V.Subramanian, CHENNAI V. DCIT, CHENNAI

ITA 821/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5756 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Salary income; Additional evidence; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . , , BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./I.T.A. NO. 821/MDS/2017 / ASSESSMENT YEAR : 2008-2009. SHRI. V. SUBRAMANIAN, OLD NO.3, NEW NO.5, II STREET, LAKSHMIPURAM, ROYAPETTAH, CHENNAI 600 014. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(3) (NOW CORPORATE CIRCLE 5(1)) CHENNAI. [PAN AAVPS 9620D] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. T.N. SEETHARAMAN, ADV $%! ' # /RESPONDENT BY : DR. S. PANDIAN, IRS, JCIT. & ' ' () /DATE OF HEARING : 05-12-2017 *+ ' () /DATE OF PRONOUNCEMENT : 07-12-2017 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER: ASSESSEE IN THIS APPEAL IS AGGRIEVED ON AN ADDITI ON OF ?62,60,020/- MADE U/S.2(22) (E) OF THE INCOME TAX A CT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT), WHICH WAS CONFIRM ED BY THE LD.CIT(A)-3, CHENNAI THROUGH HIS ORDER DATED 31.01.2017. ITA NO.821/MDS/2017. :- 2 -: 2. FACTS APROPOS ARE THAT ASSESSEE DOING SHARE TRADIN G BUSINESS HAD FILED HIS RETURN OF INCOME FOR THE IMP UGNED ASSESSMENT YEAR DISCLOSING INCOME OF ?12,22,100/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE LD. ASS ESSING OFFICER THAT ASSESSEE HAD PURCHASED LAND COSTING ?39,63,900/-. ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF THE INVESTMENT. A SSESSEE THEREUPON SUBMITTED THAT THE AMOUNT WAS GIVEN OUT OF A BORRO WING OF ?50,00,000/- TAKEN FROM M/S. HDFC BANK. AS PER THE ASSESSEE, THE TRANSACTION WAS REFLECTED IN THE BOOKS OF THE ACCO UNTS OF A COMPANY CALLED M/S. RAMANI REALTORS PVT. LTD IN WHICH ASSES SEE WAS A MAJOR SHAREHOLDER. LD. ASSESSING OFFICER THEREUPON VERIF IED THE BOOKS OF M/S. RAMANI REALTORS PVT. LTD. HE FOUND THAT THE S AID COMPANY HAD ADVANCED A SUM OF ?74,55,542/- TO THE ASSESSEE OF W HICH ?11,95,522/- WAS ACCOUNTED BY THE ASSESSEE AS SALA RY IN HIS RETURN OF INCOME. ASSESSEE WAS PUT ON NOTICE WHY THE EXCESS AMOUNT RECEIVED BY HIM FROM THE COMPANY SHOULD NOT BE CONSIDERED AS DEEMED DIVIDEND UNDER SECTION 2(22) (E) OF THE ACT. ASSE SSEE REPLIED THAT THE SUMS WERE RAISED FOR GIVING ADVANCE FOR ACQUISITION OF A PROPERTY AT COIMBATORE ON BEHALF OF THE SAID COMPANY. HOWEVER, AS PER LD. ASSESSING OFFICER NO CONFIRMATION WAS PRODUCED IN S UPPORT OF SUCH CLAIM. ACCORDING TO THE LD. ASSESSING OFFICER, OBJE CT OF THE COMPANY ITA NO.821/MDS/2017. :- 3 -: WAS NOT MONEY LENDING, BUT THEY WERE INTO REAL EST ATE BUSINESS. LD. ASSESSING OFFICER ALSO VERIFIED THE BALANCE SHEET O F M/S. RAMANI REALTORS PVT. LTD AND NOTED THAT NEITHER THE COIMBA TORE PROPERTY NOR ANY WORK IN PROGRESS FOR SUCH PROPERTY, WAS REFLECT ED THEREIN. HE MADE AN ADDITION OF ?62,60,020/- 3. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ARGUMENT OF T HE ASSESSEE WAS THAT THE ASSESSMENT WAS COMPLETED WITHOUT ASCERTAIN ING FULL FACTS. CONTENTION OF THE ASSESSEE WAS THAT HE HAD OBTAINE D A LOAN OF ?1,00,00,000/- FROM HDFC BANK ON 31.01.2007 AND HAD ADVANCED ?93,90,120/- OUT OF SUCH AMOUNT TO M/S. RAMANI REAL TORS PVT. LTD. FURTHER AS PER THE ASSESSEE, HE HAD TAKEN A LOAN O F ?1,50,00,000/- ON 23.02.2008 FROM M/S. REPCO BANK LTD, AND FROM TH IS ?1,46,00,000/- WAS INTRODUCED INTO THE COMPANY DURI NG THE PERIOD 27.02.2008 & 14.03.2008. THUS, ACCORDING TO THE AS SESSEE, THE DEBIT OF ?62,60,020/- IN HIS NAME APPEARING IN THE BOOKS OF THE COMPANY WAS MUCH LESS THAN THE SUM OF ?2,39,90,120/- ADVANC ED BY HIM TO THE SAID COMPANY. HENCE, AS PER THE ASSESSEE, SEC. 2( 22) (E) OF THE ACT COULD NOT BE APPLIED. 4. LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERIN G THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE REQUESTED FOR A REMAND ITA NO.821/MDS/2017. :- 4 -: REPORT FROM THE LD. ASSESSING OFFICER. LD. ASSESSI NG OFFICER IN HIS REMAND REPORT DATED 25.10.2016 REITERATED WHAT WAS MENTIONED IN THE ASSESSMENT ORDER. LD. COMMISSIONER OF INCOME TAX ( APPEALS) AFTER CONSIDERING THE REMAND REPORT AND REPLY GIVEN BY T HE ASSESSEE TO SUCH REMAND REPORT, HELD THAT THERE WAS NOTHING IN THE BANK PASS BOOK OF THE ASSESSEE WHICH REFLECTED THE LOANS CLA IMED TO HAVE BEEN TAKEN FROM HDFC BANK AND REPCO BANK LTD. FURTHER, A S PER THE LD. COMMISSIONER OF INCOME TAX (APPEALS), ASSESSEE COUL D NOT FURNISH ANY LOAN SANCTIONING LETTERS FROM THE BANK IN SUPPORT OF HIS CLAIM. WITH THESE OBSERVATIONS, HE UPHELD THE ORDER OF THE LD. ASSESSING OFFICER. 5. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT A DETAILED NOTE WAS FURNISHED BEFORE THE LD. ASSESSING OFFICER AS TO HOW THE LOANS WERE RECEIVED FROM HDFC BANK AND REPCO BANK AND WHE RE THESE LOANS WERE CREDITED. ACCORDING TO THE LD. AUTHOR ISED REPRESENTATIVE, LOANS AGGREGATING ?1,00,00,000/- TAKEN FROM THE HD FC BANK WERE DEPOSITED IN AN ACCOUNT IN ASSESSEES NAME WITH M/ S. ORIENTAL BANK OF COMMERCE ON 31.01.2007. AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD ON 1.02.2007 ISSUED A CHEQUE FOR ?25,0 0,000/- TO M/S. RAMANI REALTORS PVT. LTD. LD. AUTHORISED REPRESENT ATIVE FURTHER SUBMITTED THAT A SUM OF ?70,00,000/- OUT OF THE LOA N RAISED FROM M/S. ITA NO.821/MDS/2017. :- 5 -: HDFC BANK WAS TRANSFERRED ON 08.02.2007 TO A JOIN T ACCOUNT HELD BY THE ASSESSEE WITH HIS WIFE. AS PER THE LD. AUTHORI SED REPRESENTATIVE, THERE WERE TWO CHEQUES OF ?25,00,000/- EACH ISSUED FROM THIS ACCOUNT TO THE COMPANY ON 14.02.2007 AND 20.02.2007 . FURTHER AS PER THE LD. AUTHORISED REPRESENTATIVE IN ADDITION TO THE LOAN TAKEN FROM M/S.HDFC BANK, ASSESSEE HAD RAISED ANOTHER L OAN OF ?1,50,00,000/- FROM REPCO BANK P. LTD AND THIS WA S CREDITED IN ASSESSEES ACCOUNT WITH M/S. AXIS BANK ON 23.02.200 8. AS PER THE LD. AUTHORISED REPRESENTATIVE FROM THE SAID AXIS BANK A CCOUNT, ASSESSEE HAD TRANSFERRED A SUM OF ?1,46,00,000/- TO THE COMP ANY DURING THE PERIOD 27.02.2008 AND 14.03.2008. CONTENTION OF TH E LD. AUTHORISED REPRESENTATIVE WAS THAT EVIDENCE FILED BEFORE THE LD ASSESSING OFFICER DURING THE REMAND PROCEEDINGS WERE NOT CONSIDERED . 6. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. CONTENTION OF THE ASSESSEE IS THAT ADVANCE OF ?62,60,020/- RECEIVED BY IT FROM M/S. RA MANI REALTORS PVT. LTD CAME OUT OF CREDITS GIVEN TO THE SAID COMPANY. LETTER DATED 18.08.2011 FILED BY THE ASSESSEE TO THE LD. ASSESSI NG OFFICER DURING THE ASSESSMENT PROCEEDINGS READ AS UNDER:- ITA NO.821/MDS/2017. :- 6 -: WITH REFERENCE TO THE DISCUSSION WE HAD WITH YOU IN THE ABOVE MATTER ON 10.08.2011, WE FURNISH HEREWITH / BELOW THE DETAILS / CLARIFICATION REQUIRED: I. ABSTRACT OF THE BALANCES UNDER THE HEAD HDFC BANK LTD 13,19,08,150/- AND REPCO BANK LTD - 2,30,00,000/- APPEARING IN THE BALANCE SHEET AS AT 31.03.2008 OF RAMANI REALTORS PVT LTD (RRPL) (PLEASE REFER PAGE 27). II. HDFC TERM LOAN (MANAPPAKKAM) 1-APR2006 TO 31-MAR2007 SHOWING BALANCE OF 1,00,00,000/- - AS ON 31.03.2007, BEING LOAN AVAILED BY THE ASSESSEE (SRI.V.SUBRAMANIAN) IN HIS PERSONAL NAME AND INVESTED IN MANAPPAKKAM PROJECT AND MONTHLY SUMMARY FOR THE PERIOD 1-APR2007 TO 31-MAR2008 SHOWING THAT THE BALANCE REMAINED UNCHANGED TILL 31.03.2008 (IN THE BOOKS OF RRPL). III. REPCO BANK LTD (LAKE GARDEN) LEDGER ACCOUNT FOR THE PERIOD 1-APR2007 TO 31-MAR2008 SHOWING MORTGAGE LOAN AVAILED IN THE NAME OF SRI.V.SUBRAMANIAN 1,50,00,000/- IN FEBRUARY/ MARCH 2008). IV. OBC- CHENNAI ACCOUNT OF RRPL FOR THE PERIOD 1 ST APRILK 2006 TO 31 ST MARCH 2007 SHOWING HDFC LOAN RECEIPTS IN THE NAME OF SHRI.V.SUBRAMANIAN AND PAYMENTS FOR MANAPPAKKAM PROJECT OF THE COMPANY AND LEDGER ACCOUNTS STYLED SECURITY DEPOSIT MANAPPAKKAM FOR THE PERIOD 1ST APRIL 2006 TO 31 ST MARCH, 2007. THE RELEVANT PART HAS BEEN HIGHLIGHTE D ITA NO.821/MDS/2017. :- 7 -: FOR FACILITY OF REFERENCE. 2. WE REQUEST THAT THE ENCLOSED DETAILS MAY BE PERUSED IN THE LIGHT OF THE NOTE ANNEXED TO OUR WRI TTEN SUBMISSIONS DATED 22.07.2011. 3. THE HDFC LOAN WAS AVAILED BY SRI.V.SUBRAMANIAN BY MORTGAGE OF HIS PERSONAL PROPERTY FLAT NO.7 & 8, E BLOCK, RAMANI'S JANAKAPURI, T.S.NO.11/1364, OLD NO.1 0/199, C.K.COLONY, NEW SIDDHAPUDUR, COIMBATORE - 641 004 - HDFC PROVISIONAL STATEMENT ENCLOSED . 4. UNDER HDFC NORMS THE COMPANY WAS NOT ELIGIBLE TO BORROW ON ITS OWN ACCOUNT. HENCE, THE LOAN WAS TAKE N BY SRI.V.SUBRAMANIAN ON THE SECURITY OF HIS PERSONA L PROPERTY AND THE FUNDS TRANSFERRED TO THE COMPANY RRPL FOR BUSINESS PURPOSES . . 5. THE HDFC LOAN OF SRI.V.SUBRAMANIAN WAS SETTLED IN APRIL 2011 OUT OF FRESH BORROWALS BY RRPL FROM THE SAME INSTITUTION; IN THE MEANTIME, ONLY THE INTERES T ON THE LOAN WAS PAID MONTHLY THROUGH SRI.V.SUBRAMANIAN BY THE COMPANY. 6. WE ONCE AGAIN SUBMIT THAT OUT OF HIS PERSONAL BORROWALS SRI.V.SUBRAMANIAN HAD MADE A SUM OF 2,39,90, 120/- ( 93,93, 120/- FROM HDFC AND 1 ,46,00,000/- FROM REPCO BANK LTD) AVAILABLE TO RRPL AS AGAINST RS,62,60,020/- CONSIDERED AS 'LOAN OR ADVANCE' TO HIM BY RRPL AND BROUGHT TO TAX AS 'DEEMED DIVIDEND' U/S 2(22)(E) OF THE ACT IN THE ASSESSMENT ORDER DATED 31.12.2010 AND THE SAID ADDITION DESERVES TO BE DELETED. ITA NO.821/MDS/2017. :- 8 -: AS PER THE ASSESSEE HE HAD TAKEN LOANS FROM M/S.HD FC BANK AND M/S.REPCO BANK LTD AND CREDITED SUCH AMOUNT TO HIS ACCOUNT WITH ORIENTAL BANK OF COMMERCE AND AXIS BANK RESPECTIVEL Y. CONTENTION OF THE ASSESSEE IS THAT HE HAD TRANSFERRED ?25,00,000/ - FROM HIS ACCOUNT WITH M/S.ORIENTAL BANK OF COMMERCE TO THE COMPANY O N 01.02.2007, AND A FURTHER SUM OF ?50,00,000/- ON 14.02.2007 AND 20.02.2007 FROM A JOINT ACCOUNT HELD BY HIM WITH HIS WIFE. FURTHE R, CONTENTION IS THAT OUT OF THE LOANS RAISED FROM M/S.REPCO BANK LTD, CH EQUES AGGREGATING TO ?1,46,00,000/- WERE ISSUED TO THE C OMPANY DURING THE PERIOD 27.02.2007 TO 14.03.2007. LD. ASSESSING OFFI CER IN THE REMAND REPORT HAD STATED AS UNDER:- ON PERUSAL IT IS SEEN THAT THE COMPANY HAS ADVANCED AN AMOUNT OF RS.74,55,542/- OUT OF WHICH AN AMOUNT OF 11,95,552/- WAS RETURNED AS INCOME FROM SALARY AND THE ASSESSEE HIMSELF HAS STATED THAT RS74,55,542 /- WAS GIVEN TO HIM BY THE COMPANY FOR PURCHASE OF TWO PROPERTIES AT COIRNBATORE. HENCE TH E BALANCE AMOUNT OF RS.62,60,020/- IS RIGHTLY ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE BY THE ASSESSING OFFICER AS DEEMED DIVIDEND . MOREOVER, THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE COMPANY CLEARLY INDICATES THAT THE ASSESSEE HAS WITHDRAWN AMOUNTS FROM THE COMPANY TO REPAY TO VARIOUS COMPANIES AND IT IS EVIDENT TH AT THE ASSESSEE HOLDS MORE THAN 10% OF THE VOTING POWERS IN MLS RAMANI REALTORS PVT. LTD. HENCE, ITA NO.821/MDS/2017. :- 9 -: THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE REITERATED. IT IS THEREFORE, REQUESTED THAT THE CASE MAY KINDLY BE DECIDED ON MERITS. THE REMAND REPORT IS SUBMITTED FOR KIND PERUSAL OF THE COMMISSIONER OF INCOME-TAX (APPEALS). WHAT WE FIND FROM THE REMAND REPORT IS THAT NEITH ER THE LD. ASSESSING OFFICER NOR LD. COMMISSIONER OF INCOME TAX (APPEALS ), HAD GONE THROUGH THE DOCUMENTS FILED BY THE ASSESSEE IN SUP PORT OF HIS CLAIM THAT THE AMOUNTS RECEIVED BY HIM FROM THE COMPANY W ERE MUCH LESS THAN THE AMOUNTS GIVEN BY HIM TO THE SAID COMPANY. WE ARE THEREFORE OF THE OPINION THAT THE ISSUE REQUIRES A FRESH LOOK BY THE LOWER AUTHORITIES. IF THE ASSESSEE IS ABLE TO SHOW THAT HE HAD RAISED LOAN OF ?1,00,00,000/- FROM M/S.HDFC BANK AND LOAN OF ?1,50,00,000/- FROM M/S.REPCO BANK LTD, IN HIS PERS ONAL NAME AND HAD GIVEN ADVANCES AGGREGATING TO ?25,00,000/- OUT OF THE FORMER AND ?1,46,00,000/- OUT OF THE LATTER TO THE COMPANY IN OUR OPINION THERE IS NO CASE FOR ANY ADDITION U/S.2(22) (E) OF THE AC T, PROVIDED THE ADVANCES GIVEN BY THE COMPANY TO THE ASSESSEE WERE AFTER THESE DATES. LD. ASSESSING OFFICER HAS TO CONSIDER THE R EPAYMENTS IF ANY MADE BY THE COMPANY ON THE LOANS TAKEN BY THE ASSES SEE FROM M/S. HDFC AND M/S. REPCO BANK ALSO, WHILE ASCERTAINING T HE AVAILABILITY OF ASSESSEES FUNDS WITH THE COMPANY. HOWEVER, IF THE ASSESSEE IS ITA NO.821/MDS/2017. :- 10 -: UNABLE TO PROVE THAT THE ADVANCES HAD GONE OUT OF LOANS GIVEN BY HIM TO THE COMPANY ADDITION U/S.2(22) (E) OF THE AC T SHALL BE SUSTAINED BY THE LD. ASSESSING OFFICER. WITH THESE DIRECTIONS , WE REMIT THE ISSUE BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR C ONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 7TH DAY OF DECEMB ER, 2017, AT CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) / JUDICIAL MEMBER ( . '#'$ ) (ABRAHAM P. GEORGE) % &' / ACCOUNTANT MEMBER - ' / CHENNAI . / DATED:7TH DECEMBER, 2017. KV / ' $(0 1 2 1 ( / COPY TO: 1 . ! / APPELLANT 3. & 3( ( ) / CIT(A) 5. 167 $(8 / DR 2. $%! / RESPONDENT 4. & 3( / CIT 6. 79 :' / GF