Rajendra Kumar Vemuluri, Hyderabad, Hyderabad V. ACIT,Circle-2(1) , Hyderabad

MA 33/Hyd/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6846 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 06-12-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2006-2007
• Appeal Filed On: 15-06-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Deemed dividend; Commercial expediency
• Section: 2(22)(e); 254(2); 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) B EFORE SH RI SA TBEER SING H GODA RA, JU DI CIA L MEM BER AND SHR I L AXMI PR AS A D SAHU , AC COUNT ANT MEMBE R M.A. No. 33/Hyd/2021 (in ITA No. 1420/H/2016 Assessment Year: 2006-07) Rajendra Kumar Vemuluri, Hyderabad. PAN – ABIPV 2940B Vs. Asst. Commissioner of Income-tax, Circle – 2(1), Hyderabad. (Appellant) (Respondent) M.A.No. 34/Hyd/2021 (in ITA No. 1441/H/2016 Assessment Year: 2006-07) Nagabhushanam Vemuluri, Hyderabad. PAN – ABIPV 2941A Vs. Asst. Commissioner of Income-tax, Circle – 2(1), Hyderabad. (Appellant) (Respondent) Assessee by: Shri K.C. Devdas Revenue by Shri A. Sitarama Rao Date of hearing: 13/08/2021 Date of pronouncement: 07/12/2021 O R D E R PER L.P. SAHU, A.M.: These Miscellaneous Applications are filed by the assessee u/s 254(2) of the Income Tax Act seeking MA Nos. 33 & 34/Hyd/2021 V . R a j e n d r a K uma r & V . N a g a b h u s h a n a m , H y d . :- 2 -: rectification/modification of the order of the Tribunal dated 25/04/2021 in ITA Nos. 1420 & 1441/Hyd/2016. 2. In the MAs, the assessee, inter-alia, referring to the finding of the Tribunal at para 9 of the order, stated that the detailed written submissions filed vide covering letter of 02/03/2021 on 05/03/2021 has not been considered while passing the order by sheer oversight and inadvertence. In the M.A., the assessee stated as under: “2. The appeals were heard on 25/02/2021 and the order has been passed on 20/04/2021 wherein the appeals have been allowed in part. 3. The common ground involved in both these appeals is the applicability of section 2 (22)(e) of the Income Tax Act, 1961 which was assessed at Rs. 28,52,612/- and Rs. 31,56,083/- in the hands of Mr. V. Rajendra Kumar and Mr. V. N agabhushanam respectively. 4. Both the appellants were the Directors of the company M/s. Kalaniketan Textiles and Jewels Private Limited and had substantial interest in the company. 5. The appeals were posted for hearing on 25/02/2021 and the order was pronounced on 20/04/2021 wherein the addition u/ s 2(22)(e) was sustained in part at Rs. 20 lakhs in the hands of Mr. V. Rajendra Kumar and Rs. 25 lakhs in the hands of Mr. V. Nagabhushanam. 6. These Miscellaneous Applications seek to correct certain mistakes apparent from record and in the interest of justice, the Tribunal may kindly pass the order as it deems fit having regard to the facts stated herein. MA Nos. 33 & 34/Hyd/2021 V . R a j e n d r a K uma r & V . N a g a b h u s h a n a m , H y d . :- 3 -: 7. Paper Books - Two - in number, in each of the appellants' case and also a common case law paper book was filed. 8. The facts relating to the addition of deemed dividend was elaborately submitted by the appellant in connection with the remand report of the DCIT vide letter dated NIL. This finds a place at page 94 of the paper book filed by Mr. V. Rajendra Kumar on 9/ 11/2017 which was read out before the Hon 'ble Tribunal on 25.02.2021 and this brings out the business exigency in respect of the transactions and therefore the order of the Hon 'ble Tribunal at Pg. 9 of the final para of Para 9 which states that the Ld. AR of the Appellant- “..could not prove any business exigency in the present case". 9. The Appellant submits that this observation is totally contrary to the submissions made. The Appellant also relied on the judgements referred to by the Hon'ble Tribunal in the precedents Paper Book at Pg. 1 to Pg. 64 which supports the business exigency. 10. The facts in a nutshell are there are two groups of Directors / shareholders in the company. One group comprising of Mr. N aga Kanaka Durga Prasad and Jhansi Rani and the other group comprising of Vemuluri Brothers consisting of V. Rajendra Kumar and V. Nagabhushanam. 11. Mr. N aga Kanaka Durga Prasad the dissenting Director and shareholder along with Jhansi Rani created innumerable problems to the company and tried to incorporate a separate entity in the name of Kalaniketan International Private Limited (page 15-17 of V. Rajendra paper book) and copies of the correspondence with Registrar. of Companies finds a MA Nos. 33 & 34/Hyd/2021 V . R a j e n d r a K uma r & V . N a g a b h u s h a n a m , H y d . :- 4 -: place at pages 15, 16 and 1 7 of the paper book filed in the case of V. Rajendra Kumar. 12. During the course of hearing on 25/02/2021, submissions were made on the basis of the detailed paper books filed and a question emanated from the Bench as to why the assessments should not be set aside as the fact of dispute amongst the Directors was not brought out very clearly. 13. The Authorised Represented sought leave of the Hon'ble Bench on 25/02/2021 itself to contact the appellants to seek specific instructions to set aside the assessments and ask for a Passover of the hearing. Immediately, the Authorised Representative withdrew from the hearing and made an attempt to contact both the Directors which was not fruitful as they were away on account of business exigency. Considering this factor, the Authorised Representative could not revert to the Hon 'ble Bench before it arose for the day. The Authorised Representative was informed by the Bench Clerk that written submissions may be flied within a period of 25 days from 25/2/2021. 14. Accordingly, the appellant submitted written submissions vide letter dated 2/3/2021 filed on 5/3/2021. The appellant brought out the entire facts in detail in the aforesaid submissions and stated that the provisions of section 2(22)(e) of the Act are not applicable on account of commercial expediency. 15. Keeping in view the interest of the business which was paramount, the payments were made to the dissenting Directors, which is clearly spelt out in the correspondence at Pg. 94 of the Paper Book in the case ofV. Rajendra Kumar on 9/11/2017. 16. In conclusion, it was submitted that the assessments may be set aside to the Ld. A.a. and they would be in a position to demonstrate further how the transactions MA Nos. 33 & 34/Hyd/2021 V . R a j e n d r a K uma r & V . N a g a b h u s h a n a m , H y d . :- 5 -: would not fall under the provisions of section 2(22)(e) of the Act. 17. Accordingly, the entire detailed written submissions were filed on 5/3/2021. 18. In the order passed by the Tribunal at para 9, 9.1 and 10.1 of its order, the Tribunal discussed the issues and passed the order which are reproduced herein below for reference: "9. Considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. On perusal of the current account maintained with the company placed at pages 9 to 11 of paper book, there was an opening debit balance of Rs. 11,56,202/- on 07/05/2005 which is a current account maintained by the assessee. We find that the accounts of the director has been credited by the remuneration and other cash deposits. On 08/09/2005, Rs. 20 lakhs have been paid and it has also been debited into the Director's account. As per the ledger account, it is clear that the amount was transferred from HDFC Bank through DD to Ch.N.K.D. Prasad, who was director of the company in which the appellant holds substantial shares of the company. The shares owned by Ch.N.K.D. Prasad was transferred in the name of the appellant i.e, the amount was transferred for the purchase of shares in the name of the appellant. The company has also debited to the current account as maintained by the company of the director. The AR of the assessee has also alleged that the AD has not calculated the reserves and surplus on the date of advance to the directors and he has taken closing balance of reserves and surplus as at the end of the year i.e. 31/03/2006, which is not correct and while calculating the reserves and surplus, depreciation as per the IT Act has also not been calculated by the AD. It was the duty of the assessee to prove that on the date of advance the assessee must calculate the reserves and MA Nos. 33 & 34/Hyd/2021 V . R a j e n d r a K uma r & V . N a g a b h u s h a n a m , H y d . :- 6 -: surplus, which has not done by the assessee. In regard to "Reserves & Surplus", it should be read in general terms as used in the IT Act. The payer is a company and the financial statements are prepared as per the Companies Act. Therefore, both the contentions raised by the ld. AR is rejected. We also find that the current account maintained in the name of the appellants in the company's ledger, there are debit balances on different occasions, but, no interest has been charged. The ld. AR of the assessee could not prove any business exigency in the present case. 9.1 In view of the above observations, we are of the view that since the assessee is having substantial interest in M/s Kalanikethan Textiles and Jewels Pvt. Ltd., i.e. more than 10% shareholding, the amount withdrawn from the above company over and above his credit balance, is treated as deemed dividend u/ s 2(22)(e) of the Act in the hands of the assessee to the extent of Rs. 20,00,000/- Accordingly, the grounds raised by the assessee on this issue are partly allowed. 10.1 The facts and grounds are materially identical in the case of Nagabhushanam Vemuluri in ITA No. 1441/Hyd/2016 to that of ITA No. 1420/Hyd/2016 in the case of Rajendra Kumar Vemuluri and this assessee is also having substantial interest in M/ s Kalanikethan Textiles and Jewels Pvt. Ltd., i.e. more than 10% shareholding, the amount withdrawn from the above company over and above his credit balance, is treated as deemed dividend u/ s 2(22)(e) of the Act in the hands of the assessee to the extent of Rs. 25,00,000/ -. Thus, the grounds raised by the assessee on this issue are partly allowed. " 19. The appellant submits that the detailed written submissions filed vide covering letter of 2/3/2021 on 5/3/2021 has not been considered while passing the order by sheer oversight and inadvertence. MA Nos. 33 & 34/Hyd/2021 V . R a j e n d r a K uma r & V . N a g a b h u s h a n a m , H y d . :- 7 -: 20. There is a clear finding by the Tribunal at para 9 of the order which has been reproduced (supra) that the Directors viz., V. Rajendra Kumar and V. Nagabhushanam made payments to purchase the shares of the dissenting Directors which were also transferred in the name of the appellants. This was done for smooth functioning of the business which has been brought out elaborately in the written submissions made on 5/3/2021. A copy of the same is enclosed for ease of reference. 21. Therefore, the appellants pray that the submissions of the appellants in the Miscellaneous Application read with the written submissions made on 5/3/2021 be considered in the interest of justice and fair play and the Hon'ble Tribunal pass orders as it deems fit. 22. The appellants relied on the decision of the Hon'ble Delhi High Court in the case of Lachman Dass Bhatia Hingwala (P) Ltd. V s. ACIT [2011] 196 Taxmann 563 (Delhi) reported in 330 ITR 243 for favourable consideration.” 3. Referring to the observations made in the MAs, the ld. AR of the assessee submitted that along with these observations, written submissions made on 05/03/2021 be considered in the interest of justice and fair play and the pass orders as it deems fit. 4. Ld. DR objected to the above submission of the ld. AR and submitted that there is no mistake apparent from record in the order passed by the ITAT. He also submitted that the Tribunal does not have any power to review its own order. MA Nos. 33 & 34/Hyd/2021 V . R a j e n d r a K uma r & V . N a g a b h u s h a n a m , H y d . :- 8 -: 5. We have considered the rival submissions and perused the material on record. With regard to the contention of the assessee that the detailed written submissions filed vide covering letter of 02/03/2021 on 05/03/2021 has not been considered while passing the order, on verification of our registry records i.e. inward register, the said document was not found as any documents/paper books filed by the assessees/their representatives, first the same will be entered into the Inward Register and then submit the same before the concerned officers. Therefore, no such written submissions filed by the assessee on 05/03/2021 are available before the Bench and hence, there was no occasion to consider such written submissions while passing the order. 5.1 We observe that the Tribunal after considering the grounds raised in appeals, submissions made from both the sides and considering the documents available on record, passed the order. The Tribunal cannot review its own order in the garb of power vested u/s 254(2) of the Act. Therefore, recalling of the order in this case as sought by the Authorized Representative will tantamount to review of the order which is not permitted under the law. This power is not vested with the Tribunal. For this proposition, we rely on the decision of the ITAT, Mumbai Benches in the case of Gateway Terminals India Pvt. Ltd. Vs. DCIT, [2021] MA Nos. 33 & 34/Hyd/2021 V . R a j e n d r a K uma r & V . N a g a b h u s h a n a m , H y d . :- 9 -: 128 Taxmann.com 314 and the latest judgment of the Hon’ble Supreme Court in the case of CIT Vs. M/s Reliance Telecom Ltd., Civil Appeal Nos. 7110 & 7111 of 2021 vide order dated 3 rd December, 2021. Accordingly, we dismiss the MAs filed by the assessee. 6. It is lastly noticed that these cases were heard on 10.06.2021 and are being pronounced beyond the period of 90 days. We next note that hon'ble apex court's recent directions in Misc. Application No.665 of 2021 in SMW(c) of 2020 "IN RE: COGNIZANCE FOR EXTENSION 0F LIMITATION" has excluded the time period from 15.3.2020 to 2.10.2020 in all respects. 6. In the result, MAs filed by the assessee are dismissed in above terms. A copy of this common order be placed in the respective files. Pronounced in the open court on 7 th December, 2021. Sd/- Sd/- (S. S. GODARA) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 7 th December, 2021. kv MA Nos. 33 & 34/Hyd/2021 V . R a j e n d r a K uma r & V . N a g a b h u s h a n a m , H y d . :- 10 -: copy to : 1 2 V. Rajendra Kumar, 6-3-345, Lotus Esplenditer, Opp. Vengalrao Park, Road No. 1, Banjara Hills, Hyderabad. V. Nagabhushanam, 1-3-176, Saraswati Nilayam, Near Post office, Gandhi Nagar, Hyderabad – 500 080 3 ACIT, Circle – 2(1), 5 th Floor, Signature Towers, IT Building, Kondapur, Hyderabad - 84 4 CIT(A) - 10, Hyderabad 5 CIT (IT & TP), Hyderabad. 6 ITAT, DR, Hyderabad 7 Guard File.