The ITO, Ward-4(2), Ahmedabad V. Shri Mehulbhai D.Zaveri, Ahmedabad

ITA 102/AHD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9673 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P B PARMAR
• Keywords: Question of law; Deemed dividend
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 102/AHD/2012 (ASSESSMENT YEAR: 2008-09) THE ITO, WARD (2), AHMEDABAD V/S MEHULBHAI D ZHAVERI, F/101 ASAVARI TOWER, B/H. FUN REPUBLIC CINEMA, SATELLITE AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AACPZ0796J APPELLANT BY : SHRI PRASOON KABRA, SR. D. R. RESPONDENT BY : SHRI P. B. PARMAR , A.R. ( )/ ORDER DATE OF HEARING : 21 -12-201 6 DATE OF PRONOUNCEMENT : 23 -12-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF LD. CIT(A)-VIII, AHMEDABAD DATED 20.10.2011 PERTAINING TO A.Y. 2008- 09. ITA NO. 102/ AHD/2012 . A.Y. 2008- 09 2 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DELETING THE ADDITION OF RS. 45,00,000/- MADE U/S. 2(22)(E) OF T HE ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS DERIVING INCOME FROM SALARIES AND CAPITAL GAINS AND THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 29.07.2008 AT TOTAL INCO ME OF RS. 1,98,760/-. THE RETURN WAS SELECTED FOR SCRUTINY UNDER CASS AND ACC ORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS OF ONE M/S. KADAM EXPORTS (P) LTD, IT WAS NOTICED THAT THE ASSESSEE W AS THE MAJOR SHARE HOLDER/DIRECTOR OF THE COMPANY AND ALSO HAD ENTERED INTO FINANCIAL TRANSACTION WITH KADAM EXPORTS (P) LTD. ON PERUSAL OF THE COPY OF ACCOUNT IN RESPECT OF THE ASSESSEE IN THE BOOKS OF ACCOUNTS OF KADAM EXPORTS (P) LTD., IT WAS NOTICED THAT THE SAID COMPANY HAD ADVA NCED FUNDS TO THE ASSESSEE WHICH WAS NOT DURING THE ORDINARY COURSE O F ITS BUSINESS. THE A.O. NOTICED THAT THE SAID COMPANY HAS ADVANCED A TOTAL SUM OF RS. 45,00,000/-. THE A.O. FURTHER NOTICED THAT THE ASSESSEE WAS HAVI NG A SHARE HOLDING IN THE KADAM EXPORTS PVT. LTD. TO THE EXTENT OF 61.82%. TH E A.O. WAS OF THE FIRM BELIEF THAT PROVISIONS OF SECTION 2(22)(E) OF THE A CT WAS ATTRACTED. 5. THE A.O. ASKED THE ASSESSEE WHY THE ADVANCE FROM M/ S. KADAM EXPORTS (P) LTD. SHOULD NOT BE TREATED AS DEEMED DIVIDEND IN TH E HANDS OF THE ASSESSEE AS THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AR E SQUARELY ATTRACTED. ASSESSEE FILED A DETAILED REPLY, THE RELEVANT PARTS READ AS UNDER:- ITA NO. 102/ AHD/2012 . A.Y. 2008- 09 3 'I AM ENCLOSING HEREWITH COPY OF MY ACCOUNT FROM TH E BOOKS OF ACCOUNTS OF KADAM EXPORTS PVT. LTD. FROM THIS ACCOUNT, YOU WILL OBSERVE THAT I HAD GIVEN APPROXIMATELY RS. 1 CRORE TO THE COMPANY. I HAVE TA KEN RS. 45 LACS FROM COMPANY WHICH I HAD REPAID IN LESS THAN 2 MONTHS TI ME. 2. PLEASE NOTE THAT, I AM MAINTAINING CURRENT ACCOU NT WITH COMPANY. COMPANY HAS NEVER PAID OR CHARGED INTEREST IN MY ACCOUNT. 3. KADAM EXPORTS PVT. LTD. IS DIVIDEND PAYING COMPA NY. THEREFORE THERE IS NO INTENTION TO TAKE ADVANCE FROM COMPANY INSTEAD OF D IVIDEND. 4. FURTHER YOUR HONOR WILL OBSERVE THAT I HAVE TAKE N MONEY FOR VERY SHORT DURATION. KEEPING ABOVE IN VIEW, I REQUEST YOUR HONOR NOT TO TREAT ABOVE AMOUNT AS DIVIDEND U/S. 2(22)(E). 6. THE AFOREMENTIONED SUBMISSIONS OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE A.O. WHO PROCEEDED BY MAKING AN ADDITION O F RS. 56,58,034/- WHICH INCLUDED THE SUM OF RS. 45,00,000/- AS DEEMED DIVIDEND. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND CHALLENGED THE ADDITIONS SO MADE. 8. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) HELD AS UNDER:- 6. I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESS MENT ORDER AND WRITTEN SUBMISSION SUBMITTED BY THE AUTHORIZED REPRESENTATI VE OF THE APPELLANT. IT WAS THE CASE OF THE ASSESSING OFFICER THAT KADAM EXPORT S PVT. LTD. HAS PROVIDED LOAN AMOUNTING TO RS.45,00,000/- TO THE APPELLANT AND TH EREFORE, HE ADDED AN AMOUNT OF RS.45,00,000/- U/S 2(22)(E) OF THE ACT, W HEREAS DURING THE COURSE OF APPELLATE PROCEEDINGS, IT WAS THE ARGUMENT OF A.R. OF THE APPELLANT THAT THE APPELLANT WAS MAINTAINING MUTUAL, OPEN AND CURRENT ACCOMMODATION ITA NO. 102/ AHD/2012 . A.Y. 2008- 09 4 ADJUSTMENT ACCOUNT WITH THE COMPANY AND ON NEED BAS IS THE FUND WAS TRANSFERRED FROM THE APPELLANT TO COMPANY AND VICE- VERSA AND AS IT WAS NOT IN THE NATURE OF LOAN AND ADVANCES, THE PROVISIONS OF S.2(22)(E) OF THE ACT CANNOT BE INVOKED. DURING THE COURSE OF APPELLATE PROCEEDINGS , THE A.R. OF THE APPELLANT ALSO PLACED ON RECORD CIT(A) ORDERS IN THE CASE OF M/S SCHUTZ DISHMAN BIOTECH PVT. LTD. BEARING APPEAL NOS. 188/189/190/191/ITO.T DS(1)/10-11 AND DISHMAN PHARMACEUTICAL LTD. BEARING APPEAL NO.DCIT.(OSD)R.1 /226/10-11, WHEREIN UNDER THE IDENTICAL FACTS OF THE CASE, BOTH THE CIT(A)S H AVE HELD THAT WHEN THE ASSESSEE HAS MAINTAINED MUTUAL, OPEN AND CURRENT ACCOMMODATI ON ADJUSTMENT ACCOUNT WITH THE SISTER CONCERNS, THEN THE TRANSACTIONS ENT ERED INTO WITH THE SISTER CONCERNS CANNOT BE TREATED AS LOAN OR ADVANCES AND THEREFORE PROVISIONS OF S.2(22)(E) OF THE ACT CANNOT BE INVOKED. 6.1. I HAVE PERUSED THE COPY OF LEDGER ACCOUNT FURN ISHED ALONGWITH THE WRITTEN SUBMISSION. IT CAN BE SEEN THAT THERE ARE LARGE NUM BER OF DEBIT AND CREDIT TRANSACTIONS. MEANING THEREBY, THE APPELLANT HAS GI VEN AND RECEIVED FUNDS AS AND WHEN REQUIRED TO AND FROM THE COMPANY. IT IS NO T AN ACCOUNT WHEREBY LOANS AND ADVANCES HAVE BEEN GIVEN TO THE APPELLANT. IT I S AN ACCOUNT WHICH IS IN THE NATURE OF MUTUAL, OPEN AND CURRENT ACCOMMODATION AD JUSTMENT ACCOUNT WHEREIN THERE IS A MOVEMENT OF FUNDS BOTH WAYS, ON NEED BAS IS. UNLIKE TRANSACTIONS OF LOANS AND ADVANCES, IN THIS KIND OF MUTUAL, OPEN AN D CURRENT ACCOMMODATION ADJUSTMENT ACCOUNT, THE MOVEMENT OF FUNDS IS BOTH W AYS AND THE SAME IS MORE IN THE NATURE OF CURRENT ACCOUNT RATHER THAN A LOAN ACCOUNT. TRANSACTIONS IN THE NATURE OF LOANS AND ADVANCES ARE USUALLY VERY FEW A ND FOR A LONGER DURATION CARRYING INTEREST. IN THE FACTS OF THE PRESENT CASE , THE NATURE OF TRANSACTION IS IN THE FORM OF MUTUAL, OPEN AND CURRENT ACCOMMODATION ADJUSTMENT ACCOUNT AND THEREFORE, THE SAME IS NOT A TRANSACTION IN THE NAT URE OF LOANS AND ADVANCES. I HAVE ALSO PERUSED THE ORDERS OF CIT(A) IN THE CASE OF SCHUTZ AND DISHMAN (SUPRA) PLACED BEFORE ME AND IN THE BOTH THE CASES, UNDER I DENTICAL FACTS OF THE CASE, BOTH THE CIT(A)S HAVE ALSO HELD THAT WHEN THE ASSES SEE HAS MAINTAINED MUTUAL, OPEN AND CURRENT ACCOMMODATION ADJUSTMENT ACCOUNTS, PROVISIONS OF S.2(22)(E) OF THE ACT CANNOT BE INVOKED. THIS VIEW IS ALSO SUP PORTED BY THE FOLLOWING DIRECT DECISIONS- CIT VS. CREATIVE DYEING & PRINTING (P) L TD. 318ITR 476 (DEL.)],CIT VS. RAJKUMAR 318 ITR 462 (DEL),NH SECURITIES LTD. V. DC IT (2007) 11 SOT 302 (BOM) .ACIT V. GLOBAL AGENCIES (P) LTD. (2005) 87 T TJ 1086 (DEL) CIT V. NAGINDAS M. KAPADIA.(1989)177ITR393(BOM). THEREFORE, IN MY O PINION, IN THE ABSENCE OF LOANS AND ADVANCES, THE PROVISIONS OF S.2(22)(E) OF THE ACT IN RESPECT OF DEEMED ITA NO. 102/ AHD/2012 . A.Y. 2008- 09 5 DIVIDEND ARE NOT ATTRACTED AND THEREFORE ADDITION M ADE BY THE ASSESSING OFFICER IS HEREBY DELETED. 9. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD . D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. AND IN SUPPORT RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SMT. TARULATA SHYAM 108 ITR 345, HONBLE HIGH COURT OF MADRAS IN THE CASE OF P.K. AB UBUCKER 135 TAXMANN.COM 77, HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF SURENDRA KUMAR 65 TAXMANN.COM 80, HONBLE HIGH COURT OF ALLA HABAD IN THE CASE OF KRISHNA GOPAL MAHESHWARI 44 TAXMANN.COM 127, HONBL E HIGH COURT OF ALLAHABAD IN THE CASE OF SHASHI PAL AGARWAL 54 TAX MANN.COM 289. 10. PER CONTRA THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES AND PLACED STRONG RELI ANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF SCHUTZ DISHMAN BIO-TECH PVT. LTD. IN TAX APPEAL NO. 958 & 959 OF 2015 AND ALSO RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH I N THE CASE OF DISHAMAN PHARMACEUTICALS & CHEMICALS LTD. IN ITA NO. 2105 & 2125/AHD/2012. 11. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECI SIONS RELIED UPON BY THE RIVAL PARTIES. THERE IS NO DISPUTE THAT THE ASS ESSEE IS HOLDING SUBSTANTIAL INTEREST IN KADAM EXPORTS (P) LTD., THE RELEVANT EX TRACT OF THE COPY OF THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ACCO UNTS OF M/S. KADAM EXPORTS (P). LTD. IS AS UNDER:- ITA NO. 102/ AHD/2012 . A.Y. 2008- 09 6 DATE PARTICULARS VCH TYPE VCH NO . DEBIT CREDIT 30.05.2007 BY HDFC BANK CH. NO. 300195 BOI REC. M.D. ZAVERI RECEIPT 89 9,50,000.00 04.06.2007 TO HDFC BANK CH. NO. 721890 PAID TO M.D. ZAVERI PAYMENT 216 9,50,000.00 05.07.2007 BY HDFC BANK CH. NO. 353578 HDFC BANK REC. M.D. ZAVERI BY HDFC BANK CH. NO. 300197 BOI REC. M.D. ZAVERI RECEIPT RECEIPT 153 154 29,10,000.00 20,90,000.00 26.07.2007 BY HDFC BANK CH. NO. 300199 RECEIPT 182 40,00,000.00 31.07.2007 TO HDFC BANK CH. NO. 816791 PAID TO M.D. ZAVERI PAYMENT 534 15,00,000.00 11.09.2007 TO HDFC BANK CH. NO. 817102 PAID TO M.D. ZAVERI PAYMENT 753 20,00,000.00 23.10.2007 TO HDFC BANK CH. NO. PAYMENT 951 25,00,000.00 30.10.2007 TO HDFC BANK CH. NO. 817106 PAYMENT 991 5,00,000.00 02.11.2007 TO HDFC BANK CH. NO. 817108 PAYMENT 1018 25,00,000.00 11.01.2008 TO CITI BANK CURRENT A/C. CH. NO. 89402 PAYMENT 1266 35,00,000.00 30.01.2008 TO CITI BANK CURRECT A/C. CH. NO. 89403 PAYMENT 1336 3,00,000.00 TO HDFC BANK CH. NO. 817112 PAYMENT 1337 7, 00,000.00 13 .02.2008 BY HDFC BANK CH. NO. 941377 RECEIPT 573 25,00,000.00 15.03.2008 BY HDFC BANK RECEIPT 621 3,00,000.00 31.03.2008 BY HDFC BANK CH. NO. 941393 HDFC BANK RECEIPT 642 17,00,000.00 1,44,50,000.00 1,44,50,000.00 ITA NO. 102/ AHD/2012 . A.Y. 2008- 09 7 12. A PERUSAL OF THE AFORE-STATED COPY OF THE ACCOUNT C LEARLY SHOWS THAT THE ASSESSEE WAS HAVING A CURRENT ACCOUNT WITH THE SAID COMPANY. IT CAN BE SEEN THAT THERE ARE SEVERAL DEBITS AND CREDITS ENTR IES IN THE SAID ACCOUNT. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F SCHUTZ DISHMAN BIO- TECH PVT. LTD. (SUPRA) WAS SEIZED WITH THE FOLLOWIN G QUESTION OF LAW:- 'WHETHER ON FACTS AND IN LAW THE ITAT WAS RIGHT IN CANCELLING THE ORDER PASSED U/S 201(1) AND 201(A) OF THE ACT, WITH OUT APPRECIATING THAT THE AMOUNT ADVANCED WAS IN THE NATURE OF DEEMED DIVIDEN D U/S 2(22)(E) OF THE ACT?' 13. AND THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT READS AS UNDER:- 4. IT CAN THUS BE SEEN THAT THE COMMISSIONER AS A MATTER OF FACT FOUND THAT THE PAYMENTS WERE NOT IN THE NATURE OF CURRENT ADJUSTME NT. THERE WAS MOVEMENT OF FUND BOTH WAYS ON NEED BASIS. THE TRANSACTIONS IN T HE NATURE OF LOANS AND ADVANCES ARE USUALLY VERY FEW IN NUMBERS WHEREAS IN THE PRES ENT CASE, SUCH TRANSACTIONS ARE IN THE FORM OF CURRENT ACCOMMODATION ADJUSTMENT ENTRIE S. THE COMMISSIONER THEREFORE, HELD THAT THE TRANSACTIONS WERE NOT IN T HE NATURE OF LOANS AND ADVANCES. THE REVENUE CARRIED THE MATTER IN APPEAL. THE TRIBU NAL CONCURRED WITH THE VIEW OF THE CIT (APPEALS) AND HELD THAT THE AMOUNTS WERE NO T IN THE NATURE OF INTER CORPORATE DEPOSITS AND WERE THEREFORE, NOT TO BE TR EATED AS LOANS OR ADVANCES AS CONTEMPLATED IN SECTION 2(22)(E) OF THE ACT. 5. THE ISSUE IS SUBSTANTIALLY ONE OF APPRECIATION O F FACTS. WHEN THE CIT(APPEALS) AS WELL AS TRIBUNAL CONCURRENTLY HELD THAT LOOKING TO LARGE NUMBER OF ADJUSTMENT ENTRIES IN THE ACCOUNTS BETWEEN TWO ENTITIES, THE AMOUNTS W ERE NOT IN THE NATURE OF LOAN OR DEPOSIT, BUT MERELY ADJUSTMENTS, APPLICATION OF SEC TION 2(22)(E) OF THE ACT WOULD NOT ARISE. CONSEQUENTLY, NO QUESTION OF LAW ARISES. TAX APPEALS ARE DISMISSED. ITA NO. 102/ AHD/2012 . A.Y. 2008- 09 8 14. IF THE AFOREMENTIONED COPY OF ACCOUNTS IS CONSIDERE D IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT ( SUPRA), WE FIND THAT FACTS ARE SIMILAR DEBITS AND CREDITS TO THE FACTS CONSIDE RED BY THE HONBLE JURISDICTIONAL HIGH COURT. RESPECTFULLY FOLLOWING T HE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. 15. BEFORE PARTING, AS MENTIONED ELSEWHERE, THE LD. D.R . HAS RELIED UPON SEVERAL DECISIONS. IN OUR CONSIDERED OPINION, NONE OF THE DECISIONS RELIED UPON BY THE LD. D.R. THE HONBLE COURTS HAD CONSIDE RED A TRANSACTION WHICH WAS IN THE NATURE OF CURRENT ACCOUNT WHERE THERE WE RE SEVERAL DEBITS AND CREDITS. THEREFORE, THE FACTS OF THE CASE IN HAND A RE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE CASES RELIED UPON BY THE LD. D.R. 16. SINCE THE FACTS OF THE CASE DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT SQUARELY APPLY TO THE FACTS OF THE CASE IN HAND, WE HAVE RESPECTFULLY FOLLOWED THE SAME. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 23- 12- 2 016. SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 23 /12/2016