The ACIT, Kochi V. Sri. Palliparambil Abdulrahiman Jinas, Kochi

ITA 394/COCH/2020

AI Insights

The case involves an appeal by the Assistant Commissioner of Income Tax (ACIT) against Palliparambil Abdulrahman Jinas concerning the assessment year 2011-12. The primary issue was the addition of Rs. 2,60,98,047 as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961. The Assessing Officer had treated certain advances to the Managing Director as deemed dividends, which were contested in the appellate proceedings. The CIT(A) found that most of these advances were used for business purposes and not for personal benefit, thus not qualifying as deemed dividends, except for a portion related to miscellaneous expenses due to lack of evidence. The Tribunal upheld the CIT(A)'s decision, referencing similar cases and precedents.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 115527 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-12-0000
• Assessment Year: 2011-2012
• Appeal Filed On: 17-12-2020
• Other Referred Cases: Smt. Jayalakshmi vs. ACIT (2018) 96 taxmann.com 318 (Mad), CIT vs. D.M. Purnesh (2020) 426 ITR 169 (Kar)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAMESH CHERIYAN JOHN
• Keywords: Deemed dividend; TDS
• Section: 143(3); 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Satbeer Singh Godara, Judicial Memberand Shri Manoj Kumar Aggarwal, Accountant Member ITA No.394/Coch/2020 (Assessment Year:2011-12) ACIT, Corporate Circle1(1) 4th Floor, C.R. Building I.S. Press Road Kochi 682018 Vs. PalliparambilAbdulrahman Jinas No. 6, Galaxy Square Rajaj Road Junction M.G. Road, Kochi 682035 PAN –ABIPJ6838L Appellant Respondent Appellant by: Smt. J.M. Jamuna Devi, Sr. D.R. Respondent by: Shri Ramesh Cheriyan John, Adv. Date of Hearing: 09.11.2022 Date of Pronouncement: 27.12.2022 O R D E R Per: Bench This Revenue’s appeal for A.Y. 2011-12arise against the CIT(A)- 1, Kochiorder dated 23.09.2020 passed in case No. CIT(A), Kochi- 1/10088/2021-22, involving proceedings under Section 143(3) of the Income Tax Act, 1961 (in short the Act). Heard both the parties. Case file perused. 2. Coming to the Revenue’s sole substantive grievance raised in the instant appeal seeking revival of Section 2(22)(e) deemed dividend addition of Rs.2,60,98,047/- both the learned representatives invited our attention to the CIT(A)’s detailed discussion on the issue reading as follows:- “I have gone through the Grounds of Appeal, Statement of Facts and relevant portion of the assessment order. For AY. 2011-12 the Assessing Officer assessed an amount of Rs. ITA No. 394/Coch/2020 Palliparambil Abdulrahman Jinas 2 3,17,58412/- as deemed dividend u/s 2(22)(e) of the Income tax Act 1961 According to the AO a total amount of Rs. 4,82,29,844/- was advanced to the Managing Director which is being taxed as deemed dividend. Hence, assessment was made restricting the disallowance to the balance in the reserve account of the company as on 31st March 2011 which amounted to Rs. 3,17,58,412/-. In Appellate proceedings the following grounds of appeal are raised by the appellant. I. As per the Section 2(22)(e) specifically uses the words"for the individual benefit of any such shareholder". The amount advanced was totally used by the director for the business of the company and not for any individual benefit of him as per the submission and evidences filed by the appellant. 2. The Remand Report in the case of Galaxy Homes has considered an amount of Rs. 2,5797486/- out of the Advances given to the Managing Director as 'genuine expenses which was disallowed by the assessing Officer on the ground that the expenses are not proved. The Remand Report has confirmed that the expenses are rightly used for the company's business purposes. This proves that advances to that extent is expenses of the company and not for any personal benefit of the Director. Therefore, to that extent it cannot be considered as a deemed dividend. 3. Further, an amount of Rs. 2,50,36,679/- was spent by the Director for furnishing and renovation of the office space. The Appellant could not file the details of furnishing and renovation of office space before the AO as the details were called for just before the time barring date for completion of the assessment proceedings. However, in the appellate proceedings the assessee has furnished documentary evidences, bills, vouchers, agreements and TDS certificates. According to the details furnished the following expenses were incurred Structural work and interior for office Rs.4613603.00 (Construction agencies and contractors) Purchase bills Rs.2753042.00 Standing Timber Rs.5095000.00 Labour Charges Rs.3290169.00 Painting Charges Rs.1112500.00 Tile Work Rs.2512000.00 Miscellaneous Rs.5660365.00 Total Rs.25036679.00 The total amount spent as above appears in the Balance Sheet of the Company Galaxy Homes Pvt Ltd as Assets as on 31.03.2012. ITA No. 394/Coch/2020 Palliparambil Abdulrahman Jinas 3 During the appellate proceedings the appellant has not produced any documentary evidences, bills, vouchers etc., for the miscellaneous expenditure of the Rs. 56,60,365/-. In the absence of any cogent and tangible evidences for the expenditure under the head miscellaneous expenditure I hereby confirm Rs. 56,60,365/- from the total addition of Rs. 3,17,58,412/- and Delete the balance of Rs. 2,60,98,047/-. as the advances are not in the nature of Deemed Dividend u/s 2(22)(e) of the Income Tax Act, 1961. Since all expenses except miscellaneous expenses were incurred for the company Galaxy Homes Pvt Ltd and not for the personal benefit of the Director these expenses are not to be considered as advances to the Director which are taxable under the section 2(22)(e). This ground is partly allowed In Result, The appeal is Partly Allowed.” 3. Suffice to say, it has come to the record that the Assessing Officer’s remand report itself has found the impugned sum(s) in fact as representing advances drawn from the accompany M/s. Galaxy Homes Pvt. Ltd. for business purpose only. That being the case, we are of the opinion that the learned Assessing Officer had erred in law and on facts in treating the same as loans and advances attracting the deeming fiction of dividends under Section 2(22)(e) of the Act. 4. We further make it clear that the Revenue’s appeal ITA No. 393/Coch/2020 involving M/s. Galaxy Homes stood dismissed on 07.11.2022 due to the Assessing Officer’s favourable remand report in light of Smt. Jayalakshmi vs. ACIT (2018) 96 taxmann.com 318 (Mad) and CIT vs. D.M. Purnesh (2020) 426 ITR 169 (Kar) as not maintainable. This Revenue appeal also meets the same consequence. Ordered accordingly. 5. This Revenue’s appeal is dismissed in above terms. Dictated and pronounced in the open Court on 27 th December, 2022. Sd/- Sd/- (Manoj Kumar Aggarwal) (Satbeer Singh Godara) Accountant Member Judicial Member Cochin, Dated: 27 th December, 2022 ITA No. 394/Coch/2020 Palliparambil Abdulrahman Jinas 4 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -1, Kochi 4. The CIT- Kochi 5. The DR, ITAT, Cochin 6. Guard File By Order //True Copy// Assistant Registrar ITAT, Cochin n.p.