Shri Vinod Singhvi, JODHPUR V. ACIT, JODHPUR

ITA 116/JODH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4889 (ITAT-JODHPUR)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN JAIN
• Keywords: Deemed dividend
• Section: 133(6); 2

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 116/JODH/2013 (A.Y. 2009-10) SHRI VINOD SINGHVI VS ACIT, C/O. SHRI U.C. JAIN, ADVOCATE CENTRAL CIRCLE-2, SHATRUNJAY HARI SINGH NAGAR, JODHPUR. PALI ROAD, JODHPUR. PAN NO. AIAPS0053M (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. U.C. JAIN JAIN AND SH. RAJENDRA JAIN. DEPARTMENT BY : SH. N.A. JOSHI- DR. DATE OF HEARING : 26/09/2013. DATE OF PRONOUNCEMENT : 27/09/2013. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE ASSESSEE FOR A.Y. 2009-10 IS DI RECTED AGAINST THE ORDER OF LD. CIT(A), DATED 04/01/2013. 2. THE FIRST GROUND OF THIS APPEAL IS IN RELATION T O CONFIRMATION OF ADDITION OF RS. 68,28,848/- MADE BY THE AO BY INVOK ING THE PROVISIONS OF SECTION 2 (22)(E) OF THE INCOME TAX ACT, 1961 ( THE ACT FOR SHORT). 2 THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE IS T HE PROPRIETOR OF M/S. VINOD & COMPANY AND IS ALSO A DIRECTOR OF M/S. VINO D SHARES LTD., WHICH COMPANY IS A MEMBER OF STOCK EXCHANGE, CURREN CY EXCHANGE AND COMMODITY EXCHANGE. BOTH THESE ENTITIES ARE DEALING IN THE SAME LINE OF BUSINESS VIZ., DERIVING BROKERAGE FROM CLIENTS I N RESPECT OF THEIR TRANSACTIONS. BOTH HAVE CURRENT ACCOUNTS WITH EACH OTHER. THE PERUSAL OF ACCOUNTS OF ONE ENTITY IN THE BOOKS OF THE OTHER AND VICE VERSA, IT WAS NOTICED THAT THE NATURE OF THEIR ACCOUNTS ARE T HAT OF A CURRENT ACCOUNT IN WHICH SOMETIMES THERE IS A CREDIT BALANC E IN THE BOOKS OF THE COMPANY AND SOMETIMES DEBIT BALANCES. M/S. VINO D SHARE LTD. HAS CHARGED INTEREST ON PRODUCT BASIS ON THESE AMOUNTS AND HAS DEDUCTED TDS AS PER RULES. THE AO HAS TREATED THESE TRANSACT IONS IN THE SENSE OF SECTION 2(22)(E) OF THE ACT. AS PER THE ASSESSEE TH ESE ARE ORDINARY BUSINESS TRANSACTIONS IN THE CURRENT ACCOUNT MAINTA INED WITH EACH OTHER AND THEREFORE, THE PROVISIONS OF SECTION 2(22 )(E) ARE NOT APPLICABLE AS THERE IS NEITHER A DEPOSIT NOR A LOAN , SO THESE CANNOT BE TREATED AS DEEMED DIVIDENDS. BUT THE AO HAS NOT A CCEPTED THE SUBMISSIONS OF THE ASSESSEE AND AS SUCH TREATED THE M AS DEEMED DIVIDEND AND HAS MADE AN ADDITION OF RS. 68,28,848/ - WHICH HAS BEEN CONFIRMED BY LD. CIT(A). THE ASSESSEE IS FURTHER AG GRIEVED. 3 2.1 WE HAVE HEARD RIVAL SUBMISSIONS. BOTH PARTIES H AVE REITERATED THEIR EARLIER ARGUMENTS. THE LD. AR HAS ALSO FILED A WRITTEN SUBMISSION (W.S) ALONGWITH A PAPER BOOK. AFTER CONSIDERING RIV AL SUBMISSIONS WE HAVE FOUND THAT SHRI VINOD SINGHVI HAS PROVIDED A P ERSONAL SECURITY OF RS. 5,00,00,000/- TO THE ICICI BANK LTD. IN THE FAV OUR OF M/S. VINOD & COMPANY FOR NATIONAL STOCK EXCHANGE OF INDIA AND TH E ASSESSEE ALSO PRODUCED NECESSARY EVIDENCE BEFORE THE AO. BOTH ENT ITIES HAVE CURRENT ACCOUNT WITH EACH OTHER ON WHICH INTEREST IS CHARGE D ON PRODUCT BASIS. THEREFORE, THESE CREDITS CANNOT BE TREATED AS DEEME D DIVIDENDS U/S 2(22)(E) OF THE ACT IN THE HANDS OF THIS ASSESSEE. IN THIS REGARD THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRADEEP KUMAR MALHOTRA VS. CIT REPORTED IN 338 ITR 538 (CAL) HELP S THE CASE OF THE ASSESSEE. ON ALMOST SIMILAR FACTS IN ASSESSEES OWN CASE FOR A.Y. 2008- 09 APPELLATE TRIBUNAL IN ITA NO. 176 AND 177/JODH/2 011 ORDER DATED 23/03/2012 HAS HELD THAT PROVISION OF SECTION 2(22) (E) ARE NOT ATTRACTED. THE LD. DR TRIED TO DISTINGUISH THE FACT S OF TWO YEARS BUT IN VAIN BECAUSE THE CALCUTTA HIGH COURT DECISION [SUPR A] DIRECTLY SUPPORTS OUR ABOVE FINDING. IN THE CALCUTTA HIGH COURT IT HA S BEEN HELD THUS : THE PHRASE BY WAY OF ADVANCE OR LOAN S. 2(22)(E) MUST BE CONSTRUED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHAREHOLDER ENJOYS SIMPLY ON ACCOUNT OF BEING A 4 PERSON WHO IS THE BENEFICIAL OWNER OF SHARES . IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHARE HOLDER AS A CONSE QUENCE OF ANY FURTHER CONSIDERATION RECEIVED FROM THE SHAREHOLDER, THEN SUCH ADVANCE OR LOAN CANNOT BE SA ID TO BE DEEMED DIVIDEND U/S 2(22)(E). THUS, WHILE GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO A SUBSTANTIAL SHAREHOLDER COMES WITHIN THE PURVIEW OF S. 2(22)(E) , A CASE WHERE THE LOAN OR ADVANCE IS GIVEN IN RETURN T O AN ADVANTAGE CONFERRED UPON THE COMPANY BY THE SHARE HOLDER DOES NOT . ON FACTS, AS THE ADVANCE WAS IN LIEU OF THE COMPANY BEING PERMITTED TO MORTGAGE THE ASSESSE ES FLAT, IT WAS NOT GRATUITOUS AND SO NOT ASSESSABLE AS DEEMED DIVIDEND ( CREATIVE DYEING 318 ITR 476 (DEL) & NAGINDAS KAPADIA 177 ITR 393 (BOM) FOLLOWED). THEREFORE, WE ORDER TO DELETE THE IMPUGNED ADDITION AND ALLOW GROUND NO. (1) OF THIS APPEAL. 3. THE FACTS APROPOS GROUND NO. (2) ARE THAT THE AO OBTAINED INFORMATION U/S 133(6) FROM MCX WITH REGARD TO CODE MODIFICATION MADE DURING THE YEAR UNDER CONSIDERATION. THIS INFO RMATION WAS CONFRONTED TO THE ASSESSEE AND HE REPLIED THAT THE CODE MODIFICATIONS WERE DONE IN THE ORDINARY COURSE OF BUSINESS TO COR RECT THE MISTAKES COMMITTED WHILE ENTERING TRANSACTION THROUGH THE SY STEM WHICH IS VERY FAST. AFTER ANALYSIS, IT WAS NOTICED THAT FOR A.Y. 2008-09 CERTAIN CODES 5 WERE CONSIDERED AS ASSESSEES FOR WHICH THE ASSESSE E FAILED TO FILE CONFIRMATION OF ACCOUNTS FROM THE RESPECTIVE PARTIE S. OUT OF SUCH CODES THE TRANSACTIONS WERE ALSO UNDERTAKEN IN THE FOLLOWING CODES DURING THE YEAR UNDER CONSIDERATION: 1 CBL 2 CDC 3 CZD 4 SML 5 VTL 6 AL 7 A3 8 BM 9 CMT 10 D51 11 Z2 THE ASSESSEE OUT OF THE ABOVE CODES FILED CONFIRMAT ION WITH THEIR PERMANENT ADDRESS AND THEIR PAN WITH REGARD TO FOLL OWING CODES AND AS SUCH LOOKING TO THE CONFIRMATION OF ACCOUNT NO ADVE RSE VIEW IS TAKEN IN RESPECT OF SUCH CODES: S. NO. CODE 1 CZD 2 SML 3 A3 HOWEVER IN RESPECT TO OTHER CODES NO CONFIRMATION H AS BEEN FILED THE DETAIL OF WHICH IS AS UNDER WITH THE FIGURE OF MTM PROFIT / (LOSS): 6 S. NO. CODE MTM PROFIT/ LOSS 1 CBL (4,859,715.00) 2 CDC 451,960.00 3 VTL (137,665.00) 4 AL (8,324,640.00) 5 BM (596,275.00) 6 CMT (322,250.00) 7 D51 1,432,585.00 8 Z2 (15,800.00) TOTAL (12,371,800.00) THE PERUSAL OF ABOVE TABLE SHOWS THAT IN ALL THE EI GHT CODES THERE IS OVERALL A LOSS OF RS. 1,23,71,800/-. SINCE THE ASSE SSEE HAS NOT ADMITTED THE CODES AS BELONGING TO HIM AND HAS NOT CLAIMED A NY LOSS IN THE BOOKS OF ACCOUNT AND AS SUCH THE SAME IS IGNORED AN D NO ADVERSE VIEW IS TAKEN. HOWEVER THE POSSIBILITY OF EARNING OF COM MISSION INCOME OVER AND ABOVE THE NORMAL INCOME CANNOT BE RULED OUT AND AS SUCH THE A.O. ESTIMATED COMMISSION INCOME @ 2% I.E. RS 2,47,436. /- BY IGNORING THE LOSS OF RS. 1,23,71,800/- WHICH HAS NOT BEEN CLAIME D BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT OR ADMITTED AS BELONGING TO HI M. 3.1 THE LD. CIT(A) HAS ALSO CONFIRMED THIS ADDITION . 3.2 BEFORE US BOTH PARTIES HAVE REITERATED SIMILAR ARGUMENTS AS WERE ADVANCED BEFORE LD. CIT(A). WE HAVE FOUND THAT IN A .Y. 2006-07 SIMILAR ADDITION MADE HAVE BEEN DELETED BY THE APPELLATE TR IBUNAL. THE CASE 7 OF THE REVENUE IS THAT THE FACTS OF BOTH THE YEARS ARE DISTINGUISHABLE IN AS MUCH AS THAT IN EARLIER YEARS THE TRANSACTION WE RE OWNED BY THE ASSESSEE BUT NOT OWNED IN THIS YEAR. AFTER GOING TH ROUGH THE RECORDS, WE DONT FIND ANY SUCH DIFFERENCE IN A.Y. 2006-07 A LSO THE TRANSACTIONS WERE NOT ADMITTED BY THE ASSESSEE AND THE FACTS ARE MUTATIS MUTANDIS IDENTICAL. SINCE ON IDENTICAL FACTS THE TRIBUNAL IN ASSESSEES CASE FOR A.YS. 2006-07, 2007-08 AND 2008-09 ADMITTEDLY, HAS DELETED SIMILAR ADDITIONS, WE HAVE TO TAKE A CONSISTENT VIEW. THERE FORE, BY RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER DATED 12/ 04/2012 IN ITA NO. 175/JODH/2011 FOR THE A.Y. 2006-07WE ORDER TO DELET E THE IMPUGNED ADDITION OF RS. 2,47,436/- MADE BY THE A.O. TREATIN G IT AS COMMISSION INCOME AND ALLOW GROUND NO. (2) OF THIS APPEAL. 4. THE GROUND NO. (3) IS IN RESPECT OF CHARGING OF INTEREST U/S 234A, 234B, AND 234C. THIS GROUND CANNOT BE ALLOWED AS IN TEREST IS MANDATORILY CHARGEABLE, HOWEVER CONSEQUENTIAL RELIE F, IF ANY, IS TO BE ALLOWED. 5. GROUND NO. 4 AND 5 ARE GENERAL IN NATURE. 8 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER, 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH SEPTEMBER, 2013. VL/ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR