTION OF RS.40.00 LAKHS REPRESENTING THE INVESTMENT IN SHARES OF M/S.CHENNA I SPORTS ORGANIZERS PVT. LTD. THIS BEING SO, IN THE INTEREST OF NATURA L JUSTICE, THE ISSUE IN RESPECT OF THE CONSIDERATION AS DEEMED DIVIDEND REP RESENTING THE PURCHASE OF THE PROPERTY AND THE ADVANCES FOR PAYME NT TO CREDITORS ARE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS C ASE. IF THE ASSESSEE IS UNABLE TO PRODUCE THE EVIDENCES TO SUBSTANTIATE ITS CLAIM, THE AO IS AT LIBERTY TO TREAT THE SAME AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. COMING TO THE ISSUE OF RS.40.00 LAKHS REPRESENTING THE INVESTMENT IN M/S.CHENNAI SPORTS ORGANIZERS PVT. LTD., IT IS NOTI CED THAT THE ASSESSEE IS A DIRECTOR THEREIN AND THE SHARES ARE IN THE NAME O F THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE INVESTMENT BELONGS TO M/S.JUBILLEE GRANITES INDIA PVT. LTD. THE RESOLUTION HAS ALSO N OT BEEN PRODUCED BEFORE ITA NO.3066/CHNY/2016 :- 5 -: ANY OF THE LOWER AUTHORITIES OR BEFORE US. IT HAS ALSO NOT ANSWERED AS TO WHETHER THE SAID RESOLUTION WAS FILED BEFORE ANY CO NCERNED AUTHORITIES AS REQUIRED UNDER LAW. THIS BEING SO, THE ADDITION MA DE BY THE AO IN RESPECT OF THE AMOUNT OF RS.40.00 LAKHS AS DEEMED DIVIDEND STANDS CONFIRMED. THE ADDITION IN RESPECT OF RS.21,82,643/- IN RESPEC T OF THE PURCHASE OF PROPERTY AND RS.16,25,813/- REPRESENTING THE ADVANC E FOR PAYMENT TO CREDITORS WHICH HAS BEEN TREATED AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT, IS RESTORED TO THE FILE OF THE AO FOR RE-ADJUD ICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. 09. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH DAY OF JUNE, 2019, IN CHENNAI. SD/- SD/- ( . ) ( S. JAYARAMAN ) ! /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER /CHENNAI, 2 /DATED: 10 TH JUNE, 2019. TLN + )34 54 /COPY TO: 1. ( /APPELLANT 4. 6 /CIT 2. )*( /RESPONDENT 5. 4 ) /DR 3. 6 ( ) /CIT(A) 6. /GF