Prava Ranjan Pattnaik, Bhubaneswar V. ACIT, Bhubaneswar

ITA 486/CTK/2012

• Counselvise Citation: 48622114 RSA 2012
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 08-10-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: S C BHADRAAR
• Keywords: Deemed dividend
• Section: 2

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. 486/CTK/2012 / ASSESSMENT YEAR 2005 - 06 SRI PRAVA RANJAN PATTNAIK, PLOT NO.2132/5058, TANKAPANI ROAD, BHUBANESWAR PAN: AASPP 6310 N - - - VERSUS - ASST.COMMISSIONER O F INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.C.BHADRA,AR / FOR THE RESPONDENT: / SHRI N.K.NEB, DR / DATE OF HEARING: 20. 11.2012 / DATE OF PRONOUNCEMENT: 30.11.2012 / ORDER . . . , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DT.4.7.2012 OF THE COMMISSIONER OF INCOME - T AX (APPEALS) FOR THE AY 2005 - 06, RAISING THE FOLLOWING GROUNDS. 1. THE ORDER OF ASSESSMENT AS WELL AS THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS AGAINST LAW, WEIGHT OF EVIDENCES AND PROBABILITIES OF THE CASE. 2. THE LEARNED ASSESSING OFFICE R HAS RE - OPENED THE ASSESSMENT U/S147 OF INCOME TAX ACT ON WRONG PREMISE IN SPITE OF THE OBJECTION OF THE APPELLANT. HE COMPLETELY MISINTERPRETED THE ORDER OF THE HON B L E BENCH OF INCOME TAX APPELLATE TRIBUNAL (ITAT), IN THE CASE OF FALCON FINANCE LTD., WH ERE THE APPELLANT IS A SHAREHOLDER. THE LEARNED IT AT HAS NEVER ISSUED DIRECTION U/ S 150 OF INCOME TAX ACT TO TAX THE APPELLANT, WHO HAS NEITHER RECEIVED ANY LOAN OR ADVANCE FROM THE COMPANY FALCON MARINE EXPORTS LTD., WHICH HAS ACCUMULATED PROFIT NOR FROM FALCON FINANCE LTD., WHICH HAS TAKEN ADVANCE FROM FALCON MARINE EXPORTS LTD. THE INTENTION OF THE LEGISLATION HAS CLEARLY MENTIONED IN THE ORDER, WHICH SPEAKS THAT THE APPELLANT IN NO WAY HAS TAKEN BENEFIT OUT OF THE TRANSACTION MADE BETWEEN FALCON FINANCE LTD. AND FALCON MARINE EXPORTS LTD. I.T.A.NO.486/CTK/2012 2 3. SECTION 2(22)(E), CLEARLY SPEAKS THAT THERE MUST BE A PAYMENT BY A COMPANY TO A SHAREHOLDER BY WAY OF LOAN OR ADVANCE. IN THE INSTANT CASE, NO TRANSACTION BY WAY OF LOAN OR ADVANCE IS MADE BETWEEN THE APPELLANT AN D ABOVE MENTIONED TWO COMPANIES TO FULFILL THE APPLICATION OF MISCHIEF OF SECTION 2(22)(E) OF INCOME TAX ACT, FOR WHICH NO QUESTION OF DEEMED DIVIDEND ARISES IN THE HAND OF THE APPELLANT. 4. THE LEARNED ASSESSING OFFICER AS WELL AS COMMISSIONER OF INCOME - TAX (APPEALS) HAS IGNORED THE FACT THAT ULTIMATELY NO BENEFIT HAS FLOWN DOWN TO THE APPELLANT IN COURSE OF TRANSACTION BETWEEN THE TWO COMPANIES FOR A VERY SHORT PERIOD. 2. GROUND NO.1 IS OF GENERAL NATURE AND NEEDS NO SPECIFIC ADJUDICATION. 3. AS REGARD S THE OTHER GROUNDS, THE FACTS RELEVANT ARE THAT IN THE SCRUTINY ASSESSMENT PASSED IN THE CASE OF M/S.FALCON FINANCE LTD., REVEALED THAT M/S.FALCON FINANCE IS SISTER CONCERN OF M/S.FALCON MARINE EXPORTS PVT. LTD., AND M/S.FALCON MARINE EXPORTS EXTENDED LOA N OF 25 LAKHS TO ITS SISTER CONCERN M/S.FALCON FINANCE LTD. THEREFORE, IN THE SCRUTINY ASSESSMENT FOR THE ASSESSMENT YEAR 2005 - 06 ADDED BACK THIS INCOME OF 25 LAKHS TO THE TOTAL INCOME OF M/S.FALCON FINANCE LTD. MATTER WENT UPTO THE TRIBUNAL, WHEN THE TR IBUNAL HELD A VIEW THAT THE TRANSFER BETWEEN SISTER CONCERN ATTRACTS DEEMED DIVIDEND PROVISION BUT M/S.FALCON FINANCE LTD., CANNOT BE SUBJECTED TO DEEMED DIVIDEND. THE TRIBUNAL FURTHER RULED THAT THE INTENTION OF LEGISLATURE IS TO TAX DIVIDEND ONLY IN THE HANDS OF SHARE HOLDERS AND NOT IN THE HANDS OF THE CONCERN. ON THE BASIS OF ABOVE DECISION OF THE TRIBUNAL AND FURTHER ON THE FINDING THAT THE ASSESSEE HAS SUBSTANTIAL INTEREST IN BOTH THE ABOVE CONCERNS, THE ASSESSING OFFICER CONSIDERED THE SAID AMOUNT OF 25 LAKHS AS DEEMED DIVIDEND IN THE HANDS OF THE PRESENT ASSESSEE AND BROUGHT TO TAX THE SAME IN THE IMPUGNED ASSESSMENT U/S.147. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE AND THE MATERIAL MADE AVAILABLE ON RECORD, THE LEARNED CIT(A) CONFIRMED THE I.T.A.NO.486/CTK/2012 3 ADDITION OF 25 LAKHS MADE IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T.ACT. HE RELIED ON THE DECISION IN THE CASE OF CIT V. UNIVERSAL MEDICARE ( P) LTD (324 ITR 263). AGAINST THIS ORDER OF THE LEARNED CIT(A) THE ASSESSEE IS IN THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED AR OF THE ASSESSEE CONTENDED THAT PRAVA RANJAN PATNAIK (THE ASSESSEE) HOLDS SUBSTANTIAL SHARE IN FALCON MORAINES EXPORT S LIMITED AND FALCON FINANCE LIMITED AS ON 31ST MARCH, 2005. HE HAS NEITHER RECEIVED ANY LOAN OR ADVANCES FROM EITHER OF THE COMPANY IN WHICH HE HAS SUBSTANTIAL INTEREST. THEREFORE THE MISCHIEF THE PROVISION OF SECTION 2(22)(E) OF THE INCOME TAX ACT SHALL NOT BE APPLICABLE TO THE ASSESSEE. THE ASSESSMENT O RDER UNDER CONTEXT AROUSE OUT OF REASSESSMENT OF THE ASSESSEE U/S. 147 RELYING UPON THE ORDER OF HON BLE ITAT, CUTTACK BENCH IN CASE OF FALCON FINANCE LIMITED ITA NO.184/CTKI2009 DT.1.3.2010 . AS PER THE SA ID ORDER, FALCON MARINE EXPORTS LIMITED MADE ADVANCE TO FALCON FINANCE LIMITED ON 18.05.2004 AMOUNTING TO RS.25 LAKHS. THE TRANSACTION IS SQUARED UP WITHIN SEVEN DAYS, SINCE FALCON MARINE EXPORTS LIMITED IS NOT A SHARE HOLDER IN FALCON FINANCE LIMITED, THE TRIBUNAL DELETED THE ADDITION RELYING UPON THE ORDER OF SPECIAL BENCH ITAT, MUMBAI IN THE CASE OF ACIT VS. BHAUMIK COLOU RS PRIVATE LIMITED. THE LEARNED AR OF THE ASSESSEE PERUSED PARAGRAPH 5 OF THE SAID ORDER OF ITAT IN CASE OF FALCON FINANCE LIMITED , WHE REIN THE LAST PART OF THE SAID PARAGRAPH, THE INTENTION OF LEGISLATION IS MENTIONED. THE INTENTION BEHIND THE PROVISIONS OF SECTION 2(22)(E) IS TO TAX DIVIDEND IN THE HANDS OF SHARE HOLDER. THE DEEMING PROVISION AS IT APPLIES TO THE CASE OF LOANS OR ADVANC ES BY A COMPANY TO A CONCERN IN WHICH ITS SHAREHOLDER HAS SUBSTANTIAL INTEREST IS BASED ON THE PRESUMPTION THAT THE LOAN OR ADVANCES WOULD ULTIMATELY BE MADE AVAILABLE TO THE SHAREHOLDERS. IN THE INSTANT CASE NO BENEFIT OUT OF THIS TRANSACTION I.T.A.NO.486/CTK/2012 4 BETWEEN FALC ON MARINE EXPORTS LIMITED AND FALCON FINANCE LIMITED AND NO FUND HAS FLOWN TO THE APPELLANT BEING A SHARE HOLDER IN BOTH THE COMPANIES SINCE THE TRANSACTIONS BETWEEN THE TWO COMPANIES HAS BEEN SQUARED UP WITHIN SEVEN DAYS. THEREFORE, THE PROVISIONS OF SECT I ON 2(22)(E) IS NOT APPLICABLE TO THE ASSESSEE HO HAS NOT RECEIVED ANY ADVANCE FROM BOTH THE COMPANIES AMONG WHICH TRANSACTION WAS MADE AND SQUARED UP WITHIN SEVEN DAYS. HE, THEREFORE, PRAYED FOR DELETION OF THE ADDITION OF 25 LAKHS IN THE HANDS OF THE ASS ESSEE. 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. 7. ON CAREFUL ANALYSIS OF THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF RIVAL SUBMISSIONS OF THE PARTIES, IT IS FOUND THAT THE BASE OF THE O RDER OF THIS BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF FALCON FINANCE LTD V. ADDL.CIT IN ITA NO.184/CTK/200 DT.31.3.2010 FOR THE ASSESSMENT YEAR 2005 - 06 . T HE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT OF THE ASSESSEE AND AFTER HEARING THE ASSESSEE A ND PERUSING THE RECORDS HAS HELD THAT THE AMOUNT OF ADVANCE OF 25 LAKHS PAID BY FALCON MARINE EXPORTS LTD., TO FALCON FINANCE LTD., ON 18.5.2004 AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE U/S.2(22)(E) OF THE I.T.ACT. HONBLE SPECIAL BENCH OF ITAT, MU MBAI IN THE CASE OF ACIT V. BHAUMIK CO LOUR (P) LTD., (118 ITD 1) HAS CONSIDERED SUCH SIMILAR SITUATION AND CAME TO THE CONCLUSION THAT SECTION 2(22)(E) WILL NOT APPLY TO BENEFICIARY SHARE HOLDER BUT NOT A REGISTERED SHARE HOLDER. SUCH SHAREHOLDER OCCURRI NG IN THE LAST LIMB OF SECTION 2(22)(E) MUST BE BOTH BENEFICIAL AND REGISTERED SHAREHOLDER. ADMITTEDLY IN THE PRESENT CASE ON HAND, THE ASSESSEE HAS BENEFICIARY INTEREST IN THE LENDING AND BORROWING COMPANIES BUT IS NOT A REGISTERED SHARE HOLDER AND IT IS NOT MADE OUT BY THE DEPARTMENT THAT ANY BENEFIT OUT OF THE TRANSACTION BETWEEN THE TWO I.T.A.NO.486/CTK/2012 5 COMPANIES WAS DERIVED BY THE ASSESSEE AND MORE SO WHEN THE TRANSACTION OF ADVANCE BETWEEN THE TWO COMPANIES HAS BEEN SQUARED OFF WITHIN SEVEN DAYS. HENCE, CONSIDERING TH E TOTALITY OF THE CIRCUMSTANCES AND SINCE THE DEPARTMENT HAS NOT BEEN ABLE TO MAKE OUT ANY BENEFIT HAVING BEEN ACCRUED TO THE ASSESSEE BY VIRTUE OF THE TRANSACTION BETWEEN THE TWO COMPANIES AND THE ASSESSEE BEING NOT A REGISTERED SHAREHOLDER, THE IMPUGNED ADDITION MADE IN THE HANDS OF THE ASSESSEE U/S.2(22)(E) IS NOT SUSTAINABLE FOR LEGAL SCRUTINY, M ORE SO IN ABSENCE OF ANY DIRECTION BY THE TRIBUNAL WHILE PASSING ORDER IN THE CASE OF FALCON FINANCE LTD., IN ITA NO.184/CTK/2009 THAT THIS AMOUNT SHOU LD BE ADDED IN THE HANDS OF THE ASSESSEE . IN VIEW OF ABOVE, WE ARE INCLINED TO HOLD THAT THE ADDITION OF 25 LAKHS MADE IN THE HANDS OF THE ASSESSEE U/S.2(22)(E) IS NOT SUSTAINABLE FOR LEGAL SCRUTINY AND THEREFORE, THE SAME IS DIRECTED TO BE DELETED BY ALLOWING THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( ) DATE: 30.11.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SRI PRAVA RANJAN PATTNAIK, PLOT NO.2132/5058, TANKAPANI ROAD, BHUBANESWAR PAN: AASPP 6310 N 2 / THE RESPONDENT: ASST.COMMISSIO NER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO.486/CTK/2012 6 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 28.11.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.11.2012 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 ME MBER 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 30.11.2012 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 ..