Gomti Exim Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5383/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91150 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-04-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 01-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER KAUR
• Assessee Lawyers: VED JAIN ADV SMT RANO JAIN
• Keywords: Unexplained cash credit; Share purchase agreement; Deemed dividend
• Section: 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL IN (DELHI BENCH C NEW DELHI) BEFORE SHRI G.C.GUPTA, HONBLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 5383 /DEL/2010 (ASSESSMENT YEAR: 2006-07) GOMTI EXIM PVT. LTD. VS. ITO A-1/60, FF SECTOR-11 WARD-12(2) ROHINI NEW DELHI NEW DELHI PAN : AACCG6995M (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VED JAIN, ADV., SMT. RANO JAIN , CA RESPONDENT BY : SMT. PARMINDER KAUR, SR. DR. DATE OF HEARING : 15/04/2015 DATE OF PRONOUNCEMENT : 12 /06/2015 ORDER PER N.K.SAINI, A. M. : 1. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 30/09/2010 OF CIT(A)- XV, NEW DELHI. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS AP PEAL :- 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 LAW AN D ON FACTS. ITA NO. 5383 / DEL/2010 2 2(I) 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. 10,00,000/- MADE BY AO ON ACCOUNT OF SHARE APPLICATION MONEY. (II) THAT THE ABOVE SAID ADDITION HAS BEEN CONFI RMED DESPITE THE ASSESSEE BRINGING ALL MATERIAL AND EVID ENCES ON RECORD TO PROVE THE IDENTITY OF THE SHARE HOLDER. (3) THAT THE ADDITION ON ACCOUNT OF SHARE CAPI TAL HAS BEEN CONFIRMED IGNORING THE FACT THAT APPELLANT COM PANY WAS INCORPORATED DURING THE YEAR AND THERE WAS NO S OURCE OF INCOME WHICH COULD BE ALLEGED TO HAVE BEEN INTRO DUCED BY WAY OF SHARE CAPITAL. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ADDITION OF RS. 5,79,203/- ON ACCOUN T OF ADVANCE RECEIVED AGAINST THE LAND INVOKING THE PROV ISION OF SECTION 2(22)(E) OF THE ACT. (II) THAT THE ABOVE SAID ADDITION HAS BEEN CONF IRMED IGNORING ARBITRARILY THE EVIDENCE BROUGHT ON RECORD THAT THE TRANSACTION WAS ENTERED INTO IN DUE COURSE OF THE B USINESS OF THE ASSESSEE AND AS SUCH DOES NOT COME UNDER THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. (III) THAT THE APPELLANT COMPANY NOT BEING A S HAREHOLDER, NO ADDITION CAN BE MADE IN THE HANDS OF THE APPELLA NT ON ACCOUNT OF DIVIDEND. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEN D OR ALTER ANY OF THE GROUNDS OF APPEAL. 3. GROUND NO. 1 AND 5 ARE GENERAL IN NATURE SO D O NOT REQUIRE ANY COMMENTS ON OUR PART. 4. VIDE GROUND NO. 2 (I), (II) AND (III) THE GR IEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF ADDITION OF RS. 10,0 0,000/- MADE BY THE AO ON ACCOUNT OF SHARE APPLICATION MONEY. ITA NO. 5383 / DEL/2010 3 5. THE FACTS OF THE CASE IN BRIEF ARE THAT THE AS SESSEE FILED E-RETURN OF INCOME ON 28.11.2006 DECLARING NIL INCOME WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961(HEREINAFTER REFE RRED TO AS THE ACT) AND THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE HAD RAISED SHARE CAPITAL INCLUDING SHARE PREMIUM AMOUNTING TO RS. 10,00,000/- FROM SHRI VINOD KUMAR AND RS. 6,50,000/- FROM SHRI JASBIR SINGH. THE AO ASKED THE ASSESSEE TO FURNISH THE CONFIRMATION A ND THE SOURCES OF INVESTMENT MADE BY THE ABOVE MENTIONED TWO SHARE HO LDERS. HE ALSO ASKED TO PRODUCE THE AFORESAID PERSONS TO VERIFY TH E VERACITY OF THE TRANSACTIONS. IN RESPONSE THE ASSESSEE PRODUCED BO TH THE PERSONS ON 5.12.2008. THE AO OBSERVED THAT SHRI JASBIR SINGH W AS ABLE TO SUBSTANTIATE HIS SOURCES OF INVESTMENT FROM SALE PR OCEEDS OF AGRICULTURAL LAND BUT SHRI VINOD KUMAR COULD NOT DO SO. THE AO FURTHER OBSERVED THAT THE STATEMENT OF SHRI VINOD KUMAR WA S ALSO RECORDED IN WHICH HE EXPLAINED THAT HE MADE THE INVESTMENT OUT OF HIS PAST SAVINGS FROM AGRICULTURAL ACTIVITIES AND OUT OF REF UND OF CASH LOAN GIVEN TO SHRI JASBIR SINGH ALIAS PAPPU. SHRI VINOD KUMAR IN HIS STATEMENT ALSO STATED THAT HE OWNED APPROXIMATELY 40 BIGHAS O F LAND, HOWEVER, PAPERS WERE NOT AVAILABLE WITH HIM SINCE THOSE WERE MORTGAGED IN ITA NO. 5383 / DEL/2010 4 CONNECTION WITH A TRACTOR LOAN. THE AO OBSERVED THA T SHRI VINOD KUMAR COULD NOT EXPLAIN THE EXIGENCY UNDER WHICH HE HAD TO APPLY FOR BANK LOAN SPECIALLY WHEN A SUM OF RS. 10,00,000/- I N CASH WAS AVAILABLE WITH HIM. HE FURTHER OBSERVED THAT COPY OF THE KHASRA KHATONI OF AGRICULTURAL LAND AT VILLAGE NATHUPUR TH E NAMES MENTIONED WERE SHRI SARDARE, SHRI TARE AND SHRI UMED SINGH AS OWNER OF AGRICULTURAL LAND AND THE NAME OF SHRI VINOD KUMAR WAS NOT AMONGST THE CO-OWNERS OF THE LAND. THE AO POINTED OUT THAT THE ASSESSEE PRODUCED AN AGREEMENT ON THE BLANK PAPER WHICH REVE ALED THAT SHRI JASBIR SINGH OF VILLAGE NATHUPUR HAD REFUNDED AND A N OLD CASH LOAN TO SHRI VINOD KUMAR, HOWEVER, HE DID NOT FIND MERIT IN THE SUBMISSION OF THE ASSESSEE AND ADDED RS. 10,00,000/- TO ITS INCOM E BY CONSIDERING THE SAME AS UNEXPLAINED CREDITS U/S 68 OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS :- --UNION OF INDIA VS. RAGHUBIR SINGH 178 ITR 548 ( S.C) --GUJARAT STATE CO-OPERATIVE BANK LTD. VS. CIT (200 1) 250 ITR 229(GUJ.) --CIT VS STELLER INVESTMENT LTD., [2001] 251 ITR 26 3 (SC). 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MAT TER TO THE LD. C.I.T.(A) AND SUBMITTED THAT THE ASSESSEE PRODUCED FOLLOWING ITA NO. 5383 / DEL/2010 5 EVIDENCES BEFORE THE AO TO PROVE THE IDENTITY AND C REDITWORTHINESS OF SHRI VINOD KUMAR :- (I) COPY OF SHARE APPLICATION RECEIVED FROM MR. VI NOD KUMAR (II) COPY OF SHARES CERTIFICATE OF SHARES ALLOTTED TO HIM (III) COPY OF CONFIRMATION RECEIVED FROM HIM (IV) COPY OF ANNUAL RETURN AND FORM 2 FILED BEFORE THE REGISTRAR OF COMPANIES (V) VARIOUS DOCUMENTS RELATED TO ASSETS OWNED BY HI M, IDENTITY CARD. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE PRODU CED THE PERSON WHO CONFIRMED THE AMOUNT OF CONTRIBUTION TO THE ASSESSE E. IT WAS ALSO STATED THAT THE ASSESSEE PRODUCED VARIOUS PAPERS RE LATED TO LAND AND OTHER ASSETS OWNED BY SHRI VINOD KUMAR WHICH COULD ESTABLISH HIS CREDITWORTHINESS AND TO PROVE THE GENUINENESS OF TH E TRANSACTION IT WAS NECESSARY TO PROVE THE IDENTITY AND CREDITWORTH INESS OF THE CREDITOR. IT WAS SUBMITTED THAT THE AO SPECIFICALLY MENTIONED IN HIS ORDER THAT SHRI VINOD KUMAR APPEARED BEFORE HIM AND PRODUCED DETAILS OF ASSETS OWNED BY HIM. THEREFORE, ASSESSEE DISCHARGED THE ONUS CAST UPON HIM. IT WAS PRAYED THAT THE ADDIT ION OF RS. 10,00,000/- MADE BY THE AO MAY BE DELETED. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS :- 1. CIT VS. M/S LOVELY EXPORTS PVT. LTD. 216 CTR 19 5 2. CIT VS. STELLER INVESTMENT LTD. 251 ITR 263 (SC) 3. CIT VS. SOPHIA FINANCE LTD. 205 ITR 98 (DEL) 4. CIT VS. ACHAL INVESTMENT LTD. 268 ITR 211 (DEL) 5. CIT VS. M/S DIVINE LEASING & FINANCE LTD. (299 ITR 268) 6. CIT VS. SUMATI DAYAL 214 ITR 801 (SC) ITA NO. 5383 / DEL/2010 6 7. CIT VS. VALUE CAPITAL SERVICES PVT. LTD. 307 IT R 334 (DEL) 7. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE OBSERVED THAT SHRI VINOD KUMAR WAS NOT ASS ESSED TO TAX AND DID NOT HAVE A PAN. HE FURTHER OBSERVED THAT S HRI VINOD KUMAR COULD NOT PRODUCE ANY EVIDENCE WITH REGARD TO THE SOURCE OF INCOME FOR HIS CREDITWORTHINESS AND THAT THE MODE OF PAYME NT REGARDING HIS CLAIM OF AGRICULTURAL INCOME WAS NOT FURNISHED BEFO RE THE AO. THE LD. C.I.T.(A) ALSO OBSERVED THAT THE ASSESSEE COULD NO T SUBMIT EITHER THE COPY OF KHASRA, KHATAUNI OR ANY RECEIPT OF AGRICULT URAL PRODUCE AND THAT THE GENUINENESS OF THE TRANSACTION WAS IN DOUB T SINCE THE PAYMENT WAS NOT MADE THROUGH BANKING CHANNEL BUT WA S MADE IN CASH. THE LD. CIT(A) ALSO MENTIONED THAT THE CASE LAWS RELIED BY THE ASSESSEE WERE NOT APPLICABLE TO THE PRESENT CASE. A CCORDINGLY THE ADDITION MADE BY THE AO ON ACCOUNT OF SHARE CAPITAL OF RS. 10 LAC RECEIVED FROM SH. VINOD KUMAR WAS SUSTAINED. NOW, THE ASSESSEE IS IN APPEAL. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED T HE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMI TTED THAT THE ASSESSEE FURNISHED VARIOUS DOCUMENTS INCLUDING PAN CARD, SHARE CERTIFICATE, RECEIPT, KHASRA KHATAUNI ETC. BEFORE T HE AO, FOR THE ITA NO. 5383 / DEL/2010 7 AFORESAID CONTENTION OUR ATTENTION WAS DRAWN TOWAR DS PAGE NO. 51 ONWARD OF THE ASSESSEES PAPER BOOK. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE PRODUCED SHRI VINOD KUMAR BEFORE THE A O WHO RECORDED HIS STATEMENT WHEREIN THE SOURCE OF INVEST MENT WAS EXPLAINED OUT OF SAVING FROM AGRICULTURAL ACTIVITIE S. IT WAS ALSO SUBMITTED THAT SHRI VINOD KUMAR IS SON OF SHRI UMED SINGH WHOSE NAME WAS APPEARING IN KHASRA KHATAUNI COPY WHICH IS PLACED AT PAGE NO. 43 TO 49 OF THE ASSESSEES PAPER BOOK AND THE NAME OF THE FATHER SHRI UMED SINGH WAS THERE IN THE KHATAUNI AS A CO-OWNER. REFERENCE WAS MADE TO PAGE NO. 43 OF THE ASSESSEES PAPER BOOK. IT WAS SUBMITTED THAT THE ADDITION SUSTAINED BY THE AO WAS NOT JUSTIFIED. 9. IN HIS RIVAL SUBMISSIONS, THE LD. DR STRONGLY SUPPORTED THE RODER OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT TH E ASSESSEE COULD NOT PRODUCE THE CREDITWORTHINESS OF SHRI VINOD KUMA R AND THE GENUINENESS OF TRANSACTION WAS IN DOUBT. THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO U/S 68 OF THE ACT. RELIANCE WAS PLACED IN THE FOLLOWING CASE LAWS :- -- C.I.T. VS. NOVA PROMOTERS AND FINLEASE (P) LT D.342 ITR 169 (DEL.) -- C.I.T. VS. FAIR FINVEST LTD. 357 ITR 146 (DE L.) -- C.I.T. VS. GANGESHWARI METAL P. LTD. 361 ITR 10 (DEL.) --C.I.T. VS. LOVELY EXPORTS P. LTD. [2009] 319 ITR (ST.) 5 (SC) ITA NO. 5383 / DEL/2010 8 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASESS EE RECEIVED A SUM OF RS. 10,00,000/- AS SHARE APPLICATION MONEY FROM SH RI VINOD KUMAR. THE ASSESSEE FURNISHED COPY OF PAN CARD, ANNUAL RET URN, SHARE APPLICATION FORM, COPY OF SHARE CERTIFICATE, COPY O F KHASRA KHATAUNI BEFORE THE AO VIDE LETTER DATED 11.12.2008 COPIES O F THE ABOVE DOCUMENTS ARE PLACED AT PAGE NOS. 17 TO 49 OF THE A SSESSEES PAPER BOOK. IN THE PRESENT CASE, THE MAIN OBJECTION OF THE AO WAS THAT IN KHASRA KHATAUNI, THE NAME OF THE ASSESSEE WAS NOT APPEARING AS THE OWNER OF LAND. IN THIS REGARD THE EXPLANATION OF A SSESSEE WAS THAT THE NAME OF HIS FATHER SHRI UMED SINGH WAS APPEARING IN KHASRA KHATAUNI WHICH IS PLACED PAGE NO. 43 OF THE ASSESSEES PAPER BOOK WHICH CLEARLY ESTABLISHED THE OWNERSHIP OF LAND. IT IS AL SO NOTICED THAT THE ASSESSEE FURNISHED COPIES OF J FROMS IN THE NA ME OF SHRI VINOD KUMAR WHICH CLEARLY ESTABLISHED THAT HE SOLD THE AG RICULTURAL PRODUCE TO M/S. RAMESHWER DAYAL PREM CHAND AADHTI, SONEPAT MANDI, COPIES OF THE SAME ARE PLACED AT PAGE NO. 37 TO 43 OF THE ASSESSEES PAPER BOOK. IN THE PRESENT CASE, IT IS NOTICED THAT THE A SSESSEE RECEIVED A SUM OF RS. 5,00,000/- FROM SHRI JASBIR SINGH TO WHO M THE SAID AMOUNT ITA NO. 5383 / DEL/2010 9 WAS GIVEN AS AN ADVANCE TO PURCHASE THE LAND WHICH IS EVIDENT FROM PAGE NO. 44 OF THE ASSESSEES PAPER BOOK WHICH CLEA RLY SHOWS THAT THE ADVANCE MONEY GIVEN TO SHRI JASBIR SINGH WAS TAKE N BACK BY SHRI VINOD KUMAR ON 25.12.2005. BOTH THE PARTIES AFFIXED THEIR SIGNATURE ON THE ABOVE SAID DOCUMENT WHICH IS WITNESSED BY S HRI AJAY KUMAR SON OF SHRI JAGDISH AND SHRI JAGDISH SON OF SHRI R AJ KUMAR. 11. FROM THE ABOVE FACTS, IT IS CLEAR THAT SHRI VINOD KUMAR WAS A MAN OF MEANS, HIS CREDITWORTHINESS WAS PROVED AND THE IDENTITY WAS NOT IN DOUBT SINCE THE ASSESSEE PRODUCED SHRI VINOD KUMAR BEFORE THE AO WHO RECORDED HIS STATEMENT WHEREIN THE INVESTMEN T IN THE SHARES WAS ADMITTED, COPY OF THE SHARE CERTIFICATE, IS P LACED AT PAGE NO. 36 OF THE ASSESSEES PAPER BOOK WHICH REVEALED THAT 1 0,000 SHARES HAVING DESTRUCTIVE NOS. 16,501 TO 26,500 WERE ALL OTTED TO SHRI VINOD KUMAR VIDE CERTIFICATE NO. 22, THEREFORE, THE GENUI NENESS OF TRANSACTION CAN ALSO NOT BE DOUBTED. FROM THE ABOV E FACTS, IT IS CLEAR THAT THE ASSESEEE PROVED THE IDENTITY AND CREDITWOR THINESS OF SHRI VINOD KUMAR AS WELL AS THE GENUINENESS OF TRANSACTI ONS AMOUNTING TO RS. 10,00,000/-, THEREFORE, THE ADDITION MADE BY TH E AO AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED, ACCORDINGLY TH E SAME IS DELETED. ITA NO. 5383 / DEL/2010 10 12. THE NEXT ISSUE VIDE GROUND NO. 4 (I),(II), & (III) RELATES TO THE CONFIRMATION OF ADDITION OF RS. 5,79,203/- MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE AO, DURING THE COURSE O F ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD TAKEN AN ADVANCE OF RS. 10,00,000/- FROM M/S. PRECISION STOCK AND CREDIT P VT. LTD. IN WHICH SHRI JASBIR SINGH HELD 22,000 OUT OF 1,03,500 SHAR ES I.E. A BENEFICIAL HOLDING OF 21% SHARES WITH VOTING RIGHT. HE FURTHER , OBSERVED THAT SHRI JASBIR SINGH HAD HOLDING OF 24.52% IN ASSESSEES CO MPANY AND THAT THE BALANCE SHEET OF M/S PRECISION STOCK AND CREDIT PVT. LTD. REVEALED THAT IT HAD AN ACCUMULATED PROFIT OF RS. 579203/- I N THE BEGINNING OF YEAR, THUS, SATISFYING THE CONDITIONS OF APPLICABIL ITY OF SECTION 2(22)(E) OF THE ACT. THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF ADVANCE RECEIVED TO THE EXTENT OF ACCUMUL ATED PROFITS OF M/S PRECISION STOCK AND CREDIT PVT. LTD. MAY NOT BE TAXED AS DEEMED DIVIDEND AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE ASSESSEE SUBMITTED THAT THE ADVANCE WAS RECEIVED AG AINST THE LAND WHICH WAS IN THE NATURE OF NORMAL BUSINESS TRANSACT ION, M/S PRECISION STOCK AND CREDIT PVT. LTD. HAD NO ACCUMULATED PROF ITS AND THE ADVANCE WAS GIVEN ONLY OUT OF SHARE PREMIUM AVAILAB LE WITH THAT ITA NO. 5383 / DEL/2010 11 COMPANY WHICH COULD NOT BE TERMED AS PART OF ACCUMU LATED PROFIT AS SUCH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT APPLICABLE. THE AO, HOWEVER, WAS NOT SATISFIED FROM THE SUBMISS ION OF THE ASSESSEE BY OBSERVING THAT THE BALANCE SHEET OF M/S PRECISION STOCK AND CREDIT PVT. LTD. REVEALED THAT ACCUMULATED PROF ITS OF RS. 5,79,203/- WAS INCLUDED IN RESERVE AND SURPLUS AS PER SCHEDULE II. HE ALSO MENTIONED THAT A SHARE PREMIUM OF RS. 66,15,000/- WAS ADDED DURING THE YEAR BESIDE THE PROFIT FOR THE YEAR OF RS. 99, 213/- WHICH GAVE THE TOTAL RESERVE AND SURPLUS OF RS. 72,93,433/-. THE A O ACCORDINGLY MADE THE ADDITION OF RS. 5,79,203/- BY INVOKING THE PROV ISIONS OF SECTION 2(22)(E) OF THE ACT. RELIANCE WAS PLACED IN THE JU DGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF WALL CHAND & CO. LTD. VS. CIT (1975), 100 ITR 598. 13. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATT ER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE COMPANY WAS INCORPORATED DURING THE YEAR UNDER CONSIDERATION WITH THE OBJECT IVE OF DEALING IN REAL ESTATE BUSINESS AND A SUM OF RS. 10,00,000/- WAS RE CEIVED FROM ONE OF ITS CLIENT M/S PRECISION STOCK & CREDIT PVT. LTD . IT WAS FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT MAKE IT CLEAR THAT IN CASE SOME MONEY HAS BEEN ADVANCED BY ANY COMPANY ITA NO. 5383 / DEL/2010 12 FOR SOME BUSINESS TRANSACTION, THE SAME CANNOT BE CONSIDERED FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT. IT WAS FUR THER, SUBMITTED THAT THE MONEY ADVANCED BY M/S PRECISION STOCK & CREDIT WAS ON ACCOUNT OF BUSINESS TRANSACTION AND ALSO THE SAID PARTY DID NOT HAS ACCUMULATED PROFITS TO THE EXTENT OF AMOUNT ADVANCE D BY IT TO THE ASSESSEE. IT WAS EMPHASIZED THAT THE BALANCE SHEET OF M/S PRECISION STOCK & CREDIT PVT. LTD. REVEALED THAT THE SAID COM PANY HAD GIVEN THE AMOUNT OF RS. 10,00,000/- TO THE ASSESSEE ON ACCOUN T OF ADVANCE TOWARDS PURCHASE OF SOME PROPERTY. IN SUPPORT OF TH E ABOVE CONTENTION, COPY OF THE AGREEMENT WAS PRODUCED BEFO RE THE AO. IT WAS SUBMITTED THAT THE SAID AMOUNT WAS REFUNDED BACK T O THE ASSESSEE IN THE NEXT YEAR AND THE BALANCE SHEET IN THE BOOKS OF THE SAID PARTY HAD BEEN REDUCED TO NIL, THEREFORE, THE TRANSACTION WA S CLEARLY OUT OF THE PURVIEW OF PROVISIONS OF SECTION 2(22)(E) OF THE AC T. 14. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE OBSERVED THAT SHRI JASBIR SINGH WHO HAD HOLDING OF 24 TO 25% IN THE ASSESSEE COMPANY WAS ALSO HAVING A BENEFICIAL HOLDI NG WITH VOTING RIGHT OF 21% IN M/S PRECISION STOCK & CREDIT PVT. L TD. WHICH HAD AN ACCUMULATED PROFIT OF RS. 5,79,203/-. THE LD. CIT W AS OF THE VIEW THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WOULD BE APPLICABLE IN THE ITA NO. 5383 / DEL/2010 13 PRESENT CASE, SINCE SH. JASBIR SINGH WAS HOLDING MORE THAN 20% TO THE SHARES IN BOTH THE ASSESSEE AND M/S PRECISION STOCK AND CREDIT PVT. LTD. HE ALSO MENTIONED THAT THE ASSESSEE COULD NOT PROVE ON THE BASIS OF EVIDENCE THAT THE TRANSACTION WAS IN THE N ATURE OF THE BUSINESS TRANSACTION. HE, THEREFORE, CONFIRMED THE ADDITION MADE BY THE AO. NOW, THE ASSESSEE IS IN APPEAL. 15. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE ASSESSEE COMPANY WAS NOT A SHARE HOLDER OF M/S PRECISION STO CK AND CREDIT PVT. LTD. AND JUST BECAUSE OF A COMMON SHARE HOLDER THE ADDITION U/S 2(22)(E) OF THE ACT CANNOT BE MADE. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS :- 1. COMMISSIONER OF INCOME TAX VS. AMBASSADOR TRAVE LS P. LTD. [2009] 318 ITR 376(DELHI) 2. COMMISSIONER OF INCOME TAX VS. SHRI RAJ KUMAR [2 009]318 ITR 462(DELHI) 3. COMMISSIONER OF INCOME TAX VS. CREATIVE DYEING & PRINTING PVT. LTD. [2009]318 ITR 476 (DELHI) IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD RE CEIVED ADVANCE AGAINST LAND FROM M/S PRECISION STOCK AND CREDIT PV T. LTD. WHICH IS IN THE NATURE OF BUSINESS TRANSACTION. A REFERENCE WAS MADE TO PAGE NO. 51 OF THE ASSESSEES PAPER BOOK WHICH IS A COPY OF THE AGREEMENT. IT WAS SUBMITTED THAT THE TRANSACTION DURING THE NORMA L COURSE OF BUSINESS DOES NOT COME WITHIN THE AMBIT OF SECTION 2(22)(E) OF THE ACT. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS :- ITA NO. 5383 / DEL/2010 14 1.COMMISSIONER OF INCOME TAX VS. UNIVERSAL MEDICARE PRIVATE LTD. [2010] 324 ITR 263 (BOM) 2.COMMISSIONER OF INCOME TAX VS. ANKITECH PVT. LTD. & OTHERS [2012] 340 ITR 14 (DEL.) 3.COMMISSIONER OF INCOME TAX VS. MCC MARKETING (P.) LTD. [2012] 343 ITR 350 (DEL.) 4. ASSISTANT COMMISSIONER OF INCOME TAX VS. BHAUMIK COLOUR (P) LTD. [2009] 313 ITR 146 5. CIT VS. AR MAGNETICS PVT. LTD. (2014), 220 TAXMA N 209 (DELHI)(HC) 6. C.I.T. VS. NAVYUG PROMOTERS (P) LTD. (2011) 203 TAXMAN 618(DEL.) 16. IN HIS RIVAL SUBMISSIONS, THE LD. DR STRONGL Y SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITT ED THAT SINCE SHRI JASBIR SINGH WAS A COMMON SHARE HOLDERS HAVING MORE THAN 20% SHARE HOLDING IN THE ASSESSEE COMPANY AND M/S PRECI SION STOCK AND CREDIT PVT. LTD. WHICH WAS HAVING AN ACCUMULATED P ROFITS. THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) WERE RIGHTLY INV OKED BY THE AO AND THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDI TION MADE BY THE AO. 17. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH TH E PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE ENTER ED INTO AN AGREEMENT WITH M/S PRECISION STOCKS AND CREDIT PVT. LTD. ON 28.3.2006 FOR THE SALE OF AGRICULTURAL LAND AND RECEIVED RS. 10,00,000/- VIDE CHEQUE NO. 406306 OF COOPERATIVE BANK LTD, THE SAM E IS EVIDENT FROM PAGE NO. 51 TO 53 OF THE ASSESSEES PAPER BOOK WHICH IS THE COPY OF AFORESAID AGREEMENT. THE ASSESSEE ALSO ISSUED RE CEIPT FOR THE ABOVE SAID AMOUNT COPY OF WHICH IS PLACED AT PAGE N O. 54 OF THE ITA NO. 5383 / DEL/2010 15 ASSESSEES PAPER BOOK. FROM THE ABOVE FACTS, IT IS CLEAR THAT THE ASSESSEE WHO WAS ENGAGED IN THE REAL ESTATE BUSINES S RECEIVED AN ADVANCE AGAINST THE SALE OF LAND, THEREFORE IT W AS IN THE NATURE OF BUSINESS TRANSACTION. ON A SIMILAR ISSUE THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ANKITECH PVT. LTD . AND OTHERS [2012] 340 ITR 14(SUPRA) HAS HELD AS UNDER :- 25. FURTHER, IT IS AN ADMITTED CASE THAT UNDE R NORMAL CIRCUMSTANCES, SUCH A LOAN OR ADVANCE GIVEN TO THE SHAREHOLDERS OR TO A CONCERN, WOULD NOT QUALIFY AS DIVIDEND. IT HAS BEEN MADE SO BY LEGAL FICTION CREATED UNDER SEC TION 2(22)(E) OF THE ACT. WE HAVE TO KEEP IN MIND THAT T HIS LEGAL PROVISION RELATES TO DIVIDEND. THUS, BY A DEEMING PROVISION, IT IS THE DEFINITION OF DIVIDEND WHICH IS ENLARGED. LEGAL FICTION DOES NOT EXTEND TO SHAREHOLDER. WHEN WE KEEP IN M IND THIS ASPECT, THE CONCLUSION WOULD BE OBVIOUS, VIZ., LOAN OR ADVANCE GIVEN UNDER THE CONDITIONS SPECIFIED UNDER SECTION 2(22)(E) OF THE ACT WOULD ALSO BE TREATED AS DIVIDE ND. THE FICTION HAS TO STOP HERE AND IS NOT TO BE EXTENDED FURTHER FOR BROADENING THE CONCEPT OF SHAREHOLDERS BY WAY OF LE GAL FICTION. IT IS A COMMON CASE THAT ANY COMPANY IS SU PPOSED TO DISTRIBUTE THE PROFITS IN THE FORM OF DIVIDEND TO I TS SHAREHOLDERS/MEMBERS AND SUCH DIVIDEND CANNOT BE GI VEN TO NON-MEMBERS. THE SECOND CATEGORY SPECIFIED UNDER SE CTION 2(22)(E) OF THE ACT, VIZ., A CONCERN (LIKE THE ASSE SSEE HEREIN), WHICH IS GIVEN THE LOAN OR ADVANCE IS ADMITTEDLY NO T A SHAREHOLDER/MEMBER OF THE PAYER COMPANY. THEREFORE, UNDER NO CIRCUMSTANCE, IT COULD BE TREATED AS SHAREHOLDER /MEMBER RECEIVING DIVIDEND. IF THE INTENTION OF THE LEGISLA TURE WAS TO TAX SUCH LOAN OR ADVANCE AS DEEMED DIVIDEND AT THE HANDS OF DEEMING SHAREHOLDER, THEN THE LEGISLATURE WOULD H AVE INSERTED DEEMING PROVISION IN RESPECT OF SHAREHOLDE R AS WELL, THAT HAS NOT HAPPENED. MOST OF THE ARGUMENTS OF THE LEARNED COUNSELS FOR THE REVENUE WOULD STAND ANSWERED, ONCE WE LOOK INTO THE MATTER FROM THIS PERSPECTIVE. ITA NO. 5383 / DEL/2010 16 26. IN A CASE LIKE THIS, THE RECIPIENT WOULD BE A SHAREHOLDER BY WAY OF DEEMING PROVISION. IT IS NOT CORRECT ON T HE PART OF THE REVENUE TO ARGUE THAT IF THIS POSITION IS TAKEN , THEN THE INCOME IS NOT TAXED AT THE HANDS OF THE RECIPIENT . SUCH AN ARGUMENT BASED ON THE SCHEME OF THE ACT AS PROJECTE D BY THE LEARNED COUNSEL FOR THE REVENUE ON THE BASIS OF SEC TIONS 4,5,8,14 AND 56 OF THE ACT WOULD BE OF NO AVAIL. SI MPLE ANSWER TO THIS ARGUMENT IS THAT SUCH LOAN OR ADVANC E, IN THE FIRST PLACE, IS NOT AN INCOME. SUCH A LOAN OR ADVAN CE HAS TO BE RETURNED BY THE RECIPIENT TO THE COMPANY, WHICH HAS GIVEN THE LOAN OR ADVANCE. 27. PRECISELY, FOR THIS VERY REASON, THE COURTS HAVE HELD THAT IF THE AMOUNTS ADVANCED ARE FOR BUSINESS TRANSACTIO NS BETWEEN THE PARTIES, SUCH PAYMENT WOULD NOT FALL WI THIN THE DEEMING DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 18. IN THE PRESENT CASE ALSO, THE ASSESSEE COMPA NY IS NOT THE SHAREHOLDER IN M/S PRECISION STOCK & CREDIT PVT. LT D. AND RECEIVED THE AMOUNT FROM THE SAID COMPANY IN THE COURSE OF ORDIN ARY BUSINESS ACTIVITIES. THEREFORE, IN VIEW OF RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORESAID REFERRED TO CASE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT APPLICABLE. WE, THEREFORE, BY CONSIDERING THE TOTALITY OF THE FACTS DEEM IT APPROPRIATE TO DELETE THE IMPUGNED ADDITION MADE BY THE AO AND SUS TAINED BY THE LD. CIT. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALL OWED. ITA NO. 5383 / DEL/2010 17 (ORDER PRONOUNCED IN OPEN COURT ON 12 JUNE, 2015 .) SD/- SD/- (G.C.GUPTA) (N.K.S AINI) VICE PRESIDENT ACCOUNTANT MEMBER DATED 12 JUNE, 2015 BINITA COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT (ITAT), NEW DELHI. AR, ITAT N. DELHI