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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
Revenue filed this appeal against the order of the Commissioner of
Income Tax (Appeals)-2, Coimbatore in ITA No. A39/2013-14 dated
31.03.2017 for the assessment year 2008-09.
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M/s. Suba Plastics Pvt. Ltd., the assessee, is engaged in the business of
manufacture of plastic Moulded Components. The ITO, TDS Ward 1(3),
Coimbatore (A O) conducted an inspection in theassessee’s premises on
31.01.2013. Based on survey observations, the AO initiated proceedings u/s.
201, called for the details on various payments made, verified them, passed
a consolidated order u/ss. 201(1) and 201(1A) on 22.08.2013 on the
payments falling under various sections viz., 192B, 194, 194C ,194I and 194J.
The AO observed that the assesseemade payments in various amounts, in
different months of the relevant year to one of the shareholder cum
Managing Director viz., Shri V. Baskaran, who was holding 98.94% of
company share capital i.e., more than 10%, over and above the credit
balances standing in his account at the time of making those payments. It
appears from the circumstances that the AO considered that these payments
atRs. 33,10,486/- fell under the scope and definition of deemed dividend u/s.
2(22)(e) and hence attracted TDS u/s. 194 but the assesseefailed to deduct
tax on it , so the assesseewas in default in respect of TDS of Rs. 6,62,097/-
and also the interest payable u/s. 201(1A) on such TDS , the total of which
was at Rs. 12,62,457/-. It appeared that the assessee has accepted such
view of the assessee and has paid such amount on 28.02.2013 i.e., shortly
after the survey, but long before the AO passed the impugned consolidated
order dt 22.8.2013 in which the A Odetermined the tax due u/s 194 at
Rs.6,62,097 , the interest u/s 201(1A) at Rs 6,00,360, the total tax due at Rs.
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12,62,457/- , tax paid at Rs.12,62,457 and the balance payable at Rs. NIL.
The assesseefiled an appeal before the CIT(A) and the CIT(A) based upon the
decision of this Tribunal in the case of M/s. Croma India Pvt. Ltd., vs ITO, TDS
Ward 1(1), Coimbatore in ITA No. 1230 & 1231/Mds/2014 dated 04.02.2015
held that the demand raised on account of the default in respect of non-
deduction of the TDS on the deemed dividend u/s. 194 in the order u/s.
201(1) is not justified and hence directed to delete it. Further, the CIT(A)
observed from the assessment order dated 15.02.2016 passed by the DCIT in
the case of Shri V. Baskaran that the impugned deemed dividend was already
offered to tax by him in the return filed in the course of 148 proceedings and
the same was assessed in his hands. As per the return, self-assessment tax
was also paid. It appears on account of interest liability, demand of Rs.
21,85,750/- was raised in the assessment order passed by the AO. That tax
demand is in any case recoverable fromShriBaskaran. The deemed dividend,
having been taxed in the hands of ShriBaskaran, there is no case for further
recovery of the relevant tax from the appellant in view of Hon’bleSupreme
Court’s decision in the case of Hindustan Coco Cola Beverage Pvt Ltd (Supra).
The AO ofShriBaskaran may proceed to recover whatever tax payable on
account of offering of the deemed dividend by ShriBaskaranas income. In the
light of the foregoing observation , the CIT(A) held that” there cannot be
further tax liability against the appellant on account of alleged TDS default on
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deemed dividend payments and delete gross demand of Rs 12,62,457/- raised
in the order in dispute. Therefore, grounds are allowed.”
On such order, theRevenuefiled this appeal with the following grounds:
“1. The CIT(A)-2 has not accepted the AO’s reasoning, as the impugned deemed dividend was already offered to tax in the return filed by the assessee during the course of proceedings u/s. 148 and the tax has also been paid. The CIT(A), Coimbatore has erred in the assessment order dated 15.02.2016 by not mentioning the assessment year in which the assessee offered deemed dividend for taxation and paid self-assessment tax, whereas for the assessment year 2007-08, only after the inspection of 31.03.2013, the assessee himself calculated the TDS liability and paid the tax vide challans dated 28.02.2013. Also for the assessment year 2007-08, the Assessing Officer will not be able to initiate proceedings u/s. 148 in the financial year 2014-15, as it was already barred by time. 2. The CIT(A) has referred to the decision of Hon’ble Supreme Court decision in M/s. Hindustan Coca Cola case. But the CIT(A) has failed to direct the assessee to pay the interest u/s. 201(1) order from the date of drawing the deemed dividend to the date of payment of tax on deemed dividend. 3. The CIT(A), Coimbatore has erred in holding that the TDS officer has exceeded his jurisdiction by considering the amount as deemed dividend. The TDS officer also works as an Assessing Officer, reliance is also placed on ITAT, Hyderabad Bench “A” in the case of JaypeemGranities (P) Ltd vs Income Tax Officer, Ward 14(3), Hyderabad. 4. The assessee has to comply with the provisions of section 194 which states that before making payment in respect of any dividend or before making any distribution or payment to a shareholder, of any dividend has to deduct TDS from the amount of such dividend, income tax at the rates in force.”
The D R submitted that the assessee voluntarily paid the tax due u/s
194 at Rs.6,62,097 , the interest payable on the TDS u/s 201(1A) at Rs.
6,00,360 and thus, the total tax paid by it on 28.02.2013 i.e., shortly after
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the survey was duly given credit by the AO in the consolidated order
dt22.08.2013, after the survey and he determined the balance payable u/s
194 at Rs. NIL.If at all the assessee has wrongly paid the impugned tax
and interest, it should have approached the concerned authorities with proof
and request for refund etc. When the assesseevoluntarily paid the tax due
u/s 194 and the AO has not raised any demand, the decision of the CIT (A) on
such matter is untenable and hence his order may be set aside. Per contra,
the AR invited our attention to the relevant portion of the assessment order
passed by the DCIT, Corporate Circle-2, Coimbatore in the case of Shri V.
Baskaran for ay 2008-09, dated 15.02.2016 which is extracted as under:
“ 3. In response to the notice u 148 of the I.T. Act, 1961 issued, the assessee vide his letter dated 08.02.2016 had submitted asunder: "I have filed my return of income on 20-1-2016 vide acknowledgement NO.933678461200116. A copy of the acknowledgement enclosed herewith for your kind reference.
There was a inspection conducted by the Income Tax Officer, TDS Ward at M/s. Suba Plastics Private Limited during the inspection the Income Tax Officer has observed that there are withdrawal in my current account and these withdrawals have resulted in a debit balance. The amount of Debit balance was arrived at Rs.33,10,486 and the same has to be subject to TDS.
As my software has corrupted, I am unable to verify the validity. However, to buy peace, I have voluntarily admitted this amount as Deemed Dividend and I have offered the same as income in my revised return. I request you to kindly accept my return of income.”
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The assessee filed its return of income in response to notice u1s 148 of the I.T.Act, 1961 on 20-1-2016 admitting income of Rs.44,43,488. Subsequently, notice u/s 143(2) of the IT. Act, 1961 dated 4-2-2016 was issued and served on the assessee. Shri.S.Venkatesh, FCA appeared and filed details such as computation of total income statement, and hard copy of the return of income filed.
The submissions of the assessee as also the details filed have been perused. The assessee, is the Managing Director of M/s. Suba Plastics Private Limited, wherein, he holds 98.94% of shares. The current account of the assessee with the Company shows that assessee had withdrawn amounts over and above the credit balance thereby, attracting the provisions of section 2(22)(e) of the I.T. Act, 1961. According to section 2(22)(e) of the I.T. Act, 1961
"2(22)(e) : any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise (made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with our without a right to participate in profits) holding not less than ten percent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits;"
The assessee in the return filed in response to notice u/s 148 of the Act issued, had included a sum of Rs. 33,10,486 being the amounts withdrawn from the company M/s. Suba Plastics P. Ltd. over and above the credit balance under the head "Income from Other Sources" and had paid the due taxes thereon.”
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pleaded that since Shri. V. Basakaran has paid the tax on the impugned
deemed dividend and the assessee having wrongly paid tax at the behest of
the AO, it is entitled for refund and the decision of the CIT(A) is correct.
We heard the rival contentions. It is seen from the assessment order,
that the assessee has paid TDS on the deemed dividend u/s 194 at
Rs.6,62,097 and the interest payable on such TDS u/s 201(1A) at Rs.
6,00,360. Thus, it has paid the total tax at Rs. 12,62,457/-on 28.02.2013 i.e.,
shortly after the survey which was duly given credit by the A O in the
consolidated order dt22.08.2013, after the survey and the AO determined the
balance payable u/s 194 at Rs. NIL. Subsequently, as seen from the
submission of the AR extracted, supra, that the AO of Shri V. Baskaran issued
a notice u/s. 148 on 19.03.2015 and Shri. V. Baskaran filed his return on
20.01.2016 admitting the deemed dividend and has paid the due taxes
thereon. Thus, it is clearthat the assessee has wrongly paid the impugned
taxes(as per the ratio of this Tribunal,supra) by mistake or inadvertence or on
account of ignorance etc. Since, the AO has simply accepted the tax payment
made by the assessee in the consolidated order and he has not created any
demand u/s. 194, on such facts and circumstances, we are of the view that
the correct course of action available for the assessee is to approach the
concerned authority seeking refund, and the concerned authority on being
satisfied shall have to grant appropriate relief.Considering the time gap, the
jurisdiction of the involved A O’s etc, in our view, the assessee may approach
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the Administrative Commissioner of the AO i.e., the Income Tax Officer, TDS
Ward-1(3), Coimbatore and seek necessary remedy u/s. 264 by placing
relevant materials. In view of the above, the appeal of therevenue is treated
as allowed for statistical purposes.
In the result, the revenue’s appeal is treated as allowed for statistical
purposes.
Order pronounced on Wednesday, the 29th day of November, 2017 at Chennai.
Sd/- Sd/- (एन.आर.एस. गणेशन) (एसजयरामन) (N.R.S. GANESAN) (S. JAYARAMAN) !या�यकसद"य/Judicial Member लेखासद"य/Accountant Member
चे�नई/Chennai, 0दनांक/Dated: 29thNovember, 2017 JPV आदेशक&)�त1ल2पअ3े2षत/Copy to: 1. अपीलाथ%/Appellant 2. )*यथ%/Respondent 3. आयकरआयु4त (अपील)/CIT(A) 4. आयकरआयु4त/CIT 5. 2वभागीय)�त�न�ध/DR 6. गाड7फाईल/GF