RAJESH L. DURGANI, MUMBAI V. ACIT CIR 18(3),

ITA 3362/MUM/2008

• Counselvise Citation: 336219914 RSA 2008
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 19-09-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 13-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.3362/MUM/2008 (ASSESSMENT YEAR: 1996-97) SHRI RAJESH L. DURGANI, 505, OWNERS INDUSTRIAL ESTATE, L.J. ROAD, MAHIM, MUMBAI -400 016 ....... APPELLANT VS ACIT -CIRCLE-18(3), MUMBAI -400 0 ..... RESPONDENT PAN : AACPD 2487 D APPELLANT BY : SHRI VIMAL PUNMIYA RESPONDENT BY : SHRI A.K. NAYAK DATE OF HEARING : 19. 09.2011 DATE OF PRONOUNCEMENT: 30.09.201 1 O R D E R PER R.S. PADVEKAR, JM: IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDE R OF THE LD. CIT (A)-28 MUMBAI DATED 29.03.2008 FOR THE A.Y. 199 6-97. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND:- 1. THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF ` 3,51,432/- OF INCOME TAX ACT, 1961. 2. THE ASSESSEE IS AN INDIVIDUAL AND THE DIRECTOR O F M/S. ASHRAJ FOODS AND BEVERAGES P. LTD. (IN SHORT M/S. ASHARAJ FOODS). THE SHRI RAJESH L. DURGANI ITA NO. 2 ASSESSEE IS HAVING 87.5% SHARES IN THE SAID COMPANY . IT WAS NOTICED BY THE A.O THAT THE ASSESSEE HAD RECEIVED ADVANCE O F RS 1.15 CRORE FROM THE SAID COMPANY ON DIFFERENT DATES. THE A.O. TREATED THE SAID ADVANCE AS DEEMED DIVIDEND WITHIN THE MEANING OF SEC. 2(22)(E) OF THE I.T. ACT. THE A.O. MADE THE ADDITION OF RS 8,7 8,578/- TO THE EXTENT OF THE RESERVES/ACCUMULATED PROFIT OF THE CO MPANY. THE ASSESSEE TOOK STAND THAT THE SAID AMOUNT WAS RECEIV ED BY HIM BY WAY OF LEASE DEPOSIT FOR LEASING OUT THE PREMISES/GALAS TO M/S. ASHARAJ FOODS AND THE SAID AMOUNT WAS AGAIN WRITTEN BACK TO THE COMPANY AS SHARE APPLICATION MONEY AND THERE WAS NO PERSONAL B ENEFIT TO THE ASSESSEE. THE A.O. TURNED DOWN THE PLEA OF THE ASS ESSEE AND HELD THAT AS THERE WAS NO WRITTEN EVIDENCE TO SHOW THAT THE ASSESSEE HAS LET OUT THE PREMISES TO M/S. ASHARAJ FOODS, THE SAI D AMOUNT CANNOT BE TREATED AS A DEPOSIT TOWARDS LEASING OUT THE PRE MISES. THE ASSESSEE STATED BEFORE THE A.O. THAT THERE WAS NO W RITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE SAID COMPANY. THE SA ID ADDITION REACHED BEFORE THE TRIBUNAL AND NOW THE SAME HAS BE EN CONFIRMED. THE A.O. INITIATED THE PENALTY PROCEEDINGS U/S.271( 1)(C) OF THE ACT FOR CONCEALING THE PARTICULARS OF THE INCOME AS WELL AS FURNISHING INACCURATE PARTICULARS TO THE EXTENT OF RS 8,78,578 /- AND LEVIED THE PENALTY OF RS 3,51,432/-. THE ASSESSEE CHALLENGED THE PENALTY BEFORE THE LD. CIT (A) BY TAKING THE PLEA THAT THE ADDITIO N IS MADE UNDER THE DEEMING PROVISION AND HENCE, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ANY INCOME OR PARTICULARS OF INCOME. THE CONTENTION OF THE ASSESSEE WAS AGAIN REJECTED BY THE LD. CIT (A) AND PENALTY WAS CONFIRMED. NOW, THE ASSESSEE IS IN APPEAL BEFORE U S. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND PERUSED THE RECORDS AND ALSO CONSIDERED THE CASE LAWS RELIE D ON BY BOTH THE PARTIES. ADMITTEDLY, IN THE PRESENT CASE, THE PENA LTY LEVIED IN RESPECT OF ADDITION U/S.2(22)(E) OF THE ACT TREATING THE AD VANCES RECEIVED BY THE ASSESSEE AS A DIVIDEND FOR THE PURPOSE OF TAXAT ION. THOUGH THE DIFFERENT CONTENTION IS TAKEN BY THE ASSESSEE BUT A LL THE CONTENTIONS IN SHRI RAJESH L. DURGANI ITA NO. 3 RESPECT OF THE LEASING OUT OF THE INDUSTRIAL GALAS WERE REJECTED BUT THE FACT REMAINS THAT THE ADDITION IS MADE UNDER THE DEEMING THE PROVISION OF THE ACT. IT IS PERTINENT TO TAKE INTO CONSIDERATION ONE OF THE ASPECTS OF SEC. 2(22)(E) IS THAT IF THERE IS NO T ACCUMULATED IN THE HANDS OF THE COMPANY THEN IN SPITE OF THE ADVANCES, NO ADDITION CAN BE MADE. IN THE PRESENT CASE ALSO AS PER THE FACTS ON RECORD, THE ASSESSEE HAS RECEIVED ADVANCE OF RS 1.15 CRORE FROM M/S. ASHARAJ FOODS BUT DEEMED DIVIDEND U/S.2(22)(E) IS RESTRICTED TO THE EXTENT OF RS 8,78,578/- WHICH ACCORDING TO THE A.O. WAS AVAIL ABLE ACCUMULATED PROFIT IN THE SAID COMPANY. WE ARE OF THE OPINION THAT THAT THIS IS NOT FIT CASE WHERE IT CAN BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF THE INCOME. MOREOVER, THIS ISSUE HAS BEEN ALREADY RESTORED TO THE FILE OF THE A.O. FOR DETERMINING/WO RKING OUT AN ACCUMULATED PROFIT ON THE DATE OF EACH AND EVERY AD VANCE. UNDER THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE PENAL TY LEVIED BY THE A.O. IS NOT SUSTAINABLE AND WE ACCORDINGLY DELETE T HE PENALTY. 4. IN THE RESULT, ASSESSEES APPEALS IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0TH SEPTEMBER 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATED : 30TH SEPTEMBER 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -28, MUMBAI. 4) THE CIT-18, MUMBAI. 5) THE D.R. G BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN SHRI RAJESH L. DURGANI ITA NO. 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 19/20.09.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 25.09.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER