K. Narasimha Rao, Hyd, Hyderabad v. ACIT, Circle-2(2), Hyd, Hyderabad

ITA 803/HYD/2016 | 2003-2004
Pronouncement Date: 28-10-2016

Appeal Details

RSA Number 80322514 RSA 2016
Assessee PAN AHEPK8102E
Bench Hyderabad
Appeal Number ITA 803/HYD/2016
Duration Of Justice 4 month(s) 29 day(s)
Appellant K. Narasimha Rao, Hyd, Hyderabad
Respondent ACIT, Circle-2(2), Hyd, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2016
Appeal Filed By Assessee
Bench Allotted A
Tribunal Order Date 28-10-2016
Date Of Final Hearing 19-10-2016
Next Hearing Date 19-10-2016
Assessment Year 2003-2004
Appeal Filed On 30-05-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A HYDERABAD BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 103/HYD/2016 2003 - 04 K. GEETHA HYDERABAD [PAN: AHEPK8102E] ASST. COMMISSIONER OF INCOME TAX CIRCLE-2(2) HYDERABAD 803/HYD/2016 2003 - 04 K. NARASIMHA RAO HYDERABAD [PAN: ADVPK3190M] FOR ASSESSEE : SHRI S. RAMA RAO AR FOR REVENUE : SHRI A. SITARAMA RAO DR DATE OF HEARING : 19-10-2016 DATE OF PRONOUNCEMENT : 28-10-2016 O R D E R PER B. RAMAKOTAIAH A.M. : THESE TWO APPEALS ARE BY ASSESSEES AGAINST THE ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2 HYDERABAD D ATED 30-11-2015 AND 29-02-2016 RESPECTIVELY CONFIRMING T HE ADDITION MADE U/S. 2(22)(E) OF THE INCOME TAX ACT [ACT]. 2. BRIEFLY STATED ASSESSEES ARE DIRECTORS IN THE COMPA NY M/S. EYE ADS PVT. LTD. FROM WHOM ASSESSEES HAVE RECEIVED AN AMOUNT OF RS. 13 17 690/- IN THE CASE OF K. NARASIMHA RAO RS. 6 39 220/- BY SMT. K. GEETHA AND THESE AMOUNTS ARE CONSIDERED AS D EEMED DIVIDENDS BY THE ASSESSING OFFICER (AO). THE ADDITI ON WAS MADE PROPORTIONATELY AT 73:27 RATIO OF THE ACCUMULATED PROFITS OF THE SAID COMPANY. ASSESSEES HAVE QUESTIONED BOTH ADDITION U/ S. 2(22)(E) I.T.A. NOS. 103 & 803/HYD/2016 :- 2 -: AND QUANTUM OF THE AMOUNT ADDED AND MATTERS HAVE COME UP TO ITAT. THE CO-ORDINATE BENCH IN ITA NOS. 528/HYD/2007 & 529/HYD/2007 DT. 08-01-2010 HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO DIRECTING AS UNDER: 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. NO DOUBT THE ASSESSEES ADMITTED ACCUMULATED PROFIT AT THE END OF THE RELEV ANT PREVIOUS YEAR. FOR THE PURPOSE OF COMPUTING THE DEEMED DIVIDEND THE A O IS BOUND TO COMPUTE THE ACCUMULATED PROFIT ON THE DATE ON WHICH THE DEEMED DIVIDEND WAS PAID BY THE COMPANY. ADMITTEDLY THE LOWER AUT HORITIES HAVE NOT COMPUTED THE ACCUMULATED PROFIT ON THE DATE OF PAYM ENT OF MONEY. THE ASSESSEES ALSO HAVE NOT BROUGHT ON RECORD ANY MATER IAL FOR COMPUTING THE ACCUMULATED PROFIT ON THE DATE OF PAYMENT OF THE MO NEY BY THE COMPANY. IN THAT FACTUAL SITUATION IN OUR OPINION THE ACCU MULATED PROFIT ON THE DATE OF PAYMENT OF MONEY BY THE COMPANY TO THE BENEFICIA L SHAREHOLDERS HAS TO BE COMPUTED. IN THE ABSENCE OF ANY MATERIAL TO COM PUTE THE ACCUMULATED PROFIT THE MATTER NEEDS TO BE RE-EXAMINED BY THE A O. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS I SSUE AND REMIT THE MATTER BACK TO THE FILE OF THE AO. THE AO SHALL RE-CONSID ER THE ISSUE OF DEEMED DIVIDEND AND COMPUTE THE ACCUMULATED PROFIT ON THE DATE ON WHICH THE MONEY WAS PAID TO THE ASSESSEES AND THEREAFTER DECI DE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. WE MAKE IT CLEAR THAT THE ASSESSEES MAY PUT FORWARD ALL THE CONTENTIONS AVAILABLE BEFORE THE AO . THE AO SHALL EXAMINE ALL THE CONTENTIONS OF THE ASSESSEES AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW WITHOUT BEING INFLUENCED BY ANY OF THE OBSERVATIONS MADE BY THIS TRIBUNAL IN THIS ORDER. 2.1. IN THE CONSEQUENTIAL ORDERS AO HAS REPEATED THE SAME ADDITION HOWEVER DISCUSSING LAW U/S. 2(22)(E) WITH OUT EXAMINING THE ACCUMULATED PROFITS. IT WAS THE SUBMISSION OF ASSE SSEE BEFORE THE AO THAT THE ACCUMULATED PROFITS AS PER THE BALANCE SHE ET AS ON 31-03-2002 WERE SHOWN AT RS. 3 26 333/- AND AFTE R MAKING ADJUSTMENTS FOR THE DEPRECIATION ACCUMULATED PROFIT FOR THE YEAR WORKS OUT TO RS. 1 72 362/- ONLY [PARA 2.8 OF THE AS SESSMENT ORDER]. IN ARRIVING AT THAT AMOUNT ASSESSEE HAS RELIE D ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF M.V. MURUGAPPAN [62 ITR 382 388] (MAD) AND ALSO THE CO- ORDINATE I.T.A. NOS. 103 & 803/HYD/2016 :- 3 -: BENCH DECISION OF BANGALORE IN THE CASE OF BAGAMANE LEASING AND FINANCE PVT. LTD. IN ITA NOS. 442 TO 444/BANG/2010 DT. 04-11- 2010. AO HOWEVER REJECTED THESE CONTENTIONS AND ARR IVED AT THE ACCUMULATED PROFITS AT RS. 7 92 990/- AS ORIGINALLY D ETERMINED AND ADDED THE AMOUNT OF RS. 7 10 282/- IN THE CASE IN THE CASE OF SRI K. NARASIMHA RAO AND RS. 2 62 708/- IN THE CASE OF SMT. K. GEETHA IN THE SAME RATIO OF AMOUNT RECEIVED AT RS. 73:27 (WRO NGLY TYPED AS 23). EVEN THOUGH ASSESSEE CONTESTED THE SAM E BEFORE THE LD. CIT(A) ALONG WITH OTHER ADDITIONS MADE LD. CIT(A ) DISMISSED THE APPEAL ON MERITS EX-PARTE AS NONE APPEARED ON BEHALF OF ASSESSEES. 3. AGGRIEVED ON THE ORDER OF THE CIT(A) THE PRESENT A PPEALS HAVE BEEN PREFERRED. LD. COUNSEL HAS WITHDRAWN THE GROUND S REGARDING DISALLOWANCE OF INTEREST IN BOTH THE CASES AS NOT PRESSE D. WE NOTICE THAT THESE ADDITIONS HAVE ALREADY BEEN ADJUDICATED IN TH E ITAT ORDER EARLIER. LIKEWISE IN THE CASE OF SMT. K. GEETHA ADDITION OF RS. 2 02 500/- REPRESENTING UNEXPLAINED INCOME WAS ALSO NOT PRESSED. THE ONLY ISSUE FOR ADJUDICATION IS THE QUANTUM OF DE EMED DIVIDEND DETERMINED BY THE AO. 4. LD. COUNSEL WHILE STATING THAT THE PROVISIONS OF SEC TION 2(22)(E) ARE ATTRACTED IT WAS THE QUANTUM OF ADDITION THAT IS IN DISPUTE. REFERRING TO THE BALANCE SHEET OF THE COMPANY AND PARA 2.8 OF THE ASSESSMENT ORDER IT WAS SUBMITTED THAT BY MAKI NG ADDITION OF THE DEPRECIATION CLAIMED UNDER COMPANIES A CT AND ALLOWING THE DEPRECIATION AS PER IT ACT THE ACCUMULA TED PROFIT WORKS OUT TO RS. 1 72 362/- ONLY AND THIS AMOUNT ONLY CAN BE PROPORTIONATELY ADDED IN THE CASE OF ASSESSEES. HE AL SO MADE I.T.A. NOS. 103 & 803/HYD/2016 :- 4 -: CONTENTIONS THAT THE PROFIT ON THE DAY OF ADVANCE IS TO B E CALCULATED. HE RELIED ON THE PRINCIPLES LAID DOWN BY THE FOLLOWING CASES: I. M.B.S. PURUSHOTHAM VS. ITO [26 ITD 520]; II. ACIT VS. YASIN HOTELS (P) LTD. [30 SOT 47 (CHENNAI) (URO)]; III. YOGESH PAPER MILLS PVT. LTD. VS. ITO (ITA NOS. 1001 TO 1007/PN/2011); 5. LD. DR HOWEVER SUBMITTED THAT ASSESSEE HAS NOT CO-O PERATED WITH THE AO OR CIT(A) HENCE THE ADDITION MADE SHOUL D BE CONFIRMED. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE DOCUMENTS PLACED ON RECORD. THERE IS NO DISPUTE TO THE APPLICATION OF PROVISIONS U/S. 2(22)(E) ARE CONCERNE D. THE SAME WAS ALREADY ACCEPTED IN THE EARLIER APPEAL PROCEEDING S. THE ISSUE WAS RESTORED TO AO FOR DETERMINATION OF THE ACCUMULAT ED PROFITS (AS EXTRACTED ABOVE). THE CO-ORDINATE BENCH HAS ALR EADY DIRECTED THE AO TO VERIFY THE ACCUMULATED PROFITS ON THE DATE O F PAYMENT OF MONEY BY THE COMPANY TO THE BENEFICIAL SHAREHOLDERS. HOWEVER ASSESSEE HAS NEITHER PLACED ON RECORD THE DATES OF RE CEIPT NOR THE ACCUMULATED PROFIT OF THE COMPANY ON THE DATE OF REC EIPT OF MONEY. IN FACT NO DETAILS - EXCEPT THE ACCUMULATED PROFIT AS ON 31-03- 2002- WERE FURNISHED TO THE AO. AO SEEMS TO HAVE MAD E A MISTAKE OF ARRIVING AT THE ACCUMULATED PROFIT AT RS. 9 7 2 990/- AS THE SAME AMOUNT COULD NOT BE VERIFIED EITHER FROM THE B ALANCE SHEET OR FROM ANY OTHER DETAILS PLACED ON RECORD. W E ARE UNABLE TO DETERMINE HOW THIS AMOUNT OF RS. 9 72 990/- HAS BEEN ARRIVED AT BY THE AO. I.T.A. NOS. 103 & 803/HYD/2016 :- 5 -: 6.1. AS SEEN FROM THE BALANCE SHEET THE AMOUNT OF ACCU MULATED PROFIT AS ON 31-03-2002 WAS ONLY RS. 3 26 333/-. TH E DEPRECIATION CLAIMED IN THE P&L A/C WAS AT RS. 7 77 416/-. SINCE TH ERE ARE ALREADY JUDICIAL PRONOUNCEMENTS THAT THE ACCUMULATED PRO FITS ARE TO BE ARRIVED AT ON THE BASIS OF IT COMPUTATION THE DEPR ECIATION ALLOWABLE UNDER IT ACT AT RS. 9 31 388/- HAS TO BE RE DUCED. THUS THE ACCUMULATED PROFIT FOR THE YEAR WORKS OUT TO RS. 1 7 2 362/-. THE CO-ORDINATE BENCH IN THE CASE OF BAGAMANE LEASIN G AND FINANCE PVT. LTD. IN ITA NOS. 442 TO 444/BANG/2010 DT. 04-11- 2010 (SUPRA) HAS HELD THAT EXPLANATION-2 TO SECTION 2( 22)(E) DOES NOT HAVE THE EFFECT OF INCLUSION OF CURRENT YEARS BUS INESS PROFITS. IT FOLLOWED THE PRINCIPLES LAID DOWN BY THE HONBLE MA DRAS HIGH COURT IN THE CASE OF M.V. MURUGAPPAN [62 ITR 382 38 8] (MAD) (SUPRA) WHICH THESE ASSESSEES HAVE RELIED ON AND SUBMITTED BEF ORE THE AO. IN VIEW OF THAT IN THE ABSENCE OF ANY WORKING GIVEN BY ASSESSEE AND DUE TO NON-CO-OPERATION BY ASSESSEE BEFO RE THE CIT(A) ALSO WE HAVE NO OPTION THAN TO DETERMINE THE ACCUMUL ATED PROFITS AS PER THE BALANCE SHEET OF M/S. EYE ADS PVT. LTD. AS STATED ABOVE. AO IS DIRECTED TO RE-WORKOUT THE DEEMED DIVIDE ND IN EACH OF ASSESSEES HANDS AT THE SAME RATIO I.E. 73:27 CO NSIDERING THE ACCUMULATED PROFIT ON RS. 1 72 362/- ONLY. ACCORDING LY THE GROUNDS ARE PARTIALLY ALLOWED. 7. IN THE RESULT BOTH THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER 2016 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD DATED 28 TH OCTOBER 2016 TNMM I.T.A. NOS. 103 & 803/HYD/2016 :- 6 -: COPY TO : 1. SMT. K. GEETHA HYDERABAD. C/O. SRI S. RAMA RAO ADVOCATE FLAT NO. 102 SHRIYAS ELEGANCE 3-6-643 STREET NO. 9 HIMAYATNAGAR HYDERABAD. 2. SHRI K. NARASIMHA RAO HYDERABAD. C/O. SRI S. RA MA RAO ADVOCATE FLAT NO. 102 SHRIYAS ELEGANCE 3-6 -643 STREET NO. 9 HIMAYATNAGAR HYDERABAD. 3. THE ASST. COMMISSIONER OF INCOME TAX CIRCLE-2(2 ) HYDERABAD. 4. CIT (APPEALS)-2 HYDERABAD. 5. PR.CIT-2 HYDERABAD. 6. D.R. ITAT HYDERABAD. 7. GUARD FILE.