G.Uniikrishnapillai , Bangalore V. Income TAx Officer 6(1)(1) Major 6(1)(1), Bangalore

ITA 734/BANG/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1822 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 31-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMAL ANAND
• Assessee Lawyers: B NANJAPPAN
• Keywords: Unexplained cash credit; Salary income; Additional evidence; Reasonable cause; Deemed dividend; Reassessment proceedings
• Section: 143(3); 142(1); 2(22)(e); 250; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, BENGALURU BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.734/BANG/2017 (ASSESSMENT YEAR: 2009-10) SHRI G. UNIKRISHNAPILLAI, PROP. U.K.INDUSTRIES, PLOT NO.M-08,7 TH CROSS, PEENYA INDUSTRIAL ESTATE, BENGALURU-560058. PAN:AAEPU 5967A VS. APPELLANT INCOME-TAX OFFICER, WARD 6(1)(1), BENGALURU. RESPONDENT APPELLANT BY : SHRI B.NANJAPPAN, ADVOCATE. RESPONDENT BY : SHRI VIMAL ANAND, ADDL.CIT(DR) DATE OF HEARING: 02/05/2019 DATE OF PRONOUNCEMENT: 17/06/2019 O R D E R PER PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE CIT(A), BANGALORE-8, BANGALORE, PASSED U/S 143(3) R.W.S.147 AND 250 OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. 2. SINCE THERE IS A DELAY OF 18 DAYS IN FILING OF APPEAL WITH THE TRIBUNAL, THE ASSESSEE HAS FILED THE CONDONATION PETITION WITH AFFIDAVIT. WE, CONSIDERING THE SUBMISSIONS OF THE ITA NO.734/BANG/2017 PAGE 2 OF 8 LEARNED AR AND THE CONDONATION PETITION, ARE OF THE OPINION THAT THE DELAY IS SUPPORTED WITH REASONABLE CAUSE AND THE DELAY IS CONDONED FOR WHICH THE LEARNED DR HAS NO SERIOUS OBJECTION. ACCORDINGLY, WE CONDONE THE DELAY AND ADMIT THE APPEAL. 3. THE LD.AR HAS ARGUED ONLY TWO DISPUTED ISSUES (A) ADDITION OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AND (B) ADDITION OF UNEXPLAINED CREDIT IN CAPITAL ACCOUNT. THE LD.AR HAS NOT PROSECUTED THE OTHER GROUNDS OF APPEAL. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS HAVING INCOME FROM SALARY AND INCOME FROM OTHER SOURCES AND FILED THE RETURN OF INCOME ON 15/07/2009 WITH TOTAL INCOME OF RS.32,42,080/-. SUBSEQUENTLY, THE AO ISSUED NOTICE U/S 148 OF THE ACT DATED 26/3/2013 AND THE ASSESSEE FILED LETTER DATED 28/12/2014 TO TREAT THE RETURN OF INCOME FILED ON 15/7/2009 AS COMPLIANCE TO THE NOTICE. AO ISSUED NOTICE U/S 143(2) AND 142(1) AND THE LEARNED AR APPEARED FROM TIME TO TIME AND FILED THE DETAILS. IN THE REASSESSMENT PROCEEDINGS, AO FOUND THAT THE ASSESSEE HAS RECEIVED LOAN OF RS.38,94,751.72 FROM M/S. S.G.EQUIPMENTS & MACHINES PVT. LTD., WHERE THE ASSESSEE HOLDS 50% OF THE SHARE-HOLDING. SINCE THE ASSESSEE COULD NOT SUBMIT SATISFACTORY EXPLANATIONS FOR THE LOAN RECEIVED FROM THE COMPANY, THE AO DEALT ON THE PROVISIONS OF ITA NO.734/BANG/2017 PAGE 3 OF 8 2(22)(E) AND THE EXPLANATION TO SECTION IN THE ASSESSMENT ORDER AND TREATED THE LOAN OF RS.38,94,752/- AS DEEMED DIVIDEND AND SUBJECTED TO TAX. FURTHER, ON PERUSAL OF THE BALANCE SHEET FOUND AN AMOUNT OF RS.1,20,31,000/- WAS DISCLOSED AS ADDITION TO CAPITAL ACCOUNT AND SOUGHT FOR DETAILS OF ADDITION, WHEREAS THE ASSESSEE FILED LEDGER ACCOUNT COPY OF M/S.U.K.INDUSTRIES, PROPRIETARY CONCERN OF THE ASSESSEE AND ON PERUSAL OF LEDGER ACCOUNT, AO FOUND THAT THERE ARE CASH DEPOSITS ON VARIOUS DATES AND OTHER DEPOSITS IN THE BANK ACCOUNT AND NO EXPLANATIONS WERE OFFERED BY THE ASSESSEE. AO MADE ADDITION OF RS.1,20,31,000/- AS UNEXPLAINED CREDIT AND ASSESSED THE TOTAL INCOME OF RS.1,91,67,832/- AND PASSED THE ORDER U/S 143(3) R.W.S. 147 DATED 28/03/2014. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL WITH THE CIT(A) WHEREAS THE CIT(A) CONSIDERED THE FACTS AND THE GROUNDS OF APPEAL AND THE FINDING OF THE AO, BUT CONFIRMED THE ACTION OF THE AO AND DISMISSED THE ASSESSEES APPEAL. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS FILED APPEAL WITH THE TRIBUNAL. THE LEARNED AR SUBMITTED THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AND WHEREAS THE ASSESSEE HAS TO PAY TAX ON DEEMED DIVIDEND OF RS.12,87,990/- INSTEAD OF ITA NO.734/BANG/2017 PAGE 4 OF 8 RS.38,94,752/-. IN THE ASSESSMENT YEAR 2008-09, THE ASSESSEE HAS SUFFERED TAX ON DEEMED DIVIDEND INCOME OF RS.30,41,163/-. IN THE PRESENT ASSESSMENT YEAR, CONSIDERING THE RESERVES AND SURPLUS OF THE COMPANY IN THE PREVIOUS YEAR AND DEEMED DIVIDEND SUBJECT TO TAX IN THE ASSESSMENT YEAR 2008-09, THE AO HAS TO CALCULATE THE DEEMED DIVIDEND FOR ASSESSMENT YEAR 2009-10. LD.AR FILED PAPER BOOK IN SUPPORT OF THE CLAIM AND PRAYED FOR ALLOWING THE GROUND OF APPEAL. 7. ON THE SECOND DISPUTED ISSUE THE LEARNED AR SUBMITTED THAT THE AO HAS MADE ADDITION OF RS.1,20,31,000/- WHEREAS, THE ASSESSEE HAS SUBMITTED THE PAN NO. AND AADHAR CARD IN RESPECT OF PERSONS FROM WHOM THE MONEY HAS BEEN OBTAINED. THE LEARNED AR EMPHASISED THAT THE AMOUNTS HAVE BEEN CREDITED TO ASSESSEES CAPITAL ACCOUNT ARE OUT OF HIS PROPRIETARY CONCERNS AND CORPORATE COMPANYS BALANCES AND THE LEARNED AR SUBSTANTIATED HIS STAND WITH THE COPY OF THE LEDGER ACCOUNT EVIDENCES AND PAN, AADHAR AND BANK STATEMENTS. THE LEARNED AR CONTENDED THAT THESE PAYMENTS ARE THROUGH BANKING CHANNELS AND SOURCES CANNOT BE DOUBTED AND PRAYED FOR ALLOWING THE APPEAL OF THE ASSESSEE. CONTRA, LEARNED DR RELIED ON THE ORDERS OF THE CIT(A). 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON THE FIRST DISPUTED ISSUE OF ADDITION IN ITA NO.734/BANG/2017 PAGE 5 OF 8 RESPECT OF DEEMED DIVIDEND U/S 2(22)(E), THE CONTENTION OF THE LEARNED AR THAT THE ASSESSEE HAS PAID TAX ON THE DEEMED DIVIDEND IN THE ASSESSMENT YEAR 2008-09 ON RS.30,41,163/- WHEREAS IN THE PRESENT CASE, THE DEEMED DIVIDEND IS WORKED OUT AT RS.38,94,752/-. BUT THE AMOUNT HAS TO BE WORKED OUT BASED ON THE CURRENT YEAR ACCUMULATED PROFITS AFTER ADJUSTMENT OF DEEMED DIVIDEND OF ASSESSMENT YEAR 2008-09. THE LD.AR RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF M/S.ASWANI ENTERPRISES VS. ACIT IN TAX CASE APPEAL NOS.1111 AND 1112 OF 2008 DATED 25/09/2018 AND THE OBSERVATIONS OF THE HONBLE HIGH COURT AT PARA.33 WHICH READS AS UNDER: 33. AS REGARDS THE ASSESSMENT YEAR 1999-2000, IT HELD THAT IT DID NOT AGREE WITH THE VIEW TAKEN BY THE CIT (A) THAT THE DEEMED DIVIDEND FOR THE ASSESSMENT YEAR 1998- 2000 SHOULD NOT BE ADJUSTED FROM THE BALANCE OF ACCUMULATED PROFIT AS ON THE CLOSE OF THE ASSESSMENT YEAR 199899. AFTER REFERRING TO THE DECISION IN THE CASE OF G.NARASIMHAN, IT WAS FURTHER POINTED OUT THAT THERE WAS NO AMBIGUITY IN THAT REGARD. HENCE, FOR THE ASSESSMENT YEAR 1999-2000, THE ASSESSING OFFICER WAS DIRECTED TO COMPUTE THE DEEMED DIVIDEND EQUIVALENT TO THE AMOUNT ADVANCED DURING THAT YEAR TO THE EXTENT THE PGIIPL HAD ACCUMULATED PROFITS AFTER ADJUSTMENT OF THE DEEMED DIVIDEND FOR THE ASSESSMENT YEAR 1998-99. WE FOUND THAT THE AMOUNT HAS BEEN ASSESSED IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND IN ASSESSMENT YEAR 2008-09 AN AS SUCH, THE DEEMED DIVIDEND SO ASSESSED SHOULD BE ITA NO.734/BANG/2017 PAGE 6 OF 8 REDUCED FROM THE ACCUMULATED PROFITS AND BALANCE AMOUNT OF ACCUMULATED PROFITS SHOULD BE CONSIDERED IN THE CURRENT YEAR FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT. ACCORDINGLY, WE DIRECT THE AO TO COMPUTE THE DEEMED DIVIDEND AS DISCUSSED ABOVE APPLYING THE RATIO OF THE DECISION IN THE CASE OF M/S.ASWANI ENTERPRISES (SUPRA). 9. ON THE SECOND DISPUTED ISSUE WITH RESPECT TO CREDIT TO CAPITAL ACCOUNT, THE CONTENTION OF THE LEARNED AR THAT THESE CREDITS ARE FULLY DISCLOSED AND THE ASSESSEE HAS FILED THE DETAILS IN THE COURSE OF APPELLATE PROCEEDINGS. LEARNED AR REFERRED TO THE STATEMENT OF DETAILS OF AMOUNT RECEIVED AND FILED CHART WITH INFORMATION OF PAN, DATE, CHEQUE NO. AND AMOUNT AND SOURCE OF RECEIPT AND CREDIT. ON PERUSAL OF THE CIT(A) ORDER, WE FOUND THAT THE ASSESSEE HAS FILED DETAILS BEFORE THE APPELLATE AUTHORITY WHICH ARE INCOMPLETE AND THE CIT(A) HAS CALLED FOR AOS REPORT ON ADDITIONAL EVIDENCE. WHEREAS, THE LEARNED AR APPEARED BEFORE THE AO IN THE REMAND PROCEEDINGS AND SOUGHT TIME FOR SUBMISSION OF EVIDENCE. SINCE THE CIT(A) HAS CALLED FOR REMAND REPORT. THE AO FILED REPORT ON26/12/2016 REFERRED AT PARA. 6 OF THE CIT(A) ORDER AND IS NOT DISPUTED. FURTHER, LEARNED AR PRAYED FOR AN OPPORTUNITY TO SUBSTANTIATE THE CREDITS IN CAPITAL ACCOUNT WITH EVIDENCES. WE FIND THAT THE ASSESSEE HAS NOT FILED DETAILS ON ITA NO.734/BANG/2017 PAGE 7 OF 8 THIS ASPECT OF ADDITION BEFORE THE AO IN ASSESSMENT PROCEEDINGS AND THERE IS NO FINDING BY THE AO IN RESPECT OF SUBMISSION OF ANY INFORMATION/DETAILS BY THE ASSESSEE. FURTHER THERE MAY BE VARIOUS REASONS FOR THE ASSESSEE FOR NOT FILING THE DETAILS AND ALSO THE ASSESSEE SHALL NOT GAIN OR BENEFITED BY DELAYING THE PROCESS OF FURNISHING EVIDENCE TO SUBSTANTIATE THE CLAIMS. ACCORDINGLY, TO MEET THE ENDS OF JUSTICE, WE ARE OF THE SUBSTANTIVE OPINION THAT THE MATTER HAS TO BE REMANDED TO THE FILE OF THE AO TO ADJUDICATE AFRESH ON MERITS CONSIDERING THE EVIDENCES AND STATEMENTS FILED IN THE COURSE OF HEARING. ACCORDINGLY, WE REMIT THE ENTIRE DISPUTED ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION AND ALSO PROVIDE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE AND ASSESSEE SHALL ALSO CO-OPERATE IN SUBMITTING THE INFORMATION AND ALLOW THE GROUNDS OF APPEAL FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE, 2019. SD/- SD/- (B.R. BASKARAN) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BENGALURU D A T E : 17/06/2019 SRINIVASULU, SPS ITA NO.734/BANG/2017 PAGE 8 OF 8 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)- 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL BANGALORE