The ACIT-3(1), Indore V. Shri Om Prakash Suri, Indore

ITA 338/IND/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7882 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 07-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: TRIBHUVAN SACHDEVA
• Keywords: Deemed dividend
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.338 /IND/2012 A.Y.2004-05 ACIT-3(1), INDORE :: APPELLANT VS OMPRAKASH SURI INDORE PAN AEXPS-8338C :: RESPONDENT APPELLANT BY : SHRI R.A. VERMA, SR. DR RESPONDENT BY : SHRI TRIBHUVAN SACHDEVA DATE OF HEARING : 28.8.2012 DATE OF PRONOUNCEMENT : 28.8.2012 O R D E R PER JOGINDER SINGH THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 6.3.2012 PASSED BY THE LEARNED CIT(A), INDORE ON TH E GROUND THAT 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE FIRST APPELLATE AUTHORITY ERRED IN DELETING THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND BY RELYING UPON THE DECISION OF THE TRIBUN AL IN THE CASE OF THE ASSESSEE FOR AY 2005-06 ESPECIALLY WHEN THE TRI BUNAL HAS ERRED IGNORING THE SUBSTANCE OVER THE FORM WITHOUT AP PRECIATING THE FACT THAT THE AMOUNT RECEIVED BY THE ASSESSEE WAS S HOWN AS UNSECURED LOAN. 2. DURING HEARING, WE HAVE HEARD SHRI R.A. VERMA, L D. SR. DR AND SHRI TRIBHUVAN SACHDEVA, LD. COUNSEL FOR THE ASSESS EE. AT THE OUTSET, IT WAS ASSERTED BY THE LD. COUNSEL FOR THE ASSESSEE TH AT THE IMPUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE TRIBUNAL, THAT TOO, IN OWN CASE OF THE ASSESSEE FOR AY 2005-06. THI S FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REVENUE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE ASSERTION , WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL DATED 3.1.2012: 5. THE NEXT GROUND PERTAINS TO CONFIRMING THE ADDIT ION OF RS. 85,488/-, CONSIDERED AS DEEMED DIVIDEND U/S 2(2 2)(E) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE STRO NGLY OBJECTED THE ADDITION, WHEREAS THE LEARNED SR. DR D EFENDED THE IMPUGNED ORDER. 3 5.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. WITH REGARD TO THE ADDITION M ADE U/S 2(22)(E) OF THE ACT, THE ASSESSING OFFICER OBSERVED THAT DURING THE YEAR, UNDER CONSIDERATION, THE ASSESSEE HAS TAK EN THE FOLLOWING AMOUNTS OF RS.1,94,58,728/- FROM THE COMP ANY:- DATA PARTICULARS DEBIT AMOUNT CREDIT AMOUNT 01/04/04 BY OP. BAL 8,798,728 01/04/04 BY CHEQUE 600.000 08/04/04 BY CHEQUE 1,150,000 08/04/04 BY CHEQUE 1,550,000 02/06/04 BY CHEQUE 800.000 02/06/04 BY CHEQUE 1,900,000 02/07/04 BY CHEQUE 1,750,000 18.09.04 BY CHEQUES 1,00,000 05.10.04 BY CHEQUES 700,000 30.03.05 BY CHEQUES 410,000 TOTAL 1,94,58,728 ON ASSESSING OFFICERS QUERY TO ADD THE SAID AMOUNT U/S 2(22)(E) OF THE ACT, THE STAND OF THE ASSESSEE WAS THAT THE AMOUNT WAS NOT RECEIVED AS A LOAN BUT AS AN ADVANCE AGAINST SALE OF ITS LAND SITUATED IN GRAM SINHANSA TEHSIL A ND DISTRICT INDORE. TO SUPPORT THE CONTENTION THE ASSESSEE HAS FILED AGREEMENT TO SELL DATED 19.1.2004 BEFORE THE ASSESS ING OFFICER. HOWEVER, THE ASSESSING OFFICER WAS NOT CO NVINCED WITH THE SAME AND HELD THAT THE TRANSACTION WAS IN THE NATURE OF LOANS AND ADVANCES. ON FINDING THAT ACCU MULATED PROFIT OF THE COMPANY WAS RS. 58,43,165/- HE RESTRI CTED THE ADDITION U/S 2(22)(E) OF THE ACT TO THE EXTENT OF A CCUMULATED PROFIT I.E. RS. 58,43,165/-. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS), THE ASSESSEE CONTENDED THAT THE AMOUNT W AS 4 RECEIVED AS LOANS AND ADVANCES. HOWEVER, THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE ACCUMULATED PROFIT OF M/S PUZZLING EQUIPREF SERVICE S PRIVATE LIMITED WAS RS. 57,676/- AS ON 31.3.2004 AND RS. 58,43,164/- AS ON 31.3.2005. ACCORDINGLY, HE DIREC TED THAT THE ADDITION TO THE EXTENT OF RS. 57,57,676/- IS RE QUIRED TO BE MADE IN THE ASSESSMENT YEAR 2004-05 AND THE REMAINI NG AMOUNT OF RS.85,488/- WAS ADDED TO THE INCOME OF TH E YEAR, UNDER CONSIDERATION. FURTHER AGGRIEVED, THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. WE HAVE PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND ALSO GONE THROUGH THE AGREE MENT TO SELL DATED 19.1.2004 PLACED ON RECORD (PAGES 59 TO 63 OF THE PAPER BOOK). WE FIND THAT THE LAND WAS OWNED BY TH E ASSESSEE WHICH HE AGREED TO SELL TO M/S PUZZLING EQUIPREF SE RVICES PRIVATE LIMITED FOR A CONSIDERATION OF RS. 2,53,60, 000/-. AS PER THE TERMS OF THE AGREEMENT, M/S PUZZLING EQUIPR EF SERVICES PRIVATE LIMITED WAS REQUIRED TO PAY A PART OF THE SALE CONSIDERATION IN ADVANCE. THE AGREEMENT TO SELL AL SO WITNESSED PAYMENT OF THESE AMOUNTS THROUGH ACCOUNT PAYEE CHEQUES TO THE ASSESSEE ON VARIOUS DATES AS MENTION ED AT PAGE 3 OF THE AGREEMENT TO SELL. THUS, WE FIND THAT THE AMOUNT SO RECEIVED BY THE ASSESSEE WAS AGAINST SALE OF LAN D OWNED BY HIM TITLE OF WHICH IS CLEAR FROM THE DOCUMENTS PLAC ED ON RECORD. SINCE THE AMOUNT WAS RECEIVED AS A SALE CON SIDERATION IN THE NORMAL COURSE OF BUSINESS, THE SAME CANNOT B E BRANDED AS LOANS AND ADVANCES. WE ALSO FIND THAT IN ITS AU DITED BALANCE SHEET ALSO, THE ASSESSEE HAS CHANGED THE HE AD OF ITS CLASSIFICATION FROM LOANS AND ADVANCES TO INVESTMEN T IN THE SUBSEQUENT YEAR. WE, THEREFORE, DO NOT FIND ANY MER IT IN THE ACTION OF THE LOWER AUTHORITIES FOR TREATING THE T RANSACTION AS IN THE NATURE OF LOANS AND ADVANCES. THE GROUND OF THE ASSESSEE IS, THEREFORE, ALLOWED IN HIS FAVOUR. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY, 2012. 4. WE FIND THAT VIDE ORDER DATED 3.1.2012 (SUPRA), THE TRIBUNAL DECIDED TWO ISSUES PERTAINS TO THE ASSESSEE. THE IS SUE TOWARDS ADDITION MADE U/S 68 OF THE ACT WAS DECIDED AGAINST THE ASSESSEE 5 AND THE ISSUE OF DEEMED DIVIDEND U/S 2(22)(E) OF TH E ACT WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. CIT(A) F OR AY 2005-06 DIRECTED THAT THE ADDITION TO THE EXTENT OF RS.57,5 7,676/- WAS REQUIRED TO BE MADE IN AY 2004-05 AND THE REMAINING AMOUNT OF RS.85,488/- WAS ADDED FOR AY 2005-06. THE TRIBUNAL PERUSED THE RECORD ALONG WITH THE AGREEMENT TO SALE DATED 19.1. 2004, FOUND THAT THE LAND WAS OWNED BY THE ASSESSEE WHICH HE AG REED TO SELL TO M/S. PUZZLING EQUIPREF SERVICES P. LTD. FOR A CONSI DERATION OF RS.2,53,60,000/- AND AS PER THE TERMS OF THE AGREEM ENT, THE SAID COMPANY WAS REQUIRED TO PAY A PART OF THE SALE CONS IDERATION IN ADVANCE. THE PAYMENTS WERE THROUGH ACCOUNT PAYEE CH EQUE TO THE ASSESSEE ON VARIOUS DATES WHICH WERE MENTIONED ON T HE SAID SALE AGREEMENT. SINCE THE AMOUNT WAS RECEIVED AS A SALE CONSIDERATION IN THE NORMAL COURSE OF THE BUSINESS, IT WAS HELD T HAT THE SAME CANNOT BE BRANDED AS LOAN AND ADVANCES. THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. CIT(A), FOLLOWING T HE DECISION OF THE TRIBUNAL, ANALYSED THE FACTS AND DELETED THE ADDITI ON WHICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. 6 5. THE TRIBUNAL WHILE DECIDING THE IDENTICAL FACTS FOR AY 2005-06 FOUND THAT THE AGREEMENT TO SALE ALSO WITNESSED PAY MENT OF THE IMPUGNED AMOUNT THROUGH ACCOUNT PAYEE CHEQUES ON VA RIOUS DATES AS PER THE TERMS AND CONDITIONS OF THE SALE AGREEME NT. UNDISPUTEDLY, THE AMOUNTS WERE RECEIVED BY THE ASSE SSEE AGAINST SALE OF LAND AND THE TITLE OF WHICH WAS CLEAR AS WA S EVIDENT FROM THE DOCUMENTS PLACED ON RECORD AND THE IMPUGNED AMOUNTS WERE RECEIVED IN THE NORMAL COURSE OF BUSINESS AS SALE C ONSIDERATION, CONSEQUENTLY, THESE CANNOT BE BRANDED AS LOANS AND ADVANCES. IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED OPINI ON THAT SUCH TRANSACTIONS WOULD NOT COME UNDER THE PROVISIONS OF SEC. 2(22)(E) OF THE I.T. ACT, 1961. THE RATIO LAID DOWN BY HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. F. PARVEEN (2008) 222 CTR (MAD) 639 WHEREIN THE TRIBUNAL FOUND THAT THE AMOUNT WAS TRAN SFERRED BY THE COMPANY TO ITS DIRECTOR IN THE NORMAL COURSE OF BUS INESS AND NOT AS A LOAN, THE ADDITION TOWARDS DEEMED DIVIDEND U/S 2( 22)(E) OF THE ACT WAS HELD TO BE RIGHTLY DELETED, SUPPORTS THE CASE O F THE ASSESSEE. IDENTICALLY, IN ANOTHER CASE BEFORE THE HONBLE DEL HI HIGH COURT IN CIT VS. RAJKUMAR (2009) 318 ITR 462 IT WAS HELD TH AT THE TRADE ADVANCE WHICH IS IN THE NATURE OF MONEY TRANSACTED TO GIVE EFFECT TO 7 A COMMERCIAL TRANSACTION DOES NOT FALL WITHIN THE A MBIT OF PROVISIONS OF SEC. 2(22)(E) OF THE ACT. IF THE LANG UAGE USED IN SEC. 2(22)(E) OF THE ACT IS ANALYSED, IT SPEAKS ABOUT AN Y PAYMENT BY A COMPANY BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER TO A BENEFICIAL OWNER OF THE SHARES, HOLDING NOT LESS THAN 10% OF T HE VOTING POWER OR TO ANY CONCERN WHERE SUCH PERSON IS SUBSTANTIALL Y INTERESTED THEN THE SECTION IS APPLICABLE. HOWEVER, THE IMPUGN ED AMOUNTS WERE RECEIVED BY THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES AGAINST SALE OF LAND OWNED BY THE ASSESSEE IN THE N ORMAL COURSE OF BUSINESS, THEREFORE, IT CANNOT BE BRANDED AS LOAN A ND ADVANCES. WE HAVE PERUSED THE AGREEMENT TO SALE (PAGE 28 TO 32 O F THE PAPER BOOK). AS PER CLAUSE 2 OF THE SAID AGREEMENT (PAGE 30 OF PAPER BOOK), THE AMOUNT OF RS.2,53,60,000/- WAS AGREED TO BE GIVEN TO THE ASSESSEE BY THE PURCHASER AND PART OF THE PAYME NT WAS RECEIVED THROUGH CHEQUE. THE ASSESSEE WAS ALSO SUPPOSED TO G ET CONVERSION OF THE LAND WITHIN TWO MONTHS. AS PER CLAUSE 10 (PA GE 31 OF THE PAPER BOOK), THE PURCHASER WAS FREE TO DO THE DEVEL OPMENTAL WORK ON THE LAND AND WAS ALSO FREE TO SELL THE SAME TO A NY THIRD PARTY FOR WHICH THE ASSESSEE HAD NO OBJECTION. IN VIEW OF THE SE FACTS, IT CANNOT BE SAID THAT IT WAS A LOAN OR AN ADVANCE TO THE ASSESSEE. THE 8 CONTENTS OF THE SALE AGREEMENTS ARE VERY MUCH CLEAR THAT IT WAS A CLEARCUT AGREEMENT OF SALE. NO CONTRARY FACTS OR DE CISION WAS BROUGHT TO OUR NOTICE BY EITHER SIDE AND MORE SPECI FICALLY THE REVENUE. IN VIEW OF THESE FACTS, WE ARE NOT IN AGRE EMENT WITH THE CONCLUSION DRAWN IN THE ASSESSMENT ORDER AND AFFIRM THE STAND OF THE LD. CIT(A) IN ACCEPTING THE CLAIM OF THE ASSESS EE, RESULTANTLY, THERE IS NO MERIT IN THE APPEAL OF THE REVENUE. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCL USION OF THE HEARING ON 28.8.2012. SD SD (R.C. SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28.8.2012 COPY TO APPELLANT/RESPONDENT/CIT/CIT(A)/DR !VYS!