Ita/179/2013 Of Ms.lailabi Khalid v. Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN&THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 11TH DAY OF JUNE 2018 / 21ST JYAISHTA, 1940 ITA.No. 179 of 2013 --------------------- AGAINST THE ORDER/JUDGMENT IN ITA 164/COCH/2011 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 14-12-2012 APPELLANT(S)/APPELLANT:---------------------- LAILABI KHALID POOVATTUPARAMBA, CALICUT - 673 001. M/S. S L K FOOD PROCESSING, BY ADVS.SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI RESPONDENT(S)/RESPONDENT: ------------------------ COMMISSIONER OF INCOME TAX AYAKAR BHAWAN, NORTH BLOCK, KOZHIKODE - 673 001. R BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) R BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 11-06-2018ALONG WITH ITA NO.180/2013 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- I.T.A.Nos. 179, 180, 181 & 197 of 2013 ------------------------------------------- Dated this the 11[th] day of June, 2018 J U D G M E N T Vinod Chandran, J. We are of the opinion that only two questions arise in the above appeals filed by the assessee against the common order of the Tribunal, which from the memorandum, we extract here under: “ii.Whether on the facts and circumstances of the casethe appellate tribunal was justified in not relying onthe revised annual return in which transfer of sharesby the appellant was included and which was alsoaccepted by the Registrar of Companies ?the appellate tribunal was justified in not relying onthe revised annual return in which transfer of sharesby the appellant was included and which was alsoaccepted by the Registrar of Companies ? iii.Whether on the facts and circumstances of the casethe appellate tribunal was justified in coming to theconclusion that provisions of section 2(22)(e) willapply to the appellant when there was a valid transferof shares by the appellant which reduced the shareholding of the appellant to less than 10 per centduring the relevant period ?”the appellate tribunal was justified in coming to theconclusion that provisions of section 2(22)(e) willapply to the appellant when there was a valid transferof shares by the appellant which reduced the shareholding of the appellant to less than 10 per centduring the relevant period ?” 2.The facts to be noticed are thus: The appellant-assessee had been a shareholder of a closely held company. For theassessment years 2000-2001, 2003-2004, 2004-2005 and 2005-2006, the assessee had received amounts from the company asloans, respectively of Rs.4,00,000/-, Rs.2,50,000/-, Rs.8,00,000/-and Rs.27,00,000/-. Returns were filed by the assessee without ITA 179,180,181&197 of 2013 2.The facts to be noticed are thus: The appellant-assessee had been a shareholder of a closely held company. For theassessment years 2000-2001, 2003-2004, 2004-2005 and 2005-2006, the assessee had received amounts from the company asloans, respectively of Rs.4,00,000/-, Rs.2,50,000/-, Rs.8,00,000/-and Rs.27,00,000/-. Returns were filed by the assessee without ITA 179,180,181&197 of 2013 disclosing the said loans as income. The Assessing Officer underSection 147 issued notice for escapement of income treating theloans received as deemed income under Section 2(22)(e) of theIncome Tax Act, 1961. The assessee contended that she did nothave 10% shares to be covered under Section 2(22)(e). The companyhad a total number of 1936 shares of Rs.1000/- each. Theassessee held 328 shares. The assessee contended that 173 shareswere transferred to one Remlath Beevi on 25-09-1998. On accountof the transfer, the share holding of the assessee fell to 155, whichwas less than 10% of 1936, was the contention.3.The Assessing Officer called for the annual returns of theCompany from the Registrar of Companies for the various years,which were relevant for consideration. The annual returns did notshow the shares of the assessee having been transferred to another.The assessee then contended that the Company has filed a revisedreturn after October, 2006 and produced the Registers of theCompany as also the minutes book of the Board of Directors toadvance their contention. The Assessing Officer found that thepublic documents; the annual returns filed before the Registrar of ITA 179,180,181&197 of 2013 Companies, indicate the assessee having more than 10% holding ofshares in the company. The other documents, which were theregisters, in the custody of the Company, could be interpolated andare not reliable evidence to absolve the liability to tax. TheAssessing Officer rejected the contention of the assessee andproceeded with the assessment under Section 2(22)(e) treating theloan received as deemed dividend, liable to be included as income. 4.The First Appellate Authority and the Tribunal concurredwith the findings. Having gone through the orders of the authoritiesand after having heard the parties, we are of the opinion that noquestion of law arises from the order of the Tribunal. The questionsframed by the assessee as extracted herein above are on facts. Theessential facts which the Assessing Officer, the First AppellateAuthority and the Tribunal were concerned with was as to whetherthe assessee had in fact effected the transfer of shares on25-09-1998 as contended by the assessee. Concurrently this wasdecided against the assessee. 5.If the assessee had made such transfers and registered itwith the Company as stipulated under the Companies Act, 1956, specifically Sections 108 to 112 dealing with transfer of shares anddebentures, necessarily the transfer would have been registered bythe Company and share certificates issued in the name of thetransferee. If that was done, it would find reflection in the annualreturns filed by the Company. The annual returns, however, showsthe assessee holding 328 shares. Obviously, the documents produced by the assessee werecooked up and the revision of returns said to have been filed beforethe Registrar of Companies, was subsequent to the notice issuedunder Section 147; an afterthought to wriggle out of the liability. Allthe authorities having concurred on facts, we do not find any reasonto interfere with the orders. No question of law arises from theorders of the Tribunal and we reject the appeals,leaving the partiesto suffer their costs. Sd/-K. VINOD CHANDRANJudge Sd/-ASHOK MENONJudge