RAJIV VASANT POTNIS, MUMBAI V. ITO 8(2)(3), MUMBAI

ITA 5010/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84334 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 25-11-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 03-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Capital asset; Cost of acquisition; Deemed dividend

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BE NCH, MUMBAI , !' #$% , !& ! ' BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 5010/MUM/2013 ( ( ( ( ( / ASSESSMENT YEAR : 2010-11 SHRI RAJIV VASANT POTNIS, E-14, NAND DHAM IND. ESTATE PREMISES, MAROL MAROSHI ROAD, ANDHERI (E), MUMBAI-400 059 / VS. THE ITO 8(2)-3, AAYAKAR BHAVAN, MUMBAI-400 020 ) !& ./ * ./ PAN/GIR NO. : AAAPP 8864B ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . ! / APPELLANT BY: NONE ,-)+ / . ! / RESPONDENT BY: SHRI LOVE KUMAR / 0& / DATE OF HEARING :25.11.2014 12( / 0& / DATE OF PRONOUNCEMENT :28.11.2014 !3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-17, MUMBAI DT.7.5.2013 PERTAINING TO A.Y.201 0-11. 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1 IS AGAINST THE ADDITION OF RS. 6,67,066.70 A S DEEMED DIVIDEND AND ITA NO. 5010/M/2013 2 GROUND NO. 2 RELATES TO THE ADDITION OF RS. 2,57,14 2/- RECEIVED ON ACCOUNT OF REDEVELOPMENT OF THE CO. OP. HSG. SOC. WHERE AS SESSEE OWNS A FLAT. 3. THE ASSESSEE IS A DIRECTOR IN M/S. MARKS TEN EQU IPMENT PVT. LTD., AND RECEIVING REMUNERATION. BESIDES, THE ASSESSEE ALSO DERIVES INCOME FROM OTHER SOURCES BEING INTEREST INCOME. THE RETU RN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTIC ES WERE ISSUED AND SERVED UPON THE ASSESSEE. 3.1. DURING THE COURSE OF THE SCRUTINY ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEB IT BALANCE IN THE COMPANY M/S. MARKS TEN EQUIPMENT PVT. LTD., THE AO WAS OF THE FIRM BELIEF THAT THE SAID DEBIT BALANCE ATTRACTS THE PRO VISIONS OF SEC. 2(22)(E)) OF THE ACT AS THE ASSESSEE IS A BENEFICIAL OWNER OF SHAREHOLDING OF MORE THAN 10% VOTING POWER. THE ASSESSEE WAS ASKED TO E XPLAIN WHY THE AMOUNT SHOWN AS DEBIT BALANCE IN THE BOOKS OF THE C OMPANY M/S. MARKS TEN EQUIPMENT PVT. LTD., SHOULD NOT BE TREATED AS D EEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. ON RECEIVING NO EXPLANA TION FROM THE ASSESSEE, THE AO PROCEEDED BY TREATING THE DEBIT BALANCE TO T HE EXTENT OF ACCUMULATED PROFIT AS PER BALANCE SHEET OF M/S. MAR KS TEN EQUIPMENT PVT. LTD., AS ON 31.3.2010 AS DEEMED DIVIDEND AND A DDED RS. 29,68,690/-. 3.2. PROCEEDING FURTHER, THE AO NOTICED THAT THE AS SESSEE HAS RECEIVED RS. 2,57,142/- DIRECTLY FROM THE DEVELOPER. THE AS SESSEE WAS ASKED TO EXPLAIN WHY THE SAID SUM SHOULD NOT BE BROUGHT TO T AX IN THE HANDS OF THE ASSESSEE. IT WAS EXPLAINED THAT THE SAID AMOUNT WA S RECEIVED AS HARDSHIP COMPENSATION FROM THE DEVELOPER AND IS NOT TAXABLE AS THERE IS NO COST OF ACQUISITION. HOWEVER, THIS EXPLANATION OF THE ASSE SSEE DID NOT FIND FAVOUR WITH THE AO WHO DREW SUPPORT FROM A NEW ARTICLE IN DNA NEWSPAPER DT. 28.6.2011. ACCORDING TO THE AO, THE COMPENSATION W AS TAXABLE AS PER ITA NO. 5010/M/2013 3 THE PROVISIONS OF SEC. 2(24) OF THE ACT. THE AO AD DED THE SUM OF RS. 2,57,142/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). IN SO FAR AS THE ADDITION IN RESPECT OF DEEMED DIVIDEND IS CONCE RNED, THE ASSESSEE FILED A DETAILED CHART WHICH IS EXHIBITED AT PARA-4 .1 OF THE FIRST APPELLATE AUTHORITY ORDER. IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNT REFLECTED IN THE COMPANYS BOOK RELATES TO THE SALA RY CREDITED BY THE COMPANY, HOUSING LOAN CREDITED BY THE BANK DIRECTLY IN COMPANYS ACCOUNT. IT WAS FURTHER EXPLAINED THAT THERE WAS A WRONG ENTRY MADE BY THE COMPANYS ACCOUNTANT WHICH WAS REVERSED AND ON THE DEBIT SIDE OF THE ACCOUNT, THE PAYMENTS HAVE BEEN MADE TOWARDS PR OVIDENT FUND, LIC PREMIUM, MEDICLAIM AND PAYMNENT TO BUILDERS AND HOU SING LOAN INSTALLMENT. 4.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S, THE LD. CIT(A) WAS OF THE OPINION THAT THE TOTAL PEAK DEBIT BALANC ES OF RS. 6,67,066.70 SHOULD BE TAKEN AS DEEMED DIVIDEND AND ACCORDINGLY CONFIRMED THE ADDITION TO THE EXTENT OF RS. 6,67,066.70. 4.2. IN SO FAR AS THE ADDITION OF RS. 2,57,124/- IS CONCERNED, IT WAS STRONGLY CONTENDED BEFORE THE LD. CIT(A) THAT THE S AID PAYMENT HAS BEEN RECEIVED BY THE ASSESSEE FROM THE BUILDER AS COMPEN SATION FOR THE ADDITIONAL FSI PROVIDED BY THE CO. OP. HSG. SOC. T HE ASSESSEE PLACED RELIANCE ON THE DECISIONS OF THE TRIBUNAL IN THE CA SE OF NEW SHAILAJA CO. OP. HSG. SOC. LTD. VS ITO IN ITA NO. 512/M/2007, I TO VS LOTIA COURT CHS LTD. 12 DTR, ITAT, MUMBAI, OM SHANTI CO. OP. H SG. SOC. LTD., VS ITO, ITAT, MUMBAI AND JETHALAL D. MEHTA VS DCIT 2 SOT 422 (MUM). THE EXPLANATION OF THE ASSESSEE WAS DISMISS ED BY THE LD. CIT(A) HOLDING THAT IN THE CASES RELIED UPON BY THE ASSESSEE, THE ITA NO. 5010/M/2013 4 APPELLANTS WERE THE OWNERS OF THE LAND. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE IS NOT THE OWNER OF THE LAND AND HENCE THE PAYMENT RECEIVED BY HIM IS TAXABLE. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. NONE APPEARED BEFORE US. THE AUTHORISED REPRESE NTATIVE OF THE ASSESSEE VIDE LETTER DT. 24.11.2014 STATED THAT THE CASE MAY BE DECIDED ON THE BASIS OF MERIT AND THE WRITTEN SUBMISSION MADE AND PLACED ON RECORD. 7. WE HAVE CAREFULLY PERUSED THE WRITTEN SUBMISSION S BROUGHT ON RECORD BY THE AUTHORISED REPRESENTATIVE. 8. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON BY THE ORDERS OF THE AUTHORITIES BELOW. 9. IN SO FAR AS THE ADDITION ON ACCOUNT OF DEEMED D IVIDEND IS CONCERNED, WE FIND THAT THE ENTRIES IN THE BOOKS OF THE COMPANY M/S. MARKS TEN EQUIPMENT PVT. LTD., HAVE NOT BEEN PROPER LY APPRECIATED BY THE LOWER AUTHORITIES. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO EXPLAIN THE NATURE OF ENTRIES SPECIFICALLY POINTING OUT WHICH ENTRIES HAVE BEEN DOUBLY MADE IN THE BOOKS OF THE COMPANY AND HOW THE REVERSAL ENTRIES HAVE BEEN PASS ED. THE AO IS DIRECTED TO VERIFY THE ENTRIES AND DECIDE THE ISSUE AFRESH AS PER THE PROVISIONS OF LAW. GROUND NO. 1 IS TREATED AS ALLO WED FOR STATISTICAL PURPOSE. 9.1. FACTS RELATING TO GROUND NO. 2 SHOW THAT THE A SSESSEE IS A OWNER OF FLAT. THE CO. OP. HSG. SOC. WENT INTO REDEVELOPMEN T AND IN LIEU OF THE ADDITIONAL FSI, THE BUILDER MADE A PAYMENT OF RS. 2 ,57,142/- TO THE ASSESSEE. WE FIND THAT THE CAPITAL ASSET UNDER CON SIDERATION IS THE TDR ITA NO. 5010/M/2013 5 QUALIFYING FOR EQUIVALENT FSI, IT DOES NOT HAVE ANY COST OF ACQUISITION. THEREFORE, THE SALE OF THE SAME DOES NOT GIVE RISE TO ANY CAPITAL GAINS. A SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF JETHALAL D MEHTA VS DCIT (2005) 2 SOT 422 (MUM) WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL MUMBAI BENCH IN THE CASE OF SHRI HEMA NDAS J. PARIYANI IN ITA NO. 2508/M/2010. RESPECTFULLY FOLLOWING THE DE CISIONS OF THE CO ORDINATE BENCH, ADDITION OF RS. 2,57,142/- IS DIREC TED TO BE DELETED. GROUND NO. 2 IS ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH NOVEMBER, 2014 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) /JUDICIAL MEMBER !& / ACCOUNTANT MEMBER MUMBAI; 4 DATED : 28 TH NOVEMBER, 2014 . . ./ RJ , SR. PS !3 !3 !3 !3 / // / ,0 ,0 ,0 ,0 5!(0 5!(0 5!(0 5!(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 78 ,0 , , / DR, ITAT, MUMBAI 6. 8 9 / GUARD FILE. !3 !3 !3 !3 / BY ORDER, -0 ,0 //TRUE COPY// : :: : / ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI