ITO 20(3)(4), MUMBAI V. BIMLADEVI R. SEKHANI, MUMBAI

ITA 3827/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84320 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEKANAND PERMPURNA
• Keywords: Gift; Principle of natural justice; Additional evidence
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUM BAI . , , BEFORE SHRI D. KARUNAKARA RAO, AM & SHRI AMIT SHUKL A, JM ./ ITA NO. 3827/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) INCOME TAX OFFICER 20(3)(4) / VS. SMT. BIMLADEVI R. SEKHANI ROOM NO. 511, 5 TH FLOOR PIRAMAL CHAMBERS, LALBAUG MUMBAI 400012 HAKOBA COMPOUND WESTERN EXP. HIGHWAY BORIVALI (E), MUMBAI 400066 ./ PAN ABDPS8297B / APPELLANT !' / RESPONDENT # $ / APPELLANT BY: SHRI VIVEKANAND PERMPURNA !' # $ / RESPONDENT BY: SHRI K. GOPAL %& # ' / DATE OF HEARING: 02.12.2014 ()* # ' / DATE OF PRONOUNCEMENT: 02.12.2014 / O R D E R PER D. KARUNAKARA RAO, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 28.11.2011 PASSED BY THE CIT(A)-31, MUMBAI AND IT P ERTAINS TO AY 2008-09. 2. REVENUE HAS RAISED A COUPLE OF ISSUES NAMELY; (I) A PPLICABILITY OF SECTION 2(22)(E) WHEN THERE ARE NO ACCUMULATED PROF ITS WITHIN THE MEANING OF EXPLANATION 2 TO SECTION 2(22)(E) OF THE ACT, AN D (II) SUSTAINABILITY OF THE ADDITION OF ` 48.9 LAKHS WHEN THERE IS VIOLATION OF PROVISIONS OF RULE 46A OF THE I.T. RULES. 3. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE MEN TIONED THAT EXPLANATION 2 TO SECTION 2(22)(E) PROVIDES FOR THE DEFINITION OF ACCUMULATED PROFIT. THE AO INVOKED THE SAME AND MADE ADDITION OF ` 37 LAKHS CONSIDERING THE FACT THAT THE RESERVES APPEARED IN THE BALANCE SHEET IS SHARE PREMIUM RESERVES. THE CIT(A) DISTINGUISHED THE SAID RESERVE FROM ITA NO. 3827/MUM/2012 SMT. BIMLADEVI R. SEKHANI 2 ACCUMULATED PROFIT WITHIN THE MEANING OF THE SAID EXPLANATION 2 AND GRANTED RELIEF AS PER THE DISCUSSION GIVEN IN PARA 2.3 OF THE IMPUGNED ORDER. 4. BEFORE US THE LEARNED D.R. RELIED ON THE ORDER OF T HE AO. 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE BROUGHT OUR ATTENTION TO THE SUBMISSIONS MADE AND RECORDED IN P ARA 2.2 OF THE IMPUGNED ORDER AND PRAYED FOR CONFIRMING THE CONCLU SIONS DRAWN BY LEARNED CIT(A) IN PARA 2.3. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE ORD ERS OF THE REVENUE AUTHORITIES WE FIND THAT THE AO HAS ERRED IN EQUATI NG THE SHARE PREMIUM WITH ACCUMULATED PROFIT. WE PERUSED THE SAID EXPLAN ATION 2 AND FIND THAT THE EXPRESSION ACCUMULATED PROFIT IS REQUIRED TO BE UNDERSTOOD IN THE COMMERCIAL SENSE. SUCH PROFIT IS NOT PART OF THE AC CUMULATED PROFIT, AS WAS HELD IN THE CASE OF JAIKISHAN DADLANI 4 SOT 138 (MU M). WE HAVE ALSO CONSIDERED ASSESSEES ARGUMENTS THAT REVOLVED AROUN D THE STATUS OF THE ASSESSEE AND THIS KIND OF COMPANIES ARE OUTSIDE THE SCOPE OF SECTION 2(22)(E). THE COUNSEL SUBMITTED THAT THE ASSESSEE I S NOT A COMPANY IN WHICH THE PUBLIC IS SUBSTANTIALLY INTERESTED. A PERUSAL O F THE ORDER REVEALS THAT THIS ARGUMENT WAS NOT EXAMINED BY THE AO AND THEREFORE I T DOES NOT EMANATE FROM THE ORDERS OF THE REVENUE. THEREFORE, WITHOUT GOING INTO THE MERITS OF THIS ARGUMENT WE FIND THAT THE ASSESSEE DESERVES RE LIEF ON THE ISSUE OF APPLICABILITY OF EXPLANATION 2 TO SECTION 2(22)(E) OF THE ACT. ACCORDINGLY WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. THUS , GROUND NO. 1, 2 & 3 OF THE REVENUE ARE DISMISSED. 7. IN CONNECTION WITH THE OTHER GROUNDS, I.E. GROUND N O. 4 TO 6, THE LEARNED D.R. BROUGHT OUR ATTENTION TO PARA 3 IN GEN ERAL AND PARA 3.3 IN PARTICULAR THAT READ OUT THAT COPY OF THE GIFT DEE D OF SHRI RAJKUMAR SHEKHANI REGARDING GIFT OF THE SHARES TO THE APPELL ANT .... AND MENTIONED THAT THE SAID COPY OF THE GIFT DEED WAS NOT FURNISH ED BEFORE THE AO AND THE SAME ACTUALLY CONSTITUTES ADDITIONAL GROUND FOR THE CIT(A). IT IS UNFORTUNATE THAT THE SAID ADDITIONAL EVIDENCES WERE NOT REMANDE D TO THE FILE OF THE AO FOR COMMENTS, IF ANY, FROM THE AO. ITA NO. 3827/MUM/2012 SMT. BIMLADEVI R. SEKHANI 3 8. THE LEARNED COUNSEL FOR THE ASSESSEE SQUARELY MENTI ONED THAT THIS ISSUE MAY BE REMANDED TO THE FILE OF THE AO FOR FRE SH ADJUDICATION. 9. ON HEARING BOTH THE PARTIES AND AFTER DISCUSSING IN THE OPEN COURT, WE REMAND THIS MATTER TO THE FILE OF THE AO WITH A DIR ECTION TO HIM TO ADJUDICATE THIS ISSUE AFRESH AFTER GRANTING AN OPPORTUNITY OF HEARING TO THE ASSESSEE IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY GROUNDS NO. 4 TO 6 ARE ALLOWED FOR STATISTICAL PURPOSES. 10. GROUNDS NO. 7 & 8 ARE GENERAL IN NATURE AND THE SAM E DID NOT REQUIRE SPECIFIC ADJUDICATION. ACCORDINGLY THE SAME ARE DIS MISSED. 11. IN THE RESULT, THE APPEAL FILED BY REVENUE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. +, - # . /# 01 2 3 4 # - 67 ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DECEMBER, 2014. # ()* . 8%, 02.12.2014 ) # 9& SD/- SD/- ( AMIT SHUKLA ) ( D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER :& MUMBAI, 8% DATED: 2 ND DECEMBER, 2014 COPY TO: 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ( )/ THE CIT(A) 7, MUMBAI 4. / THE CIT 1, MUMBAI CITY 5. ;<9 !%=> , ' => , :& THE DR, B BENCH, ITAT, MUMBAI 6. 9? @& / GUARD FILE. % / BY ORDER '; ! //TRUE COPY// ASSISTANT REGISTRAR , :& ITAT, MUMBAI BENCHES, MUMBAI N.P.