ITAT BANGALORE BENCH ‘C’
Income-tax Officer
versus
Nam Estates (P.) Ltd.
IT APPEAL NOS. 705 & 706 (BANG.) OF 2011
CROSS OBJECTION NO. 14 (BANG.) OF 2012
[ASSESSMENT YEARS 2006-07 & 2007-08]
OCTOBER 5, 2012
ORDER
Jason P. Boaz, Accountant Member
These appeals of the Revenue are directed against the orders of the Commissioner of Income-tax (Appeals)-III, Bangalore, both dated February 23, 2011 for the assessment years 2006-07 and 2007-08. The cross-objections are filed by the assessee for the assessment year 2006-07. Since the cross-appeals and common issues are involved in these appeals, they are being heard together and disposed of by way of a common order.
2. The facts of the case, in brief, are as under :
The assessee-company (hereinafter referred to as “the company”), engaged in the business of real estate development filed its return of income for the assessment year 2006-07 on December 4, 2006 declaring income of Rs. 3,48,240. A survey under section 133A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) was conducted at the assessee’s business premises being part of the Embassy group. For the assessment year 2007-08, the return of income was filed declaring a loss of Rs.43,03,250. In both years, the case was taken up for scrutiny and assessments were completed by orders under section 143(3) of the Act determining the income of the assessee at Rs. 3,08,96,240 for the assessment year 2006-07 and at Rs.2,83,04,610 for the assessment year 2007-08 dated December 29, 2008 and December 18, 2009 respectively.
3. Aggrieved by the orders of assessment for the impugned assessment years, the assessee preferred appeals before the Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) disposed of the assessee’s appeals for the assessment year 2006-07 by order dated February 23, 2011 giving the assessee partial relief. For the assessment year 2007-08, the learned Commissioner of Income-tax (Appeals) allowed the assessee’s appeal by order dated February 23, 2011.
4. The Revenue is now in appeal before us against the orders for both the assessment years 2006-07 and 2007-08. The assessee has filed cross objections for the assessment year 2006-07.
I.T.A. No. 705/Bang/2011 (assessment year 2006-07)
5. In this appeal Revenue has raised the following grounds :
“1. The order of the learned Commissioner (Appeals) is opposed to law and facts of the case.
2. The learned Commissioner (Appeals) erred in deleting the addition of Rs. 3,05,48,000 made under section 2(22)(e) by erroneously accepting the assessee’s version that the amount shown as loan in the balance-sheet was an advance received for sale of land on the basis of an memorandum of understanding with M/s. Dynasty Developers P. Ltd. The learned Commissioner (Appeals) ought to have appreciated the facts and circumstances inasmuch as the memorandum of understanding dated June 15, 2004 has no business sense or significance as the assessee, at that point of time, was not the owner of the land agreed to be sold to the above company. The Commissioner (Appeals) ought to have enquired into the subsequent status of the deal before placing reliance on such a documents produced by the assessee.
3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the Commissioner (Appeals) in so far as it related to the above grounds may be reversed and that the Assessing Officer may be restored.
4. The appellant craves leave to add, alter, amend and/or delete any of the grounds that may be urged.”
6. The grounds raised at S. Nos. 1, 3 and 4 are general in nature and no adjudication is called for thereon, they are dismissed as infructuous.
7. In the ground raised at S. No. 2, the Revenue has challenged the learned Commissioner (Appeals)’s order deleting the addition of Rs. 3,05,48,000 made under section 2(22)(e) of the Act. The learned Departmental representative submitted that the learned Commissioner (Appeals) erred in accepting the assessee’s claim that this amount shown as loan in the assessee’s balance-sheet was not a loan but an advance received for sale/purchase of land on the basis of a memorandum of understanding dated June 15, 2004 with M/s. Dynasty Developers P. Ltd., when in reality the memorandum of understanding had no business significance at that point since the land in question was not sold to the assessee. The learned Departmental representative further submitted that the learned Commissioner (Appeals) ought to have enquired into the subsequent status of the deal before blindly placing reliance on documents produced by the assessee. The learned Departmental representative drew our attention to the learned Commissioner (Appeals)’s order. He pointed out that the learned Commissioner (Appeals) had faithfully recorded the written and oral submissions of the assessee from paragraphs 5 to 7 on pages 3 to 14 of the order and then in paragraph 8, consisting of about 8 lines, allowed the assessee’s appeal on this issue of deemed dividend under section 2(22)(e) of the Act without any discussion of the facts of the case on this issue, the legal position or assigning any reasons for taking the decision he took. In short, the learned Departmental representative submitted that there was no speaking order passed by the learned Commissioner (Appeals). He, therefore, prayed that the matter of deemed dividend under section 2(22)(e) of the Act required to be remitted back to the file of the Commissioner (Appeals) for de novo consideration in the interest of justice.
8. Learned counsel for the assessee supported the order of the learned Commissioner (Appeals), but submitted that he had no objection if the issue of deemed dividend under section 2(22)(e) of the Act be remanded to the file of the Commissioner (Appeals) for consideration afresh.
9. We have heard both parties and carefully perused the material on record. We have perused the order of the learned Commissioner (Appeals) on the issue of deemed dividend under section 2(22)(e) of the Act and agree with the contention of the learned Departmental representative that the learned Commissioner (Appeals) merely recorded the submissions of the assessee at paragraphs 6 and 7 from pages 3 to 14 of his order and then in paragraph 8 allowed the appeal of the assessee in a summary manner, bereft of any discussions of the facts of the case as brought out by the Assessing Officer and the assessee and without assigning any reasons for reaching the finding he made. We, therefore, reproduce hereunder the referred paragraph 8 on page 14 of the Commissioner (Appeals)’s order which will clarify the situation :
“8.0 Considering the facts and circumstances of the case and following the rationale of the above decisions, I hold that the advance of Rs. 3,05,48,000 received by the appellant from another company, also engaged in real estate developments towards sale of property in the course of business and considering the facts of the case, such advances are not hit by the provisions of section 2(22)(e) of the Act. The addition of Rs. 3,05,48,000 made to the income as deemed dividend as per the provisions of section 2(22)(e) of the Act is deleted.”
10. Paragraph 8 (supra) reinforces our view that the learned Commissioner (Appeals) failed to pass a speaking order on the issue at hand. Not only that, when the learned Departmental representative prayed for remitting the issue of deemed dividend under section 2(22)(e) of the Act to the file of the learned Commissioner (Appeals) for passing a speaking and reasoned order thereon, learned counsel for the assessee did not object to the learned Departmental representative’s plea. In the facts and circumstances of the case, as discussed above, we are of the view that in the interest of equity and justice it would be in the fitness of things for the issue of deemed dividend under section 2(22)(e) of the Act to be remitted to the file of the learned Commissioner (Appeals) for de novo consideration by him taking into consideration the facts of the case, the findings of the Assessing Officer in order of assessment, the submissions of the assessee, the judicial decisions cited and to pass fresh speaking orders thereon. It is ordered accordingly.
11. In the result, the Revenue’s appeal is allowed for statistical purposes.
C. O. No. 14/Bang/2012 (assessment year 2006-07)
12. In the cross-objection, the assessee has challenged the order of the learned Commissioner (Appeals) sustaining the following additions :
