Lalita Bhatia, New Delhi V. DCIT, New Delhi

ITA 5169/DEL/2010

• Counselvise Citation: 516920114 RSA 2010
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 22-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DIVYANSHU AGARWAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH D DD D : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO. .. .5169/DEL/2010 5169/DEL/2010 5169/DEL/2010 5169/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2006 2006 2006 2006- -- -07 0707 07 MS. LALITA BHATIA, MS. LALITA BHATIA, MS. LALITA BHATIA, MS. LALITA BHATIA, 9/15, SECOND FLOOR, 9/15, SECOND FLOOR, 9/15, SECOND FLOOR, 9/15, SECOND FLOOR, NEHRU ENCLAVE (EAST), NEHRU ENCLAVE (EAST), NEHRU ENCLAVE (EAST), NEHRU ENCLAVE (EAST), KALKAJI EXTENSION, KALKAJI EXTENSION, KALKAJI EXTENSION, KALKAJI EXTENSION, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 019. 110 019. 110 019. 110 019. PAN : PAN : PAN : PAN : AFOPB8939G. AFOPB8939G. AFOPB8939G. AFOPB8939G. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), 3(1), 3(1), 3(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DIVYANSHU AGARWAL, CA. RESPONDENT BY : SHRI S.N. BHATIA, SR. DR. ORDE ORDE ORDE ORDER R R R PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-VI, NEW DELHI DATED 13 TH OCTOBER, 2010 FOR THE AY 2006- 07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE CIT(A) HAS NOT GIVEN ENOUGH OPPORTUNIT Y TO PRESENT OUR CASE. 2. THAT THE AMOUNT OF RS.56,70,303/- WAS PURELY GIVEN AS LOAN & ADVANCE TO THE ASSESSEE I.E. DIRECTOR OF THE COMPANY WHICH WAS DULY RETURNED BACK TO THE COMPANY IN THE NEXT FINANCIAL YEAR. SO IT SHOULD NOT BE TREAT ED AS DEEMED DIVIDEND BUT AS LOAN & ADVANCE. SO THE ADDI TIONS MADE SHOULD BE DELETED. ITA-5169/DEL/2010 2 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DIRE CTOR AS WELL AS MAJOR SHAREHOLDER IN M/S CCS COMPUTER PRIVATE LIMI TED HOLDING 45% OF THE SHARES OF THE SAID COMPANY. AS PER THE BALANCE SHEET OF THE SAID COMPANY AS ON 31 ST MARCH, 2006, THERE IS AN ACCUMULATED PROFIT OF ` 2,08,05,323/-. THE ASSESSING OFFICER HAS RECORDED THE F INDING THAT DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT Y EAR UNDER CONSIDERATION, M/S CCS COMPUTER PRIVATE LIMITED HAS AD VANCED THE LOAN OF ` 56,70,303/- TO THE ASSESSEE. THE ASSESSING OFFICER HAS RECORDED THE FINDING THAT THE LOAN/ADVANCE GIVEN TO THE ASSESSEE IS DULY COVERED WITHIN THE PROVISIONS OF SECTION 2(22)(E ) OF THE INCOME- TAX ACT, 1961 AS DEEMED DIVIDEND. HE ACCORDINGLY MA DE THE ADDITION OF ` 56,70,303/- AS DEEMED DIVIDEND IN THE HANDS OF THE ASS ESSEE. THE SAME IS SUSTAINED BY THE LEARNED CIT(A). HENCE, THIS AP PEAL BY THE ASSESSEE. 4. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY T HE LEARNED COUNSEL THAT THE ASSESSEE IS HAVING RUNNING ACCOUNT WITH THE COMPANY M/S CCS COMPUTER PRIVATE LIMITED AND IN ALL THE PREC EDING YEARS, THERE WAS A CREDIT BALANCE OF THE ASSESSEE WITH THE COMPANY. IT IS ONLY DURING THE YEAR UNDER CONSIDERATION THAT THE ASSESSEE RE CEIVED BACK THE CREDIT BALANCE AND ALSO SOME MORE MONEY WAS RECEI VED FROM THE COMPANY FOR THE PERSONAL PURPOSE OF THE ASSESSEE WHICH WA S RETURNED IN THE SUBSEQUENT YEAR. HE, THEREFORE, SUBMITTED THAT THE AMOUNT RECEIVED IN EXCESS OF THE CREDIT BALANCE BY THE ASSESSEE WAS NOT IN THE NATURE OF LOAN OR ADVANCE BY M/S CCS COMPUTER PRIVA TE LIMITED TO THE ASSESSEE. THEREFORE, THE ASSESSEES CASE DOES NOT FALL WITHIN THE AMBIT OF SECTION 2(22)(E). THE LEARNED COUNSEL ALSO RELIE D UPON THE DECISION OF ITAT, CHENNAI BENCH IN THE CASE OF ACIT VS. SMT. G . SREEVIDYA [2012] 138 ITD 427 (CHENNAI). ITA-5169/DEL/2010 3 5. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW AND HE STATED THAT THE ASSESSEES CASE SQ UARELY FALLS WITHIN THE AMBIT OF SECTION 2(22)(E). THE ASSESSEE REC EIVED THE ADVANCE FROM THE COMPANY IN WHICH SHE WAS A MAJOR SHA REHOLDER. THE COMPANY HAD THE ACCUMULATED PROFIT OF MORE THAN THE ADVANCES RECEIVED BY THE ASSESSEE. HE, THEREFORE, SUBMITTED THA T THE ORDER OF LEARNED CIT(A) SHOULD BE SUSTAINED. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. SECTION 2 (22)(E) OF THE ACT READS AS UNDER:- 2. 2.2. 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, ( 22 ) 'DIVIDEND' INCLUDES ( E ) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AFTER THE 31ST DAY OF MAY , 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, B EING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER W ITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING N OT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CO NCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND I N WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFI T, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMP ANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS ;. 7. LET US EXAMINE THE FACTS OF THE ASSESSEES CASE IN THE L IGHT OF THE ABOVE DEFINITION OF DEEMED DIVIDEND UNDER SECTION 2 (22)(E). ADMITTEDLY, THE PAYMENT IS MADE BY THE COMPANY IN WH ICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED. THE ASSESSEE IS ADMITTEDL Y THE BENEFICIAL ITA-5169/DEL/2010 4 OWNER OF THE SHARES HOLDING MORE THAN 10% OF THE VOTI NG POWER. THE COMPANY HAS ACCUMULATED PROFIT OF MORE THAN THE AMOU NT RECEIVED BY THE ASSESSEE FROM THE COMPANY. NOW, THE ONLY DISPUTE I S WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE COMPANY IS IN T HE NATURE OF LOAN OR ADVANCE. THE COPY OF ACCOUNT OF THE ASSESSEE I N THE BOOKS OF M/S CCS COMPUTER PRIVATE LIMITED FOR THE PERIOD 1.4. 2005 TO 31.3.2006 READS AS UNDER:- DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2005 DR LALITA BHATIA JOURNAL 8,92,197.00 10-5-2005 CR CORPORATION BANK (4319) PAYMENT 3,50,000.00 23-7-2005 CR CORPORATION BANK (4319) PAYMENT 89,000.00 3-8-2005 CR CORPORATION BANK (4319) PAYMENT 2,03,500.00 5-8-2005 CR CORPORATION BANK (4319) PAYMENT 50,000.00 9-8-2005 CR CORPORATION BANK (4319) PAYMENT 2,00,000.00 17-8-2005 CR CORPORATION BANK (4319) PAYMENT 7,00,000.00 7-12-2005 CR CORPORATION BANK (4319) PAYMENT 29,00,000.00 30-1-2006 CR BANK OF PUNJAB LTD. (1110167) PAYMENT 70,000.00 15-2-2006 CR CORPORATION BANK (4319) PAYMENT 3,00,000.00 28-3-2006 CR STATE BANK OF INDIA (10591437316) PAYMENT 17,00,000.00 DR CLOSING BALANCE 65,62,500.00 8,92 ,197.00 56,70,303.00 65,62,500.00 65,62,500.00 ITA-5169/DEL/2010 5 8. FROM THE ABOVE, IT IS EVIDENT THAT THERE WAS CREDI T BALANCE OF THE ASSESSEE IN THE BOOKS OF THE COMPANY AS ON 1.4.2005 AMOUN TING TO ` 8,92,197/-. DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, ON VARIOUS DATES, THE ASSESSEE R ECEIVED THE AMOUNT FROM THE COMPANY WHICH IN TOTAL AMOUNTED TO ` 65,62,500/-. THE ASSESSEE HAS ALSO GIVEN THE COPY OF ACCOUNT OF THE SUB SEQUENT YEAR, I.E., FOR THE PERIOD 1.4.2006 TO 31.3.2007, A PERUSAL OF WHICH WILL INDICATE THAT THE ASSESSEE RECEIVED FURTHER AMOUNT FROM THE COMPANY UP TO 29.08.2006 AND THEREAFTER, ON 23.03.2007, REP AID THE ENTIRE AMOUNT OF ` 85 LAKHS. IT IS STATED BY THE LEARNED COUNSEL THAT MOR E MONEY THAN THE CREDIT BALANCE OF THE ASSESSEE WAS RECEIV ED BY THE ASSESSEE FOR PERSONAL PURPOSES WHICH IS REPAID. IN OUR OPI NION, THE NATURE OF THE TRANSACTION IS CLEARLY IN THE NATURE OF LOAN/ADVANCE RECEIVED BY THE ASSESSEE FROM THE COMPANY WHICH IS REPA ID IN THE SUBSEQUENT YEAR. MERELY BECAUSE THERE WAS A CREDIT BAL ANCE OF THE ASSESSEE WITH THE COMPANY, IT CANNOT BE SAID THAT MORE A MOUNT RECEIVED AFTER THE REPAYMENT OF ASSESSEES CREDIT BALAN CE IS NOT IN THE NATURE OF LOAN AND ADVANCE. AFTER THE REPAYMENT OF THE CREDIT BALANCE OF THE ASSESSEE IN THE BOOKS OF THE COMPANY, IF ASSESSEE HAS RECEIVED FURTHER AMOUNT, IT WAS CERTAINLY IN THE NATURE OF LO AN/ADVANCE WHICH IS TO BE REPAID BY THE ASSESSEE AND ACTUALLY REPAID BY THE ASSESSEE IN THE SUBSEQUENT YEAR. THEREFORE, WE ARE UNABLE TO ACCEPT THE ASSESSEES CONTENTION THAT THE AMOUNT RECEIVED BY THE ASSESSEE FRO M THE COMPANY OVER AND ABOVE ASSESSEES CREDIT BALANCE WAS NOT IN THE NATURE OF LOAN/ADVANCE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF ITAT, CHENNAI BENCH IN T HE CASE OF SMT. G. SREEVIDYA (SUPRA). HOWEVER, WE FIND THAT THE FACTS I N THE ABOVE CASE WERE DIFFERENT. IN THE SAID CASE, THE ASSESSEE HAD GIVEN THE BANK GUARANTEE AND COLLATERAL SECURITY FOR THE FUNDING OF THE COMPANY AND IT WAS PRE-CONDITION OF GRANTING THE BANK GUARANTEE AND COLLATERAL SECURITY FOR THE FUNDING OF THE COMPANY THAT SHE SHOU LD BE GIVEN THE ITA-5169/DEL/2010 6 ADVANCE. ON THESE FACTS, THE ITAT HELD THAT THE ARRA NGEMENT BETWEEN THE ASSESSEE AND THE COMPANY WAS MERELY FOR THE SAKE OF C ONVENIENCE ARISING OUT OF BUSINESS EXPEDIENCY. HOWEVER, NO SUCH B USINESS EXPEDIENCY HAS BEEN ESTABLISHED BY THE ASSESSEE IN THE CA SE UNDER APPEAL BEFORE US. THEREFORE, THE ABOVE DECISION OF I TAT CHENNAI BENCH WOULD NOT BE APPLICABLE. IN VIEW OF THE ABOV E, WE FIND NO MERIT IN THE ASSESSEES APPEAL. THE SAME IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 7 TH FEBRUARY, 2014. SD/- SD/- ( (( (A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN) )) ) (G.D (G.D (G.D (G.D.AGRAWAL) .AGRAWAL) .AGRAWAL) .AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 07.02.2014 VK. COPY FORWARDED TO: - 1. APPELLANT : MS. LALITA BHATIA, MS. LALITA BHATIA, MS. LALITA BHATIA, MS. LALITA BHATIA, 9/15, SECOND FLOOR, NEHRU ENCLAVE (EAST), 9/15, SECOND FLOOR, NEHRU ENCLAVE (EAST), 9/15, SECOND FLOOR, NEHRU ENCLAVE (EAST), 9/15, SECOND FLOOR, NEHRU ENCLAVE (EAST), KALKAJI EXTENSION, NEW DELHI KALKAJI EXTENSION, NEW DELHI KALKAJI EXTENSION, NEW DELHI KALKAJI EXTENSION, NEW DELHI 110 019. 110 019. 110 019. 110 019. 2. RESPONDENT : DEPUTY COMMISSIONER OF INCOME DEPUTY COMMISSIONER OF INCOME DEPUTY COMMISSIONER OF INCOME DEPUTY COMMISSIONER OF INCOME TAX, TAX, TAX, TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), NEW DELHI. 3(1), NEW DELHI. 3(1), NEW DELHI. 3(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR