ACIT, New Delhi V. Sh. Siddharth Gupta, New Delhi

ITA 6206/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3014 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 03-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 20-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: V K AGARWAL
• Keywords: Deemed dividend
• Section: 143(3); 142(1); 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 6206 /DEL/201 3 A.Y. : 20 10 - 11 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-7, NEW DELHI ROOM NO. 363, E-2, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI VS. SH. SIDDHARTH GU P T A, 17B, MGF HOUSE, ASAF ALI ROAD, NEW DELHI (PAN: AADPG5651N) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) DEPARTMENT BY : SH. S.S. RANA, CIT(DR) ASSESSEE BY : SH. V.K. AGARWAL, A.R. ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, NEW DELHI D ATED 23.9.2013 PERTAINING TO ASSESSMENT YEAR 2010-11 ON THE FOLLOW ING GROUNDS:- 1. THE ORDER OF LD. CIT(A) IS NOT CORRECT IN LAW AND F ACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION ON ACCOUN T OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INC OME TAX ACT, 1961 AMOUNTING TO RS. 6,26,90,640/-. 2 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY / ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HE ARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THE ASSESSEE HAS FILED ORIGINAL RETURN U/S. 139 OF THE I.T. ACT, 1961 ON 25.3.2011 DECLARI NG AN INCOME OF RS.2,98,62,280/-. THE ASSESSEE HAS SHOWN INCOME F ROM SALARY AT RS. 1,84,50,000/-, INCOME FROM BUSINESS AT RS. 1,0 3,60,022/-, INCOME FROM OTHER SOURCES AT RS. 8,10,945/- AND CAPITAL GA IN OF RS. 3,41,316/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE I.T. ACT, 1961 DATED 29.8.2011 WAS ISSUED AN D SERVED ON THE ASSESSEE. IN THIS CASE, NOTICE U/S. 142(1) OF THE INCOME TAX ACT, 1961 DATED 3.6.2011 WAS ISSUED TO THE ASSESSEE, REQUIRIN G HIM TO FILE THE DETAILS, WHICH WAS REMAINED UN-COMPLIED WITH. THERE AFTER, NOTICE U/S. 143(2) & 142(1) OF THE ACT ALONGWITH QUESTIONNAIRE WERE ISSUED TO THE ASSESSEE ON 28.9.2012 FIXING THE CASE FOR 12.10.201 2. IN RESPONSE THERETO, ASSESSEES A.R. ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILED THE REQUISITE DETAILS. THE AO AFTER CONSIDERI NG THE DETAILS OBSERVED THAT M/S VISHNU APARTMENT PVT. LTD. HAS SOLD 17633 SQ.FT. OF COMMERCIAL SPACE FOR A CONSIDERATION OF RS. 6,26,90,640/- TO M /S SSP DEVELOPERS PVT. LTD. ON 01.12.2009 WITHOUT ANY INVOLVEMENT OF THE ASSESSEE. THE AO HAS ASSESSED THE INCOME OF THE ASSESSEE AT AN INCOM E OF RS. 9,25,52,920/- AFTER MAKING CERTAIN ADDITION OF RS. 6,26,90,640/- AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE I.T. ACT, 1961 VIDE HIS ORDER DATED 28.3.2013 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. 3 3. AGAINST THE AFORESAID ASSESSMENT ORDER, THE ASSE SSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DAT ED 23.9.2013 HAS ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION IN DISPUTE. 4. AGGRIEVED WITH THE IMPUGNED ORDER, THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, LD. DR RELIED UPON THE ORDER PASSED BY THE AO AND REITERATED THE CONTENTIONS RAISED BY THE RE VENUE IN THE GROUNDS OF APPEAL. HE STATED THAT LD. CIT(A) HAS WRONGLY D ELETED THE ADDITION IN DISPUTE, BECAUSE M/S VISHNU APARTMENTS PVT. LTD. (V APL) TRANSFERRED 17,633 SFT COMMERCIAL SPACE ON 1.12.2009 TO M/S SSP DEVELOPERS PVT. LTD. (SSPD) FOR A CONSIDERATION OF RS. 6,26,90,640/ -. SSDP REMAINED A DEBTOR IN THE ACCOUNTS OF VAPL AND VAPL WAS CREDITO R IN THE ACCOUNTS OF SSPD IN RESPECT OF THIS AMOUNT. THE AO MADE THE ADD ITION U/S. 2(22)(E) CONCLUDING THAT AS THE ASSESSEE IS HOLDING INTEREST IN BOTH VAPL AND SSPD, THE SALE OF COMMERCIAL SPACE OF VAPL TO SSPD WAS ACTUALLY PAYMENT IN KIND BY VAPL TO SSPD AND THUS INDIRECTLY WAS A BENEFIT TO THE ASSESSEE CHARGEABLE TO TAX U/S. 2(22)(E). IN VIEW OF THE ABOVE, HE REQUESTED THAT THE IMPUGNED ORDER MAY BE CANCELLED AND ACCORDINGLY, THE APPEAL OF THE REVENUE MAY BE ALLOWED. 6. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND REITERATED THE CONTENTI ONS MADE BEFORE THE LD. CIT(A)S ORDER AT PAGE NO. 3 TO 9, WHICH ARE N OT REPRODUCED HERE FOR THE SAKE OF BREVITY. HE FURTHER STATED THAT SINCE THE LD. CIT(A) HAS 4 PASSED THE WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART. HENCE, THE APPEAL OF THE REVENUE MAY BE D ISMISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REV ENUE AUTHORITIES. WE FIND THAT LD. CIT(A) HAS DISCUSSED THE ISSUE IN DISPUTE ELABORATELY AT PAGE NO. 10 TO 12 VIDE PARA NO. 4.3 TO 4.4. FOR THE SA KE OF CONVENIENCE, WE ARE REPRODUCING HEREWITH THE RELEVANT FINDINGS OF T HE LD. CIT(A) AS UNDER:- 4.3 I HAVE CONSIDERED THE ASSESSMENT ORDER, THE SUBMISSIONS MADE AND THE RIVAL CLAIMS. IT IS NOT DISPUTED THAT THE SUBJECT OF TRANSACTION WAS TRANSF ER OF COMMERCIAL SPACE BY VAPL TO SSPD. IT IS ALSO NOT DISPUTED THAT THE APPELLANT HOLDS INTEREST IN BOTH THE TRANSACTING COMPANIES. IT IS UNDISPUTED THAT THE APPELLANT HELD 50% SHARES IN SSPD. WHILE THE REVE NUE HAS OPINED THAT THE APPELLANT HELD 18.33% SHARES I N VAPL, THE APPELLANT SUBMITS THAT HIS INTEREST WAS D ILUTED TO 5.5.% DUE TO ADDITIONAL ALLOTMENT OF 14,00,000 SHARES TO M/S DISCOVERY ESTATE PVT. LTD. ON 5.5.200 9. THUS, AS ON THE DATE OF TRANSACTION BETWEEN VAPL A ND SSPD, I.E. 1.12.2009, THE APPELLANT HELD 5.5.% SHAR ES IN VAPL AND 50% SHARES IN SSPD. THE WORDS USE IN SECTION 2(22)(E) ARE ANY PAYMENT, AND THE WORD 5 PAYMENT IS NOT DEFINED IN THE ACT. THEREFORE, IT S ORDINARY OR COMMERCIAL MEANING IS TO BE TAKEN. WHIL E CAMBRIDGE DICTIONARY DEFINES PAYMENT AS AN AMOUNT OF MONEY PAID OR REWARD, THE OXFORD DICTIONARY DEFI NES IT AS THE ACTION OR PROCESS OF PAYING SOMEONE OR SOMETHING OR OF BEING PAID'. THUS, IN THE ORDINARY SENSE THE WORD PAYMENT MEANS A PAYMENT OR REWARD OR BENEFIT IN CASH IN CONSIDERATION FOR SOME GOODS OR SERVICES OR FAVOURS. IN THE PRESENT CASE, THE TRANS ACTION IS OF SALE OF COMMERCIAL PROPERTY FOR MONEY BETWEEN TWO COMPANIES. NO DOUBT, THE APPELLANT HOLDS INTERE ST IN BOTH COMPANIES, ALTHOUGH TECHNICALLY HE HELD LESS T HAN 10% INTEREST IN THE TRANSFEROR COMPANY AS ON THE DA TE OF TRANSACTION. THE REVENUE'S SUSPICION AROSE AS TH E APPELLANT WAS HOLDING INTEREST IN BOTH THE TRANSFER OR AND TRANSFEREE COMPANIES, AND THE AMOUNT REMAINED UNPAI D DURING THE YEAR. HOWEVER, THERE IS NO TRANSFER OF F UNDS TO THE APPELLANT AND, THEREFORE, IT CANNOT BE SAID THAT THE APPELLANT HAS RECEIVED 'ANY PAYMENT'. IT IS NOT A CASE OF PAYMENT OF CASH BUT TRANSFER OF ASSETS, AND THE TRANSACTION WAS DULY RECORDED IN THE BOOKS OF BOTH ENTITIES. THESE ACCOUNTING ENTRIES AND THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED OR ASSAILED BY THE REVENUE. FURTHER, THERE IS NO EVIDENCE TO SUGGEST T HAT 6 THE APPELLANT WAS THE REAL BENEFICIARY AND THE TRANSACTION ITSELF WAS SHAM. THUS, THERE APPEARS NO JUSTIFICATION FOR THE ASSUMPTION THAT THE APPELLANT STOOD TO BENEFIT FROM THE TRANSFER. SUSPICION, HOWEVER ST RONG, CANNOT TAKE THE PLACE OF EVIDENCE AS HAS BEEN HELD IN A CATENA OF JUDGMENTS. AS RIGHTLY PLEADED BY LD. AR, THE CASE IS ALSO NOT HIT BY THE PROVISIONS OF SECTION 2 (22)(A) AS IT IS NOT THE CASE OF REVENUE THAT PROFITS HAVE BEEN DISTRIBUTED. THUS, THE ARGUMENT OF THE APPELLANT TH AT VAPL DID NOT HAVE ACCUMULATED PROFITS, OR THAT THE AO WAS WRONG IN CONSIDERING THE ASSESSED INCOME AS PAR T OF ACCUMULATED PROFITS, IS ONLY ACADEMIC AND NOT RELEVANT TO THE CASE. THE PLEA OF THE APPELLANT THA T HE WAS NOT PROVIDED ADEQUATE OPPORTUNITY IS ALSO OF NO CONSEQUENCE AS SUCH OPPORTUNITY WAS AVAILABLE AND AVAILED DURING THESE PROCEEDINGS. 4.4 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS MY CONSIDERED OPINION THAT THERE IS NO BASIS FOR CONCL UDING THAT THE TRANSACTION OF TRANSFER OF COMMERCIAL SPAC E BETWEEN V APL AND SSPD WAS SHAM OR COLOURABIE, AND AMOUNTED TO PAYMENT FOR THE BENEFIT OF THE APPELLAN T. EVEN IF IT WAS FOR THE BENEFIT OF THE APPELLANT, NO MONEY HAS BEEN RECEIVED BY THE APPELLANT AND THE APPELLAN T DID NOT HOLD CONTROLLING SHARES IN THE TRANSFEROR 7 COMPANY. THUS, THE PROVISIONS OF SECTION 2(22)(E) A RE NOT APPLICABLE. THE CASE IS ALSO NOT HIT BY THE PRO VISIONS OF SECTION 2(22)(E). I HOLD ACCORDINGLY. THE ADDITI ON MADE IS DELETED AND THE GROUNDS OF APPEAL ARE ALLOWED. 8. AFTER PERUSING THE AFORESAID FINDING, WE FIND TH AT IT IS NOT DISPUTED THAT THE SUBJECT OF TRANSACTION WAS TRANSFER OF COM MERCIAL SPACE BY VAPL TO SSPD. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HOLDS INTEREST IN BOTH THE TRANSACTING COMPANIES. IT IS UNDISPUTED THAT THE ASSESSEE HELD 50% SHARES IN SSPD. WHILE THE REVENUE HAS OPINED THAT THE ASSESSEE HELD 18.33% SHARES IN VAPL. WE NOTE THAT BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT HIS INTEREST WAS DILUTED TO 5.5.% DUE TO ADDITIONAL ALLOTMENT OF 14,00,000 SHARES TO M/S DI SCOVERY ESTATE PVT. LTD. ON 5.5.2009. THUS, AS ON THE DATE OF TRANSAC TION BETWEEN VAPL AND SSPD, I.E. 1.12.2009, THE ASSESSEE HELD 5.5.% SHARE S IN VAPL AND 50% SHARES IN SSPD. WE FURTHER NOTE THAT THE WORDS USE IN SECTION 2(22)(E) ARE ANY PAYMENT, AND THE WORD PAYMENT IS NOT DE FINED IN THE ACT. THEREFORE, ITS ORDINARY OR COMMERCIAL MEANING IS TO BE TAKEN. WHILE CAMBRIDGE DICTIONARY DEFINES PAYMENT AS AN AMOUNT OF MONEY PAID OR REWARD, THE OXFORD DICTIONARY DEFINES IT AS THE ACTION OR PROCESS OF PAYING SOMEONE OR SOMETHING OR OF BEING PAID'. THUS , IN THE ORDINARY SENSE THE WORD PAYMENT MEANS A PAYMENT OR REWARD OR BENEFIT IN CASH IN CONSIDERATION FOR SOME GOODS OR SERVICES OR FAVOURS . IN THE PRESENT CASE, THE TRANSACTION IS OF SALE OF COMMERCIAL PROPERTY F OR MONEY BETWEEN TWO 8 COMPANIES. NO DOUBT, THE ASSESSEE HOLDS INTEREST IN BOTH COMPANIES, ALTHOUGH TECHNICALLY HE HELD LESS THAN 10% INTEREST IN THE TRANSFEROR COMPANY AS ON THE DATE OF TRANSACTION. THE REVENUE' S SUSPICION AROSE AS THE ASSESSEE WAS HOLDING INTEREST IN BOTH THE TRANS FEROR AND TRANSFEREE COMPANIES, AND THE AMOUNT REMAINED UNPAID DURING TH E YEAR. HOWEVER, THERE IS NO TRANSFER OF FUNDS TO THE ASSESSEE AND, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS RECEIVED 'ANY PAYMENT'. IT IS NOT A CASE OF PAYMENT OF CASH BUT TRANSFER OF ASSETS, AND THE TRA NSACTION WAS DULY RECORDED IN THE BOOKS OF BOTH ENTITIES. THESE ACCOU NTING ENTRIES AND THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED OR ASSAILED BY THE REVENUE. FURTHER, THERE IS NO EVIDENCE TO SUGGEST THAT THE A SSESSEE WAS THE REAL BENEFICIARY AND THE TRANSACTION ITSELF WAS SHAM. TH US, THERE APPEARS NO JUSTIFICATION FOR THE ASSUMPTION THAT THE ASSESSEE STOOD TO BENEFIT FROM THE TRANSFER. SUSPICION, HOWEVER STRONG, CANNOT TAK E THE PLACE OF EVIDENCE AS HAS BEEN HELD IN A CATENA OF JUDGMENTS. WE FURTH ER FIND THAT THE PRESENT CASE IS ALSO NOT HIT BY THE PROVISIONS OF S ECTION 2(22)(A) OF THE ACT AS IT IS NOT THE CASE OF REVENUE THAT PROFITS HAVE BEEN DISTRIBUTED. THUS, THE ARGUMENT OF THE ASSESSEE THAT VAPL DID NOT HAVE ACCUMULATED PROFITS, OR THAT THE AO WAS WRONG IN CONSIDERING THE ASSESSE D INCOME AS PART OF ACCUMULATED PROFITS, IS ONLY ACADEMIC AND NOT RELEV ANT TO THE CASE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE O F THE CONSIDERED VIEW THAT THERE IS NO BASIS FOR CONCLUDING THAT THE TRAN SACTION OF TRANSFER OF COMMERCIAL SPACE BETWEEN VAPL AND SSPD WAS SHAM OR COLOURABLE, AND AMOUNTED TO PAYMENT FOR THE BENEFIT OF THE ASSESSEE . EVEN IF IT WAS FOR 9 THE BENEFIT OF THE ASSESSEE, NO MONEY HAS BEEN RECE IVED BY THE ASSESSEE AND THE ASSESSEE DID NOT HOLD CONTROLLING SHARES IN THE TRANSFEROR COMPANY. THUS, THE PROVISIONS OF SECTION 2(22)(E) A RE NOT APPLICABLE. THE CASE IS ALSO NOT HIT BY THE PROVISIONS OF SECTION 2 (22)(E). THEREFORE, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION/DISALLO WANCE IN DISPUTE BY PASSING A WELL REASONED ORDER, WHICH DOES NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME BY DISMISSING THE A PPEAL FILED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/05/2017. S SS SD DD D/ // /- -- - S SS SD DD D/ // /- -- - [ [[ [P PP PRASHANT MAHARISHI RASHANT MAHARISHI RASHANT MAHARISHI RASHANT MAHARISHI] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 30/05/2017 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES