M/s. Checkmate Services Pvt. Ltd., Ahmedabad V. The Dy.CIT.,Circle-1(1), Baroda

ITA 2133/AHD/2014

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5756 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 20-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3); 133A; 72; 13

Judgement Text

, ‘C’ । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD (Convened through Virtual Court) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI AMARJIT SINGH, ACCOUNTANT MEMEBR आयकर अपील सं./I.T.A. No. 2133/Ahd/2014 ( Assess ment Ye ar : 2010-11) M / s. C hec k mat e S erv ic es Pvt . Lt d. 1, Sa ja ni A par t men t, Da la l Ro ad, G ol wa d, F at e hg unj , Bar od a - 39 00 02 / V s . Dy . C o mmi s si on er of In co me T ax Cir cl e – 1(1 ), B ar o da यी ल सं./जीआइआर सं./P A N / G IR N o . : A A A C C 8 4 6 5 A (अपील Appellant) . . ( य / Respondent) & आयकर अपील सं./I.T.A. No. 399/Ahd/2015 ( Assess ment Ye ar : 2010-11) S mt. S ha r mila V i k ra m M a hu rk ar GF 6 ,7, 8, 9 A man T ow ers , Su va s Col on y F a te h gu nj, Va do dar a - 39 00 02 / V s . Dy . C o mmi s si on er of In co me T ax Cir cl e – 1(1 ), V ad o dar a - 39 00 07 यी ल सं./जीआइआर सं./P A N / G IR N o . : A B V P M 1 4 6 9 R (अपील Appellant) . . ( य / Respondent) अपील र स /Appellant by : Sh ri Tu sh ar H e man i, Sr . Ad vo cat e wi th S hr i An il R . Sh ah, C A & S hri P . B. Par ma r, A dv oc ate य क र स / Respondent by : Shri Ajay Pratap Singh, CIT. D.R. & Shri V. K. Singh, Sr. D.R. ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 2 - स क र D a t e o f H e a r i n g 17/02/2022 !"# क र /D a t e o f P r o n o u n c e m e n t 30/03/2022 ORDER PER MAHAVIR PRASAD, JM: The captioned two appeals have been filed at the instance of the two differen t assessees ag ainst the Commi ssioner of Income Tax (Appeals)-I, Baroda (‘C IT(A)’ in short) vide Appeal No. CAB-I/036/2013-14 & CIT(A)-1, Vadodara vide Appeal No. CAB -1/113/2014- 15 dated 02.05.2014 & 19.12.2014 arising in the assessment order dated 18.03.2013 & 28.02.2014 passed by the Asse ssing Officer (AO) un der s. 143(3) of the Income Tax Act, 1961 (the Act ) & under s.143(3 ) r.w.s. 147 of the Act; re spectively, both concerning AY. 2010-11. 2. Since, facts of th e case are common and related to each other, therefore , for the sake of brevity, we would like to dispose of these matte rs by way o f co mmon orde r. 3. Firstly , we would like to take up ITA No .2133/Ahd/2014 in case of M/s. Checkmate Services Pvt. Ltd ., wherein assessee has take n following grounds: “ 1 . T h e C I T ( A ) h a s e r r e d i n c o n f i r m i n g t h e a d d i t i o n a s I n v e s t m e n t i n P r o p e r t y a t G u r g a o n o n R s . 1 , 5 7 , 0 0 , 0 0 0/ - . S i n c e i t i s g i v e n a s a C a p i t a l C o n t r i b u t i o n i n P a r tn e r s h i p ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 3 - F i r m o f M / s . C h e c k m a t e A p p e r a l s i t i s n o t l i a b l e t o b e a d d e d a s I n c o m e . O n f a c t s o f t h e c a s e a n d a s p e r p r o v i s i o n s o f L a w t h e C I T ( A ) o u g h t t o h a v e d e l e t e d t h e a d d i t i o n m a d e o n P r o te c t i v e B a s i s s i n c e t h e s a m e a m o u n t i s a l r e a d y T a x e d i n t h e h a n d s o f t h e S m t . S h a r m i l a M a h u r k a r w i f e o f t h e D i r e c t o r o f y o u r A p p e l l a n t . 2 . T h e C I T ( A ) h a s a l s o e r r e d i n c o n f i r m i n g t h e d i s al l o w a n c e o f R s . 5 , 4 4 , 4 6 , 3 3 4 / - m a d e b y A s s e s s i n g O f f i c e r o n a c c o u nt o f d e l a y e d p a y m e n t o f E S I a n d P F o f E m p l o y e e s o f y o u r A p p e l l a n t . I t i s s u b m i t t e d b y y o u r A p p e l l a n t t h a t t h e e x p e n d i tu r e o f E m p l o y e e s C o n t r i b u t i o n t o w a r d s E S I & P F w a s i n c u r r ed d u r i n g t h e c o u r s e o f b u s i n e s s a n d f o r p u r p o s e s o f bu s i n e s s a n d t h a t i n v i e w o f S u p r e m e C o u r t J u d g e m e n t r e l i e d b y t h e A p p e l l a n t , t h e C I T ( A ) o u g h t t o h a v e d e l e t e d t h e a d di t i o n o f R s . 5 , 4 4 , 4 6 , 3 3 4 / - . ” 4. The facts of the case are that a ssessee i s a private company engaged in service industry dealing in providing security. During the previous year relevant to the assessment year under consideration the assessee has shown gross p rofi t of Rs.58,27,29 ,357/- on the total turnover of Rs.2,95,80,95,27 8/- which works out the gross profit rate at 19.70%. In this case, a survey proceedings under S.133A of the Act wa s ca rried out in the case of M/s. Checkmate Services Pvt. Ltd . and its group concerns on 06.12.2010. The findings of survey action related to AY 2010-11 in relation to Checkmate Se rvi ces Pvt. Ltd. th at assessee co mp any made investment in property at Gurgaon amounting to Rs. 1,57,00,000/- and sa me was made in property through MRS. Sharmila Mahurk ar who i s one of the Director in Checkmate Services Pvt. Ltd. vide MOU execu ted between CSPL & MRS. Sharmila Mahurk ar with an intention to become maj or partner ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 4 - in the firm. The company is engaged in in guarding business and as per the prevailing practice in the state of Haryana, no security company can directly purchase the property in the Industrial Area and accordingly the company decided to go for manufacturin g unit in the name of Mrs. Sharmila Mahurkar one of the Director of the company for stitching of dress material, th e require ment o f which is ve ry high in the security business and accordingly the company entered into me mo randu m of understanding (MOU) with Mrs. Sharmila Mahurkar fo r purchase of the p roperty in her na me for which a separate propri etary concern in the name and sty le of M/s Checkmate Apparels and all the payments fo r acquisition of the property shall be made by the company, base d on the above agreemen t the company made pay ment of Rs. 1,57,00,000/- wh ich was debited in the account of M/s checkmate Apparels the proprietary concern of Mrs. Sharmila Mahurkar. Though, this amount was debited in the account of Checkmate Apparels, howeve r the amount was given to the intending seller o f the property. T he Director of the company further sub mitted that survey declaration also contains deemed dividend for AY 2010-11 of Mrs. Sha rmila Mahurkar amounting to Rs. 28331391/-(which includes deeme d dividend of Checkmate apparels of Rs. 223772891). While a rriving at deemed dividend of M/s Check ma te Apparels the a mount of Rs. 1,57,00,000/- was also co nsidered. Learned AO mentioned that the submission of the assessee had been considered but not found acceptable. As the director of the company Sh ri Vikra m Mahurkar was confronted with the contents of Black diary 2009 page-83 dated 29.06.2009 which ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 5 - mentioned the transaction of land purchase at Gurgaon. During the surv ey proceedings the director vide reply to question no.3, dated 07.12.2010 had accepted that Rs.1.57 crores was paid out of books in respect to land purchased at Gurgaon and the sa me has bee n offered for ta xation for A.Y.2010-11. Further, state ment of shri Vikra m Mahurkar was "recorded u/s 131(1A) of the Act on l7.01.2011 wherein Director of the company discl osed Rs.1.57 c rore being investment in pro perty in Gurgaon in the hands of company. The assessee has not taken the said investment in its books contending that the investment has been included into deemed dividend declared in the hands of sharmila Mah urkar, the Director o f the assessee co mpany and the same has been offered fo r tax ation for A.Y.2010-11. Based on the afore mentioned facts & discussion as above, Rs.1.5 7 crores i s added back to the income of the assessee co mpany. 5. It is noticed in the auditor's report that the auditors had quantified the delayed payment of P.F. and ESIC to the government account, but assessee d id not disallow itself in the computation of income. The issu e here is that the assessee company has deducted P.F. and ESIC contribution from its employees' but d id not deposit in the Govern ment account within the presc ribed period as per re spective Laws. The auditors also quantified the mistak e of assessee but the same were not added back in the computation of income. Regarding contribution of employees towa rd s PF & ESIC co llected by the employer, as per the Inco me-tax Act, it is go verned by section 2(24)(x) r.w.s. 36(1 )(va ). The law is very clear that ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 6 - the contribution of e mployees' ha s to be deposited within the prescribed ti me l imit a s per P.F. and ESIC Act. In case of employees' contribution towards PF, the time li mit is 20th day of subsequent month (inclusive of grace period of 5 days) and for e mployees’ contribution towards ESIC, the time limit is 21 s t day of subsequent month for any monthly contributions received by the employer. Fro m t he table enclosed along with 3CD report, the following payments were deposited after due date. The a mount of Rs.4,65,8 7,673/- towards P.F. and Rs.78,58,661/- to wards ESIC deposited after due d ate. The amount was de ducted from the employees but assessee company failed to deposit within the prescribed time li mit. During the course of assessment proceedings, the assessee could not give any plausible explanation for delayed depositing of the above said amount and before CIT(A) as well could not give any reason for late deposit of PF & ESIC amount. 6. We have hard both the parties and perused the impugned order and mate ri al available on record. In our c onsidered opinion, this matter is squarely covered against the assessee by the Jurisdictional High Court in the case of CIT v s. GSRTC [2014] 366 ITR 1 70 (Guj.). The Hon’ble High Court held as under: " S e c t i o n 4 3 B , r e a d w i t h s e c t i o n 3 6 ( 1 ) ( v a ) o f t h e I nc o m e - t a x A c t , 1 9 6 1 - B u s i n e s s d i s a l l o w a n c e - C e r t a i n d e d u c t i o n s to b e a l l o w e d o n a c t u a l p a y m e n t ( E m p l o y e e s c o n t r i b u t i o n ) - W h e t h er w h e r e a n e m p l o y e r h a s n o t c r e d i t e d s u m r e c e i v e d b y i t a s e m pl o y e e s ' c o n t r i b u t i o n t o e m p l o y e e s ' a c c o u n t i n r e l e v a n t f u n d o n o r b e f o r e d u e d a t e a s p r e s c r i b e d i n E x p l a n a t i o n t o s e c t i o n 3 6( 1 ) ( v a ) , ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 7 - a s s e s s e e s h a l l n o t b e e n t i t l e d t o d e d u c t i o n o f s u c h a m o u n t t h o u g h h e d e p o s i t s s a m e b e f o r e d u e d a t e p r e s c r i b e d u n d e r se c t i o n 4 3 B i . e . , p r i o r t o f i l i n g o f r e t u r n u n d e r s e c t i o n 1 3 9 ( 1 ) - H e l d , y e s - A s s e s s e e S t a t e t r a n s p o r t c o r p o r a t i o n c o l l e c t e d a s um b e i n g p r o v i d e n t f u n d c o n t r i b u t i o n f r o m i t s e m p l o y e e s - H ow e v e r , i t h a d d e p o s i t e d l e s s e r s u m i n p r o v i d e n t f u n d a c c o u n t - A s se s s i n g O f f i c e r d i s a l l o w e d s a m e u n d e r s e c t i o n 4 3 B - H o w e v e r, C o m m i s s i o n e r ( A p p e a l s ) d e l e t e d d i s a l l o w a n c e o n g r o un d t h a t e m p l o y e e s c o n t r i b u t i o n w a s d e p o s i t e d b e f o r e f i l i n g r e t u r n - W h e t h e r s i n c e a s s e s s e e h a d n o t d e p o s i t e d s a i d c o n t ri b u t i o n i n r e s p e c t i v e f u n d a c c o u n t o n d a t e a s p r e s c r i b e d i n E xp l a n a t i o n t o s e c t i o n 3 6 ( 1 ) ( v a ) , d i s a l l o w a n c e m a d e b y A s s e s s i n g Of f i c e r w a s j u s t a n d p r o p e r - H e l d , y e s [ P a r a 8 ] [ I n f a v o u r o f r e v e n u e ] Therefore , respec tfully following the Hon’ble Guj arat High Court order, we confirm the addition made by the lower authorities and dismiss the ground of assessee with regard to PF & ESIC. 7. Thereafter, the a ssessee p refe rred first statutory appeal before the learne d CIT(A). The le arned CIT (A) con firmed by holding that during survey proceedings, the Director of the company voluntarily made stat ement fo r disclosure of Rs.1,57,00,000/- that this amount was paid out of books in respect of land purchase in Gurga on and same was offered for taxation for A.Y. 2010-11 and till the date of assessment proceedings, this statement did not reiterated by the assessee . On the other hand, learned AR for t he assessee cited judgment of Hon’ble Supre me Court in case of CIT vs. S. Khader Khan Son [2012] 25 taxmann.com 413 (SC), wherein it was held that in survey proceedings whether Section 133A of the Act does not empower any ITO to examine any person on oath. So, state ment re corded under S.133A of the Act has no ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 8 - evidentiary value and any admission made during such statement cannot be made basis of addition and this matter was held in favour of the a ssessee. 8. Now, against the order of the C IT (A), assessee has filed an appeal before us. 9. We have gone through the relevant record and impu gned order. In this case AO has accepte d part of investments made in Checkmate Apparels. Out of total debits of Rs.3,08,88,748/-, AO has doubted investments of only Rs.1,57,00,000/-. The rest of the investment has been accepted by the learned AO. In support of its contention, the assessee has file d deed of partnership with Mrs. Sharmila Mahurkar. As pe r entering by MOU, copy of deed p artnership is placed at page nos. 72 to 77 of the paper b ook and Checkmate Se rvices Pvt. Ltd . sec ured 95% of share in the capacity of partner and the same has not been disputed by the learned AO. Learned AR of the assessee has submitted before the lower authorities that as per prevailing practice in the State of Ha ryana, security companies cann ot start manufactu ring business of stitching of dress material. Such notification or order of State of Haryana was not brought to our notice and assessee has bee n failed to produce such notification of State of Haryana before the lower authorities. As we have noticed that advance was given in 2009 wherein apparel business was started in 2011. The a ssessee has filed an MOU and partnership deed between Mrs. Sharmila Mahurkar and M/s. Check mate Services Pvt. Ltd. wa s ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 9 - executed on 1 s t April, 2011 and sa me is part of paper book page nos.72 to 77. A survey pro ceeding was carri ed out on the group on 06.12.2010. During the survey proceedings, Shri Vikra m Mahurkar admitted that Rs.1,57,00,000/- was paid out of books. In his statement , he has not mentioned that the said amount has been paid for the business of stitching of apparel mate rial of the security guards. In our considered opinion, it amounts to a ft erthought. Moreover, not any Ha ryana Govern ment’s notification which supports contentions of the assessee/agency has been submitted before the lowe r authorities as wel l as before u s wh ich says that if a ny agency is doing business of providing security, sa me ca nnot run business of stit ching of uniform/d resse s of the Security Guards etc. The amount was paid way back in the month of July, 2009 and assessee has p roduced partners deed dated 19 t h April, 2011 first time be fore the R evenue and during survey, statement made by Shri Vikra m Mahurkar. No such averments were made by Sh ri Vik ra m Mahurkar. In view o f t he above, we do not see any infirmity in the order passed by the lower authorities and do not want to intervene in the order passed by the learned CIT(A), there fore , appeal of the assessee i s dismi ssed. 10. In the result , both grounds of appeal raised by assessee are dismi ssed. 11. Now, we co me to IT A No .399/Ahd/2015 (Smt. Sharmila Vikra m Mahurkar). ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 10 - 12. The grounds of a ppeal raised by assessee read as un der: “ I . O n L e g a l i t y o f t h e o r d e r : 1 . T h e A s s e s s m e n t O r d e r i s f r a m e d b a s e d o n S t a t e m e nt r e c o r d e d U / S . 1 3 3 A o f a " T h i r d P a r t y " a n d n o t o f t h e A p p e l l a n t a n d t h e r e f o r e b a s e d o n s u c h s t a t e m e n t a s s e s s m e n t o r d e r i s b a d i n L a w a n d v o i d . 2 . Wi t h o u t p r e j u d i c e , i t i s s u b m i t t e d t h a t A s s e s s in g O f f i c e r h a s n o r i g h t t o t a k e S t a t e m e n t o n O a t h ( o f t h i r d p a r t y ) w h i c h i s n o t v a l i d o r b i n d i n g u n d e r p r o v i s i o n s o f t h e A c t a s h e l d i n t h e c a s e o f C I T v s. K h a d a r K h a n S o n 3 5 2 I T R P . 4 8 0 ( S C ) a n d t h e r e f o r e i t i s s u b m i t t e d t h a t t h e e n t i r e A s s e s s m e n t P r o c e e d i n g s a n d t h e A s s e s s m e n t O r d e r i s w h o l l y a n d f u l l y b a s e d o n i n v a l i d S t a t e m e n t o f ' T h i r d P a r t y ' i s b a d i n L a w a nd V o i d . I I . O n R e o p e n i n g u / s . 1 4 8 : 1 . T h e C I T ( A ) h a s e r r e d b o t h i n L a w a n d i n f a c t t he u p h o l d i n g R e o p e n i n g o f A s s e s s m e n t u / s . 1 4 7 o f t h e A ct . I t i s s u b m i t t e d b y y o u r A p p e l l a n t t h a t n o n e w f a c t s h a v e c o m e t o t h e k n o w l e d g e o f A s s e s s i n g O f f i c e r a n d t h a t i t i s a c l e a r c a s e o f c h a n g e o f o p i n i o n a n d t h e r e f o r e S e c . 1 4 7 d o e s n o t a p p l y . 2 . T h e R e a s o n s R e c o r d e d b y t h e A s s e s s i n g O f f i c e r h a s n o d i r e c t " N e x u s " w i t h t h e f a c t s o f t h e c a s e a n d i s o nl y t o m a k e i n q u i r i n g o f a l l e g e d e s c a p e m e n t o f I n c o m e a n d t h e r e f o r e A s s t . O r d e r i s b a d i n l a w a n d v o i d . I I I . O n M e r i t s : 1 . Wi t h o u t p r e j u d i c e t o a b o v e i t i s s u b m i t t e d b y y ou r A p p e l l a n t t h a t S e c . 2 ( 2 2 ( e ) d o e s n o t a p p l y t o f a c t s o f t h e c a s e a n d R s . 2 , 2 3 , 7 2 , 8 9 1 / - i s n o t T a x a b l e a s " D e e m e d D i v i d e n d " s i n c e t h e L o a n t a k e n b y y o u r A p p e l l a n t w a s f o r p u r p o s e s o f B u s i n e s s a n d t h e r e f o re i s e x e m p t f o r m s e c . 2 ( 2 2 ) ( e ) . Wi t h o u t p r e j u d i c e i t i s s u b m i t t e d t h a t R s . 2 , 2 3 , 7 2 , 89 1 / - i f i t i s T a x a b l e a s I n c o m e i s n o t c o r r e c t l y w o r k e d o u t . " 2 . T h e C I T ( A ) h a s a l s o e r r e d i n c o n f i r m i n g l e v y o f I n t e r e s t u / s . 2 3 4 B a n d 2 3 4 C s i n c e t h e o r d e r t o " C h a r g e I n t e r e s t u / s . 2 3 4 A , 2 3 4 B , 2 3 4 C & 2 3 4 D a s a p p l i c a b l e " i s a m b i g u o u s u n c l e a r a n d i n v i e w o f j u d g e m e n t o f H o n . G u j a r a t H i g h C o u r t i n t h e c a s e o f ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 11 - A C I T v s . S . K . F a m i l y T r u s t , r e p o r t e d i n 2 5 1 C T R p a ge 4 2 7 s u c h i n t e r e s t i s n o t c h a r g e a b l e . ” 13. At the ti me of hearing, learn ed AR categorically mentioned in his statement that he does not wish to press the legal ground on legality of the order and reopening under s.148 of the Act and he wishes t o argue his case on me rit only. 14. The facts of the case are that the assessee i s a Di rector of M/s. Checkmat e Services Pvt. L td. and Checkmat e Facility & Electronic Sol utions Pvt. Ltd. a nd also has a proprietorship concern in the name and style of Checkmate Apparels. The assessee is a sub stantial share hol der in both the companies. During the year under consideration the assessee has received interest free loan/advance fro m M/ s. Check mate Services Pvt. Ltd. which wa s fo und during the course of survey proceedings conducted upon M/s Checkmate Services Pvt. Ltd. on 06.12.2010. Therefore , as per the provision of Section 2(22)(e ) of IT Ac t deemed dividend provision be attracted in the hands of the assessee . The CIT(A) also decline the deemed dividend of Rs.2 ,23,72,891/- in the hands of Checkmate Appa rels which is proprietary concern of the assessee and a mounting to Rs.59,58,000/- in the hands of assessee in her personal capacity. Accordingly, Rs.2,82,31,391/- was added to the total income of the assessee . ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 12 - 15. Against the said order, the assessee pre ferred first statutory appeal before the learned CIT(A) who partly allowed the appeal of the assessee holdi ng that assessee itself has disclosed additional income of Rs.2,23,72,891/- as deemed dividend under s.2(22)(e) of the Act as a result of survey proceedings under s.133A of t he Act in her case on 06.12.2010. Assessee never reit erated fro m its disclosure before filing of return of income tax and notices under s.148 of the Act. 16. We have gone through the relevant records and impugned order. It is fact that Mrs. Sha rmila Mahurkar was share holder of a nd M/s. Checkma te Services Pvt. Ltd. which is closely held company and Mrs. Sharmila Mahurkar has 10% voting power in M/s. Check mate Services Pvt. Ltd. and Mrs. Sharmila Mahurkar was having interest 100% in her proprietary concern i.e . Check mate Apparel. Since, the amounts were adv anced by M/s. Checkmate Services Pvt. Ltd. fro m its accu mulated profit to Mrs. Sharmila Mahurkar and therefore , she was directly beneficiary. Sa me a mount was used for the proprietorship firm of Mrs. Sharmila Mahurkar. So fa r partnership deed of the Checkmate apparel is concerned sa me was prepared on 1 s t April 2011 meaning thereby after the date of survey. At the time o f survey, partne rship deed was not in existence meaning thereby wherein 95% share with Mrs. Sharmila Mahurkar wa s not with the assessee. Surprisingly, M/s. Checkmate Se rvices Pvt. Ltd. i s showing above loans and advances in the asset sides in its balance sheet and same are being shown as liability in her proprietary ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 13 - concern. On the other hand, learned AR argued that same amounts we re given for the business purposes and stated that this ground is sq uarely covered by the CBDT Ci rcular No . 19/2017, wherein it is mentioned as under: “ S e c t i o n 2 ( 2 2 ) c l a u s e ( e ) o f t h e I n c o m e T a x A c t , 1 96 1 ( t h e A c t ) p r o v i d e s t h a t " d i v i d e n d " i n c l u d e s a n y p a y m e n t b y a c o m p a n y , n o t b e i n g a c o m p a n y i n w h i c h t h e p u b l i c a r e s u b s t a nt i a l l y i n t e r e s t e d , o f a n y s u m b y w a y o f a d v a n c e o r l o a n t o a s h a r e h o l d e r , b e i n g a p e r s o n w h o i s t h e b e n e f i c i a l o w n e r o f s h a r es ( n o t b e i n g s h a r e s e n t i t l e d t o a f i x e d r a t e o f d i v i d e n d w h e t h e r w i t h o r w i t h o u t a r i g h t t o p a r t i c i p a t e i n p r o f i t s h o l d i n g n o t l e s s t h a n t e n p e r c e n t o f t h e v o t i n g p o w e r , o r t o a n y c o n c e r n i n w h i c h s u ch s h a r e h o l d e r i s a m e m b e r o r a p a r t n e r a n d i n w h i c h h e h a s a s u b st a n t i a l i n t e r e s t ( h e r e a f t e r i n t h i s c l a u s e r e f e r r e d t o a s th e s a i d c o n c e r n ) o r a n y p a y m e n t b y a n y s u c h c o m p a n y o n b e h a l f , o r f or t h e i n d i v i d u a l b e n e f i t , o f a n y s u c h s h a r e h o l d e r , t o t h e e x t e n t t o w h i c h t h e c o m p a n y i n e i t h e r c a s e p o s s e s s e s a c c u m u l a t e d p ro f i t s . 2 . T h e B o a r d h a s o b s e r v e d t h a t s o m e C o u r t s i n t h e re c e n t p a s t h a v e h e l d t h a t t r a d e a d v a n c e s i n t h e n a t u r e o f c o m me r c i a l t r a n s a c t i o n s w o u l d n o t f a l l w i t h i n t h e a m b i t o f t h e p r o v i s i o n s o f s e c t i o n 2 ( 2 2 ) ( e ) o f t h e A c t . S u c h v i e w s h a v e a t t a in e d f i n a l i t y . 2 . 1 S o m e i l l u s t r a t i o n s / e x a m p l e s o f t r a d e a d v a n c e s / co m m e r c i a l t r a n s a c t i o n s h e l d t o b e n o t c o v e r e d u n d e r s e c t i o n 2( 2 2 ) ( e ) o f t h e A c t a r e a s f o l l o w s : i . A d v a n c e s w e r e m a d e b y a c o m p a n y t o a s i s t e r c o n ce r n a n d a d j u s t e d a g a i n s t t h e d u e s f o r j o b w o r k d o n e b y t h e s i s t e r c o n c e r n . I t w a s h e l d t h a t a m o u n t s a d v a n c e d f o r b u s in e s s t r a n s a c t i o n s d o n o t t o f a l l w i t h i n t h e d e f i n i t i o n of d e e m e d d i v i d e n d u n d e r s e c t i o n 2 ( 2 2 ) ( e ) o f t h e A c t . (C I T ( A) v s . C r e a t i v e D y e i n g & P r i n t i n g P v t . L t d . 1 , D e l h i H i g h Co u r t ) . i i . A d v a n c e w a s m a d e b y a c o m p a n y t o i t s s h a r e h o ld e r t o i n s t a l l p l a n t a n d m a c h i n e r y a t t h e s h a r e h o l d e r ' s p re m i s e s t o e n a b l e h i m t o d o j o b w o r k f o r t h e c o m p a n y s o t h a t th e c o m p a n y c o u l d f u l f i l a n e x p o r t o r d e r . I t w a s h e l d th a t a s t h e a s s e s s e e p r o v e d b u s i n e s s e x p e d i e n c y , t h e a d v a n c e w as n o t c o v e r e d b y s e c t i o n 2 ( 2 2 ) ( e ) o f t h e A c t . ( C I T v s A m ri k S i n g h , P &H H i g h C o u r t ) 2 . i i i . A f l o a t i n g s e c u r i t y d e p o s i t w a s g i v e n b y a c o mp a n y t o i t s s i s t e r c o n c e r n a g a i n s t t h e u s e o f e l e c t r i c i t y g e n e ra t o r s b e l o n g i n g t o t h e s i s t e r c o n c e r n . T h e c o m p a n y u t i l i se d g a s a v a i l a b l e t o i t f r o m G A I L t o g e n e r a t e e l e c t r i c i t y an d s u p p l i e d i t t o t h e s i s t e r c o n c e r n a t c o n c e s s i o n a l ra t e s . I t w a s h e l d t h a t t h e s e c u r i t y d e p o s i t m a d e b y t h e c o m pa n y t o ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 14 - i t s s i s t e r c o n c e r n w a s a b u s i n e s s t r a n s a c t i o n a r i s in g i n t h e n o r m a l c o u r s e o f b u s i n e s s b e t w e e n t w o c o n c e r n s a n d t h e t r a n s a c t i o n d i d n o t a t t r a c t s e c t i o n 2 ( 2 2 ) ( e ) o f t he A c t . ( C I T , A g r a v s A t u l E n g i n e e r i n g U d y o g , A l l a h a b a d H i g h C o u rt ) 3 . I n v i e w o f t h e a b o v e i t i s , a s e t t l e d p o s i t i o n th a t t r a d e a d v a n c e s , w h i c h a r e i n t h e n a t u r e o f c o m m e r c i a l t r an s a c t i o n s w o u l d n o t f a l l w i t h i n t h e a m b i t o f t h e w o r d ' a d v a n ce ' i n s e c t i o n 2 (2 2 ) ( e ) o f t h e A c t . A c c o r d i n g l y , h e n c e f o r t h , a p p e al s m a y n o t b e f i l e d o n t h i s g r o u n d b y O f f i c e r s o f t h e D e p a r t m e n t a n d t h o s e a l r e a d y f i l e d , i n C o u r t s / T r i b u n a l s m a y b e w i t h d r a w n/ n o t p r e s s e d u p o n . ” 17. The learned AR also cited an order of co-ordinate bench in ITA No.102/Ahd/2012 in case of ITO Vs. Meh ulbhai D Zhaveri, order dated 23.12.2016, wherein T ribunal followed Hon’ble High Co urts’ orders a re a s under: “ 4 . I t c a n t h u s b e s e e n t h a t t h e C o m m i s s i o n e r a s a m a t t e r o f f a c t f o u n d t h a t t h e p a y m e n t s w e r e n o t i n t h e n a t u r e o f cu r r e n t a d j u s t m e n t . T h e r e w a s m o v e m e n t o f f u n d b o t h w a y s o n n e e d b a s i s . T h e t r a n s a c t i o n s i n t h e n a t u r e o f l o a n s a n d a d v a n c es a r e u s u a l l y v e r y f e w i n n u m b e r s w h e r e a s i n t h e p r e s e n t c a s e , s uc h t r a n s a c t i o n s a r e i n t h e f o r m o f c u r r e n t a c c o m m o d a t i o n a d j u s t m e n t e n t r i e s . T h e C o m m i s s i o n e r t h e r e f o r e , h e l d t h a t t h e t r a n s a c t i o n s w e r e n o t i n t h e n a t u r e o f l o a n s a n d a d v a n c e s . T h e R e v e n u e c a r r i e d th e m a t t e r i n a p p e a l . T h e T r i b u n a l c o n c u r r e d w i t h t h e v i e w o f t h e C I T ( A p p e a l s ) a n d h e l d t h a t t h e a m o u n t s w e r e n o t i n t h e n a t u r e o f I n t e r C o r p o r a t e D e p o s i t s a n d w e r e t h e r e f o r e , n o t t o b e t re a t e d a s l o a n s o r a d v a n c e s a s c o n t e m p l a t e d i n s e c t i o n 2 ( 2 2 ) ( e ) o f t h e A c t . 5 . T h e i s s u e i s s u b s t a n t i a l l y o n e o f a p p r e c i a t i o n of f a c t s . Wh e n t h e C I T ( A p p e a l s ) a s w e l l a s T r i b u n a l c o n c u r r e n t l y he l d t h a t l o o k i n g t o l a r g e n u m b e r o f a d j u s t m e n t e n t r i e s i n t he a c c o u n t s b e t w e e n t w o e n t i t i e s , t h e a m o u n t s w e r e n o t i n t h e na t u r e o f l o a n o r d e p o s i t , b u t m e r e l y a d j u s t m e n t s , a p p l i c a t i o n o f s e ct i o n 2 ( 2 2 ) ( e ) o f t h e A c t w o u l d n o t a r i s e . C o n s e q u e n t l y , n o q u e s t i o n o f l a w a r i s e s . T a x a p p e a l s a r e d i s m i s s e d . ” 18. As we have held that on the date of survey proceedings on 06.12.2010, no firm was in existence and money was paid by the M/s. Checkmate Services Pvt. Ltd. to M rs. Sharmila Mahurkar and at the time of surve y, no partnership firm wa s ITA Nos. 2133/Ahd/2014 & 399/Ahd/15 (M/s. Checkmate Service s Pvt. Ltd. & Anr.) AYs. 2010-11 - 15 - in existence. Hence, when it is proved that on the date of survey or in the month of July, 2009, no firm was in existence. So, in such fact s and ci rcu mstances, arg uments of learned AR cannot be accepted that this amount was paid for the business purposes. The refo re, in our considered opinion, CBDT Circular a nd ITAT o rder is not applicable in the case. Therefore , we do not find any meri t in the appeal fil ed by the assessee . We do not find any infirmity in the order passed by the learned CIT (A). 19. In the result, appeal filed by the a ssessee is dismisse d. 20. In the co mbined result, both appeals filed by the assessee are dismissed. Sd/- Sd/- (AM ARJIT SI NGH) (MAHAVIR PRASAD) ACC OUNTANT MEMB ER JUDICIAL MEMBER Ahmedabad: Dated 30/03/2022 True Copy S.K.SINHA ेश ! " #े" / Copy of Order Forwarded to:- $. र ज / Revenue 2. आ दक / Assessee '. सं(ं)* आयकर आय + / Concerned CIT 4. आयकर आय + - अपील / CIT (A) .. / 0 1ीय 2 2 )*3 आयकर अपील य अ)*कर#3 अ45द ( द / DR, ITAT, Ahmedabad 6. 1 78 9 इल / Guard file. By order/आद श स 3 उप/स4 यक पंजीक र आयकर अपील य अ)*कर#3 अ45द ( द । This Order pronounced in Open Court on 30/03/2022