Jinendra Kumar Jain, New Delhi V. ACIT, Circle-59(1), New Delhi

ITA 5907/DEL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9349 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 15-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india; Deemed dividend
• Section: 2(22)(e)

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.-5907/DEL/2017 (ASSESSMENT YEAR-2011-12) JINENDRA KUMAR JAIN, C/O RAJ KUMAR & ASSOCIATES, CHARTERED ACCOUNTANTS, L-7A, LGF, SOUTH EXTENSION, PART-2, NEW DELHI 110 049 PAN NO. AAFPJ7404C) (APPELLANT) VS ACIT, CIRCLE 59(1), NEW DELHI APPELLANT BY SHRI RAJ KUMAR, CA RESPONDENT BY SHRI SRIDHAR DORA, SR. DR. ORDER PER H.S. SIDHU, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 7.9.2017 OF THE LD. CIT(A)-37, NEW DELHI REL EVANT TO ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUNDS: - 1. THAT THE SHOW CAUSE NOTICE ISSUED U/S. 271(1) ARE FATALLY DEFECTIVE, MORE SO, DO NOT SPECIFY AS TO WHETHER IS SUED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME, THUS ILLEGAL AND UNSUSTAINABLE, MAKING T HE IMPUGNED PENALTY ORDER LEVYING PENALTY OF RS. 12,96,955/- WI THOUT JURISDICTION AND ILLEGAL. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES, NO PENALTY CAN BE LEVIED ON DEEMED INCOME U/S. 2(22)(E) OF THE I.T. A CT. 2 3. 3. THAT WITHOUT PREJUDICE, ON MERITS, UNDER THE FAC TS, NO PENALTY U/S. 271(1) SHOULD BE LEVIED. 2. FACTS NARRATED BY THE REVENUE AUTHORITIES ARE NO T DISPUTED BY BOTH THE PARTIES, HENCE, THE SAME ARE NOT REPEATED HERE FOR THE SAKE OF CONVENIENCE. 3. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSES SEE, HAS STATED THAT ITAT VIDE ITS ORDER DATED 19.11.2018 IN QUANTUM APPEAL NO. 4126/DEL/2014 HAS DELETED ALL THE ADDITIONS EXC EPT RS. 13,634/- WHICH WAS NOT PRESSED BY THE ASSESSEE IN QUANTUM AP PEAL. IN THIS BEHALF HE FILED THE COPY OF THE TRIBUNALS ORDER DA TED 19.11.2018 IN ASSESSEES OWN CASE AND HE REQUESTED THAT PENALTY O N THE ADDITION OF RS. 13,634/- MAY BE DELETED. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT IN ASSESSEES OWN CASE IN IT A NO.4126/DEL/2014 FOR A.Y. 2011-12 VIDE ORDER DATED 19.11.2018, THE TRIBUNAL HAD ADJUDICATED THE ISSUES AND DELETED THE QUANTUM ADDITIONS, EXCEPT THE ADDITION OF RS.13,634/- BEIN G NOT PRESSED. FOR THE SAKE OF CONVENIENCE, WE ARE REPRODUCING THE RE LEVANT PORTION OF THE TRIBUNALS ORDER DATED 19.11.2018 AS UNDER:- 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE FACTS NOTED ABOVE ARE NOT IN DISPUTE. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MUKUNDRAY K. SHAH (2007) 290 ITR 433 (SC) HELD THAT THE TRUE TE ST IS WHETHER THE PAYMENT BY COMPANY WAS FOR THE BENEFIT OF THE ASSESSEE WHO WAS MANAGING DIRECTOR. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. 3 CREATIVE DYEING AND PRINTING P. LTD., (2009) 318 IT R 476 (DEL.) HELD THAT BUSINESS TRANSACTIONS DID NOT ATTRACT PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRAD IP KUMAR MALHOTRA VS. CIT (2011) 338 ITR 538 (CAL.) HELD THAT SHAREHOLDER PERMITTED TO MORTGAGE ITS PROPERTY FOR COMPANY AND RECEIVED LOAN, THEREFORE, PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT WOU LD NOT BE ATTRACTED. PB-22 IS RENT AGREEMENT BETWEEN ASSESSEE, HIS WIFE AND M/S. DESIGNARCH INFRASTRUCUT RE PVT. LTD., FOR LETTING-OUT PROPERTY. PB-20 IS CONFIRMATION WHEREBY IT IS CONFIRMED THAT ADVANCE R ENT OF RS.12,50,000/- THROUGH CHEQUE WAS GIVEN TO THE ASSESSEE FOR RENT OF 25 MONTHS. SIMILARLY, RENT SEC URITY DEPOSIT OF RS.2,80,000/- EQUIVALENT TO FOUR MONTHS RENT WAS GIVEN TO ASSESSEE (SHRI JINENDRA KUMAR JAIN). IT IS, THEREFORE, CLEAR FROM THE EVIDENCE ON RECORD THAT ASSESSEE IN FACT, HAS LET-OUT THE JOINT PROPERTY TO THE TENANT COMPANY AND HAS RECEIVED ADVANCE AS WELL AS SECURITY DEPOSIT OF THE AFORESAID AMOUNTS. THE AUTHORITIES BELOW REJECTED THE CLAIM OF ASSESSEE BE CAUSE THE AMOUNT OF ADVANCE RENT AND SECURITY DEPOSIT IS NOT MENTIONED IN THE RENT AGREEMENT. LEARNED COUNSEL FO R THE ASSESSEE ALSO REFERRED TO THE RETURN FILED BY A SSESSEE TO SHOW THAT RENT HAVE BEEN OFFERED FOR TAXATION AN D ALL TRANSACTIONS ARE THROUGH BANKING CHANNEL. THEREFORE , MERELY ADVANCE RENT AND SECURITY DEPOSIT IS NOT MENTIONED IN THE RENT AGREEMENT WOULD NOT PROVE THA T ASSESSEE HAS NOT RECEIVED THE ADVANCE RENT AND SECU RITY 4 DEPOSIT FROM THE TENANT AND LET-OUT THE PROPERTY IN QUESTION. SINCE THE AMOUNT IS PAID AS REGARDS THE TENANTED PREMISES, THEREFORE, IT IS IN NORMAL ORDIN ARY TRANSACTION OF LETTING OUT OF PROPERTY. THEREFORE, IT COULD NOT BE TREATED AS LOAN OR ADVANCE SO AS TO AT TRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT. SIMILARLY, ASSESSEE RECEIVED ADVANCE OF RS.26 LAKHS ON ACCOUNT OF AGREEMENT TO SELL THROUGH BANKING CHANNE L. COPY OF THE AGREEMENT TO SELL IS FILED ON RECORD, W HICH IS NOT DISPUTED BY THE AUTHORITIES BELOW. IT APPEAR S THAT WHILE REFERRING TO THE TENANTED PROPERTY, A.O. HAS TAKEN THE SAME PROPERTY IN THE ASSESSMENT ORDER AND UNDER MISCONCEPTION OF FACTS MADE THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND. IN FACT, IT IS AN AGREEMENT TO SEL L OF PROPERTY BEARING 31, SHANKAR VIHAR, DELHI-92, WHICH LD. CIT(A) HAS CORRECTED. THE LD. CIT(A) NOTED THAT ASSESSEE IS NOT IN BUSINESS OF LENDING MONEY. THERE FORE, THE CONTENTION OF ASSESSEE THAT IT WAS A GENUINE BUSINESS TRANSACTION IS NOT ACCEPTABLE. HOWEVER, IT IS NOT THE CASE OF THE ASSESSEE BECAUSE ASSESSEE CLAIM ED THAT THE COMPANY AGREED TO PURCHASE THE PROPERTY FR OM THE ASSESSEE ON CERTAIN TERMS AND CONDITIONS. THE S AID PURCHASE UNDER THE AGREEMENT BY THE COMPANY WOULD BENEFIT THE COMPANY. THUS, FINDING OF THE LD. CIT(A ) IS NOT JUSTIFIED. IT IS NOT IN DISPUTE THAT IT WAS THE PROPERTY OF THE ASSESSEE AND IF ASSESSEE RECEIVED ADVANCE AG AINST THE SALE OF THE PROPERTY, IT COULD NOT BE TREATED A S DEEMED DIVIDEND. THE GENUINENESS OF THE AGREEMENT T O SELL IS NOT IN DISPUTE. THEREFORE, PROVISIONS OF SE CTION 5 2(22)(E) OF THE I.T. ACT IS NOT ATTRACTED IN THE CA SE OF THE ASSESSEE. SIMILARLY, ASSESSEE RECEIVED AN AMOUNT OF RS.1,35,000/- ON ACCOUNT OF IMPREST. CONFIRMATION I S FILED AT PAGE-36 OF THE PAPER BOOK, IN WHICH, IT IS CLEARLY CONFIRMED THAT COMPANY HAS GIVEN OFFICIAL IMPREST AMOUNT OF RS.1,35,000/- TO THE ASSESSEE FOR INCURRI NG CERTAIN EXPENSES IN CONNECTION WITH SEEKING PROFESSIONAL WORK FOR THE COMPANY. THEREFORE, EXPLANATION OF ASSESSEE IS SUBSTANTIATED THAT IT WA S AN ORDINARY BUSINESS TRANSACTION AND THAT SMALL IMPRES T AMOUNT WAS GIVEN TO THE ASSESSEE TO INCUR EXPENDITU RE ON BEHALF OF THE COMPANY. THEREFORE, PROVISIONS OF SECTION 2(22)(E) WOULD NOT BE ATTRACTED IN THIS CAS E. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE NOTED ABOVE, IT IS CLEAR THAT ALL THE A MOUNTS IN QUESTION HAVE NOT BEEN GIVEN TO THE ASSESSEE FOR HIS PERSONAL BENEFIT BUT THESE AMOUNTS HAVE BEEN GIVEN FOR THE BENEFIT OF THE COMPANY. THESE WERE ORDINARY BUSINESS TRANSACTIONS AND AS SUCH, WOULD NOT ATTRAC T THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT, 196 1. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND DELETE THE ABOVE ADDITIONS. APPEAL OF ASSESSEE IS PARTLY ALLOWED. 10. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. 6.1 KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANC ES OF THE CASE, WE FIND THAT THE ADDITIONS ON WHICH THE PENALTY IN DIS PUTE WAS LEVIED, HAS ALREADY BEEN DELETED BY THE ITAT, EXCEPT THE A DDITION OF RS. 13,634/- WHICH WAS NOT PRESSED BY THE ASSESSEE IN Q UANTUM APPEAL, 6 VIDE ORDER DATED 19.6.2018 IN ITA NO. 4126/DEL/2014 (AY 2011-12) IN ASSESSEES OWN CASE AS AFORESAID, HENCE, THE P ENALTY IN DISPUTE WILL NOT SURVIVE ON THE ADDITIONS IN DISPUTE, EXCEP T THE PENALTY ON THE ADDITION OF RS. 13,634/- WHICH WAS NOT PRESSED BY T HE ASSESSEE IN QUANTUM APPEAL BEFORE THE TRIBUNAL. ACCORDINGLY, WE DELETE THE PENALTY IN DISPUTE AND SUSTAIN THE PENALTY ON THE ADDITION OF RS. 13,634/-. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED ON 19.12.2018. SD/- SD/- (L.P. SAHU) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19/12/2018 SR BHATNAGAR COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI