DCIT, JODHPUR v. Shri Om Prakash Soni, JODHPUR

ITA 581/JODH/2013 | 2003-2004
Pronouncement Date: 09-04-2014 | Result: Dismissed

Appeal Details

RSA Number 58123314 RSA 2013
Assessee PAN ABQPS0600P
Bench Jodhpur
Appeal Number ITA 581/JODH/2013
Duration Of Justice 3 month(s) 16 day(s)
Appellant DCIT, JODHPUR
Respondent Shri Om Prakash Soni, JODHPUR
Appeal Type Income Tax Appeal
Pronouncement Date 09-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 09-04-2014
Date Of Final Hearing 03-04-2014
Next Hearing Date 03-04-2014
Assessment Year 2003-2004
Appeal Filed On 24-12-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.K.SAINI ACCOUNTANT MEMBER ITA NO. 581/JU/2013 ASSESSMENT YEAR: 2003-04 THE D.C.I.T VS. SHRI OM PRAKASH SONI CENTRAL CIRCLE -1 M/S SHRI RAM GUM & CHEMICAL S JODHPUR C-79 BASNI IIND PHASE JODHPUR PAN NO. ABQPS 0600 P (APPELLANT) (RESPONDENT) CO NO. 03/JU /2014 A/O ITA NO. 581/JU/2013 ASSESSMENT YEAR: 2003-04 SHRI OM PRAKASH SONI VS. THE D.C.I.T M/S SHRI RAM GUM & CHEMICALS CENTRAL CIRCLE -1 C-79 BASNI IIND PHASE JODHPUR JODHPUR PAN NO. ABQPS 0600 P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJENDRA JAIN DEPARTMENT BY : SHRI N.A. JOSHI DR DATE OF HEARING : 03.04.2014 DATE OF PRONOUNCEMENT : 09.04.2014 ORDER 2 PER HARI OM MARATHA J.M. THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT( A) DATED 14.11.2013 PERTAINING TO A.Y 2003-2004. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE SHRI OM PRAKASH SONI IS PARTNER IN M/S SHR I RAM GUM & CHEMICALS AND ALSO DIRECTOR IN A COMPANY NAME D M/S SHRI INDIA SINO GUM (P). LTD. HE FILED HIS RETU RN OF INCOME [ROI] FOR A.Y. 2003-04 IN FORM NO. 2D ON 30.5.2003 DECLARING TOTAL INCOME OF RS. 1 20 320/-. SUBSEQUENTLY A NOTICE U /S 148 OF THE INCOME-TAX ACT 1961 ['THE ACT' FOR SHORT] WAS IS SUED ON 25.3.2010 AFTER RECORDING REQUISITE REASONS FOR REOPENING. T HE ASSESSEE COMPLIED WITH THIS NOTICE AND ALSO FILED OBJECTIONS AGAINST THE REASSESSMENT PROCEEDINGS. HOWEVER ASSESSMENT WAS COMPLETED ON 20.12.2010 U/S 143(3) R.W.S 148 OF THE ACT AT A TOT AL INCOME OF RS. 63 74 845/-. THE A.O. HAS MADE ADDITION OF RS. 62 54 525/- U/S 2(22)(E) OF THE ACT. THE ASSESSEE IS STATED TO BE T HE KEY 3 MANAGEMENT PERSONNEL HOLDING 2 50 100 SHARES VALUED AT RS. 25 01 000/- IN THE COMPANY. THUS HE IS HOLDING 50 % SHARE OF M/S SHREE INDIA SINO GUM (P). LTD. AS PER THE AUDIT RE PORT THERE HAVE BEEN TRANSACTIONS WITHIN THE COMPANY AND THE FIRM. HE IS ALSO HAVING SUBSTANTIAL INTEREST IN THE FIRM. DURING TH E YEAR AS PER THE ASSESSMENT ORDER M/S SHREE RAM GUM & CHEMICALS TOO K LOAN OF RS. 1 31 20 000/- FROM M/S SHREE INDIA SINO GUM (P). LT D [COMPANY]. ACCORDING TO THE A.O. THIS AMOUNT TAKEN BY THE FIR M AS LOAN FROM THE COMPANY ATTRACTS THE PROVISIONS OF SECTION 2 (2 2)(E) OF THE ACT AS THE ASSESSEE HAS ULTIMATE BENEFICIARY HAVING SUB STANTIAL INTEREST IN BOTH THESE CONCERNS. AFTER SEEKING EXPLANATION F ROM THE ASSESSEE THE A.O. HAS RESTRICTED THE DEEMED DIVIDE ND TO RS. 1 25 09 050/- BEING ACCUMULATED PROFIT AND AFTER TR EATING 50% SHARE HOLDING IN THE COMPANY AS THE DEEMED DIVIDEND IN TH E HANDS OF THIS ASSESSEE HAS BEEN WORKED OUT TO RS. 62 54 525/- AND HAS BEEN ADDED IN HIS HANDS. AGGRIEVED THE ASSESSEE WENT B EFORE THE LD. CIT(A) WHO HAS FOUND FAVOUR WITH THE ASSESSEE AND H AS DELETED THE ADDITION OF RS. 62 54 525/-. NOW THE REVENUE IS AG GRIEVED AND HAS FILED THIS APPEAL. 4 3. THE ASSESSEE HAS FILED CROSS OBJECTION WHICH WA S NOT PRESSED AT THE TIME OF HEARING. HENCE THE CROSS OBJECTION IS DISMISSED AS NOT PRESSED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. WE HAVE FOU ND IT FOR A FACT THAT THE ASSESSEE SHRI OM PRAKASH SONI HAS 25% SHAR E HOLDING IN THE FIRM AND 50% SHARE HOLDING IN THE COMPANY. THE CAS E OF THE REVENUE IS THAT ANY LOAN OR ADVANCE MADE BY THE COM PANY TO THE FIRM IN WHICH BOTH THE ASSESSEE HAS SUBSTANTIAL INT EREST WOULD ATTRACT DEEMING PROVISION OF SECTION 2(22)(E) OF T HE ACT. AS PER THE ASSESSEE THERE HAS BEEN NO ADVANCE BY THE COMPANY AS HAS BEEN ALLEGED BY THE A.O. BUT THIS ADVANCE IS IN RELATIO N TO BUSINESS TRANSACTIONS ENTERED INTO LEGALLY BETWEEN THE FIRM AND THE COMPANY. THEREFORE BUSINESS TRANSACTIONS CANNOT FA LL UNDER THE CATEGORY OF ADVANCE IN THE SENSE IN WHICH IT HAS BE EN ENVISAGED IN SECTION 2(22)(E) OF THE ACT. IT IS FOUND FROM RECO RDS THAT THE FIRM AND THE COMPANY ARE INDULGING IN ORDINARY COURSE OF BUSINESS FOR LAST SEVERAL YEARS. WE HAVE FOUND FOR A FACT THAT THE ASSESSEE HAS NOT RECEIVED ANY LOAN EITHER FROM THE COMPANY OR FR OM THE FIRM. AT 5 ANY POINT OF TIME NO INVESTMENT OF THE ASSESSEE IN THE FIRM HAS BEEN NEGATIVED AND THERE WAS DEBIT BALANCE. THE AS SESSEE DID NOT RECEIVE ANY LOAN OR ADVANCE FROM THE FIRM. THUS N O AMOUNT CAN BE STATED TO HAVE BEEN DIRECTLY OR INDIRECTLY DIVERT ED TO HIM. AS PER THE LD. CIT(A)S ORDER THE ASSESSEE HAD SUBMITTED COPY OF BANK BOOK ON 1.4.2002 AND 31.32007 BEFORE THE A.O. AND FROM THIS BANK BOOK IT IS CLEARLY ESTABLISHED THAT NO AMOUNT WAS ADVANCED BY THE FIRM TO THE PARTNERS AND THERE WAS CREDIT BALANCE I N THE ACCOUNTS OF THE PARTNER AND AT NO POINT OF TIME THERE WAS DEBIT BALANCE IN THE ACCOUNT OF THE PARTNERS FROM THIS BANK BOOK. IT WA S ALSO ESTABLISHED THAT THERE WERE TRANSACTIONS BETWEEN TH E FIRM AND COMPANY IN THE ORDINARY COURSE OF BUSINESS AND NO A MOUNT RECEIVED BY THE FIRM HAD BEEN UTILIZED IN GIVING ADVANCE TO ANY OF THE PARTNERS INCLUDING THIS ASSESSEE. BEFORE THE A.O. THE ASSESSEE FILED COPY OF BANK BOOK COPY OF BANK ACCOUNT AND C OPIES OF BOOKS OF ACCOUNT OF THE FIRM TO SHOW THAT NO FUND WAS TRA NSFERRED TO THE PARTNERS SO AS TO ATTRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THERE WAS SUFFICIENT CAPITAL IN THE NAME OF T HE PARTNER IN THE BOOKS OF THE FIRM. THUS IN THIS BACKGROUND THE L D. CIT(A) HAS CONCLUDED THAT THE FIRM RECEIVED TRADE ADVANCES FRO M THE COMPANY 6 FOR SUPPLY OF PARTICULAR TYPE OF GUWAR GUM POWDER. IT IS NOTICED THAT IN THE PRECEDING YEAR ALSO THE FIRM HAS BEEN R ECEIVING SUCH ADVANCE S AND SELLING GUWAR GUM POWDER TO THE COMPA NY. THUS THE TRADE ADVANCES WERE FOR SUPPLY OF GOODS AND FAILING TO SUPPLY THE AGREED QUALITY AND QUANTITY OF GUWAR GUM POWDER IT WOULD RETURN THE MONEY BACK WITHOUT INTEREST. THUS FROM THE REC ORDS WE HAVE ALSO CONCLUDED THAT THE TRANSACTIONS BETWEEN THE CO MPANY AND FIRM ARE BUSINESS TRANSACTIONS AND AMOUNTS ADVANCED BY T HIS COMPANY TO THE FIRM IS ONLY ADVANCE FOR BUSINESS PURPOSE AND N OT AS LOAN. IN THE BALANCE SHEET OF THE COMPANY THE AMOUNT HAS BE EN SHOWN AS ADVANCE FOR BUSINESS PURPOSES. LIKEWISE IN THE BAL ANCE SHEET OF THE FIRM THIS AMOUNT HAS BEEN SHOWN UNDER THE HEAD UN SECURED LOAN. WE ARE IN AGREEMENT WITH THE LD. A.R. THAT THE NATURE OF THE TRANSACTIONS HAS TO BE DECIDED ON THE BASIS OF TRUE NATURE OF TRANSACTIONS AND NOT AS PER NOMENCLATURE GIVEN IN T HE BOOKS. IN THIS CASE THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF PRAKASH COTTON MILLS P. LTD. VS. CIT 201 ITR 684 [SC] AND P ADMARAJE R. KADAMBANDE VS. CIT 195 ITR 877 ARE RELEVANT. 7 5. IN A.Y. 2005-06 SIMILAR TRANSACTIONS HAVE BEEN ACCEPTED BY THE A.O. HIMSELF WHILE PASSING THE ORDER U/S 143(3) OF THE ACT ON 20.12.2007. WE HAVE FOUND THAT SIMILAR TRANSACTION S BETWEEN THE COMPANY AND THE FIRM WERE CARRIED OUT IN THE EARLIE R YEARS AND ON THE SAME FACTS NO ADVERSE INFERENCE WAS EVER DRAWN BY THE A.O. IN THE SUBSEQUENT YEARS ALSO SIMILAR TRANSACTIONS HAV E BEEN CARRIED ON BY THE ASSESSEE. THEREFORE THE RULE OF CONSISTENC Y DEMANDS THAT NO SUCH ADVERSE INFERENCE SHOULD BE DRAWN IN THIS Y EAR ALSO. AFTER EXAMINING EXTRACTS OF THE BOOKS OF ACCOUNT PRODUCED VIS-A-VIS THE ASSESSMENT ORDER THE LD. CIT(A) HAS FOUND THAT THI S IS NOT A CASE WHERE THE FIRM HAS BEEN USED AS A CONDUIT TO PASS O N THE MONEY RECEIVED BY THE ASSESSEE FROM THE COMPANY. HE HAS ALSO OBSERVED THAT NO LOAN HAS BEEN TAKEN BY THE ASSESSEE FROM TH E FIRM. HE HAS FURTHER OBSERVED THAT IT IS NOT A CASE OF THE A.O. THAT THE ADVANCE FROM THE COMPANY HAS BEEN ROUTED THROUGH SOME INDIR ECT CIRCUITOUS WAY TO ULTIMATELY REACH THE ASSESSEE. THE DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS BASED ON SUCH A PRES UMPTION ONLY. IT IS SETTLED POSITION OF LAW THAT ADVANCES MADE DURIN G NORMAL COURSE FOR COMMERCIAL EXPEDIENCY DO NOT CONSTITUTE LOAN FO R THE PURPOSE OF 8 SECTION 2(22)(E) OF THE ACT AND CANNOT BE TAXED AS DEEMED DIVIDEND. IN THIS REGARD THE FOLLOWING DECISIONS ARE RELEVANT: 1. CIT VS. RAJKUMAR 318 ITR 462 2. CIT VS. AMBASSADOR TRAVELS P. LTD. 318 ITR 376 3. CIT VS CREATIVE DYEING & PRINTING P LTD. 318 ITR 476 4. DCIT VS. TIMELESS FASHIONS P. LTD. 33 DTR 48 6. BUT THE LD. CIT(A) BIKANER IN ASSESSEES OWN CASE WHILE PASSING ORDER U/S 201(1)/201(1A) FOR A.YS. 2003-04 TO 2009-10 PASSED BY THE DCIT[TDS] JODHPUR IN THE CASE OF M/S SHREE INDIA SINO GUMS (P) LTD. HAS HELD THAT THE SAID COMPANY H AVING FAILED TO DEDUCT TAX AT SOURCE U/S 194 OF THE DEEMED DIVIDEND PAID BY THE COMPANY TO THE PARTNERS OF THE FIRM WAS ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. AGAINST THE SAID ORDER THE LD. CIT(A) HAS OBSERVED THAT A PERUSAL OF THE COPIES OF ACCOUNT OF THE ASSESSEE- COMPANY SHOWED THAT THEY WERE NORMAL BUSINESS TRANS ACTIONS. FROM THE ACCOUNT STATEMENT IT WAS NOT ESTABLISHED THAT THEY WERE FOR THE BENEFIT OF THE SHAREHOLDERS WHO WERE ALSO P ARTNERS IN THE FIRM. THEREFORE IT CANNOT BE SAID THAT THESE AMOU NTS CONSTITUTE A DIVIDEND EVEN UNDER THE DEEMING PROVISIONS. THE AB OVE ORDER OF 9 THE LD. CIT(A) BIKANER WAS CHALLENGED BEFORE THE I TAT WHO VIDE THEIR ORDER DATED 31.7.2013 HAVE CATEGORICALLY MENT IONED IN ORDER THAT PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT ATTRACTED IN THIS CASE. THUS WE FIND THAT THE PAYMENTS IN QUES TION WERE NORMAL BUSINESS TRANSACTIONS. IT IS NOT A CASE WHERE ONE CONCERN IS DEALING IN CHEESE AND THE OTHER IN CHALK. THESE PAYMENTS B Y THE COMPANY TO THE FIRM WERE FOR BUSINESS PURPOSES. ACCORDINGL Y WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND TH EREFORE CANNOT ALLOW THIS APPEAL. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED AND THE CROSS OBJECTION OF THE ASSESSEE ALSO STANDS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN THE COURT ON 9 TH APRIL 2014. SD/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9 TH APRIL 2014 VL/- 10 COPY TO: THE APPELLANT THE RESPONDENT THE CIT BY ORDER THE CIT(A) THE DR ASSISTANT REGISTRAR ITAT JODHPUR