ITO WD - 9(1),KOLKATA, KOLKATA vs. BIMAL KUMAR KHAITAN, KOLKATA

The grounds of appeal raised by the Revenue reads as follows :- (i) On the facts and in the circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 69,46,102/- as deemed dividend u/s. 2(22)(e) . (ii) Ld. CIT(A) has erred in accepting without assigning any reason the assessee's submission that the assessee had received 20,000 shares transferred to his account from N.K. Credits & Holding Pvt. Ltd. on 30.08.2008, in spite of the fact that the Annual return submitted before MCA which, being a legal document and created by the company of which the assesse is the Managing director having his full administrative control, is a self sufficient and self evidencing document, reflects that the assesse had received 20,000 shares transferred to his account from N.K. Credits & Holding Pvt Ltd. on 30.04.2008 resulting in total shares to be 88,300 shares out of total of 7,06,600 issued shares, i.e. 12.05% as on 30.06.2008 on which the assesse had taken Rs. 1 crore. (iii) . Ld. CIT(A) had erred in accepting the additional documents concerning transfer of shares filed before him as contemporaneous documents in spite of the fact that contents of the documents were not in conformity with the Annual return which was supposed to have been verified before submission with the MCA.

The Assessee is an individual. He was the director of a company by name M/s.General Cement Products Pvt. Ltd. (GCP). The assessee held 68300 shares of GCP which constituted 9.7% of the paid up share capital of GCP. AO found from the website of Ministry of Corporate Affairs (MCA) that the GCP filed annual return of allotment of shares made for the financial year ending 31.03.2008 that the assessee in fact held 88,300 shares out of the total paid up capital of 7,06,600 equity shares of GCP. The share holding of the assessee in GCP was 12.05%. AO, therefore concluded that the assessee had substantial interest in GCP because he was holding more than 10% of the paid shares of GCP. AO further found that in the books of GCP the assessee’s account showed that the assessee had availed of advance of Rs.1 crore on 30.06.2008. AO further found that the accumulated profit of GCP were to the extent of Rs.69,46,102/-. The AO was of the view that to the extent GCP possessed accumulated profits, the loans and advances received by the assessee from GCP had to be treated as deemed dividend within the meaning of section 2(22)(e) of the Act. The AO was of the view that the provisions of Sec.22(22)(e) of the Income Tax Act, 1961 (the Act) were attracted. The provisions of Sec.2(22)(e) of the Act, reads as follows: (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 31-5-1987, 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 or without a right to participate in profits) holding not less than ten per cent 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.”

According to the AO since the Assessee held 10% of the paid up share capital and thereby 10% of the voting power, the provisions of Sec.2(22)(e) of the Act would be attracted in respect of the loan or advance availed by the Assessee from GCP. In response to the query raised by the AO in this regard the assessee submitted that a sum of Rs.1 crore on 30.06.2008 had been repaid by the assessee on the very next day to GCP i.e. 07.07.2008 without utilization. It was submitted that the amount in question cannot be considered as loan or advances within the meaning of section 2(22)(e) of the Act. It is relevant to point here that the AO had not confronted the assessee with the material which he had gathered from website of MCA. The AO rejected the stand taken by the assessee and made addition of Rs.69,46,102/- to the total income declared by the assessee by invoking the provision of section 2(22)(e) of the Act. Only in the order of assessment did the AO refer to the shareholding of the Assessee in GCP as found out by him from the website of MCA.

Before CIT(A) the assessee pointed out that it was only after the receipt of order of assessment that the assessee came to know that the AO had from the website of MCA scrutinised the annual return filed by GCP and obtained information that the assessee held 88,300 shares as on 30.04.2008. The assessee pointed out that as per the annual return by GCP in the MCA 20,000 shares is stated to have been transferred in the name of the assessee on 30.04.2008 and the shares are claimed to have been transferred from the company by N.K.Credit & Holdings Pvt. Ltd. In favour of the Assessee. It is only on the basis of transfer of 20,000 shares as on 30.04.2008 percentage of the share holding of the assessee in GCP has been worked out by the AO as 12.05%. The assessee pointed out before CIT(A) that the AO never raised a query with regard to the applicability of section 2(22)(e) of the Act in the light of the fact that the assessee holding more than 10% of paid up share capital in GCP. The assessee further pointed that the annual return filed by GCP with MCA in which it has been mentioned that the assessee acquired 20,000 shares of GCP on 30.04.2008 was erroneous. It was pointed out that the actual date of transfer of 20,000 shares in the name of the assessee was 30.08.2008. Bimal Kr. Khaitan ., ,A.Y.2009-10 5.1. It was further pointed out that the Assessee applied for transfer of shares to GCP vide his letter dated 25.08.2008 only, along with transfer deed duly stamped and executed in the name of the Assessee. It was further pointed out that GCP passed a resolution in its Board meeting dated 30.08.2008 approving the said transfer of shares in the Assessee's name. Relevant documentary in this regard was filed before CIT(A). It was thus argued on behalf of the Assessee that the said 20,000 shares of GCP were transferred and registered in the name of the Assessee only on 30.08.2008 and not on 30.04.2008, and that in the Annual Return submitted before MCA on 02.11.2008, the date of registration of transfer of shares was wrongly mentioned as 30.04.2008 instead of 30.08.08.

Aggrieved by the order of CIT(A) the revenue has preferred appeal before the Tribunal.

We have heard the learned DR, who reiterated the stand of the AO as put forth before CIT(A) in the remand report. The learned counsel for the assessee placed reliance on the order of CIT(A). He further brought to our notice that the decision of ITAT, Mumbai Bench in the case of Pravin Bhimshi Chheda Shivsada (supra) has been confirmed by the Hon’ble Bombay High Court in the case of CIT vs Pravin Bhimshi Chheda (2014) 48 taxmann.com 151 (Bombay).

We have given careful consideration to the rival submissions. From the evidence available on record it is clear that the actual transfer of shares took place only on Bimal Kr. Khaitan ., ,A.Y.2009-10 30.8.2008. The wrong mention of date in the annual return filed by GCP was the only basis on which the entire addition has been made. The Annual return has since been rectified by GCP by mentioning the correct date of transfer of 20,000 shares in the name of the Assessee as 30.8.2008. The other documentary evidence showed that there was legal transfer of 20000 shares of GCP in the name of the Assessee only on 30.8.2008. In the given facts and circumstances, we are of the view that the mere claim of the revenue that all the documents are not contemporaneous and have been brought about by the Assessee to get over the rigours of Sec.2(22)(e) of the Act cannot be accepted. In this regard it is seen that even in the remand proceedings the AO did not make any enquiries nor examined concerned persons to establish his case. In such circumstances, we are of the view that the order of the CIT(A) does not call for any interference. The same is confirmed and this appeal by the Revenue is dismissed.

In the result, the appeal by the Revenue is dismissed. Order pronounced in the Court on 20.01.2016.