SHILPRAJ DEVELOPERS PVT. LTD.,,SURAT vs. THE JCIT, T.D.S. RANGE,, SURAT

अपील�य अ�धकरण, सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, Hon'ble JUDICIAL MEMBER AND Dr.SHRI ARJUN LAL SAINI, Hon'ble ACCOUNTANT MEMBER (Virtual Hearing) आ.अ.सं./I.T.A No.3160/AHD/2014 & 2054/AHD/2016 �नधा�रण वष�/Assessment Year: 2008-09 Shilpraj Developers Pvt. Ltd., Vs. 1) The ITO/TDS-2, 12, Suryakiran Apt., Ghod-Dod Surat. Road, Surat – 395007. JCIT/T.D.S. [PAN: AADCS 3045 H] RANGE/SURAT. अपीलाथ� / Appellant ��यथ�/Respondent �नधा�रतीक�ओर से /Assessee by Shri Ashwin Parekh – CA राज�वक�ओर से /Revenue by Shri Ritesh Mishra – CIT(DR) सुनवाई की तारीख/ Date of hearing: 03.03.2021 उ�घोषणा क� तार�ख/Pronouncement on: 03.03.2021 आदेश /O R D E R PER PAWAN SINGH, JUDICIAL MEMEBER: 1. These two appeals by the Assessee are directed against the order of ld. Commissioner of Income Tax (Appeals)-4 & 3, Surat for assessment year (AY) 2008-09. In ITA No.316/AHD/2014, the assessee has challenged the validity of order under section 201(1) r.w.s 201(1A) passed by ITO- TDS. And in ITA No.2054/AHD/2016, the assessee has challenged the validity of penalty levied under section 271C of the Act. As both the appeals are arising of the order passed by ITO-TDS under section 201(1)/201(1A) and are inter- connected with each other, therefore, with the consent of the

Shilpraj Developers Pvt. Ltd., Vs. ITO/TDS-2/SRT / ITA No’s.3160/AHD/2014 & 2054/AHD/2016 for A.Y. 2007-08 parties, both the appeals were heard together and decided by consolidated order. 2. In ITA No.3160/AHD/2014 the assessee has raised following grounds of appeal: “I. The learned CIT(A) has grievously erred in law and on facts in confirming the Order u/s. 201(1) and 201(1A) of the Act passed by ITO(T.D.S.) without allowing natural opportunity to appellant. The Order be held as null and void II. The learned CIT(A) has grievously erred in law and on facts in holding that payment of Rs. 34,20,965/- to Director is covered u/s. 2(22)(e) and thereby u/s. 194 of the Act without appreciating the facts of actual payment of Rs. 20,51,515/- during the year, accumulated profit of different years, payments made in earlier years, Nature of payment made to Bank against loan taken by company. The T.D.S. and interest u/s. 201(1A) levied of Rs. 11,99,392/- should be deleted. III. The learned CIT(A) has grievously erred in law and on facts in holding that payment to Directors are covered u/s. 2(22)(e) and thereby u/s. 194 of the Act without appreciating the facts that in Assessment Order u/s. 143(3) of the Act the transactions were accepted as non-loan transactions. The T.D.S. and interest levied at Rs. 11,99,392/- should be deleted. IV. The learned CIT(A) has grievously erred in law and on facts in holding that payment of Rs. 2,84,682/- was made to Director Shri Jitendrabhai L. Patel whereas no payment was made to him, disregarding the facts of payment made to ICICI Bank to repayment of loan taken by company. The T.D.S. and interest levied should therefore, be deleted.” 3. Brief facts of case are that the assessee is a company engaged in the business of construction and textile. The Assessing Officer (AO) /ITO,TDS received information from Addl.CIT, TDS that assessee company made payment of Rs.2.84 lakhs to ICICI Bank Ltd as an installment of home loan availed by Jitendrabhai Patel/Director of assessee having shareholding of 14.94 %. Since no addition was made in the block of building of the assessee under the Schedule of fixed asset of

Shilpraj Developers Pvt. Ltd., Vs. ITO/TDS-2/SRT / ITA No’s.3160/AHD/2014 & 2054/AHD/2016 for A.Y. 2007-08 and the amount was paid by assessee on behalf of Jitendrabhai Patel, which is a benefit passed off in kind and attracts the provision of section 2(22)(e) i.e. deemed dividend. The assessee was liable to deduct tax at source of Rs.87,967/- i.e. @ 20% under section 194 of the Act. The AO further noted that assessee company has also given a loan of Rs.35.50 lakhs to Rajeshbhai Patel, Director and having shareholding of 15.41%, this payment also attracts the provision of section 2(22)(e) being deemed dividend and that assessee was liable to deduct tax at source @20%. On the basis of above observation the ITO-TDS issued a show cause notice to the assessee on 19.03.2013, which was served on 23.02.2013, directing the assessee to attend the office of AO on or before 23.03.2013 asking the assessee to show cause to as to why it should treat the assessee in default under section 201(1) as well as 201(1A) and the penalty under section 271(1)(c) of the Act. The AO noted that neither the assessee appeared nor filed any submission. The AO passed the order under section 201(1) and 201(1A) dated 26.03.2013. 4. On appeal before the ld. CIT(A) the action of AO was confirmed. The ld. CIT(A) while confirming the action of AO noted that hearing of appeal was fixed on 03.06.2014, on which the adjournment was sought on behalf of assessee and hearing was fixed on 12.08.2014. In the meantime, the notice 3

Shilpraj Developers Pvt. Ltd., Vs. ITO/TDS-2/SRT / ITA No’s.3160/AHD/2014 & 2054/AHD/2016 for A.Y. 2007-08 dated 07.08.2014 was issued for fixing the case on 22.08.2014. The ld.CIT(A) noted that none appeared on behalf of the assessee on 22.08.2014, nor any application for seeking adjournment was made. The ld.CIT(A) in absence of submission and evidence, confirmed the order passed by the AO/ITO,TDS vide order dated 27.08.2014. Thus, further aggrieved, the assessee has filed present appeal before this Tribunal. 5. We have heard the submission of learned authorized representative (AR) of the assessee and the learned departmental representative ( ld.DR) for the Revenue and have gone through the order of authorities below. The learned AR of the assessee submits that the Lower Authorities has not been given fair and reasonable opportunity to the assessee. The AO served show cause notice on the assesse on 20.03.2013 fixing the date of hearing on 23.03.2013. The date 23.03.2013 was Saturday, and office of ITO, TDS was closed. The assessee could not furnished any explanation. The AO passed the order within the three (03) days i.e. on 26.03.2013, without serving further notice. Similarly, the ld.CIT(A) fixed the date of hearing on 03.06.2014 when assessee sought adjournment. No further notice at the address given on Form 35, for the purpose of serving the notice, was served upon the assessee. The ld.CIT(A) also 4

Shilpraj Developers Pvt. Ltd., Vs. ITO/TDS-2/SRT / ITA No’s.3160/AHD/2014 & 2054/AHD/2016 for A.Y. 2007-08 confirmed the action of AO by taking view that no compliance was made. The learned AR for the assessee submits that no fair and proper opportunity was given by the Lower Authorities. The assessee has good case on merit and would succeed, if the case is heard and decided on merit. On merit, the learned AR of the assessee submits that he has furnished the complete name, address and PAN of the person who are holding more than 10% of share in the assessee company. Shri Rajesh Patel was not holding more than 10% of the shareholding. The order of ITO-TDS is not sustainable. The learned AR for the assessee prayed that matter may be restored to the file of the AO to decide all the issues afresh after giving fair and proper opportunity. 6. On the other hand, the learned DR for the Revenue submits that assessee was given three (03) days’ time which was sufficient for making compliance. The assessee neither attended the office of ITO-TDS nor furnished any explanation. Similarly, before the ld.CIT(A), the assessee has not given any explanation despite affording opportunity. The DR for the Revenue submits that in case the Bench is of the view that the matter require fresh consideration by the AO, a limited direction be issued to the AO that shareholding pattern should not be examined again.

Shilpraj Developers Pvt. Ltd., Vs. ITO/TDS-2/SRT / ITA No’s.3160/AHD/2014 & 2054/AHD/2016 for A.Y. 2007-08 7. We have considered the rival submissions of both the parties and have gone through the orders of Lower Authorities. We have noted that in para 3 of the order, the AO noted that notice was served upon the assessee on 20.03.2013 to attend his office on or before 23.03.2013. Before us, the AR of the assessee vehemently submitted that 23.03.2013 was Saturday, the office of ITO-TDS was closed and that order was passed on 26.03.2013. Similarly, the ld.CIT(A) in para 2 of the impugned order noted that hearing was fixed on 03.06.2014 on which the assessee sought adjournment. The ld.CIT(A) further recorded “the case was fixed for hearing on 12.08.2014. In the meantime notice dated 07.08.2014 was issued fixing the case on 22.08.2014”. The ld.CIT(A) noted that the notice was duly served on 07.08.2014. Before us, the learned AR for the assessee vehemently argued that for service of notice, assessee has given the address of his Counsel for the purpose of service of notice, no notice at the address mentioned in Form-3 was served upon the counsel of assessee. 8. We have noted that the ld.CIT(A) allegedly fixed the hearing on 22.08.2014 and the order was passed on 27.08.2014. In our view, no sufficient and fair opportunity was given to the assessee either by ITO-TDS or by Ld. CIT(A). Therefore, we deem it appropriate to restore the matter to the fire of AO to 6

Shilpraj Developers Pvt. Ltd., Vs. ITO/TDS-2/SRT / ITA No’s.3160/AHD/2014 & 2054/AHD/2016 for A.Y. 2007-08 pass the order afresh after considering the submissions of the assessee, including the pattern of shareholding of the directors of the assessee. Needless to direct that before passing the order, the ITO, TDS shall grant fair and proper opportunity to the assessee and pass the order in accordance with law. 9. So far as, objection of the DR for the Revenue that holding pattern shareholding should not be examined afresh, we are afraid to hear such a submission from ld. DR of the Revenue. The submission of learned DR for the revenue is not acceptable to us, which will be amounting to close the door of audi alterum pattern. 10. In the result, appeal of assessee in ITA No.3160/AHD/2014 for A.Y. 2008-09 is allowed for statistical purposes.

ITA No.2054/AHD/2014 (Against the penalty u/s.271C of the Act): 11. Considering the fact that we have set-aside the order dated 26.03.2013 passed under section201(1) rws 201(1A), on the basis of which penalty under section 271C of the Act was levied, and restore the matter to the file of AO to decide it afresh. Thus, the order of penalty levied under section 271C of the Act would not survive. However, the AO is at liberty to initiate the action afresh in accordance with law.

Shilpraj Developers Pvt. Ltd., Vs. ITO/TDS-2/SRT / ITA No’s.3160/AHD/2014 & 2054/AHD/2016 for A.Y. 2007-08 12. In the result, appeal of the assessee in ITA No.2054/AHD/2016 for A.Y. 2008-09 is allowed.

Order pronounced on 3rd March 2021 at the time of hearing of appeal. Sd/- Sd/- (Dr.ARJUN LAL SAINI) (PAWAN SINGH) (लेखा सद�य/ACCOUNTANT MEMBER) (�याियक सद�य/JUDICIAL MEMBER) सुरत/ Surat, िदनांक Dated: 3rd Mar 2021/#SGR Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat