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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PAL RAO, JM vk;dj vihy la-@ITA No. 86/JP/2019
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh jes’k lh0 ’kekZ] ys[kk lnL; ,oa Jh fot; iky jko] U;kf;d lnL; ds le{k BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PAL RAO, JM vk;dj vihy la-@ITA No. 86/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Shri Vikram Sukhani The DCIT, Vs. A-65, Shanti Path, Central Circle-7, Tilak Nagar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ADUPS 0045 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by: Shri Dileep Shivpuri (Adv.) jktLo dh vksj ls@ Revenue by : Shri A.K. Mahla (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 10/04/2019 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 20/06/2019 vkns'k@ ORDER PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 15.10.2018 of the ld. CIT(A), Jodhpur for the assessment year 2008-09. The assessee has raised the following ground:-
“1. That the Ld. Commissioner of Income Tax (Appeals)-I Jodhpur (Camp at Jaipur) has grossly erred on facts and acted unlawfully in upholding the addition of Rs. 5,50,551/- on account Shri Vikram Sukhani vs. DCIT of deemed dividend u/s 2(22)(e) of the IT Act, made by the ld. Dy. Commissioner of Income Tax, Central Circle-7, Jaipur.
The assessee has also raised additional ground as under:-
“That the notice issued by the Assessing Officer u/s 147/148 is bad in law and ab initio void, especially because it has been issued on ‘barrowed satisfaction’ with no independent application of mind by him.”
The assessee is an individual and Director in M/s Gulshan Fashions Pvt. Ltd. holding more than 10% of shares of the said company. The assessee filed his return of income for the year under consideration on 12.02.2009 declaring total income of Rs. 48,60,660/-.
Subsequently, it was found in the assessment proceeding U/s 143(3) of the Act in case of M/s Gulshan Fashions Pvt. Ltd. that a sum of Rs. 5,50,551/- was shown in the name of the assessee as sundry debtor.
The said company was also having reserves and surplus of Rs. 2.19 Crores. The AO accordingly issued notice U/s 148 of the Act on 08.03.2013 to assess the said amount of Rs. 5,50,551/- as deemed dividend U/s 2(22)(e) of the Act. The AO completed the reassessment U/s 147 r.w.s. 143(3) of the act by making addition of Rs. 5,50,5551/- U/s 2(22)(e) of the Act. The assessee challenged the action of the AO before the ld. CIT(A) but could not succeed. 2 Shri Vikram Sukhani vs. DCIT
Before us, the ld. AR of the assessee has submitted that the amount of Rs. 5,50,551/- is not dividend income of the assessee. It is an amount spent by him through the credit card of the company M/s Gulshan Fashions Pvt. Ltd. of which he is a director. Out of the amount spent, the company has segregated the amount spent into two parts i.e. (a) amount spent on the business of the company, and (b) amount spent on personal expenses of the appellant. The company has debited the personal expenses to the personal amount of Shir Vikram Sukhani, to be adjusted against the remuneration received by him as a director of the company. Thus, to fall within the definition of “dividend”, it has to be a payment, and should be, additionally, a loan or advance. Loan has been said to mean “money, property or other material goods given to another party in exchange for future repayment of the loan value amount, along with interest or other finance charged….” Thus for it to be a loan, there has to be a payment of money etc. at some point of time, to be returned later, along with interest, or other finance charges.
An advance means “payment made ahead of its normal schedule such as paying for a good or service before you actually receive it”. As stated above, a perusal of the ledger account would show that the entries are not payment made to the appellant and are neither loan or advance. Shri Vikram Sukhani vs. DCIT They are, in fact, payments made by the appellant for his personal expenses from the credit card of the company which are recouped through adjustment, at the end of the year, against the remuneration that has to be paid to the assessee who is a director of the company.
Thus, the ld. AR has submitted that the amounts are given by the company to the assessee for business and to meet the business expenses and accordingly, the same cannot be treated as deemed dividend U/s 2(22)(e) of the Act.
On the other hand, the ld. DR has submitted that the assessee has not disputed that a sum of Rs. 5,50,551/- was utilized by the assessee for his personal needs and therefore, once the assessee has utilized the company’s money for his personal expenditure the same false under the mischief of Section 2(22)(e) of the Act. The assessee has not disputed having shares holding of more than 10% in the company and the said company is having sufficient reserves and surplus. Therefore, in view of the various decisions as relied upon the ld. CIT(A) overdrawing of the amount by the assessee from the company is deemed dividend. He has relied upon the orders of the authorities below. Shri Vikram Sukhani vs. DCIT
We have considered the rival submissions as well as the relevant material on record. The assessee has not disputed that in the book of the company M/s Gulshan Fashions Pvt. Ltd. a sum of Rs. 5,50,551/- was shown outstanding towards the assessee as on 31.03.2008.
Further, it is also not disputed that the assessee is having more than 10% shareholding in the said company and the said company is having reserve and surplus of more than Rs. 2.19 Cores. The only question raised by the assessee is whether the said amount is loan or advance so as to attract the provisions of Section 2(22)(e) of the Act. The assessee has explained before the authorities below that the assessee is a director of the said company and the amount of Rs. 5,50,551/- was given to the assessee as imprest to meet the expenditure incurred by the assessee for and on behalf of the above said company. The contentions before the AO and ld. CIT(A) were that the said amount was given to the assessee as imprest money. However, before us the assessee has explained that the said amount was shown as due towards the assessee on account of the amount spent through credit card of the company. The ld. AR has submitted that the assessee has spent the amount in two part through credit card of the company one part is spent for business of the company and another amount was Shri Vikram Sukhani vs. DCIT spent on the personal expenses of the assessee. The company has debited the personal expenses to the personal account of the assessee to adjust against remuneration to be received by the assessee. Thus, the assessee has taken a different stand and explained that this amount represents spending through credit card of the company. Once, the amount is representing the expenditure incurred by the assessee for his personal use through credit card then even if the said amount was to be adjusted against the future remuneration it is still outstanding as on 31.03.2008 and would be treated as loan or advance in terms of Section 2(22)(e) of the Act. The future adjustment will be only in the next financial year and till the amount is adjusted against future remuneration it remains outstanding. In view of the facts and circumstances of the case when the assessee has overdrawn the amount and spent for personal expenses then, the provisions of Section 2(22)(e) of the Act are attracted as the other conditions as prescribed in the said section are not in disputed. The ld. CIT(A) has considered this issue in para 6.2 as under:- Shri Vikram Sukhani vs. DCIT Shri Vikram Sukhani vs. DCIT Shri Vikram Sukhani vs. DCIT Para above, it is held that the AO was justified in treating the total advances of Rs. 5,50,551/- as deemed dividend u/s 2(22)(e) of the Act Shri Vikram Sukhani vs. DCIT in the hands of the appellant. This addition is confirmed. The ground no. 2 is dismissed.” Thus, the ld. CIT(A) has referred various decisions of Hon’ble Supreme Court as well as the Hon’ble High Courts wherein the amounts given to the shareholder though was repaid subsequently was treated as deemed dividend U/s 2(22)(e) of the Act. Hence, in view of the facts and circumstances of the case, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue.
As regards the additional ground raised by the assessee though the said ground is purely legal in nature and it goes to the root of the matter however, we find that the assessee has not raised this issue before the authority below. Even the assessee never demanded the reasons recorded by the AO for reopening of the assessment and first time before us the assessee has challenged the validity of reopening.
The reasons recorded by the Assessing Officer has not been filed before us but only a reference is made to the assessment order where the Assessing officer has made some statements regarding issuance of notice U/s 148 of the Act. In the absence of the reasons recorded by the AO for reopening of the assessment this issue cannot be decided.
Accordingly, we set aside this issue to the record of the Assessing Shri Vikram Sukhani vs. DCIT Officer for adjudication of the same as per law and after giving opportunity of hearing to the assessee.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 20/06/2019.
Sd/- Sd/- ¼ jes’k lh0 “kekZ ½ ¼fot; iky jko½ (Ramesh. C. Sharma) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 20/06/2019. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shri Vikram Sukhani, Jaipur. 2. izR;FkhZ@ The Respondent- DCIT, Central Circle-7, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 86/JP/2019} vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत