The DCIT, Central Circle-1, Surat V. M/s. Western Construction Co(Guj) Pvt.Ltd., Surat

ITSSA 703/AHD/2010

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0553 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-01-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 30-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T P KRISHNA KUMAR
• Keywords: Deemed dividend
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI , A.M. & SHRI KUL BHARAT, J.M. ) I. T (SS) . A. NO. 703 & 704 / AHD/ 20 1 0 (A SSESSMENT YEAR: 2003 - 04 & 2004 - 05) THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, SURAT V/S M/S. WESTERN CONSTRUCTION CO(GUJ) PVT. LTD., SURAT 1004, TURNING POINT COMPLEX, GHOD - DOD ROAD, SURAT (APPELLANT) (RESPONDENT) PAN: AAACW2111R APPELLANT BY : SHRI T.P. KRISHNAKUMAR, SR. D.R. RESPONDENT BY : SHRI MEHUL SHAH ( )/ ORDER DATE OF HEARING : 22 - 01 - 2015 DATE OF PRONOUNCEMENT : 13 - 0 2 - 2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE 2 APPEAL S FILED BY THE REVENUE ARE AGAINST THE ORDER OF CIT(A) - II, AHMEDABAD DATED 01.07.2010 FOR A.Y. 2003 - 04 & 2004 - 05 RESPECTIVELY . 2. BEFORE US, THE L D. D.R. SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF BOTH THE CASES ARE SIMILAR EXCEPT FOR THE ASSESSMENT YEARS AND AMOUNTS AND THE SUBMISSIONS ARE ALSO COMMON FOR BOTH THE APPEALS AND THEREFORE BOTH THE APPEALS CAN BE HEARD TOGETHER. LD. A.R. DID NOT OBJ ECT TO THE AFORESAID SUBMISSIONS OF LD. D.R. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS IT (SS) A NO S. 703 & 704/AHD/2010 . A.Y. 2003 - 04 & 2004 - 05 2 TOGETHER FOR THE SAKE OF CONVENIENCE AND THUS PROCEED WITH THE FACTS IN A.Y. 2003 - 04. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UN DER. 4. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF CONSTRUCTION. A SEARCH ACTION U/S. 132 OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES AS WELL AS RESIDENTIAL PREMISES OF DOKANIA GROUP ON 14.02.2008 AND I N VIEW OF THE SEARCH , SURVEY ACTION WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AND THEREAFTER NOTICE U/S. 153A WA S ISSUED AND SERVED ON ASSESSEE. PURSUANT TO NOTICE U/S. 153A, ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 03 - 04 ON 22.10.2008 DECLARING TOTAL LOSS OF RS. 11,60,782/ - . THEREAFTER THE ASSESSMENT WAS FRAMED U/S. 143(3) R.W.S. 153A OF THE A CT VIDE ORDER DATED 30.10.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 6,39,910/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE O RDER DATED 22.06.2011 ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS FILED THE FOLLOWING GROUNDS; - I. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.3,91,297/ - ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT IN RESPECT OF LOANS RECEIVED FROM M/S NEWTON CONSTRUCTION PVT.LTD. EVEN WHEN THE AO HAD CLEARLY BROUGHT OUT IN THE ASSESSMENT ORD ER THAT ALL THE CONDITIONS LAID DOWN BY THE APEX COURT IN THE CASES OF NAVNITLAL C.ZAVERI VS. K. K. SEN, APPELLATE ACIT(1965)56 1TR 198(SC)AND TARULATA SHYAM AND OTHERS VS. CIT, WEST BENGAL(1977)108 ITR 345(SC ) FOR HOLDING THE LOAN/ADVANCE RECEIVED AS DEEM ED DIVIDEND WERE FULLY SATISFIED IN ASSESSEE'S CASE. II. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.3,91,297/ - ON ACCOUNT OF DEEMED DIVIDEND WRONGLY RELYING ON THE DECISION O F HON'BLE HIGH COURTS IN THE CASE OF CIT VS. HOTEL HILL TOP,313 ITR 116(RAJ)AND CIT VS. RAJKUMAR SINGH & OTHERS 295 ITR 9(ALL.)AND NULON INDIA LTD. V. ITO 12 SOT 260 (DEL) IGNORING THAT SECTION 2(22)(E) DOES NOT REQUIRE THAT THE CONCERN BE A SHAREHOLDER, I T ONLY STIPULATES THAT SOME SHARE HOLDERS HAVING 10% SHAREHOLDING IN THE COMPANY SHOULD HAVE SUBSTANTIAL INTEREST(=20%)IN THE CONCERN WHICH IS FULLY SATISFIED IN THIS CASE. IT (SS) A NO S. 703 & 704/AHD/2010 . A.Y. 2003 - 04 & 2004 - 05 3 III. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN L AW AND IN FACTS IN DELETING THE ADDITION OF RS.3,91,297/ - ON ACCOUNT OF DEEMED DIVIDEND WRONGLY RELYING ON THE DECISION OF HON'BLE DELHI HIGH COURTS IN THE CASE OF CIT VS. CREATIVE DYEING & PRINTING PVT.LTD.318 ITR 476 IGNORING THAT IN THAT CASE THE HON'BL E HIGH COURT HELD THAT THE TRANSACTION WAS IN THE ORDINARY COURSE OF BUSINESS BECAUSE TRANSACTION WAS FOR THE BENEFIT OF THE COMPANY ADVANCING THE LOAN AS THE LOAN WAS GIVEN TO AN ANCILLARY COMPANY; WHILE IN THE PRESENT CASE, THERE IS NO SUCH BENEFIT TO TH E PERSON GIVING THE LOAN TO THE ASSESSEE. IV. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.3,91,297 / - ON ACCOUNT OF DEEMED DIVIDEND WRONGLY RELYING ON THE DECISION OF HON BLE HIGH COURTS IN THE CASE OF BOMBAY OIL INDUSTRIES K LTD. V.DCIT 28 SOT 383 AND GUJARAT GAS FINANCIAL SERVICES LTD. V. ACIT 115 ITD 218(AHD)(SB) IGNORING THAT THESE DECISIONS HAVE NOT BEEN IN THE CONTEXT OF SECTION 2(22)(E) BUT IN THE CONTEXT OF INTEREST TAX ACT; BESIDES ASSESSEE HAS NOT GIVEN ANY EVIDENCE TO ESTABLISH THAT THESE LOANS AND ADVANCES WERE INTER CORPORATE DEPOSITS. 5. BEFORE US, LD. D.R. SUBMITTED THAT T HOUGH SEVERAL GROUND HAVE BEEN RAISED BUT THE ONLY EFFECTIVE GROUND IS WITH RESPECT TO DELETIO N OF ADDITION OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAD RECEIVED RS. 31,11,403/ - FROM NEWTON CONSTRUCTION PVT. LTD. HE ALSO NOTICED THAT ONE OF THE SHAREHOLDER IN ASSESSEE COMP ANY, NAMELY SMT. MAYA DOKANIA HELD 18.33% OF SHARES IN NEWTON CONSTRUCTION PVT. LTD. AND ALSO HELD 42.12% SHARE HOLDING IN THE ASSESSEE COMPANY. HE ALSO NOTICED THAT NEWTON CONSTRUCTION PVT. LTD. HAD ACCUMULATED PR OFIT OF RS. 17,99,690/ - IN ITS R ESERVE ACC OUNT. ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY NO ADDITION BE MADE U/S. 2(22)(E) OF THE ACT TO WHICH ASSESSEE INTERALIA SUBMITTED THAT PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT APPLICABLE. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO T HE A.O. HE CONSIDERED THE TOTAL AMOUNT OF RS. 17,99,690/ - AS DEEMED DIVIDEND AND ADDED TO THE INCOME OF THE ASSESSEE. AGGRIEVED BY T HE AFORESAID ORDER OF A.O, THE MATTER WAS IT (SS) A NO S. 703 & 704/AHD/2010 . A.Y. 2003 - 04 & 2004 - 05 4 CARRIED BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DE LETED THE ADDITION BY HOLDING AS UNDER: - 5. I HAVE CONSIDERED THE FACTS AND THE SUBMISSIONS. I AGREE WITH THE APPELLANT'S VIEW. IT IS A FACT THAT THE APPELLANT IS NOT THE SHAREHOLDER IN M/S.NEWTON CONSTRUCTION PVT. LTD. FROM WHOM IT HAS RECEIVED THE AMOUNT . IT IS ONLY SMT. MAYA G. DOKANIA WHO IS HAVING 18.33% SHARE HOLDING IN M/S. NEWTON CONSTRUCTION P. LTD., AND HAS 42.12% SHARE HOLDING IN THE ASSESSEE COMPANY. IN THE CASE OF CIT VS HOTEL HILLTOP 313 ITR 116 (RAJ.), CIT VS RAJKUMAR SINGH & OTHERS 295 ITR 9 (ALL.) AND ALSO IN THE CASE OF NULON INDIA LTD. VS ITO 12 SOT 260 (DEL.), IT WAS HELD THAT THE PROVISION OF SECTION 2(22)(E) IS NOT ATTRACTED ONLY BECAUSE THERE IS COMMON SHARE HOLDING BETWEEN THE GIVER AND THE RECEIVER CONCERN WHEREAS THE CONCERN RECEIVI NG THE AMOUNT IS NOT THE SHARE HOLDER IN THE COMPANY. SECTION 2(22)(E) IS APPLICABLE ONLY WHEN THE PAYMENT IS GIVEN TO ANY RELATED CONCERN FOR THE BENEFIT OF ANY SHAREHOLDER. THE SAME IS THE FACT IN THIS CASE WHERE THE APPELLANT COMPANY IS NOT THE SHARE HO LDER OF THE COMPANY FROM WHICH THE AMOUNT IS RECEIVED BUT ONLY THERE IS COMMON SHARE HOLDING. BY FOLLOWING THE DECISIONS IN THESE CASES, IT IS HELD THAT THE PROVISION OF SECTION 2(22)(E) IS NOT ATTRACTED TO THE AMOUNT RECEIVED BY THE APPELLANT COMPANY FROM M/S. NEWTON CONSTRUCTION P. LTD. IN VIEW OF THESE FACTS AND THE CASE LAWS RELIED ON BY THE APPELLANT, IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE I. T. ACT AND MAKING THE ADDITION. ACCORDI NGLY, THE ADDITION IS DELETED IN ALL THE YEARS . 7. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 8. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A ) AND FURTHER SUBMITTED THAT IN THE PRESENT CASE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT APPLICABLE BECAUSE THE ASSESSEE WAS NOT HOLDING MORE THAN 20% SHARE CAPITAL IN NEWTON CONSTRUCTION PVT. LTD. HE FURTHER PLACING RELIANCE ON THE DECISIO N OF SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOR PVT. LTD. (2009) 118 ITD 1 (MUM) (SB) AND SUBMITTED THAT DEEMED DIVIDEND CAN ONLY BE ASSESSED IN THE HANDS OF A PERSON WHO IS A SHARE HOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF THE BORROWIN G CONCERN IN WHICH SUCH SHARE HOLDER IS MEMBER OR PARTNER HAVING SUBSTANTIAL INTEREST. HE ALSO PLACED RELIANCE ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. ANKITECH IT (SS) A NO S. 703 & 704/AHD/2010 . A.Y. 2003 - 04 & 2004 - 05 5 PVT. LTD. AND ORS. (2012) 340 ITR 14. HE THUS SUPPORTED THE ORDER OF LD. CIT( A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD . I T IS AN UNDISPUTED FACT THAT SMT. MAYA DOKANIA HOLDS 18.33% OF SHARE HOLDING IN NEWTON CONSTRUCTION PVT. LTD. AND 42.12% SHARE HOLDING IN ASSESSEE COMPANY. ASSESSEE IS NOT A SH ARE HOLDER IN NEWTON CONSTRUCTION PVT. LTD. FROM WH OM IT HAS RECEIVED AMOUNT. WE FIND THAT THE HON BLE SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOR PVT. LTD. (SUPRA) HAS HELD THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF BORROWING CONCERN IN WHICH SUCH SHARE HOLDER IS A MEMBER OR A PARTNER HAVING SUBSTANTIAL INTEREST. FURTHER IN THE CASE OF CIT VS. ANKITECH PVT. LTD. (SUPRA), THE HON BLE DELHI HIGH COURT HAS HEL D THAT A CONCERN WHICH IS GIVEN LOAN OR ADVANCE BY A COMPANY CANNOT BE TREATED AS SHAREHOLDER/MEMBER OF THE COMPANY WHO HAS ADVANCED LOAN SIMPLY BECAUSE A SHAREHOLDER OF THE LENDER COMPANY HOLDING POWER OF 10% OR MORE THEREIN HAS SUBSTANTIAL INTEREST IN SU CH CONCERN AS SUCH LOAN OR ADVANCE CANNOT BE TREATED AS DEEMED DIVI DEND U/S. 2(22)(E) OF THE ACT. CONSIDERING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF AFORESAID DECISIONS WE ARE OF THE VIEW THAT IN THE PRESENT CASE NO ADDITION ON ACCOUNT OF DEEMED DIV IDEND U/S. 2(22)(E) CAN BE MADE. FURTHER, B EFORE US, REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECISION IN ITS SUPPORT NOR COULD CONTROVERT THE FINDINGS OF LD. CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS THE GROUNDS OF REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. IT (SS) A NO S. 703 & 704/AHD/2010 . A.Y. 2003 - 04 & 2004 - 05 6 WE NOW PROCEED WITH ITA NO. 704/AHD/2010 OF A.Y. 2004 - 2005 11. BEFORE US, BOTH THE PARTIES HAVE ADMITTED THAT I N THE PRESENT CASE , THE FACTS AND CIRCU MSTANCES OF THE CASE ARE ID ENTICAL TO THAT OF A.Y. 2003 - 04 AND WE WHILE DEC IDING THE APPEAL FOR A.Y. 03 - 04 HEREIN ABOVE HAVE DISMISSED THE APPEAL OF THE REVENUE . SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THAT OF A.Y. 03 - 04 WE THEREFORE FOR THE RE ASONS STATED HEREIN ABOVE WHILE DECIDING THE APPEAL FOR A.Y. 2003 - 04 AND FOR SIMILAR REASONS DISMISS THE GROUNDS OF REVENUE IN THE PRESENT APPEAL . 12. THUS THE APPEAL OF REVENUE IS DISMISSED. 13. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 02 - 201 5 . SD/ - SD/ - (KUL BHARAT ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD . TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD