The DCIT, Circle-1(2),, Baroda v. Hingorani Air Products Pvt.Ltd.,, Baroda

ITA 1672/AHD/2010 | 2003-2004
Pronouncement Date: 31-08-2010 | Result: Dismissed

Appeal Details

RSA Number 167220514 RSA 2010
Assessee PAN AAACH5803M
Bench Ahmedabad
Appeal Number ITA 1672/AHD/2010
Duration Of Justice 3 month(s) 13 day(s)
Appellant The DCIT, Circle-1(2),, Baroda
Respondent Hingorani Air Products Pvt.Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 31-08-2010
Assessment Year 2003-2004
Appeal Filed On 18-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D. C. AGRAWAL AM) ITA NO.1672/AHD/2010 A.Y.: 2003-04 THE D. C. I. T. CIRCLE-1(2) AAYAKAR BHAVAN RACE COURSE CIRCLE BARODA 390 007 VS M/S. HINGORANI AIR PRODUCTS PVT. LTD. SATYAM APARTMENT OPP- VUDA OFFICE FATEHGUNJ BARODA PA NO. AAACH 5803 M (APPELLANT) (RESPONDENT) C. O. NO.197/AHD/2010 (IN ITA NO.1672/AHD/2010 A.Y.: 2003-04) M/S. HINGORANI AIR PRODUCTS PVT. LTD. SATYAM APARTMENT OPP- VUDA OFFICE FATEHGUNJ BARODA VS THE D. C. I. T. CIRCLE-1(2) AAYAKAR BHAVAN RACE COURSE CIRCLE BARODA 390 007 PA NO. AAACH 5803 M (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY SHRI BHUBNESH KULSHRESTHA DR ASSESSEE BY SHRI NISHANT VYAS AR O R D E R PER BHAVNESH BENCH: THE DEPARTMENTAL APPEAL AND THE CROSS OBJECTION OF THE ASSESSEE ARE DIRECTED AGAINS T ORDER OF THE LEARNED CIT(A)-V BARODA DATED 23-03-2010 FOR ASSE SSMENT YEAR 2003-04. ITA NO.1672/AHD/2010 AND C.O. NO.197/AHD/2010 DCIT CIR-1(2) BARODA VS M/S. HINGORANI AIR PRODUC TS PVT. LTD. 2 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH T HE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL ON RECORD POINTED OUT BY THE PARTIES. 3. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PR ESS GROUND NO.1 OF THE CROSS OBJECTION CHALLENGING THE REOPENI NG OF THE ASSESSMENT U/S 147 OF THE IT ACT. ACCORDINGLY GROU ND NO.1 OF THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED BEING NOT PRESSED. 4. THE DEPARTMENTAL APPEAL IS FILED CHALLENGING THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF RS.6 06 396/- MADE ON ACCOUNT OF DEEMED DIVIDEND U/S 2 (22) (E) OF THE IT ACT ON INTER- CORPORATE DEPOSITS RECEIVED IN THE ASSESSEE COMPANY WITHOUT APPRECIATING THE DEEMING PROVISIONS OF SECTION 2 (2 2) (E) OF THE IT ACT. 5. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO M ENTIONED THAT THE DIRECTORS OF THE COMPANY NAMELY SHRI KISHAN HINGORA NI AND SHRI SHANKAR HINGORANI ARE SUBSTANTIAL SHAREHOLDERS OF T HE ASSESSEE COMPANY EACH HOLDING IN EXCESS OF 10% OF THE SHARES AND THEY ARE ALSO SUBSTANTIAL SHAREHOLDERS IN ASSOCIATE COMPANY M/S. G. S. GASES PVT. LTD. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS IT IS NOTICED THAT THE AMOUNT HAD BEEN ADVANCED BY M/S. G. S. GAS ES PVT. LTD. TO THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER APPE AL WHICH WAS FOUND FROM THE COPY OF THE ACCOUNT OF M/S. G. S. GA SES PVT. LTD. IN THE BOOKS OF THE ASSESSEE COMPANY CLOSING BALANCE W AS REFLECTED IN RES RS.6 06 396/-. IT WAS SUBMITTED BEFORE THE AO THAT THE ASSESSEE HAD BUSINESS RELATION AND TRANSACTIONS WITH THE ASS OCIATE COMPANY ITA NO.1672/AHD/2010 AND C.O. NO.197/AHD/2010 DCIT CIR-1(2) BARODA VS M/S. HINGORANI AIR PRODUC TS PVT. LTD. 3 FOR PAST MANY YEARS AND THE ADVANCES IS OUT OF BUSI NESS NEEDS. THE AO CITING THE PROVISIONS OF SECTION 2 (22) (E) OF T HE IT ACT THE LOAN WAS TREATED AS DEEMED DIVIDEND BY THE AO. IT WAS CO NTENDED BEFORE THE LEARNED CIT(A) THAT DEEMED DIVIDEND CAN BE ASSE SSED ONLY IN THE HANDS OF THE PERSONS WHO IS SHAREHOLDER IN THE LEND ER COMPANY AND NOT IN THE HANDS OF THE BORROWING COMPANY IN WHICH SUCH SHAREHOLDER IS A MEMBER. THE SPECIAL BENCH DECISION IN THE CASE OF CIT VS BHAUMIK COLOUR PVT. LTD. 118 ITD 1 (MUM) (SB) WAS R ELIED UPON. IT WAS IMPRESSED THAT THE ASSESSEE COMPANY DOES NOT HO LD SHARES IN THE ASSOCIATE CONCERN AND THUS THE ADDITION U/S 2 ( 22) E) IS NOT WARRANTED. 6. THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ORDER OF THE ITAT SPECIAL BENCH IN THE CASE OF BHAUMIK COLOUR PVT. LTD. (SUPRA) DELETED THE ADDITION AND ALLOWED THE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 6.3 ARE REPRODUCED A S UNDER: 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT ORDER. IN THE RECENT SPECIAL BENCH DECIS ION IN THE CASE OF ACIT VS BHAUMIK COLOUR PVT. LTD. 118 ITD 1 MUMBAI IT IS HELD THAT THE DEEMED DIVIDEND CAN O NLY BE ASSESSED IN THE HANDS OF THE PERSON WHO IS SHARE HO LDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF PERS ON OTHER THAN A SHARE HOLDER. THE DECISION IS ALSO DIS CUSSED THE VARIOUS LIMBS OF SECTION 2 (2) (E) AND ALSO THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS HOTEL HILLTOP 217 CTR 527 (RAJ). CONSIDERING THAT T 4HE FACTS OF PRESENT CASE ARE SIMILAR TO THOSE BEFORE S PECIAL BENCH THE ADDITION OF RS.6 06 396/- AS DEEMED DIVI DEND U/S. 2 (22) (E) IS DIRECTED TO BE DELETED. THE DEEM ED DIVIDEND CAN HOWEVER BE TAXED IN THE HANDS OF THE ITA NO.1672/AHD/2010 AND C.O. NO.197/AHD/2010 DCIT CIR-1(2) BARODA VS M/S. HINGORANI AIR PRODUC TS PVT. LTD. 4 COMMON SHARE HOLDERS I.E. MR. KISHAN HINGORANI AND SHRI SHANKAR HINGORANI AND T HE AO MAY APPRAISE THE CONCERNED AO FOR INITIATING NECESSARY ACTION. AS OF NOW GROUND NO.2 IS ALLOWED. 7. CONSIDERING THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE LEARNED DR RELIED UPON THE PROVISIONS OF SECTION 2 (22) (E) OF THE IT ACT BUT COULD NOT DISPUTE THE FINDINGS OF THE LEARNED CIT(A ) THAT THE ASSESSEE DOES NOT HOLD SHARE IN THE ASSOCIATE CONCERN. THE A O CONSIDERED THE ISSUE OF DEEMED DIVIDEND AGAINST THE ASSESSEE IN TH E LIGHT OF THE FINDINGS GIVEN IN THE ASSESSMENT YEAR 2004-05 IN WH ICH THE ASSESSEE COMPANY HAD RECEIVED MONEY SIMILARLY FROM G. S. GAS ES PVT. LTD. OF RS.16 00 000/- ON VARIOUS DATES AND WAS TREATED AS DEEMED DIVIDEND U/S 2 (22) (E) OF THE IT ACT. THE AO ACCORDINGLY TR EATED THE SAME AMOUNT FROM THE SAME ASSOCIATE CONCERN AS DEEMED DI VIDEND. THE LEARNED COUNSEL FOR THE ASSESSEE FILED COPY OF THE ORDER OF ITAT AHMEDABAD D BENCH IN THE CASE OF THE SAME ASSESSEE FOR ASSESSMENT YEAR 2004-05 IN ITA NO.146/AHD/2008 DATE D 02-07-2010 IN WHICH ON THE IDENTICAL ISSUE THE TRIBUNAL ALLOWE D THE APPEAL OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE SPECIAL B ENCH IN THE CASE OF BHAUMIK COLOR PVT. LTD. (SUPRA). THE FINDINGS OF THE TRIBUNAL IN PARA 21 READ AS UNDER: 21. IN THE PRESENT CASE ALSO THE ASSESSEE COMPANY IS NOT THE SHARE HOLDER IN THE LENDER COMPA NY. THEREFORE FOLLOWING THE ABOVE DECISIONS OF THE TRI BUNAL THE LOAN/ADVANCES GIVEN BY THE LENDER COMPANY CANNO T BE TAXED AS DEEMED DIVIDEND IN THE HANDS OF ASSESSE E COMPANY AS IT IS NOT A SHARE HOLDER IN IT. WE ACCOR DINGLY DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. ITA NO.1672/AHD/2010 AND C.O. NO.197/AHD/2010 DCIT CIR-1(2) BARODA VS M/S. HINGORANI AIR PRODUC TS PVT. LTD. 5 8. SINCE THE FACTS ARE IDENTICAL IN THE ASSESSMENT YEAR UNDER APPEAL AS HAVE ALREADY BEEN CONSIDERED IN THE SUBSE QUENT ASSESSMENT YEAR 2004-05 ABOVE THEREFORE BY FOLLOW ING THE SAME ORDER IN THE CASE OF THE ASSESSEE WE DO NOT FIND A NY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). IN THE RESULT THE DEPARTMENTAL APPEAL ON THIS GROUND IS DISMISSED. 9. IN THE RESULT THE DEPARTMENTAL APPEAL IS DISMIS SED. 10. IN THE CROSS OBJECTION OF THE ASSESSEE GROUND N O.1 IS ALREADY DISMISSED BEING NOT PRESSED. ON GROUNDS NO. 2 AND 3 THE ASSESSEE CHALLENGED THE FINDINGS OF THE LEARNED CIT(A) IN HO LDING THAT THE DEEMED DIVIDEND CAN BE TAXED IN THE HANDS OF THE DI RECTORS DESPITE NO ADVANCE HAS BEEN GIVEN TO THE DIRECTORS AND NO P ROCEEDING IS PENDING AGAINST THEM BEFORE THE LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO NOTICE H AS BEEN GIVEN TO THE DIRECTORS BEFORE ISSUE OF SUCH DIRECTION AND TH AT THE LEARNED CIT(A) HAS TRAVELED BEYOND HIS JURISDICTION. HE HAS RELIED UPON THE DECISION OF THE HONBLE PATNA HIGH COURT IN THE CA SE OF GAURI SHANKER CHHOUDHARY VS ADDL. CIT 234 ITR 865. ON THE OTHER HAND THE DR SUBMITTED THAT THE DIRECTIONS HAVE NOT BEEN DISPUTED IN THE CASE OF THE DIRECTORS AND THAT THE CROSS OBJECTION IS FILED BY THE ASSESSEE COMPANY THEREFORE THE ASSESSEE COMPANY C ANNOT CHALLENGE THE OBSERVATIONS OF THE LEARNED CIT(A) IN THE PRESENT FORM. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS RAIS ED FRIVOLOUS GROUNDS OF CROSS OBJECTIONS THEREFORE THE SAME AR E LIABLE TO BE DISMISSED WITH COST. THE LEARNED COUNSEL FOR THE AS SESSEE FAIRLY ITA NO.1672/AHD/2010 AND C.O. NO.197/AHD/2010 DCIT CIR-1(2) BARODA VS M/S. HINGORANI AIR PRODUC TS PVT. LTD. 6 CONCEDED THAT THE ASSESSEE COMPANY HAS NO GRIEVANCE IN RAISING THE ABOVE GROUNDS NO.2 AND 3 IN THE CROSS OBJECTION. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIALS AVAILABLE ON RECORD. IT IS ADMITTED FACT THAT THE L EARNED CIT(A) WHILE DELETING THE ADDITION OF DEEMED DIVIDEND AGAINST TH E ASSESSEE COMPANY AS NOTED ABOVE IN PARA 6.3 FURTHER OBSERVED THAT DEEMED DIVIDEND CAN HOWEVER BE TAXED IN THE HANDS OF THE COMMON SHAREHOLDERS I.E. SHRI KISHAN HINGORANI AND SHRI SH ANKER HINGORANI AND THE AO MAY APPRAISE THE CONCERN AO FOR INITIATI NG NECESSARY ACTION. THEREFORE THE ABOVE OBSERVATION OF THE LEA RNED CIT(A) ARE NOT THE OBSERVATION AGAINST THE ASSESSEE COMPANY. T HE LEARNED COUNSEL FOR THE ASSESSEE ALSO ADMITTED BEFORE US TH AT THE ASSESSEE HAS NO GRIEVANCE AGAINST THE AFORESAID OBSERVATIONS OF THE LEARNED CIT(A). SECTION 253 (4) OF THE IT ACT PROVIDES FOR FILING OF CROSS OBJECTION ON RECEIPT OF NOTICE IN THE DEPARTMENTAL APPEAL IF NO SEPARATE APPEAL HAS BEEN PREFERRED. SUCH CROSS OBJE CTION WOULD BE TREATED AS APPEAL PRESENTED IN ACCORDANCE WITH THE LAW. THE CROSS OBJECTION IS THEREFORE TREATED AS CROSS APPEAL IN THE MATTER. SECTION 253 (1) OF THE IT ACT PROVIDES THAT THE ASSESSEE AG GRIEVED BY THE ANY OF ORDERS MAY APPEAL TO THE TRIBUNAL AGAINST THE OR DER OF THE LEARNED CIT(A) OR CONCERNED AUTHORITY AS PROVIDED. THEREFOR E THE ASSESSEE BEFORE FILING THE CROSS OBJECTION SHOULD HAVE BEEN AGGRIEVED AGAINST THE FINDINGS OF THE APPELLATE AUTHORITY. IN THIS CA SE THE LEARNED CIT(A) HAS NOT MADE ANY FINDING OR OBSERVATIONS AGAINST TH E ASSESSEE COMPANY. THEREFORE THE ASSESSEE CANNOT BE TREATED TO HAVE ANY GRIEVANCE AGAINST THE ORDER OF THE LEARNED CIT(A). ITA NO.1672/AHD/2010 AND C.O. NO.197/AHD/2010 DCIT CIR-1(2) BARODA VS M/S. HINGORANI AIR PRODUC TS PVT. LTD. 7 THEREFORE THE ABOVE GROUNDS OF THE CROSS OBJECTION FILED BY THE ASSESSEE WOULD NOT BE MAINTAINABLE. MOREOVER THE L EARNED CIT(A) CONSIDERING THE PECULIAR FACTS OF THE CASE IN THE L IGHT OF THE PROVISIONS OF SECTION 2 (22) (E) OF THE IT ACT MERELY OBSERVE D THAT THE AO MAY APPRAISE THIS FACT TO THE CONCERNED AO FOR INITIATI NG NECESSARY ACTION AGAINST COMMON SHAREHOLDERS. THE ASSESSEE IN THE PR ESENT GROUND OF THE CROSS OBJECTION TRIED TO SAVE ITS DIRECTOR F ROM THE POSSIBLE ACTION IN ACCORDANCE WITH LAW WHICH THE ASSESSEE CA NNOT DO SO IN THE PRESENT FORM. THE ASSESSEE HAS NO LOCUSTANDI TO RAI SE THE ISSUE CONCERNING ITS DIRECTORS IN THE CROSS OBJECTION AS FILED BY THE ASSESSEE. THEREFORE THE ASSESSEE COMPANY SHALL HAV E TO CONFINE ITSELF TO THE GRIEVANCE IN IT AGAINST THE ORDER OF THE LEARNED CIT(A). THE ASSESSEE THEREFORE TRAVELED BEYOND THE MATTER IN ISSUE WHICH COULD NOT BE RAISED IN THE CROSS APPEAL. THE LEARNE D COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION IN THE CASE OF GA URI SHANKER CHOUDHARY (SUPRA) IN WHICH THE CASE WAS BEFORE THE SETTLEMENT COMMISSION IN WHICH THE ASSESSEE CONCERN WAS HUF. I N THE PRECEDING BEFORE THE SETTLEMENT COMMISSION IT WAS FOUND THAT THERE WAS COMPLETE PARTITION OF HUF AND THAT A CONCESSION WAS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT SOME INCO ME IS TAXABLE AS INCOME OF THE AOP. SINCE THE AOP WAS NOT BEFORE THE SETTLEMENT COMMISSION BUT HAS EARNED SUBSTANTIAL INCOME DURING THE RELEVANT SIX YEARS THE AO HAVING JURISDICTION WAS DIRECTED TO TAKE ACTION AS PER LAW TO BRING THE INCOME TO TAX. A NOTICE U/S 14 8 OF THE IT ACT WAS ISSUED TO THE PETITIONER WHO WAS A MEMBER OF THE HU F SEEKING TO REOPEN THE ASSESSMENT FOR THE ASSESSMENT YEAR 1981- 82. WRIT PETITION WAS FILED IN QUASHING THE NOTICE U/S 148 O F THE IT ACT. IN THE ITA NO.1672/AHD/2010 AND C.O. NO.197/AHD/2010 DCIT CIR-1(2) BARODA VS M/S. HINGORANI AIR PRODUC TS PVT. LTD. 8 BACK GROUND OF THIS FACT IT WAS HELD THAT NO REASO NS FOR 148 HAD BEEN SEPARATELY RECORDED IN THE FILE AND THAT THE NOTICE U/S 148 WAS EX- FACIE BARRED BY LIMITATION AND THAT SECTION 150 OF THE IT ACT WOULD NOT APPLY BECAUSE THE PROCEEDINGS WERE BARRED BY TIME. ACCORDINGLY NOTICE U/S 148 OF THE IT ACT WAS QUASHED. THE ABOVE JUDGMENT WOULD NOT APPLY IN THE CASE OF THE ASSESSEE AND IS CLEARL Y DISTINGUISHABLE ON FACTS. THE PETITIONER WHOSE RIGHTS WERE AFFECTED CH ALLENGED THE INITIATION OF PROCEEDINGS U/S 148 OF THE IT ACT IN THE MATTER AND THE HONBLE HIGH COURT QUASHED THE SAME. IN THE PRESENT PROCEEDINGS IF ANY RIGHT OF PERSON HAS BEEN AFFECTED ARE THE COMMO N SHAREHOLDERS MR. KISHAN HINGORANI AND MR. SHANKER HINGORANI WHO HAVE NOT PREFERRED ANY APPEAL IN THE MATTER. THE ASSESSEE CO MPANY WHO HAS NO CONCERN WITH THE OBSERVATIONS OF THE LEARNED CI T(A) HAVE UNSUCCESSFULLY CHALLENGED THE OBSERVATIONS OF THE L EARNED CIT(A) DESPITE HAVING NO GRIEVANCE OR LOCUSTANDI IN THE MA TTER. WE ACCORDINGLY HOLD THAT BOTH THE GROUNDS OF THE CROS S OBJECTION ARE NOT MAINTAINABLE IN THE PRESENT FORM AND SHALL HAVE TO BE DISMISSED AS SUCH. WE ACCORDINGLY DISMISS BOTH THE GROUNDS OF TH E CROSS OBJECTION. HOWEVER THE PARTIES ARE LEFT TO BEAR TH EIR OWN COST. 12. NO OTHER POINT IS ARGUED OR PRESSED. 13. IN THE RESULT THE CROSS OBJECTION OF THE ASSES SEE IS DISMISSED. ITA NO.1672/AHD/2010 AND C.O. NO.197/AHD/2010 DCIT CIR-1(2) BARODA VS M/S. HINGORANI AIR PRODUC TS PVT. LTD. 9 14. IN THE RESULT THE DEPARTMENTAL APPEAL AND THE CROSS OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED ON 31-08-2010 (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 31 -08-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHMEDABAD