Vardhman Automobiles (P) Ltd., Gurgaon V. ITO, Gurgaon

ITA 3995/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1381 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 16-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAMES SINGSON SR DR
• Assessee Lawyers: SAURABH ROHTGI
• Keywords: Deemed dividend; TDS
• Section: 271(1)(c); 2(22)(e); 201(1); 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI , ! ' $%&'()*+,-+! BEFORE MS. SUSHMA CHOWLA, V.P & SHRI PRASHANT MAHAR ISHI, AM . / ITA NOS.3994 & 3995/DEL/2015 / ) ) / ASSESSMENT YEAR 2011-12 VARDHMAN AUTOMOBILES (P.) LTD., OPPOSITE AIR FORCE SCHOOL, OLD DELHI ROAD, GURGAON-122001. PAN-AACCV6116D .......... 01 /APPELLANT VS THE ITO, TDS WARD, GURGAON. . $201 / RESPONDENT 0134+ / APPELLANT BY : SH. SAURABH ROHTGI, CA $20134+ / RESPONDENT BY : SH. JAMES SINGSON, SR.DR 3&, / DATE OF HEARING : 19.03.2020 56 3&, / DATE OF PRONOUNCEMENT: 21.05.2020 +% / ORDER PER SUSHMA CHOWLA,VP BOTH APPEALS FILED BY ASSESSEE ARE AGAINST ORDER O F CIT(A)-1, GURGAON DATED 01.04.2015 & 07.04.2015 RELATING TO ASSESSMEN T YEAR 2011-12 AGAINST ORDER PASSED UNDER SECTION 201(1)/201(1A) AND 271C OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) RESPECTIVELY. ITA NOS.3994 & 3995/DEL/2015 ASSESSMENT YEAR 2011-12 2 ITA NO.3994/DEL/2015 [ASSESSMENT YEAR 2011-12] 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF A PPEAL:- 1. THAT THE IMPUGNED ORDER IS BAD IN LAW AS WELL A S ON MERITS. 2. THAT THE IMPUGNED ORDER AND PROCEEDINGS IS WITHO UT JURISDICTION. 3. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN VIEW OF DOCUMENTS AND EXPLANATION FILED, THE LIABILITY FOR TDS OF RS.1,01,489/- ON DEEMED DIVIDEND U//S 2(22)(E) FOR RS.10,14,893/- AN D SUSTAINED BY LD.CIT(A) DESERVES TO BE DELETED IN LAW AS WELL AS ON MERITS. 4. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE, NO DEMAND U/S 201 SHOULD HAVE BEEN CREATED IN VIEW OF DEMAND CREA TED BY THE ITO, WARD-1(2), GURGAON IN CASE OF SURBHI JAIN. 5. THAT NO INTEREST 201(1A) SHOULD HAVE BEEN LEVIED , WITHOUT PREJUDICE, THE INTEREST CHARGED IS EXCESSIVE. 3. BRIEFLY IN THE FACTS OF THE CASE THE ASSESSEE CO MPANY HAD ADVANCE RS.70 LAKHS TO ITS ASSOCIATED CONCERNS NAMELY ARIHANT AGE NCY WHICH WAS TREATED AS DEEMED DIVIDEND TO THE EXTENT OF ACCUMULATED PROFIT S (RS.10,14,893/-), AS PER PROVISION OF SECTION 2(22)(E) OF THE ACT. THE ASSE SSEE HAD NOT DEDUCTED TAX AT SOURCE ON DEEMED DIVIDEND OF RS.10,14,893/- AND ASS ESSING OFFICER HELD THE ASSESSEE TO BE IN DEFAULT U/S 201/201(1A) OF THE AC T AND RAISED DEMAND OF RS.1,46,149/-. THE CIT(A) UPHELD THE SAID ORDER OF THE AO AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE COMPANY HAD ADVANCED THE LOAN TO ITS ASSOC IATED CONCERN M/S. ARIHANT AGENCIES WHICH WAS THEN TRANSFERRED TO THE ACCOUNT OF SH.DINESH KUMAR JAIN AND THE FUND WAS TRANSFERRED BACK TO THE ASSESSEE COMPANY ON THE ITA NOS.3994 & 3995/DEL/2015 ASSESSMENT YEAR 2011-12 3 SAME DAY AS DIRECTORS SHARE CAPITAL. THE EXPLANAT ION FILED BY THE ASSESSEE BEFORE THE CIT(A) IS AS UNDER:- DURING ASSESSMENT YEAR 2011-12, AS BUSINESS WAS GR OWING, THERE WAS A REQUIREMENT FOR MORE FUNDS. FOR INCREASING DIRECTO R CAPITAL AN AMOUNT OF RS.70 LAKHS WAS TRANSFERRED TO M/S. ARIHANT AGENCIE S (PROP. FIRM OF OTHER DIRECTOR). ARIHANT AGENCIES TRANSFERRED THE AMOUNT TO DINESH KUMAR JAIN (DIRECTOR OF VAPL) AND THE FUNDS WERE TRANSFERRED T O VAPL AS DIRECTORS SHARE CAPITAL. THIS AMOUNT WAS RECEIVED IN VAPL ON THE SAME DATE, WITHOUT GIVING ARIHANT AGENCIES OR DINESH KUMAR JAI N TIME FOR ANY OTHER UTILIZATION OF FUNDS. VAPL ARIHANT AGENCIES DINES KUMAR JAIN VAPL ON SA ME DAY. 5. THE CASE OF THE ASSESSEE BEFORE THE AUTHORITIES WAS THAT THE AFORESAID TRANSACTION WAS UNDERTAKEN IN ORDER TO RAISE BANK L OANS AND THE ASSESSEE EXPLAINED THAT IT HAD TRANSFERRED THE FUNDS AGGREGATING RS.50,00, 000/- ONLY TO M/S. ARIHANT AGENCIES ON 30.04.2010 AND RS.20,00,00 0/- ON 01.05.2010 WHICH WERE RECEIVED THE SAME DAY IN FORM OF DIRECTORS CA PITAL. OUT OF AVAILABLE FUNDS OF RS89,65,100.16 ONLY RS.70,00,000/- WERE OUTSTAND ING IN BOOKS OF ACCOUNTS. THE DIFFERENCE AMOUNT OF RS.19,65,100.16 WAS STILL LYING IN FIRM AS DIRECTORS CAPITAL AND PROFITS. THEREFORE, NO PART OF BORROWE D FUNDS WAS DIVERTED IN MAKING INTEREST FREE ADVANCE. 6. WE FIND THAT THE ISSUE OF DEEMED DIVIDEND U/S 2( 22)(E) OF THE ACT IN RESPECT OF SIMILAR TRANSACTION BEING MADE WHEREIN T HE TRANSACTION OF RECEIPT AND PAYMENT WERE ON THE SAME DATE ITSELF BY BOTH TH E PARTIES, AROSE BEFORE THE TRIBUNAL IN SERIES OF CASES I.E. SEEMA DEVI BANSAL IN ITA NO.6462/DEL/2014 ORDER DATED 18.07.2018 RELATING TO ASSESSMENT YEAR 2010-11 AND SH. HARISH KANWAR IN ITA NO.529/DEL/2017 ORDER DATED 18.10.201 7 RELATING TO ITA NOS.3994 & 3995/DEL/2015 ASSESSMENT YEAR 2011-12 4 ASSESSMENT YEAR 2011-12. WE HAVE ALSO DECIDED SIMIL AR ISSUE IN SURBHI JAIN VS ITO IN ITA NO.3993/DEL/2015 VIDE ORDER DATED 14. 05.2020 RELATING TO ASSESSMENT YEAR 2011-12, APPLYING THE RATIO LAID DO WN BY HONBLE BOMBAY HIGH COURT IN PRAVEEN BHIMSI CHHEDA SHIVSADAN VS DC IT REPORTED IN 141 TTJ 58. THE HONBLE BOMBAY HIGH COURT IN PRAVEEN BHIM SI CHHEDA SHIVSADAN VS DCIT (SUPRA) HELD THAT UNDER SIMILAR CIRCUMSTANCES, IT WAS NOT CASE OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 7. APPLYING THE SAID PARITY OF REASONING AND WE HOL D THAT THE ASSESSEE CANNOT HELD TO BE IN DEFAULT U/S 2(22)(E) OF THE AC T AND THERE IS NO MERIT IN RAISING THE DEMAND U/S 201(1) AND CHARGING INTEREST U/S 201(1A) OF THE ACT. CONSEQUENTLY, THE AO IS DIRECTED TO DELETE THE SAME . THUS, GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. ITA NO.3995/DEL/2015 [ASSESSMENT YEAR 2011-12] 8. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF AP PEAL:- 1. THAT THE IMPUGNED ORDER IS BAD IN LAW AS WELL A S ON MERITS. 2. THAT THE IMPUGNED ORDER AND PROCEEDINGS IS WITHO UT JURISDICTION. 3. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN VIEW OF DOCUMENTS AND EXPLANATION FILED, THE LEVY OF PENALT Y OF RS.1,01,489/- FOR NON-DEDUCTION OF TDS ON DEEMED DIVIDEND U/S 2(22)(E ) FOR RSS.10,14,893/- AND SUSTAINED BY LD.CIT(A) DESERVES TO BE DELETED I N LAW AS WELL AS ON MERITS. 4. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE, NO PENALTY SHOULD HAVE BEEN LEVIED BEFORE TREATING THE ASSESSE E AS ASSESSEE IN DEFAULT IN ORDER PASSED U/S 201. 5. THAT WITHOUT PREJUDICE, PENALTY PROCEEDINGS ARE WITHOUT JURISDICTION FOR NOT INITIATING THE PENALTY PROCEEDINGS IN ORDER PASSED U/S 201. ITA NOS.3994 & 3995/DEL/2015 ASSESSMENT YEAR 2011-12 5 9. FURTHER PENALTY WAS LEVIED U/S 271C OF THE ACT F OR THE AFORESAID DEFAULT U/S 201(1) OF THE ACT. SINCE WE HAVE ALREADY DELET ED THE DEMAND RAISED U/S 201(1) OF THE ACT, THERE IS NO MERIT IN LEVY OF PEN ALTY U/S 271(1)(C) OF THE ACT AND THE SAME IS DELETED. GROUNDS OF APPEAL RAISED B Y ASSESSEE ARE THUS ALLOWED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 1 ST MAY, 2020. SD/- SD/- (PRASHANT MAHARISHI) (SUSHMA CHOWLA) +, - / ACCOUNTANT MEMBER ! / VICE PRESIDENT / DATED : 21 ST MAY, 2020 * AMIT KUMAR * +%3$/&7(8+(&9 COPY OF THE ORDER IS FORWARDED TO : 1. 01 / THE APPELLANT 2. $201 / THE RESPONDENT 3. :& ; < / THE CIT(A) 4. = :& / THE PR. CIT 5. 6. (>?$/&/ * * / DR, ITAT, DELHI ?)@9 GUARD FILE. +% / BY ORDER , 2(&$/& // TRUE COPY // ' AB-C , * ASSISTANT REGISTRAR, ITAT, DELHI