AYAJ S. DHUMAL,MUMBAI vs. ITO - 26(2)(4), MUMBAI
Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI OM PRAKASH KANT () & MS. KAVITHA RAJAGOPAL () Assessment Year: 2006-07
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated
13.03.2013 passed by the Ld. Commissioner of Income-tax
(Appeals) – 28, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2006-07, raising following grounds:
“1. The Id. Commissioner of Income Tax, Appeals 28, Mumbai, erred in law and on facts while confirming the addition of Rs.
16,00,000/- u/s 2(22)(e).
The Id. Co erred in law circumstances 16,00,000/- u 3. The Id. Co erred in law Supreme Cou Private Ltd vs 4. The Appe 16,00,000/- officer and co deleted. 5. The appella any of the gro 2. At the outset, th ground No. 3 of the and was raised in Accordingly, the gro infructuous. 3. Briefly stated f individual whose prim capacity of Director i under consideration 22.09.2006, declarin processed under se (hereinafter referred information received light that M/s D ITA ommissioner of Income Tax, Appeals-28, and on facts on not appreciating the f s of the case before confirming the addit u/s 2(22)(e). ommissioner of Income Tax, Appeals-28, and on facts in not considering the rati urt of India in the case of Reliance Petro s Commissioner of Income Tax, Ahmedaba ellant therefore prays that the additio made u/s 2(22)(e) of the act by the onfirmed by the Id. CIT (Appeals) may ant craves leave to add, amend, alter and ounds of appeal as advised from time to t he Ld. Counsel for the assessee appeal was not arising from fa nadvertently, hence same was ound no. 3 of the appeal is facts of the case are that the mary source of income is salary in various companies. For the a , the assessee filed his return g total income of Rs. 62,000/-. ection 143(1) of the Income- d to as "the Act"). Subseque from the ITO, Ward-5(1)-3, Mum Darshan Impex Pvt. Ltd. ha Ajay S. Dhumal 2 A No. 4519/MUM/2013 , Mumbai, facts and tion of Rs. , Mumbai, io of Hon. o Products ad. on of Rs. assessing please be d or delete time.” e submitted that acts of the case s not pressed. s dismissed as assessee is an y, earned in the assessment year n of income on The return was -tax Act, 1961 ntly, based on mbai, it came to ad received a loans/advances of R M/s KP Power Pvt. Lt in both the companie be treated as deeme the hands of the asse return of income. T reasons to believe th notice under section 3.1 In response, th which statutory notic were initiated. Durin the Assessment Year received a loan/adva Ltd. The AO noted holding 50% equity substantial interest i that the said loan wa section 2(22)(e) in the this conclusion on tw Incorrect sharehold 3.2 It was submitte Impex Pvt. Ltd. for Dhumal held 50% ITA
Rs. 16.00 lakhs from another co td. and assessee was a substan es. As such, the amount receiv d dividend under section 2(22) essee, but this was not disclose
The Assessing Officer (AO), h hat income had escaped assess
148 of the Act.
he assessee filed a return of in ces were issued and reassessm ng the reassessment, it was ob r 2006–07, M/s Darshan Impe nce of Rs. 16,00,000/- from M/
that the assessee, Mr. Ajay S in Darshan Impex Pvt. Ltd.
n KP Power Pvt. Ltd. Accordingl as liable to be taxed as deemed e hands of Mr. Dhumal. The ass wo grounds:
ding information:
ed that the return of income o
AY 2006–07 erroneously refl shareholding due to a clerica
Ajay S. Dhumal
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A No. 4519/MUM/2013
ompany namely ntial shareholder ved was liable to (e) of the Act in d in the original having recorded sment, issued a ncome, following ment proceedings bserved that for ex Pvt. Ltd. had /s KP Power Pvt.
S. Dhumal, was and also had ly, he concluded dividend under sessee contested of M/s Darshan lected that Mr.
al error by the Chartered
Account shareholding was o contention, the asses
Darshan Impex Pvt.
FYs 2004–05, 2005–
showed that Mr. Dh during the relevan explanation on the gr after the reopening notice, and hence we
Nature of Transactio
3.3 It was further s inter-corporate depo
The amount received
Power
Pvt.
Ltd.
debentures/bonds of contention was also entire amount of Rs.
2(22)(e) of the Act in t
4. On further appe of the assessee of ho
Ltd. The relevant find
ITA tant's office.
In reality, t nly 9% as on 31.03.2006. T ssee furnished copies of annual
Ltd. filed under the Companie
–06, and 2006–07. These retur humal never held more than 9%
nt period. However, the AO round that these annual returns of assessment and issuance o re treated as an afterthought.
on – Inter-Corporate Deposit:
submitted that the alleged loan sit made in the ordinary cour d by M/s Darshan Impex Pvt. Lt was used to purchase fu f M/s King Prawns Ltd. from I rejected by the AO, who procee
16,00,000/- as deemed dividen the hands of Mr. Ajay S. Dhuma eal, the Ld. CIT(A) also rejected olding 9% shareholding in Dars ding of the Ld. CIT(A) is reprodu
Ajay S. Dhumal
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A No. 4519/MUM/2013
the assessee's
To support this l returns of M/s s Act, 1956, for rns consistently
% of the equity
O rejected this s were filed only of a show-cause n was in fact an rse of business.
td. from M/s KP ully convertible
DBI Bank. This eded to treat the nd under section al.
d the contention shan Impex Pvt.
ced as under:
“5. I have cons per return of in for assessmen the equity capi shares in case the figures of holding only 9%
even with the R pattern on 18. some kind of onwards. Acco afterthought an section 2(22)(c) this case was the assessee to relevant period income. This re therefore, auth cannot claim n share holding of Rs. 16,00,0
clearly in defau conform the ad of the assessee
5. Before us, the Books containing pag
5.1 The Learned C grounds raised, adv contended that the Darshan Impex Pvt.
50% shareholding. T made before the low
50% shareholding in Pvt. Ltd. was an inad the Chartered Accou this contention, the L
ITA sidered the facts of the case. There is no dou ncome filed in case of M/s Darshan Impex P nt year 2006-07, the assessee is holding 50
ital of the company. Similarly, the assessee of M/s K.P. Power Pvt. Ltd. The assessee cl share holding in the return was incorrect a % of the share capital. However, the facts re
ROC, the assessce did not disclosed his sha
11.2011 and only on this date the assesse return it was ROC from assessment yea rdingly, the above returns filed with the asse nd probably done with the view to escape pr
) of the Income Tax Act, as assessment proc already in advance stage. There is no other o show that his share holding was only 9%
d and not 50% as disclosed by him in the eturn has been signed and verified by the ass henticity of the same cannot be doubted. The now, by fling a belated return before the RO was only 9%. Accordingly, I hold that by tak
000/, the assessee being majority shareh ult of the provision of the section 2(22)(c). I a ddition of Rs.16,00,000/- made by the AO in e and reject grounds of appeal of the assessee
Ld. Counsel for the assessee ges 1 to 50 and 1 to 92 respectiv
Counsel for the assessee, in vanced a twofold argument.
assessee held only 9% of the Ltd., contrary to the allegation
The Ld. Counsel reiterated th wer authorities and stated that n the return of income of M/s dvertent clerical error committe untant who prepared the return
Ld. Counsel referred to the annu
Ajay S. Dhumal
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A No. 4519/MUM/2013
ubt that as Private Ltd.
% share in e is holding laimed that nd he was emains that are holding e has filed ar 2003-04
essee is an rovisions to ceedings in r proof with during the e return of sessee and e assessee
OC that his king a loan holder was accordingly, n the hands e.”
filed two Paper vely.
support of the Firstly, it was shares in M/s n that he held a he submissions the mention of Darshan Impex d by the staff of n. In support of ual returns filed under the Companie shares held by the a Paper Book, which c
M/s Darshan Impex
2007, confirming tha equity shares durin details of said sha extracted as under:
LIST
SrNo
Name of shareholder
Sunil D. Jaithwar
2
Anupama Jaithwar
Total
SrNo
Name of shareholder
Narayandas Badyani navinchandra Patel
3
N.B.H.Kulkarni
4
Satish Rao Deshmukh
5
Surekha Dhumal
6
lla Anand Rao Patel
ITA es Act, 1956, which reflected assessee. Attention was drawn t contains details of the shareho
Pvt. Ltd. for the periods 1999–2
at the assessee never held more ng the relevant period. For r areholding as reported by th
M/s Darshan Impex Pvt Ltd
T OF SHARE HOLDERS ON INCORPORATION
Type of Share
No of shares held
Nominal value of shares
Am
Equity
10
1,0
Equity
100
10
1,0
2,0
LIST OF SHARE HOLDERS AS ON 1999 To 2000
Type of Share
No of shares held
Nominal value of shares
Am
Equity
1,300
13
Equity
1,300
13
Equity
1,300
10
13
Equity
1800
10
18
Equity
3000
30
Equity
1,300
10
13
Ajay S. Dhumal
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A No. 4519/MUM/2013
the number of to page 4 of the lding pattern of 2000 and 2004–
e than 9% of the ready reference, he assessee, is mount (Rs)
%of Holding
000
50
000
50
000
100
mount (Rs)
% of Holding
3,000
13
3,000
13
3,000
13
8,000
18
0,000
30
3,000
13
Total
SrNo
Name of shareholder
Surekha Dhumal
2
Satish Rao Deshmukh
3
Ajay Shankarrao Dhumal
Total
2 The Ld. Counse 9% shareholding dur was not liable for tre deemed dividend in h 5.3 The second and Counsel for the asse provided by M/s KP P was given out of bus King Prawns Pvt. L substantial interest, the company was un facilitate the redemp purchase the debentu To support this tran ITA
10,000
LIST OF SHARE HOLDERS AS ON 2004 to 2007
Type of Share
No of shares held
Nominal value of shares
Am
Equity
8,100
81
Equity
1,000
10
10
Equity
900
10
9,0
10,000
1,0
l accordingly submitted that ass ring the year under consideratio eating said loan/advance of Rs his hands.
d alternative argument advanced essee was that the amount of R
Power Pvt. Ltd. to M/s Darshan siness expediency. It was subm
Ltd., a company in which the had issued debentures to IDB able to redeem the said debentu ption, M/s Darshan Impex Pvt ures from IDBI but lacked the n nsaction, M/s KP Power Pvt. L
Ajay S. Dhumal
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A No. 4519/MUM/2013
0,00,000
100
mount (Rs)
% of Holding
1,000
81%
0,000
10%
000
9%
00,000
100%
sessee held only on, therefore, he
.16,00,000/- as d by the Learned
Rs. 16,00,000/- n Impex Pvt. Ltd.
mitted that M/s e assessee held
BI Ltd. However, ures. In order to . Ltd. agreed to necessary funds.
Ltd. extended a sum of Rs. 16,00,00
which Rs. 15,00,000
from IDBI Bank. The the extent of Rs. 15, expediency. Further additional fact to sub submitted that land
Maharashtra to M/s limited company) for the unused portion installed windmills
Land Revenue Depa
Maharashtra Governm invested a sum of Rs of preference shares
Counsel argued tha business interest in M interest, it provided f
Ltd. for the purpose o time settlement (OTS
Pvt. Ltd. The paymen the business intere safeguarded its sub 31.03.2006, especiall by IDBI. The Ld. C
ITA
00/- to M/s Darshan Impex P
0/- was utilized for purchasing e Ld. Counsel argued that the s
,00,000/-, was made for comm r, the Ld. Counsel brought bstantiate the claim of business d had been allotted by the s King Prawns Pvt. Ltd. (later c the purpose of prawn and salt of the said land, M/s KP Powe after obtaining requisite appr artment and other relevant au ment. Additionally, M/s KP Pow s. 1 crore in M/s King Prawns P s as on 31.03.2006. In this c at M/s KP Power Pvt. Ltd. ha
M/s King Prawns Pvt. Ltd. and financial assistance to M/s Dars of acquiring the debentures from S) arrangement to bail out M/
nt of Rs. 15,00,000/- not only s est of M/s KP Power Pvt.
stantial investment of Rs. 96, ly in light of potential coercive r
Counsel also submitted addit
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A No. 4519/MUM/2013
Pvt. Ltd., out of the debentures said payment, to mercial/business on record an s interest. It was Government of converted into a production. On er Pvt. Ltd. had rovals from the uthorities of the wer Pvt. Ltd. had Pvt. Ltd. by way context, the Ld.
ad a significant
, to protect that shan Impex Pvt.
m IDBI in a one-
/s King Prawns served to protect
Ltd. but also ,00,000/- as of recovery actions tional evidence, including a copy
Maharashtra and M/
the Land Revenue D allowing the use of requested that, in admitted as additiona the file of the Assess business expediency
Darshan Impex Pvt. L
6. On the other ha
(Ld. DR) relied upo submitted that, with credible evidence had the assessee held onl
The only documents
Companies Act, 1956