Amit Ahuja, Hyderabad v. ACIT,Central Circle-1,, Hyderabad

ITA 1296/HYD/2014 | 2008-2009
Pronouncement Date: 28-11-2014 | Result: Allowed

Appeal Details

RSA Number 129622514 RSA 2014
Assessee PAN AFEPA5674H
Bench Hyderabad
Appeal Number ITA 1296/HYD/2014
Duration Of Justice 4 month(s) 24 day(s)
Appellant Amit Ahuja, Hyderabad
Respondent ACIT,Central Circle-1,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 28-11-2014
Assessment Year 2008-2009
Appeal Filed On 04-07-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NOS. 1295 & 1296/HYD/2014 ASSESSMENT YEAR : 2008-09 AMIT AHUJA HYDERABAD PAN AFEPA 5674 H ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 1 HYD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. RAMA RAO REVENUE BY SHRI RAJAT MITRA DATE OF HEARING 19-11-2014 DATE OF PRONOUNCEMENT 28-11-2014 O R D E R PER SAKTIJIT DEY J.M.: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST A CONSOLIDATED ORDER OF COMMISSIONER OF INCOME-TAX(A) -I HYDERABAD FOR THE ASSESSMENT YEARS 2004-05 AND 2008-09. ITA NO. 1295/HYD/2014 2. THE ONLY ISSUE IN THE AFORESAID APPEAL IS IN RES PECT OF ADDITION OF AN AMOUNT OF RS. 1 72 959 AS DEEMED DIV IDEND U/S 2(22)(E) OF THE ACT. 3. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE ASSESSEE AN INDIVIDUAL DERIVES INCOME FROM REAL ESTATE BUSIN ESS. FOR THE AY 2 ITA NOS. 1295 & 1296/HYD/2014 AMIT AHUJA UNDER CONSIDERATION ASSESSEE FILED HIS RETURN OF I NCOME ON 08/09/2004 DECLARING TOTAL INCOME OF RS. 2 47 850. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF ASSESSEE ON 17/09/08. AS A CON SEQUENCE OF SEARCH AND SEIZURE OPERATION A NOTICE U/S 153A OF THE ACT WAS ISSUED TO ASSESSEE ON 28/07/09 CALLING FOR RETURN O F INCOME. IN RESPONSE TO THE SAID NOTICE ASSESSEE FILED A LETTE R DATED 09/09/12 REQUESTING AO TO TREAT THE RETURN FILED ORIGINALLY AS RETURN IN PURSUANCE TO NOTICE U/S 153A OF THE ACT. DURING THE ASSESSMENT PROCEEDING AO NOTICED THAT ASSESSEE HAS SHOWN OUTS TANDING LIABILITY OF RS. 2 59 000 FROM M/S VETERAN PROPERTI ES PVT. LTD.. ON FURTHER EXAMINATION AO FOUND THAT ASSESSEE IS NOT ONLY A DIRECTOR IN M/S VETERAN PROPERTIES PVT. LTD. BUT IS ALSO H OLDING MORE THAN 10% SHARES. AO ALSO NOTED THAT THE COMPANY WAS HAVI NG ACCUMULATED PROFIT DURING THE YEAR. THEREFORE APPL YING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AO TREAT ED THE LOAN ADVANCED BY M/S VETERAN PROPERTIES PVT. LTD. AS DEE MED DIVIDEND AT THE HANDS OF ASSESSEE. ACCORDINGLY HE MADE ADDI TION OF RS. 2 59 000. BEING AGGRIEVED OF THE ADDITION SO MADE ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 4. THOUGH LD. CIT(A) AGREED WITH AO THAT THE LOAN R ECEIVED FROM THE COMPANY SHOULD BE TREATED AS DEEMED DIVIDEND AT THE HANDS OF ASSESSEE BUT HE DIRECTED AO TO RESTRICT THE ADDIT ION TO THE EXTENT OF ACCUMULATED PROFIT OF THE COMPANY AT RS. 1 72 95 9. BEING AGGRIEVED OF THE AFORESAID DECISION OF LD. CIT(A) ASSESSEE IS BEFORE US. 5. THE LEARNED AR SUBMITTED BEFORE US THAT THOUGH T HERE IS NO DISPUTE TO THE FACT THAT ASSESSEE IS DIRECTOR OF TH E COMPANY FROM WHICH ADVANCE WAS RECEIVED AND WAS HOLDING MORE THA N 10% 3 ITA NOS. 1295 & 1296/HYD/2014 AMIT AHUJA SHARE BUT OTHER CONDITION OF SECTION 2(22)(E) REL ATING TO ACCUMULATED PROFIT IS NOT SATISFIED. LD. AR REFERRI NG TO THE P&L ACCOUNT OF THE COMPANY FOR THE IMPUGNED AY SUBMITTE D THAT IT IS NOT A REAL PROFIT BUT A NOTIONAL PROFIT COMPUTED ON WORK-IN-PROGRESS. THEREFORE ACTUALLY THERE IS NO ACCUMULATED PROFIT AVAILABLE WITH THE COMPANY FOR DISTRIBUTION. AGAIN REFERRING TO BALANC E SHEET AS AT 31/03/04 A COPY OF WHICH IS AT PAGE 9 OF PAPER BOO K LD. AR SUBMITTED THAT RESERVES AND SURPLUS IS ONLY RS. 98 907.67 WHICH SHOWS THAT ACTUALLY THERE IS NO REAL PROFIT TO THE SAID COMPANY. THUS IT WAS SUBMITTED THAT AS IT IS ONLY A NOTIONA L PROFIT AND THERE IS NO ACCUMULATED PROFIT FOR THE COMPANY LOAN RECE IVED BY ASSESSEE CANNOT BE TREATED AS DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT. 6. THE LEARNED DR ON THE OTHER HAND SUPPORTING THE ORDERS OF LD. CIT(A) AND AO SUBMITTED THAT WHEN THE COMPANY HAS D ECLARED PROFIT AND OTHER CONDITIONS OF SECTION 2(22)(E) ARE ALSO SATISFIED THE AMOUNT RECEIVED BY ASSESSEE HAS BEEN CORRECTLY TREA TED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WE LL AS OTHER MATERIALS ON RECORD. UNDISPUTEDLY ASSESSEE HAS RE CEIVED LOAN OF RS. 2 59 000 FROM M/S VETERAN PROPERTIES PVT. LTD.. IT IS ALSO NOT DISPUTED THAT ASSESSEE IS A DIRECTOR IN THE SAID CO MPANY AND HOLDS MORE THAN 10% OF THE SHARES. IT IS ALSO NOT IN A DI SPUTE THAT THE COMPANY M/S VETERAN PROPERTIES PVT. LTD. FROM WHICH ASSESSEE RECEIVED LOAN IS A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. IT IS ALSO A FACT ON RECORD THAT COMPA NY HAS SHOWN PROFIT DURING THE YEAR. IT IS THE CLAIM OF ASSESSEE THAT PROFIT SHOWN BY THE COMPANY IS NOTIONAL AND NOT REAL HENCE PRO VISIONS OF 4 ITA NOS. 1295 & 1296/HYD/2014 AMIT AHUJA SECTION 2(22(E) IS NOT APPLICABLE. HOWEVER WE ARE UNABLE TO ACCEPT ASSESSEES CLAIM. ON A PERUSAL OF THE P&L A/C FOR A Y 2004-05 IT IS SEEN THAT ASSESSEE HAS SHOWN PROFIT OF RS. 1 79 959 .11 BEFORE EXPENDITURE AND TAX. IT IS ALSO EVIDENT AFTER CLAIM ING DEDUCTION TOWARDS EXPENDITURE PROVISION FOR INCOME-TAX ETC. NET SURPLUS AVAILABLE TO THE ASSESSEE IS RS. 98 907.61. THEREFO RE COMPANY HAS ACCUMULATED PROFIT OF RS. 98 907.61. THUS ALL THE CONDITIONS OF SECTION 2(22)(E) ARE SATISFIED. THERE IS NO SUCH DI STINCTION IN THE PROVISIONS BETWEEN REAL PROFITS AND NOTIONAL PROFIT S AS SOUGHT TO BE MADE OUT BY LD. AR. IN AFORESAID VIEW OF THE MATTER WE AGREE WITH THE LD. CIT(A) AND AO THAT THE LOAN TO THE EXTENT O F ACCUMULATED PROFIT HAS TO BE TREATED AS DEEMED DIVIDEND AT THE HANDS OF THE ASSESSEE U/S 2(22)(E) OF THE ACT. HOWEVER ACCUMULA TED PROFIT OF THE COMPANY AS TRANSFERRED TO RESERVES AND SURPLUS BEING RS. 98 907.61 ADDITION U/S 2(22)(E) SHOULD BE RESTRICTE D TO THAT AMOUNT IN STEAD OF RS. 1 72 959 AS DIRECTED BY LD. CIT(A). 7.1 ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NO. 1296/HYD/14 8. THE SOLITARY ISSUE IN THIS APPEAL IS WITH REGAR D TO ADDITION OF AN AMOUNT OF RS. 4 69 500 AS DEEMED DIVIDEND U/S 2( 22)(E) OF THE ACT. 9. IN THE IMPUGNED AY ALSO IN COURSE OF ASSESSMENT PROCEEDING AO NOTICED THAT ASSESSEE HAS SHOWN AN O UTSTANDING LIABILITY OF RS. 4 69 500 FROM M/S VETERAN PROPERTI ES PVT. LTD. WHEREIN ASSESSEE IS A DIRECTOR AND IS ALSO HOLDING MORE THAN 10% SHARE. AO OBSERVING THAT THE COMPANY WAS HAVING ACC UMULATED PROFITS TREATED THE AMOUNT OF RS. 4 69 500 AS DEEM ED DIVIDEND AT 5 ITA NOS. 1295 & 1296/HYD/2014 AMIT AHUJA THE HANDS OF ASSESSEE AND MADE ADDITION. BEING AGGR IEVED OF THE ADDITION MADE ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A) ASSESSEE SUBMITTED THAT AMOUNT OF RS. 4 69 500 IS NEITHER LOAN NOR ADVANCE BUT ACTUALLY REPRESENTS TH E OUTSTANDING RECEIVABLE BY THE COMPANY TOWARDS SALE OF A CAR TO ASSESSEE. LD. CIT(A) ON CONSIDERING SUBMISSIONS OF ASSESSEE HELD AS UNDER: 6.4 THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONS IDERED AND IT IS NOTED FROM THE LEDGER ACCOUNT (VEHICLES SOLD) THAT SCODA LAURA HAS BEEN SOLD TO THE APPELLANT FOR RS. 12 50 000 FOR WHICH THE APPELLANT PAID VIDE CHEQUES AMOUNTS RS. 1 40 000 RS. 4 50 000 AND RS. 2 00 000 TOTALLING R S. 7 90 000 DURING THE YEAR UNDER CONSIDERATION AND BA LANCE AMOUNT OF RS. 4 60 000 HAS BEEN SHOWN AS PAID VIDE CHEQUE NO. 706823 DT. 17/07/2008 AND CHEQUE NO. 706851 DT. 05/12/2008 DRAWN ON SYNDICATE BANK OF AMOUNTS RS. 1 60 000 AND RS. 3 00 000 RESPECTIVELY. HOWEVER TH E APPELLANT DID NOT FILE ANY DOCUMENTARY EVIDENCES IN SUPPORT OF THE TRANSFER OF THE VEHICLE FROM THE COMPANY TO THE APPELLANT. IF THE CONTENTION OF THE APPELLANT THAT THE AMOUNT OUTSTANDING REPRESENTED THE AMOUNT PAYABLE FOR THE PURCHASE OF THE VEHICLE FROM THE COMPANY IS CORRECT THEN TH E PROVISIONS OF SECTION 2(22)(E) CANNOT BE APPLIED BE CAUSE IT IS A COMMERCIAL TRANSACTION AND CANNOT BE BROUGHT WITH IN THE DEFINITION OF DEEMED DIVIDEND U/S 2(22)(E) OF IT AT . THEREFORE THE AO IS DIRECTED TO VERIFY THE REGISTRATION DOCUM ENTS AND THE BANK STATEMENT OF THE APPELLANT AND IF THERE IS A SALE TRANSACTION BETWEEN THE COMPANY AND THE APPELLANT A ND IF THE SAID PAYMENTS ARE REFLECTED IN THE BANK STATEMENT O F THE APPELLANT TO DELETE THE ADDITION MADE. 10. THE LEARNED AR REITERATING THE SUBMISSIONS MADE BEFORE THE FIRST APPELLATE AUTHORITY SUBMITTED THAT THE AMOUNT OF RS. 4 69 500 DOES NOT REPRESENT ANY LOAN OR ADVANCE. IT WAS SUBM ITTED THAT ASSESSEE PURCHASED A SKODA LAURA CAR FROM M/S VETER AN PROPERTIES PVT. LTD. FOR A CONSIDERATION OF RS. 12 50 000 OUT OF WHICH ASSESSEE HAD MADE PAYMENT OF RS. 7 90 000 DURING TH E YEAR UNDER CONSIDERATION AND THE BALANCE AMOUNT OF RS. 4 65 90 0 WAS OUTSTANDING AS ON 31/03/08. IT WAS SUBMITTED BY LD. AR THAT SINCE IT IS PURELY A BUSINESS TRANSACTION AND NOT IN THE NAT URE OF LOAN OR 6 ITA NOS. 1295 & 1296/HYD/2014 AMIT AHUJA ADVANCE PROVISIONS OF SECTION 2(22)(E) WILL NOT AP PLY. TO SUBSTANTIATE THE FACT THAT THE OUTSTANDING LIABILIT Y SHOWN RELATES TO PURCHASE/SALE TRANSACTION LD. AR DREW OUR ATTENTIO N TO THE LEDGER ACCOUNT COPY IN THE BOOKS OF M/S VETERAN PROPERTIES PVT. LTD. SHOWING SALE OF CAR TO ASSESSEE. HE ALSO REFERRED T O BALANCE SHEET OF ASSESSEE AS ON 31/03/08 WHEREIN PURCHASE VALUE O F THE CAR AND DEPRECIATION CLAIM ON IT WAS MENTIONED. THUS IT WA S SUBMITTED BY LD. AR AS IT IS A PURELY BUSINESS TRANSACTION AND N OT IN THE NATURE OF LOAN OR ADVANCE THE OUTSTANDING LIABILITY CANNOT B E TREATED AS LOAN OR ADVANCE. IN SUPPORT OF SUCH CONTENTION HE RELIE D ON THE FOLLOWING DECISIONS: 1. CIT VS. RAJ KUMAR 318 ITR 462 (DEL.) 2. CIT VS. CREATIVE DYING & PRINTING PVT. LTD. 318 ITR 476 (DEL.) 3. SMT. NISSAN CHAWLA VS. CIT 28 SOT 503 11. THE LEARNED DR ON THE OTHER HAND SUBMITTED TH AT AS LD. CIT(A) HAS SIMPLY DIRECTED THE AO TO VERIFY ASSESSE ES CLAIM THERE SHOULD NOT BE ANY GRIEVANCE ON THE PART OF ASSESSEE . 12. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WE LL AS OTHER MATERIAL ON RECORD. AS IT APPEARS FROM THE ORDER OF LD. CIT(A) THOUGH IN PRINCIPLE SHE HAS ACCEPTED THE FACT THAT ASSESSEE PURCHASED THE VEHICLE FROM THE COMPANY FOR A CONSID ERATION OF RS. 12 50 000 OUT OF WHICH AN AMOUNT OF RS. 7 90 000 W AS PAID DURING THE YEAR UNDER CONSIDERATION AND THE BALANCE AMOUNT OF RS. 4 69 500 HAS BEEN PAID IN THE SUBSEQUENT FY. HOWEVE R SHE OBSERVED THAT ASSESSEE DID NOT FILE ANY DOCUMENTARY EVIDENCE TO SHOW THAT THE VEHICLE WAS TRANSFERRED FROM THE COMP ANY TO ASSESSEE. THEREFORE LD. CIT(A) DIRECTED AO TO VERI FY THE FACT WHETHER THE OUTSTANDING LIABILITY SHOWN REPRESENT T HE AMOUNT PAYABLE FOR PURCHASE OF VEHICLE AND IF IT IS FOUND TO BE SO THEN NOT 7 ITA NOS. 1295 & 1296/HYD/2014 AMIT AHUJA TO TREAT IT AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. IN THIS CONTEXT SHE DIRECTED AO TO VERIFY REGISTRATION DOC UMENTS AND BANK STATEMENTS OF ASSESSEE TO ASCERTAIN WHETHER THE SAI D TRANSACTION HAS ACTUALLY TAKEN PLACE AND IF ASSESSEES CLAIM IS FOUND TO BE CORRECT THEN DELETE THE ADDITION MADE. HAVING PER USED THE FINDINGS OF LD. CIT(A) WE DO NOT FIND ANY SERIOUS INFIRMITY IN THE ORDER OF LD. CIT(A). ACCORDINGLY WE DIRECT THE AO TO VERIFY THE FACT AS TO WHETHER ASSESSEE HAS ACTUALLY PURCHASED THE C AR FROM THE COMPANY AS CLAIMED AND WHETHER OUTSTANDING LIABILIT Y SHOWN REPRESENTS THE OUTSTANDING SALE CONSIDERATION TO BE PAID TO COMPANY TOWARDS PURCHASE OF CAR. IF ASSESSEES CLAI M IS FOUND TO BE CORRECT NO ADDITION CAN BE MADE U/S 2(22)(E) OF THE ACT. 13. IN THE RESULT APPEAL IN ITA NO. 1295/H/14 IS P ARTLY ALLOWED AND APPEAL IN ITA NO. 1296/HYD/14 IS ALLOWED FOR ST ATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28/11/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD DATED: 28 TH NOVEMBER 2014 KV COPY TO:- 1) AMIT AHUJA C/O SHRI S. RAMA RAO ADVOCATE FLA T NO. 102 SHRIYAS ELEGANCE H.NO. 3-6-643 ST. NO. 9 HI MAYATNAGAR HYDERABAD 500 029 2) ACIT CENTRAL CIRCLE 1 AAYARKAR BHAVAN HYDE RABAD. 3) CIT(A)-I HYDERABAD 4) CIT(CENTRAL) HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE I.T.A.T. HYDER ABAD.