Astha Realestate Pvt. Ltd., Agra V. Dy. C.I.T.-4, Agra

ITA 343/AGR/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0418 (ITAT-AGRA)
• Duration Of Justice: 7 year(s) 8 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 08-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K SHARMA
• Assessee Lawyers: M M AGARWAL
• Keywords: Principle of natural justice; Deemed dividend; Set aside
• Section: 40A(3); 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA (SMC) BENCH, AGRA BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 343/AGRA/2011 ASSTT. YEAR : 2007-08 ASTHA REALESTATE PRIVATE LTD., VS. D.C.I.T. 4 , AGRA. B-154, KAMLA NAGAR, AGRA. (PAN : AAECA 7318 L) (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI M.M. AGARWAL, C.A. FOR RESPONDENT : SHRI A.K. SHARMA, JR. D.R. DATE OF HEARING : 27.12.2011 DATE OF PRONOUNCEMENT : 29.12.2011 ORDER THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 27.07.2011 PASSED BY THE THE LD. CIT(A)-II, AGRA ON THE FOLLOW ING GROUNDS : 1. BECAUSE ON DUE CONSIDERATION OF THE FACTS AND C IRCUMSTANCES OF THE CASE, GROUNDS RAISED AND SUBMISSIONS MADE, LEARNED CIT(APPEALS) HAS GROSSLY ERRED IN CONFIRMING ADDITION OF RS.179720 TOWARDS D EEMED DIVIDEND TOWARDS THE SUM RECEIVED BY THE APPELLANT FROM ASTHA MOTORS (P) LTD. 2. BECAUSE WHILE HOLDING SO, LEARNED CIT(APPEALS) ALTOGETHER IGNORED THE SUBMISSIONS AND MATERIAL PLACED BEFORE HIM TO THE E FFECT THAT :- (I). THE ISSUE WAS COVERED BY THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT, THE ORDERS OF BOMBAY HIGH COURT, DELHI HIGH COURT AND RAJASTHAN HIGH COURT IN ADDITION TO THE DECISION OF SPECIAL B ENCH OF HONBLE TRIBUNAL. (II). THE DECISION DATED 11.08.2009 OF HONBLE MUM BAI BENCH OF ITAT IN THE CASE OF UNIVERSAL INFRASERVICES (P) LTD. WAS UNREPORTED DECISION AND NOT RELIED AND REFERRED BY THE AO AND EVEN CIT(APPEALS) HAD NOT BROUGHT THE SAME TO THE NOTICE OF THE APPELLANT AND THUS COULD NOT HAVE BEEN RELIED UPON TO TAKE UNILATERAL DECISION AGAINST THE APPELLANT. 2 (III). THE DECISION DATED 11.08.2009 OF HONBLE MU MBAI BENCH OF ITAT IN THE CASE OF UNIVERSAL INFRASERVICES (P) LTD., BE ING CONTRARY TO THE DECISION OF SPECIAL BENCH OF HONBLE ITAT (2009) 118 ITD 1 (SB) , WAS ITSELF RECALLED BY THE HONBLE TRIBUNAL AND THUS WAS NOT A ORDER IN THE EY E OF LAW. (IV). THE ADDITION ITSELF WAS MADE IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE AND THE CIT(APPEALS) IGNORED THE BINDING DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF J.T. INDIA (EXPORTS) VS. UNION OF INDIA REPORTED AS (2003) 262 ITR 269 WHICH WAS DULY REFERRED AND RELIED BEFORE H IM. (V). THE CIT(APPEALS) ALSO IGNORED THE EFFECT OF A LTERNATE CONTENTION OF THE APPELLANT WHICH TOO WAS SUPPORTED BY THE DECISI ON OF HONBLE ITAT IN THE CASE OF ANIL KUMAR AGARWAL VS. ITO REPORTED AS (201 1) 51 DTR (MUMBAI)(TRIB) 251. (VI). THE ISSUE ON HAND WAS COVERED BY THE DECISIO N OF CIT (APPEALS)-II, AGRA IN THE OWN CASE OF APPELLANT FOR ASSESSMENT YE AR 2006-07 AND THE CIT (APPEALS) COMMITTED JUDICIAL INDISCIPLINE IN NOT FO LLOWING THE ORDER PASSED BY HIS PREDECESSOR. 3. BECAUSE ON THE DUE CONSIDERATION OF FACTS AND C IRCUMSTANCES OF THE ASE, SUBMISSIONS MADE AND PRECEDENCE RELIED UPON LEARNED CIT(APPEALS) ERRED IN NOT ADJUDICATING UPON THE ISSUE OF DISALLOWANCE OF INTE REST OF RS.380000 AND HELD THAT AO WOULD BE FREE TO MAKE DISALLOWANCE IN THE YEAR I N WHICH CLAIM IS MADE UNDER PROVISO TO SECTION 40(IA). THE CIT(APPEALS) RATHER OUGHT TO HAVE HELD THAT THE APPELLANT WOULD BE ENTITLED TO DISPUTE THE DISALLOW ANCE WHEN SAME IS SO DISALLOWED. 4. BECAUSE ON A DUE CONSIDERATION OF FACTS AND CIR CUMSTANCES OF THE CASE, SUBMISSIONS MADE AND PRECEDENCE RELIED UPON LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.140000 MADE BY TH E AO BY INVOKING PROVISIONS OF SECTION 40A(3) OF THE ACT. 5. BECAUSE ON A DUE CONSIDERATION OF FACTS AND CIR CUMSTANCES OF THE CASE, LEARNED CIT(APPEALS) HAS ERRED IN HOLDING THAT NOTH ING WAS STATED BY THEAR IN RESPECT OF GROUND NO. 8(A) AND 8(B) (AS RAISED BEFO RE APPELLATE COMMISSIONER) AND THUS DECLINING TO ADJUDICATE ON THOSE GROUNDS, IGNORING THE FACT THAT SPECIFIC SUBMISSIONS WERE MADE IN RESPECT OF GROUND NO. 8(A) , 8(B), 8(C) AND 8(D) IN PARAGRAPH 2.2 OF THE WRITTEN SUBMISSIONS FILED BEFO RE HIM AND HIS SPECIFIC ATTENTION WAS DRAWN TO THE RECTIFICATION APPLICATIO N FILED BEFORE THE AO AND THE COPY OF SAID APPLICATION WAS ALSO PLACED BEFORE CIT (APPEALS) AT PAGE NO. 22 TO 24 OF THE WRITTEN SUBMISSIONS. 6. BECAUSE THE ORDER APPEALED AGANST HAS BEEN PASS ED ON IPSI DIXIT, IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURA L JUSTICE. 3 2. THE FACTS NARRATED BY THE REVENUE AUTHORITIES AR E NOT DISPUTED BY BOTH THE PARTIES. THEREFORE, THERE IS NO NEED TO REPEAT THE SAME FOR THE SAKE OF CONVENIENCE. 3. AT THE TIME OF HEARING SHRI M.M. AGARWAL, C.A., THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE STATED THAT THE ISSUE INVOLVED IN GROUND N O. 1, 2 AND 3 IS COVERED BY THE DECISION OF ITAT, AGRA BENCH, AGRA PASSED IN ITA NO. 405/AGRA/2 010 (A.Y. 2006-07) IN ASSESSEES OWN CASE, I.E. DCIT 4(1) AGRA VS. M/S. ASTHA RESIDENCY PVT. LTD. HE HAS ALSO FILED A COPY OF THE SAID ORDER DATED 14.10.2011 AND DREW OUR ATTENTION TOWAR DS PAGE NOS. 80, 83 & 84 OF THE PAPER BOOK. HE REQUESTED THAT THE SAME ORDER BE PASSED IN THE P RESENT APPEAL BY DELETING THE ADDITION IN DISPUTE. 4. ON THE CONTRARY, THE LD. DR RELIED UPON THE IMPU GNED ORDER PASSED BY THE LD. CIT(A). 5. AFTER HEARING BOTH THE PARTIES AND THOROUGHLY GO ING THROUGH THE ORDER PASSED BY THIS BENCH, I AM OF THE CONSIDERED OPINION THAT THIS BEN CH HAS ADJUDICATED THE ISSUE INVOLVED IN GROUND NO. 1 TO 3 AND DECIDED THE SAME IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL FILED BY THE REVENUE. FOR THE SAKE OF CONVENIENCE, RELEVA NT FINDINGS AS CONTAINED IN PARA 5 TO 7 OF THE SAID ORDER ARE REPRODUCED AS UNDER : 5. WE HAVE HEARD BOTH THE SIDES AND HAVE ALSO PERU SED THE ORDER OF THE CIT(A). WE HAVE ALSO CONSIDERED THE CASE LAWS R ELIED UPON BY BOTH THE SIDES. AFTER HEARING THE RIVAL SUBMISSIONS WE HOLD THAT FI RSTLY, ASTHA REAL ESTATE PRIVATE LIMITED WAS NOT HAVING ACCUMULATED PROFITS WHICH CO ULD HAVE COME INTO THE AMBIT OF DEFINITION OF DEEMED DIVIDEND. AT THE BEGINNING OF THE YEAR, THE ACCUMULATED PROFITS WERE NIL. SECONDLY, THE ASSESSEE WAS NOT A SHARE HOLDER OF ASTHA REAL ESTATE PRIVATE LIMITED. HOWEVER, THERE WERE COMMON SHARE HOLDERS HAVING SUBSTANTIAL SHARE HOLDING. VARIOUS COURTS HAVE DECI DED THAT FOR THE PURPOSE OF 4 DEEMED DIVIDEND U/S. 2(22)(E) OF THE INCOME-TAX ACT , THE WORD USED IS SUCH SHARE HOLDERS AND SUCH SHARE HOLDERS MUST BE BOTH REGIST ERED SHARE HOLDERS AS WELL AS BENEFICIAL SHARE HOLDERS. THUS, THE DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF THE PERSON WHO IS SHARE HOLDER IN THE LEND ER COMPANY AND NOT IN THE HANDS OF THE PERSON OTHER THAN THE SHARE HOLDER. IN THIS CASE, THE TWIN CONDITION THAT SUCH SHARE HOLDERS SHOULD BE REGISTERED AS WEL L AS BENEFICIAL SHARE HOLDERS, IS NOT FULFILLED. THIRDLY, WE ALSO HOLD THAT THE SH ARE HOLDERS WERE HAVING SUBSTANTIAL DEPOSITS WITH THE LOAN GIVING COMPANY. SUCH ADVANCES GIVEN BY THE SAID COMPANY CAN, AT THE MOST, BE ATTRIBUTED TOWARD S THE DEPOSITS AND NOT TOWARDS THE DISTRIBUTION OF THE ACCUMULATED PROFITS. CONSID ERING ALL THESE ASPECTS, WE SUSTAIN THE ORDER OF THE CIT(A) ON THIS GROUND. 6. THE SECOND GROUND IN REVENUES APPEAL IS AGAINST RESTRICTING THE DISALLOWANCE OUT OF THE INTEREST ON BORROWED CAPITA L. THE ASSESSING OFFICER DISALLOWED THE INTEREST PAID TO THE FOLLOWING PERSO NS : SL. NO. NAME OF THE PARTY AMOUNT OF LOAN AMOUNT OF INTEREST 1 B.P. AGARWAL PROPERTIES 30,00,000 2,37,600 2 SHIV CHARAN AGARWAL 7,00,000 55,400 3 HI-TECH CONTAINERS 23,42,959 1,52,293 TOTAL RS.4,45,333 7. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE C IT(A) HAS CONFIRMED THE ADDITION OF RS.1,15,200/-. THE ADVANCES OF RS.14,40 ,000/- WERE MADE TO HI-TECH CONTAINERS ON 06.04.2005 ON THE BASIS OF THE FACTUA L FINDING THAT THE ASSESSEE HAS BORROWED ON 04.04.2005 FROM FORTUNE BUILDWELL (P) L TD. THUS, THERE WAS NEXUS BETWEEN BORROWING AND LENDING. THE BALANCE AMOUNTS DELETED AS THE REVENUE HAS FAILED TO ESTABLISH NEXUS BETWEEN THE BORROWING FUN DS AND THE DIVERSION OF THE SAME FOR THE NON-BUSINESS PURPOSE OR SAY INTEREST F REE ADVANCES TO THE SISTER CONCERN WITHOUT ANY BUSINESS NEED. THE LEARNED ARS CONTENTION THAT THE ADVANCES MADE TO B.P. AGARWAL PROPERTIES WERE TRADE ADVANCES AND THE PARTY WAS NOT RELATED TO THE ASSESSEE AND THESE WERE ALSO OLD ADVANCES COMING FROM THE PAST YEARS. THEREFORE, WE HOLD THAT REVENUE FAILED TO ESTABLISH NEXUS BETWEEN THE BORROWED FUNDS AND THESE ADVANCES. THERE IS NOTHING ON RECORD WHICH COULD SHOW THAT THESE ADVANCES WERE NOT TRADE ADVANCES. HENCE CIT(A) WAS JUSTIFIED IN DELETING THE SAME. FURTHER, IN RESPECT OF SHRI SHIV CHARAN AGARWAL ALSO, THE FINDING OF CIT (A) IS THAT THIS AMOUNT WAS RECEIVED ON THE LAST DAY OF THE FINANCIAL YEAR. NO INTEREST WAS PAYABLE FOR THE YEAR. NOTHING HAS BEEN SAID BY THE REVENUE AGAINST THIS FINDING. THEREFORE, CONSIDERING ALL TH ESE ASPECTS, WE SUSTAIN THE ORDER OF CIT(A) AND DISMISS THE GROUND RELATING TO THIS I SSUE. RESPECTFULLY FOLLOWING THE ORDER DATED 14.10.2011 P ASSED BY THIS BENCH IN ASSESSEES OWN CASE (SUPRA), THE ADDITIONS INVOLVED IN GROUND NO. 1 TO 3 ARE DELETED. 5 6. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 4 RE GARDING DISALLOWANCE OF RS.1,40,000/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVI SIONS OF SECTION 40A(3) OF THE ACT, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT OUT OF THE TOT AL PAYMENT OF RS.35,00,000/- FOR THE PURCHASE OF LAND DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE MADE PAYMENT OF RS.7,00,000/- IN CASH, BUT SINCE THE LAND SO PURCHASED REMAINED AS STOCK A ND NO PAYMENT MADE IN CASH WAS CLAIMED AS EXPENDITURE, THERE REMAINS NO JUSTIFICATION FOR DIS ALLOWANCE OF ALLEGED EXPENDITURE BY RESORTING TO THE PROVISIONS OF SECTION 40A(3) OF THE ACT. REL IANCE IS PLACED ON THE DECISION DATED 07.01.2010 OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SARGODHA FINANCE CO. LTD. IN ITA NO. 79 OF 2007. 7. ON THE CONTRARY, THE LD. DR RELIED ON THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY. 8. AFTER HEARING THE BOTH PARTIES AND PERUSING THE MATERIAL AVAILABLE BEFORE ME AS WELL AS THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. SARGODHA FINANCE CO. (SUPRA), I AM OF THE CONSIDERED OPINION THAT THE LD . FIRST APPELLATE AUTHORITY HAS SUSTAINED THE DISALLOWANCE OF RS.1,40,000/- U/S. 40A(3) OF THE AC T. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF EXPENDITURE, THE P AYMENT OF WHICH MADE IN CASH. THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORESAID DECISION HAS DECIDED THE SIMILAR CONTROVERSY IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : A BARE PERUSAL OF SECTION 40A(3) OF THE ACT SHOWS THAT IT CONTEMPLATES DISALLOWANCE OF THE EXPENDITURE WHICH IS CLAIMED AS A DEDUCTION IN CASE PAYMENT IS MADE IN CASH EXCEEDING RS.20,000/-. IN CASE, IF ANY AMOUNT IS NOT CLAIMED AS DEDUCTION THE QUESTION OF ITS DISALLOWANCE DOES NOT ARISE. THE TRIBUNAL HELD THAT 6 THE IMPUGNED AMOUNT HAS NOT BEEN CLAIMED AS DEDUCTI ON IN PROFIT AND LOSS ACCOUNT AND THEREFORE, THE PROVISION OF SECTION 40A (3) DOES NOT APPLY. WE ARE OF THE VIEW THAT THE TRIBUNAL HAS RIGHTLY HELD SO. 9. IN VIEW OF THE AFORESAID OBSERVATIONS OF THE HON BLE JURISDICTIONAL HIGH COURT, THE DISALLOWANCE OF RS.1,40,000/- MADE BY ASSESSING OFF ICER AND SUSTAINED BY LD. FIRST APPELLATE AUTHORITY DESERVES TO BE DELETED. 10. AS REGARDS TO THE ISSUE INVOLVED IN GROUND NO. 5 REGARDING NON-ADJUDICATING THE GROUND NO. 8(A) AND 8(B) WHICH THE ASSESSEE RAISED BEFORE THE LD. FIRST APPELLATE AUTHORITY, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TOWARDS THE ORI GINAL GROUNDS OF APPEAL RAISED BEFORE THE LD. CIT(A) IN FORM NO. 35. THE LD. COUNSEL FOR THE ASSE SSEE STATED THAT THE ISSUE INVOLVED IN GROUND NO. 5 MAY BE SET ASIDE TO THE LD. CIT(A) TO ADJUDIC ATE THE SAME AND DECIDE AS PER LAW. 11. ON THE CONTRARY, THE LD. DR RELIED ON THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY. 12. AFTER HEARING THE BOTH PARTIES AND PERUSING THE CONTENTION OF GROUNDS RAISED BEFORE THE LD. FIRST APPELLATE AUTHORITY AS WELL AS IN THE PRESENT APPEAL, I AM OF THE CONSIDERED OPINION THAT THE LD. FIRST APPELLATE AUTHORITY HAS WRONGLY STATED TH AT DURING THE COURSE OF APPELLATE PROCEEDINGS, NOTHING HAS BEEN STATED BY THE LD. AR OF THE APPELL ANT IN RESPECT OF THESE GROUNDS. HENCE, THE LD. FIRST APPELLATE AUTHORITY HAS DISMISSED THE SAME. I N THE INTEREST OF JUSTICE AND KEEPING IN VIEW THE STATEMENT MADE BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE ME, I AM OF THE OPINION THAT THE REQUEST OF SHRI M.M. AGARWAL, C.A. WHO HIMSELF APPEARED BEF ORE THE LD. FIRST APPELLATE AUTHORITY, IS GENUINE. THEREFORE, I SET ASIDE THE ISSUE INVOLVED IN GROUND NO. 5 AND RESTORE THE SAME BACK TO THE LD. CIT(A) TO ADJUDICATE THE SAME AS PER LAW AF TER HEARING THE ASSESSEE. 7 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.12.2011. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED: 29 TH DECEMBER, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY