Assistant Commissioner of Income Tax Circle-1 , Bellary v. Sri Sirwar Basavaraj , Bellary

ITA 1902/BANG/2018 | 2009-2010
Pronouncement Date: 30-03-2021 | Result: Allowed

Appeal Details

RSA Number 190221114 RSA 2018
Assessee PAN ACLPB7950R
Bench Bangalore
Appeal Number ITA 1902/BANG/2018
Duration Of Justice 2 year(s) 9 month(s) 29 day(s)
Appellant Assistant Commissioner of Income Tax Circle-1 , Bellary
Respondent Sri Sirwar Basavaraj , Bellary
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2021
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-03-2021
Date Of Final Hearing 15-02-2021
Next Hearing Date 15-02-2021
Last Hearing Date 21-08-2019
First Hearing Date 30-10-2019
Assessment Year 2009-2010
Appeal Filed On 01-06-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI. B.R BASKARAN ACCOUNTANT MEMBER AND SMT. BEENA PILLAI JUDICIAL MEMBER ITA NO.1902/BANG/2018 ASSESSMENT YEAR : 2009-10 THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE -1 BELLARY. VS. SRI SIRWAR BASAVARAJ NO.9/18 II CROSS GHANDHI NAGAR BELLARY-583 103. PAN ACLPB 7950 R APPELLANT RESPONDENT ASSESSEE BY : SHRI SIVA PRASAD REDDY ADVOCATE REVENUE BY : SHRI KANNAN NARAYANAN JCIT DATE OF HEARING : 15-02-2021 DATE OF PRONOUNCEMENT : 30-03-2021 ORDER PER BEENA PILLAI JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY REVEN UE AGAINST ORDER DATED 29/03/2018 PASSED BY THE LD.CIT(A) GULBARGA FOR ASSESSMENT YEAR 2009-10 ON FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE ASSESSEE IS ONE OF THE SHARE HOLDERS HOLDING MORE THAN 10% SHARES IN THE COMPANY MIS. NOBLE DISTILLERIES A POW ERS LTD. (NDPL) BEING A DOMESTIC COMPANY IN WHICH THE PUBLIC ARE NO T SUBSTANTIALLY INTERESTED. THE COMPANY HAS MADE PAYMENTS TO THE AS SESSTE AND HAS ALSO RECEIVED IN RETURN THE SAID PAYMENTS WHICH CL EARLY AMOUNTS TO ADVANCE/LOAN - THIS FACT HAS BEEN ACCEPTED BY THE L D. CT(A) IN HIS ORDER. BUT THE CIT(A) HAS ERRED IN DECLINING THAT SUCH PA YMENTS DOES NOT AMOUNT TO DEEMED DIVIDENDS. PAGE 2 OF 8 ITA NO.1902/BANG/2018 3. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE INT ERPRETATION OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT BEFORE DE CIDING THE APPEAL IN FAVOUR OF THE ASSESSEE BY HOLDING THAT 'THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO SAY THAT THE CURRENT ACCOUNT IS NOT IN THE COMMERCIAL EXPEDIENCY OF THE BUSINESS OF THE COMPANY. THE AO A LSO FAILED TO PROVE THAT THE CURRENT ACCOUNT WAS FOR THE BENEFIT OF THE APPELLANT ONLY'. THE LD. CIT(A) FAILED TO APPRECIATE THAT AS PER PROVISI ONS OF SECTION 2(22)(E) ANY PAYMENT BY WAY OF ADVANCE OR LOAN AMOUNTS TO DE EMED DIVIDEND AND IT IS FOR THE ASSESSEE TO ESTABLISH THE COMMERC IAL EXPEDIENCY THEREOF AT THE FIRST INSTANCE AND IT IS NOT FOR THE AO TO P ROVE THE CONTRARY IN THE ABSENCE OF ANY EVIDENCE PLACED ON RECORD BY THE ASS ESSEE IN THIS REGARD. 4. THE LD. CIT(A) FAILED TO APPRECIATE THAT THERE I S NO INTEREST CHARGED BY NDPL ON THE ADVANCES GIVEN TO THE ASSESSEE NOR VICE -VERSA WHICH FACT WOULD GO TO SHOW THAT THERE IS NO COMMERCIAL EXPEDI ENCY IN ADVANCING THE AMOUNTS TO THE ASSESSEE. 5. ANY OTHER GROUNDS RAISED DURING THE COURSE OF HE ARING. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RETAI L SALE OF INDIAN MADE FOREIGN LIQUOR AND IS ALSO A PARTNER IN VARIOUS PARTNERSHIP FIRMS AND MANAGING DIRECTOR OF M/S NOBL E DISTILLERIES AND POWER LTD. IS A DOMESTIC COMPANY HAVING ITS REG ISTERED OFFICE IN BELLARY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 30/09/2008 DECLARING TOTAL INCOME OF RS.19 12 134/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT AND WAS SELECTED FOR SCR UTINY. WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 143 (3) ON 20/12/2011 IS FOLLOWING ADDITIONS WERE MADE: DEEMED DIVIDEND UNDER SECTION 2 (22) (E) - RS.3 5 1 42 058/- DISALLOWANCE UNDER SECTION 14 A R.W.R 8D - RS. 2 84 160/-. 3. AGGRIEVED BY THE ADDITIONS MADE ASSESSEE PREFER RED APPEAL BEFORE THE LD.CIT(A) WHO DISMISSED THE APPEAL OF AS SESSEE VIDE ORDER DATED 28/03/2013 FOR NONAPPEARANCE. THEREAFTE R ASSESSEE PREFERRED APPEAL BEFORE THIS TRIBUNAL AND THIS TRIB UNAL WITHOUT PAGE 3 OF 8 ITA NO.1902/BANG/2018 GOING INTO THE FACTS OF THE CASE REMANDED THE ISSUE IN THE APPEAL TO THE FILE OF THE LD. AO WITH A DIRECTION TO AFFOR D THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO EXAMINE DETAILS FILED BY ASSESSEE IS BEFORE THE TRIBUNAL AND ALSO DURING THE COURSE OF HEARING TO FINALISE ACCORDINGLY. 4. AS A CONSEQUENCE TO THE DIRECTION BY THE TRIBUNA L THE CASE WAS TAKEN UP FOR EXAMINATION/HEARING AND NOTICE UND ER SECTION 142 (1) WAS ISSUED TO ASSESSEE. THE LD.AO ALSO ANAL YSED THE DETAILS FILED BY ASSESSEE BEFORE THE TRIBUNAL AND T HE ASSESSMENT ORDER UNDER SECTION 143 (3) READ WITH 254 OF THE AC T WAS PASSED ON 31/03/2016 DETERMINING TOTAL INCOME AT RS.2 27 2 5 060/-. THE LD.AO MADE ADDITION OF RS.2 08 12 937/- AS DEEM ED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 5. AGGRIEVED BY THE ORDER OF LD.AO ASSESSEE PREFER RED APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) OBSERVED AS UND ER: (I). THE TRANSACTIONS BETWEEN THE ASSESSEE INDIVID UAL AND THE COMPANY M/S. NDPL ARE TWO-WAY TRANSACTIONS IN A CURRENT AC COUNT INVOLVING BOTH RECEIPTS AND PAYMENTS MADE FOR OPERATIONAL CONVENIE NCE BY WAY OF FLOW OF FUNDS AND THEREFORE. COULD NOT BE CHARACTERISED AS DISTRIBUTION OF ACCUMULATED PROFITS. (II) IN AN OPEN & CURRENT ACCOUNT THERE WOULD BE T WO-WAY TRANSACTIONS BETWEEN THE COMPANY AND THE SHAREHOLDER. THESE PAYM ENTS IN THE NATURE OF DEBIT & CREDIT ENTRIES IN THE CURRENT ACCOUNT WO ULD CONSTITUTE AN ACCOUNT MAINTAINED IN THE COURSE OF BUSINESS APPLYI NG THE RATIO OF THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF DAGA AND COMPANY P LTD 227 ITR 480. (III) APPLYING THE RATIO OF ANOTHER DECISION OF THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF PRADEEP KUMAR MALHOTRA 338 ITR 538 THE PAYMENTS ARE NOT GRATUITOUS LOAN OR ADVANCE GIVEN B Y THE COMPANY TO ITS SHAREHOLDER AND THEREFORE THE SAME CANNOT BE TERME D AS DEEMED DIVIDEND. (IV). APPLYING THE RATIO OF THE HON'BLE TRIBUNAL K OLKATTA IN THE CASE OF ITO VS. GAYATRI CHAKRABORTHY IN ITA NO.151/KOL/2013 TH E TRANSACTIONS PAGE 4 OF 8 ITA NO.1902/BANG/2018 CANNOT BE TERMED AS DEEMED DIVIDEND U/S 2(22)(E) AS THE LOAN ACCOUNT IS DIFFERENCE FROM CURRENT ACCOUNT. 6. AGGRIEVED BY THE ORDER OF LD.CIT(A) REVENUE IS I N APPEAL BEFORE US NOW. 7. THE LD.SR.DR SUBMITTED THAT THERE ARE PAYMENTS FROM THE COMPANY TO ASSESSEE SHAREHOLDER HOWEVER NOTHING HA S BEEN BROUGHT ON RECORD TO PROVE THE REPAYMENT. HE THUS SUBMITTED THAT SUCH TRANSACTION CONSTITUTES DEEMED DIVIDEND U NDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE LD. SR.DR SUBMITTED THAT ASSESSEE RECEIVED ADVANCES OF RS.3 69 77 174/- AS PER THE LEDGER ACCOUNT OF ASSESSEE AS APPEARING IN THE BOOK S OF M/S NOBLE DISTILLERIES WHICH IS MORE THAN THE CUMULATIV E PROFITS OF THE COMPANY (RS.2 58 34 967/-) AS PER THE BALANCE SHEET . IT WAS ALSO SUBMITTED THAT ASSESSEE HOLDS 37% SHARE IN M/S.NOBL E DISTILLERIES AND HENCE IN ENTIRETY PROFIT WOULD AM OUNT TO DEEMED DIVIDEND UNDER THE PROVISIONS OF SECTION 2 (22) (E) OF THE ACT. 8. IN SUPPORT OF THIS SUBMISSION RELIANCE IS PLACE D ON FOLLOWING JUDGEMENTS: DECISION OF HONBLE SUPREME COURT IN CASE OF MS.P.S ARADA VS CIT REPORTED IN (1998) 96 TAXMANN 11 DECISION OF HONBLE SUPREME COURT IN CASE OF SMT. T ARULATA SHYAM VS CIT REPORTED IN (1977) 108 ITR 345 9. ON THE CONTRARY THE LD.AR PLACED RELIANCE ON TH E ORDER PASSED BY LD.CIT(A). HE SUBMITTED THAT THIS IS THE 2 ND ROUND OF PROCEEDINGS. HE SUBMITTED THAT TRANSACTION BETWEEN ASSESSEE AND NOBLE DISTILLERIES IS OF A RUNNING CURRENT ACCO UNT WHICH PAGE 5 OF 8 ITA NO.1902/BANG/2018 FORMS PART OF THE RECORD. HE SUBMITTED THAT THIS IS ONLY FOR OPERATIONAL CONVENIENCE OF THE BUSINESS. HE PLACED RELIANCE ON DECISION OF HONBLE KOLKATA TRIBUNAL IN CASE OF ITO VS SMT. GAYATHRI CHAKRABORTY REPORTED IN (2017) 83 TAXMANN.COM 263. 10. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 11. WE HAVE PERUSED THE LEDGER ACCOUNT OF ASSESSEE IN THE BOOKS OF NOBLE DISTILLERIES PLACED IN THE PAPER BO OK AT PAGE 55- 58 OF PAPER BOOK. ADMITTEDLY ASSESSEE HAS RECEIVED A SUM APPROX. TO RS.3.5 CRORES FROM M/S NOBLE DISTILLERI ES FOR WHICH NO EXPLANATION HAS BEEN OFFERED OTHER THAN SUBMITTI NG THAT IT IS A RUNNING ACCOUNT FOR THE PURPOSES OF BUSINESS ACTIVI TY. LD. CIT (A) GAVE RELIEF TO ASSESSEE BY OBSERVING THAT WHERE A S HAREHOLDER HAS AN OPEN AND CURRENT ACCOUNT WITH THE COMPANY EVERY DEBIT ENTRY MADE BY THE COMPANY IN THAT ACCOUNT IS NOT ALONE BY THE COMPANY TO THE SHAREHOLDERS. LDCIT(A) RELIED ON DE CISION OF HONBLE CALCUTTA HIGH COURT IN CASE OF DAGA &CO. PVT. LTD. REPORTED IN 227 ITR 480 WHEREIN IT HAS HELD THAT TO CONSTITUTE A CURRENT OR ON ACCOUNT IN THE COURS E OF BUSINESS THERE MUST BE EACH SIDE CREATING AN INDEPENDENT OBL IGATION ON THE OTHER IN THE COURSE OF THE BUSINESS OF THE COMPANY. ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE CALCUTTA TRIBUNAL IN CASE OF SMT. GAYATHRI (SUPRA) . 12. WE HAVE PERUSED THE SAID DECISION AND NOTE THAT THERE IS A CATEGORICAL OBSERVATION BY THE TRIBUNAL THAT THERE WERE RECIPROCAL DEPOSITS BETWEEN THE PARTIES AND THE ACCOUNT WAS MU TUAL. PAGE 6 OF 8 ITA NO.1902/BANG/2018 13. WE NOTE THAT LD.CIT(A) HAS NOT VERIFIED WHETHER THERE IS A CORRESPONDING DEMAND CREATED IN THE NAME OF M/S.NOB LE DISTILLERIES IN THE BOOKS OF ASSESSEE IN ORDER TO CONSTITUTE THE ALLEGED LEDGER ACCOUNT TO BE A RUNNING CURRENT ACCO UNT. THE BASIC ISSUES TO BE EXAMINED IN THE PRESENT CASE IS WHETHER DEBIT BALANCES IN THE ACCOUNTS CAN BE CONSTRUED AS ADVA NCE OR LOAN BY THESE COMPANIES. 14. WE ARE THEREFORE OF THE OPINION THAT THE LD.CIT (A) CONSIDERED THE ISSUE WITHOUT VERIFYING PROPER RECOR DS IN ACCORDANCE WITH LAW. THERE IS NO OBSERVATION BY LD. CIT(A) OF WHATSOEVER NATURE IN ORDER TO CONCLUDE THAT THE TRA NSACTION BETWEEN ASSESSEE AND NOBLE DISTILLERIES WERE A MUTU AL CURRENT RUNNING ACCOUNT FOR THE PURPOSES OF BUSINESS AS OBS ERVED BY THE DECISIONS RELIED BY LD.CIT(A) IN HIS ORDER. 15. WE ARE THEREFORE UNABLE TO ACCEPT THE REASONING BY LD.CIT(A). HOWEVER IN THE INTEREST OF JUSTICE WE RE MAND THIS ISSUE TO LD.CIT(A) IN ORDER TO VERIFY ALL THESE DET AILS BY CALLING FOR THE ACCOUNTS OF ASSESSEE AND M/S.NOBLE DISTILLERIES FOR THE RELEVANT PERIOD. 16. THE LD.CIT(A) IS THEREFORE DIRECTED TO VERIFY E ACH DEBIT ENTRY ON THE AFORESTATED LOAN AND TREAT ONLY THE EXCESS A MOUNT OF THE DEBIT IN THE BOOKS OF ACCOUNT OF THE COMPANY AS DEE MED DIVIDEND U/S 2(22)(E) OF THE ACT. PAGE 7 OF 8 ITA NO.1902/BANG/2018 17. THE LD.CIT(A) IS THUS DIRECTED TO CONSIDER THIS ISSUE IN ACCORDANCE WITH LAW. ACCORDINGLY THE GROUNDS RAISED BY REVENUE STANDS AL LOWED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY REVENUE STANDS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH 2021 SD/- SD/- (B.R BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE DATED THE 30 TH MARCH 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE PAGE 8 OF 8 ITA NO.1902/BANG/2018 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -3-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -3-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -3-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -3-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -3-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -3-2021 SR.PS 8. IF NOT UPLOADED FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -3-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS