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Income Tax Appellate Tribunal, DELHI BENCH ‘…….’ NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI L.P. SAHU
ORDER
Per L.P. Sahu, Accountant Member:
This appeal by the assessee arises out of the order dated 04.09.2014 of ld. CIT(A)-XVIII, New Delhi for the assessment year 2006-07 on the following grounds :
On the facts and in the circumstances of the case and in law the following actions of the authorities below being most arbitrary, erroneous and unlawful must be quashed. “1. Initiating proceedings u/s. 148 of the Act without there being any valid reason to form the belief of the escapement of income.
2. Passing order u/s. 143(3)/147 of the Act at Rs.9,53,380/- against the already determined income of Rs.2,73,424/-.
3. In making an addition in a sum of Rs.6,79,956/- treating the transaction between M/s. RCMC share Registry Pvt. Limited and M/s. PAN Portfolios Pvt. Limited as deemed dividend taxable u/s. 2(22)(e) of the Act in the hands of the assessee.
In charging interest u/s. 234B of the Act in a sum of Rs.1,90,180/-.
The brief facts of the case are that the assessee is a common director in two companies, viz., M/s. RCMC Share Registry Pvt. Ltd. (RCMC) and M/s. PAN Portfolio Pvt. Limited (PAN) having substantial interest in both the companies. M/s. RCMC, out of its surplus funds, advanced money to M/s. PAN. In the assessment proceedings of M/s. PAN, the AO observed that since the Director of PAN has substantial interest in lender company, therefore, the money advanced was hit by the provisions of section 2(22)(e) of the Act and an addition of Rs.13,59,911/- was made in the hands of M/s. PAN.
M/s. PAN preferred an appeal against this order before the ld. CIT(A), who vide order dated 16.11.2009 directed the Assessing Officer as follows : “Respectfully following the ratio of the above judgments on the issue, the addition of Rs.13,59,911/- in the hands of the appellant company cannot be sustained as the amount can be brought to tax only in the hands of the shareholders of the lender company, i.e., Shri Naresh Chander Gupta, Pankaj Gupta and Anuj Gupta and not in the hands of the appellant company which is not a shareholder of the lender company. In view of the above discussion, the aforesaid addition in the hands of the appellant company stands deleted. The AO is directed to take necessary action to bring the said amount to tax in the hands of Shri Naresh Chander Gupta, Shri Pankaj Gupta and Shri Anuj Gupta as per the provisions of law. If they
are assessed in some other charge, intimation may be sent to their respective Assessing Officers. Ground No. 1 is allowed.” 4. The aforesaid order of the ld. CIT(A) was challenged by the Revenue before ITAT, where the order of the CIT(A) stood confirmed vide order dated 12.03.2010.
In view of the decision of ld. CIT(A) in the case of M/s. PAN for the year under consideration, the Assessing Officer formed a belief that a sum of Rs.13,59,911/- which was liable to be assessed in the hands of common share holder, i.e., the appellant, has escaped assessment and after initiating the proceedings u/s. 147/148, assessed a sum of Rs.6,79,956/- representing to 50% of the sum of Rs.13,59,911/- in the hands of appellant, as he, in his individual capacity, held 50% shares in lender company M/s. RCMC. The ld. CIT(A) confirmed the addition in appeal before him. Being aggrieved, the assessee is in appeal before us.
We have heard the rival submissions and have perused the material available on record.
The ld. counsel for the appellant challenged the validity of initiating proceedings u/s. 147 stating that the re-assessment proceedings have been taken without having any reason of escapement of income. He, relying upon a decision of ITAT, Kolkata in IFB Agro Industries Ltd. vs. JCIT, 42 taxmann.com 246, also contended that the transaction between M/s. RCMC and PAN is in the nature of inter corporate deposit and thus, the provisions of section 2(22)(e) of the Act are not applicable to such deposits, as these deposits are neither advances nor loans and, therefore, such transactions are not covered under the provisions of section 2(22)(e) of the Act. He, therefore, submitted that the impugned order is, therefore, not sustainable in the eye of law.
The ld. DR, on the other hand, relying on the orders of the authorities below, submitted that the re-assessment proceedings initiated by AO are lawful and valid and the issue regarding taxability of deemed dividend of Rs. 13,59,911/- in the hands of common directors of lender company, viz. M/s. RCMC, stood affirmed by the Tribunal in the case of M/s. PAN. Therefore, the impugned order does not call for any interference.
Having considered the rival submissions in the light of material available on record, we find that there are two issues which need adjudication in this appeal. First is validity of initiation of re-assessment proceedings and the second, taxability on a sum of Rs. 6,79,956/- representing to 50% of the sum of Rs.13,59,911/- in the hands of appellant. As to the validity of re- assessment proceedings, we do not find any justification to disturb the conclusion arrived at by the ld. CIT(A) who has rightly held the action as valid laying his hands on the decision of Hon’ble Supreme Court in the case of Phool Chand Bajrang Lal Vs. ITO, 203 ITR 456. In the present case, the Assessing Officer received information after appellate order in the case of PAN Portfolio (P) Ltd. wherein the CIT(A) has given the direction to take action in the case of the assessee. Therefore, initiation of proceedings u/s. 147 on this count cannot be said to be invalid. Besides, after receipt of reasons recorded, no such grievance/objection on initiation of proceedings u/s. 147 appears to have been raised at the initial stage before the Assessing Officer. Therefore, finding on validity of re-assessment proceedings stands confirmed.
As far as the second issue regarding taxability of a sum of Rs. 6,79,956/- representing to 50% of the sum of Rs.13,59,911/- in the hands of appellant, being 50% holder in the lender company, we find that the issue of taxability on this amount stood decided by the CIT(A) vide order dated 16.11.2009 and affirmed by Tribunal vide order dated 12.03.2010 as mentioned in paras 3 & 4 hereinabove. Once, the taxability of the impugned sum as deemed dividend in the hands of the common directors of the lender company, stood decided by the Tribunal and attained finality, we have no option except to respectfully follow the decision of co-ordinate bench of Tribunal in order to maintain the balance of justice. No such evidence is available on record that the order of the Tribunal has either been challenged or reversed by the higher courts. Furthermore, a perusal of the assessment order reveals, the assessee in reply dated 05.09.2013 filed before the AO submitted that the assessee did not derive any benefit from the loans obtained from M/s. PAN Portfolio Pvt. Ltd. and no such plea appears to have been made before the AO that the transaction between the two companies was not in the nature of loan but an inter corporate deposit, not attracting the provisions of section 2(22)(e) of the Act. In view of this discussion, we do not find any good ground to interfere with the impugned order on this count too. Accordingly, the appeal of the assessee is liable to be dismissed.
The last ground is in respect of charging of interest u/s. 234B of the Act. The charging of interest is consequential in nature. Therefore, this ground is dismissed.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 19.01.2016. Sd/- Sd/- (I.C. SUDHIR) (L.P. SAHU) Judicial Member Accountant Member Dated :19.01.2016 *aks/- Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant. Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi
Date Initial 1. Draft dictated on PS 2. Draft placed before author PS 3. Draft proposed & placed before the JM/AM second member 4. Draft discussed/approved by Second JM/AM Member. 5. Approved Draft comes to the Sr.PS/PS 19.01.16 PS/PS 6. Kept for pronouncement on PS 7. File sent to the Bench Clerk 20.01.16 PS 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order.