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

ITA 473/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3789 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 19-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Opportunity of being heard; Deemed dividend; Set aside
• Section: 143(3); 153A; 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, HON'BLE JUDICIAL MEMBER ITA NO. 473/MUM/2020 (A.Y: 2007-08) Rekha A. Barot 1, Ground Floor Bharat Corporate Avenue Near Versova Police Station D.N. Nagar, Andheri (w) Mumbai - 400053 PAN: AENPB5677H v. DCIT – 9(2)(1) Room No. 659, 6th Floor Income Tax Mumbai - 400020 (Appellant) (Respondent) Assessee by : Shri Dalpat Shah Department by : Shri T. Shankar Date of Hearing : 09.02.2022 Date of Pronouncement : 26.04.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals)-16, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 29.11.2019 for the A.Y. 2007-08. 2. Brief facts of the case are, assessee filed her original return of income for the A.Y. 2007-08 on 31.07.2007 declaring total income of 2 ITA NO. 473/MUM/2020 (A.Y: 2007-08) Rekha A. Barot ₹.26,09,287/-. A search and seizure action was undertaken by the Income Tax Department at the premises of the assessee on 19.07.2007. Notice u/s. 153A of the Act dated 27.02.20008 were issued and served on the assessee. In response assessee filed her return of income on 14.03.2008 declaring total income of ₹.24,99,290/-. The assessment was completed u/s. 143(3) r.w.s. 153A of the Act on 15.12.2009 making an addition on account of deemed dividend u/s. 2(22)(e) of the Act on “protective basis”in the hands of the assessee for ₹.25,00,000/- the substantive addition was made in the hands of the M/s. Bharat Infrastructure & Engineering Private Limited (“Bharat”)with the observation that the assessee is the most beneficial share holder in the company “Bharat” as well as in the company M/s. Ideal Toll Road Investments & Operations Pvt. Ltd., ( “Ideal” ). The transaction involved in this case are “Ideal” paid an advance amount of ₹.25,00,000/- to “Bharat” towards booking of a flat No. 901, Mirage, D.N. Nagar, J.P. Road, Andheri (W), Mumbai for a total consideration of ₹.85,00,000/-. The “Bharat” issued a letter of allotment dated 13.12.2006 to “Ideal” wherein the flats total consideration, earnest money and details of advances received has been given. Subsequently due to the litigation and mutual understanding the advances returned by the “Bharat” to “Ideal”. 3 ITA NO. 473/MUM/2020 (A.Y: 2007-08) Rekha A. Barot 3. Subsequently, assessee filed an appeal before the Ld.CIT(A) and Ld.CIT(A) confirmed the addition and assessee preferred appeal before ITAT and ITAT remitted the matter back to the Assessing Officer for denovo consideration. The relevant extract of the ITAT is given below: - “9. We have carefully considered the rival submissions and perused the material placed before us including the orders of authorities below on the issue. We find that the addition under section 2(22)(e) of the Act of Rs.19 lakhs has been made in the hands of the assessee on the protective basis, whereas the addition was made in the hands of M/’s.BIEPL on substantive basis. We find from the order of the Id. CIT(A) that jurisdictional Tribunal deleted the addition made on substantive basis in the hands of M/s.BIEPL. The Id. AR argued before us that since substantive addition made in the hands of M/s.BIEPL has been deleted by Co-ordinate Bench and therefore the addition made on protective basis deserved to be deleted and the matter is to be examined at the end of the AO for denovo assessment of the case. We are fully in agreement with the submissions of the ld. AR that since substantive addition has been deleted in the hands of M/s.BIEPL and thus, the protective addition be set aside and the matter be restored to the file of the AO. Accordingly, we set aside the order of the ld.CIT(A) and restore this matter to the file for AO for fresh examination of the matter and decide the same in accordance with law after being providing necessary opportunity of being heard to the assessee. This ground is allowed for statistical purposes.” 4. In the second round of assessment, Assessing Officer considered the detailed submissions and the case laws relied by assessee and sustained the addition with the following observations:- “8. An Addition u/s. 2(22)(e) were made on protective basis in the hands of the appellant and additions were made on substantive basis in the hands of M/s. BIEL. In view of the decision of jurisdictional tribunal, addition on substantive basis was deleted in the hands of M/s, BIEL. Issue as to whether the amounts received are taxable as deemed dividend in the hands of shareholder is to be 4 ITA NO. 473/MUM/2020 (A.Y: 2007-08) Rekha A. Barot decided on merits now in the case of the Ms. Rekha Barot. The submissions of the assessee and the documents placed on record have been considered but not tenable. The AR of the assessee has mainly relied upon the various case laws and CBDT circular which were cited above. The assessee has not filed the specific submission. Considering the above facts and circumstances of the case and the judicial pronouncements, relied upon by the assessee, which are not applicable to the facts of the case, the contention of the assessee is not acceptable. Further, the amount in question has been borrowed in 2006 and the same have been returned in 2007 with interest. It is difficult to appreciate how a fund paid to M/s. BIEL in 2006 had to be repaid by BIEL in 2007 on account of litigation. The subsisting relation between the company and the appellant is such where the probability of entering into such a contract without any intention of buying of flat is very high. Therefore, it is clear that the bogey of allotment flat has been merely created to escape the provisions of section 2(22)(c) of the IT Act. In view of this, the A.O. has rightly made the addition u/s 2(22)(e) of the I.T. Act, amount to ₹.25,00,000/-., 5. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) confirmed the addition made by the Assessing Officer. 6. Aggrieved assessee is in appeal before us raising following grounds in its appeal: - “1. Addition of Rs. 25 00 000/U/S 2(22)(e) of the Income Tax Act 1961 1.1 On the facts and circumstances of the case, the Commissioner of Income Tax (Appeals)-16, Mumbai, erred in confirming the addition of Rs. 25,00,000/- U/S” 2(22)(e) of the Income Tax Act, 1961 (the Act). 1.2 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. The said AO further erred in treating the trade advance as a loan and considered the same as deemed dividend in the hands of your appellant. 5 ITA NO. 473/MUM/2020 (A.Y: 2007-08) Rekha A. Barot 2. The appellant craves leave to add, amend, alter, modify, delete and/or change all or any of the above grounds on or before the date of hearing.” 7. Assessee also filed additional ground of appeal challenging the assessment u/s. 143(3) r.w.s. 254 of the Act and raised the objection that during the course of the search proceedings no incriminating documents were found in respect of the additions made u/s. 2(22)(e) of the Act. We considered the submissions of both the parties and we reject the additional ground filed by the assessee at this stage. However, we proceed to adjudicate the issue on merits. 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 6 ITA NO. 473/MUM/2020 (A.Y: 2007-08) Rekha A. Barot 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 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 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. 9. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 26.04.2022. Sd/- Sd/- (AMARJIT SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 26.04.2022 Giridhar, Sr.PS 7 ITA NO. 473/MUM/2020 (A.Y: 2007-08) Rekha A. Barot Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum