Sh. Sukhwant Singh, Chandigarh V. ACIT, Chandigarh

ITA 448/CHANDI/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2345 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 23-05-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Deemed dividend
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH !, ' # , . %.. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR , A M ./ ITA NO. 448/CHD/2017 '* + ,+ / ASSESSMENT YEAR : 2013-14 SH. SUKHWANT SINGH 205, SECTOR 36-A CHANDIGARH THE ACIT CIRCLE-2 CHANDIGARH ./ PAN NO: AMVPS7107H / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI. TEJ MOHAN SINGH / REVENUE BY : SH. MANJIT SINGH ! ' # / DATE OF HEARING : 26/09/2018 $%&'() # / DATE OF PRONOUNCEMENT : 29/10/2018 '-/ ORDER PER DR. B.R.R. KUMAR, A.M.: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A)-2, CHANDIGARH DT. 14/12/2016. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT THE ORDER OF THE LD. CIT(A)-2 IS NOT A SPEAKIN G ORDER, IS ERRONEOUS, ARBITRARY, OPPOSED TO LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT(A)-2 HAS ERRED IN LAW AS WELL AS O N FACTS IN ADDING AN AMOUNT OF RS. 1,40,00,000/- ON ACCOUNT OF ADVANCE R ECEIVED BY THE APPELLANT FROM M/S ACME BUILDERS PRIVATE LTD. BY TREATING THE SAME AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 3. THAT THE LD. CIT(A)-2 HAS ERRED IN LAW AS WELL AS O N FACTS IN ADDING AN AMOUNT OF RS. 11,82,978/- UNDER SECTION 14A AS PER RULE 8D ON ACCOUNT OF DISALLOWANCE ON INVESTMENTS IN SHARES AND CAPITAL B ALANCE IN THE PARTNERSHIP FIRM. 3. BRIEFLY THE FACTS ON THE ISSUE ARE THAT DURING T HE RELEVANT YEAR ASSESSEE RECEIVED A LOAN OF RS. 1,40,00,000/- FROM M/S ACME BUILDERS PVT. LTD. IN WHICH ASSESSEE IS THE BENEFICIAL OWNER OF SHARES HOLDING MORE THAN 10% OF SHARES IN THE SAID COMPANY. M/S ACME BUILDERS PVT. LTD. HAD SUFFI CIENT ACCUMULATED RESERVES AND IS NOT IN TO THE BUSINESS OF LENDING. THE ASSES SING OFFICER OBSERVED THAT THE ADVANCE GIVEN TO THE ASSESSEE IS NOT IN THE NORMAL COURSE OF THE BUSINESS. 2 THEREFORE THE ASSESSING OFFICER TREATED THE ADVANCE RECEIVED BY THE ASSESSEE FROM THE ABOVE COMPANY AS DEEMED DIVIDEND AND MADE ADDITION OF RS. 1,40,00,000/- UNDER SECTION 2(22)(E) OF THE ACT. 4. THE LD. CIT(A) CONFIRMED THE ADDITION ON THE GRO UNDS THAT THE MONEY SO RECEIVED BY THE ASSESSE WAS GIVEN TO THE FATHER OF THE ASSESSEE FOR VARIOUS PURPOSES AND NOT UTILIZED FOR PURCHASED OF THE PROP ERTY ON BEHALF OF THE COMPANY WHO MADE THE ADVANCES. 5. BEFORE US, THE LD. AR SUBMITTED THAT M/S ACME BU ILDERS PVT. LTD. IS ENGAGED IN REAL ESTATE BUSINESS AND ASSESSEE HELD 4 0% SHARE IN THIS COMPANY. THE SUBMISSION MADE BY THE ASSESSEE BEFORE ASSESSIN G OFFICER WAS REITERATED DURING PROCEEDINGS. IT WAS SUBMITTED THAT THE ADVAN CE WAS MADE TO THE ASSESSEE FOR ACQUIRING A PROPERTY IN THE NAME OF TH E ASSESSEE AND SUBMITTED BOARD RESOLUTION DATED 15/06/2012 BEFORE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE ADVANCE WAS MADE FOR MEETING BUSINESS EXPEDIENC Y AND WERE MADE IN ORDINARY COURSE OF BUSINESS. 5.1 HE FURTHER SUBMITTED FUND FLOW CHART FOR THE FU NDS RECEIVED FROM M/S ACME BUILDERS PVT. LTD. TO THE ASSESSEE AND FROM TH E ASSESSEE TO SHRI HARPAL SINGH AND FROM THERETO BERKELEY RETAILS PVT. LTD. H E IS ALSO SUBMITTED THE RELEVANT BANK STATEMENTS DURING THE HEARING. 6. THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITI ES BELOW. 7. WE HAVE GONE THROUGH THE FACTS ON RECORD AND FIN D THAT THE AMOUNTS HAVE BEEN INDEED RECEIVED BY BARKLEY RETAILS PVT. L TD. WHICH CAN BE CONSIDERED AS A TRADE ADVANCE. THUS WE FIND THAT, T HE OBSERVATION OF THE LD.CIT(A) THAT THE ADVANCE WAS UTILIZED FOR PERSONA L PURPOSE AND NOT FOR MEETING THE BUSINESS EXPEDIENCY IS BASED ON WRONG I NTERPRETATION OF THE FACTS. HENCE PLACING RELIANCE ON THE JUDGMENT OF KARNATAKA HIGH COURT IN THE CASE OF BAGMARE CONSTRUCTIONS PVT. LTD. (ITA NO. 473/2013), THE ADDITION MADE IS HEREBY DIRECTED TO BE DELETED. 8. THIS GROUND OF APPEAL IS HEREBY ALLOWED. 9. THE SECOND GROUND RELATES TO DISALLOWANCE UNDER SECTION 14A . 10. DURING THE YEAR THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS. 1 1,82,978/- UNDER SECTION 14A WHICH THE LD. CIT(A) HAS CONFIRMED. HONORABLE PUNJA B AND HARYANA HIGH COURT IN THE CASE OF CIT FARIDABAD V. LAKHANI MARKETING I NC IN ITA NO. 970/2008 VIDE 3 THEIR JUDGMENT DATED 2-4-2014 HAVE HELD THAT THE DI SALLOWANCE UNDER SECTION 14A CAN BE MADE ONLY TO THE EXTENT OF RECEIPT OF DI VIDEND INCOME. SINCE IN THE INSTANT CASE THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME NO DISALLOWANCE UNDER SECTION 14A IS WARRANTED. 11. AS A RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . %.. . & , (DIVA SINGH) (DR. B.R.R. KUMAR) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 29/10/2018 *% + ,- . -(/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. * * ! // CIT 4. * * ! / ()/ THE CIT(A) 5. - 23 4, * # *4), 67839/ DR, ITAT, CHANDIGARH 6. 38 :'/ GUARD FILE