DCIT, Chandigarh V. Sh. Balbir Singh Uppal, Chandigarh

ITA 82/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68598 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-11-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Business expenditure; Deemed dividend
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 82/CHD/2013 ASSESSMENT YEAR : 2009-10 D.C.I.T. CENTRAL CIRCLE 1 VS. BALBIR SINGH UPPAL CHANDIGARH SCO 18-19, SECTOR 9D CHANDIGARH AAKPU 0079M (APPELLANT) (RESPONDENT) APPELLANT BY SMT. JYOTI KUMARI RESPONDENT BY: SHRI SUDHIR SEHGAL DATE OF HEARING 27.11.2013 DATE OF PRONOUNCEMENT 23.12.2013 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 26.11.2012 OF THE LD. CIT(A)(CENTRAL),GURGAON. 2 IN THIS APPEAL THE REVENUE HAS RAISED FOLLOWING G ROUNDS. (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN NOT FOLLOWING THE PROVISION S OF RULE 46A AND ASSUMING THAT ASSESSEE FULFILL ALL THE CONDITIONS O F SECTION 2(18)(B) WITHOUT ANY DOCUMENTARY EVIDENCE BEING ADMITTED UND ER RULE 46A AND DRAWING A CONCLUSION THAT SHARES OF THE COMPANY WER E LISTED ON NSE AND BSE AND THUS THE PROVISION OF SECTION 2(22) (E) ARE NOT APPLICABLE ? (II) WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) AHS ERRED IN NOT APPRECIATING THAT SECTION 2(18)(B) LAY S DOWN NUMBER OF CONDITIONS FOR ELIGIBILITY AS COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIAL INTERESTED. THE ASSESSEE HAS TO DEMONSTRATE THAT F OR THE RELEVANT PERIOD UNDER CONSIDERATION ALL CONDITIONS WERE FULFILLED. IN ABSENCE OF SUCH SATISFACTION THERE CAN BE NO PRESUMPTION IN FAVOUR OF THE ASSESSEE? (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN MERELY DELETIN G THE ADDITIONS MADE BY THE ASSESSING OFFICERS U/S 2(22)(E) OF THE IT AC T, 1961 WITHOUT ADJUDICATING ON THE ISSUE OF SHORTAGE OF CASH FOUND OF RS. 4,14,87,282 WHICH HAD PARTAKEN CHARACTER OF LOAN AND THUS ONUS TO EXPLAIN THIS LIES WITH THE ASSESSEE WHICH HE FAILED TO DISCHARGE. 2 3 AFTER HEARING BOTH THE PARTIES WE FIND THAT A SEA RCH WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE. IT WAS NOTICED THAT THE CASH AS PER BOOKS, WAS RS. 4,30,27,482/- BUT ON PHYSICAL VERIFICATION THE CASH WAS FOUND ONLY AT RS. 15,40,2 00/- INCLUDING CASH AT ALL GODOWN AND ALL PREMISES COVER ED U/S 132 OF INCOME TAX ACT . THUS THERE WAS SHORTAGE OF C ASH AMOUNTING TO RS. 4,14,87,282/-. IN RESPONSE TO A Q UESTION IT WAS STATED THAT SOME OF THE CASH WAS LYING AT PURCH ASE CENTRES WHERE THE PURCHASES ARE MADE. HOWEVER, WHEN THE AS SESSEE WAS FURTHER ASKED TO CLARIFY THE POSITION NO OTHER REPLY WAS FILED. THEREFORE, THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE THAT WHY THIS SHORT CASH SHOULD NOT BE TREAT ED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT BECAUSE THE COMPANY HAD MADE ADVANCES TO THE SHAREHOLDERS AND ASSESSEE WAS ALSO BENEFICIARY SHAREHOLDER OF THE COMPANY HOLDING 15.3 9% SHARES I.E. MORE THAN 10%. IN RESPONSE TO THE SHOW CAUSE NOTICE IT WAS STATED AS UNDER: 7.3 KINDLY REFER OT YOUR NOTICE DATED 27.12.2010. IN TH IS CONNECTION IT MAY BE SUBMITTED THAT THE CASH BELONGING TO THE COM PANY ALWAYS REMAINS AT VARIOUS DEPOTS OF THE COMPANY ITSELF. IT MAY BE FURTHER SUBMITTED THAT EXCEPT FOR THE WORKS AND REGISTERED OFFICE OF THE COMPANY, NO OTHER PREMISES WAS SEARCHED. IN FACT, AT THE TIM E OF LAST SEARCH IN 2004 SIMILAR ISSUE REGARDING CASH WAS THERE AND THE EXPLANATION OF THE ASSESSEE ON THE ISSUE WAS ACCEPTED. THE FACTS AND C IRCUMSTANCES OF THE CASE DO NOT WARRANT THAT ANY AMOUNT OF CASH WAS PAI D TO ME AND, IN FACT, I DID NOT NEED ANY. IN THE ABSENCE OF ANY PROOF ON RECORD THAT THE CASH FOUND WAS EVER GIVEN TO ME OR USED BY ME, NO ADVERS E INFERENCE CAN BE DRAWN. IT IS, THEREFORE, REQUESTED THAT NO ADVERSE INFERENCE MAY KINDLY BE DRAWN. THE ASSESSING OFFICER DID NOT ACCEPT THE SAME AND M ADE AN ADDITION VIDE PARA 7.4 WHICH IS AS UNDER: 7.4 IN ABSENCE OF ANY REPLY FILED BY YOU AND IN ABS ENCE OF PRODUCTION OF BOOKS OF ACCOUNTS BY HE ASSESSEE COMPANY THE EXPLAN ATION FILED BY YOU IS NOT ACCEPTED. A SUM OF RS. 4,14,87,282/- IS ADDE D BACK TO YOUR INCOME AS DEEMED DIVIDEND IN VIEW OF SECTION 2(22)( E) OF THE INCOME TAX ACT, 1961. 3 4 ON APPEAL IT WAS MAINLY STATED THAT THE ASSESSEE IS A LISTED COMPANY AND THEREFORE, THE PROVISIONS OF SE CTION 2(22)(E) ARE NOT APPLICABLE. RELIANCE WAS PLACED O N THE FOLLOWING CASE LAWS: * 100 ITR 598 WALCHAND & CO., LTD, V. CIT, (BOM)(19 74) * 105 ITR 62, CIT, V. BHAGAT TEWARI. (CAL) (1974) * 108 ITR 345, SMT. TARULATA SHYAM AND OTHERS, V. C IT, (SC)(1977) * 274 ITR 609, MADURA COATS P. LTD. IN RE(AAR) (200 5) * TARULATA SHYAM AND OTHERS V. CIT(CAL) 82 ITR 458 , (1971) * CIT(V) ANKITECH (P) LTD. (DEL)242 CTR 129(2011) IT WAS SUBMITTED THAT SECTION 2(22)(E) IS A DEEMING PROVISION AND THEREFORE, SAME SHOULD HAVE BEEN CONSTRUED STR ICTLY. 5 THE LD. CIT(A) AFTER EXAMINING THE SUBMISSIONS FO UND FORCE IN THE SAME AND OBSERVED THAT SINCE THE ASSES SEE COMPANY IS A PUBLIC AND LISTED COMPANY AND THEREFO RE, THE PROVISIONS OF SECTION 2(22)9E) ARE NOT APPLICABLE. 6 BEFORE US, THE LD. DR FOR THE REVENUE SUBMITTED T HAT THERE WAS NO EVIDENCE BEFORE THE LD. CIT(A) TO SHOW THAT THE ASSESSEE IS A LISTED COMPANY AND THEREFORE, THE IS SUE SHOULD BE REMITTED TO THE FILE OF ASSESSING OFFICER TO VER IFY WHETHER THE ASSESSEE IS A LISTED COMPANY OR NOT? SHE ALSO RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN CASE O F CIT VS. NATIONAL TRAVEL SERVICES, 347 ITR 305 (DELHI). 7 ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSE E FILED COPY OF ASSESSMENT ORDER PASSED U/S 153B(1)(B) R.W. S. 143(3) WHICH CLEARLY MENTION NAME OF THE ASSESSEE AS LAKS HMI ENERGY & FOODS LTD. WHICH ITSELF SHOWS THAT THE AS SESSEE IS A LISTED COMPANY. HE ALSO REFERRED TO PAGE 10 & 11 O F PAPER BOOK WHICH IS A COPY OF THE QUOTATION OF THE SHARE PRICES FROM 4 BSE AND NSE RESPECTIVELY. HE ALSO STRONGLY SUPPORT ED THE IMPUGNED ORDER. 8 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. S ECTION 2(22)(E) STARTS AS UNDER: ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WH ICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED OF ANY SUM. THUS IT BECOMES CLEAR THAT THIS PROVISION IS APPLI CABLE ONLY TO A COMPANY IN WHICH A PUBLIC IS NOT SUBSTANTIALLY IN TERESTED. SUCH COMPANY HAS BEEN DEFINED IN SECTION 2(18). WE FURTHER FIND THAT THE LD. CIT(A) HAS DEALT WITH THIS ISSUE VIDE PARA 6 & 6.1 WHICH ARE AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE IMPUGNED ASSESSM ENT ORDER AS WELL AS THE SUBMISSION OF THE ASSESSEE APART FROM T HE CITED CASE-LAWS. THE UNDISPUTED FACT BEING THE SHORTAGE IN CASH OF R S. 4,14,87,282/- WAS FOUND IN THE COURSE OF SEARCH OPERATION. THE CASH A S PER BOOKS OF ACCOUNTS OF M/S LAKSHMI ENERGY AND FOODS LTD. WAS R S. 4,30,27,4782/- WHEREAS ON PHYSICAL VERIFICATION FROM ALL THE PREMI SES COVERED U/S 132, THE CASH FOUND WAS ONLY RS. 15,40,200/-. IMPORTANTL Y THE EXPLANATION PUT FORTH IN THE STATEMENT U/S 132(4) AND DURING THE AS SESSMENT PROCEEDINGS WAS THAT THE CASH WAS LYING AT DIFFERENT PLACES. TH E REPLY TO THE SHOW CAUSE CONTENDED THAT SIMILAR WAS THE CASH POSITION IN THE EARLIER SEARCH IN 2004 AND EXPLANATION OFFERED THEN WAS ACCEPTED. THE IMPUGNED ORDER IS SILENT ON THIS CONTENTION. HOWEVER, THE ASSESSEE DID / HAS NOT FILED THE CASH POSITION LYING AT THE DIFFERENT PLACES NOR COP IES OF THE CASH BOOKS SHOWING CASH POSITION AT THE DIFFERENT PLACES AS CL AIMED. AN OSTENSIBLE LIST OF PLACES WHERE THE CASH COULD BE AVAILABLE WA S STATED ENCLOSED WITH HIS SUBMISSIONS DATED 17.05.2012 WHICH WAS NOT SO. EVEN SUBSEQUENTLY ON 19.11.2012 AND 22.11.2012, NO SUCH LIST WAS PROV IDED. INTERESTINGLY A CERTIFICATE OF CASH IN H AND AS ON 13.03.2009 (OF R S. 4,35,27,842/-) AND BALANCE AS PER AUDITED BALANCE SHEET AS ON 31.03.20 09 (OF RS. 38,53,825/-) WAS FILED WHEREIN IT WAS STATED THAT C ASH GOT UTILIZED TOWARDS BUSINESS EXPENSES. THIS CERTIFICATE IS DATE D 20.11.2012 AND SIGNED BY ONE SHRI SUNIL GUPTA CA OF S. KUMAR GUPTA & ASSOCIATES. THIS CERTIFICATION I FIND IS NOT BY THE AUDITORS OF THE COMPANY NOR THE AUTHORIZED REPRESENTATIVES OF THE ASSESSEE NOR DULY ATTESTED. HENCE NO CREDENCE AS SUCH CAN BE GIVEN TO IT. 6.1 BE THAT AS IT MAY, ON THE ISSUE OF DEEMED DIVID END, IT IS THE ASSESSEES CASE THAT M/S LAKHMI ENERGY AND FOODS LT D. IS A COMPANY WHERE PUBLIC ARE SUBSTANTIALLY INTERESTED SO THE PR OVISIONS OF SEC. 2(22)(E) ARE NOT APPLICABLE, QUOTING SEVERAL JUDGME NTS AND ECHOING THAT THE COMPANY WAS REGISTERED WITH NSE AND BSE. I FIND THAT THE LD. AO HAS AT PAGE 5 STATED THAT THE CONDITIONS FOR INVOKI NG THE PROVISIONS OF SEC. 2(22)(E) ARE FULFILLED NAMELY (I) THERE HAS BE EN AN ADVANCE BY THE COMPANY.(II) THE BENEFICIARY SHAREHOLDER HAVING 15 .39% HOLDING .. AND (III) THE COMPANY POSSESSES ACCUMULATED PROFITS .. . 5 THE LD. DR FOR THE REVENUE HAD DISTINGUISHED THE DE CISION OF ACIT V. BHAUMIK COLOUR (P) LTD., 27 SOT 270 BY SUBM ITTING THAT THIS DECISION STANDS OVER RULED IN THE LIGHT O F THE DECISION IN CASE OF CIT VS. NATIONAL TRAVEL SERVICES (SUPRA) . IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY DECIDED THE I SSUE BECAUSE THE ASSESSEE IS A COMPANY WHICH IS NOT COVERED BY T HE PROVISIONS OF SECTION 2(22)(E) BEING A LISTED COMPA NY. THIS FACT BECOMES CLEAR FROM PAGE 10 & 11 OF THE PAPER BOOK W HICH ARE THE COPIES OF THE QUOTATIONS OF THE SHARES OF THE C OMPANY LISTED AT BOMBAY STOCK EXCHANGE AND NATIONAL STOCK EXCHANGE. WE ARE OF THE VIEW THAT THERE IS NO NEED TO GO INTO THE CONTROVERSY WHETHER THE DECISION OF SPECIAL BEN CH IN CASE OF ACIT V. BHAUMIK COLOUR (P) LTD. (SUPRA) STANDS OVERRULED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN CASE O F CIT VS. NATIONAL TRAVEL SERVICES (SUPRA). THEREFORE, WE F IND NOTHING WRONG WITH THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 10 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23.12.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 6