Sri. Sardar Iqbal Singh, Secunderabad V. Joint Commissioner of Income Tax, Range 8, Hyderabad

ITA 349/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87310 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Unexplained cash credit; Opportunity of being heard; Corroborative evidences; Deemed dividend
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 349/HYD/2014 ASSESSMENT YEAR: 2009-10 SRI SARDAR IQBAL SINGH, HYDERABAD PAN AFVPS 5233H VS. JOINT COMMISSIONER OF INCOME-TAX, RANGE 8, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.C. DEVDAS REVENUE BY : SHRI RAJAT MITRA DATE OF HEARING 10-02-2015 DATE OF PRONOUNCEMENT 18-02-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST OR DER DATED 13/12/2013 PASSED BY LD. CIT(A)-III, HYDERABAD FOR A.Y. 2009-10. 2. ASSESSEE HAS RAISED FIVE GROUNDS. GROUND NOS. 1 & 5 ARE GENERAL IN NATURE, HENCE, DO NOT REQUIRE ANY SPECIF IC ADJUDICATION. 3. GROUND NO. 2 IS IN RELATION TO ADDITION OF RS. 21,50,000 U/S 68 OF THE ACT MADE BY AO AND CONFIRMED BY LD. CIT(A). 4. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE, ASSESSEE AN INDIVIDUAL IS ENGAGED IN THE BUSINESS OF MANUFAC TURE AND SELLING OF ALUMINUM TINS. FOR THE AY UNDER CONSIDERATION, A SSESSEE FILED HIS RETURN OF INCOME ON 30//09/2009 DECLARING TOTAL INCOME OF RS. 1,06,76,176. DURING THE ASSESSMENT PROCEEDING, AO H AVING NOTICED 2 ITA NO. 349/HYD/2014 SRI SARDAR IQBAL SINGH THAT ASSESSEE HAS RECEIVED UNSECURED LOAN OF RS. 21 ,50,000 FROM HIS SON SRI ANKIT SINGH, CALLED UPON ASSESSEE TO FU RNISH THE BANK STATEMENT, CONFIRMATION LETTER, IT PARTICULARS OF S RI ANKIT SINGH TO PROVE THE LOAN TRANSACTION. AFTER VERIFYING THE DET AILS SUBMITTED BY ASSESSEE, AO FOUND THAT SRI ANKIT SINGH WAS IN RECE IPT OF RS. 5,000 PER MONTH AS INTEREST INCOME. HOWEVER, HUGE TRANSAC TIONS WERE CARRIED OUT THROUGH HIS BANK ACCOUNT. WHEN ASSESSEE WAS ASKED TO FURNISH THE SOURCES FOR DEPOSITS MADE IN THE BANK A CCOUNT OF SRI ANKIT SINGH, ASSESSEE SUBMITTED THAT SRI ANKIT SING H IS NOT ASSESSEE OF THE DEPARTMENT. IT WAS FURTHER STATED THAT AN AMOUNT OF RS. 21,50,000 SHOWN AS UNSECURED LOAN IS ACTUALL Y REFUND OF AN AMOUNT ADVANCED TO HIM BY BANK TRANSFER ON VARIOUS DATES. AO, HOWEVER, OBSERVED THAT BANK STATEMENT OF SHRI ANKIT SINGH DOES NOT SUPPORT THE CLAIM OF ASSESSEE. HE FURTHER NOTED THAT, AT THE RELEVANT TIME, SRI ANKIT SINGH WAS A MINOR. AO OBSE RVED THAT RS. 20 LAKH WAS DEPOSITED IN THE BANK ACCOUNT OF SRI AN KIT SINGH ON 12/06/2008, 16/06/2008 AND 18/06/2008, BUT SOURCE O F WHICH REMAINED UNEXPLAINED. AO FINALLY HELD THAT AS NO VA LID EXPLANATION TO EXPLAIN THE DEPOSITS MADE IN THE ACCOUNT OF SRI ANKIT SINGH WAS SUBMITTED BY ASSESSEE, GENUINENESS OF THE AMOUNT OF RS. 21,50,000 RECEIVED FROM SRI ANKIT SINGH ALSO REMAIN ED UNPROVED. ACCORDINGLY, AO TREATED THE SAID AMOUNT AS UNEXPLAI NED CREDIT AND ADDED IT TO THE INCOME OF ASSESSEE FOR THE IMPUGNED AY. BEING AGGRIEVED OF SUCH ADDITION, ASSESSEE PREFERRED AN A PPEAL BEFORE LD. CIT(A) LD. CIT(A) ALSO CONFIRMED THE ADDITION B Y CONCURRING WITH THE VIEW EXPRESSED BY AO. 5. LD. AR SUBMITTED BEFORE US THAT BOTH THE AO AS W ELL AS LD. CIT(A) HAS NOT APPRECIATED THE FACTS CORRECTLY. LD. AR SUBMITTED, THE UNSECURED LOAN IS NOTHING BUT ACTUALLY ASSESSEE S MONEY, WHICH WAS TRANSFERRED TO HIS MINOR SONS ACCOUNT TH ROUGH BANKING CHANNEL AND AGAIN RECEIVED BACK THROUGH BANKING CHA NNEL. FURTHER 3 ITA NO. 349/HYD/2014 SRI SARDAR IQBAL SINGH EXPLAINING, LD. AR SUBMITTED THAT AN AMOUNT OF RS. 50,000 WAS EARLIER TRANSFERRED FROM ASSESSEES BANK ACCOUNT NO . 06211000012121 ON 17/05/08 TO HIS SONS BANK ACCOUN T NUMBERED AS 06211000023345 IN HDFC BANK ACCOUNT AND THE AMOU NT WAS AGAIN RETURNED BACK TO ASSESSEE. IN SO FAR AS THE B ALANCE AMOUNT OF RS. 20,00,000 IS CONCERNED, LD. AR SUBMITTED THA T THIS AMOUNT WAS TRANSFERRED FROM THE BANK ACCOUNT OF M/S MIRRA PACKAGING, A PROPRIETARY CONCERN OF ASSESSEE TO HIS SONS ACCOUN T AND AGAIN TRANSFERRED BACK TO ASSESSEE FROM THE BANK ACCOUNT OF SRI ANKIT SINGH. THUS, IT WAS SUBMITTED BY LD. AR THAT THE SO URCE OF UNSECURED LOAN AND THE DEPOSITS IN THE BANK ACCOUNT OF SRI ANKIT SINGH WAS FULLY EXPLAINED. LD. AR FURTHER FAIRLY SU BMITTED THAT BEFORE AO AND LD. CIT(A) ASSESSEE COULD NOT RECONCI LE TRANSFER ENTRIES BY PRODUCING THE BANK ACCOUNT OF M/S MIRRA PACKAGING, WHICH WAS NOW SUBMITTED BEFORE THE TRIBUNAL. 6. THE LD. DR, ON THE OTHER HAND, HOWEVER, SUBMITTE D, AS NECESSARY EVIDENCE TO EXPLAIN THE UNSECURED LOAN AN D THE DEPOSITS IN THE BANK ACCOUNT OF SRI ANKIT SINGH, WHO WAS NOT ONLY A MINOR, BUT, IS ALSO NOT AN INCOME-TAX ASSESSEE AT THE REL EVANT POINT OF TIME WAS NOT PRODUCED BEFORE THE DEPARTMENTAL AUTHO RITIES, AO AS WELL AS LD. CIT(A) HAD NO OTHER OPTION, BUT, TO TRE AT THE CREDIT AS UNEXPLAINED. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD AS WELL AS ORDERS O F REVENUE AUTHORITIES. AS CAN BE CULLED OUT FROM THE ASSESSME NT ORDER AS WELL AS THE ORDER PASSED BY LD. CIT(A), ADDITION OF RS. 21,50,000 HAS BEEN MADE BY TREATING IT AS UNEXPLAINED CREDIT, MAI NLY, ON THE GROUND THAT ASSESSEE HAS FAILED TO EXPLAIN THE SOUR CE OF DEPOSITS IN THE BANK ACCOUNT OF SRI ANKIT SINGH AND AS A CONSEQ UENCE UNSECURED LOAN ALSO REMAINED UNEXPLAINED. HOWEVER, ON A PERUSAL 4 ITA NO. 349/HYD/2014 SRI SARDAR IQBAL SINGH OF ASSESSEES BANK ACCOUNT NUMBERED AS 062110000121 21, IT APPEARS ON 17/05/08, ASSESSEE HAS TRANSFERRED AN AM OUNT OF RS. 50,000 TO THE ACCOUNT OF SRI ANKIT SINGH BEARING NO . 06211000023345. SIMILARLY, FROM THE BANK ACCOUNT OF M/S MIRRA PACKAGING, WHICH IS STATED TO BE A PROPRIETARY CONC ERN OF ASSESSEE, AMOUNTS OF RS. 5 LAKH EACH WERE TRANSFERRED TO THE SAVINGS BANK ACCOUNT BEARING NO. 06211000023345 OF SRI ANKIT SIN GH ON 02/06/08 AND 16/06/08. SIMILARLY, AN AMOUNT OF RS. 10 LAKH WAS TRANSFERRED FROM THE ACCOUNT OF M/S MIRRA PACKAGING TO THE AFORESAID SAVINGS BANK ACCOUNT OF SRI ANKIT SINGH ON 18/06/08. ON A PERUSAL OF THE BANK STATEMENT RELATING TO SRI ANK IT SINGH AND M/S MIRRA PACKAGING PRODUCED BEFORE US, ASSESSEES STA TEMENT, TO CERTAIN EXTENT APPEARS TO BE CORRECT. HOWEVER, IT I S TO BE NOTED THAT ASSESSEE HAS NOT EXPLAINED THE SOURCE OF DEPOSITS I N THE ACCOUNT OF SHRI ANKIT SINGH AND SUBSEQUENT TRANSFER TO ASS ESSEE BY PRODUCING RELEVANT BANK STATEMENTS AS A RESULT OF W HICH ADDITION WAS MADE BY AO TREATING THE UNSECURED LOAN AS UNEXP LAINED. THEREFORE, CONSIDERING THE FACT THAT ASSESSEE BEFOR E US HAS PRODUCED RELEVANT BANK STATEMENTS AND EXPLAINED THE SOURCE OF DEPOSITS IN THE BANK ACCOUNT OF SHRI ANKIT SINGH AN D SUBSEQUENT TRANSFER TO ASSESSEES BANK ACCOUNT, WE ARE INCLINE D TO REMIT THE MATTER BACK TO THE FILE OF AO FOR VERIFYING THIS AS PECT AFTER EXAMINING THE RELEVANT BANK ACCOUNTS AND DECIDE THE ISSUE AFTER DUE OPPORTUNITY OF BEING HEARD TO ASSESSEE. WE MAKE IT CLEAR IF ON VERIFICATION OF THE BANK STATEMENTS, ASSESSEES CLA IM IS FOUND TO BE CORRECT, THEN, NO ADDITION CAN BE MADE ON THIS COUN T. THIS GROUND IS CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPOS ES. 8. A COMMON ISSUE ARISING FROM GROUND NOS. 3 & 4 RE LATES TO ADDITION OF AN AMOUNT OF RS. 45 LAKH AS DEEMED DIVI DEND U/S 2(22)(E) OF THE ACT. 5 ITA NO. 349/HYD/2014 SRI SARDAR IQBAL SINGH 9. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, D URING ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE IS ALSO A DIRE CTOR IN M/S EURO CONSTRUCTION PVT. LTD. AND DURING THE YEAR UNDER CO NSIDERATION, ASSESSEE HAS RECEIVED A TOTAL AMOUNT OF RS. 45 LAKH S ON DIFFERENT DATES AS LOAN/ADVANCE FROM THE SAID COMPANY. AO FUR THER OBSERVED THAT ON EXAMINING THE RECEIPTS AND PAYMENTS ACCOUNT SUBMITTED BY ASSESSEE, IT WAS FOUND THAT LOAN TAKEN FROM THE COM PANY WAS UTILIZED FOR ASSESSEES PERSONAL PURPOSES LIKE INVE STING IN M/S MIRRA PACKAGING AND OTHERS. HE FURTHER FOUND THAT A S ASSESSEE IS HOLDING SHARES OF 95.249% AND THE COMPANY HAD ALSO ACCUMULATED PROFITS DURING THE YEAR, THE AMOUNT GIVEN AS LOAN/A DVANCE TO ASSESSEE HAVE TO BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. ACCORDINGLY, HE ISSUED A NOTICE TO ASSESSE E TO EXPLAIN. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS SUBMITTED BY ASSESSEE THAT THE AMOUNT RECEIVED FROM THE COMPANY WAS NOT I N THE NATURE OF LOAN/ADVANCE, BUT, IS ACTUALLY TOWARDS PURCHASE OF PROPERTY IN THE NAME OF THE COMPANY WHICH DID NOT MATERIALIZE. AO, HOWEVER, DISBELIEVED THE EXPLANATION OF ASSESSEE IN ABSENCE OF SUPPORTING EVIDENCE. AO OBSERVED THAT AS ALL THE CONDITIONS OF SECTION 2(22)(E) ARE SATISFIED, THE AMOUNT OF RS. 45 LAKH RECEIVED B Y ASSESSEE FROM M/S EURO CONSTRUCTION PVT. LTD. HAS TO BE TREATED A S DEEMED DIVIDEND U/S 2(22)(E) AND ACCORDINGLY MADE THE ADDI TION. THOUGH, ASSESSEE CHALLENGED THE ADDITION MADE IN APPEAL BEF ORE LD. CIT(A), BUT, LD. CIT(A) ALSO CONFIRMED THE ADDITION MADE BY ACCEPTING THE VIEW EXPRESSED BY AO. 10. LD. AR, REITERATING THE SUBMISSIONS MADE BEFORE THE DEPARTMENTAL AUTHORITIES, SUBMITTED BEFORE US THAT THE AMOUNT RECEIVED FROM THE COMPANY IS NOT IN THE NATURE OF L OAN/ADVANCE, BUT, FOR THE PURPOSE OF INVESTING IN PROPERTIES ON BEHALF OF THE COMPANY. WHEN THE DEAL DID NOT MATERIALIZE, ASSESSE E REFUNDED BACK THE MONEY TO COMPANY. THEREFORE, THE AMOUNT RE CEIVED NOT 6 ITA NO. 349/HYD/2014 SRI SARDAR IQBAL SINGH BEING IN THE NATURE OF LOAN/ADVANCE, PROVISIONS OF SECTION 2(22)(E) IS NOT ATTRACTED. LD. AR SUBMITTED THAT THIS IS ONL Y A RUNNING ACCOUNT WITH THE COMPANY. FURTHER, LD. AR REFERRING TO THE ACCOUNT COPY OF ASSESSEE IN THE BOOKS OF ACCOUNT OF THE COM PANY AS WELL AS COMPANYS ACCOUNT IN THE BOOKS OF ASSESSEE, SUBM ITTED THAT IF AT ALL THE AMOUNT RECEIVED FROM THE COMPANY IS TO BE T REATED AS DEEMED DIVIDEND, THEN, REPAYMENTS MADE BY ASSESSEE ALSO HAS TO BE SET OFF. 11. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT N OT ONLY BEFORE AO, BUT, ALSO BEFORE LD. CIT(A), ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM THAT THE AMOUNT RECEIVED FROM THE COMPANY WAS TOWARDS PURCHASE OF LAND ON BEHALF OF THE COMPANY. THEREFOR E, ASSESSEES CLAIM THAT THE AMOUNT RECEIVED IS NOT IN THE NATURE OF LOAN/ADVANCE CANNOT BE ACCEPTED. IT WAS SUBMITTED, AS THE AMOUNT RECEIVED SATISFIED ALL THE CONDITIONS OF SECTION 2(22)(E), A DDITION MADE WAS JUSTIFIED. 12. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AS WELL AS PERUSED THE MATERIALS ON RECORD AND THE ORDERS OF R EVENUE AUTHORITIES. THERE IS NO DISPUTE TO THE FACT THAT A SSESSEE ON DIFFERENT DATES DURING THE RELEVANT FY HAS RECEIVED AN AMOUNT OF RS. 45 LAKH FROM M/S EURO CONSTRUCTIONS PVT. LTD. W HEREIN ASSESSEE IS THE MANAGING DIRECTOR AND MAJORITY SHAR EHOLDER. IT IS ALSO NOT DISPUTED THAT THE SAID COMPANY IS A COMPAN Y WHEREIN PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. IT IS ALS O A FACT ON RECORD THAT DURING THE YEAR THE COMPANY HAD ACCUMULATED PR OFITS. THEREFORE, ALL THE CONDITIONS OF SECTION 2(22)(E) A RE SATISFIED. THOUGH, ASSESSEE HAS CLAIMED THAT THE AMOUNT RECEIV ED WAS NOT IN THE NATURE OF LOAN/ADVANCE, BUT, TOWARDS PURCHASE O F LAND IN THE NAME OF COMPANY, HOWEVER, ASSESSEE HAS NOT PRODUCED EVEN A SINGLE EVIDENCE TO JUSTIFY THE AFORESAID CLAIM. NO SPECIFIC EVIDENCE 7 ITA NO. 349/HYD/2014 SRI SARDAR IQBAL SINGH TO SHOW THAT ANY AGREEMENT WAS ENTERED INTO FOR PUR CHASE OF PROPERTY OR ANY ADVANCE WAS PAID HAS BEEN BROUGHT O N RECORD BY ASSESSEE. IN THESE CIRCUMSTANCES, ASSESSEES CLAIM THAT THE AMOUNT RECEIVED WAS NOT IN THE NATURE OF LOAN/ADVAN CE CANNOT BE ACCEPTED. HOWEVER, AS CAN BE SEEN FROM ASSESSEES A CCOUNT IN THE BOOKS OF M/S EURO CONSTRUCTION PVT. LTD. THERE IS A CREDIT BALANCE OF RS. 7,55,896.50 IN FEBRUARY, 2009. THEREFORE, AS SESSEE DESERVES TO GET CREDIT FOR THE SAID AMOUNT BY SETTI NG IT OFF AGAINST TOTAL ADVANCE OF RS. 45 LAKH. IN THE AFORESAID VIEW OF THE MATTER, WE DIRECT AO TO REDUCE THE AMOUNT OF RS. 7,55,896.5 0 FROM THE TOTAL LOAN/ADVANCE OF RS. 45 LAKH AND TREAT THE BAL ANCE AMOUNT AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THESE GROU NDS ARE PARTLY ALLOWED. 13. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED. PRONOUNCED IN THE OPEN COURT ON 18/02/2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 18 TH FEBRUARY, 2015 KV COPY TO:- 1) SRI SARDAR IQBAL SINGH C/O K. NARENDER, C.A., SU DHAKAR & CO., II FLOOR, 5-2-134, R.P. ROAD, SECUNDERABAD 5 00 003. 2) JCIT, RANGE 8, HYDERABAD 3) CIT(A)-III, HYDERABAD 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 8 ITA NO. 349/HYD/2014 SRI SARDAR IQBAL SINGH