M/s Rahul Auto Agency Pvt Ltd., Cuttack V. ITO (TDS), Cuttack

ITA 611/CTK/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2643 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 05-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 12-12-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: R S CHIMANKA
• Keywords: Deemed dividend
• Section: 206AA; 201(1)

Judgement Text

1 ITA NO. 611/CTK/2012 RAHUL AUTO AGENCY PVT. LTD., AY 2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL: CUTTACK BENCH : CUTTTACK (BEFORE SHRI K. K. GUPTA, AM & SHRI GEORGE MATHAN, JM) ITA NO. 611/CTK/2012 ASSESSMENT YEAR: 2006-07 M/S. RAHUL AUTO AGENCY PVT. LTD. VS. INCOM E-TAX OFFICER (TDS), CUTTACK (PAN: BBNRO0029B) (APPELLANT) (RESPONDENT) DATE OF HEARING: 5TH JUNE, 2013 DATE OF PRONOUNCEMENT: 5TH JUNE, 2013 APPELLANT BY: SHRI R. S. CHIMANKA, AR RESPONDENT BY: SHRI S. C. MOHANTY, DR ORDER PER BENCH: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A), CUTTACK IN APPEAL NO. 0431/2010-11 DATED 27.09.2012 FOR AY 2006-07. 2. SHRI R. S. CHIMANKA APPEARED ON BEHALF OF THE AS SESSEE AND SHRI S. C. MOHANTY APPEARED ON BEHALF OF REVENUE. 3. IN ASSESSEES APPEAL THE ASSESSEE HAS RAISED FOL LOWING GROUNDS: 1. FOR THAT, THE ORDER PASSED BY THE LD. CIT(A), C UTTACK IS NOT JUST AND PROPER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. FOR THAT, THE ASSESSEE COMPANY DEDUCTED TAX FROM THE INTEREST PAYMENT AND PAID TO THE GOVT. EXCHEQUER IN TIME AND FILES THE TDS RETURN IN TIME AND AS SUCH FRAMING OF ASSESSMENT IS NOT JUST AND PROPER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND CONFIRM THE SAME BY THE CIT(A) IS NOT JUST AND PROPER ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 3. FOR THAT, THE ASSESSEE COMPANY HAS A LEDGER ACCO UNT OF SMT. PUSPA DEVI CHANANI, WHERE THE OPENING CREDIT BALANCE WAS RS.2,57,635/- AND THE CLOSING BALANCE WAS RS.22,635/-. THE ENTIR E COPY OF THE LEDGER ACCOUNT IS REPRODUCED HERE WITH FOR YOUR HON OURS KIND REFERENCE AND RECORDS. 01.04.2005 16.04.2005 27.04.2005 TO OPENING BALANCE TO CHEQUE TO CHEQUE 1,00,000.00 1,00,000.00 RS.2,57,635.85 2 ITA NO. 611/CTK/2012 RAHUL AUTO AGENCY PVT. LTD., AY 2006-07 17.05.2005 21.07.2005 15.09.2005 17.10.2005 05.11.2005 TO CHEQUE TO CHEQUE TO CHEQUE BY CHEQUE BY CHEQUE CLOSING BALANCE 1,00,000.00 2,30,000.00 2,50,000.00 7,80,000.00 22,635.85 8,02,635.85 RS.2,25,000.00 RS.3,20,000.00 RS.8,02,635.85 THE LD. CIT(A), CUTTACK SHOULD HAVE ACCEPT THE SAME ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 4. THAT, THE LEARNED INCOME TAX OFFICER (TDS), WHIL E COMPLETING THE ASSESSMENT HAS NOT CONSIDER THE DEPOSIT OF RS.5,45, 000/- RATHER ONLY CONSIDER THE WITHDRAWAL OF RS.7,80,000/- AND AS SUC H CALCULATING THE INTEREST AND INTEREST ON TDS ON THE AMOUNT OF ADVAN CE AND CHARGING INTEREST IS ILLEGAL ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND THE SAME IS CONFIRMED BY THE LD. CIT(A) IS NOT JUST AND PROPER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 5. THAT, IN ONE HAND, THE LD. AO IN THEIR ORDER STA TED THAT THE PAID UP SHARE CAPITAL OF THE COMPANY IS RS.21,76,000/- AND IN THE SAME PARAGRAPH THE LD. AO HAS STATED THE PAID UP THE SHA RE CAPITAL OF THE COMPANY IS RS.11,27,466/- IS COMPLETELY WRONG RATHE R RS.11,27,466/- 0 IS THE RESERVE AND SURPLUS OF THE COMPANY, SO T HE SHARE HOLDING OF SMT. PUSPA DEVI CHANANI 41.33% OF THE TOTAL SHAR E IS COMPLETELY WRONG WHERE AS THE SHARE HOLDING OF THE SMT. PUSPA DEVI CHANANI IS RS.,4,66,000/- OF THE TOTAL SHARE CAPITAL OF THE CO MPANY IS RS.21,76,000/-. SO THE PROVISION OF SECTION 2(22)( E) READ WITH PROVISIONS OF SECTION 194 OF THE INCOME TAX ACT IS NOT ATTRACTED BECAUSE SMT. PUSPA DEVI CHANANI IS NOT THE MAJOR SH ARE HOLDER, SO ASSESSMENT FRAMED BY THE LD. AO IS NOT JUST AND PRO PER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND THE SAME I S CONFIRMED BY THE LD. CIT(A)IS NOT JUST AND PROPER ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE. 6. FOR THAT, AT THE TIME OF HEARING BEFORE CIT(A), CUTTACK, THE APPELLANT FOR THE ADVOCATE HAS FILED WRITTEN SUBMIS SION ALONG WITH SAME COPY OF THE JUDGMENT WHICH IS RELEVANT TO THE APPEAL MATTER, BUT THE LD. CIT(A), CUTTACK WITHOUT CONSIDER THE SAME H AS BEEN PLEASED TO CONFIRM THE APPEAL IS NOT JUST AND PROPER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 4. IT WAS THE SUBMISSION BY THE LD.AR THAT THE ISSU E IN APPEAL WAS AGAINST THE ACTION OF THE LD.CIT(A) IN CONFIRMING THE ORDER PAS SED U/S.201(1) & 201(1A) OF THE ACT IN RESPECT OF THE DEEMED DIVIDEND U/S.2(22E) RE AD WITH SECTION 194 OF THE ACT. IT WAS THE SUBMISSION THAT THE AO HAD NOTICED THAT ONE OF THE SHAREHOLDERS OF THE 3 ITA NO. 611/CTK/2012 RAHUL AUTO AGENCY PVT. LTD., AY 2006-07 ASSESSEE COMPANY WAS HAVING AN OPENING CREDIT BALAN CE OF RS.2,57,635/- AND DURING THE RELEVANT ASSESSMENT YEAR SHE HAD WITHDRA WN NEARLY RS.7,80,000/-. IT WAS THE SUBMISSION THAT CONSEQUENTLY THE AO HAD TREATED THAT THE EXCESS WITHDRAWAL BY THE SHAREHOLDER SMT. PUSPA DEVI CHANANI TO THE EXTE NT OF RS.5,22,365/- WAS DEEMED DIVIDEND AND AS THE ASSESSEE HAD NOT DEDUCTED TDS U /S. 194, PASSED AN ORDER U/S. 201(1) AND 201(1A) OF THE ACT BY TREATING THE TDS A T 20%. IT WAS THE SUBMISSION THAT THE PROVISIONS OF SECTION 194 OF THE ACT FOR T HE RELEVANT ASSESSMENT YEAR PROVIDED FOR TDS AT 10%. IT WAS THE SUBMISSION THA T THE AO MAY BE DIRECTED TO REDUCE THE DEDUCTION LIABLE FOR TDS AT 10%. 5. IN REPLY, THE LD. DR SUBMITTED THAT THE CONDITIO N FOR INVOKING THE PROVISIONS OF SECTION 2(22E) OF THE ACT WAS FULLY SATISFIED AN D AS ON 17.05.2005 THE ACCOUNT OF SMT. PUSPA DEVI CHANANI TURNED INTO A DEBIT BALANCE AND CONSEQUENTLY, THE AMOUNT WITHDRAWN AFTER THE SAID DATE TOTALING TO RS.5,22,3 65/- HAVE BEEN RIGHTLY TREATED AS DEEMED DIVIDEND BY AO. IT WAS THE SUBMISSION THAT ADMITTEDLY, U/S. 194 FOR THE RELEVANT ASSESSMENT YEAR TDS WAS LIABLE TO BE MADE ONLY AT 10%. HOWEVER, IT WAS THE SUBMISSION THAT U/S. 206AA, IF NO PAN NO. I S PROVIDED THEN THE TDS IS LIABLE TO BE MADE AT DOUBLE THE PRESCRIBED RATE. I T WAS THE SUBMISSION THAT CONSEQUENTLY, AS THE PAN NO. OF SMT. PUSPA DEVI CHA NANI WAS NOT AVAILABLE THE AO HAD RIGHTLY HOLD THAT THE TDS WAS LIABLE TO BE M ADE AT 20%. IT WAS THE SUBMISSION THAT THE ORDER OF AO AND THAT OF CIT(A) WAS LIABLE TO BE UPHELD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMITT EDLY, THE PROVISIONS OF SECTION 2(22E) OF THE ACT ARE APPLICABLE IN THE PRE SENT CASE. A PERUSAL OF THE ORDER OF CIT(A) CLEARLY SHOWS THAT SMT. PUSPA DEVI CHANAN I HELD MORE THAN 21% SHARES IN THE ASSESSEE COMPANY. ADMITTEDLY, ON 17.05.2005 , THE ACCOUNT OF SMT. PUSPA DEVI CHANANI TURNED TO DEBIT. THE ASSESSEE COMPANY ALSO HAS THE RESERVE AND SURPLUS AS PRESCRIBED IN THE PROVISIONS OF SECTION 2(22E) OF THE ACT. THUS, THE ACTION OF AO IN HOLDING THAT THE PAYMENT OF RS.5,22,365/- TO THE ASSESSEE ON AND AFTER 17.05.2005 IS HIT BY THE PROVISIONS OF SECTION 2(22 E) OF THE ACT CANNOT BE FAULTED. HOWEVER, A PERUSAL OF THE RETURN FILED BY THE ASSES SEE CLEARLY SHOWS THAT THE PAN NO. OF SMT. PUSPA DEVI CHANANI IS AVAILABLE. ADMIT TEDLY, NO TDS HAVE BEEN MADE 4 ITA NO. 611/CTK/2012 RAHUL AUTO AGENCY PVT. LTD., AY 2006-07 ON THE DEEMED DIVIDEND AS THE DEEMED DIVIDEND ITSEL F HAS BEEN COMPUTED BY THE AO. IN SUCH A SITUATION, THE RETURN OF THE ASSESSEE HAVING CLEARLY DISCLOSED THE PAN NO. OF SMT. PUSPA DEVI CHANANI, THE PROVISIONS OF S ECTION 206AA CANNOT BE HELD TO BE APPLICABLE AND CONSEQUENTLY, TDS IS LIABLE TO BE DEDUCTED ONLY AT 10%. UNDER THE CIRCUMSTANCES, THE AO IS DIRECTED TO REDUCE THE DEMAND U/S. 201(1) BY COMPUTING THE TDS LIABLE ON THE DEEMED DIVIDEND AT 10% AND CHARGE INTEREST ACCORDINGLY U/S. 201(1A) OF THE ACT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- (K. K. GUPTA) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 5TH JUNE, 2013 (JD) SR. P.S COPY FORWARDED TO :- 1. APPELLANT M/S. RAHUL AUTO AGENCY PVT. LTD., N.H. 5, GANDARPUR, CUTTACK 2. RESPONDENT- ITO (TDS), CUTTACK 3. CIT(A), CUTTACK 4. CIT,.CUTTACK 5. DR, ITAT, CUTTACK TRUE COPY BY ORDER SR. PVT. SECY. ITAT, CUTTACK