Chunilal G. Bhanvadia, RAJKOT-GUJARAT V. The Asstt. Commr. Income Tax, Circle-3, RAJKOT-GUJARAT

ITA 462/RJT/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8885 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA N SHROTE
• Assessee Lawyers: MJ RANPURA
• Keywords: Additional evidence; Valuation report; Deemed dividend
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] CHUNILAL G BHANVADAI PAN: AESPB9627G (APPELLANT) VS THE ACIT, CIRCLE - 3, RAJKOT (RESPONDENT) CHANDRIKABEN C. BHANVADIA PAN: AEPPB6279P (APPELLANT) VS THE ACIT, CIRCLE - 3, RAJKOT (RESPONDENT) REVENUE BY : S MT. USHA N. SHROTE , SR. D . R. ASSESSEE BY: S H RI M.J. RANPURA , A.R. DATE OF HEARING : 15 - 01 - 2 018 DATE OF PRONOUNCEMENT : 01 - 03 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THE S E TWO APPEAL S FILED BY TWO DIFFERENT ASSESSEES FOR A.Y. 2007 - 08 , AR ISE FROM ORDER OF THE CIT(A) - 2, RAJKOT DATED 17 - 10 - 2016 , IN PROCEEDINGS I T A NO . 462 / RJT /20 16 A SSESSMENT YEAR 200 7 - 08 ITA NO. 463 /RJT/2016 ASSESSMENT YEAR 2007 - 08 I.T.A NO S . 462 & 463 /RJT /20 16 A.Y. 2007 - 08 PAGE NO CHUNILAL G BHANVADIA & CHANDRIKABEN C.BHANVADIA VS. ACIT 2 UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1 961; IN SHORT THE ACT . 2. AS THE FACTS IN BOTH THE APPEALS ARE ALMOST SIMILAR, SO, WE TAKE ITA NO. 463/AHD/2016 AS THE LEAD AND DECIDE BOTH THE APPEALS FOR THE SAKE OF CONVENIENCE ACCORDINGLY. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ITA NO. 463/AHD/2016 THE GROUNDS STATED HERE IN BELOW ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. THE ORDER U/S. 143(3) IS BAD IN LAW 2. THE HONORABLE ACIT HAS ERRED IN LAW AS WELL AS ON FACTS IN LEVYING TAX AND INTEREST OF RS. 880398/ - U/S. 156. 4. DU RING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE ASSESSEE HAS FILED REVISED GROUNDS OF APPEAL AS UNDER: - 1.0 THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER: 2.0 THE LEARNED COMMISSIONER OF INCOME - TAX (AP PEALS) - 2 [HEREINAFTER REFERRED TO AS THE ID. 'CIT(A)'] ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING ADDITION MADE OF RS. 14,37,857/ - ON THE ALLEGED GROUND THAT ADVANCES OFF 14,37,857/ - FROM M/S. METRO CERAMIC PVT. LTD. IS COVERED WITHIN THE AMBIT OF DEEMED D IVIDEND INCOME TAXABLE UNDER THE PROVISION OF SECTION 2(22)(E) OF THE ACT. THE ADDITIONS MADE BY THE AO AND AS CONFIRMED BY THE ID. CIT(A) IS TOTALLY UNJUSTIFIED ON FACTS AS ALSO IN LAW AND MAY KINDLY BE DELETED. 5. IN THIS CASE, ORIGINAL RETURN OF INCOM E DECLARING TOTAL INCOME OF RS. 1 , 2 4 , 370/ - WAS FILED ON 31 ST MARCH, 2008. SUBSEQUENTLY, THE CASE WAS REOPENED BY ISSUING OF NOTICE U/S. 148 ON 3 RD MARCH, 201 4 ON THE REASONING THAT DEEMED DIVIDEND WAS ARIS EN TO THE ASSESSEE . DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE WAS A SHARE - HOLDER C U M DIRECTOR IN METRO CERAMIC PVT . LTD HOLDING OF 50% OF THE SHARE CAP ITAL ALONG WITH 50% OF THE VOTING RIGHTS. HE NOTICED THAT METRO CERAMIC PVT. LTD. WAS A CLOSELY HELD CO MPANY IN WHICH THE PUBLIC I.T.A NO S . 462 & 463 /RJT /20 16 A.Y. 2007 - 08 PAGE NO CHUNILAL G BHANVADIA & CHANDRIKABEN C.BHANVADIA VS. ACIT 3 WAS NOT SUBSTANTIALLY INTERESTED. ON SCRUTINY T HE ASSESSING OFFICER OBSERVED THAT IN F.Y. 2006 - 07 , THE ASSESSEE HAS RECEIVED LOAN FROM METRO CERAMIC PVT. LTD AMOUNT ING OF RS. 25,5 00/ - IN THE INDIVIDUAL CAPACITY FURTHER ASSESSE E S PROPRIETARY CONCERN HA S ALSO RECEIVED UNSECURED LOAN TO THE AMOUNT OF RS. 14 , 37 , 8 57 FROM METRO CERAMIC PVT. LTD. THE ASSESSEE EXPLAINED THAT HE HAS OBTAINED R S. 7 , 82 , 085/ - FROM THE COMPANY TO CLEAR HIS STATUTORY DUE IN RESPECT OF PAYMENT OF INCOME TA X LIABILITY. THEREFORE, THE SAME SHOULD NOT BE TREATED AS DEEMED DIVIDEND. THE ASSESSING OFFICER STATED THAT THE ASSESSEE FAILED TO SATISFACTORY EXPLA I N ED WHY THE AFORESAID LOAN SHOULD NOT BE ASSESSED AS DEEMED DIVIDEND U/S 2(22 )(E) OF THE ACT. CONSEQ UENTLY, T HE ASSESSING OFFICER HAS T REATED THE PAYMENT OF RS. 14 , 37 , 8 5 7/ - AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. 6 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 5.3 DECISION IN RESPECT OF GROUND NO.2 : - HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND RIVAL CONTENTIONS, I FIND THAT THE FACTS THAT THE ASSESSEE IS A SUBSTANTIAL SHAREHOLDER AND THAT SHE HAS RECEIVED ADVANCE FROM THE SAID COMPANY ARE CONTROVERTED. THE PLEA OF THE ASSESSEE IS THAT THE AMOUNT WAS PAID BY THE COMPANY TOWARDS HER INCOME TAX LIABILITY AND HER OTHER OBLIGATIONS IS NOT TENABLE SO AS TO TAKE HER OUT OF THE AMBIT OF SECTION 2(22)(E). THE APPELLANT HAS PLEADED THAT SHE HAD PROVIDED HER HOUSE AS A SECURITY TOWARDS THE LOANS OF THE COMPANY AND THE IMPUGNED PAYMENT OF INCOME TAX BY COMPANY ON HER BEHALF AND OTHER ADVANCES TO MEET HER PERSONAL OBLIGATIONS WAS A CONSIDERATION FOR SUCH SECURITY AND THEREFORE IN VIEW O F JUDGEMENTS OF CALCUTTA HIGH COURT, KARNATAKA HIGH COURT AND ITAT CHENNAI (SUPRA), SUCH PAYMENTS DO NO ATTRACT THE PROVISIONS OF SECTION 2(22)(E). 1 AM NOT CONVINCED BY THIS PLEA OF THE ASSESSEE AS NO SUCH CONTENTION WAS TAKEN BEFORE THE A.O. AND THIS IS ADDITIONAL EVIDENCE WHICH IS NOT ADMISSIBLE AS NO CASE HAS BEEN MADE OUT UNDER RULE 46A. BESIDES, MERELY BECAUSE THE ASSESSEE'S HOUSE WAS PLEDGED AS SECURITY FOR LOANS OF THE COMPANY (A FACT NOT CONTENDED / PROVED BEFORE THE A.O.), THE ADVANCE BY THE COMPA NY TO THE ASSESSEE COULD NOT BE TERMED AS CONSIDERATION OF SUCH SECURITY UNLESS A QUID PRO QUO IS ESTABLISHED. THEREFORE, THE CONTENTIONS OF THE ASSESSEE ARE REJECTED AND ACTION OF THE A.O. IN INVOKING THE PROVISIONS OF SECTION 2(22)(E) ON THE IMPUGNED PAY MENTS IS UPHELD. THE GROUND OF APPEAL IS REJECTED. 7 . AT THE TIME OF HEARING, THE ASSESSEE HAS FILED ADDITIONAL E VIDENCES VIDE LETTER DATED 05/12/2017 AS UNDER: - I.T.A NO S . 462 & 463 /RJT /20 16 A.Y. 2007 - 08 PAGE NO CHUNILAL G BHANVADIA & CHANDRIKABEN C.BHANVADIA VS. ACIT 4 (I) COPY OF SANCTION LETTER FROM ORIENTAL BANK OF COMMERCE FROM WHOM IMPORT LETTER OF CREDIT WAS OBTAINED BY THE M/S. METRO CERAMICS PVT. LTD. IN WHICH THE ASSESSEE IS DIRECTOR REFLECTING EQUITABLE MORTGAGE OF RESIDENTIAL PROPERTY OF A SSESSEE SITUATED AT A - 81, RAGHUKUL APARTMENT, KASTURBA ROAD, RAJKOT (II) COPY OF VALUATION REPORT IN RESPECT OF A BOVE STATED PROPERTY. 8. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING WRITTEN SUBMISSION FILED BEFORE THE LD. CIT(A) AND DETAILS OF JUDICIAL PRONOUNCEMENTS ETC. HE CONTENDED THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE INVOKING OF PROVISION OF SECTION 2(22)(E ) OF THE ACT. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF THE LD. CIT(A). 9 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE HAS FILED A DDITIONAL EVIDENCES AS SUPRA IN SUPPORT OF HER CLAIM THAT ASSES SEE COMPANY HAS COMPENSATED THE ASSESSEE BY PROVIDING THE AFORESAID LOAN AMOUNT BECAUSE ASSESSEE HAS PROVIDED HER HOUSE AS A SECURITY T O THE BANK FOR SANCTIONING LOAN T O THE COMPANY IN WHICH SHE WAS A DIRECTOR. THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - (I) DECISION OF HON BLE HIGH COURT OF KARNATKA IN THE CASE OF BAGMANE CONSTRUCTION (P) LTD. VS. CIT (2015) 57 TAXMAN.COM (II) DECISION OF HON BLE HIGH COURT OF CALCUTTA IN THE CASE OF PRADIP KUMAR MALHOTA VS . CIT (2011) 15 TAXMAN.COM 66 (III) DECISION OF HON BLE HIGH CO URT OF CHENNAI IN THE CASE OF AC IT VS. G. SREEVIDYA IN ITAT NO. 1270/IND/ 2011 I.T.A NO S . 462 & 463 /RJT /20 16 A.Y. 2007 - 08 PAGE NO CHUNILAL G BHANVADIA & CHANDRIKABEN C.BHANVADIA VS. ACIT 5 AFTER TAKING INTO CONSIDERATION THE AFORESA ID JUDICIAL PRONOUNCEMENTS , THE LD. COUNSEL HAS CONTENDE D THAT T H E ADVANCES GIVEN BY THE COMPANY TO T HE ASSESSEE SHARE - HOLDER IN COMPENSATION FOR KEEPING HER HOUSE AS SECURITY FOR THE BENEFIT OF THE COMPANY CANNOT BE TREATED AS DEEMED DIVIDEND WITHIN THE M EANING OF SECTION 2(22)(E) OF THE ACT. AFTER HEARING THE LD. COUNSEL AND AFTER GOING THROUGH THE AFORESAID ADDITIONAL EVIDENCES AND THE JUDICIAL PRONOUNCEMENTS , WE CONSIDER TH AT E VIDENCES /MATERIALS FURNISHED BY THE ASSESSEE IS REQUIRED TO BE EXAMINED BY T H E ASSESSING OFFICER IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS REGARDING THE CLAIM OF THE ASSESSEE. T H EREFORE , WE ARE OF THE VIEW THAT IT WILL BE APPROPRIATE TO RESTORE THIS CASE TO THE FILE OF ASSESSING OFFICER FOR DECIDING IT AFRESH AFTER VERIFICATION / EXAMINATION AS ABOVE AFTER AFFORDING ADEQUATE OPPORTUNITIES TO THE ASSESSEE. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . SINCE IN RESPECT OF APPEAL FILED VIDE ITA NO. 462/AHD/2016, THE ASSESSEE HAD ALSO FILED THE IDENTICA L ADDITIONAL EVIDENCES, JUDICIAL PRONOUNCEMENTS AND MATERIALS , THEREFORE, T HE SAME IS ALSO RE S TORED TO T H E FILE OF THE ASSESSING OFFICER FOR DECIDING A FRESH AS DIRECTED SUPRA IN THIS ORDER. 10 . IN THE COMBINED RESULT, BOTH THE APPEALS FILED BY DIFFERENT A SSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 01 - 03 - 201 8 SD/ - SD/ - (RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 01 /03 /201 8 / COPY OF ORDER FORWARDED TO: - I.T.A NO S . 462 & 463 /RJT /20 16 A.Y. 2007 - 08 PAGE NO CHUNILAL G BHANVADIA & CHANDRIKABEN C.BHANVADIA VS. ACIT 6 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT