Shri Vikram P. Mahurkar, Ahmedabad V. The ACIT, Circle-2(2), Baroda

ITA 3195/AHD/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8042 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 04-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANIL R SHAH
• Keywords: Deemed to accrue or arise in india; Deemed dividend; Revised return
• Section: 143(3); 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI P. K. KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA.NOS: 3195, 3197, 3199, 3201 & 3202/AHD/2014 (ASSESSMENT YEARS: 2004-05 TO 2007-08 & 2009-10) SHRI VIKRAM P. MAHURKAR, 1, SAJNI APARTMENTS, DALAL ROAD, GOLWAD FATEHGUNJ, BARODA-390002 V/S ASST. COMM. OF INCOME TAX, CIRCLE -2(2), BARODA (APPELLANT) (RESPONDENT) PAN: ACHPM3681J APPELLANT BY : SHRI ANIL R. SHAH & KINJAL SHAH, A .R. RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. ( )/ ORDER DATE OF HEARING : 13 -06-201 8 DATE OF PRONOUNCEMENT : 28 -06-2018 PER MAHAVIR PRASAD, J.M. 1. THESE FIVE APPEALS HAVE BEEN FILED BY THE APPELLANT AGAINST THE ORDER OF THE LD. CIT(A) FOR CONFIRMING OF PENALTY U/S. 271(1)(C) OF THE ACT. THESE ARE FIVE APPEALS HAVE BEEN COMMON GROUNDS OF APPEAL AND ONLY AMOUNT AND ITA NOS. 3195, 3197, 3199/AHD/2014 & ORS. . A.YS. 2004-05 TO 200 7-08 & 2009-10 2 ASSESSMENT YEARS ARE DIFFERENT. THEREFORE FOR THE S AKE OF CONVENIENCE, WE WOULD LIKE TO DISPOSE OF ALL FIVE APPEALS BY WAY OF COMMON ORDER AND FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE APPELLANT: 1 .THE CIT(A) HAS ERRED BOTH IN LAW AND IN FACT I N CONFIRMING LEVY OF PENALTY U/S. N 27I(1)( C) OF RS.3 7,22,490/- ON ADDITION OF DEEMED DIVIDEND U /S.2(22)(E) CHARACTER OF WHICH WAS DEBATABLE AND HAVING TWO OPINIONS. IT IS SUBMITTED THAT THE SINCE YOUR APPELLANT HAS N OT 'CONCEALED ANY INCOME' OR 'FURNISHED INACCURATE PARTICULARS OF SUCH INCOME' ON FACTS OF THE CASE AND PROVISIONS OF LAW AND FOR NON ACCEPTANCE OF EXPLANATION PENALTY IS NOT LEVYABLE. 2. CIT (A) HAS ALSO ERRED IN CONFIRMING PENALTY U /S. 271(1)( C) NOTICE ISSUED WHICH WAS VAGUE, UNCLEAR AND CAPABLE OF TWO VIEWS AS TO WHETHER PENA LTY PROCEEDINGS WERE INITIATED AND PENALTY LEVIED WERE 'FOR CONCEALING INCOME' OR 'FOR FURNISHING INA CCURATE PARTICULARS OF SUCH INCOME' IN VIEW OF BINDING JUDGMENT OF HON. GUJARAT HIGH COURT IN THE C ASE OF NEW SARATHIYA ENGG. COMPANY VS CIT 282 ITR PAGE 642 PENALTY IS VOID ABINITIO 2. APART FROM THE ABOVE SAID GROUND, APPELLANT ALSO FI LED FOLLOWING ADDITIONAL GROUNDS OF APPEAL: 2. (A) YOUR APPELLANT SUBMITS THAT IN VIEW O F RECENT CIRCULAR OF CENTRAL BOARD OF DIRECT TAXES BEARING F.NO.279/MISC./140/2015/ITJ AND CIRCU LAR NO.19/2017) DATED 12TH JUNE, 2017 THE AMOUNT ADDED AS DIVIDEND OF RS. 47,50,727/ - AS A RESULT OF IS PECK CREDIT OF DEBITS AND CREDITS OF RUNNING ACCOUNT OPERATED DURING COUR SE OF BUSINESS WITH CHECKMATE SERVICES PVT. LTD. IS NOT DIVIDEND U/S. 2(22)(E). (B) YOUR APPELLANT FURTHER SUBMITS THAT THE ADD ITION OF RS. 47,50,727/-REQUIRES TO BE DELETED PARTICULARLY KEEPING IN MIND THE BINDING JUDGMENT O F HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. SCHUTZ DISHMAN BIO TECH PR. LTD. TAX APPEAL NO. 958/959 OF 2015 DATED 21/12/15. 3. THE ASSESSEE HAS TAKEN ADDITIONAL GROUND. WE DO NOT FIND ANY SUBSTANCE IN THE PLEA OF THE ASSESSEE FOR ADMISSION OF ADDITIONAL GR OUNDS. THE ADDITIONAL ITA NOS. 3195, 3197, 3199/AHD/2014 & ORS. . A.YS. 2004-05 TO 200 7-08 & 2009-10 3 GROUNDS RAISED TO RAISE A PLEA THAT THE TRANSACTION S WERE COMMERCIAL IN NATURE AND THIS TRADE ADVANCES REQUIRES FACTUAL EXAMINATIO NS IN THE ABSENCE OF RELEVANT FACTS IN THIS REGARD AND IN THE ABSENCE OF REASONAB LE CAUSE FOR BELATED PLEA ON THE FACTUAL ASPECTS, WE DECLINE TO ENTERTAIN THE SA ME. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE IN THIS CA SE, A SURVEY ACTION U/S.133A OF THE ACT WAS CARRIED OUT ON 06.10.2012. DURING THE C OURSE OF SURVEY, ASSESSEE HAS DISCLOSED DEEMED DIVIDEND OF RS.5,36,578/- IN A .Y. 2004-05 FROM INSTITUTE OF FIRE & DISASTER MANAGEMENT SERVICES, WHICH IS A PROPRIETARY CONCERN OF THE ASSESSEE DURING THE PERIOD RELEVANT TO A.Y. 2004-05 . SINCE THE ASSESSEE FAILED TO OFFER TAX OF ABOVE DEEMED DIVIDEND IN HIS ORIGINAL RETURN OF INCOME FILED U/S. 139(1) ON 01.112004, THEREAFTER, CASE WAS REOPENED AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) R.W.S.147 OF THE ACT ON 29.12 .2011 DETERMINING TOTAL INCOME AT RS.42,59,058/-. SUBSEQUENTLY, ORDER U/S. 263 OF THE INCOME-TAX ACT 1961 C.I.T-I, BARODA WHICH IS REPRODUCED AS UNDER: 'THE RECORD OF THE ASSESSMENT PROCEEDINGS IN THE CA SE OF THE ASSESSEE FOR THE A.Y.2004-05 LEADING TO PASSING ORDER U/S. 143(3) ON 29.12.2011 WAS CALLED FOR AN EXAMINED. IT WAS FOUND THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. A NOTICE OF HEARING UNDER SECTION 263 (1) WAS ACCORDINGLY ISSUED ON 24.02.2012. THE ASSESSEE FILED HIS -WRITTEN SUBMISSION ON 13.02 .2013. THE POINT RAISED IN THE NOTICE WAS REGARDING NON-AD DITION OF INCOME TOWARDS DEEMED DIVIDEND FROM MJS CHECKMATE DETECTIVE AGENCY OFRS.42,14,149/- WHI CH WAS DISCOVERED DURING THE COURSE OF SURVEY AND ADMITTED BY THE ASSESSEE. IN THIS CASE, ASSESSEE FILED HIS RETURN OF INCOME F OR THE A. Y. 2004-05 ON 01.11.2004 DECLARING INCOME AT RS.23,76,210/- . ASSESSMENT U/S. 143(3) WAS FINALIZED ON 29.12.2006 DETERMINING INCOME OF RS.37,22,490/-. SUBSEQU ENTLY, SURVEY WAS CONDUCTED IN THE CASE OFM/S CHECKMATE SERVICES P.LTD. GROUP, BARODA BY THE DIRE CTOR OF INCOME-TAX(INV.), BARODA ON ITA NOS. 3195, 3197, 3199/AHD/2014 & ORS. . A.YS. 2004-05 TO 200 7-08 & 2009-10 4 06.01.2010 AND DURING THE COURSE OF SURVEY THE UNDI SCLOSED INCOME ON ACCOUNT OF DEEMED DIVIDEND OF'RS. 5,35,5681- FROM M/S INSTITUTE OF FIRE MA NAGEMENT AND RS.42,14,149/- FROM M/S CHECKMATE DETECTIVE AGENCY WAS FOUND AND ADMITTED B Y THE ASSESSEE. IN' VIEW OF THE SURVEY AND DISCLOSURE, THE CASE WAS RE-OPENED WHICH COMPLETED ON 29.12.201. IN THE REVISED RETURN FILED, THOUGH ADDITIONAL INCOME OF RS.5,35,568/- WAS SHOWN, TH E INCOME OF RS.42,14,149/-TOWARDS DEEMED DIVIDEND FROM M/S CHECKMATE DETECTIVE AGENCY WAS NO T SHOWN BY THE ASSESSEE IN HIS RETURN OF INCOME IN RESPONSE TO THE NOTICE U/S. 148. THE ASSES SING OFFICER ALSO FAILED TO CONSIDER THE SAME IN THE REOPENED ASSESSMENT, THOUGH THE CASE WAS RE-OPE NED FOR THIS VERY PURPOSE. THE ASSESSEE, IN HIS SUBMISSION DATED 13.02.2013 IN RESPONSE TO THE NOTI CE U/S. 263(1) OF THE ACT, HAS ADMITTED THAT BY MISTAKE HE HAD NOT SHOWN THE INCOME TOWARDS DEEM ED DIVIDEND OF RS.42,14,149/- FROM M/S CHECKMATE DETECTIVE AGENCY IN HIS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 148 OF THE ACT, THOUGH HE HAD ALREADY PAID TAX THEREON. THE SUBMISSION OF THE ASSESSEE HAS BEEN EXAMINED. I T IS_ UNDISPUTED THAT DEEMED DIVIDEND OF RS.42,14,149/- WAS NOT DECLARED IN THE RETURN FILED IN RESPONSE TO NOTICE U/S. 147. THE ASSESSEE CONTENTION THAT THIS WAS AN INADVERTENT MISTAKE BEC AUSE TAX ON THIS WAS PAID WAS NOT FOUND TO BE CORRECT. THIS CAN BE ASCERTAINED FROM THE FOLLOWING : - THE ORIGINAL RETURN WAS FILED SHOWING AN INCOM E OF RS.23,76,210/- AND CLAIMING REFUND OF RS. 19,38,418/- ON ACCOUNT OF IDS OFRS.26,93,967/-. THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) ON 31.03.2005 AND REFUND OF RS.18,15,470/- ( INCLUDING INTEREST U/S.244A OF RS.1,02,762/-) WAS ISSUED TO THE ASSESSEE. - THE REVISED RETURN WAS FILED ON 28.12.2011 SHO WING INCOME OF RS.29,12,774/- AND TDS CLAIM OF RS.26,93,967/- AND CLAIMING FURTHER REFUND OF RS.48,615/-. THUS, IT CAN BE SEEN THAT NO ADDITIONAL TAX WAS PAID IN RESPONSE TO NOTICE U/S. 147. ON THE CONTRARY, FURTHER REFUND WAS CLAIMED ON THE TDS ORIGINALLY CLAIMED. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO ENH ANCE THE INCOME BY AN AMOUNT OF RS. 42,14,149/-. THE ASSESSEE HAD CONCEALED INCOME OFRS .5,35,568/- IN THE ORIGINAL RETURN ANDRS.42,14,149/- IN BOTH ORIGINAL AND RETURN U/S.1 47, PENALTY U/S.271(L)(C )IS ALSO INITIATED ON THESE AMOUNTS '. ITA NOS. 3195, 3197, 3199/AHD/2014 & ORS. . A.YS. 2004-05 TO 200 7-08 & 2009-10 5 AS THE ASSESSEE HAS CONCEALED THE PARTICULARS OF IN COME, PENALTY PROCEEDINGS U/S.271(L)(C) WERE INITIATED ON THE ABOVE ISSUE IN THE ORDER U/S.263 OF THE I T ACT PASSED BY THE C.I.T-I, BARODA ON 12.03.2013. TH EREAFTER, DUE TO CHANGE IN INCUMBENCY, A FRESH NOTICE U/S. 271(L)(C) DATED 26. 07.2013 WAS ISSUED AND DULY SERVED UPON ASSESSEE ON THE SAME DAY. FURTHER, A SH OW-CAUSE NOTICE U/S. 271(1)(C) DATED 04.09.2013 WAS AGAIN ISSUED AND DUL Y SERVED UPON THE ASSESSEE ON 05.09.2013 REQUIRING THE ASSESSEE TO SHOW-CAUSE AS TO WHY PENALTY SHOULD NOT BE IMPOSED. THE DATE FOR COMPLIANCE WITH THE SH OW-CAUSE NOTICE DATED 04.09.2013 WAS FIXED ON 12.09.2013. HOWEVER, NEITHE R THE ASSESSEE FURNISHED ANY VALID EXPLANATION NOR SOUGHT FOR ANY ADJOURNMENT. IT IS THEREFORE CLEAR THAT THE ASSESSEE HAS NOTHING TO SAY ON THIS ISSUE WHICH TANTAMOUNT TO ACCEPTANCE OF THE DEFAULT AND MADE HIM LIABLE TO PE NALTY U/S.271(L)(C) OF THE IT. ACT, 1961. 5. UNDER THE ABOVE CIRCUMSTANCES, IT IS REASONABLY CON CLUDED THAT THE ASSESSEE COULD NOT SUBSTANTIATE HIS CASE OR FURNISH ANY SATI SFACTORY EXPLANATION. THE ASSESSEE FAILED TO BRING ANY APPRECIABLE MATERIAL O N RECORD TO REBUT THE CHARGE OF CONCEALMENT OF HIS INCOME. IN THIS CASE, DEEMED DIVIDEND OF RS.5,35,568 & RS. 42,14,149/- WAS DETECTED BY THE DEPARTMENT DURI NG THE COURSE OF SURVEY AND THE ASSESSEE HIMSELF ADMITTED THE SAID AMOUNT. HOWEVER, THIS AMOUNT WAS NOT SHOWN IN THE ORIGINAL RETURN FILED BY THE ASSES SEE ON 01.11.2004. THUS THERE WAS A CONCEALMENT OF INCOME TOTALING TO RS.47,49,71 7/-. THEREFORE, I AM SATISFIED THAT THE ASSESSEE HAS CONCEALED THE INCOM E TO THE TUNE OF RS.47,49,717/- ((RS.5,35,568 + 42,14,149) AND HENCE THIS IS A FIT CASE FOR LEVY OF PENALTY U/S.271(L)(C). THE WORKING OF PENALTY U/S. 271(L)(C) OF THE IT ACT IS AS UNDER: - (A) AMOUNT OF INCOME ON WHICH TAX IS SOUGHT TO BE 47,49,717 ITA NOS. 3195, 3197, 3199/AHD/2014 & ORS. . A.YS. 2004-05 TO 200 7-08 & 2009-10 6 EVADED, AS DISCUSSED ABOVE (RS.5,35,568 + 42,14,149 ) (B) AMOUNT OF TAX SOUGHT TO BE EVADED ) 15,67,407 (C) MINIMUM PENALTY LEVIABLE U/S. 271(L)(C) @ 100% THER EOF 15,67,407 (D) MAXIMUM PENALTY LEVIABLE U/S. 271(L)(C) @ 300% THER EOF 47,02,221 A MINIMUM PENALTY OF RS.15,67,407/- (RUPEES FIFTEEN LAKH SIXTY SEVEN THOUSAND FOUR HUNDRED SEVEN ONLY) IS HEREBY LEVIED 6. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 7. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IN THE IMPUGNED ORDER. IN THIS CASE, APPELLANT DURING SURVEY PROCEEDINGS DECLARED DEEMED DIVIDEND OF RS. 5,36,578/- FROM THE INSTITUTE OF FIRE & DISASTER MA NAGEMENT SERVICES AND PRIOR TO THAT APPELLANT FILED HIS ORIGINAL RETURN U /S. 139(1). THEREAFTER, CASE WAS REOPENED AND ASSESSMENT U/S. 143(3)R.W.S. 147 OF TH E ACT ON 29.12.2011 DETERMINING TOTAL INCOME AT RS.42,59,058/- AND SUBS EQUENTLY, ORDER U/S. 263 OF THE INCOME-TAX WAS PASSED BY THE LD. CIT(A). 8. IN THIS CASE, DEEMED DIVIDEND OF RS. 5,35,568/- AND RS. 42,14,149/- WAS DETECTED BY THE DEPARTMENT DURING THE COURSE OF SUR VEY AND THE SAME WAS ADMITTED BY THE APPELLANT. 9. HOWEVER IN CHALLENGE TO PENALTY PROCEEDINGS MADE U/ S. 271(1)(C) IN IT(SS)A NO. 17/AHD/2014 & ITA NO.45/AHD/2014 ORDER DATED 05 .04.2017 IN SIMILAR SITUATION, THE ISSUE OF IMPOSITION OF PENALTY WAS H ELD TO FAVOUR OF ASSESSEE. ITA NOS. 3195, 3197, 3199/AHD/2014 & ORS. . A.YS. 2004-05 TO 200 7-08 & 2009-10 7 3. THE SIMPLE QUESTION THAT ARISES FOR CONSIDERATI ON IS WHETHER PENALTY CAN BE IMPOSED BY INVOKING SECTION 271(1)(C) OF THE ACT ON LOANS AND A DVANCES AS TAKEN BY THE ASSESSEE AND REGARDED AS DEEMED INCOME BY VIRTUE OF S.2(22)(E) OF THE ACT. 4. SECTION 2(22)(E) OF THE ACT CREATES LEGAL FICTION WHEREBY LOANS/ADVANCES RECEIVED BY AN ASSESSEE ARE DEEMED AS TAXABLE INCOME IN THE HANDS OF THE RECIPI ENT ASSESSEE IN CERTAIN CIRCUMSTANCES AS SPECIFIED THEREIN. IN VIEW OF SECTION 2(22)(E) OF THE ACT, LOANS/ADVANCES AMOUNT UNDER CONSIDERATION ARTIFICIALLY PARTAKE THE CHARACTER OF DIVIDEND AND BROUGHT TO TAX AS DEEMED DIVIDEND. NEEDLESS TO SAY, THE AFORESAID PROVISION OF SECTION 2(22)(E) HA S BROUGHT A DEEMING AND UNNATURAL CONCEPT OF TREATING THE RETURNABLE LOANS/ADVANCES AS TAXABLE I NCOME IN THE HANDS OF BORROWER IN DEPARTURE WITH THE OPERATION OF THE NORMAL PROVISIONS. ADMITT EDLY, THE RELEVANT FACTS CONCERNING THE ISSUE WERE AVAILABLE TO THE AO. THUS, THERE IS NO CONCEALMENT OF ANY PARTICULARS OF ANY FACT PER SE. THE ASSESSEE HAS SIMULTANEOUSLY CLAIMED THAT THE AFORESA ID ADVANCES HAVE BEEN RECEIVED THE COURSE OF ORDINARY BUSINESS AND OWING TO ONGOING BUSINESS TRA NSACTIONS AND THUS NOT SUSCEPTIBLE TO PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THUS, WHILE THE PRO VISIONS OF S.2(22)(E) HAVE BEEN APPLIED, THE ISSUE IS NOT ENTIRELY FREE OF ANY DEBATE. AS NOTED, SECTI ON 2(22)(E) OF THE ACT IS ONLY DEEMING PROVISION OF LAW AND IS NOT A SUBSTANTIVE PROVISION. THUS, IN THE ABSENCE OF ANY PERCEPTIBLE MALAFIDES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING TH E PENALTY IMPOSED BY THE AO. THUS, WE DO NOT SEE ANY MERITS IN THE APPEALS OF THE REVENUE. 10. SINCE IN SIMILAR CIRCUMSTANCES ITAT DELETED PENALTY , THEREFORE, RELYING UPON THE AFORESAID JUDGMENT, WE DELETE THE PENALTY IN AL L FIVE APPEALS AND ALLOW THE APPEAL OF THE APPELLANT. ORDER PRONOUNCED IN OPEN COURT ON 28 - 06- 2018 SD/- SD/- (P.K. KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 28 /06/2018 RAJESH