NCK SONS EXPORTS P.LTD, MUMBAI V. DCIT CIR CIR 2(2), MUMBAI

ITA 4641/MUM/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0906 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 1996-1997
• Appeal Filed On: 07-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G N MAKAWANA
• Assessee Lawyers: PRIYANKA J MARU
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI G.S. PANNU , ACCOUNTANT MEMBER ITA NO . 4 6 41 / MUM./ 2014 ( ASSESSMENT YEAR : 1 9 96 97 ) M/S. NCK SONS EXPORTS PVT. LTD. FLAT NO.401, 4 TH FLOOR MUNSHI MANOR, 9/10 TH ROAD KHAR (WEST), MUMBAI 400 052 PAN AAACN1629B .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 2 ( 2 ) , AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 20 .... RESPONDENT ASSESSEE BY : MS. PRIYANKA J. MARU REVENUE BY : SHRI G.N. MAKAWANA DATE OF HEA RING 1 4 .0 7 .2015 DATE OF ORDER 31.07.2015 O R D E R PER G.S. PANNU, ACCOUNTANT MEMBER TH E PRESENT APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED APPEAL ORDER DATED 25 TH FEBRUARY 2010 , PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 5 , M UMBAI, FOR THE ASSESSMENT YEAR 1996 97 , WITH REFERENCE TO THE ASSESSMENT ORDER DATED 2 6 TH DECEMBER 2008 , PASSED IN TERMS OF SECTION 143(3) R/W SECTION 254 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) . THE G ROUNDS OF APPEAL RAISED BY THE ASSESSEE , ARE AS FOLLOWS : M/S. NCK SONS EXPORTS PVT. LTD. 2 ' 1) FINALISING THE APPEAL ORDER EX - PARTE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LEARNED CIT(A) ERRED IN FACTS AND IN LAW IN PASSING THE ORDER IN APPEAL BEFORE HIM EX - PARTE WITHOUT AFFORDING ADEQUATE OPPORTUNITY TO APPELLANT TO R EPRESENT ITS CASE IN THE APPEAL. 2) ASSESSMENT OF DEEMED DIVIDEND INCOME U/S.2(22)(E) A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN FACTS AND IN LAW IN CONFIRMING THE ASSESSMENT OF DEEMED DIVIDEND INCOME ULS.2 (22) (E) RS.3,81,478/ - IN THE CASE OF APPELLANT COMPANY ALTHOUGH IT WAS NOT A REGISTERED SHAREHOLDER IN THE COMPANY STANDARD VISHWAS MARBLE INDUSTRIES PVT. LTD. FROM WHICH IT HAD RECEIVED THE ADVANCE OF THAT AMOUNT, CONTRARY TO THE DECISION OF THE SPECIAL BENCH OF IT AT MUMBAI IN THE CASE OF BHAUMIK COLOUR PVT. LTD. I N ITA NO. 503 0/M/04 H OLDING THAT SUCH INCOME CAN BE ASSESSED ONLY IN THE HANDS OF A REGISTERED SHARE HOLDER OF A COMPANY AND NOT IN THE HANDS OF ANY OTHER PARTY. B) WITHOUT PREJUDICE TO THE CONTENTION S RAISED IN GROUND (A) ABOVE CIT(A)'S FURTHER ERRED IN LAW IN NOT LIMITING THE QUANTUM OF THE SAID DIVIDEND INCOME TO RS.151,833/ - BEING THE AMOUNT OF CRYSTALLIZED ACCUMULATED PROFIT ON THE FIRST DAY OF THE RELEVANT PREVIOUS YEAR I.E ., 1 ST APRIL, 1995 3) GENERAL 1) THE ORDER OF THE COMMISSIONER(APPEALS) BEING CONTRARY TO LAW, EVIDENCE AND FACTS OF THE CASE SHOULD BE SET ASIDE, AMENDED OR MODIFIED IN THE LIGHT OF THE GROUNDS DEDUCED ABOVE. 2) THE APPELLANT CRAVES LEAVE TO RESERVE TO ITSELF THE RIGHT TO AD D, TO ALTER OR AMEND OR ANNUL ANY OF THE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING AND TO PRODUCE SUCH FURTHER EVIDENCES, DOCUMENTS AND PAPERS AS MAY BE NECESSARY . 2. THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION, RECEIVED ADVANCES AMOUNTING T O ` 3,81,478, FROM M/S. STANDARD VISHWAS MARBLE INDUSTRIES PVT. LTD., WHICH IS A SISTER CONCERN OF THE ASSESSEE. IN THE FIRST ROUND OF LITIGATI ON ,THE ASSESSING OFFICER MADE ADDITION OF ` M/S. NCK SONS EXPORTS PVT. LTD. 3 3 , 81 , 478 UNDER SECTION 2(22)( E) OF THE ACT WHICH WAS CONFIRMED BY T HE CIT(A) . 3. IN THE FIRST ROUND OF LITIGATION THE TRIBUNAL IN ITA NO.314/MUM./ 2004, DATED 4 TH APRIL 2007 DIRECTED THE ASSESSING OFFICER TO RE COMPUTE THE ACCUMULATED PROFIT UP TO THE DATE OF DISTRIBUTION OF THE PAYMENT AND RE DETERMINE THE AMOUNT OF ADDITI ON UNDER SECTION 2(22(E) OF THE ACT. 4. THE ASSESSING OFFICER, HOWEVER, ADDED THE ENTIRE AMOUNT OF ` 3,81,478, TO T HE TOTAL INCOME OF THE ASSESSEE U/S 2(22)(E) OF THE ACT BEING DEEMED DIVIDEND. 5. THE ASSESSEE, BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OFF ICER, CARRIED THE MATTER BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN THE CIT(A) CONFIRMED THE ADDITION IN VIEW OF THE OBSERVATIONS MADE BY THE ASSESSING OFFICER. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVO UR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S JIGNESH P. SHAH, 114 DTR 249 IN ITA NO 197 OF 2013 , AND ALSO BY THE DECISION OF MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN BH A U MIK COLOR PVT. LTD., ITA NO.5030 /MUM./ M/S. NCK SONS EXPORTS PVT. LTD. 4 2004 , BECAUSE ASSESSEE IS NOT A SHAREHOLDER IN M/S. STANDARD VISHWAS MARBLE INDUSTRIES PVT. LTD. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, HAS MERELY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW WITHOUT CONTROVERTING THE STAND OF THE APPELLAN T. 8. AFTER HEARING BOTH THE PARTIES AND ON A PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, I FIND THAT THE ASSESSEE HAS RECEIVED ` 3,81,478, FROM STANDARD VISHWAS MARBLE INDUSTRIES PVT. LTD. W HICH IS THE SISTER CONCERN, AS STATED BY THE LEARNED COUNSEL FOR T HE ASSESSEE, AND THE ASSESSEE COMPANY IS NOT A REGISTERED SHAREHOLDER OF THE SAID COMPANY. THUS, SINCE THE ADVANCE WAS RECEIVED FROM A COMPANY OF WHICH THE ASSESSEE IS NOT A REGISTERED SHAREHOLDER, FOLLOWING THE RATIO OF THE JUDGMENT OF THE HON'BLE JURISDI CTIONAL HIGH COURT IN JIGNESH P. SHAH (SUPRA) , IT HAS TO BE HELD THAT SUCH ADVANCE IS NOT LIABLE TO BE TA X ED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. PERTINENTLY, THE AFORESAID ASPECT HAS BEEN CANVASSED BY THE ASSESSEE BEFORE THE CIT(A) ALSO, BUT T HERE IS NO ADJUDICATION ON THE SAME. R ESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE AFORESAID DECISIONS, I HEREBY DELETE THE ADDITION OF RS 3 , 81 , 478 MADE AS DEEMED DIVIDEND U/S 2(22(E) OF THE ACT . M/S. NCK SONS EXPORTS PVT. LTD. 5 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED . ORDER PR ONOUNCED IN THE OPEN COURT O N 31.07.2015 SD/ - G.S. PANNU ACCOUNTANT MEMBER MUMBAI, DATED : 31.07.2015 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