SRI MANOJ DASH,BHUBANESWAR vs. ITO, WARD-2(3), BHUBANESWAR

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK श्री चन्द्र मोहन गगग, न्द्याययक सदस्य एवं श्री अरुण खोड़पऩया, ऱेखा सदस्य के समऺ । BEFORE SHRI CHANDRA MOHAN GARG, JM & SHRI ARUN KHODPIA, AM आयकर अपीऱ सं./ITA No.405/CTK/2018 (नििाारण वषा / Assessment Year :2009-2010) Sri Manoj Dash, Vs ITO, Ward-2(3), Bhubaneswar Plot No.F/2, Amrita Residency Jayadev Vihar, Bhubaneswar-751013 PAN No. : AEOPD 6174 N (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. यनधागररती की ओर से /Assessee by : None राजस्व की ओर से /Revenue by : Shri Sovesh Ch. Mohanty, CIT-DR सुनवाई की तारीख / Date of Hearing : 09/03/2022 घोषणा की तारीख/Date of Pronouncement : 21/03/2022 आदेश / O R D E R Per Arun Khodpia, AM: This appeal by the assessee is directed against the order dated 29.01.2016, passed by the ld. CIT(A)-2, Bhubaneswar for the assessment year 2009-2010. 2. None appeared on behalf of the assessee even the case was called for second round for hearing. Therefore, the Bench proceeded to dispose off the case after considering the arguments of ld. DR and the facts and circumstances of the case. 3. The grounds raised by the assessee in this appeal are as under :- 1. For that, the impugned order of Assessment passed by the Forums below are not just and proper under the facts and in the circumstances of the case, as such the additions made therein are liable to be deleted in the interest of justice.

2 ITA No.405/CTK/2018 2. For that, the disallowance and addition of Rs.17,45,000.00 on application of section 2~2Xe) of the Act by the learned A.D. as well as by the learned C.I.T(A) is completely wrong and illegal, hence being not sustainable in the eye of law is liable to be deleted in the interest of justice. 3. For that, the learned C.I.T(A) should not have confirmed the addition of Rs.17,45,000.00 under the head deemed dividend, particularly when, the findings of the learned A.D. is contrary to the facts on record. 4. For that, the learned C.I.T(A) has committed gross error in confirming the addition of Rs.3,19,325.00, particularly when, the impugned addition made by the learned A.O. is based on assumption and without backed by any evidence. The impugned addition being not sustainable in the eye of law is liable to be deleted in the internet of justice. 5. For that, the learned C.I.T(A) has committed gross error in confirming the disallowance of interest paid on house building loan of Rs.1,50,000.00, particularly when, it was disallowed by the learned A.O. on wrong interpretation of law and the Assessee is lawfully entitled for the same. The impugned disallowance, thus being not sustainable in the eye of law is liable to be allowed in the interest of justice. 6. For that, your Appellant craves leave of This Hon'ble Tribunal to urge any other grounds, if any, at the time of hearing in the interest of justice and equity. 4. Brief facts of the case are that the assessee was the Director in M/s Kamyab Exports Pvt. Ltd., M/s Kamyab Overseas Pvt. Ltd. and Kamyab Television Ltd. The source of income of the assessee in the assessment year 2009-2010 was remuneration received from M/s Kamyab Exports Pvt. Ltd. as Director. The assessee filed his return of income on 17.11.2009 declaring total income at Rs.12,50,854/-, which was scrutinized through CASS. Upon issuance of statutory notices, the assessee though his representative appeared before the AO and filed relevant documents. Thereafter the AO completed the assessment making

3 ITA No.405/CTK/2018 addition of Rs.17,45,000/- u/s.2(22)(e) of the Act and Rs.30,19,325/- as income from other sources. Further the AO denied the loss claimed by the assessee on self occupied property of Rs.1,50,000/-. 5. Aggrieved with the assessment order, the assessee preferred appeal before the CIT(A) and the CIT(A) dismissed the appeal of the assessee. 6. Now, the assessee is in further appeal before the Tribunal. 7. Grounds No.1 & 6 are general in nature, which do not require any adjudication. 8. With regard to ground No.2 & 3, the AO during the course of assessment noted that the assessee through his AR has admitted that the assessee has substantial interest in three companies namely, M/s Kamyab Exports Pvt. Ltd., M/s Kamyab Overseas Pvt. Ltd. and Kamyab Television Ltd., therefore, the AO brought the amount of Rs.300000/- as advance outstanding against the assessee from M/s Kamyab Exports (P) Ltd. and Rs.14,45,000/- from M/s Kamyab Overseas (P) Ltd. to tax as deemed dividend under Section 56(2) of the Act by invoking Section 2(22)(e) of the Act treating the same as Deemed Dividend. The AO’s finding on this very ground are as under :- The assessee was the director and a substantial shareholder of three companies, namely Mls Kamyab Exports Pvt. Ltd., Mls Kamyab Overseas Pvt. Ltd. Et Mls Karnyab Television Pvt. Ltd. showed 'profit before taxes' of Rs.1,05,66,0881 and 'amount available for appropriation' at Rs.93,44,5181 in its return of income

4 ITA No.405/CTK/2018 for the A.Y. 2009-10. In the return of income for the A.Y. 2009-10, Mls Kamyab Overseas (P) Ltd. showed 'profit before taxes' of Rs.1,48,56,2241 and 'amount available for appropriation' at Rs.1,46,99,074/-. The amounts outstanding against the assessee as on 31.03.09 as per Ledger a/cs of Manoj Dash' in. the books of Mls Kamyab Exports (P) Ltd. & M/s Kamyab Overseas (P) Ltd. produced in course of hearing were Rs.3,00,000/- and Rs.14,45,0001 respectively. Under section 2(22) of the Income-tax Act, 1961, any payment by way of advance or loan to a shareholder (being a person who is a beneficial owner of equity shares holding not less than 10% of the voting power, to the. 'extent to which the company possesses accumulated profits is deemed as dividend and chargeable to tax as such under section 56(2) of the I. T. Act. In course of the proceeding, the A. R. admitted that the assessee has substantial interest in all the above companies. In view of the above, the advances outstanding against the assessee from Mls Kamyab Exports (P) Ltd. & M/s Kamyab Overseas (P), Ltd. as on 31.03.09 of Rs.3,00,000/- and Rs.14,45,000/- respectively are chargeable to tax as deemed dividend under section 56(2) of the Income-tax Act, 1961. Addition - Rs.17,45,0001 9. In appeal the CIT(A) discussed the issue in detail and on perusal of the ledger accounts, which has been reproduced in the appellate order at pages 7 to 12, found that details of voucher numbers, description of expenses, name of recipients etc. are neither appearing nor the complete vouchers of expenses were produced before the AO for verification, that payments towards expenses were made through journal, the bills and vouchers produced before the AO cannot be treated as independent evidence as these involve three closely held companies within the control of the assessee. The CIT(A) decided as under :- Money lending is not the substantial part of business of the companies and therefore, burden to prove that the monies were received from the companies for meeting out the expenses of the companies through the appellant lies with the appellant. In this context, the appellant submitted that advances taken by the

5 ITA No.405/CTK/2018 companies were spent towards companies expenses and duly set off throughout the year in ordinary course of business as the director was solely doing all activities by himself. The submission was made before the AO as well and the AO, after verification of the documents produced by the appellant, rejected the reply as unsatisfactory more so when the appellant himself has stated in Clause-5 of the written submission dated 21.12.2011 that one of the source of personal investment of Rs. 50,60,626/- is advance of Rs. 17,45,000/- taken from the companies. On further perusal of the abstract of ledger accounts reproduced above, it appears that details of voucher numbers, description of expenses, name of recipients etc. are neither appearing in the abstract nor the complete vouchers of expenses were produced before the AO for verification, that payments towards expenses were made though journal, the bills and vouchers produced before the AO cannot be treated as independent evidence. as these involve three closely held companies within the control of· the appellant. The appellant has not been successful in controverting the findings of the AO on this issue with any independent contemporaneous evidence that advances taken from the companies were expended for the purpose of business of the companies. Most of the credit entries were passed through journal when debits are direct transfer of monies to the account of the appellant. It is not correct to hold that credit entries made in the accounts of the appellant would not fall u/s 2(22)(e) unless it is prove that the entries pertain to specific company who transferred fund to a person having substantial interest in that company, therefore, it is not the form which is paramount, what is important is the substance. The contents of the credit entries have to be explained with proper evidence and there are materials on record which indicate diversion of the monies transferred to appellant for investment in personal assets as discussed above. In the given facts and circumstances of the case, the running account concept of the appellant is not accepted. On the other hand, looking to the debits and credits and peak debit balance in the above accounts, it appears that the addition on account of deemed dividend would have been more than what the AO has made. However, keeping in view of overall facts and circumstances of the case, addition to the extent made by the AO on this count is confirmed. 10. Ld. DR relied on the orders of the authorities below and submitted that the assessee could not establish its stand either during the course of assessment proceedings or in the appellate proceedings, therefore, he submitted that the orders of both the lower authorities deserves to be upheld.

6 ITA No.405/CTK/2018 11. Considering the submissions of ld. DR and perusing the entire material available on record, we are of the opinion that both the authorities below have taken a plausible view as the assessee could not substantiate his claim in the assessment proceedings as well as in the appellate proceedings. Even before us none appeared on behalf of the assessee. On further perusal of the impugned order, we find that the CIT(A) has rightly held that it is not correct to hold that credit entries made in the accounts of the assessee would not fall u/s.2(22)(e) of the Act unless it is proved that the entries pertain to specific company who transferred fund to a person having substantial interest in that company, therefore, the CIT(A) observed that it is not the form which is paramount, what is important is the substance. In view of the above, we do not see any reason to interfere with the above findings of the CIT(A) and accordingly, we dismiss the ground Nos.2 & 3 of the assessee. 12. With regard to ground No.4, the assessee has agitated that the addition made by the AO under the head income from other sources. At the outset, on perusal of the figure mentioned in the ground No.4 i.e. Rs.3,19,325.00 is not the actual figure which has been dealt by the AO while making the addition i.e. Rs.30,19,325/-. This appeal has been filed on 22.10.2018, since then the assessee has not rectified the figure mentioned in the ground, neither any rectification

7 ITA No.405/CTK/2018 application has been filed by the assessee in this regard. Considering the mistake clerical in nature, we are taking this ground to discuss on its merits. On perusal of the orders of both the authorities below, observations of CIT(A) containing findings by the AO also extracted from the order of CIT(A) read as under :- Decision: Both the grounds of additions and ground of appeal are taken together for adjudication since the issues are interlinked and related to each other. The A.O., on the basis of AIR information in his possession, got the statement of bank account from Axis Bank, Kalpana Square, Bhubaneswar and asked the appellant to explain the source of-'cash deposits ot'Rs.55,55,105/- made in the accounting year under consideration. The appellant explained the source of cash as advance received from the three companies wherein he is director namely M/s. Kamyab Exports Pvt. Ltd.,M/s. Kamyab Television Pvt. Ltd. and M/s. Kamyab Overseas Pvt. Ltd. The A.O. verified the correctness of the claim by requisitioning different documents as per the narration made .and found that total credits and total debits of the year in the alleged bank account were Rs. 1,27,24,148/- and Rs.1,26,80,290/- and out of the total credit, Rs.1,24,47,000/- represented advances received from the above companies, that the appellant made number of investments of personal nature mainly in insurance policies and house properties aggregating to Rs.40,18,275/-, that the above personal investments were made from the alleged SB Account were admitted in writing as of personal nature in his name or in the name of the family members, that the appellant had made investment in property with M/s. Utkal Builder on behalf of his wife Ms. Lipi Das, that his explanation of such investment out of advances received from companies and family relatives are not supported by evidence/confirmation from relatives, explanation regarding receipt of advance of Rs.6,14,772/- from in-laws is not satisfactory as credit of Rs.1,24,47,000/- in the SB A/c. of the appellant represented advance from companies out of credit total of Rs.1,27,24,148/- , that the appellant has not submitted cash flows statement with proper corroborative evidence etc. and in the given facts and circumstances of the case after considering overall facts emanating from the documents/replies submitted by the appellant, the A.O. treated Rs.30,19,325/ as income from other source. The appellant, in course of appellate proceeding and remand proceeding, likewise grossly failed to produce cogent evidence and argument to explain the source of cash deposits to the extent not verifiable from whatever the material and the argument made before the A.O. In such circumstances of the case, it is held that the appellant has failed to explain the source of deposits and therefore, addition on

8 ITA No.405/CTK/2018 this count is confirmed by placing reliance in the decision of the Apex Court in the case of CIT Vrs. Chinnathamban 292 ITR 682. In view of the above discussion, we found that both the lower authorities have passed just and proper order, in which our interference is not required. Accordingly, we uphold the findings recorded by the CIT(A) in this regard and dismiss this ground of the assessee. 13. Coming to ground No.5, this ground of assessee says that the CIT(A) has erred in disallowing of interest paid on house building loan of Rs.1,50,000.00, particularly when it was disallowed by the AO on wrong interpretation of law and the assessee lawfully entitled for the same. In this regard, ld. DR submitted that this ground is not maintainable as the same was not raised before the CIT(A), therefore, this ground of the assessee deserves to be dismissed. 14. We have considered the submissions of ld. DR and facts and circumstances of the case. On perusal of the grounds of appeal, we found that the assessee has raised the issue in ground No.5 without raising the same before the CIT(A). During the course of assessment proceedings, the AO disallowed Rs.1,50,000/- stating that the assessee is not entitled to set-off of loss on a/c of borrowed money in respect of another property and claiming it to be self- occupied. In view of the above, we are of the view that the authorities below have dealt the issue after considering the

9 ITA No.405/CTK/2018 documentary evidences placed on record by the assessee. Therefore, we dismiss this ground of assessee. 15. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 21/03/ 2022.

Sd/- Sd/- (C.M.GARG) (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 21/03/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : 1. अऩीऱाथी / The Appellant- प्रत्यथी / The Respondent- 2. आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. 5. पवभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack गार्ग पाईऱ / Guard file. 6. सत्यापऩत प्रयत //True Copy// आदेशािुसार/ BY ORDER,

(Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack