Mrs Natalina Vaz, Goa V. The Deputy Commissioner of Income Tax, Central Circle.Panaji., Panaji

CO 89/PAN/2016

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8151 (ITAT-PANAJI)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVIRAJ Y V
• Assessee Lawyers: V CHANDRASEKHAR
• Keywords: Capital asset; Business expenditure; Search and seizure; Principle of natural justice; Period of limitation; Additional evidence; Question of law; Cost of acquisition; Deemed dividend; Commercial expediency; Time period of passing order; Documents seized
• Section: 143(3); 153A; 80G; 131; 263; 132; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER & SHRI RAMIT KOCHAR HONBLE ACCOUNTANT MEMBER IT(SS)A NOS. 09 TO 13/PNJ/2015 ) (ASST. YEAR S : 20 07 - 08 TO 2011 - 12 ) D CIT, CENTRAL CIRCLE, PANAJI GOA. V . PETER VAZ, BUNGALOW NO.4, MODELS MERIDIEN, MARINE ROAD, CARANZALEM, ILHAS, GOA. PAN NO. AAYPV 2387 H (APPELLANT) (RESPONDENT) ITA NOS. 412/P N J/2015 ) (ASST. YEAR : 2012 - 13 ) D CIT, CENTRAL CIRCLE, PANAJI GOA. V . PETER VAZ, BUNGALOW NO.4, MODELS MERIDIEN, MARINE ROAD, CARANZALEM, ILHAS, GOA. PAN NO. AAYPV 2387 H (APPELLANT) (RESPONDENT) IT(SS)A NOS. 17 TO 22/PNJ/2015 ) (ASST. YEAR S : 20 07 - 08 TO 2012 - 13 ) D CIT, CENTRAL CIRCLE, PANAJI GOA. V . MRS. NATALINA VAZ, BUNGALOW NO.4, MODELS MERIDIEN, MARINE ROAD, CARANZALEM, ILHAS, GOA. PAN NO. AAYPV 2385 F (APPELLANT) (RESPONDENT) 2 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 IT(SS)A NOS. 23 TO 27/PNJ/2015 & ITA NO. 413/PNJ/2015 ) (ASST. YEAR S : 20 07 - 08 TO 2012 - 13 ) D CIT, CENTRAL CIRCLE, PANAJI GOA. V . EDGAR BRAZ AFONSO, H.NO. E - 374, TIVAI WADDO, CALANGUTE, BARDEZ, GOA. PAN NO. ABOPA 3001 A (APPELLANT) (RESPONDENT) IT(SS)A NOS. 28 TO 33/PNJ/2015 ) (ASST. YEAR S : 20 07 - 08 TO 2012 - 13 ) D CIT, CENTRAL CIRCLE, PANAJI GOA. V. MRS. VANDA AFONSO, H.NO. E - 374, TIVAI WADDO, CALANGUTE, BARDEZ, GOA. PAN NO. ABOPA 3000 B (APPELLANT) (RESPONDENT) IT(SS)A NOS. 41 TO 45/PAN/2016 ) (ASST. YEAR S : 20 07 - 08 TO 2011 - 12 ) D CIT, CENTRAL CIRCLE, PANAJI GOA. V . M/S. MODELS REAL ESTATE DEVELOPERS, 4 TH FLOOR, JOFFRE RESIDENCY, BEHIND GOA COLLEGE OF PHARMACY, PANAJI GOA. PAN NO. AACFM 4890 J (APPELLANT) (RESPONDENT) ITA NOS. 90/PAN/2016) (ASST. YEAR : 2012 - 13 ) D CIT, CENTRAL CIRCLE, PANAJI GOA. V . M/S. MODELS REAL ESTATE DEVELOPERS, 4 TH FLOOR, JOFFRE RESIDENCY, BEHIND GOA COLLEGE OF PHARMACY, PANAJI GOA. PAN NO. AACFM 4890 J (APPELLANT) (RESPONDENT) 3 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 C.O. NO S . 80 TO 84 /P A N/201 6 (ARISING OUT OF IT(SS)A NOS. 09 TO 13/PNJ/2015 ) (ASST. YEAR S : 20 07 - 08 TO 2011 - 12 ) PETER VAZ, BUNGALOW NO.4, MODELS MERIDIEN, MARINE ROAD, CARANZALEM, ILHAS, GOA. V . D CIT, CENTRAL CIRCLE, PANAJI GOA. PAN NO. AAYPV 2387 H (APPELLANT) (RESPONDENT) C.O. NO S . 85 TO 90 /P A N/201 6 (ARISING OUT O F IT(SS)A NOS. 17 TO 22/PNJ/2015 ) (ASST. YEAR S : 20 07 - 08 TO 2012 - 13 ) MRS. NATALINA VAZ, BUNGALOW NO.4, MODELS MERIDIEN, MARINE ROAD, CARANZALEM, ILHAS, GOA. V . D CIT, CENTRAL CIRCLE, PANAJI GOA. PAN NO. AAYPV 2385 F (APPELLANT) (RESPONDENT) C.O. NO S . 91 TO 95 /P A N/201 6 (ARISING OUT O F IT(SS)A NOS. 23 TO 27/PNJ/2015 ) (ASST. YEAR S : 20 07 - 08 TO 2011 - 12 ) EDGAR BRAZ AFONSO, H.NO. E - 374, TIVAI WADDO, CARANZALEM, BARDEZ, GOA. V . D CIT, CENTRAL CIRCLE, PANAJI GOA. PAN NO. ABOPA 3001 A (APPELLANT) (RESPONDENT) C.O. NO S . 96 TO 101 /P A N/201 6 (ARISING OUT OF IT(SS)A NOS. 28 TO 33/P N J/2015 ) (ASST. YEAR S : 20 07 - 08 TO 2012 - 13 ) MRS. VANDA AFONSO, V . D CIT, CENTRAL CIRCLE, PANAJI GOA. 4 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 H.NO. E - 374, TIVAI WADDO, CARANZALEM, BARDEZ, GOA. PAN NO. ABOPA 3000 B (APPELLANT) (RESPONDENT) C.O. NO S . 102 TO 106 /P A N/201 6 (ARISING OUT OF IT(SS)A NOS. 41 TO 45/P N J /201 5 ) (ASST. YEAR S : 20 07 - 08 TO 2011 - 12 ) M/S. MODELS REAL ESTATE DEVELOPERS, 4 TH FLOOR, JOFFRE RESIDENCY, BEHIND GOA COLLEGE OF PHARMACY, PANAJI GOA. V . D CIT, CENTRAL CIRCLE, PANAJI GOA. PAN NO. AACFM 4890 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V. CHANDRASEKHAR ADV. DEPARTMENT BY : SHRI RAVIRAJ Y.V. - DR DATE OF HEARING : 25 / 11 /201 6 . DATE OF PRONOUNCEMENT : / 1 2 /201 6 . O R D E R PER BENCH THESE ARE BUNCH OF APPEALS FILED BY REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEES, FOR THE ASSESSMENT YEAR 2007 - 08 TO 2012 - 13 , W HER E IN THE COMMON QUESTION HAS ARISEN WITH RESPECT TO THE BRINGING TO TAX INCOM E UNDER THE DEEMING FICTION OF S ECTION 2 ( 22 )(E) OF THE INCOME - TAX ACT , 1961 (HEREINAFTER CALLED THE ACT) AS DEEMED DIVIDEND , W HEREIN CERTAIN AMOUNTS WERE ADVANCED BY THE COMPANY M/S MODELS CONSTRUCT ION PVT . LIMITED (HEREIN AFTER CALLED AS MCPL) , A COMPANY IN WHICH PUBLIC 5 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ARE NOT SUBSTANTIALL Y INTERESTED TO THE PARTNERSHIP FIRM M/S MODELS REAL ESTATE DEVELOPERS (HEREINAFTER CALLED AS MRED) , WHEREIN MR. PETER VAZ AND MR. EDGAR BRAZ AFONSO ARE UNDISPUTEDLY AND ADMITTEDLY COMMON SHAREHOLDERS HOLDING 50% SHARE S EACH IN MCPL , AND ALSO ADMITTEDLY AND UNDISPUTEDLY ENTITLED TO 50% SHARE EACH IN THE PROFITS OF THE PARTNERSHIP FIRM MRED . THE SAID COMPANY MCPL IS ADMITTEDLY A PRIVATE LIMITED COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. AS ALSO IN T HE CASE OF SHRI EDGAR BRAZ AFONSO , THERE W ERE ADDITIONAL LY CERTAIN AMOUNT ALLEGEDLY ADVANCED BY SONESTA INNS PRIVATE LIMITED (HEREINAFTER CALLED THE SIPL) , A PRIVATE LIMITED COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED TO MR. EDGAR BRAZ AFONSO , AND IN WHICH ALSO MR.PETER V A Z AND M R .EDGAR BRAZ AFONSO ARE UNDISPUTEDLY AND ADMITTEDLY HOLDER OF 50% SHARE S OF SIPL . 2 . IT IS UNDISPUTED AND ADMITTED POSITION BETWEEN THE RIV AL PARTIES THAT SHRI PETER V A Z AND SHRI EDGAR BR AZ A F ONSO ARE COVERED BY SECTION 5A OF THE ACT WHEREIN INCOME IS TO BE APPORTIONED BETWEEN THE SPOUSES AS THEY ARE GOVERNED BY PORTUG U ESE CIVIL C ODE . T HE REVENUE HA VING MADE ADDITIONS U/S. 2(22)(E) OF THE ACT IN THE HANDS OF THE M R. PETER V A Z AND M R. EDGAR BR AZ AFONSO AND THEIR RESPECTIVE SPOUSES ( BEI NG COVERED BY SECTION 5A OF THE ACT) ON SUBSTANTIVE BASIS BY CONSIDERING THE ALLEGED LOANS AND ADVANCES GIVEN BY MCPL TO MRED AS INCOME UNDER THE ACT BEING DEEMED DIVIDEND AS HAVING BEEN HIT BY DEEMING FICTION OF SECTION 2(22)(E) OF THE ACT BEING ADVANCED BY MCPL TO MRED ALLEGEDLY FOR THE ULTIMATE BENEFIT OF SHAREHOLDERS NAMELY MR PETER VAZ AND MR. EDGAR BRAZ AFONSO BEING REGISTERED SHAREHOLDERS IN MCPL , WHO ARE ALSO PARTNERS IN MRED AS SET OUT ABOVE , WHILE THE SIMILAR ADDITIONS HAVE BEEN MADE IN THE HANDS OF PARTNERSHIP FIRM MR E D U/S . 2(22)(E) OF THE A CT ON PRO TECTIVE BASIS. FURTHER THE REVENUE HAS MADE ADDITIONS U/S. 2(22)(E) OF THE ACT 6 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 IN THE HANDS OF MR.EDGAR BRAZ AFONSO AND HIS SPOUSES (BEING COVERED BY SECTION 5A OF THE ACT ) ON SUBSTANTIVE BASI S BEING REGISTERED SHAREHOLDERS IN SIPL HOLDING 50% SHARES IN SIPL AS THE LOANS AND ADVANCES WERE GIVEN BY SIPL ALLEGEDLY FOR THE BENEFIT OF MR. EDGAR BRAZ AFONSO . ALL SUCH ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER(HEREINAFTER CALLED THE AO ) ST OOD DELETED BY LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) VIDE HIS APPELLATE ORDERS IN THE FIRST APPEAL FILED BY THE ASSESSEES . 3 . FIRST WE SHALL TAKE UP REVENUE APPEAL FOR THE ASSESSMENT YEAR 2007 - 2008 IN THE CASE OF MR. PETER VAZ IN IT( SS)A NO.09/PNJ/2015 . 4 . THE GROUNDS OF APPEA L RAISE D BY THE R EVENUE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL (HEREINAFTER CALLED THE TRIBUNAL) IN SECOND APPEAL IN IT(SS)A NO.09/PNJ/2015 READS AS UNDER : - 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE L D. CIT (A) ERRED INDELETING THE ADDITION MADE ON ACCOUNT OF DEEM ED DIVIDEND UNDER SECTION 2(22)(E) OF THE I.T.ACT. 2. W HETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE L D. CIT (A) ERRED IN ACCEPTING FRESH EVIDENCE AND NOT GIVING OPPORTUNITY TO THE ASSESSING OFFICER AS PER SUB - RULE (3) TO RULE 46A OF THE IT RULES, 1962. 3. O N THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE L D.CIT(A) ERRED IN HOLDING THAT THE AMOUNT OF RS.81,51,723/ - ADVANCED BY MODELS CONSTRUCTION PVT. LTD. TO THE FIRM M/S MODELS REAL ESTATE DEVELOPERS CANNO T BE TREATED AS DIVIDEND UNDER S ECTION 2(22)(E) OF THE INCOME TAX ACT IN THE HANDS OF THE ASSESSEE IN S PITE OF THE FACT THAT THE ASSESSEE WAS HAVING SHAREHOLDING EXCEEDING 10% OF THE VOTING POWER IN THE SAID COMPANY AND ALSO HAVE SU BSTANTIAL INTEREST IN THE SAID F IRM? 4. FOR THE ABOVE GROUNDS AND ANY ADDITIONAL GROUNDS THAT MAY BE AGITATED DURI NG THE COURS E OF THE HEARING IS PRAYED THAT THE ORDER 7 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 OF THE L D.CIT(A) - 2, P ANAJI MAY BE QUASHED AND THAT OF TH E AO RESTORED. 5 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS REGISTERED AND ALSO BENEFICIAL SHAREHOLDER AND ALSO D IRECTOR OF MCPL (A PRIVATE LIMITED COMPANY IN WHICH PUBL IC ARE NOT SUBSTANTIALLY INTER ESTED) HOLDING 50% SHARES OF MCPL, AS WELL THE ASSESSEE IS PARTNER IN PARTNERSHIP FIRM MRED HAVING 50% SHARE IN THE PROFITS OF THE AFORE - SAID PARTNERSHIP FIRM, WHICH IS AN UNDISPUTED AND ADMITTED FACTS BETWEEN THE RIVAL PARTIES. 6 . THERE WAS A SEARCH CONDUCTED BY THE REVENUE IN THE CASE OF M C P L AND MRED U/S.132 OF THE ACT ON 31 ST JAN UARY 2012 . DURING THE COURSE OF SEARCH OPERATIONS, CERTAIN DOCUMENTS BELONGING TO THE ASSESSEE WERE FOUND AND SEIZED, WHEREIN NEXUS BETWEEN THE ASSESSEE, MCPL AND MRED WAS ESTABLISHED. THE REVENUE CENTRALISE D THE CASE S VIDE CIT NOTIFICATION IN FILE.N O .477/CIT/PNJ/2012 - 13 DATED 07 MAY 2012 PASSED BY LEARNED CIT, PANAJI, GOA . NOTICES UNDER SECTION 153C OF THE ACT D ATED 30.07.2012 WAS ISSUED AND SERVED ON THE ASSESSE ON 07.08.2012 CALLING ASSESSEE TO FILE RETURN OF INCOME FOR THE ABOVE SAID ASSESSMENT YEAR. THE ASSESSE E IN REPLY THEREOF SUBMITTED THAT THE ORIGI NAL RETURN OF INCOME FILED ON 09.05.2008 BE TREATED AS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S . 153A OF THE ACT . DURING THE COURSE OF SEARCH PROCEEDINGS U/S 132 OF THE ACT, BOOK S OF ACCOUNTS OF MCPL AND MRED WERE FOUND AND SEIZED BY REVENUE . THESE ENTITIES MCPL AND MRED WERE ENGAGED I N THE BUSINESS OF CONSTRUCTION OF BUILDING S. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT MCP L IS THE COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED AND MR. PETER VA Z AND MR.EDGAR BRAZ AFONSO ARE DIRECTORS OF MCPL HOLD ING 50% SHAREHOLDING EACH WHICH IS AN UNDISPUTED POSITION BETWEEN THE RIVAL PARTIES. MR. PETER V AZ AND MR. EDGAR BRAZ AFONSO ARE ALSO PARTNERS OF THE PARTNERSHIP FIRM MRED HAVING PROFIT SHARING RATIO OF 8 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 50 % :50 % . IT WAS OBSERVE D BY THE AO FROM THE SEIZED BOOKS OF ACCOUNTS THAT THE ABOVE T WO C ONCERNS NAMELY MCPL AND MRED HAVE FINANCIAL TRANSACTION S WITH EACH OTHER AND MOST OF THESE TRANSACTIONS ARE NOT CONNECTE D TO ANY BUSINESS BETWEEN THEM WHICH ARE MAINLY IN THE NATURE OF LOANS AND ADVANCE S WHICH ARE MADE TO MEET THE IMMEDIATE FUND REQUIREMENTS, AND WE RE ALSO TREATE D AS ADVANCES (SUNDRY DEBTORS) IN THE BOOKS OF ACCOUNTS OF THE SAID CONCERN S, WHICH IN THE OPINION OF THE ASSESSING OFFICER IS HIT BY DEEMING FICTION OF SECTION 2(22)(E) OF THE ACT AND HENCE IS CHARGEAB LE TO TAX AS INCOME AS DEEMED DIVIDEND AS PER PROVISIONS AND SCHEME OF THE ACT . THE AO ALLOWED THE APPROPRIATE SET - OF F OF THE AMOUNTS FOR THE TRANSACTION S CONDUCTED BETWEEN MCPL AND MRED FOR THE BUSINESS PURPOSE S AND ONLY REMAINING PORTION WHERE THERE WAS NO BUSINESS NEXUS , THE SAME WAS CONSIDERED BY THE AO FOR THE PURPOSES OF COMPUTING DEEMED DIVIDEND TO BE TAXED AS INCOME AS PER PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE RELEVANT PROVISION OF SECTION 2(22)(E) OF THE ACT IS REPRODUCED BELOW: DEFINITIONS. 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, - ** ** (22) DIVIDEND INCLUDES - (A) *** (B)*** (C)*** (D)*** (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MAY, 1987 , BY WAY OF ADVANCE OR LOAN 9 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WH ETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CONCERN, IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFE RRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS ; BUT 'DIVIDEND' DOES NOT INCLUDE ( I ) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB - CLAUSE ( C ) OR SUB - CLAUSE ( D ) IN RESPECT OF ANY SHARE ISSUED FOR FULL CASH CONSIDERATION, WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED IN THE EVENT OF LIQUIDATION TO PARTICIPATE IN THE SURPLUS ASSETS ; [( IA ) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB - CLAUSE ( C ) OR SUB - CLAUSE ( D ) IN SO FAR AS SUCH DISTRIBUTION IS ATTRIBUTABLE TO THE CAPITALISED PROFITS OF THE COMPANY REPRESENTING BONUS SHARES ALLOTTED TO ITS EQUITY SHAREHOLDERS AFTER THE 31ST DAY OF MARCH, 1964, [AND BEFORE THE 1ST DAY OF APRIL, 1965] ;] ( II ) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER [OR THE SAID CONCERN] BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY ; ( III ) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUB - CLAUSE ( E ), TO THE EXTENT TO WHICH IT IS SO SET OFF; [( IV ) ANY PAYMENT MADE BY A COMPANY ON PURCHASE OF ITS OWN SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PROVISIONS OF SECTION 77AOF THE COMPANIES ACT, 1956 (1 OF 1956); ( V )ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERGER BY THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE 10 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 DEMERGED COMPANY (WHETHER OR NOT THERE IS A REDUCTION OF CAPITAL IN THE DEMERGED COMPANY).] EXPLANATION 1. THE EXPRESSION 'ACCUMULATED PROFITS', WHEREVER IT OCCURS IN THIS CLAUSE, SHALL NOT INCLUDE CAPITAL GAINS ARISING BEFORE THE 1ST DAY OF APRIL, 1946, OR AFTER THE 31ST DAY OF MARCH, 1948, AND BEFORE THE 1ST DAY OF APRIL, 1956. EXPLANATION 2. THE EXPRESSION 'ACCUMULATED PROFITS' IN SUB - CLAUSES ( A), (B), (D ) AND ( E ), SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB - CLAUSES, AND IN SUB - CLAUSE ( C ) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF LIQUIDATION, [BUT SHALL NOT, WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISITION OF ITS UNDERTAKING BY THE GOVERNMEN T OR A CORPORATION OWNED OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE, INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE]. [ EXPLANATION 3. FOR THE PURPOSES OF THIS CLAUSE, ( A ) 'CONCERN' MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY ; ( B ) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY TIME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN ;] THE ASSESSING OFFICER OBSERVED THAT THE LOANS AND ADVANCES RECEIVED BY MRED FROM MCPL , AS PER LEDGER EXTRACTS IN THE BOOKS OF MCPL ALONG WITH ITS ACC UMULATED PROFITS , ARE AS UNDER : - F.Y . NAME OF THE PERSON / CONCERN FROM WHOM TOTAL LOAN / ADVANCES DURING THE YEAR ACCUMULATED PROFIT WITH M/S. MCPL 11 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ADVANCE IS RECEIVED 2005 - 06 MCPL 2,77,75,11 8/ - 2,15,70,177/ - (SURPLUS IN P & L ACCOUNT) 2006 - 07 MCPL 5,20,14,366/ - 8,04,62006/ - 2007 - 08 MCPL 4,71,81,347/ - 12,86,19,493/ - 2008 - 09 MCPL 9,46,68,620/ - 15,00,32,634/ - 2009 - 10 MCPL 12,76,91,164/ - 30,08,57,131/ - 2010 - 11 MCPL 7,30,10,750/ - 43,83,73,506/ - 2011 - 12 MCPL 8,75,33,761/ - 47,85,26,714/ - IT WAS ALSO OBSERVED BY THE AO THAT MOST OF THE LOANS AND ADVANCES WERE GIVEN BY MCPL TO MRED FOR NON BUSINESS PURPOSES , WHILE SOME OF THE ADVANCE S W E RE GIVEN FOR BUSINESS PURPOSES WHICH MOSTLY CONSISTED OF CHEQUES WRONGLY DEPOSITED INT O THE BANK ACCOUNT OF MCPL AND VICE VERSA , WHERE AS THE PROJECT WAS BELONGING TO OTHER CONCERN FOR WHICH NECESSARY CREDIT WERE GIVEN BY THE ASSESSING OFFICER AND NO ADDITIONS WERE MADE U/S 2(22)(E) OF THE ACT TO T HAT EXTENT BY THE ASSESSING OFFICER . DURING T HE ASSESSMENT PROCEEDINGS , THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO EXPLAIN WHY THE LOANS AND ADVANCES RECEIVED BY MRED FROM MCPL DURING THE YEAR SHOULD NOT TO BE TREATED AS D EEMED DIVIDEND U/S.2(22)(E) OF THE ACT TO THE EXTENT OF ACCUMULATED PROFITS POSSESSED BY MCPL. THE ASSESSEE VID E HIS REPLY DATED 04.12.2013 SUBMITTED BEFORE THE ASSESSING OFFICER AS UNDER: - SUBMISSIONS REGARDING PROPOSED ADDITION IN THE HANDS OF MODEL REAL ESTATE DEVELOPERS IN RESPECT OF ADVANCES 12 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 MADE BY MODEL S CONSTRUCTION S PVT LTD DURING PREVIOUS YEARS R ELEVANT TO ASSESSMENT YEAR 2007 08 TO 2012 - 13 WE ARE IN RECEIPT OF YOUR NOTICE ASKING OUR CLIENTS MODEL REAL ESTATE DEVELOPERS TO SHOW CAUSE A S TO WHY AN A GGREGATE SUM OF RS. 38,80,57,981 OUGHT NOT TO BE ADDED AS DEEMED DIVIDEND IN THEIR HANDS FROM ASSESSMENT YEAR 2007 - 08 TO ASSESSMENT YEAR 2012 - 13. IN REGARD TO THE ABOVE WE NOW PROCEED TO SUBMIT AN EXPLANATION WHICH DEALS WITH BOTH THE LEGAL ASPECTS OF THE MATTER AS WELL AS THE FACTUAL MATRIX THEREOF. THE ADDITION SOUGHT TO BE MADE IS ON ACCOUNT OF A DEEMING FIC TION CONTAINED IN SECTION 2(22) (E). SINCE THE VARIOUS LIMBS OF THE ABOVE PROVISION WILL BE DWELT UPON EXHAUSTIVELY DURING THE COURSE O F OUR SUBMISSION FOR THE SAKE OF CLARITY THE RELEVANT PARTS OF THE SAID PROVISION IS REPRODUCED HEREUNDER' (22) DIVIDEND INCLUDES - .. (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHE R AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDE ND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS; EXPLANATION 1. THE EXPRESSION 'ACCUMUL ATED PROFITS', WHEREVER IT OCCURS IN THIS CLAUSE, SHALL NOT INCLUDE CAPITAL GAINS ARISING BEFORE THE 1ST DAY OF APRIL, 1946, OR AFTER THE 31ST DAY OF MARCH, 1948, AND BEFORE THE 1ST DAY OF APRIL, 1956. EXPLANATION 2. THE EXPRESSION 'ACCUMULATED PROFITS' I N SUB - CLAUSES (A), (B), (D) AND (E), SHALL INCLUDE ALL PROFITS OF THE 13 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB - CLAUSES, AND IN SUB - CLAUSE (C) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF LIQUIDATION, [BUT SHA LL NOT, WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISITION OF ITS UNDERTAKING BY THE GOVERNMENT OR A CORPORATION OWNED OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE, INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THR EE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE]. [EXPLANATION 3. FOR THE PURPOSES OF THIS CLAUSE, (A) 'CONCERN' MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY ; (B) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY TIME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN ;] THRESHOLD CONDITIONS OF SECTION THIS PROVISION CAN BE ATTRACTED ONLY IF THE FOLLOWING TESTS ARE SATISFIED (I) THE ASSESEEE IS A COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED (II) SUCH A COMPANY POSSESSES ACCUMULATED PROFITS (III) THERE IS EITHER A LOAN OR ADVANCES TO A SHAREHOLDER HOLDING NOT LESS THAN 10%OF THE VOTING POWER (IV) T HERE IS A LOAN OR ADVANCE TO A CONCERN IN WHICH SUCH SHAREHOLDER HASSUBSTANTIAL INTEREST (V) THERE IS A PAYMENT ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SPECIFIED SHAREHOLDER SUBMISSIONS AS TO WHY THE PROVISIONS OF SECTION 2(22) (E) OUGHT NOT TO APPLY. 14 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 BACKGROUND OF PROVISION BEFORE WE PROCEED TO REBUT YOUR HONOUR'S CONTENTIONS IT IS PERTINENT TO NOTE THAT WE ARE DEALING WITH A PROVISION WHICH IS A DEEMING FICTION AND THEREFORE HAS TO STAND THE TEST OF INTERPRETATION WITH THAT PERSPECTIVE. WE ARE STATING THI S FOR THE SPECIFIC REASON THAT WHAT ARE OTHERWISE COMMERCIAL TRANSACTIONS BETWEEN TWO RELATED ENTITIES ARE BEING SOUGHT TO BE BROUGHT INTO THE TAX NET THROUGH THIS FICTION. IT IS NECESSARY TO BEAR IN MIND THE PURPOSE FOR WHICH THIS PROVISION WAS BROUGHT ON THE STATUTE BOOK. PRIOR TO ITS INTRODUCTION THERE WAS ON THE STATUTE SECTION 104 WHICH SOUGHT TO TAX INCOME WHICH REMAINED IN THE HANDS OF THE COMPANY AS UNDISTRIBUTED PROFITS. THE SAID PROVISION WAS DELETED AND IN ITS PLACE THIS PARTICULAR PROVISION WAS BROUGHT ON THE STATUTE BOOK. THE AVOWED OBJECT OF THIS SECTION IS TO TAX SOMETHING WHICH OTHERWISE IS UNDERSTOOD BOTH BY THE PAYER AND THE RECEIVER AS DIVIDEND BUT IS CAMOUFLAGED AS A LOAN OR ADVANCE. IT IS CLEAR FROM THE FACTUAL MATRIX THE ONLY LIMB THAT IS ATTRACTED IT IS THE ALLEGED LOAN OR ADVANCES TO A CONCERN IN WHICH THE SHAREHOLDERS HAVE SUBSTANTIAL INTEREST. REBUTTAL ON LEGAL PRINCIPLES WE N OW PROCEED TO ANALYSE THE PROVISION IN DETAIL TO ESTABLISH THAT THE SAID PROVISION CANNOT APPLY. THE PROVISION WILL APPLY ONLY IN A SITUATION WHERE THERE IS A 'LOAN OR AN ADVANCE' TO A CONCERN WHI CH SATISFIES THE TESTS LAID OUT ABOVE. IT IS UNDOUBTEDLY TRU E THAT THE TWO SHAREHOLDERS WHO CONTROL MODEL CONSTRUCTIONS PVT LTD HEREINAFTER IN THESE SUBMISSIO NS REFERRED TO AS THE 'COMPANY'.THEY OWN THE ENTIRE SHAREHOLDING TH EREOF ARE ALSO PARTNERS OF MODEL REAL ESTATE DEVELOPERS HEREINAFTER IN THESE SUBMISSIONS REFERRED TO AS THE 'FIRM'. HOWEVE R THIS IS ONLY ONE PART OF THE T EST. THE QUESTION THAT NEEDS TO BE ANSWERED IS WHETHER THE MONIES THAT HAVE TRAVELLED FROM THE COFFERS OF THE COMPANY TO THE FIRM CA N BE TREATED AS LOANS OR ADVANCES IN THE CONTEXT OF THE PROVISION TO WHICH WE ARE MAKING A REFERENCE. A DETAILED ANALYSIS OF THE FACTS WILL SHOW THAT BOTH THESE ENTITIES OPERATED IN THE FIELD OF CONSTRUCTION FOR A REASONABLY 15 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 LONG PERIOD, SINCE VIRTUALLY THE CONTROLLING INTEREST IN BOTH WAS THE SAME WHENEVER BUSINESS EXIGENCIES DEMANDED FUNDS TRAVELLED FROM ONE ENTITY TO OTHER TO SATISFY THE BUSINESS REQUIREMENTS. THUS THE TRANSACTIONS BETWEEN THE TWO WERE LIKE A 'CURRENT ACCOUNT' THOUGH FROM ASSESSMENT YE AR 2007 - 08 TO ASSESSMENT YEAR 2012 - 13 MORE FUNDS HAVE FLOWED FROM THE COMPANY TO THE FIRM THAN THOSE THAT HAVE FLOWED FROM THE FIRM TO THE COMPANY IN THE EARLIER PERIOD THERE WAS A REVERSE POSITION. WE WILL IN OUR SUBSEQUENT SUBMISSIONS POINT OUT AS TO WHY THERE WAS A FLOW CONTINUOUSLY FROM THE COMPANY TO THE FIRM AS THERE WAS A DEFINITE PURPOSE IN THE MINDS OF THE STAKEHOLDERS THOUGH THE SAME MAY NOT HAVE BEEN EXHAUSTIVELY AND EXPLICITLY DOCUMENTED AND THAT PURPOSE WAS CERTAINLY NOT AVOIDING TAX. HOWEVER F OR THE TIME BEING WE ARE ADDRESSING THE ISSUE AS TO WHETHER THE FLOW OF FUNDS CAN AT ALL BE TREATED AS A 'LOAN OR ADVANCE '. IN COMMERCIALLY PARLANCE A 'LOAN' IS A TRANSFER OF FUNDS WHICH IS EITHER FOR A SPECIFIC PERIOD OR WITH A SPECIFIC TERM .AS WILL B E APPARENT FROM THE COPIES OF ACCOUNTS WHICH HAVE BEEN SEIZED AT THE TIME OF SEARCH AND WHICH ARE A MATTER OF RECORD, NO SUCH TERM WAS EVER SETTLED BY THE PARTIES BETWEEN THEM AT ALL. THERE HAS ALSO NOT BEEN A SINGLE PAYMENT OF INTEREST FROM ONE PARTY TO A NOTHER DURING THIS ENTIRE PERIOD. THEREFORE IN COMMERCIAL PARLANCE THE SAID PAYMENTS CANNOT CONSTITUTE A LOAN FOR AT NO POINT OF TIME WAS THERE ANY OBLIGATION ON THE RECEIVER TO REPAY THEM EITHER WITHIN A SPECIFIED PERIOD OR REPAY THEM AT ALL . FURTHER IT I S UNHEARD OF THAT A PERSON TO WHOM LOAN HAS BEEN ADVANCED ALSO ADVANCES MONIES OR CREDITS TO THE LENDER. THIS IS EXACTLY THE SITUATION IN THIS CASE. TO ILLUSTRATE THE COMPANY RECEIVED THE FOLLOWING SUMS / CREDITS FROM THE FIRM IN THE FOLLOWING ASSESSMENT Y EARS. ASSESSMENT YEAR AMOUNT OF CREDIT IN LAKHS 2007 - 08 97.19 2008 - 09 470.58 2009 - 10 522.42 2010 - 11 413.42 2011 - 12 443.66 2012 - 13 354.87 16 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 FROM THE ABOVE IT IS CLEAR THAT WHAT THE TRANSACTIONS CONSTITUTE A CURRENT ACCOUNT AND NOT A LOAN. THE NEXT TERM APPEARING IN THE DEEMING FICTION IS AN 'ADVANCE' . AN ADVANCE IS NORMALLY TEMPORARY IS TO BE REPAID AS SOON AS THE PURPOSE FOR WHICH IT WAS MADE HAS BEEN FULLY ACCOMPLISHED. IT IS EITHER TEMP ORARY OR TO BE ADJUSTED AGAINST VALUE TO BE RECEIV ED. IN TERMS OF SECTION 2(22) (E) THIS ADVANCE COULD BE TREATED AS DEEMED DIVIDEND ONLY IF IT CONSTITUTES A BENEFIT TO THE RECIPIENT TO THE EXCLUSION OF THE PAYER. THIS IS NOT THE CASE AS OUR SUBSEQUENT SUBMISSIONS WILL BEAR OUT. THEREFORE WE SUBMIT THAT THE TEST OF 2(22) (E) IS NOT SATISFIED AT THE THRESHOLD ITSELF AND THE PAYMENT CANNOT CONSTITUTE A LOAN OR ADVANCE AS IS UNDERSTOOD IN THE CONTEXT OF THE SAID PROVISION. IT IS NECESSARY TO POINT OUT THAT ONE HAS TO DEAL WITH REAL - LIFE SITUATIONS AND CONSID ER COMMERCIAL EXIGENCIES AND COMMERCIAL EXPEDIENCY IS WHEN IS APPRECIATING THE TERM LOANS OR ADVANCES IN THIS CONTEXT. IT IS ONLY IF THE PAYMENT OF FUNDS OUT OF THE COFFERS OF A COMPANY TO A CONCERN IS FOR THE PURPOSE OF AVOIDING TAX THAT ONE CAN TREAT THE M AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) . EVEN IF ONE TAKES A VIEW THAT ONE HAS TO INTERPRET THE PROVISION STRICTLY ONE CANNOT CONSIDER THE TRANSACTIONS BETWEEN THE COMPANY AND THE FIRM AS A LOAN OR ADVANCE. FACTUAL MATRIX WILL SHOW THAT MONIES HAVE FL OWED FROM THE COFFERS OF THE COMPANY TO THE FIRM DURING THESE YEARS BUT IN EARLIER YEARS THE POSITION WAS EXACTLY THE REVERSE THIS CANNOT BY ANY STRETCH OF IMAGINATION BE THE ACTION OF A COMPANY WHICH IS DISTRIBUTING DIVIDEND. IN FACT IF THERE IS PAYMENT O F DIVIDEND THERE WOULD BE ALWAYS SINGLE DIRECTIONAL FLOW. IT IS APPARENT THAT DESPITE THE FACT THAT THE CLOSING BALANCE IS A DEBIT BALANCE MONIES HAVE FLOWED ALSO FROM THE FIRM TO THE COMPANY (TABLE SET OUT ABOVE). AS IS BEING EXPLAINED BY US IT I S THE ONL Y ON ACCOUNT OF A FACT THAT THE MONIES FLOWED FOR COMMERCIAL EXPEDI ENCY AND WERE NEVER FOR THE PUR POSE OF VESTING IN THE HANDS OF EITHER THE SHAREHOLDERS OR THE CONCERN. FURTHER LEGAL DEFENCES HAVING REBUTTED THE THRESHOLD CONDITIONS WE NOW PROCEED TO RA ISE FURTHER LEGAL DEFENCES. FIRSTLY ASSUMING WITHOUT CONCEDING THAT THESE ARE LOANS OR ADVANCES AT ALL, WE SUBMIT THAT THEY CANNOT BE TAXED IN THE HANDS OF A CONCERN. THIS IS FOR THE SIMPLE REASON THAT SECTION 2(22) (E) MERELY INCREASES THE 17 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 SCOPE AND AMBIT OF DIVIDEND BUT DOES NOT BRING IT TO TAX. FOR THAT ONE WILL HAVE PERFORCE REFER TO THE CHARGING MECHANISM OF SECTION 8. THE SAID PROVISION CLEARLY PROVIDES THAT DIVIDEND WILL BE CHARGEABLE TO TAX ONLY IN THE HANDS OF A REGISTERED SHAREHOLDER AND NONE OTHE R. THEREFORE THE SAID PROVISION CANNOT BE TAXED IN THE HANDS OF THE FIRM. THIS IS THE DECISION OF THE JURISDICTIONAL HIGH COURT IN UNIVERSAL MEDICARE PVT LTD 324 ITR 263 (BOM) SECONDLY THE EXTENT TO WHICH SUCH PROVISION CAN BE TAXED WILL ALSO DEPEND ON TH E ACTUAL ACCUMULATED PROFIT IN THE YEAR AS WELL AS THE INTEREST OF THE INDIVIDUAL SHAREHOLDERS. WE ENTIRELY APPRECIATE THAT THIS HOWEVER IS ONLY A LEGAL DEFENCE AND ASSUMING THAT THE DECISION OF THE JURISDICTIONAL HIGH COURT STANDS THE TEST OF THE APEX CO URT ULTIMATELY THE TEAM DIVIDEND WOULD BE CHARGEABLE TO TAX IN THE HANDS OF THE INDIVIDUAL SHAREHOLDERS IF OUR THRESHOL D ARGUMENTS FAIL TO PASS MUSTER. REASONS AS TO WHY THE FUNDS FLOWED FROM THE COMPANY TO THE FIRM HOWEVER BESIDES THE LEGAL DEFENCES WHICH WE HAVE RAISED IN THE CONTEXT OF THE PROVISION AS AFORESAID WE WISH TO SUBMIT THAT IF ONE APPRECIATES THE FACTUAL MATRIX WITH AN OPEN MIND AND NOT A PREJUDICED AND JAUNDICED EYE ONE WILL ACCEPT THAT THE PASSING OF F UNDS IS PURELY ON ACCOUNT OF A DEFINITE PURPOSE WHICH THE PROMOTERS OF THE COMPANY AND THE FIRM SOUGHT TO PUT INTO ACTION .IF ONE ANALYSES THE BALANCE SHEETS OF BOTH THESE ENTITIES IT WILL BE APPARENT THAT THE INTENTION OF THE PROMOTERS WAS TO MAKE THE COMPANY THAT IS MODEL CONSTRUCTION COMPANY PVT LTD AS A HUB OF CONSTRUCTION ACTIVITY WHILE THE LAND AND THE STOCK OF PREMISES WOULD CONTINUE TO VEST IN MODEL REAL ESTATE DEVELOPERS THE FIRM. THIS WAS FOR THE REASON THAT ACCORDING TO THE PROMOTERS, IF QUALI TY OF CONSTRUCTION WAS TO BE RAISED, IT WOULD REQUIRE BETTER TECHNOLOGY, SUBSTANTIAL FINANCE AND MAY BE PARTICIPATION BY WAY OF EQUITY. THE PROMOTERS THEREFORE DECIDED THAT THE LAND BANKS WOULD BE CREATED IN THE FIRM, AND THE FIRM WOULD THEN ENTRUST THE RE SPONSIBILITY, OF ENSURING A WORLD CLASS CONSTRUCTION TO THE COMPANY. THOUGH THIS OBJECT WAS IN THE MINDS OF THE PROMOTERS IT MAY NOT HAVE BEEN EXPLICITLY DOCUMENTED AND HAS THEREFORE NOT BEEN SPELT OUT IN EARLIER DEPOSITIONS / EXPLANATIONS. 18 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 THE CONDUCT OF THE PROMOTERS WOULD BEAR OUT THIS INTENTION. IF ONE CLOSELY ANALYSES ONE WILL FIND THAT IN THE BOOKS OF THE COMPANY THE STOCK OF LAND HAS REMAINED MORE OR LESS CONSTANT AND EVEN IF ONE LOOKS AT IN ABSOLUTE TERMS IT IS STANDING AT 3.63 CRORES IN ASSESSMENT YEAR 2012 - 13. THE STOCK OF PREMISES IS AT 4.26 CRORES WHILE THERE IS ABSOLUTELY NO ADVANCE FOR LAND AND PREMISES WHICH IS REMAINING IN THE BOOKS OF THE COMPANY FOR ASSESSMENT YEAR 2012 - 13. THE OBJECT WAS THAT THE LAND BANK SHOULD BE PIE IN THE HANDS OF TH E FIRM WHILE THE CONSTRUCTION ACTIVITY WOULD BE IN THE COMPANY. THIS VIEW IS FORTIFIED IF ONE LOOKS AT THE BALANCE SHEET OF THE FIRM. IN MODEL REAL ESTATE DEVELOPERS THE STOCK OF LAND AS THAT 31 MARCH 2012 IS 21.66 CRORES, THE STOCK OF PREMISES IS 15.51 C RORES AND THE ADVANCE FOR LAND AND PREMISES IS 5.09 CRORES SO THEREFORE THERE IS A CONTINUOUS INCREASE IN THE ASSETS WHICH REFLECT AN INCREMENT IN TERMS OF VALUE OF LAND IN MODEL REAL ESTATE DEVELOPERS WHILE THE SAME DOES NOT EMANATE FROM THE ANALYSIS OF T HE BALANCE SHEET OF THE COMPANY. WE WISH TO POINT OUT THAT THEREFORE THE OBJECT WAS THAT GRADUALLY OVER A PERIOD OF TIME LAND BANK WOULD BE CREATE D IN THE FIRM WHICH WOULD THEN B E ENTRUSTED TO THE COMPANY FOR THE PURPOSES OF DEVELOPMENT. AT FIRST BLUSH TH IS WOULD LOOK TO BE AN AFTERTHOUGHT, BUT THE FACTS WILL CORROBORATE THIS INTENT. ONE WILL APPRECIATE THAT WHEN THE PROMOTERS OF A COMPANY AND THE PARTNERS OF THE FIRM BEAR THE SAME IDENTITY THE THOUGHT PROCESS MAY NOT NECESSARILY BUT BE DOCUMENTED BUT WOUL D BE EVIDENCED BY ACTIONS WHICH WOULD REFLECT IN THE ACCO UNTS. THIS IS THE POSITION IN THIS CASE. BASED ON THIS BE SUBMITTED THAT THE PAYMENTS FRO M THE COMPANY TO THE FIRM ARE N OT LOANS OR ADVANCES BUT ARE COMMERCIAL PAYMENTS FOR CREATING A LAND DEVELOPMEN T BANK WHICH WOULD THEN BE UTILIZED BY THE CONSTRUCTION COMPANY. ALTERNATE SUBMISSION FOR CORRECTION IN WORKING OF DEEMED DIVIDEND. WITHOUT PREJUDICE OUR SUBMISSION IS THAT THE PROVISIONS OF THE SECTION CANNOT APPLY, WE SUBMIT THAT THE CALCULATION AS SUB MITTED BY THE LEARNED AND ASSESSING OFFICER IS INCORRECT. THE LEARNED ASSESSING OFFICER HAS ONLY TAKEN THE ADVANCES MADE BY THE COMPANY FROM TIME TO TIME AND ADJUSTED THERE FROM THE 19 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 TRANSACTIONS WHICH WERE BUSINESS TRANSACTIONS. WE SUBMIT THAT IN THE FIRS T YEAR THAT IS ASSESSMENT YEAR 2007 - 08 THE COMPANY HAD IN FACT RECEIVED ADVANCES FROM THE FIRM AND THE PAYMENTS MADE TO THE FIRM FROM 1ST APRIL 2006 TILL AROUND .......JULY 2006 CONSTITUTE A REPAYMENT OF THOSE MONIES RECEIVED AND THOSE CANNOT CONSTITUTE A LOAN OR ADVANCE BY ANY STRETCH OF IMAGINATION. THEREFORE THEY DEFINITELY NEED TO BE EXCLUDED FROM THE AMBIT. WE ARE SUBMITTING HEREWITH A COMPUTATION WHICH WILL ESTABLISH THIS FACT AND THEREFORE IN THE FIRST YEAR THE SUM OF RS. 4.60 CRORES WILL REDUCE TO RS. 3,65,55,487. WE MUST HOWEVER SUBMIT THAT THIS IS STRICTLY AN ALTERNATE SUBMISSION WITHOUT PREJUDICE TO OUR BASIC CONTENTION THAT THE PROVISIONS OF THIS SECTION CANNOT APPLY...........................' THE ASSESSEE SUBMITTED FURTHER REPLY DATED 17.02.2013 BEFORE THE ASSESSING OFFICER, WHICH IS REPRODUCED HEREUNDER: ' WITH REFERENCE TO THE ABOVE MENTIONED SUBJECT AND YOUR SHOW CAUSE NOTICE AND FURTHER TO MY LETTER DATED 04/12/2013 IN REGA RDS TO THE PROPOSED ADDITION OF RS. 38,80,57,9 81 AS DEEMED DIVIDEND IN THE HANDS OF MY ASSESSEE M/S MRED, I WOULD LIKE TO SUBMIT THE FOLLOWING FOR YOUR KIND CONSIDERATION : 1. PRIOR TO 1/4/2005 AND UP TO 30/06/2006 MCPL OWED MONIES TO MRED. 2. TRANSFER BETWEEN MCPL & MRED AND VICE VERSA IS IN THE ORDINARY COURSE OF BUSINESS AND THE INTER UNIT ACCOUNT IS TREATED AS CURRENT ACCOUNT TRANSACTION. IT WAS IN THE INTEREST OF THE BUSINESS OF MCPL TO LEND CONTINUOUS SUPPORT TO MRED BECAUSE OF 25 LONG YEARS OF BUSINESS ASSOCIATION IN THE SAME FIELD. TO MAKE EACH OTH ER'S BUSINESS VIABLE AND PROFITABLE, TO INCREASE THE CLIENT BASE BY LAUNCHING PROJECTS AND TO CREATE MORE BETTER INFRASTRUCTURE IT WAS NECESSARY FOR MCPL TO KEEP ON FUNDING MRED OR VICE VERSA. 3. SINCE INCEPTION AND TILL DATE THERE HAVE BEEN CONTINUOUS BUSIN ESS TRANSACTIONS BETWEEN BOTH THESE ENTITIES. (DETAILS OF SUCH TRANSACTIONS WITH DOCUMENTARY EVIDENCE ENCLOSED). THERE ARE NUMEROUS 20 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 INSTANCES WHEREIN MCPL HAS SOLD/ALLOTTED PREMISES AS CONSIDERATION FOR SETTLEMENT OF LAND DUES OF MRED, SIMILAR IS THE CASE WITH MRED ALLOTTING PREMISES TO MCPL. 4. THERE WAS NEVER AN INTENTION OF MONIES BEING ADVANCED AS 'LOANS AND ADVANCES' RECOVERABLE FROM INTER UNIT. IT WAS ONLY TRANSFER OF FUNDS IN THE NORMAL COURSE OF BUSINESS AND NO LOANS WERE GIVEN. RELIANCE IS PLACE ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V/S CREATIVE DYEING AND PRINTING PVT. LTD. (2009) 318 ITR 476 (DEL), WHEREIN IT WAS HELD THAT AN AMOUNT PAID FOR GENUINE PURPOSE OF BUSINESS OR FOR PROTECTING BUSINESS OR IN VIEW OF COMMERCIAL EXP EDIENCY ARE OUTSIDE THE PURVIEW OF SECTION 2(22)(E). AGAINST THIS ORDER OF DELHI HIGH COURT THE REVENUE APPROACHED THE HON'BLE SUPREME COURT, THE HON'BLE SUPREME COURT HAS REJECTED THE SLP FILED BY THE REVENUE. 5. AUDITED BOOKS OF ACCOUNTS AND AUDITED FINANCIAL STATEMENTS NEVER TREATED THE OUTSTANDING BALANCES AS LOANS AND ADVANCES OR UNSECURED LOANS. ANALYSIS OF BOOKS OF ACC OUNTS AND BALANCE SHEET OF MRED INDICATE THAT MOST OF THE AMOUNT RECEIVED FROM MCPL WAS UTILIZED BY MRED TOWARDS REPAYMENT OF ITS BANK OD OR IN CONNECTION WITH BUSINESS TRANSACTIONS. THE TRANSACTIONS BETWEEN BOTH THESE ENTITIES HAVE BEEN REFLECTED IN THE AUDITED BOOKS OF ACCOUNTS OF BOTH THE ENTITIES UNDER THE HEAD SUNDRY DEBTORS AND SUNDRY CREDITORS RESPECTIVELY. 6. A.O. WHILE ASSESSING U/S 143(3) OF THE I.T. ACT, 1961 NEVER TREATED THE AMOUNT DUE TO MCPL BY MRED AS IN THE NATURE OF LOANS AND ADVANCES AND HENCE THE AMOUNT ADVANCED WAS NOT LIABLE FOR DEEMED DIVIDEND. 7. NEVER THERE HAS BEEN AN INSTANCE OF MRED PAYING INTEREST ON THE AMOUNT DUE TO MCPL. 8. THERE HAS BEEN NO DOCUMENTARY EVIDENCE OF WHATSOEVER NATURE TO PROVE THAT THE AMOUNT 21 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 TRANSFERRED FROM MCPL TO MRED IS IN THE NATURE OF LOANS GIVEN BY MCPL. 9. THE STATEMENT TAKEN FROM ONE OF THE SUB - STAFF OF MODELS, WHO IN TURN HAS COMMENTED THAT THERE IS NO BUSINESS TRANSACTION BETWEEN MCPL AND MRED, ITSELF IS VOID AND BAD IN LAW. HIS STATEMENT IS TAKEN U/S 132(4) OF THE ACT, USUALLY STATEMENT U/S 132(4) IS TAKEN OF THE PERSON WHO HAS BEEN SEARCHED U/S 13 2 AND NOT OF HIS EMPLOYEES. 10. MRED IS NEITHER A REGISTERED OR BENEFICIAL SHARE HOLDER OF MCPL, HENCE TRANSFERS MADE BY MCPL TO MRED WILL NOT CONSTITUTE PAYMENT MADE IN LIEU OF DIVIDEND AND ATTRACT PROVISIONS OF SECTION 2(22) (E). 11. AN AMOUNT OF RS. 38,32,06,578/ - CREDITED INTO THE BANK ACCOUNTS OF MRED ARE NOTHING BUT DIRECT TRANSFERS EFFECTED BY THE BANKERS DIRECTLY. MCPL HAVE NOT EFFECTED THESE PAYMENTS OR ARE INSTRUMENTAL IN PAYING THE AMOUNTS INTO THE BANK ACCOUNTS OF MRED SO AS TO CONSTITUTE 'PAY MENT OF DIVIDEND' THESE AMOUNTS HAVE BEEN DIRECTLY TRANSFERRED BY THE BANK (LETTER FROM BANK AND COPIES OF BANK STATEMENT DULY HIGHLIGHTING SUCH DIRECT TRANSFERS IS ENCLOSED) WHEN THE CURRENT ACCOUNT WAS OVERDRAWN OR WHEN THERE WAS MINIMUM BALANCE IN THE A CCOUNT . BANK TRANSFERRED THESE AMOUNTS ONLY TO REGULARIZE THE OVER DRAWINGS AND TO CLEAR THE CHEQUES ISSUED FOR THE PURPOSE OF BUSINESS. BANK ALSO HAS TRANSFERRED ON CERTAIN OCCASIONS AMOUNTS FROM THE ACCOUNT OF MCPL TO MRED EVEN WHEN THERE WAS POSITIVE BA LANCE IN THE BOOKS OF MRED, BUT THE BALANCE WAS NOT SUFFICIENT TO CL EAR THE CHEQUES ISSUED BY MRED. SIMILAR TRANSFER HAS BEEN DONE FROM THE BANK ACCOUNT OF MRED TO MCPL WHEN THERE WAS INSUFFICIENT BALANCE IN THE BANK ACCOUNT OF MCPL OR THE ACCOUNT WAS OVER DRAWN. ALL SUCH TRANSFERS ARE ABSOLUTELY IN THE NORMAL COURSE OF BUSINESS AND TO FACILITATE SMOOTH FLOW OF OPERATIONS. TRANSFER OF MONIES FROM MCPL TO MRED DIRECTLY BY THE BANK IS TO FULFILL THE COMMERCIAL OBLIGATIONS CASTED ON MCPL VIDE TERMS OF LOAN SA NCTION LETTER. THE BANK'S 22 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 LOAN SANCTION LETTER TO MRED CLEARLY STIPULATES THAT MCPL SHALL BE THE GUARANTOR FOR MONIES ADVANCED. THE BANKER IN THEIR LETTERS, HAVE MENTIONED THAT THEY THEMSELVES DIRECTLY TRANSFER MONIES TO REGULATE THE OD ACCOUNT OF MRED. TH IS PRACTICE IS BEING CARRIED OUT SINCE INCEPTION. TRANSFERS ARE ON ACCOUNT OF LEGITIMATE BUSINESS CONSIDERATIONS. ALL SUPPORTING DOCUMENTS TO EXPLAIN THE ABOVE FACTS HAVE ALREADY BEEN SUBMITTED DURING THE COURSE OF HEARING. HAD THE TRANSFERS NOT BEEN DONE, THE CHEQUES ISSUED WOULD HAVE BOUNCED AND WOULD HAVE BROUGHT BAD REPUTATION TO THE ORGANIZATION WHICH IN TURN WOULD HAVE DISRUPTED THE SUPPLIES AND AFFECTED THE ONGOING PROJECTS. FROM WHAT IS STATED AND BASED ON THE EVIDENCE SUBMITTED IT IS APPARENT THAT THE BANKS HAVE EFFECTED THE TRANSFERS DIRECTLY HENCE IT CANNOT BE TREATED AS OR BROUGHT UNDER THE PROVISIONS OF SECTION 2(22) (E). THERE HAS NOT BEEN EVEN A SINGLE INSTANCE WHERE MONIES ARE TRANSFERRED FROM MCPL TO MRED AND THE SAME HAS BEEN WITHDRAWN BY T HE SHAREHOLDERS FOR THEIR PERSONAL BENEFIT. MOREOVER BOTH THE SHAREHOLDERS HAVE VERY STRONG FINANCIAL BACKGROUND AND A STRONG CAPITAL BASE. THERE IS ABSOLUTELY NO NEED FROM THEM TO WITHDRAW FUNDS FROM THE COMPANY FOR THEIR DAY TO DAY MAINTENANCE AND SURVIV AL. I AM ENCLOSING THE CAPITAL POSITIONS OF THE RESPECTIVE SHAREHOLDERS TO EXPLAIN THEIR PERSONA L FINANCIAL STRENGTH. 12. TO QUALIFY FOR DEEMED DIVIDEND THE SAME HAS TO BE PAID AS AN ADVANCE OR LOAN TO THE SHAREHOLDER OR ITS CONCERN. IN THE CASE OF MCPL, THE AMOUNT HAS NEVER BEEN PAID BY MCPL TO MRED BUT HAS BEEN DIRECTLY DEBITED BY THE BANK INTERNALLY TO ADJUST THE OVERDRAWN LIMIT. 13. AN AMOUNT OF RS. 5,19,92,260/ - IS CREDITED TO THE ACCOUNT OF MCPL, AND AN AMOUNT OF RS. 9,52,43,4977 - IS DEBITED TO THE ACCOUNT OF MCPL ON ACCOUNT OF JOURNAL ENTRIES PASSED IN THE BOOKS OF MRED. THESE ARE NOTHING BUT BOOK ENTRIES PASSED MAINLY TO SETTLE THE CREDITORS BALANCE OR TO SQUARE OFF THE DEBIT BALANCE/CREDIT BALANCES TO THE CLIENT'S ACCOUNTS. SINCE BOTH MCPL AND MRE D ARE IN THE SAME LINE OF BUSINESS 23 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 THEY HAVE COMMON SUPPLIERS . MANY A TIMES DUE TO NON - AVAILABILITY OF FUNDS THE SUPPLIERS ARE PAID FROM EITHER OF THE ENTITIES WHERE BALANCES ARE AVAILABLE . ON CERTAIN OCCASIONS THERE ARE TRANSFERS OF MATERIAL BETWEEN THE SITES OF BOTH THE ENTITIES. BASED ON THE BILLS RECEIVED FROM THE SUPPLIERS ACCOUNTING ENTRIES ARE PASSED IN THE BOOKS OF THE RESPECTIVE ENTITIES. IT SO HAPPENS THAT IN THE BOOKS OF MCPL SUPP LIER IS PAID IN ADVANCE AND IN THE BOOKS OF MRED THE SUPPLIER HAS DUES TO BE PAID IN ORDER TO AVOID DOUBLE PAYMENT TO THE SUPPLIERS, THE ACCOUNTANT PASSES JOURNAL ENTRIES TO SQUARE OFF THE ACCOUNTS OF THE SUPPLIERS. FOR SUCH JOURNAL ENTRIES THERE IS ABSOLU TE NO FLOW OF FUNDS TO THE ENTITIES OR TO THE SHAREHOLDERS. AS ENUMERATED IN SECTION 2(22)(E) SINCE THERE IS NO PAYMENTS BEING MADE AND THESE ARE ONLY BOOK ENTRIES THEY DO NOT CONSTITUTE AMOUNTS PAID AS DEEMED DIVIDEND. IN THE FOLLOWING CASES IT HAS BEEN H ELD THAT PROVISIONS OF DEEMED DIVIDEND ARE NOT ATTRACTED TO JOURNAL ENT RIES : (I) 90 ITR 13 (MAD) - PAGE 20 - 24, AT PAGE 22, 1 ST PARA - IT HAS BEEN HELD THAT PAYMENT MEANS OUTGO OF MONEY - MERE DEBIT ENTRY NOT SUFFICIENT TO ATTRACT 2(22)(E). (II) 187 ITR 308 (SC) IN CONTEXT OF 80G - AT PAGE 310 - 'SUM PAID' MEANS MONEY AND NOT DONATION IN KIND. (III) 56 ITR 52 (SC) - IN CONTEXT OF 36 (I)(3) AT PAGE 57 - LAST PARA NOT EVERY DEBIT IS LOAN. 14. OTHER THAN THE DIRECT CREDITS INTO THE BANK ACCOUNT OF MRED FROM MCPL EFFECTED BY THE BANKERS, THERE ARE CREDITS ON ACCOUNT OF CHEQUES OF CLIENTS OF MCPL DEPOSITED IN THE ACCOUNT OF MRED. SUCH ENTRIES ARE USUALLY ON ACCOUNT OF CHEQUES WRONGLY BEING ISSUED BY THE CLIENTS OF MCPL IN THE NAME OF MRED, SIMILAR ARE THE CASES WHERE CLIENTS OF MRED HAVE ISSUED CHEQUES WRONGLY IN THE NAME OF MCPL TOTAL AMOUNTING TO RS. 1,96,06,151/ - . TOTAL AMOUNT CREDITED OF RS.2,06,86,388/ - DUE TO SUCH WRONGLY ISSUED CHEQUES INTO THE ACCOUNT OF MCPL CANNOT CONSTITUTE PAYMENTS 24 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 MADE BY MCPL TO MRED AS DEEMED DIVIDEND AND QUALIFY AS ADDITION UNDER SECTION 2(22) (E). 15. MCPL AND MRED HAS ONLY TWO SHAREHOLDERS / PARTNERS MR. PETER VAZ AND MR. EDGAR AFONSO. BOTH OWN THE ENTITIES EQUALLY. SINCE 2001 MRED AND MCPL IS EXCLUSIVELY MANAGED AND OPERATED BY MR.PETER VAZ. BOTH THE ENTITIES OPERATE FROM THE SAME BUSINESS PREMISES, THEY HAVE COMMON INFRASTRUCTURE, COMMON ACCOUNTING STAFF AND SAME BANKERS. ALL THESE PEOPLE NEVER DIFFERENTIATED BETWEEN BOTH THE ENTITIES. BOTH THESE ENTITIES IS RUN AS ONE SINGLE ENTITY. EVEN THE SUPPLIERS OF BOTH THE ENTITIES ARE COMMON, CLIENTS SOME TIMES ARE COMMON. SUPPLIERS, CLIENTS AND BANKERS LOOKED AT IT AS MODELS GROUP. IT WAS ONLY AT THE TIME OF AUDIT AND TAX RETURNS THE LINES WERE DRAWN. MR.PETER VAZ AND HIS ACCOUNTANT ALWAYS TREATED MCPL & MRED AS A COMMON POOL OF RESOURCES AND ACCORDINGLY THE MONIES WERE UTILIZED. FOR MR.PETER VAZ, IT WAS ALWAYS AVAILABILITY OF MONEY V/S PAYMENT OF LIABILITIES TO THE VENDORS/SUPPLIERS, GOVERNMENT DUES, INCOME TAX DUES, BANK DUES, ETC., IRRESPECTIVE OF THE FACT IN WHICH ENTITY THE FUNDS WERE AVAILABLE AND FOR WHICH ENTITIES THE LIABILITY WAS TO BE PAID. BANK ALSO TREATED BOTH THE ACCOUNTS AS MODELS GR OUP ACCOUNT AND ACCORDINGLY CHEQUES ISSUED WERE CLEARED BY THEM DIRECTLY BY DRAWING FUNDS FROM THE ACCOUNT WHERE BALANCES WERE AVAILABLE. NEVER HAS THERE BEEN ONE DIRECTION FLOW OF FUNDS. IN THE CASE OF OD ACCOUNT OF MRED TRANSFER OF FUNDS FROM MCPL TO R EGULATE THE OD ACCOUNT WAS NORMAL AND AS PER THE TERMS OF LOAN. DIRECT TRANSFER OF FUNDS BY THE BANK INTO THE CURRENT ACCOUNT WAS WITH THE VERY PURPOSE OF CLEARING THE CHEQUES AND TO CLOSE THE OVER DRAWINGS IN THE CURRENT ACCOUNT. IT IS AN ACT DONE BY THE BANKS THEMSELVES AS PRUDENT BANKERS TO AVOID OVER DRAWINGS BEYOND A CERTAIN LIMIT AND TO PROTECT THEMSELVES FROM FURTHER ENQUIRIES. A LOAN ACCOUNT CAN BE ALLOWED TO GO OVERDUE BUT NOT THE CURRENT ACCOUNT. OVER DRAWINGS IN CURRENT ACCOUNT DOES NOT USUALLY H AVE ANY SANCTIONS AND IS DONE AT THE SOLE DISCRETION OF THE BANKERS IN ORDER TO MAINTAIN GOODWILL AND 25 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 RELATION WITH THE CLIENT. MOST OF THE TIME, THE BANKER OBLIGES SO AS TO PROTECT THE ACCOUNT WITH SUCH HIGH NET - WORTH. IT IS ABSOLUTELY NORMAL FOR BANKERS TO FOLLOW SUCH PRACTICES FOR ITS REGULAR AND PRIVILEGED CLIENTS. BANK HAS ALLOWED OVER DRAWINGS IN THE CURRENT ACCOUNT OF THE GROUP AS A WHOLE, HOWEVER IN CASE WHEN THE BALANCE WAS AVAILABLE WITH EITHER OF THE ENTITY, THE BANKER USED TO TRANSFER THE MONIES DIRECTLY SU - MOTTO TO COVER THE OVER DRAWINGS OR TO CLEAR THE CHEQUES OF THE ENTITY WHERE NO FUNDS WERE AVAILABLE. 16. BES IDES ABOVE, AN AMOUNT OF RS. 1,59,76, 186/ - IS PAID TOWARDS INCOME TAX DUES OF MRED DIRECTLY FROM THE BANK ACCOUNT OF MCPL. BY NO STR ETCH OF IMAGINATION PAYMENTS MADE TOWARDS INCOME TAX DUES CAN CONSTITUTE BENEFITS IN THE NATURE OF DEEMED DIVIDEND, BECAUSE THE RECIPIENT IN SUCH CASE IS THE CE NTRAL GOV., AND NOT THE SHARE HOLDERS OF MCPL OR THEIR ENTITIES. 17, POINTS TO BE CONSIDERED BASED ON ABOVE: A) THE AMOUNTS MENTIONED IN THE SHOW CAUSE NOTICE, BASED ON APPRAISAL REPORT IS NOT CORRECT. THE INVESTIGATION WING HAS INCLUDED EVEN JOURNAL ENTRIES IN THE CREDIT SUMMATION. TOTAL AMOUNT OF CREDIT JOURNAL ENTRIES INCLUDED IN SCN IS RS. 5 ,19,92,2607 - . THE SAME NEEDS TO BE RECTIFIED AS JOURNAL ENTRIES ARE ONLY ADJUSTMENT ENTRIES AND WILL NEVER AMOUNT TO ACTUAL PAYMENTS BEING MADE. FOR JOURNAL ENTRIES, THERE IS NO RECIPIENT OF MONIES AND THEY ARE ONLY BOOK ENTRIES. THE SAME NEEDS TO BE REDUC ED FROM THE TOTAL CREDIT SUMMATION. B) AN AMOUNT OF RS. 6,02,1 5,000/ - TRANSFERRED BY THE BANK DIRECTLY TO THE LOAN ACCOUNT OF MRED FROM MCPL IS TOWARDS REPAYMENT OF BANK OD FACILITY OF MRED. THE OD FACILITY GRANTED TO MRED IS AS A GROUP FACILITY ON BEHALF OF MODELS GROUP. MCPL DOES NOT ENJOY ANY OD FACILITY. WHENEVER MCPL HAD NO FUNDS WITH THEM, OD FACILITY OF MRED WAS UTILIZED BY THEM. THE SAME NEEDS TO BE REDUCED FROM THE TOTAL CREDIT SUMMATION AS SUCH TRANSFERS DO NOT CONSTITUTE PAYMENTS MADE IN GUISE OF DE EMED DIVIDEND. HERE ALSO THE PAYMENT IS MADE DIRECTLY TO THE LOAN ACCOUNT OF MRED AND NO PERSONAL BENEFIT IS BESTOWED ON THE SHARE HOLDERS OF MCPL OR THEIR CONCERN. 26 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 C) AN AMOUNT OF RS. 15,50,47,000/ - , TRANSFERRED FROM THE BANK DIRECTLY TO THE CURRENT ACCOUNT OF MRED FROM MCPL IS TOWARDS CLEARING OF OVER DRAWN BALANCES IN THE ACCOUNT OF MRED. THE SAME NEEDS TO BE REDUCED FROM THE TOTAL CREDIT SUMMATION AS AGAIN IT IS TOWARDS BANK LOAN REPAYMENT. MCPL, IS UNDER THE MORAL AND BUSINESS OBLIGATION TO SUPPORT ITS SI STER CONCERN IN EVERY ASPECT AS THEY ARE BUSINESS DEPENDENTS. SUCH PAYMENTS CANNOT BE SAID THAT THEY ARE IN THE NATURE OF DEEMED DIVIDEND PAID BY MCPL TO THE SHARE HOLDERS OR THEIR CONCERNS. THE AFORESAID AMOUNT NEEDS TO BE REDUCED FROM THE TOTAL CREDIT SU MMATION. D) AN AMOUNT OF RS. 16,79,44,578/ - TRANSFERRED FROM THE BANK ACCOUNT OF MCPL DIRECTLY AND SU - MOTTO BY THE BANKERS TO THE CURRENT ACCOUNT OF MRED, IS FOR CLEARING OF CHEQUES ISSUED IN THE NORMAL COURSE OF BUSINESS BY MRED, WHEN THE BALANCE IN THE ACC OUNT OF MRED WAS INSUFFICIENT THE TRANSFERS WERE EFFECTED. THE SAME NEEDS TO BE REDUCED FROM THE TOTAL CREDIT SUMMATION AS THIS TOO BY NO STRETCH OF IMAGINATION CONSTITUTE PAYMENTS IN LIEU OF DIVIDEND. E) NONE OF THE ABOVE PAYMENTS CONFER ANY INDIVIDUAL BEN EFITS ON THE ASSESSE E , HENCE NOT COVERED UNDER THE PROVISIONS OF DEEMED DIVIDEND. SECTION 2(22)(E) INTENDS TO TAX THE MONIES TAKEN BY SUBSTANTIALLY INTERESTED PERSONS IN THE GUISE OF LOANS AND AD VANCES TO AVOID PAYMENT OF TAX. THE ESSENCE FOR INVOKING THE PROVISIONS OF SECTION 2(22) (E) IS THAT THE LOAN OR ADVANCE GIVEN SHOULD CONFER INDIVIDUAL BENEFIT TO THE SHAREHOLDER OR TO THE CONCERN OF THE SHARE HOLDER. ALL THESE TRANSFERS ARE ABSOLUTELY IN THE NORMAL COURSE OF BUSINESS AND MORE SO ARE IN THE NATURE O F CURRENT ACCOUNT TRANSACTION. NEITHER A SINGLE RECEIPT BY MRED CONSTITUTES LOAN GIVEN BY MCPL NOR DOES A SINGLE REPAYMENT REFLECTS REPAYMENT OF ADVANCES TAKEN. USUALLY A LOAN OR AN ADVANCE, HAS A PARTICULAR PATTERN AND SO DOES THE REPAYMENT. F) IN THE PRESENT CASE THERE HAVE BEEN NO INSTANCES, WHEREBY, MONIES WERE TRANSFERRED FROM MCPL TO MRED AND THE SAME WAS GIVEN FROM MRED TO THE SHAREHOLDERS OF MCPL AS LOANS AND ADVANCES BY MRED. EVEN THE TRANSFERS BETWEEN MCPL AND MRED WERE MADE DUE TO LEGITI MATE BUSINESS 27 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 REQUIREMENTS AND NOT WITH THE INTENTION TO AVOID PAYMENT OF DIVIDEND DISTRIBUTION TAX. G) PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE TO THE ASSESSE PRIMARILY BECAUSE : - (A) NO INCRIMINATING MATERIAL WAS FOUND OR BROUGHT ON RECORD FOR THE PROPOSED ADDITION. RELIANCE IS PLACED ON DECISION OF MUMBAI ITAT IN THE CASE OF GURENDRA SINGH BABA IN ITA NO.55. . (B) THE INVESTIGATION WING NEVER PROVED THAT THE AMOUNTS GIVEN BY MCPL TO MRED ARE IN THE NATURE OF LOANS AND ADVANCES IN THE GU ISE OF DEEMED DIVIDEND AND DIRECT BENEFITS HAVE BEEN CONFERRED ON THE SHAREHOLDERS OF THE MCPL; (C) THE INVESTIGATION WING HAS ITSELF ACCEPTED THE FACT THAT THERE EXISTS BUSINESS CONNECTION BETWEEN BOTH THE ENTITIES, WHICH IS EVIDENT FROM THE SCN ITSELF. ONCE THE BUSINESS CONNECTION IS ESTABLISHED, HOW CAN THEN THE AMOUNTS TRANSFERRED BE TREATED AS LOANS AND ADVANCES COVERED U/S 2(22)(E); NOT EACH AND EVERY CREDIT SHOULD BE FOR THE PURPOSE OF BUSINESS. THE AMOUNT GIVEN COULD ALSO BE TO SECURE FUTURE BUSINESS N EEDS. IT IS EVIDENT THAT MRED IS ACTING AS A LAND BANKING UNIT AND MCPL CARRIES OUT THE PROJECTS LATER ON. (D) THE INVESTIGATION WING NEVER GAVE THE ASSESSEE ANY TIME TO PROVE ALL THE ABOVE FACTS. IN - FACT, THE STATEMENT WITH REGARDS TO DEEMED DIVIDEND WAS TAK EN ON 27/03/2012 AND 29/03/2012. THE ASSESSEE, HAS STATED IN HIS STATEMENT THAT HE WAS NEVER ASKED TO PROVE THE BUSINESS RELATIONS OR THAT THE AMOUNTS GIVEN BY MCPL TO MRED WAS NOT IN THE NATURE OF LOANS AND ADVANCES, ATTRACTING PROVISIONS OF SECTION 2(22) (E), (E) THE OFFICER ASSESSING U/S 143(3), WITH RESPECT TO A.Y. 2006 - 07, 2007 - 08, 2008 - 09 AND 2009 - 10, NEVER TREATED THE ABOVE REFERRED PAYMENTS MADE BY MCPL AS PAYMENTS IN GUISE OF DEEMED DIVIDEND AND HENCE LIABLE TO TAX, 28 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 (F) THE IMPUGNED FACTS WERE DISCLOSED IN THE RETURN OF INCOME/BALANCE SHEET /AUDIT REPORT OF EACH YEAR PRIOR TO SEARCH. (G) MOST OF THE ASSESSMENTS FOR THE ABOVE REFERRED ASSESSMENT YEARS STOOD CONCLUDED ON THE DATE OF SEARCH AND HENCE CANNOT BE TREATED AS ABATED, (H) ISSUE CANNOT BE CON SIDERED IN THE SEARCH ASSESSMENT UNDER SECTION 153A AS IT MAY AT ITS BEST BE A MATTER OF REGULAR ASSESSMENT, BECAUSE IT IS NOT REPRESENTED AS AN UNDISCLOSED INCOME. RELIANCE IS PLACED ON ATITHI AND PATEL, 43/MUM /2010 ORDER DATED 22/10/2012, AL L CARGO GLOBA L LOGISTICS LIMITED (SUPRA) V/S DCIT ITA NO.5108 TO 5022 AND 5059/M/2010 VIDE ORDER DATED 6/7/2012. H) THE ISSUE CANNOT BE ADDRESSED IN THE PROCEEDINGS BECAUSE THOUGH THE BOOKS OF ACCOUNTS WERE FOUND DURING THE SEARCH THEY ARE REGULAR BOOKS OF ACCOUNTS A ND THE TRANSACTIONS HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS THEREFORE THEY ARE OUTSIDE THE SCOPE OF REASSESSMENT UNDER SECTION 153A. IT IS EVIDENTLY INSCRIBED IN THE LAW THAT AN ASSESSMENT UNDER U/S 153A IS DIFFERENT FROM REGULAR ASSESSMENT. THE SECTIO N CAN BE PROVOKED ONLY WHEN A SEARCH IS INITIATED U/S 132 OR BOOKS OF ACCOUNTS/OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED U/S 132A. ALSO IT IS TO BE HIGHLIGHTED THAT DURING THE COURSE THE SEARCH ITSELF, SUCH GENERALLY INCRIMINATING DOCUMENTS OR PAPERS ETC. OR UNACCOUNTED ASSETS ARE FOUND, THE PROVISION U/S 153A SHOULD BE READ HARMONIOUSLY IN CONJUNCTION WITH THE PROVISIONS CONTAINED IN SECTION 132(1) THE REASON BEING THAT THE LATTER DEALS WITH THE SEARCH AND SEIZURE AND THE FORMER DEALS WITH ASSESSMENT IN THE CASE OF SEARCH ETC. THUS, THE TWO AREINEXTRICABLE LINKED WITH EACH OTHER, WHICH IMPLIES THAT EXISTENCE OF BOOKS OF ACCOUNTS, INCRIMINATING DOCUMENTS OR UNACCOUNTED ASSETS IS OR ARE SINE QUA NON OF MAKING ASSESSMENT UNDER THIS PROVISION. IN THE CASE OF ASSESSEE, ALL THE FACTS WERE DISCLOSED IN THE RETURN OF INCOME, THE BOOKS AND ACCOUNTS WERE THE REGULAR BOOKS OF ACCOUNTS AND SINCE THE ASSESSMENTS WERE CONCLUDED UP TO THE DATE OF SEARCH, THE AMOUNT PROPOSED TO BE ADDED AS UNDISCLOSED INCOME, CANNOT B E SAID THAT IT WAS UNDISCLOSED OR UNACCOUNTED. FROM ALL WHAT IS STATED ABOVE IT IS APPARENT AND EVIDENTLY CLEAR, THAT NONE OF THE AMOUNTS RECEIVED FROM MCPL CONSTITUTES DEEMED DIVIDEND IN THE HANDS OF THE MRE D OR THE SHARE HOLDERS 29 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 OF MCPL HENCE, I HUMBLY REQUEST YOUR GOOD - SELVES TO APPLY YOUR PRUDENT JUDGMENT IN LIGHT OF WHAT IS SUBMITTED DETAILED REPLY AND DOCUMENTARY EVIDENCES SUBMITTED TO YOU AND DROP THE ENTIRE PROPOSED ADDITION. THE PROPOSED ADDITION, WILL NOT ONLY CREATE PAPER DEMAND BUT WILL ALSO DE - MORALIZE AN HONEST TAX PAYER AND WILL FURTHER DAMPEN THE BUSINESS SPIRITS. ALREADY DUE TO PRESENT POOR ECONOMIC SITUATION IN THE STATE OF GOA, ALL THE BUSINESS HOUSES ARE BADLY AFFECTED. IT HAS REALLY BEEN A TOUGH TIME TO SURVIVE AND PAY THE GENUINE TAXES DUE TO THE DEPARTMENT. SUCH FRIVOLOUS ADDITIONS, WILL NOT RESULT IN ANY TAX RECOVERIES TO THE DEPARTMENT, BUT WILL ONLY PUT THE ASSESSEE IN A HARDSHIP TO FIGHT THE LEGAL BATTLES.' THE AO AFTER CONSIDERING THE REPLIES OF THE ASSESSEE AND ON VERIFICATION OF THE LEDGER EXTRACTS OF THE MCPL IN THE BOOKS OF ACCOUNTS OF MRED OBSERVED THAT THE MRED HAS DURING THE PERIOD PERTAINING T O THE ASSESSMENT YEAR 2006 - 07 TO THE ASSESSMENT YEAR 2012 - 13 RECEIVED LOANS AND ADVANCES FROM MCP L TOTALLING TO RS. 50,99,11,226/ . IT WAS OBSERVED BY THE AO THAT NO DOCUMENTARY EVIDENCES WERE FOUND DURING THE COURSE OF THE SEARCH PROCEEDINGS U/S 132 OF THE ACT WHICH COULD PROVE THE ACTUAL LOANS AND ADVANCES RECEIVED BY THE MRED FORM MCPL WERE FOR THE PURPOSE OF BUSINESS. FURTHER, IT WAS OBSERVED BY THE AO THAT SHRI AJIT BANA ULKAR ACCOUNTANT OF MRED IN HIS STATEMENT RECORDED U/S.132(4) OF THE A CT ON 31.01.2012 DURING THE COURS E OF SEARCH HAS STATED THAT TRANSFER OF FUNDS BETWEEN MCPL AND MRED WERE DONE TO MEET FINANCIAL STR INGENCY ON ORAL INSTRUCTIONS FROM THE MANAGING P ARTNER. THE SAID MR. AJIT BANA ULKAR IN HIS AFORE - STATED STATEMENT HAS FURTHER CONFIRMED THAT THERE WERE NO BUSINESS TRANSACTIONS BE TW EEN THE COMPANY MCPL AND THE PARTNERSHIP FIRM MRED AND ALSO NO MOU OR WRITTEN UNDERSTANDING EXISTS TO TRANSFER THE FUNDS FROM BANK ACCOUNT OF MCPL TO MRED . THE RELEVANT PORTION OF THE STATEMENT OF SAID SHRI AJIT BAN ULKAR RECORDED O N 31.01.2012 U/S.132(4) OF THE A CT IS REPRODUCED AS UNDER : - 30 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 Q.11 - DURING THE COURSE OF SEARCH PROCEEDINGS TODAY IN THE PREMISES OF M/S MODELS REAL ESTATE DEVELOPERS, IT WAS OBSERVED WHILE EXAMINING THE ACCOUNTS MAINTAINED BY YOU IN TALLY SOFTWARE THAT THE FIRM OF MODELS REAL ESTATE IS SHOWN AS DEBTORS IN THE BOOKS OF MODELS CONSTRUCTION PVT LTD TO THE TUNE OF RS 19,31,07,982/ - AS ON 31.03.2011. PLEASE EXPLAIN THE TRANSACTION. ANS. ON GOING THROUGH THE ACCOUNTS IT IS OBSERVED THAT SAID FINANCIAL TRANSACTION IS NOTHING BY AN INTER - CORPORATE TRANSFER OF FUNDS TO MEET FINANCIAL STRINGENCY ON ORAL INSTRUCTION FROM THE MANAGING PARTNER. Q.12 IS THERE ANY MOU / AGREEMENT ENTERED INTO BETWEEN YOUR SISTER CONCERN M/S MODELS REAL ESTATE DEVELOPERS WITH M/S MODELS CONSTRUCTION PVT LTD ?IF SO PLEASE CLARIFY? ANS. THERE IS NO AGREEMENT AS SUCH FOR INT ER TRANSFER OF FUNDS. NORMALLY SUCH TRANSFERS ARE EFFECTED ON ORAL INSTRUCTIONS FROM THE MANAGING PARTNER. Q.13. IS THERE ANY BUSINESS TRANSACTION BETWEEN THE FIRM AND THE COMPANY. IF SO, PLEASE CLARIFY. ANS. NO, THERE IS NO BUSINESS TRANSACTION AS SUCH BETWEEN THE COMPANY AND THE FIRM. Q.14. DURING THE COURSE OF SEARCH PROCEEDINGS U/S 132 OF THE I T ACT 1961 IN THE CASE OF M/S MODELS REAL ESTATE DEVELOPERS AT 3 RD FLOOR, JOFFRE RESIDENCY, BEHIND GOA COLLEGE OF PHARMACY, PANAJI, GOA ON 31.01.2012, NO AGREEMENTS/MOU BETWEEN M/S MODELS CONSTRUCTION PVT LTD. AND M/S MODEL REAL ESTATE DEVELOPERS HAVE BEEN FOUND? PLEASE CONFIRM THE SAME. ANS. I CONFIRM THAT THERE IS NO AGREEMENTS/MOU BETWEEN M/S MODELS CONSTRUCTION PVT LTD. AND M/S MODEL REAL ESTATE DEVELOPERS.' ON DETAILED EXAMINATION OF BOOKS OF ACCOUNT S OF MCPL AND MRED , IT WAS OBSERVED BY THE AO THAT THE LOANS AND ADVANCES GIVEN BY MCPL TO MRED FROM THE ASSESSMENT YEAR 2006 - 07 TO ASSESSMENT YEAR 2012 - 13 31 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 AMOUNT S TO RS. 50 , 99,11,226/ - WHICH WERE MOSTLY GIVEN FOR NON BUSINESS PURPOSES , AND THE LOANS AND ADVANC ES WHICH WERE GIVEN FOR BUSINESS PURPOSES WERE MAINLY WR ONG CHEQUES DEPOSITED INTO THE BANK ACCO UNT OF MCPL WH EREAS THE PROJECT BELONGED TO MRE D AND VICE VERSA. FURTHER , IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THERE ARE CERTAIN CREDIT JOURNAL ENTRIES IN THE LEDGER ACCOUNT OF MCP L AND IN THE BOOKS OF MRED . THERE WERE ALSO S OME BUSINESS TRANSACTION S NOTICED BY THE ASSESSING OFFICER AND ALSO INTER - SITE TRANSFER OF MATERIALS WERE N OTICED BY THE AO , WHICH WERE DULY TAKEN INTO ACCOUNT BY THE AO AND APPROPRIATE CREDIT S /SET OFF WERE GIVEN BY THE AO AND NO ADDITION WERE MADE UNDER THE DEEMING FICTION OF S ECTION 2(22)(E) OF THE ACT BEING DEEMED DIVIDEND FOR SUCH BUSINESS TRANSACTIONS /JOURNAL TRANSACTION IN THE HANDS OF THE ASSESS EE , WHILE THE ADDITIONS WERE RESTRICTED U/S. 2(22)(E) OF THE ACT WITH RESPECT TO THE LOANS AND ADVANCES RECEIVED BY MRED FROM MCP L WHEREIN NO BUSINESS NEXUS/PURPOSE WAS ESTABLISHED AND/OR PROVED BY THE ASSESSEE TO THE EXTENT OF ACCUMULATED PROFITS OF MCPL. FURTHER IT WAS OBSERVED B Y THE AO THAT SH RI PETER VAZ , D IRECTOR OF MCPL AND PARTNER IN PARTNERSHIP FIRM MRED HAS STATED IN STATEMENT RECORDED U/S.131 OF THE ACT ON 23.02.2012 THAT TRANSACTIONS BETWEEN THESE CONCERNS WERE RELATED TO BUSINESS TRANSACTIONS I.E. REAL ESTATE BUSINESS LIKE PURCHASE OF LAND, PREMISES, CONSTRUCT ION OF PROJECTS. FURTHER MR PETER VAZ STA TED AND CONFIRMED THAT THE FUNDS WERE TRANSFERRED FROM MCP L TO MRED WHENEVER REQUIRED ON AVAILABILITY AND ON NEED BASIS AND THE SAME WAS TREATED AS ADVANCES. T HE RELEVANT EXTRACT OF STATEMENT OF SHRI PETER V A Z DATED 23.02.2012 RECORDED U/S 131 OF THE ACT IS REPRODUCED AS UNDER: - 'Q.NO.6 PLEASE GIVE THE DETAILS OF BUSINESS RELATIONS AND TRANSACTIONS BETWEEN YOUR CONCERNS M/S MODELS CONSTRUCTION PUT. LTD (MCPL), M/S MODELS REAL ESTATE DEVELOPERS (MRED), 32 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 M/S SONESTA INNS PV T LTD (SIPL) AND DIRECTORS OF THESE CONCERNS. ANS: I AND MR.EDGAR AFONSO ARE THE PROMOTERS AND DIRECTORS OF THE COMPANIES I.E . , M/S MCPL AND M/S SIPL AND PARTNERS IN M/S MRED. M/S MCPL AND M/S MRED IS INTO THE REAL ESTATE BUSINESS. M/S SIPL IS INTO THE BUSINESS OF HOSPITALITY, I. E . , RUNNING OF HOTELS. THE TRANSACTIONS BETWEEN THESE COMPANIES ARE RELATING TO THE BUSINESS, I.E . REAL ESTATE, LIKE PURCHASE OF LAND, PREMISES, CONSTRUCTION OF PROJECTS. APART FROM THIS, THERE IS A TRANSACTION OF MONEY WITHIN THESE COMPANIES WHENEVER R EQUIRED. NONE OF THE DIRECTORS OF THE COMPANY ARE DRAWING MONEY FROM THE COMPANY. Q.NO.7 PLEASE GIVE THE DETAILS OF YOUR SHAREHOLDING NUMBER OF SHARES AND PERCENTAGE OF HOLDING IN M/S MODELS CONSTRUCTION PUT. LTD, (MCPL) M/S MODELS REAL ESTATE DEVELOPERS, (MRED) M/S SONESTA INNS PUT LTD (SIPL). ANS: AT PRESENT I AM NOT ABLE TO GIVE THE DETAILS. I WILL FURNISH ALL THE DETAILS WITHIN TWO DAYS OF TIME. Q.NO.8 PLEASE GIVE THE DETAILS OF ALL BUSINESS TRANSACTIONS AND EVIDENCES TO PROVE T HE SAME. DURING THE COURSE OF SEARCH AT YOUR BUSINESS PREMISES/RESIDENCE NO AGREEMENTS/EVIDENCES WERE FOUND. PLEASE COMMENT. ANS: WHENEVER MONEY IS REQUIRED BY ANY OF THE COMPANIES MCPL & M/S SIPL OR THE FIRM MRED, THE FUNDS ARE TRANSFERRED ON AVA ILABILITY AND NEED BASIS AND THE SAME WILL BE TREATED AS ADVANCES. SOME DOCUMENTS LIKE TWO SALE DEEDS BETWEEN TH E SISTER CONCERNS WHICH WERE LYING IN MY OFFICE, HAVE ALREADY BEEN SUBMITTED TO YOUR OFFICE. IN CASE THERE ARE ANY AGREEMENT /SALE DEEDS BETWEEN THE COMPANIES WITH RESPECT TO PURCHASE/SELLING OF LAND PROPERTIES/FLATS, THE SAME WILL BE SUBMITTED TO YOUR OFFICE. Q. NO.9 DURING THE SEARCH ON 31. 01.2012 AT THE OFFICE OF MCPL NO DOCUMENTARY EVIDENCES WERE FOUND TO PROVE THE ACTUAL PURPOSE OF ADVANCES MADE BY MCPL TO MRED. PLEASE GO THROUGH THE SWORN STATEMENT OF MR. AJIT BANAULKAR, ACCOUNTANT, M/S. MODELS REAL ESTATE DEVELOPERS RECORDED U/S. 132 (4) OF THE INCOME TAX ACT ON 31. 01.2012 AND REFER TO HIS REPLIES TO QUERY 33 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 NOS. 11 TO 14 WHEREIN HE H AS STATED THAT FINANCIAL TRANSACTIONS BETWEEN M/S MODELS CONSTRUCTION PVT LTD AND M/S MODELS REAL ESTATE DEVELOPERS ARE NOTHING BUT AN INTER - CORPORATE TRANSFER OF FUNDS TO MEET FINANCIAL STRINGENCY ON ORAL CONSTRUCTIONS FROM THE MANAGING PARTNER AND THERE IS NO AGREEMENT AS SUCH FOR INTER - TRANSFER FUNDS. HE HAS ALSO STATED THAT THERE IS NO BUSINESS TRANSACTION BETWEEN THE COMPANY AND THE FIRM AND CONFIRMED THAT THERE IS NO AGREEMENT/MOU BE TWEEN M/S MODELS CONSTRUCTION PV T LTD AND M/S MODELS REAL ESTATE DEVE LOPERS. PLEASE CONFIRM AND COMMENT. ANS: I WISH TO STATE THAT SRI AJIT BANULKAR IS OUR PETTY CASH ACCOUNTANT, WHO HANDLES DAY TO DAY PETTY CASH. HE IS NOT INVOLVED IN DAY TO DAY ACCOUNTING ACTIVITY. HOWEVER, I CONFIRM THAT, BESIDES BUSINESS TRANSAC TION BETWEEN OUR SISTER CONCERNS IN THE FORM OF PURCHASE/SELLING OF LAND PROPERTIES/FLATS AND WE DO HAVE INTER - COMPANY ADVANCES, PURELY BASED ON AVAILABILITY OF FUNDS AND BUSINESS NEEDS. Q.NO. 10 PLEASE GIVE THE DETAILS OF DIVIDEND DECLARED BY YOUR COMPAN Y M/S MCPL AND ALSO THE DETAILS OF DIVIDEND DISTRIBUTION TAX PAID BY THE COMPANY FROM THE F.Y, 2005 - 06TO TILL DATE. ANS: NO DIVIDEND IS DECLARED BY THE COMPANY M/S MCPL SINCE ITS INCEPTION.' FURTHER SHRI PETER VAZ WAS IN ANO THER STATEMENT RECORDED U/S 131 ON 27.03.2012 CLAIMED THAT THE ENTIRE AMOUNT GIVEN BY MPCL TO MRED ARE FOR THE PURPOSE OF BUSINESS ONLY ARE REFLECTED UNDER THE HEAD OF SUNDRY CREDITORS / DEBTORS IN THE FINAL ACCOUNTS OF THE FIRM / COMP ANY IN THE RESPECTIVE YEARS. THE AO REJECT ED THE CONTENTION S OF THE ASSESSEE ON THE FOLLOWING GROUNDS: (A) DURING THE SEARCH PROCEEDINGS, NO DOCUMENTARY EVIDENCES IN THE FORM OF MOUS OR AGREEMENTS WERE FOUND IN SUPPORT OF THE NATURE OF ADVANCES MADE BY M/S MODELS CONSTRUCTION PVT LTD TO M/S MODELS REAL ESTATE DEV E LOPERS. 34 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 (B) MR. AJIT BANAULKAR, ACCOUNTANT, M/S. MODELS REAL ESTATE DEVELOPERS IN HIS SWORN STATEMENT ON THE DATE OF SEARCH ON 31.01.2012 CONFIRMED THAT THE FINANCIAL TRANSACTIONS ARE NOTHING BUT AN INTER - CORPORATE TRANSFER OF FUNDS TO MEET FINANCIAL STRINGENCY ON ORAL CONSTRUCTIONS FROM THE MANAGING PARTNER AND THERE IS NO AGREEMENT AS SUCH FOR INTER - TRANSFER FUNDS. (C) MR PETER VAZ HAD STATED VIDE HIS STATEMENT DATED 23/02/2012 THAT APART FROM BUSINESS RELATED TRANSACTION SUCH AS PURCHASE/SALE OF LAND/FLATS, WH ENEVER MONEY IS REQUIRED BY ANY OF THE CONCERNS MCPL AND MRED, THE FUNDS WERE TRANSFERRED ON AVAILABILITY AND NEED BASIS AND THE SAME WERE TREATED AS ADVANCES. THUS, OTHER THAN ABOVE WORKED OUT BUSINESS FUND TRANSFERS WHICH IS REDUCED FROM THE TOTAL ADVANC E, ALL THE FUNDS HAVE BEEN TRANSFERRED FROM MCPL TO MRED PURELY ON THE BASIS OF AVAILABILITY OF FUNDS AND BUSINESS NEEDS. (D) THOUGH IT IS CLAIMED THAT ABOVE MENTIONED TRANSACTIONS ARE BOOKED UNDER THE HEAD SUNDRY DEBTORS/SUNDRY CREDITORS IN THE BOOKS O F MCPL/MRED RESPECTIVELY, ANY FINANCIAL TRANSACTIONS OTHER THAN BUSINESS RELATED TRANSACTIONS BETWEEN MCPL AND MRED ASSUMES THE NATURE OF ADVANCE. (E) MOREOVER, OTHER THAN BUSINESS RELATED TRANSACTIONS WHICH IS CONSIDERED ABOVE, IT IS NOTICED IN THE LED GER EXTRACTS THAT IT IS MENTIONED IN THE PARTICULARS OF EACH ADVANCE MADE AS 'BEING TRANSFER OF AMOUNT FROM A/C... TO A/C,..' ONLY AND HENCE ALL THESE TRANSACTIONS ARE IN THE NATURE OF PURE TRANSFER OF FUNDS NOT RELATED TO BUSINESS TRANSACTION. (F) FURTHER, OTHER THAN THE ABOVE DISCUSSED SUBMISSION OF DETAILS OF PURCHASE /SALE OF FLATS/LAND PROPERTIES, THE ASSESSEE COMPANY/FIRM HAS NOT FURNISHED ANY EVIDENCE IN SUPPORT OF THE ABOVE CLAIM THAT ALL ARE BUSINESS RELATED TRANSACTIONS, SO FAR. G) MOREOV ER M/S MODELS CONSTRUCTION PVT LTD NEVER DECLARED/DISTRIBUTED ANY DIVIDEND TO ITS SHAREHOLDERS SINCE 35 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ITS INCORPORATION, AND NEVER PAID ANY DIVIDEND DISTRIBUTION TAX, EVEN THOUGH THE ACCUMULATED PROFITS WERE RS. 47,85,26,714/ - AS ON 31.03.2012. HENCE IT IS EVIDENT THAT FUNDS WERE TRANSFERRED TO M/S MODELS REAL ESTATE DEVELOPERS IN THE FORM OF LOANS AND ADVANCES BY M/S MODELS CONSTRUCTION PVT LTD TO M/S MODELS REAL ESTATE DEVELOPERS, WHICH CONSTITUTE DEEMED DIVIDEND IN THE HANDS OF M/S MODELS REAL ESTATE DEVE LOPERS. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE CULLED OUT FOLLOWING LOANS AND ADVANCES WHICH ARE TO BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT, FOR ASSESSMENT YEAR 2007 - 08 WHICH ARE REPRODUCED AS HEREUNDER : AS REGARDS TO A.Y.2007 - 08 THE ASSESSEE HAD A DEBIT BALANCE FOR THE FIRST THREE MONTHS OF THE YEAR. THE GROSS AMOUNT OF LOAN AND ADVANCES RECEIVED DURING THE YEAR IS RS.5,20,14,366/ - . AFTER GIVING DUE CONSIDERATION TO THE DEBIT BALANCE DURING THE FIRST THREE MONTHS OF THE YEAR, THE NET LOANS AND ADVANCE RECEIVED DURING THE YEAR IS CALCULATED AT RS.3,91,31,771/ - . ON VERIFICATION OF THE LEDGER ACCOUNTS OF M/S MODELS CONSTRUCTION PVT LTD I N THE BOOKS OF M/S MODELS REAL E STATE DEVELOPERS. IT IS SEEN THAT THE ASSESSEE HAS CREDIT JOURNAL ENTRIESDURING THIS PERIOD AMOUNTING TO RS.3,94,888/ - . IT IS ALSO NOTICED AND HAS ALSO BEEN CLAIMED BY THE ASSESSEE THAT CHEQUES FOR AGREEMENT OF SALE PERT AINING TO M/S MODELS CONSTRUCTION PVT LTD HAS BEEN WRONGLY CLEARED IN M/S MODELS REAL ESTATE DEVELOPERS TO THE EXTENT OF RS.37,19,991/ - . SO ALSO CHEQUES PERTAINING TO AGREEMENTS IN M/S MODELS REAL ESTATE DEVELOPERS HAS BEEN WRONGLY CLEARED IN M/S MODELS CONSTRUCTION PVT LTD TO THE EXTENT OF RS.14,10,OOO/ - . SO ALSO THERE ARE FURTHER BUSINESS TRANSACTIONS BETWEEN M/S MODELSCONSTRUCTION PVT LTD AND M/S MODELS REAL ESTATE DEVELOPERS TO THE EXTENT OF RS. 10 ,00,000/ - NAMELY BEING THE ENTRY OF ADVANCE FOR PURCHASE OF LAND FROM VELHO FAMILY WRONGLY ISSUED IN M/S MODELS REAL ESTATE DEVELOPERS WHICH HAS NOW BEEN REVERSED. THE LAND PURCHASED FROM THE VELHO'S WAS USED BY M/S MODELS CONSTRUCTION PVT LTD TO CONSTRUCT ITS PROJECT 36 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 MO DELS LEGACY. HENCE OUT OF THE TOTAL LOANS AND ADVANCES AMOUNTING TO RS.3,91,31,771/ - RECEIVED DURING THE PERIOD PERTAINING TO THIS ASSESSMENT YEAR, CREDIT FOR AN AMOUNT OF RS.65,24,879/ - (RS.3,94,888 + RS.37,19,991 + RS. 14,10,000 + RS. 10,00,OOO/ - ) IS BEING GIVEN BY CONSIDERING THE SAME AS IN THE NATURE OF BUSINESS TRANSACTION, THEREBY NOT ATTRACTING THE PROVISIONS OF SECTION 2(22)(E). HOWEVER THE ASESSEE HAS NEITHER DURING THE COURSE OF THE SEARCH PROCEED INGS NOR DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS BEEN ABLE TO PROVE ANY BUSINESS CONNECTION FOR THAT BALANCE AMOUNT OF RS.3,26,06,892/ - (RS. 3,91,31,771 - RS.65,24,879) RECEIVED AS A LOAN AND ADVANCES. THE AO HAD ALSO REJECTED THE CONTENTION OF ASSESSEE WHEREIN THE ASSESSEE TRIED TO EXPLAIN THAT THE AMOUNT IS NOTHING BUT TRANSFER EFFECTED BY THE BANK DIRECTLY W HEN THE BANK ACCOUNTS WERE OVERDRAWN . THE ASSESSE E HAS ALSO CONTENDED THAT THE MCPL WAS GUARANT OR FOR THE MRED WITH RESPECT TO LOAN S AVAILED BY MRED FROM BANK S, WHICH NECESSITATED TRANSFER OF MONEY FROM MCP L TO MRED WHEN THE LIMIT OF THE BANK OD OF MRED HAD CROSSED. IT WAS OBSERVED BY THE AO THAT THE BANK OD LIMIT OF MRED WAS RS.60 LAKHS AND THAT THE ASSESSEE S CONTENTIONS ARE NOT CORRECT AS MOST OF THE TIMES LOANS AND ADVANCES WERE GIVEN WHEN THE LIMIT HAS NOT BEEN EXCEEDED. IT WAS ALSO OBSERVED BY THE ASSESSING OFFICER THAT ON SOME OCCASIONS NO MONEY TRANSFER HAS BEEN DONE BY THE BANKER EVEN IF THE BANK OD LIMIT HAS EXCEEDED. THUS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE STAND WAS NOT CORRECT . FURTHER IT WAS OBSERVED BY THE AO THAT THE MCPL IS THE GUARANTOR OF THE LOAN AVAILED BY THE MRED AND NOT A CO - APPLICA NT FOR THE LOAN TAKEN BY MRED AND HENCE MCPL IS NOT OBLIGATE D OF THE LOAN TO MEET THE REPAYMENTS OF THE MRED. THUS THE CONTENTION OF THE ASSESSEE THAT BANK HAVE TRANSFERRED THE FUND FROM THE ACCOUN T OF MCPL TO THE ACCOUNT OF MRED WITHOUT THE KNOWLEDGE AN D WITHOUT ITS SPECIFIC INSTRUCTION OF THE MCPL WAS REJECTED BY THE AO BEING 37 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 A N AFTERTHOUGHT SO AS TO ESCAPE FROM THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT . THE ASSESSING OFFICER OBSERVED THAT PROPER SET OFF HAS BEEN ALLOWED FOR ALL THE TRANSACTIONS WHICH HAD BUSINESS NEXUS AND NO ADDITIONS HAVE BEEN MADE U/S 2(22)(E) OF THE ACT. THE AO RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. RAJ KUMAR ( 2009 ) 181 TAXMAN 155/318 ITR 462 (DELHI ), THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SMT . T AR ULATA SHYAM V. CIT(1977) 108 ITR 345 (SC) , DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF WAL CHAND & CO., L T D., V. CIT(1975) 100 ITR 598 (BOM) AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. CREATIVE DYEING & PRINTING PVT LTD (2009) 184 TAXMAN 483 (DEL. HC) . THUS, THE ASSESSING OFFICER CONFIRMED THE ADDITIONS OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT , WHEREIN THE ADDITIONS OF RS. 3,26,06,892/ - WAS CONSIDERED FOR TAXATION ON SUBSTANTIVE BASIS AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IN THE HANDS OF THE P ARTNERS SHRI PETER V A Z AND S H RI EDGAR BRAZ AFONSO , BEING PARTNERS OF MRED WITH 50% SHARE IN PROFIT SHARING WHO WERE ALSO SHAREHOLDERS OF MCPL HOLDING 50% SHARES EACH IN MCPL AS SET OUT ABOVE, TO BE DIVIDED EQUALLY BETWEEN THE TWO PARTNERS NAMELY MR PETER VAZ AND MR EDGAR BRAZ AFONSO B Y FOLLOWING THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT V. UNIVERSAL MEDICARE PRIVATE LIMITED ( 2010 ) 324 ITR 263 (BOM) , WHILE THE AMOUNT OF RS . 3,26,06,892/ - FOR THE ASSESSMENT YEAR 2007 - 08 WAS TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT ON PROTECTIVE BASIS IN THE HANDS OF MRED . T H US AN ADDITION OF RS. 1,63,03,446/ - BEING 50% OF RS.3, 26,06,892/ - WAS CONSIDERED FOR TAXATION IN THE HANDS OF THE ASSESS EE AND BALANCE OF RS. 1,63,03,446/ - BEING 50% OF RS.3,26,06,892/ - WAS CONSIDERED FOR TAXATION IN THE HANDS OF SHRI EDGAR BRAS AFONSO FOR THE IMPUGNED ASSESSMENT YEAR. SINCE THE ASSESSEE SHRI PETER V AZ AND SHRI EDGAR BRA Z AFONSO WERE COVERED BY THE SECTION 5A OF THE ACT , 50% OF 38 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 RS.1,63,03,446/ - I.E. 81,51,723/ - FOR THE ASSESSMENT YEAR 2007 - 08 WAS ADDED IN THE HAND S OF SHRI PETER V A Z AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT , AND BALANCE OF RS . 81 , 51 , 723 WAS ADDED TO THE INCOME FOR THE ASSE SSMENT YEAR 2007 - 08 IN THE HANDS OF HIS SPOUSE MRS.NATALINA VAZ AS DEEMED DIVIDEND . SIMILARLY RS.81 , 51 , 723 / - FOR THE ASSESSMENT YEAR 2007 - 08 WAS TAXED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IN THE HAND S OF MR. EDGAR BRAZ AFONSO AND THE BALANCE OF RS.81 , 51,723/ - WAS ADDED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IN THE HANDS OF HIS SP O USE NAMELY MRS VANDA AFONSO, ALSO BOTH BEING COVERED BY SECTION 5A OF THE ACT , VIDE ASSESSMENT ORDER DATED 31.03.2014 PASSED BY THE ASSESSING OFFICER IN THE CASE OF MR. PETER VAZ U/S 153 C R.W. S. 143(3 ) OF THE ACT , AS WELL SEPARATE ASSESSMENT ORDERS WERE PASSED BY THE AO IN THE CASE OF ABOVE STATED OTHER TAX - PAYERS . 7 . AGGRIEVED BY THE ASSESSMENT ORDER DATED 31.01.2014 PASSED BY THE ASSESSING OFFICER U/S 153C R.W.S. 143(3) OF THE ACT, THE ASSESSEE FILED FIR ST APPEAL BEFORE THE LD.CIT(A) AND SUBMITTED THAT MR. PETER VAZ AND MR EDGAR BRAZ AFONSO ARE DIRECTORS AND SHAREHOLDERS OF MCPL HOLDING 50% SHARES EACH WHEREIN MCPL IS A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED . IT WAS SUBMITTED THAT BOTH THE AFORE - STATED PERSONS ARE ALSO EQ UAL PARTNERS IN MRED HAVING 50% SHARES IN PROFITS. THE ASSESSES SUBMITTED THAT BOTH THESE ENTI TIES I.E. MC P L AND MRED ARE IN THE BUSINESS OF BUILDER AND CONSTRUCTION AND THEY HAD BANK ACCOUNTS WITH BANK OF INDIA, CAMPAL BRANCH AND PUNJAB AND SIND BANK, PA NAJI BRANCH FROM 1990 ONWARDS. THE BANKS HAVE GIVEN OVERDRAFT AND CASH CR E DIT LIMIT TO THE PARTNERSHIP FIRM MRED FOR WHICH THE MCPL WAS A GUARANTOR. IT WAS SUBMITTED THAT WHEN EVER MRED OVER DREW MONEY, THE BANK HAS TRANSFERRED OF ITS OWN FUNDS FROM MCPL TO MRED SO THAT MRED OVER DRAWN BALANCE GOT REDUCED OR NULLIFIED . THE LEDGER ACCOUNT EXTRACTS 39 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 OF MCPL AND MRED AS WELL BANK STATEMENTS AS ALSO WORKING OF THE ALLEGED LOANS AND ADVANCES WERE SUBMITTED BY THE ASSESSEE ALONG WITH DETAILED CHART REG ARDING THE ADDITIONS MADE BY THE ASSESSING OFFICER U/S 2(22)(E) OF THE ACT BEFORE THE LD.CIT(A) AS HEREUNDER: A.Y . DIVIDEND U/S2 (22)(E) IN THE HANDS OF PETER V AZ (RS) DIVIDEND IN THE HANDS OF EDGAR BRAZ AFONSO (R S ) DIVIDEND IN THE HANDS OF EDGAR AFONSO OF SONESTA INNS (R S ) 2007 - 08 81 , 70 , 615/ - 81 , 51 , 723 / - NIL 2008 - 09 92 , 70 , 800 / - 92 , 70 , 800 / - NIL 2009 - 10 2 , 07 , 21 , 018 / - 2 , 07 , 21 , 018 / - 27 , 60 , 000 / - 2010 - 11 2 , 70 , 47 , 803 / - 2 , 70 , 47 , 803 / - 35 , 10 , 000 / - 2011 - 12 69 , 21 , 066 / - 69 , 21 , 066 / - 56 , 44 , 143 / - 2012 - 13 98 , 91 , 743 / - 98 , 91 , 743 / - 62 , 68 , 415 / - IT WAS SUBMITTED THAT BOTH MCPL AND MRED H AVE CURRENT ACCOUNTS IN THE BANK ON WHICH NO INTEREST WAS RECEIVABLE FROM THE BANKS. IT WAS SUB MITTED THAT IF THE SURPLUS AMOUNT IS LYING IN THE BANK ACCOUNTS OF THESE ENTITIES , NO INTERE ST WAS PAID BY THE BANK ON THESE CURRENT ACCOUNTS . WHILE IF THERE IS AN OVER DRAFT AMOUNT IN THE MRED BANK ACCOUNT ON ACCOUNT OF OD / CC FACIL ITY , THE BANK WILL CHARGE INTEREST ON THE OVERDRAWN AMOUNT . THE ASSESSEE PLACED ON RECORD CONFIRMATION F ROM THE BANKERS THAT THESE ADJUSTMENTS BY THE BANK WERE DONE OF ITS OWN . I T WAS SUBMITTED THAT THE FIRM MRED HAS SAVED INTEREST PAYABLE TO THE BANK ON THE OD /CC ACCOUNTS BY THESE ADJUSTMENTS DONE BY THE BANKER, WHILE ON THE OTHER HAND MCPL HAD NOT LOST ANYTHING AS IN ANY CASE MCPL WOULD NOT HAVE EARNED ANY INTEREST ON CURRENT ACCOUNT S MAINTAINED WITH THE 40 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 BANK . THUS , IT WAS SUBMITTED THAT IT WAS ADVANTAGEOUS AND BENEFICIAL FOR THE ASS ESSEE GROUP AS A WHOLE IF THERE IS NO OVERDRAWN BALANCE IN THE OD /CC ACCOUNT S OF MRED . I T WAS ALSO SUBMITTED THAT IN EAR LIER YEARS 2003 - 04 TO 2005 - 06 MCPL WAS RECEIVI NG FUNDS FROM MRED WHICH IS THE REVERSE OF THE PRESENT SITUATION AS MRED FUNDS WERE UTILISED BY MCPL WHICH WAS ALSO DONE BY THE BANKER OF ITS OWN BY ADJUSTMENTS TO THE BANK ACCOUNTS TO REDUCE OD AMOUNTS . THE ASSES SEE PLACED ON RECORD THESE ACCOUNTS BEFORE THE LEARNED CIT(A). THE ASSESSEE SUBMITTED THAT IN THOSE YEARS T HIS ARRANGEMENT WAS AGAIN BENEFICIAL TO THE GROUP AS MCPL SAVED ON INTEREST PAYABLE TO THE BANKERS ON ITS OVER DRAWN ACCOUNTS. IT WAS SUBMITTED THAT THESE TRANSACTIONS WERE MADE IN THE COURSE OF DAY TO DAY BUSINESS AND FOR BUSINESS PURPOSES AND THE QUEST ION OF INVOKING PROVISIONS OF SECTION 2(22)(E) OF THE ACT DOES NOT ARISE AS SUCH TRANSACTIONS CANNOT BE CATE GORISED AS DEEMED DIVIDEND WITH IN THE DEEMING FICTION OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE . THE ASSESSEE RELI ED UPON THE FOLLOWING DECISIONS: - A) DEL HI H.C. CITV. CREATIVE DYING AND PRINTING P VT. LTD. {318 ITR 476} ON WHICH SPECIAL LEAVE WAS DISMISSED BY HONBLE SUPREME COURT IN (2010) 328 ITR (S T.) 10. B) CIT V. RAJKUMAR [318 ITR 462 (DEL)] C) CIT V AMB ASSADOR TRAV ELS P. LTD. [318 ITR 376 (DEL)] D) JHAMU U. SUGHAND V. DCIT [99 ITD 1(MUM)] E) SRI SATCHIDANAND S. PANDIT V. ITO [19 SOT 213 (MUM)]. IT WAS SUBMITTED BY THE ASSESSEE THAT THE UTILISATION OF MCPL SURPLUS FUNDS FOR THE OD /CC FACILITY OF MRED WAS ONLY FOR TEMPORARY PURPOSE FOR SHORT PERIODS AND NO INTEREST WAS CHARGED , AND HENCE THESE PAYMENTS CANNOT BE CATEGORISED AS LOANS AND ADVANCES WITHIN DEEMING 41 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 FICTION OF SECTION 2(22)(E) OF THE ACT TO BE CATEGORISED AS DEEMED DIVIDEND . IT WAS FURTHER SUBMI TTED THAT THERE ARE RUNNING ACCOUNT BETWEEN THE COMPA NY MCPL AND THE FIRM MRED AS THERE ARE CREDIT AS WELL AS THE DEBIT BALANCES AND THE ASSESSEE RELIED ON 367 ITR 78 FOR THE PROPOSITION THAT WHEN THERE ARE RUNNING ACCOUNT IN THE COURSE OF BUSINESS, THE AMOUNTS CANNOT BE CONSIDERED AS DEEMED DIVIDEND. IT WAS FURTHER SUBMITTED THAT MERE ENTRIES IN THE BOOKS OF ACCOUNTS DO NOT CONSTITUTE DEEMED DIVIDEND . IT WAS FURTHER SUBMITTED THAT THERE ARE NO PAYMENTS INVOLVED IN THESE TRANSACTIONS. THE ASSESSEE SUBMITTED THAT IN THE FOLLOWING CASES IT WAS HELD THAT IN CASE OF JOURNAL ENTRIES , IT DO NOT CONSTITUTE DEEMED DIVIDEND. (A) G.R. GOVINDARAJULU NAIDU V. CIT [90 ITR 13(MAD)] PAGE 20 - 24, AT PAGE 22, 1 ST PARA IT HAS BE E N HELD THAT PAYMENT MEANS OUTGO OF MONEY - MERE DEBIT ENTRY NOT SUFFICIENT TO ATTRACT 2(22)(E). (B) H.H. SR I RAMA VERMA V. CIT [187 ITR 308 (SC) ] IN THE CONTEXT OF 80 G AT PAGE 310 SUM PAID MEANS MONEY AND NOT DONATIONIN KIND. (C) BOMBAY STEAM NAVIGATION CO. PVT. LTD. V. CIT [56 ITR 52 (SC)] IN THE CONTEXT OF 36(I)(3) AT PAGE 57 LAST PARA NOT EVERY DEBIT IS LOAN. IT W A S FURTHER SUBMITTED THAT IT WAS THE INTENTION OF THE PROMOTORS OF MCPL AND MRED TO CONCENTRATE ON THE QUALITY OF CONSTRUCTION IN THE HANDS OF THE COMPANY MCPL AN D TO BUILD LAND BANK FOR DEVELOPMENT IN THE HANDS OF THE PARTNERSHIP FIRM MRED . IT WAS SUBMITTED THAT THE ULTIMATE INTENTION WAS TO DEVELOP THE LANDS THROUGH THE COMPANY MCPL ONLY. IT WAS SUBMITTED THAT THERE IS NO DOCUMENT ATION, AGREEMENT OR 42 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 MOU BETWEEN THE COMPANY MCPL AND THE FIRM MRED IN THIS REGARD. BUT T HE INTENTION WAS VERY CLEAR THAT THE LAND WILL BE ENTRUSTED BY THE FIRM MRED FOR THE DEVELOPMENT PURPOSE TO THE COMPANY MCPL AND HENCE MCPL AGREED TO STOOD GUARANTOR FOR LOANS AVAILED BY MRED FROM BANK. IT WAS ALSO SUBMITTED THAT PERUSAL OF THE B ALANCE S HEET OF THE FIRM MRED WILL REVEAL THAT FUNDS FROM THE BANK WERE UTILISED MAINLY FOR ACQUISITION OF THE LAND. BALANCE SHE ET OF THE FIRM MRED AND COMPANY MCPL WERE S UBMITTED BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT THE SAID TRANSACTIONS BETWEEN MCPL AND MRED CANNOT BE BROUGHT WITHIN THE AMBIT OF DEEMING FICTION CREATED BY SECTION 2(22)(E) OF THE ACT AS DEEMED DIVIDEND. IT WAS FURTHER SUBMITTED THAT THESE AMOUNTS WHICH WERE TAKEN BY THE FIRM MRED FROM THE COMPANY MCPL WERE NEVER UTILISED FOR THE PERSONAL PURPOSE OF THE PARTNERS OF THE FIRM MRED . WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS, I T WAS SUBMITTED BY THE ASSESSE E BEFORE LEARNED CIT(A) THAT THERE WAS NO INCRIMINATING EVIDENCE WHICH WAS FOUND DURING THE COURSE OF SEARCH CONDUCTED BY REVENUE AND THE ISSUE IS NOT RELATED TO ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AS THESE TRANSACTIONS ARE DULY RE CORDED IN THE BOOKS OF ACCOUNTS OF MCPL AND MRED . IT WAS FURTHER SUBMITTED , WITHOUT PREJUDICE, THAT THE SEARCH TOOK PLACE ON 31.01.2012 AND THE ASSESSMENT S FOR THE ASSESSMENT YEAR S 2006 - 2007 TO 2009 - 10 WERE ALREADY BARRED BY TIME ON THE DATE OF SEARCH AS THESE WERE CONCLUDED ASSESSMENTS RELYING ON THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF ALL CARGO LOGISTICS LIMITED , 137 ITD 287(MUM. SB), AND ONLY THE ASSESSMENT YEAR 2 010 - 11 TO 2 012 - 13 WERE PENDING AT THE TIME OF SEARCH WHICH STOOD ABATED WHEREI N REVENUE CAN MAKE THE ASSESSMENTS AS PER PROVISIONS OF SECTION 153A OF THE ACT. THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND MATERIAL ON RECORD HELD AS UNDER: - 43 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMIS SION OF THE APPELLANT. THERE WAS A SEARCH AND SEIZURE ACTION IN THE CASE OF THE APPELLANT. IN THE SEARCH PREMISES OF M/S MODELS CONSTRUCTION PVT. LTD AND M/S MODELS REAL ESTATE DEVELOPERS WERE COVERED. DURING THE COUR SE OF SEARCH THE FOLLOWING FACT WERE FO UND: 1. MR. PETER VAZ AND MR. EDGAR AFONSO ARE 50% EACH SHAREHOLDERS IN M/S MODELS CONSTRUCTION PVT. LTD.(MCPL). 2. MR. PETER VAZ AND MR. EDGAR AFONSO HAVE 50% EACH PROFIT SHARING RATIO IN THE PARTNERSHIP FIRM M/S MODELS REAL ESTATE DEVELOPERS (MRED). 3. BOTH THESE CONCERNS HAVE SUBSTANTIAL FINANCIAL TRANSACTION BETWEEN THEM. ON ANALYZING THESE TRANSACTIONS, THE A.O . REACHED PRIMA FACIE CONCLUSION AS UNDER : THESE TRANSACTIONS ARE NOT CONNECTED TO ANY BUSINESS BETWEEN MCPL AND MRED, THEY ARE IN THE NATURE OF LOANS AND ADVANCES AND SINCE AS PER THE PROVISIONS OF S.2(22)(E) A LOAN ON ADVANCE MADE BY A COMPANY, IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED TO A SHAREHOLDER OR TO A CONCERN IN WHICH SHAREHOLDER HAS A SUBSTANTIAL INTEREST QUALIFIES AS DEEMED DIVIDEND IN THE HANDS OF THE RECIPIENT OF SUCH LOAN. THE A.O. INVOKED THE PROVISIONS AS S.2(22)(E) AS M/S MODELS REAL ESTATE DEVELOPERS (MRED ) HAD RECEIVED L OANS AND ADVANCES FROM M/S MODELS CONSTRUCTION PVT. LTD (MCPL). THE AMOUNT OF LOANS AND ADVANCES GIVEN BY M/S MCPL TO M/S MRED IS TABULATED AS UNDER : - S.NO. A.YR. AMOUNT OF LOAN GIVEN ACCUMULATED PROFITS OF MCPL 1 2006 - 07 2,77,75,118 / - 2,15,70,177/ - 2 2007 - 08 5,20,14,366 / - 8,04,62,006 / - 3 2008 - 09 4,71,81,347 / - 12,86,19,493 / - 4 2009 - 10 9,46,68,620 / - 15,00,32,634 / - 5 2010 - 11 12,76,91,164 / - 30,08,57,131 / - 6 2011 - 12 7,30,10,750 / - 43,83,73,506 / - 7 2012 - 13 8,75,33,761 / - 47,85,26,714 / - 44 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT CLAIMED THAT THE A.O HAS MISUNDERSTOOD THE FACTS OF THE CASE AND HAS WRONGLY INVOKED THE PROVISION OF S,2(22)(E) IN THE CASE OF THE APPELLANT. THE FACTS AND ARGUMENTS OF THE APPELLANT ARE SUMMARIZED AS UNDER: I) THE TRANSACTION BETWEEN MCPL AND MRED CANNOT BE TERMED AS 'LOANS AND ADVANCES' AS NO INTEREST HAS BEEN PAID BY MRED TO MCPL AND VICE VERSA. NORMALLY A LOAN TRANSACTION SHALL BE INTEREST BEARING . II) IN THIS CASE, ITS NOT THAT ONLY MODELS CONSTRUCTION P VT. LTD. (MCPL) HAS PAID/TRANSFERRED MONEY TO MODELS REAL ESTATE DEVELOPERS(MRED) BUT, W HEN THE NEED AROSE EVEN MRED HAS P AID MONEY TO MCPL. DETAILS OF WHI CH ARE TABULATED AS UNDER: S.NO. A.YR AMOUNT OF CREDITS FROM MRED TO MCPL (IN LAKHS) 1 2007 - 08 97.19 2 2008 - 09 470.58 3 2009 - 10 522.42 4 2010 - 11 413.42 5 2011 - 12 443.66 6 2012 - 13 354.87 (III)THE TRANSACTIONS ARE IN THE NATURE OF CURRENT ACCOUNT AND NOT LOANS. IV) IT IS A FACT THAT IN THE YEARS UNDER CONSIDERATION MORE MONEY HAS FLOWED FROM THE COMPANY M/S MODELS CONSTRUCTION PVT. LTD.(MCPL) TO THE FIRM M/S MODELS REAL ESTATE DEVELOPERS(MREDJ, BUT IN THE PRECEDING YEARS, THE TREND WAS REVERSE AS MORE MONEY FLOWED FROM THE FIRM TO THE COMPANY. THE APPELLANT FURTHER EXPLAINED THAT THIS TREND H APPENED BECAUSE OF FOLLOWING REASONS: A. THE PROMOTERS/PARTNERS OF THE COMPANY/FIRM INTENDED TO MAKE THE COMPANY A HUB FOR CONSTRUCTION AND THE FIRM, AN OWNER OF LAND BANK. THIS INTENTION IS CLEAR FROM THE FACT, THAT AS PER THE BOOKS OF THE COMPANY, THE LA ND VALUE HAS 45 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 HARDLY INCREASED WHERE AS THERE SUBSTANTIAL INCREASE IN LAND HOLDING IN CASE OF FIRM. B, THE NEED TO FROM A COMPANY AROSE BECAUSE IT IS EASIER TO OBTAIN BANK LOANS IN CASE OF A COMPANY. C. THE AMOUNT OF RS.38,32,06,578/ - WAS DIRECTLY TRANSF ERRED BY MCPL TO MRED BY THE BANKERS IN ORDER TO REGULARIZE OVERDRAWN BALANCES OF MRED OR TO CLEAR CHEQUES ALREADY ISSUED BY MRED. THE APPELLANT FURTHER CONTENDED THAT THE DIRECTORS ( SHAREHOLDERS) / PARTNERS HAVE NOT BENEFITED BY THIS TRANSFER OF FUNDS FROM MCPL TO MRED AS THERE IS NOT A SINGLE INSTANCE WHERE THE MONEY HAS BEEN TRANSFERRED FROM MCPL TO MRED AND THE SAME HAS BEEN WITHDRAWN BY THE SHARE HOLDERS FOR THEIR PERSONAL BENEFIT. IT IS NOTEWORTHY THAT AN AMOUNT OF RS.5,19,92,260 / - WAS CREDITED TO THE ACCOUNT OF MCPL AND ON AMOUNT OF RS.9,52,43,497/ - WAS DEBITED TO THE ACCOUNT OF MCPL AS JOURNAL ENTRIES PASSED IN THE BOOKS OF MRED, WITHOUT ANY ACTUAL TRANSFER OF MONEY TAKING PLACE. SINCE BOTH THE CONCERNS HAVE SIMILAR BUSINESS, THEY HAVE MANY COMMON SUPPLIERS AS WELL. THEY ARE PAID FROM THE CONCERN, WHEREVER THE MONEY IS AVAILABLE AND THEREFORE SUCH JOURNAL ENTRIES WERE PASSED. BOTH THE BUSINESS ENTITIES M/S MCPL AND M/S MRED ARE MANAGED AND RUN BY MR. PETER VAZ. BOTH THE ENTITIES HA VE COMMON CONTROL, COMMON PREMISES, INFRASTRUCTURE, ACCOUNTING STAFF AND COMMON BANKERS AS WELL. THE APPELLANT ALSO FURNISHED REASONS AS TO WHY THE MONEY WAS TRANSFERRED FROM MCPL TO MRED. (I) RS.6,02,15,000/ - : REPAYMENT OF BANK O.D FACILITY OF MRED. (II) RS. 15,50,47,000/ - : TOWARDS CLEARING OF OVER DRAWN BALANCES OF MRED . (III) RS. 16,79,44,578/ - : TRANSFERRED DIRECTLY BY THE BANKERS TO THE CURRENT ACCOUNT OF MRED FOR CLEARING CHEQUES ISSUED BY MRED. NONE OF THESE MONIES HAVE TRAVELLED TO THE SHARE HOLDER S OF MCPL THROUGH MRED OR OTHERWISE. IN THE ASSESSMENT ORDER, THE A.O. OBSERVED THAT DURING THE COURSE OF SEARCH PROCEEDINGS NO EVIDENCE WAS FOUND INDICATING THE REAL INTENTION OF GIVING SUCH LOANS AND ADVANCES TO MRED BY MCPL. NO MOU(MEMORANDUM OF UNDERS TANDING) BETWEEN MCPL AND MRED HAVE BEEN ENTERED INTO. WHEN STATEMENT OF AN 46 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ACCOUNTS EXECUTIVE SHRI. AJIT BANAULKAR WAS TAKEN, HE SAID THAT THESE TRANSFERS OF MONEY WAS EFFECTED THROUGH ORAL INSTRUCTIONS OF MR. PETER VAZ. THE A.O. FURTHER OBSERVED THAT THE COMPANY M/S MODELS CONSTRUCTION PVT. LTD HAS NEVER DISTRIBUTED ANY DIVIDEND SINCE INCORPORATION AND SUCH LOANS AND ADVANCE ARE A PLOY TO TAKE OUT THE DISTRIBUTABLE PROFITS FROM THE COMPANY AND AVOID PAYMENT OF DIVIDEND DISTRIBUTION TAX WITH ABOVE OBSERVAT ION, THE A.O. PROCEEDED TO CALCULATE CHARGEABLE DEEMED DIVIDEND IN THE HANDS OF THE SHAREHOLDERS OF THE COMPANY. THE A.O. DID NOT CHARGE ANY DEEMED DIVIDEND FOR A. YR. 2006 - 07 AS, IN THIS YEAR, THE COMPANY M/S MODELS CONSTRUCTION PVT. LTD OWED MONEY TO THE FIRM M/S MODELS REAL ESTATE DEVELOPERS AND NOT VICE - VERSA. IN A.YR. 2007 - 08 AND SUBSEQUENT ASSESSMENT YEARS, THE COMPANY HAD GIVE MORE MONEY TO THE FIRM, THE A.O. CALCULATED DEEMED DIVIDEND IN THE HANDS OF THE SHAREHOLDERS AND TAXED THE SAME. ON THE BASIS OF THE FACTS DISCUSSED ABOVE IN THE MY OPINION THE PROVISIONS OF S.2(22)(E) IS NOT APPLICABLE IN THE CASES OF SHRI. PETER VAZ AND SHRI. EDGAR AFONSO FOR THE FOLLOWING REASONS; I) THE NATURE OF TRANSACTIONS IN THE BANK ACCOUNT IS SUCH THAT IT CANNOT BE SAID TO BE A LOAN ACCOUNT. ITS LIKE A CURRENT ACCOUNT BETWEEN THE COMPANY M/S MODELS CONSTRUCTION PVT. LTD. AND THE FIRM M/S. MODELS REAL ESTATE DEVELOPERS. II) THE MONEY HAS BEEN TRANSF ERRED FROM THE COMPANY TO THE FIRM FOR SPECIFIC BUSINESS PURPOSE AS ALREADY DISCUSSED EARLIER FOR A TEMPORARY PERIOD OF TIME. III) THE MONEY WHICH HAS BEEN TRANSFERRED FROM THE COMPANY TO FIRM, HAS NOT BEEN WITHDRAWN FROM THE FIRM BY THE PARTNERS OF THE FIRM, W HO ARE ALSO SHAREHOLDERS OF THE COMPANY, FOR THEIR PERSONAL USE. IV) IN THE ASSESSMENT ORDER THE A.O HAS NOT ESTABLISHED AS TO WHAT PERSONAL ADVANTAGE HAVE BEEN TAKEN BY THE SHAREHOLDERS OF THE COMPANY TO ATTRACT PROVISIONS OF S.2(22)(E). V) BOTH THE COMPANY AND THE FIRM HAVE COMMON CONTROL C OMMON OFFICE, INFRASTRUCTURE, S TAFF AND EVEN COMMON BANKERS. MONEY IS TRANSFERRED FROM ONE ACCOUNT TO 47 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 THE ANOTHER DEPENDING ON THE NEED IN THE INTEREST OF THE COMPANY AND FIRM. THE A.O. HAS PLACED RELIANCE ON T HE DECISION IN THE CASE OF CIT V . RAJ KUMAR(2009] 181 TAXMAN 155/318 ITR 462(DELHI) IN WHICH HON. DELHI HIGH COURT HELD THAT THE WORD 'ADVANCE' HAS TO BE READ IN CONJUNCTION W ITH WORD 'LOAN'. HOWEVER THIS RELIANCE OF THE A.O. IS CLEARLY MISPLACED IN THE S ENSE THAT IN THE INSTANT CASE NO INTEREST WAS PAYABLE BY THE FIRM M/S MODELS REAL ESTATE DEVELOPERS TO THE COM PANY M/S MODELS CONSTRUCTION PVT. LTD AND VICE - VERSA. THE A.O. ALSO PLACED RELIANCE ON THE DECISION OF HON . APEX COURT IN THE CASE OF SMT TANULATA SHYAM V. CIT( 1997) 10 8 ITR 345(SC) WHEREIN HON'BLE SUPREME COURT HELD THAT UNDER S.2(22 )( E) THE LIABILITY TO TAX ATTACHES TO ANY AMOUNT TAKEN AS LOAN BY THE SHARE H OLDER FROM A CONTROLLED COMPANY TO THE EXTENT IT PO SSESSES ACCUMULATED PROFITS AT THE MOMENT THE LOAN IS BORROWED AND IT IS IMMATERIAL WHETHER THE LOAN IS REPAID B EFORE THE END OF THE ACCOUNTING YEAR. IN MY CONSIDERED OPINION EVEN THIS DECISIONOF THE OF THE HON'BLE APEX COURT DOES NOT APPLY IN THE INSTANT CASE AS THE FACTS ARE ENTIRELY DIFFERENT. IN THE INSTANT CASE THE SHAREHOLDERS MR. PETER VAZ AND MR. EDGAR AFONSO HAVE NOT TAKEN ANY LOANS FROM THE CONTROLLED COMPANY I.E. M/S MODELS CONSTRUCTION PVT. LTD. ON THE OTHER HAND, THE APP ELLANT HAS PLACED RELIANCE ON MANY DECISIONS WHEREIN IT HAS BEEN HELD THAT WHEN THE FUNDS ARE ADVANCED FOR THE BUSINESS PURPOSES SUCH ADVANCES DO NOT CONSTITUTE DEEMED DIVIDEND IN THE HAND S OF THE SHARE HOLDERS VIZ JHAM U U. SUGHAND VS DCIT[99ITD 1 (MUM.)], SH. SATCHIDANAND S. PANDIT VS ITO [19 SOT 213 (MUM.], I HAVE NO DOUB TS THAT FUNDS FROM ONE CONCERN TO ANOTHER WERE TRANSFERRED FOR THE PURPOSE OF BUSINESS AS BOTH THE CONCERNS HAVE SIMILAR BUSINESS AND COMMON CONTROL. IN VIEW OF THE ABOVE DISCUSSION AND FACTS OF THIS CASE, IN MY OPINION NO DIVIDEND AROSE U/S 2(22)(E) IN THE HANDS OF THE APPELLANTS MR. PETER VAZ, MR. EDGAR AFONSO AND THEIR SPOUSES U/S 5A OF THE I. T. ACT AND ADDITION MADE ON THIS ACCOUNT IS HEREBY DELETE D. 48 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 SINCE, THE FACTS ARE IDENTICAL IN SUBSEQUENT YEARS AS WELL THIS ORDER SHALL BE APPLICABLE FOR ALL THE SUBSEQUENT YEARS . WHEREIN AD DITION HAS BEEN MADE U/S 2(22) (E) OF THE L.T. ACT. SINCE THE APPELLANT ARE COVERED UNDER SECTION 5A OF THE I.T.ACT THIS ORDER SHALLBE APPLICABLE IN THE HANDS OF THE SPOUSES OF THE APPELLANT AS WELL . THUS, IN NUT - SHELL THE LD.CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND DELETED THE ADDITION MADE IN THE HANDS OF THE ASSESSEE U/S. 2 ( 22)(E) OF THE ACT MADE BY THE ASSESSING OFFICER UNDER DEEMING FICTION OF SECTION 2(22)(E) OF THE ACT BEING DEEMED DIVIDEND WITH RESPECT TO THE LOAN S AND ADVANCES PAID BY MCP L TO MRED. 8 . AGGRIEVED REVENUE HAS FILED SECOND APPEAL BEFORE THE TRIBUNAL , WHILE THE ASSESSEE HAS FILED CROSS OBJECTIONS TO THE APPEAL FILED BY THE REVENUE . WE WILL FIRST TAKE UP REVENUE APPEAL , AND CROSS OBJECTIONS ARE SEPARATELY DEALT WITH. IT IS THE SAY OF THE LD . DR THAT THE ASSESSEE IS REGISTERED AND BENEFICIAL SHAREHOLDER AS ALSO DIRECTOR OF MCPL HOLDING 50% SHARES ALONG WITH MR.EDGAR BRA Z AFONSA WHO ALSO HOLD 50% SHARES IN MCPL AS REGISTERED AND BENEFICIAL SHAREHOLDER APART FROM BEING DIRECTOR OF MCPL . THE ASSESSEE ALONG WITH EDGAR BRAS A FONSO ARE ENTITLED TO 50% SHARES IN PROFITS OF PARTNERSHIP FIRM NAMELY MRED . IT WAS SUBMITTED BY LEARNED DR THAT ON 31.01.2012 THERE WAS SEARCH AND SEIZURE OPERATIONS CARRIED OUT BY REVENUE IN THE CASE OF MCPL AND MRED U/S 132 OF THE ACT , WHEREIN I NCRIMINATING MATERIAL S WERE FOUND AND SEIZED BELONGING TO THE ASSESSEE. IT WAS SUBMITTED THAT BOTH MCPL AND MRED WERE ENGAGED IN BUSINESS OF BUILDERS AND CONSTRUCTIONS . IT WAS SUBMITTED THAT HUGE AMOUNT S OF LOANS AND ADVANCES HAVE BEEN TRANSFERRED FROM MCPL TO 49 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 MRED FREE OF INTEREST AGGREGATING TO RS. 50.99 CRORES FROM ASSESSMENT YEAR 2006 - 07 TO ASSESSMENT YEAR 2012 - 13 . IT WAS A LSO OBSERVED THAT THE SAID COMP ANY MCPL HAS NOT DECLARED DIVIDEND SINCE ITS INCORPORATION AND THE SAID COMPANY HAS HUGE AC CUMULATED PROFITS TO THE TUNE OF RS. 47.85 CRORES AS AT 31 - 03 - 2012 . IT W A S SUBMITTED BY LD. DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSEE IS PARTNER IN THE PARTNERSHIP FIRM MRED ENTITLED TO 50% SHARE IN THE PROFITS OF THE SAID P ARTNERSHIP FIRM WHEREIN HUG E AMOUNTS WERE RECEIVED BY THE SAID FIRM MRED FROM MCPL AGGREGATING TO RS. 50.99 CRORES , IN WHICH COMPANY MCPL , ASSESSEE MR PETER VAZ IS DIREC TOR CUM REGISTERED/BENEFICIAL SHAREHOLDER HOLDING 50% SHARES. THERE WERE SOME BUSINESS TRANSACTIONS BETWEEN THE SAID COMPANY MCPL AND THE FIRM MRED AND TO THE EXTENT BUSINESS NEXUS WERE PROVED BY THE ASSESSEE , NO ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER U/S 2(22)(E) OF THE ACT AND THE REVENUE HAS GIVEN CREDIT AND SET OFF FOR THE SAME AND HENCE NO PREJUDIC E IS CAUSED TO THE ASSESSEE , AND ONLY WHERE NO BUSINESS NEXUS WAS PROVED WITH RESPECT TO TRANSFER OF FUNDS FROM MCPL TO MRED THAT THE ASSESSING OFFICER MADE THE ADDITIONS IN THE HAND OF THE PARTNERS OF THE SAID FIRM MRED NAMELY MR. PETER V AZ AND MR. EDGA R BRA Z AFONSO (AND THEIR SPOUSES AS THEY ARE COVERED BY SECTION 5A OF THE ACT ) SUBSTANTIVELY WITH RESPECT TO THE AMOUNT S OF LOANS AND ADVANCES WHICH WERE RECEIVED BY MRED FROM MCP L AS THESE PARTNERS ARE BENEFICIARIES OF THE SAID LOANS AND ADVANCES AND AR E HIT BY DEEMING FICTION CREATED BY SECTION 2(22)(E) AND THE SAID AMOUNTS WERE RIGHTLY BROUGHT TO TAX ON SUBSTANTIVE BASIS IN THE HANDS OF ASSESSEE AND MR EDGAR BRAZ AFONSO AND THEIR SPOUSES , W HILE PROTECTIVE ADDITIONS HAVE BEEN MADE IN THE HANDS OF MR ED. IT IS THE SAY OF THE LD. DR THAT THE HUGE AMOUNTS WERE ADVANCED BY THE SAID COMPANY MCPL TO MRED FOR NO BUSINESS PURPOSE S AND THE SAID NON BUSINESS ADVANCES WERE RIGHTLY BROUGHT TO TAX BY REVENUE U/S. 2(22)(E) OF THE ACT IN THE HANDS OF THE 50 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 PARTNERS WHEREIN THE SAID FIRM HAS UTILISED THE FUNDS RECEIVED FROM MCPL FOR THE BENEFITS OF THE PARTNER S OF MRED . THERE IS NO AGREEMENT BETWEEN THE PARTIES NAMELY MCPL AND MRED WHICH IS AN ADMITTED POSITION BY THESE CONCERNS AND THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ASSESSMENT ORDER OF THE AO. IT IS FURTHER THE SAY OF THE LD.DR THAT M ODUS OPERANDI ADOPTED BY THE GROUP WAS THAT THE FUNDS WERE TRANSFERRED BY THE COMPANY MCPL TO THE FIRM MRED AND HUGE LAND BANK WAS CREATED IN THE HANDS O F THE FIRM MRED OUT OF THE HUGE FUNDS RECEIVED BY MRED FROM MCPL , AND WHERE IN THE FIRM MRED WAS BENEFITED BY WA Y OF APPRECIATION IN THE MARKET VALUE OF LAND ACQUIRED OUT OF INTEREST - FREE FUNDS RECEIVED BY MRED FROM MCPL . IT IS ALSO SUBMITTED THAT SOME OF THE LAND SO ACQUIRED BY MRED WAS SOLD BY FIRM MRED TO THE COMPANY MCPL SUBSEQUENTLY AT THE THEN PREVAILING MARKET PRICE ON THE DATE OF SALE WHICH WAS HIGHER THAN THE COST OF ACQUISITION BY MRED , WHEREIN THE FIRM MRED BENEFITED DUE TO THE PROFITS E ARNED ON SALE OF LAND TO THE COMPANY MCPL AT HIGHER THAN ACQUISITION PRICE WHILE T HE FUNDS OF THE COMPANY MCPL WERE UTILISED BY MRED F OR THE PURPOSE OF THE PURCHASE OF THE SAID LAND. FURTHER, IT IS THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATI VE THAT EVEN WHEN THE LAND IS NOT SOLD TO MCPL BY MRED AND WAS UTILISED BY MRED FOR PROJECTS EXECUTED BY MRED, THE SAID FIRM MRED MADE HUGE PROFITS OUT OF THE LAND ACQUIRED OUT OF INTEREST - FREE FUNDS RECEIVED FROM MCPL. IT WAS SUBMITTED THAT AS ON 31.03.2 012 , FIRM MRED HE LD STOCK OF LAND OF RS. 21.66 CROR E S AND STOCK OF P REMISES HELD WERE RS. 15.51 CRORES AND ADVANCE FOR PURCHASE OF LAND GIVEN WERE TO THE TUNE OF RS.5 .09 CRORES AS HELD BY THE SAID FIRM MRED , WHEREIN THE FUNDS OF THE COMPANY MCPL TO THE TU NE OF RS. 24.52 CRORES WERE OUTSTANDING FOR PAYABLE AS ON 31 - 03 - 2012 BY MRED TO MCPL, WHICH WERE UTILISED BY MRED MAINLY FOR ACQUISITION OF SUCH LAND / PREMISES. THUS IT IS A CLEAR CUT CASE WHERE THE FIRM MRED AND CONSEQUENTIALLY PARTNERS OF MRED 51 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 NAMELY MR. PETER VAZ AND MR. EDGAR BRAZ AFONSO ARE BENEFITED BY WA Y OF THE FUND RECEIVED FROM THE COMPANY MCPL BY FIRM MRED, BY WAY OF APPRECIATION OF THE MARKET PRICE OF THE LAND SO ACQUIRED AND ALSO BY SELLING THE LAND TO THE COMPANY MCPL BY MRED AT A HIGHER PR ICE OR EVEN OTHERWISE DEVELOPING THE LAND FOR PROJECTS, AND MAKING PROFITS THEREON SAID DEVELOPMENT OF LAND DIRECTLY . IT IS FURTHER SUBMITTED THAT WHEN THE LAND WAS SOLD BY THE FIRM MRED TO THE COM PANY MCPL AT PROFITS NO MONEY WAS TRANS FERRED BY THE COMPA NY MCPL TO THE FIRM MRED AND THE BALANCE WERE ADJUSTED THROUGH JOURNAL ENTRIES. IT IS FURTHER SUBMITTED THAT THE PARTNERS OF THE FIRM ARE CONSEQUENTIALLY BENEFITED BY WAY OF HUGE PROFITS EARNED BY THE FIRM WHICH WERE MAINLY DUE TO THE INTEREST FREE FUND RECEIVED FROM THE COMPANY MCPL BY THE FIRM MRED WHICH WERE USED BY MRED FOR THE PUR POSE OF PURCHASE OF LAND / PROPERTIES IN ITS OWN NAME . IT IS THE SAY OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT IT IS ONLY BECAUSE OF HUGE LOANS AND ADVANCES RECEIVED INTEREST - FREE FROM MCPL BY MRED THAT THE FIRM MRED WAS ABLE TO MAKE HUGE PROFITS OTHERWISE THE SAID FIRM MRED WOULD HAVE BEEN IN LOSSES . T HE SAID HUGE PROFITS SO EARNED BY MRED WERE SHARED EQUALLY BY THE PARTNERS NAMELY MR. PETER VAZ AND MR EDGAR BRAZ AFO NSO AS BOTH OF THEM ARE PARTNERS IN MRED WITH 50% SHARES OF EACH IN PROFITS OF MRED . IT WAS FURTHER SUBMITTED THAT FIRM WOULD NOT HAVE MADE PROFITS AND WOULD HAVE BEEN IN LOSSES IF THE FUNDS WOULD NOT HAVE BEEN TRANSFERRED TO THE FIRM MRED BY THE COMPANY MCPL . THE SAID FIRM ALSO PAID SALARIES AND INTEREST ON CAPITAL TO MR PETER VAZ AND MR. EDGAR BRAZ AFONSO AND HENCE THESE PARTNERS WERE BENEFITTED BY WAY OF HUGE SHARE OF PROFITS EARNED BY MRED, SALARIES FROM MRED AND INTEREST ON CAPITAL RECEIVED BY THE SAI D PARTNERS FROM MRED. IT WAS SUBMITTED THAT SAID DETAILS ARE PLACED IN PAPER BOOK BY THE ASSESSEE, OF WHICH ATTENTION OF THE BENCH WAS DRAWN BY THE LEARNED DEPARTMENTAL REPRESENTATIVE AS UNDER : 52 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 FINANCIAL YEAR LOANS AND ADVANCES RECOVERABLE AS AT YEAR E ND BY MCPL FROM MRED PROFITS OF THE FIRM MRED 2006 - 07 3,55,65,753 8,15,54149 2007 - 08 3,56,88,605 3,86,16,429 2008 - 09 7,81,14,565 18,51,33,034 2009 - 10 16,44,63,457 10,18,99,881 2010 - 11 19,31,07,983 19,23,54,099 2011 - 12 24,51,53,779 8,01,41,968 OUR ATTENTION WAS ALSO DRAWN TO PAGES 665 - 677 OF PAPER BOOK , WHEREIN THE COMPUTATION OF INCOME OF BOTH MR PETER VAZ AND MR EDGAR BRAZ AFONSO IS PLACED WHEREIN BOTH THE PARTNERS IN ADDITION TO SHARE IN PROFITS FROM MRED ALSO RECEIVED INTEREST ON CAPITAL AS WELL REMUNERATION FROM THE PARTNERSHIP FIRM MRED. IT WA S FURTHER SUBMITTED BY THE LD.DR THAT STATEMENT U /S 132(4) OF THE ACT WAS RECORDED ON 31.01.2012 OF THE ACCOUNTANT OF THE FIRM WHEREIN THE SAID ACCOUNTANT HAD STATED THAT THERE WAS NO AGREEMENT BETWE EN THE FIRM MRED AN D THE COMPANY MCPL, A ND THE FUNDS WERE TRANSFERRED FROM MCPL TO MRED AT THE ORAL INSTRUCTION OF THE ASSESSEE AND THERE IS NO BUSINESS PURPOSES FOR THE TRANSFER OF FUNDS FROM MCPL TO MRED. FURTHER IT WAS SUBMITTED B Y THE LD. DR THAT THE STATEMENT OF THE PARTNER MR.PETER V A Z WAS ALSO RECORDED ON 23.02.2012 U/S . 131 OF THE ACT, W HEREIN HE HAS SUBMITTED THAT TRANSACTIONS BETWEEN THE FIRM MRED AND THE COMPANY MCPL WERE BUSINESS TRANSACTIONS. HOWEVER , THE SAID MR PETER VAZ SUBMITTED THAT THERE WERE ONLY TWO SALE AGREEMENTS FOR TRANSFER OF LAND FROM MRED TO MCPL WHICH WERE OF THE 53 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 NOMINAL AMOUNTS OF RS.38 LACS AND RS. 76.80 LACS , WHILE HUGE AMOUNTS OF THE LOANS AND ADVANCES TO THE TUNE OF RS. 50.99 CRORES WERE TRANSFERRED FROM MCPL TO MRED DURING ASSESSMENT YEAR 2006 - 07 TO 2012 - 13 . IT WAS SUBMITTED BY LEARNED DEPARTMENTAL REPRESENTATIVE THAT IN ANY CASE WITH RESPECT TO THESE TWO SALES TRANSACTIONS OF LAND BY MRED TO MCPL FOR VALUE OF RS. 38 LACS AND RS. 76.80 LACS , NO ADDITIONS HAVE BE EN MADE BY THE REVENUE AND PROPER CREDIT/SET OFF WA S GIVEN FOR THE AMOUNT OF AFORE - STATED SALE TRANSACTIONS WHILE MAKING ADDITIONS U/S 2(22)(E) OF THE ACT . FURTHER, IT WAS POINTED OUT BY LEARNED DEPARTMENTAL REPRESENTATIVE TO THE CHART PRODUCED BY THE ASS ESSEE WITH RESPECT TO THESE TWO SALE TRANSACTIONS OF LAND FROM MCPL TO MRED THAT THESE LANDS HAVE BEEN SOLD BY MRED TO MCPL AT PROFITS WHILE THE INTEREST - FREE FUNDS OF MCPL WERE UTILISED BY MRED TO ACQUIRE LANDS AND HENCE THERE IS BENEFIT DERIVED BY THE SA ID FIRM MRED FROM THE FUNDS UTILISED OF MCPL BY MRED WITH OUT ANY INTEREST BEING PAID BY MRED TO MCPL . IT WAS FURTHER SUBMITTED THAT SOME CHEQUES WERE DEPOSITED WRONGLY IN THE ACCOUNT OF THE FIRM MRED BELONGING TO THE COMPANY MCPL AND VICE VERSA FOR WHICH NO ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER U/S 2(22)(E) OF THE ACT AND APPROPRIATE CREDIT/ SET OFF HAS BEEN GRANTED FOR SAID TRANSACTIONS. IN ANY CASE THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE REVENUE HAS GIVEN DUE CREDIT FOR ALL THE TRANSACTIONS WHEREIN THE ASSESSEE WAS ABLE TO PROVE BUSINESS NEXUS WITH RESPECT TO INTER - SE TRANSACTIONS FOR BUSINESS PURPOSES AND NO PREJUDICE WHATSOEVER IS CAUSED TO THE ASSESSEE WITH RESPECT TO BUSINESS TRANSACTIONS AND ONLY NON - BUSINESS TRANSACTIONS WHEREIN THE ASSESSEE WAS NOT ABLE TO PROVE BUSINESS NEXUS ARE BROUGHT TO TAX BY MAKING ADDITIONS WITHIN DEEMING FICTION U/S 2(22)(E) OF THE ACT BEING DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE . IT IS FURTHER SAY OF THE LD . DR THAT SATISFACTION NOTE WAS DULY RECORDED BY THE AO OF THE ASSESSEE , AND THE COPY WAS GIVEN TO THE CA OF 54 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 THE FIRM MRED AND THE ASSESSEE VIDE LETTER DATED 22.08.2016 WHEREIN THERE IS A MENTION OF RECORDING OF SATISFACTION BY THE ASSESSING OFFICER OF THE ASSESSEE BEFORE INVOKING PROVI SIONS OF SECTION 153C OF THE ACT , WHICH LETTER DATED 22.08.2016 WAS RECEIVED ON 23.08.2016 BY CA OF THE ASSESSEE, MR MILIND R KULKARNI WHO WAS ALSO PRESENT IN THE TRIBUNAL DURING THE COURSE OF THE HEARING ON 25.11.2016. THE SAID L ETTER DATED 22.08 .2016 WHE REIN THERE WAS MENTION OF SATISFACTION BEING RECORDED BY THE ASSESSING OFFICER OF THE ASSESSEE BEFORE INVOKING PROVISIONS OF SECTION 153C OF THE ACT AND WHICH LETTER W AS RECEIVED BY THE SAID CA ON 23.08.2016 WAS PLACED BY LEARNED DEPARTMENTAL REPRESENTATIV E BEFORE THE BENCH AND T HE SAID LETTER DATED 22.08.2016 IS NOW PLACED IN FILE ON RECORD. ON BEING ASKED BY THE BENCH, MR . MILIND R KULAKARNI, CA OF THE FIRM AND THE ASSESSEE ACCEPTED THAT HE RECEIVED T HE SAID LETTER DATED 22.08.2016 OF R EVENUE ON 23.08.2016 WHEREIN THERE IS MENTION OF RECORDING OF SATISFACTION BY THE ASSESSING OFFICER BEFORE INVOKING PROVISIONS OF SECTION 153C OF THE ACT . IT IS FURTHER THE SAY OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSING OFFICER OF MCPL, MRED AND THE ASSESSEE IS SAME AND COMMON. THUS, IT WAS SUBMITTED THAT TO CONTEND THAT THERE IS NO SATISFACTION RECORDED BY THE REVENUE BEFORE INVOKING PROVISIONS OF SECTION 153C OF THE ACT WILL NOT BE CORRECT. IT WAS FURTHER SUBMITTED THAT THE FILES OF THE SEARC HED PERSONS ARE WITH CENTRAL CIRCLES AND SATISFACTION NOTE IS THERE IN THE FILES OF SEARCHED PERSON WHICH WILL BE PRODUCED BUT IT WILL TAKE SOME TIME TO PRODUCE THE SAID FILES BEFORE THE BENCH AND IN CASE MATTER IS RESTORED BACK, IT WILL BE PRODUCED BY THE ASSESSING OFFICER TO SHOW THAT SATISFACTION WAS ALSO RECORDED BY THE ASSESSING OFFICER OF THE SEARCHED PERSON AND IN ANY CASE IT WAS SUBMITTED THAT ASSESSING OFFICER OF THE ASSESSEE , MCPL AND MRED IS SAME. IT IS FURTHER SAY OF THE LD . DR THAT THE CONTENT ION OF THE ASSESSEE THAT THERE IS NO INCRIMINATING MATERIAL IS NOT CORRECT , AS THERE W AS AN INCRIMINATING 55 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 MATERIAL OF THE ASSESSEE WHICH WAS FOUND AND SEIZED DURING THE COURSE OF THE SEARCH OPERATION S U/S 132 OF THE ACT IN THE CASE OF MCPL , WHIC H ARE BY W AY OF BOOKS OF ACCOUNTS OF MCPL AND MRED WHICH ARE AN INCRIMINATING MATERIAL INCRIMINATING QUA THE ASSESSEE , AS MRED HAVING RECEIVED THE LOANS AND ADVANCES FROM MCPL WITHOUT ANY BUSINESS NEXUS BEING PROVED WHICH ARE HIT BY DEEMING FICTION CREATED BY SE CTION 2(22)(E) OF THE ACT AS DEEMED DIVIDEND , TO THE EXTENT MCPL POSSESSES ACCUMULATED PROFITS . IT IS FURTHER SAY OF THE LD.DR THAT ASSESSEE HAS NOT RAISE D ANY LEGAL GROUND CHALLENGING THE LEGALITY AND VALIDITY OF SEARCH BEFORE THE LOWER AUTHORITIES AN D IT IS ONLY BY WAY OF WRITTEN SUBMISSION SUCH CONTENTION S WERE RAISED BEFORE THE L D.CIT(A) . IT IS FURTHER THE SAY OF LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE CO CHALLENGING THE LEGALITY AND VALIDITY HAS BEEN FILED LATE BY 248 DAYS WITHOUT ANY JUSTIFICATION FOR FILING THE CO LATE ON FLIMSY GROUND THAT THE ASSESSEE WAS WRONGLY ADVISED BY PROFESSIONALS . IT WAS SUBMITTED THAT NO AFFIDAVIT OF THE PROFESSIONAL WHO ILL - ADVISED THE ASSESSEE HAS BEEN FILED WHICH IS IN BREACH OF ITAT RULES, 1963. I T WA S ALSO SUBMITTED THAT CO WAS FILED LATE DELIBERATELY BY THE ASSESSEE WHICH IS 42 MONTHS FROM THE DATE OF SEARCH SO THAT THE LIMITATION PERIOD AS PRESCRIBED IN THE ACT FOR TAKING RECOURSES TO OTHER ALTERNATIVE REMEDIES BY THE REVENUE SUCH AS RECOURSE TO S ECTION 147/148 OF THE ACT OR 263 OF THE ACT, EXPIRES AND THEN REVENUE WILL NOT BE ABLE TO TAKE ANY ALTERNATIVE ACTION AGAINST THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE IS PART OF A VERY BIG BUSINESS GROUP OF GOA ENGAGED IN CONSTRUCTION ACTIVITIES A S BUILDER AND TO SAY THAT THE ASSESSEE WAS NOT ADVISED WRONGLY BY PROFESSIONALS DOES NOT HOLD WATER AS THE ASSESSEE IS NOT A ILLITERATE PERSON OR SMALL BUSINESS - MEN WHO CANNOT SEEK BEST ADVISE FROM THE PROFESSIONALS . IN ANY CASE, THE LAW IS VERY CLEAR THAT THE CO IS TO BE FILED WITHIN 30 DAYS AND HENCE THE DELAY OF 248 DAYS IS UNJUSTIFIABLE AND CANNOT BE CONDONED. IT WAS SUBMITTED BY LEARNED 56 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 DEPARTMENTAL REPRESENTATIVE THAT THE LEGALITY AND VALIDITY OF THE SEARCH WHICH IS CHALLENGED IN THE CO WAS NEVER C HALLENGED BEFORE THE AO AND THE CIT(A) AS NO GROUNDS WERE RAISED BEFORE THE LOWER AUTHORITIES . IT WAS SUBMITTED THAT EVEN IN THE CONDONATION APPLICATION FOR CONDONING DELAY IN FILING OF CO WHICH ARE BEFORE THE TRIBUNAL , THERE ARE GENERAL REASONS GIVEN FO R FILLING OF THE CO LATE . IT IS THE CONTENTION OF THE LD.DR THAT LAND S WERE SOLD BY THE FIRM MRED TO THE COMPANY MCPL AT PROFITS AT THE PREVAILING MARKET PRICE ON THE DATE OF SALE WHICH WERE ACQUIRED BY MRED OUT OF THE FUNDS RECEIVED FROM MCP L WHICH LAND WAS ACQUIRED BY MRED OUT OF INTEREST FREE FUNDS RECEIVED BY MRED FROM MCPL. T HIS FACT WAS CONFRONTED TO THE CA MR. MILIND R KULKARNI WHO WAS PRESENT IN THE TRIBUNAL DURING THE COURSE OF THE HEARING ON 25.11.2016 AND HE CONFIRMED THAT THE LANDS WHICH ARE SOLD BY THE FIRM MRED TO THE COMPANY MCPL WERE ACQUIRED OUT OF THE FUNDS OF THE COMPANY MCPL AND WERE SOLD TO THE COMPANY MCPL BY THE FIRM MRED LATER AT PROFIT BASED ON THE PREVAILING MARKET VALUE ON THE DATE OF SALE AND HE PRODUCED A CHART TO THAT EFFECT WHEREIN RELEVANT PORTION ARE EXTRACTED , AS HEREUNDER : - S.NO . LAND PURCHA - S ED BY SOLD BY PREMISES AGREEMENT OR SALE DEED DATED PLACE ARE A C ONSIDER ATI ON A. MRED MR. LUISXAVIER PIRES AND HIS WIFE MRS.UBALDINA PIRES AND MR. EMIDIO PIRES SURVEY NO.70/10 DEED OF SALE 31.10.2006 TALEIG A O 1822 SQ.MT S 22,00,000 B. MCPL MRED SURVEY NO.70/10 DEED OF SALE 30.03.2011 TALEIGAO 1822 SQ.MT S 38,00,000/ - C. MRED DR. GIEVE PATEL , (2) MISS AVA AN PATEL, (3) MRS. GERMANA DINIZ DRISC O LL ALIAS G DRISCOLL (4) MR.DANIEL LAWRENCE DRISCOLL, (5) MRS SARITA DINIZ H O USTON ALIAS SARAH ALIAS SARA EVLA DINIZ HOUSTON ALIAS SARA / SARAH PERPETUO EVA ANTONIA DINIZ, (6) MR. PATRICK J. HOUSTON, (7) DR.JEROME A.D INIZ, (8) MRS MAUREEN DINIZ ALIAS MARGARET MARY CA SHEN DINIZ CHALTA NO.11 OF P.T. SHEET NO.145 DEED OF SALE 13.11.2006 CARANZALEM 1677 SQ.MTS 40,00,000/ - D MCPL MRED CHALTA NO.11 OF P.T. SHEET NO.145 DEED OF SALE 30.03.2011 CARANZALEM 1677 SQ.MTS 76,8 0,000/ - THUS, IT WAS SUBMITTED BY LEARNED DEPARTMENTAL REPRESENTATIVE THAT PERUSAL OF THE ABOVE CHART CLEARLY REVEALED THAT MRED ACQUIRED LAND AT TALEIGAO FOR RS. 22 LACS AND SOLD THE SAME TO MCPL FOR RS. 38 LACS. SIMILARLY, IT WAS SUBMITTED BY LEARNED DEPARTMENTA L REPRESENTATIVE THAT THE LAND AT CARANZALEM WAS ACQUIRED BY MRED FOR RS. 40 LACS AND SOLD TO MCPL FOR RS. 76.80 LACS . THUS,IT WAS SUBMITTED THAT EVEN IN THESE TWO SALE TRANSACTION OF LAND ENTERED INTO BY MCPL AND MRED, MRED MADE PROFITS BY SELLING THE LA ND TO MCPL AT PREVAILING MARKET PRICES ON THE DATE OF SALE WHICH WERE OFFERED FOR TAXATION BY MRED IN THE RETURN OF INCOME FILED WITH THE REVENUE, BUT THE FUNDS OUT OF WHICH THESE LANDS WERE ACQUIRED BY MRED WERE OF MCPL WHICH WERE GRANTED AS INTEREST - FREE LOANS AND ADVANCES BY MCPL TO MRED. WITH RESPECT TO THE CONTENTIONS OF THE ASSESSEE THAT BANKS HAVE TRANSFERRED THE FUNDS FROM COMPANY MCPL BANK ACCOUNTS TO THE BANK ACCOUNT OF THE FIRM MRED OF ITS OWN , I T WAS SUBMITTED BY THE LD. DR THAT THE COMPANY MCPL IS GUARANTOR FO R THE LOANS BY WAY OF OD/CC AVAILED BY THE FIRM MRED FROM BANKS AND UNDER THE TERMS OF THE GUARANTEE SIGNED BY MCPL , THE MCPL HAS IN - FACT AUTHORISED AND INSTRUCTED BANKS TO RECOVER ALL EXCESS BEYOND THE SANCTIONED LIMIT OF OD/CC IN FAVOUR OF MRED . THE BANKS HAD IN - FACT INVOKED THE STANDING INSTRUCTIONS EXECUTED BY THE COMPANY MCPL UNDER GUARANTEE DEED EXECUTED IN FAVOUR OF BANKS FOR SECURING BANK LOANS IN FAVOUR OF MRED AND HENCE THE FUNDS WERE TRANSFERRED BY THE BANK FROM THE COMPA NY MCPL TO THE FIRM MRED UNDER THE AUTHORISATION/STANDING INSTRUCTIONS ISSUED BY MCPL UNDER DEED OF GUARANTEE AND HENCE IT IS INCORRECT TO SAY THAT THE BANK S HAVE TRANSFERRED THE FUNDS FROM THE BANK ACCOUNTS OF MCPL TO BANK ACCOUNTS OF MRED OUT OF ITS OWN . IT WAS SUBMITTED THAT IT IS QUITE OBVIOUS THAT ONCE MRED ISSUES CHEQUES BEYOND THE SANCTIONED OD/CC LIMITS , THE BANKS HAVE EITHER TO RETURN THE CHEQUES OR TO RECOVER FROM THE GUARANTORS ACCOUNT IF THE SAME IS TO BE CLEARED AS THE GU ARAN TOR COMPANY MCPL HAS TAKEN RESPONSIBILITY FOR THE BANK ACCOUNTS OF MRED. IT WAS FOR THESE CONCERNS TO HAVE ARRANGED THEIR AFFAIRS IN THE MANNER THAT THEY ARE NOT HIT BY THE DEEMING FICTION CREATED BY 59 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 SECTION 2(22)(E) OF THE ACT AND TO AVOID OF BEING SUCH LOANS AND ADVANCES TO BE CLASSIFIED AS DEEMED DIVIDEND AS THE LAW IS VERY CLEAR AND EVEN HONBLE SUPREME COURT IN THE CASE OF NAVNIT LAL C. JAVERI V. AACIT IN (1965) 56 ITR 198(SC) HAS HELD THE SAID PROVISIONS TO BE WITHIN LEGISLATIVE COMPETENCE OF LEGISLATURE AND THE SAME WAS HELD TO BE NOT CONTRAVENING ARTICLE 14 NOR ARTICLE 19 OF CONSTITUTION OF INDIA . IT IS TOTALLY ABSURD AND INCORRECT ON THE PART OF THE ASSESSEE TO HAVE BLAMED BANKERS FOR THESE TRANSFER OF FUNDS FROM COMPANY MCPL TO THE FIRM MRED WAS THE CONTENTION OF LE ARNED DR . HE DRAW OUR ATTENTION TO TH E STATEMENT OF THE ACCOUNTS BEING LEDGER EXTRACTS OF THESE CONCERNS AS WELL AS STATEMENTS RECORDED 132(4) OF THE ACT OF THE ACCOUNTANT AS WELL AS THE STATEMENT RECORDED U /S 131 OF THE ACT OF THE ASSESS EE , WHEREIN L EARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT NO BUSINESS NEXUS IS PROVED AND HENCE THESE FUNDS ARE TRANSFERRED JUST TO GRANT ADVANTAGE / BENEFIT TO THE FIRM MRED BY THE COMPANY MCPL AND HENCE THE ASSESSING OFFICER HAS RIGHTLY BROUGHT TO THE TAXES THE SAID AMOUNT OF LOANS AND ADVANCES BY MCPL TO THE FIRM MRED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS AS THE ASSESSEE HAS BENEFITTED BY GRANT OF THESE LOANS AND ADVANCES BEING PARTNER OF MRED. IT WAS S UBMIT TED BY LEARNED DEPARTMENTAL REPRESENTATIVE THAT LD.CIT(A) HAS ADMITTED ADDITIONAL EVIDENCE U/R 46 A OF THE INCOME - TAX RULES, 1962 WHEREIN PAPER BOOKS CONSISTING OF 677 PAGES WAS FILED BEFORE LEARNED CIT(A) AND THESE DOCUMENTS WERE NOT PLACED BEFORE THE AO . IT WAS SUBMITTED THAT LEARNED CIT(A) ERRED IN ADMITTING THESE ADDITIONAL EVIDENCES WITHOUT FORWARDING THESE EVIDENCES TO THE AO FOR HIS COMMENTS AND WITHOUT CALLING REMAND REPORT FROM THE ASSESSING OFFICER AND HENCE RULE 46A OF INCOME - TAX RULES, 1962 I S CLEARLY VIOLATED. THUS IT WAS SUBMITTED THAT THE APPELLATE ORDER OF THE LD.CIT(A) BE SET ASIDE AND THE ASSESSMENT ORDER OF THE AO BE RESTORED. THE LEARNED DEPARTMENTAL 60 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 REPRESENTATIVE WOULD RELY ON THE ORDERS OF THE ASSESSING OFFICER TO SUPPORT HIS CONTEN TIONS. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT CO HAS BEEN FILED WITH 248 DAYS DELAY WITH APPLI CATION FOR CONDONATION OF DELAY. IT WAS SUBMITTED THAT NO GROUND WERE RAISE D BEFORE THE CIT(A) CHALLENGING THE LEGALITY AND VALIDITY OF SEARCH, AND ONLY WRITTEN SUBMISSI ON S WERE FILED BEFORE THE LD.CIT( A) WHERE THE CHALLENGE TO THE SEARCH WAS MADE ON THE GROUND THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF THE SEARCH AND ALSO NO SEARCH ASSESSMENT S CAN BE FRAMED AS THE ASSES SMENT S HAVE CONCLUDED AND ARE UN - AB ATED ASSESSMENT S . IT WAS SUBMITTED THAT CHALLENGING LEGALITY AND VALIDITY OF SEARCH I S A QUESTION OF LAW WHICH CAN BE ADMITTED BY THE TRIBUNAL AS ASSESSEE IS ENTITLED TO RAISE LEGAL GROUNDS AT ANY STAGE KEEPING IN VIEW THE HONBLE SUPREME COURT DECISION IN THE CASE OF NTPC V. CIT IN (1998) 229 ITR 383(SC) AND IT WAS SUBMITTED THAT TH IS IS A NEW ISSUE BEING A LEGAL ISSUE RAISED BEFORE THE TRIBUNAL FOR THE FIRST TIME AND THE SAME SHOULD BE ADMITTED BY THE TRIBUNAL. I T WAS SUBMITTED TH AT THE SEARCH WAS CONDUCTED U/S 132 OF THE ACT IN THE C A SE OF MRED AS WELL AS IN THE CASE OF MCPL , AND NO SEARCH WAS CONDUCTED IN THE CASE OF THE ASSESSEE M R. PETER V A Z, NO P ANCHANAMA W A S PREPARED AND NO SEARCH WARRANT WAS EXECUTED IN THE CAS E OF THE ASSESSEE. SINCE S EARCH WAS DIRECTED AGAINS T MRED AND MCPL, IT WAS SUBMITTED THAT NO SATISFACTION NOTE WAS RECORDED BY THE AUTHORITIES BELOW IN THE FILE OF AO OF THE SEARCHED PERSON . THE LEARNED COUNSEL FOR THE ASSESSEE WOULD ACCEPT THAT THE SATI SFACTION NOTE WAS DULY RECORDED IN THE FILE OF THE ASSESSEE. T HE LEARNED COUNSEL FOR THE ASSESSEE DRE W OUR ATTENTION TO THE CBDT CIRCULAR NO. 24/2015 DATED 31.12.2015 AND SUBMITTED THAT PROVISION S U /S.153 C OF THE ACT ARE PARA MATERIA TO PROVISIONS OF SECTI ON 158B D OF THE ACT . IT WAS SUBMITTED THAT 61 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 EVEN IF THE AO IS SAME FOR THE COMPANY MCPL , THE FIRM MRED AND ALSO THE ASSESS EE , BUT SATISFACTION NOTE H AS TO BE RECORDED IN THE FILES OF BOTH I.E. THE PERSON SEARCHED U/S 132 OF THE ACT AND PERSON AGAINST WHOM PROVISIONS OF SEC TION 153C OF THE ACT ARE INVOKED . THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE KARNATAKA H IGH COURT IN THE CASE OF ARIHANT ALUMINIUM CORPORATION V. ACIT REPORTED IN (2016) 69 TAXMANN .COM 286(KAR.) A ND ALSO CBDT CIRCULAR 24/2015 DATED 31.12.2015 . THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. CALCUTTA KNITWEARS [2014 ] 362 ITR 673(SC) . IT WAS SUBMITTED THAT INCRIMINATIN G MATERIAL FOUND AND SEIZED DURING THE SEARCH IS ESSENTIAL AND SIN E QUA NON FOR INVOKING PROVISIONS OF S EC TION 153C OF THE ACT . IT WAS SUBMITTED THAT NO INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE WAS FOUND DURING THE COURSE OF SEARCH ON MRED AND MCPL, AND HENCE NO NOTICES U/S 153C OF THE ACT COULD HAVE BEEN ISSUED TO THE ASSESSEE. T HUS IN NUT SHELL IT WAS SUBMITTED THAT THERE WAS NO SATISFACTION NOTE RECORDED BY THE AO OF THE PERSON SEARCHED AN D THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH . THE LEARNED COUNSEL FOR THE ASSESSEE WOULD SUBMIT THAT THE TRANSACTIONS BETWEEN MCPL AND MRED WERE BUSINESS TRANSACTIONS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LAND WHICH WAS TRANSFERRED BY THE FIRM MRED TO THE COMPANY MCPL WERE ADJUSTED BY THE CO MPANY MCPL AGAINST THE BALANCES RECO VERABLE FROM THE FIRM MRED AND NO AMOUNT OF MONEY WAS PAID BY THE COMPANY MCPL TO THE FIRM MRED AND HENCE THESE ARE CURRENT ACCOUNT TRANSACTIONS WHICH WERE RIGHTLY CONSIDERED TO BE BUSINESS TRANSACTIONS BY LEARNED CIT(A ) AND ADDITIONS WERE DELETED BY LEARNED CIT(A) . IT WAS SUBMITTED THAT THE FIRM MRED WAS EARLIER DEALING WITH THE COMPANY MCPL WHEREIN AMOUNT WAS ADVANCED EARLIER BY THE FIRM MRED TO THE COMPANY MCPL WHEREIN MRED DID NOT CHARGED ANY INTEREST FROM MCPL , AND NOW THE COMPANY MCPL HAS 62 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ADVANCED MONEY TO THE FIRM MRED , WHEREIN MCPL DID NOT CHARGED ANY INTEREST . IT WA S SUBMITTED B Y THE LD. AR THAT FIRM IS ALSO DEALING WITH THE OUTSIDERS WHEREIN PROJECTS FOR CONSTRUCTION OF BUILDINGS AND SALE OF FLATS ETC. WERE LAUNCHED BY MRED AND MRED EARNED PROFITS FROM THESE PROJECTS APART FROM DEALING WITH MCPL. IT WAS ADMITTED BY LEARNED COUNSEL FOR THE ASSESSEE THAT MRED SOLD LAND TO MC PL IN TWO INSTANCES ON THE PREVAILING MARKET PRICES ON THE DATE OF SALE AND EARNED PROFIT WHICH WERE OFFERED FOR TAXATION. IT WAS SUBMITTED THAT WHEN - EVER ADDITIONAL MONEY WAS REQUIRED BY MRED , IT WAS PROVIDED BY THE COMPANY MCPL ON SHORT TERM BASIS TO THE FIRM MRED , OUT OF WHICH LANDS WERE PURCHASED BY MRED WHICH LAND WAS TO BE DEVELOPED BY MCPL . IT WAS SUBMITTED THAT PROFITS WERE MADE BY MRED ON SALE OF LAND TO MCPL AND ALSO THAT LAND WAS PURCHASED BY MRED OUT OF THE MONEY WHICH WAS RECEIVED FROM THE COMPANY MCPL , BUT THE PURPOSE OF THE SAID LOANS AND ADVANCES WAS BUSINESS AS ULTIMATELY CONSTRUCTION ON THE LAND OWNED BY MRED HAS TO BE DONE BY MCPL . THE LD. AR DRE W OUR ATTENTION TO THE PAPER BOOK WHERE BY THE LEDGER EXTRACTS OF ACCOUNTS OF THE SAID COMPANY MCPL AND THE FIRM MRED ARE PLACED, BANK STATEMENTS OF THESE CONCERNS ARE PLACED A ND THE RUNNING ACCOUNTS INTER - SE OF THESE CONCERNS WERE PLACED. IT WAS SUBMITTED THAT BOOKS OF ACCOUNTS WERE PLACED BEFORE THE AO . IT WAS SUBMITTED THAT CERTIFICATI ON HAS BEEN GIVEN BY THE ASSESSEE TO THE INDEX OF THE PAPER BOOK FILED WITH THE TRIBUNAL WHEREIN IT IS CERTIFIED BY THE ASSESSEE THAT PAGES 1 - 677 OF PAPER BOOK WERE ALSO FILED BEFORE THE ASSESSING OFFICER AS WELL THE SAME WERE PRODUCED BEFORE THE LD.CIT(A ) AND HENCE TO CONTEND THAT THE SAME WERE PRODUCED FOR THE FIRST TIME BEFORE LEARNED CIT(A) WILL NOT BE CORRECT AND RULE 46A OF THE INCOME - TAX RULES, 1962 IS NOT VIOLATED . THE LD. AR RELIED UPON THE DECISION OF HONBLE HIGH COURT OF DELHI IN CIT V. ARVIN D KUMAR JAIN REPORTED IN (2012) 18 TAXMANN.COM 132(DELHI) AND SUBMITTED THAT THE AMOUNT RECEIVED BY TAX - 63 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 PAYER SHAREHOLDER FROM THE COMPANY AS A RESULT OF TRADING TRANSACTIONS COULD NOT BE BROUGHT WITHIN THE AMBIT OF CHARGEABILITY TO TAX AS DEEMED DIVIDEND WITHIN DEEMING FICTION CREATED BY SECTION 2(22)(E) OF THE ACT . IT WAS SUBMITTED THAT THERE IS A BUSINESS LINK BETWEEN THE TWO ENTITIES I.E. COMPANY MCPL AN D T HE FIRM MRED AS BOTH THE ENTITIES ARE ENGAGED IN BUSINESS OF BUILDERS AND CONSTRUCTION , AND THE SE ARE CURRENT ACCOUNT TRANSACTIONS BETWEEN THESE ENTITIES AND HENCE ARE OUTSIDE THE PURVIEW OF S EC TION 2(22)(E) OF THE ACT. IT WAS SUBMITTED THAT THE PAYMENTS FOR TH E LAND WHICH WERE TRANSFERRED BY THE FIRM MRED TO COMPANY MCPL WERE SETTLED BY WAY OF JOUR NAL ENTRIES ADJUSTMENTS AND NO PAYMENTS WERE MADE BY MCPL TO MRED AS THE PAYMENTS WERE ADJUSTED AGAINST THE RECEIVABLE OF MCPL FROM MRED . IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS BROUGHT TO TAX ON SUBSTANTIVE BASIS THE PARTNERS OF MRED U/S 2(22)(E) OF THE AMOUNT ALLEGEDLY ADVANCED BY MCPL TO MRED WHILE NO MONEY HAS FLOWN FROM THE FIRM MRED TO THE PARTNERS OF MRED ( WHO ARE ALSO DIRECTOR - SHAREHOLDERS OF MCPL) AND HENCE NO BENEFIT HAS BEEN AVAILED BY THE AFORE - STATED DIRECTOR S - SHAREHOLDER / P ARTNERS OF MCPL AND MRED VIZ. MR PETER VAZ AND MR EDGAR BRAZ AFONSO WHO ARE THE SHARE HOLDERS / PARTNERS OF THE COMPANY / FIRM AS NO OUTSIDER WERE INVOLVED IN MCPL AND MRED . IT WAS SUBMITTED THAT THE FACTS AS GIVEN BY THE L D.D R ARE CORRECT AND THERE IS NO DISPUTE ABOUT THE FACTS OF THE CASE . THE LD. COUNSEL FOR THE ASSESSEE WOULD RELY ON THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT V. RAJ KUMAR REPORTED (2009) 318 ITR 462(DEL.) TO CONTEND THAT ADVANCES GIVEN BY THE COMPANY TO SHAREHOLDERS ARE OUT OF PURVIEW OF TAXABILITY U/S 2(22)(E) OF THE ACT . IT WAS SU BMITTED THAT THE WORD ADVANCES USED IN SECTION 2(22)(E) OF THE ACT IS TO BE USED IN CON JUNCTION WITH THE WORD LOAN AND THESE CURRENT ACCOUNT TRANSACTIONS BETWEEN MCPL AND MRED CANNOT B E CATEGORISED AS LOAN TRANSACTIONS AS THERE IS NO INDICA TION OF LOAN IN THE MONEY ADVANCED 64 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 BY THE COMPANY MCPL TO THE FIRM MRED AS TO THE CHARGEABILITY OF INTEREST, REPAYMENT SCHEDULE ETC . . IT WAS SUBMITTED THAT THESE ARE CURRENT ACCOUNT TRANSACTIONS AS BOTH THE CONCERNS HAVE CONNECTION AS TO BUSINESS IS COMMON OF CONSTRUCTION AND BUILDERS AND HENCE THESE ARE BUSINESS TRANSACTION S BETWEEN TWO ENTITIES NAMELY MCPL AND MRED WHICH ARE OUT OF THE PURVIEW AND AMBIT OF TAXABILITY AS DEEMED DIVIDED WITHIN DEEMING FICTION CREATED UNDER SECTION 2(22)(E) OF THE ACT . THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDERS OF LEARNED CIT(A). 9 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CONSIDERED THE MATERIAL ON RECORD INCLUDING CASE LAWS RELIED UPON BY RIVAL PARTIES . W E HAVE OBSERVED THAT ASSESSEE MR. PETER V A Z AND ONE MR. EDGAR BRA Z AFONSO ARE 50% SH AREHOLDER EACH IN THE COMPANY M CPL (A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED) WHEREIN THEY ARE REGISTERED AS WELL BENEFICIAL SHAREHOLDERS . THE SAID TWO INDIVIDUALS NAMELY MR PETER VAZ AND MR EDGAR BRAZ AFONSO ARE ALSO PARTNERS IN THE PARTNERSHIP FIRM MRED WHEREIN BOTH THE PARTNERS HOLD 50% SHARE IN PROFITS OF THE PARTNERSHIP FIRM MRED . THERE WAS A SEARCH AND SEIZURE OPERATION S CARRIED OUT BY THE REVENUE U/S.132 OF THE ACT ON 31.01.2012 IN THE CASE OF MCPL AND MRED . THESE TWO INDIVIDUALS I.E. MR. PETER V A Z AND MR. EDGAR BRAZ AFONSO ARE COVERED BY SECTION 5 A OF THE ACT. DURING THE COURSE OF THE SEARCH OPERATION S U/S 132 OF THE ACT ON MCPL AND MRED, BOOKS OF ACCOUNTS OF THE SAID COMPANY/ FIRM WERE FOUND AND SEIZED BY THE R EVENUE WHICH CARRY THE DETAILS OF ENTRIES FOR ALLEGED HUGE AMOUNT OF LOANS AND ADVANCES RUNNING INTO SEVERAL CRORES OF RUPEES I.E. RS. 50.99 CRORES FROM FINANCIAL YEAR 2005 - 06 TO 2011 - 12 GRANTED BY MCPL TO MRED WHICH ALLEGEDLY AS PER REVENUE FALLS UNDER THE AMBIT OF PROVISIONS OF DEEMED DIVIDEND AS DEFINED UNDER THE DEEMING FICTION OF SECTION 2(22)(E) OF THE ACT AS ALLEGED BY REVENUE IN THE HANDS OF THE ASSESSEE AND MR 65 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 EDGAR BRAZ AFONSO FOR WHICH IN - FACT ADDITIONS WERE MADE BY THE ASSESSING OFFICER ON SUBSTANTIVE BASIS IN THE HANDS OF MR PETE R VAZ AND MR EDGAR BRAZ AFONSO. THE ADVANCES MADE BY MCPL TO MRE D AND ACCUMULATED PROFITS OF MCPL ARE DETAILED HEREUNDER IN THE CHART : F.Y . NAME OF THE PERSON / CONCERN FROM WHOM ADVANCE IS RECEIVED TOTAL LOAN / ADVANCES DURING THE YEAR ACCUMULATED PROFIT WITH M/S. MCPL 2005 - 06 MCPL 2,77,75,11 8/ - 2,15,70,177/ - (SURPLUS IN P & L ACCOUNT) 2006 - 07 MCPL 5,20,14,366/ - 8,04,62006/ - 2007 - 08 MCPL 4,71,81,347/ - 12,86,19,493/ - 2008 - 09 MCPL 9,46,68,620/ - 15,00,32,634/ - 2009 - 10 MCPL 12,76,91,164/ - 30,08,57,131/ - 2010 - 11 MCPL 7,30,10,750/ - 43,83,73,506/ - 2011 - 12 MCPL 8,75,33,761/ - 47,85,26,714/ - THE ADDITIONS WERE MADE ON SUBSTANTIVE BASIS IN THE HANDS OF MR PETER VAZ AND MR EDGAR BRAZ AFONSO BY THE AO U/S 2(22)(E) OF THE ACT W.R.T. LOANS AND ADVANCES MADE BY MCPL TO MRED TO THE EXTENT MCPL POSSESSES ACCUMULATED PROFI TS , AS DETAILED IN THE CHART HEREUNDER, WHILE ADDITIONS WERE MADE ON PROTECTIVE BASIS IN THE HANDS OF MRED. IT IS PERTINENT TO MENTION THAT AS SINCE MR PETER VAZ AND MR EDGAR BRAZ AFONSO ARE COVERED BY SECTION 5A OF THE ACT , SIMILAR ADDITION OF EQUIVALENT AMOUNT AS 66 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 REFLECTED IN CHART HEREUNDER WERE MADE SEPARATELY BY THE AO IN THE HANDS OF THEIR SPOUSES.: A.Y . DIVIDEND U/S . 2 (22)(E) IN THE HANDS OF PETER V AZ (RS) DIVIDEND IN THE HANDS OF EDGAR BRAZ AFONSO (R S ) 2007 - 08 81,70,615/ - 81,51,723/ - 2008 - 09 92,70,800/ - 92,70,800/ - 2009 - 10 2,07,21,018/ - 2,07,21,018/ - 2010 - 11 2,70,47,803/ - 2,70,47,803/ - 2011 - 12 69,21,066/ - 69,21,066/ - 2012 - 13 98,91,743/ - 98,91,743/ - T HUS, THESE BOOKS OF ACCOUNTS OF MCPL AND MRED WHICH WERE SEIZED BY REVENUE DURING SEARCH OPERATIONS U/S 132 OF THE ACT IN THE CASE OF MCPL AND MRED CO NTAINING DETAILS OF TRANSACTIONS OF LOANS AND ADVANCES BETWEEN MCPL AND MRED ARE INCRIMINATING MATERIAL QUA THE ASSESSEE MR. PETER VA Z AND MR EDGAR BRAZ AFONSO INCRIMINATING THEM TO BE HIT BY DEEMING FICTION OF SECTION 2(22)(E) OF THE ACT OF SUCH LOAN AND ADVANCES BEING CONSIDERED AS DEEMED DIVIDEND . THIS INCRIMINATING MATERIAL QUA THE ASSESSEE WAS FURTHER CORROBORATED BY STATEMENT RECORDED DURING THE COURSE OF SEARCH ON 31.01.2012 O F ACCOUNTANT MR AJIT BANAUKAR WHEREIN HE CONFIRMED THAT THERE IS NO MOU/AGREEMENT BETWEEN MCPL AND MRED AND FUNDS WERE TRANSFERRED FROM THE BANK ACCOUNTS OF MCPL TO BANK ACCOUNTS OF MRED AT ORAL INSTRUCTIONS OF MR PETER VAZ AND THE AMOUNTS 67 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 WERE TRANSFERRED TO MEET DEFICIENCIES IN THE BANK ACCOUNT OF MRED. IT IS PROFITABLE TO REFER TO SECTION 2(22)(E) OF THE ACT AT THIS STAGE WHICH IS REPRODUCED BELOW: DEFINITIONS. 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, - ** ** (22) DIVIDEND INCLUDES - (A) *** (B)*** (C)*** (D)*** (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MAY, 1987 , BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING PO WER, OR TO ANY CONCERN, IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, O F ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS ; BUT 'DIVIDEND' DOES NOT INCLUDE ( I ) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB - CLAUSE ( C ) OR SUB - CLAUSE ( D ) IN RESPECT OF ANY SHARE ISSUED FOR FUL L CASH CONSIDERATION, WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED IN THE EVENT OF LIQUIDATION TO PARTICIPATE IN THE SURPLUS ASSETS ; [( IA ) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB - CLAUSE ( C ) OR SUB - CLAUSE ( D ) IN SO FAR AS SUCH DISTRIBUTION IS ATTRIBUTABLE TO THE CAPITALISED PROFITS OF THE COMPANY REPRESENTING 68 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 BONUS SHARES ALLOTTED TO ITS EQUITY SHAREHOLDERS AFTER THE 31ST DAY OF MARCH, 1964, [AND BEFORE THE 1ST DAY OF APRIL, 1965] ;] ( II ) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER [OR THE S AID CONCERN] BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY ; ( III ) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUB - CLAUSE ( E ), TO THE EXTENT TO WHICH IT IS SO SET OFF; [( IV ) ANY PAYMENT MADE BY A COMPANY ON PURCHASE OF ITS OWN SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PROVISIONS OF SECTION 77AOF THE COMPANIES ACT, 1956 (1 OF 1956); ( V )ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERGER BY THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE DEMERGED COMPANY (WHETHER OR NOT THERE IS A REDUCTION OF CAPITAL IN THE DEMERGED COMPANY).] EXPLANATION 1. THE EXPRESSION 'ACCUMULATED PROFITS', WHEREVER IT OCCURS IN THIS CLAUSE, SHALL NOT INCLUDE CAPITAL GAINS ARISING BEFORE THE 1ST DAY OF APRIL, 1946, OR AFTER THE 31ST DAY OF MARCH, 1948, AND BEFORE THE 1ST DAY OF APRIL, 1956. EXPLANATION 2. THE EXPRESSION 'ACCUMULATED PROFITS' IN SUB - CLAUSES ( A), (B), (D ) AND ( E ), SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB - CLAUSES, AND IN SUB - CLAUSE ( C ) SHALL INCLUDE ALL PROFITS O F THE COMPANY UP TO THE DATE OF LIQUIDATION, [BUT SHALL NOT, WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISITION OF ITS UNDERTAKING BY THE GOVERNMENT OR A CORPORATION OWNED OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE, INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE]. [ EXPLANATION 3. FOR THE PURPOSES OF THIS CLAUSE, 69 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ( A ) 'CONCERN' MEANS A HINDU UNDIVID ED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY ; ( B ) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY TIME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN ;] T HE ASSESSEE MR PETER VAZ HOLDS MORE THAN 10% SHARES IN MCPL AS WELL IS ENTITLED FOR MORE THAN 20% SHARES IN PARTNERSHIP FIRM MRED , WHER E IN IN - FACT HE HOLDS 50% SHARES IN MCPL AND ALSO HAVE 50% SHARE IN PROFITS OF THE FIRM MRED . SIMILAR IS THE HOLDING OF MR EDGAR BRAZ AFONSO. THUS, THE CONDITIONS AS STIPULATED BY SECTION 2(22)(E) OF THE ACT ARE FULFILLED SO FAR AS MR PETER VAZ AND MR EDGAR BRAZ AFONSO ARE CONCERNED. WE HAVE OBS ERVED THAT DURING THE COURSE OF SEARCH OPERATION S , STATEMENT U/S.132(4) OF THE ACT OF THE ACCOU NTANT MR. AJIT B ANAULKAR WAS RECORDED ON 31 - 01 - 2012 WHEREIN HE CONFIRMED THAT THERE WAS NO AGREEMENTS / MOU BETWEEN THE FIRM MRED AND THE COMPANY MCPL AND FUND S ARE TRANSFERRED THROUGH BANK ACCOUNT FROM ONE BANK ACCOUNT TO ANOTHER BANK ACCOUNT ON THE INSTRUCTION S OF M R.PETER V A Z AND THESE TRANSACTION WERE MADE KEEPING IN VIEW THE FINANCIAL CONTINGENCIES AND DEFICIENCIES FROM ONE BANK ACCOUNT TO ANOTHER. IT IS PERTINENT TO MENTION THAT DURING SEARCH OPERATIONS NO MOU/AGREEMENT BETWEEN MCPL AND MRED WERE FOUND WHICH COULD EVIDENCE THAT THESE TRANSACTIONS WERE BUSINESS TRANSACTIONS BETWEEN MCPL AND MRED , NOR THE ASSESSEES WERE ABLE TO BRING ON RECORD MOU/AGREEMEN TS TO PROVE THAT THESE LOANS AND ADVANCES WERE BUSINESS TRANSACTIONS . THE S AID MR. PETER V A Z IN STATEMENT RECORDED U/S.131 OF THE ACT CONFIRMED THAT THERE ARE BUSINESS TRANSACTION S BETWEEN THE FIRM MRED AND THE COMPANY MCPL . HE ALSO SUBMITTED THAT THERE A RE SALE AGREEMENTS / AGREEMENTS ON RECORD BETWEEN MCPL AND 70 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 MRED , WHEREIN LAND BOUGHT BY MRED WERE TRANSFERRED BY FIRM MRED TO THE COMPANY MCPL . AS WE WILL SEE LATER IN THIS ORDER THAT THE ASSESSEE COULD BRING ON RECORD ONLY TWO SALES INSTANCES OF SALE OF LAND BY MRED TO MCPL FOR MINISCULE A MOUNT OF RS. 38 LACS AND RS. 76.8 0 LACS RESPECTIVELY WHILE THE LOAN AND ADVANCES GRANTED BY MCPL TO MRED STOOD AT RS. 50.99 CRORES DURING ASSESSMENT YEAR 2006 - 07 TO ASSESSMENT 2012 - 13. IN ANY CASE NO PREJUDICE IS CAUSED TO THE ASSESSEE AS NO ADDITIONS HAVE BEEN MADE BY THE AO W.R.T. THESE TWO SALES INSTANCES U/S 2(22)(E) OF THE ACT AS THESE SALE TRANSACTIONS WERE ACCEPTED BY THE AO AS BUSINESS TRANSACTIONS. IN - FACT MR. PETER VAZ IN HIS STATEMENT RECORDED U/S. 131 OF THE A CT STATED THAT FUNDS WERE TRANSFERRED KEEPING IN VIEW NEEDS OF THE CONCERNS NAMELY MCPL AND MRED AND AVAILABILITY OF THE FUNDS. THE RELEVANT EXTRACTS OF THE STATEMENT OF MR PETER VAZ ARE EXTRACTED AS HEREUNDER : Q.NO.8 PLEASE GIVE THE DETAILS OF ALL BUSINESS TRANSACTIONS AND EVIDENCES TO PROVE THE SAME. DURING THE COURSE OF SEARCH AT YOUR BUSINESS PREMISES/RESIDENCE NO AGREEMENTS/EVIDENCES WERE FOUND. PLEASE COMMENT. ANS: WHENEVER MONEY IS REQUIRED BY ANY OF THE COMPANIES MCPL & M/S SIPL OR T HE FIRM MRED, THE FUNDS ARE TRANSFERRED ON AVAILABILITY AND NEED BASIS AND THE SAME WILL BE TREATED AS ADVANCES. SOME DOCUMENTS LIKE TWO SALE DEEDS BETWEEN TH E SISTER CONCERNS WHICH WERE LYING IN MY OFFICE, HAVE ALREADY BEEN SUBMITTED TO YOUR OFFICE. IN CA SE THERE ARE ANY AGREEMENT /SALE DEEDS BETWEEN THE COMPANIES WITH RESPECT TO PURCHASE/SELLING OF LAND PROPERTIES/FLATS, THE SAME WILL BE SUBMITTED TO YOUR OFFICE. WE HAVE CAREFULLY GONE THROUGH THE ENTIRE MATERIAL PLACED BEFORE US , INCLUDING PAPER BOOK FILED BY THE ASSESSEE BEFORE THE TRIBUNAL , CASE LAWS RELIED UPON BY BOTH THE PARTIES , O THER MATERIAL ON RECORD INCLUDING THE ORDERS OF THE AUTHOR ITIES BELOW . WE HAVE OBSERVE D THAT THE SAID COMPANY 71 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 MCPL HAS TRANSFERRED HUGE AND SUBSTANTIAL AMOUNTS OF MONEY FROM ITS BANK ACCOUNT AGGREGATING TO RS. 50,99,11,226/ - FROM TIME TO TIME IN TO THE BANK ACCOUNT OF THE SAID FIRM MRED DURING ASSESSMENT YEARS 2006 - 07 TO ASSESSMENT YEARS 2012 - 13 WHILE MCPL POSSESSED ACCUMULATED PROF ITS TO THE TUNE OF RS.47,85,26,714 / - AS AT 31 - 03 - 2012 , WHERE IN NO DOUBT SOME MONE Y WAS ADVANCED BY MCPL TO MRED TOWARDS THE BONAFIDE BUSINESS TRANSACTIONS SUCH AS JOURNAL ENTRY ADJUSTMENT FOR PURCHASE OF LAND IN TWO INSTANCES AND ALSO PAYMENTS FOR MATERIAL BY MCPL ON BEHALF OF MRED AS WELL CHEQUES WRONGLY CREDITED IN THE BANK ACCOUNTS OF MCPL INSTEAD OF BEING CREDITED IN THE BANK ACCOUNT OF MRED AND VICE VERSA , WHILE FOR THE REST OF THE MONEY SO TRANSFERRED FROM THE BANK ACCOUNTS OF MCPL TO MRED, NO SATISFACTORY REPLIES / DETAILS WERE SUBMIT TED BY THE ASSESSEE TO PROVE THE BONAFIDE BUSINESS NEXUS , BUSINESS EXIGENCIES AND BUSINESS PURPOSES FOR ADVANCING OF THESE HUGE AMOUNT OF MONEY BY MCPL TO MRED . WE HAVE ALSO OBSERVED THAT THE REVENUE HAS ALREADY GIVEN CREDIT AND SET OFF FOR ALL THE BONAFIDE BUSINESS TRANSACTIONS BETWEEN MCPL AND MRED WHEREIN THE ASSESSEE COULD PROVE BUSINESS NEXUS, BUSINESS PURPOSE AND EXIGENCY AND NO ADDITIONS WERE MADE UNDER THE DEEMING FICTION AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT WITH RESPECT TO LOANS AND AD VANCES GIVEN BY MCPL TO MRED . THUS, ALL GENUINE BUSINESS TRANSACTIONS BETWEEN MCPL AND MRED WERE NOT BROUGHT TO TAX BY REVENUE UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND NO PREJUDICE IS CAUSED TO THE ASSESSEE . THE LEARNED COUNSEL FOR THE ASSES SEE COULD NOT POINT OUT A SINGLE INSTANCE WHEREIN REVENUE HAS BROUGHT TO TAX ADVANCES WITHIN AMBIT OF SECTION 2(22)(E) OF THE ACT WHICH WERE PAID BY MCPL TO MRED AND WHICH COULD BE SHOWN THAT THE ASSESSEE CONTENDED IT TO BE FOR BONAFIDE BUSINESS PURPOSES B UT THE REVENUE HAD DECLINED TO ACCEPT THE SAME AS BONAFIDE BUSINESS TRANSACTION. HOWEVER, W ITH RESPECT TO THOSE TRANSACTIONS WHERE THE AMOUNTS WERE TRANSFERRED FROM MCPL TO 72 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 MRED WHEREIN THE ASSESSEE COULD NOT EXPLAIN OR PROVE THE BUSINESS NEXUS , BUSINES S PURPOSE AND BUSINESS EXIGENCIES , THE ASSESSING OFFICER HAS MADE THE ADDITIONS U/S 2(22)(E) OF THE ACT AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS WHEREIN THE AMOUNTS WERE ADVANCED BY MCPL TO MRED , TO THE EXTENT MCPL POSSESSED AC CUMULATE PROFITS . NO ERROR WAS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ADDITIONS HAVE BEEN MADE WHEN EITHER SPECIFIC BUSINESS NEXUS OR BUSINESS EXIGENCY OR BUSINESS PURPOSE WAS SHOWN TO THE ASSESSING OFFICER BUT HE STILL PROCEEDED TO MAKE THE ADDITIONS U/S 2(22)(E) OF THE ACT REJECTING ARGUMENTS OF THE ASSESSEE . IT COULD ALSO BE NOT SHOWN BEFORE US BY THE LEARNED COUNSE L FOR THE ASSESSEE THAT MCPL STOOD GUARANTEE FOR THE LOANS AVAILED BY MRED FROM THE BANK OUT OF BUSINESS CONSIDERATION BUT ONLY A BALD ARGUMENT IS RAISED THAT BOTH MRED AND MCPL ARE IN THE BUSINESS OF BUILDERS AND CONSTRUCTION WITHOUT PINPOINTING THAT WHAT EXACTLY IS THE BUSINESS EXIGENCY OR BUSINESS NEXUS OR BUSINESS PURPOSE IN GRANTING LOANS AND ADVANCES BY MCPL TO MRED . IT COULD ALSO NOT BE SHOWN BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT ANY GUARANTEE COMMISSION WAS CHARGED BY MCPL FROM MRED FOR STA NDING GUARANTEE TO THE BANKS LOANS AVAILED BY MRED FROM ITS BANKERS. IT COULD ALSO NOT BE SHOWN BEFORE US BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER IN THE HANDS OF THE ASSESSEE U/S 2(22)(E) OF THE AC T, WHILE THE MCPL DID NOT POSSESSED THE NECESSARY ACCUMULATED PROFITS AS STIPULATED BY SECTION 2(22)(E) OF THE ACT . THE ASSESSEE BEING A REGISTERED AND ALSO BENEFICIAL HOLDER OF SHARES IN MCPL HOLDING 50% SHARES IN MCPL(A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTS) IS ALSO PARTNER IN THE FIRM MRED ENTITLED FOR 50% SHARES OF PROFIT OF MRED. SIMILAR IS THE HOLDING PATTERN OF MR. EDGAR BRAZ AFONSO. WE ARE ALSO NOT AGREEABLE TO ACCEPT THE CONTENTION S OF THE ASSESSEE THAT THE FUNDS WERE TRANSFERR ED FROM BANK ACCOUNTS OF MCPL TO 73 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 BANK ACCOUNTS OF MRED BY THE BANK OF ITS OWN WITHOUT ANY INSTRUCTIONS FROM THE ASSESSEE . WE HAVE OBSERVED THAT MC PL HAS STOOD AS GUARANTOR FOR THE BANK LOAN BY WAY OF OD/CC LIMIT AVAILED BY MRED FROM THE BANKS , W HEREIN DEED OF GUARANTEE /GUARANTEE AGREEMENT IS EXECUTED BY GUARANTOR IN FAVOUR OF BANKS TO SECURE DEBTS /LOANS OF THE BORROWER AND IN SUCH CASE S BANK TAK E STANDING INSTRUCTION S FROM THE GUARANTOR WHEREIN BANK GOT AUTHORITY TO TRANSFER FUND FRO M THE BANK ACCOUNT OF GUARANTOR TO THE BANK ACCOUNT OF THE BORROWER TO RECOVER OVERDRAWN AMOUNT IN THE BORROWER S BANK ACCOUNT . THUS THIS CONTENTION OF THE ASSESSE E IS REJECTED THAT THE BA NK HAS TRANSFERRED MONEY OF ITS OWN WITHOUT RECOURSE TO ASSESSEE FROM THE BANK ACCOUNT OF MCPL TO BANK ACCOUNT OF MRED . I N ANY CASE EVEN IF THE ARGUMENT OF THE ASSESSEE IS ACCEPTED THAT THE BANK TRANSFERRED THE MONEY FROM THE BANK ACCOUNT OF MCPL TO BANK ACCOUNT OF MRED OF ITS OWN , I T WAS FOR THE SAID COMPANY MCPL TO H AVE ENSURED THAT SUCH TRANSACTIONS SHOULD NOT HAVE TAKEN PLACE AT THE FIRST PLACE IN VIOLATION OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT . WE HAVE ALSO AFTER PERUSAL OF THE VARIOUS LEDGER ACCOUNTS EXTRACTS OF MCPL AND MRED, BANK ACCOUNTS AND THE FINANC IAL STATEMENTS OF THE MCPL AND THE MRED HAVE COME TO THE CONCLUSION THAT FU NDS ARE SYSTEMATICALLY TRANSFERRED FROM BANK ACCOUNTS OF MCPL TO BANK ACCOUNT OF MRED WHERE IN HUGE STOCK OF LAND BANK / PROPERTIES WERE BUILT BY THE SAID PARTNERSHIP FIRM MRED IN ITS NAME OUT OF INTEREST - FREE FUNDS RECEIVED FROM MCPL . IT IS OBSERVED FROM THE FINANCIAL STATEMENTS THAT AS ON 31.03.2012 FIRM MRED HE LD STOCK OF LAND OF RS. 21.66 CRORES , STOCK OF P REMISES HELD WERE RS. 15.51 CRORES AND ADVANCE FOR PURCHASE OF LAND GIVEN WERE TO THE TUNE OF RS.5 .09 CRORES BY THE SAID FIRM MRED , WHEREIN THE FUNDS OF THE COMPANY MCPL TO THE TUNE OF RS. 24.52 CRORES WERE OUTSTANDING FOR PAYABLE AS ON 31 - 03 - 2012 BY MRED TO MCPL, WHICH WERE UTILISED BY MRED FOR ACQUISITION OF SUCH LAND / PREMISES . WHILE IN THE BOOKS OF THE COMPANY MCPL THE STOCK OF 74 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 LAND HAS REMAINED MORE OR LESS CONSTANT AND EVEN IF ONE LOOKS AT IN ABSOLUTE TERMS IT IS STANDING AT 3.63 CRORES IN ASSESSMENT YEAR 2012 - 13. THE STOCK OF PREMISES IS AT 4.26 CRORES WHILE THERE IS ABSOLUTELY NO ADVANCE FOR LAND AND PREMISES WHI CH IS REMAINING IN THE BOOKS OF THE COMPANY MCPL FOR ASSESSMENT YEAR 2012 - 13. THE SAID FIRM MRED CLEARLY BENEFITTED AT THE COST OF THE SAID COMPANY MCPL WHEREIN INTEREST FREE FUNDS TO THE TUNE OF RS. 50.99 CRORES FLOWED FROM MRED TO MCPL FROM ASSESSMENT YEA R 2006 - 07 TO 2012 - 13 . THE ASSESSEE HAS RAISED AN INTERESTING ARGUMENT BEFORE THE LOWER AUTHORITIES AS WELL BEFORE US THAT IT WAS STRATEGICALLY DECIDED TO BUILD LAND BANK IN MRED WHILE CONSTRUCTION WORK SHALL BE EXCLUSIVELY HANDLED BY MCPL TO DO QUALITATIVE CONSTRUCTION WORK AND IT WAS CONTENDED THAT HENCE FUNDS WERE TRANSFERRED BY MCPL TO MRED TO ENABLE IT TO BUILD LAND BANK AND THE LANDS WILL BE THEREAFTER ENTRUSTED TO MCPL FOR DOING QUALITATIVE CONSTRUCTION WORK . THIS ASSERTION THAT MCPL WILL BE A COMPAN Y SPECIALISING IN QUALITATIVE CONSTRUCTION WORK WHEREIN ALL LAND OWNED BY MRED WILL BE ENTRUSTED TO MCPL IS AGAIN A BALD ASSERTION AND NOT EVEN A SINGLE EVIDENCE IS BROUGHT ON RECORD TO PROVE THAT LAND BANK OWNED BY MRED WAS USED BY MCPL FOR DOING PROJECT CONSTRUCTION WHEREIN MCPL ALSO BENEFITTED, EXCEPT BRINGING ON RECORD TWO SALES INSTANCES OF MINISCULE AMOUNT OF RS. 38 LACS AND RS. 76.80 LACS VIS - A - VIS THE LOANS AND ADVANCES GRANTED BY MCPL TO MRED TO THE TUNE OF RS. 50.99 CRORES. THE SAID COMPANY MCPL HAD NEVER DECLARED DIVIDEND OUT OF THE ACCUMULATED PROFITS OF AROUND RS. 47.85 CRORES HELD BY MCPL AS AT 31 - 03 - 2012, WHILE THE SAME WAS DISTRIBUTED BY MCPL TO THE SAID FIRM MRED IN THE FORM OF LOANS AND ADVANCES, IN WHICH FIRM MRED BOTH THE ASSESSEE AND MR. EDGAR BRA Z AFONSO ARE THE TWO EQUAL PARTNERS HOLDING 50% EACH SHARE IN PROFITS BOTH OF WHOM BENEF ITTED FROM MRED BY WAY OF SHARE IN HUGE PROFITS EARNED BY THE SAID FIRM MRED, SALARY FROM MRED AND INTEREST ON CAPITAL FROM MRED . T HE SAID FIRM MRED ACQUI RED 75 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 HUGE LAND BANK / PROPERTIES OUT OF THE FUNDS RECEIVED FROM THE COMPANY MCPL WHILE IN TWO CASE S , THE SAID LAND / PROPERTY SO ACQUIRED BY THE MRED OUT OF THE INTEREST - FREE FUNDS RECEIVED FROM MCP L HAD BEEN SOLD BACK TO MCPL BY MRED AT PROFITS , WHEREIN T HE SAID PROFIT S ON SALE OF LAND WAS ALSO OFFERED FOR THE TAX BY THE MRED IN ITS RETURN OF INCOME FILED WITH REVENUE. THE SAID FIRM MRED SOLD THE TWO PROPERTIES AT RS. 38 LACS AND RS 78.60 LACS WHICH IS A MINISCULE AMOUNT AS COMPARED TO THE TOTAL ADVANCES OF RS. 50.99 CRORES RELEASED BY MCPL TO MRED DURING ASSESSMENT YEAR 2006 - 07 TO ASSESSMENT YEAR 2012 - 13. IT IS ALSO OBS ERVED IN RESPECT OF TWO LANDS SOLD BY MRED TO MCPL AS PER CHART IN PRECEDING PARAS THAT MRED ACQUIRED LAND AT TALEIGAO FOR RS. 22 LACS AND SOLD THE SAME TO MCPL FOR RS. 38 LACS. SIMILARLY, IT IS OBSERVED THAT THE LAND AT CARANZALEM WAS ACQUIRED BY MRED F OR RS. 40 LACS AND SOLD TO MCPL FOR RS. 76.80 LACS . THUS, IT I S OBSERVED THAT EVEN IN THESE TWO SALE TRANSACTION OF LAND ENTERED INTO BY MCPL AND MRED, MRED MADE PROFITS BY SELLING THE LAND TO MCPL AT MARKET PRICES WHICH WERE OFFERED FOR TAXATION BY MRED B UT THE FUNDS OUT OF WHICH THESE LANDS WERE ACQUIRED WERE OF MCPL WHICH WERE GRANTED AS INTEREST - FREE LOANS AND ADVANCES BY MCPL TO MRED. IT IS CLEAR CUT CASE WHEREIN THE MRED HAS BENEFITED OUT OF THE FUNDS RECEIVED FR OM MCP L AT THE COST OF MCPL. IN OTHER C ASE S WHEREIN MRED HAS RETAINED THE LAND / PROPERTIES ACQUIRED OUT OF THE FUNDS RECEIVED FROM TH E MCPL , THE SAID LAND HAS BEEN UTILISED BY MRED IN LAUNCHING ITS OWN PROJECTS WHERE IN IT ALSO EARNED HUGE PROFITS WHICH ARE REFLECTED IN PROFIT AND LOSS ACCOUNT , WHICH WAS DECLARED TO THE REVENUE IN THE RETURN OF THE INCOME FILED WITH THE REVENUE. THE DETAILS OF THE PROFITS EARNED BY MRED AND ADVANCES RECOVERABLE BY MCPL FROM MRED AS AT YEAR END ARE DETAILED AS HEREUNDER: - 76 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 FINANCIAL YEAR LOANS AND ADVANCES RECOV ERABLE AS AT YEAR END BY MCPL FROM MRED PROFITS OF THE FIRM MRED 2006 - 07 3,55,65,753 8,15,54149 2007 - 08 3,56,88,605 3,86,16,429 2008 - 09 7,81,14,565 18,51,33,034 2009 - 10 16,44,63,457 10,18,99,881 2010 - 11 19,31,07,983 19,23,54,099 2011 - 12 24,51,53,779 8,01,41,968 IN CASE IF SUCH HUGE FUNDS HAD NOT FLOWN FROM THE BANK ACCOUNTS OF MCPL TO MRED , THE SAID FIRM MRED WOULD NOT HAVE BEEN ABLE TO ACHIEVE THE LEVEL OF BUSINESS WHICH IT ACHIEVED AND THE PROFITS WHICH IT EARNED AS IT EXPANDED ITS BUSINESS BASED ON GRANT OF HUGE INTEREST - FREE LOANS AND ADVANCES FROM MCPL TO THE TUNE OF RS. 50.99 CRORES FROM ASSESSMENT YEAR 2006 - 07 TO ASSESSMENT YEAR 2012 - 13 . THE SAID COMPANY MCPL NEVER DECLARED DIVIDEND TO ITS SHAREHOLDER AND NO DIVIDEND DISTRIBUTION TAX WA S EVER PAID BY MCPL TO GOVERNMENT , RATHER THE FUNDS WERE RELEASED IN THE FORM OF LOANS AND ADVANCES IN FAVOUR OF MRED. THE S AID MRED IN - TURN HAS DISTRIBUTED THE PROFITS TO THE PARTNERS MR PETER VAZ AND MR EDGAR BRAZ AFONSO AS THEY ARE ENTITLED EACH TO 50% SHARES IN PROFITS OF THE FIRM MRED, WHICH PROFITS WERE EARNED BY MRED MA I NLY WITH THE HELP OF INTEREST - FREE FUNDS RECEIVED FROM MCPL , BY WA Y OF DISTRIBUTION OF SHARE OF PROFITS TO MR. PETER V AZ AND MR EDGAR BRAZ AFONSO. THUS, THE MONEY FINALLY REACHED THE BENEFICIARIES NAMELY MR. PETER VAZ AND MR EDGAR BRAZ AFONSO FROM THE FIRM MRED WHEREIN THEY WERE PARTNERS IN THE FORM OF SHARE IN PROFITS OF MRED , SALARY FROM MRED AND INTEREST ON 77 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 CAPITAL FROM MRED, WHILE DIVIDEND DISTRIBUTION TAX WHICH OUGHT TO HAVE BEEN PAID BY MCPL TO THE GOVERNMENT ON DECLARATION OF DIVIDENDS TO ITS SHAREHOLDERS NAMELY MR. PETER VAZ AND MR. EDGAR BRAZ AFONSO WERE NO T PAID AS MCPL NEVER DECLARED DIVI DEND WHILE THE MONEY FINALLY REACHED THE BENEFICIARIES I.E. PARTNERS OF MRED NAMELY MR PETER VAZ AND MR EDGAR BRAZ AFONSO AS DETAILED ABOVE . APART FROM SHARE IN PROFITS OF MRED, SALARIES WERE PAID BY THE SAID FIRM MRED TO PARTNERS AND ALSO INTEREST ON CAP ITAL WAS PAID BY SAID MRED TO BOTH THE PARTNERS NAMELY MR PETER V A Z AND MR. EDGAR BRAZ AFONSO . THUS TO SAY THAT THE AFORE - SAID PARTNERS OF MRED WHO ARE ALSO THE REGISTERED AND BENEFICIAL SHAREHOLDERS OF MCPL HOLDING 50% SHARES EACH HAD NOT BENEFITED OU T O F THE F UNDS TRANSFERRED BY MCPL TO MRED WILL BE AN FALLACIOUS ARGUMENT AND IS HEREBY REJECTED KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF THIS CASE AS SET OUT ABOVE IN PRECEDING PARAS . IT IS ONE OF THE DIRECT CASE WHEREBY THE PARTNERS OF THE FIRM MRED HAS BENEFITED OUT OF THE HUGE INTEREST - FREE AD VANCES BEING GIVEN BY MCPL TO MRED AND HENCE IT IS THUS, THE DIRECT INFRINGEMENT / VIOLATION OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT . IN OUR CONSIDER ED VIEW , THE AO HAS RIGHTLY INVOKED THE PROVISION S OF SECTION 2(22)(E) OF THE ACT AND HAS BROUGHT TO TAX THE SAID LOANS AND ADVANCES GRANTED BY MCPL TO MRED , WITHIN THE DEEMING FICTION OF SECTION 2(22)(E) OF THE ACT BY TERMING THE SAME AS DEEMED DIVIDEND IN THE HANDS OF THE PARTNERS O F THE FIRM MRED I.E. MR. PETER V A Z AND MR.EDGAR BRAZ AF ONSO WHO ARE REGISTERED AS WELL BENEFICIAL SHAREHOLDER OF MCPL AND BEING BENEFICIARIES OF THE AMOUNT ADVANCED BY MCPL TO MRED AS SET OUT ABOVE , ON SUBSTANTIVE BASIS KEEPING IN VIEW THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. UNIVERSAL MEDICARE PRIVATE LIMITED , (2010) 324 ITR 263(BOM.) . EVEN HONBLE SUPREME COURT IN THE CASE OF NAVNIT LAL C. JAVERI V. AACIT IN (1965) 56 ITR 198(SC) HAS HELD THE SAID PROVISIONS TO BE WITHIN LEGISLATIVE COMPETENCE OF LEGISLATURE AND THE SAME 78 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 WAS HELD TO BE NOT CONTRAVENING ARTICLE 14 NOR ARTICLE 19 OF CONSTITUTION OF INDIA. THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE NAMELY CIT V. ARVIND KUMAR JAIN(SUPRA) , CIT V. RAJ KUMAR (SUPRA) AND OTHER CASES DOES NOT SUPPORT THE CASE OF THE ASSESSEE AS THE SAID CASE LAWS RELATES TO THE ADVANCES MADE IN THE COURSE OF BUSINESS, WHILE IN THE INSTANT CASE , THE ASSESSEE COULD NOT PROVE THE BUSINESS NEXUS AND BUSINESS PURPOSE FOR ADVANCING HUGE AMOUNT OF LOAN AND ADVANCES BY MCPL TO MRED TO THE TUNE OF RS. 50.99 CRORES FROM ASSESSMENT YEAR 2006 - 07 TO ASSESSMENT YEAR 2012 - 13 AND IN ANY CASE THE ASSESSING OFFICER HAS GIVEN SET OFF / CREDIT FOR ALL THE INTER - SE TRANSACTIONS BETWEEN MCPL AND MRED WHEREIN BUSINESS NEXUS WAS ESTABLISHED / PROVED BY THE ASSESSEE AND ALSO THE AO HAS DULY TAKEN NOTE OF RESTRICTING THE ADDITIONS U/S 2(22)(E) OF THE ACT KEEPING IN VIEW ACCUMULATED PROFITS HELD BY MCPL AS PER MANDATE OF SECTION 2(22)(E) OF THE ACT . WE ARE OF THE CONSIDERED VIEW THAT UNDER S.2(22)(E) OF THE ACT LIABILITY TO TAX ATTACHES TO ANY AMOUNT TAKEN AS LOAN AND ADVANCE BY THE SHARE HOLDER FROM A CONTROLLED COMPANY TO THE EXTENT IT POSSESSES ACCU MULATED PROFITS AT THE MOMENT THE LOAN IS BORROWED AND IT IS IMMATERIAL WHETHER THE LOAN IS REPAID BEFORE THE END OF THE ACCOUNTING YEAR , AS WAS HELD BY HONBLE APEX COURT IN THE CASE OF SMT TANULATA SHYAM V. CIT(1997) 108 ITR 345(SC) . WE ARE NOT INCLINE D TO ACCEPT THE CONTENTION OF LEARNED DR THAT RULE 46A OF INCOME - TAX RULES, 1962 IS VIOLATED AS THE ASSESSEE HAS FILED EVIDENCES BEFORE LEARNED CIT(A) FOR THE FIRST TIME . THE ASSESSEE HAS DULY GIVEN A CERTIFICATE IN THE INDEX TO PAPER BOOK WHEREIN IT IS S TATED THAT EVIDENCES AS CONTAINED IN PAPER BOOK FILED WITH TRIBUNAL CONTAINING 677 PAGES WERE ALSO BEFORE THE AO . WE HAVE NO REASON TO DOUBT THE CERTIFICATION GIVEN BY THE ASSESSEE AND STATEMENT AT BAR MADE BY THE ASSESSEE COUNSEL BEFORE US THAT ALL THESE 677 PAGES OF EVIDENCES AS ARE CONTAINED IN PAPER BOOK FILED BEFORE US WERE IN - FACT ALSO 79 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 FILED BEFORE THE AO AND LEARNED CIT(A) AND HENCE CONTENTIONS OF THE LEARNED DR THAT RULE 46A OF THE INCOME - TAX RULES, 1962 IS VIOLATED AS THESE EVIDENCES BEFORE BEING A DMITTED BY LEARNED CIT(A) WERE NOT FORWARDED TO AO FOR HIS COMMENTS AND REMAND REPORT ARE HEREBY REJECTED . WE DO NOT FIND ANY INFIRMITY IN THE ASSESSMENT ORDER OF THE AO WHICH WE ARE INCLINED TO SUSTAIN /CONFIRM AND WE HAVE ALSO OBSERVED THAT T HE APPELLATE ORDER OF THE LD.CIT(A) CANNOT BE SUSTAINED ON MERITS AND AS ON LAW AS LEARNED CIT(A) MERELY ACCEPTED THE CONTENTIONS OF THE ASSESSEE WITHOUT ANY EVIDENCES , WHICH IN - FACT PAINED US AFTER READING THE APPELLATE ORDERS OF THE LEARNED CIT(A) , AND THEREFORE WE ARE INCLINED TO SET ASIDE THE APPELLATE ORDER OF T HE LEARNED CIT(A) , AND HENCE THE ASSESSMENT ORDER PASSED BY THE AO IS HEREBY CONFIRMED ON MERITS IN WHICH WE DO NOT FIND ANY INFIRMITY AND REVENUE APPEAL IS ALLOWED . WE SHALL DEAL WITH CO FILED BY THE ASSESSEE W.R.T. REVENUE APPEAL SEPARATELY IN THE SUCCEED ING PARAS WHICH WILL ADDRESS ISSUES RAISED THEREIN BY THE ASSESSEE IN THE CO . WE ORDER ACCORDINGLY. 10 . IN THE RESULT APPEAL OF THE REVENUE IN IT(SS)A NO.09/PNJ/2015 IN THE CASE OF MR PETER VAZ FOR ASSESSMENT YEAR 2007 - 08 IS ALLOWED. 11 . AS THE ISS UE INVOLVED IN REVENUE APPEALS IN IT(SS)10/PNJ/2015, 11/PNJ/2015 , 12/PNJ/2015,13/PNJ/2015 AND IN ITA NO. 412/PNJ/2015 FOR ASSESSMENT YEAR(S) 2008 - 09 TO 2012 - 13 IN THE CASE OF MR. PETER VAZ ARE IDENTICAL TO ISSUE ADJUDICATED BY US IN IT(SS) A NO. 09/PNJ/2 015 FOR ASSESSMENT YEAR 2007 - 08 IN THE CASE OF MR. PETER VAZ , OUR DECISION IN IN IT(SS)A NO.09/PNJ/2015 FOR ASSESSMENT YEAR 2007 - 08 SHALL APPLY MUTATIS MUTANDIS TO THE ISSUE INVOLVED IN REVENUES APPEAL IN THE CASE OF MR. PETER VAZ IN IT(SS)10/PNJ/2015, 1 1/PNJ/2015 , 12/PNJ/2015, 80 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 13/PNJ/2015 AND IN ITA NO. 412/PNJ/2015 FOR ASSESSMENT YEAR(S) 2008 - 09 TO 2012 - 13. WE ORDER ACCORDINGLY. 12 . IN THE RESULT APPEAL(S) OF THE REVENUE IN IT(SS)A NO.10 - 13/PNJ/2015 AND ITA NO. 412/PNJ/2015 IN THE CASE OF MR PETER VAZ FOR ASSESSMENT YEAR 2008 - 09 TO 2012 - 13 ARE ALLOWED. 13 . THE ASSESSEE MR. PETER VAZ IS COVERED U/S 5A OF THE ACT WHEREIN INCOME IS TO BE APPORTIONED BETWEEN THE SPOUSES AS THEY ARE GOVERNED BY PORTUGUESE CIVIL CODE. THUS, THE ASSESSING OFFICER HAS MADE ADDITIONS TO THE TUNE OF 50% EACH IN THE HANDS OF MR PETER VAZ AND 50% IN THE HANDS OF MRS. NATALINA VAZ. HENCE, THE ISSUE INVOLVED IN REVENUES APPEALS IN THE CASE OF MRS NATALINA VAZ IS IDENTICAL TO THE ISSUE INVOLVED IN THE CASE OF MR. PETER VAZ. THUS, OUR DECISION IN THE CASE OF MR. PETER VAZ IN IT(SS) A NOS. 09 - 13/PNJ/2015 AND ITA NO. 412/PNJ/2015 FOR ASSESSMENT YEARS 2007 - 08 TO 2012 - 13 SHALL APPLY MUTATIS MUTANDIS TO IT(SS) A NO. 17 - 22/PNJ/2015 FOR THE ASSESSMENT YEAR(S) 2007 - 08 TO 2012 - 13 IN THE CAS E OF MRS NATALINA VAZ .WE ORDER ACCORDINGLY. 14 . IN THE RESULT APPEAL(S) OF THE REVENUE IN IT(SS)A NO.17 - 22/PNJ/2015 IN THE CASE OF MRS. NATALINA VAZ FOR ASSESSMENT YEAR 2007 - 08 TO 2012 - 13 ARE ALLOWED. 15 . AS THE ISSUE INVOLVED IN REVENUE APPEALS IN IT(SS)23 - 27/PNJ/2015, AND IN ITA NO. 413/PNJ/2015 FOR ASSESSMENT YEAR(S) 2007 - 08 TO 2012 - 13 IN THE CASE OF MR. EDGAR BRAZ AFONSO ARE IDENTICAL TO ISSUE ADJUDICATED BY US IN IT(SS) A NO. 09 - 13/PNJ/2015 AND ITA NO. 412/PNJ/2015 FOR ASSESSMENT YEAR(S) 2007 - 08 TO 2012 - 13 IN THE CASE OF MR. PETER VAZ , OUR DECISION IN IN IT(SS)A NO.09 - 13/PNJ/2015 AND ITA NO. 412/PNJ/2015 81 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 FOR ASSESSMENT YEAR(S) 2007 - 08 TO 2012 - 13 SHALL APPLY MUTATIS MUTANDIS TO THE ISSUE INVOLVED IN REVENUES APPEAL SO FAR AS LOANS AND ADVANCES GRANTED BY MCPL TO MRED IN THE CASE OF MR. EDGAR BRAZ AFONSO IN IT(SS)23 - 17/PNJ/2015 AND IN ITA NO. 413/PNJ/2015 FOR ASSESSMENT YEAR(S) 2007 - 08 TO 2012 - 13. WE ORDER ACCORDINGLY SO FAR AS ISSUE OF GRANTING OF LOANS AND ADVANCES BY MCPL TO MRED. 16 . IN THE CASE OF MR. EDGAR BRAZ AFONSO , THERE IS AN ADDITIONAL ISSUE INVOLVED WITH RESPECT TO THE LOANS AND ADVANCES GRANTED BY SONESTA INNS PRIVATE LIMITED TO MR. EDGAR BRAZ AFONSO DURING ASSESSMENT YEAR 2009 - 10 TO 2012 - 13 WHICH IS ADJUDICATED AS UNDER IN THE SUC CEEDING PARAS . FIRST WE SHALL TAKE UP REVENUE APPEAL IN THE CASE OF MR. EDGAR BRAZ AFONSO IN IT(SS) A NO. 25/PNJ/2015 FOR ASSESSMENT YEAR 2009 - 10. DURING THE COURSE OF THE SEARCH PROCEEDINGS CONDUCTED U/S 132 OF THE IN ACT THE BUSINESS PREMISES OF MCP L ON 31.01.2012 AND SUBSEQUENT SURVEY U/S.133 A OF THE ACT AT THE BUSINESS PREMISES OF THE M /S SONESTA INNS PVT LTD., IT WAS OBSERVED BY THE AO THAT THE MR. EDGAR BRA Z A F ONSO AND MR. PETER V AZ WERE HOLDING 50% SHARES EACH IN THE COMPANY NAMELY M /S SONESTA I NNS PVT . LTD. (HEREINAFTER CALLED THE SIPL) , WHICH WAS ALSO CONFIRMED BY THE ASSESSEE VIDE SUBMISSION S DATED 13 .02 .2012. THUS, IT IS AN UNDISPUTED AND ADMITTED POSITION BETWEEN RIVAL PARTIES THAT BOTH MR PETER VAZ AND MR EDGAR BRAZ AFONSO EACH HELD 50% SHAREHOLDING IN THE SIPL , WHEREIN BOTH ARE REGISTERED AND BENEFICIAL SHAREHOLDERS. THE ABOVE SAID COMPANY SIPL ., IN WHICH MR. PETER VA Z AND MR.EDGAR BRAZ AFONSO ARE HOLDING 50% SHARES EACH IS A PRIVATE LIMITED COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. THUS IT WAS OBSERVED BY THE AO THAT MR PETER VA Z AND MR EDGAR BRAZ AFONSO ARE HAVING SUBSTANTIAL INTEREST IN THE COMPANY SIPL. 82 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 IT WAS OBSERVED BY THE AO FROM THE DOCUMENTS SEIZED THAT SIPL HAD ADVANCED CERTAIN AMOUNT S TO MR EDGAR BRAZ AFONSO DU RING THE FINANCIAL YEARS 2008 - 09 TO 2011 - 12 W HICH AS PER THE LEDGER EXTRACT SUBMITTED BY MR EDGAR BRAS AFONSO ARE AS UNDER: - F.Y A.Y AMOUNT RECEIVED EXPENSES INCURRED BALANCE 2008 - 09 20 09 - 10 75,04,221/ - 17 ,84,221/ - 57,20,000/ - 2009 - 10 20 10 - 11 70,20,000/ - --- 70,20,000/ - 2010 - 11 20 11 - 12 1,22,85,215/ - 9,96,930/ - 1,12,88,825/ - 2011 - 102 20 12 - 13 2,49,96,707/ - 3,23,946/ - 2,46,72,761/ - TOTAL 4,86,81,046/ - IN THE STATEMENT RECORDED ON 31.01.2012 , THE ASSESSEE MR EDGAR BRAS AFONSO HAS CONFIRMED THAT THE DOCUMENTS SEIZED WERE OF SIPL WHERE HE IS ONE OF THE DIRECTOR AND S HAREHOLDER. FURTHER DURING THE COURS E OF STATEMENT RECORDED ON 29.03.2012 , SH. EDGAR BRAS AFONSO STATED THAT THE AMOUNTS WERE TAKEN BY HIM FROM SIPL FOR REPAIRS WORKS, RENOVATION OF THE BUILDING ETC. WHICH WAS NOT SUBSTANTIATED . THE AS S ESSEE ACCEPTED OF RECEIVING THE ADVANCES FROM SIPL AND ALSO SUBMITTED THAT THESE ADVANCES ARE REPAID BY ASSESSEE TO SIPL DURING THE SAME YEAR. THE ASSESSEE SUBMITTED THAT THERE ARE ALSO NO AMOUNTS OUTSTANDING IN THE BOOKS OF SIPL. CLARIFICATION S WERE SOUGHT BY THE AO FROM THE ASSESSEE TO SHOW CAUSE AS TO WHY AMOUNTS RECEIVED FROM THE SIPL SHOULD NOT BE TR EATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT . IN RESPONSE THE ASSESSEE SUBMITTED BEFORE THE AO AS UNDER: - 83 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 SUBMISSIONS REGARDING PROPOSED ADDITION IN THE HANDS OF EDGAR BRAZ AFONSO IN RESPECT OF ADVANCES MADE BY SONESTA INNS PRIVATE LIMITED. WE ARE IN RECEIPT OF YOUR NOTICE ASKING OUR CLIENT EDGAR AFONSO TO SHOW CAUSE AS TO WHY AMOUNTS RECEIVED FROM SONESTA INNS PVT. LTD. OUGHT NOT TO BE ADDED AS DEEMED DIVIDEND IN HIS HANDS. IN REGARD TO THE ABOVE WE NOW PROCEED TO SUBMIT AN EXPLANATION WHICH DEALS WITH BOTH THE LEGAL ASPECTS OF THE MATTER AS WELL AS THE FACTUAL MATRIX THEREOF. THE ADDITION SOUGHT TO BE MADE IS ON ACCOUNT OF A DEEMING FICTION CONTAINED IN SECTION 2(22) (E). SINCE THE VARIOUS LIMBS OF THE ABOVE PROVISION WILL BE DWELT UPON EXHA USTIVELY DURING THE COURSE OF OUR SUBMISSION FOR THE SAKE OF CLARITY THE RELEVANT PARTS OF THE SAID PROVISION IS REPRODUCED HEREUNDER I (22) 'DIVIDEND' INCLUDES ... ..... (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALL Y INTERESTED, OF ANY SUM (WHETHER AS REPRESENTING APART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENT ITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTE REST (HEREAFTER . IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS; EXPLANATION 1. THE EXPRESSION 'ACCUMULATED PROFITS', WHEREVER IT OCCURS IN THIS CLAUSE, SHALL NOT INCLUDE CAPITAL GAINS ARISING BEFORE THE 1ST DAY OF APRIL, 1946, OR AFTER THE 31ST DAY OF MARCH, 1948, AND BEFORE THE 1ST DAY OF APRIL, 1956. EXPLANATION 2. THE EXPRESSION 'ACCUMULATED PROFITS' IN SUB - CLAUSES (A), (B), (D) AND (E), SHALL INCLUDE ALL PROFITS OF THE 84 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB - CLAUSES, AND IN SUB - CLAUSE (C) SHALL INCLUDE ALL PROFITS OF THE COMPANY U P TO THE DATE OF LIQUIDATION, [BUT SHALL NOT, WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISITION OF ITS UNDERTAKING BY THE GOVERNMENT OR A CORPORATION OWNED OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE, INC LUDE A NY PROFITS OF THE - COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE]. [EXPLANATION 3. FOR THE PURPOSES OF THIS CLAUSE, (A) 'CONCERN' MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY; (B) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY TIME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN;] THRESHOLD CONDITIONS OF SECTION THIS PROVISION CAN BE ATTRACTED ONLY IF THE FOLLOWING TESTS ARE SATISFIED (A) THE ASSESEEE IS A COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED (VII) SUCH A COMPANY POSSESSES ACCUMULATED PROFITS (VIII) THERE IS EITHER A LOAN OR ADVANCES TO A SHAREHOLDER HOLDING NOT LESS THAN 10% OF THE VOTING POWER (IX) THERE IS A LOAN OR ADVANCE TO A CONCERN IN WHICH SUCH SHAREHOLDER HAS SUBSTANTIAL INTEREST ( X) THERE IS A PAYMENT ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SPECIFIED SHAREHOLDER , 85 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 SUBMISSIONS AS TO WHY THE PROVISIONS OF SECTION 2(22) (E) OUGHT NOT TO APPLY. BACKGROUND OF PROVISION BEFORE WE PROCEED TO REBUT YOUR HONOUR'S CONTENTIONS IT IS PERTINENT TO NOTE THAT WE ARE DEALING WITH A PROVISION WHICH IS A DEEMING FICTION AND THEREFORE HAS TO STAND THE TEST OF INTERPRETATION WITH THAT PERSPECTIVE. WE ARE STATING THIS FOR THE SPECIFIC REASON THAT WHAT ARE OTHERWISE COMMERCIAL TRANSACTIONS BETWEEN TWO RELATED ENTITIES ARE BEING SOUGHT TO BE BROUGHT INTO THE TAX NET THROUGH THIS FICTION. IT IS NECESSARY TO BEAR IN MIND THE PURPOSE FOR WHICH THIS PROVISION WAS BROUGHT ON THE STATUTE BOOK PRIOR TO ITS INTRODUCTION THERE WAS ON THE STATUTE SECTION 104 WHI CH SOUGHT TO TAX INCOME WHICH ' REMAINED IN THE HANDS OF THE COMPANY AS UNDISTRIBUTED PROFITS. THE SAID PROVISION WAS DELETED AND IN ITS PLACE THIS PARTICULAR PROVISION WAS BROUGHT ON THE STATUTE BOOK. THE AVOWED OBJECT OF THIS SECTIO N IS TO TAX SOMETHING WHICH OTHERWISE IS UNDERSTOOD BOTH BY THE PAYER AND THE RECEIVER AS DIVIDEND BUT IS CAMOUFLAGED AS A LOAN OR ADVANCE. IT IS CLEAR FROM THE FACTUAL MATRIX THE ONLY LIMB THAT ATTRACTED IT IS THE ALLEGED LOAN OR ADVANCES TO THE SHAREHOLD ER WHICH HAS SUBSTANTIAL INTEREST. REBUTTAL ON LEGAL PRINCIPLES WE NOW PROCEED TO ANALYSE THE PROVISION IN DETAIL TO ESTABLISH THAT THE SAID PROVISION CANNOT APPLY. THE PROVISION WILL APPLY ONLY IN A SITUATION WHERE THERE IS A 'LOAN OR AN ADVANCE' TO THE SHARE HOLDER WHICH SATISFIES THE TESTS LAID OUT ABOVE. THE QUESTION THAT NEEDS TO BE ANSWERED IS WHETHER THE MONIES THAT HAVE TRAVELLED FROM THE COFFERS OF THE COMPANY TO THE SHAREHOLDER CAN B E TREATED AS 'LOANS OR ADVANCES ' IN THE CONTEXT OF THE PROVISI ON TO WHICH WE ARE MAKING A REFERENCE. A DETAILED ANALYSIS OF THE FACTS WILL SHOW THAT THE MONIES TRANSFERRED WERE FINANCIAL TRANSACTIONS IN THE NORMAL COURSE OF BUSINESS. WE WILL IN OUR SUBSEQUENT SUBMISSIONS POINT OUT AS TO WHY THERE WAS A FLOW CONTINUOUSLY FROM THE COMPANY TO THE ACCOUNT OF MR. EDGAR AFONSO AS THERE WAS A DEFINITE PURPOSE IN THE MINDS OF THE STAKEHOLDERS THOUGH THE SAME MAY 86 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 NOT HAVE BEEN EXHAUSTIVELY AND EXPLICITLY DOCUMENTED AND THAT PURPOSE WAS CERTAINLY N OT AVOIDING TAX. HOWE VER FOR THE TIME BEING WE ARE ADDRESSING THE ISSUE AS TO WHETHER THE FLOW OF FUNDS CAN AT ALL BE TREATED AS A 'LOAN OR ADVANCE '. IN COMMERCIALLY PARLANCE A 'LOAN' IS A TRANSFER OF FUNDS WHICH IS EITHER FOR A SPECIFIC PERIOD OR WITH A SPECIFIC TERM .AS WI LL BE APPARENT FROM THE COPIES OF ACCOUNTS WHICH HAVE BEEN SEIZED AT THE TIME OF SEARCH AND WHICH ARE A MATTER OF RECORD, NO SUCH TERM WAS EVER SETTLED BY THE PARTIES BETWEEN THEM AT ALL. THERE HAS ALSO NOT BEEN A SINGLE PAYMENT OF INTEREST FROM ONE PARTY TO ANOTHER DURING THIS ENTIRE PERIOD. THEREFORE IN COMMERCIAL PARLANCE THE SAID PAYMENTS CANNOT CONSTITUTE A LOAN FOR AT NO POINT OF TIME WAS THERE ANY OBLIGATION ON THE RECEIVER TO REPAY THEM EITHER WITHIN A SPECIFIED PERIOD OR REPAY THEM AT ALL. FURTHER IT IS UNHEARD OF THAT A PERSON TO WHOM LOAN HAS BEEN ADVANCED ALSO ADVANCES MONIES OR CREDITS TO THE LENDER. THIS IS EXACTLY THE SITUATION IN THIS CASE AND THE TRANSACTIONS CONSTITUTE A CURRENT ACCOUNT AND NOT A LOAN. THE NEXT TERM APPEARING IN THE DEEMIN G FICTION IS AN 'ADVANCE'. AN ADVANCE IS NORMALLY TEMPORARY IS TO BE REPAID AS SOON AS THE PURPOSE FOR WHICH IT WAS MADE HAS BEEN FULLY ACCOMPLISHED. IT IS EITHER TEMPORARY OR TO BE ADJUSTED AGAINST VALUE TO BE RECEIVED. IN TERMS OF SECTION 2(22) (E) THI S ADVANCE COULD BE TREATED AS DEEMED DIVIDEND ONLY IF IT CONSTITUTES A BENEFIT TO THE RECIPIENT TO THE EXCLUSION OF THE PAYER. THIS IS NOT THE CASE AS OUR SUBSEQUENT SUBMISSIONS WILL BEAR OUT. THEREFORE WE SUBMIT THAT THE TEST OF 2(22) (E) IS NOT SATISFIED AT THE THRESHOLD ITSELF AND THE PAYMENT CANNOT CONSTITUTE A LOAN OR ADVANCE AS IS UNDERSTOOD IN THE CONTEXT OF THE SAID PROVISION. IT IS NECESSARY TO POINT OUT THAT ONE HAS TO DEAL WITH REAL - LIFE SITUATIONS AND CONSIDER COMMERCIAL EXIGENCIES AND COMMERCIA L EXPEDIENCY IS WHEN IS APPRECIATING THE TERM LOANS OR ADVANCES IN THIS CONTEXT. IT IS ONLY IF THE PAYMENT OF FUNDS OUT OF THE COFFERS OF A COMPANY TO A SHARE HOLDER OR HIS CONCERN IS FOR THE PURPOSE OF AVOIDING TAX THAT ONE CAN TREAT THEM AS DEEMED DIVIDE ND UNDER SECTION 2(22)(E) . EVEN IF ONE TAKES A VIEW THAT ONE HAS TO INTERPRET THE PROVISION STRICTLY ONE CANNOT CONSIDER THE TRANSACTIONS BETWEEN THE COMPANY AND THE FIRM AS A LOAN OR ADVANCE. FACTUAL MATRIX WILL SHOW THAT MONIES HAVE FLOWED FROM THE COFFERS OF THE COMPANY TO MR. EDGAR DURING THESE YEARS BUT IN CERTAIN PART OF THE YEARS THE POSITION WAS EXACTLY THE REVERSE THIS CANNOT BY 87 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ANY STRETCH OF IMAGINATION BE THE ACTION OF A COMPANY WHICH IS DISTRIBUTING DIVIDEND. IN FACT IF THERE IS PAYMENT OF DIVIDEND THERE WOULD BE ALWAYS SINGLE DIRECTIONAL FLOW. IT IS APPARENT THAT DESPITE THE FACT THAT THE CLOSING BALANCE IS A NIL BALANCE MONIES HAVE FLOWED ALSO FROM THE ASSESSEE TO THE COMPANY. AS IS BEING EXPLAINED BY US IT IS THE ONLY ON ACCOUNT OF A FAC T THAT THE MONIES FLOWED FOR COMMERCIAL EXPEDIENCY AND WERE NEVER FOR THE PURPOSE OF VESTING IN THE HANDS OF EITHER THE SHAREHOLDERS OR THE CONCERN. REASONS AS TO WHY THE FUNDS FLOWED FROM THE COMPANY TO THE SHARE HOLDER: BRIEF BACKGROUND OF MR. EDGAR AFO NSO: SINCE THE INCEPTION I.E. 1999 - 2000, IT WAS EDGAR AFONSO, WHO HAS BEEN EXCLUSIVELY INVOLVED IN AND IS MANAGING THE HOTEL SONESTA INNS. EDGAR IS BASED IN CALANGUTE AND HAS HIS OWN PRIVATE CONSTRUCTION CONCERN IN CALANGUTE. HE IS A CIVIL ENGINEER AND AR CHITECT BY PROFESSION. HE CARRIES OUT CONSTRUCTION OF INDIVIDUAL HOUSES FOR AND ON BEHALF OF HIS CLIENTS. HE ALSO CARRIES OUT REPAIRS AND RENOVATION WORKS FOR HIS VARIOUS CLIENTS. EDGAR ON VARIOUS OCCASIONS HAS ALSO CARRIED OUT REPAIRS AND RENOVATION WORKS FOR SONESTA INNS PRIVATE LIMITED (COPIES OF BILLS ENCLOSED - ANNEXURE1) EDGAR SOLELY OPERATES BANK ACCOUNTS OF SONESTA INNS AND HIS PERSONAL BUSINESS BANK ACCOUNTS. IN FACT EDGAR OPERATES MORE LIKE A CASHIER WHEN SONESTA INNS IS CONCERNED. TILL DATE EDGAR SITS IN THE OFFICE OF SONESTA AND OPERATES BOTH THE BUSINESSES EXCLUSIVELY. FOR ALL PURPOSES, EDGAR ALWAYS TREATED BOTH THE UNITS AS ONE UNIT AND THE FUNDS WERE NEED BASED TRANSFERRED TO - AND - FRO AND NOT WITH THE INTENTION TO EVADE TAX AS ENUMERATED IN THE LEGALISATION INTENT WHILE ENACTING PROVISIONS OF DEEMED DIVIDEND. MONIES WERE TRANSFERRED FROM THE BANK ACCOUNT OF SONESTA INNS TO THE ACCOUNT OF EDGAR AFONSO, WHENEVER THERE WAS DEFICIENCY IN THE BANK ACCOUNT OF EDGAR TO MEET THE BUSINESS OBLIGATIONS. S IMILARLY THE SAME WAS TRANSFERRED BACK WHEN SONESTA HAD MET THE BUSINESS OBLIGATIONS. BOTH THE ACCOUNTS WERE TREATED BY EDGAR AS ONE CURRENT ACCOUNT AND HENCE THE TRANSFER OF FUNDS. BOTH THE ACCOUNTS WERE OPERATED BY EDGAR AND HE NEVER DIFFERENTIATED HIS A CCOUNT THAT FROM THE COMPANIES ACCOUNT. 88 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 THOUGH PRACTICALLY SPEAKING COMPANY IS A SEPARATE LEGAL ENTITY, THE OPERATIONS WERE CARRIED OUT BY EDGAR AS A PROPRIETARY CONCERN. TO QUALIFY THE PAYMENT MADE TO SHAREHOLDER AS A 'LOAN AND ADVANCE', ALL THREE BASIC CONDITIONS NEEDS TO BE SATISFIED: 1) THE AMOUNT NEEDS TO BE ADVANCED OR LOANED; 2) THE COMPANY NEEDS TO PASS NECESSARY RESOLUTIONS IN ITS BOOKS IN ORDER TO ENABLE IT TO ADVANCE MONIES TO ITS SHAREHOLDERS; 3) THE AMOUNT ADVANCED SHOULD BE TREATED AS LOAN ACCOUNT IN THE BOOKS OF THE COMPANY AND ACCORDINGLY, THE SAME SHOULD BE REFLECTED IN THE STATUTORY AUDIT REPORT OF THE COMPANIES AUDITOR (CARO REPORT) AND IN THE SPECIFIC REGISTER MAINTAINED BY THE COMPANY. IN THE INSTANT CASE, NEITHER OF THE CONDITIONS ARE SATI SFIED TO TREAT THE AMOUNT GIVEN AS 'LOAN AND ADVANCE '. I AM ENCLOSING COPIES OF AUDIT REPORT FOR THE RELEVANT ASSESSMENT YEAR AS ANNEXURE - 2 TO SUPPORT THE FACT THAT THE AMOUNT GIVEN HAS NOT BEEN TREATED AS 'LOANS AND ADVANCES' EVEN BY THE STATUTORY AUDITO R OF THE COMPANY. HAD IT BEEN A LOAN AND ADVANCE, THE AUDITOR WOULD HAVE BEEN THE FIRST PERSON TO REPORT THE SAME IN HIS AUDIT REPORT AS BOUND BY THE COMPANIES ACT, 1956 AND PROFESSIONAL OBLIGATION. FINANCIAL BACKGROUND OF MR. EDGAR AFONSO: MR EDGAR AFON SO COMES FROM A VERY STRONG FINANCIAL BACKGROUND . HIS FAMILY IS CONSIDERED AS 'LANDLORDS ' IN THE VILLAGE OF CALANGUTE. BESIDES HIS PERSONAL BUSINESS THAT OF CONSTRUCTION, HE ALSO IS 50% OWNER OF MODELS GROUP. BOTH PERSONALLY AND BUSINESSWISE, HE HAS A VERY STRONG FINANCIAL BACKGROUND. THIS ITSELF EXPLAINS THAT THERE IS ABSOLUTELY NO NEED FOR HI M TO RESORT TO THE PRACTICE OF TAKING MONIES FROM SONESTA INNS PVT. LTD. FOR HIS PERSONAL GAINS. MOST IMPORTANT FACT OR REASONS FOR TRANSFER OF MONIES WAS THAT PRIOR TO 2004 - 05, EDGAR AS A CIVIL CONTRACTOR USED TO CARRY OUT REPAIRS AND MAINTENANCE WORK OF SONESTA INNS. SUBSEQUENTLY, 89 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 SINCE 2005 - 06 SERVICE TAX CAME INTO PICTURE. IF EDGAR HAD TO CARRY OUT THE REPAIRS WORK HIMSELF AND BILL THE SAME TO THE COMPANY, THAN HE WOULD HAVE HAD TO CHARGE SERVICE TAX. TO AVOID THE EXTRA BURDEN OF SERVICE TAX FOR THE CO MPANY, EDGAR USED TO PAY TO SUMS DIRECTLY TO THE CONTRACTORS AND SUPPLIERS ON BEHALF OF SONESTA. HE COULD HAVE ALSO DIRECTLY MADE PAYMENT FROM THE COMPANY ITSELF TO THE CONTRACTORS OR SUPPLIERS FOR THE REPAIRS AND RENOVATION, HOWEVER, SINCE THERE WERE COMM ON SUPPLIERS AND CONTRACTORS BOTH FOR HIS PERSONAL BUSINESSES AND THOSE USED FOR THE COMPANY WORKS, HE USED TO PAY THE AMOUNTS FROM HIS BUSINESS ACCOUNT AND THE SAME WAS REIMBURSED BY THE COMPANY. THIS WHOLE EXERCISE WAS CARRIED OUT ONLY TO REGULATE THE CO NTRACTOR BILLS AND PAYMENTS. AS A CIVIL CONTRACTOR, HE HAD SPECIAL PRICES NEGOTIATED WITH THE SUPPLIERS AND CONTRACTORS FOR HIS CONSTRUCTION PROJECTS AS HE WAS BUYING IN BULK, IF THE ORDERS HAD TO GO FROM SONESTA DIRECTLY THEY WOULD HAVE NOT GOT THE SAME R ATE BENEFIT AND HENCE THE SAME WAS ROUTED FROM THE ACCOUNT OF MR. EDGAR AFONSO. AMOUNT RECEIVED FOR ACQUISITION OF PROPERTY: DURING THE YEAR 2011 - 12, MR. EDGAR AFONSO NEGOTIATED FOR A PROPERTY AT ASSAGAO. HIS INTENTIONS WERE TO CREATE HOUSING UNITS FOR HIS HOTEL STAFF . EARLIER HE USED TO USE THE B'LOWS JUST NEXT TO HIS HOTEL BUILDING FOR HOUSING HIS STAFF . HOWEVER DUE TO EVER I NCREASING DEMAND FOR HOTEL ROOMS, DURING PEAK SEASON HE HAD TO USE THE B'LOW FOR LETTING OUT TO HOTEL GUEST. HOWEVER THE OWNERS OF THE ASSAGAO PROPERTY WERE RELUCTANT TO SELL THE PROPERTY TO A PRIVATE LIMITED COMPANY. TILL DATE, CERTAIN GOANS DON'T WANT TO SELL THEIR PROPERTY TO ANY OUTSIDERS. THEY DON'T TRUST THE COMPANIES AS THEY ARE NOT AWARE ABOUT ITS OWNERSHIP. SINCE EDGAR WAS GETTING THIS PROPERTY FOR A GOOD PRICE AND MORE - SO HE WAS IN NEEDED OF THE PROPERTY, HE AGREED TO BUY THE PROPERTY IN HIS PERSO NAL NAME AND THEN TRANSFER THE SAME TO THE COMPANY. ACCORDINGLY ON 28/12/2011, SONESTA ENTERED INTO AN AGREEMENT WITH MR. EDGAR, AUTHORISING HIM TO ACQUIRE THE PROPERLY ON BEHALF OF SONESTA. ACCORDINGLY ON 11/01/2012 AN AMOUNT OF RS. 1,00,00,000/ - WAS TR ANSFERRED FROM SONESTA INNS PRIVATE LIMITED TO MR. EDGAR AFONSO ACCOUNT. VIDE SALE DEED DATED 16/01/2012; MR. EDGAR ACQUIRED THE PROPERTY FROM THE OWNERS IN HIS PERSONAL NAME ON BEHALF OF SONESTA. IMMEDIATELY AFTER COMPLETING ALL THE NECESSARY FORMALITIES, ON 19/03/2012 EDGAR VIDE AN AGREEMENT FOR SALE TRANSFERRED THE PROPERTY IN THE 90 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 NAME OF SONESTA INNS PRIVATE LIMITED AS STIPULATED IN THE AGREEMENT DATED 28/12/2011. THE SAME IS APPEARING AS ASSET IN THE BOOKS OF SONESTA INNS PRIVATE LIMITED AND IN THE AUD ITED ACCOUNTS FOR THE YEAR ENDED 31/3/2012. (COPIES OF AUDITED ACCOUNT FOR 31/3/2012 ENCLOSED AS ANNEXURE - 3 AND COPIES OF AGREEMENT ENCLOSED AS ANNEXURE - 4). AS STATED IN YOUR NOTICE THAT IN THE PRELIMINARY STATEMENT OF MR. EDGAR AFONSO, HE STATED THAT LAND IS PURCHASED TO CONSTRUCT BUNGLOWS FOR SPECIFIC TYPE OF PERSONS/CLIENTS, HE EXPRESSED HIS INTENTION AS A CIVIL CONTRACTOR CONSIDERING THE FACT THAT SONESTA BEING A SEPARATE LEGAL ENTITY ALSO QUALIFIES FOR A SPECIFIC TYPE OF PERSON/CLIENT. HE NEVER SAID TH AT THE LAND WAS NOT FOR SONESTA. SUBSEQUENTLY HE HAS GIVEN A STATEMENT THAT THE SAID LAND IS FOR SONESTA AND HAS SUPPORTED THE SAME WITH NECESSARY AGREEMENTS DULY REGISTERED / NOTARIZED. FROM WHAT IS STATED ABOVE IT IS CLEAR THAT THE ENTIRE FLOW OF MONIES WAS ON ACCOUNT OF CURRENT ACCOUNT TRANSACTION AND BY NO STRETCH OF IMAGINATION CAN BE CONSIDERED AS ADVANCE GIVEN BY THE COMPANY TO ITS SHARE HOLDERS. THE ENTIRE AMOUNT RECEIVED FROM SONESTA INNS PVT. LTD. ALONG WITH THE AMOUNT OF RS. 1,50,00,000 GIVEN B Y SONESTA TO MR. EDGAR FOR PURCHASE OF PROPERTY VIDE AGREEMENT DATED 28/12/2011 CANNOT BE TREATED AS TRANSACTION ATTRACTING PROVISIONS OF SECTION 2(22) (E) AND NEEDS CONSIDERATION. ALSO DURING THE F.Y. 2008 - 09 DURING THE MONTH JULY 2008 TO SEPTEMBER 2008 THERE WAS A CREDIT BALANCE IN THE BOOKS OF SONESTA. I.E. SONESTA HAD TO PAY EDGAR AFONSO RS. 7,93,353/ - AND DURING THE F.Y. 2009 - 10 DURING THE MONTH OCTOBER 2009 TO NOVEMBER 2009 THERE WAS A CREDIT BALANCE IN THE BOOKS OF SONESTA. I. E. SONE STA HAD TO PAY EDGAR AFONSO RS.7 40, 000/ - . BOTH THE AMOUNTS REPAID BACK BY SONESTA HAS BEEN CONSIDERED AS DEEMED DIVIDEND IN YOUR NOTICE, WHICH NEEDS CONSIDERATION. OUR ABOVE SUBMISSIONS MAY KINDLY BE CONSIDERED BEFORE FINALISING THE ASSESSMENT . THE AO CONSIDERED THE SUBMISSION OF THE ASSESSEE AND OBSERVED THAT F O LLOWING ADVANCES HAVE BEEN MADE BY SIPL T O ITS S HAREHOLDER MR.EDGAR BRAZ AF ONSO , AS UNDER: - 91 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 FINANCIAL YEAR TOTAL LOAN / ADVANCES AS PER LEDGER (IN RS) 2008 - 09 75,04,221/ - 2009 - 10 70,20,000/ - 2010 - 11 1,22,85,215/ - 2011 - 12 2,49,96,707/ - IT WAS DULY RECORDED IN THE BOOKS OF ACCOUNTS OF SIPL AS ADVANCES TO DIRECTOR. THE AO OBSERVED THAT THE ASSESSEE HAD FAILED TO SUBMIT TH E PROOF OF EVIDENCE OF THE CLAIM THAT ALL THESE ADVANCES RECEIVED BY HIM FR OM SIPL WERE TOWARDS REPAIRS AND RENOVATIONS. THE ASSESSEE WAS AGAIN ASKED TO SUBMIT THE DETAILS AND NATURE OF THE ADVANCES AND TO FURNISH EVIDENCES OF HAVING INCURRED THE EXPENSES TOWARDS REPAIR AND MAINTENANCE AND RENOVATION. THE AO OBSERVED FROM THE MONTHLY SUMMARY AS WELL AS LEDGER EXTRACT OF ADVANCE TO DIRECTOR IN THE BOOKS OF ACCOUNTS OF SIPL THAT DURING THE FINANCIAL YEAR 2008 - 2009 , THE ASSESSEE HAS RECEIVED TOTAL ADVANCE OF RS.75,04,221/ - FROM SIPL OUT OF WHICH RS.55,00,000/ - WAS PAI D BACK BY THE ASSESSEE TO THE SIPL DURING THE SAME YEAR ( ON 09.07.2008 - R S.3,00,000/ - , RS.17,00,000/ - ON 15.07.2008 AND RS.35,00,000/ - ON 14.02.2009 ) . F URTHER IT WAS OBSERVED BY THE AO THAT THE SAID COMPANY SIPL HAS ADJUSTED AN AMOUNT OF RS. 2,00,000/ - TOWARDS D IR ECTORS REMUNERATION PAYABLE TO THE ASSESSEE WHILE THE REMAINING AMOUNT TOTALLING TO RS.16, 39,673/ - WAS ADJUSTED AGAINST BUILDING REPAIRS ELECTRICAL AND HARDWARE ITEMS, SWIMMING POOL MAINTENANCE AND FURNITURE AND F I XTURES R EPAIRS . THE ASSESSEE SUBMITTED THAT HE HAD REPAID AN AMOUNT OF RS.55,00,000/ - DURING THE YEAR ITSELF WHILE THE BALANCE AMOUNT OF RS. 19,84,221/ - WAS ADJUSTED AGAINST THE BUILDING 92 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 REPAIRS A ND SALARY PAYABLE TO HIM BY SIPL, WHICH HAS B E EN OFFERED BY HIM TO TAX IN HIS INDIVIDUAL CAPACITY IN THE RETUR N OF INCOME FILED WITH THE REVENUE FOR THE ASSESSMENT YEAR 2009 - 10. IT WAS FURTHER SUBMITTED THAT THE SAID AMOU N T OF RS. 19,84,221/ - WAS PAID TO HIM BY SIPL , AFTER DEDUCTION OF TAX ES AT SOURCE. THE AO ACCEPTED THE CONTENTION S OF THE ASSESSEE SO FAR AS THE AMOUNT OF RS.19,84,221/ - WAS CONCERNED WHICH WAS TOWARDS DIRECTOR REMUNERATION AND ALSO TOWARDS BUILDING REPAIRS AND RENOVATION , AGAINST WHICH NO AD D ITION S WERE MADE BY THE AO . FURTHER , THE AO OBSERVED THAT NO EXPLANATION HAS BEEN GIVEN BY THE ASSESSEE WITH RESPECT TO THE ADVANCE OF RS.55,20,000/ - RECEIVED FROM SIPL BY THE ASSESSEE AND THE SAME WAS TREATED BY THE AO AS LOANS AND ADVANCES AND TAXED AS DEEMED DIVIDEND U/S 2( 22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE. WITH RESPECT TO THE FINANCIAL YEAR 2 009 - 10 IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS RECEIVED RS.70,20,000/ - AS LOANS AND ADVANCES FROM SIPL AND THE LEDGER EXTRACTS CLEARLY REFLECTS THAT THE SAID AMOUNT IS GIVEN AS ADVANCE TO THE D IRECTOR I.E. THE ASSESSEE FOR WHICH NO EXPLANATION HAS BEEN OFFERED BY THE ASSESSEE , HENCE THE TOTAL AMOUNT OF RS. 70,20,000/ - WAS TREATED BY THE AO AS LOANS AND ADVANCES RECEIVED BY THE ASSESSEE BEING H IT BY THE DEEMING FICTION AS CONTAINED U/S. 2(22)(E) OF THE ACT AND WAS TAXED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11. F OR THE FINANCIAL YEAR 2010 - 11 IT WAS OBSERVED BY THE AO THAT SIPL HAS ADVANCED RS. 1,22,85,215/ - DURIN G THE YEAR TO THE ASSESSEE . IT WAS OBSERVED BY THE AO FROM THE LEDGER EXTRACT THAT THE ASSESSEE HAS PAID BACK AN AMOUNT OF RS.2,00,000/ - DURING FEBRUARY 2011 AND ANOTHER R S. 84,05,243/ - WAS PAID BACK BY ASSESSEE TO SIPL DURING THE MON TH OF 93 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 M A R CH 2011. IT WAS OBSERVED BY THE AO THAT RS. 25,94,757 / - WAS ADJUSTED TOWARDS THE BONUS / EX - GRATIA PAYABLE . BUT IT WAS OBSERVED BY THE AO THAT THE SAME WAS NOT R EFL ECTED AS INCOME BY THE ASSESSEE IN THE RETURN OF INCOM E FILED WITH THE REVENUE FOR THE ASSESSMENT YEAR 20 11 - 12. IN REPLY , THE AS SESSEE SUBMITTED THAT THE AMOUNT O F RS . 14,00,000/ - WAS ADJUSTED TOWARDS REMUNERATION PAYABLE TO THE DIRECTOR AND THE BALANCE AMOUNT OF RS.11,94,757/ - WAS PAID TO HIM BY SIPL TO WARDS STAFF BONUSES FOR THE EARLIER YEARS. SINCE NO SA TISFACTORY EXPLANATION WAS GIVEN BY THE ASSESSEE WITH RESPECT TO THE AMOUNT OF RS. 14,00,000/ - RECEIVED BY HIM FROM SIPL TOWARDS D IRECTOR R EMUNERATION AS ON VERIFICAT ION OF THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 20 11 - 12 OF THE ASSESSEE , IT WAS OBSERVED BY THE AO THAT AN AMOUNT OF RS. 1,00,0 00/ - WAS ONLY SHOWN AS DIRECTOR REMUNERATION RECEIVED FROM SIPL . IT WAS ALSO OBSERVED BY THE AO FROM THE P ROFIT AND L OSS ACCOUNT OF THE SIPL FOR THE ASSESSMENT YEAR 2011 - 2011 THAT ONLY R S.4,00,000/ - HAS BEEN DEBITED AS E XP E NSES TOWARDS REMUNERATION TO D IRECTORS AND HENCE THE CONTENTION OF THE ASSESSEE WAS REJECTED BY THE AO WITH RESPECT TO THE AMOUNT OF RS.14,00,000/ - RECEIVED BY HIM TOWARDS THE DIRECTOR REMUNERATION. WITH RESPECT TO THE REMAINING AMOUNT OF RS.11,94,757/ - , IT WAS STATED TO HAVE BEEN PAID TOWARDS STAFF BONUS FOR THE EARLIER YEARS. THE CONTENTION OF THE ASSESSEE WAS REJECTED BY THE AO AS THERE WAS NO MENTION IN THE BALANCE S HEET OF THE COMPANY SIPL THAT THERE IS ANY OUTSTA NDING BONUS ES TO BE PAID TO THE EMPLOYEES. IT WAS ALSO OBSERVED BY THE AO THAT NOTHING PREVENTED SIPL FROM MAKING DIRECT PAYMENT TO TH E EMPLOYEES TOWARDS BONUS ES AND ALSO NO EVIDENCES WERE BROUGHT ON RECORD TO SUPPORT THE CLAIM. H ENCE , THE GENUINENESS OF THE TRANSACTI ON OF RS.25,94,757/ - WAS DISPUTED BY THE AO AND THE SAME WAS ADDED TO THE INCOME OF THE ASSEESSEE AS LOANS AND ADVANCES BEING HIT B Y THE DEEMING FICTI ON CREATED U/S 2(22)(E) AS DEEMED DIVIDEND FOR THE 94 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ASSESSME NT YEAR 2011 - 12 , APART FROM THE ADDITION OF RS. 86,05,243/ - WHICH ADVANCES WERE REPAID BY THE ASSESSEE TO SIPL DURING THE SAME YEAR . THE A SSESSEE SUBMITTED DETAILS OF EXPENDITURE OF 9,96,930/ - FO R THE FINAN CIAL YEAR 2010 - 2011 AS OBSERVED BY THE AO FROM THE LEDGER EXTRACT FOR WHICH NECESSARY CREDIT /SET - OFF WAS GIVEN BY THE AO AND ADDITION OF RS.1,12,88,285/ - WAS BROUGHT TO TAX AS LOANS AND A DVANCES RECEIVED AND BEING HIT BY DEEMING FICTION CREATED U/S 2(22)(E) OF THE A CT AS THE LOANS AND ADVANCES RECEIVED BY THE ASSESSEE WERE TREATED AS DEEMED DIVIDEND AND BROUGHT TO TAX. THE AO OBSERVED THAT DURING THE COURSE OF THE RECORDING OF THE STATEMENT ON 29.03.2012 , THE ASSESSEE HAS ADMITTED THAT HE HAS RECEIVED AN ADVANCE FROM THE SIPL D URING THE FINANCIAL YEAR 2008 - 09 TO 2011 - 12 AND THESE AMOUNTS WERE RETURNED BACK TO SIPL IN THE SAME YEAR AND THE AMOUNT IS NOT OUTSTANDING IN T HE BOOKS OF SIPL WHI CH IS ALSO BEEN CONFIRMED BY THE ASSESSEE DURIN G T H E CO URSE OF THE ASSESSMENT PROCEEDINGS. THUS , THE AO OBSERVED THAT THESE ADVANCES MADE BY THE SIPL WERE FOR THE INDIVIDUAL BENEFIT OF THE SUBSTANTIAL SHAR E HOLDER OF SIPL I.E. THE ASSESSEE WHO IS HOLDING 50% SHARE OF SIPL AND THESE ADVANCES ARE CLEARLY HIT BY THE DEEMING FIC T IO N CREATED BY SECTION 2(22)(E) OF THE ACT AND IS TO BE BROUGHT TO TAX AS DE EMED DIVIDEND U/S . 2(22) OF THE ACT . THUS , THE AO GAVE DUE C REDIT /SET - OFF FOR ALL THE EXPENSE INCURR ED BY THE ASSESSEE TOWARDS THE R EPAIR AND MAINTENANCE / RENOVATION AND SALARY WHICH HAS BEEN DULY EXPLAINED BY THE ASSESSE FOR WHICH NO A D DITION S WERE MADE BY THE ASSESSING OFFICER U/S.2(22)(E ) OF THE ACT. THUS THE CONTENTION OF THE ASSESSEE FOR THE BALANCE AMOUNT THAT HE HAS RECEIVED THE ADVANCES TOWARDS BUILDING REPAIR AND MAINTENANCE AND RENOVATION AND RETURNED THE AMOUNT AFTER CONDUCTING THE REPAIR AND MAINTENANCE WAS REJECTED BY THE AO AS IT WAS OBSERVED BY THE AO THAT AMOUNTS HAVE BEEN ADVANCED IN THE INITIAL MONTH O F A PRIL TO JUNE AND THE SAME WERE RETURNED 95 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 BY THE ASSESSEE AFTER USING THEM FOR THREE TO SIX MONTHS AND THE FUNDS OF SIPL WERE UTILISED BY THE ASSESSEE FOR OWN INDIVIDUAL BENEFITS OF THE ASSESSEE . IT WAS OBSERVED BY THE AO THAT DURING THE ASSESSMENT YEAR 20 12 - 13 THE ASSESSEE HAS BEEN ADVANCE D MONEY BY SIPL FOR PURCHASE OF THE PROPERTY AMOUNTING TO R S. 1 CRORE ON 11.01.2012 WHICH WAS UTILISED FOR PURCHASE OF PROPERTY AT ASSAGOA IN HIS INDIVIDUAL NAME WHICH WAS LATER TRANSFERRED TO THE COM PANY SIPL AND AGREEMENTS WERE PLACED ON RECORD WHEREBY THE ASSESSEE WAS AUTHORISED BY SIPL TO BUY THE PROPERTY IN HIS INDIVIDUAL NAME AND LATER TO TRANSFER THE SAME TO SIPL TO PROVE THE BONAFIDE TO SHOW THAT THE ASSESSEE HAD PURCHASED THE PROPERTY IN HIS NAME WHICH WAS LATER TRANSFERRE D TO SIPL VIDE IN ACCORDANCE WITH TERM S OF AGREEMENT WITH SIPL . THE CONTENTION OF THE ASSESSEE THAT PEOPLE IN GOA DOES NOT WENT TO SELL THE PROPERTY TO THE COMPANY AS THE SHARE HOLDING IS NOT KNOWN AND HENCE THE ASSESSEE PURCHASED THE PROPERTY IN HIS INDIVIDUAL NAME UNDER AUTHORITY FROM SIPL AND LATER TRANSFERRED T H E SAME TO SIPL WAS ACCEPTED BY THE AO , F OR WHICH NECESSARY SET - OFF/ CREDIT WAS GIVEN BY THE AO AND THE BALANCE AMOUNT WAS BROUGHT TO TAX FOR THE ASSESSMENT YEAR 20 12 - 13 WITHIN AMB IT OF PROVISIONS AND MANDATE OF SECTION 2(22)(E) OF THE ACT . THUS, THE TOTAL ADVANCE S BEING GIVEN BY SIPL TO THE ASSESSEE FOR PURCHASING AFORESAID LAND OF RS.1,20,00,000/ - WAS TREATED AS GIVEN FOR BUSINESS PURPOSES AND NO ADDITIONS THEREOF WAS MADE TO THA T EXTENT BY THE AO . THE ASSESSEE ALSO COULD SHOW THAT RS. 2,00,000 WAS GIVEN BY SIPL TO THE ASSESSEE TOWARDS DIRECTOR REMUNERATION , AND RS. 2,59,877/ - WAS GIVEN BY SIPL TO ASSESSEE FOR R EPAIR AND MAINTENANCE FOR WHICH NO ADDITIONS WERE MADE BY THE AO DURING THE ASSESSMENT YEAR 20 12 - 13 , THUS RS. 1,25,36,830/ - STOOD ADDED TO THE INCOME OF THE ASSESSEE AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT, OUT OF TOTAL ADVANCE OF RS. 2,49,96,707/ - RECEIVED BY THE ASSESSEE DURING THE ASSESSMENT YEAR FROM SIPL AND B ALANCE AS SET OUT 96 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ABOVE WAS ACCEPTED BY THE AO AS STOOD DULY EXPLAINED FOR BUSINESS PURPOSES AS SATISFACTORY EXPLANATION WAS GIVEN BY THE ASSESSEE . SINCE THE ASSESSEE HELD SUBSTANTIAL INTEREST IN THE CLOSELY HELD COMPANY SIPL AND TO THE EXTENT OF ACCUMULATE D PROFITS , THE INCOME BEING LOANS AND ADVANCES RECEIVED BY THE ASSESSEE AND HIT BY DEEMING FICTION CREATED U/S 2(22)(E) OF THE ACT WAS BROUGHT TO TAX UNDER SECTION 2(22)(E ) OF THE A CT AS DEEMED DIVIDEND , AS DETAILED HERE UNDER : - (IN RS .) F.Y A.Y NAME OF THE PERSON ACCUMULATED PROFIT WITH M/S SIPL NET LOAN / ADVANCE RECEIVED DEEMED DIVIDEND 2008 - 09 2009 - 10 EDGAR B AFONSO 3,86,23,809/ - 55,20,000/ - 55,20,000/ - 2009 - 10 2010 - 11 EDGAR B AFONSO 4,81,78,690/ - 70,20,000/ - 70,20,000/ - 2010 - 11 2011 - 12 EDGAR B AFONSO 5,43,44,645/ - 1,12,88,285/ - 1,12,88,285/ - 2011 - 12 2012 - 13 EDGAR B AFONSO 6,00,64,669/ - 1,25,36,830/ - 1,25,36,830/ - TOTAL 3,63,65,115/ - THE AO RELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF MADRAS IN CIT V. SRINIVA SAN (K)(1963) 50 ITR 788 (MAD), DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF G.R. G OVINDA RAJOLU NIDU V. CIT (1973) 90 ITR 13 (MAD) , HONBLE SUPREME COURT DECISION IN THE CASE OF SMT TARULATA SHYAM V. CIT (1977) 108 ITR 345 (SC) , HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF WAL CHAND & CO ., LTD. V. CIT (1975) 100 ITR 598 (BOM), AND DECISION IN THE CASE OF CIT V. CREATIVE DYEING AND PRINTING PVT. L TD . 184 TAXMAN 483 . THUS IN NUT - SH EL L THE AO BROUGHT TO 97 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 TAX INCOME BEING LOA NS AND ADVANCES GIVEN BY SIPL WHICH COULD NOT BE EXPLAINED TO BE FOR BUSINESS PURPOSES WERE HELD TO BE HIT BY SECTION 2(22)(E) OF THE ACT AS DEEMED DIVIDEND BY HOLDING AS UNDER : - IN VIEW OF THE ABOVE, THE LOANS AND ADVANCES OF RS.55,20,000/ - REQUIRED TO BE BROUGHT TO TAX U/ S 2(22)(E) OF THE I.T.ACT FOR THE ASST. YEAR 2009 - 10 IN THE HANDS OF SHRI EDGAR BRAS AFONSO. IN VIEW OF THE ABOVE, THE LOANS & ADVANCE OF RS.70,20,000/ - REQUIRES TO BE BROUGHT TO TAX U/S 2 (22)(E) OF THE I.T.ACT FOR THE ASST.YEAR 2010 - 11 IN THE HANDS OF SHRI EDGAR BRAS AFONSO. IN VIEW OF THE ABOVE, THE LOANS & ADVANCE OF RS. 1,12,88,285/ - REQUIRES TO BE BROUGHT TO TAX U/S 2 (22}(E) OF THE I.T.ACT FOR THE ASST.YEAR 2011 - 12 IN THE HANDS OF SHRI EDGAR BRAS AFONSO. IN VI EW OF THE ABOVE, THE LOANS AND ADVANCE OF RS. 1,25,36,830/ - REQUIRES TO BE BROUGHT TO TAX U/S 2 (22)(E) OF THE I.T.ACT FOR THE ASST.YEAR 2O12 - 13 IN THE HANDS OF SHRI EDGAR BRAS AFONSO. SINCE , THE ASSESSEE WAS COVERED U/S 5A OF THE ACT, 50% OF THE AFORE - S TATED AMOUNT WAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE WHILE 50% OF THE AMOUNT WAS BROUGHT TO TAX IN THE HANDS OF THE SPOUSE OF THE ASSESSEE BY THE AO. 17 . AGGRIEVED BY THE ASSESSMENT ORDERS PASSED BY THE AO, THE ASSESSEE , MR. EDGAR BRAZ AFONSO FILED FIRST APPEAL BEFORE THE LEARNED 98 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 CIT(A) AND RE ITERATED THE SUBMISSION AS WERE MADE BEFORE THE AO. THE LD.CIT(A) ACCEPTED THE CONTENTION S OF THE ASSESSEE AND DELETED THE ADDITIONS AS MADE BY THE ASSESSING OFFICER, BY HOLDING AS UNDER: - HOWEVER, IN THE CASE OF THE MR. EDGAR AFONSO, HE HAS RECEIVED SUMS OF MONEY FROM THE COMPANY M/S. SONE STA INNS PVT. LTD, AND THE A.O HAS TREATED PART OF THE MONEY AS DEEMED DIVIDEND IN THE HANDS OF MR. EDGAR AFONSO, THE APPELLANT STATED THAT THE COMPANY M/S. SONESTA INNS PVT. LTD OPERATES A RESORT HOTEL AND IS MANAGED BY MR. EDGAR AFONSO. IN THIS COMPANY ALSO, MR. PETER VAZ AND MR. ED GAR AFONSO ARE 50% EACH SHAREHOLDERS. MR. EDGAR AFONSO HAS HIS OWN ACCOUNT IN THE SAME BANK IN WHICH M/S SONESTA INN HAS ITS ACCOUNT. BOTH THESE ACCOUNTS WERE OPERATED BY MR. EDGAR AFONSO IN THE BEST INTEREST OF THE BUSINESS AND WHENEVER THERE WAS ANY DEFI CIENCY IN ANY OF THE ACCOUNT, THE MONEY WAS TRANSFERRED FROM ONE ACCOUNT TO ANOTHER TO MEET THE BUSINESS EXPENSES. THESE TRANSFERS WERE NECESSITATED BY BUSINESS CONSIDERATIONS AND NO PERSONAL ADVANTAGE WAS OBTAINED BY MR. EDGAR AFONSO. THE TRANSFER OF F UNDS HAS BEEN TWO WAYS NECESSITATED BY THE REQUIREMENT OF BUSINESS. THE APPELLANT FURTHER CONTENDED THAT EVEN THE A.O. HAS APPRECIATED THE FACT AND HAS NOT MADE ADDITIONS IN RESPECT OF SOME MONEYS TRANSFERRED TO MR, EDGAR AFONSO, WHEN HE WITHDREW MONEY FOR PURCHASE OF A PROPERTY. HOWEVER, THE A.O. DID NOT APPRECIATE THAT ALL THE SUMS TRANSFERRED TO MR. EDGAR'S ACCOUNT WAS FOR THE PURPOSE OF BUSINESS ONLY AND THIS IS WHY THERE IS NO OUTSTANDING BALANCE IN THE NAME OF EDGAR, IN THE BOOKS OF M/S. SONESTA IN N AT THE YEAR END. AS SOON AS THE REQUIREMENT WAS OVER, MONEY WAS AGAIN TRANSFERRED TO THE COMPANY. THE APPELLANT HAS EXPLAINED IN DETAILS REGARDING THIS TO AND FRO TRAFFIC OF TRANSFER OF FUNDS BETWEEN THE APPELLANT. MR. EDGAR AFONSO AND THE COMPANY M/S. SONESTA INNS WHICH HAS BEEN REPRODUCED ON PAGE NO, 45 AND 46 OF THIS ORDER. BUT THE A.O, HAS NOT ACCEPTED THE EXPLANATION OF THE APPELLANT AND TREATED THE TRANSFER OF FUNDS AS ADVANCES AND CONCLUDED THAT PROVISIONS OF S.2(22)(E) ARE APPLICABLE. THE A.O. HAS TREATED PART OF THE MONEY TRANSFERRED AS BEING BUSINESS TRANSACTION IN NATURE AND BALANCE AS DEEMED DIVIDED. THIS IS NOT IN DISPUTE THAT MR. EDGAR AFONSO HAS NOT WITHDRAWN ANY MONEY FOR HIS 99 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 PERSONAL ADVANTAGE. HE HAS MOSTLY WITHDRAWN MONEY FOR T HE PURPOSE OF BUSINESS OF THE COMPANY AND EXCESS AMOUNT WAS NOT UTILIZED BY MR. EDGAR AS THE SAME WERE RETURNED BACK TO THE ACCOUNT OF THE COMPANY. SAME MONEY WHICH WAS RETAINED AS HIS REMUNERATION WAS DISCLOSED AS INCOME BY MR. EDGAR AFGONSO. THUS, IN VIE W OF THESE FACTS, THAT NO MONEY WAS RETAINED BY MR. EDGAR AFONSO, THE ACCOUNTS REUTILIZED FOR THE BUSINESS OF THE COMPANY EXCESS AMOUNT WAS REPAID BY - MR. EDGAR AFONSN AND NO PERSONAL ADVANTAGE WAS TAKEN, IN MY OPINION PROVISION OF S.2(22)(C) ARE NOT ATTRA CTED IN THE CASE OF MR. EDGAR AFONSO AND ADDITIONS MADE ON THIS ACCOUNT ARE DELETED. SINCE THE APPELLANT ARE COVERED U/S 5A OF THE I.T.ACT THIS ORDER SHALL BE APPLICABLE IN THE HANDS OF THE SPOUSES OF THE APPELLANT AS WELL. 18 . AGGRIEVED BY THE APPELL ATE ORDERS PASSED BY LEARNED CIT(A), THE REVENUE IN APPEAL BEFORE THE TRIBUNAL , IT IS THE CONTENTION OF THE LD.DR THAT HE RELIES UPON THE ORDER S OF THE AO, WHILE ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER S OF THE CIT(A). BOTH THE RIVAL PARTIES AGREED THAT THEIR CONTENTIONS AS ADVANCED WHILE ARGUING CASE OF MR PETER VAZ TO THE EXTENT APPLICABLE TO THE FACTS OF TH IS CASE ALSO BE READ IN THIS INSTANT APPEAL BEFORE THE TRIBUNAL. WE HAVE CONSIDERED RIVAL CON TENTIONS AND PERUSED TH E MATERIAL ON RECORD INCLUDING CASE LAWS RELIED UPON BY RIVAL PARTIES. W E HAVE OBSERVED THAT SH. EDGAR BRAZ AFONSO I.E. THE ASSESSEE IS REGISTERED CUM BENEFICIAL SHARE HOLDER AS WELL D IRECTOR OF M/S SONESTA INNS PVT LTD I.E. SIPL HOLDING 50% SHARE IN THE S AID COMPANY AND IS DIRECTLY COVERED BY THE PROVISIONS OF S ECTION 2(22)( E) OF THE ACT BEING THE HOLDER OF THE SHARES OF MORE THAN 10% IN SONESTA INNS PVT LTD WHICH IS A CLOSELY HELD PRIVATE LIMITED COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED . THIS IS AN UNDISPUTED AND ADMITTED POSITION BETWEEN RIVAL PARTIES. IT IS ALSO 100 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 UNDISPUTED AND ADMITTED POSITION BETWEEN RIVAL PARTIES THAT MR. EDGAR BRAZ AFONSO IS COVERED U/S 5A OF THE ACT. WE HAVE OBSERVED THAT THE SAID COMPANY SIPL HOLDS ACCUMULATED PROFITS AND THE LOANS AND ADVANCES GIVEN BY SIPL TO THE ASSESSEE ARE ADDED WHEREIN BUSINESS PURPOSE OR NEXUS COULD NOT BE EXPLAINED BY THE ASSESSEE TO THE EXTENT OF ACCUMULATED PROFITS POSSESSED BY SONESTA INNS PVT LTD AS DEEMED DIVID END IN THE HANDS OF THE ASSESSEE , AS DETAILED HEREUNDER: - F.Y A.Y NAME OF THE PERSON ACCUMULATED PROFIT WITH M/S SIPL NET LOAN / ADVANCE RECEIVED DEEMED DIVIDEND 2008 - 09 2009 - 10 EDGAR B AFONSO 3,86,23,809/ - 55,20,000/ - 55,20,000/ - 2009 - 10 2010 - 11 EDGAR B AFONSO 4,81,78,690/ - 70,20,000/ - 70,20,000/ - 2010 - 11 2011 - 12 EDGAR B AFONSO 5,43,44,645/ - 1,12,88,285/ - 1,12,88,285/ - 2011 - 12 2012 - 13 EDGAR B AFONSO 6,00,64,669/ - 1,25,36,830/ - 1,25,36,830/ - TOTAL 3,63,65,115/ - WE HAVE OBSERVED THAT TH E AO HAS GIVEN DUE CREDITS AND SET OFF FROM LOANS AND ADVANCES GIVEN BY SIPL TO THE ASSESSEE, WHERE - EVER THE ASSESSEE WAS ABLE TO SATISFACTORILY EXPLAIN THAT THE TRANSFER OF FUNDS TO THE ASSESSEE BY SIPL WAS FOR BUSINESS TRANSACTION ON ACCOUNT OF R EPAI R AND MAINTENANCE / RENOVATION OR WAS PAID TOWARDS DIRECTOR R EMUNER ATION BY SAID SIPL TO THE ASSESSEE. HOWEVER, FOR THE REST OF THE A DVANCES AS DETAIL ED ABOVE , THE ASSESSEE COULD NOT G IVE SATISFACTORY EXPLANATION / EVIDENCES TO SUPPORT ITS CONTENTIO NS THAT THE SAID ADVANCES 101 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 WERE GIVEN TO THE ASSESSE E BY SIPL FOR BUSINESS PURPOSES , THE SAID ADVANCES RECEIVED BY THE ASSESSEE WERE IN - FACT REPAID BY THE ASSESSEE TO SIPL DURING T HE YEAR, WHICH CLEARLY RE F LECTS THAT WITH HUGE AMOUN T S HAVE BEEN ADVANCED BY THE SAID COMPANY SIPL TO THE ASSESSEE WITHOUT ANY BUSINESS PURPOSES /NEXUS AND HENCE IS CLEARLY HIT BY DEEMING FICTION CREATED U/S 2(22)(E) OF THE ACT TO BE TREATED AS DEEMED DIVIDEND, AS NO EXPLANATION HAS BEEN GIVEN BY THE ASSESSEE DURING T HE COURSE OF RE CORDING OF STATEMENT U/S.131 OF THE ACT AS WELL AS DURING THE COURSE OF THE ASSESSMENT /APPELLATE PROCEEDINGS . I T WAS MERELY STATED BY WAY OF BALD STATEMENT IN DESPERATION THAT THE AMOUNT HAVE BEEN ADVANCED FOR R EPAIR AND MAINTENANCE AND RENOVATION WORK AND EXCESS AMOUNT OVER AND ABOVE WHAT WAS SPENT FOR REPAIRS AND MAINTENANCE/RENOVATION WAS RETURNED BY THE ASSESSEE TO SIPL WITHOUT ANY EVIDENCE/PROVE TO SUPPORT THE CONTENTIONS . WE ARE OF THE CONSIDERED VIEW THAT UNDER S.2(22)(E) OF THE ACT LIABIL ITY TO TAX ATTACHES TO ANY AMOUNT TAKEN AS LOAN AND ADVANCE BY THE SHAREHOLDER FROM A CONTROLLED COMPANY TO THE EXTENT IT POSSESSES ACCUMULATED PROFITS AT THE MOMENT THE LOAN IS BORROWED AND IT IS IMMATERIAL WHETHER THE LOAN IS REPAID BEFORE THE END OF THE ACCOUNTING YEAR , AS WAS HELD BY HONBLE APEX COURT IN THE CASE OF SMT TANULATA SHYAM V. CIT(1997) 108 ITR 345(SC) . EVEN HONBLE SUPREME COURT IN THE CASE OF NAVNIT LAL C. JAVERI V. AACIT IN (1965) 56 ITR 198(SC) HAS HELD THE SAID PROVISIONS TO BE WITHIN LEGISLATIVE COMPETENCE OF LEGISLATURE AND THE SAME WAS HELD TO BE NOT CONTRAVENING ARTICLE 14 NOR ARTICLE 19 OF CONSTITUTION OF INDIA. THE CASE LAWS RELIED UPON BY THE ASSESSEE NAMELY CIT V. ARVIND KUMAR JAIN(SUPRA) , CIT V. RAJ KUMAR (SUPRA) AND OTHER C ASES DOES NOT SUPPORT THE CASE OF THE ASSESSEE AS THE SAID CASE LAWS RELATES TO THE ADVANCES MADE IN THE COURSE OF BUSINESS, WHILE IN THE INSTANT CASE , THE ASSESSEE COULD NOT PROVE THE BUSINESS NEXUS AND BUSINESS PURPOSE FOR ADVANCING HUGE AMOUNT OF LOAN AND 102 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ADVANCES BY SIPL TO THE ASSESSEE FROM ASSESSMENT YEAR 2009 - 10 TO ASSESSMENT YEAR 2012 - 13 AND IN ANY CASE THE ASSESSING OFFICER HAS GIVEN PROPER SET OFF / CREDIT FOR ALL THE INTER - SE TRANSACTIONS BETWEEN SIPL AND THE ASSESSEE WHEREIN BUSINESS NEXUS WAS ESTABLISHED / PROVED BY THE ASSESSEE AND ALSO THE AO HAS DULY TAKEN NOTE OF RESTRICTING THE ADDITIONS U/S 2(22)(E) OF THE ACT KEEPING IN VIEW ACCUMULATED PROFITS HELD BY SIPL AS PER MANDATE OF SECTION 2(22)(E) OF THE ACT . T HE LEARNED COUNSEL FOR THE ASSES SEE COULD NOT POINT OUT WHEREIN THE BUSINESS NEXUS WAS ESTABLISHED OR PROVED BY THE ASSESSEE AND STILL ADDITIONS HAVE BEEN MADE BY THE AO NOR LEARNED COUNS EL FOR THE ASSESSEE COULD PROVE THAT THE AO HAS MADE THE ADDITIONS BEYOND THE ACCUMULATED PROFITS POS SESSED BY THE SIPL. THIS EXPLANATION OF THE ASSESSEE WITHOUT ANY SATISFACTORY EXPLANATION/EVIDENCE CANNOT BE ACCEPTE D AS THE ASSESSEE HAS DRAWN HUGE AMOUNTS FROM THE SAID COMPANY SIPL, WHILE R EPAIR AND MAINTENANCE AND RENOVATION WORK UNDERTAKEN BY THE ASSESSEE FOR SIPL WAS OF INSIGNIFICANT AMOUN T AS ARE DETAILED IN THE PRECEDING PARAS OF THIS ORDER, WE DO NOT FIND ANY INFI RMITY IN THE ORDER OF THE AO A S THE AO HAS RIGHTLY BROUGHT TO THE TAX SAID ADVANCES WHICH ARE IN THE NATURE OF LOAN AND ADVANCES BE ING GIVEN OUT OF THE ACCUMULATED PROFITS BY THE COMPANY SIPL F OR THE INDIVIDUAL BENEFIT OF ITS REGISTERED CUM BENEFICIAL SHARE HOLDER MR. EDGAR BRAZ A FSONO I.E. THE ASSESSEE , WHICH LOANS AND ADVANCES WERE DISBURSED BY SIPL TO THE ASSESSEE - SHAREHOLDER INST EAD OF DECLARING DIVIDENDS OUT OF ACCUMULATED PROFITS AND HENCE DIVIDEND DISTRIBUTION TAX IS EVADED TO BE PAID TO THE GOVERNMENT HAD THE SAID AMOUNT OF ADVANCES WOULD HAVE BEEN DISTRIBUTED BY SIPL AS DIVIDEND TO ITS SHAREHOLDER S . WE HAVE ALSO OBSERVED TH AT THE APPELLATE ORDER OF THE LEARNED CIT(A) DOES NOT HOLD MERIT AND HENCE CANNOT BE UPH E LD AS LEARNED CIT(A) MERELY ACCEPTED THE CONTENTIONS OF THE ASSESSEE WITHOUT ANY EVIDENCES , WHICH IN - FACT PAINED US AFTER READING THE APPELLATE ORDERS OF THE LEARNED CIT(A). 103 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 WE , THEREFORE , ORDER THAT THE APPELLATE ORDER OF LEARNED CIT(A) BE SET ASIDE AS THE SAME IS NOT SUSTAINABLE AT LAW AS THE LEARNED CIT(A) MERELY ACCEPTED THE CONTENTION S OF THE ASSESSEE WITHOUT ANY EVIDENCES AND HAS NOT BROUGHT ON RECOR D MATERIAL TO DISPROVE THE CONT ENTION S OF THE AO , W HILE ON THE OTHER HAND THE AO HAS ELABORATELY EXPL AINED WITH COGENT REASONS IN HIS ASSESSMENT ORDER AS TO WHY THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE APPLICABLE IN THIS INSTANT CASE OF THE ASSESSEE AND HOW THE SAID LOANS AND THE ADVANCES WHICH WERE GIV E N WITHOUT ANY BUSINESS PURPOSES BY SIPL TO THE ASSESSEE OUT OF ITS ACCUMULATED PROFITS WILL BE HIT BY THE SECTION 2(22)(E) OF THE ACT TO BE BROUGHT T O TAX AS DEEMED DIVIDEND, AND HENCE WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND UPHOLD /AFFIRM THE ASSESSMENT ORDER OF THE AO AND SINCE MR. EDGAR BRA Z AFONSO IS THE REGISTERED AND BENEFICIAL SHARE HOLDER OF THE COMPANY SIPL HOLDING SUBSTANTIAL INTEREST IN THE SAID COMPANY SIPL HOLDING 50% OF SHARES OF SIPL (A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED) , THE RATIO OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT I N THE CASE OF CIT V. UNIVERSAL M EDICARE PRIVATE LIMITED (SUPRA) IS DIRECTLY APPLICABLE TO THE INSTANT CASE AND HENCE THE AO HAS RIGHTLY BROUGHT TO TA X THE SAID AMOUNT OF LOANS AND ADVANCES GRANTED BY SIPL IN FAVOUR OF THE ASSESS EE WITHOUT ANY BUSINESS PURPOSES AND NEXUS, WITHIN THE AMBIT OF SECTION 2(22)(E) OF THE A CT BY BRINGING TO TAX THE SAME AS DEEMED DIVIDEND , TO THE EXTENT SIPL POSSESSED ACCUMULATED PROFITS , WHICH ASSESSMENT ORDER OF THE ASSESSING OFFICER WE CONFIRM AND SUSTAIN . WE SHALL DEAL WITH CO FILED BY THE ASSESSEE W.R.T. REVENUE APPEAL SEPARATELY IN THE SUCCEE DING PARAS WHICH WILL ADDRESS ISSUES RAISED THEREIN BY THE ASSESSEE IN THE CO. WE ORDER ACCORDINGLY. 104 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 19 . IN THE RESULT THE APPEAL OF THE REVENUE IN I T(SS) A NO. 25/PNJ/2015 FOR ASSESSMENT YEAR 2009 - 10 IN THE CASE OF MR EDGAR BRAZ AFONSO IS ALLOWED. 20 . AS THE ISSUES INVOLVED IN REVENUE APPEAL IN IT(SS) A NO. 25/PNJ/2015 FOR ASSESSMENT YEAR 2009 - 10 ARE IDENTICAL TO THE ISSUE SO FAR AS GRANT OF LOAN AN D ADVANCES BY SIPL TO THE ASSESSEE , MR. EDGAR BRAZ AFONSO INVOLVED IN REVENUE APPEAL(S) IN IT(SS) NO. 26 - 27/PNJ/2015 AND ITA NO. 413/PNJ/2015 FOR ASSESSMENT YEAR 2010 - 11 TO 2012 - 13 AND OUR DECISION IN IT(SS) A NO. 25/PNJ/2015 FOR ASSESSMENT YEAR 2009 - 10 S HALL APPLY MUTATIS MUTANDIS TO THE ISSUE IN IT(SS) NO. 26 - 27/PNJ/2015 AND ITA NO. 413/PNJ/2015 FOR ASSESSMENT YEAR 2010 - 11 TO 2012 - 13.WE ORDER ACCORDINGLY. 21 . IN THE RESULT , ALL THE REVENUES APPEAL IN IT(SS) A NO.23 - 27/PNJ/2015 AND ITA NO. 413/PNJ/2015 IN THE CASE OF THE ASSESSEE MR EDGAR BRAZ AFONSO ARE ALLOWED. 22 . THE ASSESSEE MR. EDGAR BRAZ AFONSO IS COVERED U/S 5A OF THE ACT WHEREIN INCOME IS TO BE APPORTIONED BETWEEN THE SPOUSES AS THEY ARE GOVERNED BY PORTUGUESE CIVIL CODE. THUS, THE ASSESSING OFFICER HAS MADE ADDITIONS TO THE TUNE OF 50% EACH IN THE HANDS O F MR EDGAR BRAZ AFONSO AND 50% IN THE HANDS OF MRS. VANDA AFONSO. HENCE, THE ISSUES INVOLVED IN REVENUES APPEALS IN THE CASE OF MRS VANDA AFONSO ARE IDENTICAL TO THE ISSUES INVOLVED IN THE CASE OF MR. EDGAR BRAZ AFONSO. THUS, OUR DECISION IN THE CASE OF MR. EDGAR BRAZ AFONSO IN IT(SS) A NOS. 23 - 27/PNJ/2015 AND ITA NO. 413 /PNJ/2015 FOR ASSESSMENT YEARS 2007 - 08 TO 2012 - 13 SHALL APPLY MUTATIS MUTANDIS TO IT(SS) A NO. 28 - 33 /PNJ/2015 FOR THE 105 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 ASSESSMENT YEAR(S) 2007 - 08 TO 2012 - 13 IN THE CASE OF MRS VANDA AFONS O .WE ORDER ACCORDINGLY. 23 . IN THE RESULT APPEAL(S) OF THE REVENUE IN IT(SS)A NO. 28 - 33 /PNJ/2015 IN THE CASE OF MRS VANDA AFONSO FOR ASSESSMENT YEAR 2007 - 08 TO 2012 - 13 ARE ALLOWED. 24 . WE HAVE OBSERVED THAT THE ADDITIONS HAVE BEEN MADE IN THE CASE OF MODEL REAL ESTATE DEVELOPERS ON THE PROTECTIVE BASIS , WHILE SUBSTANTIVE ADDITIONS HAVE BEEN MADE IN THE HANDS OF MR PETER VAZ AND MR EDGAR BRAZ AFONSO AND THEIR SPOUSE , WHEREIN WE HAVE CONFIRMED THE SUBSTANTIVE ADDITIONS MADE BY REVENUE IN THE HANDS OF MR PETER VAZ AND MR EDGAR BRAZ AFONSO AND THEIR SPOUSE WITH RESPECT TO LOANS AND ADVANCES GRANTED BY MCPL TO MRED, AS PER DETAILED DISCUSSIONS AND REASONING AS SET OUT IN PRECEDING PARAS OF THIS ORDERS. SINCE, WE HAVE CONFIRMED SUBSTANTIVE ADDITIONS IN THE HANDS OF MR PETER VAZ AND MR EDGAR BRAZ AFONSO AND THEIR SPOUSE , THE PROTECTIVE ADDITIONS MADE BY REVENUE ON THE IDENTICAL ISSUE IN THE HANDS OF MRED SHALL NOT SURVIVE W.R.T. TO LOANS AND ADVANCES GRANTED BY MCPL TO MRED. THUS, WE ORDER DELETION OF ADDITIONS MADE ON PROTECTIVE BASIS IN THE HANDS OF MRED FOR THE ASSESSMENT YEARS 2007 - 08 TO 2012 - 13 IN IT(SS) A NO. 41 - 45/PAN/2016 AND ITA NO. 90/PAN/2106 FOR ASSESSMENT YEARS 2007 - 08 TO 201 2 - 13. WE ORDER ACCORDINGLY. 25 . I N THE RESULT , ALL THE REVENUE APPEAL IN IT(SS) A NO. 41 - 45/PAN/2016 AND IN ITA NO. 90/PAN/2016 FOR ASSESSMENT YEARS 2007 - 08 TO 2012 - 13 ARE DISMISSED. 106 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 26 CROSS OBJECTIONS FILED BY THE ASSESSEES : - THESE ARE THE CROSS OB JECTIONS FILED BY THE ASSESSEES IN THE REVENUES APPEALS. THE CROSS OBJECTIONS HAVE BEEN FILED ON 17/08/2016. EACH OF THE CROSS OBJECTION IS DELAYED BY 248 DAYS. THE ASSESSEES HAVE FILED AFFIDAVITS GIVING REASONS FOR DELAY IN FILING OF THE CROSS OBJECTIO NS. THE REASONS GIVEN ARE THAT IT WAS DUE TO WRONG PROFESSIONAL ADVICE FROM THE EARLIER COUNSEL. IN THE CROSS OBJECTIONS, THE ASSESSEES HAVE RAISED THE FOLLOWING GROUNDS: - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX [APPEALS] IN SO FAR AS IT IS AGAINST THE RESPONDENT / CROSS OBJECTOR ARE OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE RESPONDENT / CROSS OBJECTOR DENIES HIMSELF LIABLE TO BE ASSESSED UNDER SECTION 143[3] R.W.S. 153C OF THE ACT UNDER THE IMPUGNED ORDER ON THE GROUNDS THAT : - I. THE PROCEEDING INITIATED U/S 153 C IS VOID AB INITIO IN AS MUCH AS THEY ARE ILLEGAL AND ULTRA VIRES THE PROVISIONS OF SECTION 153 C R.W.S 153 A OF THE ACT; II. THE MANDATORY SATISFACTION, IF ANY, ARRIVED AT BY THE ASSESSING OFFICER TO INITIATE PROCEEDINGS U/S 153 C OF THE ACT IS INADEQUATE AND INSUFFICIENT TO ASSUME JURISDICTION U/S 153 C OF THE ACT. III. THE INITIATION OF THE PROCEEDING U/S 153C OF THE ACT IS NOT ON THE BASIS OF 'ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS TO THE RESPONDENT /CROSS OBJECTOR', WHICH IS SINE QUA NON FOR PROCEED INGS TO BE INITIATED U/S 153 C AND THEREFORE THE CONSEQUENT ASSESSMENT UNDER SECTION 143(3) R.W.S. 153C IS NULL AND VOID - AB - INITIO. 3. THE LEARNED COMMISSIONER OF INCOME - TAX [APPEALS] FAILED TO APPRECIATE THAT A FINDING THAT 'ANY MONEY, BULLION, JEWEL LERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS TO A PERSON OTHER THAN A PERSON SEARCHED U/S 153A' IS A SINE QUA NON FOR MAKING A VALID ASSESSMENT UNDER SECTION 153C OF THE ACT AND THERE BEING NO SU CH FINDING IN THE CASE OF THIS RESPONDENT /CROSS 107 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 OBJECTOR, THE ENTIRE ASSESSMENT FAILS AS BEING NULL AND VOID, AB INITIO. 4. THE LEARNED COMMISSIONER OF INCOME - TAX [APPEALS] FAILED TO APPRECIATE THAT THE ORDER OF ASSESSMENT PASSED BY THE LEARNED ASSESS ING OFFICER IS BAD IN LAW AS THE MANDATORY CONDITIONS TO INVOKE THE JURISDICTION U/S. 153C OF THE INCOME - TAX ACT, 1961 DID NOT EXIST OR HAVING NOT BEEN COMPLIED WITH AND CONSEQUENTLY THE ASSESSMENT MADE IS BAD IN LAW FOR WANT OF REQUISITE JURISDICTION. 5. THE LEARNED COMMISSIONER OF INCOME - TAX [APPEALS] FAILED TO APPRECIATE THAT THE INITIATION OF PROCEEDINGS U/S 153 C & THE CONSEQUENT ORDER OF ASSESSMENT PASSED BY THE LEARNED ASSESSING OFFICER IS BAD IN LAW AS THE ASSESSMENTS U/S 153 A COULD NOT HAVE BE EN MADE LEGALLY IN THE HANDS OF THE PERSON SEARCHED, NAMELY M/S. MODEL CONSTRUCTIONS PVT. LTD, AND CONSEQUENTLY NO LEGAL AND VALID SATISFACTION COULD BE DRAWN U/S 153 C IN THE CASE OF THE RESPONDENT /CROSS OBJECTOR. 6. W ITHOUT PREJUDICE THE RESPONDENT /CR OSS OBJECTOR DENIES HIMSELF LIABLE TO BE ASSESSED OVER AND ABOVE THE TOTAL INCOME REPORTED BY THE RESPONDENT/CROSS OBJECTOR OF RS.4,89,683/ - UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER AS PER THE PAR ITY OF REASONING OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF KARANVIR SINGH 349 ITR 692, THE RESPONDENT / CROSS OBJECTOR DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST UNDER SECTION 234 A, 234 B & 234 C OF THE INCOME TAX ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER THE LEVY OF INTEREST UNDER SECTION 234 A, 234 B & 234 C OF THE ACT IS ALSO BAD IN LAW AS THE PERIOD, RATE, QUANTUM AND METHOD OF CALCULATION ADOPTED ON WHICH INTEREST IS LEVIED ARE ALL NOT DISCERNIBLE AND ARE WRONG ON THE FACTS OF THE CASE. 8. THE RESPONDENT / CROSS OBJECTOR CRAVES L EAVE OF THIS HON'BLE TRIBUNAL, TO ADD , ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 9. IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE T IME OF HEARING OF THE CROSS OBJECTION, YOUR RESPONDENT / CROSS OBJECTOR HUMBLY PRAY THAT THE CROSS OBJECTION MAY BE ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE. 108 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 2 7 . ON A SPECIFIC QUERY FROM THE BENCH AS TO WHETHER THESE GROUNDS HAD BEEN RAISED BEFORE THE LOWER AUTHORITIES, IT WAS THE SUBMISSION THAT THE ISSUES WERE BROUGHT OUT IN THE WRITTEN SUBMISSIONS BEFORE THE LD.CIT(A), THOUGH NO SPECIFIC GROUND WAS RAISED. A P ERUSAL OF THE WRITTEN SUBMISSIONS FILED BEFORE THE LD. CIT(A) SHOWS THAT THE MAIN THRUST OF THE ASSESSEES SUBMISSIONS ARE THAT THERE WAS NO INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH, WHICH COULD GIVE RISE TO AN ORDER U/S.143(3)/153C OF THE ACT. HOWEVER, A PERUSAL OF THE GROUND RAISED IN THE CROSS OBJECTION SHOWS THAT THE GROUNDS ALSO GO INTO THE JURISDICTION OF THE ASSESSING OFFICER AND THE SATISFACTION ARRIVED AT BY THE ASSESSING OFFICER. IT WAS, THEN, ADMITTED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT THIS SPECIFIC GROUND OF JURISDICTION AND THE ARRIVING OF MANDATORY SATISFACTION WAS NOT RAISED BEFORE THE ASSESSING OFFICER OR THE LD. CIT(A). IT WAS, HOWEVER, SUBMITTED THAT THE GROUNDS WERE PURELY LEGAL ISSUES AND IN VIEW OF THE DE CISION OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT REPORTED IN 229 ITR 383, THE TRIBUNAL WAS BOUND TO ADMIT THE SAME AS THE ASSESSEE WAS ENTITLED TO RAISE LEGAL GROUNDS AT ANY TIME AND THE TRIBUNAL SHOULD NOT BE PREV ENTED FROM CONSIDERING THE QUESTION OF LAW ARISING IN THE APPELLATE PROCEEDINGS, ALTHOUGH NOT RAISED EARLIER. AT THIS POINT, DEPARTMENTAL REPRESENTATIVE WAS ASKED TO GIVE HIS OBJECTIONS, IF ANY, TO WHICH HE SUBMITTED THAT THE SATISFACTION NOTE IS THERE AN D IT HAS ALSO BEEN GIVEN TO THE ASSESSEE WHEN HE HAS ASKED FOR IT. WHEN SPECIFICALLY ASKED THE DEPARTMENTAL REPRESENTATIVE TO PRODUCE THE SATISFACTION NOTE RECORDED BY THE ASSESSING OFFICER OF THE PERSON SEARCHED, IT WAS SUBMITTED THAT THE ASSESSMENT FILE S ARE NOT IMMEDIATELY AVAILABLE, BUT IN THE EVENT THAT THE TRIBUNAL WAS PLEASED TO ADMIT THE CROSS OBJECTIONS, THEN THE SAME WILL BE PRODUCED AS THE FILES ARE SPLIT AND ARE AT THE OFFICE OF THE ASSESSING OFFICER 109 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 AT CENTRAL CIRCLE, AS ALSO THE ASSESSING OFF ICERS OF THE ASSESSEE. THE DEPARTMENTAL REPRESENTATIVE FURTHER VEHEMENTLY OPPOSED THE CONDONATION OF DELAY. IT WAS THE SUBMISSION THAT THERE WAS UNREASONABLE DELAY OF MORE THAN 42 MONTHS FROM THE DATE OF SEARCH AND THE QUESTION OF JURISDICTION HAS NOT B EEN CHALLENGED BEFORE THE ASSESSING OFFICER OR LD. CIT(A). 28 . IT WAS ALSO THE SUBMISSION THAT ONLY GENERAL REASONS HAVE BEEN GIVEN FOR CONDONATION OF DELAY. IT WAS HOWEVER AGREED BY THE DEPARTMENTAL REPRESENTATIVE THAT THE ISSUES RAISED IN THE CROSS OBJECTIONS ARE LEGAL ISSUES. IT WAS THEN PUT TO THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT IN VIEW OF THE PROVISIONS OF SECTION 124(3), IT HAS BEEN SPECIFICALLY PROVIDED THAT NO PERSON SHALL BE ENTITLED TO CALL IN QUESTION THE JURISDICTION OF AN A SSESSING OFFICER AFTER THE COMPLETION OF ASSESSMENT. IT WAS SUBMITTED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT AS MENTIONED IN THE PETITION FOR CONDONATION OF DELAY, THE ASSESSEE HAD NOT BEEN ADVISED PROPERLY AND THIS HAS RESULTED IN NON - RAIS ING OF VARIOUS GROUNDS. 29 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT THE OUTSET, WHAT IS TO BE CONSIDERED IS AS TO WHETHER THE DELAY OF 248 DAYS IS REASONABLE OR NOT? THE FACTS IN THE PRESENT CASE CLEARLY SHOW THAT THE SAID LEGAL GROUNDS HAVE BEE N RAISED IN THE CROSS OBJECTION FOR THE FIRST TIME. THESE SPECIFIC GROUNDS HAVE NOT BEEN RAISED BEFORE THE LOWER AUTHORITIES AT ANY POINT OF TIME. A PERUSAL OF THE PROVISIONS OF SECTION 124(3) SHOWS THAT A QUESTION OF JURISDICTION OF AN ASSESSING OFFICER IS TO BE RAISED WELL BEFORE THE COMPLETION OF THE ASSESSMENT. THIS IS SO THAT THE ASSESSING OFFICER CAN RECTIFY ANY DEFECTS OR TAKE RECOURSE ANY OTHER PROVISIONS OF THE INCOME TAX ACT. ADMITTEDLY, THE DUTY OF THE ASSESSING OFFICER IS TO ASSESS 110 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 THE CORRE CT INCOME. SIMILARLY, IT IS ALSO THE DUTY OF AN ASSESSEE TO PAY TAX ON ITS CORRECT INCOME. THE ASSESSEE HAVING BEEN CAUGHT ATTEMPTING TO AVOID PAYMENT OF TAX, CANNOT NOW RAISE A TECHNICAL GROUND MUCH AFTER THE LIMITATION AND ALSO CLAIM INJUSTICE BEING DO NE TO HIM. BY ALLOWING THESE CROSS OBJECTIONS BY CONDONING THE DELAY WOULD IN EFFECT BY DOING INJUSTICE TO THE REVENUE INSOFAR AS THE REVENUE IS BOUND BY LIMITATION, IN RESPECT OF INITIATION OF PROCEEDINGS AND INVOCATIONS OF THE JURISDICTION. IT IS VERY MUCH TRUE THAT ON FIRST BLUSH A PRESUMPTION CAN BE DRAWN THAT THE CROSS OBJECTION CAN BE ADMITTED AND THE ISSUES RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION AND DENOVO ASSESSMENT, THEREBY GIVING REVENUE ALSO THE OPPORTUNITY TO MAKE AN Y CORRECTIONS AS REQUIRED IN RESPECT OF THE CHALLENGES TO ITS JURISDICTION UNDER SECTION 124(3). HOWEVER, THE TRIBUNAL IS AN APPELLATE AUTHORITY AND AS AN APPELLATE AUTHORITY WOULD NOT BE APPROPRIATE TO LIFT LIMITATIONS WHICH ARE PRESCRIBED UNDER THE STAT UTE THOUGH THE WORDS USED IN SECTION 254 ARE PASS SUCH ORDERS THEREON. 30 . FURTHER, IT IS NOTICED FROM THE CROSS OBJECTIONS FILED THAT THESE BEING FRESH GROUNDS NOT RAISED BEFORE THE LOWER AUTHORITIES, THE REQUIREMENT OF FILING MEMO FOR FILING ADDITIONA L GROUNDS HAVE NOT BEEN PRESENTED EXPLAINING THE REASONS FOR NOT RAISING THE SAID GROUNDS BEFORE THE LOWER AUTHORITIES. THIS IS BECAUSE THE ASSESSEE HAD SUCH LONG PERIODS AVAILABLE AND THE ASSESSEE HAS WAITED FOR EXPIRY OF THE LIMITATION ON THE REVENUE TO RAISE SUCH TECHNICAL GROUNDS. IT MUST BE MENTIONED HERE THAT THESE TECHNICAL GROUNDS RAISED ARE NOT ON ACCOUNT OF ANY RECENT DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT OR HON'BLE SUPREME COURT WHICH GAVE RISE TO THE ASSESSEE TO RAISE SUCH GROUNDS . THE ARGUMENT THAT THEY WERE NOT ADVISED PROPERLY, ALSO DOES NOT HOLD WATER INSOFAR AS THE ASSESSEES WERE ADVISED BY COMPETENT PROFESSIONALS AND IN HOUSE 111 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 PROFESSIONALS AND NONE OF THESE PROFESSIONAL HAVE FILED ANY AFFIDAVIT STATING THAT THEY HAVE GIVEN A NY WRONG ADVICE TO THEM OR THAT ADVICE GIVEN BY THEM IS ANYWAY ERRONEOUS. IN FACT, THE PRESENT COUNSEL, WHO APPEARED ON BEHALF OF THE ASSESSEE IS NOT A PERMANENT COUNSEL OF THE ASSESSEE, BUT IS THE COUNSEL ENGAGED IN REPRESENTING THE PRESENT MATTERS ONLY . NO TWO COUNSEL WOULD HAVE SAME OPINION. WITH EVERY CHANGE OF COUNSEL, A FRESH ISSUE COULD BE BROUGHT UP. THIS DOES NOT MEAN THAT WITH EVERY CHANGE OF COUNSEL FRESH GROUNDS WHICH MAY BE LEGAL IN NATURE SHOULD CONTINUE TO BE ADMITTED. THIS VIEW OF OURS FIND SUPPORT FROM THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF N.G. TECHNOLOGIES LTD. REPORTED IN (2015) 57 TAXMANN.COM 389 (DEL.), THE SLP FROM WHICH HAS BEEN DISMISSED AND REPORTED IN (2016) 70 TAXMANN.COM 37 (SC), AS ALSO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.RUDRAMUNIYAPPA REPORTED IN (2016) 75 TAXMANN.COM 241 (SC). ON THIS GROUND ALSO, WE ARE NOT INCLINED TO CONDONE THE DELAY IN FILING THE CROSS OBJECTIONS. 31 . ANOTHER ASPECT TO THIS ISSUE IS WHEN AN ASSESSEE IS C HALLENGING OR RAISING OR URGES TO BE HEARD IN SUPPORT OF ANY GROUND IN RESPECT OF WHICH THE FACT CANNOT BE BORNE OUT BY, OR IS CONTRARY TO, THE RECORD IS ALLEGED, IT IS TO BE CLEARLY STATED AND CONCISELY EXPLAIN AND SUPPORTED BY A DULY SWORN AFFIDAVIT AS P ER RULE 10 OF THE I.T.A.T. RULES, 1963. SUCH AFFIDAVIT TILL DATE HAS NOT BEEN FILED IN THESE CASES BEFORE THE TRIBUNAL. THEREFORE EVEN THE ADMISSION OF THESE GROUNDS CANNOT BE ENTERTAINED. 32 . THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. (SUPRA). A PERUSAL OF THE SAID DECISION CLEARLY SHOWS THAT THE WORDS USED THEREIN ARE THE TRIBUNAL HAD JURISDICTION TO EXAMINE THE 112 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 QUESTION OF LAW WHICH ARISES FROM THE FACTS AS FOUND BY THE INCOME TAX AUTHORITIES AND HAVING A BEARING ON THE TAX LIABILITY OF THE ASSESSEE. THE GROUNDS RAISED ARE NOT ON THE BASIS OF ANY FACT WHICH IS AVAILABLE ON RECO RD. THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS. WHEN THE SPECIFIC FACTS ITSELF ARE REQUIRED TO BE VERIFIED AND SUCH FACTS ARE NOT AVAILABLE BEFORE THE TRIBUNAL, TH E TRIBUNAL WOULD BE EXCEEDING ITS JURISDICTION AS AN APPELLATE AUTHORITY IN ADMITTING SUCH QUESTIONS OF LAW AND FOR ADJUDICATING ON THEM. THIS BEING SO AND FOR ALL THE ABOVE REASONS, WE ARE OF THE VIEW THAT THE DELAY IN FILING OF THESE CROSS OBJECTIONS AR E NOT LIABLE TO BE CONDONED AND CONSEQUENTLY THE CROSS OBJECTIONS FILED BY THE ASSESSEE STAND DISMISSED AS UN - ADMITTED. 33 . IN THE RESULT, APPEAL S OF THE REVENUE ARE ALLOWED , EXCEPT REVENUES APPEALS IN THE CASE OF MODEL REAL ESTATE DEVELOPERS WHEREIN PR OTECTIVE ADDITIONS WERE MADE BY THE REVENUE WHICH ARE DISMISSED AND THE CROSS OBJECTIONS OF THE ASSESSEES ARE DISMISSED AS UN - ADMITTED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND DAY OF D ECEMBER , 201 6 . SD/ - SD/ - (GEORGE MATHAN) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 02 ND DECEMBER , 201 6 . V.S.S.G BABU / - 113 IT(SS)A NOS.9 - 13,17 - 33 /PNJ/2015 IT(SS)A NO. 41 - 45/PAN/2016 ITA NO. 412 - 413/PNJ/2015 ITA NO.90/PAN/2016 CO NOS. 80 - 106/PAN/2016 COPY TO: 1. THE ASSESSEE . (A) SHRI PETER VAZ, BUNGALOW NO.4,MODELS MERIDIEN, MARINE ROAD, CARANZALEM, ILHAS, GOA. (B) SMT NATALINA VAZ, BUNGALOW NO.4,MODELS MERIDIEN, MARINE ROAD, CARANZALEM, ILHAS, GOA. (C) S HRI EDGAR BRAZ AFONSO, H.NO. E - 374, TIVAI WADDO, CALANGUTE, BARDEZ, GOA. (D) SMT VANDA AFONSO, H.NO. E - 374, TIVAI WADDO, CALANGUTE, BARDEZ, GOA. (E) M /S MODELS REAL ESTATE DEVELOPERS, 4 TH FLOOR, JOFFRE RESIDENCY, BEHIND GOA COLLEGE ;OF PHARMACY, PANAJI GOA. 2. T HE REVENUE. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PANAJI, GOA. 3. THE CIT(A) , PANAJI , GOA . 4. THE D.R . 5. GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY I.T.A.T., PANAJI