Jethanand M. Jagwani, Mumbai V. Income Tax Officer, Jalgaon

ITA 706/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2749 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-01-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KHUSHIRAM JADHWANI
• Keywords: Deemed dividend
• Section: 2(22)(e)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 706 /P U N/201 7 / ASSESSM ENT YEAR : 20 1 0 - 11 JETHANAND M. JAGWANI, AMBIKA BHAWAN, 801, GURU GANESHWAR, 11 TH ROAD, KHAR (W), MUMBAI 400052 PAN :ACXPJ0671P . / APPELLANT VS. THE INCOME TAX OFFICER , WARD 2 (3), JALGAON . / RESPONDEN T / APPELLANT BY : SHRI KHUSHIRAM JADHWANI / RESPONDENT BY : S HRI RAJESH GAWALI / DATE OF HEARING : 16.01.2019 / DATE OF PRONOUNCEMENT: 26 . 0 2 .201 9 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, NASHIK DATED 02.02.2017 RELATING TO ASSESSMENT YEAR 2010 - 11 AGAINST ORDER PASSED UNDER SECTION 14 3(3) R.W.S. 147 OF THE INCOME - TAX ACT , 19 61 (IN SHORT THE ACT) . ITA NO. 706 /PUN/2017 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: - 1 . BECAUSE, THE CIT(A) ERRED IN CONFIRMING THE ADDITION U/S. 2(22)(E) OF THE ACT, TO THE TUNE OF RS.6,07,080/ - DEVOID OF MERITS OF THE CASE THAT THE ADDITIONS IS NOT SUST AINABLE AT ALL. 2. BECAUSE, LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE MERITS OF THE DOCUMENTS AND DETAILS FURNISHED DURING THE COURSE OF APPELLATE PROCEEDINGS IN RELATION TO ADDITIONS MADE BY ITO U/S. 2(22)(E) TO THE TUNE OF RS.15,13,7 84/ - CONFIRMED TO THE EXTENT OF RS.6,07,080/ - . 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE ADDITION MADE U/S. 2(22)(E) OF THE ACT AT RS.6,07,080/ - . 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.13,75,850/ - . THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD TAKEN MONEY FROM LAXMI GLOBAL EXPORT IMPORT PVT. LTD. AND THERE WAS AN OPENING BALANCE OF RS.51,32,132/ - AND CLOSING B ALANCE OF RS.30,60,407/ - . THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD TAKEN MONEY FROM THE COMPANY IN WHICH THE PUBLIC WAS NOT SUBSTANTIALLY INTERESTED AND SINCE THE ASSESSEE HAD BENEFICIAL SHARE HOLDING IN THE SAID COMPANY, THE PROVISIONS OF SEC TION 2(22)(E) OF THE ACT WERE ATTRACTED. THE SAID COMPANY HAD ACCUMULATED PROFIT OF RS.15,13,784/ - AS ON 31.03.2010 AND HENCE THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE IN THIS REGARD. THE ASSESSING OFFICER RE OPENED THE ASSESSMENT U/S . 147/148 OF THE ACT. THE ASSESSEE COULD NOT EXPLAIN THE SAID TRANSACTION HENCE THE ADDITION U/S. 2(22)(E) OF THE ACT WAS MADE AT RS.15,13,784/ - . 5. BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE CONTENDED THAT THEY WERE NOT AWARE OF THE P ROVISIONS OF DEEDED DIVIDEND. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE PLEA OF ASSESSEE THAT THE CURRENT YEARS PROFIT COULD NOT BE CONSIDERED AS ACCRUED BEFORE THE END ITA NO. 706 /PUN/2017 3 OF THE YEAR AND IN THE ABSENCE OF ACCUMULATED PROFIT S, LOAN TO S HARE HOLDER COULD NOT BE TAXED AS DEEMED DIVIDEND , HELD THAT ADDITION IS TO BE CONFIRMED TO THE EXTENT OF RS.6,07,080/ - . HE DELETED THE ADDITION TO THE EXTENT OF RS.9,06,704/ - . THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (AP PEALS). 6 . THE LD. AR FOR THE ASSESSEE POINTED OUT THAT EARLIER THE ASSESSEE WAS PROPRIETOR OF HIS BUSINESS CONCERN WHICH WAS THEN CONVERTED INTO PRIVATE LIMITED COMPANY. THE ADVANCES FOR PURCHASE OF LAND AND CONSTRUCTION WERE CONVERTED INTO THE LOAN DUE FROM THE SAID CONCERN. HE FURTHER POINTED OUT THAT THE DIRECTOR HAD GIVEN PERSONAL GUARANTEE ON BEHALF OF THE COMPANY AGAINST WHICH THE AMOUNT WAS WITHDRAWN. OUR ATTENTION WAS DRAWN TO THE LEDGER ACCOUNT OF ASSESSEE IN THE BOOKS OF THE ASSESSEE IN T HIS REGARD. HE ALSO DREW OUR ATTENTION TO THE RESOLUTIONS PASSED IN THIS REGARD WHEREIN ADVANCES WERE TO BE GIVEN TO ASSESSEE TO ACQUIRED LAND IN NAVI MUMBAI ON BEHALF OF THE COMPANY. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OT HER HAND PLACED RELIANCE ON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 8 . I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST THE ADDITION MADE U/S. 2(22)(E) OF THE ACT. THE ASSESSEE WAS BENEFICIAL SHARE HOLDER OF LAXMI GLOBAL EXPORT IMPORT PVT. LTD. IN WHICH HE HAD AN OPENING BALANCE OF RS.51,32,132/ - AND CLOSING BALANCE OF RS.30,60,407/ - . THE AUTHORITIES BELOW NOTED THAT DURING THE YEAR THERE WAS TRANSACTION TO THE TUNE OF RS.1.30 CRORES AS THE AMOUNT GIVEN TO THE ASSESSEE BUT THE CLOSING BALANCE WAS RS.3 0 .60 LACS. THE ASSESSEE HAD EXPLAINED THAT IT WAS PROPRIETORSHIP CONCERN WHICH WAS CONVERTED INTO COMPANY. FURTHER A RESOLUTION WAS PASSED AT THE MEETING OF THE BOARD OF ITA NO. 706 /PUN/2017 4 DIRECTOR ON 10.03.2010 UNDER WHICH IT WAS RESOLVED THAT ADVANCES BE GIVEN TO THE ASSESSEE TO ACQUIRED LAND AT NAVI MUMBAI AND HENCE THE MONEY RECEIVED FOR THE ACQUISITION OF THE AFORESAID LAND. SINCE, THE AMOUNT HAS BEEN RECEIVED FOR THE BUSINESS TRANSACTION OF TH E COMPANY IT WAS EXPLAINED THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT ATTRACTED. I FIND MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND U/S. 2(2 2)(E) OF THE ACT WAS NOT WARRANTED WHERE THE ASSESSEE HAD RECEIVED ADVANCES FOR PURCHASE OF LAND AS IS EVIDENT FROM THE DOCUMENTS PLACED ON RECORD AND CONSEQUENTLY THE SAID ADDITION IS CANCELLED IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, THE GROUNDS OF AP PEAL ARE THUS, ALLOWED. 9 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 26 TH DAY OF FEBRUARY, 2019. SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 26 TH FEBRUARY, 2019. R K / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPO NDENT; 3. ( ) / THE CIT(A) - 2, NASHIK ; 4. THE PR. CIT - 2, NASHIK ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , / / TRUE COPY // / PRIVATE SECRETARY , / ITAT, PUNE