SRILA CHATTERJEE, MUMBAI V. ASST CIT 11(1), MUMBAI

ITA 5086/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2273 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 16-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAILASH GAIKWAD
• Keywords: Depreciation; Deemed dividend; Revised return; Documents seized
• Section: 133A

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/5086/MUM/2012, /ASSESSMENT YEARS: 2008-09 MS. SRILA CHATTERJEE 3 RD FLOOR, RAJMAHAL BLDG. ALTAMOUNT RD.,MUMBAI-400 026. PAN:AADPC 2336 A VS. ACIT-11(1) AAYAKAR BHAVAN, M.K. RD. MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI KAILASH GAIKWAD ASSESSEE BY: MS. APURVA SHAH / DATE OF HEARING: 18.07.2016 / DATE OF PRONOUNCEMENT: 27.07.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 06/07/2012,OF THE CIT ( A)-3,MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE,AN INDIVIDUAL, FILED A RETU RN OF INCOME ON 30/09/2008,DECLARING INCOME OF RS. 67.27 LAKHS.LATER ON,A REVISED RETURN WAS FILED ON 30/ 12/2008,SHOWING INCOME AT RS.71.60 LAKHS.THE ASSESSING OFFICER (AO)COMPLET ED THE ASSESSMENT,U/S.143(3) OF THE ACT, ON 13/12/ 2010, DETERMINING HER INCOME AT RS.85,94, 290/-. 2. FIRST GROUND OF APPEAL IS ABOUT THE DEEMED DIVIDEND OF RS.13.46 LAKHS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THERE WAS A DEBIT BALANCE OF RS. 11.27 LAKHS IN THE ACCOUNT OF HIGHLIGHT PICTURES (I) PVT.LTD(HPIPL) AS ON 31/03/2008,AS PER THE DOCUMENTS IMPOUNDED DURING THE COURSE OF SERVEY.HE WAS OF THE OPINION,THAT THE COMPANY HAD GIVEN MONEY TO THE EXTENT OF RS.11.27 LAKHS TO HER WHO WA S A 40% SHAREHOLDER IN THE SAID COMPANY.HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT IN QUESTION SHOULD NOT BE CONSIDERED DEEMED DIVIDEND, AS PER THE PROVISIONS O F SECTION 2(22)(E) OF THE ACT.HE FURTHER FOUND THAT AS PER THE AIR INFORMATION,SHE HAD INCUR RED AN EXPENDITURE OF RS.16.23 LAKHS BY USING CORPORATE CREDIT CARD WHICH HAD BEEN BORNE BY THE COMPANY.HE HELD THAT THE DETAILS, FILED BY HER,SHOWED THAT EXPENSES FOR PERSONAL USE, AMOUNTING TO RS.2.19 LAKHS,HAD BEEN BORNE BY THE CORPORATE ENTITY.HE DIRECTED THE ASSES SEE TO EXPLAIN AS TO WHY THE SAID AMOUNT SHOULD ALSO NOT BE CONSIDERED DEEMED DIVIDEND U/S.2 (22)(E)OF THE ACT. AFTER CONSIDERING HER SUBMISSION,THE AO HELD THAT ALL THE CONDITIONS STIP ULATED IN THE SECTION 2(22)(E) WERE SATISFIED IN THE CASE OF THE ASSESSEE,THAT SHE WAS HOLDING MO RE THAN 40% SHARES IN HPIPL,A PRIVATE LIMITED COMPANY,THAT THE COMPANY HAD ADVANCED RS.11 ,23,606/-DURING THE YEAR TO THE 5086/M/12-SRILA 2 ASSESSEE,THAT IT HAD MADE PAYMENT OF RS.2,19,333/-O N HER BEHALF,THAT THE COMPANY HAD ACCUMULATED PROFIT OF RS.1,08,43,642/-,AS ON 31/03/ 2007 AND RS.1,47,03,630/- AS ON 31/03/2008,THAT THERE WAS NO DEBTOR AND CREDITOR RE LATIONSHIP BETWEEN THE COMPANY AND THE ASSESSEE.THE AO FURTHER OBSERVED THAT THE PLEA TAKE N BY THE ASSESSEE ABOUT NON-FINALISATION OF BOOKS OF ACCOUNTS ON THE DATE OF SERVING WAS NOT ACCEPTABLE,THAT AS PER THE DOCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY CARRIED OUT U /S. 133A OF THE ACT,ON 29/08/2008,COMPANY HAD MADE PAYMENT OF RS.2.19 LAKH S ON BEHALF OF THE ASSESSEE AND THAT THERE WAS DEBIT BALANCE OF RS.11.27 LAKHS.FINALLY,T HE AO TREATED THE AMOUNT OF RS.13.46 LAKHS(11.27 LAKHS+2.19 LAKHS) AS DEEMED DIVIDEND WI THIN THE PROVISIONS OF SECTION 2 (22)(E) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM THE ASSESSEE A RGUED THAT SHE HAD A CURRENT-ACCOUNT WITH HPIPL,THAT SUMS PAID BY HER ON BEHALF OF THE C OMPANY BY USING HER CREDIT CARD HAD TO BE CONSIDERED , THAT PAYMENT MADE WAS ACCOUNTED FOR AS RECEIVABLE F ROM THE COMPANY,THAT THE COMPANY ALWAYS WAS A DEBTOR TO THE ASSESSEE,THAT TH E COMPANY ALSO OWNED THE ASSESSEES REMUNERATION PAYABLE TO HER FOR SERVICES RENDERED W HICH WERE CREDITED TO HER ACCOUNT, THAT THE ASSESSEE WOULD USE CREDIT CARD TO MAKE VARIOUS PAYMENTS ON BEHALF OF THE COMPANY, THAT THE EXPENSES INCURRED WERE FOR BUSINESS PURPOSES,TH AT THE PAYMENT FOR CREDIT CARD EXPENSES WERE MADE BY COMPANY AND TO THAT EXTENT THE PAYMENT S WERE FOR PERSONAL EXPENSES,THAT SUCH EXPENSES WERE DEBITED AGAINST VARIOUS CREDITS WHICH WERE STANDING IN THE BOOKS OF ACCOUNTS.AFTER CONSIDERING THE SUBMISSION OF THE AS SESSEE, THE FAA HELD THAT DURING THE COURSE OF SURVEY CERTAIN DOCUMENTS WERE FOUND IMPOU NDED, THAT THE THOSE DOCUMENTS REFLECTED THE DEBIT BALANCE OF RS.11.26 LAKHS WITH HPIPL, THAT THE ASSESSEE HAD NOT REBUTTED THE FACT NEGATIVE BY THE AO, THAT THE DETAILS SUBMI TTED AFTER COMPLETING THE ACCOUNTS WERE NOT FOUND VERIFIABLE, THAT SAME COULD NOT BE ACCEPTED.F INALLY,HE HELD THAT THE PROVISIONS OF SECTION 2(22)(E) WERE DULY SATISFIED BY THE ASSESSE E,BEING SHAREHOLDER AND EVEN IF THE AMOUNT SHOWING DEBIT BALANCE WAS PAID BACK THEN STILL THE PROVISIONS OF SECTION 2(22)(E) COULD BE INVOKED. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE(AR) CONTENDED THAT THE ASSESSEE HAD FURNISHED ALL THE NECESSARY DETAIL S BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS WITH REGARD TO THE BALANCE AVAILABLE IN THE ACCOUNT OF THE COMPANY, THAT SHE HAD ALWAYS CREDIT BALANCE, THAT ONLY ONCE SHE HAD CREDI T BALANCE OF RS.5000/. HE REFERRED TO THE 5086/M/12-SRILA 3 PAGES 6 OF THE PAPER BOOK ANY SUPPORT.WITH REGARD T HE CREDIT CARD, THE ASSESSEE STATED THAT THE HIGHEST DEBIT BALANCE WAS RS.7,627/-,THAT IT WAS A CURRENT-ACCOUNT, THAT THE AO AND THE FAA DID NOT APPRECIATE THE FACTS SUBMITTED BEFORE THEM. HE REFERRED TO THE BALANCE SHEET AND THE NOTES ON ACCOUNT OF THE ASSESSEE AND FURTHER STATED THAT THE ASSESSEE HAD TO RECEIVE THE SUM OF RS.23,095/-FROM THE COMPANY AT THE BEGINNING OF THE YEAR, THAT THE AMOUNT ADVANCED DURING THE YEAR BY HER WAS RS.97,689/-,THAT THE CLOSING SU M RECEIVABLE BY HER FROM THE COMPANY WAS RS.1.20 LAKHS, THAT THE COMPANY WAS A DEBTOR FOR TH E ASSESSEE BOTH AT THE BEGINNING AS WELL AS AT THE END OF THE YEAR, THAT NO ADDITION COULD BE M ADE BASED ON INCOMPLETE UNAUDITED FIGURES WHICH WERE FOUND DURING COURSE OF SURVEY,THAT THE A O AND THE FAA DID NOT CONSIDER THE AUDITED OFFICIAL STATEMENTS AND MADE THE ADDITIONS. THE DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT IN ACTION U/S. 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE,THAT CERTAIN DOCUMENTS WERE FOUND IMPOUNDED DURING THE S URVEY PROCEEDINGS, THAT ON THE BASIS OF THOSE PAPERS THE AO ARRIVED AT THE CONCLUSION THAT PROVISIONS OF SECTION 2(22)(E) WERE APPLICABLE, THAT ACCORDINGLY HE TAXED DIVIDEND INCO ME OF RS.11.23 LAKHS IN THE HANDS OF THE ASSESSEE, THAT THE ASSESSEE HAD FURNISHED THE AUDIT ED ACCOUNTS BEFORE THE AO AND CLAIMED THAT ASSESSEE WAS A NET DEBTOR, THAT PROVISIONS OF SECTI ON 2(22)(E) NOT APPLICABLE, THAT SHE WAS MAKING PAYMENT ON BEHALF OF THE COMPANY, THAT THE C REDIT BALANCE WITH REGARD TO CREDIT CARD WAS NOMINAL.WE FIND THAT THE AO/FAA DID NOT VERIFY THESE FACTS AND MADE THE ADDITION/CONFIRMED THE ADDITION.IN OUR OPINION,COMP LETING THE ASSESSMENT ON THE BASIS OF THE DOCUMENTS SEIZED IN THE MONTH OF AUGUST AND IGNORIN G THE AUDITED ACCOUNTS OF THE WHOLE YEAR WAS NOT PROPER.CONSIDERING THE PARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE,WE ARE OF THE OPINION THAT,IN THE INTEREST OF JUSTICE,THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD REA SONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.FIRST GROUND IS ALLOWED IN FAVOUR OF THE A SSESSEE,IN PART. 6. SECOND GROUND OF APPEAL IS ABOUT DEEMED VALUE OF A PROPERTY.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT IN HER BALANCE SHEET, THE ASSESSEE HAD SHOWN ONE PROPERTY AT CALCUTTA AT RS.29.87 LAKHS AND ANOTHER AT POONAM CH AMBERS,MUMBAI AT RS. 12 LAKHS.IT WAS CLAIMED THAT THE PROPERTY AT CALCUTTA WAS SOP AND T HE PROPERTY AT MUMBAI WAS BEING USED AS OFFICE PREMISES FOR KEEPING RECORDS.THE ASSESSEE DI D NOT OFFER ANY INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND HAD NOT CLAIMED ANY DEPRECIATION ON IT. HE HELD THAT THE 5086/M/12-SRILA 4 PROPERTY WAS NOT BEING USED FOR BUSINESS PURPOSES.H E COMPUTED ALV OF THE PROPERTY AT RS.1, 20,000(10% OF BOOK VALUE OF RS.12 LAKHS) AND AFTER ALLOWING STANDARD DEDUCTION @OF 30%,COMPUTED THE NET INCOME FROM HOUSE PROPERTY AT RS.84,000/-AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. 7. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FAA. BEFORE HIM,IT WAS ARGUED THAT THE PROPERTY WAS USED FOR BU SINESS PURPOSE BY THE ASSESSEE,THAT LEVYING TAX @OF 10% OF THE VALUE OF THE PROPERTY WAS WITHOU T ANY BASIS.THE FAA HELD THAT THE ASSESSEE HAD FAILED TO FURNISH ANY EVIDENCE TO PROVE THAT PROPERTY WAS USED FOR THE BUSINESS BY THE ASSESSEE,THAT SHE HAD FAILED TO PRO DUCE MUNICIPAL RATEABLE VALUE,THAT IN ABSENCE OF ANY EVIDENCE THE ESTIMATED ALV WAS REASO NABLE. FINALLY, HE UPHELD THE ORDER OF THE AO. 8. BEFORE US,THE AR ARGUED THAT THERE WAS NO JUSTIFICA TION FOR ADOPTING RENTAL INCOME @ 10% OF THE VALUE OF THE PROPERTY,THAT MUNICIPAL RATABLE VALUE WAS NOT TAKEN BY THE AO OR THE FAA FOR DETERMINING THE HOUSE PROPERTY INCOME.THE DR SU PPORTED THE ORDER OF THE REVENUE AUTHORITIES. 9. IN OUR OPINION,THE AO/FAA HAD ADOPTED THE RENTAL IN COME @10%WITHOUT ANY BASIS.THERE IS NO PROVISION IN THE ACT TO PICK UP ANY PERCENTAG E ARBITRARILY.INCOME UNDER THE HOUSE PROPERTY HAS TO BE DETERMINED AS PER THE SECTION 2( 22)(E)2 -24 OF THE ACT.AS THE INCOME FROM HOUSE PROPERTY WAS NOT COMPUTED ON THE BASIS OF ANN UAL RATABLE VALUE,SO,IN OUR OPINION MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE A O FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE A SSESSEE.SECOND GROUND OF APPEAL IS DECIDED IN HER FAVOUR,IN PART. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY,2016. 27 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 27.07.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 5086/M/12-SRILA 5 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.