ACIT, New Delhi V. Sh. Ravi Sharma, New Delhi

ITA 4930/DEL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6865 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 15-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Tangible material; Deemed dividend; Borrowed satisfaction
• Section: 143(3); 2(22)(e); 143(1); 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI F BEN CH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL M EMBER ITA NO. 4930/DEL/2016 [A.Y 2007-08] THE A.C.I.T VS. SHRI RAVI SHARMA CIRCLE 50(1) 13/30, INFOTECH HOUSE NEW DELHI G.L. SIKKA MARG, EAST PATEL NAGAR NEW DELHI PAN: ABKPS 7088 K (APPLICANT) ( RESPONDENT) ASSESSEE BY : SHRI KAPIL GO EL, ADV DEPARTMENT BY : SHRI SURENDRA PAL , SR. DR DATE OF HEARING : 30.10.2019 DATE OF PRONOUNCEMENT : 31.10.2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 17, NEW DELH I DATED 06.07.2016 PERTAINING TO ASSESSMENT YEAR 2007-08. 2 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT TH E LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,80,42,924/- ON AC COUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT, 1961 [ HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE DREW OUR ATTENTION TO THE APPLICATION DATED 16.09.2019 INVOK ING RULE 27 OF ITAT RULES TO SUPPORT THE ORDER OF THE LD. CIT(A) ON LEG AL GROUND. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AS SESSEE HAS CHALLENGED THE REOPENING OF ASSESSMENT BEFORE THE LD. CIT(A) A ND THE LD. CIT(A) DID NOT ADJUDICATE UPON THE GRIEVANCE ON THE GROUND THAT HE HAS DELETED THE ADDITIONS ON MERITS OF THE CASE. 4. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE REASONS FOR REOPENING ASSESSMENT WHICH ARE PLACED A T PAGE 18 OF THE PAPER BOOK, WHICH READ AS UNDER: ACCORDINGLY, I AM SATISFIED THAT THERE IS A FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE SAID ASSESSMEN T YEAR AND INCOME OF RS. 1,80,42,924/- CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 BY 3 REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT FOR 2007-08. 1 HAVE, THEREFORE, REASON TO' BELIEVE THAT THE SUM OF RS._ 1,80,42,924/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE 2007-98. THUS, THE SAME IS TO BE BROUGHT TO TAX UNDER SECTION 147/148 OF THE 1.7. ACT. 1961. 5. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBM ITTED THAT THE ASSESSING OFFICER HAS BORROWED SATISFACTION FROM TH E ASSESSING OFFICER OF M/S J.C. INFOTECH TECHNOLOGIES LTD. WITHOUT EXAM INING THE RESERVES AND SURPLUS OF THAT COMPANY, THE ASSESSING OFFICER FORMED A BELIEF THAT THE INCOME ESCAPED ASSESSMENT WITHOUT APPLYING HIS MIND. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON VARIOUS JUDICI AL DECISIONS TO SUPPORT HIS CONTENTIONS. 6. PER CONTRA, THE LD. DR, IN SUPPORT OF THE REOPEN ING OF THE ASSESSMENT, STATED THAT AT THE STAGE OF REOPENING T HE ASSESSMENT, THE ASSESSING OFFICER SHOULD HAVE PRIMA FACIE BELIEF AN D ONLY AFTER REOPENING ASSESSMENT, HE WILL GO INTO FACTS. THERE FORE, THERE IS NO ILLEGALITY IN REOPENING OF THE ASSESSMENT. 4 7. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE RI VAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE REASONS FOR INITIATI NG THE PROCEEDINGS U/S 147 OF THE ACT. THE SAID NOTICE IS EXHIBITED E LSEWHERE. A PERUSAL OF THE SAME SHOWS THAT THE ASSESSING OFFICER OF M/S J.C. INFOTECH TECHNOLOGIES LTD FOUND THAT THE COMPANY HAS GIVEN L OANS AND ADVANCES TO ONE OF ITS DIRECTORS, WHO IS A MAJOR SHARE HOLDE R HOLDING 49,400 SHARES OUT OF TOTAL NUMBER OF SHARES OF 50,000. TH IS INFORMATION WAS PASSED ON TO THE OFFICER OF THE APPELLANT. ON THE BASIS OF THIS INFORMATION, THE ASSESSING OFFICER WAS SATISFIED TH AT THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS AND, ACCORDINGLY, PROCEEDED TO REOPEN THE ASSESSMEN T. 8. IN OUR CONSIDERED OPINION, THERE IS NO ILLEGALIT Y IN THE FORMATION OF BELIEF BY THE ASSESSING OFFICER, IN AS MUCH AS, AT THE STAGE OF ISSUING THE NOTICE U/S 148 OF THE ACT, ALL THAT IS REQUIRED IS THAT THE ASSESSING OFFICER SHOULD HAVE SOME TANGIBLE MATERIAL EVIDENCE TO REOPEN THE ASSESSMENT. THE INFORMATION BASED ON WHICH THE NOT ICE U/S 148 OF THE ACT WAS ISSUED IS AN INFORMATION RECEIVED FROM ANOT HER INCOME TAX OFFICER AND THE SAME CANNOT BE FAULTED WITH. 5 9. THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF S ONIA GANDHI 407 ITR 594 HAD AN OCCASION TO CONSIDER A SIMILAR ISSUE . THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT READ AS UNDER: 70. THE ENTIRE PREMISE OF THE REASSESSMENT NOTICE IS THAT THE NON DISCLOSURE OF THE TAXING EVENT. I.E. ALLOTM ENT OF SHARES ( AND THE ABSENCE OF ANY DECLARATION AS TO VALUE). DEPRIVED THE ASSESSING OFFICER OF THE OPPORTUNITY TO LOOK IN TO RECORDS. IN THE CASE OF RAHUL GANDHI, NO DOUBT THE ASSESSMENT ORIGINALLY COMPLETED , WAS UNDER SECTION 143(3) HAD HE DISCLOS ED IN HIS RETURNS OR ANY RELATED DOCUMENTS ABOUT THE EVENT ( SHARE ACQUISITION) THE PRIMARY FACT WOULD HAVE BEEN ON T HE RECORD ; THE ASSESSING OFFICERS SUBSEQUENT ACTION IN PURSIN G THAT ASPECT OR LETTING GO OF IT, AFTER INQUIRY MIGHT WEL L HAVE JUSTIFIED THE CHANGE OF SECOND AND IMPERMISSIBLE OP INION ON THE SAME SUBJECT. HOWEVER , THAT IS NOT THE CASE . THE TEP AND INVESTIGATION REPORTS OF SUBSEQUENT VINTAGE ( A FTER COMPLETION OF GANDHIS ASSESSMENT ) THEREFORE, CONS TITUTED TANGIBLE MATERIAL WHICH IN TERMS OF RULING IN CIT V. KELVINATOR OF INDIA LTD (2010) 320 ITR 561 (SC) JUSTIFIED REASSESSMENT. IN THE CASE OF OTHER TWO A SSESSES ( MRS SONI GANDHI AND OSCAR FERANDES) THE RETURNS FIL ED BY THEM WERE PROCESSED UNDER SECTION 143(1) . SUCH IN STANCES ARE NOT TREATED AS ASSESSMENT DY.CIT V. ZUARI ES TATE 6 DEVELOPMENT & INVESTMENT CO LTD ( 2016) 236 TAXMAN 1 (SC) IS AN AUTHORITY ON THE SUBJECT. 10. RESPECTFULLY FOLLOWING THE DECISION OF THE HON' BLE HIGH COURT [SUPRA], WE UPHOLD THE REOPENING OF ASSESSMENT. AP PLICATION INVOKING RULE 27 OF THE ITAT RULES IS, ACCORDINGLY, DISMISSE D. 11. COMING TO THE MERITS OF THE CASE, FACTS ON RECO RD SHOW THAT DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED THE FOLLOWING AMOUNTS FROM THE COMPANY M/S J.C. INFOTECH TECHNOLOGIES LTD , IN WHICH THE ASSESSEE WAS HOLDING AROUND 98% OF SHARES: SR.NO DATE AMOUNT 1 21 . 6.2006 6 , 000 , 000 / - 2 . 08 . 08.2006 750 , 000 / - 3 08 . 08.2006 450 , 000 / - 4 08 . 08.2006 3 , 00 , 000 / - 5 25 . 08.2006 1 , 400 , 000 / - 6 18 . 09.2006 3 , 025 , 000 / - 7 14 . 11.2006 275 , 000 / - 8 28 . 11.2006 100 , 000 / - 9 11 . 12.2006 500 , 000 / - 10 11 . 01.2007 900 , 000 / - 11 11 . 01.2007 600 , 000 / - 12 14 . 02.2007 500 , 000 / - 13 07 . 03.2007 1 , 500 , 000 / - 14 08 . 03.2007 1 , 700 , 000 / - 1,80,00,000/ - 7 12. THE ASSESSING OFFICER WAS OF THE FIRM BELIEF TH AT THE PROVISIONS OF SECTION 2(22(E) OF THE ACT SQUARELY APPLY ON THE FA CTS OF THE CASE AND ON FINDING THE BALANCE IN RESERVES AND SURPLUS AS O N 31 ST MARCH, IN THE CASE OF M/S J.C. INFOTECH TECHNOLOGIES LTD AT RS. 3 .81 CRORES, THE ASSESSING OFFICER TREATED THE AMOUNT RECEIVED FROM THE COMPANY AS DEEMED DIVIDEND AND MADE ADDITION OF RS. 1,80,42,92 4/-. 13. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND STRONGLY CONTENDED THAT THE SAID AMOUNT IS SECURITY DEPOSIT AGAINST THE PROPERTY LET OUT BY THE ASSESSEE TO THE COMPANY. I T WAS VEHEMENTLY CONTENDED THAT THE SAID TRANSACTION WAS A BUSINESS TRANSACTION AND OUTSIDE THE AMBIT OF SECTION 2(22)(E) OF THE ACT. 14. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, TH E LD. CIT(A) HELD AS UNDER: 5.1 IN FIND MERIT IN HIS ARGUMENT THAT THERE IS NO FAVOUR GIVEN BY THE COMPANY TO THE APPELLANT. THE AMOUNT O F RS.1.80 CRORE WAS PAID AS A SECURITY DEPOSIT TOWARDS TAKING ON RENT THE PROPERTY OF THE APPELLANT. EXCEPT SECURITY DEPO SIT, NO FURTHER RENT WAS CHARGED. LOOKING TO THE PREVAILING MARKET RENT OF THE PROPERTY, THERE WAS NO FAVOUR APPEARED TO BE 8 GIVEN TO THE APPELLANT. THEREBY, IT WAS A SIMPLE BU SINESS AFFAIR BETWEEN THE APPELLANT AND THE COMPANY. IN TH E CASE OF GURPREET SINGH CHAWLA VS. ITO, WARD-13(4), NEW DELH I IN ITA NO. 1714/DEL/2013, THE ITAT, DELHI BENCH-C, NEW DELHI ON SIMILAR FACT HELD THAT 'ON PERUSAL OF THE ABOVE DECISION, IT IS IMPORTANT THAT UNLESS ADVANCES IT IS NOT GRATUIT OUS TO' ITS SHAREHOLDER BUT IT IS TO PROTECT THE BUSINESS INTER EST OF THE COMPANY, IT FALLS OUT OF THE PURVIEW OF TAXATION U/ S 2(22)(E) OF THE ACT. FURTHER, IT IS NOT A CURRENT ACCOUNT BU T ADVANCES IN THE NATURE OF LOAN WHICH ASSESSEE ENJOYS, SIMPLY ON ACCOUNT TO BEING A SHARE HOLDER EXCEEDING SPECIFIC PERCENTA GE, THEN ONLY, THE PROVISIONS THE SECTION 2(22)(E) OF THE AC T COMES INTO PLAY. THE ABOVE VIEW FURTHER GETS SUPPORT FROM THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT 7S. CREATIVE DYING AND PRINTING PVT. LTD. [318 ITR 476]. NO OTHE R CONTRARY DECISIONS WERE BROUGHT TO OUR NOTICE BY THE ID. DR. IN VIEW OF THE ABOVE FINDING WE REVERSE THE FINDING OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 11,23,551/- AS DEEME D DIVIDEND U/S 2(22)(E) OF THE ACT. WE ALSO CLARIFY THAT IN TH E PRESENT 9 APPEAL THE ACCUMULATED PROFIT ARE TO THE TUNE OF ON LY RS.11,23,551/- AND THE TOTAL ALLEGED ADVANCES GIVEN TO THE APPELLANT IS RS.23,77,000/- AND RS.15,00,008/- ARE ON ACCOUNT OF SECURITY DEPOSIT AND THEREFORE RS.8,77,000/- ARE THE ENTRIES OF MUTUAL CURRENT ACCOUNT TRANSACTIONS, WHI CH ARE ALSO NOT DEEMED DIVIDEND IN VIEW OF ABOVE JUDICIAL PRECE DENTS AND HENCE, TOTAL ADDITION CONFIRMED OF RS.11,23,551/- B Y THE ID. CIT(A) IS DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED.' IN VIEW OF ABOVE FACTS AND THE DECISION OF ITAT (SUPRA), THE AO IS DIRECTED TO DELETE THE ADDITION. 15. BEFORE US, THE LD. DR VEHEMENTLY STATED THAT TH E CONTENTIONS OF THE ASSESSEE HAVE NOT BEEN EXAMINED AT ASSESSMENT S TAGE NOR IT HAS BEEN EXAMINED BY THE LD. CIT(A) AT THE APPELLATE ST AGE. IT IS THE SAY OF THE LD. DR THAT THE CLAIM OF THE ALLEGED BUSINESS T RANSACTION IS TO BE EXAMINED ON FACTS AND, THEREFORE, THE MATTER SHOULD GO BACK TO THE ASSESSING OFFICER FOR VERIFICATION. 10 16. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE ST ATED THAT IN THE ASSESSMENT PROCEEDINGS ITSELF, THE ASSESSEE HAS EXP LAINED THAT HE HAS RENTED OUT SOME PROPERTY TO THE COMPANY, RENT FREE, AND IN PURSUANCE THEREOF, THE COMPANY HAS GIVEN SECURITY DEPOSIT. T HIS FACT WAS VERY MUCH AVAILABLE WITH THE ASSESSING OFFICER WHO, FOR SOME REASON, DID NOT ACCEPT. IT IS THE SAY OF THE LD. COUNSEL FOR T HE ASSESSEE THAT HOWEVER, WHEN SAME FACTS WERE FURNISHED BEFORE THE LD. CIT(A), THE LD. CIT(A), AFTER GOING THROUGH THE FACTS AND AFTER DRAWING SUPPORT FROM SOME JUDICIAL DECISIONS, ACCEPTED THE SAME AS NATURE OF BUSINESS TRANSACTION AND DELETED THE ADDITION. 17. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT DURING THE COUR SE OF ASSESSMENT ITSELF THE ASSESSEE HAS EXPLAINED THE NATURE OF TRANSACTIO NS. IT IS ALSO TRUE THAT IN THE BALANCE SHEET OF THE COMPANY M/S J.C. I NFOTECH TECHNOLOGIES LTD, IT HAS BEEN CLEARLY MENTIONED THA T THE AMOUNT OF RS. 1,80,42,924/- WAS GIVEN TO THE ASSESSEE WHICH WAS I N THE ORDINARY COURSE OF BUSINESS. WE FIND THAT WHEN SAME EVIDENC E WERE FURNISHED BEFORE THE LD. CIT(A), AFTER EXAMINING THEM, THE LD . CIT(A) WAS CONVINCED THAT THE TRANSACTION WAS IN THE ORDINARY COURSE OF BUSINESS AND PROVISIONS OF SECTION 2(22(E) OF THE ACT DO NOT APPLY. 11 18. IN OUR CONSIDERED OPINION, WHEN THE FIRST APPEL LATE AUTHORITY HAS GIVEN CATEGORICAL FINDING AFTER GOING THROUGH FACTS , NO INTERFERENCE IS CALLED FOR. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 49302/DEL/2016 IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31.10 .2019. SD/- SD/- [ SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 ST OCTOBER, 2019 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 12 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER