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Income Tax Appellate Tribunal - Chennai

Dcit, Chennai vs Thangappan Chittybabu, Chennai on 22 May, 2018

            आयकर अपील य अ धकरण, 'ए'  यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL , 'A' BENCH, CHENNAI
  ी एन.आर
    एन आर.एस
       आर एस.    न  याियक सद य एवं ए. मोहन अलंकामणी, लेखा सद य के सम
          एस गणेशन, याियक
           BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
           SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER


                 आयकर अपील सं./I.T. A. No.1094/Chny/ 2017
                ( नधा रण वष  / Assessment Year: 2011-12)
 The Deputy Commissioner of Income Vs Mr. Thangappan Chittybabu,
 Tax,                                       Dir. M/s. Akshaya Homes,
 Corporate Circle 1(1),                     3-G White House, No.48/53,
 Chennai.                                   III Main Road, Gandhi Nagar,
                                            Adyar, Chennai - 600 020.
                                                    PAN: AABPC6145K
 (अपीलाथ /Appellant)                                (  यथ /Respondent)


  अपीलाथ  क  ओर से/ Appellant by              : Smt. Vijayaprabha, JCIT

    यथ  क  ओर से/Respondent by                : Shri S. Sridhar, Advocate


  सन
   ु वाई क  तार ख/D at e of he ar i ng            : 02.04.2018

  घोषणा क  तार ख /D at e of Pr on o unc em en t   : 22.05.2018



                                  आदे श / O R D E R

 Per A. Mohan Alankamony, AM:-

The appeal by the Revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-1, Chennai, dated 15.02.2017 in New ITA No.133/CIT(A)-1/2014-15 for the assessment year 2011-12 passed U/s.250(6) r.w.s. 143(3) of the Act.

2. The Revenue has raised the following two grounds in its appeal:-

(i) The Ld.CIT(A) has erred in deleting the addition of Rs.65.40 lakhs made by the Ld.AO towards disallowance of project expenses.

(ii) The Ld. CIT(A) has erred in deleting the addition of Rs.3,29,53,226/- towards deemed dividend U/s.2(22)(e) of the Act.

3. The brief facts of the case are that the assessee is an individual carrying on real estate business in the name and style of M/s. Akshaya Homes, filed his return of income for the assessment year 2011-12 on 26.09.2011 admitting total income of Rs.2,81,80,610/-. Initially the return was processed U/s.143(1) of the Act and subsequently the case was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued on 31.07.2012. Finally the assessment order was passed U/s.143(3) of the Act on 28.03.2014 wherein the Ld.AO made addition of Rs.65,40,120/- towards disallowance of project expenses and Rs.3,29,53,226/- towards deemed dividend U/s.2(22)(e) of the Act.

4. Ground No. 2(i) : Disallowance of project expenses:-

During the course of assessment proceedings, it was observed by the Ld.AO that the assessee had debited Rs.65,40,120/- 3 ITA No.1094/Chny/2017 towards "project expenses" (related to Perumaleri Village) being the cost of land which was ignored to be transferred to TCBPT (T.Chitty Babu Property Trading, erstwhile proprietary concern of Shri T. Chittybabu) during the year FY 2009-10. On query, it was explained by the Ld.AR that these expenses pertains to Aikya project wrongly debited under Perumaleri village. Since, the explanation offered by the Ld.AR were not back by any evidence to show that the expenses were towards Aikya project, the Ld.AO disallowed the same based on his opinion that the explanation is an afterthought. Before the Ld.CIT(A), it was explained that the mistake of debiting the expense under the head Perumaleri Village is an inadvertent clerical mistake which was subsequently corrected and further, the rectification of the entries in the books of accounts does not have any impact on the overall profit of the assessee. Thereafter, on verifying the ledger accounts the Ld.CIT(A) agreed with the submission of the Ld.AR and deleted the addition. Since, the Ld.CIT(A) has arrived at his decision after verifying the books of accounts of the assessee, we do not find any reason for disbelieving the finding of the Ld.CIT(A). Therefore, we do not find it necessary to interfere in the order of the Ld.CIT(A) on this issue. Accordingly, the first ground raised by the Revenue is disposed off against it.

5. Ground No.2(ii) : Deemed Dividend U/s. 2(22)(e) of the Act:-

During the course of scrutiny assessment it was observed by the Ld.AO that the assessee had received an aggregate amount of Rs.3,29,53,226/- from M/s.Akshaya Homes Pvt. Ltd., the company in which the assessee had share holdings more than 10%. Therefore, the Ld.AO invoked the provisions of Sec.2(22)(e) of the Act and added the same to the income of the assessee because M/s.Akshaya Homes Pvt. Ltd., had accumulated profits more than that amount. On appeal, the Ld.CIT(A) deleted the deletion by observing as under:

" I have carefully perused the facts in issue, submissions made by the appellant and material on record. The Appellant's plea that there are many occasions that Mr.Citty Babu, originally the proprietor and the Managing Director of the corporate entity had been enabling the acquisition process of land holdings by using the funds of the company for strategic reasons, seems to be in order. This contention of the appellant is supported by the decision of the ITAT in its own case vide ITAT order in ITA No.934(Mds)/2010, A Bench, Chennai, dated 19.09.2011 and duly followed for AY 2008-09 & 2009-10 vide ITA Nos.1339 & 1340/Mds/2012, C Bench, Chennai dated 22.05.2015 wherein it has been held that such amounts advanced did not take the character of deemed dividend in view of the commercial expediency involved in such kind of transactions. Respectfully following the same, this ground of appeal is allowed ".

Since, the Ld.CIT(A) has decided the issue following the decision of the Tribunal in the assessee's own case in ITA No.934(Mds)/2010 dated 19.09.2011 and ITA No.1339 & 1340/Mds/2012 dated 22.05.2015 wherein on the identical issue it was held that in the case of the assessee the amount advanced by M/s.Akshaya Homes Pvt. Ltd., to the assessee was due to commercial expediency and therefore, provisions of Sec.2(22)(e) cannot be invoked, we do not find it necessary to interfere in the order of the Ld.CIT(A) on this issue also.

6. In the result, the appeal of the Revenue is dismissed.

Order pronounced on the 22nd May, 2018 at Chennai.

                  Sd/-                                     Sd/-
         (एन.आर.एस. गणेशन)                         (ए. मोहन अलंकामणी)
         (N.R.S. Ganesan)                       (A. Mohan Alankamony)
    याियक सद य/Judicial Member              लेखा सद य/Accountant Member

चे$नई/Chennai,
%दनांक/Dated 22nd May, 2018

RSR
आदे श क    त(ल)प अ*े)षत/Copy to:
1. अपीलाथ /Appellant      2.   यथ /Respondent       3. आयकर आय-
                                                              ु त (अपील)/CIT(A)
4. आयकर आय-
          ु त/CIT         5. )वभागीय   त न0ध/DR     6. गाड  फाईल/GF