The ITO, Ward-2(1), Surat V. Shri Dipesh L. Shah, Surat

ITSSA 17/AHD/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3179 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G C DAXINI SR DR
• Keywords: Deemed to accrue or arise in india; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER 1. ./ I.T(SS).A. NO.17/AHD/2014 2. . / I.T.A. NO.45/AHD/2014 ( / ASSESSMENT YEARS:2008-09 & 2009-10) 1-2 THE INCOME TAX OFFICER WARD-2(1) MAJURA GATE, SURAT / VS. 1-2 SHRI DIPESH L.SHAH 102, VISHAL HOUSE WORLD TRADE CENTRE, RING ROAD SURAT 395 001 # ./ ./ PAN/GIR NO. : ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : SHRI G.C. DAXINI, SR.DR '#& )( / RESPONDENT BY : NONE- *+ ), / DATE OF HEARING 29/03/2017 -./0 ), / DATE OF PRONOUNCEMENT 05/ 04 /2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: BOTH THE CAPTIONED APPEALS BY THE REVENUE ARE DIR ECTED AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX(APPE ALS)-II, AHMEDABAD [CIT(A) IN SHORT] DATED 18/09/2013 PASSED FOR THE ASSESSMENT YEARS (AYS) 2008-09 & 2009-10. IT(SS)A NO.17/A HD/2014 & ITA NO.45/AHD/2014 ITO VS. DIPESH L.SHAH ASST.YEARS 2008-09 & 2009-10 - 2 - 2. THE ASSESSING OFFICER (AO), IN THE INSTANT APPE ALS HAS CHALLENGED THE ACTION OF THE CIT(A) IN DELETING THE PENALTY OF RS.2,86,660/- (FOR AY 2008-09) AND RS.20,66,590/- (FOR AY 2009-10 IMPOSED UNDER S.271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS 'THE ACT') BY PENALTY ORDERS BOTH DATED 07/02/2013 FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE AO ALLEGED THAT THE ASS ESSEE HAS OBTAINED LOANS IN VIOLATION OF SECTION 2(22)(E) OF THE ACT A ND ACCORDINGLY THE LOAN AMOUNT OF RS.8,25,000/- IS DEEMED TO BE TAXABLE INC OME IN THE HANDS OF THE ASSESSEE. THE AO THUS TREATED AFORESAID AMOUNT OF LOAN AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE UNDER S.2(22) (E) OF THE ACT IN THE QUANTUM PROCEEDINGS AND ALSO PROCEEDED TO IMPOSE PE NALTY BY INVOKING SECTION 271(1)(C) OF THE ACT. THE CIT(A), HOWEVER, HELD THAT THE AFORESAID ADDITION DOES NOT CALL FOR PENALTY. FOR COMING TO SUCH CONCLUSION, THE CIT(A) OBSERVED THAT ALL THE RELEVA NT FACTS/DETAILS OF THE TRANSACTIONS OF LOAN TAKEN BY THE ASSESSEE WERE FUL LY FURNISHED AND DISCLOSED AND NO DEFECT THEREIN HAS BEEN POINTED O UT. THE CIT(A) ALSO OBSERVED THAT THE AFORESAID LOAN HAS BEEN TREATED A S INCOME CHARGEABLE ONLY BY WAY OF LEGAL FICTION CREATED UNDER S.2(22)( E) OF THE ACT. THUS, THE CIT(A) REVERSED THE ACTION OF AO TOWARDS IMPOSI TION OF PENALTY. 3. THE SIMPLE QUESTION THAT ARISES FOR CONSIDERATI ON IS WHETHER PENALTY CAN BE IMPOSED BY INVOKING SECTION 271(1)(C ) OF THE ACT ON LOANS IT(SS)A NO.17/A HD/2014 & ITA NO.45/AHD/2014 ITO VS. DIPESH L.SHAH ASST.YEARS 2008-09 & 2009-10 - 3 - AND ADVANCES AS TAKEN BY THE ASSESSEE AND REGARDED AS DEEMED INCOME BY VIRTUE OF S.2(22)(E) OF THE ACT. 4. SECTION 2(22)(E) OF THE ACT CREATES LEGAL FICTIO N WHEREBY LOANS/ADVANCES RECEIVED BY AN ASSESSEE ARE DEEMED A S TAXABLE INCOME IN THE HANDS OF THE RECIPIENT ASSESSEE IN CERTAIN CIRC UMSTANCES AS SPECIFIED THEREIN. IN VIEW OF SECTION 2(22)(E) OF THE ACT, LOANS/ADVANCES AMOUNT UNDER CONSIDERATION ARTIFICIALLY PARTAKE THE CHARAC TER OF DIVIDEND AND BROUGHT TO TAX AS DEEMED DIVIDEND. NEEDLESS TO SA Y, THE AFORESAID PROVISION OF SECTION 2(22)(E) HAS BROUGHT A DEEMING AND UNNATURAL CONCEPT OF TREATING THE RETURNABLE LOANS/ADVANCES A S TAXABLE INCOME IN THE HANDS OF BORROWER IN DEPARTURE WITH THE OPERATION OF THE NORMAL PROVISIONS. ADMITTEDLY, THE RELEVANT FACTS CONCERN ING THE ISSUE WERE AVAILABLE TO THE AO. THUS, THERE IS NO CONCEALMENT OF ANY PARTICULARS OF ANY FACT PER SE . THE ASSESSEE HAS SIMULTANEOUSLY CLAIMED THAT THE AFORESAID ADVANCES HAVE BEEN RECEIVED THE COURSE OF ORDINARY BUSINESS AND OWING TO ONGOING BUSINESS TRANSACTIONS AND THUS NOT SUSCEPTIBLE TO PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THUS, W HILE THE PROVISIONS OF S.2(22)(E) HAVE BEEN APPLIED, THE ISSUE IS NOT ENTI RELY FREE OF ANY DEBATE. AS NOTED, SECTION 2(22)(E) OF THE ACT IS ONLY DEEMI NG PROVISION OF LAW AND IS NOT A SUBSTANTIVE PROVISION. THUS, IN THE ABSENCE OF ANY PERCEPTIBLE MALAFIDES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IT(SS)A NO.17/A HD/2014 & ITA NO.45/AHD/2014 ITO VS. DIPESH L.SHAH ASST.YEARS 2008-09 & 2009-10 - 4 - DELETING THE PENALTY IMPOSED BY THE AO. THUS, WE DO NOT SEE ANY MERITS IN THE APPEALS OF THE REVENUE. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 05 / 04 /2017 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 05/ 04 /2017 4..*,.*../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-II, AHMEDABAD 5. 9:;,*67 , 67 0 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 3.4.17(DICTATION-PAD 6- P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3.4.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.5.4.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 5.4.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER