ITO WD 8(2)(1), MUMBAI V. HOTEL TUNGA REGENCY P.LTD, MUMBAI

ITA 44/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5837 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2004-2005
• Appeal Filed On: 02-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Keywords: Deemed dividend
• Section: 143(3); 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER . / ITA NO. 44 /MUM./ 2013 ( / ASSESSMENT YEAR : 20 04 05 ) INCOME TAX OFFICER WARD 8(2)(1), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APP ELLANT V/S HOTEL TUNGA REGENCY PVT. LTD. PLOT NO.16, MIDC CENTRAL ROAD ANDHERI (E), MUMBAI 400 093 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACH8822N / ASSESSEE BY : MR. HARIDAS BHAT / RE VENUE BY : MR. P ITAMBER DAS / DATE OF HEARING 18 .0 3 .201 4 / DATE OF ORDE R 28.03.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE AFORESAID APPEAL HA S BEEN PREFERRED BY THE REVENUE CHALLENGING TH E IMPUGNED ORDER DATED 12 TH OCTOBER 2012, PASSED BY THE LEARNED COMMISSIONER (APPEALS) XVII , MUMBAI, FOR THE QUANTUM OF HOTEL TUNGA REGENCY PVT. LTD. 2 ASSESSMENT PASSED UNDER SECTION 143(3) R/W SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 04 05 . 2 . THE SOLE DISPUTE RAISED BY THE DEPARTMENT IN THIS APPEAL IS THAT THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN DELETING THE ADDITION OF ` 27,62,982 MADE UNDER THE PROVISIONS OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) . 3 . BEFORE US, THE LEARNED DEPARTMENT AL REPRESENTATIVE SUBMITTED THAT WHILE GIVING THE FINDINGS, THE LEARNED COMMISSIONER (APPEALS) HAS NOT PROPERLY APPRECIATED THE FACTS OF THE CASE WHICH IS EVIDENT FROM THE FINDINGS GIVEN IN PARA 5.5 OF THE IMPUGNED ORDER. HE SUBMITTED THAT I N THE PRESENT CASE, THE NOTICE UNDER SECTION 148 WAS ISSUED TO RE OPEN THE CASE ON THE REASON THAT DURING T H E RELEVANT FINANCIAL YEAR, THE ASSESSEE COMPANY HAS RECEIVED LOAN AMOUNTING TO ` 1,66,86,661 FROM HEGDE HOTELS INDIA PVT. LTD. , WHEREIN ON E MR. SUDHAKAR HEGDE H OLDS 36.31% SHARES IN HEGDE HOTELS INDIA PVT. LTD. AND IS ALSO HOLDING 59.9% OF THE EQUITY SHARES OF THE ASSESSEE COMPANY I.E., HOTEL TUNGA REGENCY PVT. LTD. AND, THEREFORE, THE PROVISIONS OF DEEMED DIVIDEND ARE CLEARLY APPLICABLE. HE FURTHER POINTED OUT T HAT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER NOTED THAT A SUM OF ` 27,62,983 WAS SHOWN AS UNSECURED LOANS BY THE ASSESSEE FROM HEGDE HOTELS PVT. LTD. AND FURTHER SUM OF ` 2,17,10,000 AS SHARE APPLICATION MONEY (PENDING ALLOT MENT ) FROM HEGDE HOTELS INDIA P. LTD. THE ASSESSING OFFICER AFTER DETAIL DISCUSSION HAS CLEARLY BROUGHT OUT THAT INSOFAR AS THE AMOUNT OF LOAN OF ` 27,62,982 IS CONCERNED, THE SAME IS DIVIDEND INCOME. HOWEVER, T HE LEARNED COMMISSIONER (APPEALS), THOUGH HAS DISCUSSED THE ENTIRE ASSESSMENT ORDER AS WELL AS THE ASSESSEES SUBMISSIONS , BUT WHILE RECORDING THE FINAL CONCLUSION, HOTEL TUNGA REGENCY PVT. LTD. 3 HAS COMMITTED CERTAIN FACTUAL ERRORS INSOFAR AS THAT THE ASSESSEE HAS MADE INVESTMENTS IN HEGDE HOTELS INDIA P. LTD. WHICH IS NOT THE CO RRECT FACT. FURTHER THAT THE HEGDE HOTELS INDIA PVT. LTD. HAS GIVEN LOAN TO MR. SUDHAKAR HEGDE, WH O , IN TURN, HAS ADVANCED TO THE ASSESSEE IS ALSO NOT CORRECT. THE ASSESSING OFFICER NEVER RECORDED THIS FACT. THUS, THE ORDER OF THE LEARNED COMMISSIONER (APP EALS) SHOULD BE SET ASIDE SO THAT THE PROPER FINDINGS OF FACT SHOULD COME ON RECORD SO THAT THE REASONING GIVEN BY H IM SHOULD BE IN CONSONANCE WITH THE CORRECT APPRECIATION OF THE FACT. 4 . ON THE OTHER HAND, T HE LEARNED COUNSEL SUBMITTED THAT THE DETAIL CHAR T WAS GIVEN BEFORE THE LEARNED COMMISSIONER (APPEALS) WHICH HAS BEEN INCORPORATED AT PAGE 5 OF THE APPELLATE ORDER AND IT WAS SUBMITTED THAT THE AMOUNT OF ` 27,62,982 WAS FULLY RECONCILED AND THAT IT WAS NOT IN THE NATURE OF LOAN. AS REGARDS THE CONTENTIO N OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE ULTIMATE FINDINGS RECORDED BY THE LEARNED COMMISSIONER (APPEALS) IN HIS CONCLUDING PARAGRAPH NO.5.5, HE ADMITTED THAT SOME FACTUAL ERROR HAS CR E PT IN. 5 . AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIONS AND ALSO ON A PERUSAL OF THE RELEVANT FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) AND THE A .O OFFICER, WE FIND THAT THE LEARNED COMMISSIONER (APPEALS) HAS DRAWN HIS CONCLUSION ON SOME ERRONEOUS ASSUMPTION OF FACTS , T HE RELEVANT PARA GRAPH OF WHICH IS A S UNDER: 5.5 THIS SECTION IS APPLICABLE FOR PAYMENT MADE BY THE COMPANY TO ITS SHAREHOLDER AND NOT VISE VERSA. THE A.O. WAS CONSIDERING THAT HOTEL TUNGA REGENCY P. LTD. HAS MADE INVESTMENT IN M/S. HEGDE HOTELS (INDIA) P. LTD. HE HAS ALSO MENTIONED IN T HE REASONS OF REOPENING THAT THE APPELLANT WAS HAVING ENOUGH ACCUMULATED PROFITS DURING THE YEAR. HE HAS ALSO MENTIONED FROM THE ABOVE HOTEL TUNGA REGENCY PVT. LTD. 4 FACTS, IT IS CLEAR THAT THE APPELLANT HAS RECEIVED LOANS FROM M/S. HEGDE HOTELS (INDIA) P. LTD. WHICH ARE COVERED BY THE DEEMING PROVISIONS OF SECTION 2(22)(E). THE PRESUMPTION OF THE LD. A.O. PERHAPS APPEARS TO BE THAT HEGDE HOTELS HAS GIVEN LOAN TO SUDHARKAR HEDGE WHO IN TURN ADVANCED IT TO TUNGA REGENCY. HOWEVER, THE FACTS ARE CONTRARY TO THIS. THE SHAREHOLDER NAMELY, MR. SUDHAKAR HEGDE HAS APPLIED FOR SHARE APPLICATION, WHICH WAS LATER ALLOTTED TO HIM. ACCORDING TO ME, SECTION 2(22)(E) DOES NOT APPLY TO THE PRESENT STATE OF FACTS OF THE CASE AND HENCE THE ADDITION MADE BY THE APPELLANT IS NOT CORRECT. FURTHER, IN THE CASE OF ITO V/S DIRECT INFORMATION INDIA P LTD. IT WAS HELD BY HON'BLE ITAT D BENCH, MUMBAI, IN ITA NO.2576/MUM./2011, FOR A.Y. 2006 07 ON JANUARY 31, 2012 THAT SECTION 2(22)(E) ARE NOT ATTRACTED IN THE CASE OF SHARE APPLICATION MONEY. IN VIEW OF THE SAME AL SO, THE ADDITION MADE BY THE A.O. CANNOT BE SUSTAINED AND HENCE THE APPEAL OF THE APPELLANT IS ALLOWED. 6 . FROM THE ABOVE, IT IS SEEN THAT THE LEARNED COMMISSIONER (APPEALS) HAS GONE BY THE PRESUMPTION THAT THE ASSESSING OFFICER HAS CONSIDERED THAT THE ASSE SSEE HAS MADE INVESTMENT IN HEGDE HOTELS INDIA PVT. LTD., WHICH IS NOT CORRECT. SECONDLY, HE HAS GONE BY THE PRESUMPTION THAT THE ASSESSING OFFICER HAS BASED HIS CALCULATION ON THE FACT THAT HEGDE HOTELS INDIA PVT. LTD. HAD GIVEN LOAN TO MR. SUDHAKAR HEGD E, WHICH IN TUR N, HAS ADVANCED TO THE ASSESSEE, WHICH FACT IS ALSO NOT CORRECT. FURTHER, HE HAS NOT ANALYSED AS TO WHAT IS THE AMOUNT INVESTED BY HEGDE HOTELS INDIA PVT. LTD. FOR THE SHARE APPLICATION MONEY IN THE ASSESSEE COMPANY AND HOW MUCH WAS THE UNSE CURED LOAN RECEIVED BY THE ASSESSEE FROM THE HEGDE HOTELS INDIA PVT. LTD. , AND WHETHER IT WAS LOAN OR NOT , OR IF LOAN, THEN WHAT WAS THE NATURE OF THE LOAN. HE HAS ALSO NOT ANALYSED , WHETHER THE ASSESSEE IS A SUBSTANTIAL SHARE HOLDER IN HEGDE HOTELS INDIA PV T. LTD. OR NOT. ALL THESE FACTS ARE NECESSARY FOR COMING TO ANY CONCLUSION ON MERITS . THEREFORE, WITHOUT GOING INTO THE MERITS OF THE ISSUE, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RESTORE THE HOTEL TUNGA REGENCY PVT. LTD. 5 ISSUE BACK TO HIS FILE FOR PASSING THE ORDER AFRESH AFTER APPRECIATING THE PROPER FACTS OF THE CASE AND IN ACCORDANCE WITH LAW AND THEN TO ARRIVE AT A PROPER CONCLUSION IN ACCORDANCE WITH LAW. THE LEARNED COMMISSIONER (APPEALS) WILL ALSO PROVIDE REASONABLE OPPORTUNITY TO THE AS SESSEE TO PRESENT ITS CASE. THUS, THE GROUND RAISED BY THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7 . 7 . IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOS ES. 28 TH MARCH 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 28 TH MARCH 2014 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - + AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DA TED : 28 TH MARCH 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI