Shri Kaushik B.Patel, Mehsana V. The Dy.CIT.,Mehsana Circle, Mehsana

ITA 3163/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89546 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 14-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Rectification of order; Deemed to accrue or arise in india; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI G.D. AGARWAL, VICE PRESIDENT(AZ) AND SHRI S.S. GODARA, JUDICIAL MEMBER ./ I.T.A. NO.3163/AHD/2011 ( / ASSESSMENT YEAR : 2006-07) SHRI KAUSHIK B.PATEL C/O.B.PATEL INFRASTRUCTURE PVT.LTD.,SARDAR SOCIEWTY VISNAGAR MEHSANA 384 315 / VS. THE DY.CIT MEHSANA CIRCLE MEHSANA ./ ./ PAN/GIR NO. : ABXPP 2970 Q ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SUNIL H.TALATI, AR / RESPONDENT BY : SHRI M.K. SINGH, SR.DR / DATE OF HEARING 20/05/2015 !'# / DATE OF PRONOUNCEMENT 09/06/2015 / O R D E R PER S.S. GODARA, JUDICIAL MEMBER : THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-0 7 ARISES FROM ORDER OF THE CIT(A)-GANDHINAGAR, AHMEDABAD DATED 01 /09/2011 IN CASE NO.118/2010-11 UPHOLDING DEEMED DIVIDEND ADDITION O F RS.11,24,237/- U/S.2(22)(E) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ITA NO.3163/AHD /2011 SHRI KAUSHIK B.PATEL VS. DCIT ASST.YEAR 2006-07 - 2 - 2. FACTS OF THE CASE ARE IN A NARROW CAMPUS. THE ASSESSEE IS A DIRECTOR IN M/S.B.PATEL INFRASTRUCTURE PVT.LTD. HE HOLDS MORE THAN 10% OF ITS SHARES. THE ASSESSING OFFICER NOTICED HIM T O HAVE WITHDRAWN EXCESS AMOUNT OF RS.11,24,237/-. HE SOUGHT TO INVO KE DEEMED DIVIDEND ADDITION U/S.2(22)(E) OF THE ACT BY TREATING THE SA ME AS LOANS AND ADVANCES. THE ASSESSEE PLEADED TO HAVE WORKED AS A SUB-CONTRACTOR GIVING HIS TRACTOR CAR MACHINERY ON HIRE BASIS TO T HE COMPANY HAVING VALUE OF MORE THAN RS.55 LACS. HE SUBMITTED THAT T HE COMPANY HAD TAKEN POSSESSION THEREOF BY PAYING HIM A REFUNDABLE DEPOS IT SUM OF RS.12.50 LACS. THE ASSESSING OFFICER OBSERVED IN O RDER DATED 30/11/2010 THAT THE ASSESSEE HAD WITHDRAWN EXCESS AMOUNT TO TH E TUNE OF RS.9,81,400/- FROM 01/04/2005 ONWARDS. ACCORDINGLY , HE TREATED THE IMPUGNED SUM OF RS.11,24,237/- AS DEEMED DIVIDENDS AND MADE THE CONSEQUENTIAL ADDITION. 3. THE CIT(A) HAS UPHELD THE ASSESSING OFFICERS AC TION AS UNDER:- 4.2 1 HAVE GONE THROUGH THE RECTIFICATION ORDER AN D THE SUBMISSIONS OF THE APPELLANT. THE FOLLOWING PERTINENT OBSERVATIONS ARE MADE ON THE ISSUE: A) THE ASSESSEE IS ONE OF THE DIRECTOR HOLDING MORE THAN 10% OF SHARE HOLDING OF B. PATEL INFRASTRUCTURE PVT LTD. B) ASSESSEE HAS WITHDRAWN EXCESS AMOUNT OF RS.11242 37/- FROM THE COMPANY AS PER LEDGER ACCOUNT IN THE BOOKS OF THE C OMPANY. ITA NO.3163/AHD /2011 SHRI KAUSHIK B.PATEL VS. DCIT ASST.YEAR 2006-07 - 3 - C) THE APPELLANT HAS CONTENDED THAT THE COMPANY HAV E GIVEN RS.12.50 LAKHS IN LIEU OF THE POSSESSION OF VEHICLES VALUING ABOUT RS.41LAKHS. HE FURTHER CONTENDED THAT THE VALUE OF THE ASSETS GIVE N IS MORE THAN RS 41 LAKHS AGAINST WHICH THERE IS DEBIT BALANCE IN HIS A CCOUNT OF RS.20 LAKHS. AS SUCH IT WAS SUBMITTED THAT AMOUNT OUTSTANDING IS FOR THE PURPOSE OF BUSINESS. D) HOWEVER, THE ACCOUNT PROVES OTHERWISE FROM THE F ACE OF IT. THE ASSESSEE HAS SHOWN OUTSTANDING AS ON 1/4/2005 AT RS .880519/-. AGAINST THE OUTSTANDING OF RS.880519/- ASSESSEE HAS REPAID RS.595000/- TILL 30/4/2005. THE ASSESSEE HAD NOT RECEIVED ANY ADVANC E OF RS.12,50,000/- AGAINST THE VEHICLES AS CLAIMED ALTHOUGH THE VEHICL ES WERE GIVEN ON RENT DURING THE PERIOD. IN THE MONTH OF MAY, 2005 FROM 1 /4/2005 TO 31/5/2005, ASSESSEE HAD WITHDRAWN RS.9,78,800/- OUT OF WHICH RS.2,91,000/- WERE ADJUSTED BY WAY OF SALARY & MACH INERY RENT. FROM 1/8/2005 TO 30/11/2005, ASSESSEE HAD WITHDRAWN RS.9 ,78,800/- OUT OF WHICH RS.2,91,000/- WERE ADJUSTED BY WAY OF SALARY & MACHINERY RENT. FROM 1/8.2005 TO 30/11/2005 ASSESSEE HAS WITHDRAWN RS.289000/-, RS.200000/- BY WAY OF SALARY ADJUSTMENT WERE RECOVE RED. FROM 1/12/2005 TO 31/12/2005, RS.480000/- WERE RECEIVED, RS.190000/-WERE ADJUSTED BY WAY OF SALARY & MACHINERY RENT. FROM 1/ 1/2006 TO 28/2/2006 ASSESSEE HAS RECEIVED RS.249077. IN THE M ONTH OF MARCH, ASSESSEE HAS RECEIVED RS.981400/-. NOT ONLY IS THE CLAIM OF THE APPELLANT IS PROVED WR ONG FROM THE ACCOUNTS BUT ALSO IT IS CLEARLY AN AFTERTHOUGHT AND A STORY WHEN VIEWED FROM THE ANGLE OF PROBABILITIES OF HUMAN BEHAVIOR AND BUSINE SS PRACTICES. IT IS SEEN THAT THE TOTAL VALUE OF THESE ASSETS I.E. CAR AND TRACTORS RENTED OUT TO THE COMPANY IS ONLY RS.41,00,000/- ON WHICH THE ASSESSEE IS GETTING RENT OF RS.16.45 LACS P.A. WHICH ITSELF IS VERY HIG H. NO ONE WILL GIVE ANOTHER 12.5 LACS RUPEES AS ADVANCE IN SUCH A DEAL. THE ADDITION U/S.2(22)(E) MADE BY THE AO IS THEREFORE TOTALLY JU STIFIED ON- THE FACTS OF THE CASE. THE RELIANCE PLACED BY THE APPELLANT ON T HE TWO JUDGMENTS I.E. CIT VS NAGINDAS KAPADIA 177 UR 393(MUM) AND CIT VS RAJKUMAR 318 ITR 462 (DEL) IS TOTALLY MISPLACED BECAUSE IN THOSE CASES THE AMOUNTS WERE HELD TO BE ADVANCES AGAINST TRADE AND NOT LOAN . IN THE PRESENT CASE, IT IS NOT EVEN THE CLAIM OF THE APPELLANT THA T ANY AMOUNT WAS ADVANCED TOWARDS PURCHASES. THE HON'BLE SUPREME COU RT IN THE CASE OF ITA NO.3163/AHD /2011 SHRI KAUSHIK B.PATEL VS. DCIT ASST.YEAR 2006-07 - 4 - TARULATA SHYAM & ORS 108 ITR 345 HAS HELD THAT ONCE THE INCOME IS TAXABLE WITHIN THE LAW, THE HARDSHIP CAUSED TO THE APPELLANT CEASES TO BE AN ISSUE. IN THAT CASE, THE AMOUNT WAS LOANED / ADV ANCED FOR A VERY SHORT TIME, BUT STILL IT WAS HELD TAXABLE. THE GROU ND OF APPEAL IS THEREFORE DISMISSED. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE FILE. THE SOLE ISSUE THAT ARISES FOR OUR CONSIDERATION IS VALIDITY OF THE IMPUGNED ADDITION OF DEEMED DIVIDENDS. THE ASSESSE E HAS FILED A PAPER- BOOK ON RECORD. THE SAME REVEALS THAT HE GETS A MO NTHLY SALARY OF RS.50,000/- AND ALSO TRACTOR RENTAL INCOME OF RS.1, 01,000/- IN MAY-2005 AND RS.1,40,000/- FROM JUNE-2005 UPTO MARCH-2006. IT IS FURTHER SEEN THAT THE ASSESSEE HAS ALSO RECEIVED QUALISH CAR REN TAL INCOME OF RS.1,44,000/-. HIS BOOKS RECORD TRACTOR RENTAL INCO ME AS RS.15,01,000/-. THE REVENUE DOES NOT DISPUTE THE ASSESSEES FIXED A SSETS IN THE SHAPE OF AFORESAID VEHICLES. WE FIND VALUE OF ITS TRACTOR-T ROLLY TO BE RS.37,45,500/- AND QUALISH CAR THAT OF RS.3,98,496 /-. THE ASSESSEES BOOKS NOWHERE TREAT THE SUMS RECEIVED AS LOANS AND ADVANCES TO HAVE BEEN RECEIVED FROM THE AFORESAID COMPANY. THE C OMPANYS REPORT AT PAGE-16 DOES NOT DISCLOSE ANY SUCH LOAN OR ADVANCE TO THE ASSESSEE. THE AUTHORITIES BELOW NOWHERE OBSERVE ANYTHING ABOUT A CCUMULATED PROFITS SO AS TO INVOKE SECTION 2(22)(E) OF THE ACT. WE R EITERATE THAT THIS SECTION STIPULATES ADDITION OF A DEEMED INCOME STATUTE LIAB LE TO BE STRICTLY INTERPRETED. THE CASE FILE INDICATES THAT THE IMPU GNED SUMS ARE ROUTINE ITA NO.3163/AHD /2011 SHRI KAUSHIK B.PATEL VS. DCIT ASST.YEAR 2006-07 - 5 - BUSINESS TRANSACTIONS/SALARY PAYMENTS MADE BETWEEN THE COMPANY AND THE ASSESSEE-APPELLANT NOT COMING WITHIN THE PURVIE W OF DEEMED DIVIDENDS U/S. 2(22)(E) OF THE ACT. THE ASSESSEE HAS FILED A CATENA OF CASE-LAWS. WE QUOTE (2014) 29 ITR 36 (BANG.TRIB.) DCIT VS. CHARIOT INTERNATIONAL PVT.LTD. HOLDING THAT ROUTINE COMMERC IAL TRANSACTIONS INVOLVING TRADE ADVANCES ARE NOT TO BE TREATED AS D EEMED DIVIDENDS. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS OR LAW. WE ACCEPT THE ASSESSEES ARGUMENTS IN THESE FACTS. THE IMPUG NED ADDITION OF DEEMED DIVIDENDS AMOUNTING TO RS.11,24,237/- IS DEL ETED. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 9 TH JUNE, 2015 AT AHMEDABAD. SD/- SD/- ( G.D. AGARWAL) ( S.S. GODARA ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 09 / 06 /2015 &.., .(../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-GANDHINAGAR, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD