Shri Basant Poddar, Bangalore V. DCIT, Bangalore

ITA 528/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9502 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 25-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: K P DIWANESHRI P TIWARI
• Keywords: Document seized; Valuation report; Deemed dividend; Documents seized
• Section: 2(22)(e)

Judgement Text

ITA.528/BANG/2009 PAGE - 1 IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI. K. P. T. THANGAL, VICE PRESIDENT AND SHRI. K. K. GUPTA, ACCOUNTANT MEMBER I.T.A.NO.528/BANG/2009 (ASSESSMENT YEAR : 2005-06) SHRI. BASANT PODDAR, NO.487, 10 TH CROSS, RMV EXTENSION, SADASHIVNAGAR, BANGALORE 560 080 .. APPELLANT V. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -1(1), BANGALORE .. RESPONDENT APPELLANT BY : SHRI. K. P. DIWANE/SHRI. P. TIWARI RESPONDENT BY : SHRI. JASON P. BOAZ O R D E R PER K. P. T THANGAL, VICE PRESIDENT : THE APPEAL FILED BY THE ASSESSEE IS IN RESPECT OF ORDER PASSED BY CIT(A) IN THE CASE OF ASSESSEE ON 31/3/2009 FOR THE ASSESSMENT YEAR 2005-06. 2. IN GROUND NO. 1 OF THE APPEAL THE ASSESSEE IS OB JECTING TO THE ADDITION MADE BY A.O. U/S 2(22)(E) OF I.T. ACT 1961 AND CONFIRMED BY COMMISSIONER OF INCOME-TAX (A) WHICH HE IS CHAL LENGING. THE ITA.528/BANG/2009 PAGE - 2 ASSESSING OFFICER HAS DISCUSSED THE DETAILS OF ADDI TION AT PARA 8 TO 16 ON PAGE 3 TO 10 OF THE ASSESSMENT ORDER. THE ASSES SING OFFICER HAS OBSERVED THAT ASSESSEE IS HAVING SUBSTANTIAL INTERE ST IN THE COMPANY M/S MINERAL ENTERPRISE LTD. (HEREINAFTER REFERRED T O AS MEL FOR SHORT). THE ASSESSEE IS HAVING SHARE HOLDING OF MORE THAN 1 0% AND COMPANY HAS SUFFICIENT ACCUMULATED PROFITS. THE ASSESSING OFFICER HAS OBSERVED THAT AMOUNT GIVEN BY MINERAL ENTERPRISE LT D. TO SHRI K.P. PODDAR AS SECURITY DEPOSIT FOR MINING LEASE HAS BEE N ONWARD GIVEN TO SHRI BASANT PODDAR. ACCORDING TO ASSESSING OFFICER , SHRI BASANT PODDAR UNDER THE GUISE OF BUSINESS TRANSACTION BETW EEN M/S MINERAL ENTERPRISE LTD. AND K.P. PODDAR HAS WITHDRAWN SUBST ANTIAL AMOUNT OUT OF ACCUMULATED PROFITS TO THE EXTENT OF 17.9 CR ORES THROUGH HIS FATHER SHRI K.P. PODDAR. THE ASSESSING OFFICER HAS THUS CONCLUDED THAT AFORESAID SUM IS DEEMED DIVIDEND WITHIN THE ME ANING OF SECTION 2(22)(E) OF I.T. ACT 1961. THE ASSESSING OFFICER H AS ALSO REFERRED TO DECISION OF APEX COURT REPORTED AT 229 ITR 444 (S.C .) IN THE CASE OF MS. P. SARADA VS CIT. THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE COMMISSIONER OF INCOME-TAX (A) B ANGALORE. THE DETAILED WRITTEN SUBMISSIONS WERE MADE BEFORE COMMISSIONER O F INCOME-TAX (A) WHICH HAS BEEN REPRODUCED IN APPELLATE ORDER. T HE COMMISSIONER OF INCOME-TAX (A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE ITA.528/BANG/2009 PAGE - 3 REFERRED TO TWO DECISIONS OF APEX COURT REPORTED AT 252 ITR 893 (SC) IN THE CASE OF L. ALAGU SUNDARAM CHETTIAR VS CIT AN D 290 ITR 433 (S.C.) IN THE CASE OF CIT VS. MUKUNDRAY K. SHAH. THE COMMISSIONER OF INCOME-TAX (A) HAS ACCEPTED THAT TR ANSACTION BETWEEN MEL AND K.P. PODDAR WAS ON ACCOUNT OF BUSIN ESS CONSIDERATION. THE COMMISSIONER OF INCOME-TAX (A) H OWEVER HAS OBSERVED THAT TRANSFER OF HEAVY AMOUNT WITHOUT ANY REASON IS AGAINST PRINCIPLES OF PRUDENT BUSINESS. HE HAS FURTHER OBS ERVED THAT ASSESSING OFFICERS CONTENTION IS CORRECT AND JUSTI FIED. COMMISSIONER OF INCOME-TAX (A) FINALLY CONCLUDED THAT THIS IS IN DIRECT ROUTE OF FREE PASSAGE OF MONEY FROM MEL TO BASANT PODDAR AND ACCO RDINGLY THE ABOVE SUM IS CHARGEABLE TO TAX U/S 2(22)(E) OF I.T. ACT 1961. 3. BEFORE US THE LEARNED COUNSEL OF ASSESSEE SUBMIT TED THAT ADDITION AS MADE BY THE ASSESSING OFFICER IS UNJUST IFIED, UNWARRANTED AND BAD IN LAW. IT IS SUBMITTED THAT PROVISIONS OF SEC. 2(22)(E) OF INCOME TAX ACT, 1961 BRINGS FICTION OF DEEMED DIVID END INCOME. THE PROVISIONS ARE TO BE CONSTRUED STRICTLY. RELIA NCE FOR THIS IS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN TH E CASE OF COMMISSIONER OF INCOME-TAX V. C. P. SARATHY MUDALIA R (83 ITR 170) (S.C.). IT IS SUBMITTED THAT ONUS TO SHOW THAT AMO UNT IS ASSESSABLE AS ITA.528/BANG/2009 PAGE - 4 DEEMED DIVIDEND INCOME IS ON REVENUE. THE INCOME C ANNOT BE ASSESSED AS DEEMED DIVIDEND INCOME ON INFERENCES OR PRESUMPTIONS. TRANSACTIONS HAVE STRICTLY TO BE IN THE NATURE OF L OANS OR ADVANCES SO AS TO ASSESS IT AS DEEMED DIVIDEND. IT IS SUBMITTE D THAT PAYMENT IS FOR THE INDIVIDUAL BENEFIT OR ON BEHALF OF THE SHARE HO LDER HAS TO BE ESTABLISHED BY REVENUE ON THE BASIS OF LEGAL EVIDEN CE ON RECORD AND CONCLUSION CANNOT BE DRAWN ON THE BASIS OF INFERENC ES AND PRESUMPTIONS. RELIANCE FOR THIS IS PLACED ON THE DE CISION OF THE KERALA HIGH COURT IN COMMISSIONER OF INCOME-TAX V. P. V. J OHN (181 ITR 1) (KER.). THE ASSESSEE HAS NOT RECEIVED ANY PAYMENT FROM COMPANY AS LOAN OR ADVANCE, NOR ANY PAYMENT IS MADE BY COMPANY FOR INDIVIDUAL BENEFIT OR ON BEHALF OF ASSESSEE. THUS PROVISIONS OF SEC. 2(22)(E) OF INCOME TAX ACT, 1961 ARE INAPPLICABLE. IT IS SUBMI TTED THAT CONDITION PRECEDENT FOR INVOKING PROVISIONS OF SEC. 2(22)(E) OF INCOME TAX ACT, 1961 IS ABSENT AND THUS ADDITION MADE AT THE HANDS OF ASSESSEE IS UNSUSTAINABLE AND LIABLE TO BE DELETED. IT IS SUBM ITTED THAT COMMISSIONER OF INCOME-TAX (A) AT PARA 15 AT PAGE 29 & 30 OF APPELLATE ORDER HAS RECORDED FOLLOWING FINDINGS: I) IN RESPECT OF RS.17.90 CRORES A.R PLEAD VEHEMENTLY THAT THE PAYMENT WAS FOR EXPANSION OF BUSINESS OF MEL ONLY WHICH I FIND TRUE (UNDERLINING PROVIDED) ITA.528/BANG/2009 PAGE - 5 II) I FIND STRENGTH IN THE ARGUMENT OF THE AUTHORIZ ED REPRESENTATIVE THAT PAYMENT TO SHRI K.P. PODDAR BY MEL WAS ONLY AN EXPENDITURE INCURRED FOR BUSINESS EXPANSION AND PROFITS OF THE COMPANY THE ABOVE FINDINGS ARE NOT UNDER CHALLENGE FROM REV ENUE AS NO APPEAL OR CROSS OBJECTION IS FILED. ON THE FACE OF ABOVE ADMITTED POSITION NO ADDITION AS MADE BY ASSESSING OFFICER IS SUSTAINABL E. IT IS SUBMITTED THAT AGREEMENT DATED 16/8/2004 IN BETWEEN MEL/K.P. PODDAR FOR EXPLOITING THE MINES WAS PART OF SEIZED RECORD. IT IS REFERRED IN SEIZED DOCUMENTS DATED 22/7/2005 AT SR. NO.A/MEL/8 AT P AGE NO.11 TO 14. [P- 20 OF ORDER OF COMMISSIONER OF INCOME-TAX (A)]. THE GENUINENESS OF AGREEMENT IS NOT DISPUTED BY ASSESSI NG OFFICER AS IS EVIDENT FROM ASSESSMENT ORDER OF MEL AND K.P PODDAR . THE AMOUNT OF SECURITY DEPOSIT BEING REFUNDABLE NON INTEREST B EARING SECURITY DEPOSIT FOR PERIOD OF LEASE OF APPROXIMATE 10 YEARS IS REASONABLE AND FAIR. THE SAME IS AS PER TRADE PRACTICES IN BUSIN ESS CIRCLES. THE VALUE OF MINES IS RS.75 CRORES AS IS EVIDENT FROM VALUATI ON REPORT PLACED ON RECORD. THE COMPANY HAS GENERATED SUBSTANTIAL REVEN UE FROM EXPLOITATION OF MINE. ABOVE FACTS CLEARLY SUPPORT T HE GENUINENESS OF TRANSACTIONS. THE VERY SAME ASSESSING OFFICER HAS ACCEPTED THE ITA.528/BANG/2009 PAGE - 6 GENUINENESS OF AGREEMENT BY ASSESSING RS.25 LAKHS A T THE HANDS OF SHRI K.P. PODDAR WITHOUT RECORDING ANY ADVERSE OBS ERVATION. THE LEDGER ACCOUNT OF ASSESSEE WITH K.P. PODDAR CLEARLY DEMONSTRATES THAT SOME AMOUNT IS ALSO REPAID TO SHRI K.P. PODDAR AND THE SAID AMOUNT HAS NOT GONE BACK TO MEL. THIS CLEARLY INDICATES T HAT INITIAL AMOUNT RECEIVED FROM K.P. PODDAR WAS NOT THE AMOUNT RECEIV ED FROM MEL FOR THE BENEFIT OF ASSESSEE OR ON BEHALF OF ASSESSE E. THE FATHER OF ASSESSEE SHRI K.P. PODDAR AT HIS AGE OF MORE THAN 8 0 YEARS HAD GIVEN THE MONEY RECEIVED IN COMMERCIAL TRANSACTION TO HIS SON AND NOTHING UNUSUAL CAN BE SEEN THERE FROM. THE ASSESSING OFFIC ER HAS NOT EXAMINED K.P. PODDAR. HE HAS ACCEPTED THE TRANSACT ION OF REFUNDABLE NON-INTEREST BEARING SECURITY DEPOSIT FOR MINES AS COMMERCIAL TRANSACTION IN THE CASE OF COMPANY AND SHRI K.P. PODDAR AND THUS NOTHING ADVERSE CAN BE HELD AGAINST THE ASSESSEE. 'APPARENT IS REAL' IS SETTLED POSITION OF LAW. THE TRANSACTIONS BY COMPA NY ARE BUSINESS TRANSACTIONS AS IS APPARENT FROM CORROBORATIVE EVID ENCE ON RECORD. THE ASSESSEE HAS NOT RECEIVED ANY MONEY FROM COMPAN Y MEL BUT FROM SHRI K.P. PODDAR. ONUS IS ON REVENUE TO SHOW THAT APPARENT IS NOT REAL. IN THE FACTS OF THE CASE OF ASSESSEE, TH E ASSESSING OFFICER HAS NOT LED ANY EVIDENCE TO SHOW THAT APPARENT IS NOT R EAL. THE DECISION OF APEX COURT REPORTED AT 229 ITR 444 (S.C.) IN THE CA SE OF SMT. P. ITA.528/BANG/2009 PAGE - 7 SARADA RELIED UPON BY ASSESSING OFFICER IS INAPPLIC ABLE TO THE FACTS IN THE CASE OF THE ASSESSEE. IN THE FACTS OF THE SAID CASE THERE WAS DIRECT LOAN TO SHARE HOLDER WHICH WAS SQUARED UP BEFORE TH E ACCOUNTING YEAR. ON THE ABOVE FACTS IT WAS HELD THAT INITIAL LOAN/AD VANCE WAS ASSESSABLE U/S 2(22)(E). IN THE FACTS OF PRESENT CASE ASSESSE E HAS NOT RECEIVED ANY LOAN OR ADVANCE FROM COMPANY MEL. THE LEARNED COMM ISSIONER OF INCOME-TAX (A) HAS PLACED RELIANCE ON TWO DECISIONS OF APEX COURT WHICH ARE ALSO INAPPLICABLE TO THE FACTS IN THE CAS E OF ASSESSEE. CONSIDERING THE ABOVE RELIANCE BY COMMISSIONER OF I NCOME-TAX (A) ON THE ABOVE DECISIONS TO THE FACTS IN THE CASE OF ASSESSEE WHICH ARE DISTINGUISHABLE IS MISPLACED AND NOT JUSTIFIED. TH E NOTINGS ON THE SEIZED DOCUMENTS REFERRED TO IN ASSESSMENT ORDER AT PARA 8 AS EXPLAINED BY ASSESSEE TO BE MERE PROPOSAL AND WAS N OT GIVEN EFFECT TO GETS CORROBORATED FROM THE BOOKS OF ACCOUNTS ACCEPT ED IN THE CASE OF ASSESSEE AND VANDANA PODDAR BY THE SAME ASSESSING O FFICER. IN SEARCH NO CORROBORATIVE EVIDENCE IS FOUND TO SUPPOR T THE NOTINGS FOUND ON THE LOOSE PAPER. IN VIEW OF ABOVE NOTHING ADVER SE CAN BE DRAWN FROM THE LOOSE PAPER. THE OBSERVATION OF ASSESSING OFFICER AT PARA 12 TO 14 THAT TRANSACTION BETWEEN MEL/K.P. PODDAR IS A RTIFICIAL OR IS GUISE OF BUSINESS TRANSACTION AND SHAM IS CONTRARY TO LEGAL EVIDENCE ON RECORD. THE MINING OR SMALL QUANTITY PRIOR TO E XECUTION OF ITA.528/BANG/2009 PAGE - 8 AGREEMENT WAS PURELY OF EXPLORATORY STAGE AND CANNO T BE VIEWED ADVERSELY. THE ASSESSING OFFICER HAS ALLOWED DEDUC TION OF RS.25 LAKHS AS PER THE MINING AGREEMENT TOWARDS MINING CH ARGES PAID TO SHRI K.P. PODDAR IN THE CASE OF MEL AND HAS ACCEPTE D THE BALANCE SHEET OF MEL AND K.P. PODDAR IN ASSESSMENT FRAMED W ITHOUT ANY ADVERSE OBSERVATIONS. THE OBSERVATIONS OF A.O. ARE THUS APROBATE AND REPROBATE WHICH IS IMPERMISSIBLE. RELIANCE FOR THIS IS PLACED ON THE FOLLOWING DECISIONS : (I) BOMBAY CLOTH SYNDICATE V. CIT(1995) 214 ITR 21 0 (BOM.) (II) SURESH CHANDRA BHANSALI V. JCIT (2008) 115 TT J (JODPUR) 116. IN THE ASSESSMENT OF ASSESSEE RS.17.90 CRORES AMOUN T PAYABLE TO SHRI K.P. PODDAR HAS BEEN ACCEPTED AS SUNDRY CREDITORS W ITHOUT ANY ADVERSE OBSERVATION. THE AMOUNT FROM MEL IS GIVEN TO SHRI K.P. PODDAR FOR BUSINESS CONSIDERATIONS. THE ASSESSING OFFICER HAS ACCEPTED THE TRANSACTION EMANATING FROM AGREEMENT A S GENUINE IN THE ASSESSMENT FRAMED OF MEL AND SHRI K.P. PODDAR. IN MELS CASE BUSINESS ACTIVITIES GENERATING SUBSTANTIAL REVENU E OF EXPLOITING THE MINE HAVE BEEN ACCEPTED AND ASSESSED. THE COMMISSI ONER OF INCOME-TAX (A) HAS ALSO ACCEPTED THAT AMOUNT GIVEN BY MEL TO K.P. PODDAR IS FOR BUSINESS CONSIDERATION. IT IS SUBMIT TED THAT SUBSEQUENT DISPOSAL OF AVAILABILITY OF AMOUNT RECEIVED BY K.P . PODDAR IN THE ITA.528/BANG/2009 PAGE - 9 COURSE OF BUSINESS TRANSACTION CANNOT CHANGE THE CH ARACTER OF PAYMENT BY COMPANY AS PAYMENT ON BEHALF OF SHARE HOLDER OR FOR HIS BENEFIT TO INVOKE PROVISIONS OF SEC. 2(22)(E) OF INCOME TAX AC T, 1961. THE REFUNDABLE NON-INTEREST BEARING SECURITY DEPOSIT PA ID BY MEL IS THROUGH PROPER BANKING CHANNEL. IT IS CORROBORATED BY LEGAL AGREEMENT GENUINENESS OF WHICH IS BEYOND DOUBT. TH E AMOUNT OF REFUNDABLE NON-INTEREST BEARING SECURITY DEPOSIT IS NOT ALLEGED TO BE UNREASONABLE CONSIDERING THE POTENTIAL OF MINERAL D EPOSITS. THE GIVING OF REFUNDABLE SECURITY DEPOSIT IN THE CASE O F COMPANY HAS NOT BEEN EVEN ALLEGED FOR-NON BUSINESS CONSIDERATION. THE EVIDENCE ON RECORD INDICATES THAT REFUNDABLE SECURITY DEPOSIT W AS ON ACCOUNT OF BUSINESS CONSIDERATION AND THE COMPANY HAS EARNED H UGE PROFIT ON EXPLOITING SUCH MINE. THE TRANSACTION BETWEEN MEL / K.P. PODDAR IS BUSINESS TRANSACTION AND PROVISIONS OF SEC. 2(22)( E) ARE INAPPLICABLE TO BUSINESS TRANSACTIONS. RELIANCE FOR THIS IS P LACED ON THE FOLLOWING DECISIONS : (I) 220 CTR (DEL.) 475 CIT VS. AMBASSADOR TRAV ELS (P) LTD., (II) 11 SOT 302 (MUM.) N.H. SECURITIES LTD. VS. DY. CIT AND (III) 122 ITR 405 (CAL.) NANDLAL KANORIA V. CIT ITA.528/BANG/2009 PAGE - 10 THE DECISION OF HONBLE CALCUTTA HIGH COURT REPORT ED AT 122 ITR 403 WAS CONSIDERED BY APEX COURT IN THE CASE OF CIT VS. MUKUNDRAY K. SHAH REPORTED AT 290 ITR 433 (SC). THE HONBLE CAL CUTTA HIGH COURT HAS OBSERVED THAT THE THEORY OF AN INDIRECT L OAN OR ADVANCE WHICH HAS BEEN URGED ON BEHALF OF REVENUE IS DIFFIC ULT TO CONCEIVE. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES AND E VIDENCE ON RECORD ADDITION AS MADE BY THE ASSESSING OFFICER AN D UPHELD BY COMMISSIONER OF INCOME-TAX (A) IS UNJUSTIFIED AND B E, THEREFORE, DIRECTED TO BE DELETED. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT ADDITION MADE BY THE ASSESSING OFFICER AND UPHELD B Y COMMISSIONER OF INCOME-TAX (A) IS FOR THE DETAILED REASONS INDIC ATED IN THE ORDER OF LOWER AUTHORITIES. THE DEPARTMENTAL REPRESENTATIVE PLACED STRONG RELIANCE ON NOTINGS AND REASONING IN THE ORDER OF L OWER AUTHORITIES. THE LEARNED DEPARTMENTAL REPRESENTATIVE INVITED OUR ATTENTION TO THE NOTINGS FOUND IN THE SEIZED DOCUMENTS AND REPRODUCE D IN ASSESSMENT ORDER. IT IS SUBMITTED THAT AFORESAID NOTINGS CLEA RLY EXPLAINS THAT TRANSACTIONS MADE WERE ONLY TO GIVE EFFECT TO THE N OTINGS FOUND IN THE SEIZED DOCUMENT. IT IS SUBMITTED THAT MONEY RECEI VED BY SHRI K.P. PODDAR FROM COMPANY HAS BEEN GIVEN TO SHRI BASANT P ODDAR AND THIS ITA.528/BANG/2009 PAGE - 11 CLEARLY DEMONSTRATES THAT PROVISIONS OF SEC. 2(22)( E) OF INCOME TAX ACT, 1961 ARE APPLICABLE. IT IS SUBMITTED THAT SHR I BASANT PODDAR HAS WITHDRAWN SUM OF RS.17.90 CRORES FOR HIS BENEFIT OU T OF ACCUMULATED PROFIT OF MINERAL ENTERPRISES LTD. AND THUS THE SAM E HAS BEEN CORRECTLY ASSESSED AS DEEMED DIVIDEND U/S 2(22)(E) OF I.T. AC T, 1961. IN VIEW OF ABOVE IT WAS SUBMITTED THAT THERE IS NO MERIT IN CONTENTIONS OF THE ASSESSEE AND THEREFORE THIS GROUND OF APPEAL BY THE ASSESSEE DESERVES TO BE DISMISSED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE EVIDENCE ON RECORD AND FIND SUBSTANTIAL FORCE IN TH E VARIOUS SUBMISSIONS MADE. IN THE CASE OF ASSESSEE THE ASSE SSING OFFICER HAS ASSESSED SUM OF RS.17.9 CRORES AS DEEMED DIVIDEND U /S 2(22)(E) OF I.T. ACT 1961. IT IS UNDISPUTED FACT THAT ASSESSEE IS HOLDING MORE THAN 10% SHARES OF MINERAL ENTERPRISE LTD., AND COMPANY MEL HAS ACCUMULATED PROFITS OF MORE THAN RS.17.9 CRORES. I T IS SEEN THAT M/S MINERAL ENTERPRISE LTD. IS ENGAGED IN ACTIVITY OF B USINESS OF MINING ORE AND EXPORT THEREOF. THE AFORESAID COMPANY HAS SET UP 100% EXPORT ORIENTED UNIT FOR EXPORTING OF IRON ORE PROD UCED BY THE SAID UNIT. THE SAID COMPANY HAS ENTERED INTO AGREEMENT OF LEASE OF MINE WITH SHRI K.P. PODDAR. THE AGREEMENT BETWEEN MEL A ND K.P. PODDAR ITA.528/BANG/2009 PAGE - 12 DATED 16/08/2004 IS PART OF RECORDS SEIZED IN AN ACTION U/S 132(1) OF I.T. ACT 1961ON 22/07/2005 AT THE PREMISES OF THE A PPELLANT. AN AMOUNT OF RS.17.90 CORES WAS GIVEN BY MEL TO SHRI K .P. PODDAR AS REFUNDABLE SECURITY DEPOSIT FOR THE PURPOSE OF BUSI NESS OF PRODUCTION OF IRON ORE FOR EXPORT OUT OF INDIA. THE AFORESA ID UNIT IS APPROVED AS 100% EOU UNIT BY GOVERNMENT. M/S MINERAL ENTERPRIS E LTD., HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT IN RESPECT OF THIS EXPORT ORIENTED UNIT AND RECEIPTS AND EXPENSES ARE AUDITED BY CHART ERED ACCOUNTANT AND SEPARATE AUDITED STATEMENT IN RESPECT OF 100% E OU UNDERTAKING WERE SUBMITTED IN THE CASE OF COMPANY. AS PER THE TERMS AND CONDITIONS OF AGREEMENT MEL WAS TO PROVIDE REFUNDAB LE NON-INTEREST BEARING SECURITY DEPOSIT TO SHRI K.P. PODDAR AN AM OUNT OF RS.17.9 CRORES FOR A MINIMUM PERIOD OF 6 YEARS OR FOR CONTI NUATION OF OPERATION OF THE SAID AGREEMENT. AS PER THE TERMS OF AFORESAID AGREEMENT FOR PROVIDING RIGHTS OF MINING THE COMPAN Y HAD TO PAY CONSIDERATION OF RS.15 LAKHS AND 10 LAKHS AS PER CL AUSE 3 & 6 OF AGREEMENT RESPECTIVELY TO SHRI K.P. PODDAR. THE A FORESAID FACT IS EVIDENT FROM AGREEMENT DATED 16/08/2004 PLACED IN P APER BOOK AT PAGE 1 TO 4. THE REASONABILITY OF CONSIDERATION PR OVIDED IN THE AGREEMENT STANDS SUBSTANTIATED FROM THE FACT THAT M ARKET VALUE OF THE AFORESAID AMOUNT HAS BEEN CERTIFIED IN THE VALUATIO N REPORT PROVIDED ITA.528/BANG/2009 PAGE - 13 BY GLOBAL ENVIRONMENT & MINING SERVICES TO BE OF VA LUE OF RS.75 CRORES. COPY OF THE VALUATION REPORT IS PLACED IN PAPER BOOK AT PAGE 5 TO 18. IT IS EVIDENT FROM AUDITED BALANCE SHEET OF MEL, AN EOU THAT SUBSTANTIAL PROFIT OF CRORES OF RUPEES WAS GE NERATED BY CARRYING OUT MINING ACTIVITY IN RESPECT OF THIS MINE. REGUL AR ASSESSMENT OF MEL HAS BEEN COMPLETED BY THE SAME ASSESSING OFFICE R WHEREIN THE CLAIM OF DEDUCTION OF RS.25 LAKHS BEING CONSIDERATI ON PAID TO SHRI K.P. PODDAR IN TERMS OF AGREEMENT HAS BEEN ACCEPTED WITHOUT ANY ADVERSE OBSERVATION. REGULAR ASSESSMENT OF SHRI K. P. PODDAR HAS BEEN COMPLETED BY THE SAME ASSESSING OFFICER ON THE SAME DATE AS THAT IN THE CASE OF COMPANY AS WELL AS ASSESSEE WHE REIN THE CONSIDERATION RECEIVED AS PER TERMS OF AGREEMENT DA TED 16/8/2004 HAS BEEN ASSESSED TO TAX. COPY OF THE ACKNOWLEDGEMENT O F RETURN, FINANCIAL STATEMENT AND ASSESSMENT ORDER OF SHRI K. P. PODDAR ARE PLACED IN PAPER BOOKS AT PAGE 43 TO 51. IN THE BAL ANCE SHEET OF SHRI K.P. PODDAR RS.17.9 CRORES HAS BEEN SHOWN AS SECUR ITY DEPOSIT RECEIVED FROM MEL AND AMOUNT ADVANCED TO SHRI BASAN T PODDAR HAS BEEN SHOWN AS LOANS AND ADVANCES. THE INCOME OF RS .25 LAKHS HAS BEEN SHOWN BY SHRI K.P. PODDAR IN THIS RETURN OF I NCOME BEING CONSIDERATION RECEIVED FOR PROVIDING MINING LEASE T O MEL. THE ASSESSING OFFICER HAS ACCEPTED THE AFORESAID TRANSA CTION IN THE ITA.528/BANG/2009 PAGE - 14 ASSESSMENT FRAMED OF SHRI K.P. PODDAR WITHOUT ANY A DVERSE OBSERVATION. THE EVIDENCE ON RECORD THUS CLEARLY I NDICATE THAT TRANSACTION BETWEEN MEL AND K.P. PODDAR IS BUSINESS TRANSACTION. THE COMMISSIONER OF INCOME-TAX (A) AT PARA 15 OF TH E ORDER HAS ACCEPTED THAT PAYMENT OF RS.17.9 CRORES MADE BY MEL IS FOR EXPANSION OF BUSINESS. THE COMMISSIONER OF INCOME- TAX (A) HAS FURTHER OBSERVED THAT HE FINDS STRENGTH IN THE ARGU MENT THAT PAYMENT TO SHRI K.P. PODDAR IS INCURRED FOR BUSINESS EXPANSION . THE ABOVE OBSERVATION OF COMMISSIONER OF INCOME-TAX (A) THAT TRANSACTION OF SECURITY DEPOSIT BETWEEN MEL AND K.P. PODDAR ARE FO R BUSINESS CONSIDERATION ARE BASED ON EVIDENCE ON RECORD AND I N OUR VIEW ARE CORRECTLY RECORDED. WE, THEREFORE, HOLD THAT TRANS ACTION BETWEEN MEL AND K.P. PODDAR IN RESPECT OF SECURITY DEPOSIT AS P ER AGREEMENT DATED 16/08/2004 IS ON ACCOUNT OF BUSINESS CONSIDERATION AND IS A BUSINESS TRANSACTION. WE ALSO HOLD THAT PAYMENT OF RS.17.90 CRORES BY MEL TO SHRI K.P. PODDAR IS FOR BUSINESS CONSIDERATION AND IS NOT FOR THE BENEFIT OF SHRI BASANT PODDAR. IN VIEW OF ABOVE VAR IOUS OBSERVATIONS OF THE ASSESSING OFFICER AT PARA 12 TO 16 THAT TRAN SACTION BETWEEN MEL AND K.P.PODDAR ARE ARTIFICIAL BUSINESS TRANSACT IONS ARE HELD TO BE UNJUSTIFIED. WE ALSO HOLD THE AFORESAID OBSERVATIO N OF ASSESSING OFFICER ARE NOT BASED ON ANY EVIDENCE ON RECORD AND IN FACT SAME ARE ITA.528/BANG/2009 PAGE - 15 CONTRARY TO LEGAL EVIDENCE ON RECORD AS DISCUSSED H EREINABOVE. WE ARE OF THE OPINION THAT REVENUE HAVING ACCEPTED THE PAR T TRANSACTION IN RESPECT OF AGREEMENT DATED 16/08/2004 AS BUSINESS T RANSACTION CANNOT TREAT ONE PART OF TRANSACTION AS NOT GENUINE. THE ACTION OF THE ASSESSING OFFICER IS APPROBATE AND REPROBATE WHIC H IS IMPERMISSIBLE. THIS PROPOSITION IS SUPPORTED BY THE DECISION OF H ONBLE BOMBAY HIGH COURT REPORTED AT 214 ITR 210 (BOM.) IN THE CA SE OF BOMBAY CLOTH SYNDICATE VS. CIT. SIMILAR VIEW HAS BEEN T AKEN BY CO- ORDINATE BENCH OF ITAT, JODHPUR IN THE CASE REPORTE D AT 115 TTJ (JODH.) 116 IN THE CASE OF SHRI SURESH CHANDRA BAN SALI VS. JOINT CIT. IT HAS BEEN HELD BY HONBLE ITAT THAT DOCTRIN E OF APPROBATE AND REPROBATE PROHIBITS THE REVENUE AUTHORITIES FROM BL OWING HOT AND COLD IN THE SAME BREATH THEREBY ACCEPTING ONE PART OF TR ANSACTION AND TREATING THE OTHER PART AS INCORRECT. THE RATIO AS LAID DOWN IN THE SAID DECISION SQUARELY APPLIES TO THE FACTS IN THE CASE OF ASSESSEE. REVENUE HAVING ACCEPTED THE TRANSACTION OF CONSIDERATION FO R GRANTING LEASE OF MINING AT THE HANDS OF RECIPIENT AS WELL AS THE PAY ER COULD NOT HAVE FOUND FAULT IN TRANSACTION OF SECURITY DEPOSIT IN T HE VERY SAME AGREEMENT. IT IS SEEN FROM THE FACT OF THE CASE TH AT ASSESSEE HAS NOT RECEIVED ANY DIRECT LOAN OR ADVANCE FROM THE COMPAN Y AND THUS THE PROVISION OF SECTION 2(22)(E) OF I.T. ACT 1961 ARE INAPPLICABLE AT THE ITA.528/BANG/2009 PAGE - 16 HANDS OF ASSESSEE. THERE IS NO EVIDENCE ON RECORD TO INDICATE THAT ANY PAYMENT HAS BEEN MADE BY COMPANY MEL FOR INDIVIDUAL BENEFIT OR ON BEHALF OF ASSESSEE SO AS TO BRING THE SAME AS DEEME D DIVIDEND AT THE HANDS OF ASSESSEE. THE AMOUNT WHICH HAS BEEN GIVEN BY COMPANY TO SHRI K.P. PODDAR IS A TRANSACTION ON ACCOUNT OF BUS INESS EXPEDIENCY. THE SUBSEQUENT DISPOSAL OF THE SAME BY SHRI K.P.POD DAR WOULD NOT CHANGE THE CHARACTER FOR COMPANY MEL FROM A BUSIN ESS TRANSACTION TO A PAYMENT ON BEHALF OR FOR BENEFIT OF SHRI BASAN T PODDAR. THE AMOUNT GIVEN BY SHRI K.P. PODDAR TO HIS SON IS ON A CCOUNT OF NATURAL BLOOD RELATIONSHIP BETWEEN TWO PERSONS AND CANNOT B E VIEWED ADVERSELY. THE AMOUNT RECEIVED BY ASSESSEE FROM S HRI K.P. PODDAR CAN NOT BE HELD TO HAVE BEEN RECEIVED BY ASSESSEE F ROM COMPANY BEING PAYMENT MADE BY COMPANY ON BEHALF OF ASSESSEE OR FOR THE BENEFIT OF ASSESSEE IN VIEW OF CLEAR EVIDENCE ON RE CORD THAT SHRI K.P PODDAR HAS RECEIVED AMOUNT IN THE COURSE OF UNDISPU TEDLY A BUSINESS TRANSACTION. WE THEREFORE HOLD THAT LOAN RECEIVED BY ASSESSEE FROM K.P. PODDAR CAN NOT BE BROUGHT WITHIN THE FOLD OF P ROVISIONS OF SEC. 2(22)(E) OF I.T. ACT 1961. 6. THE PROVISIONS OF SECTION 2(22)(E) OF I.T. ACT 1 961 BRINGS FICTION OF THE DEEMED DIVIDEND AND IS TO BE CONSTRU ED STRICTLY. THE ITA.528/BANG/2009 PAGE - 17 AFORESAID PROPOSITION HAS BEEN LAID DOWN BY HONBLE APEX COURT IN THE CASE OF CIT VS C.P. SARATHY MUDALIAR REPORTED A T 83 ITR 170 (S.C.). IN THE FACTS OF THE SAID CASE LOAN WAS GIV EN TO HUF WHOSE MEMBERS WERE SHAREHOLDERS OF THE COMPANY. THE FUND S FOR MAKING INVESTMENT IN SHARE CAPITAL OF THE COMPANY WERE FLO WN FROM HUF. THE HONBLE APEX COURT ON SUCH FACTS HAS HELD THAT HUF IS NOT REGISTERED SHARE HOLDER OF THE COMPANY AND PROVISIO NS OF SECTION 2(22)(E) OF I.T. ACT 1961 ARE INAPPLICABLE. IN THE FACTS OF THE PRESENT CASE THE CONDITION PRECEDENT FOR INVOKING PROVISION S OF SECTION 2(22)(E) OF I.T. ACT 1961 IS ABSENT AND THUS THE AD DITION OF RS.17.9 CRORES AS DEEMED DIVIDEND AT THE HANDS OF ASSESSEE IS UNJUSTIFIED. THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS P. V. JOHN REPORTED AT 181 ITR 1 (KER.) HAS OBSERVED THAT FROM THE REL ATIONSHIP ALONE CONCLUSION CANNOT BE DRAWN TO THE EFFECT THAT PAYME NT IS MADE ON BEHALF OR BENEFIT OF THE ASSESSEE A SHAREHOLDER. IN THE FACTS OF THE PRESENT CASE THE ASSESSING OFFICER HAS CONCLUDED A GAINST THE ASSESSEE ONLY BECAUSE OF THE FACT THAT ASSESSEE IS RELATED TO K.P. PODDAR AS HIS SON. THE RATIO AS LAID DOWN IN THE DECISION OF KER ALA HIGH COURT SQUARELY SUPPORTS THE SUBMISSIONS OF ASSESSEE AND A DDITION AS MADE BY ASSESSING OFFICER UNDER SECTION 2(22)(E) OF I.T. AC T 1961 IS HELD TO BE UNJUSTIFIED. IT IS A SETTLED PROPOSITION OF LAW T HAT APPARENT IS REAL. ITA.528/BANG/2009 PAGE - 18 THE TRANSACTION BETWEEN MEL AND SHRI K.P. PODDAR AR E CORROBORATED BY LEGAL EVIDENCE ON RECORD. THE TRANSACTION BETWE EN K.P. PODDAR AND ASSESSEE IS IN RESPECT OF AMOUNT RECEIVED BY AS SESSEE FROM HIS FATHER. THE ENTIRE TRANSACTIONS ARE ALSO ACCEPTED AND CORROBORATED BY FINANCIAL STATEMENT SUBMITTED ALONG WITH RETURN OF INCOME OF THE RESPECTIVE ASSESSEES. THE ASSESSING OFFICER IN FAC T HAS ACCEPTED TRANSACTION AS RECORDED IN FINANCIAL STATEMENTS IN THE CASE OF MEL AND SHRI K.P. PODDAR. IN THE CASE OF ASSESSEE THERE IS NO SHRED OF ANY EVIDENCE ON RECORD TO SHOW THAT APPARENT IS NOT REA L. IN THE ABSENCE OF ANY SUCH EVIDENCE THE CONCLUSION OF THE ASSESSING OFFICER TO ASSESS THE AMOUNT RECEIVED AS DEEMED DIVIDEND U/S 2(22)(E) OF I.T. ACT 1961 IS HELD TO BE UNJUSTIFIED. THE ASSESSING OFFICER H AS REFERRED TO THE DECISION OF APEX COURT REPORTED AT 229 ITR 444 (S.C .) IN THE ASSESSMENT ORDER. IN THE FACTS OF THE SAID CASE TH ERE WAS DIRECT LOAN TO SHAREHOLDER WHICH WAS SQUARED UP BEFORE ACCOUNTING YEAR. THE FACTS IN THE SAID CASE ARE DISTINGUISHABLE AND INAPPLICAB LE TO THE FACTS OF THE CASE OF THE ASSESSEE AS THERE IS NO LOAN RECEIVED B Y ASSESSEE FROM COMPANY MEL. IN THE DECISION OF APEX COURT REFERRE D TO IN THE ORDER OF COMMISSIONER OF INCOME-TAX (A) REPORTED AT 252 ITR 893 (SC) THE MANAGING DIRECTOR HAD ACCEPTED THAT HE HAS OBTAINED LOAN FROM COMPANY THROUGH EMPLOYEE. IT IS ON ACCOUNT OF ADMI SSION OF ITA.528/BANG/2009 PAGE - 19 MANAGING DIRECTOR THAT ABOVE LOAN HAVING BEEN OBTAI NED FROM COMPANY IT WAS CONCLUDED THAT AMOUNT IS ASSESSABLE AS DEEMED DIVIDEND. THE FACTS AS IN THE SAID CASE ARE DISTIN GUISHABLE FROM THE FACTS IN THE CASE OF ASSESSEE AND THUS NOTHING ADVE RSE CAN BE HELD FROM THE SAID DECISION IN THE CASE OF ASSESSEE. THE COM MISSIONER OF INCOME-TAX (A) HAS REFERRED TO DECISION OF APEX COU RT IN THE CIT VS MUKUNDRAY K. SHAH REPORTED AT 290 ITR 433 (S.C.). IN THE AFORESAID CASE HONBLE ITAT HAS RECORDED A FINDING OF FACT TH AT AMOUNT GIVEN BY COMPANY TO FIRM WAS FOR THE BENEFIT OF SHAREHOL DER AND HE HAS ONWARD WITHDRAWN EXCESS AMOUNT OVER HIS CAPITAL FRO M THE SAID FIRM. IN THE FACTS OF THE SAID CASE SHAREHOLDER HAD CONTR OL OVER THE COMPANY AND ALSO THE FIRM TO WHICH MONEY WAS GIVEN BY THE C OMPANY. IN THE FACTS OF THE PRESENT CASE ASSESSEE AND SHRI K.P. PO DDAR ARE TWO SEPARATE INDIVIDUALS AND LEGAL ENTITIES. THE TRANS ACTION BETWEEN MEL AND SHRI K.P. PODDAR IS ADMITTEDLY A BUSINESS TRANS ACTION. THE FACTS IN THE CASE OF ASSESSEE ARE CLEARLY DISTINGUISHABLE FROM THAT BEFORE HONBLE APEX COURT AND THUS RATIO OF SAID DECISION IS INAPPLICABLE TO THE FACTS IN THE CASE OF ASSESSEE. WE ARE OF THE O PINION THAT RELIANCE BY COMMISSIONER OF INCOME-TAX (A) ON ABOVE DECISION TO THE FACTS IN THE CASE OF ASSESSEE WHICH ARE DISTINGUISHABLE ON F ACTS IS MISPLACED AND UNJUSTIFIED. ITA.528/BANG/2009 PAGE - 20 7. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HA S REFERRED TO NOTINGS MADE ON SEIZED DOCUMENT WHICH HAVE BEEN REP RODUCED AT PARA 8 OF THE ASSESSMENT ORDER. THE AFORESAID NOTINGS A S IS EVIDENT FROM SEIZED DOCUMENT NO WAY REFERRED TO TRANSACTION BETW EEN MEL AND K.P. PODDAR. THE BUSINESS AGREEMENT BETWEEN MEL AN D K.P. PODDAR IS DATED 16/08/2004 WHEREAS NOTINGS ARE DATED 24/5/ 2004. THE NOTINGS ON SEIZED DOCUMENT DOES NOT FIND NAME OF SH RI K.P. PODDAR OR MEL. NOTINGS CAN NOT BE CO-RELATED TO BUSINESS TRA NSACTION BETWEEN MEL AND K.P. PODDAR WHICH ARE CORROBORATED BY LEGAL EVIDENCE ON RECORD. THE ASSESSING OFFICER HAS NOT EVEN EXAMINED SHRI K.P. PODDAR ON THE LEGAL AGREEMENT DATED 16/8/2004. THE AMOUNTS OF TRANSACTIONS BETWEEN MEL/K.P. PODDAR THROUGH PROPER BANKING CHANNEL ARE DIFFERENT FROM AMOUNTS OBSERVED IN THE SEIZED DOCUMENT. THE TRANSACTION PURSUANCE TO AGREEMENT DATED 16/8/2 004 IS CORROBORATED BY LEGAL EVIDENCE ON RECORD AND IS THR OUGH PROPER BANKING CHANNEL. NONE OF THE FIGURES NOTED ON THE SEIZED DOCUMENT ARE MATCHING WITH BUSINESS TRANSACTION OF RS.17.90 CRORES. THE INFERENCE DRAWN BY THE ASSESSING OFFICER THAT FIGUR ES NOTED ON SEIZED DOCUMENT ARE IN RELATION TO AGREEMENT DATED 16/8/20 04 IS UNJUSTIFIED. IN VIEW OF ABOVE REFERENCE TO SEIZED DOCUMENT BY TH E ASSESSING OFFICER FOR CONCLUDING THAT RS.17.90 CRORES IS DEEM ED DIVIDEND U/S ITA.528/BANG/2009 PAGE - 21 2(22)(E) IS MISPLACED AND IN FACT IT HAS NO RELEVAN CE TO BUSINESS TRANSACTION UNDER CONSIDERATION. 8. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS AMBASSADOR TRAVELS PVT. LTD. REPORTED AT 220 CTR (D EL) 475 AND HONBLE ITAT IN DECISION REPORTED AT 11 SOT 302 ( MUM.) IN THE CASE OF N.H. SECURITIES LTD. VS. DCIT HAS HELD T HAT TRANSACTION IN THE ORDINARY COURSE OF BUSINESS ARE OUTSIDE THE PURVIEW OF SECTION 2(22)(E) OF I.T. ACT 1961. IN THE FACTS OF THE PRESENT CASE THE TRANSACTION BETWEEN MEL AND SHRI K.P. PODDAR IS ADMITTEDLY A BU SINESS TRANSACTION AS IS EVIDENT FROM LEGAL AND COGENT EVI DENCE ON RECORD. THE ONWARD USE OF AFORESAID AMOUNT THUS CAN NOT BE HELD AS LIABLE FOR ASSESSMENT AS DEEMED DIVIDEND U/S 2(22)(E) OF I.T. ACT 1961. THE HONBLE KOLKATTA HIGH COURT IN THE CASE OF SHRI NAN DLAL KANORIA VS CIT REPORTED AT 124 ITR 405 HAS OBSERVED AS UNDER : THE THEORY OF AN INDIRECT LOAN OR ADVANCE WHICH HA S BEEN URGED ON BEHALF OF THE REVENUE IS DIFFICULT TO CONC EIVE. A LOAN CREATES A LEGAL RELATIONSHIP BETWEEN TWO PARTI ES, NAMELY, THE LENDER AND BORROWER. IT DOES NOT APPE AR TO US THAT ON THE FACTS BEFORE US IT CAN BE SAID THAT THI S RELATIONSHIP CAME INTO EXISTENCE BETWEEN THE ASSESS EE AND THE COMPANY NOR IT CAN BE SAID THAT THERE WAS ANY L OAN OR ADVANCE BY THE SAID COMPANY TO THE WHICH THE SAID ITA.528/BANG/2009 PAGE - 22 COMPANY COULD IN LAW RECOVER FROM THE ASSESSEE. FR OM THE DECISIONS CITED THE LAW APPEARS TO BE WELL SETT LED THAT THE SECTION CONCERNED HAS TO BE CONSTRUED STRICTLY . IN THAT VIEW IT WILL NOT BE CORRECT TO CONSTRUE THE SAID SE CTION BY IMPORTING THE EXPRESSION DIRECTLY OR INDIRECTLY I N CONNECTION WITH THE EXPRESSION BY WAY OF ADVANCE O R LOAN TO A SHAREHOLDER AS APPEARING IN S. 2(22)(E) OF T HE ACT OF 1961. THE RATIO OF THE AFORESAID DECISION SUPPORTS THE SU BMISSION OF ASSESSEE THAT AMOUNT RECEIVED FROM SHRI K.P. PODDAR IS NOT A SSESSABLE AS DEEMED DIVIDEND U/S 2(22)(E) OF INCOME TAX ACT, 196 1. 9. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUM STANCES AND DETAILED REASONS INDICATED HEREINABOVE WE ARE OF TH E OPINION THAT PROVISIONS OF SECTION 2(22)(E) OF I.T. ACT 1961 AS APPLIED IN THE CASE OF ASSESSEE ARE INAPPLICABLE TO THE FACTS IN THE CA SE OF ASSESSEE. THE AMOUNT OF RS.17.90 CRORES RECEIVED BY ASSESSEE FROM SHRI K.P. PODDAR IS THE AMOUNT RECEIVED BY ASSESSEE FROM HIS FATHER AND CAN NOT BE HELD AS AMOUNT RECEIVED BY ASSESSEE FROM COMPANY SO AS TO INVOKE PROVISIONS OF SECTION 2(22)(E) OF I.T. ACT 1961. WE HOLD THAT ON FACTS AND CIRCUMSTANCES THAT TRANSACTION BETWEEN ME L/K.P. PODDAR IN RESPECT OF SECURITY DEPOSIT OF RS.17.90 CRORES IS B USINESS TRANSACTION. ON THE BASIS OF FACTS AND EVIDENCE ON RECORD WE HOL D THAT MEL HAS ITA.528/BANG/2009 PAGE - 23 NOT GIVEN ANY PAYMENT FOR THE BENEFIT OF OR ON BEHA LF OF ASSESSEE TO BRING ANY AMOUNT ASSESSABLE U/S 2(22)(E) OF INCOME TAX ACT, 1961. WE HOLD THAT ADDITION AS MADE BY THE ASSESSING OFFI CER AT RS.17.9 CRORES AND AS UPHELD BY COMMISSIONER OF INCOME-TAX (A) IS UNJUSTIFIED. THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS COMMISSIONER OF INCOME-TAX (A) FOR HOLDING THAT ADD ITION OF RS.17.9 CRORES IS DEEMED DIVIDEND AT THE HANDS OF ASSESSEE ARE HELD TO BE UNJUSTIFIED. WE HEREBY DIRECT THE ASSESSING OFFICE R TO DELETE THE ADDITION MADE AT RS.17.9 CRORES AT THE HANDS OF AS SESSEE. 10. THE GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 11. IN GROUND NO. 2 ASSESSEE HAS CHALLENGED THE VAL IDITY OF ASSESSMENT FRAMED ON VARIOUS LEGAL FACETS AS DESCR IBED IN GROUNDS OF APPEAL. 12. BEFORE US LEARNED COUNSEL OF ASSESSEE SUBMITTED THAT SIMILAR GROUNDS WERE RAISED BEFORE COMMISSIONER OF INCOME-T AX (A) WHEREIN DETAILED WRITTEN SUBMISSIONS WERE MADE WHICH HAVE B EEN REPRODUCED IN APPELLATE ORDER. THE COUNSEL OF THE ASSESSEE HA S PLACED RELIANCE AND SUBMITTED THAT HE HAS NOTHING MORE TO ADD THAN WHAT HAS BEEN SUBMITTED IN WRITTEN SUBMISSION REPRODUCED IN THE O RDER OF ITA.528/BANG/2009 PAGE - 24 COMMISSIONER OF INCOME-TAX (A). IT IS SUBMITTED TH AT IN THE FACTS OF PRESENT CASE NO OPPORTUNITY WAS GRANTED BY ADDL. CI T BEFORE GRANTING APPROVAL AS PROVIDED U/S 153D OF INCOME TAX ACT, 19 61 AND IN VIEW OF ABOVE ORDER PASSED IN THE CASE OF ASSESSEE IS BAD I N LAW. RELIANCE FOR THIS IS PLACED ON 1994 TAX L.R. 468 IN CASE OF KAMA LA PROPERTIES VS. INSPECTING ACIT (CAL.). THE ASSESSEE WAS BEING ASSE SSED BY DCIT, COMPANY CIRCLE-12(1) AND SUBSEQUENTLY CASE WAS TRAN SFERRED TO DCIT, CENTRAL CIRCLE-(1), BANGALORE. ORDER OF TRAN SFER WAS NOT COMMUNICATED TO ASSESSEE NOR OPPORTUNITY OF HEARD W AS PROVIDED TO ASSESSEE BEFORE TRANSFER OF CASE AND THUS ORDER PAS SED IS BAD IN LAW. 13. THE LEARNED D.R. ON THE OTHER HAND SUBMITTED TH AT IN THE FACTS OF THE PRESENT CASE THE JURISDICTION HAS BEEN TRANS FERRED FROM ONE ASSESSING OFFICER IN THE CITY OF BANGALORE TO THAT WITH ANOTHER ASSESSING OFFICER IN THE SAME CITY. THE LEARNED D .R. INVITING OUR ATTENTION TO PROVISIONS OF SECTION 127(3) OF I.T. A CT 1961 SUBMITTED THAT THERE IS NO NECESSITY OF GRANTING OPPORTUNITY ASSESSEE ON TRANSFER OF CASE FROM ONE ASSESSING OFFICER TO ANOTHER IN T HE SAME CITY. IT WAS SUBMITTED IN VIEW OF CLEAR MANDATE OF PROVISION S OF SECTION 127(3) OF I.T. ACT 1961 THE CONTENTION OF ASSESSEE AS RAISED IN GROUNDS OF APPEAL IS NOT JUSTIFIED AND GROUNDS OF APPEAL OF ASSESSEE DESERVES TO ITA.528/BANG/2009 PAGE - 25 BE DISMISSED. THE LEARNED D.R. ALSO INVITED OUR AT TENTION TO PARA 6 OF THE APPELLATE ORDER WHEREIN COMMISSIONER OF INCOME- TAX (A) HAS RECORDED A FINDING THAT RECORD SHOWS THAT ADDITIONA L CIT HAS APPROVED THE ASSESSMENT ORDER ON 31/12/2007 IN COMP LIANCE TO TERMS OF SECTION 153D OF I.T. ACT 1961. IT IS SUBMITTED THAT IN VIEW OF CLEAR FINDING AS NOTED BY COMMISSIONER OF INCOME-TAX (A) IN HIS APPELLATE ORDER THERE IS NO MERIT IN APPEAL OF ASSESSEE AND THEREFORE GROUND AS RAISED IN MEMO OF APPEAL. 14. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE EVIDENCE ON RECORD. IT IS SEEN THAT SIMILAR LEGAL GROUNDS W ERE RAISED BEFORE COMMISSIONER OF INCOME-TAX (A) AND DETAILED SUBMISS IONS AS MADE BY ASSESSEE BEFORE COMMISSIONER OF INCOME-TAX (A) A RE RECORDED IN APPELLATE ORDER. WE HAVE PERUSED THE ORDER OF COMM ISSIONER OF INCOME-TAX (A) AND FIND THAT ALL LEGAL FACETS OF TH E ASSESSMENT FRAMED HAVE BEEN DELIBERATED UPON IN LIGHT OF THE DECISIO NS REFERRED TO IN THE APPELLATE ORDER. WE ARE OF THE OPINION THAT GROUND S OF APPEAL AS RAISED BEFORE COMMISSIONER OF INCOME-TAX (A) HAVE B EEN CORRECTLY DISMISSED AND DOES NOT CALL FOR ANY INTERFERENCE. IN VIEW OF ABOVE WE ARE OF THE OPINION THAT THERE IS NO MERIT IN GROUND S OF APPEAL OF ITA.528/BANG/2009 PAGE - 26 ASSESSEE AND SAME ARE LIABLE TO BE DISMISSED. GR OUND NO. 2 RAISED IN MEMO OF APPEAL IS DISMISSED HAVING NO MERIT IN THE SAME. 15. THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 11TH DAY OF SEPTEMBER, 2009. SD/- SD/- (K. K. GUPTA) (K. P. T. THANGAL) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE DATED : 11TH SEPTEMBER, 2009 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, NEW DELHI 7. GF, ITAT, BANGALORE