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

ITA 707/PUN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0097 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-08-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHABANA PARVEEN
• Assessee Lawyers: KHUSHIRAM D JADHWANI
• Keywords: Deemed dividend
• Section: 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO .707 /PUN/201 7 / ASSESSMENT YEAR : 20 11 - 12 JETHANAND M. JAGWANI, AMBIKA BHAWAN, 801, GURU GANESHWAR, 11 TH ROAD, KHAR (W), MUMBAI 400052 PAN : ACXPJ0671P ....... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD 2(3), JALGAON / RESPONDENT ASSESSEE BY : SHRI KHUSHIRAM D. JADHWANI REVENUE BY : MS. SHABANA PARVEEN / DATE OF HEARING : 01 - 08 - 2019 / DATE OF PRONOUNCEMENT : 20 - 0 9 - 2019 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 2, NASHIK DATED 02 - 02 - 2017 FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS AGAINST CONFIRMING OF ADDITION TO THE EXTENT OF RS.9,06,704/ - U/S. 2( 22)(E) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2 ITA NO .707/PUN/2017, A.Y. 2011 - 12 3. SHRI KHUSHIRAM D. JADHWANI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS DIRECTOR OF LAKSHMI GLOBAL EXPORT IMPORT PVT. LTD. (IN SHORT THE COMPANY). THE COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE BUSINESS NOW CARRIED ON BY THE SAID COMPANY WAS EARLIER CONDUCTED BY THE ASSESSEE UNDER THE PROPRIETARYSHIP CONCERN. SUBSEQUENTLY, THE ASSESSEE CONVERTED ITS SOLE PROPRIETARYSHIP BU SINESS INTO PRIVATE LIMITED COMPANY. THE TRANSACTIONS BETWEEN THE ASSESSEE A ND THE COMPANY WERE PURELY ON COMMERCIAL BASIS. IN THE BOOKS OF COMPANY FOR FINANCIAL YEAR 2010 - 11 THE OPENING CREDIT BALANCE IN THE NAME OF ASSESSEE WAS RS.51,32,132.94 AND CLOS ING BALANCE WAS RS.31,60,407.94. THE ASSESSING OFFICER MADE ADDITION OF PEAK DEBIT BALANCE RS.37,88,438/ - (AFTER DEDUCTING OPENING DEBIT BALANCE) U/S. 2(22)(E) OF THE ACT. 3.1 AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 25 - 03 - 2014, THE ASSESSEE FILED A PPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE ADDITION TO RS.9,06,704/ - AFTER EXCLUDING THE ACCUMULATED SURPLUS OF EARLIER ASSESSMENT YEARS WHICH WERE ALREADY TAXED IN HANDS OF THE ASSESSEE U/S. 2(22)(E) IN IMMEDIATELY PRECEDING ASSESSMENT YEAR. I.E. ASSESSMENT YEAR 2010 - 11. THE LD. AR SUBMITTED THAT ON SIMILAR GROUNDS THE ASSESSING OFFICER HAD MADE ADDITION U/S. 2(22)(E) OF THE ACT FOR ASSESSMENT YEAR 2010 - 11. THE ASSESSEE CARRIED THE MATT ER IN APPEAL BEFORE THE TRIBUNAL IN ITA NO. 706/PUN/2017. THE TRIBUNAL VIDE ORDER DATED 26 - 02 - 2019 DELETED THE ADDITION HOLDING THAT THE ADVANCE WAS RECEIVED BY THE ASSESSEE IN THE COURSE OF BUSINESS. 3 ITA NO .707/PUN/2017, A.Y. 2011 - 12 4. PER CONTRA, MS. SHABANA PARVEEN REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSING THE APPEAL OF ASSESSEE. 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERUSED. THE ASSESSEE IN APPEAL HAS ASSAILED THE ADDITION CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) U/S. 2(22)(E) OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE TRANSACTIONS BETWEEN THE ASSESSEE AND THE COMPANY ARE PURELY ON COMMERCIAL BASIS. IT IS AN UNDISPUTED FACT THAT THE BUSINESS CARRIED ON BY THE COMPANY WAS EARLIER CONDUCT ED BY THE ASSESSEE AS SOLE PROPRIETARYSHIP CONCERN. DISALLOWANCE U/S. 2(22)(E) OF THE ACT WAS MADE BY THE ASSESSING OFFICER IN IMMEDIATELY PRECEDING ASSESSMENT YEAR AS WELL. THE ISSUE TRAVELLED TO THE TRIBUNAL. THE CO - ORDINATE BENCH OF TRIBUNAL AFTER EX AMINING THE FACTS HELD THAT THE ADDITION U/S. 2(22)(E) IN THE CASE OF ASSESSEE IS UN WARRANTED. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2010 - 11 IN ITA NO. 706/PUN/2017 (SUPRA) READS AS UNDER : 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 OPEN ING 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.30.60 LACS. THE ASS ESSEE HAD EXPLAINED THAT IT WAS PROPRIETORSHIP CONCERN WHICH WAS CONVERTED INTO COMPANY. FURTHER A RESOLUTION WAS PASSED AT THE MEETING OF THE BOARD OF DIRECTOR ON 10.03.2010 UNDER WHICH IT WAS RESOLVED THAT ADVANCES BE GIVEN TO THE ASSESSEE TO ACQUIRED LA ND 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 THE 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(22)(E) OF THE ACT WAS NOT WARRANTED WHERE THE ASSESSEE HAD RECEIVED ADVANCES FOR PURCHASE OF LAND A S 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 APPEAL ARE THUS, ALLOWED. 4 ITA NO .707/PUN/2017, A.Y. 2011 - 12 6. WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE BACK TO THE FIL E OF ASSESSING OFFICER TO EXAMINE THE FACTS. IN CASE THE FACTS IN THE ASSESSMENT YEAR UNDER APPEAL ARE SIMILAR TO THE FACTS IN ASSESSMENT YEAR 2010 - 11 , T HE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE IN LINE WITH THE ORDER OF CO - ORDINATE BENCH IN ITA NO. 706/PUN/2017 (SUPRA). NEEDLESS TO SAY, THE ASSESSING OFFICER WHILE RE - EXAMINING THE ISSUE SHALL GRANT REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE, IN ACCORDANCE WITH LAW. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSE. ORDER PRONOUNCED ON FRIDAY, THE 20 TH DAY OF SEPTEMBER, 2019. SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 20 TH SEPTEMBER, 2019 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2, NASHIK 4. THE PR. COMMISSIONER OF INCOME TAX - 2, NASHIK 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. // // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE