Ch. Ravindra Babu, Hyderabad V. The ACIT, Circle-1(2), Hyderabad

ITA 85/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91658 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 14-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-01-2014
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: B SATYANARAYANA MURTY
• Keywords: Peak credit; Deemed dividend
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 85/HYD/2014 ASSESSMENT YEAR: 2009-10 CH. RAVINDRA BABU, KUKATPALLY, HYDERABAD [PAN: ADUPC0332L] VS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI B. SATYANARAYANA MURTY , AR FOR REVENUE : S HRI RA JAT MITRA , DR DATE OF HEARING : 1 2 - 0 5 - 201 5 DATE OF PRONOUNCEMENT : 20 - 05 - 2015 O R D E R PER SAKTIJIT DEY, J.M. : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 18-09-2013 OF LD. COMMISSIONER OF INCOME TAX (APPEA LS)-II, HYDERABAD FOR THE ASSESSMENT YEAR (AY) 2009-10. 2. THERE IS A DELAY OF 15 DAYS IN FILING OF THE AFO RESAID APPEAL. LD. AR OF THE ASSESSEE HIMSELF HAS FILED AN AFFIDAVIT EXPL AINING THE REASONS FOR DELAY. AFTER GOING THROUGH THE CONTENTS OF THE AFF IDAVIT AND PETITION EXPLAINING THE REASONS OF THE DELAY, WE ARE INCLINE D TO CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING ON MERITS. I.T.A. NO. 85/HYD/2014 CH. RAVINDRA BABU :- 2 -: 3. THE ASSESSEE HAS RAISED 4 GROUNDS. GROUND NO.1 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. IN GROUND NO. 2 & 3, ASSESSEE HAS RAISED THE COMMON ISSUE OF ADDITION OF RS. 44,35,272/- AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE INCOME TAX ACT [ACT]. 4. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, AS SESSEE, AN INDIVIDUAL, AT THE RELEVANT POINT OF TIME WAS THE MANAGING DIRE CTOR OF M/S. CHADALAVADA INFRATECH LTD. HE FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 05-08-2009 DECLARING TO TAL INCOME OF RS. 57,93,850/-. DURING THE ASSESSMENT PROCEEDINGS, ON VERIFYING THE INFORMATION AVAILABLE ON RECORD, THE ASSESSING OFFI CER (AO) NOTICED THAT ASSESSEE ON VARIOUS DATES HAS WITHDRAWN MONEY FROM THE COMPANY'S ACCOUNT AMOUNTING TO RS. 3,15,43,512/-. THE AO BEI NG OF THE VIEW THAT SUCH WITHDRAWAL MADE BY THE ASSESSEE AMOUNTS TO DEE MED DIVIDEND AS PER SECTION 2(22)(E) OF THE ACT CALLED UPON THE ASS ESSEE TO EXPLAIN WHY IT SHOULD NOT BE TREATED AS 'INCOME AT HIS HANDS'. IN REPLY TO THE QUERY MADE BY THE AO, THE ASSESSEE STATED THAT HE HAS MAD E THE WITHDRAWALS OF THE AFORESTATED AMOUNT OUT OF THE SHARE APPLICAT ION MONEY AND REMUNERATION DEPOSITED WITH THE COMPANY. HENCE, SU CH WITHDRAWALS CANNOT BE TREATED AS 'LOANS OR ADVANCES' SO AS TO T REAT IT AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. THE AO ON THE B ASIS OF SUBMISSIONS MADE BY THE ASSESSEE AND ON VERIFYING THE INFORMATI ON ON RECORD FOUND THAT THE TOTAL DEPOSITS MADE BY THE ASSESSEE TOWARD S SHARE APPLICATION MONEY, REMUNERATION ETC., IN THE COMPANY AS PER THE CONSOLIDATED STATEMENT OF ACCOUNT IS TO THE TUNE OF RS. 2,71,08, 240/-. WHEREAS, THE WITHDRAWAL MADE BY THE ASSESSEE FROM THE COMPANY'S ACCOUNT IS TO THE TUNE OF RS. 3,15,43,512/-. THEREFORE, THE EXCESS W ITHDRAWAL OF RS. 44,35,272/- WAS TREATED AS DEEMED DIVIDEND U/S. 2(2 2)(E) OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. BEING AG GRIEVED OF SUCH ADDITION, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A ). I.T.A. NO. 85/HYD/2014 CH. RAVINDRA BABU :- 3 -: 5. BEFORE THE FIRST APPELLATE AUTHORITY ALSO, THE A SSESSEE PLEADED THAT IF THE ENTIRE DEPOSITS MADE BY THE ASSESSEE IN THE COMPANY INCLUDING THE SHARE APPLICATION MONEY OF RS. 2,61,50,000/- IS TAK EN INTO ACCOUNT THEN, THE DEPOSITS SHOULD BE MORE THAN THE WITHDRAW ALS MADE BY THE ASSESSEE FROM THE COMPANY'S ACCOUNT. HENCE, WITHDR AWALS MADE CANNOT BE TREATED AS LOAN AND ADVANCES SO AS TO BRING IT W ITHIN THE SWEEP OF SECTION 2(22)(E) OF THE ACT. THE LD.CIT(A) AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE VIZ-A-VIZ THE FACTS AND MATERIALS ON RECORD OBSERVED THAT THE ASSESSEE WAS MAINTAINING TWO SEPA RATE ACCOUNTS WITH THE COMPANY, ONE RELATING TO SHARE APPLICATION MONE Y AND THE OTHER RELATING TO THE REMUNERATION PAID TO HIM. SHE OBSE RVED, AS FAR AS THE SHARE APPLICATION MONEY ACCOUNT IS CONCERNED, THERE ARE ONLY CREDIT ENTRIES AND NO WITHDRAWALS HAVE BEEN MADE. ALL THE WITHDRAWALS HAVE BEEN MADE FROM THE ACCOUNT WHEREIN REMUNERATION PAI D BY THE COMPANY TO THE ASSESSEE WAS CREDITED. THUS, LD.CIT(A) CONC LUDED THAT SINCE THE WITHDRAWALS ARE BEING MADE FROM THE RUNNING ACCOUNT , ASSESSEE'S PLEA THAT DEPOSITS MADE TOWARDS SHARE APPLICATION MONEY SHOULD BE CONSIDERED AS PART OF THE DEPOSITS MADE BY THE ASSE SSEE CANNOT BE ACCEPTED. ACCORDINGLY, SHE CONFIRMED THE ADDITION OF RS. 44,35,272/- MADE U/S. 2(22)(E) OF THE ACT. 6. LD. AR REFERRING TO THE LEDGER A/C OF THE ASSESS EE IN THE BOOKS OF THE COMPANY IN RESPECT OF SHARE APPLICATION MONEY S UBMITTED THAT THERE IS A CLOSING CREDIT BALANCE OF RS. 68,50,000/-. SI MILARLY, REFERRING TO THE LEDGER COPY OF REMUNERATION PAYABLE ACCOUNT TO THE ASSESSEE IN THE BOOKS OF THE COMPANY, THE LD. AR SUBMITTED THAT IN THIS ACCOUNT ALSO THERE IS A CLOSING CREDIT BALANCE OF RS. 1,34,296/- . HENCE, THE PEAK CREDIT BALANCE WORKED OUT BY THE AO WHICH WAS TREAT ED AS 'DEEMED DIVIDEND' IS TOTALLY WRONG. THE LD. AR SUBMITTED W HEN THE ASSESSEE IS HAVING DEPOSITS WITH THE COMPANY AND WITHDRAWALS MA DE FROM SUCH I.T.A. NO. 85/HYD/2014 CH. RAVINDRA BABU :- 4 -: DEPOSITS IS MUCH LESS, THE AMOUNT CANNOT BE CONSIDE RED AS 'LOANS AND ADVANCES' GIVEN BY THE COMPANY TO THE ASSESSEE TO T REAT IT AS DEEMED DIVIDEND U/S. 2(22)(E). 7. LD. DR ON THE OTHER HAND SUPPORTING THE REASONIN G OF THE AO AND LD.CIT(A) SUBMITTED THAT AS THE ASSESSEE IS HAVING TWO ACCOUNTS, ONE RUNNING ACCOUNT AND THE OTHER SHARE APPLICATION MON EY ACCOUNT, BOTH THE ACCOUNTS CANNOT BE MIXED UP AND THE DEPOSITS/CR EDITS IN THE SHARE APPLICATION MONEY ACCOUNT CANNOT BE CONSIDERED FOR ARRIVING AT THE DEEMED DIVIDEND. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS TH E MATERIALS ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT THE AO HAS ACCEPTED ASSESSEE'S PLEA THAT DEPOSITS/CREDITS STANDING IN T HE NAME OF THE ASSESSEE IN THE BOOKS OF THE COMPANY SHOULD ALSO IN CLUDE THE SHARE APPLICATION MONEY. HOWEVER, ON WHAT BASIS THE AO H AS ARRIVED AT THE TOTAL DEPOSITS/CREDITS AT RS. 2,71,08,240/- IS NOT UNDERSTOOD. ON A PERUSAL OF THE RESPECTIVE LEDGER A/CS I.E., SHARE A PPLICATION MONEY AND REMUNERATION PAYABLE IN THE NAME OF ASSESSEE IN THE BOOKS OF COMPANY, COPIES OF WHICH ARE AT PAGE NO. 5 AND 7 OF PAPER BO OK REVEALS THAT IN THE SHARE APPLICATION MONEY ACCOUNT, TOTAL CREDITS DURI NG THE YEAR IS RS. 2,68,50,000/- WHICH INCLUDES AN AMOUNT OF RS. 2,61, 50,000/- TOWARDS SHARE APPLICATION MONEY, WHILE TOTAL DEBIT STANDS A T RS. 2 CRORES. THUS, THERE IS A CLOSING CREDIT BALANCE OF RS. 68,50,000/ -. SIMILARLY, ON GOING THROUGH THE LEDGER COPY OF REMUNERATION PAYABLE ACC OUNT OF THE ASSESSEE IN THE BOOKS OF THE COMPANY IT IS SEEN THA T WHILE TOTAL CREDITS DURING THE YEAR IS RS. 1,16,77,808/-, THE TOTAL DEB IT IS RS.1,15,43,512/-. THUS, IN BOTH THE ACCOUNTS, THERE IS A SURPLUS OF C REDIT OVER THE DEBIT. IT IS FURTHER EVIDENT, THOUGH, THE AO WHILE CONSIDERIN G THE WITHDRAWALS I.T.A. NO. 85/HYD/2014 CH. RAVINDRA BABU :- 5 -: MADE BY THE ASSESSEE HAS TAKEN ALL DEBITS IN BOTH T HE ACCOUNTS, HOWEVER, WHILE CONSIDERING THE DEPOSITS, HE HAS NOT TAKEN ALL CREDITS OF BOTH THE ACCOUNTS. IF THE TOTAL CREDIT BALANCE OF BOTH THE ACCOUNTS IS CORRECTLY COMPUTED, THEN, IT WILL COME TO RS. 3,85, 27,808/- AS AGAINST RS. 2,71,08,240/- TAKEN BY AO WHICH IS MUCH MORE TH AN THE TOTAL WITHDRAWALS OF RS. 3,15,43,512/- CONSIDERED BY THE AO FOR BOTH THE ACCOUNTS. ON PERUSAL OF MATERIALS ON RECORD IT IS CLEARLY EVIDENT THAT ACTUALLY THERE IS NO EXCESS WITHDRAWAL OF MONEY BY THE ASSESSEE FROM THE COMPANY'S ACCOUNT. THE SO CALLED PEAK WITHDRAWAL O F RS. 44,35,272/- IS REALLY NON-EXISTENT, HENCE, CANNOT BE CONSIDERED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT AT THE HANDS OF THE ASSESS EE. IN OUR VIEW, THE LD.CIT(A) HAS FAILED TO PROPERLY APPRECIATE THE AFO RESAID FACTUAL POSITION. IN VIEW OF THE AFORESAID, WE FIND NO REASON TO SUST AIN THE ADDITION MADE AND ACCORDINGLY DELETE THE AMOUNT OF RS. 44,35,272/ -. IN THE RESULT, THE GROUNDS ARE ALLOWED. 9. IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED THE LEVY OF INTEREST U/S. 234B OF THE ACT. CHARGING OF INTEREST BEING C ONSEQUENTIAL IN NATURE, NEED NOT BE ADJUDICATED IN VIEW OF OUR DECI SION HEREIN ABOVE. 10. IN THE RESULT, ASSESSEE'S APPEAL IS CONSIDERED TO BE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 20 TH MAY, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 20 TH MAY, 2015 TNMM I.T.A. NO. 85/HYD/2014 CH. RAVINDRA BABU :- 6 -: COPY TO : 1. CH. RAVINDRA BABU, FLAT NO. 302, S.S. ARCADE, VI PHASE, KPHB COLONY, KUKATPALLY, HYDERABAD. C/O. VENUGOPAL & CHENOY, CHARTERED ACCOUNTANTS, 4-4-889/16/2, TILAK ROAD, HYDERABAD. 2. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(2 ), HYDERABAD. 3. CIT(APPEALS)-II, HYDERABAD. 4. CIT-I, HYDERABAD. 5. D.R. ITAT, HYDERABAD