DCIT, Chandigarh V. Sh. Ashok Jindal, Chandigarh

ITA 109/CHANDI/2014

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5679 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Document seized; Charitable institution; Peak credit; Deemed to accrue or arise in india; Additional evidence; Deemed dividend; Commercial expediency; Documents seized
• Section: 2(22)(e); 12AA; 56

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH !, ' # , . %.. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR , A M ./ ITA NOS. 57 & 58/CHD/2014 '* + ,+ / ASSESSMENT YEARS : 2007-08 & 2008-09 SH. ASHOK JINDAL # 22, NAC MANIMAJRA CHANDIGARH THE DCIT CENTRAL CIRCLE-1 CHANDIGARH ./ PAN NO: AAMPJ1996Q / APPELLANT / RESPONDENT & ./ ITA NO. 109/CHD/2014 '* + ,+ / ASSESSMENT YEAR : 2009-10 THE DCIT CENTRAL CIRCLE-1 CHANDIGARH SH. ASHOK JINDAL # 22, NAC MANIMAJRA CHANDIGARH ./ PAN NO: AAMPJ1996Q / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI. SUDHIR SEHGAL / REVENUE BY : SMT. CHANDRAKANTA ! ' # / DATE OF HEARING : 26/09/2018 $%&'() # / DATE OF PRONOUNCEMENT : 29/11/2018 '-/ ORDER PER BENCH: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSEE AND CROSS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE SEPARATE ORDERS OF LD. CIT(A)(CENTRAL) GURGAON. 2. ASSESSEE HAS RAISED FOLLOWING MODIFIED GROUND IN ITA NO. 57/CHD/2014 FOR A.Y. 2007-08: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 3,98,509/- UNDER SEC TION 2(22)(E) OF THE INCOME TAX ACT, 1961. 2 2. THAT THE CONFIRMATION OF ADDITION OF RS. 3,98,509/- IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 12,58,710/- ON ACCOUNT OF CERTAIN SEIZED DOCUMENTS AS PER PARA 11.2.2 OF HER ORDER. 2.1 ASSESSEE HAS RAISED FOLLOWING MODIFIED GROUND I N ITA NO. 58/CHD/2014 FOR A.Y. 2008-09: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1,12,918/- UNDER SEC TION 2(22)(E) OF THE INCOME TAX ACT, 1961. 2. THAT THE CONFIRMATION OF ADDITION OF RS. 1,12,918/- IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 1 LAC ON ACCOUNT OF DEPOSIT IN OBC AS PER PARA 11.2.1 OF HER ORDER. 2.2 REVENUE HAS RAISED THE FOLLOWING GROUNDS ALONGW ITH ADDITIONAL GROUND IN ITA NO. 109/CHD/2014 FOR A.Y. 2009-10: (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3,94,207/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED INCOME UNDER SECTION 2(22)(E) OF THE I.T. ACT, 1961? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 58,86,284 /- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SEIZED DOCUMENTS AS PAGES 1 TO 48 OF A-8 OF DELTA 3. 2.3 ADDITIONAL GROUND: THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW WHILE GIVING RELIEF WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER FOR EXAMINATION OF ADDITIONAL EVIDENCE PRODUCED BEFORE HER WHICH WE RE NOT PRODUCED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS AND WITHOUT INVOKING THE PROVISIONS OF RULE 46A OF THE INCOME T AX RULES. ITA 57/CHD/2014 FOR A.Y. 2007-08 3. THE ASSESSING OFFICER MADE ADDITION UNDER SECTIO N 2(22)(E) AS THE ASSESSEE WAS SHAREHOLDER IN A NUMBER OF COMPANIES I N WHICH HE HAD SUBSTANTIAL INTEREST. THE COMPANIES GIVEN THE LOAN AND THE SHAR EHOLDING OF THE ASSESSEE ARE AS UNDER: COMPANY WHICH IS GIVING LOAN SUBSTANTIAL INTEREST OF THE ASSESSEE IN THE SAID COMPANY (MINIMUM 10% REQUIRED) LIST OF SUBSTANTIAL INTERESTED SHAREHOLDERS IN THE COMPANY WHICH IS GIVING LOAN LOAN GIVEN TO THE ASSESSEE OR TO ANY CONCERN IN WHICH ASSESSEE IS SUBSTANTIALLY INTERESTED. ASSESSEE'S INTEREST IN SAID CONCERN LOAN AMOUNT GIVEN BEING TREATED AS DEEMED DIVIDEND U/S 2(22)(E) PROPORTIONATE SHARE OF DEEMED DIVIDEND ON THE BASIS OF SHAREHOLDING AMONG THE SUBSTANTIALLY INTERESTED SHAREHOLDERS IN THE COMPANY HIMLAND AGRO FOODS INDIA LTD. .(ACCUMULATED PROFITS OF 6596859) 1640/ 15800 SHARES = 10.38% GARGI JINDAL = 2900 SHARES, URMIL JINDAL = 2300 SHARES, ASHOK JINDAL = 1640 SHARES HEERA MOTI HEALTH CARE PRODUCT LTD. 1200 / 5800 SHARES = 20.69% 359588 359588 1640/ 15800 SHARES = 10.38% GARGI JINDAL = 2900 SHARES, URMIL JINDAL = 2300 SHARES, ASHOK JINDAL = 1640 MAHAPRABHU RAM MULKH EDUCATION SOCIETY MEMBER 10000 2398 3 SHARES HEERA MOTI HEALTH CARE PRODUCT LTD. .(ACCUMULATED PROFITS OF 4393123) 1200 / 5800 SHARES = 20.69% R. L. JINDAL - 1200 SHARES, AMIT JINDAL = 600 SHARES, ASHOK JINDAL = 1200 SHARES SWAMI DEVI DAYAL HI- TECH EDUCATION SOCIETY MEMBER 500000 200000 1200 / 5800 SHARES = 20.69% ASHOK JINDAL = 1200 SHARES ASHOK JINDAL SHAREHOLDER 18000 18000 4250/33311 SHARES = 12.76% ASHOK JINDAL = 4250 SHARES ASHOK JINDAL SHAREHOLDER 20921 20921 HEERAMOTI SPICY PVT. LTD..(ACCUMULA TED PROFITS OF 3068701) TOTAL 6,00,907 4. THE A.O. MADE THE ADDITION BY OBSERVING AS UNDER : A PERUSAL OF DETAILS MENTIONED IN ABOVE PARA SHOWS THAT ALL THE CONDITIONS ENUMERATED ABOVE WERE FULLY SATISFIED IN THE CASE O F THE ASSESSEE. VIDE THIS OFFICE LETTER SHOWCAUSE NOTICE DATED 06.06.2011, THE ASSES SEE WAS SHOWCAUSED AS TO WHY THE SAID AMOUNT SHOULD NOT BE TAXED AS DEEMED D IVIDEND IN VIEW OF PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX AC T, 1961 IN RESPONSE TO THE SAID SHOW CAUSE NOTICE, THE COUN SEL OF THE ASSESSEE VIDE ITS LETTER NO. NIL DATED 06.06.2011 FILED A WRITTEN REPLY. IN THE WRITTEN SUBMISSION THE ASSESSEE REITERATED THAT THE AMOUNTS DEBITED TO THE FIRM M/S HEERA MOTI AGRO PRODUCTS, IN THE BOOKS OF THE COMPANY M/S HEERA MOT I HEALTH CARE PRODUCT LTD. & M/S HIMLAND AGRO FOODS (INDIA) LTD. WERE PROVIDED O UT OF COMMERCIAL/ BUSINESS EXPEDIENCIES AND THERE WAS NO INTENTION OF PROVIDIN G A LOAN OR ADVANCE. IT WAS FURTHER SUBMITTED THAT THE AMOUNT PROVIDED TO THE F IRMS IN WHICH SMT. URMIL JINDAL IS PARTNER HAVE NOT BEEN PERSONALLY WITHDRAWN BY SMT U RMIL JINDAL. NO INDIVIDUAL BENEFIT HAS BEEN OBTAINED BY SMT URMIL JINDAL. THE ASSESSEE SUBMITTED THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS NEED TO BE EXAMINE D. THE ASSESSEE PRODUCED THE LEDGER ACCOUNT OF THE FOLLOWING PARTIES AND MADE TH E FOLLOWING SUBMISSIONS THE REPLY OF THE ASSESSEE HAS BEEN DULY CONSIDERED. IN ORDER TO DECIDE TO THE ISSUE IN HAND IT WOULD BE IMPORTANT TO UNDERSTA ND MEANING OF 'LOAN AND ADVANCES'. A PLAIN READING OF THE SAME WOULD BE THA T ANY AMOUNT TRANSFERRED FROM LENDER TO BORROWER FOR THE PERSONAL NEEDS, BUS INESS NEEDS OR WHENEVER ONE IS FACING FINANCIAL CRISIS. THE TERM LOAN AND ADVANCE HAS NOT BEEN DEFINED IN SECTION 2(22)(E) OF THE L.T.ACT, 1961. THEREFORE, IT IS TO BE UNDERSTOOD IN COMMON COMMERCIAL PARLANCE. IN THIS REGARD, THE TWO TERMS, VIS., 'LOAN' AND ADVANCES HAVE BEEN DEFINED, BY VARIOUS AUTHORS/ AUTHORITIES, AS F OLLOWS: THE LEDGER ACCOUNTS (COPY ENCLOSED) PRODUCED BY THE ASSESSEE IN SUPPORT ITS CONTENTION REVEAL THE FOLLOWING TRANSACTIONS BETWEE N THE COMPANIES (IN WHICH THE ASSESSEE IS A SUBSTANTIAL SHAREHOLDER) AND THE CONCERNS IN WHICH THE ASSESSEE IS SUBSTANTIAL PARTNER. A PERUSAL OF LEDGER ACCOUNT FILED BY THE ASSESSEE AND ADMISSION IN HER WRITTEN REPLY REVEALS THAT THE TRA NSACTIONS BETWEEN THE TWO CONCERNS ARE OF THE FOLLOWING NATURE: THE FUNDS WERE TRANSFERRED FROM THE COMPANY TO THE FIRM TO KEEP CASH CREDIT A/C WITHIN LIMIT THE FUNDS WERE TRANSFERRED BY THE AWAY OF TRANSFER ENTRIES TRANSFER BECAUSE OF COMMON PARTIES IN BOOKS OF ACCOUNT OF BOTH THE PART IES. THE FUNDS WERE TRANSFERRED TO THE BANK ACCOUNT OF T HE CONCERN BY THE WAY OF BANK TRANSFER OR THROUGH CHEQUES. THE ABOVE INDICATES THAT THE FUNDS HAVE BEEN TRANSF ERRED FROM THE COMPANY TO THE F\RM AS THERE WAS SHORTAGE OF FUNDS THEREFOR E, THESE CAN BE ONLY TREATED AS LOANS AND ADVANCES. THE TRANSACTIONS ARE NOT SIM PLE TRANSFER ENTRIES BUT THOUGH CHEQUE/BANK TRANSFERRED WHICH WERE ISSUED AS FUNDS WERE SHORT OF FIRM. THE TRANSFER OF FUNDS HAS NOT BEEN DONE IN THE ORDI NARY COURSE OF BUSINESS. IN THIS REGARD THE ASSESSEE FAILED TO DEMONSTRATE THAT ADVA NCES WERE TRADE ADVANCES AND WERE DONE TO THE ORDINARY COURSE OF BUSINESS. A PERUSAL OF LEDGER ACCOUNT SHOWS THAT THERE HAS NOT BEEN ANY PURCHASE/SALE BET WEEN THE TWO PARTIES. MERE ASSERTION BY THE ASSESSEE LOAN WERE PROVIDED OUT CO MMERCIAL AND BUSINESS EXPEDIENCY IS NOT ENOUGH. THE ONUS LIES THE ASSESSE E TO PROVIDE THE NECESSARY PROOF TO THIS EFFECT AS THE ASSESSEE HAS CONTENDED THAT THE THERE WAS NO INTENTION OF PROVIDING OF LOANS AND ADVANCE CAN NOT BE ACCEPTED. THE 4 DEPARTMENT HAS TO LOOK INTO THE ACTUAL TRANSACTION WHATEVER BE THE 'INTENTION'. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT DURING THE YEAR UNDER CONSIDERATION, THE MONEY WAS ADVANCED TO SWAMI DEVI DYAL HI TECH E DUCATION ACADEMY IN THE BOOKS OFM/S HEERA MOTI HEALTH CARE PRODUCTS LTD . & HEERA MOTI SPICES PVT AND PAYMENT HAS BEEN MADE TO CHARITABLE TRUST THE A SSESSEE HAS NOT DERIVED ANY PERSONAL BENEFIT. IT IS ALSO SUBMITTED THAT THE ASSESSEE IS NOT ENTITLED TO 20% OR MORE OF THE INCOME OF THE SOCIETY. IN THIS REGARD I T MAY BE MENTIONED THAT THE ACCOUNTS AND THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH SHOW THAT HE FUNDS OF THE SOCIETY HAVE BEEN UTILIZED BY THE MEMB ERS OF THE SOCIETY AND THEIR FAMILY MEMBERS. THEREFORE, THE CONTENTION OF THE AS SESSEE THAT NO PERSONAL BENEFIT HAS BEEN DERIVED BY THE ASSESSEE IS NOT COR RECT THUS IN VIEW OF THE DISCUSSION ABOVE AND FACT THAT DETAILS PROVIDED BY THE ASSESSEE FAIL TO ESTABLISH THAT THE AMOUNTS WERE AD VANCED DURING THE ORDINARY COURSE OF BUSINESS AND THAT THESE WERE FOR COMMERCI AL EXPEDIENCY. RATHER THE ASSESSEE HAS CARRIED OUT THESE TRANSACTIONS TO CIRC UMVENT THE LAW. THE WITHDRAWALS MADE BY THE APPELLANT FROM THE COMPANY AMOUNTED TO GRANT OF LOAN OR ADVANCE BY THE COMPANY TO THE SHAREHOLDER. THE LEGAL FICTION CAME INTO PLAY AS SOON AS THE MONIES WHO PAID BY THE COMPANY TO THE APPELLANT. THE LEGISLATURE HAS GONE BEYOND THIS AND EVEN IF LOAN W AS NOT OUTSTANDING AS OF THE YEAR END, IF WAS STILL TREATED AS DEEMED DIVIDEND. THE LOAN OR ADVANCE TAKEN FROM THE ADVANCE MAY HAVE BEEN ULTIMATELY REPAID OR ADJUSTED, BUT THAT WILL NOT AFTER THE ADVANCE MAY HAVE BEEN ULTIMATELY REPAID O R ADJUSTED, BUT THAT WILL NOT AFTER THE FACT THAT THE ASSESSEE, IN EYE OF LAW, HA D RECEIVED DIVIDEND FROM THE COMPANY DURING THE RELEVANT ACCOUNTING YEAR. THEREF ORE IN VIEW OF THE ABOVE DISCUSSION, THE CONTENTION OF THE ASSESSEE THAT SUC H AMOUNTS ARE OUT OF BUSINESS EXPEDIENCIES AND IN THE ORDINARY COURSE OF BUSINESS IS UNACCEPTABLE AND IS ALSO NOT SUPPORTED BY ANY EVIDENCE AND HAS NOT BEEN DEMO NSTRATED BY THE ASSESSEE. THUS, RS. 4,47,620/- IS TREATED AS DEEMED DIVIDEND AS PER SECTION 2(22)(E) AND IS ADDED TO THE TAXABLE INCOME UNDER SECTION 56 OF THE INCOME TAX ACT, 1961 FOR THE YEAR UNDER CONSIDERATION. 5. THE LD. CIT(A) CONFIRMED THE ADDITION HOLDING TH AT IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS A SHAREHOLDER IN A NUMBER OF C OMPANIES IN WHICH HE HAS SUBSTANTIAL INTEREST AND THESE COMPANIES HAVE GIVEN LOANS TO THE ASSESSEE AS WELL AS COMPANIES IN WHICH HE HAS SUBSTANTIAL INTER EST. IT IS EVIDENT THAT ASSESSEE HAS HOLDING MORE THAN 10% IN M/S HEERA MOTI HEALTH CARE PRODUCTS AND M/S HIMLAND AGRO FOOD INDIA LTD. THE COMPANIES ALSO HAV E ACCUMULATED PROFITS. THEY HAVE IN TURN GIVEN LOANS TO OTHER CONCERNS WHE REIN ASSESSEE HAS SUBSTANTIAL INTEREST. THE LD. CIT(A) DISMISSED THE ARGUMENTS TH AT THOUGH EACH OF THE PARTNERS/DIRECTORS OF THE GROUP CONCERNS ARE SEPARA TE AND INDEPENDENT, THEY ACT AS A GROUP IN ORDER TO CARRY ON THE BUSINESS AN D TO ACHIEVE THE OBJECTS OF THE BUSINESS OR TRUST IN A MOST EFFECTIVE MANNER. B ANK ACCOUNTS IN DIFFERENT NAMES OF THE FIRMS/ COMPANIES, INDIVIDUAL MEMBERS A RE OPENED IN ORIENTAL BANK OF COMMERCE, MANIMAJRA AND STATE BANK OF INDIA, BAD DI, WITH THE INTENT THAT NO CHEQUE DRAWN ON ANY OF THE BANK ACCOUNT OF THE GROU P CONCERN, MUST BE DISHONOURED. THE LD. CIT(A) HAS ALSO REFUTED THE AR GUMENTS THAT THE MEASURE 5 WAS FOR COMMERCIAL EXPEDIENCY AND THAT AS NO CHEQUE S, AS TO CONSTITUTE A LOAN, WERE ISSUED IN THE NAME OF THE ASSESSEE BY THE COMPANY/ FIRM IN WHICH HE HAS SUBSTANTIAL INTEREST, THE PROVISIONS OF SECTION 2(22)(E) WERE NOT APPLICABLE. 6. BEFORE US, THE ASSESSEE REITERATED THE ARGUMENTS TAKEN BEFORE THE LOWER AUTHORITIES. THE CRUX OF THE WRITTEN ARGUMENTS IS AS UNDER: AS REGARDS, M/S. HEERA MOTI HEALTHCARE PRODUCT LTD ., IT IS SUBMITTED THAT THIS ADVANCE WAS MADE FOR THE BUSINESS EXPEDIENCY WAS NO T DIRECTLY PAID TO THE INDIVIDUAL THEREFORE, THIS ADVANCE DOES NOT FALL IN THE MISCHIEF OF SECTION 2(22) (EJ OF THE INCOME TAX ACT, 1961. APART FROM IT, IT IS FURTHER SUBMITTED; I) THE ASSESSEE GROUP CONSISTS OF PARTNERSHIP CONCERNS AND COMPANIES ENGAGED IN THE BUSINESS OF PRODUCTION AND SALE OF S PICES AND FOOD PRODUCTS AND BESIDES, THEY ARE HAVING TWO EDUCATIONAL INSTIT UTION, NAMELY SWAMI DEVI DYAL HI TECH EDUCATION ACADEMY AND MAHA PRABHU RAM MULAKH HI TECH EDUCATION SOCIETY. II) THESE CONCERNS ARE MANAGED BY FOUR BROTHERS ALONGWI TH WIVES, WHO ARE PARTNERS/DIRECTORS OR TRUSTEES IN DIFFERENT CONCERN S OF THE GROUP. THOUGH, EACH INDIVIDUAL ENTITY IS SEPARATE AND INDEPENDENT, BUT FOR THE PURPOSES OF CARRYING ON THE BUSINESS AND OTHERWISE, THEY ACT AS A GROUP IN ORDER TO CARRY ON THE BUSINESS AND TO ACHIEVE THE OBJECTS OF THE BUSINESS OR TRUST IN A MOST EFFECTIVE MANNER. III) BECAUSE OF THE VARIOUS BUSINESS ENTITIES AND IN ORD ER TO MAINTAIN THE GOODWILL AND REPUTATION, THE GROUP AS A WHOLE HAVE OPENED BANK ACCOUNTS IN DIFFERENT NAMES OF THE FIRMS/COMPANIES, INDIVIDUAL MEMBERS IN ONE BANK, NAMELY ORIENTAL BANK OF COMMERCE, MANIMAJRA AND STA TE BANK OF INDIA, BADDI AND ALL THE BANK ACCOUNTS ARE AS PER REGULAR BOOKS OF ACCOUNTS. 6 IV) FOR THE PURPOSE OF CARRYING ON THE BUSINESS AND IN ORDER TO MAINTAIN THE GOOD/WILL AND REPUTATION OF EACH ENTITY OF THE GROU P, IT HAS BEEN DECIDED AND COMMUNICATED TO THE BANKERS THAT, IF ANY, CHEQUE IS DRAWN ON ANY OF THE BANK ACCOUNT OF THE GROUP CONCERN, THEN THAT CHEQUE MUST BE HONOURED AND FOR THAT PURPOSE, AT TIMES, WHERE THERE IS LESSER BALAN CE IN THE ACCOUNT OF ONE GROUP CONCERN, BASED ON OUR INSTRUCTION TO THE BANK , THE SAME CHEQUE IS CLEARED DEBITING TO SOME OTHER ACCOUNT AND DUE TO T HIS, THERE ARE CERTAIN DEBIT AND CREDIT BALANCES, WITHIN THE GROUP CONCERNS, DUR ING THE YEAR UNDER CONSIDERATION. V) THUS, FROM THE ABOVE, IT IS CLEAR THAT THE AMOUNT I S NOT IN THE NATURE OF ANY ADVANCE OR LOAN GIVEN TO ANY INDIVIDUAL, SHAREHOLDE R OR PARTNER IN THE FIRM OR SHAREHOLDER IN THE COMPANY. VI) THUS, THE INSTRUCTIONS HAVE BEEN GIVEN SO THAT THER E IS NO LOSS OF GOODWILL OR REPUTATION ON ACCOUNT OF DISHONOUR OF CHEQUES. THUS , THIS ACT OF INTER FIRM AND COMPANIES TRANSACTIONS IS ON ACCOUNT OF COMMERCIAL EXPEDIENCY ONLY. VII) YOUR HONOUR WOULD FIND THAT THERE IS NO CHEQUE ISSU E IN THE NAME OFASSESSEE BY THE COMPANY OR FIRM, WHICH CAN BE TER MED IN THE NATURE OF ADVANCE OR LOAN AND TLIIS IS UNDISPUTED FACT. THERE FORE, THE PROVISIONS OF SECTION 2(22)(E) CANNOT BE ATTRACTED. HAD THERE BEEN ANY CH EQUE HAVING BEEN ISSUED IN THE NAME OFASSESSEE, THEN IT MAY HAVE BEEN DIFFI CULT FOR THE ASSESSEE TO COME OUT OF THE MISCHIEF OF SECTION 2(22J(E). THERE FORE, IT IS A CASE WHERE, THE PROVISIONS OF SECTION 2 (22) (E) ARE NOT ATTRACTED AT ALL. VIII) THE RELIANCE IS BEING PLACED IN THE JUDGMENT OF CHA NDIGARH BENCH OF THE INCOME TAX APPELLATE TRIBUNAL IN THE CASE OFDCIT VS LAKRA BROS. (2007) 106 TTJ 250, IN WHICH, IT HAS BEEN HELD BY THE TRIBUNAL, TH AT LEGITIMATE TRANSACTIONS CARRIED OAT IN THE ORDINARY COURSE OF BUSINESS, WHE RE THE INTENTION IS NEITHER TO GIVE A LOAN OR ADVANCE TO CONFER INDIVIDUAL BENEFIT TO SHAREHOLDER, ARE OUTSIDE THE PURVIEW OF SECTION 2 (22) (E). 7 IX) THE BUSINESS TRANSACTIONS ARE INBUILT IN THE SE NSE THAT DUE TO THE INSUFFICIENT BALANCE IN ONE ACCOUNT, THE CHEQUE HAD BEEN CLEARED FROM THE ACCOUNT OF SOME OTHER CONCERN TO SAVE THE GOODWILL AND REPUTAT ION OF THE GROUP AS A WHOLE AND, THEREFORE, THE CONTENTION OF THE ASSESSI NG OFFICER THAT IT IS NOT IN THE COURSE OF CARRYING ON ANY BUSINESS TRANSACTION IS N OT CORRECT OBSERVATION. RELIANCE IS BEING PLACED ON THE FOLLOWING JUDGMENTS .-(A). CIT VS RAJ KUMAR (2009) 23 DTR 304 (DEL.) (B). CIT VS CREATIVE DYING & PRINTING PVL LTD. (2009) 30 DTR (DEL.) 143 (C). CIT VS SMT SAVITHIRI SAM (1998) 144 CTR ( MAD) 17 (D). G.R. GOVINDRAJULU NAIDU&ANRS. VS CIT (1973 ) 90ITR13 (MAD.) X) THE ASSESSING OFFICER HAS TRIED TO DISTINGUISH T HE ABOVE SAID JUDGMENT BY MERELY STATING THAT THESE ARE NOT BUSINESS TRANSACT IONS. IN THIS REGARD, IT IS SUBMITTED THAT THE AMOUNT HAVING NOT BEEN GIVEN DIR ECTLY TO THE SHAREHOLDER IN THE NATURE OF LOAN OR ADVANCE AND, THEREFORE, THESE PROVISIONS OF SECTION 2 (22) (E) ARE NOT ATTRACTED. XI) WE ARE ALSO INVITING TO YOUR KIND HONOUR TO THE LATEST JUDGMENT OF DELHI HIGH COURT AS REPORTED IN 318 ITR 462 AND IN WHICLI, IT HAS BEEN HELD AS UNDER:- 'THE WORD 'ADVANCE' HAS TO BE READ IN CONJUNCTION W ITH THE WORD 'LOAN'. USUALLY ATTRIBUTES OF A LOAN ARE THAT IT INVOLVES POSITIVE ACT OF LENDING COUPLED WITH ACCEPTANCE BY THE OTHER SIDE OF THE MONEY AS LOAN : IT GENERALLY CARRIES AN INTEREST AND THERE IS AN OBLIGATION OF REPAYMENT. O N THE OTHER HAND, IN ITS WIDEST MEANING THE TERM 'ADVANCE' MAY OR MAY NOT INCLUDE L ENDING. THE WORD 'ADVANCE' IF NOT FOUND IN THE COMPANY OF OR IN CONJ UNCTION WITH A WORD 'LOAN' MAY OR MAY NOT INCLUDE THE OBLIGATION OF REPAYMENT. IF.. IT DOES THEN IT WOULD BE A LOAN. THUS, ARISES THE CONUNDRUM AS FTP WHAT MEANING ONE WOULD ATTRIBUTE TO THE TERM 'ADVANCE'. THE RULE OF CONSTRUCTION TO OUR MINDS WH ICH ANSWERS THIS CONUNDRUM IS NOSCITUR A SOCIIS. THE SAID RULE HAS BEEN EXPLAINED BOTH BY THE PRIVY COUNCIL IN 8 THE CASE OF ANGUS ROBERTSON VS. GEORGE DAY (1879) 5 AC 63 (PC) BY OBSERVING 'IT IS A LEGITIMATE RULE OF CONSTRUCTION TO CONSTRU E WORDS IN AN ACT OF PARLIAMENT WITH REFERENCE TO WORDS FOUND IN IMMEDIATE CONNECTI ON WITH THEM' AND OUR SUPREME COURT IN THE CASES OFROHIT PULP & PAPER MIL LS LTD. VS. CCEA1R 1991 SC 754 AND STATE OF BOMBAY VS. HOSPITAL MAZDOOR SABHA AIR 1960 SC 610.THE PRINCIPLES WITH REGARD TO THE APPLICABILITY OF THE RULE OF CONSTRUCTION ARE BRIEFLY AS FOLLOWS: (I) DOES THE TERM IN ISSUE HAVE MORE THAN ONE MEANING ATTRIBUTED TO IT I.E., BASED ON THE SETTING OR THE CONTEXT ONE COULD APPLY THE NARROWER OR WIDER MEANING; (II) ARE WORDS OR TERMS USED FOUND IN A GR OUP TOTALLY 'DISSIMILAR' OR IS THERE A 'COMMON THREAD' RUNNING THROUGH THEM; (HI) THE PURPOSE BEHIND INSERTION OF THE TERM, (I) THE TERM 'ADVANCE' HAS U NDOUBTEDLY MORE THAN ONE MEANING DEPENDING ON THE CONTEXT IN WHICH IT IS USE D; (II) BOTH THE TERMS, THAT IS, ADVANCE OR LOAN ARE RELATED TO THE 'ACCUMULATED PRO FITS' OF THE COMPANY; (HI) AND LAST BUT NOT THE LEAST THE PURPOSE BEHIND INSER TION OF THE TERM ADVANCE WAS TO BRING WITHIN THE TAX NET PAYMENTS MADE IN GUISE OF LOAN TO SHAREHOLDERS BY COMPANIES IN WHICH THEY HAVE A SUBSTANTIAL INTEREST SO AS TO AVOID PAYMENT OF TAX BY THE SHAREHOLDERS. THE WORD 'ADVANCE' WHICH A PPEARS IN THE COMPANY OF THE WORD 'LOAN' COULD ONLY MEAN SUCH ADVANCE WHICH CARRIES WITH IT AN OBLIGATION OF REPAYMENT TRADE ADVANCE WHICH IS IN T HE NATURE OF MONEY TRANSACTED TO GIVE EFFECT TO A COMMERCIAL TRANSACTI ON WOULD NOT FALL WITHIN THE AMBIT OF THE PROVISIONS OFS. 2(22)(E).' XII). IN OUR CASE, SINCE IT IS NEITHER LOAN OR ADVA NCE AND, THEREFORE, SUCH AMOUNT BEING NEITHER GIVEN IN ADVANCE OR LOAN, THE PROVISI ONS OF SECTION 2 (22) (E) ARE NOT APPLICABLE. 7. LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE LD. CIT(A) WHEREIN IT IS HELD THAT THE MODUS OPERANDI OF CLEARING THE CHEQUE S FROM AN ACCOUNT TO ANOTHER ACCOUNT ON TRANSFERRING THE AMOUNTS CANNOT BE TERMED AS A MEASURE 9 OF COMMERCIAL EXPEDIENCY. IT IS CLEARLY TO CIRCUMVE NT THE LAW. IT WAS ARGUED THAT THE PAYMENTS ARE BEING ROUTED IN A ROUNDABOUT FASHI ON WHEREIN THE ASSESSEE IS A ULTIMATE BENEFICIARY. THE MODUS ADOPTED BY THE AS SESSEE IS A CLEAR CIRCUMVENTING OF PROVISIONS OF SECTION 2(22)(E). 8. WE HAVE GONE THROUGH THE FACTS ON RECORD. THE AS SESSING OFFICER HAS CLEARLY MENTIONED ON PERUSAL OF THE RECORD THAT THE FUNDS WERE TRANSFERRED FROM THE COMPANY TO THE FIRM TO KEEP THE CASH CREDIT ACC OUNTS WITHIN LIMITS, THE FUNDS WERE TRANSFERRED BY THE WAY OF TRANSFER ENTRI ES AND THE FUNDS WERE TRANSFERRED TO THE BANK ACCOUNT OF THE CONCERN BY T HE WAY OF BANK TRANSFER OR THROUGH CHEQUES. THUS THERE WAS NO DISPUTE THAT THE AMOUNTS WERE TRANSFERRED TO MEET THE COMMERCIAL EXPEDIENCY OF VARIOUS BUSINE SS ENTITIES MANAGED BY THE ASSESSEE. THERE WAS NO PERSONAL BENEFIT GAINED BY THE ASSESSEE IN THESE TRANSACTIONS. THE COMMERCIAL EXPEDIENCY COULD BE DE MONSTRATED BY THE ASSESSEE AND HENCE THE AMOUNTS CANNOT BE TAXED UNDE R SECTION 2(22)(E) AS THERE WAS NO GAIN BY THE ASSESSEE AS INDIVIDUAL AND THERE WAS NO INTENTION OF UTILIZATION OF RESERVES AND SURPLUS FOR THEIR BENEF IT CIRCUMVENTING THE DIVIDEND DISTRIBUTION TAX. HENCE, WE HEREBY DIRECT THAT THE ADDITION MADE UNDER SECTION 2(22)(E) BE DELETED FOR BOTH THE YEARS OF THE ASSES SEES APPEAL. 9. REGARDING THE GROUND NO. 3 PERTAINING TO THE ADD ITION OF RS. 12.58 LACS ON ACCOUNT OF SEIZED MATERIAL THE LD. CIT(A) CONFIR MED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NOTINGS ON THE SEIZED MATERIAL. 10. BEFORE US, IT WAS ARGUED THAT THE ASSESSING OFF ICER HELD IT TO BE UNACCOUNTED TRANSACTIONS EVEN THOUGH THEY WERE ROUG H ENTRIES. IT WAS ARGUED THAT THE ASSESSEE IS NEITHER A PARTNER NOR A PROPRI ETOR OF ANY BUSINESS CONCERN AND HENCE THESE TRANSACTIONS CANNOT BE ATTRIBUTED T O THE ASSESSEE. 11. LD. DR ON THE OTHER HAND ARGUED THAT THE DOCUME NTS HAVE BEEN FOUND AT THE PREMISES OF THE ASSESSEE AND HENCE THE ONUS IS ON THE ASSESSEE TO EXPLAIN 10 AND IN THE ABSENCE OF ANY EXPLANATION THE DEEMING P ROVISIONS OUGHT TO HAVE BEEN APPLIED TO THE DOCUMENTS FOUND AND SEIZED FROM THE PREMISES OF THE ASSESSEE. 12. WE HAVE GONE THROUGH THE DOCUMENT PER SE AND F OUND THAT DETAILS SUCH AS DALIYA, NAMAK, ZEERA, CHALAN NUMBERS HAVE BEEN M ENTIONED ALONGWITH A B/F BALANCE OF RS. 9,10,028/- AND CALCULATIONS TOTA LING TO RS. 10,49,765/- AND FURTHER DEDUCTION OF RS. 3,61,170/- AND ADDITION OF RS. 5,68,065/- TO THIS AMOUNT TOTALING TO RS. 12,54,660/-. KEEPING IN VIEW THE SP ECIFIC FIGURES MENTIONED IT CANNOT BE SAID TO BE A ROUGH OR DUMB DOCUMENT. IT C AN BE EASILY DECIPHERABLE THAT IT PERTAINS TO BUSINESS TRANSACTIONS AND THE O NUS IS ON THE ASSESSEE TO DEMONSTRATE THE ACCOUNTABILITY OF THESE TRANSACTION S IN THEIR REGULAR BOOKS OF ACCOUNT OF BUSINESS CONCERNS. SINCE THE ASSESSEE FA ILED TO DO SO IT CAN BE CONVENIENTLY HELD THAT THESE ARE THE BUSINESS TRANS ACTIONS AND THE ONLY WAY TO ESTIMATE THE PROFITS OR THE GAINS DERIVED FROM SUCH TRANSACTIONS IS TO DETERMINED THE GP EARNED IN THIS TYPE OF BUSINESS WHICH CAN BE DETERMINED @ 10% AMOUNTING TO RS. 1,25,400/- ON THE AMOUNTS MENTIONE D IN THE SEIZED MATERIAL. THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE A MOUNT ACCORDINGLY. ITA 58/CHD/2014 FOR A.Y. 2008-09 13. GROUND NO. 3 FOR THE A.Y. 2008-09 PERTAINS TO A DDITION OF RS. 1,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH DE POSITS IN THE BANK ACCOUNT WHICH THE LD.AR DEMONSTRATED THAT THERE WAS NO SUCH ENTRY IN THE BANK ACCOUNT NUMBER 2442010002540 (OBC) HENCE THIS ADDITION IS BEING DELETED WITH THE LIBERTY TO THE DEPARTMENT TO APPRO ACH THIS TRIBUNAL IF THE AMOUNT IS FOUND DEPOSITED IN THE F.Y. 2007-08 BY TH EIR DOCUMENTS. ITA 109-CHD-2014 FOR A.Y. 2009-10 14. APROPOS THE ADDITION MADE UNDER SECTION 2(22)(E ) THE LD. CIT(A) CATEGORICALLY HELD THAT THE ADDITION OF DEEMED DIVI DEND IS IN RESPECT OF THE 11 AMOUNT OF SWAMI DEVI DAYAL HI TECH EDUCATION ACADE MY WHICH IS SOCIETY ENGAGED IN THE PROVIDING EDUCATION WHICH WAS INCORP ORATED ON 20/08/2000. THE CONCERN IS A SOCIETY/TRUST GRANTED REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT,1961 BY THE CIT, PANCHKULA. HENCE TH E CASE WOULD BE OUTSIDE THE SCOPE OF SECTION 2(22)(E). SINCE THE DECISION O F THE LD.CIT(A) IS IN CONSONANCE WITH THE FACTS AND THE LEGAL POSITION ON THIS ISSUE UNDISPUTEDLY, THE GROUND TAKEN UP BY THE REVENUE IS HEREBY DISMISSED. 15. GROUND NO. 2 PERTAINS TO THE DELETION OF AMOUNT S ADDED TO THE TOTAL INCOME BY THE ASSESSING OFFICER BASED ON THE SEIZED MATERIAL MARKED AS A- 8/DELTA-3. 16. THE ISSUE HAS BEEN DEALT IN THE IMPUGNED ORDER WHEREIN THE DETAILS OF AMOUNT WISE RECEIPTS AND PAYMENTS FROM 07/05/2008 T O 05/07/2008 HAVE BEEN TABULATED BASED ON THE SEIZED DOCUMENTS PAGES 1-48 OF DELTA 3 A-8. THE SEIZURE IS BASICALLY A NOTEPAD, MAINTAINED BY THE ASSESSEE FOR RECORDING OF DAY TO DAY CASH RECEIPTS AND PAYMENTS. THE TOTAL RECEIPTS WAS WORKED OUT TO RS. 72,30,369/- AND PAYMENTS TO RS. 97,36,284/-. AGAINST THIS NOTE- PAD, THE ASSESSEE HAD SURRENDERED AN AMOUNT OF RS. 38,50,000/- FOR THE AY CONCERNED ON THE BASIS OF THEORY OF PEAK CREDIT. THIS DECLARATION WAS HOWEV ER FOUND NOT ACCEPTABLE BY THE ASSESSING OFFICER AS IT WAS MAINTAINED THAT THE TRANSACTIONS WAS NOT A CASE WHEREIN MONEY WAS ROTATED BY THE ASSESSEE IN HIS NO RMAL COURSE OF BUSINESS. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT EXPENDIT URES WERE MADE OUT OF ASSESSEES UNACCOUNTED CASH AND SO ADDED THE EXPEND ITURE INCURRED OVER AND ABOVE THE RECEIPTS (I.E; RS. 25,05,915/-) AS WELL A S THE TOTAL RECEIPTS DEPICTED LESS THE SURRENDERED AMOUNT (I.E; 33,80,369/-). ACCORDIN GLY A SUM OF RS. 58,86,284/- WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. 17. LD. CIT(A) DELETED THE ADDITION AND CONSIDERED TAXING OF GP HOLDING THAT THE TRANSACTIONS ARE MAINLY WITH REGARD TO DEPOSITS IN THE REGULAR BANK ACCOUNTS 12 OF THE GROUP. THE LD.CIT(A) DETERMINED THE UNEXPLAI NED/OUTSIDE TRANSACTIONS CONDUCTED OUTSIDE THE REGULAR BOOKS TO RS.34,27429/ -. AND FOUND THAT THE SAID AMOUNT WAS COVERED BY THE SURRENDER MADE IN THE RET URN. THE BALANCE AMOUNT OF RS.14,76,717/- PERTAINING TO PURCHASES OUT OF TH E BOOKS AS EVIDENCED FROM THE SEIZED NOTE PAD IS STATED TO BE PART OF ROTATION OF UNDISCLOSED FUNDS, THE PROFITS OF WHICH WAS ALSO COVERED IN THE SURRENDER. THE CHA RT PREPARED SHOWING THE SOURCE OF ENTRIES AS PER THE IMPUGNED ORDER BASED O N THE SEIZURE HAS BEEN FOUND TO BE EXPLAINED. IN NO CASE, IT WAS HELD THA T THE TOTAL OF BOTH THE RECEIPTS AND PAYMENTS BE ADDED WHEN IT IS QUITE APPARENT THA T SOME OF THE ENTRIES PERTAINED TO PURCHASES OF NOODLES, EXPENSES TOWARDS PHOTOSTAT APART FROM NAMES OF PERSONS. 18. ACCORDINGLY THE SUM OF RS.34,27429/- IS TAKEN A S THE UNEXPLAINED AMOUNT AND ON RS.14,76,717/-, APPLIED A GP RATE OF 20% WHI CH IS THE NORMAL ACCEPTED RATE FOR THIS LINE OF BUSINESS WHICH WORKS OUT TO ABOUT RS. 3,00,000/- AS PROFITS. CONSEQUENTLY, IT WAS SEEN THAT THE SURRENDER OF RS .38,50,000/- FOUND TO COVER THE SUM OF THE TRANSACTIONS APPEARING IN THE SEIZED DOCUMENTS. 19. DURING THE HEARING BEFORE US, THE ASSESSEE HAS APPRAISED ALONG WITH THE CHART DESCRIBING EVERY ENTRY WITH REFERENCE TO THE PHOTOCOPY OF THE SEIZED MATERIAL, BANK ACCOUNT STATEMENTS AND RELEVANT NARR ATIONS. IT WAS ARGUED THAT THE ENTRIES WERE ALSO PART OF THE SEIZED MATERIAL W ITH THE DEPARTMENT AND REFLECTED IN THE BOOKS OF ACCOUNTS, WHEREAS THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. WE FIND THAT THE LD. CIT(A) HAS CALCULATED THE UNEXPLAINED TRANSACTIONS COGENTLY AS MENTIONED IN THE PARA ABOV E AND DETERMINED THE UNACCOUNTED INCOME RS. 34,27,428/- WHICH HAS BEEN C OVERED BY THE SURRENDER MADE AND OFFERED TO TAX. REGARDING THE AMOUNT OF RS . 14,76,717/- THE LD. CIT(A) HAS DETERMINED THE GP @ 20%. SINCE NO INFIRMITY COU LD BE OBSERVED IN THE ORDER OF THE LD. CIT(A), WE HEREBY DECLINE TO INTERFERE I N THE ORDER OF THE LD. CIT(A). 13 20. AS A RESULT THE GROUNDS TAKEN UP BY THE REVENUE IN ITA NO. 109/CHD/2014 IN A.Y. 2009-10 ARE HEREBY DISMISSED ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . %.. . & , (DIVA SINGH) (DR. B.R.R. KUMAR) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 29/11/2018 *% + ,- . -(/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. * * ! // CIT 4. * * ! / ()/ THE CIT(A) 5. - 23 4, * # *4), 67839/ DR, ITAT, CHANDIGARH 6. 38 :'/ GUARD FILE