Mukesh Thakurdas Jaisinghani Ulhasnagar v. Dcit Cir 2 Kalyan

In The Income Tax Appellate Tribunal I Bench Mumbai Before Shri R C Sharma Am Shri Sandeep Gosain Jm Ita No 1803 Mum 20 16 Assessment Year 2011 12 Shri Mukesh Thakurdas Jaisinghani 202 2 Nd Floor Ratan Deep Apartment Sapna Garden R Oad Sector 17 Ulhasnagar Vs Dcit Cir 2 Kalyan 421 301 Pan Gir No Adopj 7369 L Appellant Respondent Assessee By Shri Sudhir V Hunnargikar Revenue By Shri Ram Tiwari Date Of Hearing 28 11 201 7 Date Of Pronounc Eme Nt 18 12 201 7 O R D E R Per R C Sharma A M This Is An Appeal Filed By The Assessee Against The Order Of Cit A 3 Thane Dated 01 12 2015 For A Y 2011 12 In The Matter Of Order Passed U S 143 3 Of The It Act 2 The Followin G Grounds Have Been Taken By The Assessee 1 A For That On Proper Construction Of The Facts Of The Case And The Provisions Of Section 2 22 E Of The Income Tax Act 1961 Herein After Referred To As The Act Both The Learned Commissioner Of Income Tax A 3 Thane And The Deputy Commissioner Of Income Tax Circle 2 Kalyan Have Totally Misconstrued The Relevant Facts Of The Case Of The Impugned Assessment Year In Question 2011 12 And Failed To Appraise The Exact Nature Of Payment Made By Dheeraj E States Private Limited Depl To Arrive At The Proper Determination Of The Quantum Of The Deemed Dividend Within The Meaning Of The Ita No 1803 Mum 2016 Shri Mukesh Thakurdas Jaisinghani 2 Provisions Of Section 2 22 E Of The Act As It Is Pertinent To Note That The Nature Of Payment Made By The Company Depl T Hrough Mutual Open Running And Current Account To The Shareholder During The Concerned Relevant Year In Any Case Cannot Be Construed As The Payment In The Nature Of Loans And Advances To Be Considered As The Deemed Dividend Under The Purview Of The Secti On 2 22 Fe Of The Act On The Following Grounds I The Nature Of The First Type Of Payment Is The Remuneration To The Director Of Rs 12 00 000 On Account Of Indebtedness Of The Company And Is Nothing But The Payments Made In The Nature Of Regular Expe Nditure During The Ordinary Course Of Business Transactions Of The Company Ii The Nature Of Other Type Of Amount Given By The Company Depl To The Shareholder Appellant Is The Repayment And Not The Payment Of The Amount Of Rs 7 00 000 Out Of The Amount Given By Him To Company All The Requisite Evidence Called For In This Regard Was Furnished Before The Appellate Authority And Was Also Available Before Assessing Authority B For That The Learned Commissioner Of Income Tax A 3 Thane Failed To Consider That A Mutual Open Running And Current Account Maintained By The Said Company And Payment Made To The Appellant Even If They Are Related Parties Under Section 2 22 E In The Normal Course Of Business Cannot Be Treated As Loans Or Advances With Out Considering The Recognized Distinction Made As Per Article 1 And 19 Of Schedule To The Limitation Act 1963 In Respect Of The Various Items Of The Loans Or Advances Adopted By The Courts To Determine The Exact Nature Of Those Transactions Relied On Th E Decisions Of The Honble Bombay High Court In The Case Of Durga Prasad Mandelia Vs Registrar Of Companies 1987 61 Comp Cas 479 And Pennwalt India Ltd S Case Supra C For That Not Even Considering The Basic Facts Of The Ledger Extract Of Account O F The Appellant Mukesh T Jaisinghani Loan Against Property Apparent From The Face Of The Assessment Order Itself Passed Under Section 143 3 Of The Act By The Deputy Commissioner Of Income Tax Circle 2 Kalyan Dated 3 Rd March 2014 Page No 6 7 Of The A Oj And The Non Application Of The Judicial Mind For The Proper Treatment Of The Above Referred Transactions Fy 2010 11 Of I Re Payment Rs 70 Oooo Amount Debited T D S On Salary Rs 279 Ooo To The Appellant Out Of The Amount Received Rs 600 0000 By The Said Company And Ii Payments Rs L 200 Ooo Made Towards The Remuneration To Director On Account Of Indebtedness The Purported Findings In This Behalf Has Been Arrived At By The C I T A 3 Thane By Ignoring The Relevant Materials And Or By Taking In To Consideration Other Irrelevant And Or Extraneous Materials And Finally Concluding Upon The Improper Surmises Ita No 1803 Mum 2016 Shri Mukesh Thakurdas Jaisinghani 3 Adopted The Erroneous Amount As Deemed Dividend Within The Purview Of The Provisions Of Section 2 22 E Of The Act And Same Is Therefore Wholly Arbitrary Unreasonable And Perverse The Analytical Review For The Determination Of Proper Quantum Of The Qualifying Amount Of Deemed Dividend U S 2 22 E Of The Act Annexure I The Statement Of Date Wise Dr Cr Balance Of The Tra Nsactions Fy 2010 11 Annexure Ii For Evaluating The Proper Eligible Of Deemed Dividend U S 2 22 E Of The Act Is Enclosed Herewith For Your Perusal D For That The Findings Made In The Appellate Order Passed On 1st December 2015 Passed U Sec 250 Of The Said Act Para No 5 Iv A To G Index Page No 18 19 Are Extraneous And Seems Not To Have Been Concluded Judiciously I When All The Material Evidence Called For In This Regard Within The Powers Of Sec 25 O Of The Act Was Furnished In The Appell Ate Proceedings Ii When All The Relevant Material Records In This Regard Were Also Available Before The Assessing Authority Hi When In Fact The Appellant Has Made Up A Fit Case During The Appellate Proceedings For The Determination Of Proper Quantum Of The Qualifying Amount Of Deemed Dividend U S 2 22 E Of The Act Iv Even Without Demanding For The Remand Report Of The Assessing Authority Or Going In To The Merits Of The Plea And Facts Of The Case As The Appellate Authority Has Denied The Proper Opportunity Of Being Heard In This Regard Before Rejecting The Same Only Upon The Arbitrary Inference That The Said Plea Was Not Taken By The Appellant Before The Assessing Authority At The Time Of The Scrutiny Proceeding And Thus Have Caused The Total Gr Oss Injustice To The Appellant E For That The Order Dated 1 St December 2015 Passed U S 250 Of Act By The C I T Appeals 3 Thane Bearing I T A No 1375 13 14 For The Assessment Year 2011 12 Appealed Against Is Otherwise Erroneous On Facts And Or In L Aw And Needless To Say That While Exercising The Powers U S 246 A Of The Act The Appellate Authority Has Not Exercised His Direction In Accordance With The Law Reason 2 The Appellant Most Respectfully Urge For The Admission Of The New Plea As Contende D Before The Appellate Authority U S 254 Of The Act To Assess The Correct Tax Liability Of The Appellant National Thermal V Cit 229 Itr 383 Sc 3 The Appellant Craves Leave To Add Alter Amend And Or Modify The Grounds Taken Here 4 The Substantial Qu Estions Of Facts Law Involved In This Appeal Are A Whether On A True And Proper Construction Of The Facts Of The Case And The Provisions Of Section 2 22 E Of The Income Tax Act 1961 The Amount Of Rs 1900000 Comprising Of Ft Re Payment Rs 70 Ooo O To The Appellant Out Of The Amount Received Ita No 1803 Mum 2016 Shri Mukesh Thakurdas Jaisinghani 4 Rs 6000000 By The Said Company And Ii Payments Rs 12 Ooooo Made On Account Of Indebtedness Of The Said Company Towards The Remuneration To The Director Through The Mutual Open Running And C Urrent Account In The Ordinary Course Of Business Of The Company To The Interested Director Appellant Of The Said Company Is Chargeable To Tax As The Deemed Dividend Within The Purview Of Section 2 22 E Of The Said Act B Whether The Purported Worki Ng Of The Quantum Of Deemed Dividend Of Rs 19 00 000 Within The Purview Of Section 2 22 E Of The Said Act Derived By The Commissioner Of Income Tax Appeals 3 Thane And Deputy Commissioner Of Income Tax Circle 2 Kalyan Is Correct And Proper C W Hether The Purported Finding In Appellate Order Dated 1 St December 2015 Passed Under Section 250 Of The Said Act Para No 5 Iv A To G Page No 9 And 10 Of The Appellate Order Is Relevant Or Extraneous When In Fact Ultimately The Appellate Authority Has Arbitrarily Concluded Upon The Inference That The Said Plea Was Not Taken By The Appellant Before The Assessing Authority At The Time Of The Scrutiny Proceeding As The Appellant Has Made Up A Fit Case During The Appellate Proceedings For The Determination Of Proper Quantum Of The Qualifying Amount Of Dividend U S 2 22 E Of The Act D Whether The Purported Decision Of The Commissioner Of Income Tax Appeals 3 Thane Is Based On Proper Relevant Material Or Has Been Arrived At By Ignoring The Relevant Ma Terials And Or By Taking In To Consideration Other Irrelevant And Or Extraneous Materials And Or Are Otherwise Arbitrary Unreasonable And Perverse 3 Rival Contentions Have Been Heard And Record Perused 4 Short Issue In This Case Relates To Treati Ng The Amount Of Rs 19 Lakhs Received By The Assessee From M S Dheerah Estates Private Limited As Deemed Dividend U S 2 22 E Of The Act At The Outset Learned Ar Placed On Record The Order Of The Tribunal In Case Of Brother Of Assessee Mr Raju Tha Kurdas Jaisinghani Dated 27 07 2016 Wherein Issue Was Considered And It Was Held That Amount So Received From M S Dheeraj Estates Private Ltd Was Not In The Nature Of Loans And Advances But In The Nature Of Remuneration Received As Director Of The C Ompany And Repayment Of Loan Given By Assessee Ita No 1803 Mum 2016 Shri Mukesh Thakurdas Jaisinghani 5 5 We Had Gone Through The Order Of The Tribunal And Found That Exactly Similar Issue Was Decided By Tribunal In Favour Of Assessee After Having Following Observation 3 Rival Contentions Have Been Heard An D Record Perused The Facts Of The Case Are That The Assessee Is Engaged In The Business Of Transport Hiring Services Under The Name And Style M S Raju Roadlines The Assessee Is Also A Partner In Various Firms From Where He Had Received Share Of Profit Interest On Capital And Remuneration Besides Above Income He Had Salary Income From M S Dheeraj Estates Pvt Ltd During The Course Of Assessment Proceedings The Ao Noticed That The Assessee Had Withdrawn An Amount Of Rs 20 00 000 From The Account Of M S Dheeraj Estates Pvt Ltd Where He Owns 25 Of The Total Share Holdings In The Course Of Assessment U S 143 3 The Ao Made An Addition Of Rs 20 00 000 U S 2 22 E Of The Act By Observing That Assessee Was In Receipt Of Amount From The Company In Which He Was Having 25 Of Total Share Holding From The Record We Found That A Sum Of Rs 11 60 000 Was Received By Assessee As A Director Of The Company The Amount Received On Account Of Directors Remuneration Which Have Been Duly Offered For Tax As I Ncome Cannot Be Held In The Nature Of Loan So As To Attract Provisions Of Section 2 22 E Of The Act 4 I Also Found That During The Year Under Consideration The Assessee Deposited An Amount Of Rs 75 Lakhs To M S Dheeraj Estates Private Limited In Decemb Er 2010 Therefore All The Payments Made By M S Dheeraj Estates Private Limited To The Assessee After The Receipt Of Rs 75 Lakhs I E Rs 9 50 Lakhs Cannot Be Construed As Loan Advance But As Amounts Paid From The Said Rs 75 Lakhs Bringing It Out Of The Purview Of Section 2 22 E Of The Act In View Of The Above I Found That An Amount Of Rs 11 60 000 Was Paid On Account Of Directors Remuneration Which M S Dheeraj Estates Pvt Ltd Was Supposed To Pay A Sum Of Rs 9 50 Lakhs Was Paid Out Of The Amount Of Rs 75 Lakhs Deposited By The Assessee With Dheeraj Estates Pvt Ltd In December 2010 Total Of These Two Payments Worked To Be Rs 21 10 000 Rs 11 60 000 9 50 000 The Payment Made By Dheeraj Estates Pvt Ltd To The Assessed During The Year Was Rs 20 00 000 Which Is Below Rs 21 10 Lakhs Accordingly No Addition U S 2 22 E Is Warranted 5 In The Result Appeal Of The Assessee Is Allowed 6 In The Case Before Us From The Record We Found That Out Of Total Payment Of Rs 19 Lakhs Added By A O U S 2 22 E A Sum Of Rs 7 Lakhs Ita No 1803 Mum 2016 Shri Mukesh Thakurdas Jaisinghani 6 Was Received By The Assessee As Repayment Of The Amount Deposited With The Company And A Sum Of Rs 12 Lakhs Was Towards Remuneration To The Director The Repayment Of Loan Was Out Of Amount Already Given To The Company And The Amount Received In The Form Of Remuneration Cannot Be Treated As Loans And Advances So As To Attract Provisions Of Section 2 22 E Respectfully Following The Order Of The Tribunal In The Case Of Brother Of Assessee Dated 27 07 2016 Vis Vi S Facts Of The Year Under Consideration We Do Not Find Any Merit For Treating The S Um Of Rs 19 Lakhs Received By Assessee As Deemed Dividend U S 2 22 E Of The It Act 7 In The Result Appeal Of The Assessee Is Allowed O Rder Pronounced In The Open C Ourt On This 18 12 2017 S D Sandeep Gosain Sd R C Sharma Judicial Member Accountant Member Mumbai Dated 18 12 201 7 Karuna Sr Ps Copy Of The Order Forwarde D To By Order Asstt Registrar Itat Mumbai 1 The Appellant 2 The Respondent 3 The Cit A Mumbai 4 Cit 5 Dr Itat Mumbai 6 Guard File True Copy