SACHIN CHOKHANI, MUMBAI V. ITO 9(3)( 1), MUMBAI

ITA 4505/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0999 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 14-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 30-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHWAS MUNDHE
• Assessee Lawyers: UMESH KOLAPKAR
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4505/MUM/2014 ASSESSMENT YEAR: 2010-11 SACHIN CHOKHANI, VS. INCOME-TAX OFFICE-9(3)(1) 102/103-A, RIZVI PARK. MUMBAI S.V. ROAD, SANTACRUZ (W) MUMBAI 400 054 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI UMESH KOLAPKAR, AR REVENUE BY: SHRI VISHWAS MUNDHE, DR DATE OF HEARING : 14/0 2/2017 DATE OF PRONOUNCEMENT: 24/04/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2010-11. THE APPEAL IS DIRECTED AGAINST THE ORDER AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -20, MUMBAI AND ARISES OUT OF THE ORDER U/S 143(3) OF THE INCOME TA X ACT, 1961(THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER:- 1. THE ASSESSEE IS AN INDIVIDUAL, ASSESSING OFFICER ER RED IN MAKING ADDITION OF DEEMED DIVIDEND OF RS.8,19,745/-TO THE EXTENT OF RESERVES AND SURPLUS U/S 2(22)(E) OF THE I.T. ACT, 1961. 2. ASSESSING OFFICER IS NOT APPRECIATING THAT THREE DI FFERENT TRANSACTIONS NAMELY UNSECURED LOAN GIVEN TO COMPANY, LAND MOU AC COUNT AND CAR ITA NO. 4505/MUM/2014 2 LEASE ACCOUNT ARE MAINTAINED BY THE ASSESSEE. THAT THE ASSESSING OFFICER HAS CONSOLIDATED ALL THE THREE TRANSACTIONS AND CONSIDERED THE ABOVE AS LOAN, THUS CONSIDERED IT AS DEEMED DIVIDEN D U/S 2(22)(E). 3. ASSESSING OFFICER ERRED IN DEMANDING INCOME-TAX OF RS.4,67,690/-. 4. APPELLANT PLEAD BEFORE YOUR HONOUR TO DIRECT ASSESS ING OFFICER TO: DELETE THE ADDITION MADE OF RS.8,19,745/- AS DEEMED DIVIDEND U/S 2(22)(E). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A DIRECTOR, HAVING 24.15% SHARES IN HIS COMPANY VIZ . HOME AND BEYOND PVT. LTD. (NOW SHREE SHAKUN REALTY PVT. LTD. ). THE ASSESSING OFFICER (AO) ON VERIFICATION OF THE DETAI LS FILED BY THE ASSESSEE FOUND THAT THE ASSESSEE HAD RECEIVED ADVAN CE/ LOAN ON VARIOUS DATES FROM HIS COMPANY. AS PER THE LEDGER, THE ASSESSEE HAD RECEIVED RS.57,53,607/- AS ON 02.03.2010 FROM H IS COMPANY AND PAID RS.29,89,112/-. AS ON 31.03.2010 T HE ACCOUNTS STAND SETTLED. THE ASSESSEE FILED BEFORE T HE AO THE COPY OF AGREEMENT WITH M/S SHAKUN REALTY PVT. LTD. WHEREIN HE HAD ENTERED INTO MOU TO TRANSFER HIS LAND FOR DEVEL OPMENT AGAINST THE CONSIDERATION OF RS. 1 CRORE. THE ASSES SEE FURTHER STATED THAT HE HAD RECEIVED RS. 35 LACS AS ADVANCE. THE ASSESSEE STATED THAT AS THE AGREEMENT WAS NOT COMPLETED DUE TO LEGAL HASSLES, THE AMOUNT OF RS. 35 LACS WAS RETURNED BAC K BY HIM TO M/S SHAKUN REALTY PVT. LTD. BY 31.03.2013. 3.1 THE AO FOUND THAT THE CONTENTION OF THE ASSESSE E THAT HE HAD RETURNED THE ADVANCE RECEIVED AGAINST THE PROPE RTY TO SHREE SHAKUN REALTY PVT. LTD. AND THAT THERE WAS NO APPLICATION OF SECTION 2(22)(E) IS NOT CORRECT. AS PER THE LEDG ER OF SHREE SHAKUN REALTY PVT. LTD. IN THE BOOKS OF THE ASSESSE E, IT WAS SEEN ITA NO. 4505/MUM/2014 3 THAT THE ASSESSEE HAD RECEIVED EXCESS PAYMENTS AGAI NST HIS LOANS TO THE COMPANY/ THE DEPOSITS IN LIEU OF PROPE RTY. IN THE BALANCE SHEET SUBMITTED WITH THE RETURN OF INCOME FOR THE A.Y. 2010-11 OF M/S HOME AND BEYOND PVT. LT D. (I.E. SHREE SHAKUN REALTY PVT. LTD.), THE AO NOTICED THAT THERE WAS A RESERVE AND SURPLUS OF RS.8,19,745/-. AS PER THE SE CTION 2(22)(E), THE DEEMED DIVIDEND TO THE EXTENT OF RESE RVE AND SURPLUS CAN BE ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. ACCORDINGLY, THE AO ADDED BACK THE AMOUNT OF RS.8,1 9,745/- TO THE TOTAL INCOME OF THE ASSESSEE AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) DISMIS SED THE APPEAL OF THE ASSESSEE ON THE FOLLOWING REASONS: I FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION TO THE EXTENT OF RS.8,19,745/- ON THE GROUND THAT APPELLANT HAS OBTAI NED LOAN FROM THE COMPANY. SUCH ADDITION TO HAVE BEEN TAKEN ON ACCOUNT OF MOU FOR DEVELOPMENT RIGHT TO THE PROPERTY SITUATED AT TALUKA MAWAL DIST. PUNE HAVING REGISTRATION NO. 4696 DATED 22.09.1998. IT IS PERTINENT TO MENTION THAT SUCH MOU HAS NEVER BEEN HONOURED HENCE WHATEVER AMOUNT HAS BEEN TAKEN HAS BEEN REFUNDED BY THE APPELLANT. HAD THIS MO U BEING RIGHT, APPELLANT WOULD HAVE FORFEITED THE ADVANCES SO OBTAIN ED, BUT SAME HAS NOT BEEN DONE, IT MEANS ONLY WITH A VIEW TO GIVE COLOUR OF COMMERCIAL TRANSACTION, SUCH MOU HAS BEEN PREPARED. FURTHER, IT IS VERY SURPRISING TO NOTE THAT THE WRITTEN DOWN VALUE OF HONDA CITI CAR I S OF RS.3,76,083/- WHEREAS ADVANCES FOR SO CALLED LEASE OF CAR HAS BEEN CLAIMED TO BE OF RS.9,00,000/-. SUCH CAR LEASE AGREEMENT CANNOT BE B ELIEVED. IT IS VERY OBVIOUS THAT WITH A VIEW TO GIVE COLOUR OF COMMERCI AL TRANSACTION, SUCH SELF SERVING CAR LEASE AGREEMENT HAS BEEN PREPARED, SUBS EQUENTLY. IT IS TO BE REITERATED THAT NO PRUDENT BUSINESSMEN CAN ADVANCE RS .9,00,000/- FOR TAKING SUCH CAR OF THE DIRECTOR ON LEASE RENT WHERE AS THE TOTAL PURCHASE PRICE OF THE IS BELOW R.9,00,000/-. OBVIOUSLY, ARGU MENT ADVANCED BY THE LD. A.R. IS NOT TENABLE IF THAT FACTS AND CIRCUMSTANCES OF THE CASE IS APPRECIATED AND ANALYZED IN ITS TOTALITY. SUCH ARGUMENT IS NOT FO UND SUBSTANTIATED NOR IS FOUND TO STAND TO THE TEST OF REASONING. THEREFORE, IN THE LIGHT OF SUCH FACTUAL ASPECTS, THE FINDING OF THE ASSESSING OFFICER THAT THERE IS DEEMED DIVIDEND BECAUSE APPELLANT IS A DIRECTOR OF THE COMPANY HAVI NG 24.15% STAKE OF SHARES AND HAS OBTAINED LOAN OR DEPOSIT FOR PERSONAL USE AND UTILITY AND ITA NO. 4505/MUM/2014 4 THERE IS A RESERVES AND SURPLUS IN THE BALANCE OF TH E COMPANY NAMELY SHREE SHAKUN REALTY PVT. LTD., HENCE THE ADDITION SO MADE IS SUSTAINED. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT THE LD. CIT(A) DID NOT APPRECIATE THE FACT THAT THE ASSESSEE HAD THREE DIFFERENT TRANSACTIONS WITH THE COMPANY NAMEL Y: (I) UNSECURED LOAN ACCOUNT: UNSECURED LOAN GIVEN T O COMPANY BY THE ASSESSEE (ANNEXURE I) . (II) COMMERCIAL ADVANCE AGAINST KARLA LAND MOU ACCOUNT: TRADE ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE. (ANNEXURE II) . (III) COMMERCIAL ADVANCE FOR CAR LEASE ACCOUNT: WH ERE CAR (HONDA CITY) IS OWNED BY ASSESSEE AND LEASED TO THE COMPANY FOR INTEREST FREE DEPOSIT OF RS.9,00,000/- (ANNEXURE III) . 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ACCOU NTS / DOCUMENTS STATED BY THE LD. COUNSEL OF THE ASSESSEE AS MENTIONED AT PARA 5 HERE-IN-ABOVE HAVE NOT BEEN LOO KED INTO BY THE AO. THE SAID DOCUMENTS HAVE BEEN CURSORILY E XAMINED BY THE LD. CIT(A). THESE ACCOUNTS/ DOCUMENTS HAVE A DEFINITE BEARING ON THE FACTS IN THE INSTANT CASE. IN VIEW O F THE ABOVE, THE ORDER OF LD. CIT(A) IS SET ASIDE AND THE SAME IS RE STORED TO THE FILE OF THE AO TO MAKE AN ASSESSMENT AS PER THE PRO VISIONS OF THE ACT AFTER GIVING REASONABLE OPPORTUNITY OF BEIN G HEARD TO ITA NO. 4505/MUM/2014 5 THE ASSESSEE. THE ASSESSEE IS DIRECTED TO FILE THE DETAILS BEFORE THE AO. 8. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24/04/2017 SD/- SD/- (JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI: DATED: 24/04/2017 RAHUL, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI