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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRIKULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER (A.Y. 2011-12) Meena Rakesh Bansal, 34, Quay Street, Darukhana, Reay Road, Mumbai-400010. PAN: AAKPB5746L ...... Appellant Vs. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi. ..... Respondent Appellant by : Sh. Sameer Dalal, Adv. Respondent by : Sh. Ashish Kumar, Sr. DR Date of hearing : 05/07/2022 Date of pronouncement : 03/10/2022 ORDER PER GAGAN GOYAL, A.M:
This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi [hereinafter referred to as (‘NFAC)] dated 06.10.2021 for the Assessment Year (AY) 2011-12. The assessee has raised the following grounds of appeal: “The present appeal is directed against order passed by the learned Commissioner of Income Tax, NFAC.
The learned CIT (A) has erred in sustaining the addition on account of deemed dividend U/s. 2 (22) (e) of Income Tax Act.”
Brief facts of the case are that the assessee e-filed her return of income on 30th July 2011 declaring income of Rs. 12, 62,291/-. The case was reopened u/s 148 of the act. In response to notice u/s. 148, assessee requested to treat the original return filed as return filed in response to notice u/s. 148 of the Act. Assessee is a partner in M/s Bansal Brothers predominantly receiving income by way share of profit in the firm, income from house property and income from other sources.
The reasons recorded for reopening the assessment is reproduced as under: "Information has been received through mail on 23.3.2018 from the office of DDIT (Inv.) Unit-1 (1), Mumbai regarding immovable property purchase transaction. In this case, the assessee Meena Bansal along with his husband Shri. Rakesh Bansal has purchased property worth Rs.40 lacs. Assessee having 50% share in the property. On verification of source of payment for purchase of property, it came to know that M/s. Esquire Share &Stockbrokers Ltd. made direct payment to the seller. Il was further observed that the assessee was holding 18% share in M/s. Esquire Share &Stockbrokers Ltd. on behalf of assessee is in nature in this case. /Of loans and advances and therefore provision of Sec. 2(22)(e) of the I.T Act is applicable”
4, In response to reasons recorded by the AO for reopening of the matter assessee submitted her reply vide letter dated 04-12-2018 which is reproduced as under:
"Regarding receipts from Esquire Shares & Stock brokers Ltd. Rs. 20, 00,000/- deemed dividend income u/s 2(22) (e) of the Income Tax Act. Please find herewith enclosed audited final accounts of Esquire Shares & Stock Brokers Ltd. showing profit & loss account Rs. 12, 74,438 as on 01-04-2010 Regarding nature of advances received by your assessee -please note that Esquire Shares & Stock brokers Ltd. has issued cheques Rs. 10, 00,000 and Rs. 1, 00,000 and Rs. 1, 00,000 and Rs. 29,00,000 on 18-10-2011, 15-12-2010 and 15-12-2010 respectively to Saroj Mohanlal Rathod & Others. Above payment were made by Esquire Shares& Stock Brokers Ltd. for purchase of Plot No. 31 in Jay Co-Opp. Housing Soc. Ltd. Jamnagar as per agreement dated 26/11/2010. Directors were authorised wide resolution in meeting on 01/10/2010. Above referred company was unable to use the said plot for commercial purpose and were unable to cancel the deal in view of possibility of doubtful recovery, Directors of the company Mr. Rakesh Bansal and Mrs Meena Bansal have decided to buy property jointly in their name authorised by the board resolution in the meeting held on 02-01-2011. Accordingly sellers were requested to sign and co-operate for registration of document dated 06-01-2011. This payment were ultimately squared-off in books by making matching entries in Partnership firm M/s Bansal Brothers where above company Mr Rakesh Bansal and Mrs Meena Bansal were Partners. I would like draw your kind attention to the fact that capital account of Mr Rakesh Bansal and Mrs Meena Bansal with M/s Bansal Bros have sufficient balance as on 11-01-2011 i.e. day on which sale agreement was executed between Saroj M. Rathod & Others. In view of the above facts, company has not advanced any loan to its shareholders Mr. Rakesh Bansal. It is only current transactions. Recently, Hon'ble Calcutta High Court in the case of CIT vs Gayatri Chakraborty (2018) Taxman.com 244 Order dated 03.05.20187 AY 2009-10 held that .... "The assessee was beneficiary of the sums given by BAPL was the point of time during the previous year and BAPL was the beneficiary of the sums given by the assessee at another point of time during the previous year. It was case of Mutual running or account which created independent obligations on the other and not merely transactions which created obligations on other side. Those on the other being merely complete or partial discharge of such obligations and there were reciprocal demand between the parties and the account was mutual. "
After considering the reply of the assessee, AO was not satisfied with the contentions of the assessee. He made an addition of Rs 12,74,438/- being free distributable reserve and surplus of M/S Esquire Shares andStockbrokers Ltd u/s 2(22)(e) of the Act. Being aggrieved with the order of AO assessee preferred an appeal before Ld. CIT (A). Ld. CIT (A). Also confirmed the view taken by the AO and dismissed the appeal of the assessee.
Being still aggrieved assessee moved an appeal before ITAT. We have gone through the order of the AO, order of the Ld. CIT (A) and a paper-book filed before us. As per our observation board of the company M/S Esquire Shares and Stock brokers Ltd authorised Mr Rakesh Bansal director and husband of the assessee to conclude the deal with seller Smt. Saroj Ben Mohan Lal Rathod for sum of Rs 40/-lakhs (dated 01-10-2010). Thereafter a sale agreement dated 26- 11-2010 entered into between M/s. Esquire Shares and Stock brokers Ltd. and Smt. Saroj Ben Mohan Lal Rathod. Against this property seller received a cheque of Rs 10 lakhs as advance on 15-11-2010. Thereafter seller further received two cheques of Rs 1lakh and Rs 29 lakhs on 15-12-2010. Thereafter on 02-01-2011 the company M/s. Esquire Shares and Stock brokers Ltd. passed a further board resolution in favour Mr Rakesh Bansal and Mrs Meena Bansal (director and shareholder) to take over the ownership of the plot and reimburse the company with the funds given for plot. This is due to the fact that the management of Jay Cooperative Society Ltd (where the plot is situated) had categorically denied issue NOC in favour of M/s. Esquire Shares and Stock brokers Ltd. As the bye laws of the cooperative society did not allow any commercial activity/exploitation of the plot.
As the full payment had already been made to the seller and company M/s. Esquire Shares and Stock brokers Ltd anticipated a dispute in buying this property in its name and on cancellation of the transaction there was a fear of bad debts of the amount. Accordingly, sellers were requested to sign and cooperate for registration of plot in the name of two directors i.e., Mr Rakesh Bansal and Mrs Meena Bansal. There was an agreement between appellant, her husbandand seller on 06-01-2011. In the meantime, before even registration of the plot assessee along with her husband returned the whole amount back to the company M/s. Esquire Shares and Stock brokers Ltd on 29-03-2011.
Ultimately the plot was registered in the name of the assesseeand her husband on 04-11-2011. We have gone through the ledger account of seller in the books of M/s. Esquire Shares and Stock brokers Ltd. Initially the amount was debited as if company is buying the property from the seller and later on, they changed the narration of the entry as if the amount was being paid on behalf of Mr Rakesh Bansal and Mrs Meena Bansal. On the relevant date i.e., 11-01-2011 Mr Rakesh Bansal and Mrs Meena Bansal had sufficient balance/funds in their respective capital accounts in the partnership firm M/s Bansal Brothers. The same reopening u/s 148 of the act was done in the case of assesses husband and same amount of Rs 12, 74,438/- added as deemed dividend in his hand also u/s 2(22) (e).
As per the legal position same amount of reserve and surplus can’t be added twice i.e., like in the instant case Rs 12,74,438/- were added in the hands of assessee’s husband and the same amount out of reserve and surplus added again in the hands of the assessee also. Assessee informed AO that her husband’s case was also re-opened on the similar ground and addition of Rs. 12, 74,840/- has already been made in the hands of her husband. To substantiate this fact assessee submitted her husband’s assessment order dated 11.12.2018 in A.Y. 2011-12. We have perused the assessment order dated 11.12.2018, the copy of which is available on appeal file, in which impugned addition of Rs. 12,74,438/- u/s. 2(22)(e) of the Act has already been made in the hands of Rakesh Bansal, husband of assessee, and as such cannot again be added in the name of his wife, the assessee in this case.
Despite of the fact that addition has already been made in the hands of assessee’s husband and the same has been in the knowledge of the AO, he again made an addition in the hands of assessee also. This action of AO will certainly tantamount to double addition i.e. same amount of reserve and surplus added twice once in the hands of assessee and before that in the hands of assessee’s husband. It’s the basic principle that the amount utilised for the purposes of sec.2(22)(e) out of reserve and surplus, get exhausted if any addition has already been made in the hands of some other share holder to that extent. So, in this ground itself addition in the hands of assessee can’t be made as amount has already been exhausted in the hands of her husband.This view get strength from the decision of honourable Supreme Court in the case of CIT Vs G. Narsimhan 112 Taxmann 66 and the honourable jurisdictional High Court in the case of CIT Vs P.K. Badianti 1970 76 ITR-36.