Shivaji Bhagwanrao Jadhav,, Pune v. Deputy Commissioner of Income-tax,,

ITA 698/PUN/2015 | 2006-2007
Pronouncement Date: 28-11-2017 | Result: Allowed

Appeal Details

RSA Number 69824514 RSA 2015
Assessee PAN AAKPJ7226M
Bench Pune
Appeal Number ITA 698/PUN/2015
Duration Of Justice 2 year(s) 6 month(s) 14 day(s)
Appellant Shivaji Bhagwanrao Jadhav,, Pune
Respondent Deputy Commissioner of Income-tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted A
Tribunal Order Date 28-11-2017
Date Of Final Hearing 21-11-2017
Next Hearing Date 21-11-2017
Assessment Year 2006-2007
Appeal Filed On 14-05-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE . BEFORE MS. SUSHMA CHOWLA JM AND SHRI D. KARUNAKAR A RAO AM . / ITA NOS.677 & 678/PUN/2015 / ASSESSMENT YEARS : 2005-06 TO 2006-07 DCIT CENTRAL CIRCLE-2(1) PUNE . /APPELLANT VS. SHRI SHIVAJI BHAGWANRAO JADHAV ROW HOUSE NO.79/80 HIMALI CO.OP HOUSING SOCIETY ERANDWANE PUNE 411 004 PAN : AAKPJ7226M . / RESPONDENT . / ITA NO.698/PUN/2015 / ASSESSMENT YEAR : 2006-07 SHRI SHIVAJI BHAGWANRAO JADHAV ROW HOUSE NO.79/80 HIMALI CO.OP HOUSING SOCIETY ERANDWANE PUNE 411 004 PAN : AAKPJ7226M . /APPELLANT VS. DCIT CENTRAL CIRCLE-2(1) PUNE . / RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI AJAY MODI JCIT / DATE OF HEARING : 21.11.2017 / DATE OF PRONOUNCEMENT: 28.11.2017 / ORDER PER D. KARUNAKARA RAO AM : THERE ARE 3 APPEALS UNDER CONSIDERATION INVOLVING ASSESS MENT YEARS 2005-06 2006-07. THE APPEAL ITA NO.677/PUN/201 5 IS FILED BY THE REVENUE AND IT RELATES TO A.Y. 2005-06. FURTHER THE ITA NO.678/PUN/2015 AND ITA NO. 698/PUN/2015 FILED BY THE R EVENUE AND ASSESSEE RESPECTIVELY ARE THE CROSS APPEALS RELATING TO A.Y. 2006 -07. ITA NOS.677 678 & 698/PUN/2015 SHRI SHIVAJI B. JADHAV 2 2. BACKGROUND FACTS OF THE ASSESSEE AND THE APPEALS INC LUDE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF EXECUT ION OF IRRIGATION CONTRACTS AND THE GENERATION OF ENERGY FROM W INDMILLS. SHRADDHA CONSTRUCTION COMPANY IS THE FLAGSHIP COMPANY OF THE SHRADDHA GROUP OF CASES. THERE WAS SEARCH AND SEIZURE ACTION IN SHRADDHA GROUP OF CASES ON 08-09-2010. THEREFORE THE A SSESSMENTS IN THESE CASES WERE COMPLETED U/S.153A R.W.S. 143(3) OF THE A CT. WE SHALL NOW TAKE UP THE ASSESSMENT YEAR-WISE ADJUDICATION OF TH E APPEALS FILED BY BOTH THE REVENUE AND THE ASSESSEE. ITA NO.677/PUN/2015 (BY REVENUE A.Y. 2005-06) 3. IN THIS APPEAL REVENUE RAISED THE FOLLOWING GROUND CONT AINING COUPLE OF ISSUES NAMELY (1) ADDITION ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT; AND (2) ADDITION ON ACCOUNT OF MUNICIPA L VALUE OF A PROPERTY UNDER THE HEAD INCOME FROM HOUSE PROPERTY. FOR THE SAKE OF REFERENCE GROUND IS EXTRACTED AS UNDER : 01. ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DEEMED DIVIDEND AND INCOME FROM HOUSE PROPERTY BY MERELY RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MURALI AGRO PRODUCTS LTD. 49 TAXMANN.COM 172 (BOM. HC) AND WITHOUT APPRECIATING THE MERIT OF THE CASE. THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT ASSESSMENT U/S.153A IS AN INDEPENDENT PRO CEEDING AND THERE IS NO REQUIREMENT IN THE STATUTE THAT FOR MAKING ADDIT ION WHILE MAKING ASSESSMENTS U/S.153A SOME ADDITION SPECIFIC INCRIMIN ATING MATERIAL SHOULD HAVE BEEN SEIZED DURING THE COURSE OF THE SE ARCH . 4. BACKGROUND FACTS OF THESE ISSUES INCLUDE THAT THE ASS ESSEE IS A SHAREHOLDER IN M/S. SHRADDHA ENERGY AND INFRA PROJECTS PVT. LTD. AO NOTED THAT THE ASSESSEE RECEIVED LOANS/ADVANCES DURING THE YEAR FROM THE SAID COMPANY. ACCORDINGLY ON CONSIDERING THAT THE ASSESSEE ITA NOS.677 678 & 698/PUN/2015 SHRI SHIVAJI B. JADHAV 3 COMPANY HAS 10% SHARE HOLDING IN THE SAID COMPANY WHICH HAS RESERVES THE AO INVOKED THE PROVISIONS OF SECTION 2(22)(E) O F THE ACT AND MADE THE ADDITION UNDER THE SAID SECTION TO THE EXTENT OF AVAILABLE RESERVES. AS PER THE CURRENT YEAR BALANCE SHEET OF TH E COMPANY RS.75 19 436/- IS THE RESERVES. IT INCLUDES CURRENT YEAR PROFITS TOO. ACCORDINGLY AS PER THE LAW AO EXCLUDED THE CURRENT YEA R PROFITS AND RESTRICTED THE ADDITION TO BALANCE OF RS.45 13 855/- ON RESERVE ACC OUNT. 5. DURING THE FIRST APPELLATE PROCEEDINGS THE ASSESSEE O BJECTED AND SUBMITTED THAT SUCH ADDITION IS UNSUSTAINABLE IN SEARCH AS SESSMENTS AS IT IS THE CASE OF NON-ABATED ASSESSMENT AND THE ADD ITION IS NOT BASED ON ANY INCRIMINATING MATERIALS SEIZED DURING THE SAID SEARCH AC TION ON THE ASSESSEE OR OTHERWISE. THIS IS A CASE WHERE ASSESSMENT U/S.143(3) OF THE ACT WAS ALREADY COMPLETED ON 28-03-2013. CIT(A) CONSIDER ED THE SAME AND DELETED THE ADDITION AS PER THE DISCUSSION GIVEN IN P ARA NOS. 2.1.3 TO 2.1.5 OF HIS ORDER. 6. IN THE BACKGROUND OF THE SAID FACTS BEFORE US LD. CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION U/S.2(22)(E) OF THE ACT IS UNDISPUTEDLY MADE IN THE SEARCH ASSESSMENT U/S.153A OF THE ACT AND WITHOUT HAVING THE STRENGTH OF ANY INCRIMINATING MATERIAL S EIZED DURING THE SEARCH ACTION. HE ALSO SUBMITTED THAT THIS IS A CASE OF NON-ABATED ASSESSMENT AND IN SUCH CASE THE ADDITION IF ANY NEEDS TO BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL. IN THIS REGARD HE R ELIED ON VARIOUS DECISIONS INCLUDING THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MURLI AGRO PRODUCTS LTD. 49 TAXMANN.C OM 172 AND MANY OTHERS RELEVANT FOR SIMILAR LEGAL PROPOSITION. 7. LD. DR FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE AO. ITA NOS.677 678 & 698/PUN/2015 SHRI SHIVAJI B. JADHAV 4 8. ON HEARING BOTH THE PARTIES ON THIS LEGAL ISSUE WE PERU SED THE ORDER OF THE CIT(A) AND FIND THE PARA NOS. 2.1.4 AND 2.1.5 AR E RELEVANT AND THE SAME ARE EXTRACTED AS UNDER : 2.1 . 4 HOWEVER AS FAR AS THE LEGALITY OF THE ADDITIONS MADE BY THE LEARNED AO IN THE ASSESSMENT ORDER IS CONCERNED I FIND THAT IN THIS CASE THE ORIGINAL ASSESSMENT ORDER U/S. 143(3) WAS PASSED BY THE LEARNED AO ON 07.12.2007 . THE APPELLANT HAS ACCEPTED THE ASSESSMENT ORDER AND DID NOT FILE APPEAL AGAINST THE SAME. THE HONORABLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT V MURLI AGRO PRODUCTS LTD 49 TAXMANN . COM 172 (BOM) (HC) HAS HELD THAT WHEN THE ORDER IS ALREADY PASSED U/S. 143(3) THE AO CANNOT MAKE THE ADDITION IN THE ASSESSMENT ORDER PASSED U/S. 153A IN ABSENCE OF THE SEIZED MATERIAL FOUND DURING THE SEARCH. IN OTHER WORDS WHEN THE ASSESSMENT HAS ATTAINED FINALITY THE SAME CANN OT BE DISTURBED WITHOUT INCRIMINATING MATERIAL FOUND DURING SEARCH. 2.1.5 I FIND THAT THE ADDITIONS MADE BY THE LEARNED AO IN THE ORDER PASSED U/S 153A ARE NOT BASED ON THE SEIZED MATERIAL OR INCRIMINATING DOCUMENTS SEIZED DURING THE SEARCH . CONSIDERING THE FACT THAT THE ADDITIONS MADE BY THE LEARNED AO ARE NOT BASED ON THE INCRIMINATING MATERIAL THE ADDITIONS CANNOT BE SUST AINED. ACCORDINGLY I DELETE THE ADDITIONS OF RS 45 13 855 MADE ON ACCOUN T OF THE DEEMED DIVIDEND AND ADDITION OF RS.9 57 279 AS DEEMED RENT AL INCOME FROM THE PROPERTIES. 9. CONSIDERING THE ABOVE FINDING OF THE CIT(A) WHICH IS IN TUN E WITH THE BINDING DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MURLI AGRO PRODUCTS LTD. (SUPRA) WE ARE OF THE VIEW THE O RDER OF THE CIT(A) ON THIS ADDITION IS FAIR AND REASONABLE. IT DOES NO T CALL FOR ANY INTERFERENCE. ACCORDINGLY THIS PART OF THE GROUND OF THE REVENUE IS DISMISSED. 10. REGARDING THE OTHER LIMB OF THE GROUND RELATING TO THE ADDITION OF RS.9 57 279 FOR TAXING THE SAME UNDER THE HEAD INCOME FRO M HOUSE PROPERTY SIMILAR ARGUMENT IS RAISED BEFORE US. THERE IS N O DISPUTE ON THE FACT THAT THE PRESENT ASSESSMENT IS A NON-ABATE D ASSESSMENT AND NO INCRIMINATING MATERIAL IS SEIZED AND RELIED UPON BY THE DE PARTMENT IN ORDER TO SUPPORT THE SAID ADDITION OF RS.9 57 279/-. FOR THE SAME ITA NOS.677 678 & 698/PUN/2015 SHRI SHIVAJI B. JADHAV 5 REASONS DISCUSSED BY THE CIT(A) IN PARA NOS. 2.1.4 AND 2.1. 5 WHICH ARE ALREADY EXTRACTED ABOVE WE ARE OF THE OPINION THAT THE OTHER LIMB OF GROUND NO.1 IS ALSO DISMISSED. ACCORDINGLY THE ONLY GROU ND RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT APPEAL OF THE REVENUE FOR A.Y. 2005-06 IS DISMISSED. 12. WE SHALL TAKE UP THE CROSS APPEALS FOR A.Y. 2006-07. ITA NO.678/PUN/2015 (BY REVENUE 2006-07) ITA NO.698/PUN/2015 (BY ASSESSEE 2006-07) 13. GROUNDS RAISED BY THE REVENUE IN ITA NO.678/PUN/2015 READS AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCE 0 HE CASE THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE B Y THE A .O. ON ACCOUNT OF DEEMED DIVIDEND BY RELYING ON THE DECISION OF NAVANITLAL JHAVARI V S. CIT (1971) 80 ITR 582 (SC) . THE LD . CIT ERRED BY NOT APPRECIATING THAT THIS DECISION IS NOT APPLICABLE ON THE ISSUE O F ACCUMULATED PROFITS. IN THIS CASE L AW ON THE ISSUE OF ACCUMULATED PROFIT THE APEX COURT HAD ONLY EXPRESSED I TS OPINION W . R . T . THE DEDUCTION OF DEPRECIATION IN ACCORDANCE TO THE INCOME TAX ACT AS AGAINST THE DEPRECIATION IN ACCO R DANCE TO THE COMPANIES ACT WHILE COMPUTING ACCUMULATED PROFITS . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD . CIT(A) WA S NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE A. O . ON ACCOUNT OF INCOME FROM LET OUT PROPERTIES WITHOUT APPRECIATING THAT MUNICIPAL VALUE DOES NOT REPRESENT THE FAIR RENT WHICH A PROPERTY CAN FE TCH IF LET OUT. IT IS COMPUTED VER Y MECHANICALL Y BY THE CORPORATION AND IS NOT REVISED PERIODICALLY . 14. THE REVENUE ALSO FILED AN ADDITIONAL GROUND WHICH READS AS UNDER : THE CIT(A)-12 PUNE ERRED IN LAW AND ON FACTS IN A FFIRMING THE ADDITION OF RS.50 76 578/- ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T. ACT 1961 MADE BY THE LEARNED AO. THE LD. I.T. AUTHORI TIES OUGHT TO HAVE APPRECIATED THAT NO ANY INCRIMINATING MATERIAL WAS FOUND W.R.T. ISSUE OF DEMAND DIVIDEND DURING THE SEARCH PROCEEDING U/S.13 2 OF THE I.T. ACT 1961. 15. GROUNDS RAISED BY THE ASSESSEE READS AS UNDER : ITA NOS.677 678 & 698/PUN/2015 SHRI SHIVAJI B. JADHAV 6 1. THE HONBLE CIT(A)-12 PUNE ERRED IN LAW AND ON FAC TS IN AFFIRMING ADDITION OF RS.50 76 578/- AS DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T. ACT 1961 MADE BY THE LD. AO. 2. THE HONBLE CIT(A)-12 PUNE ERRED IN LAW AND ON FAC TS IN AFFIRMING ADDITION OF RS.50 00 000/- AS DEEMED U/S.2(22)(E) OF THE I.T. ACT 1961 ; WITHOUT APPRECIATING THAT THE AMOUNT OF RS.50 00 00 0/- WAS NOT ADVANCED/PAID TO THE APPELLANT. THE HONBLE CIT(A) -12 PUNE FURTHER ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE SA ID TRANSACTION WAS A SIMPLE RESTRUCTURING AND NO ANY LOAN/DEPOSIT WAS EX TENDED BY M/S. SHRADDHA CONSTRUCTION & POWER GENERATION PVT. LTD. TO THE APPELLANT. 16. BEFORE US LD. COUNSEL FOR THE ASSESSEE AND THE LD. D R FOR THE REVENUE SUBMITTED THAT REVENUE IS AGGRIEVED AGAINST THE RELIEF GRANTED BY THE CIT(A) IN MATTERS RELATING TO (1) DEEMED DIVIDEND U/S .2(22)(E) OF THE ACT AND ALSO THE (2) TAXABILITY OF PROPERTY INCOME UND ER THE HEAD INCOME FROM PROPERTY. REFERRING TO THE ADDITION OF DEEM ED DIVIDEND LD. DR FOR THE REVENUE SUBMITTED THAT THE AO DISALLOWED T HE AMOUNT OF RS.60 25 271/- U/S.2(22)(E) OF THE ACT ON ACCOUNT OF DEEMED DIVIDEND THIS YEAR TOO FOR SAME REASONS. DURING THE FIRST APPELLAT E PROCEEDINGS THE ASSESSEE FILED THE WRITTEN SUBMISSIONS STATING THAT TH E PAYMENTS BY THE COMPANY TO THE ASSESSEE ARE NOT COVERED BY THE SAID PROVISIONS RELATING TO DEEMED DIVIDEND. CIT(A) CONSIDERED THE AMOUNT OF ACCUMULATED RESERVES AND EVENTUALLY CONFIRMED THE ADDITIO N PARTLY AND RESTRICTED THE ADDITION TO RS.50 76 578/- ONLY. THUS THE CIT(A) GRANTED PART RELIEF TO THE ASSESSEE AMOUNTING TO RS.9 48 693/-. 17. AGGRIEVED WITH THE SAID DECISION OF CIT(A) BOTH THE REVE NUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFORE THE TRIBUNAL. 18. ON THIS ISSUE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS A CASE WHERE ASSESSMENT WAS ORIGINALLY COMPLETED U/S.143(3) OF THE ACT WELL BEFORE THE SEARCH ACTION ON 08-09-2010. THEREFORE THE PRESENT ASSESSMENT CONSTITUTES A NON-ABATED/COMPLETED ASSESS MENT. IN SUCH ITA NOS.677 678 & 698/PUN/2015 SHRI SHIVAJI B. JADHAV 7 CASE AS DISCUSSED ABOVE THE ADDITIONS CAN BE MADE ONLY ON THE BASIS OF SEIZED MATERIAL/INCRIMINATING MATERIAL. SAME IS THE ARGUMEN T IN CONNECTION WITH THE OTHER GROUNDS RELATING TO ADDITION UN DER THE HEAD INCOME FROM HOUSE PROPERTY AMOUNTING TO RS.6 00 446/-. AO CONSIDERED THE MUNICIPAL VALUE AS THE FAIR MARKET VALUE OF THE PROPERTY AND TAXED THE SAME IN THE SEARCH ASSESSMENT U/S.153A OF THE ACT. 19. LD. DR FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE AO. HOWEVER HE FAIRLY SUBMITTED THAT THERE IS NO INCRIMINATING MATERIAL OR SEIZED PAPERS IN SUPPORT OF THE ADDITIONS ON THIS ACCOUNT. 20. ON HEARING BOTH THE PARTIES ON THE LIMITED ISSUE OF TH E VALIDITY OF MAKING SUCH ADDITION IN AN ABATED ASSESSMENT IN THE A BSENCE OF ANY INCRIMINATING MATERIAL WE ARE OF THE OPINION THAT THE ADDIT IONS MADE BY THE AO ON BOTH THE COUNTS ARE REQUIRED TO BE DELETED IN VIEW OF THE BINDING JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MURLI AGRO PRODUCTS LTD. (SUPRA). ACCORDINGLY THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED AND THE GROUNDS RAISED BY THE AS SESSEE ARE ALLOWED. 21. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED AND T HE APPEAL OF THE REVENUE IS DISMISSED. 22. TO SUM UP BOTH THE APPEALS OF REVENUE ARE DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF NOVEMBER 2017. SD/- SD/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 28 TH NOVEMBER 2017. ITA NOS.677 678 & 698/PUN/2015 SHRI SHIVAJI B. JADHAV 8 / COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY / ITAT PUNE THE APPELLANT THE RESPONDENT THE CIT(A) - 12 PUNE CIT - 12 PUNE A BENCH PUNE; / GUARD FILE.