Shri Bhadresh K.Shah, Ahmedabad V. The ACIT.,Circle-1, Ahmedabad

ITA 89/AHD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9685 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-12-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TUSHAR H HEMANI
• Keywords: Deemed dividend; Reason to believe
• Section: 143(3); 148

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI, JUDICIAL MEMBER ITA NO.89/AHD/2012 ( / ASSTT YEAR : 2003-04) SHRI BHADRESH K. SHAH 9A, ASHOK VATIKA NO.1 BOPAL ROAD AMBLI AHMEDABAD 380 058. PAN : ANFPS 7040 G. VS. ACIT, CIR.1 AHMEDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TUSHAR H. HEMANI, AR / RESPONDENT BY : SHRI JAMESH KURIAN, SR.DR / DATE OF HEARING 16-12-2016 / DATE OF PRONOUNCEMENT 23 -12-2016 O R D E R PER S.S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSTT.YEAR 2003-04 ARISES AGAINST THE CIT(A)-6, AHMEDABADS ORDER DATED 3.11.2011 PASSED IN CASE NO.CIT(A)-I/ACIT.CIR.1/230/10 - 11 IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, IN SHORT THE ACT. 2. WE COME TO THE RELEVANT PLEADINGS. THE ASSESSEE RAISES T WO SUBSTANTIVE GROUNDS INTERALIA CHALLENGING VALIDITY OF REOPENING FOLLOWED BY THE ONE ON MERIT AGAINST SECTION 2(22)(E) ADDITION OF DEEMED DIVIDEND AMOUNTING TO RS.60 LAKHS AS MADE BY BOTH THE LOWER AUTHORITIES. ITA NO.89/AHD/2012 - 2 3. WE FIRST ADVERT TO ASSESSEES LEGAL GROUND. IT FILED RETURN ON 26.9.2003 STATING INCOME OF RS.71,62,969/-. THE ASSESSEE HOLDS 99.90% AND 35.46% OF STAKES IN M/S.VARINDAVAN ALLOYS PVT. LTD. AND M/S.AIA ENGINEERING LTD.; RESPE CTIVELY. THE ASSESSING OFFICER ISSUED SECTION 148 NOTICE DATED 26.3.2010 AFTER FORM ING REASONS TO BELIEVE THAT ASSESSEES TAXABLE INCOME LIABLE TO BE ASSESSE D HAS ESCAPED ASSESSMENT. THE ASSESSEE APPELLANT SOUGHT FOR COPY OF ABOVE REASONS. THE ASSE SSING OFFICER FURNISHED THE SAME READING AS UNDER: PERUSAL OF RETURN OF AIA ENGINEERING LTD. FOR THE A.Y.2003-04 REVEALS THAT AIA ENGINEERING LTD. HAS RECEIVED LOANS FROM M/S. KEYUR FINANCIAL SERVICES PVT. LTD. PERUSAL OF DETAILS OF AIA ENGINEERING LTD. PERTAINI NG TO A.Y.2003-04 SHOWS A BALANCE OF INTER-CORPORATE DEPOSIT AS ON 31/03/2003 AT RS.29,12,271/- AS AGAINST BALANCE OF RS.NIL IN THE EARLIER YEAR. IT IS FURTHE R SEEN THAT AIA ENGINEERING LTD. HAS PAID RS.104141/- AS INTEREST AGAINST CORPORATE DEPOSIT TO M/S. KEYUR FINANCIAL SERVICES PVT. LTD. FURTHER, I T IS SEEN THAT M/S. KEYUR FINANCIAL'SERVICES PVT. LTD. HAS FORWARDED LOAN OF RS.28,50,000/- ON 02/01/2003 TO M/S. AIA ENGINEERING LTD. IT IS HOWEVER NOTED THAT ALTHOUGH THE TRANSACTION HAVE BEEN TERMED AS INTERCORPORATE DEPOSITS, ACTUALLY SUCH TRANSACTION ARE LOAN TRANSACTIONS, THE TERM OF FORWARDAL OF THE SAID AMOUNT FROM M/S. KEYUR FINANCIAL SERVICES PVT. LTD. BEING NOT FIXED. IT IS FURTHER NOTED THAT SHRI BHADRESH K. SHAH HOLDS 99% SHARES IN M/S. KEYUR FINANCIAL SERVICES PVT. LTD AND ALSO HOLD MORE THAN 20% SHARES IN AIA ENGINEERING LTD. IT IS THEREFORE SEEN THAT THE LOANS FORWARDED BY M/S. KEYUR FINANCIAL SERVICES PVT. LTD. FALLS UNDER THE PURVIEW OF SEC.2(22 )(E) OF THE I.T. ACT. FURTHER, THE ACCUMULATED PROFITS IN THE BOOKS OF M/S. KEY UR FINANCIAL SERVICES PVT. LTD. AS ON 31/03/2002 WAS RS.36,18,829/- AND AS ON 31/03/2003 WAS RS.35,39,180/-. IN VIEW OF THE ABOVE FACTS, THE PROVISION OF SEC.2(22)(E) ARE CLEARLY APPLICABLE. THE LOAN AMOUNT IS THEREFORE TAXABLE AS DIVIDEND, IN THE CASE OF SHRI BHADRESH K. SHAH, IN VIEW OF SEC.2(22)(E) OF THE I. T. ACT. THEREFORE, THE UNDERSIGNED HAS REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX FOR THE YEAR UNDER CONSIDERATION (A.Y.2003-04) HAS ESCAPED ASSESSMENT AS PER THE PROVISIONS OF SECTION 147 OF THE I.T. ACT. THERE FORE, A NOTICE U/S. 148 OF THE I.T. ACT IS BEING ISSUED FOR RE-ASSESSMENT U/S. 147 OF THE I.T. ACT. THE ASSESSING OFFICER THEREAFTER FRAMED THE IMPUGNED REAS SESSMENT MAKING THE ABOVE DEEMED DIVIDEND ADDITION IN QUESTION OF RS.60 LAKHS AS ADVANCED BY M/S.VARINDAVAN ALLOYS P.LTD. TO M/S.AIA LTD. (SUPRA) THEREBY REJE CTING THE ITA NO.89/AHD/2012 - 3 ASSESSEES EXPLANATION THAT THE SAME WAS IN THE NATURE OF INTER -CORPORATE DEPOSITS. THE CIT(A) UPHOLDS THE SAME. 4. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEES SOLE ARGUMENT ON T HIS LEGAL ISSUE IS THAT THE IMPUGNED ADDITION OF RS.60 LAKHS AS ADVANCED BY M/S.V ARINDAVAN TO M/S.AIA NEVER FOUND REASON OF RE-OPENING SINCE THE REOPENING NOTICE SO UGHT TO ADD LOANS RECEIVED FROM M/S.KEYUR FINANCIAL SERVICES PVT. LTD. LEA RNED DEPARTMENTAL REPRESENTATIVE FAILS TO REBUT THIS FACTUAL POSITION. WE NOTICE I N THIS BACKGROUND THAT HONBLE JURISDICTIONAL HIGH COURT IN (2013) 30 TAXMANN.COM 1 (GUJ) CIT VS. MOHAMED JUNED DADANI UPHOLDS TRIBUNALS ORDER QUASHING A SIMILAR REOPENING ON THE GROUND THAT WHEN THE ASSESSING OFFICER HAD NOT MADE ANY ADDITION QUA THE REASON RECORDED IN REOPENING OF THE ASSESSMENT, HE COULD NOT MAKE ADDITIONS ON SOM E OTHER GROUNDS NOT FORMING PART OF THE RE-OPENING REASONS RECORDED. WE REP EAT THAT THE ABOVE LOAN IN QUESTION OF RS.60 LAKHS IS NO WHERE RECORDED AS REASON OF REOPE NING AND THERE IS NO ADDITION MADE QUA THOSE REASONS WHICH HAVE BEEN EXTRACTED HEREINABOVE. WE THUS ACCEPT ASSESSEES LEGAL GROUND CHALLENGIN G VALIDITY OF REOPENING. THE SAME STANDS QUASHED RENDERING THE LATER GROUND ON MERITS TO BE ACADEMIC. 5. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 23 RD DECEMBER, 2016 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER AHMEDABAD; DATED, 23/12/2016