ACIT CORPORATE CIRCLE-6(2), CHENNAI vs. SHRI T PADMAKUMAR, CHENNAI

आदेश/ O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

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&160/2017-18/CIT(A)-15 dated 10.07.2019 for assessment years 2012-13, in the above connected cases with the following common grounds:

“ 1. The order of the Ld. CIT(A) is contrary to the law and facts of the case. 2.The Ld. CIT(A) ought to have appreciated that the issue under consideration was still pending before the Hon'ble Supreme Court in the case of M/s. National Travel Services vs CIT (89 taxmann.com 332 (SC)) and before the Hon'ble Madras High Court in the case of M/s. SubhavarshaInfotech vs. DCIT against the Tribunal order vide and 2805/Chny/2016 dated 05.12.2018. 2.1 The Ld. CIT(A) ought to have noted that the order of the tribunal in the case of M/s. SubhavarshaInfotechvs DCIT in cross appeals vide ITA No. 2365/Chny/2016 and ITA No. 2805/Chny/2016 dated 05.12.2018 confirming the addition in the hands of the M/s. SubhavarshaInfotech was not accepted by the assessee and that the appeal is still pending before the Hon'ble Madras High Court.

3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.”

Sundaramoorthy, Mr.T. Padmakumar and Mr.J . Selvakumar, were also partners in the firm, M/s SubhavarshaInfotech. Out of the fund transferred of Rs. 7.54 Crores, the firm - M/s SubhavarshaInfotechtransferred Rs.4.54 Crores to the above three partners and the remaining Rs.3 Crores to Smt. Priya Rachel, wife

:-3-: 2685 & 2805/Chny/2019 of the one of the partner’s/shareholder’s close friend and therefore to a third party. By observing that it was a deemed dividend u/s 2(22)(e), the Assessing officer added the entire fund received of Rs.7.54 Crores in the hands of M/ s SubhavarshaInfotech. On the firm’s appeal, the CIT(A) deleted the addition of Rs.3 Crores, which was transferred to a third party but confirmed the addition of Rs.4.54 Crores which was transferred to the above three partners . On further appeal by both the firm and the Department, the Hon’ble ITAT, Chennai upheld the addition ofthe AO in the hands of the firm - M/s SubhavarshaInfotech. The firm accepted the ITAT’s order partly to the extent of confirmation of the addition of Rs.4.54 Crores, but appealed against the ITAT’s decision in respect of the confirmation of the addition of Rs.3 Crores given to the third party. The firm’s appeal is pending before the Hon’ble High Court of Madras.

2.1 While the above addition was contested in appeal in the ITAT, the AO re- opened and assessed one-third of Rs.7.54 Crores in the hands of the above three partners on protective basis. Out of which ,the appeals in respect of two partners namely, Mr.S.Sundaramoorthy and Mr.T.Padmakumar are dealt with in this order. The AO has made the aforesaid protective assessment in the hands of the above two partners relying the case of Madhur Housing and Development company (CA No 3961 of 2013) SC , which upheld the decision of the Hon’ble HC of Delhi in the case of CIT vsAnkitech P Ltd (ITA No. 462 of 2009). Aggrieved,

:-4-: 2685 & 2805/Chny/2019 the above assessees filed appeals before the CIT(A). Before the CIT(A), the assessees have, inter alia,submitted that, since theHon’ble ITAT, Chennai has already confirmed the addition of deemed dividendto the extent of Rs.4.54 Crores in the hands of the firm, M/s SubhavarshaInfotechand the firm has also accepted the ITAT’s decision, further additionof the same amount in the hands of the firm’s partners amount to double addition and therefore, the impugned additions should be deleted. With regard to the addition of Rs.3 Crores confirmed by the Hon’ble ITAT, Chennai in the hands of the firm, the firm has not accepted the ITAT’s decision and has contested in appeal before the Hon’ble High Court of Madras, on the ground that the said amount was neither received by the firm nor by the partners.The assessee’s have pointed out that the aforesaid decision was mentioned by the apex court in the case of National Travel Services Vs. CIT and has referred the earlier decision of the apex court in the case of Madhur Housing & Development Company to a larger bench of the Supreme Court.

2.2 After considering the assessees submissions, the Ld. CIT(A) held, inter alia, that the AR has furnished a copy of appeal filed by the firm - M/s SubhavarshaInfotech before the Hon’ble High Court against the decision of Hon’ble ITAT, Chennai as mentioned above in which only the confirmation of addition of Rs.3 Crores given to third party has been contested in appeal. After

:-5-: 2685 & 2805/Chny/2019 considering the AR’s submission, I am convinced that, since the Hon’ble ITAT, Chennai has already confirmed the addition of Rs.4.54 crores in the hands of the firm - M/s SubhavarshaInfotechand the same has been accepted by firm, further addition of the same amount in the hands of the two partners clearly amounts to double addition. Besides, since the issue under consideration has not reached finality in the apex court, I am of the considered opinion that as of now, in view of the Hon’ble ITAT Chennai’s decision of the confirmation of addition of Rs.4.54 Crores, the addition in the hands of the appellants - Mr.S.Sundaramoorthy and Mr.T.Padmakumaron a protective basis by the AO clearly amounts to a double addition and therefore, is unfair and unreasonable, which deserves to be deleted.

Accordingly, theldCIT(A) deleted the addition ofdeemed dividend u/s 2(22)(e) the hands of the two appellants,Mr.S.Sundaramoorthy and Mr.T.Padmakumar are deleted.

Per contra, the Ld. AR submitted on the same lines submitted before the Ld.

CIT(A) and relied on them.

:-6-: 2685 & 2805/Chny/2019 SubhavarshaInfotechcan now be considered also in the hands of the above partners protectively.We have gone through the order of this tribunal in the case of M/s SubhavarshaInfotechVs. DCIT in cross appeals vide and 1TA No.2805/CHNY/2016 dated 5-12-2018. The relevant portion is extracted as under:

“ 13. We have considered the rival contentions and perused the orders of the authorities below. There is no dispute that a sum of Rs. 7,54,00,000/- was received by the assessee as advance from MIs. Symbiotic Infotech P. Ltd. There is also no dispute that the said Company had two different accounts in the books of the assessee, one for trading advances and other for non-trading loans/ advances, and the sum of Rs. 7,54,00,000/- was not a trading advance. It is also not disputed that MIs. Symbiotic Infotech P. Ltd. had accumulated profits of Rs. 28,09,06,827/- as on 31.03.2012. Assessee had relied on a judgment of Hon’ble Jurisdictional High Court in. the case of Printwave Services P. Ltd (supra). Lower authorities had taken a view that the said judgment applied only to Companies and not to partnership firms, who were the recipients of loans/advances. We are of the opinion that this view taken by the id. Commissioner of Income Tax (Appeals) cannot be faulted. Hon’ble Supreme Court in the case of National Travel Services (supra) while referring a similar issue to a larger Bench had expressed serious doubt on the view taken by the Hon’ble Delhi High Court in the case of CIT vs. Ankitech Pvt. Ltd (2012) 340 ITR 14 and the judgment of their Lordship in Madhur Housing and Development Co. (supra). Here before us, admittedly, the shareholders were the same as the partners of the assessee firm and the facts are very similar to the one before Hon’ble Apex Court in National Travel Services (supra).

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, she was not closely related to one of the partners. No doubt, id.Authorised Representative argued that such loan given to Sm. PriyaRacherl did notindividually benefit any partners or firm and hence Section 2(22) (e) of the Act would not apply. However, we are of the opinion that such a narrow definition to the word “individual benefit” cannot be given. The benefit will include direct or indirect things. Partner whose friend’s wife received the advance had indirectly benefited from the advance received by the assessee from M/s. Symbiotic Infotech P. Ltd. We are therefore of the opinion that ld. Commissioner of Income Tax (Appeals) fell in error in giving relief of Rs. 3,00,00,000/- to the assessee. In these circumstances, we dismiss the grounds 6 to 10 of the assessee and allow the appeal of the Revenue.”

4.1 On receipt of the above order, the firm, M/s SubhavarshaInfotechhas accepted the ITAT’s decisionto the extent of Rs.4.54 Crores and therefore it reached finality . With regard to the addition of Rs.3 Crores confirmed by the Hon’ble ITAT, Chennai, supra , in the hands of the firm, the firm has not accepted the ITAT’s decision and has contested in appeal before the Hon’ble High Court of Madras which is pending now . In such facts and circumstances, the Ld CIT(A) ‘s decision “since the issue under consideration has not reached finality in the apex court, I am of the considered opinion that as of now, in view of the Hon’ble ITAT Chennai’s decision of the confirmation of addition of Rs.4.54 Crores, the addition in the hands of the appellants - Mr.S.Sundaramoorthy and Mr.T.Padmakumaron a protective basis by the A O clearly amounts to a double addition and therefore, is unfair and unreasonable, which deserves to be :-8-: 2685 & 2805/Chny/2019 deleted.” does not require any interference and hence the Revenue’s above appeals are dismissed.

Order pronounced on Tuesday, 02nd day of June, 2020 at Chennai.