ITA NOS. 2078/Del/2011 & 3268/Del/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E" NEW DELHI
BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. Nos. 2078/DEL/2011 & 3268/DEL/2012
A.Y. : 2005-06
Smt. Neelam Khanna, vs. Income Tax Officer,
C/o P. Singh & Co., Ward 1(2),
103/1, Amar Shree Complex, Meerut
Delhi Road, Meerut
(PAN: AAXPK1359H)
(Appellant) (Respondent)
Assessee by : Sh. V.K. Goel, Advocate
Department by : Sh. Sunil Bajpai, CIT(DR)
ORDER
PER SHAMIM YAHYA: AM
These Appeals by the Assessee are directed against the
respective orders of the Ld. Commissioner of Income Tax passed u/s.
263 and u/s. 271(1)(c) of the I.T. Act respectively.
ITA No. 2078/Del/2011
2. This appeal by the assessee pertains to assessment year 2005-06
and is against order u/s. 263 dated 28.3.2011.
3. In this case Ld. CIT noted that "on examination of records it was
found that the AO had failed to investigate the advance of Rs.
12,00,000/- received by the assessee from M/s Khanna Plantation Pvt.
Ltd. which was advanced to her for the purchase of FDR. The
company possessed Rs. 10,90,965/- as accumulated profits in the
forms of Reserves and Surpluses. Since the assessee is a share holder
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ITA NOS. 2078/Del/2011 & 3268/Del/2012
of over 10% shares in the company M/s Khanna Plantation Pvt. Ltd.,
the amount of Rs. 10,90,965/- was required to be assessed in the
hands of the assessee as deemed dividend income of the assessee as
per section 2(22)(e) of the I.T., Act, 1961. While completing the
assessment the AO had failed to assess the amount of Rs. 10,90,965/-
as deemed divided in the hands of the assessee u/s. 2(22)(e) of the I.T.
Act, 1961".
4. Pursuant to notice u/s. 263 the assessee's counsel informed that
the share application money of Rs. 20,39,000/- was lying with M/s
Khanna Plantation Pvt Ltd. in the name of assessee's husband Sh.
Inderjeet Khanna against which the shares could not be allotted. The
payment of Rs. 12 lacs which was received by the company by selling
the popular plants held by it was in fact the refund the share
application money to Sh. Inderjeet Khanna, husband of the assessee.
It was further submitted that FDR made for Rs. 12 lacs pursuant to the
said withdrawal was made in the joint names of Sh. Inderjeet Khanna
and Smt. Neelam Khanna for a period of three months. However, Ld.
CIT was not convinced. He directed that a sum of Rs. 10,90,965/- be
added u/s 2(22)(e) of the I.T. Act in the hands of the assessee.
5. Against the above order the assessee is in appeal before us.
6. We have heard both the counsel and perused the records. At
the outset, Ld. Counsel of the assessee submitted that on this very
issue of deemed dividend, assessee's assessment was reopen u/s. 148
of the I.T. Act. After considering the issue and discussing the
assessee's reply in this regard, the AO has not added the said amount
u/s 2(22)(e) of the I.T. Act. Hence, ld. Counsel of the assessee
submitted that the AO has duly applied his mind and he has come to
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ITA NOS. 2078/Del/2011 & 3268/Del/2012
the conclusion that deemed dividend u/s 2(22)(e) of the I.T. Act, in this
case do not arise in the hands of the assessee. Hence, Ld. Counsel of
the assessee submitted that assumption of jurisdiction of the Ld. CIT
u/s. 263 of the I.T. Act is totally invalid. On merits of the case, the Ld
counsel of the assessee submitted that the assessee company already
owed a sum of Rs. 20,39,000 to the assessee's husband for share
application money. Against the said sum, a sum Rs. 12 lacs was
paid for FDR in the joint name of assessee and her husband. Ld.
Counsel of the assessee further submitted that upon maturity of the
FDR, the amount involved was also deposited in the account of the
assessee's husband. Hence, Ld. Counsel of the assessee submitted
that there is no question of deemed dividend u/s. 2(22)(e) in the hands
of the assessee. Ld. Counsel of the assessee further submitted that
assessee and her husband are the only two share holders and
Directors of this company.
7. Ld. DR on the other hand submitted that AO has not given his
finding on this issue. Hence, assumption of jurisdiction by the Ld. CIT
u/s. 263 was valid. He further supported the order of the Ld. CIT.
8. Upon careful consideration, we find that section 263(1) of the I.T.
Act postulates that "the Commissioner may call for an examine the
record of any proceeding under this Act, and if he considers that any
order passed therein by the Assessing Officer is erroneous in so far as
it is prejudicial to the interest of the revenue, he may, after giving the
assessee an opportunity of being heard and after making or causing to
be made such inquiry as he deems necessary, pass such order hereon
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ITA NOS. 2078/Del/2011 & 3268/Del/2012
as the circumstances of the case justify, including an order enhancing
or modifying the assessment, or cancelling the assessment and
directing a fresh assessment."
9. Now in this case, we find that Ld. CIT in his order has noted that
in this case while completing the assessment the AO has failed to
examine and assess the amount of Rs. 10,90,965/- as deemed
dividend in the hands of the assessee u/s. 2(22)(e) of the I.T. Act.
10. Upon careful consideration, we find that the company M/s Khanna
Plantation Pvt. Ltd. had two share holders being the assessee and her
husband. It is undisputed that a share application money of Rs.
20,39,000/- was lying with M/s Khanna Plantation Pvt. Ltd. in the name
of assessee's husband, Inderjeet Khanna against which shares could
not allotted. Now the company by way of refund of the above said
share application money obtained a FDR of Rs. 12 lacs in the joint
name of assessee's husband Sh. Injderjeet Khanna and Smt. Neelam
Khanna, the assessee. In these circumstances, we find that a sum of
Rs. 12 lacs being FDR made in the joint name of assessee and her
husband was admittedly refund against the share application of
Rs. 20,39,000/-. This aspect was duly examined and adjudicated by
the Assessing Officer. In these circumstances, we agree that a sum of
Rs. 12 lacs cannot be treated as loans and advance in the hands of the
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ITA NOS. 2078/Del/2011 & 3268/Del/2012
assessee from the said company. It was only refund of share
application money received by the company from assessee's husband
Sh. Injderjeet Khanna, which was refunded in the joint name of the
assessee and her husband. In these circumstances, in our considered
opinion, the order u/s. 263 of the I.T. Act is not sustainable. The AO
has properly applied his mind in assessment order on the impugned
issue. He has discussed the same and he is correct in holding that any
addition in this case is called for as deemed dividend in the hands of
the assessee. Accordingly, we set aside the order of the Ld. CIT u/s.
263 of the I.T. Act.
11. In the result, the appeal filed by the assessee is allowed.
ITA NO. 3268/DEL/2012
12. In this appeal the assessee is aggrieved regarding the penalty
imposed by the Ld. CIT(A) on the assessee of Rs. 3,50,000/- u/s.
271(1)(c) of the I.T. Act.
13. In this case pursuant to the order u/s. 263 as discussed above on
account of addition of Rs. 10,90,965/- u/s. 271(1)(c) of the I.T. Act. Ld.
CIT(A) has also imposed penalty of Rs. 3,43,752/- u/s. 271(1)(c) of the
I.T. Act. We find that as discussed above, we have already deleted the
addition as made by the Ld. CIT in this regard. As such there is no
basis which now remains for the purpose of this penalty. Accordingly,
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order of the Ld. CIT(A) levying the penalty u/s. 271(1)(c) in this case is
set aside and levy of penalty is deleted.
14. In the result, both the appeals filed by the Assessee stand
allowed.
Order pronounced in the Open Court on 22/4/2014, upon
conclusion of hearing.
Sd/- Sd/-
TOLANI]
[R.P. TOLANI] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date:- 22/4/2014
SRBHATNAGAR
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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Date of dictation ..................................
Date on which the typed draft is placed before the Dictating Member...........................
Date on which the approved draft comes to the Sr.PS/PS...................................
Date on which fair order sent to Member for signature....................................
Date on which the fair order comes back after pronouncement to the Sr. PS/PS.....................................
goes to the Bench Clerk....................................
Date on which the file goes
Date on which the file goes to the Head Clerk....................................
The date on which the file goes to the Assistant Registrar for Signature on the order..............................
Date of Despatch of the Order ......................................
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