ACIT, Bhubaneswar V. M/s Srusti Estates Pvt. Ltd, Bhubaneswar

ITA 446/CTK/2012

• Counselvise Citation: 44622114 RSA 2012
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 29-10-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: G NAIKS K SARANGIR KAR ARS
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 446/CTK/2012 / ASSESSMENT YEAR 2009 - 10 ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(2), BHUBANESWAR. - - - VERSUS - M/S.S RUSTI ESTATES PVT. LTD., PLOT NO .339(P), GOUTA M NAGAR, BMC - MAUSIMA MAIN ROAD, BHUBANESWAR PAN:: AAECS 5765 R ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI N.K.NEB, DR / FOR THE RESPONDENT: / SHRI G.NAIK/S.K.SARANGI/R.KAR, ARS / DATE OF HEARING: 29.10.2012 / DATE OF PRONOUNCEMENT: 09.11.2012 / ORDER . . . , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THIS APPEAL IS FILED BY THE DEPARTMENT HAVING BEEN AGGRIEVED B Y THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) DT.5.6.2012 FOR THE ASSESSMENT YEAR 2009 - 10 IN THE CASE OF THE ASSESSEE. 2. THE SOLE ISSUE RAISED BY THE DEPARTMENT AGAINST DELETION OF THE ADDITION OF 21,00,000 MADE BY THE ASSESSING OFFICER U/S.2(2 2)(E) OF THE I.T.ACT,1961. 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUE RAISED IN THE APPEAL OF THE DEPARTMENT AND ITS LEGAL IMPLICATIONS. 4. ON CAREFUL CONSIDERATION OF THE MATERIAL TO THE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE SUBMISSI ONS OF BOTH THE PARTIES, THE UNDISPU TED FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE IS A REALTOR FILED ITS RETURN FOR THE PERIOD UNDER CONSIDERATION WHICH WAS ORIGINALLY PROCEEDED U/S.143(1) ISSUING THE INTIMATION. LATER ON THE RETURN WAS TAKEN UP FO R SCRUTINY AFTER COMPLYING THE NECESSARY STATUTORY NOTICES. IN COURSE OF ASSESSMENT, THE ASSESSING OFFICER FOUND THAT A SUM OF 21 LAKHS WAS RECEIVED AS ADVANCE FROM SAMBIT RESORTS PVT. LTD., I.T.A.NO. 446/CTK/2012 2 DURING THE PERIOD UNDER CONSIDERATION AS CAN BE SEEN FROM THE AUDITORS REPORT AND BANK STATEMENT AND LIST OF ADVANCE RECEIPTS FROM THE OTHER PARTY. THEREFORE, THE ASSESSING OFFICER IS OF THE VIEW THAT THIS IS NOTHING BUT DEEMED DIVIDEND FALLING WITHIN THE AMBIT OF THE PROVISIONS OF SECTION 2(22)(E) AND ACCORDINGLY, HE MADE THE ADDITION OF 21 LAKHS TO THE INCOME OF THE ASSESSEE APART FROM OTHER ISSUES. 5. HAVING BEEN AGGRIEVED BY THE ASSESSME NT ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND THE LEARNED CIT(A) AFTER CONSIDERING THE MATERIAL AVAILABLE AND ANALYZING THE SAME IN THE LIGHT OF THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE ASSESSING OFFICER, HAS COME TO THE CONCLUSION THAT THIS ISSUE OF DEEMED DIVIDEND IS NOT TENABLE UNDER LAW AND HENCE, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WHILE DOING SO, THE LEARNED CIT(A) HAS RELIED ON THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. UNIVERSAL MEDICARE P VT. LTD (324 ITR 263)(BOM) AND SPECIAL BENCH OF THE TRIBUNAL OF BOMBAY BENCH IN THE CASE OF ACIT V. BHAUMIK COLOURS PVT. LTD [317 ITR (AT) 146] AND ALSO THE DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF CIT V. HILL TOP [217 ITR 527 (RAJ.)]. 6. AGGRIEVED BY THIS ORDER OF THE LEARNED CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 7. DURING THE COURSE OF HEARING, THE LEARNED DR HAS VEHEMENTLY ARGUED ASSAILING THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND SUPPORTING THE ORDER PASSED BY T HE AO IN THE ASSESSMENT ORDER CONTENDING INTERALIA THAT THERE IS ACCUMULATED PROFIT IN THE CASE OF M/S.SAMBIT RESORTS PVT. LTD., AND ONE SHARE HOLDER OF BOTH THE COMPANIES IS COMMON HAVING SUBSTANTIAL INTEREST IN BOTH THE COMPANIES AND IT WAS CORRECTLY ASS ESSED BY THE ASSESSING OFFICER AS DEEMED DIVIDEND U/S.2(22)(E) BUT THE LEARNED CIT(A) MISAPPLYING THE DECISIONS HAS FOUND THAT THIS DOES NOT COME UNDER THE AMBIT OF SECTION 2(22)(E). THEREFORE, HE SOUGHT FOR SETTING ASIDE THE ORDER OF THE LEARNED CIT(A) AN D RESTORE THAT OF THE ASSESSING OFFICER. 8. CONTRARY TO THIS, THE LEARNED AR OF THE ASSESSEE HAS VEHEMENTLY ARGUED CONTENDING INTERALIA THAT THE SCOPE OF SECTION 2(22)(E) BASICALLY SPEAKS THAT THE TRANSACTION MUST BE SHOWN BY T HE DEPARTM ENT THAT IT IS NO THING BUT A RUSE FOR I.T.A.NO. 446/CTK/2012 3 DIVIDEND PAYMENT UNDER THE GUISE OF LOAN AND ADVANCE. AS CAN BE SEEN FROM THE FACTUAL ASPECTS OF THE ISSUE THAT THE ASSESSEE IS DEALING IN REAL ESTATES AND HE RECEIVED ADVANCE OF 21 LAKHS FROM M/S.SAMBIT RESORTS PVT. LTD., AND OUT OF IT 5 LAKHS HAS ALREADY BEEN RETURNED DURING THE SAID PERIOD AND THE BALANCE WAS SHOWN AS ADVANCE FROM PARTY SHOWN IN THE BALANCE SHEET AND THE AUDIT REPORT HAS ALSO MENTIONED THE SAME. FROM THIS INFO RMATION ONLY THE ASSESSING OFFICER HAD INCLINED TO HOLD AS DEEMED DIVIDEND HOLDING THAT THE SINGLE PERSON HAS SHARE HOLDINGS IN BOTH THE COMPANIES AND SUBSTANTIAL INTEREST, THEREFORE IT AMOUNTS TO DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. THE ASSESSEE HAD S HOWED THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE PERSON FROM WHOM ADVANCE IS RECEIVED TOWARDS AGREEMENT FOR SALE OF LAND BY THE ASSESSEE TO LENDER. THIS FACTUALLY ASPECT WAS TOTALLY IGNORED BY THE LEARNED CIT(A) . THE SCOPE OF SECTION 2(22)(E) WILL NOT COMPREHEND THE BUSINESS TRANSACTIONS BECAUSE THE ASSESSEE IS A REALTOR ENGAGED IN PURCHASE OF LAND AND SALE. AS PER THE AGREEMENT DT.56.4.2008 PRODUCE D BEFORE THE AO AND THE COPY OF WHICH IS MADE AVAILABLE TO THE TRIBUNAL, IT IS FOUND THAT THE EN TERED INTO AGREEMENT WITH MR. SIDHARTH KUMAR PRADHAN, SON OF KANDURI CHARAN PRADHAN TO PURCHASE LANDED PROPERTY IN MOUZA - MAHERAPALI IN KHATA NO.644/164, PLOT NO.227/1808, AREA AC. 0.200 DECIMALS AND THE ASSESSEE HAS TO TAKE APPROPRIATE ACTION FOR PEACEFU L POSSESSION & CONSTRUCTION OF BOUNDARY WALL OVER IT BEFORE EXECUTION OF SALE DEED AS WELL AS HANDING OVER POSSESSION TO M/S.SAMBIT RESORTS PVT. LTD. THIS IS NOTHING BUT A TRADE TRANSACTION IN THE CASE OF THE ASSESSEE COMPANY BECAUSE THE ASSESSEE - COMPANY IS DOING THE BUSINESS OF REAL ESTATE I.E., PURCHASE AND SALE OF LANDED PROPERTY. THEREFORE, IN NO CIRCUMSTANCES, THIS CAN COMPREHEND WITHIN THE SCOPE OF SECTION 2(22)(E) OF THE ACT THEREFORE, IT WAS WRONGLY TREATED AS DEEMED DIVIDEND WHICH WAS CORRECTED BY THE LEARNED CIT(A) RIGHTLY RELYING ON THE VARIOUS JUDICIAL PRONOUNCEMENTS REFERRED TO IN THE IMPUGNED ORDER. THEREFORE, IN THESE FACTS AND CIRCUMSTANCES, THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A) IS NOT ALL INFORMED AND ACCORDINGLY, HE SOUGHT FOR UP HOLDING THE SAME BY DISMISSING THE APPEAL OF THE DEPARTMENT. 9. ON CAREFUL ANALYSIS OF THE ORDER PASSED BY THE LEARNED CIT(A), IT IS FOUND THAT THE LEARNED CIT(A) HAS COME TO THE CONCLUSION THAT THE PRESENT TRANSACTION I.T.A.NO. 446/CTK/2012 4 WILL NOT COMPREHEND WITHIN THE SCOPE OF SECTION 2( 22)(E) BASING ON THE DECISION OF SPECIAL BENCH OF ITAT,BOMBAY IN THE CASE OF ACIT V. BHAUMIK COLOUR (P) LTD (SUPRA) WHICH SAYS THAT SECTION 2(22)(E) CANNOT BE INVOKED IN THE HANDS OF NON - SHARE HOLDERS. THE SAME PRINCIPLES WAS ALSO UPHELD BY HO NBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. UNIVERSAL MEDICARE PVT. LTD (SUPRA), WHEREIN IT WAS HELD THAT SECTION 2(22)(E) CAN BE INVOKED ONLY IN THE HANDS OF SHARE HOLDERS. THE SAME PRINCIPLE IS ALSO HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ANKITECH (P) LTD [340 ITR 14] . HE ALSO CONSIDERED THE DECISION OF HONBLE RAJSTHAN HIGH COURT IN THE CASE OF CIT V. HOTEL HILL TOP (217 ITR 527) WHICH HAS ALSO HELD THE SAME VIEW. IN THE PRESENT CASE ON HAND IT IS UNDISPUTED THAT THE ASSESSEE IS NOT A S HARE HOLDER OF THE ASSESSEE COMPANY. IN THESE FACTS AND CIRCUMSTANCES, BY APPLYING THE DECISIONS OF THE VARIOUS JUDICIAL PRONOUNCEMENT STATED ABOVE, THE TRANSACTION WILL NOT COMPREHEND SECTION 2(22)(E) OF THE ACT. APART FROM THAT THIS BENCH HAS ALREADY PAS SED ORDER DT.13.7.2012 IN THE CASE OF ACIT V. ORIDINKS PVT. LTD., IN ITA NO.024/CTK/2012 BY EXAMINING SUCH SIMILAR ISSUE HOLDING THAT SUCH A TRANSACTION WILL NOT ALL WITHIN THE SCOPE OF SECTION 2(22)(E). WHILE GIVING THIS DECISION, THE TRIBUNAL FOLLOWED TH E JUDICIAL PRONOUNCEMENT THAT WERE FOLLOWED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE IS COVERED IN THE FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS BENCH STATED SUPRA. IN THAT VIE W OF THE MATTER, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED ORDER HAS NOT INFIRMED IN ANY WAY REQUIRING ANY INTERFERENCE. THEREFORE, WE CONFIRM THE SAME AND DISMISS THE APPEAL OF THE REVENUE FINDING THE ISSUE RAISED BY THEM AS DEVOID OF MERIT. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. SD/ - SD/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( ) DATE: 09.11.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 446/CTK/2012 5 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(2), BHUBANESWAR. 2 / THE RESPONDENT: M/S.SRUSTI ESTATES PVT. LTD., PLOT NO.339(P), GOUTAM NAGAR, BMC - MAUSIMA MAIN ROAD, BHUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 02.11.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05.11.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 09.11.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..