ITO, Mandi Gobindgarh V. Sh. Ashok Arya Prop., Mandi Gobindgarh

ITA 1001/CHANDI/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68613 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 09-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K P BAJAJ
• Keywords: Additional evidence; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1001/CHD/2010 ASSESSMENT YEAR: 2007-08 THE ITO, VS. SH. ASHOK ARYA WARD 1, PROP. M/S ARYA STEELS MANDI GOBINDGARH MANDI GOBINDGARH PAN NO. AALPH9476H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. AKHILESH GUPTA RESPONDENT BY : SHRI K.P. BAJAJ DATE OF HEARING : 02/12/2013 DATE OF PRONOUNCEMENT : 23/12/2013 ORDER PER T.R.SOOD, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 13/05/2010 OF CIT (APPEALS), PATIALA. 2. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 18,00,000/- B Y TREATING THE DEEMED DIVIDEND U/S 2(22)(E) AS A DEBT BUT NO T AS A LOAN /ADVANCE, WITHOUT APPRECIATING THE FACT THAT THE AS SESSEE HAD AVAILED LOANS ON VARIOUS DATES FROM THE COMPANY IN WHICH HE HAD SUBSTANTIAL INTEREST. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS FURTHER ERRED IN ALLOWING BENEFIT TO THE ASSESSEE B Y DELETING THE SAID ADDITION OF RS. 18,00,000/-, WITHOUT APPRE CIATING THE 2 FACT THAT THE PROVISIONS OF SECTION 2(22)(E) ARE DE EMING PROVISIONS AS PER WHICH ANY LOAN /ADVANCE AVAILED B Y A PERSON HAVING SUBSTANTIAL INTEREST IN THE COMPANY I S TO BE TREATED AS DIVIDEND BECAUSE THE CASE IS NOT COVERED BY ANY OF THE EXCEPTIONS. SUCH A VIEW IS ALSO SUPPORTED BY TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TARULAT A SHYAM & OTHERS VS CIT(1977)108 ITR 345 (SC). 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 4,00,000/-, M ADE BY THE AO ON A/C OF UNEXPLAINED UNSECURED LOANS, BY ADMITT ING THE ADDITIONAL EVIDENCE, I.E. COPY OF ACCOUNT OF M/S SH REE GANESH ISPAT INDUSTRIES, DURING THE APPELLATE PROCEEDINGS IN VIOLATION OF RULE 46A AND GIVING RELIEF TO THE ASSE SSEE. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE IS A DI RECTOR IN H.S. STEELS PVT. LTD IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. THE ASSESSEE WAS HAVING 13.83% SHARES IN THIS COMPANY. FURTHER, THIS COMPA NY HAS ACCUMULATED PROFIT OF RS. 39,32,406/- AS ON 31.3.2007. THE COMPANY HA D GIVEN LOAN OF RS. 18 LAKHS TO THE ASSESSEE AS PER THE FOLLOWING DETAILS: - RS. 5 LAKHS ON 25.08.2006 RS. 2.5 LAKHS ON 31.08.2006 RS. 1 LAKH ON 13.10.2006 RS. 4 LAKH ON 22.12.2006 RS. 3.5 LAKHS ON 11.01.2007 RS. 2 LAKHS ON 7.03.2007 THEREFORE, THE ASSESSING OFFICER ISSUED A SHOW CAUS E NOTICE THAT WHY THESE ADVANCES SHOULD NOT BE TREATED AS DEEMED DIVIDEND U /S 2(22)(E) OF THE ACT. IT WAS MAINLY SUBMITTED THAT COMPANY HAS GIVEN TEMPORA RY LOAN AS ASSESSEE WAS HAVING A CURRENT ACCOUNT WITH THE COMPANY. THE ASS ESSING OFFICER DID NOT FIND FORCE IN THE SAME AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 3 4. ON APPEAL BEFORE CIT(A), IT WAS MAINLY SUBMITTED THAT TEMPORARY ADVANCE GIVEN BY THE ASSESSEE CANNOT BE TERMED AS LOAN OR A DVANCE. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS NOT TAKING ONLY TEMPORA RY ADVANCES FROM THE COMPANY BUT ALSO GIVING TEMPORARY ADVANCES TO THE C OMPANY. IT WAS FURTHER SUBMITTED THAT THE ISSUE WAS COVERED IN FAVOUR OF T HE ASSESSEE BY THE ORDER OF CHANDIGARH BENCH OF THE TRIBUNAL IN DCIT VS LAKRA BROTHERS 162 TAXMAN (CHD) 170. THE LD. CIT(A) AGREED WITH THE SUBMISSI ONS AND ALLOWED THE RELIEF. 5. BEFORE US, LD. DR STRONGLY SUPPORTED THE ORDER O F ASSESSING OFFICER. 6. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). HE ALSO REFERRED TO PAGE 2 4 OF THE PAPER BOOK WHICH IS A COPY OF THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF H.S. STEEL PVT LTD. HE SUBMITTED THAT AT NO POINT OF TIME THE ASSESSEE HAD TAKEN A LOAN OF RS. 18 LAKHS. IN FACT, THE FIRST LOAN WAS TAKEN ON 25.8.2006 AMOU NTING TO RS. 5 LAKHS AND THE SAME WAS RETURNED ON 28.8.2006. SIMILARLY, THE NEX T LOAN OF RS. 2.50 LAKHS WAS GIVEN ON RETURNED INCOME ON 5.9.2006. OTHER ENTRIE S ARE ALSO SIMILAR. THE ASSESSEE HAS ALSO GIVEN A SUM OF RS. 8 LAKHS TO THE COMPANY ON 24.1.2007 WHICH HAS BEEN RETURNED BY THE COMPANY ON VARIOUS DATES. THUS, IT IS CLEAR THAT IT IS A CASE OF CURRENT ACCOUNT AND ONLY TEMPORARY ADVANCE HAVE BEEN GIVEN OR TAKEN. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FIN D FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE. WE FIN D THAT THE ISSUE HAS BEEN ADJUDICATED BY THE LD. CIT(A) VIDE PARA 2.4 WHICH I S AS UNDER;- 2.4 I HAVE GONE THROUGH THE FACTS ON RECORD AND THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSE E AND THE DECISION OF THE HONBLE JURISDICTIONAL TRIBUNAL HAVING BEARING ON THE ISSUE IN HAND. IN MY CONSIDERED OPIN ION THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL TRIBUNAL. IT IS AN ADMITTED FACT THAT 4 THE ENTRIES OF DEBIT AND CREDIT IN THE ACCOUNT OF T HE COMPANY ARE IN THE NATURE OF ORDINARY BUSINESS SHOR T TERM FINANCE ENTRIES WHICH ARE IN VOGUE IN THE AREA. IT IS ALSO A FACT THAT THE ENTRIES ARE NEITHER SUPPORTED BY ANY CONTRACT OR AGREEMENT OF LOAN OR ADVANCE. UNDER SUCH CIRCUMS TANCES IT IS NOT POSSIBLE TO GIVE THE ENTRIES THE MEANING OF LOAN AND ADVANCE IN THE SENSE IN WHICH IT HAS BEEN USED IN SECTION 2(22)(E). SUCH AN INTERPRETATION WAS NEVER INTENDED BY THE LEGISLATURE. IF THAT BE SO EACH AND EVERY EN TRY OF CREDIT IN THE ACCOUNT OF THE COMPANY WILL BE TREATE D AS PROFIT. IF REPAYMENT OF THE CREDIT MADE WILL MEAN T HE RETURN OF INCOME. THIS TYPE OF JUGGLED INCOME WAS NEVER ANTICIPATED BY THE LEGISLATURE. THERE BEING NO CONT RACT OR AGREEMENT FOR RAISING OF LOAN AND ADVANCE THE TERMS OF ITS ACCEPTANCE AND REPAYMENT, THE TRANSACTION CAN, AT B EST BE TREATED AS A DEBT BUT NOT LOAN OR ADVANCE. THIS GROUND IS, THEREFORE, ALLOWED. WE ARE OF THE OPINION THAT LD. CIT(A) HAS CORRECTLY ADJUDICATED THE ISSUE. THE COPY OF THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THE COMPANY IS AS UNDER:- PERIOD : 01-04-2006 TO 31-03-2007 ASSTT . YEAR 2007-2008 DATE NARRATION DEBIT CREDIT BALANCE D/C 25-08-2006 TO CH. NO. 205274 5,00,000.00 5,00,000.00 DR. 28-08-2006 BY CH. NO. 140852 5,00,000.00 0.00 31-08-2006 TO CH. NO. 205285 2,50,000.00 2,50,000.00 DR. 05-09-2006 BY CH. NO. 140855 2,50,000.00 0.00 13-10-2006 TO CH. NO. 205384 1,00,000.00 1,00,000.00 DR. 19-10-2006 BY CH. NO. 326584 1,00,000.00 0.00 22-12-2006 TO CH. NO. 278167 4,00,000.00 4,00,000.00 DR. 26-12-2006 BY CH. NO. 140898 4,00,000.00 0.00 11-01-2007 TO CH. NO. 278017 3,50,000.00 3,50,000.00 DR. 15-01-2007 BY CH. NO. 297507 3,50,000.00 0.00 24-01-2007 BY CH. NO. 297519 8,00,000.00 8,00,000.00 CR 25-01-2007 TO CH. NO. 278046 5,00,000.00 3,00,000.00 CR 27-01-2007 TO CH. NO. 278047 3,00,000.00 0.00 07-03-2007 TO CH. NO. 278323 2,00,000.00 2,00,000.00 DR 08-03-2007 BY CH. NO. 297560 2,00,000.00 0.00 TOTAL 26,00,000.00 26,00,000.00 0.00 5 THE ABOVE CLEARLY SHOWS THAT ASSESSEE HAS TAKEN ONL Y TEMPORARY ADVANCES WHICH HAVE BEEN RETURNED TO THE COMPANY WITHIN A WEEK. T HE ASSESSEE HAS ALSO GIVEN SIMILAR ADVANCES TO THE COMPANY, THEREFORE, THESE T RANSACTIONS ARE ON ACCOUNT OF TEMPORARY LOANS IN THE NATURE OF CURRENT ACCOUNT AN D CANNOT BE TERMED AS LOAN AND ADVANCES AS CONTAINED IN SECTION 2(22)(E) OF TH E ACT. THEREFORE, WE FIND NOTHING WRONG IN THE ORDER OF LD. CIT(A) AND WE CON FIRM THE SAME. 8. GROUND NO.3 : AFTER HEARING BOTH THE PARTIES, W E FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT ASSESSEE HAS TAKEN LOANS FORM VARIOUS PARTIES. ONE LOAN AMOUNTING TO RS. 4 LAKH S WAS TAKEN FROM SHREE GANESH ISPAT INDUSTRIES. HOWEVER, NO CONFIRMATION OR ADDRESS OF THE PARTY OR PAN NUMBER WAS FILED, THEREFORE, ASSESSING OFFICER ADDED THE SUM OF RS. 4 LAKHS TO THE INCOME OF THE ASSESSEE. BEFORE LD. CI T(A) IT WAS SUBMITTED THAT MANY LOANS WERE TAKEN ON TEMPORARY BASIS. HOWEVER, IN THE CASE OF LOAN FROM SHREE GANESH ISPAT INDUSTRIES, CONFIRMATION AND PAN NUMBER COULD NOT BE FILED BECAUSE THE COUNSEL OF THAT COMPANY COULD NOT BE CO NTACTED. THE LD. CIT(A) WAS SATISFIED WITH THE CONFIRMATION AND DELETED THE ADDITION. 9. BOTH THE PARTIES WERE HEARD. 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) VIDE PARA 3.2 WHICH IS AS UND ER:- I HAVE GONE THROUGH THE FACTS RELATING TO THE CONT ROVERSY. THE FINANCING ENTRY OF RS. 4,00,000/- WAS SUPPORTED BY BANK RECORDS AND COPY OF ACCOUNT OF THE LENDING PAR TY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE CONFIRME D COPY COULD NOT BE FILED BECAUSE THE REPRESENTATIVE OF TH E CONCERN COULD NOT BE CONTACTED. THE ASSESSEE HAS NOW FILED THE CONFIRMED COPY OF ACCOUNT OF THE ABOVE CONCERN. SI NCE MANY OTHER CREDITS HAVE BEEN ACCEPTED BY THE ASSESS ING OFFICER ON THE BASIS OF EVIDENCE IN THE SHAPE OF CO NFIRMED COPY OF ACCOUNT THE CREDIT IN THE ACCOUNT OF SHREE GANESH 6 ISPAT CO IS ALSO TAKEN TO BE GENUINE. THE ASSESSEE SUCCEEDS ON THIS GROUND . 11. SINCE THE LD. CIT(A) HAS ACCEPTED THIS LOAN BEC AUSE THE CONFIRMATION AND PAN NUMBER WAS FILED BEFORE HIM AND HE WAS SATISFIE D THAT SOME LOANS HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER ON SIMILAR C ONFIRMATIONS, THEREFORE, IN OUR OPINION THE ISSUE HAS BEEN CORRECTLY DECIDED BY HIM AND THERE IS NO NEED TO REMAND THE MATTER BACK TO THE FILE OF ASSESSING OFF ICER. 12. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 23 RD DECEMBER, 2013 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH