Shri Nishith Babulal Shah (Prop. M/s.Akash Export), Ahmedabad V. The ACIT, Circle-5(3), Ahmedabad

ITA 982/AHD/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0791 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-07-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 17-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 143(3); 142(1); 2(22)(e); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SHRI PRAMOD M. JAGTAP, VICE PRESIDENT & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ I. T. A. No . 982/Ahd/20 18 ( नधा रण वष / A ss es sment Year : 2014-15) Sh r i Ni s hit h B ab ul al Sh a h Pr op . M/s . Ak as h E x p or t s , 52 , S .P . D i a m on d Ma rk e t, B a p u na g a r , Ah me d ab a d 38 00 2 4 बनाम/ Vs . A.C.I.T. C ir c l e – 5( 3 ) , A h m e da b ad थायी लेखा सं./जीआइआर सं./P A N/ G I R N o . : A K Q P S 8 9 3 4 Q (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri S. N. Divatia, A.R. यथ क ओर से/Respondent by : Shri Shramdeep Sinha, Sr. D.R. स ु नवाई क तार ख / D a t e o f H e a r i ng 20/07/2022 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 14/10/2022 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the assessee is directed against the order dated 07.03.2018 passed by the Ld. Commissioner of Income Tax (Appeals) – 5, Ahmedabad arising out of the order dated 06.12.2016 passed by the ACIT, ITA No. 982/Ahd/2018 (Shri Nishith Babulal Shah vs. ACIT) A.Y.– 2014-15 - 2 - Circle-5(3), Ahmedabad under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2014-15. 2. We have heard the rival submissions made by the respective parties. We also perused the materials available on record. 3. The brief facts leading to the case is this that the assessee, an individual deriving income from proprietary business of export of cut and polish diamond in the name of M/s. Akash Exports filed his return of income for A.Y. 2014-15 on 19.09.2014 declaring total income of Rs.71,68,160/-. The case was selected for scrutiny and notice under Section 143(2) of the Act dated 23.09.2015 followed by notice under Section 142(1) of the Act calling for certain details was issued on the assessee on 12.04.2016. Due to change incumbent, further notice under Section 142(1) of the Act 01.07.2016 was duly served. 4. During the course of assessment proceeding, it was found that the appellant has received unsecured loan amounting to Rs.3,25,90,000/- from his wife Smt. Sonal N. Shah during the year, out of money received by her from M/s. N. B. Space Pvt. Ltd. wherein the appellant was holding 55.96% shares. The Ld.AO came to a finding that the appellant since having substantial interest in M/s. N. B. Space Pvt. Ltd. from whom his wife received loans invoking the provision of Section 2(22)(e) of the Act made addition of Rs.20,36,380/- to the extent of accumulated profits, which was, in turn, confirmed by the First Appellate Authority. Hence, the instant appeal before us. ITA No. 982/Ahd/2018 (Shri Nishith Babulal Shah vs. ACIT) A.Y.– 2014-15 - 3 - 5. It is the case of the assessee that when the loan was given by M/s. N. B. Space Pvt. Ltd. to Sonal Shah, it was not known to them where the fund would be utilized as it was transaction in the ordinary course of the company. On the other hand, when the said deposit was received by the appellant from his wife it was not known to him what was the source of such fund he received. Therefore, both are independent and co-related transactions. The fund given to the appellant obtained from the company is co-incident and further it is also an ordinary commercial activity of the spouse of the appellant. It was further case made out by the assessee that the appellant shareholder has not received any benefit out of the co-incidental fund received from his wife as he has not received any benefit to generate income or profit from the said fund, whereas, the wife of the appellant has been benefitted, but, however, she has neither the shareholder of the company. Irrespective of the interest element as a criteria of deemed dividend, the appellant has paid interest to his wife Sonal Shah, on such deposit without directly earning the interest thereon, meaning thereby, no benefit has been obtained by the appellant out of the funds so received from his wife, whereas, his wife has earned the interest from his husband i.e. appellant herein and, in turn, paid to the company at a lower rate. From the above fact, it appears that it is not the appellant but the spouse of the appellant became the actual beneficiary. We also further notice that the company has not given loan to Sonal Shah on behalf of the appellant nor for the individual benefit of the appellant and therefore, the deposit to the appellant by his wife doesn’t fall within the ambit and purview of Section 2(22)(e) of the Act. Moreso, when the interest has been paid on such fund by the appellant to his wife, the addition invoking Section 2(22)(e) of the Act is not found to be ITA No. 982/Ahd/2018 (Shri Nishith Babulal Shah vs. ACIT) A.Y.– 2014-15 - 4 - justifiable and thus the same is liable to be deleted. In that view of the matter, we delete the addition made by the authorities below. 6. In the result, assessee’s appeal is allowed. This Order pronounced on 14/10/2022 Sd/- Sd/- (P. M. JAGT AP) (MADHUMITA ROY) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 14/10/2022 True Copy S. K. SINHA आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad