Sh. Harish Kanwar, New Delhi V. ITO, New Delhi

ITA 529/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3704 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 31-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Question of law; Cost of acquisition; Deemed dividend
• Section: 143(3); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A. NO. 529/DEL/2017 A.Y. : 2011-12 SH. HARISH KANWAR, M-259, GREATER KAILASH-II, NEW DELHI 110 048 (PAN: AABPK1035G) VS. ITO, WARD 3(4), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VED JAIN, CA DEPARTMENT BY : SH. ARUN KUMAR YADAV, SR. DR ORDER PER H.S. SIDHU : JM ASSESSEE HAS FILED THIS APPEAL AGAINST THE IMPUGNE D ORDER DATED 12.10.2016 PASSED BY THE LD. CIT(A)-2, NEW DELHI R ELEVANT TO ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD BOTH IN THE EYE OF LA W AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ADDITION OF RS.3,09,38,391/- MADE BY 2 THE AO INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 3(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ABOVE ADDITION DESPITE THE FACT THAT THE SAID AMOUNT WAS NEVER RECEIVED BY THE ASSESSEE FROM THE COMPANIES BUT WAS A FRAUDULENT ACT COMMITTED BY THE OFFICER OF THE BANK. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N IGNORING THE CONTENTION OF THE ASSESSEE THAT THE AB OVE- SAID AMOUNT WAS NOT IN THE NATURE OF LOANS AND ADVANCES. 4. WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATIVE, THE LEARNED CIT(A) HAS ERRED BOTH ON F ACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSES SEE THAT THE COMPUTATION OF 'ACCUMULATED PROFITS' MADE BY THE AO IS WRONG. 5(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE OF AN AMOUNT OF RS.34,27,655/- BEING DEDUCTION UNDER SECTION 54 OF THE ACT DESPITE THE ASSESSEE BEING ELIGIBLE FOR THE SAM E. 3 (II) THAT THE DISALLOWANCE OF EXEMPTION UNDER SECT ION 54 AMOUNTS TO DOUBLE ADDITION, THE ASSESSEE HIMSELF ADDED THE SAME IN SUBSEQUENT ASSESSMENT YEAR. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF THE AO IN DISALLOWING AN AMOUNT OF RS.1,13,375/- BEING BROKERAGE AND LEGAL EXPENSES, WHILE COMPUTING CAPITAL GAIN ON SALE OF PROPERTY BEARING NO. B-7, SECTOR-72, NOIDA. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING THE DEDUCTION OF RS.2,00,000/- BEING THE EXPENDITURE INCURRED ON ADDITIONAL ALTERATION WHILE COMPUTING C APITAL GAIN IN RESPECT OF PROPERTY BEARING NO. 8-143, GREA TER KAILASH, PART II, NEW DELHI, SOLD BY THE ASSESSEE. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING DEDUCTION OF RS1,00,000/- BEING THE EXPENDITURE INCURRED ON LEGAL AND BROKERAGE EXPENSES IN RESPECT OF SALE OF PROPERTY BEARING NO. S-143, GREATER KAILASH , PART II, NEW DELHI. 4 9. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED HIS RETURN OF INCOME ON 30.07.2011 DECLARING AN INCOME OR RS.30,5 6,940/-. THE RETURN OF THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE INC OME TAX ACT, 1961 AND THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY. STATUTORY NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 WAS ISSUED IN TH IS CASE IN RESPONSE TO WHICH, THE A.R. OF THE ASSESSEE ATTENDED THE PROCEE DINGS FROM TIME TO TIME. THE ASSESSEE HAS SHOWN INCOME FROM SALARY, CA PITAL GAINS AND OTHER SOURCES. THE DETAILS AND INFORMATION FILED HAVE BEE N EXAMINED. THE ASSESSEE IS DIRECTOR/SHAREHOLDER IN M/S CRAFTPAC CO NTAINERS PVT. LTD. (79.58% SHARE-HOLDING); M/S CPC POLYMERS PVT. LTD. (51% SHAREHOLDING); AND M/S TRIMAXX INFRASTRUCTURE DEVELOPMENT PVT. LTD . (50% SHAREHOLDING). PERUSAL OF THE DETAILS FILED REVEALS THAT DURING THE YEAR THE ASSESSEE RECEIVED AN AMOUNT OR RS.3,01,00,000/- FRO M M/S CRAFTPAC CONTAINERS PVT. LTD. AND RS.99,00,000/- FROM M/S CP C POLYMERS PVT. LTD. AND IN TURN HAD PROVIDED AN FDR TO M/S CRAFTPAC CON TAINERS PVT. LTD. SINCE NO SHAREHOLDING HELD BY THE ASSESSEE IS MORE THAN THE SPECIFIED LIMIT PROVIDED U/S 2(22)(E) OF THE ACT THE PROVISI ONS OF SECTION 2(22)(E) OF THE ACT HAVE BEEN ATTRACTED. ACCORDINGLY, THE A SSESSEE WAS REQUIRED TO FURNISH HIS EXPLANATION. THE ASSESSEE FURNISHED ITS EXPLANATION VIDE LETTER DATED 25.1.2013 AND HAS RELIED UPON VARIOUS CASE LA WS. AFTER CONSIDERING THE SUBMISSIONS AND THE CASE LAWS, THE AO HAS COMPL ETED THE ASSESSMENT OF THE ASSESSEE AT AN INCOME OF RS. 3,77,96,067/- A S AGAINST RETURNED 5 INCOME OF RS. 3056940/- BY MAKING AN ADDITION OF RS . 30938391/- ON ACCOUNT OF DEEMED DIVIDEND AND ADDITION OF RS. 3948 167/- BE RE-COMPUTING THE CAPITAL GAIN DECLARED BY THE ASSES SEE. THE AO HAS ALSO COMPLETED THE ASSESSMENT OF COMPANY M/S CRAFTPAC CO NTAINERS PVT. LTD. WHEREBY HE MADE AN ADDITION OF RS. 10035866/- ON AC COUNT OF DEEMED DIVIDEND. THE AO COMPLETED THE ASSESSMENT AT RS. 3, 77,96,067/- VIDE ORDER DATED 28.2.2014 PASSED U/S 143(3) OF THE ACT. 3. AGGRIEVED WITH THE ASSESSMENT ORDER DATED 28.2.2 014, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS COMMON IMPUGNED ORDER DATED 12.10.2016 HAS DISMISSED THE A PPEAL OF THE ASSESSEE AND DELETED THE ADDITION OF RS. 1,00,35,86 6/- OF THE CASE I.E. CRAFTPAC CONTAINER PVT. LTD. 4. AGAINST THE COMMON IMPUGNED ORDER DATED 12.10. 2016, ASSESSEE HAS FILED THE APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSES SEE HAS FILED A PAPER BOOK CONTAINING PAGES 1 TO 119 CONTAINING VARIOUS D OCUMENTS FILED DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCE EDINGS. HOWEVER, WITH REGARD TO ADDITION OF RS. 3,09,38,391/- CONFIR MED BY THE LD. CIT(A) ON ACCOUNT OF THE DEEMED DIVIDEND HAS STATED THAT THE TRANSACTION REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE WAS A FRAUDULENT TRANSACTION ENTERED BY THE RELATIONSHIP MANAGER OF CITI BANK. THE CREDIT AND DEBIT HAS HAPPENED SIMULTANEOUSLY AND THERE WAS NEVER ANY FUND AVAILABLE WITH THE ASSESSEE SO AS TO FALL WITHIN TH E MEANING OF LOAN OR 6 ADVANCE IN TERMS OF THE PROVISIONS OF SECTION 2(22 )(E) OF THE I.T. ACT. TO SUPPORT HIS CONTENTION, HE RELIED UPON THE CASE LAW OF HONBLE BOMBAY HIGH COURT IN THE CASE OF (I) CIT VS. UNIVERSAL MED ICAL PVT. LTD. 324 ITR 263; ITAT, DELHI IN THE CASE OF SH. HARSH DHIR VS. ITO 2014 (10) TMI 847; (III) HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. HARSH DHIR 2015 (9) TMI 1243 AND HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRAVIN BHIMSHI CHHEDA (2014) 48 TAXMANN.COM 151 (BO MBAY) AND ITAT, KOLKATA DECISION IN THE CASE OF ITO VS. BIMAL KUMA R KHAITAN 2016 (3) TMI 443. 5.1 WITH REGARD TO DISALLOWANCE OF EXEMPTION U/S. 5 4 OF THE ACT CLAIMED BY THE ASSESSEE IS CONCERNED, LD. COUNSEL OF THE AS SESSEE STATED THAT ASSESSSEE IN THE PRESENT CASE HAS IN FACT OFFERED T HIS AMOUNT AS INCOME IN THE SUBSEQUENT ASSESSMENT YEAR AND HAS ALREADY PAID DUE TAXES IN THE SUBSEQUENT YEAR AY 2012-13. THUS, LD. CIT(A) HAS WR ONGLY CONFIRMED THE ADDITION IN THIS YEAR AND THE SAME NEEDS TO BE DELE TED. 5.2 WITH REGARD TO GROUND RELATING TO DISALLOWANCE OF AN AMOUNT OF RS. 1,13,375/- BEING BROKERAGE AND LEGAL EXPENSES PAID BY THE ASSESSEE IS CONCERNED, LD. COUNSEL OF THE ASSESSEE STATED THA T A SUM OF RS. 2,26,750/- WAS PAID TO NOIDA AUTHORITY AS ONE TIM E LEASE CHARGES AT THE TIME OF PURCHASE OF PLOT AND THE EVIDENCE OF TH E SAME WAS SUBMITTED, WHICH IS NOW PLACED AT PAGE NO. 99 AND 101 OF THE P APER BOOK, WHICH WAS NOT CONSIDERED AND LD. CIT(A) HAS WRONGLY CONFIRMED THE ADDITION MADE BY THE AO, WHICH NEEDS TO BE DELETED. 7 5.3 APROPOS GROUND NO. 7 RELATING TO DISALLOWANCE OF DEDUCTION OF RS.2,00,000/- BEING THE EXPENDITURE INCURRED BY TH E ASSESSEE IN RESPECT OF PROPERTY NO. S-143, GREATER KAILASH, PART-II, NE W DELHI IS CONCERNED, LD. COUNSEL OF THE ASSESEE STATED THAT THIS AMOUNT WAS INCURRED BY THE ASSESSEE ON THIS PROPERTY AFTER THE PURCHASE AND TH E SAME BE INCLUDED IN THE COST WHILE COMPUTING THE CAPITAL GAIN. THE LOWE R AUTHORITIES HAVE IGNORED THE EVIDENCES OF THIS EXPENDITURE, HENCE, H E REQUESTED THAT THE ADDITION IN DISPUTE MAY BE DELETED. 5.4 WITH REGARD TO GROUND NO. 8 RELATING TO DISALLO WANCE OF RS. 1,00,000/- BEING THE EXPENDITURE INCURRED ON LEGAL AND BROKERAGE AT THE TIME OF SALE OF ABOVE PROPERTY, LD. COUNSEL OF THE ASSESSEE HAS STATED THAT THE AS PER THE PROVISIONS OF THE SECTION 48, THE CAPITAL GAIN IS TO BE COMPLETED AFTER DEDUCTING FROM THE ACTUAL CONSIDERA TION RECEIVED, THE EXPENDITURE INCURRED IN CONNECTION WITH SUCH SALES, HENCE, HE REQUESTED THAT THE ADDITION IN DISPUTE MAY BE DELETED. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND FILED THE WRITTEN SUBMISSIONS CITING THER EIN THE VARIOUS CASE LAWS. THE CASE LAWS CITED BY THE LD. DR IN THE WRIT TEN SUBMISSIONS ARE REPRODUCED HEREUNDER :- IN THE ABOVE CASE, IT IS HUMBLY SUBMITTED THAT THE FOLLOWING DECISIONS MAY KINDLY BE CONSIDERED WH ILE ADJUDICATING THE ISSUE OF ADDITION MADE BY THE LD. AO U/S 2(22)(E) OF THE IT ACT 1961: 8 1. MISS P. SARADA VS CIT [96 TAXMAN 11. 229 ITR 444.144 CTR 209] (COPY ENCLOSED) WHERE HON'BLE SUPREME COURT HELD THAT ADVANCES MADE BY COMPANY TO ASSESSEE WOULD HAVE TO BE TREATED AS DEEMED DIVIDENDS PAID ON DATES WHEN WITHDRAWALS WER E ALLOWED TO BE MADE AND SUBSEQUENT ADJUSTMENT OF ACCOUNT MADE ON VERY LAST DAY OF ACCOUNTING YEAR WO ULD NOT ALTER POSITION THAT ASSESSEE RECEIVED NOTIONAL DIVIDENDS ON VARIOUS DATES. 2. CIT VS. P. K. ABUBUCKER 259 ITR 507 (MAD): IN THIS CASE THE ASSESSEE HAD LEASED OUT ON MONTHLY RE NT THE GROUND FLOOR OF A BUILDING TO A COMPANY IN WHIC H HE HAD SUBSTANTIAL INTEREST AND AT THE SAME TIME TAKEN AN ADVANCE /LOAN OF RS. 10 LACS FROM THE COMPANY FOR T HE PURPOSE OF CONSTRUCTION OF UPPER FLOORS. THIS ADVAN CE WAS TO BE ADJUSTED AGAINST THE RENT ACCRUING IN THE FUTURE MONTH ON THE LETTING OUT OF THE GROUND FLOOR . IT WAS HELD BY THE HON'BLE HIGH COURT THAT 'ADVANCE' IMPLIES PAYMENT OF A SUM WHICH WAS NOT DUE AT THE TIME IT WAS PAID AND IN THE CASE OF THE ASSESSEE WH EN ADVANCE WAS PAID BY THE COMPANY NOTHING WAS DUE TO BE PAID TO THE ASSESSEE AND IT WAS ONLY AGAINST FUT URE RENT THAT THIS ADVANCE WAS TO BE SET OFF. HON'BLE C OURT 9 HELD THAT ADVANCE PAID IS A DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE IT ACT. 3. COMMISSIONER OF INCOME-TAX NATIONAL TRAVEL SERVICES [2011] 14 TAXMANN.COM 14 (DELHI) (COPY ENCLOSED) WHERE HON'BLE DELHI HIGH COURT HELD THAT FOR PURPOSE OF SECTION 2(22)(E), A PARTNERSHIP FIRM HAV ING PURCHASED SHARES THROUGH ITS PARTNERS IN COMPANY WHICH HAS PAID LOANS IS TO BE TREATED AS A SHAREHOL DER AND IT IS NOT NECESSARY THAT IT HAS TO BE 'REGISTER ED SHAREHOLDER' OF COMPANY. 4. COMMISSIONER OF INCOME-TAX V. BHARTI OVERSEAS TRADING CO[2012] 21 TAXMANN.COM 543 (DELHI) (COPY ENCLOSED) - ASSESSEE-FIRM CONSISTED OF TWO PARTNERS - THEY WERE HOLDING SHARES IN A COMPANY - FIRM RECEIV ED CERTAIN SUM FROM COMPANY - ASSESSING OFFICER MADE ADDITION TO INCOME TREATING SAME AS DEEMED DIVIDEND APPLYING SECTION 2(22)(C) AS PARTNERS WERE HOLDING MORE THAN 10 PER CENT SHARES - WHETHER ADDITION WAS JUST IFIED - HELD, YES [IN FAVOUR OF REVENUE] 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS ESPECIALLY THE IMPUGNED ORDER, WRITTEN SUBMISSIONS FILED BY B OTH THE PARTIES AS WELL AS THE PAPER BOOK FILED BY THE ASSESSEES COUNSEL, CONTAINING PAGES 1 TO 119 IN WHICH HE HAS ATTACHED THE COPY OF ACKNOWLEDG EMENT OF INCOME TAX 10 RETURN ALONGWITH COMPUTATION OF INCOME FOR AY 2011- 12; COPY OF REPLY FILED BEFORE THE AO, DATED 20.11.2013; LIST OF SHAR EHOLDERS, COPY OF AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT F OR THE YEAR ENDING ON 31.3.2011, COPY OF LEDGER ACCOUNT OF HARISH KANWA R FROM 1.4.2010 TO 31.3.2011, COPY OF CITI BANK LEDGER ACCOUNT FROM 30 .6.2010 TO 10.8.2010, COPY OF LEDGER ACCOUNT OF M/S CPC POLYME RS PVT. LTD. FROM 10.4.2010 TO 31.3.2014 (FILED IN THE CASE OF M/S CR AFTPAC CONTAINERS PVT. LTD.); LIST OF SHAREHOLDERS, COPY OF LEDGER ACCOUNT OF SH. HARISH KANWAR FROM 1.4.2010 TO 31.3.2011, COPY OF ACKNOWLEDGEMENT OF INCOME TAX RETURN ALONGWITH COMPUTATION OF INCOME FOR AY 2011- 12, COPY OF AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE Y EAR ENDING ON 31.3.2011 ALONGWITH DIRECTORS REPORT, COPY OF LEDGE R ACCOUNT OF M/S CRAFTPAC CONTAINERS PVT. LTD. FROM 1.4.2010 TO 31.3 .2012, COPY OF BANK STATEMENT FROM 1.4.2011 TO 31.12.2011 (FILED IN THE CASE OF CPC POLYMERS PVT. LTD.); COPY OF BANK STATEMENT OF HARI SH KANWAR FROM 1.4.2011 TO 31.12.2011; COPY OF AFFIDAVIT OF SH. HA RISH KANWAR; DETAILS OF CALCULATION OF DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT FOR AY 2011-12; COPY OF DRAFT IN THE NAME OF M/S CRAFTPAC CONTAINERS PVT. LTD; COPY OF LETTER REGARDING ENCASHMENT OF FD FILED BY M/S CRAFTPAC CONTAINERS PVT. LTD. TO CITI BANK, DATED 30.12.2009 ; COPY OF RELY BY CITI BANK OFFICIAL, DATED 7.1.2011; COPY OF LETTER FROM CITI BANK, DATED 14.1.2011 ALONGWITH FOLLOWING: COPY OF PRELIMINARY ACCOUNT RECONCILIATION STATEMENT, COPY OF SETTLEMENT AGREEMENT; COPY OF FO RM FOR FUNDS TRANSFER, DATED 6.8.2010; COPY OF DRAFT OF RS. 376/ - LACS IN THE NAME OF 11 CRAFTPAC CONTAINERS PVT. LTD.; COPY OF BANK STATEME NT FROM 12.3.2011 TO 6.4.2011; COPY OF LETTER WITHDRAWING OF COMPLAINT FILED BEFORE SHO, GURGAON, DATED 2.8.2011; DETAILS OF CALCULATION OF CAPITAL GAINS OF RESIDENTIAL PLOT, NOIDA IN AY 2011-12; COPY OF ACKN OWLEDGEMENT OF INCOME TAX RETURN ALONGWITH COMPUTATION OF INCOME FOR AY 2012-13; COPY OF LEDGER ACCOUNT OF NOIDA PLOT IN THE BOOKS OF THE ASSESSEE; COPY OF BANK STATEMENT OF HARISH KANWAR FROM 1.4.2010 TO 17 .10.2010; COPY OF WRITTEN SUBMISSIONS FILED BEFORE CIT(A)-2, DATED 14 .10.2015; COPY OF CONTINUED WRITTEN SUBMISSIONS FILED BEFORE CIT(A)-2 , DATED 28.12.2015 AND COY OF CONTINUED WRITTEN SUBMISSIONS FILED BEF ORE THE LD. CIT(A)-2, DATED 28.1.2016. WE FIND THAT LD. CIT(A) HAS PASS ED A COMMON ORDER DATED 12.10.2016 IN THE CASE OF THE ASSESSEE AND TH E COMPANY M/S CRAFTPAC CONTAINERS PVT. LTD. FOR A.Y. 2011-12. IN THIS CASE THE ASSESSING OFFICER COMPLETED THE ASSESSMENT OF THE ASSESSEE AT AN INCOME OF RS. 3,77,96,067/- AS AGAINST RETURNED INCOME OF RS. 30, 56,940/- BY MAKING AN ADDITION OF RS. 3,09,38,391/- ON ACCOUNT OF DEEM ED DIVIDEND AND ADDITION OF RS. 39,48,167/- BE RE-COMPUTING THE CAP ITAL GAIN DECLARED BY THE ASSESSEE. THE AO HAS ALSO COMPLETED THE ASSESSM ENT OF COMPANY M/S CRAFTPAC CONTAINERS PVT. LTD. WHEREBY HE MADE AN AD DITION OF RS. 1,00,35,866/- ON ACCOUNT OF DEEMED DIVIDEND. BOTH T HESE APPEALS WERE HEARD TOGETHER. THE LD. CIT(A) IN THE CASE OF THE C OMPANY CRAFTPAC CONTAINER PVT. LTD. DELETED THE ADDITION OF RS. 1,00,35,866/- MADE BY THE AO. HOWEVER, SHE ENHA NCED THE INCOME OF THE COMPANY BY RS.4,00,00,000/-. IN THE CASE OF THE ASSESSEE, THE LD. 12 CIT(A) HAS CONFIRMED THE ADDITIONS MADE BY THE AO. ASSESSEE APPEALED AGAINST THE ORDER PASSED BY THE LD. CIT(A) IN THE C ASE OF CRAFTPAC CONTAINER PVT. LTD. WHEREIN THE ITAT VIDE ITS ORDE R DATED 28.8.2017 PASSED IN ITA NO. 547/DEL/2017 HAS DELETED THE ADDI TION IN DISPUTE. NOW THE ASSESSEE IS APPEAL BEFORE THE TRIBUNAL AND HAS RAISED AS MANY AS 09 GROUNDS, AS AFORESAID. 8. SINCE THE GROUND 1 AND 9 ARE GENERAL IN NATURE, HENCE, NEED NOT BE ADJUDICATED. 9. AS REGARDS GROUND NO.2 TO 4 ARE IN RELATION TO THE ADDITION OF RS.3,09,38,391/- CONFIRMED BY THE LD. CIT(A) ON ACC OUNT OF THE DEEMED DIVIDEND IS CONCERNED, WE FIND THAT THIS ADDITION H AS BEEN MADE ON THE ALLEGATION THAT ASSESSEE RECEIVED RS. 3,01,00,000/- FROM CRAFTPAC CONTAINERS PVT. LTD. AND RS. 99,00,000/- FROM CPC P OLYMERS PVT. LTD. WHICH IN TURN WERE USED FOR MAKING FDR IN THE NAME OF CRAFTPAC CONTAINERS PVT. LTD. WITH CITI BANK. THE ADDITION H AS BEEN RESTRICTED TO THE ACCUMULATED PROFIT OF RS. 2,09,02,255/- IN THE CASE OF CRAFTPAC CONTAINERS PVT. LTD. AND RS. 1,00,35,866/- IN THE CASE OF CPC POLYMERS PVT. LTD. MERELY ON THE ALLEGATION THAT WHILE PREPARING FOR T HE FUNDS WERE ROUTED THROUGH THE ACCOUNT OF THE ASSESSEE. LN THIS REGARD IT IS PERTINENT TO NOTE THAT THERE WAS A FRAUD COMMITTED BY THE RELATIONSHI P MANAGER OF THE CITI BANK GURGAON WHEREBY HE INDUCED VARIOUS CORPORATES TO GET AN FDR PREPARED AND HAVE A RETURN OF 24% PER ANNUM. IN THI S PROCESS HE GOT CHEQUES SIGNED FROM THE DIRECTORS OF THE VARIOUS CO RPORATES. LNSTEAD OF 13 GETTING THESE FUNDS TRANSFERRED IN THE NAME OF THE CORPORATES, THE RELATIONSHIP MANAGER FRAUDULENTLY DIVERTED THE, FUN DS BY USING THE BANK ACCOUNT OF THE INDIVIDUAL DIRECTOR. THE CASE OF THE ASSESSEE IS ONE OF THE SAME. IT WAS NEVER INTENDED THAT THE FDR WAS TO BE PREPARED IN THE NAME OF THE ASSESSEE. THE FUNDS WERE SUPPOSED TO BE TRANSFERRED FROM CORPORATES I.E. CRAFTPAC CONTAINERS PVT. LTD. RS. 3 ,01,00,000/- AND CPC POLYMERS PVT. LTD. RS. 99,00,000/- DIRECTLY TO THE CITI BANK FOR ISSUE OF FDR IN THE NAME OF THE CORPORATE ITSELF. LT WAS THE FRAUDULENT ACTIVITY OF THE RELATIONSHIP MANAGER WHEREBY HE USED THE BLANK VOUCHER GOT SIGNED FROM THE DIRECTOR FOR TRANSFERRING THE FUNDS FROM T HE COMPANY TO THE ACCOUNT OF THE DIRECTOR AND SIPHONING OF THE FUNDS FROM SUCH ACCOUNT. IT IS IMPORTANT THAT CREDIT AND DEBIT IN THE ACCOUNT OF T HE ASSESSEE HAS HAPPENED SIMULTANEOUSLY AT THE SAME DATE AND THE SA ME TIME. THIS FACT WAS ADMITTED BY THE CITI BANK AS IS EVIDENT FROM TH E SETTLEMENT AGREEMENT AT PB. PG. 75 TO 89 WHEREBY THE CITI BANK HAS ENTERED INTO SETTLEMENT WITH THE CRAFTPAC CONTAINERS PVT. LTD. I N THIS AGREEMENT, IN PARA 2.4 ON PAGE 79 IT HAS BEEN ADMITTED THAT THE F RAUD PERPETRATED BY SHIV RAJ, THE RELATIONSHIP MANAGER. THIS AGREEMENT HAS BEEN SIGNED WITH THE COMPANY ONLY I.E. M/S CRAFTPAC CONTAINERS PVT. LTD. THE AMOUNT ALSO HAS BEEN PAID DIRECTLY TO M/S CRAFTPAC CONTAINERS P VT. LTD. AS IS EVIDENT FROM THE CHEQUE ISSUED PLACED AT PB. PG. 91. THUS, THE ADDITION IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF DEEMED DIVIDEND IS UNSUSTAINABLE BOTH ON FACTS AND LAW. AS PER THE ABOVE STATED FACT S, THE ASSESSEE HAS NOT RECEIVED ANY LOAN OR ADVANCE. THE TRANSACTION REFLE CTED IN THE BANK 14 STATEMENT OF THE ASSESSEE WAS A FRAUDULENT TRANSACT ION ENTERED BY THE RELATIONSHIP MANAGER OF CITI BANK. THE CREDIT AND D EBIT HAS HAPPENED SIMULTANEOUSLY AND THERE WAS NEVER ANY FUND AVAILAB LE WITH THE ASSESSEE SO AS TO FALL WITHIN THE MEANING OF LOAN OR ADVANCE IN TERMS OF THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX AC T. IN THIS REGARD WE DRAW SUPPORT FROM THE FOLLOWING JUDGMENTS: I). IN THE CASE OF CIT VS. UNIVERSAL MEDICAL PVT. L TD. 324 ITR 263 (BOMBAY), WHICH IS SQUARELY APPLICABLE TO T HE FACTS OF THE PRESENT CASE WHEREIN IT WAS HELD THAT WHERE THE AMOUNT WAS TRANSFERRED FROM BANK ACCOUNT OF THE COMPANY TO THE BANK ACCOUNT OF THE ASSESSEE AND NO LOAN OR ADVANCE WAS GRANTED AND INFACT THE AMOUNT I N QUESTION HAS ACTUALLY BEEN DEFALCATED AND NOT SHOWN IN THE BOOKS OF ACCOUNTS, THE PROVISION OF SECTION 2(2 2)(E) OF THE ACT COULD NOT BE INVOKED TO TAX IN ASSESSEE' S HANDS. RELEVANT PARA IS AS UNDER: '9. IN ORDER THAT THE FIRST PART OF CLAUSE (E) OF SECTION 2(22) IS ATTRACTED, THE PAYMENT BY A COMPANY HAS TO BE BY WAY OF AN ADVANCE OR LOAN. THE ADVANCE OR LOAN HAS TO BE MADE, AS THE CASE MAY BE, EITHER TO A SHAREHOLDER, BEING A BENEFICIAL OWNER HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER OR TO ANY CONCERN TO WHICH SUCH A 15 SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST. THE TRIBUNAL IN THE PRESENT CASE HAS FOUND THAT AS A MATTER OF FACT NO LOAN OR ADVANCE WAS GRANTED TO THE ASSESSEE, SINCE THE AMOUNT IN QUESTION HAD ACTUALLY BEEN DEFALCATED AND WAS NOT REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE FACT THAT THERE WAS A DEFALCATION SEEMS TO HAVE BEEN ACCEPTED SINCE THIS AMOUNT WAS ALLOWED AS A BUSINESS LOSS DURING THE COURSE OF ASSESSMENT YEAR 2006-07. CONSEQUENTLY, ACCORDING TO THE TRIBUNAL THE FIRST REQUIREMENT OF THERE BEING AN ADVANCE OR LOAN WAS NOT FULFILLED. IN OUR VIEW, THE FINDING THAT THERE WAS NO ADVANCE OR LOAN IS A PURE FINDING OF FACT WHICH DOES NOT GIVE RISE TO AN Y SUBSTANTIAL QUESTION OF LAW. ' II). IN THE CASE OF SHRI HARSH DHIR, VERSUS INCOME TAX OFFICER, WARD 10 (3) , NEW DELHI 2014 (10) TMI 847 - ITAT DELHI SIMILAR PROPOSITION WAS LAID DOWN. '9. THE SUM OF RS. 1 LAKH WAS PAID BY DIPL TO THE ASSESSEE ON 23RD APRIL, 2008. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THERE WAS NO PAYMENT MADE BY THE 16 ASSESSEE TO DIPL BEFORE THIS DATE. THEREFORE, THE SUM OF RS. 1 LAKH PAID BY DIPL TO THE ASSESSEE ON 23RD APRIL, 2008 IS IN THE NATURE OF LOAN AND ADVANCE CHARGEABLE AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). THE OTHER SUM OF RS. 6,50,000/- WAS PAID BY DIPL TO THE ASSESSEE ON 19.11.2008. HOWEVER, BEFORE THE ABOVE DATE, DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE PAYMENT MADE BY THE ASSESSEE TO DIPL WAS MUCH MORE. THE SUM OF RS. 7 LAKHS WAS PAID BY THE ASSESSEE TO OIPL JUST A DAY EARLIER I.E. 18.11.2008. THEREFORE, FOR THE DETAILED DISCUSSION IN THE EARLIER PARAGRAPHS, IN OUR OPINION, THE SUM OF RS. 6,50,000/- CANNOT BE TREATED AS LOAN AND ADVANCE WITHIN THE MEANING OF SECTION 2(22)(E). ANOTHER SUM PAID BY DIPL TO THE ASSESSEE IS U 9,75,000/-. WE FIND THAT ON THE SAME DATE I.E. 4TH MARCH, 2008, THERE IS A PAYMENT BY THE ASSESSEE OF RS. 10 LAKHS TO DIPL. THEREFORE, IN OUR OPINION , THE SUM OF RS. 9,75,000/- ALSO CANNOT BE TREATED AS LOAN AND ADVANCE WITHIN THE MEANING OF SECTION 2(22)(E).' 17 III). THE ABOVE JUDGEMENT IS AFFIRMED BY THE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX, DELHI-III VERSUS HARSH DHIR 2015 (9) TMI 1243 - DELHI HIGH COURT IV). IN THE CASE OF COMMISSIONER OF INCOME-TAX-22 V. PRAVIN BHIMSHI CHHEDA [2014] 48 TAXMANN.COM 151 (BOMBAY) WHEREIN IT HAS BEEN HELD THAT CIRCUITOUS TRANSFER OF FUNDS TO SHAREHOLDER'S FIRM WASN'T DEEMED DIVIDEND IF CO. GOT BACK ITS FUND ON SAME DAY. RELEVANT PARA IS AS UNDER: '6. UPON A BARE PERUSAL OF THE SAID PROVISION AND THE TRANSACTION IN QUESTION, THE TRIBUNAL CONCLUDED THAT IN THIS CASE THE TRANSACTION WAS A CIRCUITOUS TRANSACTION AND THE MONEY WHICH INITIALLY BELONGS TO M/S. SWATI ENERGY AND PROJECTS PVT. LTD. WAS RETURNED TO THE SAME COMPANY ON THE VERY SAME DAY THROUGH M/S. POWER SERVICE CORPORATION. THE OBJECT AND PURPOSE OF SECTION 2(22)(E) WAS NOTED BY THE TRIBUNAL. WE NEED NOT GO INTO THAT ASPECT OR ANY WIDER CONTROVERSY. THE TRIBUNAL, THEN, ANALYSES THIS TRANSACTION AND HOLDS THAT THERE IS NO FLOW OF FUND OR 18 ANY BENEFIT FROM M/S. SWATI ENERGY AND PROJECTS PVF. LTD. TO MIS. SUJYOTI ENTERPRISES OR TO ITS PARTNER MR. PRAVIN B. CHHEDA. MR. PRAVIN BHIMSHI CHHEDA IS THE RESPONDENT ASSESSEE BEFORE US. IT IS IN THESE CIRCUMSTANCES, THAT THE TRIBUNAL CONCLUDED THAT THIS IS NOT A LOAN OR ADVANCE SO AS TO ATTRACT SECTION 2(22)(E). WE ARE NOT REQUIRED TO GO INTO ANY FURTHER CONTROVERSY OR LARGER QUESTION. THE TRIBUNAL MAY HAVE ADDRESSED ITSELF TO THE STATUS OF MR. MANISH OEDHIA AND THE FINANCIAL POSITION OF M/S. POWER SERVICE CORPORATION POSSIBLY TO TAKE CARE OF THE ARGUMENT OF THE REVENUE THAT THESE WERE ENTITIES CLOSELY CONNECTED AND POSSIBLY THE MONEY WAS ROUTED THROUGH THEM ALTHOUGH THERE WAS NO GENUINE BUSINESS TRANSACTION. IN TAKING CARE OF THAT ARGUMENT, THE STATUS AND FINANCIAL POSITION OF ALL THE ENTITIES, THEIR ANNUAL INCOME HAS BEEN REFERRED BY THE TRIBUNAL. ONCE, WE ARE OF THE VIEW THAT THE TRANSACTION ESSENTIALLY CARRIED OUT IN THIS CASE IS NOT FALLING UNDER SECTION 2(22)(E), THEN, THE FINDING OF FACT 19 RENDERED BY THE TRIBUNAL CANNOT BE SAID TO BE PERVERSE OR VITIATED BY ANY ERROR OF LAW APPARENT ON THE FACE OF THE RECORD.' V). INCOME TAX OFFICER, WARD-9 (1) KOLKATA VERSUS BIMAL KUMAR KHAITAN 2016 (3) TMI 443 - ITAT KOLKATA HAS CONFIRMED THE DECISION OF LD.CIT(A) AND LD CIT(A) HELD AS UNDER: '5.9. CIT(A) ALSO HELD THAT SINCE THE MONEY IN QUESTION REMANDED WITH THE ASSESSEE ONLY FOR ONE DAY AND WAS RETURNED TO GCP WITHOUT ANY UTILISATION IT CANNOT BE TREATED AS ADVANCE OR LOAN WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT AND CAME TO THE AFORESAID CONCLUSION. CIT(A) PLACED RELIANCE ON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF PRAVEEN BHIMSHI CHHEDA SHIV SADAN VS DCIT 11 ITR 705 (MUMBAI) WHEREIN IT WAS HELD THAT THE PROVISION OF SECTION 2(22)(E) OF THE ACT CANNOT BE ATTRACTED WHERE THE TRANSACTION WAS CIRCUITOUS TRANSACTION AND THE MONEY WHICH INITIALLY BELONGED TO THE COMPANY WAS RETURNED TO IT ON THE VERY SAME DAY. THE TRIBUNAL HELD 20 THAT LOOKING AT THE TRANSACTIONS FROM THE OBJECTS OF SECTION 2(22)(E) OF THE ACT IT CANNOT BE SAID THAT THERE WAS DIVERSION OF DIVIDEND IN THE FORM OF LOANS OR ADVANCES. CIT(A) ACCORDINGLY DELETED THE ADDITION MADE BY AO.' 9.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOW THE PRECEDENTS, AS AFORESAID, WE DELETE THE ADDITION IN DISPUTE AND ALLOW THE GROUND. 10. GROUND NO. 5 IS REGARDING DISALLOWANCE OF EXEMP TION UNDER SECTION 54 OF THE INCOME TAX ACT CLAIMED BY THE ASSESSEE. I N THIS CASE THE CAPITAL GAIN HAS ARISEN DURING THE YEAR. THE ASSESSEE CLAI MED DEDUCTION DURING THE YEAR. IT WAS CONTENDED THAT SINCE THE ASSESSEE HAS NOT BEEN ABLE TO PURCHASE THE NEW PROPERTY WITHIN THE SPECIFIED PERI OD, HE HAS DECLARED THIS CAPITAL GAIN IN THE NEXT ASSESSMENT YEAR. IN THIS REGARD, ATTENTION WAS INVITED TO PAGE NO. 96-98 OF THE PAPER BOOK WHI CH IS COMPUTATION OF INCOME FOR THE SUBSEQUENT YEAR. AS PER PAGE NO. 97 THE ASSESSEE HAS DECLARED THE CAPITAL GAIN ON THIS PROPERTY IN A SUB SEQUENT YEAR 2012-13. IN VIEW OF THIS FACT, WE ARE OF THE VIEW THAT THE ISSUE NEEDS TO BE SET ASIDE TO THE FILE OF THE AO WITH THE DIRECTIONS THA T HE SHALL VERIFY THE RETURN FOR THE NEXT ASSESSMENT YEAR. IN CASE THE CA PITAL DECLARED IN THE SUBSEQUENT YEAR, THEN THE SAID CAPITAL GAIN NEEDD T O BE DELETED. ACCORDINGLY, THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE. IN CASE 21 THE AO IS OF THE VIEW THAT THE CAPITAL GAIN IS CHAR GEABLE TO TAX IN THE YEAR UNDER CONSIDERATION, THEN HE SHALL DELETE THE INCO ME IN THE SUBSEQUENT ASSESSMENT YEAR 2012-13, AS WE ARE OF THE VIEW THAT THE SAME INCOME CANNOT BE TAXED TWICE. 11. GROUND NO. 6 IS REGARDING DISALLOWANCE OF AN A MOUNT OF RS. 1,13,375/- BEING BROKERAGE AND LEGAL EXPENSES PAID BY THE ASSESSEE, WHILE COMPUTING CAPITAL GAIN ON THE SALE OF PROPERT Y BEARING NO. B-7, SECTOR-72. WE NOTE THAT THE AO HAD DISALLOWED THIS EXPENDITURE ON THE GROUND THAT ASSESSEE HAS NOT FILED THE DETAILS. THI S IS FACTUALLY INCORRECT. A SUM OF RS. 2,26,750/- WAS PAID TO NOIDA AUTHORITY A S ONE TIME LEASE CHARGES AT THE TIME OF PURCHASE OF THE PLOT. THE EV IDENCE OF THE SAME WAS SUBMITTED PLACED AT PB. PG. 99 ALONG WITH THE BANK STATEMENT AT PAGE 101 WHEREBY A SUM OF RS. 113375/- (BEING 50% SHARE. OF THE ASSESSEE OF RS. 226750) IS THE DEBIT APPEARING. THUS, THE SAME BEING COST OF ACQUISITION IT WAS RIGHTLY DEDUCTED WHILE COMPUTING CAPITAL GAIN. BEFORE THE AO ASSESSEE SUBMITTED THE LEDGER ACCOUNT (PB PG .99) OF THE PROPERTY SHOWING THE AMOUNT OF EXPENSES PAID TO NOIDA AUTHOR ITY AND THE SAME WAS CO-RELATED WITH THE BANK STATEMENT AT PB PG. 10 1 WHERE IN PO IS MADE ON 30.6.2010 FOR MAKING PAYMENT TO NOIDA AUTHO RITY. IN OUR VIEW THE LD. CIT(A) HAS GONE WRONG IGNORING THESE EVIDE NCES AND CONFIRMING THE DISALLOWANCE MADE BY THE AO, HENCE, THE ADDITIO N IN DISPUTE IS DELETED. 22 12. APROPOS GROUND NO.7 WHICH IS RELATING TO DISALL OWANCE OF DEDUCTION OF RS. 200000/- BEING THE EXPENDITURE INCURRED BY T HE ASSESSEE IN RESPECT OF PROPERTY BEARING NO. S-143, GREATER KAILASH, PAR T-II, NEW DELHI. THIS AMOUNT WAS INCURRED BY THE ASSESSEE ON THIS PROPERT Y AFTER THE PURCHASE. IN OUR VIEW THE SAME IS TO BE INCLUDED IN THE COST WHILE COMPUTING THE CAPITAL GAIN. THE AO HAS DISALLOWED THE SAME AND TH E LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE IGNORING THE EXPLANATION AND EVIDENCES SUBMITTED BY THE ASSESSEE IN SUPPORT THEREOF. SINCE THE ASSESSEE HAVING INCURRED THE EXPENDITURE THE SAME OUGHT TO HAVE BEE N ALLOWED WHILE COMPUTING COST OF THE ASSETS SOLD, HENCE, THE ADDIT ION IN DISPUTE IS DELETED. 13. APROPOS GROUND NO.8 WHICH IS RELATING TO DISALL OWANCE OF RS. 1,00,000/- BEING THE EXPENDITURE INCURRED ON L EGAL AND BROKERAGE AT THE TIME OF SALE OF THE ABOVE PROPERTY. AS PER THE PROVISION OF THE SECTION 48, THE CAPITAL GAIN IS TO BE COMPUTED AFTER DEDUCT ING FROM THE ACTUAL CONSIDERATION RECEIVED, THE EXPENDITURE INCURRED IN CONNECTION WITH SUCH SALES. THE ASSESSEE HAVING INCURRED THESE EXPENSES THE AO AND LD. CIT(A) HAVE GONE WRONG IN DISALLOWING THE SAME, HEN CE, THE ADDITION IN DISPUTE IS DELETED. 14. AFTER PERUSING THE CASE LAWS CITED BY THE LD. D R, WE FIND THAT THE SAME ARE ON DISTINGUISHED FACTS, HENCE, ARE NOT A PPLICABLE IN THE PRESENT CASE. 23 15. IN THE RESULT, THE APPEAL OF THE IS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18/10/2017. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 18/10/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT ASSISTANT REGISTRAR, ITAT, DELHI BENCHES