DCIT, Agra V. Dr. Manvendra Swarup Sharma, Agra

ITA 377/AGR/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2450 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHRI
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO.377/AGR/2009 ASST. YEAR: 2005-06 DY. COMMISSIONER OF INCOME TAX, VS. DR. MANVENDRA S WARUP SHARMA, CIRCLE 4(1), AGRA. C-43, SITE-C, UPSIDC, SIKANDRA, AGRA. (PAN : ALYPS 4408 B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINOD KUMAR, JR. D.R. RESPONDENT BY : SHRI PANKAJ GARGH, ADVOCATE ORDER PER H.S. SIDHU, J.M. : THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST TH E ORDER DATED 23.06.2009 PASSED BY THE LD. CIT(A) ON THE FOLLOWING GROUNDS :-. 1. THAT THE LD. CIT(A)-II, AGRA HAS ERRED IN LAW & ON THE FACTS IN IGNORING THE VITAL ASPECTS THAT THE ENTIRE MONEY IN WHATSOEVER FORM COMES IN A COMMON KITTY AND DO NOT HAVE SEPARATE IDENTIFICATION. SO, THE ABOVE HOLDING THA T THE PAYMENT OF STATUTORY LIABILITY FROM THE ACCUMULATED PROFIT DOES NOT APPEAR TO BE CORRECT. 2. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS BY S IMPLY STATING THAT THE STATUTORY LIABILITIES WAS MORE THA N RESERVES AND SURPLUS PAID DURING THE YEAR IGNORING THE VERY IMPO RTANT ASPECT THAT PROFIT ACCRUES ON DAY TO DAY BASIS AND THE QUA NTUM OF 2 ACCUMULATED PROFIT SHOULD BE SEEN ON THE DATE ON WH ICH THE LOAN WAS GIVEN TO ITS SHARE HOLDER AND WHICH WAS ` 4,76,161/-AND NOT NIL AS HELD BY HIM. 3. THE ORDER OF THE LEARNED CIT(A) DESERVES TO BE V ACATED AND THAT OF THE AOS BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR ALTER NAY OR MORE GROUND OR GROUNDS OF APPEAL AS MAY BE DEEMED FIT AT THE TIME OF HEARING OF APPEAL. 2. THE FACTS ARE NOT DISPUTED BY BOTH THE PARTIES A ND, THEREFORE, NO NEED TO REPEAT THE SAME FOR THE SAKE OF CONVENIENCE. 3. AT THE TIME OF HEARING, THE LD. D.R. RELIED UPON THE ORDER PASSED BY THE ASSESSING OFFICER AND, ON THE CONTRARY, THE LD. COU NSEL FOR THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORI TY. 4. AFTER HEARING THE BOTH THE PARTIES AND PERUSING THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENU E AUTHORITIES, WE FIND THAT THE ASSESSEE RECEIVED LOAN OF ` 7,50,000/- ON 29.10.2004 FROM JAI HOSPITAL & RESEAR CH CENTRE (P) LTD. IN WHICH THE ASSESSEE HAS SUBSTANTI AL INTEREST AND HAVING MORE THAN 10% SHARE HOLDING. AFTER PERUSING THE ASSESSMENT R ECORDS, THE ASSESSING OFFICER IS OF THE OPINION THAT THE AMOUNT IN DISPUTE DESERVES TO BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER). AFTER 3 HEARING THE ASSESSEE, THE ASSESSING OFFICER ADDED T HE ENTIRE LOAN AMOUNT IN DISPUTE AND TREATED THE SAME AS COVERED UNDER THE PROVISION S OF SECTION 2(22)(E) OF THE ACT. THE ASSESSEE PLEADED BEFORE THE LD. FIRST APPELLATE AUTHORITY THAT THE OPENING BALANCE UNDER THE HEAD RESERVE AND SURPLUS AS PER B ALANCE SHEET OF JAI HOSPITAL & RESEARCH CENTER (P) LTD. WAS ` 14,50,112/- WHEREAS IN THE YEAR UNDER CONSIDERATION JAI HOSPITAL & RESEARCH CENTRE (P) LTD. HAS PAID IN COME TAX LIABILITY OF ` 18,61,627/- CREATED IN THE ASSESSMENT YEAR 1999-2000 AND 2000-0 1 BECAUSE THIS LIABILITY WAS FOR THE EARLIER YEARS WHICH WERE NEITHER ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS IN THE PRECEDING YEARS NOR WERE ADJUSTED FROM THE AMOUNTS APPEARING UNDER THE RESERVE AND SURPLUS. THE ASSESSEE MADE THE PAYMENT OF ` 18,61,627/- AS A TAX LIABILITY FOR THE ASSESSMENT YEARS 1999-2000 & 2000-01 AND ADJUSTED F ROM RESERVE AND SURPLUS ON ACCOUNT OF WHICH AT THE YEAR END THE RESERVE AND SU RPLUS AS PER THE BALANCE SHEET OF JAI HOSPITAL & RESEARCHER CENTRE (P) LTD. WAS NIL. THUS, THERE WERE NO ACCUMULATED PROFITS IN THE HANDS OF THE COMPANY JAI HOSPITAL AN D RESEARCH CENTRE (P) LTD. AT THE OPENING OF RELEVANT ACCOUNTING YEAR OR ON THE DATE ON WHICH LOAN OF ` 7,50,000/- WAS GIVEN TO THE ASSESSEE. THE LD. FIRST APPELLATE AUTHORITY HAS ACCEPTED THE AVERMENT OF THE ASSESSEE AND DELETED THE ADDITION I N DISPUTE AFTER PERUSING THE INCOME TAX ACCOUNTS FOR THE F.Y. 2004-05 AS PER THE BOOKS OF THE COMPANY JAI HOSPITAL & RESEARCH CENTRE (P) LTD. IN WHICH ` 18,61,627/- HAS BEEN PAID TOWARDS 4 THE INCOME TAX LIABILITY FOR ASSESSMENT YEARS 1999- 2000 & 2000-01. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PARAGRAPH OF THE IMPUG NED ORDER AT PAGE NO.4 IS REPRODUCED AS UNDER :- I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMEN T RECORD, SUBMISSION OF AR AND POSITION OF LAW. IN MY OPINIO N, APPELLANT DESERVE TO SUCCEED. ON PERUSAL OF THE COPY OF INCOME TAX A CCOUNT FOR F. Y. 2004-05 AS PER THE BOOKS OF COMPANY JAI HOSPITAL & RESEARCH CENTRE (P) LTD, ` 18,61,627/- HAS BEEN PAID TOWARDS INCOME TAX LIABI LITY OF A.Y. 1999-2000 AND 2000-01. IF THE PROVISION OF THESE IN COME TAX LIABILITIES WERE MADE IN EARLIER YEARS BY THE COMPANY, THERE SH ALL BE NO RESERVES AND SURPLUS AS APPEARING IN THE BALANCE SHEET AS ON 31/03/04. CONSIDERING THE FACT THAT THE INCOME TAX LIABILITY RELATES TO EARLIER ASSESSMENT YEARS AND THE FACT THAT SURPLUS AS ON 31 /03/05 AS PER BALANCE SHEET OF THE COMPANY IS NIL, IT CANNOT BE S AID THAT THERE WAS ANY ACCUMULATED PROFITS IN THE HANDS OF THE COMPANY. SI NCE THERE IS A SPECIFIC PROVISION IN LAW THAT THE COMPANY POSSES A CCUMULATED PROFIT AT THE TIME IT MAKES PAYMENT OF LOAN/ADVANCE THE PROVI SION OF SECTION 2(22)(E) ARE NOT FULLY SATISFIED. RESPECTFULLY FOL LOWING THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. G. NARASIMHAN REPORTED IN 118 ITR 60, THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF ` 7,50,000/- BY INVOKING THE PROVISION OF SECTION 2( 22)(E) OF THE INCOME TAX ACT IS NOT TENABLE. THEREFORE AMOUN T OF ` 7,50,000/- ADDED BY THE ASSESSING OFFICER IS DELETED. 5. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF T HE PRESENT CASE AND THE CONCLUDED PARAGRAPH REPRODUCED ABOVE, AND THE IMPUG NED ORDER, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED F OR IN THE WELL REASONED ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY. THERE FORE, THE PRESENT APPEAL FILED BY THE REVENUE IS DISMISSED. 5 ITA NO.377/AGR/2009 ASST. YEAR: 2005-06 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18.03.201 1). SD/- SD/- (P.K. BANSAL) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: AGRA DATE: 18 TH MARCH, 2011 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR, ITAT, AGRA BENCH, AGRA 6. GUARD FILE ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRI BUNAL, AGRA TRUE COPY