A.C.I.T.,Circle-43, Kolkata V. Shri Ramesh Chandra Kataria, Kolkata

ITA 266/KOL/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9625 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-12-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 02-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IMOKABA JAMIR
• Section: 2(22)(e)

Judgement Text

1 ITA NO. 266/KOL/2020 RAMESH CHANDRA KATARIA AY 2015-16 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA ( ) BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VARKEY, JM] I.T.A. NO. 266/KOL/2020 ASSESSMENT YEAR: 2015-16 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-43, KOLKATA. VS. SHRI RAMESH CHANDRA KATARIA (PAN: AFYPK7865C) APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 16.12.2020 DATE OF PRONOUNCEMENT 05.01.2021 FOR THE APPELLANT SHRI IMOKABA JAMIR, CIT, DR FOR THE RESPONDENT SHRI S. S. GUPTA, AR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT(A)-13, KOLKATA DATED 19.12.2019 FOR A Y 2015-16. 2. THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN ALLOWING THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AGAINST THE ADDITION OF RS. 10.10 CR. MADE BY THE AO U/S. 2(22)(E) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). THE MAIN PLEA WHICH HAS BEEN TAKEN INTO CONSIDERATION BY THE LD. CIT(A) IS THAT THE ADVANCE OF RS.10.10 CR. WHICH WAS RECEIVED (BY M/S. SUMAN JEWELLER) FROM THE SISTER CONCERN (M/S. ROHIT JEWELLER PVT. LTD.) WAS FOR BUSINESS PURPOSE IN WHICH ASSESSEE HAD SUBSTANTIAL INTEREST WAS IN THE NATURE OF NORMAL TRADE ADVANCE WHICH HAS BEEN LATER ADJUSTED AGAINST THE ACTUAL SALE OF GOLD ORNAMENTS PARTLY AND BALANCE REPAID SUBSEQUENTLY, WHICH FACTS GOES ON TO PROVE THE BUSINESS TRANSACTION AND HAPPENED DUE TO BUSINESS EXPEDIENCY AND WERE TRANSACTION WHICH WERE CARRIED IN THE NORMAL COURSE OF BUSINESS AND HENCE, DO NOT ATTRACT THE MISCHIEF OF THE PROVISION AS PROVIDED IN SECTION 2(22)(E) OF THE ACT AND THAT THE ASSESSEES CASE IS COVERED BY THE CBDT CIRCULAR NO. 19/2017 DATED 12.06.2017 AND CONSEQUENTLY SECTION 2(22)(E) OF THE ACT IS NOT ATTRACTED AND THEREFORE THE AOS ACTION OF MAKING ADDITION WAS DELETED. AGAINST THIS ACTION OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE, THE REVENUE HAS PREFERRED THIS APPEAL BEFORE US. 3 ITA NO. 266/KOL/2020 RAMESH CHANDRA KATARIA AY 2015-16 FROM GAIL TO GENERATE ELECTRICITY AND SUPPLIED IT TO THE SISTER CONCERN AT CONCESSIONAL RATES, IT WAS HELD THAT THE SECURITY DEPOSIT MADE BY THE COMPANY TO ITS SISTER CONCERN WAS A BUSINESS TRANSACTION ARISING IN THE NORMAL COURSE OF BUSINESS BETWEEN TWO CONCERNS AND THE TRANSACTION DID NOT ATTRACT SECTION 2(22)(E) OF THE ACT. (CIT, AGRA VS. ATUL ENGINEERING UDYOG, ALLAHABAD HIGH COURT). 3. IN VIEW OF THE ABOVE IT IS A SETTLED POSITION THAT TRADE ADVANCES, WHICH ARE IN THE NATURE OF COMMERCIAL TRANSACTIONS WOULD NOT FALL WITHIN THE AMBIT OF THE WORD ADVANCE IN SECTION 2(22)(E) OF THE ACT. ACCORDINGLY, HENCEFORTH, APPEALS MAY NOT BE FILED ON THIS GROUND BY OFFICERS OF THE DEPARTMENT AND THOSE ALREADY FILED, IN COURTS/TRIBUNALS MAY BE WITHDRAWN/NOT PRESSED UPON. 4. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED.[EMPHASIS GIVEN BY US ] SD/- NEETIKA BANSAL DEPUTY SECRETARY TO GOVERNMENT OF INDIA 4. THE LD. CIT(A) TOOK NOTE OF THE FACTS BROUGHT TO HIS NOTICE DURING THE FIRST APPELLATE PROCEEDINGS AS DISCERNED FROM A PERUSAL OF THE IMPUGNED ORDER WHICH SHOWS THAT ASSESSEE BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT ITS CASE FALLS IN THE KEN OF THE AFORESAID CBDT CIRCULAR AND THEREFORE CLAIMED THAT SECTION 2(22)(E) OF THE ACT IS NOT ATTRACTED IN THE FACTS OF ITS CASE BECAUSE THE TRADE ADVANCE FROM THE SISTER COMPANY WAS FOR THE PURPOSE OF NORMAL BUSINESS / COMMERCIAL ACTIVITY AND OCCURRED DUE TO BUSINESS EXPEDIENCY AND DOES NOT FALL IN THE AMBIT OF SECTION 2(22)(E) OF THE ACT, WHICH PLEA WAS ACCEPTED BY THE LD CIT(A) AND HE GAVE RELIEF TO THE ASSESSEE. IN ORDER TO PROVE THAT ITS CASE FALLS IN THE KEN OF THE CBDT CIRCULAR (SUPRA), BEFORE US, THE LD. AR SHRI S.S. GUPTA POINTED OUT THAT THE TWO CONCERNS I.E. M/S. SUMAN JEWELLER AND M/S. ROHIT JEWELLER PVT. LTD. EARLIER HAD OPERATED FROM THE SAME PREMISE AND HAD COMMON DISPLAY OF THEIR STOCKS TO CATER TO THE CUSTOMERS/BUYERS OF BOTH CONCERNS. ACCORDING TO THE LD. AR, IN THIS ASSESSMENT YEAR, M/S. SUMAN JEWELER SHIFTED TO A DIFFERENT PLACE IN BURRABAZAR WHEREAS M/S. ROHIT JEWELLER PVT. LTD. CONTINUED TO OPERATE FROM CAMAC STREET. THEREFORE, THE STOCK OF THE TWO CONCERNS WHICH EARLIER WERE MAINTAINED AT THE SAME PLACE WAS SPLIT BETWEEN THE TWO PREMISES. THE LD. AR REFERRED TO THE LEDGER COPIES PLACED IN THE PAPER BOOK FROM WHERE HE DREW OUR ATTENTION TO THE FACT THAT M/S. SUMAN JEWELLER NOT ONLY RECEIVED MONEY FROM M/S. ROHIT JEWELLER PVT. LTD. BUT ALSO PAID OR REPAID FUNDS TO M/S. ROHIT JEWELLER PVT. LTD. THROUGHOUT THE YEAR UNDER CONSIDERATION AS NORMAL BUSINESS TRANSACTIONS. ACCORDING TO LD. AR, THE MONEY RECEIVED FROM THE SISTER CONCERN M/S. ROHIT JEWELLER PVT. LTD. WAS PAID BY M/S. SUMAN JEWELLER TO SUNDRY CREDITORS FOR GOODS PURCHASED FROM M/S. EMARELD JEWEL INDUSTRY INDIA LTD. (HEREINAFTER REFERRED TO AS M/S. EJIIL), M/S. MALLICK JEWELLERS ETC. AGAINST PURCHASES MADE FROM THEM. IT WAS POINTED 5 ITA NO. 266/KOL/2020 RAMESH CHANDRA KATARIA AY 2015-16 MARGIN SO AS TO USE THE SAID REALIZATION FOR REPAYMENT OF TRADE ADVANCES FROM M/S. ROHIT JEWELLER PVT. LTD. THE LD. AR DREW OUR ATTENTION TO THE DETAILS OF PURCHASES MADE BY M/S. ROHIT JEWELLER PVT. LTD. FROM M/S. SUMAN JEWELLER AND CORRESPONDING SALES BY M/S. ROHIT JEWELLER PVT. LTD. WHICH HAVE BEEN DEPICTED IN TWO TABLES WHICH WERE PLACED BEFORE US. THUS, ACCORDING TO LD. AR, THE PURCHASES OF CASTING LIGHT WEIGHT GOLD ORNAMENTS IN EXCESS BY FROM M/S. SUMAN JEWELLER FROM M/S EJIL WERE AGAINST THE ANTICIPATED EXPORT ORDERS FROM M/S ROHIT JEWELLER PVT. LTD. AND THAT ON FAILURE OF M/S. ROHIT JEWELLER PVT. LTD. TO PLACE EXPORT ORDERS, THE ADVANCES TAKEN FROM M/S ROHIT JEWELLER PVT. LTD. WERE REFUNDED BY M/S. SUMAN JEWELLER TO M/S. ROHIT JEWELLER PVT. LTD. THROUGH SALES IN DOMESTIC MARKETS. ACCORDING TO THE LD. AR, WITHIN 01-02 YEARS BOTH M/S. ROHIT JEWELLER PVT. LTD. AND M/S. SUMAN JEWELLER DISPOSED OFF THE HUGE STOCK AND THE TRADE ADVANCE FROM M/S. ROHIT JEWELLER PVT. LTD. TO M/S. SUMAN JEWELLER WAS BROUGHT DOWN TO NIL. THUS, ACCORDING TO LD. AR, THE TRANSACTION BETWEEN THE SISTER CONCERNS WERE PURELY IN THE NATURE OF TRADE ADVANCE WITH PURCHASE AND SALE OF GOLD ORNAMENTS AND IT CANNOT BE TERMED AS LOAN/ADVANCE AS ENVISAGED IN SECTION 2(22)(E) OF THE ACT. IT WAS ALSO BROUGHT TO OUR NOTICE THAT IN THE SUBSEQUENT ASSESSMENT YEAR I.E. AY 2016-17 M/S. ROHIT JEWELLER PVT. LTD. HAS PURCHASED GOLD ORNAMENTS WORTH RS.7.35 CR. FROM M/S. SUMAN JEWELLERS AND ACCOUNTS BETWEEN THE TWO WAS FINALLY SETTLED IN THE FY 2016-17. THUS, ACCORDING TO LD. AR, THE TRADE ADVANCES BETWEEN THE SISTER CONCERNS WERE AKIN TO THAT OF RUNNING CURRENT ACCOUNT WERE BOTH DEBIT AND CREDIT OF MONEY TOOK PLACE INTERMITTENTLY/REGULARLY BETWEEN THE TWO CONCERNS. THEREFORE, ACCORDING TO THE LD. AR, THE LD. CIT(A) CORRECTLY APPRECIATED THE AFORESAID FACTS BY TAKING NOTE THAT THE AFORESAID FACTS OF THE ASSESSEES CASE FALLS SQUARELY IN THE SETTLED EXEMPTION GIVEN IN CBDT CIRCULAR NO. 19/2017 DATED 12.06.2017, WHICH ACTION OF LD. CIT(A) ACCORDING TO HIM DOES NOT REQUIRE ANY INTERFERENCE. 7. PER-CONTRA, THE LD. CIT, DR ASSAILING THE ACTION OF THE LD. CIT(A) CONTENDED THAT THE ASSESSEE BEING A PARTNER OF M/S. SUMAN JEWELLER HAVING SHAREHOLDING OF 82.27% HAD RECEIVED ADVANCE OF RS.10.10 CR. FROM M/S. ROHIT JEWELLER PVT. LTD. WHEREIN THE ASSESSEE HAD 50% SHAREHOLDING, AND THE AO NOTED THAT M/S ROHIT JEWELLER PVT. LTD. HAVING ACCUMULATED PROFIT OF RS. 12.62 CR. THE AO RIGHTLY ADDED RS.10.10 CR. U/S. 2(22)(E) OF THE ACT. ACCORDING TO THE LD. DR, THE AO NOTED THAT THE AMOUNT TAKEN AS ADVANCE FROM M/S. ROHIT JEWELLER PVT. LTD. WAS GIVEN TO THE SUNDRY CREDITORS FOR THE GOODS PURCHASED BY M/S. SUMAN JEWELER AND THUS FORMED THE WORKING CAPITAL OF M/S. SUMAN JEWELER. ACCORDING TO 7 ITA NO. 266/KOL/2020 RAMESH CHANDRA KATARIA AY 2015-16 AMBIT OF ADVANCE AS ENVISAGED IN SECTION 2(22)(E) OF THE ACT. WE HAVE TAKEN NOTE OF THE FACTS CONSIDERED BY THE LD. CIT(A) IN THE IMPUGNED ORDER WHICH WE HAVE DISCUSSED FROM PARA 4 TO 6 (SUPRA) WHICH ARE NOT REPEATED TO AVOID REPETITION AND FOR THE SAKE OF BREVITY. FURTHER TO THE SAID FACTS THE LD. AR DREW OUR ATTENTION TO PAGE 53 OF THE PAPER BOOK FROM WHICH WE NOTE THAT RS. 10.10 CR. WAS ADVANCED TO THE ASSESSEE ON 31.03.2015 WHICH IS EVIDENT FROM THE LEDGER ACCOUNT PLACED IN PAPER BOOK PAGE 53. THE LD. AR DREW OUR ATTENTION TO PAGE 54 AND 55 OF THE PAPER BOOK WHEREIN WE NOTE THAT THE OPENING BALANCE OF THE LEDGER ACCOUNT FROM 01.04.2015, 31.03.2016 (AY 2016-17) THE OPENING BALANCE BROUGHT FORWARD FROM THIS AY WAS TO THE TUNE OF RS. 10.10 CR. AND M/S. SUMAN JEWELLER HAS MADE THE SALE OF GOLD ORNAMENTS WORTH RS. 2.04 CR ON 16.10.2015 TO M/S ROHIT JEWELLER PVT. LTD. WHICH FACT IS CORROBORATED FROM INVOICE KEPT AT PAGE 59 OF THE PAPER BOOK. LIKEWISE, FROM THE LEDGER KEPT OF PAGE 54/55 OF PB IT IS DISCERNIBLE THAT M/S. SUMAN JEWELLER HAS MADE A SALE ON 08.12.2015 OF GOLD ORNAMENTS WORTH RS. 2.44 CR. TO M/S. ROHIT JEWELLER PVT. LTD WHICH FACT IS CORROBORATED FROM THE INVOICE KEPT AT PAGE 60 OF THE PAPER BOOK. LIKEWISE, M/S. SUMAN JEWELER HAS SOLD GOLD ORNAMENTS WORTH RS. 1.16 CR. ON 17.12.2015 TO M/S. ROHIT JEWELLER PVT. LTD. WHICH IS EVIDENT FROM INVOICE PLACED AT PAGE 61 OF THE PAPER BOOK. LIKEWISE, M/S. SUMAN JEWELLER HAS SOLD THE GOLD ORNAMENTS WORTH RS.1.06 CR. ON 22.12.2015 TO M/S. ROHIT JEWELLER PVT. LTD. WHICH IS EVIDENT FROM PAGE 63 OF THE PAPER BOOK AND THUS, WE NOTE THAT THE GOODS WORTH RS.7.06 CR. WAS SOLD AY 2016-17 BY M/S. SUMAN JEWELLER TO M/S. ROHIT JEWELLER PVT. LTD WHICH GOES ON TO SHOW THAT TRANSACTION BETWEEN THE SISTER CONCERN WERE COMMERCIAL IN NATURE AND ADVANCE WAS TRADE ADVANCE. THE LD. AR DREW OUR ATTENTION TO FACT THAT THERE WAS SUBSEQUENT SALE OF GOLD ORNAMENTS IN THE AY 2017-18 AND THEY HAVE SQUARED UP THE TRADE ADVANCE RECEIVED FROM M/S. ROHIT JEWELLER PVT. LTD. THE LD. AR HAS TAKEN THE PAIN TO DEMONSTRATE BEFORE US THAT THESE ARE REGULAR SALE AND PURCHASE OF GOODS BETWEEN BOTH THE SISTER CONCERNS AND THIS AMOUNT OF RS. 10.10 CR. GIVEN BY M/S ROHIT JEWELLER PVT. LTD. TO M/S SUMAN JEWELLER PVT. LTD. WAS IN THE NATURE OF TRADE ADVANCE AND CANNOT BE TERMED AS ADVANCE AS ENVISAGED U/S. 2(22)(E) OF THE ACT AND, THEREFORE, RELYING ON THE RATIO-DECIDENDI DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. CREATIVE DYEING & PRINTING 318 ITR 476 (DEL.) [THE REVENUE APPEAL BEFORE THE HONBLE SUPREME COURT WAS DISMISSED] AND THE RATIO OF THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. AMRIK SINGH 231 TAXMAN WE FIND THAT ON THE FACTS DISCUSSED BY THE LD. CIT(A), AND NOTED BY US, WE AGREE THAT THE ADVANCE GIVEN BY M/S ROHIT JEWELLER TO M/S