AMOL J. SHAH,MUMBAI vs. ITO 3(2)(2), MUMBAI
What did the Tribunal hold?
The Tribunal admitted the additional evidence (MOU) as there was a reasonable cause for its non-furnishing earlier. The matter was restored to the AO for fresh examination considering the additional evidence.
What were the facts?
The assessee received money from a closely held company, which the AO assessed as deemed dividend under Section 2(22)(e). The assessee claimed the withdrawal was for business purposes pursuant to an MOU, but this document was not initially provided to tax authorities.
What were the issues?
Whether the amount received by the assessee from a closely held company constitutes deemed dividend income under Section 2(22)(e) and if additional evidence can be admitted at the appellate stage.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
O R D E R Per B R Baskaran, AM: Both the appeals filed by the assessee are directed against the separate orders passed by the ld.CIT(A)-III, Mumbai for the assessment years 2001-02 and 2002-03, wherein the ld.CIT(A) had confirmed the assessment of deemed dividend made under section 2(22)(e) of the Income Tax Act, 1961.
The ld. Counsel appearing for the assessee submitted that the AO has assessed the amount received by the assessee from a closely held company M/s M J Exports (P) Ltd as deemed dividend income u/s 2(22)(e) of the Act. The ld. Counsel submitted that the assessee had withdrawn the money in connection with a business transaction in pursuance of Memorandum of Understanding (MOU) dated 1.4.1999 entered between 2 and 6902/Mum/2008 the assessee; M/s M J Export Private Limited and M/s Shreya Impex Private Limited. The ld. Counsel further submitted that the assessee belongs to a group which consists of several entities and hence he has to travel frequently in India and abroad for business purposes. Accordingly, he is constrained to fully dependent upon the Accountant for maintenance of accounts and also for assisting the counsels in the Income Tax matters. The present assessment proceedings were initiated in the year 2006 i.e. after expiry of about 7 years from the date of entering into MOU and further the Accountant, who was aware of the facts, had left the organization. Hence, the details of MOU, which describes the business purpose, as per which the money was withdrawn constitutes an importance piece of evidence and the same was not brought to the notice of Tax Authorities. Subsequently, upon examination of the records, it came to light that the assessee has failed to bring on record the above said important document to the notice of Tax Authorities. Accordingly, the ld. AR submitted that the MOU referred above and the explanation relating thereto are vital piece of evidences relating to the issue of determining the applicability of provisions of section 2(22)(e) of the Act. Accordingly, he prayed that the additional evidence furnished by the assessee be admitted and be examined.
On the contrary, the ld.DR submitted that the assessee has brought a new evidence for the first time before the Tribunal and hence, the same requires examination at the end of the AO, if it is admitted by the Tribunal.
We heard the rival contentions and perused the record. From the submissions made by the ld.AR of the assessee, we notice that the assessee belongs to a group consisting of 9 undertakings. According to the ld.AR, the assessee has to travel frequently within India and outside India in connection with the business activities relating to the above said 3 and 6902/Mum/2008 concern. It was further submitted that the assessee had withdrawn fund in pursuance of MOU entered in the month of April, 1999 and the same was inadvertently not brought to the notice of Tax Authorities. It was further submitted that the Accountant who was aware of the relevant facts has left the company and hence, new persons could not lay their hands on the MOU. According to the ld. AR, the MOU is a vital document, which requires to be examined in order to determine the applicability of the provisions of section 2(22)(e) of the Act.
The explanations furnished by the assessee, in our view, shows that there was a reasonable cause for not furnishing the evidences cited above before the tax authorities. The purpose of assessment is to determine the correct amount of total income and accordingly, in the facts and circumstances of the instant case, we are of the view that the request of the assessee to admit additional evidences should be accepted. In fact, admission of additional evidence would promote the cause of justice. Accordingly, we admit the additional evidence furnished by the assessee. At the same time, we find merit in the contentions of the ld.DR that the additional evidence requires examination at the end of the AO. Accordingly, we set aside the order of ld.CIT(A) passed for both the years under consideration and restore all the issues to the file of the AO with a direction to examine them afresh in both the years by considering the additional evidences and also any other information or explanations that may be furnished by the assessee during the set aside proceedings. After providing adequate opportunity of being heard, the assessing officer may take appropriate decision in accordance with the law.
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