Manav Kumar Saraf, Kolkata V. A.C.I.T.,Circle-37, Kolkata

ITA 340/KOL/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6087 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 20-03-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PRAMOD HIMMATSINGHKA
• Keywords: Depreciation; Deemed dividend
• Section: 2(22)(e); 143(1)

Judgement Text

ITA NO. 340/KOL/2020 ASSE SSMENT YEAR: 2013-2014 MANAV KUMAR SARAF 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A(SMC) BENCH, KOLKATA [VIRTUAL COURT HEARING] BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT I.T.A. NO. 340/KOL/2020 ASSESSMENT YEAR: 2013-2014 MANAV KUMAR SARAF,................................. ............................ APPELLANT 14B, HALDER LANE, BOWBAZAR, BEHIND YOGAYOG BHAWAN, KOLKATA-700012 [PAN:AKTPS7234D] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ............... RESPONDENT CIRCLE-37, KOLKATA, 3, GOVERNMENT PLACE WEST, ROOM NO. 13, 2 ND FLOOR, KOLKATA-700001 APPEARANCES BY: SHRI PRAMOD HIMMATSINGHKA, A.R., APPEARED ON BEHALF OF THE ASSESSEE SHRI JAYANTA KHANRA, JCIT, SR. D.R., APPEARED ON BE HALF OF THE REVENUE DATE OF CONCLUDING THE HEARING : MARCH 30, 2021 DATE OF PRONOUNCING THE ORDER : APRIL 23, 2021 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-11, KOLKATA DA TED 23.05.2019 . 2. AT THE OUTSET, IT IS NOTED THAT THERE IS A DELAY OF 199 DAYS ON THE PART OF THE ASSESSEE IN FILING THIS APPEAL BEFORE T HE TRIBUNAL. IN THIS REGARD, THE ASSESSEE HAS MOVED AN APPLICATION SEEKI NG CONDONATION OF THE SAID DELAY AND KEEPING IN VIEW THE REASONS GIVEN TH EREIN, I AM SATISFIED THAT THERE WAS A SUFFICIENT CAUSE FOR THE DELAY OF 199 DAYS ON THE PART OF THE ASSESSEE IN FILING THIS APPEAL BEFORE THE TRIBU NAL. EVEN THE LD. D.R. HAS NOT RAISED ANY OBJECTION IN THIS REGARD. THE SAID D ELAY IS ACCORDINGLY CONDONED AND THIS APPEAL OF THE ASSESSEE IS BEING D ISPOSED OF ON MERIT. ITA NO. 340/KOL/2020 ASSE SSMENT YEAR: 2013-2014 MANAV KUMAR SARAF 2 3. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPEA L READ AS UNDER:- 1. THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CAS E LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.5,10,590/- M ADE BY AO INVOKING SECTION 2(22)(E) BEING THE AMOUNT OF LOAN OR ADVANCE RECEIVED BY THE ASSESSEE SHAREHOLDER FROM M/S. AKSH AT PLYWOOD (P) LTD.; DESPITE SUCH AMOUNT WAS RECEIVED IN THE O RDINARY COURSE OF HIS BUSINESS AND INTEREST WAS PAID BY THE ASSESSEE ON THE SAID AMOUNT, THE ADDITION SO MADE IS LIABLE TO BE DELETED. 2. THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN DISALLOWING INTEREST PAID ON HOUSING LOAN RS.3,68,115/- (RS. 5,18,115 -RS.1,50,000 DEDUCTION CLAIMED U/S 24B) ARBITRARILY, ALTHOUGH THE SAID INTEREST RS.3,6 8,115/- WAS NOT CLAIMED BY THE APPELLANT AND WAS NOT MATTER OF DISPUTE. 3. THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CASE , LD. CIT(A) ERRED IN NOT CONSIDERING THE DEPRECIATION DISALLOWA NCE RS.76,401/- ON MOTOR CAR, DISALLOWANCE OF MOTOR CAR MAINTENANCE RS.38,800/- MADE BY AO. 4. AS REGARDS THE ISSUE RAISED IN GROUND NO. 1 RELA TING TO THE ADDITION OF RS.5,10,590/- MADE ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT, THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, WHO IS ENGAGED IN THE BUSINESS OF TR ADING AND RETAILING OF PLY AND ALLIED PRODUCTS. THE RETURN OF INCOME FOR T HE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 09.10.2013 DECLAR ING TOTAL INCOME OF RS.15,42,711/-. ALTHOUGH THE SAID RETURN WAS INITIA LLY PROCESSED BY THE ASSESSING OFFICER UNDER SECTION 143(1) OF THE ACT, IT WAS SUBSEQUENTLY SELECTED FOR SCRUTINY IN CASS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICE R THAT THE ASSESSEE WAS 50% SHAREHOLDER OF THE COMPANY, NAMELY M/S. AKSHAT PLYWOODS PVT. LTD. AND HAD TAKEN A LOAN AMOUNTING TO RS.7,68,000/- FRO M THE SAID COMPANY DURING THE YEAR UNDER CONSIDERATION. ACCORDING TO T HE ASSESSING OFFICER, THE SAID TRANSACTION WAS FALLING WITHIN THE PURVIEW OF SECTION 2(22)(E) OF THE ACT AND SINCE M/S. AKSHAT PLYWOODS PVT. LTD. WA S HAVING SUFFICIENT RESERVE AND SURPLUS, WHICH WAS MORE THAN THE LOANS AND ADVANCES GIVEN TO THE ASSESSEE, THE AMOUNT OF RS.7,68,000/- WAS AD DED BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE AS DEEM ED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. ITA NO. 340/KOL/2020 ASSE SSMENT YEAR: 2013-2014 MANAV KUMAR SARAF 3 5. THE ADDITION MADE BY THE ASSESSING OFFICER ON AC COUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT WAS CHAL LENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS). DU RING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(APPEALS), IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE RELEVANT TRANSACTIO NS WITH M/S. AKSHAT PLYWOODS PVT. LIMITED WERE PURELY OF BUSINESS NATUR E AND, THEREFORE, SECTION 2(22)(E) HAD NO APPLICATION. THE LD. CIT(AP PEALS), HOWEVER, FOUND THAT THERE WAS ANOTHER ACCOUNT IN THE BOOKS OF AKSH AT PLYWOODS PVT. LIMITED STANDING IN THE INDIVIDUAL NAME OF THE ASSE SSEE AND THERE WAS AN ADDITION OF RS.5,10,590/- IN THE SAID ACCOUNT REPRE SENTING LOAN STANDING IN THE NAME OF AKSHAT PLYWOODS PVT. LIMITED. SINCE THESE TRANSACTIONS IN THE NATURE OF LOAN WERE NOT BUSINESS TRANSACTIONS, THE LD. CIT(APPEALS) TREATED THE AMOUNT OF RS.5,10,590/- AS DEEMED DIVID END AND ADDITION MADE BY THE ASSESSING OFFICER TO THAT EXTENT UNDER SECTION 2(22)(E) WAS SUSTAINED BY HIM. 6. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS INVITED MY ATTENTION TO THE EXTRACT OF LEDGER ACCOU NT OF THE ASSESSEE IN THE BOOKS OF M/S. AKSHAT PLYWOODS PVT. LTD. PLACED AT PAGE NO. 5 OF THE PAPER BOOK TO SHOW THAT INTEREST OF RS.42,590/- WAS PAID BY THE ASSESSEE TO M/S. AKSHAT PLYWOODS PVT. LIMITED ON THE OUTSTAN DING LOAN AMOUNT DURING THE YEAR UNDER CONSIDERATION. IN THIS REGARD , HE HAS RELIED ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KUMAR MALHOTRA VS.- CIT (ITA NO. 219 OF 2003) DATED AUGU ST 02, 2011, WHEREIN IT WAS HELD THAT IF SUCH LOAN OR ADVANCE IS GIVEN BY THE COMPANY TO A SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDE RATION WHICH IS BENEFICIAL TO THE COMPANY RECEIVED FROM SUCH A SHAR EHOLDER, SUCH ADVANCE OR LOAN CANNOT BE SAID TO BE DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. EXPLAINING FURTHER IT WAS OBSERVED BY THEIR LORDSHIPS THAT THE GRATUITOUS LOAN OR ADVANCE GIVE N BY A COMPANY TO ITA NO. 340/KOL/2020 ASSE SSMENT YEAR: 2013-2014 MANAV KUMAR SARAF 4 THOSE CLASSES OF SHAREHOLDERS WOULD COME WITHIN THE PURVIEW OF SECTION 2(22)(E) BUT NOT THE LOANS OR ADVANCES WHICH ARE GI VEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREH OLDER. IN THE PRESENT CASE, THE AMOUNT OF LOAN IN QUESTION WAS GI VEN TO THE ASSESSEE BY THE CONCERNED COMPANY ON INTEREST AND SINCE THE SAI D LOAN WAS NOT A GRATUITOUS ONE AND WAS GIVEN IN RETURN TO AN ADVANT AGE CONFERRED UPON THE COMPANY BY THE ASSESSEE IN THE FORM OF INTEREST , I FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAME CANNOT BE TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SE CTION 2(22)(E) OF THE ACT. EVEN THE LD. D.R. HAS NOT BEEN ABLE TO RAISE A NY CONTENTION TO REBUT OR CONTROVERT THIS POSITION. I, THEREFORE, RESPECTFULL Y FOLLOW THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F PRADIP KR. MALHOTRA (SUPRA) AND DELETE THE ADDITION MADE BY THE ASSESSI NG OFFICER AND SUSTAINED BY THE LD. CIT(APPEALS) ON ACCOUNT OF DEE MED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. GROUND NO. 1 OF THE AS SESSEES APPEAL IS ACCORDINGLY ALLOWED. 7. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 2, T HE LIMITED CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESS EE IS THAT DEDUCTION ON ACCOUNT OF INTEREST ON HOUSING LOAN WAS CLAIMED BY THE ASSESSEE ONLY TO THE EXTENT OF RS.1,50,000/- UNDER SECTION 24(B) OF THE ACT AND NOT RS.5,18,115/- AS WRONGLY TAKEN BY THE LD. CIT(APPEA LS). HE HAS CONTENDED THAT THE DISALLOWANCE OF RS.3,68,115/- MADE BY THE LD. CIT(APPEALS) ON ACCOUNT OF INTEREST ON HOUSING LOAN THUS IS NOT SUS TAINABLE. THE LD. D.R. HAS CONTENDED THAT THIS CLAIM MADE BY THE LD. COUNS EL FOR THE ASSESSEE REQUIRES VERIFICATION BY THE ASSESSING OFFICER. SIN CE THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO NOT RAISED ANY OBJECTION FOR GETTING THIS MATTER VERIFIED BY THE ASSESSING OFFICER, I RESTORE THIS I SSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFY ING THE CLAIM OF THE ASSESSEE THAT DEDUCTION ON ACCOUNT OF INTEREST ON H OUSING LOAN WAS CLAIMED ONLY TO THE EXTENT OF RS.1,50,000/- AND NOT RS.5,18,115/- AS WRONGLY TAKEN BY THE LD. CIT(APPEALS). IF THE CLAIM OF THE ASSESSEE IS ITA NO. 340/KOL/2020 ASSE SSMENT YEAR: 2013-2014 MANAV KUMAR SARAF 5 FOUND TO BE CORRECT ON VERIFICATION, THE ASSESSING OFFICER SHALL DELETE THE DISALLOWANCE OF RS.3,68,115/- AS DIRECTED TO BE MAD E BY THE LD. CIT(APPEALS) ON THIS ISSUE. GROUND NO. 2 OF THE ASS ESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 8. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 3 RE LATING TO THE DISALLOWANCE OF DEPRECIATION ON MOTOR CAR AMOUNTING TO RS.76,401/- AND DISALLOWANCE ON MOTOR CAR MAINTENANCE AMOUNTING TO RS.38,800/-, IT IS OBSERVED THAT THE ASSESSEE WAS OWNER OF TWO CARS, O NE CHEVROLET BEAT AND THE OTHER MARUTI VAN. SINCE THE MARUTI VAN WAS BEIN G USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS, DEPRECIATION CLAIMED ON THE SAID CAR WAS ALLOWED BY THE ASSESSING OFFICER. THE CLAIM OF DEPRECIATION AMOUNTING TO RS.76,401/- MADE BY THE ASSESSEE ON AC COUNT OF CHEVROLET BEAT CAR, HOWEVER, WAS DISALLOWED BY THE ASSESSING OFFICER. IN MY OPINION, EVEN THOUGH THE PERSONAL USE OF CHEVROLET BEAT CAR BY THE ASSESSEE CANNOT BE RULED OUT, THE CLAIM OF THE ASSE SSEE FOR DEPRECIATION ON THE SAID CAR CANNOT BE ENTIRELY DISALLOWED AND I T WILL BE FAIR AND REASONABLE TO RESTRICT THE SAME TO ONE-THIRD FOR SU CH PERSONAL USE AS THE CLAIM OF THE ASSESSEE OF HAVING USED THE SAID CAR F OR BUSINESS PURPOSE ALSO CANNOT BE OUTRIGHTLY REJECTED. I, THEREFORE, D IRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE MADE ON ACCOUN T OF DEPRECIATION OF CHEVROLET BEAT CAR TO THE EXTENT OF 1/3 RD . SIMILARLY THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CAR MAINTENA NCE FOR PERSONAL USE TO THE EXTENT OF 50% IS DIRECTED TO BE RESTRICTED T O ONE-THIRD. GROUND NO. 3 OF THE ASSESSEES APPEAL IS ACCORDINGLY PARTLY AL LOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 23 RD , 2021. SD/- (P.M. JAGTAP) VICE-PRESIDE NT KOLKATA, THE 23 RD DAY OF APRIL, 2021 ITA NO. 340/KOL/2020 ASSE SSMENT YEAR: 2013-2014 MANAV KUMAR SARAF 6 COPIES TO : (1) MANAV KUMAR SARAF, 14B, HALDER LANE, BOWBAZAR, BEHIND YOGAYOG BHAWAN, KOLKATA-700012 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-37, KOLKATA, 3, GOVERNMENT PLACE WEST, ROOM NO. 13, 2 ND FLOOR, KOLKATA-700001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-11, KOLK ATA; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.