ASHOK KUMAR BOHRA HUF, V. DCIT, Ajmer

ITA 440/JPR/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82781 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K C MOONDRA
• Keywords: Deemed dividend; Reassessment proceedings

Judgement Text

ITA NO.440//JP/2011 ASHOK KUMAR BOHRA, HUF VS. DCIT , CIRCLE- 1 , AJMER 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 440/JP/2011 ASSESSMENT YEAR : 2006-07 PAN : AAFHA 8248 H SHRI ASHOK KUMAR BOHRA (HUF) VS. THE DCIT BHAWAN CITY ROAD, MADANGANJ CIRCLE- 1 KISHANGARH, AJMER (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.C. MOONDRA DEPARTMENT BY: SHRI RAJESH OJHA DATE OF HEARING: 10-09-2014 DATE OF PRONOUNCEMENT: 22-10-2014 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A), AJMER DATED 21-02-2011 FOR THE ASSESSM ENT YEAR 2006-07 WHEREIN VARIOUS GROUNDS ARE RAISED. 2.1 AT THE TIME OF HEARING, ONLY ONE ISSUE IS PRESS ED WHICH ARISES OUT OF FOLLOWING GROUNDS NO. 6 AND 7 OF THE MEMO. THE OTHE R GROUNDS BEING NOT PRESSED DO NOT CALL FOR ANY ADJUDICATION: VI. THE LD. CIT(A) ERRED IN LAW IN REJECTING THE GROUND. LD.AO ERRED IN LAW IN MAKING ADDITION OF RS. 1,93,715/- MERELY ON THE BASIS OF INCORRECT AND VAG UE ITA NO.440//JP/2011 ASHOK KUMAR BOHRA, HUF VS. DCIT , CIRCLE- 1 , AJMER 2 INFORMATION AND WITHOUT PROVIDING REASONABLE OPPORT UNITY TO DEFEND THE APPELLANT. MOREOVER, PROVISION OF SECT ION 2(22)(E) ARE NOT APPLICABLE TO HINDU UNDIVIDED FAMILY WHO IS NOT THE SHAREHOLDER OF THE ALLEGED COMPANY. VII. THE LD. CIT(A) ERRED IN LAW IN REJECTING THE GROUND, WITHOUT PREJUDICE TO ABOVE MENTIONED GROUND S, APPELLANT SUBMITS THAT IN THE SECOND PARA ON THE LA ST PAGE OF ASSESSMENT ORDER , LD. AO WRONGLY MENTIONED AT TH E TIME THE SHRI ASHOK KUMAR BOHRA HAD SUBSTANTIAL INTEREST IN THE HUF BECAUSE SHAREHOLDER SHRI ASHOK KUMAR BOHRA WAS NE ITHER ENTITLED TO ANY SHARE OF FROM THE INCOME OF ASHOK K UMAR BOHRA, HUF NOR HE EVER RECEIVED ANY SHARE FROM THE INCOME OF THIS HUF. MOREOVER, LD. AO WRONGLY TREATED SUBSTANT IAL INTEREST OF ASHOK KUMAR BOHRA IN THE INCOME OF HIS HUF WITHO UT SPECIFYING HIS SHARE IN THE INCOME OF HIS HUF BECAU SE ASHOK KUMAR BOHRA NEVER ENTITLED / HAD 20% OR MORE SPECIF IC SHARE IN INCOME OF HUF. 2.2 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A HUF AND IT IS KARTA . SHRI ASHOK KUMAR BOHRA IN INDIVIDUAL CAPACITY IS S HAREHOLDER AND DIRECTOR OF ONE COMPANY ANUPAM MARBLES (P) LTD. IT IS PERTIN ENT TO MENTION THAT THERE IS NO FINDING THAT ANY SHARE APPLICATION MONE Y HAS BEEN ADVANCED BY THE HUF WHICH IMPLIES THAT SHAREHOLDING IN THE COMP ANY EXCLUSIVELY BELONGS TO THE DIRECTOR IN THE INDIVIDUAL CAPACITY. THE ASSESSEE HUF HAS RUNNING ACCOUNT WITH THE SAID COMPANY I.E. M/S. ANU PAM MARBLES (P) LTD. , KISHANGARH. THE AO ON THIS INFORMATION REOPENED THE ASSESSMENT TO APPLY PROVISION OF SEC 2(22)(E) OF THE ACT ON THE REASON ING THAT THE DEBIT BALANCE AGAINST THE ASSESSE HUF IN THE BOOKS OF ANUPAM MARB LES AMOUNTED TO DEEMED DIVIDEND. ITA NO.440//JP/2011 ASHOK KUMAR BOHRA, HUF VS. DCIT , CIRCLE- 1 , AJMER 3 2.3 DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE EXPLAINED THAT HUF IS NOT A SHAREHOLDER OF THE COMP ANY, NO ADVANTAGE HAS BEEN DERIVED BY IT AND NO DEEMED DIVIDEND CAN BE DE EMED TO HAVE BEEN RECEIVED BY IT. THE A/C IN QUESTION WAS A RUNNING ACCOUNT BETWEEN HUF AND THE COMPANY AND HAS NO CONCERN WITH THE INDIVIDUAL DIRECTOR. A PERUSAL OF THE ACCOUNT SHOWS THAT FOR THE PERIOD 01-04-2006 TO 29-11-2005 I.E. ABOUT 07MONTHS. RATHER HUF HAD ADVANCED AN AMOUNT OF RS. 5,62,285/-. ON 29-11-2005, THE COMPANY HAD REPAID A SUM OF RS. 6.5 0 LACS TO THE ASSESSEE, HUF RESULTING INTO DEBIT BALANCE OF RS. 1,93,715/-. THUS THE AMOUNT AND PERIOD ADVANCED BY ASSESSE TO COMPANY FAR EXCEED TH E DEBIT BALANCE. FROM THE ACCOUNT ITSELF, IT APPEARS THAT THE COMPANY HAD PAID INTEREST OF RS. 61,855/- AFTER ADJUSTING PLUS AND MINUS DAYS OF CRE DIT AND DEBIT OF FUNDS. AS THE HUF WAS NOT A SHAREHOLDER IN THE SAID M/S. ANUP AM MARBLES (P) LTD. AND A/C BEING ONLY A CURRENT ACCOUNT AND MINOR DEBI T BEING NOT A LOAN THE DEEMED DIVIDEND CAN NEITHER BE ADDED IN LAW NOR ON FACTS. THE AO HOWEVER , ADDED THIS AMOUNT AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT BY APPLYING THE LOGIC THAT THE DIRECTOR BEING KARTA OF HUF HAS INDIRECT BENEFICIAL INTEREST MORE THAN 10% AND THE DEBIT REPRESENTED LOAN TO HUF . THE ASSESSEE'S PLEA IN THIS BEHALF ABOUT NON-APPLICABILITY OF SECTION 2(22 )(E) WAS REJECTED BY THE LD.CIT(A) IN FIRST APPEAL. ITA NO.440//JP/2011 ASHOK KUMAR BOHRA, HUF VS. DCIT , CIRCLE- 1 , AJMER 4 2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT LEGAL AND FACTUAL CONTENTIONS OF THE ASSESSEE TO BE CORRECT. THE SHARES HELD BY SHRI ASH OK KUMAR BOHRA, WAS IN INDIVIDUAL CAPACITY AND HAD NO CONNECTION WITH ASS ESSEE HUF. THE HUF CURRENT A/C WITH THE COMPANY IS NOT A LOAN A/C BESI DES MOST OF THE TIME HUF IS CREDITOR IN THE A/C. THE ISSUE IN QUESTION IS SQ UARELY COVERED BY THE DECISION OF HON'BLE APEX COURT IN FAVOUR OF THE AS SESSEE IN CASE OF CIT VS. C.P. SARATHY MUDALIAR, 83 ITR 170 (SC) WHEREIN IT H AS BEEN HELD THAT SHAREHOLDER MUST BE REGISTERED SHAREHOLDER AND NOT TO THE BENEFICIAL OWNER. THIS ISSUE STANDS FURTHER DECIDED BY THE HON'BLE R AJASTHAN HIGH COURT IN THE CASE OF CIT VS. HOTEL HILLTOP, 313 ITR 116 (RAJ .), HOLDING AS UNDER:- (I) THAT THE ASSESSEE WAS NOT SHOWN TO BE THE SHARE HOLDER OF THE COMPANY AND THE TWO INDIVIDUALS WHO WERE PAR TNERS OF THE FIRM WERE THE MAJORITY SHAREHOLDERS OF THE COMP ANY. THEREFORE THE SECURITY ADVANCED BY THE COMPANY TO T HE ASSESSEE COULD NOT BE DEEMED TO BE DIVIDEND AS THE ASSESSEE WAS NOT A SHAREHOLDER IN THE COMPANY. THE AMOUNT WAS PAID BY THE COMPANY TO THE ASSESSEE ON BEHALF OF THE INDIVIDUAL S. THEREFORE, THE LIABILITY OF TAX AS DEEMED DIVIDEND COULD BE AT TRACTED IN THE HANDS OF THE INDIVIDUALS, BEING THE SHAREHOLDERS IN THE COMPANY. THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING TH E ORDER OF THE COMMISSIONER (APPEALS) DELETING THE ADDITION OF RS. 10 ITA NO.440//JP/2011 ASHOK KUMAR BOHRA, HUF VS. DCIT , CIRCLE- 1 , AJMER 5 LAKHS MADE AS DEEMED DIVIDEND UNDER SECTION 2(22)(E ) OF THE ACT. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CAS E AND LEGAL POSITION, WE HOLD THAT THE IMPUGNED AMOUNT CANNOT BE ADDED U/S 2 (22)(E) OF THE ACT IN THE HANDS OF ASSESSEE HUF AND THE SAME IS DELETED. THUS THE GROUNDS AS RAISED ABOVE BY THE ASSESSEE ARE ALLOWED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22- 10-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 22 ND OCT, 2014 *MISHRA COPY FORWARDED TO:- 1. SHRI ASHOK KUMAR BOHRA, HUF, KISHANGARH 2. , THE DCIT, CIRCLE- 1, AJMER 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 440/JP/2011) AR ITAT, JAIPUR