SAI SHIV DEVELOPERS, MUMBAI V. ASST CIT 21(3), MUMBAI

ITA 3157/MUM/2011

• Counselvise Citation: 315719914 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 14-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V RAVI NAMBOODRI
• Assessee Lawyers: D C JAIN; SUBHASH SHETTY
• Keywords: Deemed dividend
• Section: 143(3); 147; 148; 263; 63

Judgement Text

I.T.A. NO.3157 & 3158/M/2011 M/S. SAI SHIV DEV ELOPERS. PAGE 1 O F 7 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A.NOS. 3157 & 3158/MUM/2011 ASSESSMENT YEARS: 2006-07 & 2005-06 M/S. SAI SHIV DEVELOPERS, AMAR MAHAL, NEAR CHANDAN CINEMA, JUHU, MUMBAI 400 049. PAN: AANFS 2229 J VS. ASST. COMMISSIONER OF I.T. 21 (3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. SUBHASH SHETTY & MR. D.C.JAIN. RESPONDENT BY : MR. K.V.RAVI NAMBOODRI. DATE OF HEARING: 14-05-2011. DATE OF PRONOUNCEMENT: 23-05-2012. O R D E R PER VIVEK VARMA: THE APPEALS FILED BY THE ASSESSEE ARISE AGAINST THE ORDER UNDER SEC. 263 PASSED BY THE CIT 21, MUMBAI DATED 14/03/2 011. I.T.A. NO. 3158/M/11 A.Y 2005-06 : GROUND NO. 1 : 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE REVISION UNDER SECTION 263 SHOULD BE 4ONE BY TAKING INTO ACC OUNT THE DATE OF THE ORIGINAL ASSESSMENT ORDER UNDER SECTION 143(3) AND NOT THE ORDER OF REASSESSMENT UNDER SECTION 147 READ WITH SECTION 143 (3) OF THE INCOME TAX ACT? 1 .(A) AS PER SECTION 263 (2) OF I.T. ACT, NO ORDER SHALL BE MADE UNDER SUBSECTION (1) OF SECTION 263 AFTER THE EXPIRY OF T WO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED. 1.(B) THE ORDER PASSED U/S 63 ON 14-03-20 11 IS CLE ARLY BARRED BY LIMITATION WITH REFERENCE TO THE ORDER PASSED UNDER SECTION 143 (3) BY I.T.A. NO.3157 & 3158/M/2011 M/S. SAI SHIV DEV ELOPERS. PAGE 2 O F 7 THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2005 -06 ON 12-06- 2007. 2. THE FACTS ARISING FROM THE IMPUGNED ORDER AS S UBMITTED BY THE A.R. ARE THAT THE ASSESSEE FIRM WAS ASSESSED U/S 14 3(3) VIDE ORDER DATED 12-06-2007. THIS ASSESSMENT WAS REOPENED U/S 147/148 ON 22- 02-2010 ON THE ISSUE OF SECTION 80IB(10)(C) OF THE I.T. ACT. THE ASSESSMENT U/S 143(3)/148 WAS COMPLETED ON 30-12-20 10. 3. THE CIT, ISSUED NOTICE U/S 263 TO THE ASSESSEE O N 25-02-2011, WHEREIN THE CIT SOUGHT TO REVISE THE ORDER OF ASSES SMENT DATED 30-12- 2010,ON THE ISSUE OF DEEMED DIVIDEND U/S 2(22)(E) O F THE I.T. ACT. IN RESPONSE TO THE NOTICE, THE ASSESSEE SUBMITTED ITS WRITTEN SUBMISSIONS DATED 03-03-2011, WHEREIN PRIMARILY, IT WAS SUBMITT ED THAT THE PROVISIONS OF SECTION 2(22)(E) ARE NOT ATTRACTED ON THE PERSON WHO IS NOT THE SHAREHOLDER OF THE LEADING COMPANY AND SINC E THE ASSESSEE FIRM WAS NOT A SHAREHOLDER IN THE LENDING COMPANY, I.E. M/S MUCHHALA MAGIC LAND PVT. LTD., THE PROVISIONS CONTAINED IN S ECTION 2(22)(E) CANNOT BE MADE APPLICABLE ON IT. THE ASSESSEE RELIE D ON THE DECISION OF CIT V/S HOTEL HILL TOP, REPORTED IN 313 ITR 116 (RA J) AND CIT V/S BHAUMIK COLOUR PVT. LTD., 313 ITR 146 (MUM. TRIB) ( SB). THE CIT WHILE PASSING THE IMPUGNED ORDER, REJECTED THE CONTENTION OF THE ASSESSEE AND SET ASIDE THE ORDER PASSED U/S 143(3) DATED 30- 12-2010. 4. THE ASSESSEE AGAINST THE ORDER OF THE CIT, IS IN APPEAL BEFORE THE ITAT. 5. BEFORE THE ITAT, THE ASSESSEE FILED THE FOLLOWIN G GROUNDS: I.T.A. NO.3157 & 3158/M/2011 M/S. SAI SHIV DEV ELOPERS. PAGE 3 O F 7 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE REVISION UNDER SECTION 263 SHOULD BE DONE BY TAKING INTO ACC OUNT THE DATE OF THE ORIGINAL ASSESSMENT ORDER UNDER SECTION 143(3) AND NOT THE ORDER OF REASSESSMENT UNDER SECTION 147 READ WITH SECTION 143 (3) OF THE INCOME TAX ACT? 1 .(A) AS PER SECTION 263 (2) OF I.T. ACT, NO ORDER SHALL BE MADE UNDER SUBSECTION (1) OF SECTION 263 AFTER THE EXPIRY OF T WO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED. 1.(B) THE ORDER PASSED U/S 63 ON 14-03-20 11 IS CLE ARLY BARRED BY LIMITATION WITH REFERENCE TO THE ORDER PASSED UNDER SECTION 143 (3) BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2005 -06 ON 12-06- 2007. 6. GROUNDS NO. 1, 1(A) AND 1(B) ARE ON THE LEGALITY OF THE ISSUE OF NOTICE U/S 263 AGAINST THE ORDER OF ASSESSMENT DATE D 30-12-2010. 7. THE AUTHORISED REPRESENTATIVE APPEARING ON BEHAL F OF THE ASSESSEE TOOK THE ABOVE GROUNDS AND CHALLENGED THE CORRECTNESS OF THE REVISIONARY ORDER. ACCORDING TO THE A.R. THE OR IGINAL ORDER U/S 143(3) WAS PASSED ON 12-06-2007. THE CASE WAS REOPE NED U/S 147 VIDE NOTICE U/S 148 AND THE ISSUE INVOLVED IN THE R E-ASSESSMENT PROCEEDINGS WAS ON DEDUCTION U/S 80IB(10)(C). NOWHE RE IN THE NOTICE U/S 148 OR IN THE ASSESSMENT ORDER THERE WAS A MENT ION OF THE ISSUE U/S 2(22)(E). IT IS THIS ORDER, DATED 30-12-2010, W HICH THE CIT HAS SET ASIDE. ACCORDING TO THE A.R., SINCE THE ISSUE UNDER WHICH THE REVISION IS BEING SOUGHT TO BE MADE WAS NOT THE ISSUE IN RE-ASS ESSMENT PROCEEDINGS, THE IMPUGNED ISSUE MUST GO TO THE ORIG INAL ASSESSMENT ORDER, WHICH IS DATED 12-06-2007. ACCORDING TO THE A.R., IF AT ALL THE CIT HAD TO REVISE THE ORDER OF ASSESSMENT, IT HAD T O BE THE ORIGINAL ORDER U/S 143(3) DATED 12-06-2007 AND NOT RE-ASSESS MENT ORDER DATED 30-12-2010, BECAUSE SECTION 148 PROCEEDINGS HAD LIM ITED ISSUE, I.E. U/S 80IB(10). THEREFORE, ACCORDING TO HIM, THE CIT COULD HAVE ONLY I.T.A. NO.3157 & 3158/M/2011 M/S. SAI SHIV DEV ELOPERS. PAGE 4 O F 7 SOUGHT TO REVISE THE ASSESSMENT FRAMED ON 12-06-200 7. SINCE U/S 263 THE PROCEEDINGS WERE INITIATED VIDE SHOW CAUSE NOTI CE DATED 25-02- 2011, ACCORDING TO THE A.R. IT WAS WELL BEYOND THE LIMITATION, WHICH ACCORDING TO SUB SECTION U/S 2 TO SECTION 263 EXPIR ED ON 31-03-2010. 8. GROUND NO. 2 : 2. THE LEARNED COMMISSIONER OF INCOME TAX FAILED T O APPRECIATE BEFORE PASSING AN ORDER U/S 263 THAT DEEMED DIVIDEN D COULD BE ASSESSED ONLY IN THE HANDS OF THE PERSON WHO IS A S HAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTH ER THAN A SHAREHOLDER. FROM THE FACTS AS SEEN FROM THE IMPUGNED ORDER, TH E ASSESSEE IS CONTESTING THE ISSUE OF SECTION 2(22)(E), WHEREI N THE ASSESSEE HAD SUBMITTED THAT THE COMPANY, M/S MUCHHALA MAGIC LAND PVT. LTD. HAD ADVANCED CERTAIN LOAN TO MR. ARUN KUMAR J. MUCHHALA . MR. ARUN KUMAR J. MUCHHALA IS A DIRECTOR IN THE COMPANY AND HE IS A PARTNER IN THE ASSESSEE FIRM AS WELL. THE A.R. POINTED OUT THAT IT WAS MR. ARUN KUMAR J. MUCHHALA, WHO WAS THE BENEFICIARY AND NOT THE AS SESSEE FIRM. IT WAS FURTHER POINTED OUT THAT IN ACCORDANCE WITH THE PRO VISIONS OF SECTION 2(22)(E), IF THE LOAN IS GIVEN BY THE COMPANY TO IT S SHAREHOLDER(S), THEN THE MISCHIEF OF SECTION 2(22)(E) GETS ATTRACTED. AC CORDING TO THE AUTHORISED REPRESENTATIVE, THE FIRM M/S SAI SHIV DE VELOPERS IS NOT A SHAREHOLDER IN THE COMPANY, THEREFORE, THE PROVISIO NS OF SECTION 2(22)(E) DOES NOT HIT THE ASSESSEE FIRM. 9. THE A.R. TO SUPPORT BOTH HIS CONTENTIONS, I.E. O N LIMITATION AND ON APPLICABILITY OF SECTION U/S 2(22)(E) RELIES ON THE FOLLOWING DECISIONS: A) CIT VS ICICI BANK LTD. 343 ITR 74 (BOM) I.T.A. NO.3157 & 3158/M/2011 M/S. SAI SHIV DEV ELOPERS. PAGE 5 O F 7 B) CIT VS ALAGENDRA FINANCE LTD. 293 ITR 1 (SC) C) ASHOKA BUILDCON LTD. 325 ITR 574 (BOM) D) ACIT BHAUMIC COLOUR (P) LTD. 313 ITR 146 (TRIB) 10. ON THE OTHER HAND, THE DR RELIED ON THE ORDER O F THE CIT. 11. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. APROPOS THE ISSUE OF LIMITATION, WE FIND TH AT THE LATEST DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S ICICI BANK LTD, REPORTED IN 343 ITR 74, SQUARELY COVERS THE CASE OF THE ASSESSEE, WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HOLDS , DOCTRINE OF MERGER- ORDER OF ASSESSMENT DOES NOT MERGE IN ORDERS OF REA SSESSMENT AS REGARDS ISSUES NOT FORMING SUBJECT-MATTER OF LIMITATION F OR REVISION OF ASSESSMENT ORDER IN RESPECT OF THOSE ISSUES RUNS FROM THE DA TE OF ASSESSMENT ORDER NOT FROM THE DATE OF REASSESSMENT ORDERS. 12. RESPECTFULLY FOLLOWING THE ORDER OF THE HON'BLE JURISDICTIONAL HIGH COURT AS WELL AS BY THE HONBLE APEX COURT, DI RECTLY ON THE ISSUE RAISED BY THE ASSESSEE IN APPEAL BEFORE US, WE HOLD THAT THE PROCEEDINGS U/S 263 ARE BARRED BY LIMITATION AS THE ORDER SOUGHT FOR REVISION COULD HAVE BEEN THE ORIGINAL ORDER PASSED U/S 143(3) ON 12- 06-2007. THE CIT WAS WRONG TO REVISE THE ORDER OF R EASSESSMENT DATED 30-12-2010. WE, THEREFORE, SET ASIDE THE PROC EEDINGS U/S 263 AS INITIATED BY THE CIT. 13. ON THE ISSUE OF APPLICABILITY OF SECTION 2( 22)(E), WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE COORDINATE BENCH, IN SPECIAL BENCH CASE OF ACIT VS BHAUMIC COLOUR (P) LTD., REPORTED I N 313 ITR 146 (TRI- I.T.A. NO.3157 & 3158/M/2011 M/S. SAI SHIV DEV ELOPERS. PAGE 6 O F 7 SB) IN FAVOUR OF THE ASSESSEE, WHEREIN THE SPECIAL BENCH HAD HELD, SHAREHOLDER MUST BE BOTH REGISTERED AND BENEFICIAL SHAREHOLDER FOR THE PROVISION TO APPLY. DEEMED DIVIDEND NOT TO BE TAXED IN HANDS OF PERSON OTHER THEN SHAREHOLDER OF LENDING COMPANY . 14. WE, THEREFORE, ALLOW THE APPEAL ON BOTH THE GROUNDS RAISED BY THE ASSESSEE. APPEAL IN I.T.A. NO. 3158/M/2011 FOR ASSESSMENT YEA R 2005-06 IS, THUS, ALLOWED. I.T.A. NO. 3157/M/11 A.Y 2006-07 : IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS: 1) UNDER THE FACTS, CIRCUMSTANCES AND IN LAW THE L EARNED COMMISSIONER OF INCOME TAX ERRED IN PASSING AN ORDE R U/S 263 OF I.T. ACT. 1.(A) THE LEARNED COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THAT :- (I) DEEMED DIVIDEND COULD BE ASSESSED ONLY IN THE H ANDS OF THE PERSON WHO IS SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER. (II) THE APPELLANT FIRM IS NOT A SHAREHOLDER IN THE LENDING COMPANY I.E. M/S MUCHHALA MAGIC LAND PVT. LTD. 15. GROUNDS NO. 1(A) AND 1(B) ARE SIMILAR TO GROUND NO. 2 IN ASSESSMENT YEAR 2005-06. 16. HAVING HELD THAT THE ASSESSEE FIRM IS NOT THE S HAREHOLDER IN M/S MUCHHALA MAGIC LAND PVT. LTD., AS IN ASSESSMENT YEA R 2005-06, AND THE FACTS BEING IDENTICAL, WE HOLD THAT THE PROVISI ONS U/S 2(22)(E) ARE NOT ATTRACTED, HENCE THE REVISION ON THE ISSUE OF S ECTION 2(22)(E) IS NOT VALID. HENCE ORDER OF REVISION U/S 263 PASSED BY TH E CIT IS SET ASIDE. 17. IN THE RESULT THE APPEAL IS ALLOWED. I.T.A. NO.3157 & 3158/M/2011 M/S. SAI SHIV DEV ELOPERS. PAGE 7 O F 7 APPEAL IN I.T.A. NO. 3158/M/2011 FOR ASSESSMENT YEA R 2005-06 IS, THUS, ALLOWED. APPEAL IN I.T.A. NO. 3157/M/2011 FOR ASSESSMENT YEA R 2006-07 IS, THUS, ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 3/05/2012. SD/- SD/- (R.S.SYAL) ( VIVEK VARMA ) ACCOUNTNAT MEMBER JUDIC IAL MEMBER MUMBAI: 23/05/2012. P/-*