Amritsar Transport Co., Pvt. Ltd,, ... vs Department Of Income Tax

Dy.Commr. of Income tax, vs. M/s. Amritsar Transport Co.Pvt. Ltd. Circle-1, Amritsar. I/S Ghee Mandi, Amritsar. (Appellant) (Respondent)

Appellant by:Sh.V.K. Singh, DR Respondent by:Sh.P.N.Arora, Advocate

Date of hearing:19/02/2015 Date of pronouncement:26/02/2015

ORDER

PER A.D.JAIN, JM:

This is Department's appeal for the assessment year 2005-06 against

the order of the CIT(A), Amritsar, dated 17.01.2014. The Department has

raised the following grounds of appeal:

"1. Whether worthy CIT(A) is right in deleting the addition on account of deemed dividend of R.380886/- u/s 2(22)(e) which was shown as surplus in profit and loss account.

2. Whether worthy CIT(A) is right in deleting the addition on account of deemed dividend of R.7,92,429/- u/s 2(22)(e) which was shown by assessee as loan and advances recoverable from companies in which directors are interested.

3. Whether worthy CIT(A) is right in deleting the addition on account of proportionate interest on advance for plot of Rs.28,78,303/- which is not incidental to the business.

2 ITA No.221(Asr)/2014 4. Whether worthy CIT(A) is right in deleting the above additions on the ground that there was no mistake apparent from record and thus section 154 of the Income Tax Act, is not applicable."

2. Vide order dated 23.12.2009, passed u/s 154/155 of the Act, the AO

observed that the assessee company, in the return filed, had declared nil

income., that this return was processed and later on, the case was selected

for scrutiny and the assessment had been completed. It was noticed from the

assessment record that the assessee-company had not accumulated profit,

whereas, as per schedule forming part of the balance sheet as on 31.03.2005,

had shown surplus in the profit & loss account, amounting to Rs.3,80,886/-.

The AO was, thus, of the opinion that the provision of section 2(22)(e) of the

Act and as provided under section 115(O) of the Act were applicable and tax

was chargeable. The AO observed that as such, surplus in the profit & loss

account was not admissible. This was taxed under section 115(O) of the Act

@ 12.5%.

3. The AO further, observed that as per schedule 'G' of balance sheet,

the loans and advances included loans and advances recoverable from

Companies in which Directors of the assessee company were interested.

These loans and advances amounted to Rs.7,92,429/-. The AO observed that

as per provisions of section 2(22)(e) of the Act, loans and advances made by

the Directors are liable to tax u/s 115(O) of the Act @ 12.5% in the hands of

the assessee-company. The AO charged such tax as he observed that nothing 3 ITA No.221(Asr)/2014

was on record showing that tax u/s 115(O) of the Act had been charged in

assessee's case.

4. By virtue of the impugned order, the ld. CIT(A) decided the matter in

favour of the assessee. Aggrieved, the department is in appeal.

6. Before us, the Ld. DR has contended that the ld. CIT(A) has erred in

deleting the addition correctly made by the AO., that while doing so, the ld.

CIT(A) erred in observing that there was no mistake apparent from the

record., and that, therefore, the provisions of section 154 of the Act were not

applicable.

7. On the other hand, the ld. Counsel for the assessee has placed strong

reliance on the impugned order. It has been contended that the ld. CIT(A)

has correctly held that there was no mistake apparent from the record and so

the provisions of section 154 of the Act were not attracted.

8. In this regard, it is seen that in the order passed u/s 154 of the Act, the

AO made addition pertaining to the provisions of section 2(22)(e) and

section 115 (O) of the Act.

9. The AO also made an addition of Rs.28,78,303/- on account of capital

investment on plot. Here also, the provisions of section 2(22)(e) were

invoked and the amount was taxed u/s 115(O) of the Act.

10. At the outset, the issue as to whether the question regarding

correctness or otherwise of an addition under the provisions of section 4 ITA No.221(Asr)/2014

2(22)(e) of the Act, involves lengthy argument and ascertainment thereby

obviating the applicability of the section 154 of the Act, there being no

mistake apparent from the record stands addressed in " ITO vs. Volkart

Bros." reported in 82 ITR 50 (SC), 'CIT vs. Hero Cycles Pvt. Ltd.' reported

in 228 ITR 463(SC), ' CIT vs. Haji Abdul Hamid' reported in 292 ITR 143

(All.) and 'Export Cororation Ltd.' reported in 279 ITR 477 (Guj.), amongst

others. In all these cases, it has been held to the effect that a mistake

apparent from record must be an obvious and patent mistake and not

something which can be established by a long-drawn process of reasoning

on points on which there may be conceivably two opinions., that a decision

on a debatable point of law is not a mistake apparent from the record, that

rectification u/s 154 of the Act, can only be made when a glaring mistake of

fact or law has been committed by the officer passing the order and it

becomes apparent from the record, that rectification is not possible if the

question is debatable and that the point which is not examined on fact or in

law cannot be dealt with as a mistake apparent from the record.

11. In the present case, the ld. CIT(A), while deciding the matter in favour

of the assessee, has held as follows:

"The issue of deemed dividend requires detailed investigation and ascertainment of the facts to establish it. Further, this issue of deemed dividend was considered by the AO during regular assessment proceeding and assessee has twice submitted its explanation on this issue details of which are available in office record on page number 207 to 210. Even on merit no case has been 5 ITA No.221(Asr)/2014

made by the AO on the issue of deemed dividend u/s 2(22)(e) r.w.s. 115(O) as he has not identified shareholders or any concern in which such shareholder is a member or a partner and in which he has substantial interest and to whom during year any loan or advances have been given by the assessee.

In view of the above, appeal on all quantum issue is decided in favour of the assessee."

12. That issues falling under the provisions of section 2(22)(e) of the Act

are vexed questions involving lengthy arguments and ascertainment cannot

be refuted. This has duly been taken into consideration by the ld. CIT(A)

while passing the impugned order. We do not find any error in the order of

the ld. CIT(A). The same is hereby confirmed.

13. In the result, the appeal of the department is dismissed.

Order pronounced in the open court on 26th February, 2015.

Sd/- Sd/- (B.P. JAIN) (A.D.JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 26th February, 2015 /SKR/ Copy of the order forwarded to:

1. The Assessee:M/s. Amritsar Transaport Co.Pvt. Ltd. Amritsar.

2. The DCIT, Cir-1, Asr.

3. The CIT(A), Asr.

4. The CIT, Asr.

5. The SR DR, ITAT, Amritsar.

True copy By order

(Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.