PRAKASHBHAI DHIRUBHAI THAKKAR,RAJKOT V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), RAJKOT, RAJKOT

ITA 222/RJT/2025

AI Insights

The case revolves around the assessment of Prakashbhai Dhirubhai Thakkar, a director at M/s Parth Laboratories Pvt Ltd, for the assessment year 2007-08. The primary issue was the addition of Rs.1,15,000 to Thakkar's income as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961, which was alleged to be a loan from the company. The Assessing Officer initially reopened the assessment under section 147 based on information that Thakkar had taken a loan from the company during the financial year 2006-07. However, Thakkar contested this, providing evidence that the loan was taken in an earlier financial year and partially repaid by 2006-07. The Tribunal, after examining the documents and evidence presented, concluded that the loan was indeed taken in a prior financial year and not during the year under consideration, leading to the allowance of Thakkar's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714588 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2007-2008
• Other Referred Cases: Sreelekha Bannerjee (491 ITR 122)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMR GUPTA
• Assessee Lawyers: DEVINA PATEL
• Keywords: Opportunity of being heard; Deemed dividend; Salary income
• Section: 147; 148; 133(6); 2(22)(e)

Judgement Text

" आयकर अपीलȣय अͬधकरण,राजकोट Ûयायपीठ, राजकोट। IN THE INCOME TAX APPELLATE TRIBUNAL, “SMC” RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.222/RJT/2025 Ǔनधा[रण वष[/Assessment Year : 2007-08 Prakashbhai Dhirubhai Thakkar 49-B, Panchvati Society Street No.3, Rajkot-360 001 बनाम/ Vs Assistant Commissioner of Income- tax, Circle-2(1), Rajkot, Aayakar Bhavan, Race Course Ring Road, Rajkot-360 001 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAYPT 4729 R (अपीलाथȸ/Assessee) (Ĥ×यथȸ/Respondent) Ǔनधा[ǐरती कȧ ओर से/Assessee by : Ms. Devina Patel, AR राजèव कȧ ओर से/Revenue by : Shri Dheeraj Kumr Gupta, Sr-DR सुनवाई कȧ तारȣख /Date of Hearing : 16/05/2025 घोषणा कȧ तारȣख /Date of Pronouncement : 05/08/2025 आदेश/Order Per, Dr. Arjun Lal Saini, AM Captioned appeal filed by the assessee, pertaining to Assessment Year 2007-08, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals) [in short, “Ld.CIT(A”], dated 24.02.2025, which in turn arises out of an order passed by National Faceless Assessment Centre, Delhi/Assessing Officer u/s 147 r.w.s. 254 r.w.s. 144B of the Act, on 20.09.2021. 2. The assessee has raised the following grounds of appeal: “1. The learned commissioner of Income tax (appeals), National Faceless Appeal Centre has erred in confirming the action of the Assessing Officer in respect of pass the order u/s.147 rws 254 rws 144B of the I.T Act, whereby assessed the total income of Rs.3,59,220/-, as against the returned income of Rs.2,44,220/-, it is totally wrong, unwarranted, unjustified and bad in law. Printed from counselvise.com ITA No. 222/RJT/2025 (AY:07-08) Prakashbhai D Thakkar Page | 2 2. The learned Commissioner of Income-tax(Appeals), National Faceless Appeal Centre has erred in confirming the action of the Assessing Officer in respect of addition made on account of deemed dividend within the meaning of section 2(22)(e) of the I.T. Act and added to the total income of Rs.1,15,000/- it is totally wrong, unwarranted, unjustified and bad in law. 3. The learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in confirming the action of the Assessing Officer in respect of not considering the facts that when the hon'ble ITAT Rajkot Bench has allowed the appeal and given the decision in favour of assessee even though the Assessing Officer has not follow the direction of the ITAT and made the addition on surmises and conjecture basis and wrongly apply the section 2(22)(e) and taken the loan from the company is treated as deemed dividend it is totally wrong, unwarranted, unjustified and bad in law. 4. The learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in confirming the action of the Assessing Officer in respect of initiation the penalty proceedings u/s.271(1)(c) of the I.T Act, it is totally wrong, unwarranted, unjustified and bad in law. 5. The learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre has erred in confirming the action of the Assessing Officer in respect of charging the interest u/s.234A, 234B, 234C it is totally wrong, unwarranted, unjustified and bad in law. 6. Your applicant reserves the right in addition or alteration in the grounds of appeal at the time of hearing.” 3. Brief facts, as discernible from the orders of lower authorities are that the assessee, (Shri Prakashbhai Dhirubhai Thakkar), is one of the directors of M/s Parth Laboratory Private Limited. His total income comprises of salary income received from the said company and interest on Savings Bank Account. The assessee filed his return of income for the assessment year (A.Y.) 2007-08, on 31-08-2008, showing total income of Rs.2,44,220/-. The return of income was processed u/s 143(1) of the Act, without any modification. Subsequently, information was received on 05-09-2012, from the ACIT, Circle-2, Rajkot vide her letter No. ACIT/Cir.2/Information/PLPL/2012-13/10, dated 04-09-2012, that the assessee, (Shri Prakashbhai Dhirubhai Thakkar), who is having more than 10% share in the company M/s Parth Laboratories Pvt Ltd, has obtained Printed from counselvise.com ITA No. 222/RJT/2025 (AY:07-08) Prakashbhai D Thakkar Page | 3 advance / loan of Rs.1,15,000/- from the company, during the F.Y.2006-07 relevant to assessment year (Α.Υ.) 2007-08. 4. Based on the above information, assessee`s case was re-opened u/s 147 of the Act by issue of notice u/s 148 of the Act, dated 20-01-2014 by the erstwhile ITO, Ward 3(4), Rajkot. After considering the submission of the assessee, the assessment was completed by making addition of Rs.1,15,000/- on account of deemed dividend within the meaning of Section 2(22)(e) of the Act. 5. Aggrieved by the above assessment order, the assessee preferred an appeal before Ld.CIT (A)-2, Rajkot, which was dismissed by the Ld.CIT(A). Subsequently, during the course of second appeal proceedings, the assessee filed before ITAT, Rajkot Bench, Rajkot, a paper book running from Page No.1 to 6 containing copies of ledger accounts for the period 01-04-2004 to 31-03-2010 and submitted that the assessee had not taken any loan from the company during the F.Y.2006-07. It was contended by the Ld. Counsel of the assessee that the loan was taken in the earlier years and in the year under consideration, part of it was re-paid. The plea that the loan was taken in the earlier years, was submitted by the assessee, only before the ITAT and not submitted before the authorities below. As the submission of the assessee is not very clear, the case was remanded to the assessing officer for verification by the ITAT, Rajkot Bench, vide ITA No.119/RJT/2017 dated 20-02-2019. 6. During the course of fresh assessment proceedings, the assessee was given sufficient opportunity of being heard and was required to produce documentary evidence / other related documents for taking loan to the tune of Rs.1,15,000/- from M/s Parth Laboratories Pvt Ltd. He was also required to furnish his books of accounts, financial statements and ledger accounts with respect to the said loan /advance account. In response, vide his letter dated 06- 09-2021, the assessee submitted that he had not maintained any books of Printed from counselvise.com ITA No. 222/RJT/2025 (AY:07-08) Prakashbhai D Thakkar Page | 4 account, as his source of income is only salary and savings bank interest. However, the assessee has furnished the copy of Paper Book running pages No.1 to 6, which was submitted before Honorable ITAT for verification. The Paper Book contains the ledger account of \"P.D.Thakkar Housing Loan Account\" in the books of M/s Parth Laboratories Pvt Ltd, for the F.Yrs. 2004-05 to 2006-07. As per the Paper Book, the \"P.D.Thakkar Housing Loan Account\" shows opening balance of Rs.1,45,000/- as on 01-04-2004. Subsequently, an amount of Rs.10,000/- was repaid by the assessee on 24-03-2005 and another amount of Rs.20,000/- was repaid on 27-03-2006. Hence, the opening balance as on 01-04-2006 is shown as Rs.1,15,000/- and not transaction was effected during the F.Y.2006-07 resulting in the same closing balance of Rs.1,15,000/- as on 31-03-2007. 7. During the course of assessment proceedings, a letter u/s 133(6) of the Act, dated 03-09-2021, was issued to M/s Parth Laboratories Pvt Ltd, calling for its confirmation of the loan transaction with the assessee with supportive evidences. The company was also required to furnish its balance sheet with all schedules and the list of loan creditors. Despite sufficient opportunity given, M/s Parth Laboratories Pvt Ltd, neither confirmed the submission of the assessee nor furnished the required details with supportive evidences. The assessee, has been asked to furnish copy of his bank statements but the assessee did not furnish the copy of his bank account statements for the F.Yrs. 2004-05 to 2006-07 to verify the genuineness of his claim. In the absence of any materials evidences, the claim of the assessee that the loan was availed in the earlier year prior to F.Y.2006-07, is not accepted. The assessing officer observed that by the Hon'ble ITAT, Rajkot Bench, in its order dated 20-02- 2019, there is no ambiguity that the provisions of section 2(22)(e) of the Act, will be applied, in the year in which the specified person has taken a loan from the company. The assessing officer, therefore, held that assessee failed to prove Printed from counselvise.com ITA No. 222/RJT/2025 (AY:07-08) Prakashbhai D Thakkar Page | 5 that the loan was not availed during F.Y.2006-07, the advance of Rs.1,15,000/-, which was received by the assessee, from M/s Parth Laboratories Pvt Ltd, in which he was a beneficial owner of shares holding 10.76% shares of the company, was added back to the income of the assessee for the assessment year 2007-08, on account of deemed dividend within the meaning of Section 2(22)(e) of the Income-tax Act, 1961. 8. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal, before Ld.CIT(A), who has confirmed the addition made by the Assessing Officer. The Learned CIT(A) noticed that assessee did not produce the bank statement before CIT(A) and assessee had reiterated its submission mostly on law. The ld.CIT(A) also, observed that it is very unlikely that the company, M/s Parth Laboratories Pvt Ltd, would not confirm the transaction in the ledger, when assessee is a director in the company. In view of these findings the addition was sustained by ld.CIT(A). 9. Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. 10. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Before me, Ms. Devina Patel, Ld. Counsel for the assessee, pleaded that bank statement of the assessee for the year under consideration was filed before the authorities below. Ledger accounts of assessee, from the books of M/s Parth Laboratory Pvt. Ltd. from financial years 1996-97 to 2006-07 and extract of audited accounts of M/s Parth Laboratory Pvt. Ltd. for the year ended on 31.03.1997, were produced by the assessee. From the perusal of above documents, it can be noted that the assessee had received loan from M/s Parth Laboratory Pvt. Ltd, in the financial year Printed from counselvise.com ITA No. 222/RJT/2025 (AY:07-08) Prakashbhai D Thakkar Page | 6 1996-97 and not during the year under consideration. Thus, since there was no loan taken by the assessee, during the year under consideration, question of treating Rs.1,15,000/-, as deemed dividend for the year does not arise. Further, since the loan was taken in financial year 1996-97, bank statement for the said year could not be ascertained but it is pertinent to note that the impugned loan has been shown in the audited accounts of M/s Parth Laboratory Pvt. Ltd in financial year 1996-97, hence its receipt in the financial year 1996-97, gets genuinely established, therefore, addition made by the assessing officer may be deleted. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity. I find that the bank statement of the assessee for the year under consideration and Ledger accounts of assessee from the books of M/s Parth Laboratory Pvt. Ltd. from FYs 1996-97 to 2006-07 (pages 4-12 of PB) and extract of audited accounts of M/s Parth Laboratory Pvt. Ltd. for the year ended on 31.03.1997, are sufficient document to examine such a small amount. Therefore, I find merit in the arguments advanced by the ld. Counsel for the assessee. The ld. Sr-DR, on the other hand, strongly relied upon the orders passed by the Assessing Officer as well as the Ld.CIT(A), and it was contended that the records furnished by the assessee do not clearly indicate, the genuineness of the transaction. I do not find merit in the arguments tendered by ld. Sr-DR for the revenue, as the assessee has submitted a plethora of documents, to prove that it is not a deemed dividend, u/s 2(22)(e) of the Act. The whole exercise is to be based on facts and it is the duty of the assessing officer to marshal all the facts and come to a logical conclusion about the issue of deemed dividend for the year under consideration, for that, I rely on the Judgment of Hon'ble Supreme Court in case of Sreelekha Bannerjee (491 ITR 122), wherein it was held that “ ..... before the department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it Printed from counselvise.com ITA No. 222/RJT/2025 (AY:07-08) Prakashbhai D Thakkar Page | 7 by putting to the assessee some information or evidence, which it has in possession ...”On perusal of the paper-book, I note that all these details of the loan/advance were available before the authorities below, by way of Bank statement, Ledger Copy, and explanations of the assessee. I note that assessing officer has not refuted or discredited these evidences and documents. The assessing officer does not mention why he is not accepting these evidences. On the contrary, the assessing officer has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. Based on this factual position, I allow the appeal of the assessee. 11. In the result, the assessee’s appeal is allowed. Order pronounced in the open court on 05/08/2025. Sd/- (Dr. A.L. SAINI) लेखा सदèय/ACCOUNTANT MEMBER राजकोट /Rajkot Ǒदनांक/ Date: 05/08/2025 DKP Outsourcing Sr.P.S आदेश कȧ ĤǓतͧलͪप अĒेͪषत/ Copy of the order forwarded to :  अपीलाथȸ/ The Assessee  Ĥ×यथȸ/ The Respondent  आयकर आयुÈत/ CIT  आयकर आयुÈत(अपील)/ The CIT(A)  ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, राजकोट/ DR, ITAT, RAJKOT  गाड[ फाईल/ Guard File By order/आदेश से, // True Copy // सहायक पंजीकार आयकर अपीलȣय अͬधकरण, राजकोट Printed from counselvise.com "