ACIT, Circle - 3, Asansol, Asansol V. Shree P.D. Cement (P) Ltd., Burdwan

ITA 1122/KOL/2010

• Counselvise Citation: 112223514 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 11-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2010
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: S M SURANA
• Keywords: Share purchase agreement; Deemed dividend
• Section: 56

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE , ,, , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. .!' !'!' !'. .. . , #$ SHRI C.D.RAO, ACCOUNTANT MEMBER % % % % / ITA NO.1122/KOL/2010 &' ()/ ASSESSMENT YEAR : 2007-08 (+, / APPELLANT ) A.C.I.T., CIRCLE-3, ASANSOL - & - - VERSUS - . (./+,/ RESPONDENT ) SHREE P.D.CEMENT (P) LTD., ASANSOL (PAN:AADCP 1707 A) +, 0 1 #/ FOR THE APPELLANT: SHRI NIRAJ KUMAR ./+, 0 1 #/ FOR THE RESPONDENT: SHRI S.M.SURANA 2&3 0 '$ /DATE OF HEARING : 09.11.2011. 4( 0 '$ /DATE OF PRONOUNCEMENT : 15.12.2011. #5 / ORDER ( (( ( . .. .!' !'!' !'. .. . ) )) ), , , , #$ PER SHRI C.D.RAO, AM THE ABOVE APPEAL IS FILED BY THE REVENUE AGAINST TH E ORDER DATED 25.02.2010 OF THE LD. CIT(A)-ASANSOL PERTAINING TO A.YR.2007-08. 2. THERE IS A DELAY OF 20 DAYS IN FILING OF THE APPEAL BY THE REVENUE FOR WHICH REVENUE HAS FILED A CONDONATION PETITION EXPLAINING THE REASONS FOR SUCH DELAY. AFTER CONSIDERING THE SUBMISSIONS BY REVENUE THE DELAY IS CONDONED. 3. THE ONLY ISSUE RAISED BY THE REVENUE IS REGARDIN G DELETION OF ADDITION OF RS.1,04,77,780/- MADE BY AO U/S 2(22)(E) OF THE IT ACT. 2 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DO ING THE SCRUTINY ASSESSMENT ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS.1, 04,77,780/- BY OBSERVING AS UNDER :- 3.1 DURING THE YEAR THE ASSESSEE COMPANY RECEIVED A TOTAL SUM OF RS. 1,54,77,777 FROM GOYAL INTRA PVT. LTD. ON DIFFERENT DATES IN TW O DIFFERENT HDFC BANK ACCOUNTS. WHEN ASSESSEE WAS ASKED ABOUT THE NATURE OF PAYMENT RECEIVED ASSESSEE REPLIED IT IS SHARE APPLICATION MONEY AND PRODUCED A SHARE CERTIF ICATE ISSUED ON 31-03-2007 BUT ASSESSEE FAILED TO GIVE ANY SUPPORTING GENUINE EVID ENCE TO PROVE THE AMOUNT RECEIVED AS SHARE APPLICATION MONEY. THE DIRECTORS OF THE AS SESSEE COMPANY MADAN LAL BHALOTIA, SURESH KUMAR BHALOTIA, RAJESH KUINAR BHAL OTIA AND SANJAY BHALOTIA ARE ALSO DIRECTOR OF THE COMPANY GOYAL INTRA PVT. LTD. AND ALSO HOLD SUBSTANTIAL INTEREST IN THE COMPANY GOYAL HITRA PVT. LTD. ONE OF THE DIRECT OR OF THE COMPANY MADAN LAL BHALOTIA HOLD 18.30% SHAREHOLDING IN P.D.CEMENT PVT . LTD. AS ON 31-03-07.THE ASSESSEE COMPANY AND GOYAL INTRA PVT. LTD ALSO HAVE SAME REGISTERED OFFICE ADDRESS AND ACCUMULATED PROFIT OF GOYAL INTRA PVT. LTD AS O N 31-03-2007 IS RS. 48,11,6800!- THE ASSESSEE COMPANY PRODUCED A SHARE CERTIFICATE I SSUED TO GOYAL INTRA PVT. LTD. MENTIONING EQUITY SHARE EACH OF RUPEE 10/- FOR 5,00,000 SHARES BUT NO MENTION OF NIONV RECEIVED IN EXCESS OF RS 50,00,000 ICE. RS. 1 ,04,77,777/- IN THE SHARE ALLOTMENT PROCEDURE. ASSESSEE COMPANY HAS NOT COMPLIED WITH S HARE ALLOTMENT PROCEDURE PRESCRIBED FOR PRIVATE LIMITED COMPANY; THEY FAILED TO MAINTAIN SHARE APPLICATION MONEY RECEIVED IN DIFFERENT ACCOUNT TO DIFFERENTIAT E THE NATURE OF MONEY RECEIVED FROM LOAN AND ADVANCES. IN ABSENCE OF ANY CRITERIA TO DIFFERENTIATE SHARE APPLICATION MONEY FROM NORMAL BUSINESS TRANSACTION, MONEY RECEI VED IN EXCESS OF FOR WHICH ALLOTMENT HAS NOT BEEN DONE IS TREATED AS LOAN AND ADVANCE AS NO DOCUMENTS HAS BEEN SUBMITTED BY THE ASSESSCE TO SUBSTANTIATE THE MONEY RECEIVED IS SHARE APPLICATION MONEY AND NOT LOAN AND ADVANCE. ASSESSEE WAS ASKED LATER ON TO PROVE THE REMAINING AMOUNT OF RS. 1,04,77,777 TO PROVE AS SHARE APPLICATION MONEY. ASSESSEE FAILE D TO PROVE AND SUBMITTED THAT THE REMAINING MONEY RECEIVED IS BASICALLY SHARE PREMIUM MONEY. BUT ASSESSEE AGAIN FAILED TO PROVE THE REMAINING AMOUNT RECEIVED AS SH ARE PREMIUM MONEY AS NO SUPPORTING DOCUMENTS WERE PRODUCED. 4.1. ON APPEAL THE LD. CIT(A) HAS DELETED THE SAME BY OBSERVING THAT 6. AFTER CONSIDERING ALL THE ABOVE FACTS I AM OF T HE OPINION THAT THERE WAS NO JUSTIFICATION FOR THE A.O. TO HOLD THAT RS.1,04,77, 777/- WAS LOAN OR ADVANCE TO THE ASSESSEE FROM M/S GOYAL INTRA PVT. LTD.. IT WAS CLE AR CUT MONEY RECEIVED ON ACCOUNT OF SHARE PREMIUM. FURTHER, THE A.O. HAS NOT SPECIFI ED AS TO WHAT PROCEDURES THE ASSESSEE COMPANY DID NOT FOLLOW WHILE ALLOTTING THE SHARES. THE CONDITION OF MAINTAINING A SEPARATE BANK ACCOUNT FOR SHARE APPLI CATION MONEY APPLIES TO LISTED COMPANIES AND IS NOT APPLICABLE TO PVT. LTD. COMPAN IES. FURTHER, THERE ARE NO ACCUMULATED PROFITS AVAILABLE WITH M/S GOYAL INTRA PVT. LTD. AND HENCE THE PROVISIONS OF SEC. 2(22)(E) READ WITH SECTION 56 WILL NOT APPL Y IN THIS CASE. I, THEREFORE, HOLD THAT THIS ADDITION WAS NOT AS PER LAW AND THE SAME IS DE LETED. 4.2. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEA L BEFORE US. 3 5. AT THE TIME OF HEARING THE LD. DR APPEARING ON BEHALF OF THE REVENUE HAS RELIED ON THE ORDER OF ASSESSING OFFICER. 6. ON THE OTHER HAND THE LD. AR APPEARING ON BEHAL F OF ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES WHI CH ARE AS UNDER :- 4. DURING THE COURSE OF THE APPEAL PROCEEDINGS, THE ID. A/R DREW ATTENTION TO THE AUDITED BALANCE SHEET OF THE ASSESSEE COMPANY AND S TATED THAT ON PERUSAL OF THE BALANCE SHEET IT WOULD BE SEEN THAT THE SHARE CAPIT AL OF THE COMPANY INCREASED BY RS.50 LAKHS AND THE SHARE PREMIUM ACCOUNT INCREASED BY RS.1 CRORE WHICH WAS SHOWN IN THE RESERVE & SURPLUS HEAD IN THE BALANCE SHEE T. IT WAS STATED THAT THESE AMOUNTS WERE RECEIVED BY CHEQUE FROM M/S GOYAL INTRA PVT. L TD.. IT WAS FURTHER STATED THAT DUE INTIMATION OF THE ALLOTMENT OF THE 5 LAKHS SHARES W AS GIVEN TO THE REGISTRAR OF COMPANIES IN FORM NO.2 ALONG WITH THE PRESCRIBED FE ES ON 09.04.2008. A COPY OF THE SAID FORM NO.2 WAS SUBMITTED. IT WAS ALSO STATED TH AT THE ASSESSEE COMPANY HAD COMPLIED WITH ALL THE PROCEDURES OF SHARE ALLOTMENT PRESCRIBED FOR PVT. LTD. COMPANIES. IT WAS FURTHER STATED THAT THESE FACTS W ERE EXPLAINED TO THE A.O. DURING THE ASSESSMENT PROCEDURE VIDE LETTERS 09 & 28.11.2009. IT WAS THEN STATED THAT OUT OF RS.1,54,77,777/- RECEIVED FROM M/S GOYAL INTRA PVT. LTD., RS.50,00,000/- WAS UTILIZED FOR ALLOTMENT OF SHARES, RS.1,00,00,000/- WAS UTILI ZED FOR SHARE PREMIUM AND RS.4,77,777/- WAS REFUNDED TO M/S GOYAL INTRA PVT. LTD. IT WAS ALSO STATE THAT PERUSAL OF BALANCE SHEET OF M/S GOYAL INTRA PVT. LTD. WOULD SHOW THAT RS.1,50,00,O00/ WAS SHOWN AS INVESTMENT IN SHARES AND NOT AS LOAN AN AD VANCE. THE LD. A/R ALSO REITERATED THAT SEC. 2(22)(E) WOULD NOT BE APPLICABLE ALSO BEC AUSE OF THE FACT THAT M/S GOYAL INTRA PVT. LTD. DID NOT HAVE ACCUMULATED PROFITS WHICH WO ULD BE APPARENT ON PERUSAL OF THEIR BALANCE SHEET. 7. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF MATERIALS AVAILABLE ON RECORD, THE HONBLE DELHI HIGH COURT I N THE CASE OF CIT VS ARVIND KUMAR JAIN HAS HELD THAT TRADE ADVANCES ARE NOT LOA NS AND ADVANCES AND THE SAME CANNOT BE SAID AS DEEMED DIVIDEND U/S 2(22)(E) OF T HE IT ACT. THE HONBLE HIGH COURT FURTHER OBSERVED THAT THE WORD ADVANCE HAS TO BE READ IN CONJUNCTION WITH THE WORD LOAN. THE WORD ADVANCE MEANS SUCH ADVANCE WHICH CARRIES WITH IT AN OBLIGATION FOR RE-PAYMENT. TRADE ADVANCES WHICH ARE IN THE NAT URE OF MONEY TRANSACTED TO GIVE EFFECT TO THE COMMERCIAL TRANSACTION DO NOT FALL WI THIN THE AMBIT OF SECTION 2(22)(E) OF THE IT ACT. THEY FURTHER RELIED ON THE CASE OF CIT VS RAJ KUMAR REPORT`ED IN 318 ITR 462. 4 7.1. KEEPING IN VIEW OF THE ABOVE FINDINGS, WE ARE OF THE OPINION THAT THE SHARE ADVANCES ALSO CANNOT BE TREATED AS ADVANCE SINCE SU CH ADVANCE CARRIES NO OBLIGATION OF RE-PAYMENT AND THEREFORE DOES NOT FALL WITHIN THE A MBIT OF SECTION 2(22)(E) OF THE IT ACT. IN THE RESULT WE UPHELD THE ACTION OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. 6 7 89: $6; < ; => ORDER PRONOUNCED IN THE COURT ON 15.12.2011. SD/- SD/- , , , , MAHAVIR SINGH, JUDICIAL MEMBER . .. .!' !'!' !'. .. . , , , , #$ #$ #$ #$ , C.D.RAO, ACCOUNTANT MEMBER. ( (( ('$ '$ '$ '$) )) ) DATE: 15.12.2011. #5 0 .8 ?#8(7- COPY OF THE ORDER FORWARDED TO: 1. SHREE P.D.CEMENT (P) LTD. 2 THE A.C.I.T.CIRCLE-3, ASANSOL. 3. THE CIT, 4. THE CIT(A)-ASANSOL 5. DR, KOLKATA BENCHES, KOLKATA /8 ./ TRUE COPY, #5&2/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.) 5