ITO 8(1)(3), MUMBAI V. DIPTI NIKHIL MODI, MUMBAI

ITA 3767/MUM/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9187 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 28-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Question of law; Deemed dividend
• Section: 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 3767/MUM/2012 ASSESSMENT YEAR: 2006-07 ITA-8(1)(3) R.NO. 206, 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020 VS. DIPTI NIKHIL MODI UNIT NO. 5, SHAH INDL. ESTATE, VEERA DESAI ROAD, ANDHERI (W) MUMBAI 400 058 PAN: - AABPM 8977 F (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI J. P. BAIRAGRA REVENUE BY : SHRI LOVE KUMAR DATE OF HEARING : 1 7 .03.2015 DATE OF ORDER : 25.03.2015 O R D E R PER AMIT SHUKLA, JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENU E AGAINST ORDER DATED 05.03.2012, PASSED BY LD. CIT(A)-16, MUMBAI I N RELATION TO THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR THE A.Y. 2006 -07. THE REVENUE IS MAINLY AGGRIEVED BY DELETION OF PENALTY OF RS.33,99 ,660/- WHICH WAS LEVIED ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) O F RS.1,01,00,000/-. 2. BRIEF FACTS OF THE CASE ARE THAT, ASSESSEE IS AN INDIVIDUAL WHO HAD RECEIVED MONEY FROM 3 COMPANIES, WHEREIN SHE WAS MA JOR SHAREHOLDER. THE DETAILS OF AMOUNT RECEIVED AND PATTERN OF HER S HAREHOLDING WERE AS UNDER:- ITA NO. 3767/MUM/2012 ASSESSMENT YEAR: 2006-07 2 SR. NO. NAME OF THE COMPANY AMOUNT RECEIVED % OF SH ARES 1 M/S. EXIM MULTI MEDIA P. LTD. RS.68,00,000 50 2 M/S. EDGE FINE PRINT P. LTD. RS,9,00,000 13.33 3 M/S. SHIPPING TIMES (I) P. LTD. RS.24,00,000 50 TOTAL RS.1,01,00,000 IN RESPONSE TO THE SHOW CAUSE NOTICE BY THE AO, AS TO WHY THIS AMOUNT SHOULD NOT BE TAXED AS DEEMED DIVIDEND U/S 2(22)(E) , THE ASSESSEE SUBMITTED THAT THESE AMOUNTS HAVE BEEN RECEIVED TO WARDS DEPOSITS FOR THE PREMISES USED BY THESE CONCERNS FOR THEIR BUSIN ESS. THE AO FURTHER REQUIRE TO FURNISH DOCUMENTARY EVIDENCES LIKE LEASE AGREEMENTS TO JUSTIFY THE CLAIM. HOWEVER, NO FURTHER EVIDENCES WA S FURNISHED BY THE ASSESSEE. ACCORDINGLY, HE TREATED THE SAID AMOUNT A S A LOAN/ADVANCE GIVEN BY THESE COMPANIES TO THE ASSESSEE AND TREATE D IT AS DEEMED DIVIDEND U/S 2(22)(E). 3. IN THE FIRST APPEAL, THE LD. CIT(A) CONFIRMED TH E SAID ACTION OF THE AO ON THE GROUND THAT ALL THE CONDITIONS MENTIONED U/S 2(22)(E) ARE FULFILLED AND THEREFORE, THE PROVISIONS OF DEEMED D IVIDEND ARE SQUARELY APPLICABLE. IN THE SECOND APPEAL ALSO, THE TRIBUNAL HAS CONFIRMED THE SAID ADDITION ON THE GROUND THAT THE ASSESSEES ARG UMENT THAT SHE HAS RECEIVED DEPOSITS IN LIEU OF THE PREMISES GIVEN TO THESE COMPANIES FOR THEIR OFFICIAL PURPOSE COULD NOT BE SUBSTANTIATED. THEREFORE, ORDER OF THE LD. CIT(A) WAS UP HELD. 4. IN THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITT ED THAT ASSESSEE IS THE OWNER OF IMMOVABLE PROPERTIES WHICH HAS BEEN LET OUT/ GIVEN TO THE VARIOUS COMPANIES FOR THEIR OFFICE PURPOSE. IN LIEU OF THAT SHE HAD ITA NO. 3767/MUM/2012 ASSESSMENT YEAR: 2006-07 3 RECEIVED REFUNDABLE DEPOSITS FROM THESE 3 CONCERNS IN WHICH SHE WAS A SHAREHOLDER. TO SUBSTANTIATE THE SAID CLAIM INTEREN AL PAYMENT VOUCHERS ISSUED BY THE BANK WAS ALSO FURNISHED, WHICH CLEARL Y STATED THAT THESE WERE IN THE FORM OF DEPOSITS AND NOT LOANS. SUCH A DEPOSIT CANNOT BE TREATED AS LOAN OR ADVANCE WITHIN THE AMBIT OF SECT ION 2(22)(E). HOWEVER, THE ASSESSING OFFICER REITERATED THE SAME FINDING AS WAS GIVEN IN THE QUANTUM PROCEEDINGS AND HELD THAT SINCE THIS ISSUE HAS BEEN CONFIRMED BY THE TRIBUNAL THEREFORE, PENALTY IS LEV IABLE. HE ALSO HELD THAT THE ASSESSEE HAD NOT FURNISHED PROPER PARTICUL ARS OF INCOME AND ASSESSEES CLAIM HAVE BEEN HELD TO BE INCORRECT. AF TER REFERRING TO CATENA OF CASE LAWS HE LEVIED THE PENALTY OF RS.33,99,660/ -. 5. BEFORE THE LD. CIT(A), THE ASSESSEE GAVE DETAIL SUBMISSIONS ALONG WITH THE EVIDENCE OF BANK PAYMENT VOUCHER WHICH WAS ISSUED BY THE BANK FOR THE DEPOSITS RECEIVED BY THE ASSESSEE. IT WAS ALSO POINTED OUT THAT IN THE QUANTUM PROCEEDINGS, THIS PRIMARY EVIDE NCE WHICH SUBSTANTIATES THE ASSESSEES CLAIM WAS NOT CONSIDER ED AT ALL. THE ASSESSEE HAS EVEN FILED MISCELLANEOUS APPLICATION B EFORE THE TRIBUNAL TO HIGHLIGHT THIS FACT THAT THESE EVIDENCES WERE FILED AND REFERRED BEFORE THE TRIBUNAL BUT HAS NOT BEEN DEALT UPON AND THEREF ORE, WRONG FINDING OF FACT HAS BEEN ARRIVED. HOWEVER, THE TRIBUNAL HAS DISMISSED THE ASSESSEES APPLICATION ON THE GROUND THAT IT IS BEY OND THE SCOPE OF SECTION 254(2). IT WAS FURTHER SUBMITTED THAT, NOT EVERY AMOUNT RECEIVED BY THE SHAREHOLDER ON ACCOUNT OF THE BUSINESS DEALI NG CAN BE TREATED AS LOAN OR ADVANCE WITHIN THE PURVIEW OF SECTION 2(22) (E). THE SECURITY DEPOSITS RECEIVED BY THESE COMPANIES WAS FOR THE US E OF THE PREMISES BELONGING TO THE ASSESSEEE AND SUCH A SECURITY DEPO SIT IS NOTHING BUT RECEIVED DURING THE COURSE OF NORMAL BUSINESS TRANS ACTION IN LIEU OF ITA NO. 3767/MUM/2012 ASSESSMENT YEAR: 2006-07 4 USAGE OF THE PREMISES FOR OFFICE AND BUSINESS PURPO SE. IN SUPPORT, VARIOUS DECISIONS WERE ALSO RELIED UPON. FURTHER TH E ASSESSEES EXPLANATION BEFORE THE AO IN PENALTY PROCEEDINGS HA S NOT BEEN FOUND TO BE FALSE OR UNSUBSTANTIATED. THEREFORE, NO PENALTY CAN BE LEVIED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 6. THE LD. CIT(A) DELETED THE PENALTY AFTER DETAILE D DISCUSSION AND CONSIDERING THE ENTIRE MATERIAL PLACED ON RECORD AN D THE EXPLANATION FILED BY THE ASSESSEE. HE NOTED THAT THE ASSESSEE H AS GIVEN COMPLETE DETAILS OF REFUNDABLE DEPOSITS FOR THE USE OF THE P ROPERTY GIVEN ON RENT AND ASSESSEE ALSO HAS FURNISHED INTERNAL BANK VOUCH ERS MADE BY THESE CONCERNS WHICH CLEARLY STATED THAT THE PAYMENT WAS TOWARDS DEPOSITS AND NOT ANY ADVANCE OR LOAN. THIS FACT HAS NOT BEEN TAKEN INTO COGNIZANCE EITHER BY THE CIT(A) OR BY THE TRIBUNAL EVEN THOUGH THEY WERE PLACED BEFORE THEM. HE ALSO TOOK NOTE OF THE F ACT THAT THESE PROPERTIES WERE NOT LET OUT IN THE EARLIER YEARS AN D ONLY THIS YEAR THE PROPERTY WAS GIVEN TO THESE COMPANIES. FURTHER THE APPEAL U/S 260A HAS BEEN FILED BEFORE THE HONBLE BOMBAY HIGH COURT AGA INST THE ORDER OF THE TRIBUNAL AND THE SAME HAS BEEN ADMITTED BY THE HONBLE HIGH COURT ON SUBSTANTIAL QUESTION OF LAW. THE PROPERTY IN QUE STIONS WERE COMMERCIAL PROPERTIES WHICH WERE GIVEN TO THE 3 CON CERNS FOR THEIR OFFICE PURPOSE. THEREFORE, ANY DEPOSITS RECEIVED IN LIEU IS NOTHING BUT FOR THE LETTING OF THE PROPERTIES. AFTER REFERRING TO T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS P. LTD. REPORTED IN (2010) 322 TTR 158, HE DELETED THE PEN ALTY. 7. BEFORE US, THE LD. DR STRONGLY RELIED UPON THE O RDER OF THE AO AND THE FINDING GIVEN IN THE QUANTUM PROCEEDINGS AND SU BMITTED THAT IT COULD NOT BE ESTABLISHED BY THE ASSESSEE DURING THE COURSE OF THE ITA NO. 3767/MUM/2012 ASSESSMENT YEAR: 2006-07 5 QUANTUM PROCEEDINGS THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE THREE COMPANIES WAS NOT IN THE FORM OF LOAN OR ADVANCE. ONCE, THE TRIBUNAL HAS GIVEN A CATEGORY FINDING OF FACT, THEN PENALTY HAS RIGHTLY BEING LEVIED BY THE AO. 8. ON THE OTHER HAND, LEARNED COUNSEL, SHRI J. P. B AIGARA, SUBMITTED THAT THE ASSESSEE WAS THE OWNER OF VARIOUS PROPERTI ES WHICH WERE GIVEN TO THE THREE COMPANIES FOR THE USAGE OF THEIR BUSIN ESS PURPOSE. THE ASSESSEE HAS NOT RECEIVED ANY RENT FROM THESE 3 COM PANIES. HOWEVER, IN LIEU OF LETTING OUT THE PROPERTIES, THE ASSESSEE HAS RECEIVED REFUNDABLE SECURITY DEPOSITS FROM THESE COMPANIES. THIS IS EVI DENT FROM THE INTERNAL BANK PAYMENT VOUCHERS OF THESE COMPANIES THAT THEY WERE IN THE NATURE OF DEPOSITS. THIS EVIDENCE ITSELF GOES TO SHOW THAT ASSESSEE HAD NOT RECEIVED ANY LOAN OR ADVANCE AS STIPULATED U/S 2(22 )(E). THIS VITAL EVIDENCE WHICH WAS FILED BEFORE AO AS WELL AS BEFOR E THE APPELLATE AUTHORITIES HAS NOT BEEN CONSIDERED AT ALL. THE ASS ESSEES EXPLANATION IN THIS REGARD HAS NOT BEEN REBUTTED BY THE DEPARTMENT IN THE PENALTY PROCEEDINGS. THUS, THE FINDING OF FACT AS RECORDED BY THE LD. CIT(A) AND THE LAW RELATING TO LEVY OF PENALTY U/S 271(1)(C) A S DISCUSSED BY HIM SHOULD BE CONFIRMED. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AS WELL AS MATERIAL PL ACED ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS MAJOR SHAREHOLD ER IN M/S. EXIM MULTI MEDIA P. LTD.; M/S. EDGE FINE PRINT P. LTD. AND M/S . SHIPPING TIMES (I) PVT. LTD. FROM THESE COMPANIES, THE ASSESSEE HAS RE CEIVED MONEY FOR SUMS AGGREGATING RS.1,01,00,000/- WHICH HAS BEEN CO NTENDED TO BE IN THE FORM OF REFUNDABLE SECURITY DEPOSITS FOR LETTIN G THE PROPERTIES OWNED BY THE ASSESSEE TO THESE COMPANIES FOR THEIR BUSINE SS PURPOSE. LIST OF ITA NO. 3767/MUM/2012 ASSESSMENT YEAR: 2006-07 6 PROPERTIES OWNED BY THE ASSESSEE AND GIVEN FOR USE TO THESE COMPANY WERE FILED BEFORE THE AUTHORITIES DURING THE QUANTU M PROCEEDINGS. ALONG WITH THESE DETAILS, THE ASSESSEE HAD ALSO FILED INT ERNAL BANK PAYMENT VOUCHER BY THESE COMPANIES WHICH SHOW THAT AMOUNT H AS BEEN GIVEN AS DEPOSIT FOR THE USE OF THE PROPERTY. THESE BANK V OUCHERS MENTIONS THE CHEQUE NUMBER, NAME OF THE ASSESSEE, THE AMOUNT OF DEPOSITS GIVEN AND THE DETAIL OF THE PROPERTY. ALL THESE EVIDENCES THOUGH FILED IN THE COURSE OF THE QUANTUM PROCEEDINGS, HAVE NOT BEEN TA KEN INTO COGNIZANCE BY ANY OF THE APPELLATE AUTHORITIES. IT HAS BEEN BROUGHT TO OUR NOTICE BY THE LEARNED COUNSEL THAT, ASSESSEE HA S NOT RECEIVED ANY RENT FROM THESE COMPANIES, INSTEAD SHE HAD RECEIVED ONLY SECURITY DEPOSITS. IN LIGHT OF THESE FACTS, IT CANNOT BE CON CLUSIVELY HELD THAT THE AMOUNTS GIVEN BY THESE COMPANIES ARE IN THE FORM OF LOAN OR ADVANCE. THIS FACT IS FURTHER CORROBORATED BY THE FACT THAT, NEITHER THERE IS ANY ENTRY OF LOAN IN THE BOOKS OF THE ASSESSEE NOR IN T HE BOOKS OF THESE COMPANIES. HOW SUCH AN AMOUNT RECEIVED BY THE ASSES SEE IS CONSIDERED IN THE NATURE OF LOAN IS NOT BORNE OUT FROM THE REC ORDS. BE IT THAT AS MAY BE, IT IS WELL SETTLED PROPOSITION OF LAW THAT THE FINDING GIVEN IN THE QUANTUM PROCEEDINGS ARE QUITE RELEVANT AND HAVE A PROVATIVE VALUE, BUT SUCH A FINDING ALONE MAY NOT JUSTIFY THE IMPOSI TION OF PENALTY, BECAUSE THE CONSIDERATIONS THAT ARISE IN THE PENALT Y PROCEEDINGS ARE SEPARATE AND DISTINCT FROM THOSE IN THE ASSESSMENT PROCEEDINGS. EVEN THOUGH MATTER HAS BEEN CONCLUDED IN THE QUANTUM ASS ESSMENT PROCEEDINGS, THEN ALSO, THEY ARE NOT CONCLUSIVE SO FAR AS PENALTY PROCEEDINGS ARE CONCERNED. THE MATTER IN THE PENALT Y PROCEEDINGS HAS TO BE EXAMINED AFRESH FROM THE ANGLE WHETHER THE AS SESSEE IS GUILTY OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. ITA NO. 3767/MUM/2012 ASSESSMENT YEAR: 2006-07 7 THE ASSESSEE MAY ADDUCE FRESH EVIDENCE IN THE PENAL TY PROCEEDINGS TO ESTABLISH THAT THE MATERIAL AND RELEVANT FACTS GOES TO PROVE THE BONA FIDE OF THE CLAIM OR TAKE A DIFFERENT PLEA UPON THE SAME EXISTING MATERIAL THAT THERE IS NO CONCEALMENT OF INCOME OR FURNISHIN G OF INACCURATE PARTICULARS. THE DEGREE OF PROOF NECESSARY UNDER TH E EXPLANATION-1 TO SECTION 271(1)(C) CAN BE DISCHARGED BY THE ASSESSEE BY POINTING OUT THE FACTORS AND THE MATERIAL IN HIS FAVOUR, BECAUSE EXP LANATION MERELY RAISES A REBUTTAL PRESUMPTION TO WHICH ASSESSEE CAN ALWAYS DISCHARGE HIS ONUS BY POINTING OUT THE FACTORS RELATING TO PRE-PONDERE NCE OF PROBABILITY. HERE IN THIS CASE, THE ASSESSEES EXPLANATION THAT THE MONEY RECEIVED FROM THESE COMPANIES WERE IN THE NATURE OF REFUNDAB LE SECURITY DEPOSITS RECEIVED BY THE ASSESSEE IN LIEU OF LETTING OF THE PROPERTIES OWNED BY HER HAS NOT BEEN FOUND TO BE FALSE AND IN FACT HAS BEEN SUBSTANTIATED BY THE EVIDENCE IN THE FORM OF INTERNAL BANK VOUCHERS AND THE ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS WELL AS OF THE COMPANIES. THE REVENUE HAS NO MATERIAL TO REBUT SUCH AN EVIDENCE O R THAT THE ASSESSEES EXPLANATION IS FALSE BASED ON MATERIAL O N RECORD. THE ASSESSEES ONUS IN THE PENALTY PROCEEDINGS STANDS F ULLY DISCHARGED. ONCE, IT HAS BEEN SHOWN THAT THE AMOUNT HAS BEEN RE CEIVED NOT AS LOAN BUT AS DEPOSITS, THE DEEMING FICTION OF 2(22)(E) CA NNOT BE STRETCHED TO HOLD THAT THE PAYMENT MADE BY A COMPANY TO A SHAREH OLDER BY WAY OF DEPOSIT IN LIEU OF USAGE OF PROPERTY FOR ITS BUSINE SS PURPOSE IS IN THE NATURE OF LOAN. IT IS A TRITE LAW THAT THE DEEMING FICTION HAS TO BE STRICTLY CONSTRUED AND SUCH LEGAL FICTION CANNOT BE EXTENDED FOR ANY KIND OF PAYMENT BY A COMPANY TO ITS SHAREHOLDER. THUS, ON T HE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE REASONS RECORDED BY THE LD. CIT(A) FOR DELETING THE PENALTY IS LEGALLY AND FACT UALLY CORRECT AND ITA NO. 3767/MUM/2012 ASSESSMENT YEAR: 2006-07 8 ACCORDINGLY THE SAME IS AFFIRMED. THUS, THE PENALTY LEVIED BY THE AO HAS RIGHTLY BEEN DELETED AND THE GROUND RAISED BY THE R EVENUE STANDS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF MARCH, 2015. SD/- SD/- (B. R. BASKARAN) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 25.03.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR D BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.