MEHUL J PAREKH, MUMBAI V. ACIT CEN CIR 45, MUMBAI

ITA 3645/MUM/2011

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0254 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-03-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARNEJA
• Keywords: Business expenditure; Corroborative evidences; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE D.T. GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.477/M/2009, ITA NO.478/M/2009, ITA NO.3645/M /11 & ITA NO.3646/M/2011 ASSESSMENT YEAR: 2005-06 & 2006-07 SHRI MEHUL J. PAREKH CONCORD, 12 TH FLOOR, BULLOCK ROAD, BAND STAND, BANDRA(W), MUMBAI - 400050 PAN:AACPP6247L VS. ACIT CENTRAL CIRCLE 45 MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI MANI JAIN, A.R. REVENUE BY : SHRI R. S. ARNEJA, CIT-D.R. DATE OF HEARING : 24.01.2018 DATE OF PRONOUNCEMENT : 14.02.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: ITA NO.477/M/09 & 478/M/09 THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 10.11.2008 OF THE COMMISSIONER OF INCOM E TAX (APPEALS) CENTRAL- III, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2005-06 AND 2006-07. 2. THE COMMON GROUND IN BOTH THESE APPEAL ARE GROUND 1 & 2 EXCEPT THE FIGURE AND GROUND 3 IN A.Y.2006-06 IS ADDITIONAL GROUND. 3. NOW WE WILL TAKEN UP GROUND 1 &2 IN BOTH THE ASSE SSMENT YEARS. THE SHORT FACTS OF THE CASE ARE AS UNDER:- THE SEARCH ACTION U/S.132 WAS CONDUCTED ON 10.01.20 06 IN THE OFFICE PREMISES, FACTORIES, GODOWN OF M/S.UNIMARK REMEDIES LTD. AND RESIDENTIAL PREMISES OF THE DIRECTORS. THE COMPANY OPERATES IN SPECIALIZED FIELD OF MANUFACTURE OF ACTIVE PHARMACEUTICAL INGREDIENTS (BULK DRUGS) AND SPECIALITY INTERMEDIATES. ITA NO.477&478/M/2009 &3645&3646/M/11 A.Y.2005-06&2006-07 2 SHRI JAYANT M. PAREKH ALONG WITH HIS TWO SONS SHRI MEHUL PAREKH AND SHRI SANDIP PAREKH CONTROLS THE GROUP. THE ASSESSING OF FICER NOTED THAT ASSESSEE WAS HAVING SUBSTANTIAL HOLDING IN THE ASSESSEE COMP ANY OF M/S.UNIMARK REMEDIES LTD. ON PERUSAL OF THE SEIZED PAPERS, THE ASSESSING OFFICER NOTED THAT M/S.UNIMARK REMEDIES LTD. HAS MADE SEVERAL PAYMENTS IN CASH TO SHRI MEHUL PAREKH ON VARIOUS DATES BUT THEY HAVE NOT BEEN RECO RDED IN THE CASH BOOK. ON PERUSAL OF THE VOUCHERS ENTRY THE AMOUNT WAS WHEREI N THE ENTRY APPEARING IOU. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE COMP ANY HAS GIVEN BY WAY OF ADVANCES AND SAME MAY USE BY ASSESSEE FOR HIS OWN P URPOSE. THE NARRATION OF THE PAYMENT WAS SHOWN IN ASSESSMENT ORDER AND AO HO LD THAT PAYMENT TOTALLING TO RS.3,13,650/- TO BE TREATED AS INCOME OF SHRI MEHUL PAREKH U/S.2(24)(IV) OF INCOME TAX ACT. 4. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS DISMI SSED THE APPEAL OF THE ASSESSEE. SIMILARLY, THE AO HAS ALSO MADE ADDITIO N OF RS.11,59,800/- U/S.2(24)(IV) OF THE ACT IN A.Y.2006-07. 5. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT ABOV E PAYMENTS MADE BY M/S. UNIMARK REMEDIES LTD. TO ASSESSEE AND OTHE R PERSONS ARE NOT LOAN AND ADVANCES. ALL THE PAYMENTS WERE MADE BY COMPANY TO ASSESSEE AND OTHER PERSONS FOR INCURRING BUSINESS E XPENDITURE. THE EXPENDITURE WERE INCURRED AND SUBSEQUENTLY, ASSESSEE AND OTHER PERSONS WERE SUBMITTED THE ACCOUNTS AND EXPENDITURE HAVE BEEN RECORDED IN BOOKS OF THE ACCOUNTS. 6. ON THE OTHER HAND LEARNED DR RELIED UPON THE ORDER O F REVENUE AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PA RTIES. WE FIND THAT AS PER SECTION 2(24)(IV) OF THE ACT, WHICH LAYS DOWN THAT ANY SUM PAID BY ANY SUCH COMPANY IN RESPECT OF ANY OBLIGATION WHICH , BUT FOR SUCH PAYMENT, WOULD HAVE BEEN PAYABLE BY THE DIRECTOR IS TO BE TREATED AS INCOME OF THE DIRECTOR. WE FIND THAT, FROM THE PER USAL OF THE PAYMENT MADE BY M/S. UNIMARK REMEDIES LTD. THROUGH IOU TO ASS ESSEE AND SUCH ITA NO.477&478/M/2009 &3645&3646/M/11 A.Y.2005-06&2006-07 3 PAYMENTS HAVE BEEN MADE BY THE COMPANY AND ITS WAS RE CORDED IN THE BOOKS OF ACCOUNTS OF THE COMPANY. WE FIND THAT PAY MENTS BY COMPANY TO THE ASSESSEE AND OTHER PERSONS FOR INCURRING BUSINE SS EXPENDITURE. THE EXPENIDUTREA WAS INCURRED AND SUBSEQUENTLY ASSESSEE AND OTHER PERSONS TO WHOM THE ABOVE PAYMENTS WERE MADE, SUBMITTED ACCO UNTS AND EXPENDITURES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUN TS. THEREFORE, IN OUR OPINION, SECTION 2(24)(IV) IS NOT APPLICABLE. THEREFORE, WE DELETE THE SAME. THEREFORE, WE ALLOW THE APPEAL OF THE ASSESS EE ON THIS GROUND. THEREFORE, WHEN ANY PAYMENT IS RECORDED IN THE BOOKS OF ACCOUNTS AND SAID AMOUNT CANNOT BE TREATED AS INCOME OF THE ASSES SEE, THEREFORE, WE ALLOW THE GROUND OF APPEAL. 8. THE SECOND GROUND RELATES TO MAKING THE ADDITION OF RS.50,98,528/- BY INVOKING THE PROVISION U/S.2(22)(E) OF THE ACT. THE ASSESSING OFFICER NOTICED THAT ANNEXURE A3 OF SEVERAL CASH PAYMENTS WE RE RECORDED AS HAVING PAID TO ASSESSEE AND THIS PAYMENT WAS NARRATED IN CIT(A) ORDER WHICH IS AS UNDER:- DATE AMOUNT (RS) NATURE OF TRANSACTION 29.4.2004 1,85,000 CASH 6.5.2004 11,000 CASH 7.5.2004 30,000 CASH 12.5.2004 26,500 CASH 6.7.2004 50,000 CASH 17.08.2004 50,000 CASH 5.10.2004 84,400 CASH 6.10.2004 1,00,000 CASH 18.10.2004 45,710 CASH 21.10.2004 1,03,560 CASH 30.10.2004 2,60,000 CASH 9.11.2004 20,000 CASH 10.11.2004 1,14,363 CASH 5.1.2004 90,000 CASH 10.1.2005 4,41,000 PURCHASE OF DOLLARS 10.1.2005 5,29,200 PURCHASE OF DOLLARS 15.2.2005 90,000 CASH 1.3.2005 5,00,000 CASH 6.3.2005 6,50,000 CASH ITA NO.477&478/M/2009 &3645&3646/M/11 A.Y.2005-06&2006-07 4 16.3.2005 16,87,395 CASH 23.3.2005 30,000 CASH TOTAL 50 ,98,528 9. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE C OMPANY HAD FAILED TO PROVE THE PURPOSE OF USE OF THESE FUNDS AS THEY WER E NOT SUPPORTED BY EVIDENCE / BILLS/ VOUCHERS TO PROVE THAT THESE AMOUNTS WERE INCURRED AS EXPENSES. ACCORDINGLY, THE AMOUNT OF RS.50,98,528/- WAS TREAT ED AS DEEMED DIVIDEND IN A.Y.2005-06 AND RS.47,09,504/- IN A.Y.2006-07. 10. MATTER CARRIED TO CIT(A) AND CIT(A) HAS DISMISS ED THE APPEAL OF THE ASSESSEE. 11. THE LEARNED AR SUBMITTED THAT ASSESSE COMPANY H AS MADE ALL THE PAYMENTS FOR METING OUT VARIOUS BUSINESS EXPENDITUR ES OF THE COMPANY AND WHICH WERE DULY INCURRED BY ASSESSEE ON BEHALF OF T HE COMPANY. THE LEARNED AR SUBMITTED THAT THERE IS A PAYMENT MADE TO ASSESS EE FOR HIS PERSONAL PURPOSE AND SAME IS NOTED IN SEIZED MATERIAL. THE SEIZED M ATERIAL CLEARLY INDICATES THAT THE OTHER PAYMENTS MADE BY THE COMPANY TO THE APPEL LANT WERE FOR METING OUT DAY TO DAY BUSINESS EXPENDITURE. THE LD. D.R. SUPP ORTED ORDER OF LOWER AUTHORITIES. 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT COMPANY HAS MADE PAYMENT FOR MAKING THE EXPENSES ON BEHALF OF THE COMPANY. WE FIND THAT THE ASSESSEE HAS INCURRED EX PENSES WHICH HAVE BEEN ENTERED IN BOOKS OF THE COMPANY. WE FIND THAT THIS EXPENSES ARE NOT IN NATURE OF ADVANCES TO THE ASSESSEE. WE FURTHER OBSERVED T HAT THE ENTIRE PAYMENT OF THIS IS RECORDED IN BOOKS OF ACCOUNTS AND WHEN THE AMOUNT IS RECORDED IN BOOKS OF ACCOUNT IT CANNOT BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 13. IN THE RESULT APPEAL IS ALLOWED ON THIS GROUND. ITA NO.477&478/M/2009 &3645&3646/M/11 A.Y.2005-06&2006-07 5 14. NEXT GROUND TREATING THE CAPITAL GAIN OF RS.483 0484/- ON SALE OF AGRICULTURAL LAND. THE AO OBSERVED THAT ASSESSEE H AS SHOWN CAPITAL GAIN OF RS.4830484/- ON SALE OF LAND AT PANVEL WHICH INCLUD ED CONSIDERATION RECEIVED BY CHEQUE AS WELL AS BY CASH. THE ASSESSEE HAS REQ UESTED THAT HE HAS WRONGLY DECLARED CAPITAL GAIN AS THE LAND WAS SOLD AS AGRIC ULTUERAL LAND. ASSESSEE DID NOT FILE SUPPORTING EVIDENCE THAT LAND IN QUESTION WAS AGRICULTURAL LAND. THEREFORE, AO AND THE LD. CIT(A) DID NOT ALLOW THE CLAIM. 15. THE LD. A.R. SUBMITTED BEFORE US THAT HE COULD NOT SUBMIT THE EVIDENCES BEFORE THE AO AND THE LD. CIT(A). NOW, HE WANTED T O SUBMIT THE EVIDENCES BEFORE THE AO AND THEREFORE, HE REQUESTED TO RESTOR E THE MATTER BACK TO THE FILE OF AO. 16. THE LD. D.R. OBJECTED TO IT. 17. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE LD. A.R. COULD NOT SUBMIT THE EVIDENCES BEFORE THE AO AND THE LD. CIT(A). NOW HE WANTED TO SUBMIT THE EVIDENCES BEFORE THE AO AND PRAYED TO RESTORE THE MATTER BACK TO THE AO. IN THE INTEREST OF JUST ICE AND FAIRPLAY, WE RESTORE THIS MATTER BACK TO THE FILE OF AO AND AO IS DIRECT ED TO DECIDE THE MATTER AFRESH AFTER GIVING DUE OPPORTUNITY OF HEARING TO T HE ASSESSEE AS PER LAW. 18. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ITA NO.3645/M/11 & 3646/M/11 19. THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 20.01.2011 OF THE COMMISSIONER OF INCOM E TAX (APPEALS) 38, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELE VANT TO ASSESSMENT YEAR 2005-06 AND 2006-07. 20. IN RESPECT OF THE ABOVE MENTIONED PENALTY APPEA LS, THE AO AND CIT(A) HAS IMPOSED THE PENALTY ON THE GROUND THAT ASSESSEE COMPANY HAD MADE PAYMENTS TO THE DIRECTORS WHICH IS IN NATURE OF DEE MED DIVIDEND U/S.2(22)(E) OF THE ACT AND THE PENALTY WAS IMPOSED FOR THE SAME . AS WE HELD THAT THIS ITA NO.477&478/M/2009 &3645&3646/M/11 A.Y.2005-06&2006-07 6 PAYMENT IS NOT IN THE NATURE OF LOAN AND ADVANCES, THEREFORE WE DELETE THE PENALTY IN BOTH THE YEARS. 21. IN THE RESULT BOTH THE PENALTY APPEALS ARE HERE BY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.02.2018. SD/- SD/- (G.MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 14.02.2018. * MP . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI