Abhijit Vivekanand Patil, Panvel V. Addl.CIT,Panvel Range, Panvel, Panvel

ITA 452/PUN/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79854 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Opportunity of being heard; Deemed dividend
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.452/PN/2011 (ASSESSMENT YEAR : 2007-08) ABHIJIT VIVEKANAND PATIL, PROP. OF M/S. ABHIJIT TRANSPORT, PLOT NO.25, ASWAD, VIJAYPATH, PANVE, DIST, RAIGAD - 410206 .. APPELLANT PAN NO.AJWPP2808E VS. ADDL.CIT, PANVEL RANGE, PANVEL .. RESPONDENT ASSESSEE BY : SHRI SUBODH RATNAPARKHI REVENUE BY : SHRI S.P. WALIMBE DATE OF HEARING : 29-04-2014 DATE OF PRONOUNCEMENT : 30-05-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 14-01-2011 OF THE CIT(A)-I, THANE RELATING TO ASSESSMENT YEAR 2007-08. 2. THIS APPEAL WAS EARLIER DECIDED BY THE TRIBUNAL VIDE ORDER DATED 19-07-2012. SUBSEQUENTLY, THE ASSESSEE FILED A MIS CELLANEOUS APPLICATION STATING THAT CERTAIN ERRORS HAD CREPT I N THE ORDER OF THE TRIBUNAL FOR WHICH THE TRIBUNAL VIDE ORDER DATED 04 -11-2013 RECALLED THE ORDER FOR FRESH ADJUDICATION. THEREFORE, THIS IS A RECALLED MATTER. 3. THE ASSESSEE IN ITS GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS. 1 CROR E MADE BY THE AO U/S. 2(22)(E) OF THE INCOME TAX ACT, 1961. 2 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN EMPLOYEE OF KARNALA INFRASTRUCTURE PROJECT PVT. LTD. (IN SHOR T KIPL) AND IS ALSO ENGAGED IN BUSINESS OF TRANSPORT AND RE-SELLER OF S AND AND METAL IN THE NAME AND STYLE OF ABHIJIT TRANSPORT. THE ASSESS EE ALSO OPERATES PETROL PUMP CALLED ASWAD PETROLEUM WHICH IS OWNED BY UNC LE OF THE ASSESSEE SRI MANOHAR SHANKAR PATIL. THE ASSESSEE D URING THE IMPUGNED ASSESSMENT YEAR WAS HOLDING 45% SHARE OF THE COMPAN Y KIPL AND RECEIVED SALARY OF RS. 26 LAKHS FROM THE SAID COMP ANY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ON PERUSAL OF THE BALANCE SHEET OF SRI ABHIJIT PATIL NOTED THAT HE HAS RECEIVED A L OAN OF RS. 1 CRORE FROM KIPL. FROM THE VARIOUS DETAILS FURNISHED BY THE AS SESSEE THE AO NOTED THAT THE COMPANY KIPL HAS RESERVES TO THE TUNE OF R S. 2,04,75,496. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY T HE PROVISIONS OF SECTION 2(22)(E) SHOULD NOT BE APPLICABLE TO HIM. 5. THE ASSESSEE VIDE HIS REPLY DATED 24-12-2008 SUB MITTED AS UNDER : THE ASSESSEE ENTERED INTO AN AGREEMENT ON 07-11-2006 WITH KARNALA INFRASTRUCTURE PVT. LTD. TO GIVE SERVICES OF ACQUISITIO N OF ABOUT 10 ACRES OF CONTIGUOUS LAND AT PALASPE, TALUKA PANVEL, DEVELOPMEN T THEREOF AND TRANSFERRING THE SAME IN THE NAME OF THE COMPANY FOR THEIR CONSTRUCTION PROJECT. DURING THE YEAR, THE ASSESSEE RECEIVED RS. 100 LACS AS ADVANCE AS PER THE CONTRACT. COPY OF THE AGREEMENT IS PRODUCED FOR YOUR KIND REFERENCE. ASSESSEE STARTED NEGOTIATING WITH VARIOUS FAR MERS FOR ACQUISITION OF LAND AND TILL 31-03-2007 RS. 8.00 LACS WERE GIVEN AS ADVANCE TO THE FARMERS. AS THE ADVANCE WAS RECEIVED F ROM THE COMPANY WAS FOR GIVING SERVICES AS PER THE CONTRACT AND AS ASSESSEE HAS STARTED GIVING CONTRACTED SERVICES, THE PROVISION OF SECTION 2( 22)(E) ARE NOT APPLICABLE. YOUR KIND ATTENTION IS DRAWN TO THE DECI SION OF THE MUMBAI ITAT IN CASE OF NH SECURITIES LTD. VS. DCIT SOT 302. 6. THE AO THEREAFTER ASKED THE ASSESSEE TO EXPLAIN THE UTILISATION OF ABOVE RS. 1 CRORE BY HIM. HE ALSO ASKED THE ASSESS EE TO EXPLAIN AS TO HOW THE AMOUNT WAS REPAID IF NOT UTILISED, THE EXTE NT OF LAND PURCHASED AND THE NAME OF THE PERSONS IN WHOSE NAME THE LAND WAS PURCHASED AND 3 WHETHER THE LAND SO PURCHASED WAS TRANSFERRED IN TH E NAME OF THE COMPANY ALONG WITH NECESSARY BANK DETAILS. 7. IT WAS SUBMITTED BY THE ASSESSEE THAT HE CARRIED OUT NEGOTIATIONS WITH MADHUKAR BHOIR, ANANT BHOIR, LAXMAN VINAYAK BH AVE, YESHWANT DHARMANKAR AND MAHADEV S. MOGHE FOR PURCHASE OF LAN D. ADVANCES WERE GIVEN TO SOME OF THESE PARTIES WHERE NEGOTIATI ONS WERE SUCCESSFUL. IT WAS SUBMITTED THAT THE CONTIGUOUS PIECE OF LAND COULD NOT BE OBTAINED BY THE ASSESSEE. 8. HOWEVER, THE AO WAS NOT CONVINCED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE. HE OBSERVED FROM THE BANK STATEME NT FURNISHED BY THE ASSESSEE (BANK ACCOUNT NO. 199 WITH KARNALA NAGRI S AHKARI BANK) THAT ADVANCE OF RS. 50 LACS WAS RECEIVED ON 07-11-06 AND ANOTHER RS.50 LACS ON 08-11-06. ON 06-11-06 THE ASSESSEE HAS AVAILED CREDIT LIMIT OF RS. 2, 67,66,142/- FROM THE SAID BANK. ON FURTHER PERUSAL OF THE BANK STATEMENT HE OBSERVED THE FOLLOWING : DATE AMOUNT ADVANCED CREDIT BALANCE WITH BANK PURPOSE OF ADVANCE 04-04-06 5,00,000 29,77,036 PARTNERS CAPITAL WITH PATEL AND PATIL 13-04-06 5,00,000 86,21,036 DO 15-05-06 5,00,000 1,31,86,640 DO 06-06-06 5,00,000 1,55,00,730 DO 20-06-06 10,00,000 1,49,05,589 DO 28-06-06 5,00,000 1,74,14,629 DO 23-08-06 5,00,000 1,86,55,879 DO 07-10-06 5,00,000 1,69,55,749 DO 09-11-06 5,00,000 1,51,86,142 DO 50,00,000 9. ON FURTHER ANALYSIS OF THE BANK STATEMENT THE AO NOTED THAT THE OTHER TRANSACTIONS INCLUDE PAYMENTS TO VIVEK AUTOMO BILES, EXPENDITURE ON BUNGLOW AND FOREIGN VISIT OF SRI ABHIJIT PATIL. DUE TO THESE PAYMENTS TO PATEL AND PATIL, VIVEK AUTOMOBILES AND PERSONAL EXPENDITURE THE 4 CREDIT LIMIT WITH THE BANK WHICH WAS RS. 2,17,66,14 2/- ON 07-11-06 CAME DOWN TO RS. 1,67,66,142/- AFTER THE ADVANCE OF RS. 1 CRORE WAS RECEIVED. ON 11-11-06 AN AMOUNT OF RS. 1,52,74,816/- WAS RECE IVED FROM VIVEK AUTOMOBILES WHICH REDUCED THE CREDIT BALANCE TO RS. 55,192/-. ON PERUSAL OF OTHER BANK ACCOUNT OF THE ASSESSEE (ACC OUNT NO. 222 WITH KNS BANK) THE AO OBSERVED THAT DURING THE YEAR ADVA NCES OF RS. 29,50,523/- WAS GIVEN, THE DETAILS OF WHICH ARE UND ER : DATE AMOUNT ADVANCED CREDIT BALANCE WITH BANK PURPOSE OF ADVANCE 25-08-06 9,64,580 1,97,162 ASWAD PETROLEUM 20-10-06 6,66,060 1,42,48,28 DO 15-02-07 25,79,800 35,86,148 DO 23-03-07 2,19,633 23,95,342 DO 23-03-07 3,20,450 27,15,792 DO 28-03-07 32,00,000 92,778 DO 79,50,523 10. IN THIS BACKGROUND THE AO EXAMINED THE REAL PUR POSE OF ADVANCE TAKEN FROM KIPL AMOUNTING TO RS. 1 CRORE. THE ASSE SSEE HAD EARLIER SUBMITTED THAT ADVANCE WAS TAKEN FOR THE PURCHASE O F LAND IN THE NAME OF ABHIJIT PATIL WHICH WAS SUBSEQUENTLY TO BE CONVERTE D TO NON- AGRICULTURAL LAND AND THEN TO BE TRANSFERRED IN THE NAME OF THE COMPANY. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE THE AO OBSERVED THAT THE PAYMENTS MADE TO THE FARMERS ARE AS UNDER : DATE PARTICULARS AMOUNT BALANCE A.Y. 2006-07 02-09-2005 CASH 1,24,000 1,24,000 08-09-2005 CHEQUE TO AP BHOIR 6,50,000 7,74,000 A.Y. 2007-08 08-06-06 PAID TO ANAT BHOIR 2,00,000 9,74,000 26-10-06 MAHADEV BHOIR 6,00,000 15,74,000 10.1. THUS THE AO NOTED THAT RS. 7,74,000 WAS PAID DURING F.Y. 2005- 06 (A.Y. 2006-07) AND RS. 8 LACS WAS PAID DURING F. Y. 2006-07 (A.Y. 5 2007-08). THE LAND AT PALASPE HAS BEEN SHOWN AS FI XED ASSETS IN THE BALANCE SHEET OF ABHIJIT PATIL. 10.2. THE AO ANALYSED THE SUBMISSION OF THE ASSESSE E AND OBSERVED THAT AS PER THE ASSESSEES SUBMISSION, THE LAND WAS PURC HASED AS PER AGREEMENT BETWEEN KPIL AND THE ASSESSEE, WHEREAS TH E TRANSACTIONS SHOW THAT WHATEVER LAND WAS PURCHASED BY ABHIJIT PA TIL WAS PURCHASED EVEN BEFORE THE AGREEMENT WAS EXECUTED AND WAS SHOW N IN THE FIXED ASSETS OF ABHIJIT AUTOMOBILE. THE PAYMENT OF RS. 1 CRORE MEANT TO BE FOR THE PURCHASE OF LAND WAS INFACT FOR BAILING OUT THE ASSESSEE AS HE HAD CREDIT BALANCE OF RS. 2,17,66,142/- ON 07-11-06, WH ICH WAS SUBSEQUENTLY REDUCED TO RS. 1,17,66,142/- AFTER THESE RECEIPTS A ND ON 11-11-06, AN AMOUNT OF RS. 1,52,74,816/- WAS RECEIVED FROM VIVEK AUTOMOBILE, WHICH REDUCED THE CREDIT BALANCE TO RS.55,192. THE CREDIT BALANCE WAS MAINLY BECAUSE THE ASSESSEE HAS MADE INVESTMENTS WI TH PATEL AND PATIL, ASWAD PETROLEUM AND INTEREST ON LOAN. THE AMOUNT R ECEIVED FROM KPIL HAS THEREFORE NOTHING TO DO WITH THE PURCHASE OF LA ND FOR THE COMPANY. 10.3 THE AO FURTHER OBSERVED THAT EVEN IF IT IS CON SIDERED THAT ADVANCE WAS FOR THE PURCHASE OF LAND, THE QUESTION ARISES W HY WAS THE ADVANCE GIVEN TO AN EMPLOYEE WHO WAS GETTING RS. 26 LACS AS SALARY DURING THE YEAR. THE PAYMENT COULD HAVE BEEN MADE DIRECTLY TO THE FARMERS AS AND WHEN THE LAND WAS PURCHASED. HE NOTED THAT AS PER T HE ACCOUNTS THE ADVANCE WAS NOT MEANT FOR PURCHASE OF LAND AS THE L AND IN THE NAME OF ABHIJIT HAD ALREADY BEEN PURCHASED AND NO FURTHER L AND WAS PURCHASED OR TRANSFERRED IN NAME OF COMPANY AFTER THE ADVANCE WA S TAKEN. THEREFORE, HE WAS OF THE OPINION THAT THE SAID AGREEMENT IS ON LY A PLOY TO SHOW THAT THE ADVANCE HAS BEEN GIVEN FOR PURCHASE OF LAND FOR THE COMPANY AND TO 6 ESCAPE PROVISIONS OF SECTION 2(22)(E). REJECTING TH E EXPLANATION GIVEN BY THE ASSESSEE AND DISTINGUISHING THE DECISIONS CI TED BEFORE HIM HE HELD THAT THE PROVISIONS OF SECTION 2(22)(E) ARE CLEARLY ATTRACTED. HE ACCORDINGLY MADE ADDITION OF RS. 1.00 CR. TO THE TO TAL INCOME OF THE ASSESSEE. 11. BEFORE THE CIT(A) THE ASSESSEE REITERATED THE S AME SUBMISSIONS AS MADE BEFORE THE AO. IT WAS SUBMITTED THAT THE COMP ANY KIPL HAD ENGAGED THE ASSESSEE TO ACQUIRE FOR THEM A CONTIGUO US LAND ADMEASURING OF ABOUT 10 ACRES AT VILLAGE PALASPE, TALUKE PANVEL , DISTRICT RAIGAD. AS PER THE MOU DATED 07-11-2006, THE LAND TO BE ACQUIR ED FOR THE ABOVE COMPANY WAS AGRICULTURAL LAND AND DUE TO RESTRICTIO NS PLACED UNDER LAND REVENUE LAWS THE SAME COULD NOT BE DIRECTLY PURCHAS ED IN THE NAME OF THE COMPANY. IT WAS SUBMITTED THAT SINCE THE ASSESSEE WAS OWNING A SMALL PORTION OF THE LAND IN HIS PERSONAL CAPACITY, THERE FORE, TAKING INTO ACCOUNT ALL FACTORS INTO CONSIDERATION HE WAS IDEALLY PLACE D TO ACQUIRE THE SAID LAND FOR AND ON BEHALF OF THE COMPANY. AS PER THE MOU HE WAS SUPPOSED TO ACQUIRE THE LAND FROM THE FARMERS AFTER NECESSARY PERMISSIONS/SANCTIONS FROM THE LAND REVENUE AUTHORI TIES AND AFTER NA PERMISSION TO TRANSFER THE SAID 10 ACRES OR THEREAB OUTS LAND IN THE NAME OF THE COMPANY FOR THE CONSIDERATION OF RS. 3 CRORE . ACCORDINGLY, HE HAD RECEIVED AN ADVANCE OF RS. 1 CRORE. SUBSEQUENT LY A FURTHER SUM OF RS. 1 CRORE WAS RECEIVED BY THE ASSESSEE FROM THE C OMPANY DURING THE ASSESSMENT YEAR 2008-09. SINCE HE WAS UNABLE TO A CQUIRE THE ENTIRE 10 ACRES OF CONTIGUOUS PIECE OF LAND AT THE DESIGNATED AREA, THE MOU ENTERED INTO BETWEEN HIM AND THE COMPANY WAS TERMIN ATED AND THE ENTIRE SUM OF RS. 2 CRORES RECEIVED BY HIM TILL THEN WAS R EFUNDED TO THE 7 COMPANY. IT WAS SUBMITTED THAT HE BEING A SHAREH OLDER IN THE COMPANY WAS ONLY INCIDENTAL AND THE TRANSACTION ENTERED INT O BETWEEN HIM AND THE COMPANY WAS A COMMERCIAL TRANSACTION. IT WAS SUBMI TTED THAT THE AO HAS NEITHER EXAMINED THE COMPANY NOR HAS PROVIDED A NY OTHER EVIDENCE IN SUPPORT OF THE CLAIM THAT THE TRANSACTION AS PUT FORTH BY THE ASSESSEE WAS NOT GENUINE. RELYING ON A COUPLE OF DECISIONS IT WAS SUBMITTED THAT THE ADDITION MADE U/S. 2(22)(E) SHOULD BE DELETED. 12. HOWEVER, THE LEARNED CIT(A) ALSO WAS NOT CONVI NCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND HELD THAT THE PROVISIONS OF SECTION 2(22)(2) ARE CLEARLY APPLICABLE TO THE FACTS OF THE CASE. HE, HOWEVER, ACCEPTED THE ALTERNATE CONTENTION OF THE ASSESSEE T HAT ACCUMULATED PROFIT UPTO THE DATE OF PAYMENT OF ADVANCE ONLY SHOULD BE CONSIDERED FOR DETERMINING THE QUANTUM OF DEEMED DIVIDEND. HE ACC ORDINGLY DIRECTED THE AO THAT THE PROFITS UPTO THE DATE OF ADVANCE ON LY SHOULD BE CONSIDERED FOR DETERMINING THE DEEMED DIVIDEND. AG GRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFOR E US. 13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO APPLIED THE PROVISIONS OF SECTION 2 (22)(E) ON THE GROUND THAT FUNDS WERE NOT UTILISED FOR THE PURPOSE OF BUSINESS BUT UTILIS ED FOR PERSONAL USE OF THE DIRECTOR. REFERRING TO PAGE 13 OF THE PAPER BO OK THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE LAY OUT PLAN AND SUBMITTED THAT THE ASSESSEE HAS ALREADY ACQUIRED A PORTION OF THE LAND AND FOR THE REMAINING PORTION HE WAS ENGAGED WITH VARIO US OTHER FARMERS SO AS TO MAKE A CONTIGUOUS PLOT. REFERRING TO PAGES 1 4 TO 17 HE DREW THE ATTENTION OF THE BENCH TO THE AGREEMENT FOR CANCELL ATION OF THE MOU. REFERRING TO PAGE 18 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE 8 BENCH TO PALAPSE LAND DETAILS PURCHASED BY SHRI ABH IJIT VIVEKANAND PATIL FROM VARIOUS PERSONS. HE SUBMITTED THAT SHRI ABHIJIT VIVEKANAND PATIL WAS ALREADY HAVING IN HIS NAME ABOUT 4.78 ACR ES OF LAND. THEREFORE, THE ASSESSEE IS NOT REQUIRED TO UTILISE THE SAME MONEY FOR GIVING ADVANCE TO OTHERS FOR ACQUISITION OF LAND. HE SUBMITTED THAT THE TRANSACTION OF THE COMPANY WITH THE ASSESSEE WAS FO R PROCUREMENT OF LAND. IT WAS NOT THE CONDITION THAT SOME FUND HAS TO BE UTILISED FOR PURCHASE OF LAND. HE SUBMITTED THAT WHEN THE ASSES SEE WAS ALREADY HAVING 4.78 ACRES OF LAND HIMSELF FOR WHICH NO PAYM ENT WAS REQUIRED TO BE MADE TO ANY OTHER PERSON, THEREFORE, IN ABSENCE OF IMMEDIATE PAYMENT BEING REQUIRED TO BE MADE TO FARMERS THE ASSESSEE H AS UTILISED THE FUND FOR HIS OWN PURPOSE. HE ACCORDINGLY SUBMITTED THAT NO ADDITION U/S.2(22)(E) SHOULD HAVE BEEN INVOKED. HE SUBMITTE D THAT SINCE THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN TH E BUSINESS OF CONSTRUCTION, THEREFORE, IT WAS NOT ELIGIBLE TO BUY AGRICULTURAL LAND AND THE SAME HAS TO BE PURCHASED THROUGH SOME INDIVIDUA L IN VIEW OF THE PROVISIONS OF SECTION 63 OF THE BOMBAY TENANCY ACT. HE SUBMITTED THAT THE ASSESSEE COMPANY ENTERED INTO AN MOU WITH THE A SSESSEE ON 07-11- 06 WHICH WAS SUBSEQUENTLY CANCELLED ON 01-08-08 SIN CE THE ASSESSEE WAS UNABLE TO ACQUIRE CONTIGUOUS PIECE OF LAND ADMEASUR ING ABOUT 10 ACRES OR THEREABOUTS. REFERRING TO PAGE 19 OF THE PAPER BOOK THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE LAND ACQUIRED BY THE ASSESSEE. REFERRING TO PAGE 28 OF THE PAPER BOOK THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE PROFIT DECLARED BY THE ASSESSEE ON ACCOUNT OF SALE OF LAND AT AKURLI WHICH HAS BEEN SHOWN UNDER THE HEAD INCOME FROM BUSINESS /PROFESSION. HE 9 SUBMITTED THAT IT IS A COMMERCIAL TRANSACTION BETWE EN THE COMPANY AND THE DIRECTOR. REFERRING TO THE FOLLOWING DECISIONS HE SUBMITTED THAT TRADE ADVANCE IS OUTSIDE THE PURVIEW OF SECTION 2(2 2)(E) OF THE I.T. ACT. 1. CIT VS. NAGINDAS M. KAPADIA REPORTED IN 177 ITR 39 3 (BOM.) 2. CIT VS. RAJKUMAR REPORTED IN 318 ITR 464 (2009) (DELHI) 3. CIT VS. CREATIVE DYEING & PRINTING (P) LTD. REPOR TED IN 318 ITR 476 4. N.H. SECURITIES LTD. VS. DCIT REPORTED IN 11 SOT 302 (2007) (MUMBAI) 5. SMT. NIGAM CHAWLA VS. ITO REPORTED IN 28 SOT 503 (DELHI) (2009) 6. JHAMU U. SUGHAND VS. DCIT REPORTED IN 99 ITD (MUM BAI) (2006) 7. DCIT VS. LAKRA BROTHERS REPORTED IN 106 TTJ (CHD.) (2007) 8. ACIT VS. GLOBAL AGENCIES (P) LTD. REPORTED IN 1 SO T 510 (DELHI) (2004) HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE THE T RANSACTION HAS NOT YET BEEN COMPLETED, THEREFORE, INVOKING THE PROVISIONS OF SEC. 2(22)(E) IS NOT JUSTIFIED. HE SUBMITTED THAT SINCE THE MONEY COULD NOT BE UTILISED THE COMPANY HAS REFUNDED THE MONEY. 14. IN HIS ALTERNATE CONTENTION HE SUBMITTED THAT T HE MATTER MAY BE RESTORED TO THE FILE OF THE AO SINCE THE LOWER AUTH ORITIES HAVE NOT COMMENTED UPON THE TRANSACTION AND THE COMPANY HAS NOT BEEN EXAMINED. THEREFORE, IN THE INTEREST OF JUSTICE, T HE MATTER SHOULD BE RE- EXAMINED AT THE LEVEL OF AO TO COME TO AN INDEPENDE NT CONCLUSION. 15. THE LEARNED DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDERS OF THE AO AND THE CIT(A). HE SUBMITTED THAT THE ADVAN CE WAS MADE BY THE COMPANY WHICH WAS SUBSEQUENTLY RETURNED TO THE COMP ANY. DURING THE INTERVENING PERIOD THE ADVANCE WAS UTILISED FOR PER SONAL USE. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DURGA PRASAD MORE REPORTED IN 82 ITR 540 AND IN THE CASE OF SUMATI DAYAL VS. CIT REPORTED IN 214 IT R 801. HE 10 SUBMITTED THAT THE VARIOUS DOCUMENTS FURNISHED BY T HE ASSESSEE ARE SELF SERVING AND THE AO CAN GO BEYOND THE DOCUMENTS. 16. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE A SSESSING OFFICER MADE THE ADDITION OF RS.1.00 CRORE BY INVOKING THE PROVI SIONS OF SEC.2(22)(E) ON THE GROUND THAT THE COMPANY KIPL HAVING SUFFICIE NT RESERVES HAS ADVANCED AN AMOUNT OF RS. 1 CRORE TO A DIRECTOR HAV ING SUBSTANTIAL INTEREST IN THE COMPANY WHO HOLDS ABOUT 45% OF THE SHARE. WE FIND THE LEARNED CIT(A) UPHELD THE ACTION OF THE AO IN INVOK ING THE PROVISIONS OF SEC. 2(22)(E) AND DIRECTED THE AO TO RESTRICT SU CH ADDITION TO THE EXTENT OF ACCUMULATED PROFITS UPTO THE DATE OF PAYMENT OF ADVANCE. 16.1 IT IS THE SUBMISSION OF THE LEARNED COUNSEL FO R THE ASSESSEE THAT THIS IS A TRADE TRANSACTION AND THE ADVANCE WAS GIVEN BY THE COMPANY TO THE ASSESSEE FOR PURCHASE OF CONTIGUOUS LAND ADMEASURIN G OF ABOUT 10 ACRES OR THEREABOUTS SINCE THE COMPANY WAS NOT AUTHORISED TO PURCHASE AGRICULTURAL LAND. IT IS THE SUBMISSION OF THE LEA RNED COUNSEL FOR THE ASSESSEE THAT SINCE THE ASSESSEE WAS ALREADY HAVING 4.78 ACRES OF LAND AND THE ASSESSEE HAD UNDERTAKEN TO ACQUIRE LAND FOR A FIXED CONSIDERATION OF RS.30 LAKHS PER ACRE, THEREFORE, TO THIS EXTENT HE WAS NOT REQUIRED TO MAKE ANY ADVANCE TO VARIOUS FARMERS FOR ACQUIRING C ONTIGUOUS LAND OF 10 ACRES. SINCE THE ASSESSEE WAS UNABLE TO ACQUIRE CO NTIGUOUS LAND OF 10 ACRES, THEREFORE, ULTIMATELY, THE MOU WAS CANCELLED AND MONEY WAS REFUNDED TO THE COMPANY. SINCE IT IS A COMMERCIAL TRANSACTION THE PROVISIONS OF SECTION 2(22)(E), ACCORDING TO THE LD . AR ARE NOT 11 APPLICABLE TO THE FACTS OF THE PRESENT CASE. SINCE THE LOWER AUTHORITIES HAVE NOT ADJUDICATED FROM THIS ANGLE AND THE COMPAN Y DIRECTORS WERE NOT EXAMINED, THEREFORE, WE FIND MERIT IN THE ALTERNATE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATION O F THE ISSUE. WE ACCORDINGLY RESTORE THE ISSUE TO THE FILE OF THE AS SESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AND IN ACCORDA NCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSE SSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED FOR STATISTICAL PURPOSES PRONOUNCED IN THE OPEN COURT ON 30-05-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 30 TH MAY, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, THANE 4. THE CIT-I, THANE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE