Smt Suman Suresh N Kolhapure, Pune V. ITO, Pune

ITA 1864/PUN/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2713 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-02-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 27-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINHA
• Keywords: Deemed dividend; Reassessment proceedings

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1863/PN/2012 #& & / ASSESSMENT YEAR : 2004-05 SHRI SURESH N. KOLHAPURE, C-11, DEVANKUSH PALACE, ASHWINI CO.OP HOUSING SOCIETY, BOMBAY-PUNE ROAD, PUNE 411005 PAN NO.ABEPK 3631Q . / APPELLANT V/S ACIT, CIRCLE-3, PUNE . / RESPONDENT . / ITA NO.1864/PN/2012 #& & / ASSESSMENT YEAR : 2004-05 SMT. SUMAN SURESH N. KOLHAPURE, C-11, DEVANKUSH PALACE, ASHWINI CO.OP HOUSING SOCIETY, BOMBAY-PUNE ROAD, PUNE 411005 PAN NO.AJVOJ 4466G . / APPELLANT V/S ITO, WARD-3(2), PUNE . / RESPONDENT / ASSESSEE BY : SHRI NIKHIL PATHAK / REVENUE BY : SHRI MANISH KUMAR SINHA / DATE OF HEARING :16.02.2016 / DATE OF PRONOUNCEMENT:19.02.2016 2 ITA NO.1863 & 1864/PN/2012 / ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE RESPECTIVE ASSESSEES A RE DIRECTED AGAINST THE SEPARATE ORDERS DATED 28-06-2012 AND 29- 06-2012 RESPECTIVELY OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEAR 2004-05. SINCE COMMON ISSUES ARE INVOLV ED IN BOTH THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHE R AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP ITA NO.1863/PN/2012 (A.Y. 2004-0 5) (SHRI SURESH N. KOLHAPURE) : 2.1 IN GROUNDS OF APPEAL NO.1 THE ASSESSEE HAS CHALLENGE D THE VALIDITY OF REASSESSMENT PROCEEDINGS U/S.147 OF THE I.T. ACT. 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET DID N OT PRESS GROUND OF APPEAL NO.1 FOR WHICH THE LD. DEPARTMENTA L REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, THE FIRST G ROUND BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 4. IN GROUNDS OF APPEAL NO.2 TO 5 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN SUSTAINING AN AMOUNT OF RS.3,44,689/- OUT OF THE ADDITION OF RS.13,96,057/- BY THE A O U/S.2(22)(E) OF THE I.T. ACT. 5. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSES SEE IS A DIRECTOR AND ONE OF THE SHAREHOLDERS OF SUNAKO CONSTRU CTION PVT. LTD. HE FURTHER NOTED THAT THE ASSESSEE HAS RECE IVED ADVANCE/LOAN AMOUNTING TO RS.2,31,164/- FROM THE COMPANY DURING THE YEAR UNDER CONSIDERATION. HE THEREFORE ASKED THE 3 ITA NO.1863 & 1864/PN/2012 ASSESSEE TO EXPLAIN AS TO WHY THE SAID INCOME SHOULD NO T BE TAXED AS DEEMED DIVIDEND U/S.2(22)(E) FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE VIDE LETTER DATED 22-12-200 9 SUBMITTED AS UNDER WHICH HAS BEEN REPRODUCED BY THE A O IN THE BODY OF THE ASSESSMENT ORDER : WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, ASSUMING THA T WITHOUT ADMITTING THAT THE ASSESSEE HAS TAKEN LOAN OR AD VANCE, ONLY THE AMOUNT OF ACCUMULATED PROFITS OF RS.5,80,044/- SHO ULD BE CONSIDERED AS DEEMED DIVIDEND. THUS THE MAXIMUM BALANC E OF ACCUMULATED PROFITS FOR THE ASSESSMENT YEAR 2005-06 IS RS.5,80,044/- AND WITHOUT PREJUDICE TO THE CONTENTIO N THAT NO ADDITION IS TO BE MADE, THE ADDITION IF AT ALL, TO B E MADE CAN BE OF ONLY RS.5,80,044/-. 6. TO JUSTIFY HIS CLAIM THE ASSESSEE ALSO SUBMITTED COPIES OF MEMORANDUM OF UNDERSTANDING WITH THE COMPANY AND THE SEQUENCE OF TRANSACTIONS TO SUPPORT THE ABOVE SUBMISSION. 7. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE ACCUMULATED PROFITS OF THE COMPANY IS RS.13,96,057/-. HE ACCORDINGLY MADE ADDI TION OF RS.13,96,057/- TO THE TOTAL INCOME OF THE ASSESSEE AS P ER THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT. 8. BEFORE CIT(A) IT WAS SUBMITTED THAT THE COMPANY SUNAK O CONSTRUCTION PVT. LTD WAS OWNED BY THE ASSESSEE AND H IS FAMILY MEMBERS AND THE COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCTING HOUSING PROJECTS IN PUNE AND THE ASSESSEE WAS IN POSSESSION OF A LARGE PIECE OF LAND BEYOND HADAPSAR ADMEASURING 204 ACRES. THE COMPANY WAS INTERE STED IN ACQUIRING A PART OF THE LAND TO THE EXTENT OF 50 ACRES FOR THE PURPOSE OF CARRYING OUT DEVELOPMENT THEREON. THE ASSESS EE HAS FURTHER SUBMITTED THAT A MOU WAS ENTERED INTO WITH THE ASSESSEE ON 18-07-2003 AND THE COMPANY AGREED TO PURCHASE 50 4 ITA NO.1863 & 1864/PN/2012 ACRES FOR A SUM OF RS. 1.50 CRORES. HOWEVER, THE SAID MOU WAS SUBSEQUENTLY CANCELLED ON 22-12-2005 AS THE SAID LAND W AS IN A FOREST ZONE AND THE COMPANY WAS UNABLE TO GET THE ZONE CHANGED FROM THE GOVERNMENT. IT WAS SUBMITTED THAT THE PAYMENT S MADE TO HIM FROM 5-11-2003 TILL 21-10-2005 WERE THE AMOUNTS TOWARDS THE ADVANCE FOR THE PURCHASE OF THE ABOVE LAND . IT WAS ACCORDINGLY CONTENDED THAT THE ADVANCES WERE TOWARDS SALE OF LAND AND THUS THE SAID ADVANCES WERE MADE BY THE COMP ANY IN THE COURSE OF ITS BUSINESS OPERATIONS AND, THEREFORE, THE SAME COULD NOT BE CONSIDERED AS DEEMED DIVIDEND. THE DECISION O F THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NAGINDAS M. KAPA DIA (1980) 177 ITR 393 AND THE DECISION OF THE MUMBAI BENCH O F THE TRIBUNAL IN THE CASE OF N.H. SECURITIES LTD. VS. DCIT (2007) 1 1 SOT 302 (MUM) WERE RELIED UPON FOR THE PROPOSITION THAT ADVANCES DID NOT CONSTITUTE DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. IT WAS FURTHER ARGUED THAT THE INTENTION OF T HE ASSESSEE WAS NEVER TO AVOID TAX ON DIVIDEND AND THAT THE ASSESS EE HAD BEEN HANDING OVER TEMPORARY INTEREST FREE LOANS TO THE COMPANY OUT OF HIS OWN FUNDS AND THE SAME IS ALSO EVIDENT FROM TH E LEDGER EXTRACT OF THE COMPANY'S BOOKS OF ACCOUNT. THE A SSESSEE ON A WITHOUT PREJUDICE BASIS SUBMITTED THAT EVEN IF THE ADVANCE IS CONSIDERED TO BE FALLING WITHIN THE AMBIT OF DEEMED DIVIDEN D U/S 2(22)(E), THE DEEMED DIVIDEND IS TO BE RESTRICTED TO THE EXTENT OF ACCUMULATED PROFITS AVAILABLE WITH THE COMPANY. IT WAS ARGUED THAT THE MAXIMUM BALANCE OF AMOUNT ADVANCED BY THE COMPANY TO THE ASSESSEE IS OF RS. 3,44,689/-AND THE ACCUMULATED PROFITS AS PER THE BALANCE SHEET IS OF RS. 13,96,057/-. HENCE THE DISALLOWANCE BE RESTRICTED ONLY TO THE 5 ITA NO.1863 & 1864/PN/2012 EXTENT OF RS. 3,44,689/- I.E. THE MAXIMUM BALANCE OUTSTANDING DURING THE YEAR. 9. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) SUSTAINED AN AMOUNT OF RS.3,44,689/- OUT OF THE ADDITION OF RS.13,96,057/- MADE BY THE AO AND GAVE RELIEF O F RS.10,51,368/- BY OBSERVING AS UNDER : 4.1 THE APPELLANT'S SUBMISSION HAS BEEN CONSIDERED. IT IS UNDISPUTED THAT THE COMPANY WHERE IN THE APPELLANT H AS SUBSTANTIAL INTEREST HAS ADVANCED MONEY TO THE APPELLA NT. THE MOU SIGNED BETWEEN THE APPELLANT AND SUNAKO CONSTRUCTION PVT. LTD DATED 18-7-2003 FOR THE PURCHASE OF 50 ACRES OF LAND IS THE REASON STATED BY THE APPELLANT FOR ADVANCING THE ADVANCES WH ICH HAS BEEN TREATED BY THE A.O. TO BE DEEMED DIVIDEND U/S 2(22)( E) OF THE I.T. ACT. THE CONTENTION OF THE APPELLANT THAT THE ADVAN CES DID NOT CONSTITUTE THE DEEMED DIVIDEND AS THE SAME HAD BEEN GI VEN IN THE COURSE OF BUSINESS OPERATIONS IS DIFFICULT TO BE BELIEVED . THE LAND OWNED BY THE APPELLANT WHICH BECAME THE SUBJECT MAT TER OF THE MOU WAS LOCATED IN THE FOREST ZONE WHICH IS AN UNDISPU TED FACT. THEREFORE, THE QUESTION OF DEVELOPMENTAL WORK ON THE SAID LAND AS ENVISAGED BY THE COMPANY COULD NOT HAVE BEEN CARRIED OUT UP TILL THE TIME THE SAID LAND COULD HAVE BEEN CONVERTED FRO M THE PRESENT FOREST ZONE TO THAT OF A RESIDENTIAL ZONE. THE VARIOU S CLAUSES OF THE MOU PRIMA FACIE DO NOT INDICATE THE ENTIRE TRANSACTI ON TO BE GENUINE AS THE TIME PE.IOD AGREED UPON AS PER CLAUSE 4 INDICATES TO BE A PERIOD OF 5 YEARS FROM THE DATE OF THE MOU. THE POSSESSION OF THE LAND WAS TO BE TRANSFERRED OR HANDED OVER ONLY AF TER RECEIPT OF ENTIRE CONSIDERATION AND FOR WHICH THE TIME PERIOD G IVEN IS ALSO A PERIOD OF 5 YEARS. THE APPELLANT HAS TRIED TO GIVE TH E MONEY RECEIVED FROM THE COMPANY, THE COLOUR OF ADVANCE AN D THE MOU SIGNED APPEARS TO BE A DEVICE TO AVOID THE TAX. THE M OU IN ANY CASE COULD NOT BE COMPLETED AS THE SAME WAS CANCELLED BY TH E COMPANY ON 22-12-2005 AFTER HAVING NOT BEEN ABLE TO GET THE ZONE CHANGED FROM THE EXISTING FOREST ZONE. THE VERACITY OF THE MO U ITSELF IS UNBELIEVABLE THAT AN AGREEMENT EXECUTED ON JULY 200 3, BUT THE POSSESSION WAS TO BE HANDED OVER AFTER MORE THAN FIVE YE ARS. THE SAID PROPERTY HAS NOT BEEN SHOWN TO BE APPEARING IN TH E BALANCE SHEET OF THE COMPANY AS IS EVIDENT FROM THE BALANCE SHE ET FILED FOR THE YEAR ENDING 31-3-2004 FOR AY. 2004-05. IN VIEW OF THE ABOVE MENTIONED FACTS THE CONTENTION RAISED BY THE APPELLA NT THAT THE ADVANCES/ DEPOSITS WERE OBTAINED IN THE COURSE OF BUSINE SS CANNOT BE ACCEPTED. THUS THE JUDICIAL DECISIONS RELIED UPON B Y THE APPELLANT ARE NOT APPLICABLE TO THE FACTS OF THE PRE SENT CASE AND HENCE ARE DISTINGUISHABLE. IN THE CASE OF CIT VS SUNIL CHOPRA (2011) 242 CTR 498 (DEL), IT WAS HELD THAT THE CONTENTION, THAT LOAN / ADVANCES WERE NOT TAKEN AS LOANS RATHER THEY WERE BUSIN ESS RECEIPTS IN THE ORDINARY COURSE OF BUSINESS WAS NOT SUSTAI NABLE. THE AO. RECORDED THAT AGREEMENT WAS SHAM IN AS MUCH AS THE AGREEMENT WAS EXECUTED ON 18.09.2003 AND THE HANDING OVER OF THE PROPERTY WAS TO BE DONE BEFORE 31.12.2008 AND THE PA YMENT WAS STILL REFLECTED IN THE BALANCE-SHEET OF THE ASSESSEE AS ON 31.03.2005, 6 ITA NO.1863 & 1864/PN/2012 EVEN THOUGH THE AGREEMENT WAS ENTERED ON 18.09.2003. THE HON'BLE COURT HELD THAT THE AO. RIGHTLY HELD THE TR ANSACTIONS AS SHAM AND TREATED THEM AS DEEMED DIVIDEND U/S 2(22)(E) OF THE I.T. ACT. IN VIEW OF THE ABOVE FACTS AND THE RATIO OF THE DECISION THE ADVANCES MADE BY THE COMPANY CONSTITUTED THE DEEMED D IVIDEND IN THE HANDS OF THE APPELLANT. 4.2 ANY LOAN OR ADVANCE PAID TO A SUBSTANTIAL SHAREHO LDER WITH 10% INTEREST IN THE COMPANY OR TO A CONCERN IN WHICH SUCH SUBSTANTIAL SHAREHOLDER HAS SUBSTANTIAL INTEREST (20%) IS T AXABLE TO THE EXTENT OF ACCUMULATED PROFIT U/S 2(22)(E) OF TH E ACT. SUCH TAX IS SPARED ONLY, IF SUCH LOAN OR ADVANCE IS MADE BY A COMP ANY IN THE ORDINARY COURSE OF BUSINESS OR WHERE MONEY LENDING IS A SUBSTANTIAL PART OF THE ASSESSEES BUSINESS. BY ENACTING SUB CLAUSE (E) OF SEC.2(22) THE LEGISLATURE HAS CREATED A FICTION AND HAS MADE PAYMENT REFERRED TO IN SUB-CLAUSE (E) 'DIVIDEND' FO R THE PURPOSE OF THE I.T. ACT, 1961. THUS THE SUB-CLAUSE (E) CREATES A F ICTION BRINGING IN AMOUNTS PAID OTHERWISE THAN AS DIVIDENDS, INTO SET O F DIVIDENDS AND, THEREFORE, THIS CLAUSE MUST BE GIVEN A STRICT INT ERPRETATION. IN THE CASE OF TARULATA SHYAM VS CIT (1977) 108 ITR 345 (SC) IT WAS HELD THAT THE SECTION GIVES AN ARTIFICIAL DEFINITION OF 'DIVIDEND'. IT DOES NOT TAKE IN DIVIDEND ACTUALLY DECLARED OR RECEI VED AND THE DIVIDEND TAKEN NOTE OF BY THE PROVISION IS DEEMED DIV IDEND AND NOT REAL DIVIDEND. THE LOAN GRANTED TO A SHAREHOLDER HAS TO BE RETURNED TO THE COMPANY. IT DOES NOT BECOME THE INCO ME OF THE SHAREHOLDER. FOR CERTAIN PURPOSE, THE LEGISLATURE HAS D EEMED SUCH LOAN AS 'DIVIDEND', HENCE IT MUST NECESSARILY RECEIVE A STRICT CONSTRUCTION WHERE THERE IS A LOAN AMOUNT, IT IS SUCH AMOUNT WHICH WILL HAVE TO BE TREATED AS DEEMED DIVIDEND. IN THE C ASE OF CIT VS NARASIMHAN (G) (1999) 236 ITR 327 (SC) IT WAS HELD TH AT ADVANCES GIVEN BY A COMPANY TO ITS SHAREHOLDER SHOULD BE TREATE D AS PAYMENT OUT OF ACCUMULATED PROFITS OF THE COMPANY, W HETHER CAPITALIZED OR NOT, AND MUST BE TREATED AS DIVIDEND A ND WOULD GO TO REDUCE THE ACCUMULATED PROFIT OF THE COMPANY. 4.3 IN THE PRESENT CASE IT IS UNDISPUTED THAT THE ACCU MULATED PROFIT OF THE COMPANY SUNAKO CONSTRUCTION PVT. LTD. WAS OF RS. 13,96,057/- AND THE AO. HAS TAXED THE AMOUNT OF ADVA NCE TO THE TUNE OF RS. 13,96,057/- AS INCOME OF THE APPELLANT U/ S 2(22)(E) OF THE LT. ACT. THE AO. HAS NOT GIVEN THE CREDIT FOR TH E CREDIT BALANCE OF THE APPELLANT AT THE BEGINNING OF THE YEAR BEFOR E ARRIVING AT THE TAXABLE DEEMED DIVIDEND U/S 2(22)(E) OF RS. 13,96,05 7/-. THUS, THE AMOUNT OF ADVANCE MADE BY THE COMPANY TO THE APPELL ANT IT IS NOTICED FROM THE LEDGER ACCOUNT OF THE APPELLANT IN THE BOOKS OF ACCOUNT OF THE COMPANY THAT THE OPENING BALANCE OF THE APPELLANT WAS A CREDIT BALANCE OF RS. 12.70 LACS AS ON 01.04.2003 AND RS. 7.5 LACS WAS FURTHER ADVANCED BY THE ASSESSEE TO THE COMPANY THUS, THE CREDIT BALANCE BEING 20.20 LACS AS ON 22-4-2003. THE COMPANY HAS PAID A SUM OF RS. 15.70 LACS ON 5 TH MAY 2003 AND, THEREAFTER, UPTO 3.11.2003 THERE IS A CREDIT BALANCE OF THE APPELLANT IN THE LEDGER ACCOUNT OF THE COMPANY. THE AO. HAS NOT EXAMINED THE LEDGER ACCOUNT WHICH CLEARLY INDICATED THE CREDIT BALANCE OF RS.20.30 LACS. WHEN A SHAREHOLDER HAS A MUTUAL OPEN CURRENT ACCOUNT WITH THE COMPANY, EVERY DEBIT ENTRY MADE BY THE COMPANY IN T HAT ACCOUNT IS NOT A LOAN BY THE COMPANY TO THE SHAREHOLDER. THE CRUCIAL POINT TO BE CONSIDERED IS WHETHER AT THE MOMENT THE SHAREHOL DER 7 ITA NO.1863 & 1864/PN/2012 BECAME A DEBTOR AND COMPANY BECAME A CREDITOR. IF T HERE WAS ALREADY SUFFICIENT CREDIT BALANCE IN THAT ACCOUNT TO ABSORB THE DEBIT, SAID DEBIT WOULD NOT BE DEEMED DIVIDEND U/S 2(22)(E) . THE DEBIT THEN WOULD REPRESENT REPAYMENT BY THE COMPANY OF A D EBT DUE TO THE SHAREHOLDER. IF THERE IS A CREDIT BALANCE IN THAT ACCOUNT ON THE DATE OF DEBIT WHICH IS LESS THAN THE AMOUNT FOR WHICH DEBIT IS MADE, THE DIFFERENCE BETWEEN DEBITED AMOUNT AND EXISTING C REDIT BALANCE WOULD BE DEEMED DIVIDEND. HENCE POSITION AT THE TIME OF EACH DEBIT WOULD BE REQUIRED TO BE SEEN AS TO WHETHER THE TRANSACTION RESULTED IN DEEMED DIVIDEND AND IF SO, TO WHAT EXTENT . DEBIT BALANCE AT A PARTICULAR POINT OF TIME DOES NOT GIVE CORRECT PICTURE SO ALSO BALANCE AT THE END OF THE YEAR SPECIALLY SO IN AN ACCOUNT WHERE NUMBER OF CREDIT AND DEBIT ENTRIES ARE MADE IN THE COURSE OF A YEAR. IT WAS SO HELD BY THE BOMBAY HIGH COURT IN T HE CASE OF CIT VS P.K. BADIANI (1970) 76 ITR 369 (BOM) AND CIT VS MR S. MAYA B. RAMCHAND (1986) 162 ITR 460 (BOM). THEREFORE, THE M AXIMUM BALANCE OF THE AMOUNT ADVANCED BY THE COMPANY TO TH E APPELLANT IS RS.3,44,689/- AND THE ACCUMULATED PROFITS AS PER THE B ALANCE SHEET IS RS. 13,96,057/- AND, THEREFORE, THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) WILL HAVE TO BE RESTRICT ED TO RS. 3,44,689/- AS AGAINST RS. 13,96,057/- TAKEN BY THE AO. THUS THE ADDITION MADE BY THE AO. IS CONFIRMED TO THE EXTENT OF RS. 3,44,689/- AND THE REMAINING AMOUNT OF RS. 10,51,368/- IS DIRECTED TO BE DELETED. 10. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSID ERED THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. WE FIND IN THE INSTANT CASE THE AO MADE ADDIT ION OF RS.13,96,057/- AS DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T. ACT IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF LOAN GIVEN BY T HE COMPANY TO THE ASSESSEE. WE FIND THE LD.CIT(A) AFTER CONSIDERING THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BO OKS OF THE COMPANY SUSTAINED AN AMOUNT OF RS.3,44,689/- BEING TH E AMOUNT OUTSTANDING AGAINST THE ASSESSEE OUT OF THE ADD ITION OF RS.13,96,057/- MADE BY THE AO AND DELETED THE BALANCE AM OUNT OF RS.10,51,368/-. THE REVENUE IS NOT IN APPEAL BEFORE US FO R 8 ITA NO.1863 & 1864/PN/2012 THE RELIEF GRANTED BY THE CIT(A). WE FIND THE CIT(A) HAD REJ ECTED THE CONTENTION OF THE ASSESSEE THAT THE ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE WAS FOR THE PURPOSE OF BUSINES S IN ABSENCE OF ANY EVIDENCE GIVEN BY THE ASSESSEE. BEFORE U S ALSO THE LD. COUNSEL FOR THE ASSESSEE COULD NOT JUSTIFY THAT THE ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE IS FOR BU SINESS PURPOSES. UNDER THESE CIRCUMSTANCES AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LD. COUN SEL FOR THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), WE FIND NO IN FIRMITY IN THE ORDER OF THE CIT(A). IN OUR OPINION, THE ORDER OF THE CIT(A) IS JUSTIFIED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE SINCE THE MAXIMUM AMOUNT ADVANCED BY THE COMPANY TO THE AS SESSEE WHICH IS OUTSTANDING AT ANY TIME DURING THE YEAR IS RS.3,44,689/-. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT (A) WHICH IS WELL REASONED. THE GROUNDS RAISED BY THE ASSES SEE ARE DISMISSED. ITA NO.1864/PN/2012 (A.Y. 2004-05) (SMT. SUMAN SURESH KOLHAPURE) : 12. THE ONLY ISSUE IN THE GROUNDS RAISED BY THE ASSESS EE IS REGARDING THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS.2,59,094/- MADE BY THE AO U/S.2(22)(E) OF THE I.T. ACT. 13. AFTER HEARING BOTH THE SIDES, WE FIND DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO SUBMIT THE DETAILS OF ADVANCE RECEIVED FROM THE COMPANY AND THE ACCOUNTS OF THE ASSESSEE IN THE BOOKS OF THE COMPANY M /S. SNAKO CONSTRUCTION PVT. LTD. IN WHICH THE ASSESSEE IS A D IRECTOR. FROM THE VARIOUS DETAILS FILED BY THE ASSESSEE THE AO NOT ED THAT THE ASSESSEE HAS RECEIVED ADVANCE OF RS.2,59,094/- FROM T HE 9 ITA NO.1863 & 1864/PN/2012 SAID COMPANY. AFTER SETTING OFF THE AMOUNT OF RS.75,000/- RECEIVED BY THE ASSESSEE AGAINST THE AMOUNT SHOWN REC EIVABLE OF RS.81,250/- AND REJECTING THE VARIOUS SUBMISSIONS GIVEN BY THE ASSESSEE THE AO TREATED THE AMOUNT OF RS.2,59,094/- AS DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T. ACT IN THE HANDS OF THE ASS ESSEE. HE ACCORDINGLY MADE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. 14. WE FIND IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSEE BY OBSERVING AS UNDER : 3.5 IN THE PRESENT CASE IT IS UNDISPUTED THAT THE ACC UMULATED PROFIT OF THE COMPANY SUNAKO CONSTRUCTION PVT. LTD. WAS OF RS. 13,96,057/- AND THE AO. HAS TAXED THE AMOUNT OF ADVA NCE TO THE TUNE OF RS. 2,59,094/- AS INCOME OF THE APPELLANT U/S 2(22)(E) OF THE I.T. ACT. THE A.O. HAS ALSO RIGHTLY GIVEN THE CREDIT FOR THE CREDIT BALANCE OF THE APPELLANT AT THE BEGINNING OF THE YE AR BEFORE ARRIVING AT THE TAXABLE AMOUNT OF RS.2,59,094/- AS DEEMED DIVI DEND. THE APPELLANT'S CONTENTION THAT THE AMOUNT GIVEN. WAS ON ACCOUNT OF CERTAIN REIMBURSEMENTS OF EXPENSES CANNOT BE ACCEPTED IN VIEW OF THE SPECIFIC FINDING OF THE COURTS AS DISCUSSED ABOVE AN D ALSO THE EXPRESS PROVISION OF THE ACT. THE APPELLANT HAS ALSO CON TENDED THAT THE CLOSING BALANCE AT THE END OF THE YEAR WAS OF RS. 2,02,377/- AFTER CREDITING THE SALARY OF RS. 75,000/- AS ON 31-3-2004 A ND EVEN OTHERWISE IF THE SAID SALARY IS EVENLY SPREAD OVER THE Y EAR, THE MAXIMUM BALANCE FOR THE YEAR IS OF RS. 2,14,877/- AND THE SAME BE CONSIDERED AS DEEMED DIVIDEND AS AGAINST RS. 2,59,094/- TAKEN BY THE A.O. CANNOT BE ACCEPTED IN VIEW OF THE DECISION OF THE MUMBAI ITAT IN THE CASE OF RAJESH P. VED VS ACIT (2010) 1 ITR 275 (MUMBAI) (TRIB) WHICH HELD THAT REMUNERATION PAYABL E CANNOT BE SET OFF AGAINST SUCH LOAN. THE HON. APEX COURT POINTED OUT IN THE CASE OF TARULATA SHYAM VS CIT (SUPRA) THAT THIS SUB-CLAU SE IS ATTRACTED AT THE POINT OF TIME WHEN THE ADVANCE, LO AN OR OTHER PAYMENT IS MADE IN TERMS OF THE CLAUSE. IT IS, HOWEVER, IMMATERIAL THAT THE AMOUNT WAS REPAID EVEN BEFORE THE END OF TH E ACCOUNTING YEAR AND IT WILL MAKE NO DIFFERENCE THAT THE LOAN I S FOR A SHORT PERIOD AND CARRIED INTEREST. THUS THE APPELLANT'S CONT ENTION IN VIEW OF THE ABOVE RATIO OF THE DECISION CANNOT BE CONSIDER ED AND IS LIABLE TO REJECTED. THUS THE DISALLOWANCE MADE BY THE A.O. O F RS.2,59,094/- ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22) (E) IS LIABLE TO BE UPHELD AND GROUNDS OF APPEAL NO.1 & 2 RAISED BY THE APPELLANT ARE LIABLE TO BE DISMISSED. 15. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 10 ITA NO.1863 & 1864/PN/2012 16. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHO HAS CONFIRMED THE ADDITION O N THE BASIS OF VARIOUS DECISIONS SINCE THE COMPANY HAS ACCUMULAT ED PROFIT AND HAS GIVEN LOAN TO THE DIRECTOR. THE LD. COUNSEL FOR THE ASSESSEE COULD NOT CONTROVERT THE FACTUAL FINDINGS GIVEN B Y THE CIT(A) NOR COULD CONTROVERT THE ORDER OF CIT(A). UNDER THESE CIRCUMSTANCES AND IN ABSENCE OF ANY CONTRARY MATERIAL B ROUGHT TO OUR NOTICE BY THE LD. COUNSEL FOR THE ASSESSEE AGAINS T THE ORDER OF THE CIT(A) WE UPHOLD THE SAME. GROUNDS RAISED B Y THE ASSESSEE ARE ACCORDINGLY DISMISSED. 17. IN THE RESULT, THE APPEALS FILED BY THE RESPECTIVE ASS ESSEES ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19-02-2016. SD/- SD/ - ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 19 TH FEBRUARY, 2016. ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ) - II , PUNE 4. 5. 6. THE CIT-II, PUNE $ ''(, (, / DR, ITAT, B PUNE; - / GUARD FILE. / BY ORDER , // TRUE COPY // ' //TRUE C /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE