Appeal details
Counselvise Citation
379319914 RSA 2011
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-09-2011
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Assessment Year
2006-2007
Appeal Filed On
10-05-2011
Judgement Text
1 ITA NO. 3793/MUM/2011 (ASST YEAR 2006-07) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R S SYAL , AM & SHRI VIJAY PAL RAO, J M ITA NO. 3793/MUM/2011 (ASST YEAR 2006-07) M/S BODHESH TRADE INVEST P LTD UNIT NO.20 KEITUO INDUSTRIES ESTATE 22 KONDIVITA LANE MAROL, ANDHERI (E) MUMBAI 59 VS THE INCOME TAX OFFICER WARD 8(1)( 2) MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AAACB9185A ASSESSEE BY SHRI DIRENDRA M SHAH REVENUE BY SHRI PRADEEP SHARMA DT.OF HEARING 30 TH AUG 2011 DT OF PRONOUNCEMENT 23 SEPT 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE REVISION ORDER DATED 30.3.2011 OF THE CIT PASSED U/S 263 FOR THE ASSESSM ENT YEAR 2006-07. 2 THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS IN THIS APPEAL: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT ERRED IN PASSING AN ORDER U/S 263 OF THE ACT, WHICH IS BAD IN LAW AND CONTRARY TO THE FACTS ON RECORD. HENCE THE ORDER PASSED U/S 263 BE CAN CELLED. II) THE LD CIT ERRED IN PASSING AN ORDER U/S 263 WHEN THE REGULAR ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS NOT ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD CIT ERRED IN HOLDING AND DIRECTING THE ASSESSING OFFICER TO TAX RS . 1,11,62,456/- RECEIVED BY THE APPELLANT CO AS LOAN AS DEEMED DIVIDEND U/S 2(2 2)(E) OF THE I T ACT, WHICH BE SET ASIDE. IV (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT ERRED IN ISSUING SECOND NOTICE U/S 263 OF THE ACT. 2 ITA NO. 3793/MUM/2011 (ASST YEAR 2006-07) (B) THE LD CIT ERRED IN LAW AND ON FACTS IN HOLDING AND STATING THAT THE ASSESSING OFFICER ERRED IN NOT MAKING THE DISALLOWA NCE U/S 14A OF THE ACT. V) THE APPELLANT PRAYS THAT THE ORDER U/S 263 OF T HE ACT BE CANCELLED. 3 THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 24.12. 2008. SUBSEQUENTLY THE CIT OBSERVED FROM THE ASSESSMENT RECORDS THAT THE ASSES SEE RECEIVED UNSECURED LOANS FROM FOUR COMPANIES, OUT OF WHICH THREE WERE HAVING ENOUGH RESOURCES AND SURPLUS AVAILABLE WITH THEM. THE CIT HAS FURTHER OBSERVED THAT SOME OF THE SHARES IN THESE COMPANIES AND THE ASSESSEE COMPANY ARE HELD BY COM MON PERSONS THEREFORE, IN HIS VIEW, THE LOANS OBTAINED BY THE ASSESSEE COMPAN Y FROM ARCO HOLDINGS & TRADING P LTD, ARCO MICAVER P LTD AND ARCO ELECTRO TECHNOLO GIES LTD., CONSTITUTE DEEMED DIVIDEND U/S 2(22)(E) OF THE I T ACT. ACCORDINGLY, SHOW CAUSE NOTICE DATED 15.3.2011 WAS ISSUED TO THE ASSESSEE. SUBSEQUENTLY ANOTHER SH OW CAUSE NOTICE DATED 29.3.2011 WAS ALSO ISSUED ON THE ISSUE THAT THE INT EREST PAID OF RS. 5,26,156/- ON LOANS AND ADMINISTRATIVE EXPENSES OF RS. 22,076/- WERE PR OPORTIONATELY REQUIRED TO BE DISALLOWED U/S 14A BECAUSE THE ASSESSEE HAS SHOWN L ONG TERM CAPITAL GAINS AND DIVIDEND. WHILE PASSING THE IMPUGNED ORDER, THE CI T HAS HELD THAT SINCE THE ASSESSING OFFICER HAS NOT ADDED THE LOANS OF RS. 1 ,11,62,456/- AS ASSESSEES INCOME U/S 2(22)(E); THEREFORE, THE ASSESSMENT ORDER PASSE D U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND AC CORDINGLY, THE SAME IS SET ASIDE TO BE RE-FRAMED BY THE ASSESSING OFFICER BY TAKING TH E SAID AMOUNT OF RS. 1,11,62,456/- BEING DEEMED DIVIDEND U/S 2(22)(E) OF THE I T ACT. 3.1 THE CIT FURTHER HELD THAT THERE IS AN OMISSION ON THE PART OF THE ASSESSING OFFICER FOR NOT DISALLOWING THE PROPORTIONATE INTER EST AND ADMINISTRATIVE EXPENSES U/S 3 ITA NO. 3793/MUM/2011 (ASST YEAR 2006-07) 14A OF THE I T ACT WHICH HAS RENDERED THE ASSESSMEN T ORDER DT 24.12.2008 AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND HENCE, SET ASIDE THE ASSESSMENT ORDER WITH THE DIRECTION TO THE ASSESSIN G OFFICER TO MAKE NECESSARY DISALLOWANCE U/S 14A. 4 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL AS THE LD DR AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS THE IS SUE OF DEEMED DIVIDEND U/S 2(22)(E), IT IS PERTINENT TO NOTE THAT THE CIT HAS INVOKED THE JURISDICTION ON THE BASIS OF THE FACT THAT THE ASSESSEE LOOK LOANS FROM THREE CO MPANIES NAMELY ARCO HOLDINGS & TRADING P LTD, ARCO MICAVER P LTD AND ARCO ELECTRO TECHNOLOGIES LTD., AND SOME OF THE SHAREHOLDERS IN THESE COMPANIES AS WELL AS THE ASSESSEE COMPANY ARE COMMON. SINCE THIS ISSUE IS SETTLED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS BHAUMIK COLOUR P LTD REPORTED IN 118 IT D 1 AND FURTHER BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS COMMISSIONER OF INCOME-TAX VS UNIVERSAL MEDICARE PRIVATE LIMITED REPORTED IN 324 ITR 263 (BOM); THEREFORE, IT IS NOW SETTLED PROPOSITION OF LAW THAT THE INCOME CAN BE D EEMED U/S 2(22)(E) ONLY IN THE HAND OF THE REGISTERED SHARE HOLDER, WHO IS THE REC IPIENT AND BENEFICIARY OF ANY SUCH PAYMENT BY THE COMPANY. THEREFORE, THIS ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE AND TO THAT EXTENT THE REVISION ORDER PASSED U/S 26 3 IS NOT SUSTAINABLE. 4.1 AS REGARDS THE ISSUES OF DISALLOWANCE U/S 14A I S CONCERNED, IT IS MANIFEST FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING ABOUT THE ISSUE. EVEN NO ENQUIRY WAS MADE BY THE ASSESSING O FFICER AND THEREFORE, THERE IS NO APPLICATION OF MIND ON THE PART OF THE ASSESSING OF FICER TO ADDRESS THE ISSUE OF 4 ITA NO. 3793/MUM/2011 (ASST YEAR 2006-07) DISALLOWANCE U/S 14A. THE ASSESSING OFFICER HAS NO T AT ALL DISCUSSED THE ISSUE OR GIVEN ANY FINDING ON THE ISSUE AND THE ASSESSMENT O RDER DOES NOT EXHIBIT OR INDICATE ANY THOUGH PROCESS ON THE PART OF THE ASSESSING OFF ICER IN ADDRESSING THE ISSUE U/S 14A. THEREFORE, WHEN NO VIEW HAS BEEN TAKEN BY TH E ASSESSING OFFICER ON THE ISSUE OF DISALLOWANCE U/S 14A THEN, THERE IS NO QUESTION OF TAKING OTHER VIEW BY THE CIT. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR IN DUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME-TAX REPORTED IN 243 ITR 83 HAS OBSERVED THAT WHEN THE ITO PASSED THE ORDER WITHOUT APPLICATION OF MIND, THE O RDER PASSED BY HIM IS ERRONEOUS AND EXERCISING JURISDICTION BY THE CIT U/S 263 WAS JUSTIFIED. SINCE THE ASSESSMENT ORDER DOES NOT SHOW ANY APPLICATION OF MIND BY THE ASSESS ING OFFICER WITH RESPECT TO INVOKING THE PROVISIONS OF SEC. 14A WHEREAS THE AS SESSEE HAS ADMITTED THE DIVIDEND INCOME AS WELL AS THE LONG TERM CAPITAL GAINS ON SA LE OF SHARES AND ALSO CLAIMED INTEREST AND ADMINISTRATIVE EXPENSES. ACCORDINGLY , THE CIT WAS JUSTIFIED IN EXERCISING HIS POWERS OF REVISION U/S 263 OF THE I T ACT WITH RESPECT TO THE ISSUE OF SEC. 14A. 5 ON MERITS, THIS ISSUE IS NOW REQUIRED TO BE ADJUD ICATED IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF GODREJ & BOYCE MFG P LTD VS ACIT REPORTED IN 328 ITR 81. SINCE THE CIT IN TH E IMPUGNED ORDER HAS DIRECTED THE ASSESSING OFFICER TO MAKE NECESSARY DISALLOWANCE; T HEREFORE, THE ASSESSING OFFICER HAS TO DECIDE THE ISSUE IN LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG P LTD (SUPRA) AND NO IN TERFERE IS REQUIRED ON OUR PART OF THE IMPUGNED ORDER IN RESPECT OF SEC. 14A. 5 ITA NO. 3793/MUM/2011 (ASST YEAR 2006-07) 6 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 23 RD DAY OF SEPT 2011. SD/- SD/- ( R S SYAL ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 23 RD , SEPT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI
