SHRI VIKRAM SUKHANI, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-7, JAIPUR

ITA 86/JPR/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2141 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MAHLA
• Assessee Lawyers: DILEEP SHIVPURI
• Keywords: Business expenditure; Deemed dividend; Set aside
• Section: 143(3); 2(22)(e); 147; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 86/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 SHRI VIKRAM SUKHANI A-65, SHANTI PATH, TILAK NAGAR, JAIPUR. CUKE VS. THE DCIT, CENTRAL CIRCLE-7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADUPS 0045 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI DILEEP SHIVPURI (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI A.K. MAHLA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 10/04/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 20/06/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.10.2018 OF THE LD. CIT(A), JODHPUR FOR THE ASSES SMENT YEAR 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)-I JODHPUR (CAMP AT JAIPUR) HAS GROSSLY ERRED ON FACTS AND ACTED UNLAWFULLY IN UPHOLDING THE ADDITION OF RS. 5,50,55 1/- ON ACCOUNT ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 2 OF DEEMED DIVIDEND U/S 2(22)(E) OF THE IT ACT, MADE BY THE LD. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-7, J AIPUR. 2. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND A S UNDER:- THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER U/ S 147/148 IS BAD IN LAW AND AB INITIO VOID, ESPECIALLY BECAUSE I T HAS BEEN ISSUED ON BARROWED SATISFACTION WITH NO INDEPENDE NT APPLICATION OF MIND BY HIM. 3. THE ASSESSEE IS AN INDIVIDUAL AND DIRECTOR IN M/ S GULSHAN FASHIONS PVT. LTD. HOLDING MORE THAN 10% OF SHARES OF THE SAID COMPANY. THE ASSESSEE FILED HIS RETURN OF INCOME FO R THE YEAR UNDER CONSIDERATION ON 12.02.2009 DECLARING TOTAL INCOME OF RS. 48,60,660/-. SUBSEQUENTLY, IT WAS FOUND IN THE ASSESSMENT PROCEE DING U/S 143(3) OF THE ACT IN CASE OF M/S GULSHAN FASHIONS PVT. LTD. T HAT A SUM OF RS. 5,50,551/- WAS SHOWN IN THE NAME OF THE ASSESSEE AS SUNDRY DEBTOR. THE SAID COMPANY WAS ALSO HAVING RESERVES AND SURPL US OF RS. 2.19 CRORES. THE AO ACCORDINGLY ISSUED NOTICE U/S 148 OF THE ACT ON 08.03.2013 TO ASSESS THE SAID AMOUNT OF RS. 5,50,55 1/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE AO COMPLETED THE REASSESSMENT U/S 147 R.W.S. 143(3) OF THE ACT BY MAKING ADDITION OF RS. 5,50,5551/- U/S 2(22)(E) OF THE ACT. THE ASSESSEE CHALLENGED TH E ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 3 4. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE AMOUNT OF RS. 5,50,551/- IS NOT DIVIDEND INCOME OF THE ASSESSEE. IT IS AN AMOUNT SPENT BY HIM THROUGH THE CREDIT CARD OF T HE COMPANY M/S GULSHAN FASHIONS PVT. LTD. OF WHICH HE IS A DIRECTO R. OUT OF THE AMOUNT SPENT, THE COMPANY HAS SEGREGATED THE AMOUNT SPENT INTO TWO PARTS I.E. (A) AMOUNT SPENT ON THE BUSINESS OF THE COMPAN Y, AND (B) AMOUNT SPENT ON PERSONAL EXPENSES OF THE APPELLANT. THE CO MPANY HAS DEBITED THE PERSONAL EXPENSES TO THE PERSONAL AMOUNT OF SHI R VIKRAM SUKHANI, TO BE ADJUSTED AGAINST THE REMUNERATION RECEIVED BY HIM AS A DIRECTOR OF THE COMPANY. THUS, TO FALL WITHIN THE DEFINITION OF DIVIDEND, IT HAS TO BE A PAYMENT, AND SHOULD BE, ADDITIONALLY, A LOA N OR ADVANCE. LOAN HAS BEEN SAID TO MEAN MONEY, PROPERTY OR OTHER MAT ERIAL GOODS GIVEN TO ANOTHER PARTY IN EXCHANGE FOR FUTURE REPAYMENT O F THE LOAN VALUE AMOUNT, ALONG WITH INTEREST OR OTHER FINANCE CHARGE D. THUS FOR IT TO BE A LOAN, THERE HAS TO BE A PAYMENT OF MONEY ETC. AT SOME POINT OF TIME, TO BE RETURNED LATER, ALONG WITH INTEREST, OR OTHER FINANCE CHARGES. AN ADVANCE MEANS PAYMENT MADE AHEAD OF ITS NORMAL SCHEDULE SUCH AS PAYING FOR A GOOD OR SERVICE BEFORE YOU ACTUALLY RECEIVE IT. AS STATED ABOVE, A PERUSAL OF THE LEDGER ACCOUNT WOULD SHOW T HAT THE ENTRIES ARE NOT PAYMENT MADE TO THE APPELLANT AND ARE NEITHER L OAN OR ADVANCE. ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 4 THEY ARE, IN FACT, PAYMENTS MADE BY THE APPELLANT F OR HIS PERSONAL EXPENSES FROM THE CREDIT CARD OF THE COMPANY WHICH ARE RECOUPED THROUGH ADJUSTMENT, AT THE END OF THE YEAR, AGAINST THE REMUNERATION THAT HAS TO BE PAID TO THE ASSESSEE WHO IS A DIRECT OR OF THE COMPANY. THUS, THE LD. AR HAS SUBMITTED THAT THE AMOUNTS ARE GIVEN BY THE COMPANY TO THE ASSESSEE FOR BUSINESS AND TO MEET TH E BUSINESS EXPENSES AND ACCORDINGLY, THE SAME CANNOT BE TREATE D AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT DISPUTED THAT A SUM OF RS. 5,50,551/- WAS U TILIZED BY THE ASSESSEE FOR HIS PERSONAL NEEDS AND THEREFORE, ONCE THE ASSESSEE HAS UTILIZED THE COMPANYS MONEY FOR HIS PERSONAL EXPEN DITURE THE SAME FALSE UNDER THE MISCHIEF OF SECTION 2(22)(E) OF THE ACT. THE ASSESSEE HAS NOT DISPUTED HAVING SHARES HOLDING OF MORE THAN 10% IN THE COMPANY AND THE SAID COMPANY IS HAVING SUFFICIENT R ESERVES AND SURPLUS. THEREFORE, IN VIEW OF THE VARIOUS DECISION S AS RELIED UPON THE LD. CIT(A) OVERDRAWING OF THE AMOUNT BY THE ASSESSE E FROM THE COMPANY IS DEEMED DIVIDEND. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS NOT DISPUTED T HAT IN THE BOOK OF THE COMPANY M/S GULSHAN FASHIONS PVT. LTD. A SUM OF RS. 5,50,551/- WAS SHOWN OUTSTANDING TOWARDS THE ASSESSEE AS ON 31 .03.2008. FURTHER, IT IS ALSO NOT DISPUTED THAT THE ASSESSEE IS HAVING MORE THAN 10% SHAREHOLDING IN THE SAID COMPANY AND THE SAID C OMPANY IS HAVING RESERVE AND SURPLUS OF MORE THAN RS. 2.19 CORES. TH E ONLY QUESTION RAISED BY THE ASSESSEE IS WHETHER THE SAID AMOUNT I S LOAN OR ADVANCE SO AS TO ATTRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE ASSESSEE HAS EXPLAINED BEFORE THE AUTHORITIES BELOW THAT THE ASSESSEE IS A DIRECTOR OF THE SAID COMPANY AND THE AMOUNT OF RS. 5,50,551/- WAS GIVEN TO THE ASSESSEE AS IMPREST TO MEET THE EXPEND ITURE INCURRED BY THE ASSESSEE FOR AND ON BEHALF OF THE ABOVE SAID CO MPANY. THE CONTENTIONS BEFORE THE AO AND LD. CIT(A) WERE THAT THE SAID AMOUNT WAS GIVEN TO THE ASSESSEE AS IMPREST MONEY. HOWEVER , BEFORE US THE ASSESSEE HAS EXPLAINED THAT THE SAID AMOUNT WAS SHO WN AS DUE TOWARDS THE ASSESSEE ON ACCOUNT OF THE AMOUNT SPENT THROUGH CREDIT CARD OF THE COMPANY. THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAS SPENT THE AMOUNT IN TWO PART THROUGH CREDIT CARD OF THE COMPANY ONE PART IS SPENT FOR BUSINESS OF THE COMPANY AND ANOTH ER AMOUNT WAS ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 6 SPENT ON THE PERSONAL EXPENSES OF THE ASSESSEE. THE COMPANY HAS DEBITED THE PERSONAL EXPENSES TO THE PERSONAL ACCOU NT OF THE ASSESSEE TO ADJUST AGAINST REMUNERATION TO BE RECEIVED BY TH E ASSESSEE. THUS, THE ASSESSEE HAS TAKEN A DIFFERENT STAND AND EXPLAI NED THAT THIS AMOUNT REPRESENTS SPENDING THROUGH CREDIT CARD OF THE COMP ANY. ONCE, THE AMOUNT IS REPRESENTING THE EXPENDITURE INCURRED BY THE ASSESSEE FOR HIS PERSONAL USE THROUGH CREDIT CARD THEN EVEN IF THE S AID AMOUNT WAS TO BE ADJUSTED AGAINST THE FUTURE REMUNERATION IT IS S TILL OUTSTANDING AS ON 31.03.2008 AND WOULD BE TREATED AS LOAN OR ADVANCE IN TERMS OF SECTION 2(22)(E) OF THE ACT. THE FUTURE ADJUSTMENT WILL BE ONLY IN THE NEXT FINANCIAL YEAR AND TILL THE AMOUNT IS ADJUSTED AGAI NST FUTURE REMUNERATION IT REMAINS OUTSTANDING. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE ASSESSEE HAS OVE RDRAWN THE AMOUNT AND SPENT FOR PERSONAL EXPENSES THEN, THE PR OVISIONS OF SECTION 2(22)(E) OF THE ACT ARE ATTRACTED AS THE OTHER COND ITIONS AS PRESCRIBED IN THE SAID SECTION ARE NOT IN DISPUTED. THE LD. CIT(A ) HAS CONSIDERED THIS ISSUE IN PARA 6.2 AS UNDER:- ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 7 ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 8 ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 9 PARA ABOVE, IT IS HELD THAT THE AO WAS JUSTIFIED IN TREATING THE TOTAL ADVANCES OF RS. 5,50,551/- AS DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 10 IN THE HANDS OF THE APPELLANT. THIS ADDITION IS CON FIRMED. THE GROUND NO. 2 IS DISMISSED. THUS, THE LD. CIT(A) HAS REFERRED VARIOUS DECISIONS OF HONBLE SUPREME COURT AS WELL AS THE HONBLE HIGH COURTS WHEREIN TH E AMOUNTS GIVEN TO THE SHAREHOLDER THOUGH WAS REPAID SUBSEQUENTLY WAS TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. HENCE, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY E RROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) QUA THIS ISSUE . 7. AS REGARDS THE ADDITIONAL GROUND RAISED BY THE A SSESSEE THOUGH THE SAID GROUND IS PURELY LEGAL IN NATURE AND IT GO ES TO THE ROOT OF THE MATTER HOWEVER, WE FIND THAT THE ASSESSEE HAS NOT R AISED THIS ISSUE BEFORE THE AUTHORITY BELOW. EVEN THE ASSESSEE NEVER DEMANDED THE REASONS RECORDED BY THE AO FOR REOPENING OF THE ASS ESSMENT AND FIRST TIME BEFORE US THE ASSESSEE HAS CHALLENGED THE VALI DITY OF REOPENING. THE REASONS RECORDED BY THE ASSESSING OFFICER HAS N OT BEEN FILED BEFORE US BUT ONLY A REFERENCE IS MADE TO THE ASSESSMENT ORDER WHERE THE ASSESSING OFFICER HAS MADE SOME STATEMENTS REGARDIN G ISSUANCE OF NOTICE U/S 148 OF THE ACT. IN THE ABSENCE OF THE RE ASONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT THIS ISSUE C ANNOT BE DECIDED. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING ITA NO. 86/JP/2019 SHRI VIKRAM SUKHANI VS. DCIT 11 OFFICER FOR ADJUDICATION OF THE SAME AS PER LAW AND AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20/06/2019. SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20/06/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI VIKRAM SUKHANI, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE-7, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 86/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR