ITO, Aluva v. Smt.Nishi Jahangir,, Aluva

ITA 79/COCH/2012 | 2005-2006
Pronouncement Date: 11-10-2013 | Result: Allowed

Appeal Details

RSA Number 7921914 RSA 2012
Assessee PAN ACTPJ2046C
Bench Cochin
Appeal Number ITA 79/COCH/2012
Duration Of Justice 1 year(s) 6 month(s) 28 day(s)
Appellant ITO, Aluva
Respondent Smt.Nishi Jahangir,, Aluva
Appeal Type Income Tax Appeal
Pronouncement Date 11-10-2013
Appeal Filed By Department
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 11-10-2013
Date Of Final Hearing 16-07-2013
Next Hearing Date 16-07-2013
Assessment Year 2005-2006
Appeal Filed On 13-03-2012
Judgment Text
ITA NO. 79/ COCH/ 2012 1 IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH COCHIN BEFORE S/SH RI N.R.S. GANESAN JM & B. R. BASKARAN AM ITA NO. 79 /COCH/ 2012 (ASST YEAR 2005 - 06 ) THE INCOME TAX OFFICER WARD 4 ALUVA VS SMT NISHI JEHANGIR MACKAR MANZIL ALUVA - 1 ( APPELLANT) (RE SPONDENT) PAN NO. ACTPJ2046C ASSESSEE BY SRI T M SREEDHARAN REVENUE BY SMT S VIJAYAPRABHA JR DR / SRI M ANIL KUMAR CIT - DR DATE OF HEARING 16 TH JULY 2013 DATE OF PRONOUNCEMENT 11 TH OCT 2013 OR D ER PER B.R. BASKARAN AM: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29 TH DEC 2011 PASSED BY THE LD CIT(A) - II KOCHI AND IT RELATES TO THE AY 2005 - 06. THE REVENUE IS ASSAILING THE D ECISION OF THE LD CIT(A) IN DELE TING THE ASSESSMENT OF DEEMED DIVIDEND MADE U/S 2(22)(E) OF THE I T ACT. 2 THE FACTS RELATING TO THE SAME ARE STATED IN BRIEF: THE ASSESSEE IS THE MAJOR SHAREHOLDER OF A CLOSELY HOLDING COMPANY NAMED M/S NORTPAK FIBRE OPTICS PVT L TD . HOLDING 99.8% OF THE SHARES. THE AO NOTICED THAT THE PERSONAL ACCOUNT OF THE ASSESSEE MAINTAINED IN THE BOOKS OF ABOVE SAID COMPANY WAS DEBITED WITH THE FOLLOWING PAYMENTS: 15.3.2005 TO STATE BANK OF TRAVANCORE CURRENT A/C CH NO. 5700 RS. 12 00 00 0/ - 30.3.2005 TO SBT CURRENT A/C CH NO. 15828 AMT PAID TO SHR I K A KUNJUMOHAMMED RS. 8 02 500/ - - DO CHEQUE NO. 15829 RS. 12 06 075/ - - DO - CHEQUE NO. 15830 RS. 30 250/ - BY SBT EXCESS BANK CHARGES ( RS. 900/ - ) CLOSING BALANCE RS. 32 37 925/ - ITA NO. 79/ COCH/ 2012 2 2.1 THUS THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE COMPANY SHOWED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.32 37 925/ - FROM THE ABOVE SAID COMPANY DURING THE YEAR UNDER CONSIDERATION. SINCE THE COMPANY WAS HAVING ACCUMULATED PROFIT S AND SINCE THE ASSESSEE WA S HOLDING MORE THAN 10% OF THE SHARES THE AO PROPOSED TO TAX THE ABOVE SAID AMOUNT AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE . THE ASSESSEE DISPUTED THE PROPOSAL GIVEN BY THE AO WITH THE FOLLOWING EXPLAN ATIONS: - (A) THAT THE PAYMENT OF RS. 12 .00 LACS DEBITED TO HER ACCOUNT ON 15.3.2005 REPRESENTS ADVANCE TAX PAYMENT MADE ON BEHALF OF HER HUSBAND MR . N J E HANG I R. (B) THAT T HE PAYMENT MADE TO MR K A KUNJUMOHAMMED ON 30.3.2005 R EPRESENTS PAYMENT MADE AS ADVA NCE FOR THE PURCHASING A LAND IN THE NAME OF THE ABOVE SAID COMPANY. (C) THAT THE ABOVE SAID PAYMENTS WERE ERRONEOUSLY DEBITED TO THE ACCOUNT OF THE ASSESSEE BY CLERICAL MISTAKE . ACCORDINGLY IT WAS CONTENDED THAT THE ASSESSEE DID NOT RECEIVE ANY P AYMENT FOR HER PERSONAL BENEFIT. THE AO DID NOT ACCEPT THE EXPLANATION S GIVEN BY THE ASSESSEE AND ACCORDINGLY ASSESSED THE AMOUNT OF RS. 32 37 925/ - AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE IN TERMS OF SEC. 2(22)(E) OF THE ACT . 3 IN THE APPELLAT E PROCEEDINGS BEFORE LD CIT(A) IT WAS SUBMITTED THAT MR N JEHANGIR IS THE MANAGING DIRECTOR OF THE GROUP CONCERNS . IT WAS FURTHER SUBMITTED THE ABOVE SAID COMPANY ISSUED A SINGLE CHEQUE FOR AN AMOUNT OF RS. 1.65 LACS FOR PAYING ADVANCE TAX FOR ALL THE GR OUP CONCERNS AND ALSO FOR MR . N JEHANGIR. THE PAYMENT MADE ON BEHALF OF MR N JEHANGIR SHOULD HAVE BEEN DEBITED TO THE ACCOUNT OF MR . N JEHANGIR ; BUT DU E TO SIMILARITY OF THE NAME IT WAS ERRONEOUSLY DEBITED TO THE ACCOUNT OF THE ASSESSEE. IT WAS ALSO SUB MITTED THAT THE PAYMENT MADE TO MR K A KUNJUMOHAMMED WAS FOR THE PU RPOSE OF PURCHASING LAND IN THE NAME OF ITA NO. 79/ COCH/ 2012 3 COMPANY BUT THE TRANSACTION DID NOT MATERIALIZE DUE TO SOME DISPUTES. THE SAID PAYMENTS WERE ALSO ERRONEOUSLY DEBITED TO THE ACCOUNT OF THE ASSESSE E. 3.1 THE LD CIT(A) TOOK THE VIEW THAT THE ASSESSEE DID NOT DERIVE ANY PERSONAL BENEFIT OUT OF THE ABOVE SAID PAYMENTS. HENCE HE OBSERVED THAT THE AO HAS NOT SHOWN AS TO HOW THESE PAYMENTS MADE BY THE COMPANY CAN BE CONSIDERED AS FOR THE INDIVIDUAL BENE FIT OF THE ASSESSEE . FURTHER THE LD CIT(A) ALSO OBSERVED THAT THE AO WAS NOT ABLE TO PROVE THAT THE EXPLANATIONS GIVEN BY THE ASSESSEE ARE NOT BONAFIDE. HENCE T HE LD CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THESE PAYMENTS HAVE BEEN WRONGLY DEBITED T O THE ACCOUNT OF THE ASSESSEE DUE TO CLERICAL MISTAKE S. A CCORDINGLY HE DELETED THE ASSESSMENT OF DEEMED DIVIDEND REFERRED ABOVE. AGGRIEVED THE REVENUE HAS FILED THIS APPEAL BEFORE US. 4 THE LD DR SUBMITTED THAT THE HUSBAND OF THE A SSESSEE MR N JEHANGIR IS NOT A SHAREHOLDER IN THE ABOVE COMPANY . H ENCE THERE WAS NO NECESSITY FOR THE COMPANY TO PAY ADVANCE TAX THAT TOO TO THE TUNE OF RS.12 .00 LACS ON BEHALF OF HIM. THE COMPANY SHOULD HAVE MADE THE SAID PAYMENT ONLY ON THE INSTRUCTIONS GIVEN BY THE ASSESSEE WHO IS HOLDING ABOUT 9 9. 8% OF THE SHARES THEREOF. HENCE THE COMPANY HAS RIGHTLY DEBITED THE ACCOUNT OF THE ASSESSEE WI TH THE AMOUNT OF RS.12.00 LAKHS AND THE SAID ENTRY CLEARLY SHOWS THAT THE AMOUNT OF RS.12.00 LAKHS WAS PAID ONLY ON BEHALF OF THE ASSESSEE. THE LD D.R SUBMITTED THAT THE DECISION TAKEN BY THE COMPANY TO DEBIT THE ACCOUNT OF THE ASSESSEE WA S A CONSCIOUS DECISION AND CANNOT BE CONSIDERED AS A CLERICAL MISTAKE. HENCE THE PAYMENT OF RS.12 .00 LACS DEBITED IN THE ACCOUNT OF THE ASSESSEE SHOULD BE CONSIDERED AS PAYMENT MADE ON BEHALF OF AND FOR THE BENEFIT OF THE ASSESSEE ONLY. THE LD DR FURTHER SUBMITTED THAT THE PAYMENT MADE TO MR K A KUNNJUMOHAMMED THOUGH CLAIMED TO BE AN ADVANCE PAYMENT MADE FOR PURCHASE OF LAND I N THE NAME OF THE COMPANY YET NO EVIDENCE WAS FURNISHED TO SUBSTANTIATE THE SAID CONTENTION S . ITA NO. 79/ COCH/ 2012 4 ACCORDINGLY THE LD D.R SUBMITTED THAT THE SAID EXPLANATION WITH REGARD TO THE PAYMENTS MADE TO SHRI KUNNJUMOHAMMED ALSO DO NOT HAVE ANY MERIT. 4.1 THE LD AR HOWEVER REITERATED THE CONTENTIONS MADE BEFORE THE TAX AUTHORITIES I.E. HE SUBMITTED THAT THE ACCOUNT OF THE ASSESSEE HAS BEEN WRONGLY DEBITED WITH THE PAYMENTS REFERRED ABOVE BY CLERICAL MISTAKE . THE LD AR SUBMITTED THAT MR N JEHANGIR IS THE MANAGING DIREC TOR OF THE GROUP CONCERNS AND THE ADVANCE TAX PAYMENT FOR ALL THE GROUP CONCERNS WERE MADE BY A SINGLE CHEQUE FOR AN AGGREGATE AMOUNT OF RS.1.65 CRORES . THE ABOVE SAID PAYMENTS WERE ACCOUNTED FOR IN THE RESPECTIVE ACCOUNT OF GROUP CONCERNS. H OWEVER TH E PAYMENT MADE ON BEHALF OF MR. N. JEHANGIR WAS WRONGLY DEBITED TO THE ACCOUNT OF THE ASSESSEE INSTEAD OF DEBITING THE SAME TO THE ACCOUNT MR N JEHANGIR DUE TO RESEMBLANCE OF NAME . HE ALSO REITERATED THE CONTENTIONS MADE BEFORE THE TAX AUTHORITIES IN RE SPECT OF THE PAYMENT S M ADE TO MR K A KUNJUMOHAMMED. HE FURTH ER SUBMITTED THAT THE COMPANY HAS CORRECTED THE CLERICAL MISTAKES IN THE SUCCEEDING YEAR BY TRANSFERRING THE AMOUNTS WRONGLY DEBITED TO THE ACCOUNT OF THE ASSESSEE TO THE ACCOUNTS OF MR. N. JEHAN GIR AND SHRI K.A. KUNNJUMOHAMMED. HE FURTHER SUBMITTED THAT THE COMPANY VIZ. M/S NORTPAK FIBRE OPTICS PVT LTD HAS BEEN MERGED WITH ANOTHER COMPANY NAME D M/S SFO TECHNOLOGIES (P) LTD IN DEC 2008 AND IN THE BOOK S OF M/S SFO TECHNOLOGIES P LTD. THE LD CO UNSEL FURTHER SUBMITTED THAT ACCOUNT OF SHRI K.A. KUNNJUMOHAMMED WAS TRANSFERRED FROM M/S SFO TECHNOLOGIES (P) LTD TO M/S SWIRFTLINK FIBRE OPTICS (P) LTD DURING THE FINANCIAL YEAR 2005 - 06. ACCORDINGLY HE SUBMITTED THAT THE TRANSACTIONS WITH SHRI K.A. KUNN JUMOHAMMED ARE NOT RELATED TO THE ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING THE ASSESSMENT OF THE DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. ITA NO. 79/ COCH/ 2012 5 5 WE HAVE HEAR D THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. WE ARE CONCERNED WITH THE ASSESSMENT YEAR 2005 - 06 AND THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE COMPANY M/S NORTPAK FIBRE OPTICS P LTD WAS IN EXISTENCE. IT IS AL SO AN ADMITTED FACT THAT THE ASSESSEE HEREIN IS THE MAJOR SHARE HOLDER HOLDING 99.8% OF THE SHARES. THOUGH THE ASSESSEES HUSBAND MR N JEHANGIR IS STATED TO BE THE MANAGING DIRECTOR OF THE GROUP CONCERNS YET HE IS NOT THE SHAREHOLDER OF M/S NORTPAK FIBRE OPTICS P LTD. 5.1 ACCORDING TO LD CIT(A) THE PAYMENT OF ADVANCE TAX OF RS.12.00 LAKHS MADE BY THE COMPANY ON BEHALF OF MR. N. JEHANGIR CANNOT BE CONSIDERED AS THE PAYMENT MADE ON BEHALF OF THE ASSESSEE. THE QUESTION THAT REQUIRES CONSIDERATION IN THE FACTS AND CIRCUMSTANCES OF THE CASE IS - WHAT WAS THE NECESSITY FOR THE COMPANY M/S NORTPAK FIBRE OPTICS P LTD TO MAKE THE ABOVE SAID PAYMENT ON BEHALF OF MR. N. JEHANGIR ? . IT IS AN ADMITTED FACT THAT MR. N. JEHANGIR IS NOT A SHARE HOLDER AND HE I S ONLY THE MANAGING DIRECTOR OF GROUP CONCERNS. THUS THERE IS NO DIRECT CONNECTION BETWEEN MR N JEHANGIR AND M/S NORTPAK FIBRE OPTICS P LTD. HENCE AS CONTENDED BY LD D.R THERE MAY NOT BE ANY NECESSITY OR COMPULSION FOR THE ABOVE SAID COMPANY TO MAKE T HE PAYMENT OF RS.12.00 LACS ON BEHALF OF MR. JEHANGIR. HOWEVER THERE IS AN INDIRECT CONNECTION I.E THE SPOUSE OF MR. N. JEHANGIR BEING THE ASSESSEE HEREIN IS THE MAJOR SHARE HOLDER OF THE ABOVE SAID COMPANY. HENCE THERE IS MERIT IN THE CONTENTION S OF THE LD D.R THAT THE PAYMENT OF RS.12.00 LAKHS COULD HAVE BEEN MADE BY THE COMPANY ONLY UPON RECEIVING INSTRUCTIONS FROM THE ASS ESSEE . IN THIS SCENARIO IN OUR VIEW THERE IS MERIT IN THE CONTENTION OF THE LD D.R THAT THE ABOVE SAID PAYMENT CAN ONLY BE CONSIDERED AS HAVING BEEN MADE ON BEHALF OF THE ASSESSEE HEREIN. SINCE THE PAYMENT IS MADE TO THE SPOUSE OF THE ASSESSEE THERE IS AN ELEMENT OF PERSONAL BENEFIT ALSO IN THIS TRANSACTION. T HE CONTENTION OF THE LD D.R GETS REINFORCED BY THE FACT THAT TH E SAID PAYMENT WAS DEBITED TO THE ACCOUNT OF THE ITA NO. 79/ COCH/ 2012 6 ASSESSEE. THOUGH THE ASSESSEE CONTENDS THAT THE ACCOUNT OF THE ASSESSEE WAS DEBITED DUE TO CLERICAL MISTAKE YET THE SAME IS NOT CONVINCING DUE TO THE FACT THAT THERE IS NO DIRECT CONNECTION BETWEEN MR. JEH ANGIR AND THE ABOVE SAID COMPANY. 5.2 EVEN FOR A MOMENT IF IT IS ASSUMED THAT THE ACCOUNT OF THE ASSESSEE WAS DEBITED BY CLERICAL MISTAKE I.E. INSTEAD OF DEBITING THE ACCOUNT OF MR. N. JEHANGIR THE ACCOUNT OF THE ASSESSEE IS DEBITED IN OUR VIEW THE SAME WILL NOT MAKE ANY DIFFERENCE I.E. EVEN IF THE COMPANY HAS DEBITED THE ACCOUNT OF MR. N. JEHANGIR WITH THE AMOUNT OF RS.12.00 LAKHS IT CAN STILL BE ASSESSED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE FOR THE SIMPLE REASON THAT THE RE IS NO DIRECT CONNECTION BETWEEN THE COMPANY AND MR. JEHANGIR AND FURTHER THE SAID PAYMENT COULD HAVE BEEN MADE ONLY UPON THE INSTRUCTION OF THE ASSESSEE ON HER BEHALF. 5.3 IN RESPECT OF THE PAYMENT S MADE TO MR K A KUNJUMOHAMM ED THOUGH IT IS CLAIMED THAT TH E SAME REPRESENTS ADVANCE GIVEN FOR THE PURCHASE OF LAND FOR THE PURPOSE OF COMPANY YET NO DOCUMENT WAS PR ODUCED TO SUBSTANTIVE THE SAID EXPLANATION. HOWEVER THE FACT REMAINS THAT THE ACCOUNT OF THE ASSESSEE IS DEBITED WITH THE PAYMENTS MADE TO MR. K.A. KUNNJUMOHAMMED. THE PRINCIPLE OF LAW IS THAT THE APPARENT I S REAL UNLESS THE CONTRARY IS PROVED. FURTHER IT IS THE RESPONSIBILITY OF THE PERSON WHO CLAIMS THAT THE APPARENT IS NOT REAL TO SUBSTANTIATE HIS CLAIM. IN THE INSTANT CASE WE NOTICE THA T THE ASSESSEE HAS FAILED TO SUBSTANTIATE HER CLAIM WITH REGARD TO THE PAYMENT MADE TO MR. K.A. KUNNJUMOHAMMED. THOUGH IT WAS CLAIMED THAT THE ACCOUNT OF SHRI K.A. KUNNJUMOHAMMED WAS TRANSFERRED TO SOME OTHER COMPANY YET NO MATERIAL WAS BROUGHT ON RECOR D TO EXPLAIN THE NATURE OF TRANSACTIONS ENTERED WITH THE ABOVE SAID PERSON. FURTHER THE NECESSITY OF TRANSFERRING THE ACCOUNT OF SHRI K.A. KUNNJUMOHAMMED FROM M/S SFO TECHNOLOGIES (P) LTD (MERGED COMPANY) TO SOME OTHER COMPANY WAS NOT EXPLAINED. HENCE I N OUR VIEW RELIANCE CANNOT BE PLACED ON THE BOOK ENTRIES PASSED IN THIS ITA NO. 79/ COCH/ 2012 7 REGARD. A CCORDINGLY IN OUR VIEW THE SAID PAYMENT S DEBITED TO THE ACCOUNT OF THE ASSESSEE HAVE TO BE TREATED AS THE PAYMENT S MADE TO THE ASSESSEE ONLY . 5.4 THE LD CIT(A) HAS OBSER VED THAT THE AO WAS NOT ABLE TO PROVE AS TO HOW THE ABOVE SAID PAYMENT CAN BE CONSIDERED AS FOR INDIVIDUAL BENEFIT OF THE ASSESSEE . W E ARE NOT A BLE TO AGREE WITH THE SAID VIEW OF LD CIT(A). ONCE THE AO HAS NOTICED THAT THE ACCOUNT OF THE ASSESSEE HAS BE EN DEBITED WITH CERTAIN PAYMENT S IN OUR VIEW IT IS THE RESPONSIBILITY OF THE ASSESSEE TO EXPLAIN THE NATURE OF TRANSACTIONS AND TO REBUT THE PRESUMPTION THAT WILL BE FLOWING THERE FROM. W E HAVE ALREADY NOTICED THAT THE ASSESSEE HAS NOT SUBSTANTIATED HER EXPLANATIONS GIVEN WITH REGARD TO THE PAYMENTS MADE TO SHRI K.A. KUNJUMOHAMMED WITH ANY MATERIAL. FURTHER WE HAVE ALSO NOTICED THAT THERE WAS NO ACCEPTABLE EXPLANATION WITH REGARD TO THE PAYMENT OF RS.12.00 LAKHS TOWARDS THE ADVANCE TAX OF MR. N. JEHANGI R. 5.5 IT IS A WELL SETTLED PROPOSITION THAT THE SUBSEQUENT REPAYMENT OF LOAN OR ADVANCE PAID WOULD NOT ALTER THE ASSESSMENT MADE U/S 2(22)(E) OF THE ACT. IN THE INSTANT CASE ALSO IT WAS CLAIMED THAT THE ACCOUNTS OF MR. N. JEHANGIR AND MR. K.A. KUN NJUMOHAMMED HAVE BEEN DULY DEBITED BY TRANSFERRING THE PAYMENTS FROM THE ACCOUNT OF THE ASSESSEE IN THE SUCCEEDING YEAR. WE ARE OF THE VIEW THAT THE TRANSFER SO MADE WILL NOT AFFECT THE ASSESSMENTS TO BE MADE U/S 2(22)(E) OF THE ACT IN VIEW OF THE ABSEN CE OF NEXUS BETWEEN THE COMPANY AND MR. N. JEHANGIR AND FURTHER IN THE ABSENCE OF SUPPORTING DOCUMENTS TO SUBSTANTIATE THE EXPLANATIONS WITH REGARD TO THE PAYMENTS MADE TO MR. K.A. KUNNJUMOHAMMED. 6. IN VIEW OF THE FOREGOING DISCUSSIONS WE ARE NOT ABLE TO AGREE WITH THE DECISION RENDERED BY LD CIT(A) . A CCORDINGLY WE SET ASIDE THE ORDER OF THE LD CIT(A) AND UP HOLD THE ASSESSMENT OF DEEMED DIVIDEND MADE BY THE AO. ITA NO. 79/ COCH/ 2012 8 7 IN THE RESULT THE APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF OCT 2013. SD/ - S D/ - (N.R.S. GANESAN) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 11 TH OCT 2013 RAJ* COPY TO: APPELLANT THE INCOME TAX OFFICER WARD 4 ALUVA RESPONDENT - SMT NISHI JEHANGIR MACKAR MANZIL ALUVA 1 CIT(A) CIT KOCHI DR GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT COCHIN