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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: Shri Shamim Yahya
O R D E R This appeal by the assessee is directed against order of learned CIT(A) dated 09.01.2017 and pertains to assessment year 2009-2010.
2. The grounds of appeal read as under:-
“1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing to A.O. to restrict the addition made u/s 2(22)(e) of the I.T.Act amounting to Rs.38,86,631/- to Rs.3,02,937/-.
2. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”
3. In this case on perusal of the records it was found that assessee was holding 99.9% shares in M/s.ASP Exports Ltd. M/s.ASP Export Limited has accumulated profit of Rs.4,61,88,730 as on 31.03.2009. As per the Balance
. Shri Dinesh Kumar Goel. Sheet of the assessee has taken loan from M/s ASP Exports Limited with a closing balance of Rs.36,93,106. The A.O. opined that it can be seen that all the three parameters of violation of provisions of section 2(22)(e) is satisfied.
4. Upon Assessing Officer’s enquiry in this regard, assessee replied as under:-
“1. During the year under assessment the assessee entered into lease agreement with M/s ASP Exports Limited vide Indenture of Lease dated 05.12.2008.
As per the above the assessee interest free deposit of Rs, 50,00, OOO/- against the above lease.
The amount of Rs. 50,00,000/- being interest free deposit was erroneously debited to the assessee personal account. The same is now rectified.
Copy of Ledger Account for the year 01.04.2008 to 31.03.2009.
5. Copy of Lease Deposit Account for the year 01.04.2008 to 31.03.2009.
Copy of Indenture of Lease dated 05.12.2008.
From the above account you will found that there is hardly any amount chargeable under deemed dividend."
However, the A.O. was not satisfied. He concluded as under:- “From the above discussions it is established that the assessee's plea that he has received Interest free deposit from M/s ASP Exports Ltd is not correct. The claimed Indenture of lease dated 05.12.2008 is an afterthought and a colourful device to mislead the assessment proceedings. Hence the assessee's . Shri Dinesh Kumar Goel. submission regarding receipt of interest free deposits of Rs.50,00,000/- from M/s ASP Exports Ltd is hereby rejected. For invoking section 2(22)(e) the condition which is required to be fulfilled is that a shareholder should be holding not less than ten percent of the voting power in the company which has given loan or advance to the extent of accumulated profit. Here the assessee was holding 99.9 % shares in M/s ASP Exports Ltd. M/s ASP Exports Ltd has accumulated profit of Rs.4,61,88,730/- as on 31.03.2009. Thus, it is clear that all the conditions laid down in Section 2(22)(e) of the l.T Act are fulfilled in the assessee's case and accordingly, provisions of Section 2(22)(e) of the l.T Act are applied. During the year under consideration, the assessee received amounts from M/s ASP Exports on many occasion and also repaid amounts. From the above discussions it is established that the assessee has received loans of Rs.38,86,331/- in contravention of provisions of Section 2(22)(e) of the Income Tax Act, 1961. Accordingly, a sum of Rs.38,86,331/- is added to the income of the assessee being income from Other Sources for the year as deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961.”
6. Against the above order, assessee appealed before the learned CIT(A). The learned CIT(A) held as under:-
“I have considered the stand of the AO as well as submissions of the appellant. While arguing the case of the appellant, the Ld.AR also relied upon the decision of Hon'ble Kolkatta High Court in the case of Pradeep Kumar Mathotra V/s. CiT West Bengal (Calcutta High Court) (ITA 219 of 2003).
5.3.1. A perusal of the entire facts show that the AO has rejected appellant claim after giving the following findings with regard to the date of purchasing of property by assuming that . Shri Dinesh Kumar Goel. the assessee has taken plea that he has leased a property to M/s. ASP Exports Limited by virtue of indenture of lease dated 05.12.2008. However on verification of the alleged Indenture of Lease dated 05.12.2008, it is found that the property in question was acquired by virtue of a Sale Deed dated 06.12.2008. The agreement for purchase of the property was executed on 06.12.2008 and the indenture of lease was executed on 05.12.2008. It is not understandable as to how the indenture of lease was executed for the property which was not acquired by the assessee. As against above it has been clarified by the Ld. AR that the agreement for purchase of property was executed on 05.12.2008 & not on 06.12.2008. With regard to Registration of Agreement for Sale of the Property claimed to be let out, it has been explained that the appellant that they have let out Flat No. 1801 and 1802 in the building known as Cupola C Wing in the project Bhumiraj Heritage vide indenture of lease dated 05.12.2008. However on verification of records, it was found that the agreement for sale for both the above properties were registered on 31.12.2008. The appellant has explained that the agreement for sale of Flat No. 1801 & 1802 was registered on 05.12.2008 as per copy of Index No. II dated 05.12.2008. The stamp duty & registration charges on paid 25.11.2008. Only the registration of the Property was completed on 31.12.2008. 5.3.2. With regard to Stamp Paper of Indenture of Lease, the AO assumed that the Indenture of Lease was on a Rs.100/- Stamp Paper. Perusal of the same goes to show that the assessee purchased the stamp paper on 10.11.2008, prior to purchase of the property. This has been strongly refuted by the Ld.AR who submitted that the appellant had purchased stamp paper on 10.11.2008 prior to the date of purchase of property. 5.3.3. As regards the issue that the appellant was not authorized to let out the property, the A.O. held that on verification of the operating paras of the Agreement for sale registered on . Shri Dinesh Kumar Goel. 31.12.2008, it was found that the assessee was not authorized to let out the property as he has not made final payment to the builders. The appellant had paid Rs.8,00,000/- for both the properties and Agreement for sale were executed, whereas Rs.84,40,000/- was payable to the builders. The preamble of the Agreement for sale registered on 31.12.2008. This observation of the AO has been strongly refuted by the Ld. AR who submitted that the appellant made full payment of Rs.84,40,000/-to the builder as such he was not allowed to let out the above property. The date-wise chart as explained by the Ld. AR is reproduced as under :- Payments made against Flat No .1801, Bhumiraj Hermitage Date Receipt No. Amount 05.12.2008 6434 4,00,000 17.12.2008 6439 7,00,000 20.12.2008 6451 35,20,000 TOTAL 46,20,000 Payments made against Flat No .1802, Bhumiraj Hermitage Date Receipt No. Amount 05.12.2008 6434 4,00,000 17.12.2008 6442 7,00,000 20.12.2008 6449 35,00,000 20.12.2008 6450 13,747 20.12.2008 6452 6,253 TOTAL 46,20,000 5.3.4. In the assessment order, the AO after rejecting the explanation given by AR, computed the disallowance U/s.2(22)(e) at Rs.38,86,331/-. However, this computation refuted by the Ld. AR. regard to deemed dividend has been of appellate proceedings, the issue of deemed dividend was discussed thread bared with the Ld.AR, and appellant filed revised working annexed in Page No.55 & 56 of Paper Book for additions U/s.2(22)(e). As per the said working the additions U/s.2(22)(e) works at Rs.3,02,937/-.The relevant details as worked out by the Ld.AR is reproduced as under :- MR. DINESH KUMAR GOEL LOAN ACCOUNT WITH M/S.ASP EXPORTS LTD FOR THE YEAR ENDED 31.03.2009 Date Amount Debit Amount Closing Credit Balance Opening Balance 0 9689430 9689430 09.04.2008 15834 0 9673596 17.04.2008 30000 0 9643596 30.Q4.2008 0 7500 9651096 09.05.2008 15834 0 9635262 09.05.2008 0 21000 9656262 09.05.2008 0 150000 9806262 12.05.2008 0 25000 9831262 31.05.2008 0 7500 9838762 30.06.2008 o 7500 9846262 05.07.2008 0 50803 9897065
09.07.2008 15834 0 9881231 31.07.2008 6875000 0 3006231 31.07.2008 0 7500 3013731 31.08.2008 0 7500 3021231 16.10.2008 30000 0 2991231 23.10.2008 15834 0 2975397 31.10.2008 7500 2982897 09.11.2008 15834 0 2967063 09.11.2008 0 400000 3367063 10.11.2008 1000000 0 2367063 15.11.2008 20000 0 2347063 18.11.2008 600000 0 1747063 25.11.2008 550000 0 1197063 26.11.2008 1500000 0 -302937 MR. DINESH KUMAR GOEL LOAN ACCOUNT WITH M/S.ASP EXPORTS LTD FOR THE YEAR ENDED 31.03.2009 Date Amount Debit Amount Closing Credit Balance 27.11.2008 0 200000 200000 30.11.2008 0 7500 207500 03.12.2008 0 300000 507500 03.12.2008 0 300000 807500
. Shri Dinesh Kumar Goel. 05.12.2008 0 300000 1107500 09.12.2008 15834 0 1091666 11.12.2008 0 100000 1191666 23.12.2008 185000 0 1006666 31.12.2008 0 7500 1014166 03.01.2009 0 200000 1214166 09.01.2009 15834 0 1198332 20.01.2009 0 300000 1498332 22.01.2009 325000 0 1173332 22.01.2009 0 82442 1255774 22.01.2009 0 237494 1493268 28.01.2009 200000 0 1293268 31.01.2009 0 7500 1300768 06.02.2009 15834 0 1284934 12.02.2009 0 8533 1293467 28.02.2009 0 7500 1300967 09.03.2009 15834 0 1285133 25.03.2009 9000 0 1276133 31.03.2009 0 7500 1283633 31.03.2009 0 367319 1650952 31.03.2009 37834 0 1613118 31.03.2009 0 47 1613165 5.3.5. Before parting, it will be pertinent to mention here that the AO has not made any reference to any judicial pronouncements so as to strengthen his calculation and observations. However, during the course of appellate proceedings the Ld.AR has referred and relied upon the judgment of the Hon’ble Kolkata High Court in the case of Pradeep Kumar Malhotra (supra).”
7. The learned CIT(A) concluded as under:-
“In view of the facts and circumstances narrated above as well as judicial pronouncements referred above, the addition made by the AO amounting to Rs.38,36,331/- as deemed dividend is restricted to Rs.3,02,937/- and the balance amount of Rs.35,33,394/- (38,36,331/- minus 302937/-) is directed to be deleted by the AO. Accordingly, the grounds of appeal is to be treated as partly allowed.”
8. Against above order of learned CIT(A) assessee is in appeal before the ITAT.
9. I have heard both the Counsel and perused the records. I find that the assessee’s explanation have been found by the Assessing Officer to be an afterthought. However, learned CIT(A) has elaborately examined the same in light of the assessee’s submissions. Learned CIT(A) has found considerable cogency in the same. Despite the same, the learned CIT(A) has arrived at a computation which mandates disallowance of only a part, amounting to Rs.3,02,937. Furthermore, the computation finally arrived at by the learned CIT(A) is also correct. Hence, I do not find any infirmity in the order of learned CIT(A). Accordingly, I uphold the same.
. Shri Dinesh Kumar Goel. 10. In the result, this appeal filed by the Revenue stands dismissed.