DCIT, Circle, Bhilwara V. Shri Pankaj Mansinghka, Bhilwara

ITA 280/JODH/2018

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3720 (ITAT-JODHPUR)
• Duration Of Justice: 5 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-01-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 05-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KUMAR GPUTA
• Keywords: Capital asset; Gift; Salary income; Cost of acquisition; Deemed dividend; TDS; Set aside; Capital Gains
• Section: 145; 54; 143(3); 142(1); 2(22)(e); 143(1); 143(2); 101

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR(DB). BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 280/Jodh/2018 Assessment Year: 2015-16 Deputy Commissioner of Income Tax, Circle, Bhilwara. (Appellant) Vs. Shri Pankaj Mansinghka, Mansinghka House, Gangaopur Choraha, Bhilwara. [PAN:ABWPM 9428M ] (Respondent) Appellant by Sh. Shrawan Kumar Gupta (Adv.) & Shri Ashok Kumar Gputa (Adv.) Respondent by Smt. Alka Rajvanshi Jain, CIT DR Date of Hearing 31.01.2024 Date of Pronouncement 22.02.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by revenue the aggrieved from the order of the Commissioner of Income Tax (Appeals), Ajmer dated 28.03.2018 [here in after ld. CIT(A) ] for assessment year 2015-16, which in turn arise from the order dated 29.12.2017 passed under section 143(3) of the Income Tax Act, [ here in after referred as “Act” ] by ACIT, Circle, Bhilwara. ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 2 2. In this appeal, the Revenue has raised following grounds: - “ On facts and in law, the Ld. CIT(A), Ajmer erred in :- 1.) deleting addition of Rs. 3,41,00,000/- made on account of deemed dividend u/s. 2(22)(e) of the I.T. Act, 1961 without appreciating the fact that making of agreement to sale and concelling thereof was only an act of convenience by the assessee to obtain fund from the company wherein the assessee was a beneficial owner and also managing director to avoid the provisions of section 2(22)(e) of the I.T. Act, 1961; 2.) deletiong addition of Rs. 3,41,00,000/- without appreciating the fact that the cancellation of agreement to sale on 03.04.2017 just before sale of flats to Kamble Family on 21.04.2017 was actually part of sham transactions to bypass provisions of section 2(22)(e) in respect of receipts of ₹3,41,00,000/-; 3.) deleting addition of Rs. 3,41,00,000/- without appreciating the finding of AO that apparent was real or not and sham transactions were used as colorable device to evade tax liability on account of deemed dividend u/s. 2(22)(e) of the I.T. Act, 1961; 4.) The appellant craves to add, amend, alter, delete or modify the above ground of appeal before or at the time of hearing." 3. Succinctly, the fact as culled out from the records is that the assessee is an individual deriving income from salary, house property, capital gains and other sources and has filed his e-return of income on 28.08.2015 declaring income of Rs. 16,44,210/-. The same was processed u/s 143(1) of the IT Act, 1961 on 18.10.2015 on the declared income. The case selected for limited scrutiny under scheme of CASS. Notice u/s 143(2) of the Act was issued on 20.09.2016 and duly served upon the assessee on 22.09.2016 fixing the case of hearing on 27.09.2016. Subsequently, notice u/s 142(1) of the Act and query letter dated 06.03.2017 was issued fixing the case for hearing on 16.03.2017. The details called for considered and placed on record by the ld. AO. ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 3 3.1 During the assessment proceeding the ld. AO noted that assessee during the year under consideration has sold immovable property for a consideration of ₹3,41,00,000/- on which long term capital gain arise of 1,16,33,052/- which was claimed as deduction u/s 54 of the Act. The working of the capital gain, filed in return of income is re- produced as under:- Full value consideration Rs. 3,41,00,000 Less: Cost of acquisition with indexation Rs. 2,24,66,948/- Deduction u/s 54 Rs. 1,16,33,502/- LTCG on movable property NIL The assessee vide notice dated 06.03.2017 u/s 142(1) of the Act, was asked to submit the details of the immovable property sold along with copy of purchase and sale deeds and also requested to submit the document regarding deduction claimed u/s 54 of the Act. In response, the assessee has submitted copy of purchases deed of flats in question and agreement for sale of two flats bearing No. 1304 and 1305 situated in Julian Apartment, Ivory Towers Co-operative Housing Society Ltd, Bhakti Park, Wadala (East), Mumbai. The agreement for sale was executed between the assessee and M/s Godavari Pulps & Papers Mills Pvt. Ltd. on 31.03.2015 and two flats were shown to be sold one for Rs. 2.0 Crore &another for Rs. 1.41 Crore respectively. The assessee is Managing Director in M/s Godavari Pulps & Papers Mills Pvt. Ltd. and ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 4 holding 14.11% of share of the company. Later on, the assessee was requested to submit the registered sale deed in respect of the immovable property in question. 3.2 In response, the assessee has submitted the copy of sale deeds which were executed on 21.04.2017. From the above deed it is noticed that the flats bearing No.1304 and 1305 were sold to Mr. Kundalik K. Kamble, Mrs. Priya KundalikKamble and Mr. Kunal Kundalik Kamble for consideration of Rs. 2.10 Crors and Rs. 1.40 Crores respectively and the deed was executed between the assessee i.e. Shri Pankaj Mansinghka (Seller) and above-mentioned persons. Nowhere in this deed detail of earlier Agreement for Sale was mentioned. From the registered sale deed the ld. AO noticed following points:- “1. The assessee is the sole and absolute holder of the said flats and that besides him no other person or persons has/have any right, title, interest, claim or demand of any nature whatsoever into or upon the said flat by way of sale, exchange, mortgage, possession, inheritance, charge, lien, gift, trust, lease, tenancy, licence, easement or otherwise howsoever. D 2. The Kotak Bank vide its letter dated 29.03.2017 address to the assessee confirmed that upon receipt of outstanding loan amounting to ₹57,65,567/- will release the mortgage/charge of the said flats. 3. Sale consideration against the said flats were received by the assessee through chq/RTGS on the dates mentioned in the sale deed. 4. The purchaser will deducted TDS @1% of the total consideration on the said flats as part of payment to the assessee and same was deposited to the Income tax department.” ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 5 3.3 Based on these set of contention the ld. AO noted that even after receiving full consideration of ₹3,41,00,000 possession of the property was not transferred to M/s Godavari Pulps & Papers Mills Pvt. Ltd. The assessee has not paid outstanding loan on property which was obtained fromKotak bank, power connection was also running in the name of assessee and finally details of the agreement of sale executed on 31.03.2015 was not mentioned in the registered sale deed executed on 21.04.2017. These all factssuggeststhat no actual transaction of sale of flats bearing number 1304 and 1305 were executed between the assessee and M/s Godavari Pulps & Papers Mills Pvt. Ltd. After considering these set of facts, in the sale deed the assessee was asked to showcase as to why an amount of ₹3,41,00,000 received from the company that is M/s Godavari Pulps & Papers Mills Pvt. Ltd. in which the assessee holds more than 10% of the shares should not be treated as deemed dividend under the provision of section 2(22)(e) of the Act. In response the assessee filed a detailed submission on 26.12.2017. The ld. AO considered the submission of the assessee but the same was not acceptable. The ld. AO noted that the agreement for sale of flat was cancelled due to the assessee’s failure, the agreement was cancelled on 03.04.2017 and flats were sold to Kamble family on 21.04.2017. This shows the transaction was shame and colourable device to avoid the tax liability by the assessee. The assessee has filed all these details only ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 6 when the show cause notice was issued to the assessee. In the cancellation deed the reason mentioned was that the assessee failed to repay the loan along with the interest to Kotak Bank. The assessee has not submitted as to why the loan was not repaid and when the flats were transferred to the company and the sale consideration as per agreement has already been received in advance. Based on these reasons the ld. AO noted that the assessee required fund for purchasing another property but if he has taken loan from the company where he is director and shareholder holding more than 10 % shares, then in that case issue of deemed dividend arises. Therefore, sale consideration and supported documents was disbelieved and the addition of Rs. 3,41,00,000/- was made in the returned income of the assesseeas deemed dividend for the amount received by the assessee from M/s Godavari Pulps & Papers Mills Pvt. Ltd. 4. Aggrieved from the order of the assessment making addition, of deemed dividend the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised by the assessee the relevant finding of the ld. CIT(A) is reiterated here in below:- “4.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully, it is seen that the appellant had filed the return of income, in which sale of immovable property for the consideration of Rs. 3,41,00,000/- was shown as under:- Full value consideration Rs. 3,41,00,000 ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 7 Less: Cost of acquisition with indexation Rs. 2,24,66,948/- Deduction u/s 54 Rs. 1,16,33,502/- LTCG on movable property NIL The sales consideration was shown as per the "agreements to sale" dated 31.03.2015. As per the "agreements to sale" dated 31.03.2015, the appellant had agreed to sale and transfer to M/s Godavari Pulp & Paper Mills Pvt. Ltd. Flat No. 1304 and 1305 for the consideration of Rs. 2 crore and Rs. 1,41,00,000/- respectively. The tax was deducted at source as per the Provisions of Section 194(1)(A) by M/s Godavari Pulp & Paper Mills Pvt. Ltd. on the sales consideration paid to the appellant. The tax so deducted at source was deposited by M/s Godavari Pulp & Paper Mills Pvt. Ltd. to the account of the government. M/s Godavari Pulp & Paper Mills Pvt. Ltd. has shown both the flat as addition to asset (Rs. 3,41,00,000). In the Balance Sheet dated 31.03.2016 and 31.03.2017 also, these flats have been shown as part of the fixed assets of the M/s Godavari Pulp & Paper Mills Pvt. Limited. The assessment of M/s Godavari Pulp & Paper Mills Pvt. Ltd. for A.Y. 2015-16 has been completed u/s 143(3). The AO has not made any adverse comment about the purchase of the flat for Rs. 3,41,00,000/- shown by M/s Godavari Pulp & Paper Mills Pvt. Ltd. in their books of accounts. The AO of M/s Godavari Pulp & Paper Mills Pvt. Ltd. has not given the finding that funds of Rs. 3,41,00,000/- were utilized by the company for giving advance to Shri Pankaj Mansinghka for other than business purpose. M/s Godavari Pulp & Paper Mills Pvt. Ltd. only has paid maintenance charges of these flat for the F.Y. 2015-16 and 2016-17. In other words, M/s Godavari Pulp & Paper Mills Pvt. Ltd. had shown purchase of these flats in their books of accounts and these flats are appearing in the books of M/s Godavari Pulp & Paper Mills Pvt. Ltd. as part of fixed on 31.03.2015, 31.03.2016 and 31.03.2017. 4.4 The "agreements to sale" were made on Rs. 100 Non Judicial Stamp Paper. The stamp paper was purchased on 20.03.2015. The stamp paper was shown to have been purchased for "agreement" between "Pankaj Mansinghka and M/s Godavari Pulp & Paper Mills Pvt. Ltd.". The appellant has not shown any rent income from these two flats in the F.Y. 2015-16 and 2016-17. The appellant, out of sales consideration received in respect of these flats, had also made deposits of Rs. 30,01,000/- in "Capital Gain Deposit Account" in Indian Overseas Bank. After going through all the documents filed by the appellant, I do not find any justification for agreeing with the observation of the AO that "the alleged sale of property is a sham transaction and the receipts of Rs. 3,41,00,000/- was to be treated as deemed dividend in the hands of the appellant". Copy of all the documents filed by the appellant show that (agreements to sale, return of income filed by M/s Godavari Pulp & Paper Mills Pvt. Ltd. for A.Y. 2014-15, 2015-16 and 2016-17. Balance Sheet dated 31.03.2015, 31.03.2016 & 31.03.2017 of M/s Godavari Pulp & Paper Mills Pvt. Ltd., assessment order dated 29.09.2017 for A.Y. 2015-16 for M/s Godavari ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 8 Pulp & Paper Mills Pvt. Ltd., the cancellation agreement dated 03.04.2017, the deposits of Rs. 30,01,000/- made in Capital Gain Deposit Account by the appellant, tax deducted at source by M/s Godavari Pulp & Paper Mills Pvt. Ltd.) it is not correct that all these documents were prepared only as a colourable device to avoid tax liability on account of deemed dividend. None of the document could have been back dated, None of the document can be fabricated. The conclusion drawn by the AO that all the entries in the books of M/s Godavari Pulp & Paper Mills Pvt. Ltd. or in the books of appellant were made only to avoid the deeming Provisions of Section 2(22)(e) is based only on conjectures and surmises. I am fully convinced that the amount of Rs. 3,41,00,000/- was received by the appellant only against the sale of two flats as per the "agreements to sale" dated 31.03.2014 and it was not "advance or loan" as defined u/s 2(22)(e). Therefore, the Provisions of Section 2(22)(e) are not applicable to the amount of Rs. 3,41,00,000/- received by the appellant from M/s Godavari Pulp & Paper Mills Pvt. Limited. Accordingly, the addition of Rs. 3,41,00,000/- made by the AO u/s 2(22)(e) is hereby deleted. 5.0 In the result, the appeal is allowed.” 5. Feeling dissatisfied from the above findings of the ld. CIT(A), the Revenue has preferred the present appeal on the three grounds, which are interrelated and are common challenging the action of the ld. CIT(A) while deleting the addition of Rs. 3,41,00,000/- made under section 2(22)(e) of the Act by the ld. AO.The ld. DR representing the revenue contended that the assessee is Managing Director of the company and holding more than 10% of shares in M/s Godavari Pulp & Paper Mills Private Limited. The assessee claimed that two flats were sold by him to the company but in fact there is no sale by the assessee to the said company. Though consideration for the sale of flats alleged to have been paid but even though the assessee has not released the lien on account of pending loan with the Kotak Mahindra Bank Ltd. The assessee ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 9 contended that the said sale transaction subsequently cancelled on the reasons that the assessee has not cleared the loan amount and thereby the lien on the flats. Thus, the contention shows that the assessee has made a story to avoid the provisions of Section 2(22)(e) of the Act. The agreement was cancelled just before 15days just before the actual sale made on 21.04.2017 and the agreement was cancelled on 03.04.2017. These facts are duly recorded in the orders of the lower authorities and are very much clear to establish the contention of the ld. AO. The ld. DR representing the Revenue heavily relied upon the decision of Hon’ble Apex Court in the case of Vikram Krishna vs. Pr. CIT (2020) 114 taxmann.com 197 (SC), wherein based on the fact in that case, it is held that the agreement of sale and cancellation of such deed is merely covered up and a camouflage for giving loan to the assessee by the company to avoid contravention of the provisions of section 2(22)(e) of the Act. Based on these facts the ld. DR relied upon the findings of the lower authorities. Thus, the ld. DR in support the contentions so raised has relied upon the following decisions:- • Vikram Krishna vs. PCIT (2020) 114 taxmann.com 197(SC) • Kapil N Shah vs. ITO (2017) 85 taxmann.com 253 (Mumbai-Trib.) 6. Per contra, the ld. AR of the assessee supported the order of the ld. CIT(A) and submitted that the same has been passed after ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 10 considering the contention of the ld. AO. The order of the ld. CIT(A) is speaking order and has been passed after considering the evidence placed on record and thus there is no merits in the grounds of appeal of the revenue. To drive home to the various contentions of the ld. AO and that of the ld. DR the ld. AR of the assessee relied upon the submission and the same is reiterated here in below : “FACTS: The brief facts of the case are that the assessee is a individual and a regular IT asssessee. He is having income from salary, capital and other sources also rental income. For the year he has filled his ROI declaring the total income of Rs.16,44,210/- . The case of the assessee selected for the scrutiny. During the course of assessment proceedings the ld. AO has noted that the assessee has claimed deduction of Rs.1,16,33,502/- u/s 54 on the sale of two flats for Rs.2.0 crore and 1.41 core totaling to Rs. 3,41,00,000/- on 31.03.2015 to the Company M/s Godavari PuplpsPvt. Ltd. In which the assessee is also director and having holding of 14.11%. The flats No. 1304 & 1305 situated at Julian Apartment, Ivory Co-Operative Housing Society Ltd, Bhakti Park, Wadala(East) Mumbai. On being asked the details of deduction and property sold purchased, the assessee submitted the same. However the A/R by mistake filed the sale deed executed on dt. 21.04.2017 to the other persons in place of Sale agreements on dt. 31.03.2015, which was cancelled on 03.04.2017. The ld. AO has issued the Show cause notice that why the deduction claimed u/s 54 be rejected and to treat the consideration of Rs.3.41 crore received by you against the alleged sale consideration of property as deemed u/s 2(22)(e). In response thereto the assessee filed the reply vide page 8-9 of the assessment order. However the ld. AO did feel satisfy with the reply “The submissions of the assessee has been carefully considered but the same is not acceptable. The assessee submitted that agreement for sale of flats with M/s Godavari Pulp and Paper Mills P. Ltd was cancelled due to the assessee failed to get transferred them in favour of the company in a reasonable time period. It is very interesting, that the agreement for sale was cancelled on 03.04.2017 i.e. just before the sale of these flats to Kamble family on 21.04.2017. It is worthwhile to mention there that the assessee is managing Director in the company in question and also holing more than 10% shares. Thus a deeper study was needed to ascertain whether the transactions ware genuine transactions or sham and colourable device only to avoid tax liability on account of demand dividend. In short, it was to be ascertained whether the apparent was real. At the outset, neither agreement for sale nor deed of cancellation was notarized and these documents are only between the assessee and the company GPPL in which he has holding Managing Position, hence genuineness of these documents are not established. ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 11 When the deed was cancelled on 03.04.2017, then why the assessee has not suo- moto submitted all these facts during the assessment proceedings, it is only when he asked to show cause then he has submitted cancellation deed. In cancellation deed it is mentioned that the assessee has failed to repay the loan alongwith interest to Kotak Mahindra Bank and released bank’s charge on the said flats for the reason best known to him. The assessee has also not submitted any explanation during the assessee proceedings as to why the loan was not repaid and flats ware not transferred to the company when entire sale consideration was received in advance and what is astonishing in this case is that the company has paid loan Installment to the bank without holding title in its name. Thus, the whole scenario shows that the assessee required fund for purchasing another property but if he obtained loan from its company wherein he was managing director and holding more then 10% shares, then issue of demand dividend arises, therefore, a false agreement for sale was executed and when the property was actually sold, the agreement for sale was cancelled. However, it is a fact, that assessee has received Rs. 3,41,00,000/- from M/s. Godavari Pulp and paper Mills P. Ltd. Which is shown in his return of income. In view of the above facts, it is held that the property being Fiat No. 1304 and 1305 were never sold to M/s. Godavari Pulp & Paper Mills P. Ltd. Property shown to sold through an agreement of sale is not correct as the “Agreement for sale” does not have any legal value. Thus, alleged sale of property is a sham transaction. Since, there is no sale of property assessee’s claim of cost of assets and deduction u/s. 54 of the I.T. Act are not allowable against receipt of 73,41,00,000/- from M/s. Godavari Pulp and Paper Mills P. Ltd. Assessee has received Rs. 3,41,00,000/- from M/s. Godavari Pulp and Paper Mills P. Ltd. Wherein he is Managing Director and holding more than 10% shares of the company. Also, general reserve of the company as per balance sheet dated 31.03.2015 are Rs. 4,50,00,000/-. Therefore, receipts of Rs. 3,41,00,000/- is hereby treated as deemed dividend in the hands of the assessee and added to the total income. Against this the assessee has filed the appeal before the ld. CIT(A). Before the CIT(A) assessee has filed detailed WS and details vide page 3 to 8 of the ld. CIT(A) order. Where he has explained all the facts and position and the ld. CIT(A) after considering the same has deleted the addition vide his observation at page 8-10.Against which the revenue is in appeal before your honor. SUBMISSIONS: 1. At the very outset we strongly rely upon on the order of the ld. CIT(A). 2. Correct facts not considered by the ld. AO but rightly considered by the CIT(A): As the assessee had purchased two adjoining flats being flat Nos. 1304 & 1305 in the building known as Julian Appt, Ivory Towers Co-Operative, Housing Society Ltd, Bhakti Park, Wadala (East), Mumbai- 400037, vide instruments of purchases dated 15.02.2008. ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 12 Aforesaid flats were sold by the assessee to M/s. Godavari Pulp & paper Mills Pvt. Ltd. Mumbai, in which the appellant is a share holderholding 14.11 % voting rights in the paid-up share capital of the said company as also he is a Managing Director of the company, vide agreement of sale dated 31.05.2015 for an agreement consideration of Rs. 3,41,00,000/-. Simultaneous to execution of aforesaid agreement and as evident, vide clause 8 of the agreement, vacant & peaceful possession of both the flats was handed over to the company. Since the appellant had obtained financial assistance from Kotak Mahindra Bank Ltd. For purchases of said flats a covenant was recorded in the said agreement that it will be the responsibility of the appellant to pay off and settle bank liability and accordingly Rs. 69,28,745/- being aggregated amount of part of purchases consideration was retained by the said buyers ( viz Godavari Pulp & Paper Mills Pvt. Ltd.). The appellant, however could not liquidate the bank liability hence the company eventually cancelled the said agreement dated 31.05.2015 vide a cancellation deed executed on 03.04.2017 by and between the appellant and said Company. During the course of the assessment proceedings, when the Assessing Officer called for a copy of sell deed, the authorized representatives staff in a hurry and by mistake, filed a copy of sale agreement dated 21.04.2017 which was executed by the appellant and some other party (Shri Kundalik K. Kamble and Smt. Priya K. Kamble ) after cancellation of earlier sale deed dated 31.03.2015, on 03.04.2017. The Assessing Officer, on receipt of the said documents, tried to make a hill out of a mole by assuming many unsubstantiated facts and eventually held that the transaction of sale of property was not a valid transaction and that the whole of the consideration amount was a loan given by the company to the appellant and went further to invoke the provisions of sec. 2(22)(e) of the I.T. Act, 1961 holding it to be a case of deemed dividend. It is submitted that the conclusions drawn by the learned Assessing Officer are erroneous and contrary to the statutory provisions. Sec. 2(47) of the I.T. Act, 1961, defines the term transfer and includes almost all kind of transfer modes in its fold. In the case of the appellant, though it is very clearly mentioned in the document of transfer that it is a transaction of sale, the Assessing Officer did not agree with the contents of the said agreement for following reasons : • Neither agreement for sale nor deed of cancellation were notarized and these documents were only between the assessee and the company GPPL in which he was holding managing position. • Why the cancellation deed dated 03.04.2017 was not submitted suo-mota. • The appellant did not pay back the loan amount. • The Company paid loan installment to the bank without holding title in its name. (A) In this regard it is submitted that the reasoning of the Assessing Officer is wrong and contrary to the express provisions of the Act. Nowhere in the income tax Act, it is required that documents conveying intention of transfer of property should be compulsorily notarized. However the ld. AOo has ignored the facts the same was executed on Stamp of Rs.100/-. On the contrary the definition of transfer in sec. 2(47) of I.T. Act, 1961, not only include the direct sale, but also treat the transaction ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 13 involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to sec.53 A of the Transfer of Property Act, 1882, as sale only. Vide following provisions: S. 45 says “45(1) Any profit and gains arising from the transfer of a capital assets effected in the previous years shall, save as otherwise provided in S. 54.... be charged to income tax under the head “ Capital Gains” and shall be deemed to be the income of the previous year in which the transfer took place.” Here the word is given transfer not sale consideration or date of Registry and the definition of transfer is given in S. 2(47) of the Act as under “ S. 2(47) “Transfer” in relation to a capital assets, includes,- • the sale, exchange or relinquishments or • the extinguishment of any rights therein (v) any transaction involving theallowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in S. 53A of the Transfer of Property Act 1882.” As in the present case transfer had been taken place on 31.03.2015when sale agreement has been done and payment received. And the assessee has also given unconditionally possession/ownership in favor of the purchaser. These facts have also not denied by the ld. AO Section 53A in The Transfer Of Property Act, 1882 53A. 1[ Part performance.- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.] Thus a perusal of the terms of the deed of sale dated 31.03.2015, clearly shows the intention of the parties to treat the transaction as a transaction of sale instead of loan, inasmuch as, partial payment of consideration was acknowledge by the parties to the agreement and possession of the property was also handed over which is recorded in clause 8 of the agreement dated 31.03.2015. ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 14 (B) Regarding non disclosure of cancellation deed dated 03.04.2017, it is submitted that as the said transaction of cancellation was not relevant for the purpose of assessment for the assessment year under consideration, hence it was not submitted initially. In any case, said deed of cancellation, was also submitted to the Assessing Officer when the situation so demanded and not that the appellant had deliberately tried to withheld the facts. (C) The third reason of doubting the sale transaction by the Assessing Officer is that the appellant did not pay back the loan amount to Kotak Mahindra Bank Ltd. As the appellant himself was facing financial crunch, he could not pay the loan amount immediately. This fact was disclosed in the sale deed itself and the appellant had undertaken the responsibility to liquidate said liability. In a situation like this, how a transaction of sale can be doubted. If the Company paid loan amount to the bank there is no wrong, because the Company has kept part amount out of sale consideration and the Company has purchased and there was interest of the company, this facts although support the case of the assessee. (D) The fourth and final reason is that the loan installment was repaid by the Company and not by the appellant. The company paid only Rs. 12,12,755/- ( 505314+707441) towards loan liability which was necessary for the company to protect the property purchased. Failure of payment of EMI due would have resulted in invocation of collateral by means of which the bank would have taken the possession of the property. The appellant has repaid the said amount to the company on cancellation of sale deed. 3. While concluding his reasoning’s it is stated by the Assessing Officer that assessee needed funds for purchasing another property, hence a false agreement was executed to avoid the rigors of sec. 2(22)(e). In this context, it is to be noted that the appellant deposited Rs. 30,01,000/- with Indian Overseas bank in Capital Gain Deposit Account which fact was completely ignored by the Assessing Officer. In the premise of the above stated facts and statutory provisions, it is submitted that the conclusion of the Assessing Officer is patently erroneous and hence deserved to be discarded. 4. Further the ld. AO has made the addition of Rs. 3,41,00,000/- to the returned income, without even specifying the head of income, by recourse of sec. 2(22)(e) of I.T. Act. As the Section 2(22)(e) applies in case of any payment made by a closely held Company by way of advance or loan. Term advance or loan appearing in section 2(22)(e) must be construed to mean, those advances or loans which a shareholder enjoys simply on account of being a person who is the beneficial owner of shares holding not lees than ten percent of the voting power, but if such payment is given to such share holder a consequence of any further consideration which beneficial to the Company received from such share holder, in such cases, such payment cannot be said to be deemed dividend. The appellant has received Rs. 3,41,00,000/- from M/s. Godavari Pulp & Paper Mills Pvt. Ltd. Towards the sale consideration of immovable property being 2 flats at Mumbai, and not as and by way of either loan or advance as contemplated by sec. 2(22)(e) of the I.T. Act, 1961. Provisions of sec. 2(22)(e) cannot be invoked in this situation. The Hon’ble Delhi High Court in the case of CIT V. Rajkumar 181 Taxman 155 has held that: ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 15 “The word ‘advances’ which appears in the company of the word loan, in sec. 2(22)(e) can only mean such advances which carries with an obligation of re- payment. Trade advances, which is in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provision of sec. 2(22)(e)”. 5. The Assessing Officer has not brought any material or evidence on record to discredit the deeds of sale dated 31.03.2015 and rested his convections merely on the conjectures and surmises. In the premise as aforesaid, the amount received by the appellant towards sale consideration of the property sold, cannot be brought to tax by resort to sec 2(22)(e) of the Act. The ld. AO has nowhere has proved that the amount was received was a interest free loan or advances not of against the sale consideration. On perusal of the assessment order also the ld. AO stated clearly that these were loan or advances. If these were loan or advances the assessee could not have shown the LTCG in the ITR nor the company would have shown in the fixed assets of its Balance Sheet. The appellant, after conclusion of the sale of the flats and receipt of sale consideration, deposited a sum of Rs. 30,01, 000/- in designated account being capital gain deposit account with Indian Overseas Bank and invested balance of capital gain at Rs. 86,54,360/- towards purchases of a new house. The Assessing Officer ignored the factual position in its entirety and disallowed the said amount of deposit and reinvestment amount to allow the exemption u/s 54 of the I.T.Act. 1961. The ld. AO nowhere denied the facts of depositing in the Capital gain account, nor the purchase of new assets. The revenue has also consider the interest income from the LTCG account. All these show the contradictory approach of the revenue. Since the appellant complied with the statutory requirements in its true intent, he is entitled or the deduction allowed by the statute. 6. The Assessing Officer, after holding the transaction of sale of property as a device rejected the claim of the appellant, without appreciating the fact that in the case of the Company the balance sheet as at 31 st March, 2015 (copy enclosed) depicted the investment in property in its schedule of fixed assets, and that in the assessment proceedings of the company, no adverse view was taken. We had also filled a copy of assessment order passed for the even assessment in the case of the company also for your honours ready reference and submit that the impugned addition has been made without any basis, without any material or evidence to controvert the facts and in an arbitrary manner hence deserves to be set aside. To conclude, it is urged before your honour that the impugned assessment order has been passed without appreciating all aspects and facts of the case, which is evident from the fact that appellant did not even receive the entire amount of Rs. 3,41,00,000/-, but still the addition has been made for that count. The impugned addition therefore deserves to be deleted in its entirely.” 7. Further on being asked by the ld. CIT(A) the assessee has further submitted before the ld. CIT(A) as under: “ Kindly refer the appellant proceedings dated 12.03.2018 in the case of the above referred appellant for the captioned assessment year when we were asked to submit certain details/ explanations etc. ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 16 As desired by your honour, we are submitting following for your kind consideration: • The flats sold by the appellant on 31.03.2015 could not be transferred in the record of the society viz, Ivory Towers Co. op. Housing Soc. Ltd., since the stamp duty registration of the agreement for sale was not completed, as the appellant could not pay off the housing loan liability to Kotak Mahindra Bank Ltd. The appellant, however, handed over the physical possession of the flats in question as evident from clause 8 of the agreement for sale dated 31 st March, 2015 and which is recorded as assets by the purchasing party viz, Godavari Pulp & Paper Mills Pvt. Ltd. in its financial statements. In view of sec. 2(47)(i) & 2(47) (v) of the I.T.Act, 1961, transfer is completed and non-registration / transfer of flats in the records of the society is inconsequential in so far as the computation of capital gain is concerned. It has been held in catina of cases that provisions of other statutes cannot be imported into the I.T. Act, to decide whether a transaction is exigible to tax or not, few of which are as under: ITO Ward 6(2), New Delhi V Maruti Countrywide Auto Financial Services P. Ltd. 115 ITD 329 (Delhi); “ The Madras High Court in the case of T.N.Power Finance & Infrastructure Corpn Ltd V Dy CIT (2006) 280 ITR 491 has held that RBI Guidelines cannot override the statutory provisions of Income Tax act. As on date, no contrary decisions of any other High Court was cited by the assessee, therefore, no controversy exsisted when the Assessing Officer sought to rectify the order u/s 154. Another contention of the assessee that the RBI Guidelines made inroads into the provisions of sec. 145 was also devoid of any merits. If the contention of the assessee was accepted, it would amount to allowing the assessee to follow hybrid system of accounting, which is not permissiable in view of provisions of sec. 145 with effect from 01.04.1997. T.N. Power Finance & Infrastructure Development Corporation Ltd V Jt Commissioner of Income Tax 280 ITR 491 ( Madras); “Reserve bank directive cannot override statutory provisions of Explanation to sec.36(1) (vii)-Provision for non-performing assets debited to P & L a/c as per RBI directions cannot be allowed as bad debit in view of mandatory provisions of Explanation to s 36(1)(vii) “. CIT V Sawhney Exports 304 ITR 93 (Delhi); “It was further held that the approval from the RBI was not a mandatory condition for writing off, under the provisions of the Act and as such the addition of Rs 31,62,238/- was deleted.” To sum up the issue, it is urged that in view of specific provision of the I.T. Act, 1961 vide sec. 2(47)(i) / 2(47)(v) the transfer is completed and capital gain has to be computed accordingly. • Maintenance charges in respect of two flats was paid to Ivory Towers Co-Op Housing Society Ltd. By M/s. Godavari Pulp & Paper Mills Pvt. Ltd. in support where of copy of ledger account in the books of Godavari Pulp & Paper Mills Pvt.LTd. Are enclosed for 01.04.2015 to 31.03.2016 and 01.04.2016 to 31.03.2017. • Copy of appellant’s account in the books of M/s. Godavari Pulp & Paper Mills Pvt.Ltd. enclosed for there years commencing from 01.04.2015. ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 17 • Three year’s financial statements ( 01.04.2014 to 31.03.2017) of M/s. Godavari Pulp & Paper Mills Pvt.LTd. • Original sale deeds are produced herewith for your honour’s kind perusal. • The appellant closed the loan account on 31.05.2017. In the context of aforesaid discussions, we urge your honour to kindly delete the impugned addition made to the returned income and oblige.” 8. The ld. CIT(A) after considering all the above facts, circumstances and legal position of law has deleted the addition by observing as under “4.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that the appellant had filed the return of income, in which sale of immovable property for the consideration of Rs. 3,41,00,000/- was shown as under: Full value consideration Rs. 3,41,00,000/- Less: Cost of acquisition with indexation Rs. 2,24,66,948/- Deduction u/s 54 Rs. 1.16,33,502/- LTCG on movable property Nill The sales consideration was shown as per the “agreements to sale” dated 31.03.2015. As per the “agreements to sale” dated 31.03.2015, the appellant had agreed to sale and transfer to M/s. Godavari Pulp & Paper Mills Pvt. Ltd. flat No. 1304 and 1305 for the consideration of Rs. 2 crore and Rs. 1,41,00,000/- respectively. The tax was deducted at source as per the Provisions of sec. 194(1)(a) by M/s. Godavari Pulp & Paper Mills Pvt. Ltd. On the sales consideration paid to the appellant. The tax so deducted at source was deposited by M/s. Godavari Pulp & Paper Mills Pvt.Ltd. to the account of the government. M/s. Godavari Pulp & Paper Mills Pvt.Ltd. has shown both the flat as addition to asset ( Rs. 3,41,00,000). In the balance sheet dated 31.03.2016 and 31.03.2017 also, these flats have been shown as part of the fixed assets of the M/s. gaodvari Pulp & Paper Mills Pvt. Ltd. The assessment of M/s. Godavari Pulp & Paper Mills Pvt.ltd. fot A.Y 2015-16 has been completed u/s 143(3). The AO has not made any adverse comment about the purchased of the flat for Rs. 3,41,00,000/- shown by M/s. Godavari Pulp & Paper Mills Pvt. Ltd. In their books of accounts. The AO of M/s. Godavari Pulp & Paper Mills Pvt.Ltd. has not given the finding that funds of Rs. 3,41,00,000/- were utilized by the company for giving advance to Shri pankajMansinghka for other than business purpose. M/s. Godavari Pulp & Paper Mills Pvt. Ltd. Only has paid maintenance charges of these flat for the F.Y. 2015-16 and 2016-17. In other words, M/s. Godavari Pulp & Paper Mills Pvt. Ltd. Had shown purchase of these flats in their books of accounts and these flats are appearing in the the books of M/s. Godavari Pulp & Paper Mills Pvt. Ltd. As part of fixed on 31.03.2015, 31.03.2016 and 31.03.2017. 4.4 The “agreements to sale” were made on Rs. 100 Non Judicial Stamp Paper. The stamp paper was purchased for “ agreement” between “ Pankaj Mandinghka and M/s. Godavari Pulp & Paper Mills Pvt. Ltd.” The appellant has not shown any rent income from these two flats in the F.Y. 2015-16 and 2016-17. The appellant, out of ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 18 sales consideration received in respect of these flats, had also made deposits of Rs. 30,01,000/- in “Capital Gain Deposit Account” in Indian Overseas bank. After going through all the documents filed by the appellant, I do not find any justification for agreeing with the observation of the AO that “the alleged sale of property is a sham transaction and the receipts of Rs. 3,41,00,000/- was to be treated as deemed dividend in the hands of the appellant”. Copy of all the documents filed by the appellant show that (agreements to sale, return of income filed by M/s. gadavari Pulp & Paper Mills Pvt. Ltd. For A.Y. 2014-15, 2015-16, and 2016-17, balance Sheet dated 31.03.2015, 31.03.2016 & 31.03.2017 of M/s. gadavari Pulp & Paper Mills Pvt. Ltd. Assessment order dated 29.09.2017 for A.Y. 2015-16 for M/s. Godavari Pulp & Paper Mills Pvt. Ltd., the cancellation agreement dated 03.04.2017, the deposit of Rs. 30,01,000/- made in Capital Gain Deposit Account by the appellant, tax deducted at source by M/s.gadavari Pulp & Paper Mills Pvt.Ltd. ) it is not correct that all these documents were prepared only as a colourable device to avoid tax liability on account of deemed dividend. None of the document could have been back dated. None of the document can be fabricated. The conclusion drawn by the AO that all entries in the books of M/s. Godavari Pulp & Paper Mills Pvt. Ltd. Or in the books of appellant were made only to avoid the deeming provisions of sec 2(22)(e) is based only on conjectures and surmises. I am fully convinced that the amount of Rs. 3,41,00,000/- was received by the appellant only against the sale of two flats as per the agreements to sale dated 31.03.2014 and it was “ advance or loan” as defined u/s 2(22)(e). therefore, the provisions of sec. 2(22)(e) are not applicable to the amount of Rs. 3,41,00,000/-received by the appellant from M/s. Godavari Pulp & Paper Mills Pvt. Ltd. Accordingly, the addition of Rs. 3,41,00,000/- made by the AO u/s 2(22)(e) is hereby deleted. 9. Hence we pray that the above finding of the ld. CIT(A) may also kindly be considered as our WS before your honor. 10. Further when the assessee himself has offered the sale in the ITR itself and shown the LTCG then it has not remained a case of loan or advances as misinterpreted by the ld. AO. The payment by the company to the bank against the loan taken by the assessee also proves that this is sale transaction. Further when the amount has been taken on 31.03.2015 then how the amount can be understood said to be used interest free for whole year. Further when in support the assessee has produced various facts, evidences, documents then how the addition can be made on assumption presumption, guess work and suspicion And it is settled legal position that no addition or assessment can be made on assumption, presumption and suspicion, suspicion may be strong but cannot take the place of reality, are the settled principles kindly refer Dhakeshwari Cotton Mills 26 ITR 775 (SC) also refer R.B.N.J. Naidu v/s CIT 29 ITR 194 (Nag), Kanpur Steel Co. Ltd. v/s CIT 32 ITR 56 (All) . Also refer CIT v/s Kulwant Rai 291 ITR 36( Del). Where held that it is well settled legal position in respect income tax assessment proceeding that although strict rule of Evidence Act do not apply in assessment proceeding, assessment cannot be made on imagination and guesswork also refer . DhirajlalGirdharilal v CIT (26 ITR 736 (SC), Omar Salary Mohanmed Sait v CIT (37 ITR ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 19 151) (SC), Lekchabnd Bhagat Ambica Ram v CIT (37 ITR 285) (SC), CIT v Nandini C. (1989) 230 ITR 679, 689 (Cal). Thus the documentary evidences cannot be discarded or denied all together on the basis of assumption, presumption, guess work and suspicion. The ld. AO has not made any inquiry from the purchasers or company before making the addition despite all the details available before him. 10. Judgment relied upon by the DR is not applicable: Further during the course of last hearing the ld. DR relied upon the decision in the case of Vikram Krishna where the SLP of has been dismissed. However the same is not applicable in the present case and distinguishable from the facts of the present case as under: In case Vikram Krishna In case of assesse 1. It is treated Advances by both the parties Not treated as advance by both the parties 2. Only 20% amount received and treated as adnavces Full payment received except bank dues 3. No transfer U/s 2(47) Transfer u/s 2(47) 4. No LTCG shown in return LTCG shown in Return 5. No deduction claimed u/s 54 Deduction claimed u/s 54 6. No deposit in capital gain account Deposit in the capital gain 7. Purchaser Not shown the property in assets in company fixed assets. Purchaser Shown as assets in the company fixed assets 8. Sale deed cancelled with in the year Resale after tow year. 9. Assessee enjoyed the property Assessee not enjoyed the property and not has any income from this property in that period. 10. No tax on deposit in Capital Gain account interest in later years Tax on interest on Capital Gain Interest in later year. 11. Part Amount repaid from advances Full amount repaid from advances 12. No Loan from Bank Loan from Kotak Mahindra bank 13. Not accepted LTCG LTCG accepted 14 Holding 50% Holding 14.11% 15 Material Produced Material Produced Thus the case law relied upon does not applicable in the present case. In the case of pr. CIT (CENTRAL) vs. DWARKA PRASAD AGGARWAL February 13, 2018 (2018) 101 CCH 0527 DelHC it has been held that As far as the additions made ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 20 under Section 2(22)(e) goes, both the authorities held that the assessee had provided security by way of mortgage of his personal property so that M/s Pilot Industries could obtain bank loans. In lieu of that security, assessee was provided with loans. This kind of transaction though facially suspect, stands sufficiently explained. The Court also notices that the recent Board’s circular in this regard (which is dated 12.06.2017- circular 19/2017) is based upon judicial decisions of various High Courts and has guided the Income Tax Authorities 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. Furthermore, similar decisions have been rendered by various High Courts including this Court in Commissioner of Income Tax vs. Raj Kumar, (2009) 318 CTR 462, Commissioner of Income Tax vs. F. Praveen, (2008) 220 CTR 639 (Mad.) etc. Thus the property transferred was in the possession of the Purchaser and Company has enjoyed the same. The assessee has not used that property in that period, the same was used by the purchasers. Hence it is the business transaction not simple advance. Further in support we filed the ledger account of maintenance of the flats, which shows that the same has been paid by the company, electricity bill has also been paid by the company and the same were used by the company for its own or company purpose. And these facts has been ignored by the ld. AO. Further on perusal of the Computation of later years it shows that the assessee has also not claimed any house property income or deduction. Which has been claimed in earlier years. Prayer:-In view of the above facts, submissions and legal position the appeal of the revenue may kindly be dismissed and oblige.” 6.1 The ld. AR of the assessee in support of the contention so raised in the written submission has also filed paper book containing the evidences/ judgements which is listed here in below : S. No. Description Pages. 01 Copy of computation of income 1-3 02. Copy of submission before CIT(A) dated 12.03.2018 with Annexures 4-37 Copy of submission before CIT(A) dated 26.03.2018 with Annexures 38-50 04 Copy of decision reported in: • 115 ITD 329 (Del) 51-54 • 280 ITR 491 (Mad) 55-57 ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 21 • 304 ITR 93 (Del) 58-60 • 105 ITR 642 (SC) 61-67 • 319 ITR 437 (Guj) 68-71 • 162 ITR 460 (Bom) 72-80 • 121 TTJ 713 (Chennai) 81-87 6.2 The ld. AR of the assessee vehemently submitted that the issue is to be decided in this case as to whether receipt of money from M/s Godavari Pulp & Paper Mills Private Limited is loan transaction or the transaction for sale of the property. The assessee contended that the impugned receipt cannot be termed as loan transaction as all the evidences placed on record categorically proves that the transactions made by the assessee is for sale of two flats and not of any loan transaction alleged by the Revenue. Even the computation of income (paper books No. 1 to 3) the assessee has shown the capital gain transactions arising out of such sale of two flats for a consideration of Rs. 3,41,00,000/-.The computation of capital gain is not disputed by the Revenue at the time of the assessment and the same receipt cannot considered as for charging the capital gain and the loan at the same time. The Revenue has not disputed any of the evidences placed on record in support of the computation of capital gain. The contention of the Revenue that the transactionsis camouflage as sale of property is not correct, as the society maintenance charges were paid by the company and this fact placed on record is not disputed. Therefore, considering ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 22 over all evidence and facts placed on record, the decision of the ld. CIT(A) is on merits and the decision of the ld. CIT(A) is purely based on facts an appreciation of evidences placed on record. Therefore, heavily relied upon the findings of the ld. CIT(A) in his case. So far as the decision relied upon are on having different facts and the same is not applicable to the facts of the case on hand. 7. We have heard the rival contentions and perused the material placed on record and gone through the various judicial precedent cited by both the parties to drive home to their contention. The apple of the discord in this case is that the assessee has received consideration for sale of two flats for Rs.2.0 crore and 1.41 core totaling to Rs. 3,41,00,000/- on 31.03.2015 from M/s Godavari PuplpsPvt. Ltd. In that company the assessee is director and having holding of 14.11%. The assessee has offered the computation of the capital gain of the flats No. 1304 & 1305 situated at Julian Apartment, Ivory Co-Operative Housing Society Ltd, Bhakti Park, Wadala(East) Mumbai. In the assessment proceeding on being asked the details of deduction and property sold, the assessee submitted the butby mistake filed the sale deed executed on dt. 21.04.2017 to the other persons in place of Sale agreements on dt. 31.03.2015 with M/s Godavari Pulp & Paper Mills Private Limited. The said deal of sale of flats was cancelled on 03.04.2017. The ld. AO ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 23 has issued the Show cause notice stating that why the deduction claimed u/s 54 be rejected and to treat the consideration of Rs.3.41 crore received byassessee and alleged that the same is not for sale consideration of property but is a deemed income u/s 2(22)(e). The submission of the assessee was rejected asthat agreement for sale of flats with M/s Godavari Pulp and Paper Mills P. Ltd was cancelled due to the assessee failed to get transferred them in favour of the company in a reasonable time period. The ld. AO noted that the agreement for sale was cancelled on 03.04.2017 i.e. just before the sale of these flats to Kamble family on 21.04.2017. The ld. AO noted that since the assessee is managing Director in the company in question and also holing more than 10% shares the transactions was not considered as genuine transactions and was alleged as sham and colourable device to avoid tax liability on account of demand dividend. The ld. AO contended that when the deed was cancelled on 03.04.2017, then why the assessee has not suo-moto submitted all these facts during the assessment proceedings, it is only when assessee was asked to show cause then he has submitted cancellation deed.In cancellation deed it is mentioned that the assessee has failed to repay the loan along with interest to Kotak Mahindra Bank and released bank’s charge on the said flats. The ld. AO contended that the assessee has also not submitted any explanation during the assessment proceedings as to why the loan was not repaid ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 24 and flats ware not transferred to the company when entire sale consideration was received in advance for an amount of Rs. 3,41,00,000/- from M/s. Godavari Pulp and paper Mills P. Ltd. The said income / receipt is shown as capital gain the return of income filed by the assessee and the same is not disputed by the revenue. The ld. CIT(A) has considered the overall facts and evidences placed before him and accepted the fact that assessee had purchased two adjoining flats being flat Nos. 1304 & 1305 in the building known as Julian Appt, Ivory Towers Co-Operative, Housing Society Ltd, Bhakti Park, Wadala (East), Mumbai- 400037, vide instruments of purchases dated 15.02.2008. The said two flats were sold by the assessee to M/s. Godavari Pulp & paper Mills Pvt. Ltd. Mumbai, in which the appellant is a share holderholding 14.11 % voting rights in the paid-up share capital of the said company as also he is a Managing Director of the company, vide agreement of sale dated 31.05.2015 for an agreement consideration of Rs. 3,41,00,000/-.It is not under dispute that vide clause 8 of the agreement, vacant & peaceful possession of both the flats was handed over to the company and based on that capital gain has already been offered by the assessee and accepted by the revenue. Thus, the said receipt has already been considered as sale consideration of the flats and accepted by the revenue then the same income cannot be considered as deemed dividend merely on the reasons that the deal was cancelled. Thus, the ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 25 finding of the ld. AO is contrary to the statutory provisions. Sec. 2(47) of the I.T. Act, 1961, defines the term transfer and includes almost all kind of transfer modes in its fold. In the case of the assessee, though it is very clearly mentioned in the document of transfer that it is a transaction of sale, the Assessing Officer did not agree with the contents of the said agreement for the reasons that neither agreement for sale nor deed of cancellation were notarized and these documents were only between the assessee and the company GPPL in which he was holding managing director position.Why the cancellation deed dated 03.04.2017 was not submitted suo-moto. The appellant did not pay back the loan amount.The Company paid loan instalment to the bank without holding title in its name. We considered the arguments of the assessee that it is not required that documents conveying intention of transfer of property should be compulsorily notarized. The definition of transfer in sec. 2(47) of I.T. Act, 1961, not only include the direct sale, but also treat the transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to sec.53 A of the Transfer of Property Act, 1882, as sale only.Thus a perusal of the terms of the deed of sale dated 31.03.2015, clearly shows the intention of the parties to treat the transaction as a transaction of sale instead of loan, inasmuch as, partial payment of consideration was acknowledge by the parties to the agreement and ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 26 possession of the property was also handed over which is recorded in clause 8 of the agreement dated 31.03.2015.Consequently revenue also taxed the assessee on the capital gain arising out of the sale of the said property. Regarding non disclosure of cancellation deed dated 03.04.2017, it is submitted that as the said transaction of cancellation was not relevant for the purpose of assessment for the assessment year under consideration as the same has already been taxed in the year under consideration. The third reason of doubting the sale transaction by the Assessing Officer is that the appellant did not pay back the loan amount to Kotak Mahindra Bank Ltd for which the assessee contended that the reason for sale of the flats was on account of the financial crunch and that is why he could not pay the loan amount immediately. The fourth reason is that the loan instalment was repaid by the Company and not by the assessee, for which it is evident that the company paid only Rs. 12,12,755/- ( 505314+707441) towards loan liability which was necessary for the company to protect the property purchased. Failure of payment of EMI due would have resulted in invocation of collateral by means of which the bank would have taken the possession of the property. The assessee has repaid the said amount to the company on cancellation of sale deed. As regards the fund required to be new property and thus this loan was obtained by the assessee, this contention of the ld. AO it is clear that theassessee deposited Rs. ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 27 30,01,000/- with Indian Overseas bank in Capital Gain Deposit Account which fact was completely ignored by the Assessing Officer.Thus, considering the overall discussion and facts available on record we are of the considered view that there is no infirmity in the findings of the ld. CIT(A) and the addition of Rs. 3,41,00,000/- has rightly been deleted by the ld. CIT(A) as the Section 2(22)(e) applies in case of any payment made by a closely held Company by way of advance or loan. The term advance or loan appearing in section 2(22)(e) must be construed to mean, those advances or loans which a shareholder enjoys simply on account of being a person who is the beneficial owner of shares holding not lees than ten percent of the voting power, but if such payment is given to such share holder a consequence of any further consideration which beneficial to the Company received from such share holder, in such cases, such payment cannot be said to be deemed dividend as the assessee has received Rs. 3,41,00,000/- from M/s. Godavari Pulp & Paper Mills Pvt. Ltd. towards the sale consideration of immovable property being 2 flats at Mumbai, and not as and by way of either loan or advance as contemplated by sec. 2(22)(e) of the I.T. Act, 1961. Provisions of sec. 2(22)(e) cannot be invoked in this situation. The decision relied upon by the ld. DR is clearly distinguishable and the same is already appeared in the written submission and the same is thus considered but are not applicable to the facts of the present case. ITA No. 280-Jodh-2018 Shri Pankaj Kumar Mansinghka 28 Thus, considering the discussion recorded herein above and on careful consideration of the order of the ld. CIT(A) we see no to interfere with the detailed findings recorded by the ld. CIT(A) and by the bench herein above the ground No. 1 to 3 raised by the Revenue stands dismissed and ground No. 4 being general in nature and not decided. In the result, the appeal of the revenue is dismissed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judcial Member Accountant Member Dated 22/02/2024 Santosh(On Tour) Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order