DCIT 8(2), MUMBAI V. OMEGA SHIPPING AGENCIES P.LTD, MUMBAI

ITA 5164/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84337 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 18-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAC HCHINAND DUBEY
• Assessee Lawyers: AJAY R SINGH
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 5164/MUM/2013 ASSESSMENT YEAR: 2010-11 DCIT 8 (2) R. NO. 216-A, AAYAKAR BHAVAN M.K. ROAD. MUMBAI VS. M/S. OMEGA SHIPPING AGENCIES PVT. LTD. 610, A-WING, KOHINOOR CITY MALL, KIROL ROAD, KURLA (W), MUMBAI-70 PAN:AAACO 3745 R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY R. SINGH REVENUE BY : SHRI SAC HCHINAND DUBEY DATE OF HEARING : 19 . 11 . 2014 DATE OF ORDER : 26 . 1 1 .2014 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGA INST ORDER DATED 14.05.2013, PASSED BY THE LD.CIT(A) -17 , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y . 2010-11. 2. IN GROUND NO. 1 TO 3 THE REVENUE HAS MAINLY CHAL LENGED THE DELETION OF ADDITION OF RS.1,54,00,000/- U/S 2(22)( E) BY THE LD.CIT(A), ON THE GROUND THAT ASSESSEE IS NOT A SHAREHOLDER IN THE COMPANY WHO HAD GIVEN LOAN/ADVANCE, FOLLOWING THE DECISION OF I TAT SPECIAL BENCH; MUMBAI IN THE CASE OF ACIT VS. BHAUMIK COLOURS PVT. LTD. (2009) 313 ITR 146 (AT)(SB) . ITA NO. 5164/MUM/2013 M/S. OMEGA SHIPPING AGENCIES PVT. LTD ASSESSMENT YEAR: 2010-11 2 IN GROUND NO. 4 & 5, THE REVENUE IS AGGRIEVED BY TH E DELETION OF RS.11,39,842/- WHICH WAS MADE BY THE AO ON ACCOUNT OF UN-RECONCILED AIR INFORMATION. 2. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF SHIPPING AGENTS AND HAS BEEN EARNING COMMISSION INCOME ON BUSINESS SOURCED BY WAN HAIRLI NES (INDIA) PVT. LTD., THE PRINCIPAL. DURING THE COURSE OF THE ASSES SMENT PROCEEDINGS THE AO ON PERUSAL OF THE TAX AUDIT REPORT NOTED THAT, T HE ASSESSEE HAD TAKEN LOAN FROM, M/S. POSEIDON SHIPPING AGENCY PVT. LTD.; M/S. FAIRWIND SHIPPING AGENCY PVT. LTD; M/S. ASIAN SEAWAYS PVT. L TD.; AND M/S. CREDANCE SHIPPING AGENCIES PVT. LTD. OF RS.40,00,00 0/-, RS.15,00,000/- AND RS.4,00,000/- RESPECTIVELY. THE ASSESSEE WAS RE QUIRED TO FILE SHAREHOLDING PATTERN OF THE ASSESSEE COMPANY IN THE AFORESAID COMPANIES. IN RESPONSE THE ASSESSEE SUBMITTED FOLLO WING SHAREHOLDING PATTERN IN THE LENDING COMPANY. NAME OF THE SHARE HOLDER OMEGA SHIPPING AGENCY PVT. LTD. (ASSESSEE COMPANY POSEIDON SHIPPING AGENCY PVT. LTD. FAIRWIND SHIPPING AGENCY PVT. LTD. ASIAN SEAWAYS PVT. LTD. C REDANCE SHIPPING AGENCIES PVT. LTD. S. MURALIDHARAN 57% 50% 50% 50% 50% GEORGE ABRO 43% 50% 50% 50% 50% THE ASSESSING OFFICER AFTER EXAMINING THE RESERVE A ND SURPLUS AS PER THE BALANCE SHEET AS AT 31 ST MARCH 2009 AND 31 ST MARCH 2010 OF THE LENDING COMPANIES HELD THAT THE PROVISIONS OF DEEMED DIVIDE ND U/S 2(22)(E) ARE ITA NO. 5164/MUM/2013 M/S. OMEGA SHIPPING AGENCIES PVT. LTD ASSESSMENT YEAR: 2010-11 3 CLEARLY ATTRACTED. THE ASSESSEES CASE BEFORE THE A O WAS THAT, FIRSTLY, ASSESSEE IS NOT A SHAREHOLDER OF THE LENDING COMPAN Y AND SECONDLY, THE AMOUNT WAS GIVEN BY THE LENDING COMPANY FOR THE COM MERCIAL CONSIDERATIONS AND BUSINESS TRANSACTIONS. THE ASSES SEE HAD ALSO PLACED RELIANCE UPON DECISION OF ITAT SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOUR PVT. LTD. (SUPRA) AND OTHER DECISION S OF THE HIGH COURT. HOWEVER, THE LEARNED ASSESSING OFFICER HELD THAT DE EMED DIVIDEND IS TAXABLE, EITHER IN THE HANDS OF THE SHAREHOLDER HOL DING 10% OF THE VOTING POWER IN THE COMPANY WHICH GIVES THE LOAN OR ADVANCE, OR IN THE HANDS OF A CONCERN, WHERE SUCH SHAREHOLDER IS HOLDI NG 20% OR MORE OF THE VOTING POWER IN CASE OF A COMPANY, OR IS BENEFI CIALLY ENTITLED TO 20% OF THE INCOME IN THE CASE OF A CONCERN OTHER THAN A COMPANY. THUS HE HELD THAT IN VIEW OF THE PROVISIONS OF SECTION 2(22 )(E), THE RECEIPTS OF LOAN FROM A LENDING COMPANY ARE DEEMED DIVIDEND U/S 2(22)(E) IN THE HAND OF THE ASSESSEE. 3. BEFORE THE LD.CIT(A), THE ASSESSEE REITERATED IT S SUBMISSIONS AND CITED VARIOUS CASE LAWS THAT THE ASSESSEE IS NOT A SHAREHOLDER IN THE LENDING COMPANIES AND THEREFORE, NO ADDITION CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 2(22)(E). THE LD.CIT(A) H AS ADMITTED THIS FACT THAT THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN T HE FOUR LENDING COMPANIES. AFTER RELYING UPON THE DECISION BY THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT . LTD. (2010) 324 ITR 363, HE HELD THAT DEEMED DIVIDEND HAS TO BE TAXED O NLY IN THE HANDS OF THE SHAREHOLDER. HE ALSO FOLLOWED THE DECISION OF T HE LD.CIT(A) FOR THE A.Y. 2009-2010 ON SIMILAR FACTS, WHILE DELETING THE SAID ADDITION. ITA NO. 5164/MUM/2013 M/S. OMEGA SHIPPING AGENCIES PVT. LTD ASSESSMENT YEAR: 2010-11 4 4. BEFORE US THE LD. DR STRONGLY RELIED UPON THE RE ASONING GIVEN BY THE AO FOR MAKING THE ADDITION U/S 2(22)(E), WHEREA S THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNA L IN ASSESSEES OWN CASE FOR THE A.Y. 2009-2010, HAS DELETED THE SAID A DDITION BY FOLLOWING THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT. LTD. (SUPRA) AND DECISI ON OF CIT VS. IMPACT CONTAINERS PVT. LTD. AND OTHERS (JUDGMENT DATED 04. 07.2004). THUS THE ISSUE INVOLVED IS SQUARELY COVERED BY THE EARLIER Y EAR ORDER OF THE TRIBUNAL. 5. AFTER CONSIDERING THE RELEVANT FACTS AND ALSO TH E MATERIAL PLACED ON RECORD, WE FIND THAT IT IS AN ADMITTED FACT THAT AS SESSEE IS NOT A SHAREHOLDER IN THE FOUR LENDING COMPANIES WHO HAVE GIVEN LOAN TO THE ASSESSEE. EVEN THOUGH TWO OF THE SHAREHOLDERS WERE COMMON HAVING AROUND 50% OF SHARE IN ALL THE FOUR LENDING COMPANI ES. THE ISSUE, WHETHER THE PROVISIONS OF DEEMED DIVIDEND U/S 2(22) (E) ARE ATTRACTED IN A CASE, WHERE THE ASSESSEE COMPANY IS NOT A SHAREHO LDER IN THE LENDING COMPANIES, IS NO LONGER RES INTEGRA, IN VIEW OF THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT. THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE EARLIER YEAR ON SIMILAR SET OF FACTS, HAVE DELETED THE ADDITION AFTER RELYING UPON FOLLOWING TWO DECISIONS OF THE HONBLE JURISDI CTIONAL HIGH COURT, (I) CIT VS. UNIVERSAL MEDICARE PVT. LTD. (2010) 324 ITR PAGE 263 (BOM) (II) CIT VS. IMPACT CONTAINERS PVT. LTD. (2014) 107 DTR (BOM) 145. IN THE LATER DECISION, THE HONBLE HIGH COURT HAS DISCUSSE D THE ENTIRE MATTER AFRESH AND AFTER ANALYZING THE PROPOSITION LAID DOW N IN UNIVERSAL MEDICARE PVT. LTD. AND ALSO BY SPECIAL BENCH IN BHA UMIK COLOURS, HAVE REITERATED THAT IF THE ASSESSEE COMPANY IS NOT SHAR EHOLDER IN THE LENDING COMPANY, THEN THE PROVISIONS OF SECTION 2(22)(E) CA NNOT BE INVOKED. ITA NO. 5164/MUM/2013 M/S. OMEGA SHIPPING AGENCIES PVT. LTD ASSESSMENT YEAR: 2010-11 5 THUS, RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENC E OF THE HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE DELETION O F THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) BY THE L D.CIT(A) AND ACCORDINGLY GROUND NO. 1 TO 3 AS RAISED BY THE REVE NUE IS DISMISSED. 6. THE NEXT ISSUE INVOLVED IS DELETION OF ADDITION OF RS.11,39,842/- ON ACCOUNT OF UN-RECONCILED AIR INFORMATION. THE ASSES SING OFFICER NOTED THAT THERE IS A DISCREPANCY IN THE RECEIPTS REFLECT ED IN THE P/L ACCOUNT AS PER AIR INFORMATION AND THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE COULD NOT RECONCILE THE FOLLOWING RECEIPTS : AND THEREFORE, THE SAME WAS ADDED BACK TO THE ASSES SEES INCOME. 7. BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED THA T THE ASSESSEE IS MAINTAINING BOOKS OF ACCOUNT, WHEREIN RECEIPTS ARE ACCOUNTED ON THE BASIS OF BILL OF LADING (BL) NUMBERS AND NOT BY THE NAME OF THE CLIENT. AS PER THE INDUSTRY PRACTICE, DEBIT NOTE IS PREPARED I N FAVOUR OF CLEARING AND FORWARDING AGENT AND PAYMENT IS RECEIVED FROM THE S HIPPER/CONSIGNEE. THE TRANSACTIONS AS POINTED OUT IN AIR INFORMATION DOES NOT PERTAIN TO THE ASSESSEE AND THE ASSESSEE HAD SPECIFICALLY REQU ESTED THE AO TO PROVIDED FURTHER DETAILS, WHICH HAS NOT BEEN PROVID ED. 8. THE LD.CIT(A), DELETED THE SAID ADDITION ON THE GROUND THAT, AO COULD NOT PROVIDE THE DETAILS OF BILL OF LADING TO THE ASSESSEE AND ALSO THE ASSESSEE IS ONLY A SHIPPING AGENT AND ALL THE T RANSACTIONS ARE CARRIED 1 SHORT REVENUE RECOGNIZED RS.5,69,832/- 2 NO ENTRIES FOUND RS.5,70,010/- TOTAL RS.11,39,842/- ITA NO. 5164/MUM/2013 M/S. OMEGA SHIPPING AGENCIES PVT. LTD ASSESSMENT YEAR: 2010-11 6 OUT MAINLY ON BEHALF OF THE PRINCIPAL HENCE THE SAI D RECEIPTS CANNOT BE TREATED AS INCOME OF THE ASSESSEE. 9. THE LD. DR SUBMITTED THAT THE ASSESSEE WAS REQUI RED TO RECONCILE THE DIFFERENCE FROM ITS BOOKS OF ACCOUNT AS THE ASS ESSEE IS ONLY AWARE OF ITS TRANSACTIONS. THEREFORE, THE AO HAS RIGHTLY ADD ED THE UN-RECONCILED AMOUNT OF RS.11,39,842/-. 10. ON THE OTHER HAND, LEANED COUNSEL SUBMITTED THA T, THE ASSESSEE HAS PROVIDED ALL THE DETAILS OF TRANSACTIONS WHICH WERE MAINTAINED ON THE BASIS OF BILL OF LADING. IT ALSO SUBMITTED BY T HE ASSESSEE THAT THE ENTIRE DETAILS OF TRANSACTIONS HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT BASED ON BILL OF LADING NUMBER AND ALSO THE DETAILS OF PAYMENT AND TDS DEDUCTED. THESE DETAILS HAVE ALSO BEEN PLACED BEFOR E US. HE SUBMITTED THAT, WITHOUT ANY SPECIFIC DETAILS BY THE AO, IT IS VERY DIFFICULT TO RECONCILE A TRANSACTION WHICH DOES NOT PERTAIN TO T HE ASSESSEE. HE SUBMITTED THAT THE NAME APPEARING IN THE DEBIT NOTE COULD BE THAT OF C&F AGENT AND NOT OF SHIPPER OR CONSIGNEE AS PREVAL ENT IN THE SHIPPING INDUSTRY. HOWEVER, IN FORM 26AS, THE NAME OF THE DE DUCTOR WOULD BE THERE. THERE ARE CASES, WHERE THERE MAY BE ERROR IN PUNCHING OF PAN OF THE PAYEE BY THE DEDUCTOR. IT IS VERY DIFFICULT TO GIVE PROPER RECONCILIATION WHEN EXACT DETAILS ARE NOT GIVEN FOR THE TRANSACTIONS. HENCE THE ADDITION HAS RIGHTLY BEEN DELETED BY THE LD.CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTION AND ALSO PER USED THE RELEVANT FINDING GIVEN BY THE AUTHORITIES BELOW AND THE MATE RIAL PLACED ON RECORD. BEFORE THE AO, THE ASSESSEE HAD SUBMITTED THE ENTIR E DETAILS OF ALL THE TRANSACTIONS, WHICH HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT, ON THE BASIS OF BILL OF LADING NUMBER AS PER THE INDUSTRY PRACTICE AND NOT IN THE ITA NO. 5164/MUM/2013 M/S. OMEGA SHIPPING AGENCIES PVT. LTD ASSESSMENT YEAR: 2010-11 7 NAME OF THE CLIENT. THE PAYMENTS IS RECEIVED ON THE BASIS OF DEBIT NOTE FROM CLEARING AND FORWARDING AGENT AND THEREFORE, T HE TRANSACTIONS ARE OFTEN RECORDED IN THEIR NAME AND NOT IN THE NAME OF SHIPPER OR CONSIGNEE. THE ASSESSEE HAS CATEGORICALLY STATED TH AT, IN ABSENCE OF ANY SPECIFIC DETAILS IT IS DIFFICULT TO GIVE THE CORREC T RECONCILIATION. THE INFORMATION WHICH HAS BEEN RECEIVED AND FORWARDED B Y THE AO DOES NOT CONTAIN ANY DETAIL AND THERE IS NO EVIDENCE THAT SU CH TRANSACTIONS HAS BEEN CARRIED OUT BY THE ASSESSEE. BEFORE US, THE AS SESSEE HAD SUBMITTED ENTIRE DETAILS OF TDS WHICH ARE VOLUMINOUS IN NATUR E. THESE DETAILS WERE ALSO FILED BEFORE THE AO. THE ASSESSING OFFICER, WI THOUT GIVING ANY SPECIFIC DETAILS QUA THE INFORMATION, CANNOT EXPECT THE ASSESSEE TO EXPLAIN SUCH TRANSACTION. IN CASE OF INFORMATION RE CEIVED THROUGH AIR OR FROM OTHER SOURCES THE INITIAL ONUS IS ON THE ASSES SING OFFICER, THAT SUCH AN INFORMATION WHICH HAS BEEN RECEIVED PERTAINS TO THE ASSESSEE AND HAS NOT BEEN RECORDED BY THE ASSESSEE, IN ITS BOOK S OF ACCOUNT. WE CAN UNDERSTAND IF THERE IS SOME DISCREPANCY IN FORM 26A S, WHERE THE ASSESSEE CAN BE EXPECTED TO EXPLAIN THE ENTRIES. HO WEVER, IF THE ASSESSEE HAS PROPERLY RECONCILED THE RECEIPTS FORM NO. 26AS VIS--VIS THE BOOKS OF ACCOUNT, THEN THE ONUS IS ON THE DEPAR TMENT TO SHOW THAT THE ENTRIES IN 26AS AND TRANSACTIONS RECORDED IN TH E BOOKS OF ACCOUNT ARE NOT CORRECT. THUS, IN THE INTEREST OF JUSTICE, WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO WITH THE DIRECTION THAT, AO S HOULD PROVIDE SPECIFIC DETAILS OF THE INFORMATION, AS TO WHO HAS DEDUCTED THE TAX ON THE PAYMENT MADE TO THE ASSESSEE, WHICH HAS NOT BEEN RE CORDED BY THE ASSESSEE. IF NO SPECIFIC DETAILS ARE PROVIDED, THEN NO ADDITION SHOULD BE MADE. THUS GROUND NO. 4 & 5 ARE TREATED AS PARTLY A LLOWED FOR THE STATISTICAL PURPOSE. ITA NO. 5164/MUM/2013 M/S. OMEGA SHIPPING AGENCIES PVT. LTD ASSESSMENT YEAR: 2010-11 8 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER, 2014. SD/- SD/- (SANJAY ARORA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 26.11.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.