Income Tax Appellate Tribunal - Chandigarh
Elson Hosiery Mills, Ludhiana vs Acit, Ludhiana on 28 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
SMC BENCH, CHANDIGARH
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER
ITA No.823/Chd/2015
(Assessment Year : 2008-09)
M/s Elson Hosiery Mills, Vs. The A.C.I.T.,
Ludhiana. Circle-1, Ludhiana.
PAN: AAAAFE4106B
(Appellant) (Respondent)
Appellant by : Shri S.C. Jain
Respondent by : Shri S.K. Mittal, DR
Date of hearing : 15.09.2016
Date of Pronouncement : 28.11.2016
O R D E R
PER DIVA SINGH, J.M. :
The present appeal has been filed by the assessee assailing the correctness of the order dated 28.09.2015 of learned Commissioner of Income Tax (Appeals)-1, Ludhiana pertaining to 2008-09 assessment year on the following grounds :
"1. That CIT(A)-I has not considered the correct facts of the case. The deemed dividend considered by the CIT(A)-I at Rs.21,19,154 u/s 2(22)(e) of the Income Tax Act, 1961 may please be deleted.
2. There was opening balance of Rs.12,64,154/- as on 01.04.2007 which have been considered in the assessment year 2007-08 and again addition of this amount tentamounts to double addition.
3. That the amount has been received by the firm from M/s Elson Knitwears (P) Ltd. on interest and accordingly TDS has been deducted. The A.O. has allowed the expenditure during the assessment year.
4. That the A.O. has accepted the contention during assessment year 2005-
06 to 2007-08 hence similarly during assessment year 2009-10 to 2012- 13 and this fact has not been considered by the CIT(A)-I. 2 ITA No.823/Chd/2015
5. The CIT(A)-I has given the judgment in the appeal order for which no opportunity has been given to the assessee for natural justice.
6. That the addition of deemed dividend of Rs.21,19,154/- be deleted.
7. That the assessee craves to leave, amend, alter, take additional grounds of appeal at the time of hearing or before the time of hearing."
2. However, the parties were heard only in respect of Ground No.5. The issues relatable to the other grounds were addressed by the Ld. AR to demonstrate that a non-speaking order has been passed. Inviting attention to the impugned order Ld. AR submitted that the submissions of the assessee have been recorded and reproduced in the impugned order, however without discussing why they cannot be accepted he has instead relying upon the decisions not relevant to the issue and without confronting these to the assessee and ignoring the decisions relied upon by the assessee confirmed the action of the Assessing Officer. On facts it was submitted the decision of the Jurisdictional High Court in the case of CIT vs. Sharman Woolen Mills Ltd. (2012) 204 Taxmann 0082 (P&H) is fully applicable and has been relied upon and not discussed in the impugned order. The Revenue's contention that shareholders of the lending company and that of the assessee were the same, it was submitted till date has not been accepted by any forum and the appeal till date has not been admitted by the Jurisdictional High Court. In these circumstances, it was his limited prayer that the issues be remanded to the CIT(A) for a decision de novo.
3. The Ld. Sr.DR though relied upon the impugned order was unable to show any discussion in the order on the submissions of the Ld. AR. Accordingly, it was submitted that he would have no objection if the impugned order is restored to the CIT(A).
4. I have heard the rival submissions and perused the material available on record. The relevant facts of the case are that the Assessing Officer considering the fact that though the assessee received a loan of 3 ITA No.823/Chd/2015 Rs.21,19,154/- from M/s Elson Knitwears Pvt. Ltd. and deducted TDS thereon claimed interest expenditure thereon. Treating the same as deemed dividend under section 2(22)(e) of the Act the claim was considered to be not allowable as one of the main share holders Shri Gurdip Singh had 720 shares out of 2774 (26% share holding) and Shri Gurdip Singh was also a partner in the assessee firm with a profit sharing ratio of 50%. The assessee was questioned by the Assessing Officer that since Shri Gurdip Singh was a partner with the substantial interest in the firm and he was also a director who was the beneficial owner of the share holdings more 10% of the voting power why the amount of loan should not be treated as dividend in the hands of the assessee under section 2(22)(e) of the Act. The following facts were brought out by the Assessing Officer :
"1. One of the main share holders is Sh. Gurdip Singh who has 720 shares out of 2774 (26% share holding).
2. Sh. Gurdip Singh is also a partner in the assessee firm M/s Elson Hosiery Mills with a profit sharing ratio of 50%.
3. The company M/s. Elson Knitwears Pvt. Ltd. has sufficient accumulated profits as on the date of giving of the loans."
4.1 In view thereof, addition of the said amount by way of a disallowance was made in the hands of the assessee company. Aggrieved, the assessee came up in appeal before the CIT (Appeals), relying on not only the past history on the said issue but also decisions independent of the past history in support of its claim. It is seen that though the arguments and decisions to an extent have been extracted in the impugned order however, on a perusal of the findings recorded in para 3.2 it is found that these decisions have not been referred to and is a mere repetition and justification of the Assessing Officer's action. The learned A.R. in the course of the arguments had also referred that repeatedly, the case has been adjourned on the request of the Revenue and the Revenue has sought time to go through the assessment 4 ITA No.823/Chd/2015 records from 2006-07, 2007-08 and 2009-10 assessment years. A perusal of the record shows that the appeal came up for hearing on 07.07.2016 time was sought by the assessee and it was granted. On 25.07.2016 again it was adjourned on the request of the Revenue. The learned Sr.D.R. considering the circumstances again stated, that he has no objection if the matter is remanded to the file of the CIT (Appeals). Considering the arguments of the learned A.R. who submitted that non-speaking order has been passed without referring to either the judgments relied upon or the submission on facts available on record and the submission of the ld. Sr. DR the impugned order is set aside and the issue is restored back to the file of the CIT(A) with a direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard.
5. In the result, the appeal of the assessee is allowed for statistical purposes.
The order is pronounced in the open court on 28th November, 2016.
Sd/-
(DIVA SINGH) JUDICIAL MEMBER Dated : 28 t h November, 2016 *Rati(Chandigarh)*/ Sujeet (Delhi) Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR //True Copy// Assistant Registrar, ITAT, Chandigarh