REKHA A BAROT, MUMBAI V. DY CIT CC 9 (2)(1), MUMBAI

ITA 472/MUM/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2488 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 19-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA NAIR
• Keywords: Deemed dividend; Set aside
• Section: 143(3); 153A; 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 472/MUM/2020 Assessment Year: 2006-07 Rekha A. Barot, 1, Ground Floor, Bharat Corporate Avenue, Near Versova Police Station, D.N. Nagar, Andheri (West) Mumbai-400053. Vs. DCIT Central Circle-9(2)(1), 6 th floor, Room No. 659, Income Tax, Mumbai-400020. PAN No. AENPB 5677 H Appellant Respondent Assessee by : Mr. Dalpat Shah, AR Revenue by : Mrs. Smita Nair, DR Date of Hearing : 22/06/2022 Date of pronouncement : 27/07/2022 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 29.11.2019 passed by the Ld. Commissioner of Income-tax (Appeals)-16, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2006-07, raising following ground: 1. Invalid assessment U/S 143(3) r.w.s. 254 of the Income Tax Act, 1961 1.1 On the facts of the case and in the circumstances of the case that the CIT(A) of the Act without appreciating the fact that during the course of search proceedings no incrementing documents were found in respect of the additions made U/S 2(22)(e) of the Act. Therefor additions of ₹19,00,000/ assessment order passed U/S 143(3) r.w.s. 254 of the Act is beyond the scope of section 153A of the Act and therefore needs to be deleted. 2. Addition of Rs. 19,00,000/ Tax Act, 1961 2.1 On the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) confirming the addition of Rs. 19,00,000/ Income Tax Act, 1961 (the Act). 2.2 The said CIT(A) er said amount represent the trade advances which was paid under a contractual obligation and therefore does not fall within the ambit of word (advance) as mentioned in section 2(22)(e) of the Act. If further erred in considered the same as deemed dividend in the hands of your appellant. 1. Invalid assessment U/S 143(3) r.w.s. 254 of the Income Tax On the facts of the case and in the circumstances of the case t the CIT(A) - 16 erred in passing the order U/S 143(3) r.w.s. 254 of the Act without appreciating the fact that during the course of search proceedings no incrementing documents were found in respect of the additions made U/S 2(22)(e) of the Act. Therefor ₹19,00,000/- made U/S 2(22)(e) of the Act made in the assessment order passed U/S 143(3) r.w.s. 254 of the Act is beyond the scope of section 153A of the Act and therefore needs to be Addition of Rs. 19,00,000/- U/S 2(22)(e) of the Income Tax Act, 1961 On the facts and circumstances of the case, the Commissioner of Income Tax (Appeals)-16, Mumbai, erred in confirming the addition of Rs. 19,00,000/- U/S 2(22)(e) of the Income Tax Act, 1961 (the Act). The said CIT(A) erred in not considering the fact that the said amount represent the trade advances which was paid under a contractual obligation and therefore does not fall within the ambit of word (advance) as mentioned in section 2(22)(e) of the Act. If further erred in treating the trade advance as a loan and considered the same as deemed dividend in the hands of your Rekha A. Barot ITA No. 472/M/2020 2 1. Invalid assessment U/S 143(3) r.w.s. 254 of the Income Tax On the facts of the case and in the circumstances of the case 16 erred in passing the order U/S 143(3) r.w.s. 254 of the Act without appreciating the fact that during the course of search proceedings no incrementing documents were found in respect of the additions made U/S 2(22)(e) of the Act. Therefore the made U/S 2(22)(e) of the Act made in the assessment order passed U/S 143(3) r.w.s. 254 of the Act is beyond the scope of section 153A of the Act and therefore needs to be of the Income On the facts and circumstances of the case, the 16, Mumbai, erred in U/S 2(22)(e) of the red in not considering the fact that the said amount represent the trade advances which was paid under a contractual obligation and therefore does not fall within the ambit of word (advance) as mentioned in section 2(22)(e) of the Act. If treating the trade advance as a loan and considered the same as deemed dividend in the hands of your 2. At the outset, the Ld. Counsel of the assessee submitted that issue-in-dispute is covered in favour of the assessee by the order of the Tribunal in the case of the assessee for assessment year 2007 in ITA No. 473/M/2020. The Ld. DR could not controvert the above argument of the Ld. Counsel of the assessee. 3. We have heard the rival submissions of the parties on the issue-in-dispute and per the Assessing Officer has made addition of received by M/s Bharat Infrastructure & Engineering P. Ltd. (BIEPL) from M/s Ideal Toll Road Investments and Operations Pvt. Ltd. The assessee is a beneficial shareholder in the both these companies and therefore, according to the Assessing Officer, the said advances qualify for deemed dividend u/s 2(22)(e) of the Act. Whereas contention of the assessee is that the advances are in the nature of the ‘trade’ advances given by M/s Ideal Toll Road Investments and Operations Pvt. Ltd. to M/s Bharat Infrastructure Pvt. Ltd. for At the outset, the Ld. Counsel of the assessee submitted that dispute is covered in favour of the assessee by the order of nal in the case of the assessee for assessment year 2007 in ITA No. 473/M/2020. The Ld. DR could not controvert the above argument of the Ld. Counsel of the assessee. We have heard the rival submissions of the parties on the dispute and perused the material on record. We find that the Assessing Officer has made addition of ₹19 lakhs M/s Bharat Infrastructure & Engineering P. Ltd. (BIEPL) M/s Ideal Toll Road Investments and Operations Pvt. Ltd. The assessee is a beneficial shareholder in the both these companies and therefore, according to the Assessing Officer, the said advances qualify for deemed dividend u/s 2(22)(e) of the Act. Whereas contention of the assessee is that the advances are in the nature of advances given by M/s Ideal Toll Road Investments and Operations Pvt. Ltd. to M/s Bharat Infrastructure Pvt. Ltd. for Rekha A. Barot ITA No. 472/M/2020 3 At the outset, the Ld. Counsel of the assessee submitted that dispute is covered in favour of the assessee by the order of nal in the case of the assessee for assessment year 2007-08 in ITA No. 473/M/2020. The Ld. DR could not controvert the above We have heard the rival submissions of the parties on the used the material on record. We find that 19 lakhs, for advances M/s Bharat Infrastructure & Engineering P. Ltd. (BIEPL) M/s Ideal Toll Road Investments and Operations Pvt. Ltd. The assessee is a beneficial shareholder in the both these companies and therefore, according to the Assessing Officer, the said advances qualify for deemed dividend u/s 2(22)(e) of the Act. Whereas, contention of the assessee is that the advances are in the nature of advances given by M/s Ideal Toll Road Investments and Operations Pvt. Ltd. to M/s Bharat Infrastructure Pvt. Ltd. for booking of a flat in a proposed project (West), Mumbai. The assessee claimed that said amount under contractual obligation for booking a flat development and construction. We find that identical advances in the assessment year 2007 No. 473/M/2020 as not liable for deemed dividend u/s 2(22)(e). The relevant finding of the Tribunal is reproduced as under: “8. Considered the rival submissions and material placed on record, we observed that assessee is the most beneficial sha the companies “Bharat” and “Ideal” and we observed that the advances for booking of flat was given by “Ideal” to “Bharat”. Since the advance given by a company to the another company which is for the purpose of purchase of a flat, it clear transactions between two companies for the purpose of common business transactions. It is not the case of tHe Assessing Officer that the advance paid were enjoyed by the assessee or indirectly benefit was enjoyed by the assessee in th assessee is a most beneficial owner however nothing was brought on record to show that assessee is indirectly enjoyed the benefit out of these transactions. Therefore, we are inclined to agree with the submissions of the asses between two companies. We observed that several cases in which various courts have held that the transactions in the normal course booking of a flat in a proposed project ‘Madhuban (West), Mumbai. The assessee claimed that said amount under contractual obligation for booking a flat, which was under development and construction. We find that identical advances in the assessment year 2007-08 has been held by the Trib No. 473/M/2020 as not liable for deemed dividend u/s 2(22)(e). The relevant finding of the Tribunal is reproduced as under: 8. Considered the rival submissions and material placed on record, we observed that assessee is the most beneficial shareholder in both the companies “Bharat” and “Ideal” and we observed that the advances for booking of flat was given by “Ideal” to “Bharat”. Since the advance given by a company to the another company which is for the purpose of purchase of a flat, it clearly indicates that the transactions between two companies for the purpose of common business transactions. It is not the case of tHe Assessing Officer that the advance paid were enjoyed by the assessee or indirectly benefit was enjoyed by the assessee in these transactions. Even though assessee is a most beneficial owner however nothing was brought on record to show that assessee is indirectly enjoyed the benefit out of these transactions. Therefore, we are inclined to agree with the submissions of the assessee that it is the business transactions between two companies. We observed that several cases in which various courts have held that the transactions in the normal course Rekha A. Barot ITA No. 472/M/2020 4 Madhuban’ at Andheri (West), Mumbai. The assessee claimed that said amount is advanced which was under development and construction. We find that identical advances in has been held by the Tribunal in ITA No. 473/M/2020 as not liable for deemed dividend u/s 2(22)(e). The relevant finding of the Tribunal is reproduced as under: 8. Considered the rival submissions and material placed on record, reholder in both the companies “Bharat” and “Ideal” and we observed that the advances for booking of flat was given by “Ideal” to “Bharat”. Since the advance given by a company to the another company which is ly indicates that the transactions between two companies for the purpose of common business transactions. It is not the case of tHe Assessing Officer that the advance paid were enjoyed by the assessee or indirectly benefit ese transactions. Even though assessee is a most beneficial owner however nothing was brought on record to show that assessee is indirectly enjoyed the benefit out of these transactions. Therefore, we are inclined to agree with the see that it is the business transactions between two companies. We observed that several cases in which various courts have held that the transactions in the normal course of business, the assessee company having received the advances from another company cannot be treated as dividend u/s. 2(22)(e) of the Act . Further in the normal course of transactions if the advances are received or given to another company without there being any finding that the beneficiary is directly or indirectly enjoyed by the shareholder, provisions of section u/s. 2(22)(e) of the Act cannot be invoked. Accordingly, Ground raised by the assessee in this regard is allowed.” 3.1 Respectfully following the same, the order of the Ld. CIT(A)in the issue-in-dispute is set aside and the addition of dividend is deleted. The ground No. 2 of the appeal is accordingly allowed. Since, we have already deleted the addition on merit, the ground No. 1 of the appeal is merely rendered academic, dismissed as infructuous. 4. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Court on Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; of business, the assessee company having received the advances from another company in the normal course of business, the same cannot be treated as dividend u/s. 2(22)(e) of the Act . Further in the normal course of transactions if the advances are received or given to another company without there being any finding that the s directly or indirectly enjoyed by the shareholder, provisions of section u/s. 2(22)(e) of the Act cannot be invoked. Accordingly, Ground raised by the assessee in this regard is Respectfully following the same, the order of the Ld. CIT(A)in dispute is set aside and the addition of dividend is deleted. The ground No. 2 of the appeal is accordingly allowed. Since, we have already deleted the addition on merit, the ground No. 1 of the appeal is merely rendered academic, dismissed as infructuous. In the result, the appeal filed by the assessee is allowed. ounced in the Court on 27/07/2022. Sd/- SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT Rekha A. Barot ITA No. 472/M/2020 5 of business, the assessee company having received the advances in the normal course of business, the same cannot be treated as dividend u/s. 2(22)(e) of the Act . Further in the normal course of transactions if the advances are received or given to another company without there being any finding that the s directly or indirectly enjoyed by the shareholder, provisions of section u/s. 2(22)(e) of the Act cannot be invoked. Accordingly, Ground raised by the assessee in this regard is Respectfully following the same, the order of the Ld. CIT(A)in dispute is set aside and the addition of the deemed dividend is deleted. The ground No. 2 of the appeal is accordingly allowed. Since, we have already deleted the addition on merit, the ground No. 1 of the appeal is merely rendered academic, hence In the result, the appeal filed by the assessee is allowed. OM PRAKASH KANT) MEMBER Dated: 27/07/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary ITAT, Mumbai Rekha A. Barot ITA No. 472/M/2020 6 Sr. Private Secretary) ITAT, Mumbai