MAHINDRA SINGH MEHTA, MUMBAI V. ITO 9(2)(3), MUMBAI

ITA 726/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0769 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 04-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 25-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIPUL J SHAH
• Keywords: Deemed dividend

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 726 & 4180 /MUM/ 2011 ( / ASSESSMENT YEAR : 2006 - 07 MR. MAHENDRA SINGH MEHTA, 340/C, OBEROI WOODS, GOREGAON(E), MUMBAI / VS. THE ITO - 9(2)(3), MUMBAI ./ ./ PAN/GIR NO. : AABPM 7661A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI VIPUL J. SHAH / RESPONDENT BY : MS. AMRITA SINGH / DATE OF HEARING : 0 4 . 0 6 .2015 / DATE OF PRONOUNCEMENT : 0 4 .0 6 .2015 / O R D E R PER N.K. BILLAIYA, AM: TH ESE TWO APPEALS BY THE ASSESSEE ARE PREFERRED AGAINST TWO DIFFERENT ORDER S OF THE LD. CIT(A) - 20 , MUMBAI DT. 2 6 . 11 .201 0 & 5.3.2013 PERTAINING TO ASSESSMENT YEAR 200 6 - 0 7 . 2. ITA NO. 726/MUM/2011 IS AGAINST THE QUANTUM ADDITION AND ITA NO. 4180/MUM/2013 IS AGAINST THE LEVY OF PENALTY U/S. 271(1)(C) OF THE MR. MAHENDRA SINGH MEHTA 2 ACT ON THE QUANTUM ADDIT ION. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 726/M/2011 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS AND ON GOING THROUGH THE COPY OF LEDGER ACCOUNT IN THE BOOK S OF M/S. NEURAL TECHNOLOGIES & SOFTWARE PVT. LTD. , IN WHICH THE ASSESSEE IS A SHARE HOLDER HAVING 42.58% SHARE HOLDING. THE ASSESSING OFFICER FURTHER NOTICED THAT THE SAID COMPANY HAS ACCUMULATED PROFIT OF RS. 37.71 LAKHS. ON PERUSAL OF THE SAID LEDGE R ACCOUNT, THE ASSESSING OFFICER FOUND THAT THERE IS A CREDIT BALANCE OF RS. 2,62,736/ - INVOKING THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT , T HE AO ASKED THE ASSESSEE TO EXPLAIN WHY THE CREDIT BALANCE SHOULD NOT BE TAXED AS DEEM ED DIVIDEND. 3.1. THE ASSESSEE FILED A DETAILED REPLY AND STATED THAT THE ASSESSEE IS DIRECTOR IN THE SAID COMPANY AND LOOKS AFTER THE ENTIRE WORKING OF THE COMPANY. IT WAS FURTHER BROUGHT TO THE NOTICE OF THE AO THAT DURING THE FINANCIAL YEAR 2005 - 06, THE ASSESSEE ALONGWI TH MRS. RAMITA MEHTA HAS INCURRED TOTAL EXPENSE OF RS. 9.80 LAKHS ON BEHALF OF THE SAID COMPANY. IT WAS ALSO POINTED OUT THAT ON THE BEGINNING OF THE FINANCIAL YEAR 2005 - 06, THE SAID COMPANY OWED RS. 4,37,264/ - TO THE ASSESSEE THEREFORE, PROVISIONS OF SEC . 2(22)(E) ARE NOT APPLICABLE ON THE FACTS OF THE CASE. THIS SUBMISSION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO WHO WENT ON TO TREAT RS. 2,62,736/ - AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE M ATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. MR. MAHENDRA SINGH MEHTA 3 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THE COPY OF THE LEDGER ACCOUNT OF SHRI MAHENDRA MEHTA IN THE BOOKS OF M /S. NEURAL TECHNOLOGIES & SOFTWARE PVT. LTD. THE LD. COUNSEL DREW OUR ATTE NTION TO THE OPENING BALANCE AS ON 1.4.2005 AND POINTED OUT THAT THE SAID COMPANY OWES THE ASSESSEE RS. 4,37,264/ - . THE LD. COUNSEL FURTHER STATED THAT THE ENTRY ON 2.4.2005 WHICH IS A DEBIT ENTRY OF RS. 5,00,000/ - IS ON ACCOUNT OF ADVANCE PREMIUM REFUNDE D BY ICICI PRUDENTIAL LIFE INSURANCE CO. , WHICH HAS BEEN WRONGLY ENTERED ON 2 ND APRIL 2005 WHEN THE SAID AMOUNT HAS REFUNDED ON 22 ND APRIL 2005 WHICH IS EVIDENT FROM THE LETTER OF ICICI PRUDENTIAL PLACED AT PAGE - 12 OF THE PAPER BOOK. IT IS THE SAY OF THE LD. COUNSEL THAT IF THIS ERRONEOUS ENTRY IS REMOVED FROM THE LEDGER ACCOUNT, THE ASSESSEE WOULD BE HAVING CREDIT BALANCE IN THE SAID COMPANY. 6. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY DISTINGUISHING FACT ON RECORD. 7. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS MADE BY THE LD. COUNSEL. AFTER CAREFULLY PERUSING THE COPY OF THE LEDGER ACCOUNT, WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. AS PER THE LETTER PLACED AT PAGE - 12 OF THE PAPER BOOK, THE ICICI PRUDENTIAL REFUNDED THE AMOUNT OF RS. 5,00,000/ - ON 22.4.2005, THE SAME CANNOT FIND ENTRY IN THE BOOKS ON 2 ND APRIL, 2005 OBVIOUSLY THIS ENTRY IS ERRONEOUS. IF THIS ENTRY IS REMOVED THEN THE ASSESSEE HAS CREDIT BALANCE IN THE SAID COMPANY AND THEREFORE WOULD MAKE THE PROVISIONS OF SEC . 2(22)(E) OF THE ACT INAPPLICABLE. CONSIDERING ALL THESE FACTS IN TOTALITY, WE DO NOT FIND ANY REASON FOR MAKING THE ADDITION. WE, ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION MADE U /S. 2(22)(E) OF THE ACT. THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. MR. MAHENDRA SINGH MEHTA 4 8. ITA NO. 4180/M/2013 IS AGAINST THE LEVY OF PENALTY U /S. 271(1)(C) OF THE ACT ON THE ADDITION MADE U/S. 2(22)(E) OF THE ACT. 9. VIDE OUR ORDER OF EVEN DATE IN ITA NO. 726/M/2011, WE HAVE DELETED THE ADDITION MADE U/S. 2(22)(E) OF THE ACT. WE, THEREFORE DO NOT FIND ANY REASON FOR THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. THE AO IS DIRECTED TO DELETE THE PENALTY. 10. IN T HE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. OR DER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 4 TH JUNE , 2015 SD/ - SD/ - ( JOGINDER SING H ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 4 TH JUNE , 2015 . . ./ RJ , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI