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

ITA 5652/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3080 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 08-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: AJAY R SINGH
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J M AND SRI RAMIT KOCHAR , A M ITA NO .5652/MUM/2014 (A.Y.:2011 - 12 ) THE DY. COMMISSIONER OF INCOME TAX - 8(2), MUMBAI, R. NO.216 - A, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI 400 0 20 VS. M/S. OMEGA SHIPPING AGENCIES PVT. LTD., 610, A - WIG, KOHINOOR CITY MALL, KIROL ROAD, KURLA (W), MUMBAI 400 070 PAN: A A ACO 3745 R APPELLANT .. RESPONDENT APPELLANT BY SHRI NAVEEN GUPTA, DR RESPONDENT BY SHRI AJAY R. SINGH, AR DATE OF HEAR ING 15 - 06 - 2016 DATE OF PRONOUNCEMENT 20 - 06 - 2016 O R D E R PER MAHAVIR SINGH , JM : THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE ORDER OF LEARNED CIT (A) - 1 7 , MUMBAI PASSED IN APPEAL NO.CIT ( A) - 17 / IT /303 / 13 - 14 DATED 09 - 06 - 2014 . ASSESSMENT W AS FRA MED BY THE DCIT, CIRCLE - 8(2), MUMBAI FOR ASSESSMENT YEAR 2011 - 12 VIDE HIS ORDER DATED 07 - 02 - 2014 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE (ACT). 2. THE FIRST ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER O F THE CIT (A) DELETING THE ADDITION MADE BY THE AO ON LOANS AND ADVANCES TREATING THE SAME AS DEEMED DIVIDEND BY INVOKING THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT. FOR THIS, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.2,69,09,485/ - U/S 2(22) (E) OF THE ACT IGNORING THE FACT THAT THE PROVISIONS OF SECTION 2(22)(E) ARE SQUARELY APPLICABLE TO THE ASSESSEES CASE? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.2,69,09,485/ - U/S 2(22)(E) OF THE ACT HOLDING THAT THE DEEMED DIVIDEND IS TAXABLE ONLY IN THE HANDS OF SHAREHOLDERS BY PLACING ITA NO. 5652 /MUM/20 1 4 2 RELIANCE UPON TH E DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS BHAUMIK COLOURS (2009) SOT (MUM SB) IGNORING THE INTENT OF LEGISLATURE AS CLARIFIED IN CBDT CIRCULAR NO.495 DATED 22.09.1987? 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE AO WHILE FRAMING ASSESSM ENT IN THE PRESENT CASE NOTED THAT THE ASSESSEE COMPANY HAS TAKEN LOAN FROM M/S. POSEIDON SHIPPING AGENCY PVT. LTD. OF RS.1,50,00,000/ - , M/S. FAIRWIND SHIPPING AGENCY PVT. LTD. OF RS.61,00,000/ - , M/S. ASIAN SEAWAYS PVT. LTD. OF RS.55,00,000/ - AND FROM M/S. CREDANCE SHIPPING AGENCIES PVT. LTD. OF RS.5,00,000/ - RESPECTIVELY. THE AO REQUIRED THE ASSESSEE TO FILE SHAREHOLDING PATTERN OF THE ASSESSEE COMPANY AS WELL AS OF M/S. POSEIDON SHIPPING AGENCY PVT. LTD., M/S. FAIRWIND SHIPPING AGENCY PVT. LTD., M/S. ASIA N SEAWAYS PVT. LTD. AND M/S. CREDANCE SHIPPING AGENCIES PVT. LTD. WHICH ARE DETAILED HEREUNDER: - NAME OF THE SHAREHOLDER OMEGA SHIPPING AGENCIES PVT. LTD. (ASSESSEE COMPANY) POSEIDON SHIPPING AGENCY PVT. LTD. FAIRWIND SHIPPING AGENCY PVT. LTD. ASIAN SE AWAYS PVT. LTD. CREDANCE SHIPPING AGENCIES PVT. LTD. S. MURALIDHARAN 57% 50% 50% 50% 50% GEORGE ABRO 43% 50% 50% 50% 50% ACCORDING TO THE AO SHRI S. MURAL IDHARAN AND SHRI GEORGE ABRO AR E HAVING 57% AND 43% SHAREHOLDING IN THE ASSESSEE COMPANY AND BOT H ARE HAVING 50% SHAREHOLDING IN EACH OF THE ABOVE LENDER COMPANIES ALSO. ACCORDINGLY, THE AO BY INVOKING THE PROVISIONS OF DEEMED DIVIDEND U/S 2 (22) (E) OF THE ACT TREATED THESE LOANS AMOUNTING TO RS.2,69,09,485/ - AS INCOME OF THE ASSESSEE BY OBSERVING A S UNDER : - 5.4.8 THEREFORE, THE RECEIPTS OF LOANS AMOUNTING TO RS.2,69,09,458/ - [RS.1,50,00,000/ - (BEING AMOUNT OF LOAN TAKEN) + RS.61,00,000/ - (BEING AMOUNT OF LOAN TAKEN), RS.53,09,485/ - (BEING AMOUNT RESTRICTED TO ACCUMULATED BALANCE) AND RS.5,00,000/ - ( BEING AMOUNT OF LOAN TAKEN)] BY THE ASSESSEE FROM M/S. POSEIDON SHIPPING AGENCY PVT. LTD., M/S. FAIRWIND SHIPPING AGENCY PVT. LTD. AND M/S. CREDANCE SHIPPING AGENCIES PVT. LTD. RESPECTIVELY, AS UNSECURED LOAN DURING F. Y. 2010 - 11 ARE TREATED AS DEEMED DIVI DEND U/S. 2(22)(E) IN THE HANDS OF THE ASSESSEE COMPANY AND IS BROUGHT TO TAX UNDER THE HEAD INCOME FROM ITA NO. 5652 /MUM/20 1 4 3 OTHER SOURCES. PENALTY PROCEEDINGS U/S. 271 (1) (C) R. W. EXPLANATION TO SEC. 274 OF THE ACT, ARE INITIATED SEPARATELY FOR FURNISHING CONCEALING THE P ARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A), DELETED THE ADDITION BY HOLDING THAT NONE OF THE LENDER COMPANIES IS SHAREHOLDER OF THE ASSESSEE COMPANY AND FURTHER H ELD THAT SHAREHOLDERS REFERRED TO IN SECTION 2(22)(E) OF THE ACT REFERS TO BOTH REGISTERED AND BENEFICIAL SHAREHOLDERS. ACCORDINGLY, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUE SANDS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS UNIVERSAL MEDICARE PVT. LTD. [ (2011) 237 CTR 147 (BOM.) ] WHEREIN THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL WAS APPROVED IN THE CASE OF ACIT VS M/S. BHAUMIK COLOURS PVT. LTD. [( 2009) 120 TTJ 865 (BOM.) (SB)]. ACCORDING TO THE L EARNED COUNSEL FOR THE ASSESSEE, SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS HOTEL HILLTOP [(2008) 217 CTR (RAJ.) 527]. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT IN ASSESSEES OWN CASE EXACTLY ON IDENTICAL FACTS, THE TRIBUNAL IN ASSESSMENT YEAR 2009 - 10 AND 2010 - 11 IN ITA NO.7039/MUM/2012 AND ITA NO.5164/MUM/2013 VIDE ORDERS DATED 05 - 09 - 2014 AND 26 - 11 - 2014 RESPECTIVELY , ALLOWED THE CLAIM OF THE ASSESSEE BY OBS ERVING AS UNDER: - 5. AFTER CONSIDERING THE RELEVANT FACTS AND ALSO THE MATERIAL PLACED ON RECORD, WE FIND THAT IT IS AN ADMITTED FACT THAT ASSESSEE IS NOT A SHAREHOLDER IN THE FOUR LENDING COMPANIES WHO HAVE GIVEN LOAN TO THE ASSESSEE. EVEN THOUGH TWO O F THE SHAREHOLDERS WERE COMMON HAVING AROUND 50% OF SHARE IN ALL THE FOUR LENDING COMPANIES. THE ISSUE, WHETHER THE PROVISIONS OF DEEMED DIVIDEND U/S 2(22)(E) ARE ATTRACTED IN A CASE, WHETHER THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN THE LENDING COMPANI ES, IS NO LONGER RES INTEGRA, IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT. THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEAR ON SIMILAR SET OF FACTS, HAVE DELETED THE ADDITION AFTER RELYING UPON THE FOLLOWING TWO DECISIONS OF THE HO NBLE JURISDICTIONAL HIGH COURT, (I) CIT VS. UNIVERSAL MEDICARE PVT. LTD. (2010) 324 ITR PAGE 263 (BOM) (II) CIT VS. IMPACT CONTAINER PVT. LTD. (2014) 107 DTR (BOM) 145. IN THE LATER DECISION, THE HONBLE HIGH COURT HAS DISCUSSED THE ENTIRE MATTER AFRESH A ND AFTER ANALYZING THE PROPOSITION LAID DOWN IN UNIVERSAL MEDICARE PVT. LTD. AND ALSO BY THE SPECIAL BENCH IN BHAUMIK COLOURS, HAVE REITERATED THAT IF THE ASSESSEE ITA NO. 5652 /MUM/20 1 4 4 COMPANY IS NOT SHAREHOLDER IN THE LENDING COMPANY, THEN THE PROVISIONS OF SECTION 2(22)(E) C ANNOT BE INVOKED. THUS, RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENCE OF THE HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE DELETION OF THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) BY THE LD. CIT(A) AND ACCORDINGLY GROUND NO.1 TO 3 AS RA ISED BY THE REVENUE IS DISMISSED.. WHEN, THESE FACTS WERE CONFRONTED TO THE LEARNED SR. DR, HE FAIRLY CONCEDED THE POSITION. 4. AFTER HEARING THE RIVAL CONTENTIONS AND GOING THROUGH THE FACTS AND CIRCU MSTANCES OF THE CASE, WE FIND T HAT IN THIS YEAR ALS O NONE OF THE LENDER COMPANIES IS SHAREHOLDER IN THE ASSESSEE COMPANY EITHER BY WAY OF BENEFICIAL SHAREHOLDING OR BY WAY OF REGISTERED SHAREHOLDING. IN TERMS OF THE ABOVE AND THE JUDICIAL PRECEDENCE CITED ABOVE AND ALSO TAKING A CONSISTENT VIEW, WE CONFIRM THE ORDER OF THE CIT (A) AND THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF THE REVENUE IS AS REGARDS TO THE ORDER OF THE CIT (A) DELETING THE ADDITION OF UN - RECONCILED AIR INFORMATION. FOR THIS, THE REVENUE HAS RAI SED THE FOLLOWING GROUND: - 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.8,05,447/ - ON ACCOUNT OF UN - RECONCILED AIR INFORMATION ON THE BASIS OF CONJECTURES AND SURMISES WITHOUT APPRE CIATING THAT BOTH BEFORE THE AO AS WELL AS THE CIT (A), THE ASSESSEE HAD FAILED TO FURNISH THE CORROBORATIVE EVIDENCE TO SHOW THAT THE EXCESS RECEIPTS AS PER THE AIR INFORMATION WERE NOT ITS INCOME? 6. AT THE OUTSET, BOTH THE PARTIES AGREED THAT SIMILAR ISSUE WAS RAISED BY THE REVENUE IN ITA NO.5164/MUM/2013 FOR ASSESSMENT YEAR 2010 - 11 AND THE TRIBUNAL HAS SET ASIDE THE SAME TO THE FILE OF THE AO WITH THE FOLLOWING DIRECTION: - 11. WE HAVE HEARD THE RIVAL CONTENTION AND ALSO PERUSED THE RELEVANT FINDING GIVEN BY THE AUTHORITIES BELOW AND THE MATERIAL PLACED ON RECORD. BEFORE THE AO, THE ASSESSEE HAD SUBMITTED THE ENTIRE 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 INDUST RY PRACTICE AND NOT IN THE NAME OF THE CLIENT. THE PAYMENTS IS RECEIVED ON THE BASIS OF DEBIT NOTE FROM CLEARING AND FORWARDING AGENT AND ITA NO. 5652 /MUM/20 1 4 5 THEREFORE, THE TRANSACTIONS ARE OFTEN RECORDED IN THEIR NAME AND NOT IN THE NAME OF SHIPPER OR CONSIGNEE. THE ASSESSEE HAS CATEGORICALLY STATED THAT, IN ABSENCE OF ANY SPECIFIC DETAILS IT IS DIFFICULT TO GIVE THE CORRECT RECONCILIATION. THE INFORMATION WHICH HAS BEEN RECEIVED AND FORWARDED BY THE AO DOES NOT CONTAIN ANY DETAIL AND THERE IS NO EVIDENCE THAT SUCH TRANSACTIO NS HAS BEEN CARRIED OUT BY THE ASSESSEE. BEFORE US, THE ASSESSEE HAD SUBMITTED ENTIRE DETAILS OF TDS WHICH ARE VOLUMINOUS IN NATURE. THESE DETAILS WERE ALSO FILED BEFORE THE AO. THE ASSESSING OFFICER, WITHOUT GIVING ANY SPECIFIC DETAILS QUA THE INFORMATION , CANNOT EXPECT THE ASSESSEE TO EXPLAIN SUCH TRANSACTION. IN CASE OF INFORMATION RECEIVED THROUGH AIR OR FROM OTHER SOURCES THE INITIAL ONUS IS ON THE ASSESSING OFFICER, THAT SUCH AN INFORMATION WHICH HAS BEEN RECEIVED PERTAINS TO THE ASSESSEE AND HAS NOT BEEN RECORDED BY THE ASSESSEE, IN ITS BOOKS OF ACCOUNT. WE CAN UNDERSTAND IF THERE IS SOME DISCREPANCY INFORM 26AS, WHERE THE ASSESSEE CAN BE EXPECTED TO EXPLAIN THE ENTRIES. HOWEVER, IF THE ASSESSEE HAS PROPERLY RECONCILED THE RECEIPTS FORM NO.26AS VIS - - VIS THE BOOKS OF ACCOUNT, THEN THE ONUS IS ON THE DEPARTMENT TO SHOW THAT THE ENTRIES IN 26AS AND TRANSACTIONS RECORDED IN THE 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 DIRECT ION THAT, AO SHOULD PROVIDE SPECIFIC DETAILS OF THE INFORMATION, AS TO WHO HAS DEDUCTED THE TAX ON THE PAYMENT MADE TO THE ASSESSEE, WHICH HAS NOT BEEN RECORDED BY THE ASSESSEE. IF NO SPECIFIC DETAILS ARE PROVIDED, THEN NO ADDITION SHOULD BE MADE. THUS GRO UND NO.4 & 5 ARE TREATED AS PARTLY ALLOWED FOR THE STATISTICAL PURPOSE. 7. BOTH THE PARTIES CONCEDED THAT IN THE SIMILAR FASHION THE ISSUE CAN BE REMITTED BACK TO THE FILE OF THE AO. IN VIEW OF THE ABOVE CONCESSION, GIVEN BY BOTH THE PARTIES, WE SET ASID E THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO IS TO DECIDE THE ISSUE IN TERMS OF EARLIER DIRECTIONS OF THE TRIBUNAL IN THIS REGARD . 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON 20 /06 / 201 6 . SD/ - SD/ - ( RAMIT KOCHAR ) ( MAHAVIR SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI , DATED 20 /6 / 201 6 LAK SHMIKANTA DEKA/SR.PS ITA NO. 5652 /MUM/20 1 4 6 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI DATE INITIAL DICTATION PAD ATTACHED WITH THE DRAFT ORDER YES 1. DRAFT DICTATED ON 15 - 06 - 16 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 17 - 06 - 16 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WH ICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT ( A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//