I.T.O.WD.12(2)(1), MUMBAI v. PRAVIN D. DESAI, MUMBAI

ITA 5901/MUM/2008 | 2005-2006
Pronouncement Date: 21-05-2010 | Result: Allowed

Appeal Details

RSA Number 590119914 RSA 2008
Assessee PAN AAEPD4414F
Bench Mumbai
Appeal Number ITA 5901/MUM/2008
Duration Of Justice 1 year(s) 7 month(s) 25 day(s)
Appellant I.T.O.WD.12(2)(1), MUMBAI
Respondent PRAVIN D. DESAI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 21-05-2010
Date Of Final Hearing 09-04-2010
Next Hearing Date 09-04-2010
Assessment Year 2005-2006
Appeal Filed On 26-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI D MANMOHAN VICE PRESIDENT AND SHRI R K PANDA ACCOUNTANT MEMBER ITA NO 5901/MUM/2008 (ASSESSMENT YEAR: 2005-06) ITO -12(2)(1) AAYAKAR BHAVAN R NO 137 M K ROAD MUMBAI -400 020 VS PRAVIN D DESAI 207 PANCHSHEEL C ROAD CHURCHGATE MUMBAI -400 009 PAN : AAEPD 4414 F APPELLANT RESPONDENT APPELLANT BY: SHRI KESHAV SAXENA RESPONDENT BY: NONE ORDER PER R K PANDA AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 21 ST JULY 2008 OF THE CIT (A)-XII MUMBAI RELATING TO ASSESSME NT YEAR 2005-06. 2. THIS CASE WAS FIXED FOR HEARING ON A NUMBER OF T IMES AND WAS ADJOURNED AT THE REQUEST OF THE ASSESSEE. THE CASE WAS LAST FIXED F OR HEARING ON 28TH FEBRUARY 2010 AND AT THE REQUEST OF THE ASSESSEE THE CASE WAS AD JOURNED TO 9TH APRIL 2010 AS THE LAST OPPORTUNITY. HOWEVER ON 9.4.2010 NONE APPEAR ED ON BEHALF OF THE ASSESSEE WHEN THE NAME OF THE ASSESSEE WAS CALLED. ACCORDIN GLY THIS APPEAL IS BEING DISPOSED OF ON THE BASIS OF MATERIAL AVAILABLE ON R ECORD AND AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. 3. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER:- ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) HAS ERRED IN DELETING THE AMOUNT OF RS 10 LAKHS AS DEEM ED DIVIDEND U/S 2(22)(E) OF THE I.T. ACT WITHOUT APPRECIATING THE FACT THAT INCOME OF UNITS ON THE ASSESSEES INVESTMENT WERE NEVER PASSED TO THE ASSE SSEE ON REALISATION AND THE SAME WERE USED FOR PERSONAL USE. ITA 5901/M/2008 PRAVIN D DESAI 2 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS ING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE I S A DIRECTOR IN THE FOLLOWING COMPANIES FROM WHERE HE HAS TAKEN LOANS: 1. GAYATRI ESTATES AGRICULTURAL & ALLIED PRODUCTS PVT LTD RS.16 67 945 2. JAMBIVALI ESTATES AGRICULTURAL AND ALLIED PRODU CTS PVT LTD RS 21 79 854 3. ADVENT CORPORATION PVT LTD RS 7 06 532 5. CONSIDERING THE DIFFERENCE BETWEEN OPENING BALAN CE AND CLOSING BALANCE THE ASSESSING OFFICER OBSERVED THAT THERE WERE CREDITS DURING THE YEAR. HE THEREFORE ASKED THE ASSESSEE TO FURNISH LOAN CONFIRMATIONS IN RESPECT OF LOANS TAKEN FROM THESE COMPANIES ALONG WITH LEDGER ACCOUNT TO FIND OUT THE NATURE OF CREDITS. THE ASSESSING OFFICER ALSO ASKED THE ASSESSEE TO EXPLAIN AS TO WH Y THE PROVISIONS OF SECTION 2(22)(E) SHOULD NOT BE INVOKED IN HIS CASE. 6. IN RESPONSE TO THE SAME THE ASSESSEE REPLIED AS UNDER:- THE AMOUNTS SHOWN AS RECEIVED FROM COMPANIES ARE N OT LOAN. THE INVESTMENTS ARE MADE IN THE NAME OF DIRECTORS AND P ROPER DISCLOSURES ARE MADE IN THE ACCOUNTS OF THE COMPANY REGARDING T HE SAME. HENCE THE DIVIDENDS ARE RECEIVED IN THE NAME OF ASSESSEE WHICH IS LATER REMITTED TO THE COMPANY. THUS THE AMOUNTS SHOWN AS RECEIVED FROM COMPANY ARE ACTUALLY DIVIDEND RECEIVED FROM UTI IN RESPECT INVESTMENTS MADE IN THE NAME OF THE ASSESSEE. 7. THE ASSESSING OFFICER AGAIN ASKED THE ASSESSEE T O EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 2(22)(E) SHOULD NOT BE INVOKE D IN HIS CASE AS CREDITS DURING THE ACCOUNTING YEAR ARE APPEARING IN THE LOAN TAKEN FRO M THESE COMPANIES. HOWEVER IT WAS STATED BY THE ASSESSEE THAT HE HAD NOTHING MORE TO SAY EXCEPT THE SUBMISSION AS MADE EARLIER. 8. HOWEVER THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. HE OBSERVED THAT THE INVESTMENTS OWNED BY THE COMPANY SHOULD BE HELD IN THE NAME OF THE COMPANY ONLY. IF INCOME OF UNITS W AS RECEIVED ON BEHALF OF THE COMPANY FOR UNITS OWNED BY THE COMPANY THEN THE SA ME SHOULD HAVE BEEN PASSED ON TO THE COMPANY ON REALISATION. BY NOT PASSING O VER THE INCOME AND USING THE FUNDS FOR PERSONAL USE IS NOTHING BUT LOANS ADVANCE D BY THE COMPANY. HE OBSERVED THAT IN THE INSTANT CASE THE CREDITS ARE APPEARIN G IN THE LOAN ACCOUNT AND THE ITA 5901/M/2008 PRAVIN D DESAI 3 ASSESSEE IS ENJOYING THE BENEFIT BY CIRCULATING IT FOR HIS OWN. THEREFORE THE PROVISIONS OF SECTION 2(22)(E) ARE CLEARLY APPLICAB LE. HE NOTED FROM THE LEDGER ACCOUNTS OF THESE COMPANIES THAT IN THE CASE OF ADV ENT CORPORATION PVT LTD THE ASSESSEE HAS CREDITED DIVIDEND RECEIVED FROM RBI (N ET) RS 1 69 000/- AND IN JAMBIVALI ESTATES AGRICULTURAL AND ALLIED PRODUCTS PVT LTD (NET) RS (7 29 854). HE OBSERVED THAT THESE ARE THE CREDITS APPEARING IN TH E LOAN ACCOUNTS ON THE BASIS OF (NET). THUS THE ASSESSEE HAS NOT FURNISHED FULL T RANSACTIONS APPEARING IN THE LEDGER ACCOUNT FOR WHICH THE CREDITS APPEARING IN THE LEDG ER CANNOT BE IDENTIFIED. FURTHER ALL CREDITS APPEARING IN THE LOAN ACCOUNTS ARE TO B E CONSIDERED FOR THE PURPOSE OF DEEMED DIVIDEND. HE ACCORDINGLY ESTIMATED THE CR EDITS AT RS 10 LAKHS IN ABSENCE OF SUCH DETAILS AND TREATED THE SAME AS DEEMED DIVIDEN D WITHIN THE MEANING OF SECTION 2(22)(E) OF THE INCOME-TAX ACT. 9. BEFORE CIT (A) IT WAS SUBMITTED THAT THE ASSESS ING OFFICER HAD NO BASIS TO ESTIMATE AN AMOUNT OF RS 10 LAKHS AS THE DEEMED DIV IDEND IN THE HANDS OF THE ASSESSEE AN ACT WHICH IS NOT LEGAL AND NOT PROPER. FURTHER THE PROVISIONS OF SECTION 49 OF THE COMPANIES ACT LEGALLY ALLOW THE COMPANIES TO INVEST IN THE NAMES OF OTHER PERSONS. IT WAS SUBMITTED THAT INVESTMENTS WERE MA DE IN THE NAMES OF THE ASSESSEE WHO WAS DIRECTOR IN THESE COMPANIES BECAUSE INVESTM ENTS IN UTI / RBI WERE NOT ALLOWED / NOT PERMISSIBLE IN THE NAME OF THE COMPAN IES AT THE TIME OF SUCH INVESTMENTS. THEREFORE IN ORDER TO ENSURE THE COM PLIANCES OF INVESTMENT NORMS OF THE UTI / RBI AT THAT TIME THESE INVESTMENTS WERE M ADE IN THE NAME OF THE DIRECTOR IE THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE ENTIRE FUNDS USED FOR INVESTMENT IN UTI / RBI BELONGED TO THOSE COMPANIES ONLY AND T HE DIVIDEND RECEIVED FROM UTI IN RESPECT OF ALL SUCH INVESTMENTS WERE LATER DULY RET URNED BACK TO THE COMPANIES CONCERNED. THE AUDITED ACCOUNTS WERE ALSO FURNISHE D BEFORE CIT (A) WHEREIN IT WAS CLEARLY MENTIONED IN THE NOTES TO ACCOUNTS THAT THE SE INVESTMENTS OF THE COMPANIES HAVE BEEN MADE IN THE NAME OF THE DIRECTOR. 10. BASED ON THE SUBMISSIONS MADE BEFORE HIM THE C IT (A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WHILE DOING SO HE HELD THAT THE ASSESSEES CASE IS DIFFERENT FROM NORMAL PROVISIONS OF SECTION 2(22)(E ). THE COMPANIES WHICH HAVE ITA 5901/M/2008 PRAVIN D DESAI 4 INVESTED THEIR FUNDS IN THE NAME OF THE ASSESSEE DI RECTOR WERE DULY DISCLOSED SUCH INVESTMENTS IN THE NOTES TO THE AUDITED ACCOUNTS. THEREFORE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE TO THE PRESENT CASE. H E ACCORDINGLY DELETED THE ADDITION. AGGRIEVED WITH SUCH ORDER OF THE CIT (A) THE REVENUE IS BEFORE US. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITT ED THAT THE CIT (A) HAS NOT PROPERLY APPRECIATED THE FACTS OF THE CASE AND DELE TED THE ADDITION MADE BY THE ASSESSING OFFICER WHEN THE ASSESSEE HAS NOT TRANSFE RRED THE DIVIDENDS RECEIVED FROM UTI & RBI TO THE COMPANIES CONCERNED IMMEDIATELY ON RECEIPT OF THE SAME AND UTILISED IT FOR ITS PERSONAL BENEFIT. THEREFORE TH E PROVISIONS OF SECTION 2(22)(E) ARE CLEARLY APPLICABLE. IT IS IMMATERIAL THAT THE ASSE SSEE HAS RETURNED SUCH AMOUNTS SUBSEQUENTLY. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER BE UPHELD AND THAT OF CIT (A) BE SET ASIDE. 12. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY TH E LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE MATERIAL AVAILABLE O N RECORD. WE FIND IN THE INSTANT CASE THE DATE OF RECEIPT OF DIVIDEND BY THE DIRECT OR AND THE DATE OF TRANSFER OF THE SAME TO THE RESPECTIVE COMPANIES ARE NOT AVAILABLE SO AS TO FIND OUT AS TO WHEN SUCH AMOUNTS WERE TRANSFERRED TO THE COMPANIES. THE ACC UMULATED PROFITS OF THE COMPANIES FROM WHICH THE ASSESSEE HAS TAKEN THE MON EY FOR THE PURPOSE OF INVESTMENT ARE ALSO NOT AVAILABLE. FURTHER UNDER THE PROVISIONS OF SECTION 2(22)(E) THE SPECIFIC AMOUNTS HAS TO BE ADDED AND IT CANNOT BE ADDED ON ESTIMATE BASIS. WE FIND THAT THE CIT (A) WHILE DELETING THE ADDITION M ADE BY THE ASSESSING OFFICER HAS NOT ADDRESSED TO ALL THESE ISSUES AND HAS MERELY CA RRIED AWAY BY THE SUBMISSIONS OF THE ASSESSEE THAT IT HAD RETURNED THE DIVIDEND RECE IVED FROM UTI TO THE CONCERNED COMPANIES AND SUCH COMPANIES HAVE DISCLOSED THE SAM E IN THEIR AUDITED ACCOUNTS THAT THE INVESTMENTS HAVE BEEN MADE IN THE NAME OF THE DIRECTOR. IN VIEW OF SUCH NON-APPLICATION OF MIND BY CIT (A) WE IN THE INTER EST OF JUSTICE DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE CIT (A) FOR ADJUDICATION OF THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GRO UND RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ITA 5901/M/2008 PRAVIN D DESAI 5 13. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 21ST DAY OF MAY 2010. SD/- (D MANMOHAN) VICE PRESIDENT SD/- (R K PANDA) ACCOUNTANT MEMBER MUMBAI DATE: 21ST MAY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-XII MUMBAI. 4) THE CIT XII MUMBAI. 5) THE D.R. C BENCH ITAT MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T. MUMBAI ITA 5901/M/2008 PRAVIN D DESAI 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 9.4.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 3.5.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER