P.K.Jayagopal, Pallipalayam V. ACIT, Salem

MA 131/CHNY/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3593 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 09-10-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 05-08-2015
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 131; 6; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . !' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER M.P.NO. 131/MDS/2015 AND S.P. NO. 397/MDS/2015 (IN ITA NO. 445/MDS/2015) / ASSESSMENT YEAR : 2011-12 SHRI P.K. JAYAGOPAL, 5, BYE-PASS ROAD, PALLIAPALAYAM 638 006, NAMAKKAL DIST. PAN: ACFPJ3546H (PETITIONER) VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I(1), SALEM. (RESPONDENT) PETITIONER BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT / DATE OF HEARING : 09.10.2015 / DATE OF PRONOUNCEMENT : 16.10.2015 & / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THE MISCELLANEOUS PETITION AND THE STAY PETITION ARE FILED BY THE ASSESSEE. BY THE MISC. PETITION, THE ASSESS EE SEEKS - - MA 131 & SP 397/15 2 RECALL OF THE ORDER OF THE TRIBUNAL IN ITA NO.445/M DS/2015 DATED 17.7.2015. 2. THE LD. AR SUBMITTED THAT THE TRIBUNAL WRONGLY D ECIDED THE ISSUE OF DEEMED DIVIDEND U/S.2(22)(E) OF THE AC T AGAINST THE ASSESSEE BY OBSERVING IN PARA 7 AT PAGES 4 & 5 AS U NDER : 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIE S BELOW. THE ASSESSEE IS A DIRECTOR OF M/S. PKPN SPINNING MILLS (P) LTD. AND HE HAS RECEIVED A SUM O F ` 79,08,532/-. IN THE ACCOUNTS OF THE COMPANY, IT HAS SHOWN AS LOANS AND ADVANCES TO THE ASSESSEE SHRI P.K. JAYAGOPAL. BEFORE THE ASSESSING OFFICER, THE C A OF THE ASSESSEE HAS CERTIFIED THAT THE AMOUNT OF ` 79,08,532/- RECEIVED AS LOANS AND ADVANCES AND THE COMPANY HAS NOT CHARGED ANY INTEREST. THE ONLY SUBMISSION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT THE FINANCIAL TRANSACTION WAS DONE FOR THE PURPOSE OF SMOOTH CONDUCT OF BUSINESS. THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE BEFORE THE ASSESSING OFFICER THE ACTUAL PURPOSE FOR WHICH THE AMOUNT WAS RECEIVED AND HOW THE TRANSACTION HELPS PKPN SPINNING MILLS (P) LTD. FOR SMOOTH FUNCTIONING . IN SO FAR AS APPLICATION OF SECTION 2(22)(E) IS CONCER NED, THE LD. COUNSEL FOR THE ASSESSEE APPEARED BEFORE US HAS NOT DISPUTED. HE HAS ONLY SUBMITTED THAT THE AMOUNT OF ` 34,01,550/- DID NOT INVOLVE OUTGOING OR FLOW OF MONEY FROM THE COMPANY TO THE ASSESSEE. THI S ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE IS AN AFTERTHOUGHT AND IT CANNOT BE ACCEPTED FOR THE REAS ON THAT IN THE BALANCE SHEET OF M/S. PKPN SPINNING MIL LS (P) LTD., A SUM OF ` 79,08,532/- WAS SHOWN AS LOANS AND ADVANCES TO SHRI JAYAGOPAL AND THIS FACT WAS NO T DISPUTED BY THE ASSESSEE NEITHER BEFORE THE ASSESSI NG OFFICER NOR BEFORE THE LD. CIT(A) OR EVEN BEFORE US . - - MA 131 & SP 397/15 3 MOREOVER, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT ABLE TO EXPLAIN THE SUBSTANCE IN MAKING THE ENTRIES . HE SAYS THAT IT IS ONLY A NOTIONAL PAYMENT. THEREFORE, THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE IN THI S REGARD IS REJECTED. 3. ACCORDING TO THE LD. AR, AT THE TIME OF HEARING, THE ASSESSEE HAS RELIED ON THE FOLLOWING DECISIONS OF J URISDICTIONAL HIGH COURT: I) CIT V. SMT. SAVITHIRI SAM (236 ITR 1003), WHEREI N IT WAS HELD THAT DEBIT BALANCE IN THE ACCOUNT OF ESTATE OF DECE ASED SHAREHOLDER TRANSFERRED TO THE ACCOUNT OF HIS WIFE IN THE BOOKS OF THE COMPANY CANNOT BE TREATED AS PAYMENT MADE TO HE R BY THE COMPANY SO AS TO ATTRACT THE PROVISIONS OF SEC .2(2 2)(E) OF THE ACT. II) G.R.GOVINDARAJULU NAIDU & ANOTHER V. CIT (90 IT R 13), WHEREIN IT WAS HELD THAT NOTIONAL PAYMENT BY BOOK E NTRIES DOES NOT CONSTITUTE PAYMENT BY WAY OF LOAN OR ADVANCE FOR THE PURPOSE OF SEC.2(6A)(E) OF THE I.T.ACT, 1922. 3.1 FURTHER, THE LD. AR SUBMITTED THAT THE TRIBUNAL WRONGLY APPLIED EXPLANATION 3(B) TO SEC.2(22)(E) OF THE ACT TO THE CASE OF THE ASSESSEE, FOR THE SAID EXPLANATION, CLAUSE (A) DEFINES CONCERN AND CLAUSE (B) EXPLAINS AS TO WHEN A PERS ON SHALL BE - - MA 131 & SP 397/15 4 DEEMED TO HAVE SUBSTANTIAL INTEREST IN A CONCERN, O THER THAN A COMPANY AND THE EXPLANATION APPLIES ONLY TO LATER P ART OF SEC.2(22)(E), STARTING WITH OR TO ANY CONCERN IN W HICH SUCH SHAREHOLDER IS A MEMBER . AND HENCE, NOT APPLICABLE TO THE CASE OF THE ASSESSEE. ACCORDING TO HIM, THERE ARE ERRORS IN THE ORDER OF THE TRIBUNAL WHICH REQUIRES TO THE REC TIFIED. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE TRIBUNAL. 5. WE HAVE HEARD BOTH THE SIDES. ADMITTEDLY, THE T RIBUNAL HAS NOT MENTIONED THE JUDGMENTS RELIED ON BY THE AS SESSEES COUNSEL IN ITS ORDER, THOUGH THE TRIBUNAL HAS GIVEN FINDING ON THE ISSUE ON MERIT AT PARA 7 AND OBSERVED THAT THE LD . COUNSEL FOR THE ASSESSEE HAS NOT ABLE TO EXPLAIN THE SUBSTANCE IN MAKING THE ENTRIES. FURTHER, THE JUDGMENT IN THE CASE OF G.R.GOVINDARAJULU NAIDU & ANOTHER V. CIT CITED SUPR A, WAS DELIVERED ON OLD INCOME-TAX ACT,1922 AND THE CIRCU MSTANCES ARE TOTALLY DIFFERENT AND NO BEARING ON THE FACTS OF TH E PRESENT CASE. THE JUDGMENT IN THE CASE OF CIT V. SMT. SAVITHIRI S AM CITED SUPRA, WAS IN CONNECTION WITH THE TRANSFER OF DEBIT BALANCE IN THE ACCOUNT OF THE DECEASED SHAREHOLDER TO THE ACCOUNT OF HIS WIFE IN - - MA 131 & SP 397/15 5 THE BOOKS OF ACCOUNT, WHO IS NOT A SHAREHOLDER. IN THAT CIRCUMSTANCES, IT WAS HELD BY THE JURISDICTIONAL HI GH COURT THAT THE PROVISIONS OF SEC.2(22)(E) OF THE ACT ARE NOT A PPLIED. 6. FURTHER, IT IS PERTINENT TO MENTION HERE THAT TH ERE IS A DIRECT JUDGMENT FROM THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. L. ALAGUSUNDARAM CHETTIAR (109 ITR 508), WHE REIN IT WAS OBSERVED THAT LOAN ADVANCED BY THE COMPANY TO HUF O F ONE K, THE LOW PAID EMPLOYEE OF THE COMPANY WAS KARTA AND K IN TURN, ADVANCING LOAN TO ASSESSEE, MANAGING DIRECTOR OF TH E COMPANY, WAS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE IN VIEW OF ADMISSION BY THE ASSESSEE THAT WHEN REQUIRED LOAN, HE OBTAINED IT THROUGH K IN THIS MANNER. IN VIEW OF CONTRADICT ORY JUDGMENTS, THE ISSUE ARISING FROM THE MISC. PETITION IS A DEBA TABLE ONE AND IT CANNOT BE SAID THAT IT SHOULD BE RECTIFIED U/S.254( 2) OF THE ACT. U/S.254 (2) ONLY MISTAKE, WHICH IS APPARENT FROM TH E FACE ON RECORD, COULD BE RECTIFIED AND NOT DEBATABLE ISSUE. IF IT IS SO, IT IS ONLY AN ERROR IN JUDGMENT AND NOT A MISTAKE APPAREN T FROM THE RECORD AMENABLE TO RECTIFY UNDER SEC.254(2) OF THE ACT. IN OUR OPINION, THE ORDER OF THE TRIBUNAL TO BE READ IN A WHOLE AND NOT AS A PIECEMEAL MANNER. ACCORDINGLY, THE ORDER OF T HE TRIBUNAL - - MA 131 & SP 397/15 6 ON THESE ISSUES IS NOT LIABLE TO BE INTERFERED WITH UNLESS THE TRIBUNAL HAS NOT TAKEN INTO CONSIDERATION ANY IRREL EVANT MATERIAL OR HAS FAILED TO TAKE INTO CONSIDERATION ANY RELEVA NT MATERIAL OR THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IS PERVER SE IN THE SENSE THAT NO REASONABLE PERSON, ON THE BASIS OF THE FACT S BEFORE THE TRIBUNAL, COULD HAVE COME TO THE CONCLUSION TO WHIC H IT HAS COME. IN VIEW OF THE ABOVE DISCUSSION, WE FIND NO MERIT IN THE MISC. PETITION FILED BY THE ASSESSEE AND IT DESERVE S TO BE DISMISSED. 7. SINCE, THE APPEAL IS DISPOSED OF BY THE TRIBUNAL , THE STAY PETITION FILED BY THE ASSESSEE DOES NOT REQUIRE ANY ADJUDICATION AND THEREFORE, THE SAME IS DISMISSED. 8. IN THE RESULT, MISCELLANEOUS PETITION AND STAY P ETITION ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 16 TH OF OCT., 2015 AT CHENNAI. SD/- SD/- ( ) ( ) (CHANDRA POOJARI) (V. DURGA RAO) !' /ACCOUNTANT MEMBER #'' !' /JUDICIAL MEMBER # /CHENNAI, $ /DATED, THE 16 TH OCT., 2015. MPO* - - MA 131 & SP 397/15 7 % & '() *+ ) /COPY TO: 1. *,-. /APPELLANT 2. '/'-. /RESPONDENT 3. %' %' 0 (*,) /CIT(A) 4. %' %' 0 /CIT 5. )1,' '2 /DR 6. 3 4 /GF.