Dy. Commissioner of Income Tax, Lucknow V. Desh Raj Agarwal, Lucknow

ITA 910/LKW/2014

• Counselvise Citation: 91023714 RSA 2014
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-10-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 23-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: YOGESH AGARWAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.910/LKW/2014 ASSESSMENT YEAR:2011-12 DY. CIT RANGE I LUCKNOW V. DESH RAJ AGARWAL B-6, SECTOR B ALIGANJ, LUCKNOW TAN/PAN:AEMPA5286L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. AMIT NIGAM, D.R. RESPONDENT BY: SHRI. YOGESH AGARWAL, ADVOCATE DATE OF HEARING: 07 10 2015 DATE OF PRONOUNCEMENT: 06 11 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN GIVING RELIEF OF RS.87.58 LAKHS FOR ADDITION OF CASH DEPOSIT OF RS.87.58 LAKHS IN SAVING BANK ACCOUNT AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS A DIRECTOR OF THE COMPANY, M/S CHINTPURNI ENGINEERING WORKS PVT. LTD. AND RECEIVING SALARY FROM IT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEPOSITED RS.87.50 LAKHS IN CASH IN SAVING BANK ACCOUNT WITH SBI. IN RESPONSE TO SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT M/S CHINTPURNI ENGINEERING WORKS WAS :- 2 -: REGISTERED IN THE YEAR 1993 AS PARTNERSHIP FIRM, IN WHICH HE WAS A PARTNER. SINCE E-PAYMENTS BECAME MANDATORY TO DEPOSIT THE INCOME TAX, TDS, SALES TAX, SERVICE TAX, EXCISE, ETC, THE FIRM OPENED AN ACCOUNT IN HIS NAME FROM WHERE ALL THE E-PAYMENTS WERE MADE. THE ACCOUNT WAS REFLECTED IN THE BOOKS OF ACCOUNT OF THE FIRM. IN YEAR 2009, THE FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY AND THE SAID ACCOUNT IS REFLECTED IN THE BOOKS OF ACCOUNT OF THE COMPANY ALSO. IT WAS SUBMITTED THAT THE COMPANY HAS NEITHER GIVEN ANY LOAN NOR ADVANCE TO THE ASSESSEE HENCE THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT ATTRACTED. THE AO CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE ASSESSEE AND THE COMPANY ARE SEPARATE PERSONS. THE AO FURTHER OBSERVED THAT M/S. CHINTPURNI ENGINEERING (P) LTD. IS A COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED AND THE ASSESSEE HOLDS 26.98% SHARE IN THE COMPANY, THE COMPANY HAS GIVEN ADVANCE/LOAN OF RS.87.58 LAKH TO THE ASSESSEE AND THE COMPANY HAS SUFFICIENT ACCUMULATED PROFITS AS PER THE AUDITED ACCOUNTS. CONSIDERING THE ABOVE FACTS, THE ASSESSING OFFICER TAXED THE CASH DEPOSITS OF RS.87.58 LAKHS AS DEEMED DIVIDEND AS PER PROVISIONS OF SECTION 2(22)(2) OF THE ACT. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT IN THE ERSTWHILE FIRM, M/S CHINTPURNI ENGINEERING WORKS WHICH WAS CONVERTED INTO A PVT. LTD. COMPANY IN WHICH THE ASSESSEE BECAME THE DIRECTOR/SHAREHOLDER, BUT THE ACTIVITIES OF DEPOSITING THE E-TAX REMAINED THE SAME AND IT WAS DEPOSITED FROM THE SAME BANK ACCOUNT OF THE ASSESSEE. THE SOURCE OF CASH DEPOSIT IN BANK ACCOUNT WAS CASH WITHDRAWAL FROM M/S CHINTPURNI ENGINEERING WORKS PVT. LTD. WHICH IN TURN WAS USED TO DEPOSIT ITS STATUTORY LIABILITIES. HE HAS ALSO PLACED RELIANCE UPON THE CBDT CIRCULAR NO.5/2008 THROUGH WHICH CBDT HAS ALLOWED THE PAYMENT TO BE MADE FROM THIRD PARTY :- 3 -: ACCOUNTS. IT WAS ALSO CONTENDED THAT SECTION 2(22)(E) OF THE ACT CAN ONLY BE INVOKED WHERE LOAN OR ADVANCE IS TO BE GIVEN TO THE SHAREHOLDERS OF THE COMPANY. SINCE THE AMOUNT WAS DEPOSITED TO CLEAR STATUTORY LIABILITIES, PROVISIONS OF SECTION 2(22)(E) CANNOT BE INVOKED. THE LD. CIT(A) RE-EXAMINED THE CLAIM OF THE ASSESSEE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS AND BEING CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE, HE DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 6. I HAVE CONSIDERED THE MATTER AND PERUSED THE DOCUMENTS AND EVIDENCES SUBMITTED BY THE APPELLANT. THE APPELLANT WAS A PARTNER IN THE PARTNERSHIP FIRM, M/S. CHINTPURNI ENGINEERING WORKS. THE SAVINGS BANK ACCOUNT IN THE SBI WAS OPENED ON 31.10.2008 IN THE NAME OF THE APPELLANT BY DEPOSITING RS.5,000/- IN CASH FOR E-PAYMENT OF TAXES. THIS BANK ACCOUNT FORMED PART OF THE BOOKS OF ACCOUNT OF THE FIRM FOR FY 2008-09. THE FIRM WAS CONVERTED INTO A COMPANY M/S. CHINTPURNI ENGINEERING WORK (P) LTD. WHICH WAS INCORPORATED ON 17.07.2009. THE APPELLANT BECAME ONE OF THE DIRECTORS OF THE COMPANY. THE SAVINGS BANK ACCOUNT STANDING IRI TIIE NAME OF THE APPELLANT NOW FORMED PART OF THE BOOKS OF ACCOUNT OF THE COMPANY. IT IS NOTED THAT THE BALANCE OF RS.10,788/-IN THE SAVINGS ACCOUNT IS DULY REFLECTED UNDER THE HEAD CASH AND BANK BALANCES OF THE AUDITED BALANCE SHEET OF THE COMPANY AS. ON 31.03.2011. ON PERUSAL OF THE STATEMENT OF THE SBI BANK ACCOUNT, THE DETAILS OF SOURCE OF CASH DEPOSITS THEREIN AND E-PAYMENTS MADE FROM THE BANK ACCOUNT IT IS NOTED THAT THE CASH DEPOSITED IN THE SBI BANK ACCOUNT HAVE BEEN WITHDRAWN FROM REGULAR BANK ACCOUNTS OF THE COMPANY AT CANARA BANK, HDFC BANK, AXIS BANK, PUNJAB NATIONAL BANK. THE SOURCE OF THE CASH DEPOSITS OF RS.87.58 LAKH WAS DULY EXPLAINED BY THE APPELLANT IN A CHART SUBMITTED BY HIM. IT IS ALSO NOTED THAT THE :- 4 -: CASH DEPOSITED IN THE ACCOUNT HAS BEEN UTILISED FOR MAKING E- PAYMENT OF TAXES WITHIN A COUPLE OF DAYS. IN VIEW OF THE ABOVE, I FIND THAT THE AO WAS NOT JUSTIFIED IN TREATING THE CASH DEPOSITS IN THE SBI ACCOUNT IN THE NATURE OF LOANS AND ADVANCES GIVEN TO THE APPELLANT THE BANK ACCOUNT IS ESSENTIALLY PART OF THE BOOKS OF ACCOUNT OF THE COMPANY AND ALL THE TRANSACTIONS THEREIN ARE RELATING TO THE COMPANY ONLY. TRANSFERRING THE AMOUNT FROM ONE BANK ACCOUNT OF THE COMPANY TO ANOTHER ACCOUNT, ALBEIT STANDING IN THE NAME OF THE APPELLANT CANNOT BE IN THE NATURE OF LOANS AND ADVANCES TO THE APPELLANT IT IS ALSO SEEN THAT THE SAID TRANSACTIONS ARE NOT IN THE NATURE OF PAYMENT MADE BY THE COMPANY ON BEHALF OF THE APPELLANT OR ENTERED INTO FOR HIS INDIVIDUAL BENEFIT CONSIDERING THE FACTS DISCUSSED ABOVE, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN TAXING THE CASH DEPOSITS OF RS.87.58 LAKH AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. ADDITION OF RS.87.58 LAKH MADE BY THE ASSESSING OFFICER IS, THEREFORE, DELETED. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. D.R. HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS FURNISHED A COPY OF THE SAVING BANK ACCOUNT OF THE ASSESSEE ALONG WITH BALANCE SHEET AND DETAILS OF WITHDRAWALS MADE FROM THE ACCOUNTS OF THE COMPANY TO EXPLAIN THE SOURCE OF DEPOSIT. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT SINCE THE ASSESSEE HAS EXPLAINED THE SOURCE OF DEPOSIT ALONG WITH THE PURPOSE OF OPENING THE ACCOUNT, NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 5. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSEE HAS PLACED DETAILS OF CASH WITHDRAWALS FROM THE ACCOUNT OF THE COMPANY AS SOURCE OF DEPOSIT IN THE SAVING BANK ACCOUNT ALONG WITH PURPOSE OF OPENING OF :- 5 -: THE BANK ACCOUNT. FROM THE COPY OF BANK ACCOUNT, IT IS EVIDENTLY CLEAR THAT WHATEVER DEPOSITS WERE MADE, IT WAS UTILIZED FOR E-PAYMENT OF STATUTORY LIABILITIES. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT NO ADVANCE OR LOAN WAS GIVEN TO THE ASSESSEE. THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT CANNOT BE INVOKED. WE HAVE ALSO CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A) AND WE FIND THAT THE LD. CIT(A) HAS ADJUDICATED THE ISSUE PROPERLY AND JUDICIOUSLY IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS. SINCE WE DO NOT FIND ANY INFIRMITY THEREIN, WE CONFIRM HIS ORDER. 6. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 6 TH NOVEMBER, 2015 JJ:0710 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR