PERIWINKLE FASHIONS P.LTD, MUMBAI V. DCIT 8(2), MUMBAI

ITA 388/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100688 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 16-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIPUL JOSHI SHRI PREMAND J
• Keywords: Principle of natural justice; Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI. BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO 388/MUM/2014 ASSESSMENT YEAR: 2010-11 M/S.PERIWINKLE FASHIONS PVT. LTD., 402, AKRUTI STAR, 4 TH FLOOR, OPP.AKRUTI CENTRE POINT BUILDING, CENTRAL ROAD, MIDC, ANDHERI(E), MUMBAI 400 093. VS. DY.COMMISSIONER OF INCOME TAX-8(2), ROOM NO.209, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 PAN/GIR NO. AADCP 3365M ( APPE LLANT ) ( RESPONDENT ) ORDER PER G.S. PANNU, AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 7, MUMBAI DATED 28/10/2013, WHICH IN-TURN HAS ARISEN FROM THE ORDER PASSED APPELLANT BY SHRI VIPUL JOSHI RE SPONDENT BY SHRI PREMAND J DATE OF HEARING 07/07/ 2015 DATE OF PRONOUNCEMENT 21 /08/ 2015 2 ITA NO 388/MUM/2014 ASSESSMENT YEAR: 2010-11 PAGE 2 OF 6 BY THE ASSESSING OFFICER DATED 11/12/2012 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) P ERTAINING TO ASSESSMENT YEAR 2003-04. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL:- 1. AGAINST ADDITION OF RS. 905,515/- AS DEEMED DIV IDEND U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961 (ACT). THE COMMISSIONER OF INCOME-TAX (APPEALS) -17, MUMB AI [HEREINAFTER REFERRED TO AS CIT (A)] HAS ERRED IN UPHOLDING THE ADDITION OF RS. 905,515/ - MADE BY THE ASSESSING OFFICER ('AO') U/S 2(22)(E) OF THE ACT IG NORING THE FACTS OF THE CASE. THE CIT (A) SHOULD HAVE APPRECIATED THAT THE SAID AMOUN T REPRESENTS FOLLOWING: A. RS. 900,000/- BEING REPAYMENT OF LOAN ADVANCED BY THE APPELLANT TO TAINWALA TRADING AND INVESTMENT CO. PVT. LTD. (TTIC ) ON 1ST APRIL 2009. B. RS. 5,515/- BEING RENTAL INCOME OF THE APPELLAN T OFFERED TO INCOME TAX BY THE APPELLANT. THE CIT (A) FAILED TO APPRECIATE THAT SINCE NO LOAN OR ADVANCE HAS BEEN RECEIVED BY THE APPELLANT FROM TIIC DURING THE YEAR, THE APP ELLANT DID NOT RECEIVE ANY UNDUE ADVANTAGE OR BENEFIT. HENCE, THE PROVISIONS O F SECTION 2(22)(E) OF THE ACT ARE NOT ATTRACTED. 2. AGAINST ADDITION OF RS. 28,74,875/- AS DEEMED D IVIDEND U/S 2(22)(E) OF THE ACT (I) THE CIT (A) HAS ERRED IN UPHOLDING AN ADDITION OF RS. 1,55,61,902/- (RESTRICTED TO PROFITS AS ON 31ST MARCH, 2010 RS. 28,74,875/-) MADE BY THE AO WITHOUT CONSIDERING THE FACTS OF THE CASE. THE CIT (A) SHOU LD HAVE APPRECIATED THAT THE SAID SUM OF RS. 1,55,61,902/ - REPRESENTS FOLLOWING : A. RS. 12,011,902/- REPRESENTS MERE TRANSFER OF OP ENING BALANCE FROM TTIC TO TAINWALA HOLDINGS PVT. LTD. (THPL) IN THE BOOKS OF THE APPELLANT. AS SUCH, THE TRANSACTION CANNOT BE CONSIDERED AS LOAN OR ADVANCE RECEIVED BY THE APPELLANT DURING THE YEAR. B. ADDITIONAL ADVANCES OF RS. 3,550,000/- RECEIVED BY THE APPELLANT WERE SQUARED OFF DURING THE YEAR AND AS SUCH, THERE IS N O UNDUE ADVANTAGE OR BENEFIT. THE CIT (A) SHOULD HAVE APPRECIATED THAT THE PROVIS IONS OF SECTION 2(22)(E) OF THE ACT ARE NOT ATTRACTED AS NO LOAN OR ADVANCE HAS BEE N RECEIVED BY THE APPELLANT FROM THPL DURING THE YEAR. 3 ITA NO 388/MUM/2014 ASSESSMENT YEAR: 2010-11 PAGE 3 OF 6 (II) THE CIT(A) FAILED TO APPRECIATE THAT THE ADDIT IONS U/S. 2(22)(E) OF THE ACT SHOULD BE RESTRICTED TO THE ACCUMULATED PROFITS AS ON THE DATE OF RECEIPT OF LOAN/ADVANCE AND NOT AS AT 31 ST MARCH 2010. THE APPELLANT HUMBLY PRAYS THAT THE IMPUGNED ADDITI ON MADE BY THE CIT(A) BE DELETED, IN THE INTEREST OF NATURAL JUSTICE. 2. THE APPELLANT BEFORE US IS A COMPANY INCORPORA TED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS INTER- ALIA, ENGAGED IN THE BUSINESS OF INVESTMENT IN MOVABLE AND IMMOV ABLE ASSETS AND BUYING, SELLING, MARKETING AND DEALING IN ALL K INDS OF FASHION PRODUCTS AND COMMISSION AGENCY. FOR THE YEAR UNDER CONSIDERATION IT FILED A RETURN OF INCOME,DECLARING AN INCOME OF RS.10,25,26,780/- WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT, WHEREIN T HE TOTAL INCOME WAS DETERMINED AT RS.10,65,59,300/-. THE ADDITION MADE TO THE RETURNED INCOME, AND WHICH IS SUBJECT MATTER OF CON TROVERSY BEFORE US, IS AN AMOUNT RS.37,80,390/-, WHICH WAS ADDED IN THE HANDS OF THE ASSESSEE COMPANY AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. THE SAID ADDITION HAS ALSO BEEN SUSTAINED BY CIT(A); AND, ACCORDINGLY, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. THE ADDITION OF RS.37,80,390/- IS COMPRISING OF TWO LIMBS, NAMELY, A SUM OF RS.9,05,515/- PURPORTED TO HAVE B EEN RECEIVED FROM M/S. TAINWALA TRADING & INVESTMENT COMPANY L TD.; AND, A SUM OF RS.28,74,875/- REPRESENTING AMOUNT RECEIVED FROM M/S. TAINWALA HOLDINGS PVT. LTD. THE FORMER ADDITION IS AGITATED BY WAY OF GROUND OF APPEAL NO.1 AND THE LATTER IS AGITATE D BY WAY OF GROUND OF APPEAL NO.2 BEFORE US. 4 ITA NO 388/MUM/2014 ASSESSMENT YEAR: 2010-11 PAGE 4 OF 6 4. BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE S UBMITTED THAT IN SO FAR AS THE ADDITION OF RS.9,05,515/- IS CONCE RNED, THE ASSESSEE DOES NOT WISH TO PRESS THE SAME, THEREFORE , GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS DISMISSED. 5. WITH RESPECT TO THE ADDITION OF RS.28,74,875/-, CONSIDERED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE AC T, IT IS CONTENDED THAT THE SAID ADDITION IS NOT TENABLE IN VIEW OF TH E JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UN IVERSAL MEDICARE PVT. LTD., 324 ITR 263 (BOM). IT IS SUBMI TTED THAT THE SAID AMOUNT IS PURPORTED TO HAVE BEEN RECEIVED FROM M/ S. TAINWALA HOLDINGS PVT. LTD. AND SINCE ASSESSEE WAS NOT A SHA REHOLDER IN THE SAID CONCERN, SUCH AMOUNT COULD NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE COMPANY FOLLOWING THE RATIO OF THE JUD GMENT IN THE CASE CIT VS. UNIVERSAL MEDICARE PVT. LTD.(SUPRA). 6. ON THIS ASPECT, THE LD. DR APPEARING FOR THE REV ENUE HAS NOT DISPUTED THE FACTUAL MATRIX BROUGHT OUT BY LD. REPR ESENTATIVE FOR THE ASSESSEE. 7. IN VIEW OF THE AFORESAID FACTUAL MATRIX, THE PLE A OF THE ASSESSEE, BASED ON THE JUDGEMENT OF THE HONBLE BOM BAY HIGH 5 ITA NO 388/MUM/2014 ASSESSMENT YEAR: 2010-11 PAGE 5 OF 6 COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT . LTD.(SUPRA) IS LIABLE TO BE UPHELD, THEREBY RESULTING IN DELETION OF AN ADDITION OF RS.28,74,875/- IN THE HANDS OF THE ASSESSEE COMPANY . ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) ON THIS ASPECT AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.28,7 4,875/- MADE IN THE HANDS OF THE ASSESSEE ON THE GROUND THAT SUCH D IVIDEND COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE AS IT IS NOT A SHAREHOLDER IN M/S. TAINWALA HOLDINGS PVT. LTD. THUS, IN SO FA R AS GROUND OF APPEAL NO.2 IS CONCERNED ASSESSEE SUCCEEDS. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21/08/ 2015. SD/- SD/- ( AMIT SHUKLA ) (G.S. PANNU ) ( JUDICIAL MEMBER ) ( ACCOUNTANT M EMBER ) MUMBAI DATED 21/08/2015 VM. COPY TO: THE APPELLANT THE RESPONDENT THE CONCERNED CIT(A) THE CONCERNED CIT THE DR, CBENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI