Sri Sachanand Ladhani, Bengaluru V. Assistant Commissioner Of Income Tax, Central Circle-2(3), Bengaluru

CO 59/BANG/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2910 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-10-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 07-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SRINIVASAN
• Keywords: Unexplained investment; Capital asset; Additional evidence; Deemed dividend
• Section: 143(3); 153A; 2(22)(e); 119; 132

Judgement Text

ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.58/BANG/2018 ASSESSMENT YEAR : 2007-08 ACIT CENTRAL CIRCLE-2(3) BANGALORE VS. SRI SACHANAND LADHANI 12, 3 RD MAIN ROAD JAYAMAHAL EXTENSION BENGALURU 560 046 PAN NO : AAZPL5063F APPELLANT RESPONDENT C.O. NO.59/BANG/2018 (ARISING OUT OF ITA NO.58/BANG/2018) ASSESSMENT YEAR : 2007-08 SRI SACHANAND LADHANI BENGALURU 560 046 VS. ACIT CENTRAL CIRCLE-2(3) BANGALORE APPELLANT RESPONDENT APPELLANT BY : MS. NEERA MALHOTRA, D.R. RESPONDENT BY : SHRI V. SRINIVASAN, A.R. DATE OF HEARING : 03.08.2021 DATE OF PRONOUNCEMENT : 25.10.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 3 0-10-2017 PASSED BY LD CIT(A)-11, BANGALORE AND THEY RELATE TO THE A SSESSMENT YEAR 2007-08. 2. THE REVENUE HAS FILED THIS APPEAL ON THE FOLL OWING TWO ISSUES:- (A) DEEMED DIVIDEND ASSESSED U/S 2(22)(E) OF THE ACT RS.1.00 CRORE (B) UNEXPLAINED INVESTMENT OF RS.53,69,040/- ASSE SSED PROTECTIVELY. ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 2 OF 12 3. IN THE CROSS OBJECTION, THE ASSESSEE IS CHAL LENGING THE VALIDITY OF SEARCH PROCEEDINGS AND ALSO CONTENDING THAT THE LD CIT(A) SHOULD HAVE DELETED THE ADDITION OF DEEMED DIVIDEND MADE U /S 2(22)(E) OF THE ACT ON THE GROUND THAT THE PROVISIONS OF SEC.2( 22)(E) WOULD FAIL IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS ONE OF THE DIRECTORS IN M/S. BRINDAVAN BEVERAGES PVT. LTD. (BBPL) AND ALSO IN M/S. CAUVERI AQUA PVT. LTD. (CAPL). A SEARCH U/S 132 OF THE ACT WAS CARRIED OUT IN THE HANDS OF THE ASSESSE E AND OTHER GROUP CONCERNS ON 18.12.2012. CONSEQUENTLY, THE ASSESSMEN T OF THE ASSESSMENT YEAR UNDER CONSIDERATION WAS COMPLETED B Y THE A.O. U/S 143(3) R.W.S. 153A OF THE ACT. 5. THE FIRST ISSUE RELATES TO ADDITION MADE U/S 2(22)(E) OF THE ACT AS DEEMED DIVIDEND. THE A.O. NOTICED THAT THE ASSE SSEE HELD 33% OF SHARES IN CAPL AND 25% OF SHARES IN BBPL. THUS, TH E ASSESSEE HEREIN IS A SHAREHOLDER HAVING SUBSTANTIAL INTEREST IN BOTH THE ABOVE SAID COMPANIES. THE A.O. NOTICED THAT M/S. BBPL HA S RECEIVED LOAN OF RS.1.00 CRORE FROM M/S. CAPL IN THE FINANCIAL YE AR RELEVANT TO THE ASSESSMENT YEAR 2007-08. SINCE THE LOAN WAS RECEIVE D BY A CONCERN, IN WHICH THE ASSESSEE IS SUBSTANTIALLY INTERESTED, THE A.O. TOOK THE VIEW THAT THE LOAN RECEIVED BY THE BBPL FROM CAPL S HALL BE ASSESSABLE AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE, BEING A SHAREHOLDER HAVING SUBSTANTIAL INTEREST, IN TERMS OF SEC. 2(22)(E) OF THE ACT. 6. THE ASSESSEE SUBMITTED BEFORE AO THAT M/S. CAPL HAS GIVEN FUNDS TO M/S. BBPL FOR BUSINESS PURPOSES AND HENCE THE PROVISIONS OF SEC. 2(22)(E) ARE NOT ATTRACTED. IT WAS EXPLAIN ED THAT M/S. CAPL HAD ENTERED INTO AN AGREEMENT WITH M/S. BBPL, AS PE R WHICH, BOTH ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 3 OF 12 THE COMPANIES HAVE AGREED TO MAKE INVESTMENTS JOINT LY IN PROPERTY DEVELOPMENT PROJECTS OF M/S. EMBASSY GROUP. IT WAS SUBMITTED THAT THE PAYMENTS WERE MADE BY CAPL TO BBPL IN CONNECTIO N WITH THE ABOVE SAID BUSINESS ACTIVITIES. THE A.O. DID NOT A CCEPT THE ABOVE SAID EXPLANATIONS OF THE ASSESSEE. HE TOOK THE VIEW THA T M/S. CAPL SHOULD HAVE GIVEN MONEY DIRECTLY TO M/S. EMBASSY GR OUP AND NOT TO ITS SISTER CONCERN. HE ALSO EXPRESSED THE VIEW THA T THE ABOVE ARRANGEMENT DOES NOT HAVE ACKNOWLEDGEMENT OF EMBASS Y GROUP. ACCORDINGLY, THE AO HELD THAT THE AMOUNT RECEIVED B Y M/S. BBPL FROM CAPL IS DEEMED DIVIDEND ASSESSABLE U/S 2(22)(E ) OF THE ACT. UNDER THE PROVISIONS OF SEC.2(22)(E) OF THE ACT, TH E LOAN AMOUNT IS ASSESSABLE TO THE EXTENT OF ACCUMULATED PROFITS AVA ILABLE WITH LENDER COMPANY AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. IN THE INSTANT YEAR, THE ACCUMULATED PROFITS AVAILABLE WITH THE LE NDER COMPANY WAS MORE THAN THE AMOUNT OF LOAN. ACCORDINGLY, THE AO HELD THAT THE LOAN AMOUNT OF RS.1.00 CRORE IS ASSESSABLE AS DEEME D DIVIDEND. SINCE THE AO HAD ASSESSED THE ABOVE SAID AMOUNT OF RS.1.00 CRORE AS DEEMED DIVIDEND IN THE HANDS OF ANOTHER SHARE HO LDER NAMED SHRI PRAKASH LADHANI, HE ASSESSED THE ABOVE SAID AMOUNT ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE. 7. THE LD. CIT(A) NOTICED THAT HE HAS ACCEPTED T HE EXPLANATIONS FURNISHED BY SHRI PRAKASH LADHANI IN HIS APPEAL THA T THESE TRANSACTIONS ARE BUSINESS TRANSACTIONS AND ACCORDIN GLY HE HAD DELETED THE ADDITION OF RS.1.00 CRORE MADE U/S 2(22 )(E) OF THE ACT IN AY 2007-08. ACCORDINGLY, THE LD CIT(A) HELD IN THE APPEAL FILED BY THE ASSESSEE THAT THERE IS NO CASE FOR ASSESSMENT O F DEEMED DIVIDEND ON MERITS. ACCORDINGLY, THE LD CIT(A) DELETED THE PROTECTIVE ADDITION. THE REVENUE IS AGGRIEVED. ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 4 OF 12 8. WE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. WE NOTICE THAT THIS BENCH OF TRIBUNAL, VIDE ITS ORDER DATED 25.10.2021 PASSED IN ITA NO.69/BANG/2018 PASSED IN THE HANDS O F PRAKASH LADHANI, HAS CONFIRMED THE ORDER PASSED BY LD CIT(A ) IN THE HANDS OF PRAKASH LADHANI IN DELETING THE ADDITION OF DEEM ED DIVIDEND. THE RELEVANT PORTION OF THE ORDER PASSED IN THE HANDS O F PRAKASH LADHANI BY THIS BENCH IS EXTRACTED BELOW:- 7. THE LD D.R SUBMITTED THAT M/S CAPL HAS GIVEN LOANS TO BBPL IN VARIOUS YEARS AND THE AGGREGATE AMOUNT OF LOANS SO GIVEN FROM AY 2007-08 TO 2013-14 WAS RS.13.84 CRORES. THE ASSESSEE HAD PLACED RELIANCE ON ASSIGNMENT AGREEMENTS DATED 28-03-2015 FOR SALE OF UNDIVIDED INTEREST IN LAND AND BUILT UP SPACE, AS PER WHICH PROPERTIES WO RTH RS.13.64 CRORES WERE ASSIGNED IN FAVOUR OF CAPL BY BBPL. ACCORDINGLY, T HE LD CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE. THE LD D.R SUBMITT ED THAT A CLOSE PERUSAL OF THE ASSIGNMENT AGREEMENTS WOULD SHOW THAT THE FACTS ARE NOT AS CLAIMED BY THE ASSESSEE BEFORE LD CIT(A). SHE SUBMITTED THAT THE CAPL GOT FOLLOWING PROPERTIES AS PER ASSIGNMENT AGREEMENTS:- CONSTRUCTION AGREEMENT ASSIGNED - 10,63,17,108 UNDIVIDED INTEREST IN LAND ASSIGNED - 3,00,86,1 00 ----------------------- 13,64,03,208 ============= HOWEVER, IN THE CONSTRUCTION AGREEMENT, IT IS MENTI ONED THAT THE ASSIGNEE/S HAVE ALREADY PAID A SUM OF RS.8,84,36,266/- AND IT HAS AGREED TO PAY THE BALANCE OF RS.1,78,80,842/- TO THE ASSIGNOR ON OR B EFORE 20-06-2015. IN ADDITION TO THE ABOVE, IT IS STATED THAT THE ASSIGN EE HAS AGREED TO REIMBURSE A SUM OF RS.34,35,100/- TO THE ASSIGNOR TOWARDS THE ADDITIONAL IN RESPECT OF SCHEDULE B APARTMENT, WHICH HAS BEEN PAID BY THE AS SIGNORS TO THE DEVELOPERS. THE LD D.R CONTENDED THAT THERE WAS NO NECESSITY TO MAKE FURTHER PAYMENTS, WHEN THE LOANS GIVEN BY CAPL TO B BPL IS MORE THAN THE ASSIGNED VALUE. 8. THE LD D.R SUBMITTED THAT THE ASSIGNMENT AGRE EMENTS DO NOT SPECIFICALLY MENTION THAT THE LOANS AND ADVANCES PAID BY M/S CAU VERY AQUA P LTD WERE ADJUSTED IN ASSIGNMENT AGREEMENT. ACCORDINGLY, THE LD DR CONTENDED THAT THE LOANS AND ADVANCES WERE NOT ADJUSTED AGAINST AC QUISITION OF PROPERTY BY WAY OF ASSIGNMENT AGREEMENTS DATED 28-03-2015. ACC ORDINGLY, THE LD DR CONTENDED THAT THE LOANS GIVEN BY CAPL TO BBPL WERE SEPARATE TRANSACTIONS AND HENCE THE ASSESSMENT OF DEEMED DIVIDEND MADE U/ S 2(22)(E) OF THE ACT SHOULD BE UPHELD. 9. THE LD. A.R., HOWEVER, SUBMITTED THAT THERE W ERE TRADING TRANSACTIONS BETWEEN CAPL & BBPL IN THE PAST. THE TRADING OPERATIONS ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 5 OF 12 WERE SUSPENDED AND FROM THE YEAR 2002 ONWARDS BBPL OWED A SUM OF RS.1.97 CRORES TO M/S. CAPL. AT THAT POINT OF TIME , AN AGREEMENT DATED 14.11.2005 WAS ENTERED BETWEEN BOTH THE COMPANIES W ITH THE OBJECTIVE OF MAKING INVESTMENT IN PROPERTY DEVELOPMENT ACTIVITIE S. AS PER THE AGREEMENT, CAPL SHALL GIVE FURTHER MONEY TO BBPL FOR BUSINESS PURPOSES OF MAKING INVESTMENTS IN REAL ESTATE ACTIVITIES. ACCORDINGLY , CAPL HAS GIVEN MONEY TO BBPL IN CONNECTION WITH THE ABOVE SAID BUSINESS ACT IVITIES OVER THE YEARS. BOTH THE COMPANIES HAVE KEPT THE ACCOUNT OF OTHER C OMPANY AS RUNNING ACCOUNT ONLY IN CONNECTION WITH THE BUSINESS ACTIVI TIES. FROM ASSESSMENT YEARS 2007-08 TO 2013-14, CAPL HAS GIVEN AN AGGREGA TE SUM OF RS.13.85 CRORES. THE ASSIGNMENT AGREEMENTS WERE ENTERED ON 28-03-2015 BY BBPL IN FAVOUR OF M/S. CAPL WHICH WAS ALSO ENDORSED BY E MBASSY GROUP (THE DEVELOPERS). AS PER THE ABOVE SAID AGREEMENT, BBPL HAS ASSIGNED PROPERTY VALUE OF RS.13.64 CRORES TO CAPL. HENCE, M/S. CAPL HAS OBTAINED PROPERTIES ALMOST EQUAL TO THE AMOUNT ADVANCED BY I T FROM ASSESSMENT YEARS 2007-08 TO 2013-14. THESE FACTS PROVE THAT BOTH T HE COMPANIES HAVE JOINED TOGETHER TO CARRYING BUSINESS ACTIVITIES OF MAKING INVESTMENT IN REAL ESTATE ACTIVITIES. FINALLY, CAPL WAS GIVEN PROPERTIES ALM OST EQUAL TO THE INVESTMENTS MADE. ACCORDINGLY, THE LD A.R SUBMITTE D THAT THE AO WAS NOT CORRECT IN CONSIDERING THESE TRANSACTIONS AS LOAN T RANSACTIONS. HE SUBMITTED THAT THE LD CIT(A) HAS CORRECTLY APPRECIATED THESE TRANSACTIONS AS BUSINESS TRANSACTIONS. ACCORDINGLY, HE SUBMITTED THAT THE O RDER PASSED BY LD CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE IN ALL THE THREE YEARS. 10. THE LD. A.R. FURTHER SUBMITTED THAT THE A.O., IN THE GROUNDS OF APPEAL FILED BY THE REVENUE, HAS TAKEN A CONTENTION THAT THERE IS NO DISTINCTION BETWEEN AN ADVANCE AND BUSINESS ADVANCE. HE SUBM ITTED THIS CONTENTION IS CONTRARY TO THE PROVISIONS OF SECTION 2(22)(E) O F THE ACT AND ALSO THE DECISIONS RENDERED BY JURISDICTIONAL KARNATAKA HIGH COURT. 11. WE HEARD THE PARTIES AND PERUSED THE RECORD. T HERE IS NO DISPUTE WITH REGARD TO THE FACT THAT BOTH CAPL AND BBPL HAD ENTERED INTO AN AGREEMENT DATED 14 TH NOVEMBER, 2005. THE OBJECT OF ENTERING INTO THE A BOVE SAID AGREEMENT IS MENTIONED AS UNDER IN THE AGREEME NT:- WHEREAS BBPL HAS MADE INVESTMENT IN PROPERTY DEVEL OPMENT MAINLY WITH THE EMBASSY GROUP IN BANGALORE AND BBPL HAS AG REED TO INVOLVE CAPL IN SOME OF THESE VENTURES TO SHARE THE BENEFIT S OF SUCH INVESTMENT IN REAL ESTATE VENTURES OF THE EMBASSY GROUP. IN THE AGREEMENT, IT IS ALSO SPECIFICALLY MENTIONED AS UNDER:- 2. CAPL SHALL MAKE FURTHER INVESTMENTS AS AND WHE N REQUIRED TO SUPPORT THIS REAL ESTATE INVESTMENT OF BBPL IN THE EMBASSY GROUP UPON THE REQUEST MADE BY BBPL FROM TIME TO TIME AND ANY SUCH INVESTM ENT SHALL NOT CARRY ANY INTEREST. .. 9. THE AMOUNT INVESTED BY CAPL IN BBPL FROM TIME TO TIME SHALL BE PROPORTIONATELY ADJUSTED AS AND WHEN DEVELOPED PROP ERTIES ARE TRANSFERRED INTO CAPL. ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 6 OF 12 THE AGREEMENT DATED 14.11.2005 ENTERED BETWEEN BOTH THE COMPANIES MAKES IT CLEAR THAT BBPL HAS MADE INVESTMENTS IN VARIOUS PROJECTS OF THE EMBASSY GROUP AND CAPL IS INVOLVED IN THESE VENTURES. IT I S FURTHER MENTIONED THAT CAPL SHALL PAY MONEY TO BBPL AS AND WHEN REQUIRED T O SUPPORT THE REAL ESTATE INVESTMENT ACTIVITIES IT HAS ALSO BEEN MENT IONED THAT THE AMOUNT INVESTED BY CAPL SHALL BE ADJUSTED AGAINST THE PROP ERTIES. 12. IT IS AN UNDISPUTED FACT THAT THE AMOUNTS I NVESTED BY CAPL HAS BEEN ADJUSTED AGAINST THE PROPERTIES ASSIGNED TO CAPL BY BBPL, VIDE ASSIGNMENT AGREEMENTS DATED 28.03.2015. THUS THE ORIGINAL AGR EEMENT DATED 14.11.2005 STANDS CORROBORATED BY THE ASSIGNMENT AG REEMENTS DATED 28-03- 2015. THESE UNCONTROVERTED DOCUMENTS SUPPORT THE S UBMISSIONS OF THE ASSESSEE THAT THE AMOUNTS GIVEN BY CAPL TO BBPL ARE NOT LOANS OR ADVANCES CONTEMPLATED IN SEC.2(22)(E) OF THE ACT. 13. THE LD DR CONTENDED THAT THE ASSIGNMENT AGR EEMENTS DO NOT MENTION ABOUT ADJUSTMENT OF LOAN AND ADVANCES GIVEN EARLIER BY CAPL TO BBPL. SHE ALSO STATED THAT THE AGREEMENTS MENTION ABOUT FURTH ER PAYMENTS, WHICH WAS ACTUALLY NOT NECESSARY, WHEN THE AMOUNTS ALREADY GI VEN BY CAPL TO BBPL WERE IN EXCESS OF THE ASSIGNED VALUE OF PROPERTIES. HOWEVER, WE ARE OF THE VIEW THAT WHAT IS REQUIRED TO BE SEEN IS WHETHER CA PL HAS ADVANCED MONEYS AS PURE LOAN AMOUNTS OR FOR BUSINESS PURPOSES. THE AGREEMENTS PRODUCED BY THE ASSESSEE BEFORE LD CIT(A), WHICH WERE ALSO C ONFRONTED WITH THE AO, WOULD PROVE THAT THE TRANSACTIONS ENTERED BETWEEN T HE PARTIES ARE BUSINESS TRANSACTIONS. THE LD A.R ALSO SUBMITTED THAT BOTH THE COMPANIES ARE MAINTAINING ACCOUNTS AS RUNNING ACCOUNTS ONLY AND R EAL ESTATE INVESTMENT ACTIVITY WAS AGREED TO BE A CONTINUOUS ACTIVITY. H ENCE THE QUESTION OF MAKING ONE TO ONE RECONCILIATION, AS CONTENDED BY LD DR. W OULD NOT ARISE IN THESE TYPES OF TRANSACTIONS. 14. AT THIS JUNCTURE, WE FEEL IT PERTINENT TO EX TRACT THE ORDER PASSED BY LD. CIT(A) IN THIS REGARD:- 7.4 I CONSIDERED THE SUBMISSIONS MADE AND MATERIAL S ON RECORD. THE CONTENTION OF THE APPELLANT IS THAT TH E DEEMED DIVIDEND CANNOT BE ASSESSED FOR THE ASSESSMENT YEAR S 2007-08, 2008-09, 2010-11 & 2011-12 BECAUSE IT WAS NOT BASED ON ANY MATERIALS FOUND AT THE TIME OF SEARCH AND THESE ASS ESSMENTS HAD NOT ABATED ON THE DATE OF SEARCH. THE SECOND CONTEN TION OF THE APPELLANT IS THAT THE ADVANCE PAID BY M/S. CAUVERY AQUA PVT. LTD., TO M/S. BRINDAVAN BEVERAGES PVT. LTD., IS NOT A LOAN OR ADVANCE SINCE IT WAS GIVEN IN CONNECTION WITH PROPE RTY INVESTMENTS TO BE MADE AFTER TERMINATION OF THE DIS TRIBUTION BUSINESS BETWEEN THE 2 COMPANIES WHEN AN AMOUNT OF RS. 1,97,11,809/-WAS DUE TO M/S. CAUVERY AQUA PVT. LTD. , FROM M/S. BRINDAVAN BEVERAGES PVT. LTD. ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 7 OF 12 7.5 I FIND THAT THE APPELLANT HAS BEEN ABLE TO S UBSTANTIATE ITS EXPLANATION THAT THE AMOUNTS ADVANCED BY M/S. CAUVE RY AQUA PVT. LTD., TO M/S. BRINDAVAN BEVARAGES PVT. LTD., IS NOT A LOAN OR ADVANCE BUT A BUSINESS TRANSACTION BETWEEN THESE 2 COMPANIES FOR PURCHASE OF REAL ESTATE PROPERTIES. IT IS NOT I N DISPUTE THAT M/S. CAUVERY AQUA PVT. LTD., WAS A DISTRIBUTOR OF M /S. BRINDAVAN BEVERAGES FOR PRODUCTS MANUFACTURED FROM 1999 TO 20 02 AND THERE WAS A SUM OF RS. 1,97,11,809/- OUTSTANDING AT THAT TIME. THERE WAS AN AGREEMENT DATED 14/11/2005 BETWEEN THE 2 COMPANIES TO INVEST THE ABOVE AMOUNT DUE IN REAL ES TATE DEVELOPMENT PROJECTS OF EMBASSY GROUP WITH WHOM M/S . BRINDAVAN BEVERAGES PVT. LTD., WAS ALREADY HAVING S UBSTANTIAL INVESTMENTS. THIS CLAIM OF THE APPELLANT IS NOT SHO WN TO BE INCORRECT IN THE ASSESSMENT ORDER WITH REGARD TO AN Y MATERIALS THAT SHOWS A DIFFERENT PICTURE. RATHER, THE A.O. HA S SIMPLY DISBELIEVED THE EXPLANATION OF THE APPELLANT THAT T HE TRANSACTIONS BETWEEN THESE COMPANIES WERE BUSINESS TRANSACTIONS AND HAS HELD THAT THE EXPLANATION WAS NOT A SATISFACTORY ON E BY OBSERVING THAT M/S. CAUVERY AQUA PVT. LTD., NEED NOT HAVE MAD E INVESTMENTS THROUGH M/S. BRINDAVAN BEVERAGES PVT. L TD., AND COULD HAVE DIRECTLY GONE TO EMBASSY GROUP. THE A.O. HAS ALSO MENTIONED THAT THERE WAS NO ACKNOWLEDGMENT FROM EMB ASSY GROUP SHOWING PAYMENTS FROM MI.S. CAUVERY AQUA PVT. LTD., FOR ANY PROJECT AND A.O. REGARDED THE EXPLANATION OF TH E APPELLANT AS GIVING A COLOUR OF BUSINESS TRANSACTIONS TO LOAN S THAT WERE ADVANCED. 7.6 I FIND THE ABOVE BASIS STATED BY THE A.O. TO DISBELIEVE THE EXPLANATION OF THE APPELLANT IN THE ASSESSMENT ORDE R IS NOT CORRECT. THE FACT THAT M/S. BRINDAVAN BEVERAGES HA D ALREADY MADE SUBSTANTIAL INVESTMENTS WITH EMBASSY GROUP AND THAT M/S. CAUVERY AQUA PVT. LTD., HAD EXPRESSED ITS DESI RE TO JOIN IS VERY CLEAR FROM THE AGREEMENT DATED 14.11.2005, THE VERACITY OF WHICH HAS NOT BEEN IMPEACHED IN THE ASSESSMENT PROC EEDINGS. MERELY BECAUSE THE A.O. IS OF THE VIEW THAT THE INV ESTMENTS COULD HAVE BEEN MADE DIRECTLY AND NOT THROUGH M/S. BRINDA VAN BEVERAGES PVT. LTD., CANNOT BE A REASON TO DISCARD THE BUSINESS ARRANGEMENT BETWEEN THE PARTIES. HENCE, I DO NOT FI ND THE REASONS MENTIONED BY THE A.O. IN THE ASSESSMENT ORD ER THAT THE APPELLANT HAS TRIED TO GIVE A COLOUR OF BUSINESS TR ANSACTION TO A LOAN ADVANCED VERY CONVINCING. 7.7 THE APPELLANT HAS PRODUCED BEFORE ME TWO ASSI GNMENT AGREEMENTS DATED28.03.2015 BY WHICH M/S. BRINDAVAN BEVERAGES PVT. LTD., HAS ASSIGNED ITS RIGHTS IN THE PURCHASE AGREEMENT WITH EMBASSY GROUP IN RESPECT OF UNDIVIDED INTEREST IN L AND AS WELL AS ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 8 OF 12 CONSTRUCTION OF THE APARTMENT NO. 5211 IN THE PROJE CT OF EMBASSY GROUP CALLED 'EMBASSY LAKE TERRACES'. THIS ASSIGNME NT AGREEMENT IS ALSO ENDORSED BY M/S. EMBASSY GROUP WH O HAS SIGNED AS CONSENTING WITNESS. THIS DOCUMENT WAS PRO DUCED TO SUBSTANTIATE THE CLAIM THAT THERE WAS AN AGREEMENT BETWEEN THE COMPANIES TO ACQUIRE REAL ESTATE PROPERTIES AS PER THE AGREEMENT DATED 14.11.2005 ENTERED EARLIER. SINCE THE SAID DO CUMENT HAS BEEN EXECUTED ON 28.03.2015 AND VERY CLOSE TO THE A SSESSMENT ORDER DATED 30.03.2015, THE PRAYER OF THE APPELLANT FOR ADMISSION OF THE SAME UNDER RULE 46A OF THE I.T. RULES IS CON SIDERED. NO SPECIFIC OBJECTION HAS ALSO BEEN RAISED BY THE A.O. FOR ADMISSION OF THIS ADDITIONAL EVIDENCE. 7.8 TAKING INTO CONSIDERATION THE MATERIALS ON RECO RD, I HOLD THAT THE APPELLANT HAS BEEN ABLE TO ESTABLISH THAT THE AMOUNTS ADVANCED BY M/S. CAUVERY AQUA PVT. LTD., TO M/S. BR INDAVAN BEVERAGES PVT. LTD., ARE NOT MERE LOANS OR ADVANCES BUT THE SAID ADVANCES CONSTITUTE A BONAFIDE BUSINESS TRANSA CTION BETWEEN THE 2 COMPANIES FOR ACQUISITION AND INVESTM ENTS TO BE MADE IN REAL ESTATE DEVELOPMENT PROJECTS WITH EMBAS SY GROUP. THE A.O. OBSERVATION THAT THERE WAS NO ACKNOWLEDGEM ENT OF THIS ARRANGEMENT FROM EMBASSY GROUP IS ALSO ADDRESS ED SINCE IN THE ASSIGNMENT AGREEMENT DATED 28.3.2015, EMBASS Y GROUP HAS SIGNED AS A CONSENTING WITNESS. HENCE, THE GROU NDS ON WHICH THE A.O. HAS DISBELIEVED THE STAND OF THE APPELLANT IN THE ASSESSMENT PROCEEDINGS ARE REJECTED. 7.9. I ALSO FIND THAT THE STAND OF THE A.O. IN THE REMAND REPORT IS ALSO NOT THAT THE ADVANCES ARE NOT BUSINESS ADVA NCES. THE A.O. HAS SUBMITTED IN THE REMAND REPORT THAT THERE IS NO DIFFERENCE BETWEEN AN ADVANCE AND BUSINESS ADVANCE AND ONCE TH E PARAMETERS MENTIONED IN SEC. 2(22)(E) ARE FULFILLED , THE LIABILITY TO TAX AS DEEMED DIVIDEND ARISES. HOWEVER, THIS STAND OF THE A.O. IS CONTRARY TO THE RULING OF THE HON'BLE JURISDICTI ONAL HIGH COURT IN THE CASE OF BAGMANE CONSTRUCTIONS PVT. LTD., IN 119 DTR 49 (KAR.) WHERE IT HAS BEEN HELD AS UNDER:- '27. IN THIS BACKGROUND WHEN WE LOOK AT THE AFORESA ID PROVISION, IT IS CLEAR THAT ANY PAYMENT MADE BY A C OMPANY BY WAY OF ADVANCE OR LOAN HAS TO BE UNDERSTOOD IN T HE CONTEXT OF THE OBJECT WITH WHICH THE SAID PROVISION IS INTRODUCED THOUGH THE LEGISLATURE HAS INTRODUCED `ADVANCE' AS WELL AS 'LOAN' WHICH ARE TWO DIFFERENT WORKS, THE MEANING OF EACH OF THOSE WORKS HAVE TO BE UNDER STOOD IN THE CONTEXT IN WHICH THEY ARE USED EACH WORK TAK ES ITS ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 9 OF 12 COLOUR FROM THE OTHER. THE MEANING OF THE WORD 'ADV ANCE ' IS TO BE UNDERSTOOD BY THE MEANING OF THE WORD LOAN WHICH IS USED IMMEDIATELY THEREAFTER. ASSOCIATED WORDS TA KEN THEIR MEANING FROM ONE ANOTHER UNDER THE DOCTRINE O F NOSCITUR A SOCITS, THE PHILOSOPHY OF WHICH IS THAT THE MEANING OF A DOUBTFUL WORD MAY BE ASCERTAINED BY REFERENCE TO THE MEANING OF WORDS ASSOCIATED WITH I T. THIS RULE, ACCORDING TO MAXWELL MEANS THAT, WHEN TWO OR MORE WORDS WHICH ARE SUSCEPTIBLE OF ANALOGOUS MEANING AR E COUPLED TOGETHER THEY ARE UNDERSTOOD TO BE USED IN THEIR COGNATE SENSE. THEY TAKE AS IT WERE THEIR COLOUR FR OM EACH OTHER, THAT IS, THE MORE GENERAL IS RESTRICTED TO A SENSE ANALOGOUS TO A LESS GENERAL. IN THE CASE OF A LOAN, MONEY IS ADVANCED GENERALLY ON PAYMENT OF INTEREST. IN OTHER WORDS THE LOAN ADVANCED GENERALLY ON PAYMENT OF INTEREST. IN OTHER WORDS THE LOAN ADVANCE HAS TO BE REPAID WITH INTEREST. IN THE CASE OF AN ADVANCE ALSO, THE ELEME NT OF REPAYMENT IS THERE BUT SUCH A REPAYMENT MAY BE WITH INTEREST OR WITHOUT INTEREST. THEREFORE, WHEN THE S AID TWO WORDS ARE USED IN THE AFORESAID PROVISION WITH THE PURPOSE OF LEVYING TAX, IF THE INTENTION OF SUCH ADVANCE OR LOAN IS TO AVOID PAYMENT OF DIVIDEND DISTRIBUTION TAX UNDER S. 115-0 OF THE ACT, SUCH A PAYMENT BY A COMPANY CERTAINLY CONSTITUTES A DEEMED DIVIDEND BUT IF SUCH A PAYMENT IS MADE FIRSTLY NOT OUT OF ACCUMULATED PROFITS AND SEC ONDLY EVEN IF IT IS OUT OF ACCUMULATED PROFITS BUT AS TRA DE ADVANCE AS A CONSIDERATION FOR THE GOODS RECEIVED OR FOR PU RCHASE OF A CAPITAL ASSET WHICH INDIRECTLY WOULD BENEFIT T HE COMPANY ADVANCING THE LOAN, SUCH ADVANCE CANNOT BE BROUGHT WITHIN THE WORD 'ADVANCE' USED IN THE AFORE SAID PROVISIONS. THE TRADE ADVANCE WHICH IS IN THE NATUR E OF MONEY TRANSACTED TO GIVE EFFECT TO COMMERCIAL TRANS ACTIONS WOULD NOT FALL WITHIN THE AMBIT OF THE PROVISIONS O F S.2(22)(E) OF THE ACT'. 7.10 RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON 'BLE JURISDICTIONAL HIGH COURT [SUPRA] I HOLD THAT A TRA DE ADVANCE FOR PURCHASE OF CAPITAL ASSETS OR PURCHASE OF GOODS CANNOT BE CONSIDERED AS A LOAN OR ADVANCE WITHIN THE SCOPE OF SEC. 2(22)(E) OF THE ACT. I HAVE ALREADY HELD THAT THE APPELLANT HAS BEEN ABLE TO SUBSTANTIATE ITS EXPLANATION THAT THE AMOUNTS AD VANCED BY M/S. CAUVERY AQUA PVT. LTD., TO M/S. BRINDAVAN BEVE RAGES PVT. LTD., WAS FOR PURPOSES OF MAKING INVESTMENTS IN REA L ESTATE DEVELOPMENT PROJECTS OF EMBASSY GROUP AND THAT THER E IS NO MATERIAL TO DISBELIEVE THE SAID CLAIM OF THE APPELL ANT. HENCE, THE ADDITIONS MADE BY THE A.O. OF RS.1,00,00,000/-,RS.5 9,68,494/- ,RS.59,72,492/-,RS.81,76,829/- RS.1,30,44,602/- AND ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 10 OF 12 RS.50,31,297/- FOR THE ASSESSMENT YEARS 2007-08, 20 08-09, 2010-11, 2011-12, 2012-13 AND 2013-14 ARE DELETED. 15. IN VIEW OF THE FOREGOING DISCUSSIONS, IN OUR C ONSIDERED VIEW, THE FINDINGS ARRIVED AT BY LD CIT(A) DO NOT CALL FOR AN Y INTERFERENCE. ACCORDINGLY, WE CONFIRM THE ORDER OF LD CIT(A) IN D ELETING THE ADDITIONS MADE U/S 2(22)(E) OF THE ACT IN THIS YEAR. 9. IT CAN BE NOTICED THAT THE DECISION RENDERED BY LD CIT(A) IN DELETING THE ASSESSMENT OF DEEMED DIVIDEND IN THE H ANDS OF PRAKASH LADHANI HAS BEEN UPHELD BY THE TRIBUNAL ON THE REAS ONING THAT THE TRANSACTIONS OF ADVANCING MONEY BY CAPL TO BBPL ARE BUSINESS TRANSACTIONS. ACCORDINGLY, WE CONFIRM THE DECISION OF LD CIT(A) IN HOLDING THAT THERE IS NO CASE FOR ASSESSMENT OF DEE MED DIVIDEND ON MERITS AND HENCE THE PROTECTIVE ADDITION MADE IN TH E HANDS OF THE ASSESSEE HEREIN IS LIABLE TO BE DELETED. 10. THE NEXT ISSUE URGED BY THE REVENUE RELATES T O THE ADDITION OF RS.53,69,040/- RELATING TO UNEXPLAINED INVESTMENT M ADE ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE. THE SUBSTANTIAL ADDITION WAS MADE IN THE HANDS OF SHRI PRAKASH LADH ANI AND THIS ADDITION WAS CONFIRMED IN HIS HANDS BY LD CIT(A). ACCORDINGLY, IN THE INSTANT CASE, THE LD CIT(A) DELETED THE PROTECT IVE ADDITION. THE REVENUE IS AGGRIEVED. 11. THE LD A.R SUBMITTED THAT THE ASSESSEE SHRI PRAKASH LADHANI HAD CHALLENGED THE DECISION RENDERED BY LD CIT(A) I N RESPECT OF THE ABOVE SAID ADDITION BY FILING APPEAL BEFORE ITAT AN D THE SAME WAS NUMBERED AS ITA 2856/BANG/2017. THEREAFTER, SHRI P RAKASH LADHANI HAS OPTED TO SETTLE THE ISSUE UNDER DIRECT TAXES VIVAD SE VISHWAS ACT AND ACCORDINGLY FILED RELEVANT FORMS. ACCORDINGLY, HE SUBMITTED THAT THE IMPUGNED ISSUE HAS SINCE BEEN SE TTLED BY SHRI PRAKASH LADHANI ACCEPTING THE ADDITIONS MADE IN ITS HANDS ON SUBSTANTIVE BASIS. ACCORDINGLY, HE CONTENDED THAT THE PROTECTIVE ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 11 OF 12 ADDITION MADE IN THE HANDS OF THE ASSESSEE HAS RIGH TLY BEEN DELETED BY LD CIT(A). 12. SINCE THE ADDITION MADE ON SUBSTANTIVE BASI S IN THE HANDS OF SHRI PRAKASH LADHANI HAS BEEN UPHELD BY LD CIT(A), THE PROTECTIVE ADDITION MADE IN THE HANDS OF THE ASSESSEE OF THE V ERY SAME AMOUNT WAS DELETED BY LD CIT(A). IT WAS FURTHER SUBMITTED THAT SHRI PRAKASH HAD FILED APPEAL BEFORE ITAT CHALLENGING THE DECISI ON RENDERED BY LD CIT(A) AND FURTHER HE HAS OPTED TO SETTLE THE ISSUE UNDER DTVSV SCHEME. THE ASSESSEE HAS FURNISHED A COPY OF FORM NO.1FILED UNDER THE ABOVE SAID SCHEME. UNDER THE ABOVE SAID SCHEME, THE ABOVE SAID COMPANY IS REQUIRED TO PAY TAX SHOWN IN FORM NO.3 A ND FINAL CERTIFICATE IN FORM NO.5 IS REQUIRED TO BE ISSUED I N PROOF OF SETTLEMENT OF DISPUTE. SINCE THESE MATTERS ARE PENDING, WE RE STORE THIS ISSUE TO THE FILE OF AO WITH THE DIRECTION TO DELETE THIS PR OTECTIVE ADDITION UPON FURNISHING OF FORM NO.5 ISSUED TO SHRI PRAKASH LADH ANI IN SETTLEMENT OF THIS DISPUTE. 13. THE LD A.R DID NOT PRESS THE CROSS OBJECTION AND HENCE THE SAME IS DISMISSED AS NOT PRESSED. 14. IN THE RESULT, THE APPEAL OF REVENUE IS TRE ATED AS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCT, 2021. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 25 TH OCT, 2021. VG/SPS ITA NO.58/BANG/2018 SRI SACHANAND LADHANI, BANGALORE PAGE 12 OF 12 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE