Shri Balasaheb Madhavrao Khairnar, Nashik V. Dy. CIT, Circle-1, Nashik

ITA 571/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88929 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 01-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 571/PN/2013 (ASSESSMENT YEAR : 2009-10) SHRI BALASAHEB MADHAVRAO KHAIRNAR, A-1, HEERA PANNA HOUSING SOCIETY, NEAR ASHIRWAD SHOP, NASHIK ROAD, NASHIK PAN NO. ABAPK2597F .. APPELLANT VS. DY.CIT, CIRCLE-1, NASHIK .. RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI SANTOSH KUMAR DATE OF HEARING : 04-02-2015 DATE OF PRONOUNCEMENT : 11-02-2015 ORDER PER SUSHMA CHOWLA, JM : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A)- I, NASHIK DATED 14-12-2012 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST ORDER PASSED U/S.143(3) OF THE ACT. 2. THE ONLY GROUND OF APPEAL RAISED IN THE PRESENT APP EAL IS AGAINST THE INVOKING OF PROVISIONS OF SECTION 2(22)(E) OF THE A CT RESULTING IN ADDITION OF RS.38,76,000/-. 3. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FU RNISH HIS SHAREHOLDING IN VARIOUS COMPANIES AND ALSO TO FURNISH THE EXTRACT OF ACCOUNT OF THE ASSESSEE APPEARING IN THE BOOKS OF ACCOU NT OF THE SAID COMPANIES. THE AO NOTED THAT M/S. PRECISION AUTO IN DUSTRIES PVT. LTD HAD ADVANCED LOANS/ADVANCES TO THE ASSESSEE DURING THE FINANCIAL YEAR 2008-09 IN WHICH COMPANY THE ASSESSEE WAS HOLDING MORE THAN 10% SHARES. THE COMPANY HAD ACCUMULATED RE SERVES 2 AND SURPLUS OF RS.1.30 CRORES IN ASSESSMENT YEAR 2009-10 AND THE ASSESSEE HAD TAKEN ADVANCE OF RS.38,76,000/- FROM THE SA ID COMPANY. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS T O HIS LIABILITY TO PAY TAX ON THE SAID DIVIDEND RECEIVED OR ADVANC ED FROM THE CONCERN IN WHICH HE HAD BENEFICIAL INTEREST. THE ASSE SSEE ADMITTED THAT HE WAS A BENEFICIAL SHAREHOLDER IN THE VARIOU S PRIVATE LIMITED COMPANIES AND 2 OF THE COMPANIES WERE HAVING ACCUMULATED PROFITS, WHILE OTHER CONCERNS WERE RUNNING INTO LOSSES. THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT HE HAD GIVEN UNSECURED LOANS TO BOTH THE ABOVE-MENTIONED COMPANIES FROM TIME TO TIME AND THE PAYMENTS RECEIVED BY THE ASSE SSEE FROM THE SAID COMPANIES WERE LESS THAN THE AMOUNTS PAID TO T HE SAID COMPANIES. THE ASSESSEE ALSO POINTED THAT IN THE CASE OF M/S. PRECISION AUTO INDUSTRIES PVT. LTD. IN THE ACCOUNT OF THE ASSESSEE THERE WAS CREDIT OF RS.1,08,15,225/- AND DEBIT OF RS.85,45,780 /-. SO IT IS CLEAR, THAT THE PAYMENTS WERE RECEIVED FROM THE COMPANY OUT OF THE ADVANCES GIVEN TO THE COMPANY AND NOT OUT OF TH E ACCUMULATED PROFITS OF THE COMPANY. THE ASSESSING OFFICER R EJECTING THE CLAIM OF THE ASSESSEE INVOKED PROVISIONS OF SECTION 2(22 )(E) OF THE ACT AND MADE ADDITION OF RS.38,76,000/-. THE SAID ADDITION W AS CONFIRMED BY THE CIT(A) AGAINST WHICH THE ASSESSEE IS IN AP PEAL BEFORE US. 4. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSES SEE FAIRLY ADMITTED THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT W ERE ATTRACTED IN THE CASE AS IT SATISFID ALL THE CONDITIONS PRO VIDED THEREUNDER. HOWEVER, IT WAS POINTED OUT BY THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE THAT THE PERUSAL OF THE COPY OF THE ACCOUNT PLACED AT PAGES 1 AND 2 OF THE PAPER BOOK REFLE CT THAT THE MAXIMUM AMOUNT WITHDRAWN WAS RS.38,76,000/- WHEREAS THE 3 OPENING AND CLOSING BALANCES WERE CREDIT AMOUNTS. THE LEA RNED AUTHORISED REPRESENTATIVE, HOWEVER, DREW OUR ATTENTION T O THE COPY OF THE BALANCE SHEET PLACED AT PAGE 11 OF THE PAPER BOO K WHERE ALONG WITH THE SHARE CAPITAL ACCOUNT IT WAS POINTED OUT T HAT THE ASSESSEE HAD ADVANCED SHARE APPLICATION MONEY OF RS.40 LA KHS. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD PLACED RELIANCE ON THE FOLLOWING DECISIONS : I. ANIL KUMAR VS. ITO (2011) 9 TAXMANN.COM 131 (MUM ) ITA NO.6481/MUM/2007 ORDER DATED 29-04-2009 II. DY.CIT VS. VIKAS OBEROI (2013) 37 TAXMANN.COM 4 6 (MUMBAI) ITA NOS.4362 TO 4364, 4440 & 4495/MUM/20 11, CO NOS. 112 & 113, 169 & 170/MUM/2012 ORDER DATED 20-0 3-2013. 5. THE PLEA OF THE AUTHORISED REPRESENTATIVE FOR THE ASS ESSEE BEFORE US WAS THAT COMPLETE ACCOUNT OF THE ASSESSEE SH OULD BE CONSIDERED FOR THE YEAR UNDER APPEAL AND NO DISALLOWANCE WAS WARRANTED. IT WAS ALSO POINTED BY THE LEARNED COUNSEL T HAT NO ALLOTMENT AGAINST THE SHARE APPLICATION MONEY HAS BEEN MA DE TILL DATE. THE PLEA RAISED BY THE ASSESSEE BEFORE US WAS AD MITTEDLY A FRESH PLEA. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF THE CIT( A) AND POINTED OUT THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE AC T ARE SQUARELY ATTRACTED. IN THIS CASE, RELIANCE WAS PLACED AT PARA 5.2 OF THE CIT(A)S ORDER AND IT WAS POINTED OUT THAT THE ADDIT ION IN THE CASE WAS WARRANTED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE ARISING WAS THAT IN VIEW OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WHETHER THE ASSESSEE HAD ADVANCED S UFFICIENT FUNDS WHICH FAR EXCEEDED THE WITHDRAWALS MADE BY THE ASSESSEE AND ANY DISALLOWANCE BE MADE U/S.2(22)(E) OF THE ACT ON ACCOUNT OF 4 DEEMED INCOME. THE ASSESSEE WAS A DIRECTOR IN M/S. PREC ISION AUTO INDUSTRIES LTD. AND HAD MORE THAN 10% SHARES IN THE SA ID CONCERN. THE SAID COMPANY HAD RESERVES AND SURPLUS OF RS.1.30 CRO RES IN ASSESSMENT YEAR 2009-10 AND THE ASSESSEE HAD TAKEN AN ADVANCE OF RS.38,76,000/- AS ON 16-04-2008. THE COPY OF THE LEDGER ACCOUNT PLACED AT PAGES 1 AND 2 OF THE PAPER BOOK REFLECT THAT BOTH THE OPENING AND THE CLOSING BALANCES WERE IN CREDIT, HOWEVER, DURING TH E ACCOUNTING PERIOD, THE ASSESSEE HAD MADE CERTAIN WITHDRA WALS ON ACCOUNT OF WHICH THERE WAS DEBIT BALANCE AGAINST THE ASS ESSEE. THE ASSESSEE IN ADDITION TO HOLDING THE INVESTMENT OF RS.53,55,0 00/- IN THE SHARE CAPITAL ACCOUNT HAD ALSO ADVANCED SHARE APPLIC ATION MONEY OF RS.40 LAKHS WHICH IS CLEARLY REFLECTED FROM THE BALA NCE SHEET OF M/S. PRECISION AUTO INDUSTRIES LTD. FILED AT PAGES 11 TO 21 OF THE PAPER BOOK. THE CLAIM OF THE ASSESSEE BEFORE US W AS THAT THE ADVANCES MADE BY THE ASSESSEE TO THE SAID COMPANY FAR EXCEEDED THE WITHDRAWALS MADE BY THE ASSESSEE FROM THE SAID COMPANY. 7.1 WE ARE IN CONFORMITY WITH THE SAID STAND OF THE ASSESS EE THAT IN ADDITION TO THE SHARE CAPITAL ACCOUNT THERE WAS AN OU TSTANDING SHARE APPLICATION MONEY OF RS.40 LAKHS IN THE BOOKS OF M/S. PRECISION AUTO INDUSTRIES LTD. AGAINST WHICH TILL DATE NO S HARES HAVE BEEN ALLOTTED, AS POINTED BY THE LEARNED AUTHORISED REPRE SENTATIVE FOR THE ASSESSEE. THE MAXIMUM WITHDRAWAL BY THE ASSESSE E DURING THE FINANCIAL YEAR 2008-09 FROM THE SAID COMPANY WAS RS.38,76,000/- WHICH WAS ADMITTEDLY WAS LESS THAN THE SHA RE APPLICATION MONEY OUTSTANDING OF THE ASSESSEE. IN THE AB OVE SAID FACTS AND CIRCUMSTANCES WHERE ON CONSIDERATION OF THE T OTAL ACCOUNT OF THE ASSESSEE INCLUDING THE SHARE APPLICATION MONEY, WHIC H WAS LOAN ACCOUNT, TILL THE SHARES WERE ALLOTTED TO THE ASSESSE E AND THE WITHDRAWAL MADE BY THE ASSESSEE, BEING LESS THAN THE AM OUNT 5 ADVANCED BY THE ASSESSEE, THEN THERE WAS NO LOAN OR A DVANCE RECEIVED BY THE ASSESSEE FROM THE SAID COMPANY JUSTIFYIN G THE INVOKING OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 7.2 WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE MUMBAI BENCHES OF THE TRIBUNAL IN THE CASE OF ANIL KUMAR VS. ITO (S UPRA) AND DY.CIT VS. VIKAS OBEROI (SUPRA) AND FOLLOWING THE SAME P ARITY OF REASONING WE HOLD THAT THERE IS NO MERIT IN THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. THE PLEA RAISED BY THE ASSESSEE BEFORE US EVEN IF IS A NEW PLEA ARISE FROM THE MATERIAL ON RECORD AND THERE IS NO MERIT IN THE ARGUMENT S OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE IN T HIS REGARD. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.38,76,000/-. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF FEBRUARY, 2015. SD/- SD/- (G.S.PANNU) (SUSH MA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 11 TH FEBRUARY, 2015 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, NASHIK 4. THE CIT-I, NASHIK 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE