DCIT 9(2), MUMBAI V. ASHOK D JAIN, MUMBAI

ITA 4505/MUM/2013

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7367 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH KUMAR YADAV
• Keywords: Deemed dividend; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH MUMB AI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.4505/MUM/2013 (ASSESSMENT YEAR 200 9-10 ) DCIT 9(2) ROOM NO. 218, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. VS. SHRI ASHOK D. JAIN 11, UNNAT NAGAR CHS, M.G. ROAD, GOREGAON(W), MUMBAI-62. PAN: AACPJ7464P APPELLANT RESPONDENT RESPONDENT BY : SHRI RAJESH KUMAR YADAV (DR) APPELLANT BY : SHRI NARESH JAIN (AR) DATE OF HEARING :25.04.2018 DATE OF PRONOUNCEMEN T : 27.04.2018 ORDER PER PAWAN SINGH, JUDICIAL MEMBER; 1. THE INSTANT APPEAL BY REVENUE UNDER SECTION 253 OF THE INCOME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMM ISSIONER OF INCOME-TAX (APPEALS)-20 [LD. CIT(A)], MUMBAI DATED 25.03.2013 FOR ASSESSMENT YEAR 2009-10. THE LD CIT(A) REVERSED THE FINDING OF ASSESSING OFFICER IN MAKING THE DISALLOWANCE UNDER SECTION 2(22)(E) WHIL E PASSING ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT DATED 21.12.2 011. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 2,19,78,500/- MADE BY THE AO AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE IT ACT., WITHOUT APPRECIATING THAT ALL THE CONDITIONS PRESCRIBED IN THE SAID SECTION ARE FULFILLED IN THE ASSESSEE'S CASE? ITA NO.4505/M/13- SHRI ASHOK D. JAIN 2 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN TREATING THE 'LOANS ' AS. 'ADVANCED FOR COMMERCIAL PURPOSE', HENCE NOT COVERED UNDER SECTIO N 2(22)(E) OF THE IT ACT. I.E. IN TERMS OF 2(22)(E)(II), WITHOUT APPRECI ATING THAT THE ASSESSEE FAILED TO ESTABLISH DURING ASSESSMENT AS WELL AS AP PELLATE PROCEEDING THAT THE IMPUGNED LOAN WAS UTILIZED FOR ANY COMMERC IAL PURPOSE SINCE THE DEVELOPMENT AGREEMENT PRODUCED BY THE ASSESSEE WAS NOT IMPLEMENTED, AS EVIDENT FROM THE RECORDS OF THE YEA R UNDER CONSIDERATION AND THE FOLLOWING YEAR? 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS P ROPRIETOR OF M/S NITIKA TOWER AND IS ONE OF THE DIRECTOR IN M/S JALARAM POL YMERS PVT LTD, FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 30.09.2009 DECLARING TOTAL INCOME OF RS. 32,01,510/-. THE ASSESSMENT WAS COMPLETED ON 21.12.2011 UNDER SECTION 143(3) OF THE ACT. THE ASS ESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER MADE THE ADDITION OF R S. 2,19,78,500/- UNDER SECTION 2(22)(E) OF THE ACT. ON APPEAL BEFORE THE L D. CIT(A), THE ENTIRE ADDITION ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTIO N 2(22)(E) WAS DELETED. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A) , THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE RE VENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LD. DR FOR THE REVE NUE FURTHER SUBMITS THAT THE LD. CIT(A) DELETED THE ADDITION ON THE BAS IS OF AGREEMENT PROPOUNDED BY ASSESSEE SUBSEQUENTLY, AFTER RAISING THE ISSUE BY ASSESSING ITA NO.4505/M/13- SHRI ASHOK D. JAIN 3 OFFICER DURING THE ASSESSMENT, SHOWING THE COMMERCI AL EXPEDIENCY ABOUT LENDING OF MONEY. THE ASSESSEE HAS PREPARED THE AGR EEMENT AFTER RAISING THE QUERY BY THE ASSESSING OFFICER. THERE IS NO PRO VISION UNDER SECTION 2(22)(E) FOR END USE OF MONEY. THE LD. CIT(A) HAS NOT MADE APPROPRIATE ENQUIRY BEFORE DELETING THE ADDITION. IT WAS DUTY O F THE LD. CIT(A) TO MAKE ADEQUATE AND SUFFICIENT ENQUIRY BEFORE DELETING THE ADDITION IN SUPPORT OF HIS SUBMISSION, THE ADDITION IN SUPPORT OF HIS SUBM ISSION, THE LD. DR FOR THE REVENUE RELIED UPON THE DECISION OF HONBLE DEL HI HIGH COURT IN CASE OF CIT VS. JANSAMPARAK ADVERTISING & MARKETING (P.) LTD. [375 ITR 373 (DELHI). 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD CIT(A). THE LD. AR OF THE ASSESSEE SUBMITS THAT THE RE WAS NO REASON FOR MAKING ADDITION ON ACCOUNT OF DEEMED DIVIDEND. THE ASSESSEE MADE A JOINT VENTURE WITH THE COMPANY FOR COMMERCIAL TRANS ACTION. THE ASSESSEE RECEIVED MONEY PURELY FOR CARRYING OUT ACTIVITIES F OR DEVELOPMENT OF LAND AND EXECUTED THE JOINT VENTURE AGREEMENT DATED 5 TH APRIL 2006 BETWEEN ASSESSEE AND HIS MOTHER AND M/S JALARAM POLYMER PVT . LTD. IN CONSEQUENCE OF AGREEMENT AMOUNT WAS REMITTED BY PVT . LTD. COMPANY TO M/S. NIKITA DEVELOPERS ON CONSIDERATION FOR CARRYIN G OUT CONSTRUCTION ACTIVITIES IN A JOINT VENTURE. THUS, THE GENUINE BU SINESS TRANSACTION IN ADVANCE FOR DEVELOPMENT OF LAND CANNOT BE TREATED A S DEEMED DIVIDEND. THE ASSESSING OFFICER HAS NOT CARRIED OUT PROPER EN QUIRY WITH REGARD TO ITA NO.4505/M/13- SHRI ASHOK D. JAIN 4 END USE OF MONEY. DURING THE APPELLATE STAGE, THE L D. CIT(A) DIRECTED THE ASSESSING OFFICER TO INVESTIGATE ABOUT THE END USE OF MONEY, RECEIVED BY ASSESSEE FROM M/S JALARAM POLYMER PVT. LTD., AND TO ASCERTAIN IF THE AMOUNT WAS UTILIZED FOR JOINT VENTURE AS CLAIMED BY ASSESSEE. THE ASSESSING OFFICER HAS NOT DISPUTED THE END USE OF MONEY. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL AGAINST THE AS SESSEE. THE AMOUNT RECEIVED BY M/S. NIKITA DEVELOPERS WAS FOR COMMERCI AL EXPEDIENCY. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESS EE RELIED UPON THE CIRCULAR NO. 19 OF 2017 OF CBDT DATED 12.06.2017 AN D THE DECISION OF HONBLE SUPREME COURT IN CASE OF AMRIK SINGH [2015] 8 TMI 1262 (SC). THE ASSESSEE ALSO RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN CIT VS ARVIND KUMAR JAIN[2012]TAXMAN 44 (DELHI) (MA G). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE MAT ERIAL PLACED BEFORE US. THE ASSESSING OFFICER DURING THE ASSESSMENT FROM TH E BALANCE SHEET OF M/S. NIKITA DEVELOPERS, WHEREIN ASSESSEE IS PROPRIE TOR, NOTED THAT NITIKA TOWER HAS SHOWN A LOAN OF RS. 2,19,78,500/- FROM M /S JALARAM POLYMER PVT. LTD. THE ASSESSEE HAS SUBSTANTIAL SHAREHOLDING IN M/S JALARAM POLYMER PVT. LTD. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE LOAN/ADVANCE OF RS. 2,19,78,500/- APPEARING IN THE BALANCE SHEET SHOULD NOT BE TREATED AS DIVIDEND INCOME IN THE HAND OF AS SESSEE. THE ASSESSEE FILED ITS REPLY DATED 05.12.2011. IN THE REPLY THE ASSESSEE CONTENDED THAT ITA NO.4505/M/13- SHRI ASHOK D. JAIN 5 LOAN FROM M/S JALARAM POLYMER PVT. LTD. WAS IN DUE COURSE OF BUSINESS AND FOR COMMERCIAL EXPEDIENCY FOR DEVELOPMENT OF LA ND UNDER JOINT VENTURE AGREEMENT. THE CONTENTION OF ASSESSEE WAS N OT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICER CONCLUDED THAT THE NORMAL COURSE OF BUSINESS OF M/S JALARAM POLYMER PVT. LTD. IS NOT A LAND DEVELOPMENT. THUS, THE ADVANCE IS NOT A NORMAL COUR SE OF BUSINESS OF M/S JALARAM POLYMERS. FURTHER, THE JOINT VENTURE DEVELO PMENT OF LAND IS NOT BORNE OUT FROM THE P & L A/C, BALANCE SHEET OF THE ASSESSEE AND THE SAME IS AN AFTERTHOUGHT. THE ASSESSING OFFICER ALSO CONC LUDED THAT M/S JALARAM POLYMER PVT. LTD. HAS RESERVE AND SURPLUS AMOUNT AT RS. 3,41,33,404/- AS ON 31.03.2009 AND RS. 2,56,28,123/- AS ON 31.03.200 8. THUS, THE AFORESAID ADVANCE WAS TREATED AS DIVIDEND INCOME IN THE HAND OF ASSESSEE. BEFORE THE LD. CIT(A) THE ASSESSEE FURNISHED WRITTEN SUBMI SSIONS AND EXPLAINED THAT IN THE JOINT VENTURE THE COMPANY ( M.S JALARAM POLYMERS) IS ALSO ONE OF PARTICIPANT, THE AMOUNT WAS GIVEN FOR COMMERCIAL TRANSACTION, THUS, IMPROPER PRESENTATION IN THE BALANCE SHEET, THE GEN UINE BUSHINESS TRANSACTION OR ADVANCES FOR DEVELOPMENT OF LAND, CA NNOT BE TREATED AS DEEMED DIVIDEND. ON THE WRITTEN EXPLANATIONS AND SU BMISSIONS OF ASSESSEE THE LD CIT(A), ISSUED ORDER UNDER SECTION 250(4) DA TED 07.08.2012, FOR CONSEQUENTIAL ENQUIRY AND DIRECTED THE ASSESSING OF FICER TO FURNISH THE REPORT ON OR BEFORE 14.09.2012. NO REMAND REPORT WA S FURNISHED BY ASSESSING OFFICER TILL THAT DATE. THE LD CIT(A) AG AIN VIDE REMINDER DATED ITA NO.4505/M/13- SHRI ASHOK D. JAIN 6 17.09.2012 DIRECTED THE ASSESSING OFFICER TO FURNIS H THE REMAND REPORT WITHIN SEVEN DAYS, BUT, AGAIN THE ASSESSING OFFICER FAILED TO FURNISH HIS REMAND REPORT WITHIN TIME FIXED BY LD CIT(A). HOWEV ER, ON FURTHER REMINDER OF THE LD CIT(A), THE ASSESSING OFFICER FI LED HIS REMAND REPORT DATED 01.03.2013. IN THE REMAND REPORT THE ASSESSI NG OFFICER CONTENDED THAT IN THE BOOKS OF ACCOUNT OF BOTH THE CONCERN TH E AMOUNT HAS BEEN SHOWN LOAN AND ONLY WHEN DURING THE ASSESSMENT TH E ISSUE OF DEEMED DIVIDEND WAS RAISED THE ASSESSEE SUBMITTED COPY OF THE AGREEMENT (JOINT VENTURE). THE ASSESSING OFFICER ALSO SHOWN HIS RESE RVATION THAT THE LAND FOR THE DEVELOPMENT OF WHICH, THE JOINT VENTURE WAS PREPARED, WAS JOINTLY OWNED BY SMT. ANCHIDEVI JAIN AND ASSESSEE, AND ALL THE AMOUNT IS RECEIVED BY ASSESSEE ALONE. THE AMOUNT WAS RECEIVED IN THE ACCOUNT OF NITIKA TOWER AND NOT IN THE NAME OF ASSESSEE. ON TH E REMAND REPORT OF ASSESSING OFFICER THE ASSESSEE FILED HIS COMMENTS/ REJOINDER, WHEREIN THE ASSESSEE REPEATED HIS EARLIER VERSION. THE ASSESSEE ALSO EXPLAINED THAT THE FUNDS WERE TAKEN PURELY FOR COMMERCIAL TRANSACTION DURING THE COURSE OF REGULAR BUSINESS. FUNDS WERE TRANSFERRED TO NITIKA TOWER, WHO HAS TO EXECUTE THE SAID AGREEMENT OF JOINT VENTURE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE REMAND REPORT FU RNISHED BY ASSESSEE, THE LD CIT(A) OBSERVED THAT THE ASSESSING OFFICER H AD TO FIND OUT WHETHER THE AMOUNT WAS UTILIZED FOR JOINT VENTURE AS CLAIME D BY THE ASSESSEE OR NOT. THE ASSESSING OFFICER HAS GIVEN HIS COUNTER COMMENT S; THEREFORE, THE ITA NO.4505/M/13- SHRI ASHOK D. JAIN 7 VERACITY OF THE JOINT VENTURE CANNOT BE DISCARDED. THE LD CIT(A) ALSO EXAMINED THE OBJECTION OF ASSESSING OFFICER THAT TH E AGREEMENT WAS PREPARED WHEN THE ISSUE OF DEEMED DIVIDEND WAS RAIS ED. THE LD CIT(A) CONCLUDED THAT THE FROM THE AGREEMENT IT IS EVIDENT THAT THE STAMP PAPER WAS PURCHASED ON 14.03.2006 AND AGREEMENT WAS EXECU TED ON 05.04.2006 AND THE SAME IS DULY ATTESTED BY NOTARY, WHICH CANN OT BE DISBELIEVED. THE LD CIT(A) ON THE BASIS OF MATERIAL ON RECORD OBSERV ED THAT AS PER THE TERM AND CONDITIONS OF THE AGREEMENT THE AMOUNT WAS NOT GIVEN IN THE NAME OF INDIVIDUAL BUT TO NITIKA TOWER (DEVELOPER), WHO HAS TO CARRY OUT THE DEVELOPMENT ACTIVITY IN SURVEY NO.414,CTS, NO.1208, MALAD SOUTH, BORIWALI. THE ASSESSING OFFICER HAS NOT PROVED THE FATS OTHERWISE. ON THE BASIS OF HIS CONCLUSION THE LD CIT(A) HELD THAT SUC H TRANSACTION IS BEYOND THE SCOPE OF SECTION 2(22)(E) OF THE ACT. 6. WE HAVE SEEN THE CBDT CIRCULAR NO19/2017 DATED 12. 07.2017, WHEREIN IT IS CLARIFIED THAT THE TRADE ADVANCES, WHICH ARE IN THE NATURE OF COMMERCIAL TRANSACTION WOULD NOT FALL WITHIN THE AM BIT OF WORD ADVANCE IN SECTION 2(22)(E) OF THE ACT. IT IS FURTHER CLARI FIED THAT APPEALS MAY NOT BE FILED BY THE OFFICERS OF THE DEPARTMENT AND APPEAL FILED, IN THE COURTS/ TRIBUNAL MAY BE WITHDRAWN. AS WE HAVE SEEN THAT THE ASSESSEE HAS PROVED THAT HAS RECEIVED THE MONEY FOR COMMERCIAL EXPEDIEN CY AND IS NOT COVERED BY THE PROVISIONS OF SECTION 2(22)(E) OF TH E ACT. ITA NO.4505/M/13- SHRI ASHOK D. JAIN 8 7. THE CASE LAW RELIED BY LD DR FOR THE REVENUE IN CIT VS JANSAMPARAK ADVERTISINGS & MARKETING (P) LTD, IS NOT HELPFUL T O HIM, AS THE INSTANT CASE IS NOT SUCH, WHERE THE LOWER AUTHORITIES HAS N OT CARRIED OUT NECESSARY INVESTIGATION AND THE SUBMISSION OF THE ASSESSEE WA S ACCEPTED UNILATERALLY BY LD CIT(A). THE ASSESSEE THROUGHOUT THE ASSESSMEN T AND AT THE STAGE OF FIRST APPELLATE STAGE CONTENDED THAT THE MONEY WAS ADVANCED FOR COMMERCIAL EXPEDIENCY, WHICH HE HAS PROVED. THE ASS ESSING OFFICER MADE ADDITION/ DISALLOWANCE ON THIS BASIS OF ASSUMPTION AND PRESUMPTIONS. THE ASSESSING OFFICER HAS NOT DISPUTED THE END USE OF M ONEY. THUS, WE DONT ACCEPTED THE SUBMISSIONS OF THE LD. DR THAT THE ASS ESSEE AFTER RAISING THE QUESTION RELATED TO THE DEEMED DIVIDEND PROPOUNDED THE JOINT VENTURE AGREEMENT, WHEN THE ASSESSEE HAS EXECUTED THE AGREE MENT WITH THE COMPANY IN THE YEAR 2006 FOR DEVELOPMENT OF LAND ST AND IN HIS OWN NAME ALONG WITH HIS MOTHER. WITH THIS OBSERVATION NO IN TERFERENCES IS CALL FOR IN THE FINDING OF LD CIT(A). IN THE RESULT THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE FAILED. 8. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 27.04.2018. SD/- SD /- G.S. PANNU PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 27.04.2018 SK ITA NO.4505/M/13- SHRI ASHOK D. JAIN 9 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR A BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI