ITO, Chandigarh V. M/s J.N. Goyal Hospital Pvt. Ltd., Chandigarh

MA 247/CHANDI/2018

AI Insights

The case revolves around the Revenue's challenge against the ITAT's earlier decision which dismissed the addition of Rs. 84,29,636 as deemed dividend under section 2(22)(e) of the Income Tax Act, 1961. The Revenue contended that the decision of the Supreme Court in CIT Vs. Ankitech Pvt. Ltd., which was relied upon by the ITAT, was under reconsideration and thus not final. However, the ITAT found no merit in the Revenue's Miscellaneous Application as the Supreme Court's decision remained binding and no new developments or stays were presented that would alter the precedent set by the Supreme Court.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135472 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 10 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-09-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 31-10-2018
• Other Referred Cases: Sharman Woolen Mills Ltd. [2012] 204 Taxman 82(P&H), CIT Vs. Navyug Promoter Pvt. Ltd., 203-ITR-618 (Delhi), ACIT Vs. M/s Color Crafts Pvt. Ltd., Ludhiana in ITA No. 1248/Chd/2011 of ITAT, Chd, ACIT Vs. M/s India Casting Company in ITA No. 55/Agr/2012 of ITAT Agra, CIT vs M.K. Shah (290-ITR-433), CIT Vs. Ankitech Pvt. Ltd (ITA No. 462/2009), CIT Vs. Universal Medicare Pvt. Ltd 324 ITR 263 (Bom)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Deemed dividend
• Section: 143(3); 2(22)(e)

Judgement Text

आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “ए” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH ᮰ी आकाश दीप जैन, उपा᭟यᭃ एवं ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM Miscellaneous Application No. 247/Chd/2018 In आयकर अपील सं./ ITA NO. 194/Chd/2017 िनधाᭅरण वषᭅ / Assessment Year : 2010-11 The ITO Ward-5(4) Chandigarh बनाम J.N. Goyal Hospital Pvt. Ltd. Flat No. 1265, Sector 50-C Chandigarh ̾थायी लेखा सं./PAN NO: AACCJ1834A अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : None (Application Rejected) राज᭭व कᳱ ओर से/ Revenue by : Smt. Amanpreet Kaur, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 15/09/2023 उदघोषणा कᳱ तारीख/Date of Pronouncement : 18/09/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : The present Miscellaneous Application has been filed by the Revenue against the order passed by the Coordinate Bench in ITA No. 194/Chd/2017 dt. 22/05/2018 and the contents of the Miscellaneous Application reads as under: “Sub: Filing of Miscellaneous Application in ITA No 194/Chd/2017 dated 22.05.2017 in the case M/s J.N. Goyal Hospital Pvt. Ltd., Flat No. 1265, Sector 50-C, Chandigarh A.Y. 2010-11 (PAN - AACCJ1834A)- Regarding Kindly refer to your order passed in ITA No 194/Chd/2017 dated 22.05.2017 in the above mentioned case vide which the appeal of the department was dismissed. In this regard, it is submitted that the issue involved and brief facts of the case are as under:- Assessment for the assessment year 2010-11 was completed under section 143(3) of the Income tax Act, 1961 on 10.03.2016 by making an addition of Rs. 84,29,636/- on account of deemed dividends u/s 2(22)(e) of the Income tax Act, 1961. The assessee company has not carried out on any business activities during the period relevant the A.Y.2010-11. As per duly audited Balance Sheet of the assessee company for the year ending on 31.03.2010, the assessee company has shown 'long term borrowings' of Rs. 95,83,601/-. These include a loan from M/s. Deepak Gases Pvt. Ltd. (PAN - AAACD5148D) having outstanding balance of Rs. 2 84,29,636/- as on 31.03.2010. The assessee has submitted confirmation from M/s. Deepak Gases Pvt. Ltd, alongwith duly audited balance sheet as on 31.03.2010 of the said company. During the course of assessment proceedings, the AO found that M/s. Deepak Gases Pvt. Ltd. is sister concern of the assessee company. Mr. Jai Narayan and Mrs. Hema Goyal are common Directors in both the companies. Besides being directors and substantial shareholders in the assessee company, they respectively hold 56.50% and 43.50% shares in M/s. Deepak Gases Pvt. Ltd. which has accumulated Reserve & Surplus (i.e. accumulated profits) of Rs.97,57,202/-, including current year profits of Rs.5,94,610/- as on 31.03.2010 as per their duly audited balance sheet for the A.Y. 2010-11. Further, during the course of assessment proceedings the AO revealed that the assessee company was the recipient of the long term loans/borrowings from its Directors Rs. 95,83,601/- and from M/s. Deepak Gases Private Limited since A.Y. 2010-11. The details of loans received by the assessee company from M/s Deepak Gases Private Limited is as given below: F.Y. ending on Relevant A.Y. Amount of loans [Rs.] 31.03.2010 2010-11 84,29,636/- 31.03.2010 2010-11 11,53,985/- TOTAL 2010-11 95,83,601/- Further, M/s. Deepak Gases has confirmed this amount, which it has also shown in its balance sheets as on 31.03.2010, grouped it as short term loan and advances. However, M/s Deepak Gases Private Limited itself has raised Rs. 38.31 lacs from the HUF of its Director M/s Jai Narain and it has accumulated reserve and surplus of Rs. 97.57 lacs, which is apparent from its balance sheet as on 31.03.2010. The amount of loans so advanced are to be treated as "deemed dividend" in the hands of the recipient (i.e. the assessee company) as per the provisions of Section-2(22)(e), subject to availability of profits/accumulated profits of the lending company (i.e. M/s Deepak Gases Private Limited) in the relevant assessment year. In view of the aforesaid facts and provisions of law, the amount of loans totaling to Rs.84,29,636/-[ Closing balance: Rs. 1,04,90,202/- Opening Balance: Rs.97,57,202 ] advanced by the lender sister concern during the relevant period were treated as "deemed dividend" in the hands of the assessee company and an addition of Rs. 84,29,636/- was made which resulted into a demand of Rs. 45,32,310/-. Aggrieved by the order of AO, the assessee preferred an appeal before Ld. CIT(A). The Ld. CIT(A) vide his order dated 07.11.2016 in appeal No. 289/2/15-16 has allowed the appeal of the assessee on the ground that the appellant company is not the shareholder of the lender company i.e. M/s Deepak Gases Pvt. Ltd. and vice versa. Therefore, section 2(22)(e) is not applicable in the case of the appellant and hence the addition made on account of deemed dividend of Rs. 84,29,636/- is deleted. The Ld. CIT(A) relied on the decisions of the Jurisdictional High Court in the case of Sharman Woolen Mills Ltd. [2012] 204 Taxman 82(P&H), CIT Vs. Navyug Promoter Pvt. Ltd., 203-ITR-618 (Delhi), ACIT Vs. M/s Color Crafts Pvt. Ltd., Ludhiana in ITA No. 1248/Chd/2011 of ITAT, Chd and ACIT Vs. M/s India Casting Company in ITA No. 55/Agr/2012 of ITAT Agra. The Ld. 3 CIT(A) has not taken the cognizance of decision made by Hon'ble Supreme Court in the case of CIT vs M.K. Shah ( 290-ITR-433). Aggrieved by the order of Ld. CIT(A), the Assessing officer, preferred an appeal before Hon'ble ITAT. The Hon'ble ITAT vide his order dated 22.05.2018 in appeal No. 194/CHD/2017 has dismissed the appeal of Revenue on the ground that the appellant company is not the shareholder of the lender company i.e. M/s Deepak Gases Pvt. Ltd. and vice versa and said that the section 2(22)(e) is not applicable in the case of the appellant, hence the addition made on account of deemed dividend of Rs. 84,29,636/- is liable to be deleted. The Hon'ble ITAT in his order stated that the decision of Ld. CIT(A) is rightly based on the judgments of the Jurisdictional High Court in the case of Sharman Woolen Mills Ltd. [2012] 204 Taxman 82(P&H). M/s Olympus Personnel Allied Services Pvt. Ltd in ITA No. ITA/57/Chd/2015 dt. 18.01.2016, CIT v Ankitech Pvt. Ltd (ITA No. 462/2009), CIT Vs. Universal Medicare Pvt. Ltd 324 ITR 263 (Bom) wherein it was held that the deemed dividend is assessable in the hands of the share holder only. The Hon'ble ITAT has deleted the addition of Rs. 84,29,636/- made u/s 2(22)(e) of the Act by relying on the decision of Hon'ble Apex Court in the case of M/s Ankitech Pvt. Ltd., whereas the said decision has already been placed under reconsideration before the Hon'ble Chief Justice of India. In view of the above, the Hon'ble ITAT is requested to kindly rectify the above said order passed in ITA No 194/CHD/2017 dated 22.05.2018 keeping in view the decision/Judgment of the Hon'ble Apex Court on the following grounds of appeal:- "Whether on facts and circumstances of the case and in law, the Hon 'ble ITAT has erred in deleting the addition of Rs. 84,29,636/- made u/s 2(22) (e) of the Act by relying on the decision of Hon 'ble Apex Court in the case of M/s Ankitech Pvt. Ltd, whereas the said decision has already been placed under reconsideration before the Hon'ble Chief justice of India, and thus the said issue has not reached finality." 2. None appeared on behalf of the assessee, however an adjournment application has been filed and on perusal thereof, we find that no reasonable cause has been stated for non appearance, hence the same is hereby rejected. 3. After hearing the ld DR and going through the Miscellaneous Application and the material available on the record, we find that the Revenue has preferred the present Miscellaneous Application for the reason that the decision of the Hon’ble Supreme Court in case of CIT Vs. Ankitech Pvt. Ltd. (ITA No. 462/2009) which has been relied on by the Coordinate Bench has been placed for reconsideration before the Hon’ble Chief Justice of India. However, nothing has been brought on record as to whether there is any stay on the order so passed or subsequent development in the 4 matter in terms of passing of a fresh order. In view of the same, as the matter stands as of today, the order of the Hon’ble Supreme Court in case of CIT Vs. Ankitech Pvt. Ltd. (supra) continue to remain binding on all authorities including the Tribunal and given that the same have duly been followed by the Coordinate Bench, we do not see any mistake which has crept in the order so passed by the Coordinate Bench. 4. In view of the same the Miscellaneous Application so filed by the Revenue is hereby dismissed. (Order pronounced in the open Court on 18/09/2023) Sd/- Sd/- आकाश दीप जैन िवᮓम ᳲसह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा᭟यᭃ / VICE PRESIDENT लेखा सद᭭य/ ACCOUNTANT MEMBER AG Date: 18/09/2023 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant / 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar