Appeal details
Counselvise Citation
[2022] 106 COUNSELVISE.COM (IT) 1789 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 11 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-07-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
2012-2013
Appeal Filed On
31-07-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C” DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.4446/DEL/2016 Assessment Year 2012-13 M/s. Jayson Industries, 389, Old Post Office Street, Sadar Bazar, New Delhi. vs. Income Tax Officer, Ward-63(3), New Delhi. TAN/PAN: AAAFJ2205N (Appellant) (Respondent) I.T.A. No.2406/DEL/2018 Assessment Year 2014-15 M/s. Jayson Industries, 389, Old Post Office Street, Sadar Bazar, New Delhi. vs. Income Tax Officer, Ward-63(4), New Delhi. TAN/PAN: AAAFJ2205N (Appellant) (Respondent) I.T.A. No.6440/DEL/2019 Assessment Year 2012-13 M/s. Jayson Industries, 389, Old Post Office Street, Sadar Bazar, New Delhi. vs. Income Tax Officer, Ward-63(3), New Delhi. TAN/PAN: AAAFJ2205N (Appellant) (Respondent) I.T.A. No.9595/DEL/2019 Assessment Year 2014-15 M/s. Jayson Industries, 389, Old Post Office Street, Sadar Bazar, New Delhi. vs. Income Tax Officer, Ward-63(1), New Delhi. TAN/PAN: AAAFJ2205N (Appellant) (Respondent) I.T.As. No.4446/Del/2016, 2406/Del/2018, 6440 & 9595/Del/2019 2 Appellant by: Shri A.K. Srivastava, CA Respondent by: Shri Gurpreet Shah Singh, Sr.DR. Date of hearing: 26 07 2022 Date of pronouncement: 29 07 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: The captioned Appeals arises from the respective orders of CIT(A) for different assessment years tabulated hereunder: ITA No. A.Y. Assessee Assessment order date CIT(A) Order Appeal by 4446/Del/2016 2012-13 M/s. Jayson Industries 30.03.2015 CIT(A)-XX, Gurgaon, order dated 13.06.2016 Assessee 2406/Del/2018 2014-15 M/s. Jayson Industries 30.12.2016 CIT(A)-XX, Gurgaon, order dated 31.01.2018 Assessee 6440/Del/2019 2012-13 M/s. Jayson Industries 30.03.2015 CIT(A)-XX, Gurgaon, order dated 29.05.2019 Assessee 9595/Del/2019 2014-15 M/s. Jayson Industries 29.03.2019 CIT(A)-XX, Gurgaon, order dated 30.09.2019 Assessee 2 . All th e fo u r ap p eals are in terco n n ected p erta in in g to same assesse e an d h av e b een h eard to g eth er. We sh all p rocee d with th e cap tio n ed ap p eal s h ereu n d er: ITA No .4 4 4 6 /Del/2 0 16 (Assessm ent Yea r 2 0 1 2-1 3) 3 . Th e g ro u nd s o f ap p eal ra ised b y th e assesse e read s as u n d er: “ 1 . T h a t o n t h e f a c t s a n d c i rc u m s t a n c e s o f t h e c a se a n d i n l a w, t h e l e a rn e d C o m m i s si o n e r o f I n c o m e - T a x (A p p e a l s ) e rr e d i n u p h o l d i n g t h e a d d i t i o n o f R s . 3 , 1 2 , 6 0 0 / - o u t o f R s. 10 , 4 3 , 2 1 1 / - I.T.As. No.4446/Del/2016, 2406/Del/2018, 6440 & 9595/Del/2019 3 i n c u rr e d o n M o u l d s M a n u f a c t u ri n g & R e p a i r e x p e n s e s, b y a p p l y i n g s e c t i o n 4 0 A (2 ) (b ) o f t h e A c t . 1 . 1 T h a t t h e L e a r n e d A s se s si n g O f f i c e r a s we l l a s th e L e a r n e d Co m m i ss i o n e r o f I n c o m e T a x (A p p e a l s ) f a i l e d t o a p p re c i a t e a n d d i st i n g u i sh t h e se r v i c e s r e n d e r e d b y t h e re l a t e d p ar t y a n d o t h e r p a rt i e s. 1 . 2 T h a t t h e o b se r v a t i o n o f t h e L e a rn e d Co m m i ss i o ne r o f I n c o m e T a x (A p p e a l s ) t h a t t h e A O h a s c o m p a re d t h e CN C / A M C c h a n g e s f o r M o u l d s i n t h e m a rk e t , b e i n g f a c t u a l l y in c o r r e c t a n d n o t b a se d o n a n y e v i d e n c e , t h e d i s a l l o w a n c e m a d e i n a s se s s m e n t d e se r v e s t o b e d e l e t e d . 2 . T h a t o n t h e f a c t s a n d c i rc u m s t a n c e s o f t h e c a se a n d i n l a w, t h e l e a rn e d C o m m i s si o n e r o f I n c o m e - T a x (A p p e a l s ) e rr e d i n u p h o l d i n g t h e a d d i t i o n o f R s . 2 5 , 4 3 , 2 6 2 / - u / s. 2 (2 2) (e ) o f t h e A c t , a s d e e m e d d i v i d e n d . 2 . 1 T h a t t h e L e a rn e d C o m m i s si o n e r o f I n c o m e T a x (A pp e a l s ) a s w e l l a s t h e L e a r n e d A s s e ss i n g O f f i c e r o u g h t t o ha v e h e l d t h a t t h e a s s e ss e e n o t b e i n g a sh a r e h o l d e r o f t h e L e n d e r c o m p a n y , n o a d d i t i o n c o u l d b e m a d e t o i t s i n c o m e u / s 2 (2 2 ) (e ) of t h e A c t . 3 . WI T H O U T P R E J U D I CE t o g ro u n d n o . s 2 & 2 . 1 a b o v e , t h e L e a r n e d C o m m i s si o n e r o f I n c o m e T a x ( A p p e a l s ) e r r e d i n h o l d i n g t h a t g ra n t i n g o f l o a n s w a s n o t " S u b s t a n t i a l B u s i n e ss " o f t h e l e n d e r . 4 . T h a t t h e l o we r a u t h o r i t i e s f a i l e d t o a p p r e c i a t e t h e n a t u r e o f a p p e l l a n t s' b u s i n e s s a n d i n h o l d i n g t h e e x p e n d i tu r e a s p e r so n a l i n n a t u r e , wi t h o u t b ri n g i n g a n y e v i d e n c e on re c o r d t h a t t h e sa m e w e re p e rs o n a l i n n a t u r e . ” I.T.As. No.4446/Del/2016, 2406/Del/2018, 6440 & 9595/Del/2019 4 3 .1 Gro un d No .1 o f th e ap p eal o f th e assesse e c o n cerns d isal lo wan ce o f R s.3 ,1 2 ,6 0 0 /- by inv o k in g Sectio n 40A(2 )(b ) o f th e Act . 3 .2 It is th e ca se o f th e assesse e th at th e act io n s o f th e Re v en ue au th o ritie s are misco n ceiv ed o n facts an d law. Th e assessee co n ten d s th at b o th Assessin g Offi cer an d CIT(A) mi sd irec ted th ems elv es in mak in g d isal lo wan ces o n factu a lly in co rrect p remise . With re fe ren ce to th e P&L acco u n t an d th e su b missio n s mad e b e fo re th e C IT(A) on factu al p o sitio n , it was co n ten d ed th at th e Assessin g Officer h as co mp ared th e ex p en ses in cu rred an d p aid to th e sister co n cern , Jay p ee Teh n op last Pv t. Ltd ., with o u tsid e p arty , n amely , Kals i Mo u ld an d Dy es wh ereas th e n atu re o f serv ice s ren d ered b y bo th th e en ti t ies are wh o lly d ifferen t. Th e assesse e p o in ts o u t th at th e en t ity , n a me ly , Kals i Mo u ld an d Dy es ten d ers serv ices in CNC (Co mp u terized Nu meri cal M i ll in g Mach in e) seg men t wh ereas th e sis te r co n cern h as prov id ed AMC serv ices. With re feren ce to th e su b miss io n s mad e b efo re th e CIT(A), th e assess ee su b mi ts th at th e assesse e is en g ag ed in th e b u sin ess o f man u fac tu rin g o f p las t ic g o o d s an d h as o b tain ed serv ices u n d er AMC re la ted to Mo u ld Man u fac tu rin g an d Rep a ir Ex p en ses fro m th e rela ted p arty an d CNC Serv ices fro m u n rela ted p arty an d b o th th e serv ices are n o t co mp arab le an d th u s can n o t b e th e b asis fo r d eter min a tio n o f fa ir mark et v alu e b y in vo k in g the p ro v isio n s o f Sec ti o n 4 0A(2 )(b ) o f th e Act . 3 .3 We fin d ju st i fic at i o n in th e c ase ma d e o u t o n beh alf o f th e assesse e. Wh ile th e assesse e h as d emo n strat ed th at th e n atu re o f serv ices are d i ffer en t, th e CIT(A) h as co n firmed the ac tio n o f th e I.T.As. No.4446/Del/2016, 2406/Del/2018, 6440 & 9595/Del/2019 5 Assessin g Offi cer with o u t tak in g co g n izan ce o f su ch fac ts . Seco n d ly , th e CIT(A) h as o b serv ed th at th e Assessing Officer h as mad e d is al lo wan ce to ward s ex cessi v e p ay men t to re l ativ e p ar ty u n d er Sectio n 4 0A(2 )(b ) on th e b asis o f fair mark et v alu e b u t h o wev er th e sou rce o f fa ir mark et v alu e is in u n kn own territo ry . Ex cep t fo r th e co mp ariso n with th e amo u n t p aid to Kals i Mo u ld an d Dy es v is-à-v is amo u n t p aid to sis ter co n ce rn (Jay p ee Tech n o p last Pv t. Ltd . wh ich are st ate ly en g ag ed in ren d ering d ifferen t s erv ices an d also , o n e is ti me b ased o n seamless b asi s wh ile o th er is esse n tia lly serv i ce b as ed , th e co mp ariso n is rig h t ly cla i med to b e u n ju sti fiab le . We th u s fin d meri t in th e p lea o f th e assesse e fo r lack o f so u n d b asis fo r d etermin at io n o f ‘fa ir mark e t v alu e’ an d con sequ en t in ap p licab i li t y o f Sectio n 4 0A(2 )(b ) in th e fac ts o f th e case . We th u s set asid e th e act io n o f th e Rev en u e Au th o rities an d re sto re th e s tan ce o f th e ass essee . Gro u n d no .1 o f th e ap p eal o f th e a ssessee is a llo wed . 3 .4 In th e resu lt, Grou n d No .1 o f th e ap p eal o f th e asses see is allo wed . 4 . Gro un d No .2 con cern s ad d itio n o f Rs.2 5 ,4 3 ,2 6 2 u nd er Sect io n 2 (2 2 )(e) o f th e Ac t. 4 .1 Brie fly st at ed , th e assesse e (p artn er firm) o b tain ed lo an fro m th e sis ter co n cern , n ame ly , M/s . Jay p ee Tech n o p last Pv t . Ltd . On e o f th e p artn ers o f th e firm, Ms . An it a Jain h o ld in g p rofi t sh arin g ratio o f 2 5 % in th e fir m (recip ien t o f lo an ) is also h o ld in g 1 4 .5 2% sh ares in th e len d er co mp an y , n ame ly , M /s. J ay p ee Tech n o p last Pv t. Ltd . Th e asse s see fir m h ere in o b tain ed lo an o f Rs.3 2 lac fro m th e co mp an y as o n 3 1 .0 3 .2 01 2 . Th e Assessin g Offic er in v o k ed th e p ro v isio n s o f Secti o n 2(2 2)(e) on th ese fa cts an d mad e an ad d itio n I.T.As. No.4446/Del/2016, 2406/Del/2018, 6440 & 9595/Del/2019 6 o f Rs.2 5 ,4 3 ,2 6 2 /- i.e. to th e ex ten t o f accu mu l at ed p ro fits ly in g as reserv e an d su rp lu s o f th e len d er co mp an y with referen c e to Sect io n 2 (2 2 )(e) o f th e Ac t. 4 .2 Befo re th e CIT(A), th e assesse e co n ten d ed th at th e assessee- fir m h as tak en th e lo an o n co mmerc i al ter ms an d p aid in teres t @ 1 2 % to th e len d er co mp an y . It was fu rth er p o in ted ou t th at th e su b stan tia l b u sin e ss o f th e len d er c o mp an y was to ad v an ce lo an an d th erefo re, Sec t io n 2 (22 )(e) h as no ap p licab il i ty in t h e fac ts o f th e ca se. Th e CIT(A) h owev er co n fi rmed th e ad d i tio ns mad e b y th e Assessin g Offi cer. Th e CIT(A) rejec ted th e co n ten tio n o f th e assesse e th a t th e ma in b u sin ess o f t h e len d er co mp an y is p last ic man u fa ctu rin g wh ich can n o t b e eq u ated with th e su b stan tia l b u sin ess. 4 .3 Befo re u s, th e p l ea tak en o n b eh alf o f th e assesse e is su mmariz ed h ereu n d er: (i) th e lo an h as b een o b tain ed by th e assessee o n pay men t o f in teres t in o rd in ary co u rse o f bu sin ess o f l en d in g b y th e len d er co mp an y . (ii) th e ‘su b stan tia l b u sin ess’ n eed n o t b e ‘ma in bu sin ess’ o f th e ass essee in th e l ig h t o f th e ju d g men ts in th e case o f CIT vs. Pa r le P la st ic L td ., (2 0 1 1 ) 3 3 2 ITR 6 3 (Mu m) an d C IT vs. Bh a ra t Ho tels L td . , (2 0 1 9 ) 4 1 0 ITR 41 7 (Del ). (ii i) th e assess ee firm in its el f h as n eith er in v ested it s o wn fu n d s in th e len d er co mp an y d irect ly o r th ro ug h its p artn ers n o r th e assessee fir m is a sh are h o ld er o f th e le n d in g co mp an y an d th u s th e rat io o f ju d g men t o f Ho n ’b le Delh i I.T.As. No.4446/Del/2016, 2406/Del/2018, 6440 & 9595/Del/2019 7 Hig h Co u rt in th e case o f CIT v s. A n kite ch (P ) L td . (2 0 12 ) 3 4 0 ITR 1 4 (Del) a n d th e ratio o f judg men t o f Ho n ’b le Ap ex Co u rt in th e ca s e o f Ma d h u r Hou sin g a n d Develo p ment Co mp an y, (2 0 1 8 ) 4 0 1 ITR 1 52 (S C) sh all sq u arely ap p ly and th u s n o ad d itio n is p ermiss ib le in th e ab sen ce o f th e ass essee fir m b ein g n eith er reg istered sh areh o ld er n o r a b enefici al sh areh o ld er in th e len d er co mp an y . 4 .4 On carefu l co n sid e ratio n o f th e fa cts an d arg u men ts n arrated ab o v e, we n o tice a t th e o u tse t th at th e asse ssee fir m h a s o b tain ed lo an s fro m th e s ist er co n cern o n co mmerc ia l b as is. On facts i t h as emerg ed th a t th e l en d er co mp an y h as ch arg ed in terest o n ad v an ces mad e to asse ssee fir m. Th e asse s see h as tak en p lea th at th e ad v an ces mad e b y th e len d er co mp a n y to th e b o rrower assesse e fir m i s n o t a lo an / ad v an ce b u t is b eset with th e charac t er o f q u id p ro qu o owin g to ch arg e o f in tere st fo r th e b en e fi t o f lend er co mp an y . In th e c ircu ms tan ces , th e Ho n ’b le Ca lcu t ta Hig h Co u rt in th e cas e o f Pr a d ip Ku ma r Ma lh o tra vs. CIT, (2 0 1 1 ) 3 3 8 ITR 5 3 8 (Ca l. ) h as o b serv ed th at ad v an ces g iv en b y len d e r firm was n o t fo r th e in d iv id u al b en efit o f th e sh areh o ld er bu t fo r b u sin ess p u rpo ses an d th erefo re su ch tran sac ti o n s co u ld no t fal l with in th e sweep o f d eemin g fic tio n creat ed un d er Sectio n 2 (2 2)(e) o f th e Act. Th is rea so n o n a st an d alo n e b as is is su ffic ient to ex clu d e th e ap p licab i l ity o f S e ctio n 2 (2 2 )(e) o f th e Act o n th e mo n ey receiv ed b y th e assess ee firm. Si milar v iew h a s b een ex p ressed i n PCIT vs. Mo h an Bh ag wa tp ra sa d Ag ra wa l, (2 0 20 ) 1 1 5 ta xman n .co m 69 (Gu j. ). Also , th e s ame v iew h as b een fo l lo wed b y th e C o -ord in ate Ben ch o f th e Tri b u n al in S mt. S an g eeta Ja in vs. ITO in ITA No .1 8 1 7 /Ko l/2 0 0 9 ; Assessmen t Yea r 2 00 6 -0 7 , o rd er d ated 11 t h Ma rch , 2 01 6. Hence, th e lo an o b tai n ed b ein g no t g ratu ito u s in I.T.As. No.4446/Del/2016, 2406/Del/2018, 6440 & 9595/Del/2019 8 n atu re, d o n o t fal l with in th e misch i ef o f Se ct io n 2 (2 2)(e) o f th e Act. We th u s o p in e th a t th e ac t io n o f th e Assess in g Offi cer ru n s co u n ter to th e man d ate o f Sec tio n 2 (22 )(e) o f th e Act o n th is sco re alo n e. Hen ce, we are n o t in clin ed to ex amin e o th e r li mb s o f arg u men ts ra ised o n b eh alf o f th e ass essee . 4 .5 In th e resu lt, Grou n d No .2 o f th e ap p eal o f th e asses see is allo wed . ITA No .2 4 0 6 /Del/2 0 18 (Assessm ent Yea r 2 0 1 4-1 5) 5 . As p er its g ro u nd s o f ap p eal, th e asse ssee h as ch allen g e d th e ad d itio n o f Rs .8 ,6 0 ,0 0 6 /- u n d er Secti o n 2 (22 )(e) of th e Act. 5 .1 Th e fact s o f th e i ssu e b ein g simi lar to th e Grou nd No .2 o f th e ap p eal in ITA No .4 4 46 /Del/2 0 1 5 , th e o b serv at io ns mad e in ITA No .4 44 6 /Del/ 2 0 15 sh all ap p ly mu ta tis mu ta n d is to th e fac ts o f th is cas e. Hen ce, we see n o ju stific atio n in ad d it io n s mad e u n d er Sect io n 2 (2 2 )(e) o f th e Ac t. 5 .2 In th e resu l t, th e a p p eal o f th e asses s ee is a llo wed . ITA No s. 6 6 4 0 /Del/2 0 1 9 (Assessm ent Yea r 2 012 -1 3) a nd 9 5 95 /Del/2 0 1 9 (Assessm ent Yea r 2 01 4 -15 ) 6 . Bo th th ese ap p eals co n cern i mp o sitio n o f p en alt y o f Rs.8 ,8 2 ,4 6 2 /- (Assessmen t Year 2 0 1 2 -1 3 ) and Rs.3 ,5 0,0 00 /- (Assessmen t Year 2 0 14 -15 ) u n d er Sectio n 2 7 1 (1 )(c) of th e Act in co n seq u en ce o f q u an tu m ad d i tio n s d iscu ssed in ITA No .4 44 6 /Del/2 0 1 6 (Assessmen t Year 2 0 12 -13 ) an d ITA No .2 40 6 /Del/2 0 1 8 (Assessmen t Year 2 0 14 -15 ). 7 . In ou r con sid ered op in io n , th e pen alty i mp o sed un d er I.T.As. No.4446/Del/2016, 2406/Del/2018, 6440 & 9595/Del/2019 9 Sect io n 2 7 1 (1 )(c) can n o t su rv iv e fo r twin reaso n s; (i) th e q u an tu m ad d it io n s i tse lf is d ev o id o f mer it. (ii) th e issu e in v o lv ed , a t an y rat e, i s h ig h ly d eb atab l e an d th u s n o case o f an y co n cealmen t o f in co me / fu rn ish ing o f in accu rat e p artic u lars o f in co me p er se cou ld b e su ccess fu lly mad e o u t b y th e Rev en u e . 8 . Th e p en alty i mp o s ed b y th e Rev en u e are th u s rev ersed and can cel led . 9 . In th e resu l t, b o th th e ap p eal s o f th e assesse e are a llo wed . 1 0 . In th e co mb in ed resu lt, al l th e fo u r cap tio n ed ap p eals o f th e assesse e are a llo wed . Order pronounced in the open Court on 29/07/2022. Sd/- Sd/- [KUL BHARAT] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /07/2022 Prabhat
