DCIT, Ludhiana V. M/s Vishivkarma Bikes, Ludhiana

ITA 831/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60920 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 01-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: S R CHHABRA
• Keywords: Gift; Deemed dividend; Condonation of delay
• Section: 143(3)

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.831 /CHD/2011 (ASSESSMENT YEAR : 2006-07) THE D.C.I.T., VS. VISHIVKARMA BIKES CIRCLE 1, C-217, PHASE VIII, LUDHIANA. FOCAL POINT, LUDHIANA. PAN: AADFV0749A AND C.O.NO.74/CHD/2011 ARISING OUT OF ITA NO.831 /CHD/2011 (ASSESSMENT YEAR : 2006-07) VISHIVKARMA BIKES VS. THE D.C.I.T., C-217, PHASE VIII, CIRCLE 1, FOCAL POINT, LUDHIANA. LUDHIANA. PAN: AADFV0749A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH, DR RESPONDENT BY : SHRI S.R.CHHABRA DATE OF HEARING : 25.06.2012 DATE OF PRONOUNCEMENT : 27.06.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, LUDHIANA DAT ED 14.06.2011 RELATING TO ASSESSMENT YEAR 2006-2007 AGAINST THE O RDER PASSED U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE APP EAL FILED BY THE REVENUE. 2. THE ASSESSEE HAS MOVED AN APPLICATION FOR CONDON ATION OF DELAY IN FILING THE CROSS OBJECTION WHICH IS FILED AFTER A D ELAY OF 65 DAYS. IN 2 VIEW OF THE FACTS AND CIRCUMSTANCES AS POINTED OUT IN THE APPLICATION MOVED FOR CONDONATION OF DELAY IN FILING THE CROSS OBJECTION I.E. ON THE BASIS OF ADVICE OF EARLIER COUNSEL FOR THE ASSESSEE , WE FIND MERIT IN THE CLAIM OF THE ASSESSEE AND THE DELAY OF 65 DAYS IS H EREBY CONDONED. 3. THE APPEAL OF THE REVENUE AND THE CROSS OBJECTIO N FILED BY THE ASSESSEE ON THE SIMILAR ISSUE WERE HEARD TOGETHER A ND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE. 4. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN I TA NO.831/CHD/2011 ARE AS UNDER: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING OF RS.22,00,000/- AS AGAINST RS.27,00,000/- MADE BY THE ASSESSING OFFICER U/S 2(22)(E) AS DEEMED DIVIDEND. 2. THAT THE LD. CIT(A) ERRED IN NOT APPRECIATING TH E FACT THAT AMOUNT OF ADVANCE RECEIVED FROM THE FIRM M/S VISHAVKARMA INDUSTRIES (P) LTD., AMOUNTING TO RS.27,00,000/- WAS IN THE NATURE OF DIVIDEND U/S 2(22)(E) OF I.T. ACT, 1961 AND ASSESSED TO TAX ACCORDINGLY. 4. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IN C.O.NO.74/CHD/2011 IS AS UNDER: 1. THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS I N UPHOLDING THE ADDITION OF RS.5 LACS ON ACCOUNT OF DEEMED GIFT U/S 2(22)(E) OF THE INCOME TAX ACT. 5. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE INVOKING OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE ASSESSING OFFICER HAD MADE ADDITION OF RS.27 LACS ON ACCOUNT OF DEEME D DIVIDEND IN THE HANDS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE CIT (APPEALS) APPLIED THE RATIO LAID DOWN IN ACIT VS. BHAUMIK COLOR PVT. LTD. (2009) 18 DTR 451(MUM) (TRI BUNAL) AND CIT VS. HOTEL HILL TOP (2008) 5 DTR 46 (RAJ) AND UPHELD THE ADDITION TO THE EXTENT OF ONLY RS.5 LACS. 3 6. THE REVENUE IS IN APPEAL AGAINST THE DELETION O F ADDITION OF RS.22 LACS AND THE ASSESSEE IS IN APPEAL AGAINST THE CONF IRMATION OF ADDITION OF RS.5 LAS. 7. SHRI MANJIT SINGH PUT IN APPEARANCE ON BEHALF OF THE REVENUE AND SHRI S.R.CHHABRA APPEARED FOR THE ASSESSEE AND PUT- FORWARD THEIR CONTENTIONS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FACTS RELATING TO THE ISSUE RAISED IN THE PRESENT A PPEAL ARE THAT THE ASSESSEE IS A PARTNERSHIP CONCERN AND CONSTITUTED O F TWO PARTNERS SHRI CHARANJIT SINGH AND SMT.HARVINDER KAUR. THE SAID S HRI CHARANJIT SINGH WAS DIRECTOR OF VISHIVKARMA INDUSTRIES PVT. LTD. HA VING 23% SHAREHOLDING IN THE SAID COMPANY. THE ASSESSING OF FICER WAS OF THE VIEW THAT HOLDINGS OF THE PARTNERS OF THE ERSTWHILE PARTNERSHIP CONCERN WERE MORE THAN 10% AND HENCE THE PROVISIONS OF SECT ION 2(22)(E) OF THE ACT WERE APPLICABLE. THE CIT (APPEALS) IN TURN REL IED UPON THE RATIO LAID DOWN IN BHAUMIK COLOUR PVT. LTD. (SUPRA) AND C OMPUTED THE DISALLOWANCE OF RS.5 LACS. 9. WE FIND THAT THE PRESENT ISSUE IS COVERED BY TH E RATIO LAID DOWN BY CHANDIGARH BENCH OF THE TRIBUNAL IN ACIT VS. ARORA KNITFAB (P) LTD., LUDHIANA IN ITA NO.514/CHD/2011 AND C.O.NO.58/CHD/2 011, VIDE ORDER DATED 24.8.2011. IN THE FACTS BEFORE THE CHANDIGAR H BENCH OF THE TRIBUNAL, THE COMPANY M/S ARORA FABRICS PVT. LTD. W AS OWNED BY LARGELY FOUR SHARE HOLDERS WHO HAD COMBINED SHAREHOLDING OF 85.71%. THERE WAS SISTER CONCERN BY THE NAME OF M/S ARORA KNITFAB PVT. LTD. IN WHICH MRS.HARVINDER KAUR HAS 58.84% SHAREHOLDING. M/S AR ORA KNITFAB PVT. LTD. HAD RECEIVED LOAN FROM M/S ARORA FABRICS PVT. LTD. OF RS.4.43 4 CRORES. THE ADDITION WAS MADE ON ACCOUNT OF THE AC CUMULATIVE HOLDING OF THE PARTNERS BY INVOKING THE PROVISIONS OF SECTI ON 2(22)(E) OF THE ACT. THE TRIBUNAL RELYING UPON THE RATIO IN BHAUMIK COLO RS PVT. LTD. [313 ITR (AT) 146 (MUM) (SB)], CIT VS. HOTEL HILL TOP (2 009) [313 ITR 116 (RAJ)] AND ALSO CIT VS. UNIVERSAL MEDICARE PVT. LTD . (2010) [190 TAXMAN 144 (MUM)] HELD THAT WHERE THE CONDITIONS LA ID DOWN IN SECTION 2(22) OF THE ACT WITH REGARD TO MINIMUM SHAREHOLDIN G BY THE SHAREHOLDERS IN THE ASSESSEE COMPANY WERE NOT FULFI LLED, THE SHAREHOLDING OF VARIOUS DIFFERENT PERSONS COULD NOT BE CLUBBED TO DECIDE THE ISSUE OF FULFILLMENT OF CONDITION LAID DOWN IN SECTION 2(22)(E) OF THE ACT. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN IT A NO.14 OF 2012 (ONM) DATE OF DECISION 19.4.2012 HAS DISMISSED THE APPEAL FILED BY THE REVENUE IN VIEW OF THE INTERPRETATION TO SECTION 2( 22)(E) OF THE ACT BY BOTH THE BOMBAY AND RAJASTHAN HIGH COURTS. 10. WE FIND THAT THE ISSUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ARORA KNITFAB PVT. LTD. (SUPRA). THE ASSESSEE FIRM BEFORE US WAS NOT A SHAREHOLDER IN THE CONCERN M/S VISHIVKARMA INDUST RIES PVT. LTD. IT IS ONLY THE PARTNER SHRI CHARANJIT SINGH WHO WAS ALSO THE DIRECTOR OF THE SAID COMPANY. UNDOUBTEDLY THE ASSESSEE HAD BUSINES S RELATIONS WITH ITS SISTER CONCERN AND OVER AND ABOVE THE SALES AMOUNT, THE SAID COMPANY HAD GIVEN CHEQUES TO THE ASSESSEE OF RS.2 LACS DATE D 28.7.2005 AND RS.5 LACS DATED 8.9.2005. FURTHER CHEQUE OF RS.5 LACS D ATED 27.10.2005 WAS GIVEN BY THE ASSESSEE TO THE SAID COMPANY. THE SAI D TRANSACTIONS THOUGH WERE IN THE NATURE OF ADVANCES OR LOANS BETWEEN THE ASSESSEE PARTNERSHIP CONCERN AND IT SISTER CONCERN WHICH IS PRIVATE LIMI TED COMPANY, BUT NO SHAREHOLDING WAS HELD BY THE ASSESSEE PARTNERSHIP C ONCERN IN THE INDIAN COMPANY AND IN THE ABSENCE OF THE SAME, THE PROVISI ONS OF SECTION 5 2(22)(E) OF THE ACT WERE NOT ATTRACTED, WHICH COMES INTO OPERATION ONLY WHEN THERE IS SHAREHOLDING OF MORE THAN 10% OF VOTI NG POWER AND THERE IS INTERCHANGE OF FUNDS FOR NON BUSINESS PURPOSES. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT (SUPRA) AND HON'BLE RAJASTHANA HIGH COUR T (SUPRA) AND ALSO BY HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ARORA KNITFAB PVT. LTD.(SUPRA). IN THE ABSENCE OF ANY P AYMENT BEING MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF THE SHAR EHOLDER, THE TRANSACTION IN QUESTION WOULD NOT FALL WITHIN THE DOMAIN OF THE DEEMED DIVIDEND, I.E. IN THE HANDS OF THE ASSESSEE BEFORE US. CONSEQUENT LY, WE FIND NO MERIT IN THE APPLICATION OF THE PROVISIONS OF SECTION 2(2 2)(E) OF THE ACT IN THE PRESENT CASE. WE DIRECT THE ASSESSING OFFICER TO D ELETE THE ADDITION OF RS.27 LACS IN THIS REGARD. THUS GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED AND GROUND OF APPEAL RAISED BY THE AS SESSEE IN C.O. IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE CROSS OBJECTIONS FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JUNE, 2012. SD/- SD/- (T.R. SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH JUNE, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH