Shabro Metals & Technologies Ltd., New Delhi V. DCIT, New Delhi

ITA 5306/DEL/2012

• Counselvise Citation: 530620114 RSA 2012
• Duration Of Justice: 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 01-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P K MISHRA
• Keywords: Deemed dividend
• Section: 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G: NEW DELHI) BEFORE SHRI. G.D.AGRAWAL, VICE PRESIDENT AND SHRI I.C. SUDHIR, JUDICIAL MEMBER ITA NO.5306 /DEL/ 2012 (ASSESSMENT YEAR :2008-09) SHARBO METALS & TECHNOLOGIES LTD. VS. DCIT 217-222. TRIBHUVAN COMPLEX CIRCLE-8(1) ISHWAR NAGAR, NEW DELHI MAIN MATHURA ROAD, NEW DELHI AAACS2037E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. K. MISHRA, C.A REVENUE BY : SHRI VIVEK K UMAR, D.R ORDER PER I. C. SUDHIR, JUDICIAL MEMBER: THE APPELLANT HAS QUESTIONED FIRST AP PELLATE ORDER WHEREBY THE LD. CIT(A) HAS CONFIRMED THE PENALTY OF RS.67,061/- LEVIED U/S 271(1) (C) OF THE ACT BY THE A.O. 2. AT THE OUTSET OF HEARING THE LD. A.R SUBMITTED THAT THE ISSUE RAISED IS COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF ITO VS. PARAMOUNT APPARELS PVT. LTD ITA NO. 2539/BOMB/2011 (A.Y 2004-05), ORDER DAT ED 31/1/2012, COPY SUPPLIED. HE POINTED OUT THAT IN THE A.Y 2007-08 TH E A.O HAD MADE DEEMED ADDITION OF RS.1,09,18,872/- U/S 2 (22) (E) OF THE I.T ACT V IDE HIS ORDER DATED 17/12/2009. ITA NO.5306 /DEL/2012 2 THE LD. CIT (A) VIDE HIS ORDER DATED 22/3/2010 REST RICTED THE ADDITION TO RS.6,62,999/- BEING ACCUMULATED PROFITS. THE SAME WAS NOT QUESTIONED BY THE ASSESSEE BEFORE THE TRIBUNAL WHEREAS THE DEPARTMENT PREFERRED AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 22/9/2010 DISMISSED THE APPEAL PREFERRED BY THE REVENUE AND AO DID NOT IMPOSE PENALTY AGAINS T THE ADDITION OF RS.6,62,999/- ON DEEMED DIVIDEND. IN THE ASSESSMENT YEAR UNDER C ONSIDERATION I.E. A.Y 2008-09 RETURN WAS FILED U/S 139 (1) OF THE ACT. THE A.O M ADE DEEMED ADDITION OF RS.1,99,230/- U/S 2 (22) (E) OF THE ACT VIDE ORDER DATED 12/11/2010 ON THE BASIS OF ADDITION MADE IN A.Y 2007-08. THE ASSESSEE DID NOT PREFER FIRST APPEAL AGAINST THE SAID ADDITION HAVING REGARD TO SMALLNESS OF THE AMO UNT AND HAVING NOT FILED ANY SECOND APPEAL IN THE PRECEDING YEAR. THE ASSESSING OFFICER VIDE HIS ORDER DATED 31/5/2011 LEVIED PENALTY OF RS.67,061/- ON THE ADDI TION OF DEEMED DIVIDEND OF RS.1,99,230/-. THE LD. CIT (A) VIDE HIS ORDER DATE D 26/7/2012 HAS UPHELD THIS PENAL ACTION AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL. THE LD. D.R ON THE OTHER HAND PLACED RELIANCE ON PENALTY ORDER. H E ALSO CITED FOLLOWING DECISIONS IN SUPPORT; CIT VS. ESCORTS FINANCE LTD. (2010) 327 ITR 510. CIT VS. ESCORTS FINANCE LTD. (2010) 328 ITR 44 (DEL HI). 3. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT ON AN IDENTICAL ISSUE IN THE CASE OF ITO VS. PARAMOUNT APPARELS PVT. LTD (SUPRA) , THE MUMBAI BENCH OF THE TRIBUNAL HAS HELD THAT DEEMED DIVIDEND IS A LEG AL FICTION CREATED U/S 2 (22) (E) OF ITA NO.5306 /DEL/2012 3 THE ACT. THE AMOUNT WOULD PARTAKE CHARACTER OF THE DIVIDEND AND SAME CAN BE BROUGHT TO TAX AS DEEMED DIVIDEND. THE TRIBUNAL HE LD THAT IT IS NOT A FIT CASE WHERE IT CAN BE SAID THAT THE ASSESSEE HAS CONCEALED THE INCOME OR FILED INACCURATE PARTICULARS OF INCOME AND HAS ACCORDINGLY UPHELD TH E ACTION OF THE LD. CIT(A) WHEREBY HE HAD DELETED THE PENALTY LEVIED U/S 271(1 )(C) OF THE ACT. IN THE PRESENT CASE BEFORE US DURING THE COURSE OF ASSESSMENT PROC EEDINGS THE A.O FOUND THAT THE ASSESSEE COMPANY IS HAVING TRANSACTIONS WITH ITS SU BSIDIARY COMPANY NAMELY M/S PRIMA MULTITRADE AND EXIM PVT. LTD OF RS.1,99,230/- DURING THE YEAR AND IN THE ASSESSMENT YEAR 2007-08 THERE WAS A DISALLOWANCE U/ S 2(22)(E) OF THE ACT ON THE TRANSACTION WITH THE ABOVE NAMED SUBSIDIARY COMPANY WHICH WAS CONFIRMED BY THE LD. CIT(A). HE NOTED FURTHER THAT DURING THE YEAR T HE TRANSACTIONS AMOUNTING TO RS.1,99,230/- WAS DONE AND ACCORDINGLY HE DISALLOWE D THE SAME U/S 2(22)(E) OF THE ACT BASED UPON THE REASONING ADVANCED IN THE ASSESS MENT ORDER FOR A.Y 2007-08. THE A.O HAS LEVIED PENALTY U/S 271(1)(C) OF THE ACT ON THE SAID ADDITION OF RS.1,99,230/- ON THE BASIS THAT THE ASSESSEE HAD DE LIBERATELY NOT SHOWN THE AMOUNT IN QUESTION AS ITS INCOME AND THE ASSESSEE HAD FURNISH ED INACCURATE PARTICULARS OF ITS INCOME WITH A VIEW TO CONCEALMENT OF INCOME. THE A UTHORITIES BELOW HAVE ALSO NOT FOUND THE EXPLANATION GIVEN BY THE ASSESSEE TO BE B ONAFIDE. THE EXPLANATION OF THE ASSESSEE IN THIS REGARD REMAINED THAT THE ADDITION REPRESENTS ONLY NOTIONAL INCOME ASSESSED BY THE A.O AND THERE IS NO CONCEALMENT OF ANY INCOME AND FURTHER THAT THE ITA NO.5306 /DEL/2012 4 A.O HAS MADE THE ADDITION SIMPLY ON THE BASIS OF SI MILAR ADDITION MADE IN THE ASSESSMENT YEAR 2007-08. IT WAS SUBMITTED FURTHER THAT IN THE PRECEDING ASSESSMENT YEAR SIMILAR ADDITION OF RS.6,62,999/- WAS MADE BUT NO PENALTY WAS IMPOSED ON SUCH ADDITION. IT WAS SUBMITTED FURTHER THAT THERE WAS NO CONCEALMENT ON THE PART OF THE ASSESSEE AS DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSEE HAD FILED THE RELEVANT DETAILS AND INFORMATION WITH REGARD TO THE TRANSACTION OF RS.1, 99,230/- CARRIED OUT WITH M/S PRIMA MULTITRADE AND EXIM PVT. LTD AND ONLY ON THE BASIS OF SUCH DETAILS AND INFORMATION, THE A.O HAS INVOKED T HE PROVISIONS OF SECTION 2 (22)(E) OF THE ACT AND MADE A DEEMED ADDITION OF RS .1,99,230/-. IT WAS SUBMITTED THAT THE ADDITION HAS BEEN CROPPED UP DUE TO DIFFER ENCES ON VIEWING THE TRANSACTION AND NOT ON ACCOUNT OF ANY INACCURATE FURNISHING OF PARTICULARS OF INCOME. WITHOUT PREJUDICE TO THESE SUBMISSION ON MERITS OF THE CASE IT WAS FURTHER SUBMITTED THAT THERE WAS AN OPENING BALANCE OF RS.1,09,18,872/- DU E TO THEM, WHICH WAS REDUCED TO RS.55,12,722/- AT THE YEAR END MEANING THEREBY, THE ASSESSEE HAS REFUNDED THE AMOUNT TO THE EXTENT OF RS.54,06,150/-BY WAY OF PAY MENTS AND OTHER DEBITS ON ACCOUNT OF COMMERCIAL TRANSACTIONS. THEREFORE, THE RE WAS NO TRANSFER OF FUNDS FROM THE SUBSIDIARY COMPANY TO THE ASSESSEE WHICH COULD ATTRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. HENCE THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND WAS ITSELF CONTRARY TO THE PROVISIONS OF THE ACT. IT WAS SUBM ITTED FURTHER THAT THE ASSESSEE HAD ACCEPTED THE ADDITION IN THE QUANTUM PROCEEDINGS DU E TO THE SMALLNESS OF THE AMOUNT ITA NO.5306 /DEL/2012 5 INVOLVED AND TO AVOID UNDUE LITIGATION COST IN CHAL LENGING THE ADDITION IN THE APPELLATE PROCEEDINGS. 4. CONSIDERING ABOVE SUBMISSIONS WE ARE OF TH E VIEW, THAT IN ABSENCE OF REBUTTAL OF THE ABOVE EXPLANATION OF THE ASSESSEE IT IS VERY DIFFICULT TO INFER BEYOND DOUBT IN THE PRESENT CASE THAT THERE WAS CONCEALMENT OF INCO ME OR FURNISHING INACCURATE PARTICULAR THEREOF ON THE PART OF THE ASSESSEE TOWA RDS THE DEEMED ADDITION OF RS.1,99,230/- MADE U/S 2(22)(E) OF THE ACT TO ATTRA CT PENAL ACTION U/S 271(1)(C) OF THE ACT. THERE IS NO DISPUTE THAT DEEMED DIVIDEND IS A LEGAL FICTION CREATED U/S 2 (22)(E) OF THE ACT AND AMOUNT WOULD PARTAKE CHARACTER OF TH E DIVIDEND AND SAME CAN BE BROUGHT TO TAX AS DEEMED DIVIDEND. UNDER THESE CIR CUMSTANCES, WE HOLD THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN INVOKING TH E PROVISIONS OF SECTION 271(1)(C) OF THE ACT AGAINST THE SAID DEEMED ADDITION OF RS.1 ,99,230/- IN ABSENCE OF FINDING BEYOND DOUBT THAT THERE WAS CONCEALMENT OF INCOME O R FURNISHING INACCURATE PARTICULAR OF THE SAID INCOME ON THE PART OF THE AS SESSEE. WE THUS WHILE SETTING ASIDE THE PENALTY ORDER DIRECT THE AO TO DELETE THE PENAL TY OF RS.67,061/- LEVIED U/S 271(1) (C) OF THE ACT. THE GROUND IS THUS DECIDED IN FAVO UR OF THE ASSESSEE. 4. CONSEQUENTLY, APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 23/8/2013. SD/- SD/- (G.D.AGRAWAL) (I.C. SUDHIR) (VICE PRESIDENT) (JUDICIAL MEMBER) ITA NO.5306 /DEL/2012 6 DATED THE 23 RD DAY OF AUGUST , 2013 R. NAHEED COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DE LHI.