Sri.M. Khalid, Calicut v. The ACIT, Calicut

ITA 348/COCH/2016 | 2002-2003
Pronouncement Date: 19-10-2016

Appeal Details

RSA Number 34821914 RSA 2016
Assessee PAN AETPK4267Q
Bench Cochin
Appeal Number ITA 348/COCH/2016
Duration Of Justice 2 month(s) 2 day(s)
Appellant Sri.M. Khalid, Calicut
Respondent The ACIT, Calicut
Appeal Type Income Tax Appeal
Pronouncement Date 19-10-2016
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 19-10-2016
Date Of Final Hearing 19-10-2016
Next Hearing Date 19-10-2016
Assessment Year 2002-2003
Appeal Filed On 16-08-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER I.T.A. NOS. 34 6 - 351/COCH/2016 ASSESSMENT YEARS 2000 - 01 TO 2005 - 06 SHRI M. KHALID SLK FOOD PROCESSING 12/328 POOVATTUPARAMBA KOZHIKODE. [PAN:AETPK 4267Q] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-1(1) KOZHIKODE. (REVENUE - RESPONDENT) ASSESSEE BY SHRI SU RENDRANATH RAO CA REVENUE BY SHRI A. DHANARAJ SR.DR DATE OF HEARING 1 9 /10 / 201 6 DATE OF PRONOUNCEMENT 19 TH / 10/ 201 6 O R D E R PER GEORGE GEORGE K. JUDICIAL MEMBER THESE APPEALS AT THE INSTANCE OF THE ASSESSEE AR E DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE CIT(A) KOZHIKODE DATED 0 4/05/2016. THE RELEVANT ASSESSMENT YEARS ARE 2000-01 TO 2005-06. 2. THE COMMON ISSUE THAT ARISES FOR MY CONSIDERAT ION IN ALL THE APPEALS IS WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE O RDER OF THE ASSESSMENTS WHEREIN ADDITIONS HAVE BEEN MADE U/S. 2(22)(E) OF T HE ACT. FOR THE ASSESSMENT I.T.A. NOS.346-351/2016 2 YEARS 2001-02 AND 2002-03 THE ASSESSEE HAS ALSO CH ALLENGED THE RE-OPENING OF THE ASSESSMENTS. 3. THE BRIEF FACTS IN RELATION TO THE CASE ARE AS FOLLOWS:- THE ASSESSEE IS A DIRECTOR IN A PRIVATE LIMITE D COMPANY NAMELY M/S. KILBAN FOODS INDIA PVT. LTD. HE IS HAVING BENEFICIAL SHAR EHOLDING OF MORE THAN 10% IN THE SAID PRIVATE LIMITED COMPANY. THE COMPANY FOR THE ASSESSMENT YEARS 2000- 01 TO 2005-06 HAD ADVANCED THE FOLLOWING AMOUNTS TO THE ASSESSEE:- AY AMOUNT 2000-01 RS. 5.50 LAKHS 2001-02 RS.11.00 LAKHS 2002-03 RS. 9.50 LAKHS 2003-04 RS. 20.00 LAKHS 2004-05 RS. 9.50 LAKHS 2005-06 RS. 15.35 LAKHS 3.1 THE ASSESSING OFFICER WHILE FRAMING THE ASSE SSMENTS FOR THE ASSESSMENT YEARS 2000-01 TO 2005-06 HELD THAT THE ABOVE AMOUNT S TAKEN BY THE ASSESSEE FROM M/S. KILBAN FOODS INDIA PVT. LTD. ARE DEEMED D IVIDEND AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND ADDED THE SAME T O THE TOTAL INCOME OF THE ASSESSEE. I.T.A. NOS.346-351/2016 3 4. AGGRIEVED BY THE ADDITIONS MADE U/S. 2(22)(E) O F THE ACT THE ASSESSEE PREFERRED APPEALS TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) DISMISSED THE APPEALS OF THE ASSESSEE BY FOLLOWING THE ORDER OF T HE TRIBUNAL IN THE CASE OF MRS. LAILABI KHALID VS. ACIT IN I.T.A. NOS. 164-167/COCH /2011 DATED 14/12/2012 (MRS. LAILABI KHALID IS ANOTHER DIRECTOR HAVING MORE THAN 10% IN M/S. KILBAN FOODS INDIA PVT. LTD.) THE RELEVANT FINDING OF THE CIT(A) READ S AS FOLLOWS: 5.1 IT IS STATED BY THE APPELLANT THAT HE HAS TRA NSFERRED 135 SHARES TO SMT. NAFEESA ON 25/09/1998 AND 297 SHARES TO SMT. SULEKH A ON 25/09/1998 TOTALING TO 432 SHARES WHICH IN EFFECT REDUCED THE PERCENT AGE OF SHARE HOLDING OF THE APPELLANT BELOW 10% OF THE TOTAL SHARE CAPITAL. HO WEVER IN THE ORIGINAL RETURNS FILED BEFORE THE REGISTRAR OF COMPANIES AS PER THE COMPANIES ACT THESE TRANSFERS WERE NOT REFLECTED. IN THOSE RETURNS SH ARE HOLDING OF SHRI M. KHALID IN THE COMPANY WAS SHOWN AS 586 IN ALL THESE YEARS. T HE APPELLANT FILED REVISED ANNUAL RETURNS BEFORE THE REGISTRAR OF COMPANIES FO R ALL THESE YEARS ON 19/10/2006 SHOWING THE SHARES HELD BY THE APPELLANT AT 154 SHARES FOR ALL THESE YEARS. THIS APPEARS TO BE AN AFTERTHOUGHT. 6. IN THE CASE OF ANOTHER MAJOR SHAREHOLDER OF THE SAME COMPANY MRS. LAILABI KHALID WHO WAS HOLDING 328 SHARES SIMILAR ADDITIO NS WERE MADE FOR ASSESSMENT YEARS 2000-01 2003-04 2004-05 AND 2005-06. THE FIRST APPELLATE AUTHORITY I.E. THE COMMISSIONER OF INCOME TAX(APPEALS)-I KO ZHIKODE HAS DECIDED THE ISSUE AGAINST MS. LAILABI KHALID WHICH WAS CONFIRM ED BY THE ITAT COCHIN BENCH IN THEIR ORDER IN I.T.A. NOS. 164 165 166 & 167/COC H/2011 DATED 14/12/2012. IN THAT CASE ALSO IN THE ORIGINAL RETURNS FILED BEFOR E THE REGISTRAR OF COMPANIES SHOWING HER SHAREHOLDING AT A LOWER NUMBER WHICH I S LESS THAN 10% OF THE TOTAL SHARES SUBSCRIBED IS ONLY AN AFTERTHOUGHT. THE CO MMISSIONER OF INCOME TAX (APPEALS)-I KOZHIKODE AS WELL AS THE INCOME TAX AP PELLATE TRIBUNAL COCHIN BENCH HAS CONFIRMED THE ORDERS IN THE CASE OF MS. L AILABI KHALID. 7. THE FACTS IN THE APPELLANTS CASES ARE IDENTICA L TO THE FACTS IN THE CASE OF MS. LAILABI KHALID. IN VIEW OF THE SAME I UPHOLD THE FINDINGS OF THE ASSESSING OFFICER THAT THE FILING OF REVISED RETURNS BEFORE THE REGIS TRAR OF COMPANIES IS ONLY AN AFTERTHOUGHT. THEREFORE THE DECISION OF THE ASSESS ING OFFICER IS CONFIRMED FOR ALL THE AYS 2000-01 TO 2005-06. I.T.A. NOS.346-351/2016 4 8. IN THE RESULT ALL THE SIX APPEALS ARE DISMISSE D. 5. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSE SSEE HAS FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR T HE ASSESSEE HAS FAIRLY ADMITTED THAT THE ISSUE ON MERITS NAMELY ADDITION U/S. 2(2 2)(E) OF THE ACT IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE ORDERS OF THE T RIBUNAL IN THE CASE OF MRS. LAILABI KHALID VS. ACIT(SUPRA). HOWEVER HE SOUGHT FOR ADJOURNMENT OF THE CASE ON THE GROUND THAT HE HAS TO GATHER MATERIALS FOR A RGUING THE ISSUE OF VALIDITY OF RE-OPENING OF ASSESSMENTS FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03. THIS PLEA OF THE ASSESSEE IS REJECTED FOR THE REASON THA T THE ISSUE OF VALIDITY OF RE- ASSESSMENT WAS NEVER THE SUBJECT MATTER OF ADJUDICA TION BEFORE THE CIT(A). MOREOVER THESE APPEALS HAVE BEEN FILED BEFORE THE TRIBUNAL IN THE MONTH OF JULY AND ASSESSEE HAD SUFFICIENT TIME FOR GATHERING THE NECESSARY MATERIAL AND ARGUE THE MATTER. HENCE I REJECT THE PLEA OF ADJOURNMENT OF THE CASE AND PROCEED TO DISPOSE OF THE MATTER ON MERITS. THE LD. DR WAS DUL Y HEARD. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. M/S. KILBAN FOODS INDIA PVT. LTD. IS A PRIVATE LIMITED C OMPANY AND ALL ITS SHAREHOLDERS ARE FAMILY MEMBERS. THE ASSESSEE WAS HAVING A TOTAL OF 586 SHARES IN THE PVT. LTD. COMPANY OUT OF TOTAL SHARES OF 1936. SINCE TH E ASSESSEE WAS HAVING MORE THAN 10% OF THE VOTING RIGHTS AND HAD RECEIVED AMOU NTS FROM M/S. KILBAN FOODS INDIA PVT. LTD. THE AMOUNTS WERE TREATED AS DEEMED DIVIDEND FOR THE RESPECTIVE ASSESSMENT YEARS UNDER THE PROVISIONS OF SECTION 2( 22)(E) OF THE I.T. ACT. THE I.T.A. NOS.346-351/2016 5 CONTENTION OF THE ASSESSEE IS THAT PROVISION OF SEC . 2(22)(E) WILL NOT HAVE APPLICATION FOR AY 2000-01 TO 2005-06 SINCE HE WAS HAVING LESS THAN 10% OF THE TOTAL SHARE CAPITAL. THE ASSESSEE STATES THAT HE H AD TRANSFERRED 135 SHARES TO NAFEESA ON 25/09/1998 AND ANOTHER 297 SHARES TO SUL EKHA ON THE SAME DATE AND HENCE FOR AY 2000-01 TO 2005-06 HE WAS HAVING LESS THAN 10% OF THE TOTAL SHARE CAPITAL. THE CONTENTION OF THE ASSESSEE IS DEVOID OF ANY MERITS BECAUSE IN THE ORIGINAL RETURNS FILED BEFORE THE REGISTRAR OF COMP ANIES AS PER THE COMPANIES ACT THESE TRANSFERS WERE NOT REFLECTED. IN THOSE RETURN S SHAREHOLDING OF THE ASSESSEE IN THE PRIVATE LIMITED COMPANY WAS SHOWN AT 586 FOR ALL THE CONCERNED ASSESSMENT YEARS. THE ASSESSEE FILED THE REVISED ANNUAL RETURN S BEFORE THE REGISTRAR OF COMPANIES FOR ALL THE ASSESSMENT YEARS ONLY ON 19/1 0/2006 SHOWING THAT THE SHARES HELD BY THE ASSESSEE IN THE SAID PRIVATE LIM ITED COMPANY WAS ONLY 155 WHICH ACCORDING TO ME IS ONLY AN AFTERTHOUGHT TO GE T OVER THE PROVISION OF SECTION 2(22)(E) OF THE ACT. ON IDENTICAL FACTS THE TRIBU NAL IN THE CASE OF MS. LAILABI KHALID (SUPRA) WHO IS ALSO A DIRECTOR IN M/S. KILBA N FOODS INDIA PVT. LTD. HAD DECIDED THE MATTER IN FAVOUR OF THE REVENUE. THE R ELEVANT FINDING OF THE TRIBUNAL READS AS FOLLOWS: 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE RECORD. ON A CAREFUL CONSIDERATION OF THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS IN OUR VIEW THE REAL QUESTION THAT ARISES FOR OUR CONSIDE RATION IS WHETHER THE CLAIM MADE BY THE ASSESSEE ABOUT TRANSFER OF 173 SHARES O N 25.9.1998 IS CORRECT OR NOT. IF IT IS HELD TO BE CORRECT THE ASSESSMENT O F DEEMED DIVIDEND IN ALL THE I.T.A. NOS.346-351/2016 6 YEARS IS LIABLE TO BE SET ASIDE. OTHERWISE THE AP PEALS OF THE ASSESSEE ARE LIABLE TO BE DISMISSED. 10. NOW TURNING TO THE FACTS OF THE CASE IN OU R VIEW FOLLOWING FACTS ARE VERY MUCH RELEVANT TO DECIDE THE QUESTION STATED IN THE PRECEDING PARAGRAPH. (A) WE NOTICE THAT THE ASSESSEE HEREIN HAS HERSELF SIGN ED THE SHARE CERTIFICATES ORIGINALLY ISSUED ON 27-07-1991 TO THE ASSESSEE IN HER CAPACITY AS CHAIRMAN OF THE COMPANY VIZ. M/S KILB AN FOODS (INDIA) PVT LTD. THIS FACT PROVES THE STAND OF THE AO THAT THE ASSESSEE COULD CONTROL THE RECORDS MAINTAINED BY THE COMPANY. (B) THOUGH THE TRANSFER OF SHARES HAS BEEN CLAIMED TO H AVE BEEN MADE ON 25.9.1998 YET THE INFORMATION ABOUT SHARE TRANSFER S HAS NOT BEEN REPORTED IN THE ANNUAL RETURNS WHICH ARE STATUTORI LY REQUIRED TO BE FILED BEFORE THE REGISTRAR OF COMPANIES EVERY YEAR. IN FACT IN THE ANNUAL RETURNS FILED FOR THE YEAR ENDING 31.3.1999 TO 31.3.2005 THE COMPANY CONTINUED TO DISCLOSE THE SAME SHARE HOLDIN G PATTERN WITHOUT CARRYING OUT THE MODIFICATION VIS--VIS THE CLAIM O F TRANSFER. (C) IN THE SHARE TRANSFER FORM IN FORM NO. 7-B THE CO LUMN PERTAINING TO THE CONSIDERATION HAS NOT BEEN FILLED UP. THOUGH THE SAID FORM NO.7-B CONTAINS THE DATE OF ENDORSEMENT BY REGISTRA R OF COMPANIES AS 21.8.1998 WE WERE INFORMED THAT THE SAID FORM IS N ORMALLY PURCHASED FROM THE MARKET FROM THE VENDORS WHO USUALLY OBTAI N SUCH ENDORSEMENTS IN BULK. (D) THE AO HAS POINTED OUT THAT THE ASSESSEE DID NOT DI SCLOSE THE CAPITAL GAIN ARISING ON TRANSFER OF SHARES IN HER RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 1999-2000. DURING THE COURSE OF AR GUMENTS THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E HAS GIFTED THE SHARES TO THE TRANSFEREE. HOWEVER WE NOTICE THAT THE ASSESSEE IS SUBMITTING THIS ARGUMENT FOR THE FIRST TIME BEFORE US AND SHE DID NOT I.T.A. NOS.346-351/2016 7 EXPLAIN ABOUT HER LAPSE TO DISCLOSE THE CAPITAL GAI N IN HER RETURN OF INCOME FOR THE ASST. YEAR 1999-2000. (E) THE BOARD OF DIRECTORS IN THE MEETING HELD ON 26. 9.1998 HAVE APPROVED THE TRANSFER OF 432 SHARES OUT OF 586 SHAR ES EFFECTED BY ANOTHER SHARE HOLDER NAMED SHRI M KHALID. HOWEVER SHRI M KHALID HAS CONTINUED TO SHOW THE NUMBER OF SHARES AS 586 D URING THE YEAR ENDING 31.3.99 TO 31.3.2002 AND THE SAID FACT IS EV IDENT FROM THE RETURN OF INCOME FILED BY SHRI M KHALID. THE VERY FACT THAT SHRI M KHALID DID NOT DISCLOSE THE DETAILS OF TRANSFER OF SHARES IN HIS RETURN OF INCOME CAST SHADOW ON THE TIMING OF THE MINUTES REC ORDED IN THE BOARD MEETING HELD ON 26.9.1998. (F) THE MOST IMPORTANT POINT IS THAT THE ASSESSEE HAS FILED REVISED ANNUAL RETURNS FOR THE YEAR ENDING 31.3.1999 TO 31.3.2005 ONLY ON 19.10.2006 WHICH IS AFTER THE DATE OF ISSUE OF NOT ICES U/S 148 FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05. THE NOTICES FOR THE ABOVE SAID TWO YEARS WERE ISSUED ON 04.10.2006. THIS FAC T CLEARLY PROVES THAT THE WHOLE EXERCISE ABOUT THE TRANSFER OF SHARE S HAVE BEEN CARRIED OUT AFTER THE RECEIPT OF THE NOTICES U/S 148. THUS IT CAN BE SEEN THAT ALL THE DOCUMENTS ON WHIC H THE ASSESSEE HAD PLACED RELIANCE ARE INTERNAL DOCUMENTS WHICH ARE UNDER TH E CONTROL OF THE ASSESSEE. THE VERY FACT THAT THE ANNUAL RETURNS WERE REVISED AFTER THE RECEIPT OF NOTICES U/S 148 ALSO GOES TO SUPPORT OF THE CASE OF REVENUE THAT THE ASSESSEE HAS CREATED INTERNAL EVIDENCES TO SUBSTANTIATE HER CLAI M OF TRANSFER OF SHARES. HENCE IN OUR VIEW THE AO WAS RIGHT IN LAW IN REJE CTING THE SAID DOCUMENTS AS SELF SERVING DOCUMENTS. THE ASSESSEE HAS MISERABLY FAILED TO BRING ON RECORD ANY THIRD PARTY EVIDENCE TO SUBSTANTIATE HER CLAIM OR TO CORROBORATE THE ENTRIES PASSED IN THE STATUTORY REGISTERS. I.T.A. NOS.346-351/2016 8 11. IT IS APPOSITE HERE TO EXTRACT THE FOLLOWIN G OBSERVATIONS MADE BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (82 ITR 540) @ 546:- SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TES T THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREF ORE THE COURTS AND TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE HEM BY APPLYING THE TEST OF HUMAN PROBABILITIES. IN THE INSTANT CASE AS STATED EARLIER THE DOCUMEN TS WHICH WERE RELIED UPON BY THE ASSESSEE ARE INTERNAL DOCUMENTS UNDER HER CONTR OL. HENCE IN OUR VIEW THE AO WAS JUSTIFIED IN PLACING RELIANCE ON THE ANNUAL RETURNS ORIGINALLY FILED WITH THE REGISTRAR OF COMPANIES. THE IMPORTANT POINT IS THA T THE COMPANY M/S KILBAN FOODS (INDIA) PVT LTD IS A CLOSELY HELD COMPANY WIT H FEW SHARE HOLDERS AND HENCE THE POSSIBILITY OF OMISSION IN REPORTING THE SHARE TRANSFERS IN THE ANNUAL RETURN IS BLEAK AND IN ANY CASE SUCH OMISSION WOUL D NOT CONTINUE FOR SEVEN CONTINUOUS YEARS I.E. FROM YEAR ENDING 31.3.99 TO 31.3.2005. THE FACT THAT THE ASSESSEE DID NOT DISCLOSE ANY CAPITAL GAIN ON SUCH TRANSFER OF SHARES IN THE ASSESSMENT YEAR 1999-2000 AND THE WEALTH STATEMENT FILED BY MR. KHALID FOR SUBSEQUENT YEARS ALSO CLEARLY PROVE THAT THE STORY OF TRANSFER OF SHARES IS CLEARLY AN AFTER THOUGT. 12. HENCE ON A CONSPECTUS OF THE MATTER WE AR E OF THE VIEW THAT THE CLAIM OF TRANSFER OF SHARES WAY BACK ON 25.9.1998 IS ONLY AN AFTERTHOUGHT ON THE PART OF THE ASSESSEE IN ORDER TO ESCAPE FROM THE CLUTCHES O F THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT RELATING TO THE DEEMED DIVIDEND S. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) AND ACCORDINGLY UPHOLD HIS ORDER. 13. IN THE RESULT THE APPEALS FILED BY THE ASS ESSEE ARE DISMISSED. I.T.A. NOS.346-351/2016 9 6.2 IN VIEW OF THE ORDER OF THE TRIBUNAL IN THE C ASE OF MS. LAILABI KHALID (SUPRA) WHICH IS IDENTICAL TO THE FACTS OF THE PRESENT CASE I HOLD THAT THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITIONS MADE BY THE ASSESSING O FFICER BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IT IS OR DERED ACCORDINGLY. 7. IN THE RESULT THE APPEALS FILED BY THE ASSE SSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19 TH -10-2016 SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE: KOCHI DATED: 19 TH OCTOBER 2016 GJ COPY TO: 1. SHRI M. KHALID SLK FOOD PROCESSING 12/328 POO VATTUPARAMBA KOZHIKODE. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE -1(1) KOZHIKODE. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS) KOZHIKO DE. 4. THE COMMISSIONER OF INCOME-TAX KOZHIKODE. 5. D.R. I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR ) I.T.A.T. COCHIN