Sushil Grover, New Delhi V. Addl. CIT, New Delhi

ITA 514/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7332 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 21-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 02-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SH. I.C. SUDHIR , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 514 /DEL/ 2012 ASSESSMENT YEAR: 2008 - 09 SH. SUSHIL GROVER, 101, PATEL NAGAR COMMERCIAL COMPLEX, RANJIT NAGAR, NEW DELHI VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE - 33, NEW DELHI GIR/PAN : AAAPG3108K (APPELLANT) (RESPONDENT) APPELLANT BY SH. K.V.S. R. KRISHNA, CA RESPONDENT BY SMT. RISHPAL BEDI, SR. DR DATE OF HEARING 21.04.2016 DATE OF PRONOUNCEMENT 14.06.2016 ORDER PER O.P. KANT, , A. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 29/11/2011 OF THE LEARNED COMMISSIONER OF INCOME - TAX ( A PPEALS) - XXVI, LAXMI NAGAR DELHI - 92 FOR ASSESSMENT YEAR 2008 - 09 RAISING FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION MADE BY THE AO OF RS. 26,71,222/ - , AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT, 1961. THE ADDITION MADE BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) IS ON ASSUMPTIONS WIT HOUT ANY BASIS, WITHOUT UNDERSTANDING THE NATURE OF THE TRANSACTIONS AND HENCE SHOULD BE DELETED. 2. THE APPELLANT SUBMITS THAT SUM OF RS. 26,71,222/ - IS NEITHER LOAN NOR ADVANCE BUT IT IS THE PAYMENT RECEIVED AGAINST SUPPLY OF MATERIALS ON CONTINUOUS BASIS S UPPORTED BY BILLS I.E. TRADE ADVANCE. THEREFORE, THE PROVISIONS OF SEC. 2(22)(E) WILL NOT BE APPLICABLE AT ALL AND THE ADDITION MADE OF RS. 26,71,222/ - DESERVES TO BE CANCELLED. 3. IT IS CONTENDED THAT THE WORD ADVANCE AS MENTIONED IN SEC. 2(22)(E) HAS TO BE READ IN CONJUNCTION WITH THE WORD LOAN WHICH MEANS THAT THERE SHOULD BE ATTRIBUTES OF MONEY LEND COUPLED WITH THE ACCEPTANCE BY THE OTHER SIDE AS A BORROWER ON SPECIFIC TERMS WHICH NORMALLY INCLUDES PAYMENT OF INTEREST AT A FIXED PERCENTAGE, OBLIGATIO N OF REPAYMENT, TENURE OF THE AMOUNT ADVANCED OR LOANED ETC. NO SUCH FEATURES EXIT IN THE PRESENT TRANSACTION. HENCE, THE PROVISIONS OF SEC. 2(22)(E) WOULD NOT APPLY. 4. THE LD. CIT(A) HAS RELIED UPON IRRELEVANT MATERIAL, INCORRECT APPRECIATION OF FACTS 2 ITA NO. 514/DEL/2012 AY: 2008 - 09 AND H AS DRAWN ADVERSE CONCLUSION ON GENUINENESS OF TRADE ADVANCE WHICH WAS ACCEPTED BY THE AO. THUS THE ORDER OF THE CIT(A) IS PERVERSE, WRONG AND BAD IN LAW. 5. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 6. THE APPELLANT PRAYS THAT HE MA Y BE ALLOWED TO ADD, AMEND, ALTER, MODIFY OR FOREGO ANY OF THE GROUNDS AT THE TIME OF HEARING. 2. T HE FACTS IN BRIEF ARE THAT THE ASSESSEE WAS THE PROPRIETOR OF TWO CONCERNS, NAMELY , M/S DK TRADERS AND M/S FLAIR IMPEX DURING RELEVANT PERIOD. IN THE SCRU TINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) OBSERVED FROM THE BALANCE SHEET OF M/S FLAIR IMPEX FOR THE YEAR END RELEVANT TO YEAR UNDER CONSIDERATION THAT UNDER THE HEAD CURRENT LIABILITIES - ADVANCE RECEIVED AN ADVANCE OF RS. 28,52, 941/ - WAS RECEIVED BY THE ASSESSEE FROM M/S COSMO TRIB OLOGY (I) PRIVATE L IMITED, IN WHICH THE ASSESSEE WAS HAVING SUBSTANTIAL INTEREST , I.E. , HAVING SHAREHOLDING MORE THAN 10% OF SHARES ELIGIBLE FOR VOTING. IT WAS ALSO OBSERVED BY THE AO THAT THE C OMPANY M/S COSMO T RIBOLOGY (I) PRIVATE L IMITED, WAS HAVING RESERVE AND SURPLUS IN THE BOOKS OF RS. 26,71, 222 / - AT RELEVANT PERIOD OF TIME. ACCORDING TO THE ASSESSING OFFICER , THE ADVANCE RECEIVED BY THE ASSESSEE FROM THE COMPANY WAS IN THE NATURE OF LOANS OR ADVANCES WHICH SATISFIED ALL THE CONDITIONS OF SECTION 2(22) (E) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) . THE ASSESSEE , HOWEVER , SUBMITTED THAT THE ADVANCE WAS FOR THE PURPOSE OF SUPPLY OF MATERIAL. THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE AND HELD THE AMOUNT TO THE EXTENT OF ACCUMULATED PROFIT OF T HE COMPANY AMOUNTING TO RS. 26,71, 222/ - AS DEEMED DIVIDEN D UNDER SECTION 2(22) (E ) OF THE ACT. BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS), THE ASSESSEE REITERATED THE SU BMISSION THAT AMOUNT OF RS. 28,52, 941/ - RECEIVE D FROM M/S COSMO TRIBOLOGY (I) PRIVATE L IMITED WAS A TRADE ADVANCE AGAINST SUPPLY OF G OODS , NAMELY , WAXES. IN SUPPORT OF THE PROPOSITION THAT TRADE ADVANCES DO NOT FAL L WITHIN THE AMBIT OF SECTION 2(22) (E) OF THE A CT, THE ASSESSEE RELIED ON THE J URISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. RAJKUMAR REPORTED IN (2009) 318 ITR 46 2 (DEL). THE LEARNED COMMISS IONER OF INCOME - TAX ( APPEALS), ON THE BASIS OF THE BILL BOOKS OF THE PROP RIETARY CONCERN OF THE ASSESSEE , THE LEDGER ACCOUNT OF THE COMPANY AND NO VAT 3 ITA NO. 514/DEL/2012 AY: 2008 - 09 REGISTRATION OF THE ASSESSEE , HELD THAT THE TRANSACTION BETWEEN THE ASSESSEE AND COMPANY WAS NOT OF A TRADE ADVANCE AND , THEREFORE , THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) UPHELD THE FINDINGS OF THE AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS REPRODUCED ABOVE. 3. THE ONLY EFFECTIVE GR OUND OF GRIEVANCE OF THE ASSESSEE IN GROUND NO. 1 TO 4 IS AGAINST CONFIRMING THE ADDITIO N OF DEEMED DIVIDEND OF RS. 26,71, 222/ - BY THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS). 4.1 . BEFORE US, THE LEARNED AUTHORIZED R EPRESENTATIVE OF THE ASSESSEE ADDRE SSING THE GROUNDS SUBMITTED THAT THE PROPRIETARY CONCERN OF THE ASSESSEE M/S . FLAIR IMPEX , WAS HAVING A RUNNING ACCOUNT WITH THE COMPANY M/S COSMO TRIBOLOGY (I) PRIVATE L IMITED AND THE ASSESSEE RECEIVED PAYMENT AGAINST SUPPLY OF MATERIALS ON CONTINUOUS BAS IS WHICH WAS SUPPORTED BY THE BILLS. FURTHER , HE SUBMITTED THAT THE WORD ADVANCE AS MENTIONED IN SECTION 2(22)(E) OF THE ACT HAD TO BE READ IN CONJUNCTION WITH THE WORD LOAN THAT THERE SHOULD BE ATTRIBUTES OF MONEY LEND COUPLED WITH THE ACCEPTANCE BY T HE OTHER SIDE AS A BORROWER ON THE SPECIFIC TERMS WHICH , NORMALLY , INCLUDES PAYMENT OF INTEREST AT A FIXED PERCENTAGE, OBLIGATION OF REPAYMENT, TENURE OF AMOUNT ADVANCED ETC . AND NO SUCH FEATURES WERE OBSERVED IN THE TRANSACTION OF THE ASSESSEE AND , THEREF ORE , THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE LEARNED AUTHORISED R EPRESENTATIVE FURTHER REBUTTING THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME - TAX( APPEALS) THAT MODUS OPERANDI ADOPTED BY THE ASSESSEE WAS TO RECORD TRANSACTIONS IN SUCH A MANNER AS TO CONFUSE THE AUTHORITIES TO MAKE - BELIEVE THAT THESE TRANSACTIONS WERE MADE AGAINST THE TRADE ADVANCES, SUBMITTED THAT TRANSACTION OF PURCHASE OF WAX BY TH E COMPANY FROM THE ASSESSEE WAS DULY REFLECTED IN THE ANNUAL STATEMENTS OF THE COMPANY, A COPY OF WHICH WAS AVAILABLE FROM PAGE 22 TO 32 OF THE PAPER BOOK DATED 21/04/2016. THE LEARNED AUTHORIZED R EPRESENTATIVE SUBMITTED THAT THE ASSESSEE WAS MAINTAINING S EPARATE BILL BOOKS FOR PARAFFIN WAX AND SLACK WAX AND , THEREFORE , THE BILL NUMBER T1/008 DATED 30/04/2007 OF PARAFFIN WAX WAS ISSUED FROM BOOK 4 ITA NO. 514/DEL/2012 AY: 2008 - 09 NO. 1 AND BILL NUMBER T1/053 DATED 30 /04/ 2007 OF SLACK WAX WAS ISSUED FROM BOOK NO. 2 AND THUS THE FINDING OF T HE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) THAT SUPPLIES RENDERED BY THE ASSESSEE WERE NOT DATE WISE ON THE SERIAL NUMBER PROVIDED IN THE BILL BOOKS , WAS BASED ON INCORRECT APPRECIATION OF THE FACTS. IN RESPE CT OF THE OBSERVATION OF THE LEARNED COMMIS SIONER OF INCOME TAX(APPEALS) ON CHEQUES ISSUED BY THE COMPANY, THE LEARNED . AR SUBMITTED THAT ALL THE CHEQUES RECEIVED WERE DEPOSITED IN THE BANK ACCOUNT OF THE PROPRIETARY CONCERN M/S . FLAIR IMPEX AND IN FACT SIX CHEQUES WERE ISSUED AND NOT THE THREE AS OBSERVED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) . AS REGARD TO THE OBSERVATION OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT NO TRANSPORT BILLS WERE FURNISHED BY THE COMPANY TO PROVE THAT GOODS WERE ACTUALLY LIFTED FROM THE PREMISES O F THE ASSESSEE, THE LEARNED AR SUBMITTED THAT THE ASSESSEE DID NOT INCUR ANY TRANSPORT COST AND AS MENTIONED IN THE BILLS , THE PARTY USED TO ARRANGE THEIR OWN TRANSPORTS FOR LIFTING GOODS FROM THE PREMISES OF THE ASSESSEE. AS REGARD TO THE OBSERVATION OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT THE ASSESSEE DID NOT FURNISH ANY VAT REGISTRATION NUMBER, THE LD . AR SUBMITTED THAT IN THE BILLS SUBMITTED TO THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) , THE VAT REGISTRATION NUMBER WAS CLEARLY MENT IONED AS TIN 07910136693. IN VIEW OF ABOVE, THE LEARNED AR SUBMITTED THAT LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ARRIVED AT WRONG CONCLUSION THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE COMPANY WAS NOT A COMMERCIAL TRANSACTION AND THE AMOUNT ADVA NCED WAS NOT A TRADE ADVANCE. 4.2 ON THE CONTRARY, LEARNED SR. DEPARTMENTAL R EPRESENTATIVE RELIED ON THE FINDINGS OF THE AUTHORITIES BELOW AND SUBMITTED TO CONFIRM THE ADDITION OF THE DEEMED DIVIDEND. 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESSEE. THE ONLY ISSUE IN DISPUTE I S WHETHER THE AMOUNT OF RS. 28,52, 941/ - ADVANCED BY THE COMPANY M/S COSMO 5 ITA NO. 514/DEL/2012 AY: 2008 - 09 TRIBOLOGY (I) PRIVATE L IMITED WAS A TRADE ADVANCE OR NOT. THE LEARNED COMMISSIONER OF INCOME - TAX( APPEALS) HAS DECIDED THE ISSUE AS UNDER : THE ABOVE THREE SITUATIONS IN THE SECTION 2(22)(E) HAVE TO BE SEEN SEPARATELY. ON PERUSAL OF THE DETAILS, IT IS SEEN, THAT THE APPELLANT IS A SHAREHOLDER IN M/S. COSMO TRIBOLOGY (L)PVT. LTD. HAVING MOR E THAN 10% VOTING RIGHTS. THE OTHER TWO SHAREHOLDERS ARE ALSO APPARENTLY THE FAMILY MEMBERS OF THE APPELLANT. THE APPELLANT IS A PROPRIETOR OF TWO CONCERNS NAMELY M/S. FLAIR IMPEX AND M/S. D.K. TRADERS. M/S. D.K. TRADER IS IN THE BUSINESS OF MANUFACTURE OF WAX AND CANDLES AND M/S. FLAIR IMPEX IS ENGAGED IN TRADING IN ALL KINDS OF WAXES LIKE PARAFFIN WAX, SLACK WAX ETC. THE COMPANY AND THE ABOVE TWO CONCERNS ARE UNDER THE CONTROL AND MANAGEMENT OF THE APPELLANT. THE AR OF THE APPELLANT FURNISHED THE BILLS FO R SUPPLYING THE MATERIAL TO M/S. COSMO TRIBOLOGY INDIA PVT. LTD. A PERUSAL OF THE SAME SHOWED THAT THE APPELLANT MAINTAINED SIX BILL BOOKS WHICH ARE SERIALLY NUMBERED BUT THE TRANSACTIONS WERE RECORDED IN AN IRREGULAR MANNER SPREADING THE TRANSACTIONS TO B E COVERED IN ALL THE SIX BILLS BOOKS. FOR INSTANCE, BOOK NO.1 CONSISTS OF 200 INVOICES. HOWEVER, IT IS SEEN ON 30.4.2007 SUPPLIES WERE MADE TO THE COMPANY VIDE AN INVOICE NO.TI/008 FROM BOOK NO. - 1 AND AGAIN ON THE SAME DATE ANOTHER INVOICE NO. TI/053 THE S UPPLIES WERE BOOKED FROM THE BILL BOOK NO. - 2 INSTEAD OF THE SAME BOOK NO. - 1. IN FACT THE SUPPLIES SHOULD HAVE BEEN RENDERED DATE - WISE ON THE SERIAL NUMBERS PROVIDED IN THE BILL BOOKS RATHER THAN ONE SUPPLY WAS RECORDED IN ONE BOOK NUMBER AND THE SECOND ONE IN ANOTHER BILL BOOK NUMBER ON THE SAME DAY AND DATE. IN FACT THE RECORDING OF THE SALE BY THE APPELLANT SHOULD HAVE BEEN IN THE CONSECUTIVE NUMBERS. AT PRESENT THEY ARE HAND - PICKED AND RECORDED IN DIFFERENT BILL BOOKS AND ARRANGED IN SUCH A MANNER AS IF THEY ARE IN CONTINUITY IN LEDGER ACCOUNT. SIMILARLY, ON 17.9.2007 GOODS WERE SUPPLIED VIDE INVOICE NO.TI/165 FROM THE BILL BOOK NO. - 4 AND ON THE VERY NEXT DATE I.E. 18/9/2007 VIDE INVOICE NO.TI/069 MATERIAL WAS SUPPLIED TO THE COMPANY. SIMILARLY, FROM BOOK NO. - 2 ON 4/2/2008, 12/2/2008 AND 1.3.2008 AGAINST THE INVOICE NUMBERS TI/092, 094, 097 GOODS WERE SUPPLIED AND FROM BILL BOOK NO. - 6 ON 8.2.2008 16.2.2008 AGAINST THE INVOICE NO. TI/251 AND 253 GOODS WERE SUPPLIED. ON PERUSAL OF THE BILLS FOR THE YEAR UNDE R CONSIDERATION AND ALSO FOR THE SUBSEQUENT YEARS, IT IS SEEN THAT THIS MODUS OPERANDI ADOPTED BY THE APPELLANT WAS TO RECORD TRANSACTIONS IN SUCH A MANNER TO CONFUSE THE AUTHORITIES TO MAKE BELIEVE THAT THESE ARE THE TRANSACTIONS WHERE SUPPLIES WERE MADE AGAINST THE TRADE ADVANCES. IT IS ALSO SEEN FROM THESE EXAMPLES THAT BILLS WERE DRAWN ACCORDING TO THE ADJUSTMENTS TO BE MADE RATHER THAN IN THE REGULAR COURSE OF BUSINESS. ON PERUSAL OF THE LEDGER ACCOUNT FURNISHED BY THE APPELLANT IT IS SEEN, THAT CHEQUE S WERE ISSUED BY THE COMPANY AND CREDITED IN THE ACCOUNTS IN THE FOLLOWING MANNER AGAINST THEIR DATES: - DATE CHEQUES NOS. 10.4.2007 221614 7.5.2007 221617 17.7.2007 221620 5.11.2007 221627 ETC. FROM THE ABOVE IT IS SEEN THAT THE COMPANY IS MAINTAINING ONLY ONE SINGLE CHEQUE BOOK EXCLUSIVELY TO ISSUE THE CHEQUES TO THE APPELLANT AS THEY ARE IN SERIAL NUMBER ALMOST THROUGHOUT THE YEAR. THERE ARE NO CHEQUES ISSUED FOR MONTHS TOGETHER TO ANY OTHER PE RSON AS ONLY THREE CHEQUE LEAVES WERE ISSUED BETWEEN 17.7.2007 AND 5.11.2007. THE AR OF THE APPELLANT HAS NOT PROVIDED THE BANK STATEMENT TO SUBSTANTIATE WHETHER THE 6 ITA NO. 514/DEL/2012 AY: 2008 - 09 ABOVE CHEQUES WERE ACTUALLY ENCASHED AND RECORDED IN THE RESPECTIVE ACCOUNT. NO TRANSPORT BILLS WERE FURNISHED BY THE COMPANY TO PROVE THAT THE GOODS WERE ACTUALLY LIFTED FROM THE APPELLANT S PREMISES BECAUSE ON THE BILL IT IS MENTIONED PARTY OWN TRANSPORT . THE APPELLANT ALSO HAS NOT FURNISHED THE VAT REGISTRATION NUMBER OF THE APPELLANT BECA USE THE GOODS THOSE WERE SUPPLIED WERE SUBJECTED TO VAT IN THE APPELLANT S BILLS. THEREFORE, THE APPELLANT COULD NOT CONCLUSIVELY PROVE THAT THE TRANSACTIONS BETWEEN THE APPELLANT AND THE COMPANY M/S. COSMO TRIBOLOGY (I) PVT. LTD. IS STRICTLY A COMMERCIAL TRANSACTION WHERE THE TRADE ADVANCES WERE EXTENDED BY THE COMPANY TO THE APPELLANT. SINCE THE APPELLANT IS A PROPRIETOR OF A CONCERN WHO BENEFITTED TO THE EXTENT OF THE ACCUMULATED PROFITS IN THE GARB OF TRADE ADVANCES, THE ASSESSING OFFICER HAS RIGHTLY HE LD IT TO BE A DEEMED DIVIDEND UNDER SECTION 2(22)(E). IN VIEW OF THIS, THE ADDITION MADE BY THE ASSESSING OFFICER IS UPHELD AND IS CONFIRMED. 4.4 I N RESPECT OF THE OBSERVATIONS OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) , THE ASSESSEE FILED AN APPLICATION UNDER SECTION 154 OF THE ACT BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) ON 10/01/2012, WHICH IS AVAILABLE AT PAGE 64 TO 68 OF THE ASSESSEE S PAPER - BOOK DATED 4/4/ 2012, WHEREIN THE ASSESSEE HAS SUBMITTED EXP LANATION OF EACH OBSERVATION OF THE COMMISSIONER OF INCOME TAX(APPEALS) , WHICH IS VERY MUCH RELEVANT IN DECIDING THE ISSUE IN DISPUTE AND , THEREFORE , FOR THE PURPOSE OF CLARITY, WE REPRODUCE THE SAME AS UNDER: AT PAGE NO.12 OF YOUR HONOUR S ORDER IN THE 2 ND PARAGRAPH AT LINE NO.8 IT IS STATED THAT: THE AR OF THE APPELLANT FURNISHED THE BILLS FOR SUPPLYING THE MATERIAL TO M/S COSMO TRIBOLOGY (I) PVT. LTD. A PERUSAL OF THE SAME SHOWED THE APPELLANT MAINTAIN 6 BILL BOOKS WHICH ARE SERIALLY NUMBERED BUT THE TRANSACTIONS WERE RECORDED IN AN IRREGULAR MANNER SPREADING THE TRANSACTIONS TO BE COVERED IN ALL THE 6 BILL BOOKS . REPLY: - THE FACT OF ASSESSEE MAINTAINING 6 BILL BOOKS IS CORRECT. HOWEVER, IT IS CLARIFIED THAT THE TRANSACTIONS ARE NOT RECORDED IRREGULA RLY BUT ARE RECORDED ACCORDING TO THE REQUIREMENT OF THE MATERIAL NAMELY PARAFFIN WAX OR SLACK WAX BY THE COMPANY. THE ASSESSEE CATERS TO OTHER BUYERS ALSO. THE 6 BOUND BILL BOOKS OF THE ASSESSEE IS PRODUCED TO CLARIFY THIS FACT. AT LINE NO.12 OF YOUR HON OURS ORDER IT IS NOTED THAT: FOR INSTANCE, BOOK NO. 1 CONSISTS OF 200 INVOICES. HOWEVER IT IS SEEN ON 30.4.2007 SUPPLIES WERE MADE TO THE COMPANY VIDE INVOICE NO. TI/008 FROM BOOK NO.1 AND AGAIN ON THE SAME DATE ANOTHER INVOICE NO.TI/053 THE SUPPLIES WER E BOOKED FROM BILL BOOK NO.2 INSTEAD OF BILL BOOK NO.1. IN FACT THE SUPPLIES SHOULD HAVE BEEN RENDERED DATE - WISE ON THE SERIAL NO. PROVIDED IN THE BILL BOOKS RATHER THAN ONE SUPPLY RECORDED ON ONE BILL BOOK NUMBER AND THE SECOND ONE IS ON THE ANOTHER BOOK NO. ON THE SAME DATE'. 7 ITA NO. 514/DEL/2012 AY: 2008 - 09 REPLY : - YOUR HONOUR S ATTENTION IS DRAWN TO THE SAME BILLS AGAIN. PLEASE NOTE THAT BILL BOOK NO.1 IS FOR PARAFFIN WAX AND BILL BOOK NO.2 IS FOR SLACK WAX. BOTH ARE DIFFERENT QUALITIES OF WAXES AND THEREFORE, TWO SEPARATE BILL BOOKS ARE MAINTAINED. 30.4.2007 TI/008 BOOK 1 PARAFFIN WAX 30.4.2007 T1/053 BOOK 2 SLACK WAX IT MAY PLEASE BE NOTED THAT THERE ARE SEVERAL BUYERS FROM THE ASSESSEE AND BOOK NO.1 ALL ARE PERTAINING TO PARAFFIN WAX AND IN BOOK NO.2, ALL THE BOOKS ARE PERTA INING TO SUPPLY OF SLACK WAX. AT LINE NO.19 OF YOUR HONOURS ORDER IT IS NOTED THAT: AT PRESENT THEY ARE HANDPICK AND RECORDED IN DIFFERENT BILL BOOKS AND ARRANGED IN SUCH A MANNER AS IF THEY ARE IN CONTINUITY IN LEDGER ACCOUNT. SIMILARLY, ON 17.9.2007 G OODS WERE SUPPLIED VIDE INVOICE NO. TI/165 FROM THE BILL BOOK NO.4 ON THE VERY NEXT DAY I.E. 18.9.2007 VIDE INVOICE NO. TI/069 MATERIAL WAS SUPPLIED TO THE COMPANY. SIMILARLY, FROM BILL BOOK NO.2 ON 4.2.2008, 12.2.2008 AND 1.3.2008 AGAINST THE V OICE NO. TI/092, 094, 097 GOODS WERE SUPPLIED AND FROM BILL BOOK NO.6 ON 8.2.2008, 16.2.2008 AGAINST THE INVOICE NO. TI/251 AND 253 GOODS WERE SUPPLIED. REPLY: - AGAIN THE APPELLANT SUBMITS THAT AS AND WHEN THERE WAS REQUIREMENT FROM THE COMPANY, THE SUPPLY OF MATE RIAL WAS MADE. IT IS ALSO EVIDENT FROM THE BILL BOOKS THAT THERE ARE MANY BUYERS FROM THE ASSESSEE AND THE BILL BOOKS ARE KEPT IN A BOUND MANNER SO THAT THERE IS ABSOLUTE CONTROL BY THE ASSESSEE. AS REGARDS THE REFERENCE TO THE SPECIFIC BILLS, ATTENTION IS AGAIN DRAWN TO THE SAME BILLS WHICH ARE FORMING PART OF THE RECORD. THE PERUSAL OF THE BILLS CLEARLY SHOW THAT THEY ARE FOR DIFFERENT QUALITY OF WAX MATERIAL AS STATED BELOW: - 17.9.2007 T1/165 BOOK NO. 4 PARAFFIN WAX 18.9.2007 T1/069 BOOK NO.2 SLACK WAX 4.2.2008 T1/92 BOOK NO.2 SLACK WAS 12.2.2008 94 - DO - 1.3.2008 97 - DO - 8.2.2008 T1/251 BOOK NO. 6 PARAFFIN WAX 16.2.2008 T1/253 BOOK NO. 6 PARAFFIN WAX IT MAY PLEASE BE NOTED THAT THE ASSESSING OFFIC ER HAS METICULOUSLY SEEN OUR BOOKS OF ACCOUNTS INCLUDING THE BILL BOOKS AND WAS SATISFIED. THE AO DID NOT DOUBT THAT THE SUPPLIES WERE MADE AGAINST TRADE ADVANCES. AT PAGE 12, LAST LINE ONWARDS CONTINUED UP TO PAGE 13, IT IS NOTED IN THE ORDER AS UNDER: - ON PERUSAL OF THE LEDGER ACCOUNT FURNISHED BY THE APPELLANT IT IS SEEN THAT CHEQUES WERE ISSUED BY THE CO. AND CREDITED IN THE ACCOUNT SINCE THE FOLLOWING MANNER AGAINST THEIR DATES: DATE CHEQUE NOS . 10.4.2007 22614 8 ITA NO. 514/DEL/2012 AY: 2008 - 09 7.5.2007 221617 17.7.07 22162 0 5.11.2007 221627 ETC. FROM THE ABOVE IT IS SEEN THAT THE COMPANY IS MAINTAINING ONLY ONE SINGLE CHEQUE BOOK TO ISSUE THE CHEQUES TO THE APPELLANT AS THEY ARE IN SERIAL NUMBER ALMOST THROUGHOUT THE YEAR. THERE ARE NO CHEQUES ISSUED FOR MONTHS TOGETHER TO ANY OTHER PERSON AS ONLY 3 CHEQUE LEAVES WERE ISSUED BETWEEN 17.7.2007 AND 5.11.2007. THE AR OF THE APPELLANT HAS NOT PROVIDED THE BANK STATEMENT TO SUBSTANTIATE WHETHER THE ABOVE CHEQUES WERE ACTUALLY ENCASHED AND RECORDED IN THE RESPECTIVE ACCOUNTS . REPLY: - THE BANK ACCOUNT OF FLAIR IMPEX I.E. THE PROPRIETORSHIP OF THE ASSESSEE WHEREIN THE CHEQUES ARE DEPOSITED AND CLEARED ARE ENCLOSED. FURTHER, IT IS CLARIFIED THAT FROM 17.7.2007 TO 15.11.2007 THERE ARE 6 CHEQUES ISSUED AND NOT 3 CHEQUES AS MENTIONE D IN THE ORDER. AT PAGE NO.13, LINE NO.6 IN THE APPELLATE ORDER IT IS NOTED THAT: NO TRANSPORT BILLS WERE FURNISHED BY THE COMPANY TO PROVE THAT THE GOODS WERE ACTUALLY LIFTED FROM THE APPELLANT S PREMISES BECAUSE ON THE BILL IT IS MENTIONED PARTY OWN TRANSPORT . THE APPELLANT HAS ALSO NOT FURNISHED THE VAT REGISTRATION NO. OF THE APP ELLANT BECAUSE THE BOOKS THOSE WERE SUPPLIED WAS SUBJECTED TO WAX IN THE APPELLANT BILL.' AS RIGHTLY POINTED OUT IN THE BILL IT IS CLEARLY MENTIONED AS THE PARTY OWN TRANSPORT THAT MEANS THE GOODS ARE LIFTED FROM THE APPELLANT S PREMISES BY THE COMPANY BY USING ITS OWN TRANSPORT. THE ASSESSEE DOES NOT INCUR ANY TRANSPORT COSTS. IN THE BILLS THE VAT REGISTRATION NUMBER IS CLEARLY STATED AS TL NO.07910136693, COPY OF THE SALES TAX DEPARTMENT ALLOTMENT OF TIN IS ENCLOSED FOR YOUR READY REFERENCE. THEREFORE, THE ASSESSEE IS HAVING PROPER VAT REGISTRATION WHICH IS EVIDENT FROM THE BILLS ALREADY FILED BY THE ASSESSEE. IN VIEW OF THE ABOVE SUBMISSIONS, SINCE THERE IS A MISTAKE WHICH IS APPARENT FROM RECORD, YOUR HONOURS ARE REQUESTED TO RECTIFY THE ORDER INCORP ORATING THE SAID FACTS WHICH GO TO THE ROOT OF THE MATTER AND CONCLUSIVELY PROVE THAT THE TRANSACTION BETWEEN THE APPELLANT AND THE COMPANY M/S. COSMO TRIBOLOGY (I) PVT. LTD. IS A COMMERCIAL TRANS ACTION AND THE TRADE ADVANCE IS AGAINST SUPPLY OF MATERIAL AND CANNOT BE TREATED DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT, 1961. 4.5 IN SUPPORT OF THE CONTENTIONS, THE LEARNED AR DURING THE HEARING OF THE CASE, ALSO PRODUCED ORIGINAL BILL BOOKS OF THE PROP RIETARY CONCERN OF THE ASSESSEE, I.E. , M/S FLA IR IMPEX. ON EXAMINATION OF THE BILL BOOKS, WE FOUND THAT THE ASSESSEE HAS MAINTAINED SEPARATE BILL BOOKS FOR PARAFFIN WAX AND SLACK WAX AND DUE TO THAT BILLS OF THE SAME DATE ARE NOT HAVING RUNNING SERIAL NUMBERS. WE ALSO AGREE WITH THE OTHER CONTENTIONS RAISED BY THE LEARNED AUTHORIZED 9 ITA NO. 514/DEL/2012 AY: 2008 - 09 R EPRESENTATIVE OF THE ASSESSEE THAT THE ASSESSEE WAS REGISTERED TO VAT AND TRANSPORT EXPENSES WERE BORNE BY THE PURCHASE PARTIES. WE ALSO FIND FROM PAGE 31 OF THE ASSESSEE S PAPER BOOK DATED 21/04/2016 THAT THE PURCHASES MA DE BY THE COMPANY M/S COSMO TRIBOLOGY (I) PRIVATE L IMITED WERE DULY MENTIONED IN THE NOTES TO ANNUAL STATEMENT OF THE COMPANY F OR THE YEAR UNDER CONSIDERATION . IN VIEW OF ABOVE FACTS, WE ARE OF THE OPINION THAT THE TRANSACTION BETWEEN THE ASSESSEE AND COMPANY WAS A COMMERCIAL TRANSACTION AND THE PAYMENTS ADVANCED WERE IN THE NATURE OF TRADE ADVANCE AND IN SUCH A CASE RESPECTFULLY FOLLOWI NG THE FINDINGS OF THE HON BLE J URISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF I NCOME T AX VS. RAJKUMAR (SUPR A) , WE HOLD THAT THE MONEY ADVANCED TO GIVE EFFECT TO A COMMERCIAL TRANSACTION WOULD NOT FALL WITHIN THE AMBI T OF THE PROVISION OF SECTION 2(22) (E) OF THE ACT. ACCORDINGLY , THE GROUNDS NO. 1 TO 4 OF THE APPEAL ARE ALLOWED. 5. THE GROUNDS NO. 5 AND 6 ARE GENERAL IN NATURE AND, THEREFORE , NOT REQUIRED TO ADJUDICATE UPON AT OUR END. 6. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 1 4 T H JUNE , 2016 . S D / - S D / - ( I.C. SUDHIR ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 4 T H JUNE , 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI