G.M.J. THAMPY, MUMBAI V. ACIT CEN CIR-34, MUMBAI

ITA 1275/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5048 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 13-07-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 25-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SRIVASTAVA
• Keywords: Search and seizure; Question of law; Tangible material; Deemed dividend; Block assessment; Commercial expediency; Onus to prove
• Section: 143(3); 153A; 234B; 132

Judgement Text

1 IN THE I NCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI. BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI V.D. RAO, JUDICIAL MEMBER. I.T.A. NOS. 1275, 1276 & 1277/MUM/2009 ASSESSMENT YEARS : 2002-03, 2004-05 & 2005-06. G.M.J. THAMPY, ASSTT. COMMISSIONER OF INCOME-TAX, GULAB BUILDING, NEAR GPO, VS. CIRCLE-34, MUMBAI. 237 P.D. MELLO ROAD, MUMBAI-400001. PAN AADPJ2644Q APPELLANT. RES PONDENT. APPELLANT BY : SHRI VIJAY MEHTA. RESPONDENT BY : SHRI AJAY KUMAR SRIVASTAVA. O R D E R PER BENCH. ALL THESE APPEALS ARE FILED BY THE ASSESSEE AND D IRECTED AGAINST THE ORDERS OF THE CIT(APPEALS), CENTRAL, VI, MUMBAI DAT ED 23-12-2008 FOR THE ASSESSMENT YEARS 2002-03, 2004-05 AND 2005-06. 2. THE FIRST APPELLATE AUTHORITY HAD PASSED A COMM ON ORDER FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06. AS THE ISSUES ARISING IN ALL THE APPEALS ARE COMMON, FOR THE SAKE OF CONVENIENCE, THEY ARE H EARD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDER. 2 3. FACTS IN BRIEF. THE ASSESSEE IS AN INDIVIDUAL AND IS IN THE BUSIN ESS AS AIR TICKETING AGENT. HE CARRIES ON THE BUSINESS AS A SOLE PROPRI ETOR UNDER THE NAME AND STYLE AS M/S RIYA TRAVELS. HE IS ALSO THE MANAGING DIRECT OR OF M/S RIYA TRAVELS AND TOURS (I) PVT. LTD. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CONDUCTED ON RIYA GROUP ON 9-11-2005. WARRANTS OF A UTHORIZATION OF SEARCH WERE GIVEN IN THE NAME OF A) M/S RIYA TRAVELS & TO URS (I) PVT. LTD., B) MR. G.M.J. THAMPY, PROPRIETOR RIYA TRAVELS AND ALSO, MA NAGING DIRECTOR OF RIYA TRAVELS & TOURS (I) PVT.LTD., C) MRS. GRACY GEORGE, WIFE OF MR. G.M.J. THAMPY, THE ASSESSEE. THERE IS ONLY ONE ADDITION TH AT IS MADE, WHICH IS IN DISPUTE BEFORE US, AND THAT IS AN ADDITION U/S 2(22 )(E). THERE WAS ONLY CERTAIN CASH SEIZURE MADE DURING THE COURSE OF SEARCH. AN A MOUNT OF RS.7,43,415/- WAS TRAVELERS CHEQUE AND RS.6,56,610/- WAS FOREIGN CURRENCIES AND BOTH WERE SEIZED IN THE PREMISES OF THE COMPANY M/S RIYA TRAV ELS & TOURS (I) PVT. LTD. IN THE RESIDENTIAL PREMISES, CASH FOUND WAS RS.53,0 53/- FROM MR. G.M.J. THAMPY AND MRS. GRACY GEORGE. NOTICES U/S 153A WERE ISSUED AND THE ASSESSEE FILED RETURNS OF INCOME FOR THE FINANCIAL YEARS 199 9-2000 TO 2004-05. THEREAFTER SCRUTINY PROCEEDINGS WERE CONDUCTED. ADDITIONS WERE MADE U/S 2(22)(E) AS WELL AS UNDER THE HEAD UNDISCLOSED SERVICE CHARGES AND A LSO UNDER THE HEAD BOGUS REFUND. THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY GRANTED PART RELIEF. THE ASSESSEE FILED THESE APPEA LS. 4. FOR THE ASSESSMENT YEAR 2002-03 THE SOLE GROUND IS THE ADDITION U/S 2(22)(E) AND THE AMOUNT IN DISPUTE IS RS.14,47,274/ -. FOR THE ASSESSMENT YEAR 2004-05 THE SOLE ISSUE IS THE ADDITION U/S 2(22)(E) AND THE AMOUNT IN DISPUTE IS RS.2,06,12,533/-. FOR THE ASSESSMENT YEAR 2005-06 T HE SOLE ADDITION IS U/S 2(22)(E) AND THE AMOUNT OF ADDITION IS RS.2,02,04,5 67/-. IN THIS YEAR THE CHARGING OF INTEREST U/S 234A, 234B AND 234C IS ALS O DISPUTED. THE ASSESSEE HAS 3 FILED ADDITIONAL GROUND OF APPEAL FOR THE ASSESSME NT YEARS 2002-03 AND 2004- 05. THE GROUND READS AS FOLLOWS : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITIONS MADE BY TH E ASSESSING OFFICER AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE I.T. ACT, D ESPITE THE FACT THAT DURING THE COURSE OF SEARCH NO EVIDENCE OR MATERIAL WAS FOUND INDICATING THAT THE TRANSACTIONS ARE HIT BY THE PROVISIONS OF SECTION 2(22)(E). 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SUBSEQUENT TO THE FILING OF THE APPEAL BEFORE THE HONBLE TRIBUN AL, THE ASSESSEE CAME ACROSS CERTAIN DECISIONS RENDERED BY VARIOUS BENCHES OF TH E TRIBUNAL, WHEREIN IT HAS BEEN HELD THAT IN ASSESSMENT PROCEEDINGS U/S 153A/1 53C OF THE ACT, THE AUTHORITIES CAN MAKE THE ADDITION/DISALLOWANCE ONLY IN RESPECT OF THOSE ISSUES WHICH ARE ARISING OUT OF INCRIMINATING MATERIAL FOU ND DURING THE COURSE OF SEARCH. HE SUBMITTED THAT IN THE CASE OF THE ASSES SEE, THE DISALLOWANCE HAS BEEN MADE, NOT ON THE BASIS OF INCRIMINATING DOCUMENTS F OUND DURING THE COURSE OF SEARCH, BUT ON THE REAPPRAISAL OF THE EVIDENCE ALRE ADY AVAILABLE ON RECORD AND THAT THE DISALLOWANCES ARE UNSUSTAINABLE. HE SUBMI TTED THAT ALL THE MATERIAL FACTS REQUIRED FOR THE PURPOSE OF ADJUDICATION OF THE ABO VE GROUND ARE ALREADY ON RECORD AND IT WAS REQUESTED THAT ADDITIONAL GROUND BEING PURELY LEGAL IN NATURE, SHOULD BE ADMITTED AND ADJUDICATED UPON. FOR THE PR OPOSITION THAT WHEN AN ADDITIONAL GROUND OF APPEAL RAISES PURELY QUESTIONS OF LAW AND WHEN NO NEW FACTS WERE REQUIRED TO BE BROUGHT ON RECORD, THE AD DITIONAL GROUND SHOULD BE ADMITTED, HE RELIED ON THE FOLLOWING CASE LAWS: I) NATIONAL THERMAL POWER CORPORATION VS. CIT 229 ITR 380 (SC) II) JUTE CORPORATION OF INDIA VS. CIT 186 ITR 388 (SC). III) AHMEDABAD ELECTRICITY CO. LTD. VS. CIT 199 ITR 35 1 (BOM) (FB). 4 6. MR. AJAYKUMAR SRIVASTAVA, LEARNED DR, OPPOSED T HE ADMISSION OF ADDITIONAL GROUND. HE SUBMITTED THAT ADMISSION OF T HE GROUND WOULD REQUIRE VERIFICATION OF FACTS AND HENCE HAS TO BE REJECTED. 7. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIR CUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ADD ITIONAL GROUND HAS TO BE ADMITTED AS IT RAISES A PURELY QUESTION OF LAW AND AS NO NEW FACTS ARE REQUIRED TO BE BROUGHT ON RECORD. THE ADDITIONAL GROUND CHALLEN GES THE JURISDICTION OF THE AO U/S 153A. 8. THE LEARNED COUNSEL FOR THE ASSESSEE MR. VIJAY MEHTA FIRST SUBMITTED THE ARGUMENTS ON THIS ADDITIONAL GROUND. HE ARGUED THAT AS NOTHING HAS BEEN FOUND DURING THE COURSE OF SEARCH, WHICH C OULD BE SAID TO BE INCRIMINATING MATERIAL RELATABLE TO THE ASSESSMENT YEAR 2002-03 OR 2004-05 AND AS NO ASSESSMENT OR RE-ASSESSMENT PROCEEDINGS ARE P ENDING BEFORE THE AO AND AS TIME FOR ISSUAL OF 143(2) NOTICE IS OVER, THE A O HAD NO VALID JURISDICTION TO ISSUE NOTICE U/S 153A OR TO COMPLETE THE ASSESSMENT IN PURSUANCE THEREOF. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS : A) ORDER OF THE TRIBUNAL IN THE CASE OF LMJ INTERNATIO NAL LTD. VS. DCIT 119 TTJ 214 (KOL). B) ORDER OF THE TRIBUNAL IN THE CASE OF SHRI ANIL KUMA R BHATIA VS. ACIT AND ANR. IN ITA NOS. 2660 TO 2665/DEL/2009 AND OTHE RS FOR A.YS. 2000- 01, 2002-03 TO 2006-07. C) ORDER OF THE TRIBUNAL IN THE CASE OF SHRI ANIL P. K HEMANI VS. DCIT IN ITA NOS. 2885 TO 2860/MUM/2008 FOR A.YS. 1999-00 TO 2004-05. D) ORDER OF THE TRIBUNAL IN THE CASE OF M/S VIRAJ FOR GINGS LTD. VS. DCIT AND ANR. IN ITA NO. 1948 AND 1949/MUM/08 FOR A.Y. 2 001-02. E) ORDER OF THE TRIBUNAL IN THE CASE OF MEGHMANI ORGAN ICS LTD. VS. DCIT 129 TTJ 255 (AHD). 5 F) ORDER OF THE TRIBUNAL IN THE CASE OF S.K. JAIN VS. ACIT IN IT(SS)A NOS. 210 TO 216/IND/2007 DATED 28-01-2010. THE LEARNED COUNSEL SUBMITTED THAT THE AO DID NOT A CQUIRE ANY JURISDICTION TO MAKE THE IMPUGNED ADDITION AS THE ORIGINAL ASSESSME NT IN QUESTION, DID NOT ABATE. HE SUBMITTED THAT THE MANDATE OF SECTION 153 A OF THE ACT, IS TO COMPUTE THE TOTAL INCOME AS IT IS UNDERSTOOD, IN THE SENSE THE TOTAL INCOME MEANS, INCOME ORIGINALLY ASSESSED PLUS ANY FURTHER INCOME ARISING OUT OF SEIZED MATERIAL. HE SUBMITTED THAT THE ASSESSMENT ORDERS P ASSED U/S 143(3) OR IN CASE 143(1) IS PASSED AND NO NOTICE U/S 143(2) IS ISSUED THEN THE 143(1) BECOME FINAL AND NOTHING HAS BEEN FOUND DURING THE COURSE OF SEA RCH. THE CONCLUDED ASSESSMENT PROCEEDINGS CANNOT BE REOPENED AND REASS ESSED U/S 153A WHEN THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE COURS E OF SEARCH. 9. ON THE ADDITIONAL GROUND THE LEARNED DR MR. AJA YKUMAR SRIVASTAVA, OPPOSED THE CONTENTIONS OF THE ASSESSEE AND SUBMITTED THAT AN ASSESSMENT U/S 153A(1)(B) NEED NOT BE BASED ONLY ON SEIZED MATERIAL. HE SUBMITTED THAT SECTION 153A INTRODUCED BY THE FINAN CE ACT, 2003, AS A COMPLETE NEW CODE AND IT NOW REQUIRES THE AO TO MANDATORILY ISSUE NOTICE U/S 153A(1)(A), WHERE A SEARCH HAS BEEN INITIATED. HE S UBMITTED THAT THE SECTION NOWHERE REQUIRES THAT, NOTICE CAN BE ISSUED ONLY WH EN THERE IS MATERIAL FOUND OR SEIZED DURING THE COURSE OF SEARCH. HE SUBMITTED TH AT THE NON OBSTANTE CLAUSE IN SECTION 153A, MAKES THIS INTENTION VERY CLEAR. HE S UBMITS THAT THE ISSUE OF NOTICE FOR THE PERIOD OF 6 YEARS FOR MAKING OF ASSE SSMENTS U/S 153A(1)(B) IS MANDATORY, IRRESPECTIVE OF ANY OTHER PROVISIONS O F THE ACT AND THAT IT GRANTS AUTOMATIC JURISDICTION TO THE AO. HE SUBMITS THAT T HESE ARE MANDATORY PROVISIONS AND THE AO HAS NO DISCRETION IN THE MATT ER AND NOTICE HAS TO BE ISSUED FOR SIX YEARS. HE CONTENDS THAT ONCE A NOTIC E IS MANDATORY, THE AO AUTOMATICALLY ASSUMES JURISDICTION FOR ALL THE SIX YEARS AND THE ACT PROVIDES THAT THE AO HAS TO ASSESS OR REASSESS THE TOTAL INCOME F OR SIX YEARS, AFTER CONSIDERING 6 ALL OTHER PROVISIONS OF THE ACT AND EVIDENCE AVAILA BLE WITH HIM ON THE BASIS OF SEIZED MATERIAL AS WELL AS OTHERWISE. HE SUBMITTED THAT THE TOTAL INCOME AS DEFINED IN SECTION 2(45) IS THE TOTAL INCOME AS PER SECTION 5 COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THUS HE SUBMITS THAT THE ASSESSMENTS NEED NOT BE BASED ON SEIZED MATERIAL, SINCE THE WOR D USED IS TOTAL INCOME AND THE AO IS BOUND TO MAKE AN ASSESSMENT, WHETHER BASE D ON SEIZED MATERIAL OR OTHERWISE, SO AS TO COMPUTE THE TOTAL INCOME AS DEF INED IN SECTION 2(45). HE FURTHER DREW SUPPORT FROM THE SECOND PROVISO TO SEC TION 153A AND SUBMITTED THAT IT IS PROVIDED THAT ALL PENDING ASSESSMENT PRO CEEDINGS SHALL ABATE. HIS CONTENTION IS THAT IF THERE IS SEIZED MATERIAL AND IF AN ASSESSMENT ABATES, THEN, IF THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSE E IS ACCEPTED, THE AO WOULD BE PROHIBITED FROM DOING THE ASSESSMENT. HE RELIED ON THE JUDGMENT OF THE HONBLE JHARKHAND HIGH COURT IN THE CASE OF ABHAY K UMAR SHROFF 290 ITR 114. HE FURTHER SUBMITTED THAT THERE IS A MATERIAL CHANGE IN THE BLOCK ASSESSMENT PROVISIONS AND THE PROVISIONS OF SECTION 153A AND N OW WHAT IS TO BE COMPUTED IS TOTAL INCOME OF THE ASSESSEE AND NOT THE UNDISCL OSED INCOME OF THE ASSESSEE. IN THE BLOCK PROCEDURE, IT WAS SPECIFICALLY PROVIDE D U/S 153B(1)(A) THAT THE UNDISCLOSED INCOME HAS TO BE COMPUTED AS PER THE EV IDENCE FOUND/SEIZED DURING THE SEARCH AND THAT IN THESE PROVISIONS NO SUCH CON DITION EXIST. HE EMPHASIZED ON THE PHRASE ASSESS OR REASSESS USED IN SECTION 153A(1)(B). HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F ADDITIONAL INCOME-TAX OFFICER, CIRCLE-I, SALEM AND ANOTHER VS. E. ALFRED 44 ITR 442(SC) AND SUBMITTED THAT THE APEX COURT HELD THAT THE WORD A SSESSMENT PRESERVES THE ENTIRE PROCESS OF COMPUTATION OF LEVY OF TAX. HE FU RTHER RELIED ON THE EXPLANATION TO SECTION 153A, WHICH PROVIDES THAT SA VE AS OTHERWISE PROVIDED, , ALL PROVISIONS OF THE ACT SHALL APPLY AND THESE INC LUDE THE PROVISIONS OF 143(2)/142(1)/131 ALSO AND SUBMITTED THAT THESE SEC TIONS REQUIRE AND CONFER JURISDICTION ON THE AO TO ASSESS AND REASSESS TOTAL INCOME. HE RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F V. JAGMOHAN RAO AND 7 OTHERS VS. COMMISSIONER OF INCOME TAX AND EXCESS PR OFIT TAX 75 ITR 373 S.C.) FOR THE PROPOSITION THAT, ONCE THE JURISDICTI ON IS VALIDLY ASSUMED ON ONE ISSUE, THE AO CANNOT BE RESTRICTED TO ONLY ASSESSME NT OF THE INCOME WHICH HAS ESCAPED ASSESSMENT, BUT IT IS DUTY TO LEVY TAX ON E NTIRE INCOME THAT HAS ESCAPED ASSESSMENT DURING THE YEAR. HE POINTED OUT THAT UN DER SECTION 153A, THE WORD IS ASSESSED OR REASSESSED, INSTEAD OF COMPUTING OR AGGREGATING AS U/S 158BB. HE REFERRED TO THE DECISION OF THE KOLKATA B ENCH OF THE TRIBUNAL IN THE CASE OF LMJ INTERNATIONAL 119 TTJ 214 (KOL) AND SU BMITTED THAT THE INTERPRETATION OF LAW BY THE HONBLE BENCH CANNOT B E ACCEPTED. HE FURTHER SUBMITS THAT IT IS NOT MATERIAL AND PHYSICAL FORM T HAT CAN BE CONSTRUED AS EVIDENCE AND INFORMATION CAN BE IN INTANGIBLE FORM AND THAT IN INCOME-TAX PROCEEDINGS THE RIGOURS OF EVIDENCE ARE MUCH LESSER . HE RELIED ON NUMBER OF CASE LAWS FOR THESE PROPOSITIONS. FURTHER HE RELIED ON SERIES OF CASE LAWS FOR THE PROPOSITION THAT EVEN IN A BLOCK ASSESSMENT, WHEN E NTRIES ARE FOUND IN THE BOOKS OF ACCOUNT AND WHEN THERE IS NO MATERIAL SIZED DURI NG THE COURSE OF SEARCH, THE AO CAN STILL MAKE AN ADDITION U/S 158BC. ON SIMILAR ANALOGY HE SUBMITS THAT EVEN U/S 153A, ADDITIONS CAN BE MADE WHEN THERE IS NO TANGIBLE MATERIAL. 10. THE LEARNED DR FURTHER RELIED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL REPORTED IN 117 ITD 74 (DEL) IN THE CASE OF SHIVNATH ROI HARNARAIN (INDIA) LTD. VS. DCIT FOR THE PROPOSITION THAT THERE IS NO REQUIREMENT FOR AN ASSESSMENT U/S 153A BEING BASED ON ANY MATER IAL SEIZED IN THE COURSE OF SEARCH. HE FURTHER RELIED UPON ANOTHER DECISION OF THE DELHI G BENCH OF THE TRIBUNAL IN THE CASE OF SHYAM LATA KAUSHIK 114 ITD 940 (DEL) WHEREIN IT IS HELD THAT THE AO GETS JURISDICTION FOR MAKING AN AS SESSMENT MADE U/S 153A, BEING BASED ON ANY MATERIAL SEARCH SEIZED IN THE CO URSE OF SEARCH. WHILE ACCEPTING THAT THERE ARE CERTAIN DECISIONS IN FAVOU R OF THE ASSESSEE IN THE CASE OF ANIL KUMAR BHATIA, OF ITAT, DELHI AND ANIL P. KHEM ANI, ITAT, MUMBAI, HE 8 SUBMITTED THAT IN VIEW OF THE CONFLICT OF DECISION THE MATTER MAY BE REFERRED TO A SPECIAL BENCH. 11. ON A CAREFUL CONSIDERATION OF THE FACTS AND CI RCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT HIS BEI NG A LEGAL GROUND AND IS ON THE ISSUE OF JURISDICTION OF THE AO AND AS THE FACT WHETHER THERE WAS MATERIAL SEIZED DURING THE COURSE OF SEARCH OR NOT, IS VERY MUCH ON RECORD, BY WAY OF RECORDING IN THE PANCHANAMA ETC. THE GROUND HAS TO BE NECESSARILY ADMITTED. WE ARE NOT IN AGREEMENT WITH THE LEARNED DR THAT THE I SSUE REQUIRES FRESH INVESTIGATION INTO THE FACTS AND THAT ADMISSION OF THE GROUND WOULD BE A PRESUMPTION THAT NO MATERIAL WAS FOUND DURING THE C OURSE OF SEARCH. BEFORE WE DECIDE ON THIS ISSUE OF JURISDICTION, WE WOULD LIKE TO CONSIDER THE ARGUMENTS MADE BY BOTH THE PARTIES ON MERITS. 12. THE LEARNED COUNSEL FOR THE ASSESSEE MR. VIJAY MEHTA SUBMITTED THAT THE COMPANY M/S RIYA TRAVELS & TOURS (I) PVT. LTD., REGULARLY SOLD AIR TICKETS TO THE PROPRIETARY CONCERN OF THE APPELLANT M/S RIYA TRAVELS AND MOST OF THE DEBIT ENTRIES IN THE BOOKS OF THE COMPANY ARE R ELATED TO SALE OF AIR TICKETS TO THE PROPRIETARY CONCERN OF THE ASSESSEE AND CREDIT ENTRIES ARE RELATED TO THE PAYMENTS RECEIVED BY THE COMPANY FROM THE PROPRIETA RY CONCERN OF THE ASSESSEE. HE SUBMITTED THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE COMPANY ARE BUSINESS TRANSACTIONS AND, THEREFORE, T HE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE. HE POINTED OUT THAT TH E CIT(APPEALS) HAS ACCEPTED THIS FACT IN PARA 4.5 OF HIS ORDER. HE FURTHER SUBM ITTED THAT, HOWEVER, THE LEARNED CIT(APPEALS) HELD THAT A DEBIT ENTRY OF RS.1,34,73, 740/-, APPEARING ON 08-02- 2002, VIDE CHEQUE NO. 696735, REPRESENTS THE PAYMEN T OF ADVANCE BY THE COMPANY TO THE PROPRIETARY FIRM OF THE ASSESSEE AND HENCE, HE CAME TO A CONCLUSION THAT THE PROVISIONS OF SECTION 2(22)(E), ARE APPLICABLE TO THIS PAYMENT. THE LEARNED COUNSEL SUBMITTED THAT THE CIT (APPEALS) HAS NOT APPRECIATED THE FACTS CORRECTLY. HE FILED A COPY OF THE RUNNING ACCOUNT OF THE 9 ASSESSEES PROPRIETARY FIRM, WITH THE PRIVATE LIMIT ED COMPANY AND POINTED OUT THAT THE ASSESSEE HAD MADE FOUR PAYMENTS AGGREGATIN G TO A SUM OF RS.5,75,00,000/- TO THE COMPANY BETWEEN 02-02-2002 AND 08-02-2002.HE ALSO SUBMITTED THAT THE CIT(APPEALS) HAS OVERLOOKED THE FACT THAT IMMEDIATELY AFTER 08-02-2002, THE ASSESSEE HAD MADE AGGREGATE PAYMENT S OF RS.2,25,00,000/- TO THE COMPANY BETWEEN 09-02-2002 AND 13-02-2002. THUS HE VEHEMENTLY CONTENDED THAT THE TRANSACTION OF RS.1,34,73,740/-, FOR THE ASSESSMENT YEAR 2002-03, WAS GUIDED BY COMMERCIAL EXPEDIENCY AND IS PART OF A RUNNING CURRENT ACCOUNT AND THUS DOES NOT REPRESENT A LOAN OR ADVAN CE. HE SUBMITTED THAT, WHEN ALL THE TRANSACTIONS ARE ACCEPTED AS BUSINESS TRAN SACTIONS, THE DEPARTMENT CANNOT ISOLATE ONE TRANSACTION FROM THE ENTIRE LEDG ER ACCOUNT AND TREATED THAT AS AN ADVANCE FOR THE PURPOSE OF SECTION 2(22)(E). 13. FOR THE ASSESSMENT YEAR 2004-05 THE LEARNED CO UNSEL DREW OUR ATTENTION TO THE COPY OF THE LEDGER ACCOUNT AND POI NTED OUT THAT THE AMOUNT OF RS.2,50,00,000/- IS RECEIVED ON 13-09-2003, WAS TRA NSFERRED ALMOST SIMULTANEOUSLY BACK TO THE COMPANY ON THE VERY SAME DAY. SIMILAR WAS THE TRANSACTION ON 15-09-2003 WHERE THE AMOUNT WAS TRAN SFERRED ON THE VERY SAME DAY. HE SUBMITTED THAT THESE AMOUNTS WERE WRONGLY C REDITED TO M/S RIYA TRAVELS AND THAT M/S RIYA TRAVELS HAS NEVER UTILIZE D THIS AMOUNT AND IT HAS RECTIFIED THE MISTAKE BY INSTANTANEOUSLY REFUNDING THE AMOUNT TO THE COMPANY. THUS HE SUBMITS THAT THE ADDITION U/S 2(22)(E) FOR THAT YEAR CANNOT BE MADE. 14. FOR ASSESSMENT YEAR 2005-06 HE SUBMITTED THAT THE AMOUNT OF RS.15 LAKHS RECEIVED BY THE COMPANY FROM THE PROPRI ETARY CONCERN ON 02-06- 2004 WAS GIVEN BACK ON 08-06-2004. SIMILARLY AN AMO UNT RECEIVED ON 17-06- 2004 OF RS.15 LAKHS WAS RETURNED ON 12-07-2004. M/S RIYA TRAVELS PAID AN AMOUNT OF RS.10 LAKHS TO THE COMPANY WHICH WAS REPA ID BY THE COMPANY TO THE PROPRIETARY CONCERN ON 22-11-2004. THUS HE SUBMITS THAT THIS WAS A RUNNING CURRENT ACCOUNT WHERE FUNDS WERE FREELY FLOWN FROM THE COMPANY TO THE 10 PROPRIETARY CONCERN AND FROM PROPRIETARY CONCERN TO THE COMPANY AND THESE WERE ALL BUSINESS TRANSACTIONS AND THE PROPRIETARY CONCERN HAS NEVER UTILIZED THE AMOUNT RECEIVED FROM THE COMPANY FOR OTHER BUSINESS PURPOSES WITH THE COMPANY AND HENCE NO ADDITION CAN BE MADE U/S 2(22) (E). 15. THEREAFTER MR. VIJAY MEHTA REFERRED TO AN ENTR Y OF RS.2,75,00,000/- ON 07-11-2004 AND AN AMOUNT OF RS. 4,25,00,000/- ON 08-11- 2004. HE SUBMITTED THAT THESE AMOUNTS WERE TRANSFER RED BACK TO THE COMPANYS ACCOUNT SIMULTANEOUSLY AND INSTANTANEOUSLY ON THE SAME DAY AND AT THE SAME MOMENT. HE SUBMITTED THAT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, IT WAS EXPLAINED TO THE AO THAT THE PRIVATE LIMITED COMPAN Y, WHICH IS ENGAGED INTER ALIA IN THE BUSINESS OF PROVIDING INTERNATIONAL AIR TICKET BOOKING SERVICES, AND WHICH IS A MEMBER OF ITTA AND IT WAS REQUIRED TO PR OVIDE A BANK GUARANTEE TO IATA. AS THE BANK GUARANTEE AMOUNT IS CALCULATED BY TAKING TOTAL TURNOVER AS REDUCED BY THE AMOUNT OF PAID UP SHARE CAPITAL AND RESERVES, THE ASSESSEE WANTED TO INCREASE ITS SHARE CAPITAL IN CERTAIN YEA RS. AS HIGHER THE AMOUNT OF BANK GUARANTEE, HIGHER WOULD BE THE AMOUNT OF FIXED DEPOSIT TO BE DEPOSITED WITH THEM AS MARGINAL SECURITIES, AND TO REDUCE THI S BURDEN THE ASSESSEE ROUTED ITS AMOUNT THROUGH M/S RIYA TRAVELS AND BROUGHT BY THE SAME TO THE COMPANY FOR INCREASING ITS SHARE CAPITAL. HE VEHEMENTLY CON TENDED THAT THE COMPANY M/S RIYA TRAVELS & TOUR (I) PVT.LTD., FOR ITS OWN BENEF IT, WANTED TO INCREASE THE PAID UP SHARE CAPITAL, TO MINIMIZE THE AMOUNT OF B ANK GUARANTEE TO BE PROVIDED TO IATA AND CONSEQUENTLY TO REDUCE BLOCKING OF FUN DS IN FDRS. HE SUBMITTED THAT NONE OF THE FUNDS TRANSFERRED TO THE ASSESSEE WERE UTILIZED BY IT, EVEN FOR THE MOMENT AND THAT THE ASSESSEE HAS NOT BENEFITED FROM THESE TRANSACTIONS. THUS HE SUBMITTED THAT THESE TRANSACTIONS ARE NEITHER LOANS OR ADVANCES, WHICH WERE EITHER AVAILED BY THE ASSESSEE OR UTILIZED BY HIM A ND HENCE THE PROVISIONS OF SECTION 2(22)(E) WOULD NOT APPLY. HE PRAYED THAT TH E ADDITIONS BE DELETED. 11 16. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AMB ASSADOR TRAVELS P. LTD. 318 ITR 376 FOR THE PROPOSITION THAT WHEN THE ASSES SEE WAS INVOLVED IN BOOKING OF RESORTS FOR THE CUSTOMERS OF THESE COMPANIES AND ENTERED INTO NORMAL BUSINESS TRANSACTIONS, AS PART OF ITS DAY TO DAY BU SINESS ACTIVITY, THE FINANCIAL TRANSACTIONS CANNOT BE TREATED AS LOANS AND ADVANCE S. HE FURTHER RELIED ON THE DECISION OF MUMBAI A-BENCH OF THE TRIBUNAL IN THE C ASE OF N.H. SECURITIES LTD. 11 SOT 304 (MUM) FOR THE PROPOSITION THAT WHERE PAY MENTS ARE MADE TO A SHAREHOLDER, THROUGH MUTUAL, OPEN AND CURRENT ACCOU NT, WHEN THE PAYMENTS ARE IN THE ORDINARY COURSE OF BUSINESS, THEY WOULD NOT COME UNDER THE PURVIEW OF SECTION 2(22)(E). HE FURTHER RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. IDHAYAM PUBLICATIONS LTD. 28 5 ITR 221 (MAD) WHERE IT IS HELD THAT WHEN THE TRANSACTION BETWEEN THE ASSESSEE AND THE DIRECTOR CUM SHARE HOLDER WAS NOT A LOAN TRANSACTION AND WHEN IT IS ON LY A CURRENT ACCOUNT TRANSACTION AND WHEN NO INTEREST WAS BEING CHARGED TO THE ABOVE TRANSACTION, IT CANNOT BE CALLED A LOAN OR DEPOSIT. HE VEHEMENTLY C ONTENDED THAT THERE IS NO BENEFIT WHATSOEVER THAT HAS ACCRUED TO THE ASSESSEE OR THAT WHICH IS AVAILED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY NOR ANY INT EREST IS PAID AND THUS IT IS NOT A LOAN OR AN ADVANCE WHICH WOULD ATTRACT THE PROVIS IONS OF SECTION 2(22)(E). HE PRAYED FOR RELIEF. THE LEARNED COUNSEL SUBMITTED TH AT THE ADDITIONAL GROUND WOULD NOT SURVIVE FOR THE ASSESSMENT YEAR 2005-06. 17. THE LEARNED DR, MR. AJAYKUMAR SRIVASTAVA, OPPO SED THE CONTENTIONS OF THE ASSESSEE AND SUBMITTED THAT THES E AMOUNTS, THOUGH ROUTED THROUGH THE CURRENT ACCOUNT, WERE IN FACT ADVANCES GIVEN TO THE ASSESSEE BY THE COMPANY. HE VEHEMENTLY CONTENDED THAT THE MOTIVES F OR TAKING THE AMOUNT WOULD TAKE A BACK SEAT, WHEN THERE IS A DEEMING PRO VISION IN THE STATUTE. HE RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF WALCHAND & CO. (P) LTD. VS. CIT 204 ITR 146 (BOM). HE ALSO RELIED ON THE 12 JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF MI SS P. SARDA VS. CIT 229 ITR 444 (SC) AND SUBMITTED THAT THE HONBLE COURT H ELD THAT THE FICTION EMBODIED IN SECTION 2(22)(E) CAME INTO PLAY AS SOON AS MONIES WERE PAID BY THE COMPANY AND THAT THE FACT THAT LOANS AND ADVANCES W ERE ULTIMATELY ADJUSTED AT THE END OF THE YEAR AGAINST THE CREDIT BALANCE OF A NOTHER SHAREHOLDER, WILL NOT ALTER THE FACT THAT THE ASSESSEE RECEIVED DIVIDEND FROM THE COMPANY DURING THE RELEVANT ACCOUNTING PERIOD. HE FURTHER RELIED ON TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF L. ALAGUNDARAM CHETTIA R VS. CIT 252 ITR 893 FOR THE PROPOSITION THAT WHEN THE COMPANY HAS ADVANCED LARGE AMOUNTS TO THE EMPLOYEE BY WAY OF LOAN, WHO IN TURN PASSED THE SAI D AMOUNT TO THE ASSESSEE WHO IS A MANAGING DIRECTOR OF THE COMPANY, SUCH ADV ANCE TO ASSESSEE CONSTITUTED A PAYMENT FOR THE BENEFIT OF THE ASSESS EE AND WAS ASSESSED HIS DEEMED DIVIDEND U/S 2(6A)(E) OF THE I.T. ACT, 1922. HE RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF WALCHAND A ND CO. (P) LTD. VS. CIT REPORTED IN 204 ITR 146 FOR THE PROPOSITION THAT A LOAN TAKEN BY THE SHAREHOLDER, THOUGH REPAID FULLY BEFORE DECLARATION OF DIVIDENDS BY THE COMPANY, IS DEEMED DIVIDEND TAXABLE AND IT CANNOT BE A CASE OF DOUBLE TAXATION. 18. ON THE ARGUMENT OF THE ASSESSEE THAT THIS IS A CURRENT ACCOUNT AND THE ASSESSEE IS HAVING A NUMBER OF BUSINESS TRANSAC TIONS WITH THE COMPANY AND CERTAIN ISOLATED TRANSACTIONS SHOULD NOT BE POINTED OUT FOR ADDITION U/S 2(22)(E), THE LEARNED DR SUBMITTED THAT IT IS TRUE THAT THE A SSESSEE FIRM IS HAVING BUSINESS TRANSACTIONS WITH THE COMPANY AND THAT RUNNING ACCO UNT FILED BY THE ASSESSEE, IS IN FACT A CURRENT ACCOUNT. BUT AT THE SAME TIME, HE POINTED OUT THAT THE CIT(APPEALS) HAS TAKEN CARE, NOT TO INCLUDE THE BUS INESS TRANSACTIONS U/S 2(22)(E). HE TOOK THIS BENCH THROUGH THE ORDER OF THE AO AS WELL AS THE CIT(APPEALS) AND RELIED ON THE SAME. HE DISTINGUISH ED THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN TH E CASE OF CIT VS. IDHAYAM PUBLICATIONS LTD. 285 ITR 221 (MAD) AND SUBMITTED T HAT THIS CASE RELATES TO 13 PROVISIONS U/S 269SS AND PENALTY U/S 271D AND HENCE NOT APPLICABLE. HE PRAYED THAT THE ORDERS OF THE AUTHORITIES BELOW BE UPHELD. 19. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDER ATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPE RS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 20. IT IS A WELL SETTLED LEGAL PRINCIPLE THAT A LE GAL FICTION MUST BE GIVEN STRICT INTERPRETATION. THE HONBLE SUPREME COURT IN THE CASE OF SMT. TARULATA SHYAM & ORS. VS. CIT 108 ITR 345 (SC) HAS LAID DOWN THE PROPOSITION THAT WHEN A DEEMING LEGAL FICTION, CREATES AN ARTIFICIAL LIABILITY, IT MUST BE GIVEN A STRICT INTERPRETATION. SECTION 2(22)(E) READS AS FO LLOWS : ( E ) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WH ETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) 92 [MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF AD VANCE OR LOAN TO A SHAREHOLDER 93 , BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE O F DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFE RRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEH ALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PR OFITS ; BUT DIVIDEND DOES NOT INCLUDE ( I ) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CLAUSE ( C ) OR SUB-CLAUSE ( D ) IN RESPECT OF ANY SHARE ISSUED FOR FULL CASH CONS IDERATION, WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED IN THE EVEN T OF LIQUIDATION TO PARTICIPATE IN THE SURPLUS ASSETS ; [( IA ) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CLAUSE ( C ) OR SUB-CLAUSE ( D ) IN SO FAR AS SUCH DISTRIBUTION IS ATTRIBUTABLE TO THE CAPITALISED PROFITS OF THE COMPANY REPRESENTING BONUS SHARES AL LOTTED TO ITS 14 EQUITY SHAREHOLDERS AFTER THE 31ST DAY OF MARCH, 19 64, [AND BEFORE THE 1ST DAY OF APRIL, 1965] ;] (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER 97 [OR THE SAID CONCERN] BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSIN ESS OF THE COMPANY ; ( III ) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF B Y THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUB-CLA USE ( E ), TO THE EXTENT TO WHICH IT IS SO SET OFF; [( IV ) ANY PAYMENT MADE BY A COMPANY ON PURCHASE OF ITS OW N SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PROVISION S OF SECTION 77A OF THE COMPANIES ACT, 1956 (1 OF 1956); ( V ) ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERGER B Y THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE DEMERGED COMPANY (WHETHER OR NOT THERE IS A REDUCTION OF CAPITAL IN THE DEMERGED COMPANY).] EXPLANATION 1. THE EXPRESSION ACCUMULATED PROFITS, WHEREVER IT OCCURS IN THIS CLAUSE, SHALL NOT INCLUDE CAPITAL GA INS ARISING BEFORE THE 1ST DAY OF APRIL, 1946, OR AFTER THE 31ST DAY OF MA RCH, 1948, AND BEFORE THE 1ST DAY OF APRIL, 1956. EXPLANATION 2. THE EXPRESSION ACCUMULATED PROFITS IN SUB-CLAUSE S ( A), (B), (D ) AND ( E ), SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO T HE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOS E SUB-CLAUSES, AND IN SUB-CLAUSE ( C ) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO TH E DATE OF LIQUIDATION, 1 [BUT SHALL NOT, WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISITION OF ITS UNDERTAKING BY THE GO VERNMENT OR A CORPORATION OWNED OR CONTROLLED BY THE GOVERNMENT U NDER ANY LAW FOR THE TIME BEING IN FORCE, INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDI NG THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE]. 2 [ EXPLANATION 3. FOR THE PURPOSES OF THIS CLAUSE, ( A ) CONCERN MEANS A HINDU UNDIVIDED FAMILY, OR A FI RM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY ; ( B ) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL IN TEREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY TIME DURING THE PREVIOUS YEAR, 15 BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER C ENT OF THE INCOME OF SUCH CONCERN ;] THE SECTION CONTEMPLATES THAT THE PAYMENT SHOULD BE MADE , A) BY A COMPANY WHICH IS NOT A COMPANY IN WHICH PUBLIC ARE SUBSTANT IALLY INTERESTED; B) OF A SUM BY WAY OF A LOAN OR AN ADVANCE; C) TO A SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIARY OWNER OF THE SHARES; D)OR TO ANY CONCE RN IN WHICH A SHAREHOLDER IS A MEMBER OR A PARTNER IN WHICH HE HAS SUBSTANTIAL INT EREST; E) OR A PAYMENT MADE ON BEHALF OF OR FOR THE BENEFIT OF THE INDIVIDUAL S HAREHOLDER; F) TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULA TED PROFITS. 21. IN THE CASE BEFORE US, THE ONLY ISSUE THAT ARI SES FOR CONSIDERATION IS WHETHER THE SUM OF MONEY HAS BEEN GIVEN BY THE COMP ANY M/S RIYA TRAVELA & TOURS (I) PVT. LTD., TO THE SHAREHOLDER MR. G.M.J. THAMPY, BY WAY OF A LOAN OR AN ADVANCE. THE OTHER PARAMETERS LAID DOWN IN THE S ECTION ARE NOT IN DISPUTE BEFORE US. WITH THESE OBSERVATIONS, WE NOW CONSIDER THE FACTS OF THE CASE. 22. A PERUSAL OF THE GENERAL LEDGER ACCOUNT OF THE ASSESSEE, IN THE BOOKS OF M/S RIYA TRAVELS & TOURS (I) PVT. LTD. DIS CLOSE HUGE AMOUNT OF TRANSACTIONS RUNNING INTO MANY PAGES. A COPY OF THE ACCOUNT HAS BEEN FILED BEFORE US. THE UNDISPUTED FACT IS THAT M/S RIYA TRA VELS & TOURS (I) PVT. LTD., REGULARLY SOLD AIR TICKETS TO THE PROPRIETARY CONC ERN M/S RIYA TRAVELS AND THAT MOST OF THE FINANCIAL TRANSACTIONS IN THE BOOKS OF THE COMPANY RELATE TO THE SALE OF AIR TICKETS AND OTHER SUCH BUSINESS TRANSACTIONS . IN FACT THE CIT(APPEALS) HAS EXCLUDED THESE TRANSACTIONS AFTER ACKNOWLEDGING THE FACT THAT THESE ARE BUSINESS TRANSACTIONS AND NOT LOAN AND ADVANCE AT PAGE 4.5OF HIS ORDER. THE REVENUE HAS NOT DISPUTED THIS FINDING AND NO ADDITION WAS MADE U/S 2(22)(E). FOR THE ASSESSMENT YEAR 2002-03 THE SOLE ENTRY THAT WAS CON SIDERED AS LOAN AND ADVANCE BY THE CIT(APPEALS) WAS AN ENTRY ON 08-02-2002 OF R S.1,34,73,740/- RECEIVED BY THE ASSESSEE VIDE CHEQUE NO. 696735. THE LEARNED COUNSEL FOR THE ASSESSEE 16 POINTED OUT THAT THE PROPRIETARY CONCERN M/S RIYA T RAVELS HAD GIVEN THE COMPANY FOUR PAYMENTS AGGREGATING TO A SUM OF RS.5. 75 CRORES BETWEEN 02-02- 2002 AND 08-02-2002. EVEN IMMEDIATELY AFTER 08-02-2 002 THE ASSESSEE MADE AGGREGATE PAYMENTS OF RS.2.25 CRORES TO THE COMPANY BETWEEN 09-02-2002 AND 13-02-2002. ON 06-02-2002 THERE WERE CREDITS OF RS. 1 CRORE AS WELL AS RS.30 LAKHS AND ON 08-02-2002 THERE WAS OTHER CREDIT OF R S.75 LAKHS. WHEN THE ENTIRE ACCOUNT IS TAKEN TOGETHER, THE SUBMISSIONS OF THE L EARNED COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.1,34,73,740/- IS WRO NGLY TAKEN AS A LOAN OR AN ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE, APPEA RS TO BE CORRECT. THE VERY FACT THAT THE PROPRIETARY CONCERN HAS GIVEN HUGE AM OUNTS TO THE COMPANY JUST BEFORE 08-02-2002, GIVES CREDENCE TO THE ARGUMENT O F THE LEARNED COUNSEL THAT THIS AMOUNT OF RS.1,34,73,740/- IS NOTHING BUT A RE TURN OF THE AMOUNTS BY THE COMPANY TO THE SOLE PROPRIETARY CONCERN. IN ANY EVE NT, THIS CANNOT BE CHARACTERIZED EITHER AS A LOAN OR AN ADVANCE. BOTH THE CONCERNS ARE HAVING A CURRENT ACCOUNT AND ALL THE FINANCIAL TRANSACTIONS ARE GUIDED BY COMMERCIAL EXPEDIENCY AND EXIGENCIES OF BUSINESS. WHEN THE R EVENUE HAS ACCEPTED ALL OTHER TRANSACTIONS AS BUSINESS TRANSACTIONS, THERE IS NO REASON GIVEN TO SPECIFICALLY ISOLATE AND TAKE UP THIS TRANSACTION A S THAT WHICH IS NOT FOR THE PURPOSE OF BUSINESS. THE LEARNED DR WAS NOT ABLE TO REFUTE THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SOLE PROPRIETARY CONCERN BETWEEN 02-02-2002 AND 08-02-2002 HAD GIVEN AN AMOUNT OF RS .5.75 CRORES TO THE COMPANY AND THE TRANSACTION ON 08-02-2002 WAS A REF UND OF THOSE AMOUNT. WHEN THIS FACTUAL ISSUE IS NOT CONTROVERTED BY THE REVENUE, WE HAVE TO HOLD THAT THIS IS NOT A LOAN OR AN ADVANCE. THUS ON FACTS WE ARE UNABLE TO SUSTAIN THE ADDITION MADE U/S 2(22)(E). THUS THE ADDITION OF RS .14,47,274/- FOR THE ASSESSMENT YEAR 2002-03 IS HEREBY DELETED. 23. COMING TO THE ASSESSMENT YEAR 2004-05, A LOOK AT THE LEDGER COPY CLEARLY SHOWS THAT THE AMOUNTS RECEIVED FROM THE C OMPANY BY THE SOLE 17 PROPRIETARY CONCERN ON 13-09-2003 AND ON 15-09-200 3 OF RS.2.5 CRORES EACH, WERE SIMULTANEOUSLY AND INSTANTANEOUSLY TRANSFERRE D BACK TO THE PROPRIETARY CONCERN. THE ASSESSEE HAS NOT DERIVED ANY BENEFIT W HATSOEVER FROM THIS TRANSACTION. WHEN THE ADMITTED FACT IS THAT BOTH TH E ASSESSEE AND THE COMPANY ARE HAVING AN OPEN AND MUTUAL CURRENT ACCOUNT AND T HAT THE FINANCIAL TRANSACTIONS BETWEEN THE TWO ENTITIES ARE MUTUAL TR ANSACTIONS DONE OUT OF COMMERCIAL EXPEDIENCY AND BUSINESS NECESSITY, EACH AND EVERY TRANSACTION CANNOT BE CONSIDERED AS A LOAN OR AN ADVANCE. WHEN AN AMOUNT IS NOT KEPT IN THE SOLE PROPRIETARY CONCERN FOR A DAY AND WHEN THE SOL E PROPRIETARY CONCERN NOT USED IT, IT CANNOT BE CALLED A LOAN OR AN ADVANCE. WE HOLD THAT THE ADDITION OF AN AMOUNT OF RS.2,06,12,533/- MADE U/S 2(22)(E) HAS TO BE NECESSARILY DELETED AS THERE IS NO LOAN OR AN ADVANCE AS CONTEMPLATED WITH IN THE SECTION 2(22)(E). THERE WAS NEITHER A LOAN NOR A REPAYMENT ON FACTS. 24. COMING TO THE ASSESSMENT YEAR 2005-06, THE TRA NSACTIONS WERE ALSO IN THE FORM OF CURRENT ACCOUNT TRANSACTIONS, WHICH WERE UNDERTAKEN DURING THE ORDINARY COURSE OF BUSINESS. AMOUNTS WERE EXCHANGED BETWEEN THE PARTIES AND THERE IS NO FINDING THAT A PARTICULAR TRANSACTION I S A LOAN TRANSACTION. WHEN THERE IS AN ATTEMPT TO BRING TO TAX A PARTICULAR AMOUNT, THE BURDEN OF PROOF LIES ON THE REVENUE TO PROVE THAT THE SAME IS INCOME AS CONTEMP LATED UNDER THE ACT. IN THIS CASE THE REVENUE HAS NOT DISCHARGED ITS BURDEN THAT A PARTICULAR AMOUNT RECEIVED BY M/S RIYA TRAVELS, A PROPRIETARY CONCERN , IS A LOAN OR ADVANCE. ON THE OTHER HAND, THE ASSESSEE HAS LAID EVIDENCE TO P ROVE THAT THIS IS NEITHER A LOAN NOR AN ADVANCE. THESE FINDINGS OF US ARE BASED ON T HE PROPOSITION LAID DOWN IN CASE LAWS, WHICH WILL BE DISCUSSED IN THIS ORDER. 25. ON FACTS WE FIND THAT ON 2 ND JUNE, 2004, THE PROPRIETARY CONCERN HAD GIVEN AN AMOUNT OF RS.15 LAKHS TO THE COMPANY A ND THIS WAS REPAID BY THE COMPANY ON 08-06-2004. SIMILARLY AN AMOUNT OF RS.15 LAKHS WAS ONCE AGAIN ADVANCED BY THE SOLE PROPRIETARY CONCERN ON 17-06-2 004 AND THIS WAS REPAID BY 18 THE PRIVATE LIMITED COMPANY TO RIYA TRAVELS ON 12-0 7-2004. SIMILARLY AN AMOUNT TAKEN BY THE COMPANY ON 19-11-2004 FROM THE PROPRIETARY CONCERN, AMOUNTING TO RS.10 LAKHS WAS RETURNED TO THE PROPRI ETARY CONCERN ON 22-02- 2004. THUS ON THESE FACTS, BY NO STRETCH OF IMAGINA TION, THESE TRANSACTIONS CAN BE TREATED AS LOANS OR ADVANCES COVERED U/S 2(22)( E). THIS LEAVES US WITH ONLY TWO TRANSACTIONS OF 17-11-2004 AND 18-11-2004 AMOUN TING TO RS.2.75 CRORES AND RS.4.25 CRORES RESPECTIVELY. HERE ALSO THE AMOU NT RECEIVED BY THE PROPRIETARY CONCERN M/S RIYA TRAVELS, WAS INSTANTAN EOUSLY, ON THE SAME DAY TRANSFERRED BACK TO THE COMPANY. THE EXPLANATION IS THAT THE COMPANY IS A MEMBER OF THE INTERNATIONAL AIR TRAVELS ASSOCIATIO N (IATA) AND AS PER THE TERMS AND CONDITIONS, THE ASSESSEE WAS REQUIRED TO PROVIDE BANK GUARANTEE TO IATA. THE GUARANTEE AMOUNT WAS CALCULATED BY TAKING THE TOTAL TURNOVER AS REDUCED BY THE AMOUNT OF PAID UP SHARE CAPITAL AND RESERVES. IT IS WELL KNOWN THAT, HIGHER AMOUNT OF BANK GUARANTEE, HIGHER IS TH E FIXED DEPOSITS THAT ARE REQUIRED TO KEPT WITH THE BANKERS TO OBTAIN GUARANT EE, AS THE BANK INSISTS ON ADEQUATE MARGIN. HIGHER AMOUNT OF FIXED DEPOSITS IN VOLVES BLOCKING OF SUBSTANTIAL FUNDS. THE COMPANY FOR ITS OWN PURPOSES , ROUTED THE AMOUNT THROUGH THE PROPRIETARY CONCERN, WITH AN INTENTION TO INCREASE ITS PAID UP OF SHARE CAPITAL AND TO MINIMIZE THE INSTANCE OF BANK GUARANTEE TO BE PROVIDED TO IATA AND CONSEQUENTLY REDUCE THE BLOCKING OF FUNDS. THE QUESTION TO BE ANSWERED IS, CAN THIS BE CALLED A LOAN OR AN ADVANC E. THE MONEY IS NOT GONE OUT OF THE COFFER OF THE COMPANY, NOR HAS RIYA TRAVELS USED THE AMOUNT FOR ITS PURPOSES. A LOAN OR ADVANCE PRE-SUPPOSES THE MONEY OF THE COMPANY IS OUT OF THE COMPANY, FOR BEING USED BY THE OTHER PERSON FOR ITS USE. WHEN THE MONEY IS SIMPLY CIRCULATED AND HAS COME BACK TO THE COFFER O F THE COMPANY, SIMULTANEOUSLY, WE FIND DIFFICULTY IN ACCEPTING THE THEORY THAT A PERSON HAS LENT MONEY TO ANOTHER. IN THIS CASE THE COMPANY SOUGHT T O ACHIEVE ITS OBJECT BY USING THE SOLE PROPRIETARY CONCERN. ON THIS FACTUAL MATR IX, WE ARE OF THE CONSIDERED OPINION, THAT THE AMOUNT ROUTED BY THE COMPANY, THR OUGH THE SISTER CONCERN RIYA 19 TRAVELS, CANNOT BE CONSIDERED AS A LOAN OR AN ADVAN CE GIVEN BY THE COMPANY TO THE SOLE PROPRIETARY CONCERN. WE RELY ON THE FINDIN G OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJ KUMAR (2009) 181 T AXMAN 155 WHERE IT HAS BEEN HELD AS FOLLOWS : 10.5 IF THIS PURPOSE IS KEPT IN MIND THEN, IN OUR VIEW, THE WORD ADVANCE HAS TO BE READ IN CONJUNCTION WITH THE WORD LOAN . USUALLY ATTRIBUTES OF A LOAN ARE THAT IT INVOLVES POSITIVE ACT OF LEND ING COUPLED WITH ACCEPTANCE BY THE OTHER SIDE OF THE MONEY AS LOAN : IT GENERALLY CARRIES AN INTEREST AND THERE IS AN OBLIGATION OF REPAYMENT . ON THE OTHER HAND, IN ITS WIDEST MEANING THE TERM ADVANCE MAY OR M AY NOT INCLUDE LENDING. THE WORD ADVANCE IF NOT FOUND IN THE C OMPANY OF OR IN CONJUNCTION WITH A WORD LOAN MAY OR MAY NOT INC LUDE THE OBLIGATION OF REPAYMENT. IF IT DOES THEN IT WOULD BE A LOAN. T HUS, ARISES THE CONUNDRUM AS TO WHAT MEANING ONE WOULD ATTRIBUTE TO THE TERM ADVANCE . THE RULE OF CONSTRUCTION TO OUR MINDS W HICH ANSWERS THIS CONUNDRUM IS NOSCITUR A SOCIIS. THE SAID RULE HAS B EEN EXPLAINED BOTH BY THE PRIVY COUNCIL IN THE CASE OF ANGUS ROBERTSON VS. GEORGE DAY (1879) 5 AC 63 (PC) BY OBSERVING 'IT IS A LEGITIMAT E RULE OF CONSTRUCTION TO CONSTRUE WORDS IN AN ACT OF PARLIAM ENT WITH REFERENCE TO WORDS FOUND IN IMMEDIATE CONNECTION WITH THEM' A ND OUR SUPREME COURT IN THE CASES OF ROHIT PULP & PAPER MILLS LTD. VS. CCE AIR 1991 SC 754 AND STATE OF BOMBAY VS. HOSPITAL MAZDOOR SAB HA AIR 1960 SC 610. 10.7 IMPORTANTLY, THE BROAD PRINCIPLES WHICH EMER GE FROM THE JUDGMENT OF THE SUPREME COURT WITH REGARD TO THE APPLICABILITY OF THE SAID 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 TH E SETTING OR THE CONTEXT ONE COULD APPLY THE NARROWER OR WIDER MEANING; (II) ARE WORDS OR TERMS USED FOUND IN A GROUP TOTALLY DISSIMILAR OR IS THERE A COMMON THREAD RUNNING THROUGH THEM; (III) THE PURPOSE BE HIND INSERTION OF THE TERM. 20 10.8 LET S EXAMINE AS TO WHETHER BASED ON THE A FORESAID TESTS THE SAID RULE OF CONSTRUCTION NOSCITUR A SOCIIS OUGHT TO BE A PPLIED IN THE INSTANT CASE. (I) THE TERM ADVANCE HAS UNDOUBTEDLY MORE THAN ONE MEANING DEPENDING ON THE CONTEXT IN WHICH IT IS USED; (II) BOTH THE TERMS, THAT IS, ADVANCE OR LOAN ARE RELATED TO THE ACCUMULATED PR OFITS OF THE COMPANY; (III) AND LAST BUT NOT THE LEAST THE PURPO SE BEHIND INSERTION OF THE TERM ADVANCE WAS TO BRING WITHIN THE TAX NET PA YMENTS 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. 10.9 KEEPING THE AFORESAID RULE IN MIND WE ARE OF THE OPINION THAT THE WORD ADVANCE WHICH APPEARS IN THE COMPANY OF THE WORD LOAN COULD ONLY MEAN SUCH ADVANCE WHICH CARRIES WITH IT AN OBLIGATI ON OF REPAYMENT. TRADE ADVANCE WHICH IS IN THE NATURE OF MONEY TRANS ACTED TO GIVE EFFECT TO A COMMERCIAL TRANSACTION WOULD NOT, IN OUR VIEW, FALL WITHIN THE AMBIT OF THE PROVISIONS OF S. 2(22)(E) OF THE ACT. THIS INTERPRETATION WOULD ALLOY THE RULE OF PURPOSIVE CONSTRUCTION WITH NOSCITUR A SOCIIS, AS WAS DONE BY THE SUPREME COURT IN THE CASE OF LIC OF INDIA VS. RETD. LIC OFFICERS ASSOCIATION (2008) 3 SCC 321. THE OBSE RVATIONS IN PARA 24 OF THE REPORT BEING APPOSITE ARE EXTRACTED HEREI NBELOW : 'EACH WORD EMPLOYED IN A STATUTE MUST TAKE COLOUR FROM THE PUR PORT AND OBJECT FOR WHICH IT IS USED. THE PRINCIPLE OF PURPOSIVE INTERP RETATION, THEREFORE, SHOULD BE TAKEN RECOURSE TOE.' 26. REFERRING TO THE JUDGMENTS OF THE HONBLE SUPR EME COURT IN THE CASE OF MISS. P. SARDA VS. CIT, 229 ITR 444, THE HO NBLE COURT HELD THAT WITHDRAWALS OF SHAREHOLDER FROM THE COMPANY, AMOUNT ED TO LOAN AND ADVANCE AND THAT THE FACT THAT ULTIMATELY THE AMOUNT IS REP AID OR ADJUSTED, WILL NOT ALTER THE POSITION. IN OUR CONSIDERED OPINION, THE ISSUE BEFORE US IS C LEARLY COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT. THE AMOUNTS R ECEIVED BY THE ASSESSEE AS A RUNNING ACCOUNT AND WHICH IS RETURNED INSTANTANEO USLY CANNOT BE CALLED A LOAN OR AN ADVANCE, AS IT IS NEITHER GIVEN AS A LOAN BY THE COMPANY, NOR WAS IT ACCEPTED AS A LOAN BY THE ASSESSEE. 21 27. COMING TO THE OTHER CASE LAWS, WE OBSERVE THAT IN THE CASE OF M/S CHANDRA CEMENT VS. DCIT 68 TTJ (JAIPUR) 35, THE J AIPUR BENCH HELD AS FOLLOWS : WHEN ONE SINGLE INDIVIDUAL IS MANAGING THE AFFAIRS OF TWO CONCERNS AND THE DECISION TO TRANSFER THE FUNDS FROM ONE CONCERN TO ANOTHER OR TO REPAY THE FUNDS COULD HAVE BEEN SAID TO HAVE BEEN L ARGELY INFLUENCED BY THE SAME INDIVIDUAL, IT CANNOT BE SAID THAT TRANSAC TION PARTAKE THE NATURE OF EITHER DEPOSIT OR LOAN. THIS CASE LAW ALSO APPLIES TO THE FACTS OF THIS CAS E. THE HONBLE MADHYA PRADESH HIGH COURT HAS IN THE C ASE OF PATIRAM JAIN (SUPRA) HELD THAT : IT HAS ALSO BEEN ACCEPTED BY THE RESPONDENTS THAT T HE TRANSACTIONS MADE BETWEEN THE TWO SISTER CONCERNS WERE UNDER EXCEPTIO NAL CIRCUMSTANCES TO ACCOMMODATE THE EMERGENCY NEEDS OF THE SISTER CONCE RN FOR A VERY SHORT AND TEMPORARY PERIOD. AS SUCH, IT DID NOT AMOUNT TO A LOAN OR DEPOSIT AS DEFINED UNDER SECTION 269SS OF THE INCOME-TAX ACT. IN THIS CASE LAW, IT IS HELD THAT ACCOMMODATION OF TRANSACTION TO MEET EMERGENCY NEEDS CANNOT BE CALLED LOANS. ONCE IT IS NOT A LOAN , IT CANNOT BE AN ADVANCE WHICH IS IN THE NATURE OF A LOAN. THE COCHIN BENCH OF THE TRIBUNAL IN MUTHOOT M. GEOR GE BANKERS VS. ACIT (1994) 47 TTJ (COCHIN) 435 HELD AS UNDER : AGAINST THE BACKGROUND, WE EXAMINE THE TRANSACTION S BETWEEN THE SISTER CONCERNS AND THE ASSESSEE THERE ARE TRANSFER OF FUN DS FROM AND TO THE SISTER CONCERNS. THERE IS NO EVIDENCE TO SHOW THAT MONEY WAS LOANED OR KEPT DEPOSITED FOR A FIXED PERIOD OR REPAYABLE ON D EMAND. FURTHER, THE SISTER CONCERNS AND THE ASSESSEE ARE OWNED BY THE S AME FAMILY GROUP OF PEOPLE WITH A COMMON MANAGING PARTNER WITH CENTRALI SED ACCOUNTS UNDER 22 THE SAME ROOF. TRANSFER OF FUNDS HAS TAKEN PLACE IN A WHIMSICAL MANNER. THEREFORE, IT IS RATHER DIFFICULT TO SAY THAT THE T RANSACTIONS ARE IN THE NATURE OF DEPOSITS OR LOANS WITH CERTAIN CONDITIONS ATTACH ED TO THEM, EITHER AS REGARDS THE PERIOD OF SUCH DEPOSITS OR LOANS OR WIT H REGARD TO THEIR REPAYMENTS. FROM THE COPIES OF THE ACCOUNTS FURNISH ED BEFORE US ALL THAT CAN BE GATHERED IS THAT FUNDS HAVE BEEN TRANSFERRED FROM AND TO THE SISTER CONCERNS AS AND WHEN REQUIRED AND SINCE THE MANAGIN G PARTNER IS COMMON TO ALL THE SISTER CONCERNS, THE DECISION TO TRANSFER THE FUNDS FROM ONE CONCERN TO ANOTHER CONCERN OR TO REPAY THE FUND S COULD BE SAID TO HAVE BEEN LARGELY INFLUENCED BY THE SAME INDIVIDUAL . IN OTHER WORDS, THE DECISION TO GIVE AND THE DECISION TO TAKE RESTED WI TH EITHER THE SAME GROUP OF PEOPLE OR WITH THE SAME INDIVIDUAL. IN SUCH CIRC UMSTANCES OF THE CASE, WE HOLD THAT THE TRANSACTION INTER SE BETWEEN THE S ISTER CONCERNS AND THE ASSESSEE CANNOT PARTAKE OR THE NATURE OF EITHER D EPOSIT OR LOAN THOUGH INTEREST MIGHT HAVE BEEN PAID ON THE SAME. EXCEPTIN G FOR THE TRANSFER OF FUNDS BEING WITNESSED IN THE BOOKS OF ACCOUNT OF TH E CONCERNED FIRMS, NO MATERIAL IS ON RECORD TO SHOW ISSUE OF RECEIPT OR P RONOTE IN EVIDENCE OF ACCEPTING DEPOSITS OR LOANS AS UNDERSTOOD IN COMMON PARLANCE. IT ONLY REPRESENTS DIVERSION OF FUNDS FROM ONE CONCERN TO A NOTHER DEPENDING UPON THE EXIGENCIES OF THE BUSINESS. FROM THE ABOVE, IT IS CLEAR THAT TRANSACTION BETWEE N SISTER CONCERNS ARE JUST DIVERSION OF FUNDS FOR MEETING VISTITUDES OF BUSINE SS AND ARE NEITHER LOANS OR ADVANCES. THESE DECISIONS SUPPORT THE VIEW THAT CUR RENT ACCOUNT TRANSACTIONS BETWEEN THE SISTER CONCERNS CANNOT BE CALLED LOANS OR ADVANCES FOR THE PURPOSE OF INVOKING SECTION 2(22)(E). THE TERM ADVANCES I N THIS SECTION IS USED ALONG WITH THE WORD LOAN AND THIS WORD DOES NOT INCLUDE TRANSFER OF FUNDS OR TRADE OR BUSINESS ADVANCES. 28. THE HONBLE DELHI HIGH COURT IN THE CASE OF CI T VS. AMBASSADOR TRAVELS P. LTD. (2009) 318 ITR 376 (DEL) HELD THAT WHEN THE ASSESSEE ENTERED INTO NORMAL BUSINESS TRANSACTION AS A PART OF DAY T O DAY BUSINESS ACTIVITY, THIS 23 CANNOT BE TREATED AS LOANS OR AS ADVANCES. THE MUMB AI A BENCH OF THE TRIBUNAL IN THE CASE OF N.H. SECURITIES LTD. VS. DC IT REPORTED IN 11 SOT 302 HELD THAT WHERE PAYMENTS ARE MADE BY A COMPANY IN T HE COURSE OF CARRYING ON ITS REGULAR BUSINESS THROUGH A MUTUAL, OPEN AND CUR RENT ACCOUNT TO A RELATED PARTY DO NOT COME UNDER THE PURVIEW OF SECTION 2(2 2)(E). 29. APPLYING THE PROPOSITIONS LAID DOWN IN THESE CASE LAWS FOR THE FACTS OF THE CASE, WE ACCEPT THE ARGUMENTS OF THE L EARNED COUNSEL FOR THE ASSESSEE THAT THE TRANSACTIONS BETWEEN THESE SISTER CONCERNS ARE BUSINESS TRANSACTIONS AND ARE GUIDED BY COMMERCIAL EXPEDIENC Y AND REQUIREMENTS OF BUSINESS AND ARE MERE DIVERSION OF FUNDS AND ARE NEITHER A LOAN OR ADVANCE AS CONTEMPLATED U/S 2(22)(E). THUS THIS GROUND OF THE ASSESSEE IS ALLOWED. 30. COMING TO THE CASE LAWS CITED BY THE LEARNED D R IN THE CASE OF SMT. TARULATA SHYAM & ORS., THE HONBLE SUPREME COU RT HAD HELD THAT WHILE INTERPRETING A STATUTE THERE IS NO SCOPE FOR IMPORT ING INTO THE STATUTE WORDS WHICH ARE NOT THERE. AS ALREADY STATED, THE HONBLE COURT HAS HELD THAT THERE SHOULD BE STRICT INTERPRETATION OF THE RELEVANT PRO VISIONS. IN THIS CASE THE ISSUE WHETHER A PARTICULAR FINANCIAL TRANSACTION BETWEEN THE TWO CONCERNS, CAN BE CONSIDERED AS A LOAN OR AN ADVANCE, WAS NOT THE SUB JECT MATTER OF CONSIDERATION BY THE HONBLE SUPREME COURT. IN FACT THERE WAS NO DISPUTE ON THE FACT THAT THE AMOUNT RECEIVED BY THE SHAREHOLDER WAS A LOAN. IN T HE CASE ON HAND THE DISPUTE IS THAT THE FINANCIAL TRANSACTION BETWEEN THE SISTE R CONCERNS, IS A BUSINESS AND TRADE TRANSACTION AND NOT A LOAN OR AN ADVANCE. THU S THIS CASE IS NOT OF MUCH ASSISTANCE. 24 31. IN THE CASE OF MISS P. SARDA VS. CIT THE FACTS WERE THAT, THERE WERE WITHDRAWALS MADE BY THE ASSESSEE FROM THE COMPANY A ND SUCH WITHDRAWALS WERE TREATED AS LOANS AND ADVANCES. THE FACT THAT T HERE WAS AN ULTIMATE ADJUSTMENT WAS HELD TO BE NOT RELEVANT. THIS CASE LAW DOES NOT APPLY TO THE FACTS OF THE CASE AS A CONTENTION THAT THIS IS NEIT HER A LOAN NOR AN ADVANCE. THE AMOUNTS WERE NOT USED BY THE ASSESSEE OR EVEN KEPT BY THE ASSESSEE FOR EVEN A MOMENT. IT IS NOT A CASE WHERE THE ASSESSEE HAS USE D THE AMOUNTS AND ULTIMATELY REPAID IT. 32. IN THE CASE OF L. ALAGUSUNDARAM CHETTIAR VS. C IT 252 ITR 893 (S.C.) THE HONBLE SUPREME COURT WAS CONSIDERING A CASE WHERE THE UNDISPUTED FACT WAS THAT A LOAN WAS TAKEN BY AN EMPLOYEE AND T HEN THE SAME WAS PASSED ON TO THE MANAGING DIRECTOR. THIS CASE HAS NO APPLICAT ION. SIMILARLY, IN THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF WALCHAND & CO. (P) LTD. VS. CIT REPORTED IN 204 ITR 146 (BOM) THE HON BLE COURT WAS CONSIDERING THE FACT WHERE THERE IS NO DISPUTE AT ALL ON THE ISSUE WHETHER THE TRANSACTION WAS A LOAN TAKEN BY A SHAREHOLDER OR NO T. THE ACCEPTED FACT WAS THAT IT WAS A LOAN. THE COURT CONCLUDED THAT THE ARGUMEN T OF DOUBLE TAXATION DOES NOT COME TO THE RESCUE OF THE ASSESSEE. 33. AS ALREADY STATED, IN THE CASE ON HAND, NONE O F THE TRANSACTIONS IN QUESTION, CAN BE CONSIDERED EITHER AS A LOAN TRANSA CTION OR AS AN ADVANCE IN THE NATURE OF LOAN. WHEN THE FUNDS TRANSFERRED FROM THE COMPANY TO THE PROPRIETARY CONCERN AND VICE VERSA ARE NEITHER LOANS OR ADVANC ES, THE PROVISIONS OF SECTION 2(22)(E) CANNOT BE ATTRACTED. THUS IN VIEW OF THE A BOVE DISCUSSION, WE DELETE THE ADDITIONS MADE FOR ALL THE THREE YEARS ON MERITS. 34. COMING TO THE LEGAL ARGUMENTS ON THE ADDITIONA L GROUND I.E. JURISDICTION U/S 153A, AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON 25 MERITS, A DECISION ON THE SAME WOULD BE AN ACADEMIC EXERCISE. THUS WE DO NOT GIVEN ANY FINDING ON THIS ISSUE. 35. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON 25/8/10. SD/- SD/- (V. DURGA RAO) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI, DATED : 25 TH AUGUST, 2010. COPY FORWARDED TO : 1. APPELLANT,. 2. RESPONDENT. 3. C.I.T. 4. CIT(APPEALS) 5. D.R., ITAT, G-BENCH, MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, MUMBAI.