GHANSHAM J. SHEWAKRAMANI, MUMBAI V. ACIT 16(1), MUMBAI

ITA 7507/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2578 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 20-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAKESH KUMAR AGARWAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Salary income; Deemed dividend
• Section: 54; 154

Judgement Text

SHRI GHANSHAM J SHEWAKRAMANI ITA NO. 7507 /M UM /201 3 1 G IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G , MUMBAI . , , BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. : 7507 /MUM/20 1 3 (ASSESSMENT YEAR :200 7 - 08 ) SHRI GHANSHAM J SHEWAKRAMANI , 11 - A, SETT MINAR, DR. G. DESHMUKH MARG, MUMBAI - 400 026 .: PAN: AALPS 0237 Q VS ACIT 16 (1), AAYAKAR BHAVAN, MUMBAI (APPELLANT (RESPONDENT) APPELLANT BY : SHRI B V JHAVERI RESPONDENT BY : SHRI RAKESH KUMAR AGARWAL /DATE OF HEARING : 22 - 0 7 - 201 5 / DATE OF PRONOUNCEMENT : 30 - 10 - 201 5 ORDER , . . : PER AMIT SHUKLA, J M : THE A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 1 2 . 08 .201 3 , PASSED BY CIT(A) - 27 , MUMBAI IN RELATION TO THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR THE ASSESSMENT YEAR 2007 - 08. THE ASSESSEE HAS CHALLENGED THE LEVY OF PENALTY WITH REGARD TO THE FOLLOWING ADDITIONS : - A . ADDITION OF RS. 23,36,720/ - AS DEEMED DIVIDEND ; B . ADDITION OF RS. 7,69,627/ - ON AC COUNT OF INTEREST PAYMENT ; C . ADDITION OF RS. 22,500/ - ON ACCOUNT OF DEEMED RENT. 2. AT THE OUTSET, THE LD. COUNSEL SUBMITTED THAT IN SO FAR AS ADDITION OF RS. OF RS. 7,69,627/ - ON ACCOUNT OF INTEREST PAYMENT IS CONCERNED, THE SAME HAS BEEN DELETED BY THE CIT(A) AND THIS SHRI GHANSHAM J SHEWAKRAMANI ITA NO. 7507 /M UM /201 3 2 MATTER HAS ATTAINED FINALITY , THEREFORE , PENALTY LEVIED ON SUCH AN ADDITION SHOULD ALSO BE DELETED. ACCORDINGLY, WE DIRECT THE DELETION OF PENAL TY ON THE ADDITION OF RS. 7,69,627/ - . 3. REGARDING LEVY OF PENALTY ON ACCOUNT OF DEEMED DIVIDEND AND DEEMED RENT, THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 31.03.2008 DECLARING TOTAL INCOME OF RS. 16,96,974/ - . TH E ASS ESSEE HAS SHOWN INCOME FROM SALARY, INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES . ON EXAMINATION OF THE DETAILS OF INCOME FROM HOUSE PROPERTY, THE LD. AO NOTED THAT, ASSESSEE HAS A FLAT AT GARIMA APARTMENT BUT THE SAME WAS NOT OFFERED F OR INCOME AS DEEMED RENT. ACCORDINGLY, THE AO ADOPTED VALUE AT RS. 27,500/ - AS ALV. FURTHER PERUSAL OF THE BALANCE SHEET, AO NOTED THAT THE ASSESSEE HAS TAKEN HUGE AMOUNT O F LOANS AND ADVANCES AS ON 31.03.2007 FROM VARIOUS COMPANIES ( AS PER THE DETAILS GIVEN AT PAGE 2 OF THE ASSESSMENT ORDER ) . WHEN THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE AS TO WHY ON SUCH LOANS AND ADVANCES RECEIVED FROM THE SAID 14 COMPANIES WHERE THE ASSESSEE HAS INTEREST OF MORE THAN 10 PER CENT SHOULD NOT BE TREATED AS DEEMED DIV IDEND U/S 2(22)(E), THE ASSESSEE SUBMITTED THAT, FROM THE RETURNS OF 7 COMPANIES IN WHICH ASSESSEE WAS A SHAREHOLDER IT IS EVIDENT THAT HE DID NOT OWN MORE THAN 10% OF ITS SHARES. THE AO THEREAFTER GOT FURTHER INFORMATION ABOUT THE SHAREHOLDING PERCENTAGE OF THE ASSESSEE IN A COMPANY KNOWN AS BILLIMORIA MARBLES AND STONES PVT LTD WHICH WAS AT 38% AND FOR FINANCIAL YEAR 2005 - 06 THE ASSESSEE WAS HOLDING MORE THAN 60% OF THE SHAREHOLDING IN SUCH COMPANY, WHICH ASSESSEE REPORTED LESS THAN 10% . THUS, HE SUBMI TTED THAT GENUINENESS OF THE SAID RETURN FILED BY THE ASSESSEE SUBSEQUENTLY IS NOT CORRECT. LATER ON, THE ASSESSEE VIDE LETTER DATED 28.12.2009 ADMITTED THAT, IN SOME OF THE CO MPA N IE S, THE ASSESSEE HA D SHAREHOLDING OF MORE THAN 10%, WHICH FACT HAS BEEN NOT ED BY THE AO AT PAGE 4 OF THE ASSESSMENT ORDER. ACCORDINGLY, HE TREATED THE ENTIRE LOANS AND ADVANCES SHRI GHANSHAM J SHEWAKRAMANI ITA NO. 7507 /M UM /201 3 3 RECEIVED FROM SUCH CONCERNS, AT RS. 4 , 9 1,27, 2 3 7/ - AS INCOME FROM OTHER SOURCES BY TREATING IT AS DEEMED DIVIDEND . 4. FROM THE STAGE OF FIRST APPEAL, SUCH AN ADDITION WHICH WAS SUBSTANTIALLY REDUCED T O RS. 23,36,270/ - AFTER ACTUAL VERIFICATION . 5. THE PENALTY HAS BEEN LEVIED BY THE AO ON SUCH DISALLOWANCE S WHICH AFTER DETAILED DISCUSSION CIT(A) TOO HAS CONFIRMED THE SAID PENALTY. 6. AFTER HEARING BO TH THE PARTIES AND ON PERUSAL OF IMPUGNED ORDER AND MATERIAL ON RECORD, WE FIND THAT AT THE ASSESSMENT STAGE, THE ADDITION ON ACCOUNT OF DEEMED DIVIDED WAS MADE AT RS. 49 1, 27,2 5 7/ - . SUCH AN ADDITION WAS REDUCED TO RS. 71,54,961/ - BY THE CIT(A) VIDE ORDER D ATED 08.11.2010. SUBSEQUNTLY , THE ASSESSEE FILED A RECTIFICATION APPLICATION U/S 1 54 POINTING OUT CERTAIN MISTAKES, IN RESPONSE TO WHICH, THE LD. CIT(A) VIDE ORDER DATED 4 TH AUGUST, 2004 PASSED U/S 154, RESTRICTED THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND AT RS. 23,36,720/ - SINCE BALANCE DIVIDEND INCOME HAS ALREADY BEEN TAXED IN THE HANDS OF THE ASSESSEE IN THE AY 2005 - 06. THE ASSESSEES EXPLANATION HAD BEEN THAT, IT HAS DISCLOSED ALL THE FACTS OF THE LOANS TAKEN FROM VARIOUS COMPANIES, HOWEVER MATERIAL FA CT RELATING TO PERCENTAGE OF HOLDING IN CERTAIN COMPANIES, WHICH H AS CHANGED FREQUENTLY FROM TIME TO TIME COULD NOT BE PROPERLY REPORTED. SINCE ASSESSEE HAD DISCLOSED ALL THE LOANS AND ADVANCES, THEN EVEN IF THE ADDITION HAS BEEN CONFIRMED BY INVOKING THE DEEMING PROVISION , THAT TOO WHICH HAS VERIFIED FROM ASSESSMENT STAGE TO APPELLATE STAGE, WE ARE OF THE OPINION THAT IT DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS SO AS TO ATTRACT PENALTY U/S 271(1)(C). FURTHER, WHEN THE ADDITION ITSELF HAS BEE N MADE UNDER THE DEEMING PROVISIONS AND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO FURNISH ALL THE PARTICULARS OF INCOME , THEN IN OUR OPINION, PENALTY CANNOT BE LEVIED SHRI GHANSHAM J SHEWAKRAMANI ITA NO. 7507 /M UM /201 3 4 U/S 271(1)(C). ACCORDINGLY , PENALTY ON ACCOUNT OF DEEMED DIVIDEND STANDS DELETED . 7 . AS REGARD, THE LEVY OF PENALTY ON DEEMED RENT OF RS. 22,500/ - , THE SAME IS AGAIN ON DEEMED ALV BECAUSE ADMITTEDLY THE ASSESSEE HAD NOT ACTUALLY RENTED THE HOUSE. THUS, ON THIS ADDITION ALSO NO PENALTY IS WARRANTED . ACCORDINGLY, PENALTY LEVIED BY TH E AO AND CONFIRMED BY THE CIT(A) ON THIS SCORE STANDS DELETED. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER , 2015. SD/ - SD/ - ( . ) ( ) ( D. KARUNAKARA RAO ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 30 TH OCTOBER , 2015 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 27 , MUMBAI. 4 ) THE CIT - 16 , MUMBAI. 5 ) G , , / THE D.R. G BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS