The ITO, Ahmedabad V. Shri Mitin Ambalal Patel, Ahmedabad

ITA 580/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8519 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N P PATEL; SHRI G C PIPAR
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER SL NO. ITA NO(S) ASSESSMENT YEAR(S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 573/AHD/2016 2007 - 08 ITO WARD - 3(1)(4), AHMEDABAD M/S. PRIMA TRANSFORMER PVT. LTD., 809/2, KOTHARI CHAR RASHTA, SANTEJ, TALUKA-KALOL, DIST.GANDHINAGAR-382721 PAN:AADCP 7725 R 2. 574/AHD/2016 2008 - 09 - DO - REVENUE - DO - ASSESSEE 3. 575/AHD/2016 2009 - 10 - DO - REVENUE - DO - ASSESSEE 4. 576/AHD/2016 2007 - 08 - DO - REVENUE SHRI VINOD VITTHALBHAI PATEL,3 FRIENDS AVENUE, B/H RAJPATH CLUB, NR. PAKWAN CHAR RASTA, BODAKDEV, AHMDEDABAD PAN: ACMPP 3617 L 5. 577/AHD/2016 2010 - 11 - DO - REVENUE - DO - ASSESSEE 6. 578/AHD/2016 2007 - 08 - DO - REVENUE SHRI MITIN A. PATEL, 1, FRIENDS AVENUE, B/H RAJPATH CLUB, NR. PAKWAN CHAR RASTA, BODAKDEV, AHMEDABAD PAN: ACMPP 3618 F 7. 579/AHD/2016 2008 - 09 - DO - REVENUE - DO - ASSESSEE 8. 580/AHD/2016 2009 - 10 - DO - REVENUE - DO - ASSESSEE !'#$ / APPELLANT BY : SHRI N.P.PATEL, SR.DR &'#'$ / RESPONDENT BY : SHRI G.C. PIPARA, AR ()'* / DATE OF HEARING 23/01/2018 +,-'* / DATE OF PRONOUNCEMENT 02/ 04 /2018 ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 2 - / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE RESPECTIVE ASSESSEES AGAINST THE RESPECTIVE APPELLA TE ORDERS OF THE LD. CIT(A)-9, AHMEDABAD [CIT(A) IN SHORT] ARISING IN TH E RESPECTIVE ASSESSMENT ORDERS PASSED U/S. 143(3) R.W.S. 147 OF THE ACT TABULATED AS UNDER:- NAME OF THE ASSESSEE ASSESSMENT YEAR CIT(A) ORDER DATED ASSESSMENT ORDER DATED M/S. PRIMA TRANSFORMER PVT. LTD 2007-08 14.12.2015 13.03.2015 -DO- 2008-09 -DO- -DO- -DO- 2009-10 -DO- -DO- SHRI VINOD VITTHALBHAI PATEL 2007-08 -DO- 10.03.201 5 -DO- 2010-11 -DO- -DO- SHRI MITIN A. PATEL 2007-08 -DO- -DO- -DO- 2008-09 -DO- -DO- -DO- 2009-10 -DO- -DO- 2. THE ISSUE INVOLVED FOR ALL ASSESSEE HEREIN BEI NG INTERCONNECTED, ALL THE MATTERS WERE HEARD TOGETHER FOR DISPOSAL BY COMMON ORDER. ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 3 - 3. WE SHALL FIRST TAKE UP THE GRIEVANCE OF THE REVE NUE IN RESPECT OF ASSESSEE - PRIMA TRANSFORMERS PVT. LTD. IN ITA NO. 573/AHD/2016 CONCERNING A.Y. 2007-08 FOR ADJUDICATION PURPOSES. 3.1. THE GROUNDS OF APPEAL RAISED BY THE REVENUE CO NCERNING ASSESSMENT YEARS 2007-08 READ AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.25,00,0007- MADE ON ACCOUNT OF DEEMED DIVIDED U/ S.2(22)(E) OF THE ACT. THE LD, CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THAT M/S PRIMA AUTOMATION PVT. LTD., IN WHICH BOTH SHRI MITI N A. PATEL AND SHRI VINOD V PATEL WERE SUBSTANTIAL SHAREHOLDERS HOLDING MORE THAN 20% OF THE PAID UP CAPITAL, HAD ADVANCES LOAN OF RS.24 LACS TO THE ASS ESSEE COMPANY IN WHICH SHRI MITIN A. PATEL AND SHRI VINOD V PATEL WERE SUB STANTIAL SHAREHOLDERS AND HELD MORE THAN 20% OF THE PAID UP CAPITAL AND FURTH ER, THE LENDING COMPANY NAMED PRIMA AUTOMATION INDIA PVT. LTD. ALSO HAD ACC UMULATED PROFIT AND THEREFORE THE PROVISIONS OF SECTION2(22)(E) R.W. EX PLANATION 3(A) R.W. CIRCULAR NO.495 OF 22/09/1987 WILL BE APPLICABLE IN THE HAND S OF THE ASSESSEE COMPANY. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT CONSIDERING THE AFORESAID CIRCULAR NO.495 OF 22/09/1987 RELATING TO DEEMED DI VIDEND. THE CASE FALLS UNDER THE EXCEPTION NO. 8(B) OF THE CIRCULAR NO. 21 OF 2015 DATED 10/12/2015 WHICH STATES THAT 'WHERE BOARD'S O RDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR... APPEAL MAY BE FILED IRRESPECTIVE OF THE QUANTUM OF TAX EFF ECT.' ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) MAY BE SET-ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED. ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 4 - 4. THE REVENUE, IN ESSENCE, IS AGGRIEVED BY THE ORD ER OF THE LD. CIT(A) DELETING THE ADDITION MADE IN THE HANDS OF T HE ASSESSEE ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 5. WHEN THE MATTER WAS CALLED FOR HEARING, THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE IN THE CAPTAINED RE VENUE APPEAL SUBMITTED AT THE VERY OUTSET THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.25 LAKHS IN AGGREGATE FROM M/S. PRIMA AUTOMATION PVT. LTD. WHICH IS ALLEGED TO BE IN THE NATURE OF DEEMED DIVIDEND WITH IN THE MEANING OF SECTION 2(22)(E) OF THE INCOME-TAX ACT. THE LD. AUT HORISED REPRESENTATIVE SUBMITTED THAT THE AO ON THE BASIS O F SHARE HOLDING DETAILS OF THE ASSESSEE COMPANY, OBSERVED THAT SHR I MITIN A. PATEL AND SHRI VINOD V PATEL BOTH HOLDS 44% OF THE SHARE HOLDING OF A LENDER COMPANY (PRIMA AUTOMATION) AND ALSO OWNS 42.5% SHAR ES OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER (AO) ACCORD INGLY NOTED THAT BOTH THESE INDIVIDUALS HAVE SUBSTANTIAL INTEREST IN THE BOTH COMPANIES I.E. THE BORROWER (ASSESSEE) AS WELL AS THE LENDER COMP ANY. IT WAS FURTHER NOTED BY THE A.O. THAT IN VIEW OF THE HUGE ACCUMULA TED PROFITS HELD BY LENDER COMPANY FAR IN EXCESS OF THE AMOUNT LENT, TH E BORROWER-COMPANY I.E. ASSESSEE IS SUSCEPTIBLE TO TAX IN VIEW OF SEC TION 2(22)(E) OF THE ACT. IN THESE FACTS, THE LD. AUTHORISED REPRESENTATIVE S UBMITTED THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE COMPANY IS NOT A SH ARE HOLDER OF THE LENDER COMPANY NOR IS THE LENDER COMPANY A SHARE HO LDER OF THE ASSESSEE ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 5 - COMPANY. THE AUTHORISED REPRESENTATIVE ACCORDINGLY CONTENDED THAT SINCE THE BASIC CONDITION OF RECIPIENT OF THE MONEY TO BE A SHARE HOLDER IS NOT SATISFIED AT THE FIRST INSTANCE, QUESTION TH E APPLICABILITY OF SECTION 2(22)(E) IN THE HANDS OF THE ASSESSEE DOES NOT ARIS E AT ALL. THE LD. AUTHORISED REPRESENTATIVE ACCORDINGLY SUBMITTED THA T THE CIT(A) HAS APPRECIATED THE FACTS IN PERSPECTIVE AND IN ACCORD WITH PLETHORA OF JUDICIAL PRECEDENTS AVAILABLE ON THE ISSUE AND ACCO RDINGLY FOUND NO JUSTIFICATION FOR SUCH ADDITIONS. THE LD. AUTHORISE D REPRESENTATIVE THEREAFTER POINTED OUT THAT THE IDENTICAL ISSUE ARO SE IN THE CASE OF THE DCIT VS. M/S. CORRTECH ENERGY LIMITED ITA NO. 113/A HD/2013 WHERE THE CO-ORDINATE BENCH OF TRIBUNAL HAS TAKEN A VIEW IN FAVOUR OF THE ASSESSEE IN SYNC WITH THE DECISION OF VARIOUS HIGH COURTS INCLUDING JUDGMENT OF HONBLE GUJARAT HIGH COURT IN CORRTEC E NERGY LIMITED. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT IN VIE W OF THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN ITS ORDER DATED 24.03 .2014 IN TAX APPEAL NO. 238 OF 2014 RELEVANT TO A.Y. 2009-10 IN THE CAS E OF CORRTECH ENERGY LIMITED AND HOST OF OTHER SIMILAR JUDGEMENTS OF OTH ER COURTS, THE ISSUE IS NO LONGER RES INTEGRA AND THEREFORE NO INTERFERENCE WITH THE ORDER OF TH E LD. CIT(A) IS CALLED FOR. 7. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND RELIED UPON THE ORDER OF THE LD. CIT(A). IT WAS CONTENDE D THAT CONDITIONS OF SUBSTANTIAL INTEREST STIPULATED UNDER S.2(22)(E) HAVE BEEN SATISFIED BY ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 6 - THE COMMON SHAREHOLDER AND THEREFORE ADDITIONS MADE IN THE HANDS OF ASSESSEE BEING RECEIPT OF LOAN/ADVANCES IS FULLY JU STIFIED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE SU BSTANTIVE ISSUE THAT ARISES FOR CONSIDERATION IN THE INSTANT CASE I S APPLICABILITY OR OTHERWISE OF MISCHIEF OF SECTION 2(22)(E) OF THE AC T IN THE FACTS OF THE CASE. SECTION 2(22)(E) SEEKS TO TRIGGER TAXABILITY OF LOANS/ADVANCES PAID BY A CLOSELY HELD COMPANY IN CERTAIN CIRCUMSTANCES. THE ASSESSEE COMPANY IN THE INSTANT CASE HAS RECEIVED AN AMOUNT OF RS. 25 LAKH FROM LENDER (PRIMA TRANSFORMERS PVT. LTD.). IT IS THE C ASE OF THE ASSESSEE THAT IT IS NOT THE SHARE HOLDER OF THE LENDER COMPANY AN D THEREFORE THE CHARGEABILITY OF INCOME DOES NOT ARISE IN THE HANDS OF THE ASSESSEE HAVING REGARD TO THE LANGUAGE EMPLOYED IN THE DEEMING PROV ISIONS OF SECTION 2(22)(E) OF THE ACT. THE ASSESSING OFFICER, ON TH E OTHER HAND, HAS CONTENDED THAT THE ASSESSEE-COMPANY AS WELL AS THE LENDER-COMPANY ARE INTERCONNECTED AND HAS COMMON SHAREHOLDERS HOLDING SUBSTANTIAL INTEREST IN BOTH THE COMPANIES CONTEMPLATED UNDER S.2(22)(E) OF THE ACT. IT WAS THEREFORE CLAIMED THAT MISCHIEF OF DEEMING F ICTION TO SECTION 2(22)(E) IS CLEARLY ATTRACTED. WE ARE IN AGREEMENT WITH THE CONTENTION OF MR. PIPARA THAT WHERE THE ASSESSEE COMPANY WAS NOT A SHARE HOLDER OF THE LENDER- COMPANY PER SE, THEN NOTWITHSTANDING A FACT THAT BOTH THE COMPANIES HAVE COMMON SHARE HOLDER HAVING SUBSTANTI AL INTEREST IN BOTH THE COMPANIES, THE TAXABILITY OF DEEMED DIVIDEND IN TERMS OF PROVISIONS ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 7 - OF S.2(22)(E) OF THE ACT WOULD NOT ARISE IN THE HAN DS OF THE RECIPIENT- COMPANY (ASSESSEE) WHICH IS NOT THE REGISTERED SHAR E HOLDERS OF THE LENDER COMPANY. 9. WE FIND THAT THE AFORESAID PROPOSITION OF LAW HA S BEEN JUDICIALLY DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE GU JARAT HIGH COURT IN THE CASE OF CORRTECH ENERGY PVT. LTD. (SUPRA). WE A LSO FIND THAT SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS. INDIA CAPITAL MARKET PVT. LTD. (2016) 387 I TR 510 (BOM.) AND OTHER LONG LINE OF JUDICIAL PRECEDENTS. CONSEQUENT IALLY, THE ISSUE IS NO LONGER RES INTEGRA . IN THE ABSENCE OF ASSESSEE HOLDING THE SHARES IN LENDING-COMPANY, THE MONEY RECEIVED BY ASSESSEE IS THUS NOT QUALIFIED TO BE TAXED AS DEEMED DIVIDEND IN THE HANDS OF ASSES SEE-COMPANY. HENCE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE LD. CIT(A) ABSOLVING THE ASSESSEE FROM THE CLUTCHES OF S.2(22) (E) OF THE ACT. THUS, WE DECLINE TO INTERFERE WITH THE RELIEF GRANTED BY THE CIT(A). 10. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO. 573/AHD/2016 STAND DISMISSED. 11. THE APPEAL OF THE REVENUE IN ITA NO. 574/AHD/20 16 AND 575/AHD/2016 CONCERNING A.Y. 2008-09 & 2009-10 ALSO STANDS ON THE SAME FOOTING WITH A.Y. 2007-08. THE ASSESSEE ARE N OT A SHAREHOLDER OF ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 8 - LENDING-COMPANY AND OTHER FACTS ARE ALSO SIMILAR. THE FACTS BEING SIMILAR, OUR VIEW IN A.Y. 2007-08 SHALL APPLY MUTATIS MUTANDIS TO OTHER APPEALS NOTED ABOVE FOR PARITY OF REASONS REVENUE A PPEAL IN ITA NO. 573/AHD/2016 & 574/AHD/2016 ARE ALSO DISMISSED. 12. WE SHALL NOW TURN TO OTHER APPEALS IN ITA NO.57 6/AHD/2016, 577/AHD/2016, 578,579,580/AHD/2016 CONCERNING APPLI CABILITY OF S.2(22)(E) AND CONSEQUENT ADDITIONS IN THE HANDS OF SHARE HOLDERS HOLDING SUBSTANTIAL INTEREST IN BOTH LENDER AS WELL AS BORR OWER COMPANY. 13. WE SHALL FIRST ADVERT TO ITA NO. 576/AHD/2016 R ELEVANT CONCERNING A.Y. 2007-08 WHERE PROVISIONS OF SECTION 2(22)(E) WAS INVOKED IN THE HANDS OF SHARE HOLDERS; NAMELY SHRI VINOD V PATEL HOLDING SUBSTANTIAL INTEREST IN BOTH COMPANIES. 13.1. BRIEFLY STATED, THE ASSESSEE (SHRI VINOD VIT THALBHAI PATEL) IS STATED TO BE SHAREHOLDER HOLDING SUBSTANTIAL INTERE ST IN THE LENDER- COMPANY - PRIMA AUTOMATION (INDIA) PVT.LTD. AS WEL L AS BORROWER COMPANY NAMELY PRIMA TRANSFORMER PVT.LTD. THE LENDE R-COMPANY HAS LENT AN AMOUNT OF RS.25 LAKHS TO THE BORROWER-COMPA NY. THE AO IN THE COURSE OF THE SCRUTINY ASSESSMENT HAS ACCORDINGLY A SSESSED THE AFORESAID AMOUNT OF LOANS/ADVANCES GIVEN BY THE LENDER-COMPAN Y TO THE BORROWER COMPANY AS DEEMED DIVIDEND ON PROTECTIVE BASIS AS P ER SECTION 2(22)(E) ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 9 - OF THE ACT WHILE FIXING THE TAX LIABILITY ON BORROW ER-COMPANY ON SUBSTANTIVE BASIS. 13.2. IN THE FIRST APPEAL, THE CIT(A) DELETED THE AFORESAID ADDITION OF RS.25 LAKHS IN THE HANDS OF THE ASSESSEE ON THE GRO UND THAT THE ASSESSEE HIMSELF HAS NOT RECEIVED THE IMPUGNED LOANS/ADVANCE S FROM THE LENDER COMPANY. THE ASSESSEE NOT BEING RECIPIENT OF THE L OAN CANNOT BE TAXED UNDER S.2(22)(E) OF THE ACT NOTWITHSTANDING A COMMO N SHAREHOLDER HOLDING SUBSTANTIAL INTEREST IN LENDING-COMPANY A ND BORROWER-COMPANY BOTH. FOR THIS PROPOSITION, THE CIT(A) RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. D AISY PACKERS PVT.LTD. 220 TAXMAN 331 (GUJ.) WHICH IN TURN RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. ANKITECH (P ) LTD. 340 ITR 14 (DELHI). THE CIT(A) OBSERVED THAT THE ASSESSEE (SH RI VINOD VITTHALBHAI PATEL) WHO IS THE SHAREHOLDER OF LENDER-COMPANY HAS NOT RECEIVED ANY LOAN FROM THE LENDER-COMPANY. THE PROTECTIVE ADDIT IONS THEREFORE WERE NOT FOUND JUSTIFIED BY THE CIT(A). THE RELEVANT OP ERATIVE PARA OF THE ORDER OF THE CIT(A) READ AS UNDER:- 5.2. I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS AND CASE LAWS RELIED UPON BY THE APPELLANT AND OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORDER. IT IS OBSERVED THAT THE AO HAS MADE THE ADDITION U/S.2(22)(E) OF THE ACT ON PROTECTIVE BASIS TO PROTECT THE INTEREST OF REVENUE. IT IS A MATTER OF FACT TH AT THE COMPANY NAMELY PRIMA AUTOMATION PVT.LTD., HAD GIVEN A LOAN OF RS.25 LACS TO PRIMA TRANSFORMERS PVT.LTD. IT IS ALSO A MATTER OF FACT THAT ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 10 - PRIMA TRANSFORMERS PVT.LTD. IS NOT A REGISTERED SHA REHOLDER OF PRIMA AUTOMATION PVT.LTD. NO LOAN HAS BEEN RECEIVE D BY THE APPELLANT I.E. SHRI VINOD V.PATEL FROM PRIMA AUTOMA TION PVT.LTD. THE PROVISIONS OF SEC.2(22)(E) OF THE ACT IN RESPEC T OF DEEMED DIVIDEND ARE APPLICABLE IN CASE OF A REGISTERED SHA REHOLDER AS DECIDED IN SEVERAL JUDGMENTS. THERE IS A DIRECT JU DGMENT OF JURISDICTIONAL HONBLE GUJARAT HIGH COURT IN THE CA SE OF CIT VS. DAISY PACKERS PVT.LTD. (TA NO.212 OF 2010) APART FR OM OTHER JUDGMENTS RELIED UPON BY THE APPELLANT. IN THE PRE SENT CASE, THE APPELLANT WHO IS THE SHAREHOLDER OF PRIMA AUTOMATIO N PVT.LTD. HAS NOT RECEIVED ANY LOAN FROM PRIMA AUTOMATION PVT.LTD . HENCE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS CONSIDERING THE LEGAL POSITION, THE ADDITION OF RS.25,00,000/- IN T HE HANDS OF THE APPELLANT AS DEEMED DIVIDEND U/S.2(22)(E) OF THE AC T ON PROTECTIVE BASIS MADE BY THE A.O. IS NOT JUSTIFIED. ACCORDING LY THE A.O. IS DIRECTED TO DELETE THE SAME. THUS, THIS GROUND OF APPEAL IS ALLOWED. 13.3. THE CIT(A) ACCORDINGLY REVERSED THE ACTION OF THE AO AND DELETED THE ADDITIONS SO MADE ON PROTECTIVE BASIS BY HOLDI NG THAT THE ASSESSEE NOT BEING THE RECIPIENT OF THE LOAN IS NOT HIT BY S ECTION 2(22)(E) OF THE ACT. 13.4. AGGRIEVED, THE REVENUE IS IN APPEAL AGAINST T HE ACTION OF THE CIT(A). 13.5. THE LD.AR FOR THE ASSESSEE IN THE REVENUES A PPEAL, FIRSTLY SUBMITTED AT THE OUTSET THAT THE CONCLUSION DRAWN B Y THE CIT(A) IS IN CONSONANCE WITH THE DECISION OF HONBLE GUJARAT HIG H COURT IN THE CASE OF DAISY PACKERS (SUPRA) AND THE DECISION OF THE HO NBLE SUPREME COURT ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 11 - IN THE CASE OF CIT VS. MADHUR HOUSING AND DEVELOPM ENT COMPANY IN CIVIL APPEAL NO.3961 OF 2013 & ORS. JUDGEMENT DATED 05/10/2017 WHERE THE HONBLE APEX COURT HAS CONFIRMED THE DELH I HIGH COURT RULING IN CIT VS. ANKITECH PVT.LTD. (2012) 340 ITR 14. SECONDLY, THE LD.AR SUBMITTED THAT APART FROM THE FACT THAT THE A SSESSEE HEREIN IS NOT THE RECIPIENT OF THE LOAN AND THUS COVERED BY ANKIT ECH PVT.LTD.(SUPRA), THE NATURE OF TRANSACTIONS BETWEEN THE BORROWER-COM PANY AND LENDER- COMPANY ARE COMMERCIAL IN NATURE. IN ELABORATION, THE LD.AR ADVERTED OUR ATTENTION TO THE LEDGER ACCOUNT DEMONSTRATING T RANSACTIONS BETWEEN THE LENDER AND BORROWER COMPANY AND CONTENDED THAT THE TRANSACTIONS BETWEEN THE TWO-COMPANIES WERE CONTINUOUS AND MUTUA L AND AT SOME INSTANCE THERE ARE RECEIVABLE AMOUNTS, WHEREAS IN O THER INSTANCES THERE WERE PAYABLE AMOUNTS BETWEEN THE TWO-COMPANIES. IT WAS THUS ASSERTED THAT SUCH TRANSACTIONS IN THE NATURE OF OPEN, MUTUA L AND CURRENT ACCOUNT BETWEEN THE TWO-COMPANIES ENGAGED IN SIMILAR LINE O F BUSINESS AND ARE IN ESSENCE TOWARDS FACILITATION OF BUSINESS IN CONTRAS T TO THE EXPRESSION LOANS AND ADVANCES SIMPLICITOR CONTEMPLATED UNDER S.2(22)(E) OF THE ACT. THE LD.AR SUBMITTED THAT HAVING REGARD TO THE AIM AND OBJECT OF THE DEEMING FICTION UNDER S.2(22)(E) OF THE ACT, TH E TRANSACTIONS OF SUCH NATURE WHERE THERE IS INFLOW AS WELL AS OUTFLOW OF MONEY HAVING REGARD TO THE BUSINESS EXIGENCY IS OUTSIDE THE SCOPE OF P ROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE LD.AR THUS SUBMITTED THAT THE CASE OF THE REVENUE FALLS ON THIS ALTERNATIVE GROUNDS ALSO. TH E LD.AR POINTED OUT ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 12 - THAT THE CIRCULAR NO.19/2017 DATED 12/06/2017 ISSUE D BY THE CBDT ALSO ENVISAGE THAT TRADE ADVANCE IN THE NATURE OF COMMER CIAL TRANSACTIONS WOULD NOT FALL WITHIN THE AMBIT OF PROVISIONS OF SE CTION 2(22)(E) OF THE ACT. THE LD.AR EXHORTED THAT THE TRANSACTIONS BEIN G COMMERCIAL IN NATURE BETWEEN THE LENDER AND BORROWER-COMPANIES WE RE ALSO DULY TAKEN BEFORE THE LOWER AUTHORITIES. IT IS A DIFFERENT MA TTER THAT THIS ALTERNATIVE CONTENTION WAS NOT ADJUDICATED BY THE CIT(A) WHILE GRANTING RELIEF ON THE SUBSTANTIVE GROUND THAT THE ASSESSEE IS NOT THE BEN EFICIARY OF THE LOAN AND THUS NOT SUSCEPTIBLE TO SECTION 2 (22)(E) OF THE AC T. THIRDLY, THE LD.AR CONTENDED THAT THE ASSESSEE BEING A SHAREHOLDER OF THE LENDER-COMPANY AS WELL AS BORROWER-COMPANY HAS PROVIDED BANK GUARANTE E ON BEHALF OF THE LENDER-COMPANY IN THE COURSE OF CARRYING ON OF ITS BUSINESS. THEREFORE, APART FROM THE TRANSACTIONS BEING COMMERCIAL IN NAT URE, THE ELEMENT OF QUID PRO QUO DO EXISTS BETWEEN THE LENDER-COMPANY PRIMA AUTOMATI ON AND BORROWER-PRIMA TRANSFORMER. THE LD.AR THEREAF TER RAISED FOURTH ALTERNATIVE GROUND THAT SUCH PROTECTIVE ADDITIONS I N THE HANDS OF THE ASSESSEE COULD NOT HAVE BEEN MADE ON PROTECTIVE BAS IS MERELY TO PROTECT THE INTEREST OF THE REVENUE IN THE PROCEEDINGS CARR IED OUT UNDER S.147 OF THE ACT. IN ELABORATION, THE LD.AR SUBMITTED THAT A PROTECTIVE ASSESSMENT INEVITABLY IMPLIES A CASE OF PROBABLE ES CAPEMENT. THUS, A FIRM BELIEF WHICH IS INDISPENSIBLE FOR INVOKING S .147 OF THE ACT IS FOUND ABSENT IN THE ACTION OF THE AO. THE LD.AR ACCORDIN GLY SUBMITTED THAT ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 13 - THE APPEAL OF THE REVENUE IS REQUIRED TO BE DISMISS ED ON ANY OR ALL OF THE FOUR GROUNDS POINTED OUT ABOVE. 13.6. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AO AND CONTENDED THAT EITHER THE BORROWER-COMPANY OR THE A SSESSEE (BEING A COMMON SHAREHOLDER) IS REQUIRED TO BE TAXED FOR REC EIPT OF ADVANCE FROM THE LENDER-COMPANY IN TERMS OF SECTION 2(22)(E) OF THE ACT. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE SHORT QUESTION IN CONTROVERSY IS WHETHER THE ASSESSEE-COM PANY, A COMMON SHAREHOLDER IN THE LENDER-COMPANY AS WELL AS THE BO RROWER-COMPANY CAN BE SAID TO BE HIT BY THE PROVISIONS OF SECTION 2(22 )(E) OF THE ACT FOR THE LOANS/ADVANCES GRANTED BY THE LENDER-COMPANY TO THE BORROWER-COMPANY. 14.1. THE ASSESSEE HAS RAISED FOUR DEFENSE TO SUPP ORT THE CONCLUSION OF THE CIT(A), NAMELY (I) THE ASSESSEE (COMMON SHAREHO LDER IN LENDER- COMPANY AND BORROWER COMPANY) IS NOT THE RECIPIENT OF LOAN AND THEREFORE NOT SUSCEPTIBLE TO THE PROVISIONS OF SECT ION 2(22)(E) OF THE ACT IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DAISY PACKERS(SUPRA) AND HONBLE HIGH COURT IN THE CASE OF ANITECH (P) LTD.(SUPRA) AS APPROVED BY HONBLE SUPREME COURT IN MADHUR HOUSING; (II) THE TRANSACTIONS BETWEEN THE LENDER-COMPANY AN D BORROWER-COMPANY ARE COMMERCIAL IN NATURE FOR FACILITATION OF BUSINE SS AND THEREFORE ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 14 - COVERED BY THE BENEFICIAL INTERPRETATION RENDERED B Y CBDT CIRCULAR NO.19/2017; (III) THE ASSESSEE HAS PROVIDED BANK G UARANTEE TO THE LENDER FOR FACILITATION OF ITS BUSINESS AND THEREFORE THE RECEIPT OF LOAN/ADVANCE IS AN ACT OF QUID PRO QUO AND (IV) THE PROTECTIVE ADDITIONS UNDER S.147 OF THE ACT IN THE HANDS OF THE ASSESSEE IS NOT SUSTAIN ABLE IN LAW HAVING REGARD TO THE PHRASEOLOGY OF SUBSTANTIVE PROVISIONS OF SECTION 147 OF THE ACT. 14.2. ON PERUSAL OF THE CIT(A), WE FIND THAT THE CI T(A) HAS REVERSED THE ACTION OF AO AND GRANTED RELIEF TO THE ASSESSEE O N FIRST PARAMETER ITSELF I.E. THE ASSESSEE NOT BEING A RECIPIENT OF THE LOA N CANNOT BE TAXED UNDER THE DEEMING FICTION OF SECTION 2(22)(E) OF THE ACT. THE CIT(A) HAS NOT ADDRESSED THE ISSUE ON OTHER ALTERNATIVE GROUNDS. WE FIND THAT THE FIRST DEFENSE OF THE ASSESSEE IS LEGAL IN NATURE AND IS S UPPORTED BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DA ISY PACKERS (SUPRA) AND THE DECISION OF HONBLE DELHI COURT IN THE CASE OF ANKITECH (P) LTD.(SUPRA) AS APPROVED BY HONBLE SUPREME COURT IN MADHUR HOUSING. THE DECISION CONTINUES TO HOLD THE FIELD AS ON DA TE ALTHOUGH ISSUE HAS BEEN REFERRED TO LARGER BENCH BY THE HONBLE SUPREM E COURT. 14.3. WE SHALL NOW ADVERT TO THE SECOND ALTERNATIV E PLEA RAISED ON BEHALF OF THE ASSESSEE THAT THE TRANSACTIONS ARE OP EN, MUTUAL AND CURRENT AND ARE IN THE NATURE OF TRADE ADVANCES. THE PLEA TAKEN IN THIS REGARD BEFORE LOWER AUTHORITIES HAVE NOT BEEN REBUTTED. TH US, IN VIEW OF THE ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 15 - CBDT CIRCULAR, THE TRADE ADVANCES STAND EXCLUDED F ROM THE AMBIT OF SECTION 2(22)(E) OF THE ACT. 14.4. WE NOW NEXT TURN TO ANOTHER PLEA OF THE ASSES SEE THAT THE ADVANCES MADE BY THE LENDER-COMPANY TO THE BORROWER-COMPANY IS NOT A LOAN/ADVANCE SIMPLICITOR BUT IS BESET WITH THE CHA RACTER OF QUID PRO QUO OWING TO THE PERSONAL GUARANTEES OF THE SHAREHOLDER FOR BENEFIT OF THE LENDER-COMPANY. 14.5. WE ALSO TAKE NOTE OF THE FOURTH PLEA ON BEHA LF OF THE ASSESSEE THAT A PROTECTIVE ASSESSMENT UNDER S.147 OF THE ACT TO MER ELY SAFE-GUARD THE INTEREST OF THE REVENUE IS NOT SUSTAINABLE IN RE-AS SESSMENT PROCEEDINGS UNDER S.147 OF THE ACT. A PROTECTIVE ASSESSMENT IMP LIEDLY MEANS THAT THE AO IS NOT SURE ABOUT THE ESCAPEMENT IN THE HANDS OF THIS ASSESSEE BUT MERELY SEEKS TO COVER THE POSSIBLE REVENUE LOSS. T HIS, IN OUR VIEW, IS CONTRARY TO THE MANDATE OF SECTION 147 OF THE ACT W HICH PROVIDES THAT IT IS INCUMBENT UPON THE AO TO HAVE POSITIVE BELIEF TO WARDS ESCAPEMENT (IN CONTRAST TO PROBABLE ESCAPEMENT) BASED ON THE M ATERIAL AVAILABLE ON RECORD. CLEARLY, THE ACTION OF THE AO RUNS COUNTE R TO THE MANDATE OF SECTION 147 OF THE ACT. NOTABLY, THE CASE OF ESCAP EMENT OF INCOME QUA ASSESSEE HEREIN IS NOT FINALLY ASCERTAINED EVEN AT THE ASSESSMENT STAGE PURSUANT TO NOTICE FOR RE-OPENING UNDER S.147/148 O F THE ACT. 15. HENCE, IN VIEW OF THE DISCUSSION NOTED HEREINAB OVE, WE FIND MERIT IN THE PLEA OF THE ASSESSEE ON ALL COUNTS. THEREFO RE, WE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE CONCLUSION DRAWN BY TH E CIT(A). ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 16 - 16. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .576/AHD/2016 FOR AY 2007-08 IS DISMISSED. 17. THE REVENUE HAS FILED SIMILAR APPEALS IN ITA NO S.577, 578, 579 & 580/AHD/2016 AGAINST THE CAPTIONED ASSESSEES FOR DI FFERENT ASSESSMENT YEARS AS CAPTIONED. 18. THE ISSUE INVOLVED AS WELL AS THE FACTS IN ALL THE OTHER FOUR APPEALS ARE IDENTICAL. THEREFORE, THE CONCLUSION DRAWN IN ITA NO.576/AHD2016 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.577 TO 580/AHD/2016 (SUPRA). THUS ALL THE OTHER APPEALS IN ITA NOS.577 TO 580/AH D/2018 ARE ALSO DISMISSED. 19. IN THE COMBINED RESULT, ALL THE EIGHT APPEALS O F THE REVENUE ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 02/ 04/2018 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 02/ 04/2018 MUKUL/T.C. NAIR, SR. PS ITA NOS.573 TO 580/AHD/20 16 ITO VS. M/S.PRIMA TRANSFORMER PVT.LTD. ASST.YEAR 2007-08, 2008-09, 2009-10 & 2010-11 - 17 - ! ' / COPY OF THE ORDER FORWARDED TO : 1. !'# / THE APPELLANT 2. &'# / THE RESPONDENT. 3. 234* 5* / CONCERNED CIT 4. 5* ( ! ) / THE CIT(A)-9 5. 67*(34 , !!34- , !2 / DR, ITAT, AHMEDABAD 6. 9) / GUARD FILE. / BY ORDER, //TRUE COPY// &6** //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION ..22.3.18 (DICTATION-PAD 25- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.2.4.18 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2.4.18 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER