PRATEEK KOTHARI, Jaipur V. ACIT, Jaipur

ITA 312/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5231 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 31-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Search and seizure; Salary income; Loose papers; Opportunity of being heard; Deemed dividend; Unabsorbed depreciation
• Section: 143(3); 153A; 132; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 312/JP/2015 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2007-08 PRATEEK KOTHARI, H-12, SUKHI JEEWAN COMPLEX, JACOB ROAD, JAIPUR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: ABIPK 8090 R VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI VIJAY GOYAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI M.S. MEENA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 26/05/2016 MN?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 15/06/2016 VKNS'K @ ORDER PER: T.R. MEENA, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 25/02/2015 PASSED BY THE LEARNED CIT(A)-4, JAIPUR, FOR A.Y. 2007-08. THE RESPECTIVE GROUNDS OF APPEAL RAISED BY THE APPELLAN T ARE AS UNDER:- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 24,80,911/- MADE ON ACCOUNT OF ADVANCE RECEIVED BY THE ASSESSEE FROM M/S NAKSHATRA REAL ESTATES PRIVATE LIMITED. ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 2 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) ERRED IN HOLDING THAT THE ADVANCE RECEIVED BY THE ASSESSEE FROM M/S NAKSHATRA REAL ESTATES PRIVATE LIMITED AMOUNTING TO RS. 24,80,911/- REPRESENTS LOAN AND PROVISIONS OF SECTION 2(22)(E) OF INCOME TAX ACT, 1961 WERE ATTRACTED. 3. THAT THE ORDER OF THE LD CIT(A), CONFIRMING THE ADDITION MADE BY THE LD ASSESSING OFFICER ON ACCOUN T OF DEEMED DIVIDEND BY APPLYING THE PROVISIONS OF SECTION 2(22)(E) OF INCOME TAX ACT IS ARBITRARY, WHIMSICAL, CAPRICIOUS, PERVERSE AND AGAINST THE LAW AND FACTS OF THE CASE. THE ORDER OF LD CIT(A) IN THIS REGARD DESERVES TO BE SET ASIDE AND ADDITION MADE BY THE LD ASSESSING OFFICER DESERVES TO BE DELETED. THE ASSESSEE HAS ALSO TAKEN ADDITIONAL GROUND, WHICH IS REPRODUCED AS UNDER:- THE ASSESSMENT ORDER PASSED U/S 153A READ WITH SECTION 143(3) OF THE INCOME TAX ACT FOR ASSESSMENT YEAR 2007-08 IS BAD IN LAW, VOID AB-INITIO, AND ALSO THE ADDITION MADE THEREIN DESERVES TO BE DELETED AS NO ADDITION CAN BE MADE IN THE ASSESSMENT MADE U/S 153A READ WITH SEC. 143(3) CONSEQUENT TO THE SEARCH UNLESS SOME INCRIMINATING MATERIAL IN SUPPOR T OF THE ADDITION IS FOUND AS A RESULT OF SEARCH. 2. THE ASSESSEE HAS INCOME FROM SALARY, CAPITAL GAIN AND OTHER SOURCES. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT BY THE DEPARTMENT U/S 132 OF THE INCOME TAX ACT, 1961 (IN SHORT THE AC T) AND SURVEY U/S 133 OF THE ACT WAS CARRIED OUT BY THE DEPARTMENT ON THE MEMBERS OF KGK ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 3 GROUP ON 06/5/2010. ASSESSEE IS A MEMBER OF PRATEEK KOTHARI SUB-GROUP. THE LD ASSESSING OFFICER OBSERVED THAT DURING THE CO URSE OF SEARCH, CASH JEWELLERY, STOCK IN TRADE, VALUABLES, DOCUMENTS, BOO KS OF ACCOUNT AND LOOSE PAPERS WERE FOUND AND SEIZED FROM THE PREMISES OF TH E MEMBERS OF KGK GROUP OF WHICH ONE SUCH MEMBER HAPPENS TO BE THE ASS ESSEE. NOTICE U/S 153A OF THE ACT WAS ISSUED ON 16/9/2001 TO FILE RETU RN AS PER RULE 12 OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES). THE ASSESSEE HAD FILED RETURN DECLARING TOTAL INCOME OF RS. 6,21,000/- AND SPECULATION BUSINESS LOSS OF RS. 3,90,430/-, UNABSORBED DEPRECIATION FOR CURRENT YEAR OF RS. 2,51,106/- WITH BROUGHT FORWARD LONG TERM CAPITAL LOS S OF A.Y. 2005-06 AT RS. 5,65,025/- WAS FILED ON 25/10/2011. THE ORIGINAL RETURN FILED BY THE ASSESSEE U/S 139(1) OF THE ACT ON 26/10/2007 AND ID ENTICAL INCOME HAD BEEN DISCLOSED IN THE RETURN. IN RESPONSE TO NOTICE U/S 153A, NO UNDISCLOSED INCOME PERTAINING TO THE RELEVANT YEAR HAD BEEN DECLARED BY THE ASSESSEE. THE LD ASSESSING OFFICER FURTHER OBSER VED THAT DURING THE COURSE OF SCRUTINY PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAD TAKEN LOAN OF RS. 31.65 LACS FROM M/S NAKSHATRA REAL ESTA TES DEVELOPERS PVT. LTD. IN WHICH THE ASSESSEE IS SHAREHOLDER OF 50%. A S PER AUDITED BALANCE SHEET OF THE COMPANY, IT HAD RESERVE AND SURPLUS AT RS. 24,80,911/-. THE LD ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 4 DEEMED DIVIDEND. THE ASSESSEE SUBMITTED BEFORE THE LD ASSESSING OFFICER THAT THERE WAS NO RESERVE AND SURPLUS ON FIRST DAY O F THE YEAR UNDER CONSIDERATION, THEREFORE, DEEMING PROVISION CANNOT BE APPLIED. THE LD ASSESSING OFFICER HELD THAT THE ASSESSEE SOLD THE L AND TO THE COMPANY, WHICH HAS BEEN TRANSFERRED BACK TO THE ASSESSEE IN F ORM OF LOAN. THEREFORE, HE MADE ADDITION U/S 2(22)(E) OF THE ACT AT RS. 24,80,911/-. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD CO NFIRMED THE ADDITION BY OBSERVING THAT THE ASSESSEE WAS NOT ABLE TO GIVE EVI DENCE BEFORE THE ASSESSING OFFICER, THEREFORE, HE ACCEPTED THE ADDIT IONAL EVIDENCE UNDER RULE 46A OF THE RULES, WHICH WAS FORWARDED TO THE ASSE SSING OFFICER FOR HIS COMMENT. AS PER ASSESSING OFFICER, THE AGREEMENT TO SALE WAS DATED 08/11/2006 WAS SIMPLY AN AFTERTHOUGHT TO ESCAPE THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THERE WAS NO EVIDENCE THAT AGREE MENT TO SALE WAS MATERIALIZED INTO ACTUAL SALE. AS PER AGREEMENT TO SALE, THE CONSIDERATION WAS FOR RS. 50,01,000/- OUT OF WHICH RS. 25.00 LACS WAS PAID ON 10/11/2006 AND FURTHER RS. 12.50 LACS WAS TO BE PAID WITHIN FOUR MONTHS I.E. UP TO 10/3/2007 AND THE BALANCE OF RS. 12,51 L ACS WAS TO BE PAID AFTER THE APPELLANT COMPLETED THE JDA PROCEDURE OF CONVER SION AND PATTA. AS PER ASSESSING OFFICER, WITHIN SUCH CONDITIONS, SUM A RS. 24,80,911/- CLAIMED TO ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 5 HAVE BEEN RECEIVED AS ADVANCE, HAD NOT BEEN PROVIDE D INASMUCH AS ONLY RS. 12.51 LACS WAS REMAINING TO BE PAID AS ON 10/3/2 007 WHEREAS THE APPELLANT RECEIVED TOTAL SUM OF RS. 31.65 LACS. IT IS SUBMITTED BY THE ASSESSEE BEFORE THE LD CIT(A) THAT THE APPELLANT HA D RECEIVED RS. 21,80,911/- FROM THE COMPANY NAMELY M/S NAKSHATRA R EAL ESTATES DEVELOPERS PVT. LTD. IN WHICH THE APPELLANT IS DIREC TOR AND HAVING SHAREHOLDING OF 50% WAS NOT THE LOAN AMOUNT BUT IT R EPRESENTED ADVANCE RECEIVED ON ACCOUNT OF SALE AGREEMENT OF 2 PLOTS WHI CH M/S NAKSHATRA REAL ESTATES DEVELOPERS PVT. LTD. HAS TO PURCHASE FROM T HE ASSESSEE AND THIS BEING A BUSINESS TRANSACTION, THEREFORE, IT WAS NOT TO BE COVERED U/S 2(22)(E) OF THE ACT. THE LD CIT(A) ALSO CONSIDERED TH E VARIOUS OTHER DOCUMENTS INCLUDING THE COPY OF THE LETTER RECEIVED FROM JDA, JAIPUR DATED 07/6/2006 ADDRESSED TO APPELLANT. IT IS NOTED THAT THE APPELLANT HAD PAID AND RECEIVED AMOUNT FROM M/S NAKSHATRA REAL ESTATES DEVELOPERS PVT. LTD. ON REGULAR BASIS. IT IS FOUND FROM THE COPY OF ACCO UNT IN THE BOOKS OF THE COMPANY THAT INITIALLY THE ASSESSEE PAID ON 09/10/2 006 RS. 31.75 LACS AND RS. 30.00 LACS TO M/S NAKSHATRA REAL ESTATES DEVELO PERS PVT. LTD. AND IN SUBSEQUENT PERIOD OF FINANCIAL YEAR 2006-07 FROM 08 /11/2006 TO 30/12/2006 THE APPELLANT HAD RECEIVED TOTAL AMOUNT OF RS. 93.40 LACS FROM THE COMPANY OF DIFFERENT DATES. ON 27/3/2007, AGAIN THE APPELLANT HAD ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 6 PAID RS. 1,01,000/- TO THE COMPANY, THEREFORE, TRAN SACTION WITH THE COMPANY CANNOT BE SAID TO BE WHOLLY RELATED TO THE S ALE TRANSACTIONS OF THE PLOTS. IN OTHER WORDS, IT IS NOTED THAT THE ASSESSE E HAD ADVANCED LOAN AND ALSO RECEIVED LOANS FROM M/S NAKSHATRA REAL ESTATES DEVELOPERS PVT. LTD. BUT THE ASSESSEE WAS CLAIMING THAT THE AMOUNT RECEIV ED FROM 8/11/2006 TO 30/12/2006 WERE NOT LOANS BUT WERE AMOUNT OF ADVANCES RECEIVED ON ACCOUNT OF THE SALE OF TWO PLOTS. HOWEVER, SUCH CONTE NTION OF THE APPELLANT PRIMA FACIE DOES NOT APPEAR TO BE GENUINE INASMUCH AS, AS PER THIS AGREEMENT THE TWO PLOTS WHICH WERE TO BE SOLD TO M/S N AKSHATRA REAL ESTATES DEVELOPERS PVT. LTD. WERE NEVER SOLD AND THE TRANSACTION WAS NEVER MATERIALIZED. MOREOVER, IT MAY ALSO BE NOTED THAT IN THE LETTER DATED 07/6/2007 WRITTEN BY THE JDA, JAIPUR TO THE ASSESSEE THERE IS A REFERENCE OF THEIR LETTER DATED 20/11/2006 THROUGH WHICH THE J DA HAS INFORMED TO THE ASSESSEE THAT THE PLOT NO. C-55 AND C-56 CANNOT BE REGULARIZED AS THERE WAS ILLEGAL CONSTRUCTION ON SUCH PLOTS. THIS FACT INDICATES THAT THESE TWO PLOTS WERE NOT OF SALEABLE PLOTS AS PER THE JDA N ORMS AND EVEN AFTER SUCH LETTER DATED 20/11/2006 THE ASSESSEE HAS RECEI VED SUBSTANTIAL AMOUNT OF RS. 53.50 LACS FROM 23/11/2006 TO 30/12/2 006 FROM M/S NAKSHATRA REAL ESTATES DEVELOPERS PVT. LTD.. WHEN B OTH THE PLOTS WERE NOT SALEABLE WHY THE COMPANY WOULD MAKE PAYMENT TO THE AS SESSEE. ALL THE ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 7 FACTS OF THE TRANSACTION ESTABLISHED THAT THESE PAY MENTS WERE REGULAR LOANS. WHEN THE ASSESSEE NOTICED THIS FACT THAT LOA N TAKEN FROM THE COMPANY IS A VIOLATION OF SECTION 2(22)(E) OF THE A CT THEN HE MADE ATTEMPT TO SHOW THAT THESE PAYMENTS WERE FOR SALE OF TWO PLOTS . THEREFORE, HE CONFIRMED THE ADDITION U/S 2(22)(E) OF THE ACT AT R S. 24,80,911/- UP TO RESERVE AND SURPLUS. HOWEVER, OUTSTANDING LOAN AGAIN ST THE ASSESSEE WAS ON CLOSING DATE AT RS. 30.64 LACS. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT HE HAS RAISED A TECHNICAL GROUND AS THERE WAS A SEARCH AND NOTICE U/S 153A WAS GIVEN TO THE ASSESSEE TO COM PLETE THE ASSESSMENT BUT FINALLY NO ADDITION WAS MADE ON ACCOU NT OF INCRIMINATING DOCUMENTS, THEREFORE, OTHER ADDITION MADE BY THE AS SESSEE IS NOT ALLOWABLE IN CASE OF SEARCH U/S 153A OF THE ACT. BEI NG A TECHNICAL GROUND IS ALLOWABLE AS HELD BY THE HON'BLE SUPREME COURT IN TH E CASE OF NATIONAL THERMAL POWER CO. LTD. VS CIT (1998) 229 ITR 0383. HE F URTHER RELIED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF ZAKIR HUSSAIN VS. CIT & ANR. (2006) 202 CTR (RAJ) 40 WHEREI N THE HON'BLE HIGH COURT HAS HELD THAT ADDITIONAL GROUND IS TO BE ALLO WED, WHICH HAD A BEARING ON CORRECT DETERMINATION OF TAX LIABILITY ON THE GR OUND OF LIMITATION. ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 8 VARIOUS OTHER CASE LAWS ALSO REFERRED. AFTER CONSIDE RING BOTH THE PARTIES ON THIS ISSUE, WE DEEM FIT TO ALLOW THE ADDITIONAL GROUN D BEING A TECHNICAL. 4.1 THE LD AR OF THE ASSESSEE HAS ALSO SUBMITTED THA T THE ASSESSEE FILED RETURN U/S 139(1) ON 26/10/2007 AND THE LD ASSESSIN G OFFICER COULD HAVE ISSUED NOTICE BY 30/09/2008 U/S 143(2) OF THE ACT. IN THIS CASE, SEARCH WAS CONDUCTED ON 06/5/2010, THEREFORE, THE ASSESSING OFFICER ISSUED NOTICE ON 2/11/2011 U/S 153A READ WITH SECTION 143( 2) OF THE ACT. DURING THE COURSE OF SEARCH, NO INCRIMINATING DOCUMENTS WER E FOUND, THEREFORE, NO NOTICE CAN BE ISSUE U/S 153A READ WITH SECTION 14 3(2) OF THE ACT BECAUSE NO PROCEEDING WAS PENDING BEFORE THE ASSESSI NG OFFICER. THE LD ASSESSING OFFICER MADE ADDITION ON THE BASIS OF ENT RIES RECORDED IN THE AUDITED BOOKS OF ACCOUNT OF THE ASSESSEE. THERE WAS N O EVIDENCE FOUND DURING THE COURSE OF SEARCH THAT THE ASSESSEE HAD R ECEIVED LOAN FROM M/S NAKSHATRA REAL ESTATES DEVELOPERS PVT. LTD.. THE SCO PE OF SECTION 153A IS LIMITED TO AN ASSESSMENT MADE ON THE BASIS OF INCRI MINATING DOCUMENT FOUND AND SEIZED DURING THE COURSE OF SEARCH. THE LD ASSESSING OFFICER MADE ADDITION IN ROUTINE MANNER WITHOUT REFERRED ANY SEIZED MATERIAL OR INCRIMINATING DOCUMENTS. THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION HAD ATTENDED THE FINALITY. THE ASSESSMENT COMPLETED IN THE IMPUGNED ASSESSMENT YEAR WILL NOT GET ABATED. HE FURTHER RELI ED ON THE DECISION OF ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 9 HONBLE ITAT, JAIPUR BENCH, JAIPUR IN THE CASE OF M/ S JADAU JEWELLERS & MANUFACTURERS PVT. LTD. IN ITA NO. 686/JP/2014 DATE D 14/12/2015 WHEREIN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HONBLE BENCH AND THE ORDER U/S 153A READ WITH SECTION 143(3) AS HELD VOID AB-IN ITIO. HE FURTHER RELIED VARIOUS DECISIONS ON THIS ISSUE AS UNDER:- A) CIT V/S SMT. SHAILA AGARWAL, 204 TAXMAN 276 (ALLAHABAD HIGH COURT) B) VISHAL DEMBLA VS DEPUTY COMMISSIONER OF INCOME TA X ITAT, JODHPUR BENCH ITA NOS. 304 TO 308/JD/2013; 22ND JULY, 2013 (2013) 93 DTR (JD)(TRIB) 1 (2013) 36 CCH 484 JODHTRIB (2014) 61 SOT 10 (JODHPUR)(URO). C) MARIGOLD MERCHANDISE (P) LTD VS DEPUTY COMMISSIO NER OF INCOME TAX ITAT DELHI ITA NOS. 2666 & 2667/DEL/2013 27TH DECEMBER, 2013 (2013) 38 CCH 050 DEL TRIB. D) GURINDER SINGH BAWA V. DCIT (2012) 28 TAXMANN.COM 328 (MUM TRIB) E) KUSUM GUPTA V. DCIT, ITA NOS. 4873/DEL/2009, (20 05- 06) 2510 (A.Y. 2003-04), 3312(A.Y. 2004-05) 2833/DEL/2011 (A.Y. 2006-07). F) MGF AUTOMOBILES LTD. V. ACIT, ITA NOS 4212 & 4213/DEL/2011 (ITAT DELHI) G) TARANNUM ZAFAR KHAN VS. ACIT, ITA NOS. 5888 TO 5890/MUM/2009 HONBLE ITAT MUMBAI HELD THAT:- H) VEE GEE INDUSTRIAL ENTERPRISES VS. ACIT, ITA NO . 1/DEL/2011 & ITA NO.2/DEL/2011 (ITAT DELHI) ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 10 I) ITA NOS. 1153 TO 1159/HYD/2012 MIR MAZHARUDDIN , 24.1.2013 (ITAT HYDERABAD). J) ASHA KATARIA, I.T.A. NOS. 3105, 3106 & 3107/DEL /2011 20.5.2013 HONBLE ITAT DELHI HELD THAT:- K) NATVAR PARIKH & CO PVT LTD VS DEPUTY COMMISSION ER OF INCOME TAX (ITAT MUMBAI) ITA NO. 2143/MUM./2009, 2144/MUM./2009 & 2145/MUM./2009 22ND JANUARY, 2014 (2014) 39 CCH 031 MUMTRIB. 5. THE LD CIT DR HAS VEHEMENTLY SUPPORTED THE OF THE LD CIT(A) AND ARGUED THAT IN THE ASSESSEES GROUP CASES, NUMBER O F INCRIMINATING DOCUMENTS AS WELL AS UNRECORDED ASSETS WERE FOUND AN D SEIZED AS THE ASSESSING OFFICER HAS MENTIONED IN THE ASSESSMENT O RDER ITSELF SHOWED THAT DURING THE COURSE OF SEARCH, INCRIMINATING DOCUMENT S AND UNRECORDED ASSETS WERE FOUND. THEREFORE, THE LD ASSESSING OFFICE R HAD RIGHTLY ISSUED NOTICE U/S 153A OF THE ACT. FURTHER THE TECHNICAL G ROUND HAD NOT RAISED BEFORE THE LD ASSESSING OFFICER. OTHERWISE THE LD AS SESSING OFFICER SHOULD HAVE REFERRED THE INCRIMINATING DOCUMENTS WITH HIM F OR THIS TECHNICAL GROUND AS SUCH THIS TECHNICAL GROUND HAS ALSO NOT B EEN RAISED BEFORE THE LD CIT(A). THEREFORE, THE TECHNICAL GROUND RAISED BY TH E ASSESSEE IS DESERVED TO BE DISMISSED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPU TED FACT THAT THE RETURN ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 11 U/S 139(1) OF THE ACT WAS FILED ON 26/10/2007 BY THE ASSESSEE. AS PER LAW, NOTICE U/S 143(2) COULD BE ISSUED ON OR BEFORE 30/0 9/2008. THERE WAS A SEARCH AND SEIZURE IN THIS GROUP ON 06/5/2010. THE L D ASSESSING OFFICER ISSUED NOTICE U/S 153A READ WITH SECTION 143(2) OF T HE ACT ON 02/11/2011. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT NO ADD ITION WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF INCRIMINATING DOC UMENTS FOUND DURING THE COURSE OF SEARCH EXCEPT SOME REGULAR ADDITIONS. TECH NICAL GROUND CAN BE RAISED AT ANY STAGE BEFORE THE ITAT EVEN BEFORE THE HON'BLE HIGH COURT IF IT GOES TO THE ROOT OF THE MATTER AND TO ASSESS THE CORRECT INCOME OF THE ASSESSEE. IT IS A FACT THAT ON TIME FOR SELECTION O F THE CASE FOR SCRUTINY HAD ALREADY BEEN ELAPSED AND NO PROCEEDINGS WERE PENDING BEFORE THE ASSESSING OFFICER. THEREFORE, THE PROCEEDINGS FOR TH E YEAR UNDER CONSIDERATION WERE NOT ABATED. THIS ISSUE HAS BEEN CO NSIDERED BY THE VARIOUS ITATS AS WELL AS HON'BLE HIGH COURTS. IT HAS BEEN HELD THAT ASSESSMENT U/S 153A READ WITH SECTION 143(3), THE LD ASSESSING OFFICER HAS TO ASSESS THE INCOME IN ABATED YEAR ONLY WHERE I NCRIMINATING DOCUMENTS WERE FOUND AND SEIZED AND NO REGULAR ADDI TION CAN BE MADE UNDER THIS SECTION AS THE COORDINATE BENCH HAS DECI DED THIS IDENTICAL ISSUE IN THE CASE OF M/S JADAU JEWELLERS AND MANUFACTURERS P. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT TECHNICAL GROUND RAISE D BY THE ASSESSEE ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 12 SUCCEEDS AND ORDER PASSED U/S 153A READ WITH SECTION 143(3) OF THE ACT HAS BEEN HELD VOID AB-INITIO. THE OTHER CASE LAWS REF ERRED BY THE ASSESSEE IS ALSO SQUARELY APPLICABLE. THEREFORE, WE HAVE CONS IDERED VIEW THAT ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 153A R EAD WITH SECTION 143(3) OF THE ACT IS OUT OF JURISDICTION. ACCORDING LY, WE ALLOW THE ASSESSEES APPEAL ON THIS GROUND. 7. ON MERIT, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSEE AS WELL AS THE COMPANY ARE IN REAL ESTATE BUSINESS. DURING THE YEAR UNDER CONSIDERATION, THE COMPANY NAMELY M/A NAKASHATRA RE AL ESTATES DEVELOPERS PVT. LTD. SOLD ITS LAND AND WAS PLANNING TO INVESTMENT THE SALES CONSIDERATION IN SOME OTHER LAND/PROPERTY, THEREFOR E THE COMPANY ENTERED INTO AN AGREEMENT DATED 08.11.2006 WITH THE ASSESSEE TO BUY PLOTS NO. 55 AND 56 IN THE SCHEME NO. 1C, LAL KOTHI, TONK ROAD, J AIPUR FROM THE ASSESSEE. AS PER TERMS AND CONDITIONS OF THE AGREEM ENT, BOTH THE PLOTS WERE SOLD TO COMPANY FOR RS. 50,01,000/- AND ADVANCE OF RS. 25,00,000/- WAS PAID AT THE TIME OF SIGNING THE AGREEMENT, RS. 1 2,50,000/- WAS TO BE PAID WITHIN FOUR MONTHS FROM SIGNING THE AGREEMENT A ND BALANCE AMOUNT OF RS. 12,51,000/- WAS TO BE PAID AFTER CONVERSION OF LAND FOR COMMERCIAL PURPOSE AND AT THE TIME OF EXECUTION OF REGISTERED SALES DEED. AS PER TERMS AND CONDITIONS OF AGREEMENT THE CONVERSION OF LAND FOR COMMERCIAL ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 13 PURPOSE WAS TO BE COMPLETED WITHIN SIX MONTH FROM SIG NING THE AGREEMENT AND IN CASE THE ASSESSEE FAILED TO DO SO, THE DEAL DEEMED TO BE CANCELLED AND THE ASSESSEE HAD TO RETURN ALL THE ADVANCES REC EIVED FROM COMPANY. THE ASSESSEE DID NOT RECEIVE THE SECOND INSTALLMENT OF RS. 12,50,000/- IN FULL FROM THE COMPANY WITHIN FOUR MONTHS OF THE AGRE EMENT AS STIPULATED IN THE AGREEMENT. DUE TO SOME LEGAL TECHNICALITIES TH E ASSESSEE COULD NOT GET THE CONVERSION OF THE LAND IN COMMERCIAL AND OB TAINED THE JDA PATTA OF THIS PLOT, THEREFORE THE DEAL WITH COMPANY STAND CAN CELLED AND THE ASSESSEE RETURNED BACK THE ADVANCE RECEIVED FROM CO MPANY IN THE MONTH OF MAY-JUNE, 2007. THUS THE AMOUNT RECEIVED BY THE A SSESSEE FROM THE COMPANY WAS AGAINST THE PURCHASE OF PLOT FROM THE AS SESSEE. HE HAS FURTHER DRAWN OUR ATTENTION FROM THE COPY OF ACCOUNT , WHICH SHOWS THAT INITIALLY THE ASSESSEE HAS GIVEN AMOUNT TO THE COMP ANY ON 09/10/2006 RS. 31,75,000/- AND ON 10/10/2006 RS.30,00,000/-. THEREA FTER, THE ASSESSEE RECEIVED REFUND OF RS. 40 LACS FROM THE COMPANY OUT OF THE EARLIER ADVANCES MADE TO THE COMPANY. ON 09-11-2006, THE AS SESSEE RECEIVED RS. 25,00,000/- AGAINST THE AGREEMENT TO SALE OF TWO PLO TS TO THE COMPANY. HE HAS FURTHER DRAWN OUR ATTENTION ON PAGE NO. 80 OF TH E PAPER BOOK AND ARGUED THAT THERE WAS CORRESPONDENCE WITH JDA FOR C ONVERSION OF LAND FOR BOTH THE PLOTS WHICH WERE SOLD TO THE COMPANY. THE ASS ESSEE MADE FULL ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 14 EFFORTS TO CONVERT TWO PLOTS INTO COMMERCIAL BUT THE Y COULD NOT GET CONVERTED. THE ASSESSEE MADE ANOTHER APPLICATION FOR RECONSTITUTION OF PLOT ON 19/5/2007, WHICH WAS ALSO REJECTED ON 07/6/20 07. THE LD CIT(A) HELD THAT THERE WAS NO SALEABLE VALUE OF THE PLOT AN D IS ALSO WITHOUT ANY BASIS EVEN DISPUTED PROPERTY HAS ITS SALEABLE VALUE IN THE MARKET. THEREFORE, THIS OBSERVATION IS MADE BY THE LD CIT(A) WITHOUT ANY BASIS. THE ASSESSEE ALSO PPURCHASED THESE PLOTS THROUGH REG ISTERED SALE DEED WHICH HAS BEEN DECLARED IN THE CLOSING STOCK BY THE ASSESSEE, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. HE FURTHER ARGUED THAT EXPRESSION USED IN SECTION 2(22)(E) IS ADVANCED OR LOAN WHICH HAS BE EN CONSIDERED BY THE HONBLE ITAT, AGRA BENCH IN THE CASE OF SHRI KRISHA N MURARI LAL AGARWAL VS DCIT 2013 (9) TMI 445 WHEREIN IT HAS BEEN HELD THA T IN ORDINARILY MEANS PAYMENT OF CASH OR TRANSFER OF GOODS FOR WHICH ACCOUNTING MUST BE REFERRED BY THE RECIPIENT AT SOME LATER DATE. THE TRANSACTION OF LOAN INVOLVES LENDING THE DELIVERY BY ONE PARTY AND RECE IPT BY ANOTHER PARTY OF SUM MONEY UPON EXPRESS OR IMPLIED AGREEMENT TO REPA Y IT WITH OR WITHOUT INTEREST. IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDERATION, WHICH IS B ENEFICIAL TO THE COMPANY RECEIVED FROM A SHAREHOLDER, IN SUCH CASE, SUCH ADVANCE OR LOAN CANNOT BE SAID TO A DEEMED DIVIDEND WITHIN THE MEANI NG OF THE ACT. HE ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 15 FURTHER ARGUED THAT TRADE ADVANCES WHICH ARE IN THE NATURE OF MONEY TRANSACTED TO GIVE EFFECT TO A COMMERCIAL TRANSACTI ON WOULD NOT FALL WITHIN THE AMBIT OF THE PROVISIONS OF S. 2(22)(E) OF THE A CT. FOR WHICH HE RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT V/S RAJ KUMAR 318 ITR 462 (DELHI). HE FURTHER ARGUED THAT THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. CREATIVE DYEING AND PRINTING PVT. LTD. (2009) 318 ITR 476 WHEREIN IT HAS BEEN HELD THAT ADVANCES FOR CO MMERCIAL PURPOSES I.E. FUND RECEIVED FOR EXPANSION OF PRODUCTION CAPA CITY FROM THE COMPANY TRANSACTION WAS HELD AS BUSINESS TRANSACTION AND NOT COVERED U/S 2(22)(E) OF THE ACT. HE FURTHER RELIED ON THE FOLLOWING DECIS IONS. (I) THE HONBLE MP HIGH COURT IN THE CASE OF CIT VS. OM PRAKASH SURI (NO.2) 359 ITR 41. (II) THE HONBLE CHENNAI BENCH OF ITAT IN THE CASE OF ACIT V SMT. G. SREEVIDYA 138 ITD 427. (III) THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KUMAR MALHOTRA V CIT 338 ITR 538. (IV) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AMBASSADOR TRAVELS P. LTD. [2009] 318 ITR 376 (DELHI ) (V) IN THE CASE OF CIT V ARVIND KUMAR JAIN 2011-TIOL- 790- HC-DEL-II (VI) 2016 (1) TMI 84 GUJARAT HIGH COURT CIT VS SCHUTZ DISMAN BIO TECH PVT LTD. ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 16 (VII) 2015 (12) TMI 763 ITAT DELHI ACIT VS ASHOK KUMAR GARG. (VIII) 2015 (12) TMI 1371 ITAT MUMBAI ACIT VS SMT DIN A SUDHIR SHAH. (IX) JAIPUR BENCH OF HONBLE ITAT IN THE CASE OF SHR I ASHOK KUMAR AGARWAL ITA NO 810/JP/2014 ORDER DATED 04-03- 2016. THEREFORE, THE ADVANCES MADE BY THE COMPANY TO THE A SSESSEE WERE FOR THE PURPOSES OF BUSINESS AND NOT COVERED U/S 2(22)( E) OF THE ACT. THEREFORE, ORDER OF THE LD CIT(A) IS DESERVED TO BE D ELETED. 8. AT THE OUTSET, THE LD CIT DR HAS VEHEMENTLY SUPP ORTED THE ORDER OF THE LD CIT(A) AND ARGUED THAT THE ASSESSEE MAKE BEL IEVE THEORY NOT TO MAKE PROVISIONS OF SECTION 2(22)(E) OF THE ACT APPL ICABLE. ALL THE FACTS HAVE BEEN GIVEN BY THE LD CIT(A) IN HIS APPEAL ORDER CLEA RLY INDICATES THAT THE ASSESSEES AGREEMENT TO SALE WITH THE COMPANY IS AN AFTERTHOUGHT, THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LD CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE AS WELL AS THE COMPANY ARE IN THE REAL ESTA TE BUSINESS. IN INITIALLY, THE ASSESSEE HAD ADVANCED MONEY OF R S. 31,75,000/- ON 09/10/2006. THEREAFTER RS. 30.00 LACS ON 10/10/2006 . ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 17 THEREAFTER, HE RECEIVED BACK AMOUNT OF RS. 40.00 LAC S ON 08/11/2006 ON 09/11/2006. THE ASSESSEE RECEIVED RS. 25.00 LACS WHIC H INCLUDES ASSESSEES OUTSTANDING AMOUNT OF RS. 21.75 LACS PAR TLY AGAINST THE AGREEMENT TO SALE OF TWO PLOTS I.E. RS. 3.35 LACS. TH EREAFTER THE ASSESSEE RECEIVED RS. 15.00 LACS ON 23/11/2006, RS. 10.00 LA CS ON 07/12/2006, RS. 2.00 LACS ON 08/12/2006, RS. 1.00 LAC ON 12/12/2006 AND RS. 40,000/- ON 30/12/2006. THUS, TOTAL AMOUNT RECEIVED FROM THE CO MPANY AGAINST THE PLOTS AT RS. 31.65 LACS UP TO 30/12/2006. THEREAFTER AGAIN THE ASSESSEE PAID RS. 1,01,000/- TO THE COMPANY ON 26/3/2007. THE COPY OF ACCOUNTS SHOWS THAT THE ASSESSEE AND COMPANY AS REGULAR TRAN SACTION AND APPEARS TO BE CURRENT ACCOUNT MAINTAINED BY BOTH. FINALLY T HE ASSESSEE HAS LIABILITY AGAINST THE COMPANY AT RS. 30.64 LACS AS ON 31/3/20 07. IT IS FACT THAT THERE WAS AN AGREEMENT TO SALE BETWEEN THE ASSESSEE AND THE COMPANY DATED 08/11/2006, WHICH HAS BEEN NOTARIZED ON 08/11/2006, SHOWS THAT THE ASSESSEE AND COMPANY MADE AGREEMENT TO SALE TWO PLOT S BEARING NO. 55 AND 56, SCHEME NO. 1C OF LAL KOTHI, TONK ROAD, JAIPU R FOR A CONSIDERATION OF RS. 50,01,000/-. THE ASSESSEE HAS RECEIVED RS. 25 .00 LACS VIDE CHEQUE NO. 000405 DRAWN ON BANK OF PUNJAB AT THE TIME OF SI NGING OF AGREEMENT AND 25% WAS TO RECEIVE WITHIN FOUR MONTHS FROM THE DA TE OF SIGNING OF THE AGREEMENT. REMAINING AMOUNT OF RS. 12,51,000/- WAS T O RECEIVE AFTER ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 18 ISSUE OF JDA PATTA AND CONVERSION OF LAND FOR COMME RCIAL PURPOSES AND AT THE TIME OF EXECUTION OF REGISTERED SALE DEED. THE L D ASSESSING OFFICER AS WELL AS THE LD CIT(A) HAS DOUBTED THE TRANSACTION BUT IT IS A FACT THAT IN REAL ESTATE MOST OF THE TRANSACTIONS ARE BEING MADE ON T HE BASIS OF AGREEMENT TO SALE AND TO AVOID THE STAMP DUTY PAYMENT. IN REA L ESTATE BUSINESS NUMBER OF TRANSACTIONS OF PURCHASE AND SALE OF THE PLOTS ARE BEING MADE AND STAMP DUTY FINALLY IS TO BE BORNE BY THE ACTUAL USER OF THE PLOT AT THE TIME OF REGISTRATION. THEREFORE, GENERALLY THE TRANS ACTIONS MADE ON AGREEMENT TO SALE BASIS. IT IS ALSO A FACT THAT THI S TRANSACTION WAS IN BETWEEN DIRECTOR OF THE COMPANY AND COMPANY EVEN AS PER THIS AGREEMENT, THE ASSESSEE HAS TO MAKE REGISTRY OF BOT H THE PLOTS AT THE TIME OF FINAL CONVERSION AND ALLOTMENT OF PATTA. THE CORR ESPONDENCE BETWEEN THE ASSESSEE AND THE JDA SHOWS THAT THERE WAS EFFORTS TO CONVERT THE LAND COMMERCIALLY AND GET THE PATTA FROM THE JDA, WHICH C ANNOT BE DOUBTED. THE ASSESSEE RELIED ON VARIOUS DECISIONS ON DEEMED D IVIDEND WHEREIN IT HAS BEEN HELD THAT LOAN ADVANCES GIVEN AGAINST THE CONSIDERATION ARE BUSINESS TRANSACTIONS NOT DEEMED DIVIDEND U/S 2(22) (E) OF THE ACT. THEREFORE, WE HELD THAT THE TRANSACTION MADE BETWEEN T HE ASSESSEE AND THE COMPANY ARE BUSINESS TRANSACTIONS AND IS NOT CO VERED U/S 2(22)(E) OF ITA 312/JP/2015_ PRATEEK KOTHARI VS ACIT 19 THE ACT. ACCORDINGLY, WE REVERSE THE ORDER OF THE LD CIT(A) AND APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/6/2016. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 15 TH JUNE, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI PRATEEK KOTHARI, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ACIT, CENTRAL CIRCLE-2, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDR @ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 312/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR