Satish Kumar Gupta, New Delhi V. ACIT, New Delhi

ITA 401/DEL/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6780 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-10-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 29-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K BANSAL SENIOR
• Assessee Lawyers: SAHIL MEHTA S
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT AND AND AND AND SHRI KULDIP SINGH SHRI KULDIP SINGH SHRI KULDIP SINGH SHRI KULDIP SINGH, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 401/DEL/2010 401/DEL/2010 401/DEL/2010 401/DEL/2010 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2006 2006 2006 2006 - -- - 07 0707 07 SHRI SATISH KUMAR GUPTA, SHRI SATISH KUMAR GUPTA, SHRI SATISH KUMAR GUPTA, SHRI SATISH KUMAR GUPTA, 135, DEVIKA TOWER, 135, DEVIKA TOWER, 135, DEVIKA TOWER, 135, DEVIKA TOWER, 6, NEHRU PLACE 6, NEHRU PLACE 6, NEHRU PLACE 6, NEHRU PLACE, ,, , NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AACPG7419H. PAN : AACPG7419H. PAN : AACPG7419H. PAN : AACPG7419H. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -23(1), 23(1), 23(1), 23(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GAURAV JAIN AND SHRI SAHIL MEHTA, ADVOCATES. RESPONDENT BY : SHRI N.K. BANSAL, SENIOR DR. DATE OF HEARING : 25.10.2016 25.10.2016 25.10.2016 25.10.2016 DATE OF PRONOUNCEMENT : 28.10.2016 28.10.2016 28.10.2016 28.10.2016 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: :- -- - THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEA R 2006-07 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XXIII, NEW DELHI DATED 3 RD DECEMBER, 2009. 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASS ESSEE IS AGAINST THE ADDITION OF `28,46,927/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE ASSESSEE IS A SHAREHOLDER IN ORIEN T CARPET GALLERY PVT.LTD. (HEREINAFTER REFERRED TO AS OCG). THAT AT THE BEGINNING OF THE YEAR, THERE WAS CREDIT BALANCE OF THE ASSESSEE IN T HE COMPANY AMOUNTING TO `3,28,78,073/-. THUS, THE ASSESSEE WA S TO RECEIVE THE ITA-401/DEL/2010 2 MONEY FROM THE COMPANY. ALMOST FOR WHOLE YEAR, THE ASSESSEE WAS TO RECEIVE MONEY FROM THE COMPANY. HOWEVER, ON RECEIP T OF TWO CHEQUES OF `5 LAKHS AND `25 LAKHS EACH ON 01.02.2006 AND 11 .02.2006, THERE WAS CREDIT BALANCE OF THE COMPANY WITH THE ASSESSEE AND THE ASSESSEE HAS ALREADY PAID `25,31,866/-. THUS, THE CREDIT BA LANCE OF THE COMPANY AMOUNTING TO `28,46,927/- REMAINED ONLY FOR THE PERIOD OF SIXTEEN DAYS WITH THE ASSESSEE AS AGAINST WHICH THE CREDIT OF THE ASSESSEE OF MORE THAN A CRORE WAS WITH THE COMPANY FOR MORE THAN NINE MONTHS. HE, THEREFORE, SUBMITTED THAT MERELY BECAUSE IN RUNNING ACCOUNT JUST FOR A FEW DAYS THERE WAS CREDIT OF THE COMPANY, IT CANNOT BE SAID THAT THE ASSESSEE HAS RECEIVED LOAN OR ADVA NCE FROM THE COMPANY WHICH CAN BE TREATED AS DEEMED DIVIDEND IN TERMS OF SECTION 2(22)(E) OF THE ACT. HE ALSO STATED THAT THE CREDI T OF `5 LAKHS WAS BY MISTAKE WHICH THE COMPANY HAS PAID TO THE ASSESSEE S SON AND WHICH WAS SUBSEQUENTLY RECTIFIED ALSO. WITH REGARD TO `2 2 LAKHS, IT IS STATED THAT THIS AMOUNT WAS PAID TO THE ASSESSEE FOR SEARC HING OUT THE BUILDING FOR THE COMPANY. THE ASSESSEE IS DIRECTOR IN THE SAID COMPANY. HOWEVER, HIS MAIN ARGUMENT WAS THAT THE A SSESSEE HAD A RUNNING ACCOUNT WITH THE COMPANY AND FOR MORE THAN 10-11 MONTHS, THERE WAS A SUBSTANTIAL CREDIT OF THE ASSESSEE IN T HE COMPANY AND IT IS ONLY FOR A FEW DAYS THERE WAS CREDIT OF THE COMPANY WITH THE ASSESSEE. THUS, MERELY BECAUSE THE RUNNING ACCOUNT TURNED TO BE CREDIT BALANCE FOR THE COMPANY FOR A FEW DAYS, IT CANNOT BE SAID T HAT SUCH CREDIT BALANCE WAS IN THE NATURE OF LOAN OR ADVANCE. 4. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF AUTHORITIES BELOW. HE STATED THAT FOR THE PURPOSE OF SECTION 2(22)(E), EACH TRANSACTION IS TO BE CONSIDERED IN ISOLATION. THAT AS ON 19 TH JANUARY, 2006, THERE WAS CREDIT BALANCE OF `1,46,92 7/- OF OCG WITH THE ASSESSEE. THEREAFTER, THE COMPANY PAID THE SUM OF `5 LAKHS ON 1 ST FEBRUARY, 2006 AND `22 LAKHS ON 11 TH FEBRUARY, 2006 RESULTING IN TOTAL ITA-401/DEL/2010 3 CREDIT BALANCE OF `28,46,927/-. THUS, CREDIT BALAN CE OF THE COMPANY WITH THE ASSESSEE WAS IN THE NATURE OF LOAN AND ADV ANCE AND SECTION 2(22)(E) WAS RIGHTLY APPLIED BY THE ASSESSING OFFIC ER AND RIGHTLY SUSTAINED BY LEARNED CIT(A). THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE THAT THE AMOUNT WAS GIVEN TO T HE ASSESSEE IN HIS CAPACITY AS DIRECTOR OF THE COMPANY FOR ACQUIRI NG THE IMMOVABLE PROPERTY OF THE COMPANY. THEREFORE, THIS CONTENTIO N IS RIGHTLY REJECTED BY THE CIT(A). HE ALSO STATED THAT THE ASSESSEE IS A SUBSTANTIAL SHAREHOLDER OF OCG AND OCG HAS ACCUMULATED PROFIT. THEREFORE, ALL THE CONDITIONS FOR APPLICABILITY OF SECTION 2(22)(E ) ARE DULY SATISFIED. HE, THEREFORE, REQUESTED THAT THE ORDER OF LEARNED CIT(A) SHOULD BE SUSTAINED. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. FOR APP LICABILITY OF SECTION 2(22)(E), APART FROM OTHER CONDITIONS, THE AMOUNT R ECEIVED BY THE SHAREHOLDER SHOULD BE IN THE NATURE OF LOAN OR ADVA NCE. LET US EXAMINE THE ACCOUNT OF THE COMPANY WITH THE ASSESSE E WHICH READS AS UNDER :- SATISH KUMAR GUPTA GENERAL LEDGER 01/04/05 TO 31/03/06 DATE TYPE/NO DESCRIPTION DEBIT CREDIT BALANCE TYPE ORIENT CARPET GALLERY P.LTD. 01/APR/2005 OPENING BALANCE 32878073.00 DR 07/APR /2005 BR/0001 CHQ RECD FROM OCG PVT LTD 250000.00 32628073.00 DR 07/APR/2005 BR/0002 CHQ RECD FROM OCG PVT LTD 2000000.00 30628073.00 DR 08/APR/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 250000.00 30378073.00 DR 15/APR/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 75000.00 30303073.00 DR ITA-401/DEL/2010 4 29/APR/2005 BP/0002 CHQ ISSD TO OCG PVT LTD 400000.00 30703073.00 DR 30/APR/2005 BP/0002 CHQ ISSD TO OCG PVT LTD 800000.00 31503073.00 DR 04/MAY/2005 BP/0001 CHQ ISSD TO OCG PVT LTD 1000000.00 32503073.00 DR 06/MAY/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 150000.00 32353073.00 DR 26/MAY/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 1100000.00 31253073.00 DR 30/MAY/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 50000.00 31203073.00 DR 02/JUN/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 20 00000.00 29203073.00 DR 04/JUN/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 2000000.00 27203073.00 DR 06/JUN/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 1000000.00 26203073.00 DR 07/JUN/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 2000000.00 24203073.00 DR 09/JUN/20 05 BR/0001 CHQ RECD FROM OCG PVT LTD 1000000.00 23203073.00 DR 11/JUN/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 400000.00 22803073.00 DR 13/JUN/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 1200000.00 21603073.00 DR 15/JUN/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 150000.00 21453073.00 DR 15/JUN/2005 BR/0002 CHQ RECD FROM OCG PVT LTD 400000.00 21053073.00 DR 11/AUG/2005 BP/0001 CHQ ISSD TO OCG PVT LTD 500000.00 21553073.00 DR 17/AUG/2005 BP/0001 CHQ ISSD TO OCG PVT LTD 100000.00 21653073.00 DR 31/AUG/2005 BP/0001 CHQ ISSD TO OCG PVT LTD 500000.00 22153073.00 DR 19/SEP/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 500000.00 21653073.00 DR 27/SEP/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 500000.00 21153073.00 DR ITA-401/DEL/2010 5 03/OCT/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 30 0000.00 20853073.00 DR 26/OCT/2005 BP/0001 CHQ ISSD TO OCG PVT LTD 100000.00 20953073.00 DR 12/DEC/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 5000000.00 15953073.00 DR 12/DEC/2005 BR/0002 CHQ RECD FROM OCG PVT LTD 1500000.00 14453073.00 DR 14/DEC/2005 B R/0001 CHQ RECD FROM OCG PVT LTD 600000.00 13853073.00 DR 14/DEC/2005 BR/0002 CHQ RECD FROM OCG PVT LTD 700000.00 13153073.00 DR 16/DEC/2005 BR/0002 CHQ RECD FROM OCG PVT LTD 2500000.00 10653073.00 DR 17/DEC/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 35 00000.00 7153073.00 DR 22/DEC/2005 BR/0001 CHQ RECD FROM OCG PVT LTD 5000000.00 2153073.00 DR 03/JAN/2006 BR/0001 CHQ RECD FROM OCG PVT LTD 1000000.00 1153073.00 DR 10/JAN/2006 BR/0001 CHQ RECD FROM OCG PVT LTD 500000.00 653073.00 DR 19/JAN/2006 BR/ 0001 CHQ RECD FROM OCG PVT LTD 800000.00 - 146927.00 CR 01/FEB/2006 BR/0001 CHQ RECD FROM OCG PVT LTD 500000.00 - 646927.00 CR 11/FEB/2006 BR/0001 CHQ RECD FROM OCG PVT LTD 2200000.00 - 2846927.00 CR 27/FEB/2006 BP/0002 CHQ ISSD TO OCG PVT LTD 2531866.7 0 - 315060.30 CR 31/MAR/2006 CLOSING BALANCE - 3150060.30 CR ACCOUNT TOTALS 38809939.70 39125000.00 6. FROM THE ABOVE, IT IS EVIDENT THAT THERE IS RUNN ING ACCOUNT OF THE COMPANY IN THE BOOKS OF THE ASSESSEE. THERE IS REG ULAR RECEIPT AND PAYMENT OF MONEY BETWEEN THE ASSESSEE AND THE COMPA NY. IN THE BEGINNING OF THE YEAR I.E., ON 1 ST APRIL, 2005, THERE WAS DEBIT BALANCE OF `3.28 CRORES OF THE COMPANY IN THE BOOKS OF THE ASS ESSEE. THUS, AS ON 1 ST APRIL, 2005, THE ASSESSEE WAS TO RECEIVE MORE THAN `3 CRORES FROM ITA-401/DEL/2010 6 UCG. WE FIND THAT TILL 30 TH MAY, 2005, THE DEBIT BALANCE REMAINED MORE THAN `3 CRORES AND UP TO 26 TH OCTOBER, 2005, THE DEBIT BALANCE REMAINED MORE THAN `2 CRORES. THUS, FOR MORE THAN HALF OF THE YEAR, THE DEBIT BALANCE OF THE COMPANY IN THE BOOKS OF TH E ASSESSEE WAS MORE THAN `2 CRORES. UP TO 16 TH DECEMBER, 2005, THE DEBIT BALANCE OF THE COMPANY WAS MORE THAN A CRORE AND UP TO 10 TH JANUARY, 2006, IN THE RUNNING ACCOUNT, THERE WAS DEBIT BALANCE OF THE COMPANY. IT IS ONLY AT THE END OF JANUARY OR IN THE BEGINNING OF F EBRUARY THE CREDIT BALANCE OF THE COMPANY OCCURRED AND THE HIGHEST CRE DIT BALANCE REMAINED `28,46,927/- FOR A PERIOD OF 17 DAYS. AS AGAINST THIS CREDIT BALANCE FOR A PERIOD OF 17 DAYS, WE FIND THAT THE D EBIT BALANCE OF THE COMPANY IN THE ACCOUNTS OF THE ASSESSEE REMAINED IN CRORES FOR MONTHS TOGETHER. IN THE ABOVE CIRCUMSTANCES, AFTER CONSIDERING THE ENTIRETY OF FACTS AND THE SUBMISSION OF BOTH THE SI DES, WE AGREE WITH THE ASSESSEE THAT THERE WAS A RUNNING ACCOUNT OF TH E ASSESSEE WITH OCG AND FOR MOST OF THE PERIOD, THERE WAS HUGE DEBI T BALANCE OF THE COMPANY AND IT IS ONLY FOR FEW DAYS THERE WAS A MEA GER CREDIT BALANCE OF THE COMPANY. IN OUR OPINION, SUCH MEAGER BALANC E OF THE COMPANY FOR A FEW DAYS IN A RUNNING ACCOUNT WHEREIN THERE W AS HUGE DEBIT BALANCE OF THE COMPANY FOR MONTHS TOGETHER CANNOT B E SAID TO BE LOAN AND ADVANCE SO AS TO ATTRACT PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IN VIEW OF THE ABOVE, WE HOLD THAT ON THE FACTS OF THIS CASE, SECTION 2(22)(E) WAS WRONGLY APPLIED. ACCORDINGLY, WE DELE TE THE ADDITION OF `28,46,927/- MADE BY THE ASSESSING OFFICER. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 28.10.2016 . SD/- SD/- (KULDIP SINGH (KULDIP SINGH (KULDIP SINGH (KULDIP SINGH ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. ITA-401/DEL/2010 7 COPY FORWARDED TO: - 1. APPELLANT : SHRI SATISH KUMAR GUPTA, SHRI SATISH KUMAR GUPTA, SHRI SATISH KUMAR GUPTA, SHRI SATISH KUMAR GUPTA, 135, DEVIKA TOWER, 6, NEHRU PLACE, 135, DEVIKA TOWER, 6, NEHRU PLACE, 135, DEVIKA TOWER, 6, NEHRU PLACE, 135, DEVIKA TOWER, 6, NEHRU PLACE, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. 2. RESPONDENT : ASSISTANT COMMISSIONER OF INCOME TA X, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CI CICI CIRCLE RCLE RCLE RCLE- -- -23(1), NEW DELHI. 23(1), NEW DELHI. 23(1), NEW DELHI. 23(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR