Neelam Khanna, Meerut V. CIT, Meerut

ITA 3268/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6321 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 15-04-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 26-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL BAJPAI
• Assessee Lawyers: V K GOEL
• Keywords: Opportunity of being heard; Deemed dividend
• Section: 27; 148; 263

Judgement Text

ITA NOS. 2078/DEL/2011 & 3268/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NOS. 2078/DEL/2011 & 3268/DEL/2012 A.Y. : 2005-06 SMT. NEELAM KHANNA, C/O P. SINGH & CO., 103/1, AMAR SHREE COMPLEX, DELHI ROAD, MEERUT (PAN: AAXPK1359H) VS. INCOME TAX OFFICER, WARD 1(2), MEERUT (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. V.K. GOEL, ADVOCATE DEPARTMENT BY : SH. SUNIL BAJPAI, CIT(DR) ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE LD. COMMISSIONER OF INCOME T AX PASSED U/S. 263 AND U/S. 271(1)(C) OF THE I.T. ACT RESPECTIVELY . ITA NO. 2078/DEL/2011 ITA NO. 2078/DEL/2011 ITA NO. 2078/DEL/2011 ITA NO. 2078/DEL/2011 2. THIS APPEAL BY THE ASSESSEE PERTAINS TO ASSESSME NT YEAR 2005-06 AND IS AGAINST ORDER U/S. 263 DATED 28.3.2011. 3. IN THIS CASE LD. CIT NOTED THAT ON EXAMINATION OF RECORDS IT WAS FOUND THAT THE AO HAD FAILED TO INVESTIGATE THE ADV ANCE OF RS. 12,00,000/- RECEIVED BY THE ASSESSEE FROM M/S KHANNA PLANTATION PVT. LTD. WHICH WAS ADVANCED TO HER FOR THE PURCHASE OF FDR. THE COMPANY POSSESSED RS. 10,90,965/- AS ACCUMULATED PRO FITS IN THE FORMS OF RESERVES AND SURPLUSES. SINCE THE ASSESSEE IS A SHARE HOLDER ITA NOS. 2078/DEL/2011 & 3268/DEL/2012 2 OF OVER 10% SHARES IN THE COMPANY M/S KHANNA PLANTATI ON PVT. LTD., THE AMOUNT OF RS. 10,90,965/- WAS REQUIRED TO BE AS SESSED IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND INCOME OF THE ASSESSEE AS PER SECTION 2(22)(E) OF THE I.T., ACT, 1961. WHIL E COMPLETING THE ASSESSMENT THE AO HAD FAILED TO ASSESS THE AMOUNT O F RS. 10,90,965/- AS DEEMED DIVIDED IN THE HANDS OF THE ASSESSEE U/S. 2(22)(E) OF THE I.T. ACT, 1961. 4. PURSUANT TO NOTICE U/S. 263 THE ASSESSEES COUNS EL INFORMED THAT THE SHARE APPLICATION MONEY OF RS. 20,39,000/- WAS LYING WITH M/S KHANNA PLANTATION PVT LTD. IN THE NAME OF ASSESSEES H USBAND SH. INDERJEET KHANNA AGAINST WHICH THE SHARES COULD NOT BE ALLOTTED. THE PAYMENT OF RS. 12 LACS WHICH WAS RECEIVED BY THE COMP ANY BY SELLING THE POPULAR PLANTS HELD BY IT WAS IN FACT THE REFUN D THE SHARE APPLICATION MONEY TO SH. INDERJEET KHANNA, HUSBAND OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT FDR MADE FOR RS. 12 LACS PURSUANT TO THE SAID WITHDRAWAL WAS MADE IN THE JOINT NAMES OF SH. IN DERJEET KHANNA AND SMT. NEELAM KHANNA FOR A PERIOD OF THREE MONTHS. HOWEVER, LD. CIT WAS NOT CONVINCED. HE DIRECTED THAT A SUM OF RS. 10,90,965/- BE ADDED U/S 2(22)(E) OF THE I.T. ACT IN THE HANDS OF THE ASSESSEE. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. AT THE OUTSET, LD. COUNSEL OF THE ASSESSEE SUBMITTED TH AT ON THIS VERY ISSUE OF DEEMED DIVIDEND, ASSESSEES ASSESSMENT WAS REOPEN U/S. 148 OF THE I.T. ACT. AFTER CONSIDERING THE ISSUE AND D ISCUSSING THE ASSESSEES REPLY IN THIS REGARD, THE AO HAS NOT AD DED THE SAID AMOUNT U/S 2(22)(E) OF THE I.T. ACT. HENCE, LD. COUNSEL O F THE ASSESSEE SUBMITTED THAT THE AO HAS DULY APPLIED HIS MIND AND HE HAS COME TO ITA NOS. 2078/DEL/2011 & 3268/DEL/2012 3 THE CONCLUSION THAT DEEMED DIVIDEND U/S 2(22)(E) OF THE I.T. ACT, IN THIS CASE DO NOT ARISE IN THE HANDS OF THE ASSESSEE. HE NCE, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ASSUMPTION OF JURISDICTION OF THE LD. CIT U/S. 263 OF THE I.T. ACT IS TOTALLY INVALID. ON ME RITS OF THE CASE, THE LD COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY ALREADY OWED A SUM OF RS. 20,39,000 TO THE ASSESSEES HUSBAN D FOR SHARE APPLICATION MONEY. AGAINST THE SAID SUM, A SUM RS. 12 LACS WAS PAID FOR FDR IN THE JOINT NAME OF ASSESSEE AND HER H USBAND. LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT UPON MATURITY OF THE FDR, THE AMOUNT INVOLVED WAS ALSO DEPOSITED IN THE AC COUNT OF THE ASSESSEES HUSBAND. HENCE, LD. COUNSEL OF THE ASSE SSEE SUBMITTED THAT THERE IS NO QUESTION OF DEEMED DIVIDEND U/S. 2( 22)(E) IN THE HANDS OF THE ASSESSEE. LD. COUNSEL OF THE ASSESSEE FURTH ER SUBMITTED THAT ASSESSEE AND HER HUSBAND ARE THE ONLY TWO SHARE HOL DERS AND DIRECTORS OF THIS COMPANY. 7. LD. DR ON THE OTHER HAND SUBMITTED THAT AO HAS NO T GIVEN HIS FINDING ON THIS ISSUE. HENCE, ASSUMPTION OF JURISD ICTION BY THE LD. CIT U/S. 263 WAS VALID. HE FURTHER SUPPORTED THE ORDER OF THE LD. CIT. 8. UPON CAREFUL CONSIDERATION, WE FIND THAT SECTION 263(1) OF THE I.T. ACT POSTULATES THAT THE COMMISSIONER MAY CALL FOR AN EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ER RONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAK ING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER HEREON ITA NOS. 2078/DEL/2011 & 3268/DEL/2012 4 AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSE SSMENT AND DIRECTING A FRESH ASSESSMENT. 9. NOW IN THIS CASE, WE FIND THAT LD. CIT IN HIS OR DER HAS NOTED THAT IN THIS CASE WHILE COMPLETING THE ASSESSMENT THE AO HAS FAILED TO EXAMINE AND ASSESS THE AMOUNT OF RS. 10,90,965/- AS D EEMED DIVIDEND IN THE HANDS OF THE ASSESSEE U/S. 2(22)(E ) OF THE I.T. ACT. 10. UPON CAREFUL CONSIDERATION, WE FIND THAT THE CO MPANY M/S KHANNA PLANTATION PVT. LTD. HAD TWO SHARE HOLDERS BEING THE ASSESSEE AND HER HUSBAND. IT IS UNDISPUTED THAT A SHARE APPLICATI ON MONEY OF RS. 20,39,000/- WAS LYING WITH M/S KHANNA PLANTATION PVT. LTD. IN THE NAME OF ASSESSEES HUSBAND, INDERJEET KHANNA AGAINST WHI CH SHARES COULD NOT ALLOTTED. NOW THE COMPANY BY WAY OF REFUND OF THE ABOVE SAID SHARE APPLICATION MONEY OBTAINED A FDR OF RS. 12 LACS IN THE JOINT NAME OF ASSESSEES HUSBAND SH. INJDERJEET KHANNA AND SMT. NEELAM KHANNA, THE ASSESSEE. IN THESE CIRCUMSTANCES, WE F IND THAT A SUM OF RS. 12 LACS BEING FDR MADE IN THE JOINT NAME OF ASSESS EE AND HER HUSBAND WAS ADMITTEDLY REFUND AGAINST THE SHARE APPL ICATION OF RS. 20,39,000/-. THIS ASPECT WAS DULY EXAMINED AND ADJUDICATED BY THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES, WE AG REE THAT A SUM OF RS. 12 LACS CANNOT BE TREATED AS LOANS AND ADVANCE IN THE HANDS OF THE ITA NOS. 2078/DEL/2011 & 3268/DEL/2012 5 ASSESSEE FROM THE SAID COMPANY. IT WAS ONLY REFUND OF SHARE APPLICATION MONEY RECEIVED BY THE COMPANY FROM ASSESS EES HUSBAND SH. INJDERJEET KHANNA, WHICH WAS REFUNDED IN THE JOIN T NAME OF THE ASSESSEE AND HER HUSBAND. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ORDER U/S. 263 OF THE I.T. ACT IS NOT SUSTAINABLE. THE AO HAS PROPERLY APPLIED HIS MIND IN ASSESSMENT ORDER ON THE IMPUGNED ISSUE. HE HAS DISCUSSED THE SAME AND HE IS CORRECT IN HOLDING THAT ANY ADDITION IN THIS CASE IS CALLED FOR AS DEEMED DIVID END IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT U/S. 263 OF THE I.T. ACT. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO. 3268/DEL/2012 ITA NO. 3268/DEL/2012 ITA NO. 3268/DEL/2012 ITA NO. 3268/DEL/2012 12. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED REGARD ING THE PENALTY IMPOSED BY THE LD. CIT(A) ON THE ASSESSEE OF RS. 3,5 0,000/- U/S. 271(1)(C) OF THE I.T. ACT. 13. IN THIS CASE PURSUANT TO THE ORDER U/S. 263 AS DISCUSSED ABOVE ON ACCOUNT OF ADDITION OF RS. 10,90,965/- U/S. 271(1)( C) OF THE I.T. ACT. LD. CIT(A) HAS ALSO IMPOSED PENALTY OF RS. 3,43,752/- U /S. 271(1)(C) OF THE I.T. ACT. WE FIND THAT AS DISCUSSED ABOVE, WE HAVE ALREADY DELETED THE ADDITION AS MADE BY THE LD. CIT IN THIS REGARD. AS SUCH THERE IS NO BASIS WHICH NOW REMAINS FOR THE PURPOSE OF THIS PEN ALTY. ACCORDINGLY, ITA NOS. 2078/DEL/2011 & 3268/DEL/2012 6 ORDER OF THE LD. CIT(A) LEVYING THE PENALTY U/S. 27 1(1)(C) IN THIS CASE IS SET ASIDE AND LEVY OF PENALTY IS DELETED. 14. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/4/2014, U PON CONCLUSION OF HEARING. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 22/4/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NOS. 2078/DEL/2011 & 3268/DEL/2012 7 DATE OF DICTATION . DATE OF DICTATION . DATE OF DICTATION . DATE OF DICTATION . DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS.. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS.. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS.. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS.. DATE ON WHICH FAIR ORDER SENT TO MEMBER FOR SIGN ATURE DATE ON WHICH FAIR ORDER SENT TO MEMBER FOR SIGN ATURE DATE ON WHICH FAIR ORDER SENT TO MEMBER FOR SIGN ATURE DATE ON WHICH FAIR ORDER SENT TO MEMBER FOR SIGN ATURE DATE ON WHICH THE FAIR ORDER COMES BACK AFTER PRONO UNCEMENT TO THE SR. PS/PS. DATE ON WHICH THE FAIR ORDER COMES BACK AFTER PRONO UNCEMENT TO THE SR. PS/PS. DATE ON WHICH THE FAIR ORDER COMES BACK AFTER PRONO UNCEMENT TO THE SR. PS/PS. DATE ON WHICH THE FAIR ORDER COMES BACK AFTER PRONO UNCEMENT TO THE SR. PS/PS. DATE ON WHICH THE FILE G DATE ON WHICH THE FILE G DATE ON WHICH THE FILE G DATE ON WHICH THE FILE GOES TO THE BENCH CLERK OES TO THE BENCH CLERK OES TO THE BENCH CLERK OES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT R EGISTRAR FOR SIGNATURE ON THE ORDER THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT R EGISTRAR FOR SIGNATURE ON THE ORDER THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT R EGISTRAR FOR SIGNATURE ON THE ORDER THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT R EGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DESPATCH OF THE ORDER .. DATE OF DESPATCH OF THE ORDER .. DATE OF DESPATCH OF THE ORDER .. DATE OF DESPATCH OF THE ORDER ..