Random Constructors Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 3150/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7374 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAMEER SHARMA
• Keywords: Difference of opinion; Deemed dividend; Assessment record; Change of opinion
• Section: 148

Judgement Text

ITA NO. 3150 / DEL/ 2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI J.S. REDDY, ACCOUNTANT MEMBER I.T.A. N O. 3150 /DEL/2013 A.Y . : 200 8 - 0 9 RANDOM CONSTRUCTORS PRIVATE LIMITED, C/O KAPIL GOEL, ADVOCATE, A - 1/25, SECTOR - 15, ROHINI, DELHI 110 085 (PAN:AACCR2294J) VS. INCOME TAX OFFICER, WARD II(3), GURGAON (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. KAPIL GOEL, ADV. DEPARTMENT BY : SH. SHAMEER SHARMA, SR. DR DATE OF HEARING : 22 - 10 - 2014 DATE OF ORDER : 29 - 10 - 2014 ORDER PER H.S. SIDHU : J M ASSESSEE HAS FILED THIS A PPEAL AGAINST THE IMPUGNED ORDER DATED 28 . 3 .2013 PASSED BY THE LD. CIT(A) - 2 , FARIDABAD RELEVANT TO ASSESSMENT YEAR 200 8 - 0 9 . 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED : - INVALID REOPENING U/S. 148: PATENT CHANGE OF OPINION AND REVIEW IN GARB OF REOPENING ON SAME SET OF FACTS. ITA NO. 3150 / DEL/ 2013 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN NOT QUASHING THE PATENTLY BAD REOPENING AGAINST THE PLAIN LETTER OF THE LAW SUFFERING FROM VICE OF CHANGE OF OPINION AND REVIEW IMPERMISSIBLE U/S. 148 OF THE ACT AS HEL D BY SC IN KELIVANATORS S CASE 320 ITR 561. INCORRECT ENCHANCEMENT AND CONFIRMATION FOR ADDITION FOR DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT FOR RS. 150,000/ - FURTHER ENHANCED AT RS. 13,62,780/ - (ENHANCEMENT OF RS. 12,12,780/ - ) 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT - A ERRED IN (I) UPHOLDING THE ADDITION MADE BY THE AO U/S. 2(22) ( E) OF THE ACT FOR RS. 150,000/ - AND (II) FURTHER ENHANCING THE SAME BY RS. 12,12,780/ - SIDELINING THE APPLICABLE PRECEDENTS AND AVAILABLE E VIDENCES TO SUIT HIS PREMEDITATED CONCLUSION. 3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN TREATING THE AMOUNT OF RS. 13,62,780/ - AS DEEMED DIVIDEND U/S. 2(22)(E) NOT FOLLOWING AVAILABLE BINDING JURISDICTIONAL P &H HIGH COURT DECISIONS IN CASES OF M/S OCTAVE APPARELS AND SHARMAN WOOLEN MILLS LTD. RESPECTIVELY IN ITA NO. 132 OF 2012 AND 132 OF 2012, STATING ONLY SHAREHOLDER IS TAXABLE FOR DEEMED DIVIDEND. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD. CIT(A) ERRED IN TREATING THE AMOUNT OF RS. ITA NO. 3150 / DEL/ 2013 3 13,62,780/ - AS DEEMED DIVIDEND U/S. 2(22)(E) ON GROSS NON APPRECIATION OF PHRASE LOAN / ADVANCE AS INTERPRETED IN NEXT MENTIONED DECISIONS AND WRONGLY HOLDING THAT FOR AN AMOUNT TO BE DEEMED DIVI DEND, IT IS NOT NECESSARY THAT PAYMENT SHOULD BE LOAN OR ADVANCE AND THAT IT SHOULD NOT BE ADVANCED FOR BUSINESS PURPOSE. (DELHI HIGH COURT IN THE CASE OF CIT VS. RAJ KUMAR, 318 ITR 462 (DELHI); CIT VS. AMBASSADOR TRAVELS P LTD. 318 ITR 376 (DELHI), THE HON BLE DELHI HIGH COURT; ARVIND KUMAR JAIN ITA NO. 589 OF 2011) THAT THE APPELLANT CRAVES LEAVE TO ADD, TO, AMEND, MODIFY RESCIND, SUPPLEMENT OR ALTER ANY OF THE GROUNDS STATED HEREIN ABOVE, EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. B RIEFLY STATED FACTS ARE THAT THE RETURNED INCOME OF RS. 24,63,770/ - WAS ASSESSED AT RS. 26,13,258/ - . SUBSEQUENTLY, IT CAME TO THE NOTICE OF THE DEPARTMENT THAT THE ASSESSEE COMPANY HAD TAKEN A LOAN OF RS. 13,62,780/ - FROM M/S KONARK RESORT MANAGEMENT PVT LTD. DURING THE YEAR UNDER CONSIDERATION. SINCE THE AO HAD REASONS TO BELIEVE THAT THE LOAN TAKEN FROM M/S KONARK RESORT MANAGEMENT P LTD. HAD TO BE TAXED AS DEEMED DIVIDEND IN VIEW OF MR. RANJAN AGGARWAL HAVING MORE THAN 10% VOTING POWER IN BOTH THE COMP ANIES, A NOTICE U/S. 148 WAS ISSUED TO HIM. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE ASSESSING OFFICER VIDE HIS ORDER DATED 10.12.2010 PASSED U/S. 143(3)/147/148 OF THE I.T. ACT FINALLY ASSESSED THE INCOME AT RS. 27,63,258/ - AFTER ADDING AN AMOUNT OF RS. 1,50,000/ - ON ACCOUNT OF DEEMED DIVIDEND REPRESENTING LOAN ADVANCED BY M/S KONARK RESORT MANAGEMENT PVT LTD. TO THE ASSESSEE COMPANY. ITA NO. 3150 / DEL/ 2013 4 4. AGAINST THE ABOVE ORDER DATED 10.12.2010, THE ASSESSEE APPEALED BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE IMPUGNED ORDER DATED 28.3.2013 HAS DISMISSED THE APPEAL OF THE ASSESSEE AND ASSESSED INCOME WAS ENHANCED. 5. AGAINST THE AFORESAID ORDER DATED 28.3.2013 PASSED BY THE LD. FIRST APPELLATE AUTHORITY THE ASSESSEE IS IN APPEAL BEFORE US. 6. LD. COUNS EL OF THE ASSESSEE FILED A PAPER BOOK CONTAINING PAGES 1 TO 41 HAVING THE ASSESSMENT RECORDS AND SOME DELHI HIGH COURT DECISION COPIES. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSESSEE STATED THAT THE PRESENT ISSUE IN DISPUTE HAS BEEN SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ANKITECH P LTD. (340 ITR 14) AND REQUESTED THE SAME MAY BE FOLLOWED IN THE PRESENT CASE. 6 .1 ON THE CONTRARY, LD. DR RELIED UPO N THE ORDER S OF THE LOWER AUTHORITIES. 7 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RELEVANT RECORDS, THE PAPER BOOK FILED BY THE LD. COUNSEL OF THE ASSESSEE AND ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH THE DELHI HIGH COU RT S ORDER IN THE CASE OF CIT VS. ANKITECH P LTD. (340 ITR 14) (SUPRA). WE FIND THAT THE HON BLE HIGH COURT OF DELHI IN THE AFORESAID CASE HAS HELD AS UNDER: - ACCORDING TO SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961, THE FOLLOWING CONDITIONS ARE TO BE SATISFIED : (I) THE PAYER COMPANY MUST BE A CLOSELY HELD COMPANY; (II) IT APPLIES TO ANY SUM PAID BY WAY OF LOAN OR ADVANCE DURING THE YEAR TO THE FOLLOWING PERSONS : (A) A SHAREHOLDER HOLDING AT LEAST 10 OF THE VOTING POWER IN THE PAYER COMPANY; (B) A COMPANY IN WHICH SUCH SHARE HOLDER HAS AT LEAST 20 PER CENT OF THE VOTING POWER; (C) A CONCERN (OTHER THAN COMPANY) IN WHICH SUCH ITA NO. 3150 / DEL/ 2013 5 SHARE HOLDER HAS AT LEAST 20 PER CENT INTEREST; (III) THE PAYER COMPANY HAS ACCUMULATED PROFITS ON THE DATE OF ANY SUCH PAY MENT AND THE PAYMENT IS OUT OF ACCUMULATED PROFITS; (IV) THE PAYMENT OF LOAN OR ADVANCE IS NOT IN THE COURSE OF ORDINARY BUSINESS ACTIVITIES. BY A DEEMING PROVISION IT IS THE DEFINITION OF DIVIDEND WHICH IS ENLARGED. THE LEGAL FICTION DOES NOT EXTEND TO SHAREHOLDER . THE FICTION IS NOT TO BE EXTENDED FURTHER FOR BROADENING THE CONCEPT OF SHAREHOLDERS. CIRCULAR NO. 495, DATED SEPTEMBER, 22, 1987, ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES IS NOT BINDING ON THE HIGH COURT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAD RECEIVED ADVANCES OF RS. 6,32,72,265/ - BY WAY OF BOOK ENTRY FROM A COMPANY, JGPL AND THE SHARE HOLDERS HAVING SUBSTANTIAL INTEREST IN THE ASSESEE COMPANY ALSO HA D 10 PER CENT OF THE VOTING POWER IN JGPL. THE ASSESSING OFFICER WAS OF THE VIEW THAT AS THE TWO GUPTAS WERE MEMBERS HOLDING SUBSTANTIAL INTEREST IN JGPL WHICH HAD PROVIDED LOANS AND ADVANCES TO THE ASSESSEE COMPANY AND THESE VERY PERSONS HAD SUBSTANTIAL I NTEREST IN THE ASSESSEE COMPANY, FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT THE AMOUNT RECEIVED BY THE ASSESSEE FROM JGPL WHICH CONSTITUTED ADVANCES AND LOANS WOULD BE TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT AND ADDED THE AMOUNT TO THE INCOME OF THE ASSESSSEE. THE TRIBUNAL DELETED THE ADDITION. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEALS, THAT THE TRIBUNAL WAS CORRECT IN LAW IN DELETING THE ADDITION OF RS. 6,32,72,265/ - MADE BY THE ASSESSING OFF ICER IN THE HANDS OF THE ASSESEE COMPANY UNDER SECTION 2(22)(E). 7. 1 KEEPING IN VIEW THE AFORESAID DECISION OF THE HON BLE DELHI HIGH COURT, WE FIND CONSIDERABLE COGENCY IN THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE THAT THE ISSUE IN DISPUTE IN THE PRESENT CASE HAS BEEN SQUARELY COVERED IN FAVOR OF THE ASSESSEE BY THE DECISION OF THE HON BLE DELH I HIGH COURT IN CIT VS. ANKITECH P LTD. (SUPRA) . AS THE ADMITTED FACT IS THAT THE ASSESSEE IS NOT A ITA NO. 3150 / DEL/ 2013 6 REGISTERED SHARE HOLDER OF M/S KONARK RESORT MANAGEMENT PVT. LTD., THEREFORE, RESPECTFULLY FOLLOWING THE PRECEDENT AS AFORESAID, WE ALLOW THE APPEAL OF THE ASSESSEE. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE O PEN C OURT ON 29 / 10 /20 1 4 . SD/ - SD/ - [ J.S. REDDY] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 29 / 10 /201 4 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES