ACIT CEN CIR -34, MUMBAI v. RIYA RESORTS & PROPERTIES P. LTD, MUMBAI

ITA 5302/MUM/2009 | 2006-2007
Pronouncement Date: 21-05-2010 | Result: Dismissed

Appeal Details

RSA Number 530219914 RSA 2009
Assessee PAN AACCR3648P
Bench Mumbai
Appeal Number ITA 5302/MUM/2009
Duration Of Justice 8 month(s) 5 day(s)
Appellant ACIT CEN CIR -34, MUMBAI
Respondent RIYA RESORTS & PROPERTIES P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 21-05-2010
Assessment Year 2006-2007
Appeal Filed On 16-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI BEFORE SHRI N.V. VASUDEVAN JM & SHRI R.K. PANDA A M BEFORE SHRI N.V. VASUDEVAN JM & SHRI R.K. PANDA A M BEFORE SHRI N.V. VASUDEVAN JM & SHRI R.K. PANDA A M BEFORE SHRI N.V. VASUDEVAN JM & SHRI R.K. PANDA A M I.T.A. NO. 5302/MUM/2009 (ASSESSMENT YEAR 2006-07) ACIT-CC 34 R. NO. 104 FIRST FLOOR AAYAKAR BHAVAN MUMBAI-400 020 VS. VS. VS. VS. M/S. RIYA RESORTS & PROPERTIES PVT. LTD. GULAB BUILDING GROUND FLOOR 237 P.DMELLO ROAD FORT MUMBAI-400 001 PA: AACCR3648P APPELLANT APPELLANT APPELLANT APPELLANT RESPONDENT RESPONDENT RESPONDENT RESPONDENT APPELLANT BY: SHRI R.N. JHA RESPONDENT BY: SHRI A.K. GHOSH & MS. BHOOMIKA VORA O R D E R O R D E R O R D E R O R D E R DATE OF HEARING: 12.05.2010 DATE OF ORDER: 21.05.2010 PER R.K. PANDA AM: PER R.K. PANDA AM: PER R.K. PANDA AM: PER R.K. PANDA AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 17 TH APRIL 2009 OF THE CIT(A) CENTRAL-VI MUMBAI RELA TING TO ASSESSMENT YEAR 2006-07. 2. GROUNDS OF APPEAL NOS. 1 AND 2 BY THE REVENUE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) WAS NOT JUSTIFIED IN GRANTING RELIEF TO THE ASSESSEE OF RS.4 21 08 111/- ON ACCOUNT OF DEEMED DIVIDEND WITHOUT APPRECIATING THE PROVISIONS OF SE CTION 2(22)(E) AS WELL AS THE FACT THAT THE ASSESSEE HAS RECEIVED LOAN FROM COMPANY M/S. RIYA TOUR & TRAVELS LTD. (RTTL) WHEREIN AS WELL AS M/S. RIYA RESORTS & PROPERTIES LTD. MR. G.M.J. THAMPY HAS COMMON SHARE HOLDING AND HAS SUBSTANTIAL INTEREST I.E. MORE THA N 30% IN BOTH THE COMPANIES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT APPRECIATIN G THE CHRONOLOGICAL EVENTS OF THE CASE FROM WHICH IT IS OBVIOUS THAT THE ACTION OF THE ASSESSEE IS AN AFTERTHOUGHT TO AVOID THE CONSEQUENCE OF SECTION 2(22)(E). I.T.A. NO. 5302/MUM/2009 M/S. RIYA RESORTS & PROPERTIES PVT. LTD. ============================== 2 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS TAKEN UNSECURED LOAN OF RS.10 29 00 000/- FROM ANOT HER COMPANY M/S. RIYA TRAVELS & TOURS (INDIA) PVT. LTD. (RTTL) AND M R. G.M.J. THAMPY WHO WAS HOLDING 80% SHARE CAPITAL IN RIYA RESORTS & PROPERTIES PVT. LTD. (RRPL) WAS THE MANAGING DIRECTOR OF THE COMPA NY ADVANCING THE LOAN NAMELY RTTL AND HOLDING SUBSTANTIAL SHARE CAPI TAL (WHICH WAS ALWAYS MORE THAN 20% IN RTTL). ACCORDING TO THE AS SESSING OFFICER SHRI G.M.J. THAMPY WAS HOLDING 76.25% SHARE CAPITAL IN RRPL AS ON 31.03.2004 AND WAS HOLDING 80% OF THE SHARE CAPITAL IN RRPL AS ON 31.03.2006 AND THEREFORE PROVISIONS OF SEC. 2(22) (E) WERE APPLICABLE TO RRPL THE ASSESSEE. THE ASSESSING OFFICER ACCO RDINGLY CONFRONTED THE SAME TO THE ASSESSEE. IN RESPONSE TO THE SHOW CAUSE NOTICE IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT 76.25% SHA RES OF RRPL HELD BY SHRI G.M.J. THAMPY WAS TRANSFERRED TO MR. M.G. T HOMAS ON 15.10.2004. HOWEVER IT WAS CLAIMED THAT IN THE RE TURN OF INCOME FOR THE A.Y. 2006-07 FILED BY THE ASSESSEE DUE TO OVERS IGHT THE SHAREHOLDING WAS SHOWN AS UNDER: NAME PERCENTAGE OF SHAREHOLDING G.M.J. THAMPY 80% GRACY GEORGE 20% NITIN GEORGE JOHN 10% 10% TOTAL 110% IT WAS STATED THAT THERE WAS DEFINITELY SOME INADVE RTENT MISTAKE IN THE RETURN OF INCOME FILED BY THE ASSESSEE AS SH AREHOLDING OF THE COMPANY COULD NOT EXCEED 100% WHEREAS IN THE ABOVE SHAREHOLDING PATTERN IT WAS 110% WHICH WAS A MISTAKE APPARENT F ROM THE RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE VIDE LETTER DATED 07.11.008 CLARIFIED THAT WITH EFFECT FROM 15. 10.2004 THE SHARE HOLDING PATTERN OF RRPL WAS AS UNDER: NAME PERCENTAGE OF SHAREHOLDING M.G. THOMAS 76.25 GRACY GEORGE 22.75 NITIN GEORGE JOHN 1.00 TOTAL 100.00 I.T.A. NO. 5302/MUM/2009 M/S. RIYA RESORTS & PROPERTIES PVT. LTD. ============================== 3 2.2 THE ASSESSEE VIDE LETTER DATED 17.11.2008 SUBMITT ED COPY OF ANNUAL RETURN FILED WITH ROC FOR THE FINANCIAL YEAR ENDING ON 31.03.2005 WHICH WAS FILED ON 09.07.2008 AND COPY OF SHARE TRANSFER FORMS DATED 05.10.2004 FILED WITH ROC TO SUBSTANTI ATE THAT 76.25% SHARES HELD BY SHRI G.M.J. THAMPY WERE TRANSFERRED TO SHRI M.G THOMAS ON 15.20.2004. 2.3 THE ASSESSING OFFICER REJECTED THE ASSESSEES CLAI M ON THE GROUND THAT THE SHARES HELD BY SHRI G.M.J. THAMPY W ERE TRANSFERRED TO SHRI M.G. THOMAS AS AN AFTER THOUGHT IN ORDER TO AV OID THE IMPLICATIONS OF THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT. THE ASSESSING OFFICER THEREFORE MADE THE ADDITIONS IN THE HANDS OF THE A SSESSEE U/S. 2(22)(E) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD ACCEPTED THE LOAN FROM RTTL AND THERE WAS A COMMON SHARE HOLDER IN MR. G.M.J. THAMPY WHO WAS HOLDING MORE THAN 20% SHARES IN BOT H THE COMPANIES DURING THE PERIOD WHEN THE LOAN WAS TAKEN . HE ACCORDINGLY MADE AN ADDITION OF RS.4 21 08 111/- AS DEEMED DIVI DEND U/S.2(22)(E) OF THE I.T. ACT. 2.4 BEFORE CIT(A) IT WAS SUBMITTED THAT G.M.J. THAMPY W AS NOT HOLDING ANY SHARES IN RRPL AND THEREFORE NO ADDIT ION COULD BE MADE IN THE HANDS OF THE ASSESSEE U/S. 2(22)(E) OF THE A CT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE COMPANY WAS NOT A SHARE HOLDER IN RTTL WHO HAD ADVANCED THE MONEY TO THE ASSESSEE FOR WHIC H ADDITION HAD BEEN MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. SINCE THE ASSESSEE WA S NOT A SHAREHOLDER IN RTTL THE ADDITION U/S. 2(22)(E) COULD NOT BE MA DE IN THE HANDS OF THE ASSESSEE IN RESPECT OF ANY LOAN OR ADVANCE GIVE N BY RTTL TO THE ASSESSEE. RELYING ON A NUMBER OF DECISIONS IT WAS SUBMITTED THAT LOAN FROM A COMPANY COULD BE DEEMED TO BE DIVIDEND U/S. 2(22)(E) ONLY IF A LOAN WAS RECEIVED BY THE SHAREHOLDER. 2.5 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND RELYING ON VARIOUS DECISIONS INCLUDING THE DECISION OF THE SPECIAL BENCH OF THE I.T.A. NO. 5302/MUM/2009 M/S. RIYA RESORTS & PROPERTIES PVT. LTD. ============================== 4 TRIBUNAL IN THE CASE OF ACIT VS. BHAUMIK COLOUR PVT . LTD. REPORTED IN 120 TTJ 865 THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE IS NOT A SHAREHOLDER OF THE LENDER COMPANY . AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 2.6 AFTER HEARING BOTH THE SIDES WE FIND THE CIT(A) HA S GIVEN A CLEAR-CUT FINDING THAT THE ASSESSEE COMPANY IS NOT A SHAREHOLDER OF THE LENDER COMPANY VIZ. RTTL. THE LEARNED DR COULD NO T CONTROVERT THE ABOVE FACTUAL FINDING GIVEN BY THE CIT(A). SINCE T HE CIT(A) HAS DELETED THE ADDITION BY FOLLOWING THE DECISION OF T HE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMIK COLOUR PVT. LTD . (SUPRA) AND IN ABSENCE OF ANY DISTINGUISHABLE FEATURES BROUGHT BEF ORE US BY THE LEARNED DR WE FIND NO INFIRMITY IN THE ORDER OF TH E CIT(A) AND ACCORDINGLY THE SAME IS UPHELD. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 3. GROUNDS OF APPEAL NO. 3 BY THE REVENUE READS AS UND ER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) WAS NOT JUSTIFIED IN GRANTING RELIEF OF RS.10 00 000/- TO THE ASSESSEE WITHOUT APPRECIATING THE ACCOUNTING PRINCIPLE I.E. IF ANY INFRUCTUOUS LIABI LITY IS REFLECTED IN BALANCE SHEET THE SAME INFRUCTUOUS AS SET WILL ALSO BE REFLECTED IN THE BALANCE SHEET. 3.1 FACTS OF THE CASE IN BRIEF ARE THAT DURING THE AS SESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT IN SC HEDULE-V TO THE BALANCE SHEET UNDER THE HEAD CURRENT LIABILITIES A N AMOUNT OF RS.14 80 578 WAS APPEARING IN THE NAME OF REGISTER ED OFFICE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FILED THE BREAK UP OF THE SAID AMOUNT AS UNDER: PARTICULARS AMOUNT (RS.) ADVANCE FOR SALE OF UN-PROTECTIVE RUBBER PLANTS 4 3 3 498 FEDERAL BANK (FDR RS.10 00 000)+(37 944 INTEREST) 1 0 37 944 PROVISION FOR TAX 4 145 EXPENSES PAYABLE 5 000 TOTAL 14 80 578 ON BEING QUESTIONED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO EXPLAIN THE NATURE OF THE LIABILITY SHOWN I.T.A. NO. 5302/MUM/2009 M/S. RIYA RESORTS & PROPERTIES PVT. LTD. ============================== 5 IN THE NAME OF FEDERAL BANK ON THE LIABILITY SIDE O F THE BALANCE SHEET THE ASSESSEE SUBMITTED THAT THE FDR OF RS.10 00 000 PLUS INTEREST OF RS.37 944 WAS RECEIVED AS MATURITY OF FDR AND THE S AME WAS WRONGLY SHOWN IN THE ACCOUNT HEAD OF REGISTERED OFFICE UN DER THE MAIN HEAD CURRENT LIABILITIES IN THE BALANCE SHEET. IT WAS ALSO STATED THAT INTEREST ON FDR OF RS.37 944 WAS OFFERED TO TAX IN THE RETURN OF INCOME FOR THE A.Y. 2007-08. THE ASSESSING OFFICER HOWEV ER REJECTING THE EXPLANATION HELD THAT THE ASSESSEE HAD SHOWN THE FI CTITIOUS LIABILITY IN THE NAME OF REGISTERED OFFICE AND ACCORDINGLY ADD ED THE SAME TO THE RETURN OF INCOME BEING EXCESS OF ASSETS OVER LIABIL ITIES. 3.2 BEFORE CIT(A) IT WAS SUBMITTED THAT THE ASSESSEE WA S ENGAGED IN AGRICULTURAL ACTIVITY IN REMOTE VILLAGES IN THE STATE OF KERALA WHERE THE ACCOUNTS WERE BEING MAINTAINED WHICH IS EVIDENT FRO M THE FACT THAT THE AUDITOR WAS BASED IN THE STATE OF KERALA. DURING T HE PREVIOUS YEAR RELEVANT TO THE A.Y. 2005-06 THE ASSESSEE MADE AN F DR OF RS.10 00 000/- WITH FEDERAL BANK OF INDIA WHICH WAS EVIDENT FROM SCHEDULE-VI OF THE BALANCE SHEET. DURING THE PREVI OUS YEAR RELEVANT TO THE A.Y. 2006-07 AND MORE PRECISELY ON 16.6.2005 TH E SAID FD ACCOUNT WAS CLOSED AND THE MATURITY VALUE OF RS.10 37 944 W AS CREDITED IN THE BANK ACCOUNT WITH FEDERAL BANK WHICH WAS EVIDENT F ROM THE COPY OF BANK STATEMENT ENCLOSED. HOWEVER AT THE TIME OF M AKING ENTRY IN THE BOOKS OF ACCOUNT AT THE PLANTATION SITE THE ACCOUN TANT FAILED TO UNDERSTAND THE NATURE OF CREDIT OF RS.10 37 944 APP EARING IN THE BANK STATEMENT OF FEDERAL BANK ON 16.6.2005. HE THEREF ORE PASSED AN ENTRY IN THE BOOKS BY DEBITING THE BANK BY RS.10 37 944 AND CREDITING REGISTERED OFFICE BY RS.10 37 944. IT WAS UNDER THESE CIRCUMSTANCES THAT THE REGISTERED OFFICE WAS CREDITED BY RS.10 37 944 IN THE BOOKS OF ACCOUNT MAINTAINED AT THE PLANTATION SITE AND TH EREFORE THE SAME WAS APPEARING IN THE BALANCE SHEET UNDER THE HEAD CURRENT LIABILITIES. THOUGH THE FIXED DEPOSIT ACCOUNT WAS CLOSED ON 16.6 .2005 THE FIXED DEPOSIT OF RS.10 00 000 WITH FEDERAL BANK WAS APPEA RING IN THE BALANCE SHEET AS ON 31.3.2006 BECAUSE OF THE FACT T HAT INSTEAD OF CREDITING FIXED DEPOSIT ACCOUNT AND INTEREST ON FIXED DEPOSIT THE I.T.A. NO. 5302/MUM/2009 M/S. RIYA RESORTS & PROPERTIES PVT. LTD. ============================== 6 ACCOUNTANT CREDITED THE REGISTERED OFFICE IN THE BOOKS OF ACCOUNT. THE MISTAKE WAS DETECTED IN THE NEXT YEAR AND THE R ECTIFICATION ENTRY WAS PASSED. EVEN THE INTEREST ON FIXED DEPOSIT OF RS.37 944 WAS OFFERED TO TAX IN THE A.Y. 2007-08 AS A PRIOR PERIO D ITEM. IN VIEW OF THESE SUBMISSIONS IT WAS CLAIMED THAT THE ADDITION MADE BY THE ASSESSING OFFICER WAS LIABLE TO BE DELETED. 3.3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE TH E LEARNED CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: 5.3 I HAVE CONSIDERED THE FACTS OF THE ISSUE AS WE LL AS THE WRITTEN SUBMISSIONS MADE BY THE AR. A PERUSAL OF THE COPIES OF ACCOUNT OF FD WITH FEDERAL BANK LTD. AN D THE LEDGER ACCOUNTS OF REGISTERED OFFICE AS ON 31.3.2 006 AND 31.6.2007 CLEARLY BRINGS OUT THAT THE CONTENTIO N OF THE ASSESSEE IS CORRECT. THE FACT THAT THE FD IN QUEST ION HAVING ALREADY MATURED ON 16.6.2005 CONTINUED TO AP PEAR AS AN OPENING BALANCE AS ON 1.4.2006 INDICATES THE WRONG ENTRY HAVING BEEN MADE UNDER THE HEAD REGIST ERED OFFICE. A SIMILAR MISTAKE IN RESPECT OF INTEREST INCOME OF RS.37 944 IS ALSO APPARENT. HENCE THE ADDITION OF RS.10 00 000 MADE BY THE AO IN RESPECT OF THE SAID FD HAVING BEEN WRONGLY CREDITED IN THE REGISTERED OFFI CE ACCOUNT IS DELETED. HOWEVER REGARDING THE BALANCE AMOUNT OF RS.37 944 THE ADDITION MADE IS CONFIRMED SINCE THE SAID AMOUNT ACTUALLY REPRESENTED THE INCO ME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. HOW EVER THE AO MAY ALLOW THE NECESSARY RELIEF IN THE A.Y. 2 007-08 IN RESPECT OF SUCH INTEREST INCOME IF THE SAME IS WRONGLY SHOWN AS INCOME IN THAT YEAR. THIS GROUND OF APPEA L IS THEREFORE PARTLY ALLOWED. 3.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENU E IS IN APPEAL BEFORE US. 3.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BOTH THE SIDES AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). THE LEARNED DR COULD NOT CONTROVERT THE FACTUAL FINDING S GIVEN BY THE CIT(A) THAT THE FD IN QUESTION HAVING ALREADY MATURED ON 1 6 TH JUNE 2005 CONTINUED TO APPEAR AS AN OPENING BALANCE AS ON 1 ST APRIL 2006 INDICATES THAT A WRONG ENTRY HAS BEEN MADE UNDER TH E HEAD REGISTERED OFFICE INSTEAD OF CREDITING THE SAME TO THE FD ACC OUNT WITH FEDERAL BANK. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) I.T.A. NO. 5302/MUM/2009 M/S. RIYA RESORTS & PROPERTIES PVT. LTD. ============================== 7 AND ACCORDINGLY THE SAME IS UPHELD. THE GROUND RAI SED BY THE REVENUE IS ACCORDINGLY DISMISSED. 4. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ON 21ST MAY 2010. SD/ SD/ SD/ SD/- -- - (N.V. VASUDEVAN) (N.V. VASUDEVAN) (N.V. VASUDEVAN) (N.V. VASUDEVAN) JUDICIAL MEMBER SD/ SD/ SD/ SD/- -- - ( (( (R.K. PANDA R.K. PANDA R.K. PANDA R.K. PANDA) )) ) ACCOUNTANT MEMBER MUMBAI DATED 21ST 21ST 21ST 21ST MAY 2010 MAY 2010 MAY 2010 MAY 2010 COPY TO: (1) THE APPELLANT (2) THE RESPONDENT (3) THE CIT(A) CENTRAL-VI MUMBAI (4) THE CIT CENTRAL-III MUMBAI (5) THE DR D BENCH ITAT MUMBAI. //TRUE COPY// //TRUE COPY// //TRUE COPY// //TRUE COPY// / / TRUE COPY / / / / TRUE COPY / / / / TRUE COPY / / / / TRUE COPY / / BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO I.T.A. NO. 5302/MUM/2009 M/S. RIYA RESORTS & PROPERTIES PVT. LTD. ============================== 8 DATE INITIALS DRAFT DICTATED ON 13. 10.2010 SR. P.S. DRAFT PLACED BEFORE THE AUTHOR 14.10.2010 SR. P. S. DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER AM/JM DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM APPROVED DRAFT COMES TO THE SR. PS SR. P.S. KEPT FOR PRONOUNCEMENT ON SR. P.S. FILE SENT TO THE BENCH CLERK SR. P.S. DATE ON WHICH FILE GOES TO THE HEAD CLERK DATE OF DISPATCH