CIMS Hospital Pvt.Ltd., Ahmedabad V. The ACIT,Cent.Circle-2(3), Ahmedabad

ITSSA 233/AHD/2012

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2451 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 18-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Reopening of assessment; Principle of natural justice; Deemed dividend
• Section: 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER IT(SS)A NO. 233/AHD/2012 / ASSESSMENT YEAR : 2009-10 CIMS HOSPITAL PVT LTD, NR. SHUKAN MALL, OFF SCIENCE CITY ROAD, SOLA, AHMEDABAD PAN : AABCC 6721 A VS ACIT, CENTRAL CIRCLE-2(3), AHMEDABAD ./ ITA NO. 1912/AHD/2015 / ASSESSMENT YEAR : 2009-10 DR. KEYUR HARSADRAI PARIKH, 381-A, 17 TH LANE, SATYAGRAH CHHAVANI, JODHPUR TEKRA, AHMEDABAD PAN : AFSPP 5662 G VS DCIT, CENTRAL CIRCLE-2(3), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR, AR REVENUE BY : SHRI K. MADHUSUDAN, SR DR / DATE OF HEARING : 11/11/2016 / DATE OF PRONOUNCEMENT: 16/11/2016 / O R D E R PER R.P. TOLANI, JUDICIAL MEMBER:- \ THESE ARE TWO APPEALS OF DIFFERENT ASSESSEES ONE BEING COMPANY AND OTHER BEING A DIRECTOR. THE ISSUE BEING SIMILAR AN D GROUNDS BEING INTER- CONNECTED, THESE APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FOLLOWING GROUNDS RAISED BY THE ASSESSEE(S) IN T HEIR RESPECTIVE APPEALS:- IT(SS)A NO. 233/AHD/2012: ASSESSEE- CIMS HOSPITAL P VT LTD THE LEARNED COMMISSIONER (APPEAL) ERRED IN FACT AND IN LAW IN DIRECTING THE ADDITION OF RS.3,20,000/- IN THE HANDS OF DR. KEYUR PARIKH AS UNACCOUNTED IT(SS)A NOS. 233/AHD/2012 & ITA NO.1912/AHD/2015 ASSESSEE- CIMS HOSPITAL PVT LTD & DR. KEYUR H. PARIKH AY : 2009-2010 2 CASH BALANCE IN ASSESSMENT YEAR 2009-10 WHICH WAS G IVEN BY HIM TO THE APPELLANT-COMPANY. ITA NO. 1912/AHD/2015 : ASSESSEE- DR. KEYUR HARSADR AI PARIKH 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN FACT AN D IN LAW IN ACCEPTING THE VALIDITY OF THE RE-OPENING OF THE CASE U/S 148 ONLY ON THE BASIS OF THE FINDINGS OF THE HONBLE COMMISSIONER (APPEALS)-III, AHMEDABAD IN THE APPELLATE ORDER DATED 27.01.2012 IN CASE OF CIMS HO SPITALS PVT LTD. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN FACT AN D IN LAW IN CONFIRMING ADDITION ON ACCOUNT OF UNEXPLAINED CASH OF RS.3,20,000/- ON THE GROUND THAT CIT(A)-III HAS DELETED ADDITION OF RS.4,25,000/- FOR ASSESSMENT YEAR 2009-10 IN CASE OF CIMS HOSPITAL PV T LTD AND GIVEN THE FINDING THAT RS.4,25,000/- BELONG TO THE APPELL ANT BY IGNORING THE FACT THAT THE APPELLANT HAS DULY DISCLOSED THE CASH ON 31.03.2008 IN HIS WEALTH TAX RETURN. 3. BRIEF FACTS ARE AN AMOUNT OF RS.4,25,000/- WAS ADDED IN THE HANDS OF HOSPITAL BY THE AO, REJECTING THE ASSESSEES EXPLAN ATION THAT THE SAID AMOUNT WAS CONTRIBUTED BY DR. KEYUR PARIKH, ONE OF THE DIRECTORS WHO WAS ASSESSED TO INCOME-TAX AND WEALTH-TAX. THE FACT OF THIS CONTRIBUTION WAS REFLECTED IN THE WEALTH-TAX RETURN OF DR. KEYUR PAR IKH WHICH WAS ACCEPTED BY THE DEPARTMENT. THE ASSESSEE, CIMS HOSPITAL PVT LTD CHALLENGES THE ADDITION THOUGH DELETED THE ADDITION IN THE HANDS O F CIMS HOSPITAL PVT LTD. ACCORDING TO ASSESSEE, THE LD. CIT(A) TRAVELL ED BEYOND HIS POWERS BY DIRECTING THIS AMOUNT TO BE ADDED IN THE HANDS OF D R. KEYUR PARIKH, WHO WAS NOT A PARTY TO APPEAL, BY FOLLOWING OBSERVATION S:- HOWEVER, SINCE DR. KEYUR PARIKH HAS CLAIMED THE CA SH OF RS.4,25,000 AS BELONGING TO HIM, IN MY CONSIDERED VIEW, THE ADDITI ON OF BALANCE AMOUNT OF UNEXPLAINED CASH CANNOT BE MADE IN THE HANDS OF THE APPELLANT COMPANY BUT IN THE HANDS OF DR. KEYUR PARIKH. FURTHER, MERELY THAT DR. KEYUR PARIKH HAS PAID WEALTH TAX ON THE CASH AMOUNT OF RS.4,25,0 00/- AS ON 31.03.2008 DOES NOT PROVE THAT THE AMOUNT OF RS.4,25,000/- IS EXPLAINED FOR INCOME TAX PURPOSES ALSO. THE AO IS THEREFORE DIRECTED TO TAX THE BALANCE CASH OF RS.3,20,000/- IN THE HANDS OF DR. KEYUR PARIKH IN A SSESSMENT YEAR 2009-10 AND NOT IN THE HANDS OF THE APPELLANT-COMPANY. IT(SS)A NOS. 233/AHD/2012 & ITA NO.1912/AHD/2015 ASSESSEE- CIMS HOSPITAL PVT LTD & DR. KEYUR H. PARIKH AY : 2009-2010 3 3.1 BASED ON THIS FINDING, COMPLETED ASSESSMENT OF DR. KEYUR PARIKH WAS RE-OPENED U/S 148. DURING THE COURSE OF REASSESSME NT, FEELING BOUND BY THE DIRECTION ISSUED BY LD. CIT(A), THE AO REJECTED EXP LANATION THAT IT HAD THE SOURCE AND ACCEPTED DR. PARIKHS CONTRIBUTING THIS AMOUNT AND THE TRANSACTION BEING REFLECTED IN HIS WEALTH-TAX RETUR N. THE ADDITION WAS ACCORDINGLY MADE. 3.2 AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, WHE RE THE REOPENING OF ASSESSMENT WAS CHALLENGED ON THE GROUND THAT LD. CI T(A)-III, AHMEDABAD COULD NOT HAVE ISSUED SUCH DIRECTIONS IN THE CASE O F AN ASSESSEE WHO WAS NOT A PARTY TO APPEAL BEFORE HIM AND CHALLENGED THE ADD ITION ON MERITS ALSO. ON MERITS, LD. CIT(A) CONFIRMED THE ADDITION ON THE RE ASONING THAT LD. CIT(A)- III, AHMEDABAD HAD ALREADY GIVEN FINDING THAT THE A MOUNT OF RS.4,25,000/- BELONGED TO APPELLANT DR. KEYUR PARIKH BY FOLLOWING OBSERVATIONS:- 8.1 THE AO HAS DISCUSSED IN DETAIL THE CASH BALAN CE, CASH BOOK AND THE WITHDRAWAL OF THE APPELLANT WHICH IS JUSTIFIED. IT IS SEEN THAT THE APPELLANT WAS REGULARLY MAINTAINING THE BOOKS OF ACCOUNT AND AS ON 21.08.2008 CASH BALANCE WAS RS.1,05,116/- ONLY AS AGAINST THE CASH FOUND OF RS.4,25,000/-. THE AO HAS GIVEN THE BENEFIT OF CASH IN HAND OF RS. 1,05,116/- SHOWN IN THE CASH BOOK AND ONLY EXCESS CASH OF RS.3,20,000/- WAS ADDED AS UNEXPLAINED CASH. IT IS SEEN THAT THE SAME AMOUNT OF RS.4,25,0 00/- WAS ALSO ADDED IN THE CASE OF CIMS HOSPITAL PVT LTD IN AY 2009-10 HOWEVER THE ABOVE ADDITION OF RS.4,25,000/- HAS ALREADY BEEN DELETED BY THE CIT(A )-III, AHMEDABAD VIDE ORDER AND HE HAS GIVEN THE FINDING THAT RS.4,25,000 /- BELONG TO THE APPELLANT DR. KEYUR PARIKH. 3.3 AGGRIEVED, BOTH THE PARTIES ARE IN APPEAL BEFOR E US. 4. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT LD. C IT(A) WHILE DECIDING THE APPEAL OF CIMS HOSPITAL PVT LTD CANNOT DECIDE A ND DIRECT THAT THE ADDITION IN THAT CASE SHOULD BE DELETED IN THE HAND S OF COMPANY AND ADDED IN A THIRD PARTYS ASSESSMENT WITHOUT HEARING THE A FFECTED PARTY. THIS IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND AMOUNT S TO AN UNTENABLE DIRECTION. SAME BEING NON-EST CANNOT BE A VALID FO UNDATION FOR RE-OPENING IT(SS)A NOS. 233/AHD/2012 & ITA NO.1912/AHD/2015 ASSESSEE- CIMS HOSPITAL PVT LTD & DR. KEYUR H. PARIKH AY : 2009-2010 4 OF ASSESSMENT IN THE HANDS OF DR. KEYUR PARIKH. R ELIANCE IS PLACED ON THE DECISION OF ITAT, AHMEDABAD D BENCH IN THE CASE O F ITO VS. BIOTECH OPHTHALMIC PVT LTD IN ITA NO.443/AHD/2011 AND CO NO .71/AHD/2011, WHEREIN ITAT WHILE DECIDING ASSESSEES CROSS-OBJECT ION HAS DECIDED THE FOLLOWING GROUNDS:- 9. THE ASSESSEE HAS ALSO MOVED A CROSS-OBJECTION W HICH SEEKS TO EXPUNGE CIT(A)S DIRECTIONS TO BRING THIS DEEMED DIVIDEND T O TAX IN THE HANDS OF SHRI MEHUL P. ASNAMI, DIRECTOR IN ASSESSEES COMPANY. 4.1 ITAT DEALT WITH THE PROVISIONS OF SECTION 153(3 ) REGARDING THE POWER OF CIT(A) FOR ISSUING DIRECTION AND HELD AS UNDER:- 19. AS WE PART WITH OUR ADJUDICATION ON THIS ISSUE , WE MAY ALSO TAKE NOTE OF LEARNED DEPARTMENTAL REPRESENTATIVES CONTENTION TH AT THE ASSESSEE HAS NO LOCUS STANDI TO RAISE ANY GRIEVANCE AGAINST THESE D IRECTIONS AS HE IS NOT THE AGGRIEVED PARTY VIS--VIS THESE DIRECTIONS. WE ARE UNABLE TO SEE ANY MERITS IN THIS PLEA EITHER. THE MANNER IN WHICH THE APPEAL HA S BEEN DECIDED BY THE CIT(A) GIVES AN IMPRESSION, WHICH IS A WHOLLY INAPP ROPRIATE IMPRESSION AND WHICH HAS ALSO BEEN REITERATED BEFORE US BY THE LEA RNED DEPARTMENTAL REPRESENTATIVE, THAT THE IMPUGNED ADDITIONS HAVE BE EN DELETED IN THE HANDS OF THE ASSESSEE AS THESE ADDITIONS ARE REQUIRED TO BE MADE IN THE HANDS OF SOMEONE ELSE. THE DELETION OF THE IMPUGNED ADDITION IN THE HANDS OF THE ASSESSEE COMPANY HAS BEEN THUS PROJECTED TO BE, THO UGH PERHAPS AT A SOMEWHAT SUBLIMINAL LEVEL, DEPENDENT OF THE ADDITIO N BEING CONFIRMED IN THE HANDS OF THE DIRECTOR. THE DIRECTIONS GIVEN BY THE CIT(A) DO PREJUDICE INTERESTS OF THE ASSESSEE INASMUCH AS THESE DIRECTI ONS NOT BEING IMPLEMENTED MAY BE VIEWED AS DETRIMENTAL TO THE INTERESTS OF TH E ASSESSEE BUT THEN THE DIRECTIONS SUFFER FROM LEGAL INFIRMITIES, FROM GLAR ING PROCEDURAL FLAWS, AND ARE INCAPABLE OF BEING IMPLEMENTED ANYWAY. IN ANY C ASE, SINCE THESE DIRECTIONS ARE GIVEN IN THE CASE OF THIS ASSESSEE A ND THE APPELLATE ORDER BY THE CIT(A) IN THE CASE OF THIS ASSESSEE CANNOT BE CHALL ENGED, IN APPEAL BEFORE US, BY A THIRD PARTY, THE ONLY WAY TO PREVENT THESE DIR ECTIONS REACHING THE FINALITY IS A CHALLENGE BY THIS ASSESSEE HIMSELF, P ARTICULARLY BECAUSE, AS IS THE SETTLED LEGAL POSITION, THE STATUTORY PROVISIONS AR E TO BE CONSTRUED UT RES MAGIS VALEAT QUAM PEREAT I.E., IN SUCH A MANNER AS TO MAKE IT WORKABLE RATHER THAN REDUNDANT. THE ASSESSEE BEFORE US, THEREFORE, HAS, IN OUR CONSIDERED VIEW, LOCUS STANDI TO CHALLENGE LEGALITY OF THESE D IRECTIONS. 20. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE VACATE THE DIRECTIONS IN QUESTIONS. THE CROSS OBJECTION IS THU S ALLOWED. IT(SS)A NOS. 233/AHD/2012 & ITA NO.1912/AHD/2015 ASSESSEE- CIMS HOSPITAL PVT LTD & DR. KEYUR H. PARIKH AY : 2009-2010 5 4.2 THUS, IT IS PLEADED THAT LD. CIT(A) WAS UNJUSTI FIED IN GIVING SUCH A DIRECTION TO ADD THE IMPUGNED AMOUNT IN THE HANDS O F DR. KEYUR PARIKH CONSEQUENTLY. THE DIRECTION IN QUESTION DESERVES T O BE EXPUNGED FROM THE APPELLATE ORDER. 5. ADVERTING TO THE APPEAL OF DR. KEYUR PARIKH, THE LD. COUNSEL FOR THE ASSESSEE ONCE AGAIN CONTENDS THAT THE DIRECTION OF LD. CIT(A) IS HELD TO BE UNTENABLE AND IT CANNOT FORM A VALID BASIS FOR RE-O PENING OF ASSESSMENT. THEREFORE, THE REASSESSMENT IN THE CASE OF DR. KEYU R PARIKH DESERVES TO BE QUASHED BEING BASED ON UNTENABLE NON-EST GROUND. 6. APROPOS MERITS, LD. COUNSEL CONTENDS THAT THE AS SESSEE HAS DEMONSTRATED THE SOURCE OF CONTRIBUTION MADE IN CIM S HOSPITAL PVT LTD BY AMPLE EVIDENCE AND DISCHARGED ITS BURDEN IN EFFECTI VE TERMS BY FILING THE CASH FLOW STATEMENT; COMPLETE FACTS WITH THE TRANSA CTION IN QUESTION IS REFLECTED IN THE WEALTH-TAX RETURN WHICH IS ACCEPTE D BY THE DEPARTMENT. THE ASSESSEES EXPLANATION HAS BEEN BRUSHED ASIDE ON TH E BASIS OF ASSUMPTIONS; THEREFORE, THE ADDITION CANNOT BE SUSTAINED IN THE HANDS OF THE ASSESSEE ON MERITS ALSO. RELIANCE IS PLACED ON THE HONBLE GUJ ARAT HIGH COURT JUDGMENT IN THE CASE OF PIPUSHKUMAR O. DESAI VS. CIT, REPORT ED IN [2001] 247 ITR 568 (GUJ) AND ITAT DECISION IN THE CASE OF JAGAT MINERA L PVT LTD VS. DCIT IN ITA NO.2750/AHD/2011. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN OUR CONSIDERED VIEW, WHILE DECIDING THE APPEAL OF CIMS HOSPITAL PVT LTD, LD. CIT(A) WAS NOT AUTHORIZED TO ADD THAT AMOUNT IN THE CASE OF DIRECTOR WHO WAS NOT A PARTY TO THE CIMS HOSPITAL PVT LTD APPEAL PROCEEDINGS. THE SUBJECT MATTER BEFORE HIM WAS WHETHER THE AMOUNT WA S LIABLE FOR ADDITION IN THE CASE OF CIMS HOSPITAL PVT LTD OR NOT. SINCE THE LD. CIT(A) EXCEEDED IT(SS)A NOS. 233/AHD/2012 & ITA NO.1912/AHD/2015 ASSESSEE- CIMS HOSPITAL PVT LTD & DR. KEYUR H. PARIKH AY : 2009-2010 6 HIS JURISDICTION IN GIVING THIS DIRECTION WHICH DOE S NOT FALL WITHIN THE FOUR CORNERS OF HIS POWERS ENSHRINED IN THIS BEHALF, FOL LOWING THE CO-ORDINATE BENCH DECISION IN THE CASE OF BIOTECH OPHTHALMIC P VT LTD (SUPRA), WE EXPUNGE THE DIRECTION OF LD. CIT(A) CONTAINED TO TH IS EFFECT IN THE CASE OF CIMS HOSPITAL PVT LTD. 8. ADVERTING TO THE APPEAL OF DR. KEYUR PARIKH, SIN CE THE ASSESSMENT HAS BEEN RE-OPENED ONLY ON THE BASIS OF A DIRECTION ISS UED BY LD. CIT(A) IN CIMS HOSPITAL PVT LTD CASE WHICH IS HELD TO BE UNTENABLE AND NON-EST, THE FOUNDATION OF PROCEEDINGS U/S 147/148 BECOMES INVAL ID AND DESERVES TO BE QUASHED. HOWEVER, WE MAY LIKE TO ADJUDICATE THE ISS UE ON MERITS AS WELL. IN OUR CONSIDERED VIEW, LD. CIT(A) CONFIRMED THE ADDIT ION NOT APPLYING HIS INDEPENDENT MIND AND DISCRETION; AND MERELY UPHOLDI NG THE ADDITION ON THE GROUND THAT THE CIT(A) IN THE CASE OF CIMS HOSP ITAL PVT LTD HAS DIRECTED TO MAKE THE ADDITIONS, THE SAME IS CONFIRM ED. IN OUR VIEW, THE CONFIRMATION OF THE ADDITION CANNOT BE UPHELD. BES IDES, THE ASSESSEE DISCHARGED HIS BURDEN BY PROVIDING NECESSARY CASH F LOW STATEMENTS AND DEMONSTRATED THAT THE TRANSACTION IN QUESTION WAS R EFLECTED IN THE WEALTH- TAX RETURN WHICH WAS ACCEPTED BY THE DEPARTMENT. T HEREFORE, IN OUR VIEW, THIS AMOUNTS TO DISCHARGE OF BURDEN CAST UPON THE A SSESSEE IN THIS BEHALF. FURTHER, THE DEPARTMENT CANNOT BLOW HOT AND COLD AN D TAKE A DIVERGENT DECISION QUA ADDITION IN WEALTH-TAX AND INCOME-TAX PROCEEDINGS. THUS, THE GROUNDS OF THE ASSESSEE(S) ARE ALLOWED ON BOTH THE COUNTS. 9. IN THE RESULT, BOTH THE APPEALS BY THE ASSESSEE( S) ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 16 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (R.P. TOLANI) JUDICIAL MEMBER AHMEDABAD; DATED 16/11/2016 *BIJU T., SR. PS IT(SS)A NOS. 233/AHD/2012 & ITA NO.1912/AHD/2015 ASSESSEE- CIMS HOSPITAL PVT LTD & DR. KEYUR H. PARIKH AY : 2009-2010 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD