Brahmananda Pradhan, Jajpur V. DCIT, Cuttack

ITA 58/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4410 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 29-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-01-2011
• Court: TRIBUNAL
• Department Lawyers: PA NIGRAHI
• Assessee Lawyers: NIRANJAN PANDA
• Keywords: Principle of natural justice; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 058/CTK/2011 & STAY PETITION NO.18/CTK/2011 / ASSESSMENT YEAR 2006 - 07 SRI BRAHMANANDA PRADHAN, C/O. M/S.PRADHAN INDUSTRIES, P.O.PATULI, JAJPAUR ROAD, JAJPUR 755 048 PAN: ABB PP 3365 M - - - VERSUS - DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), CUTTACK. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI NIRANJAN PANDA, AR / FOR THE RESPONDENT: / SHRI M.R.PA NIGRAHI, DR / ORDER . . . , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT.24.11.2010 FOR THE AS SESSMENT YEAR 2006 - 07 IN CASE OF THE ASSESSEE. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. FOR THAT THE ORDER OF THE LEARNED CIT (APPEALS), CUTTACK {IN SHORT C.I.T (A) DATED 24.11.2010 CONFORMING THE ASSESSMENT ORDER DATED 30.12.2009 PASSE D BY THE DY. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), CUTTACK (IN SHORT A.O) IS NOT JUST AND CORRECT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. FOR THAT LEARNED C.I.T (A) IS ERRED IN MISINTERPRETING THE P ROVISIONS OF SEC. 2(22) OF THE I.T.AC T, 1961 THEREBY CONFIRMING THE ADDITION OF 1,10,64,272.78 (THE INCREMENTAL BALANCE DURING THE A.Y 2006 - 07) SHOWN AS ADVANCE BY THE PRADHAN INDUSTRIES (P) LTD. (COMPANY) TO MR. BRAHMANANDA PRADHAN, (SHARE HOLDER DIRECTOR) AS DIVIDEND INCOME IN THE HANDS O F THE APPELLANT. I.T.A.NO. 058/CTK/2011 & STAY PETITION NO.18/CTK/2 011 2 3. FOR THAT THE LEARNED C.I.T (A) FAILED TO APPRECIATE THE FACT THAT MOST OF THE AMOUNTS BOOKED AS ADVANCE BY THE COMPANY TO THE APPELLANT ARE NOT PAYMENTS BUT ONLY ADJUSTMENT BOOK ENTRIES (PASSED THOROUGH JOURNALS) FOR RECORDING SOME CO MMERCIAL TRANSACTION BETWEEN THE COMPANY & THE APPELLANT. IN FACT THESE ARE NEITHER PAYMENTS ON ACCOUNT OF LOANS & ADVANCES NOR PAYMENTS FOR THE BENEFITS OF THE SHAREHOLDE RS. 4. FOR THAT THE LEARNED C.I.T (A) IS NOT CORRECT IN CONCLUDING THAT, THE PRESE NT CASE OF THE APPELLANT IS DISTINGUISHABLE FROM THE CASE LAW SITED BY THE APPELLANT. LEARNED C.I.T (A) HAS ALSO NOT SPECIFIED ANY COGENT REASONS FOR DIFFERENTIATING THE PRESENT CASE FROM THE CASE SITED BY THE APPELLANT. 5. FOR THAT LEARNED C.I.T (A) OB SERVATIONS THAT THE WRITTEN SUBMISSION DATED 15.09.2010 BY THE LEARNED A.R REGARDING TRADING TRANSACTIONS IS AN AFTERTHOUGHT IS ABSOLUTELY WRONG, RATHER LEARNED C.I.T(A) HAS TRIED TO ADOPT SOME COLORFUL OBSERVATION FOR DISMISSING OF THE APPEAL OF THE APP ELLANT. 6. FOR THAT IN ANY CASE LEARNED C.I.T (A) HAS FAILED TO APPRECIATE THAT THE PRE REQUISITES OF SECTION 2(22)(E) STOOD WHOLLY UN - SATISFIED TO DESIGNATE THE MERE ADJUSTMENT BOOK ENTRIES PASSED FOR RECORDING GENUINE BUSINESS (PURCHASE & SALES) TRANSA CTIONS BETWEEN THE COMPANY AND THE APPELLANT AS DIVIDEND. 7. FOR THAT EVEN OTHERWISE, THE DETAILS OF BOOKS OF ACCOUNTS, DOCUMENTS FURNISHED BY THE APPELLANT TO ESTABLISH THAT THE ENTRIES RECORDED BY THE COMPANY IN THE NAME OF THE APPELLANT ARE ADJUSTMENT ENTRIES IN RELATION TO THE GENUINE PURCHASE AND SALES TRANSACTION & ARE NEITHER PAYMENTS ON ACCOUNT OF LOANS & ADVANCES NOR PAYMENTS FOR THE BENEFITS OF THE SHAREHOLDERS REMAINED UNAPPRECIATED BY THE LEARNED C.I.T (A). 8. FOR THAT THE LEARNED C.I. T (A) DETERMINATION OF INCOME OF 1,25,16,420 AS AGAINST 14,52,150 SHOWN BY THE APPELLANT BY ADDING 1,10,64,270 AS DIVIDEND INCOME HAS NO LEG TO STAND AND IS INCORRECT AND ILLEGAL ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. FOR THAT THE ORDER PASSED BY THE LEARNED C.I.T (A) IS BAD IN LAW AND LIABLE TO BE QUASHED ON THE ABOVE GROUNDS OR SUCH OTHER GROUNDS IF ANY TO BE URGED AT THE TIME OF HEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. I.T.A.NO. 058/CTK/2011 & STAY PETITION NO.18/CTK/2 011 3 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUES RAISED BY THE ASSESSEE AND THEIR LEGAL I MPLICATIONS. 4. DURING THE COURSE OF HEARING THE LEARNED AR OF THE ASSESSEE CONTENDED THAT THE LOWER AUTHORITIES HAVE MISAPPLIED THE PROVISIONS CONTAINED IN SECTION 2(22) OF THE INCOME - TAX ACT, 1961 IGNORING TOTALLY THE REAL FACT THAT THE AMOUNT IN DISPUT E WAS NOTHING BUT THE BALANCE OF RUNNING ACCOUNT OF THE COMPANY MAINTAINED IN THE BOOKS OF ASSESSEE. THIS ACCOUNT DEPICTS THE ADJUSTMENT ENTRIES PASSED THROUGH JOURNAL EVIDENCING COMMERCIAL TRANSACTIONS BUT ACTUALLY THERE ARE NO PAYMENTS INVOLVED. THE PLEA TAKEN BY THE LEARNED CIT(A) THAT THE ADVANCES TAKEN BY THE ASSESSEE FOR THE TRANSLATIONS ARE TRADING TRANSACTI ONS IS AN AFTERTHOUGHT, IS NOTHING BUT A ROUSE FOR DISMISSING THE ASSESSEES APPEAL. BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE CON TENTION OF THE ASSESSEE APPELLANT THAT THE PROVISIONS CONTAINED IN SECTION 2(22)(E) ARE NOT AT ALL SATISFIED IN THE PRESENT CASE AS THE INCREASE IN QUESTION ARE ALL BOOK ENTRIES PASSED FOR RECORDING GENUINE TRANSACTIONS OF PURCHASE AND SALES BETWEEN THE CO MPANY AND THE ASSESSEE. THEY ARE NEITHER PAYMENTS ON ACCOUNT OF LOAN OR ADVANCE NOR PAYMENT FOR THE BENEFIT OF THE SHARE HOLDERS. IN THAT VIEW OF THE MATTER, THE LEARNED AR OF THE ASSESSEE SOUGHT FOR ALLOWING THE ASSESSEES APPEAL BY SETTING ASIDE THE ORDE R OF THE LEARNED CIT(A). 5. CONTRARY TO THIS, THE LEARNED DR VEHEMENTLY ARGUED TO UPHOLD THE ORDER PASSED BY THE LEARNED CIT(A) BY DISMISSING THE APPEAL OF THE ASSESSEE. 6. ON CAREFUL ANALYSIS OF THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A) IN THE LIGHT OF THE RIVAL SUBMISSIONS OF THE PARTIES AND THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL, IT IS FOUND THAT THE BALANCE IN THE ACCOUNT OF THE COMPANY MAINTAINED BY THE ASSESSEE IN ITS BOOKS CONSISTS OF JOURNAL ENTRIES. ON GOING THROUGH THE COPY OF ACCOUNT, IT IS SEEN THAT IT IS THE RUNNING I.T.A.NO. 058/CTK/2011 & STAY PETITION NO.18/CTK/2 011 4 ACCOUNT BEGINNING WITH THE OPENING BALANCE ON 1.4.2005. THE DEPARTMENTAL AUTHORITIES HAVE NOT BEEN ABLE TO MAKE OUT THAT THE PAYMENTS RECEIVED FROM THE ASSESSEE ARE LOANS/ADVANCES BUT ALL PAYMENTS MADE TO DIFFERENT ENTITIE S SUCH AS ORISSA MINING CORPORATION AND ULTIMATELY THE BALANCE AS PER THE SAID ACCOUNT THE ASSESSEE HAS PAID MONEY TO THE EXTENT OF 4,50,000 TO THE SAID COMPANY. THEREFORE, BY NO STRETCH OF IMAGINATION THESE TRANSACTIONS WILL COMPREHEND WITHIN THE DEFINITION OF DEEMED DIVIDEND AS ENVISAGED IN SECTION 2(22)(E) OF THE I.T.ACT,1961. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT UNLESS THE ASPECT OF CONTROLLING SHARE HOLDING OF THE ASSESSEE IN THE SAID COMPANY AND THE TRANSACTIONS IN QUESTION AMOUNTS TO ADVANCE/LOAN, THE PROVISIONS OF SECTION 2(22)(E) IS NOT ALL ATTRACTED. IN NEITHER OF THE TWO ORDERS OF THE DEPARTMENTAL AUTHORITIES IT H AS MET OUT BY THE DEPARTMENT THAT THE ASSESSEE IS HAVING CONTROL IN SHARE HOLDING INTEREST IN THE COMPANY AND THE AMOUNT IN QUESTION ARE AMOUNTS PAID BY THE COMPANY AS LOAN/ADVANCE TO THE ASSESSEE. THE ENTRIES FOUND IN THE SAID ACCOUNT ARE ONLY ADJUSTMENT ENTRIES BUT ACTUALLY THERE IS NO PAYMENT AND RECEIPT OF THE AMOUNTS MENTIONED IN THE SAID ACCOUNT. THERE IS NO VERIFICATION BY EITHER OF THE DEPARTMENTAL AUTHORITIES THAT THE SAID ACCOUNT IS NOT THE RUNNING ACCOUNT AND THERE IS CONTROL INTEREST OF SHARE HO LDERS OF THE ASSESSEE AND THE AMOUNTS MENTIONED IN THE SAID ACCOUNT WERE PAID TO THE ASSESSEE BY THE COMPANY AS LOAN/ADVANCE. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THIS IS A FIT CASE TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ISSUE AND ASCERTAIN THE SHARE HOLDING OF THE ASSESSEE IN THAT COMPANY AND ASCERTAIN THE TRUE NATURE AND EFFECT OF THE ENTRIES MADE IN THE ACCOUNT OF THE COMPANY IN THE LEDGER OF THE ASSESSEE AND ASCERTAIN AS TO WHETHER THEY ARE LO ANS/ADVANCE OR THEY RELATED TO THE TRADING TRANSACTIONS BETWEEN THE COMPANY AND THE ASSESSE E AND PASS NECESSARY CONSEQUENTIAL I.T.A.NO. 058/CTK/2011 & STAY PETITION NO.18/CTK/2 011 5 ORDER AS PER LAW, OF COURSE STRICTLY FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. WITH THE ABOVE DIRECTION, THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE IS HEREBY DIRECTED TO CO - OPERATE THE ASSESSING OFFICER FOR EARLY DISPOSAL OF THE MATER BY FURNISHING THE REQUIRED INFORMATION/MATERIALS AS REQUIRED BY THE ASSESSING OFFICER. 7. IN VIEW OF THE ABOVE, THE STAY PETITION NO.18/CTK/2011 FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND THEREFORE, REJECTED AS SUCH. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE STAY PETITION FILED BY THE ASSESSEE IS REJECTED BEING INFRUCTUOUS. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 13 TH MAY, 2011 S D/ - S D/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER. ( ) DATE: 13 TH MAY, 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SRI BRAHMANANDA PRADHAN, C/O. M/S.PRADHAN INDU STRIES, P.O.PATULI, JAJPAUR ROAD, JAJPUR 755 048. 2 / THE RESPONDENT: DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), CUTTACK. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY.