ROSHAN SEQUEIRA, MUMBAI V. DCIT 20(2), MUMBAI

ITA 6560/MUM/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3756 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIYA
• Keywords: Salary income; Deemed dividend
• Section: 2(22)(e); 143(1)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE SH. SHAMIM YAHYA , AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 6560/MUM/2014 ( / ASSESSMENT YEAR: 2009 - 10 ) R OSHAN SEQUEIRA, IQN DATA SOLLUTIONS PVT. LTD, 347 LAXMI PLAZA, LAXMI INDL. ESTATE, ANDHERI LINK ROAD, ANDHERI (EAST) , MUMBAI - 400 053 / VS. DCIT 20(2 ) , PIRAMAL CHAMBERS, MUMBAI - 400 012 ./ ./ PAN NO. A SBP S3025N ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENTBY : SHRI CHAITANYA ANJARIYA , D R / DATE OF HEARING : 04 .12 .2018 / DATE OF PRONOUNCEMENT : 11.02.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 31 , MUMBAI DATED 08.09.2014 F OR AY 2009 - 10 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN ADDING RS 77,30,469/ - UNDER THE HEAD INCOME FROM SALARY OF THE APPELLANT BY OVERLOOKING THE FACT THAT THE COMMISSION RECEIVED WAS PURELY IN CONNECTION WITH THE GROWTH OF THE BUSINESS BY INTRODUCING CLIENTS AND NOT AS PER THE TERMS OF EMPLOYMENT. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN DISREGARDING THE FACT THAT TOTAL EXPEN SES AMOUNTING TO RS. 42,41,577/ - IS DISALLOWED BY THE ASSESSING OFFICER IN THE HANDS OF THE APPELLANT EVEN THOUGH THE SAME HAS NOT BEEN CLAIMED BY THE SAID M/S I QN DATA SOLUTIONS PVT LTD. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN ADDING RS 15,75,000/ - RECEIVED BY THE APPELLANT AS DEEMED DIVIDEND BY DISREGARDING THE FACT THAT THE SAME WAS RECEIVED AS AN ADVANCE AGAINST IN TERIM DIVIDEND DECLARED BY M/S IQN DATA SOLUTION PVT LTD. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) ALSO ERRED IN CONFIRMING THE SAME WITHOUT APPRECIATING THE MERITS. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED WRONGLY CHARGING INTEREST 3 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA U/S 234A, B, C IN INITIATING PENALTY U/S 274 R W S 271 (1) (C). [ B] RELIEF PRAYED: THE APPELLANT THEREFORE PRAYS AS FOLLOWS, 1. TO DELETE ADDITION OF RS 77,30,4697 - UNDER THE HEAD INCOME FROM SALARY RECEIVED FROM THE EMPLOYER M/S IQN DATA SOLUTION PVT LTD. 2. TO ALLOW THE EXPENSES OF RS. 42,41,5777 - IN THE HANDS OF THE APPELLANT. 3. TO DELETE ADDITION OF RS 15,75,000/ - ON ACCOUNT OF DEEMED DIVIDEND. 4. TO DELE TE INTEREST CHARGED U/S 234A, B, C & D AND INITIATION OF PENALTY U/S 271( 1 )(C). [C] GENERAL: - THE APPELLANT RESERVE RIGHTS TO ADD ALTER OR DELETE ANY PORTION OF THIS APPEAL BEFORE ITS CONCLUSION. THIS APPEAL IS FILED IN TIME AND MAY PLEASE B E ALLOWED IN FULL. A DETAILED PAPER BOOK ALONG WITH CASE LAWS WILL BE SUBMITTED AT THE TIME OF HEARING. 4 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA 2. AT THE VERY OUTSET, IT IS NOTICED THAT NONE HAS APPEARED ON BEHALF OF ASSESSEE IN SPITE OF CALLS AND EVEN NO APPLICATION FOR ADJOURNMENT WAS MOVED. FROM THE ORDERSHEETS, WE NOTICED THAT NOBODY WAS APPEARING ON BEHALF OF THE ASSESSEE AND EVEN PREVIOUS NOTICES ISSUED TO THE ASSESSEE HAD RETURNED BACK WITH THE REPORT LEFT. IN SUCH CIRCUMSTANCES, THE ASSESSEE WAS UNDER OBLIGATION TO INTIMATE THE NEW ADDRESS TO THE DEPARTMENT BUT THE SAME HAS NOT BEEN DONE. THEREFORE IN THESE CIRCUMSTANCES, WE ARE LEFT WITH NO OTHER OPTION EXCEPT TO PROCEED THE ASSESSEE EX - PARTE AS THE PRESENT APPEAL PERTAINS TO THE YEAR 2014. ON THE OTHER HAND L D. DR IS PRESENT IN THE COURT AND IS READY WITH ARGUMENTS. THEREFORE WE HAVE DECIDED TO PROCEED WITH THE HEARING OF THE CASE EX - PA RTE WITH THE ASSISTANCE OF THE L D. DR AND THE MATERIAL PLACED ON RECORD. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND E - FILED HIS RETURN OF INCOME FOR AY 2009 - 10 ON 30.09.09 DECLARING TOTAL INCOME OF RS. 43,41,090/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, INFORMA TION RECEIVED THAT THE ASSESSEE HA S TAKEN A LOAN OF RS . 15,75,000/ - 5 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA FROM M/S IQN DATA SOLUTION PVT LTD, WHEREIN HE WAS ONE OF THE DIRECTORS, AND HENCE THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE APPLICABLE IN THIS CASE. ACCORDINGLY, THE ASSESSMENT PROCEEDINGS IN THIS CASE WERE REOPENED. DURING THE COURS E OF RE - ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAD RECEIVED LOAN OF RS. 15,75,000/ - FROM THE COMPANY M/S IQN DATA SOLUTIONS PVT. LTD. HE FUR THER OBSERVED THAT THE ASSESSEE WAS A DIRECTOR IN THE SAID COMPANY AND WAS HOLDING 50% SHARES. ACCOR DINGLY HE ASKED THE ASSESSEE TO EXPLAIN WHY THIS AMOUNT SHOULD NOT BE TAXED AS 'DEEMED DIVIDEND' U/S 2(22)(E). THE ASSESSEE SUBMITTED THAT ON 01/04/2008, THE COMPANY HAD DECLARED INTERIM DIVIDEND OF RS. 33,60,000/ - AND THAT EACH OF THE DIRECTORS WERE ACCOR DINGLY ELIGIBLE TO RECEIVE DIVIDEND OF RS.16,80,000/ - . IT WAS FURTHER STATED THAT AGAINST THIS THE DIRECTORS OF THE COMPANY HAD WITHDRAWN DIVIDEND WHICH WAS DEBITED TO THE ADVANCE COMMISSION ACCOUNT AND THAT PENDING THE FINAL DIVIDEND THE SAID AMOUNT HAD B EEN KEPT TO THE CREDIT OF THE INTERIM DIVIDEND ACCOUNT. THE ASSESSEE ALSO SUBMITTED THAT THE COMBINED LEDGER ACCOUNT INCORPORATING INTERIM DIVIDEND IN ADVANCE COMMISSION ACCOUNT FOR THE PERUSAL OF THE AO. TH E AO OBSERVED THAT THE 6 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA ASSESSEE 'S SUBMISSIONS WER E NOT ACCEPTABLE SINCE INTERIM DIVIDEND WAS GENERALLY DECLARED BY THE BOARD OF DIRECTORS AFTER REVIEWING OPERATIONS FOR AT LEAST SOME PERIOD DURING THE YEAR UNDER REFERENCE AND NOT ON THE FIRST DAY OF THE YEAR ITSELF. FOR THESE REASONS, HE PROCEEDED TO ADD THE AMOUNT OF RS. 15,75,000/ - BACK TO THE RETURNED INCOME OF THE ASSESSEE . AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESS EE . NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APP EAL BY RAISING THE ABOVE GROUND . GROUND NO. 1 & 2 4 . THE SE GROUND S RAISED BY THE ASSESSEE ARE INTER CONNECTED AND INTER RELATED AND RELATES TO CHA LLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ADDIT ION UNDER THE HEAD INCOME FROM SALARY RECEIVED AND DISREGARDING THE EXPENSES IN THE HANDS OF THE ASSESSEE, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 7 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA 5 . WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD , JUDGMENT CITED BY LD. DR AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUND RAISED BY THE AS SESSEE IN PARA NO. 5.2 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 5.2 . IN VIEW OF THE MATERIAL FACTS BEING UNCHANGED FROM THE PRECEDING YEAR, FOLLOWING THE REASONING GIVEN IN MY ORDER FOR A.Y. 2009 - 10, I HOLD THAT THAT THE COMMISSION OF RS. 77,30,469 / - RECEIVED BY THE APPELLANT, IS PART OF SALARY AND IN ACCORDANCE WITH THE PROVISIONS OF THE STATUTE, THE EXPENSES CLAIMED AGAINST THE SAME ARE NOT ALLOWABLE AS DEDUCTIONS. THE TOTAL COMMISSION OF RS.77,30,469/ - WILL BE ASSESSABLE IN THE HANDS OF THE APPEL LANT AS SALARY INCOME. AS PER THE COMPUTATION OF TOTAL INCOME IN THE IMPUGNED ASSESSMENT ORDER, I FIND THAT THE A.O. HAS ADDED AN AMOUNT OF RS.85,64,369/ - TO THE INCOME OF RS.8,33,900/ - ALREADY DECLARED BY THE APPELLANT. AS PER PARA 6 OF THE IMPUGNED ASSE SSMENT ORDER, THE AMOUNT OF RS.85,64,369/ - COMPRISES RS.8,33,900/ - (SALARY DECLARED BY THE A PPELLANT) AND RS.77,30,469/ - (COMMISSION RECEIVED BY THE APPELLANT). THIS HAS 8 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA RESULTED IN THE AMOUNT OF RS.8,33,900/ - BEING ADDED TWICE AND ACCORDINGLY, THE A.O. IS DIRECTED TO REDUCE THIS ADDITION BY RS.8,33,900/ - . THESE GROUNDS ARE THEREFORE PARTLY ALLOWED. 6. AFTER HAVING GONE THROUGH THE ORDERS PASSED BY REVENUE AUTHORITIES AS WELL AS ORDERS PASSED BY REVENUE AUTHORITIES AND CONSIDERING THE FACTS AS DISCUSSED ABOVE, WE FIND THAT LD. CIT(A) AFTER APPREC IATING THE FACTS OF THE CASE HAD RIGHTLY CONCLUDED THAT THE COMMISSION INCOME RECEIVED BY THE ASSESSEE IS TAXABLE AS INCOME FROM SALARY AND THE ORDER OF LD. CIT(A) WAS BASED ON THE REASONING GIVEN IN THE EARLIER YEARS ORDER FOR AY 2009 - 10 AND THUS IN THIS WAY THE TOTAL COMMISSION WAS RIGHTLY ASSESSED AS SALARY IN THE HANDS OF THE ASSESSEE. 7. EVEN BEFORE US, N O NEW FACTS O R CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE 9 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED . GROUND NO. 3. 8 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN MAKING ADDITION OF RS. 15,75,000/ - RECEIVED BY THE ASSESSEE AS DEEMED DIVIDEND. 9 . WE HAVE HEARD LD. DR AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY LD. DR AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUND RAISED BY THE ASSESSEE IN PARA NO. 5 .3 & 5.3.1 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 5.3 IN GROUN D NO. 3, THE APPELLANT HAS CHALLENGED THE ADDITION OF RS.15,75,000/ - TO THE RETURNED INCOME OF THE APPELLANT U/S 2(22)(E).DURING ASSESSMENT PROCEEDINGS THE AO RECEIVED INFORMATION FROM DCIT, RANGE - 8(2), MUMBAI THAT THE APPELLANT HAD RECEIVED 10 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA LOAN FROM THE SAID COMPANY. THE AO ACCORDINGLY ASKED THE APPELLANT TO EXPLAIN WHY THE LOAN AMOUNTING TO RS. 15,75,000/ - SHOULD NOT BE ADDED BACK TO HIS RETURNED INCOME AS 'DEEMED DIVIDEND?' THE APPELLANT SUBMITTED THAT THE DIRECTORS OF THE COMPANY HAD WITHDRAWN SAID DIV IDEND WHICH WAS DEBITED TO THE ADVANCE COMMISSION ACCOUNT AND THAT PENDING FINAL DIVIDEND THE SAID AMOUNT WAS CREDITED IN THE 'INTERIM DIVIDEND ACCOUNT'. IN APPEAL, THE CONTENTIONS RAISED BEFORE THE AO HAVE BEEN REPEATED. ON PERUSAL OF THE DOCUMENT SUBMITT ED IN THE PAPER BOOK FILED BY THE APPELLANT DURING THESE PROCEEDINGS, I FIND THAT IN SUPPORT OF HIS CONTENTION THE APPELLANT HAS FURNISHED THE COPY OF THE LEDGER ACCOUNT ENTITLED 'ROSHAN SEQUEAIRA' WHICH READS AS UNDER: ROSHAN SEQUEAIRA IQN SOLUTIONS PVT LTD LEDGER ACCOUNT 1 - APR - 2008 TO 31 - MAR - 2009 DATE PARTICULARS VCH TYPE VCH NO DEBIT CREDIT 1 - 4 - 2008 OPENING BALANCE 9,75,000 1 - 4 - 2008 CR DIVIDEND FROM IQN JOURNAL 2 16,80,000 08 - 06 - 2008 DR CITI BANK CITI BANK - RECEIPT CITI/REC/12 2,00,000 04 - 10 - 2008 DR CITI BANK CITI BANK - RECEIPT CITI/REC/42 4,00,000 16,80,000 15,75,00 0 DR CLOSING BALANCE 1,05,000 16,80,000 16,80,000 11 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA 5.3.1 AS IS EVIDENT FROM THE ABOVE, THE ACCOUNT REFLECTS THE CREDIT OF RS.16,80,000/ - WITH THE NARRATION 'DIVIDEND FROM IQN' WITH SUBSEQUENT DEBITS TOTALING RS.6,00,000/ - . EVEN DURING THESE PROCEEDINGS, THE APPELLANT HAS BEEN UNABLE TO EXPLAIN AS TO WHY THE DIVI DEND (INTERIM OR OTHERWISE) IS CREDITED TO SUCH ACCOUNT OR EVEN WHY THERE IS A NEGATIVE OPENING BALANCE IN THE ACCOUNT. IT IS ONLY ARGUED THAT THE NOMENCLATURE WAS ERRONEOUSLY GIVEN BY THE THEN ACCOUNTANT. THE FACT REMAINS THAT THE APPELLANT AND ONE SHRI D EEPAK SITLANI ARE THE ONLY TWO DIRECTORS THE COMPANY M/S IQN DATA SOLUTIONS PVT. LTD. THE BOARD RESOLUTION DATED 01.04.2008, IS SIGNED BY THE SECOND DIRECT I.E. SHRI DEEPAK SITLANI, AND AS SUCH APPEARS TO BE A SELF - SERVING DOCUMENT. NO EXPLANATION IS GIVEN AS TO WHY THE AMOUNT OF 'INTERIM DIVIDEND' IS CREDITED AT THE BEGINNING OF THE FINANCIAL YEAR OR EVEN WHY SUCH DIVIDEND IS CREDITED TO THE LOAN ACCOUNT. COMMISSION ENTRIES ARE ALSO NOT FORMING PART OF THE SAID ACCOUNT. NO CORRESPONDING DETAILS ARE FURNISH ED WITH REGARD TO THE SECOND DIRECTOR MR. DEEPAK SITLANI. THUS THE ARGUMENTS OF THE APPELLANT SEEKING TO LINK THE INTERIM DIVIDEND WITH THE LOAN AMOUNT LACKS FORCE AND BEAR THE DISTINCT TINGE OF AFTERTHOUGHT. IN VIEW OF THESE FACTS, I UPHOLD THE ADDITION O F RS.15,75,000/ - IN THE HANDS OF THE APPELLANT AS DEEMED DIVIDEND AND THE GROUND RAISED BY THE APPELLANT IS DISMISSED. 12 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA 10 . AFTER HAVING GONE THROUGH THE ORDERS PASSED BY THE REVENUE AUTHORITIES AND CONSIDERING THE FACTS AS DISCUSSED ABOVE, WE FIND THAT DUR ING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAD NOT BEEN ABLE TO EXPLAIN AS TO WHY THE DIVIDEND IS CREDITED TO SUCH ACCOUNT OR WHY THERE WAS A NEGATIVE OPENING BALANCE. LD. CIT(A) AFTER APPRECIATING THE FACTS OF THE CASE HAD RIGHTLY CONCLUDED THAT N O CORR ESPONDING DETAILS WERE FURNISHED WITH REGARD TO THE SECOND DIRECTOR MR. DEEPAK SITLANI. THUS THE ADDITIONS IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND WAS RIGHTLY UPHELD. 11 . EVEN BEFORE US, N O NEW FACTS O R CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED . 13 I.T.A. NO. 6560 /MUM/201 4 ROSHAN SEQUEIRA 12 . IN THE NET RESULT , THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED W ITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH FEB , 2019. SD/ - SD/ - ( SHAMIM YAHYA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 11 . 02 .201 9 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI