Shri Hemant Jain, Indore V. The DCIT 1(1), Indore

ITA 632/IND/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5823 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 30-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIB JAIN
• Keywords: Business income; Speculation loss; Deemed dividend
• Section: 143(3)

Judgement Text

SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 1 OF 14 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .. , .. , % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER SHRI HEMANT JAIN 3 JANKI NAGAR INDORE 452001 VS. DCIT 1(1), INDORE APPELLANT RESPONDENT PAN:ABHPJ 1977 H APPELLANT BY SHRI ANIL GARG, CA AND SHRI ARPIT GAUR CA RESPONDENT BY SHRI RAJIB JAIN JCIT DATE OF HEARING 03.01.2017 DATE OF PRONOUNCEMENT 16.01.2017 O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, INDORE [HEREINAFTER REFERRED T O AS THE CIT (A)] DATED 22.08.2013. THIS APPEAL PERTAINS TO ASSESSMENT YEAR 20 08-09 AS AGAINST APPEAL DECIDED IN RESPECT OF ASSESSMENT ORDER DATED 02. 12.2010 PASSED U/S. 143(3) OF INCOME TAX ACT, 1961(HEREIN AFTER REFERRE D TO AS 'THE ACT) BY THE DCIT 1(1), INDORE [HEREINAFTER REFERRED TO AS THE A O]. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- . . /. I.T.A. NO. 632/IND/2013 ( ( / ASSESSMENT YEAR:2008-09 SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 2 OF 14 1(I) THAT, THE LEARNED CIT(A) GROSSLY ERRED BOTH O N FACTS AND IN LAW, IN CONFIRMING THE ADDITION OF RS. 57,75,019/- MADE BY TH E LEARNED AO IN APPELLANT`S INCOME BY INVOKING PROVISION OF SECTION 2(2 2)(E) OF INCOME TAX ACT,1961. (II) THAT, THE LEARNED CIT (A) GROSSLY ERRED IN CON FIRMING THE ADDITION MADE BY THE AO UNDER SECTION 2(22)(E) OF THE ACT, WITHOUT A PPRECIATING THE MATERIAL FACT THAT THE APPELLANT HAD NOT TAKEN ANY LOAN OR A DVANCE FROM M/S. LAKHANLAL KANTILAL BROKERS PVT. LTD. THE LEARNED A O ALSO ERRED IN NOT CONSIDERING THE MATERIAL FACT THAT THE IMPUGNED SUM O F RS. 1,00,00,000/- WAS RECOVERED BY THE APPELLANT FROM THE ABOVE NAMED COMPANY ON BEHALF OF ONE OF HIS DEBTORS ONLY AND THEREFORE, THE TRANSACTI ON DOES NOT FALL WITHIN THE MISCHIEF OF PROVISIONS OF SECTION 2(22)(E) OF INCOME T AX ACT,1961. 2(I) THAT, THE LEARNED CIT(A) GROSSLY ERRED, BOTH O N FACTS AND IN LAW, IN CONFIRMING ADDITION OF RS.15,57,894/- MADE BY THE LEAR NED AO IN APPELLANT`S INCOME ON ACCOUNT OF ALLEGED SPECULATION TRANSACTION S. (II) THAT, THE LEARNED CIT (A) GROSSLY ERRED, IN NO T CONSIDERING AND APPRECIATING THE MATERIAL FACT THAT THE IMPUGNED PAYMENTS WERE GENUIN ELY MADE BY THE APPELLANT, DURING THE ORDINARY COURSE OF HIS CARRYING OUT DELIVERY BASED BUSINESS AND THE TRANSACTION COVERED BY IMPUGNED PAYMEN TS WERE NOT SPECULATIVE TRANSACTIONS WITHIN THE DEFINITION OF CL AUSE (5) OF SECTION 43 OF INCOME TAX ACT,1961. (III) THAT, WITHOUT PREJUDICE TO ABOVE, THE LEARNED C IT(A) GROSSLY IN NOT APPRECIATING THE MATERIAL FACT THAT IF THE NATURE OF THE SUBJECT TRANSACTION IS REGARDED AS THAT OF SPECULATIVE LOSS TRANSACTION THA N, CORRESPONDINGLY , THE SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 3 OF 14 NATURE OF OTHER TRANSACTION, UNDER WHICH THE APPELLAN T HAS EARNED INCOME BY RECEIVING PAYMENTS FROM VARIOUS PARTIES, SHOULD ALSO HAVE BEEN REGARDED AS SPECULATIVE PROFIT TRANSACTION AND ACCORDINGLY, T HE ALLEGED SPECULATIVE LOSS TRANSACTION OUGHT TO HAVE BEEN ALLOWED TO BE SE T-OFF AGAINST THE SPECULATIVE PROFIT TRANSACTION UNDER THE PROVISIONS O F SUB-SECTION (1) OF SECTION 73 OF THE ACT. (IV) THAT, WITHOUT PREJUDICE TO ABOVE, EVEN BY ASSUMING AND NOT ADMITTING, IF THE PAYMENTS OF RS. 15,57,894/- WERE REGARDED AS SPECU LATION TRANSACTIONS, NOT ELIGIBLE FOR SET-OFF FROM GAIN FROM OTHER TRANSA CTION OF THE SIMILAR NATURE, THAN THE LOSS OF RS. 15,57,894/- ARISING ON ACCOUNT OF IMPUGNED TRANSACTION WAS OUGHT TO HAVE BEEN ALLOWED TO BE CARRIED FORWARD FOR SET-OFF UNDER THE PROVISION OF SUB-SECTION (2) OF SECTION 73 OF THE AC T. 3. GROUND NO. 1 RELATES TO ADDITION OF RS. 57,75,019/- AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. 4. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF L OWER AUTHORITIES ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND WAS A SHAREHOLDER IN A COMPANY NAMED M/S. LAKHANLAL KANTILAL BROKERS PVT. LTD. (IN SHORT LKB PL). THE AO FOUND THAT THERE ARE SEVERAL TRANSACTIONS BETWEEN THE ASSESSEE AND TH E ABOVE COMPANY DURING THE SUBJECT YEAR. ONGOING THROUGH THE ACCOU NTS OF THE COMPANY, IT WAS NOTICED THAT THE COMPANYS ACCOUNT SHOWED CREDIT BALANCE ON 08.02.2008 AMOUNTING TO RS. 57,75,019/-. SINCE THE ASSESSEE IS A SHAREHOLDER OF THE PREVIOUSLY MENTIONED COMPANY, AND THEREFORE PROVISI ONS OF SECTION 2 (22) (E) ARE APPLICABLE. IT WAS EXPLAINED BY THE ASSESSEE , THAT THE COMPANY ACCOUNTS WAS ALWAYS HAVING DEBIT BALANCE BUT ON THE SA ID DATE, IT SHOWS SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 4 OF 14 CREDIT BALANCE DUE TO THE REASONS THAT THE ASSESSEE HAD ISSUED A CHEQUE ON THE SAID DATE BUT IT COULD NOT BE CLEARED ON THE SAM E DAY DUE TO THE REASONS THAT NEXT DAYS WERE SATURDAY AND SUNDAY. IT WAS FUR THER ARGUED THAT THE COMPANY AS WELL AS THE ASSESSEE TRANSACTED SAME AMOUN T OF RS. 1,00,00,000/- PAYABLE TO EACH OTHER, ONE OF THEM BY R TGS AND THE OT HER ONE BY CHEQUE. IT HAS BEEN FURTHER REFERRED THAT IT THAT THE CHEQUE ISS UED WAS CLEARED LATE; HENCE, IT SHOWS CREDIT BALANCE ON 08.02.2008. IT WAS ARGUED THAT THERE WAS NO CREDIT OF THE COMPANY. HOWEVER, THIS SUBMISSION OF T HE ASSESSEE WAS NOT FOUND ACCEPTABLE ON THE GROUND THAT SAID AMOUNT REFLEC TED CREDIT OF THE ASSESSEES ACCOUNT BY AN AMOUNT OF RS. 1,00,00,000/- RECEIVED ON 08.02.2088 WHEREAS PAYMENT OF RS. 1,00,00,000/- HAS BEEN REFLEC TED ON 12.02.2008 . THUS, THERE IS A WIDE GAP OF FOUR DAYS BETWEEN THE ABOVE TRA NSACTION. IT IS NOTEWORTHY THAT THE BALANCE OF THE COMPANY AFTER REC EIPT OF ABOVE SUM RS. 1,00,00,000/- AND THE CREDIT BALANCE WAS AT RS. 57, 75,019/- WHICH CLEARLY DEEMED DIVIDEND AS THE SAID DATE. THIS ASPECT HAS BEE N EXAMINING THE PERSPECTIVE OF THE CONDITIONS LAID DOWN IN SECTION 2 (22) (E). THE ASSESSEE IS A SHAREHOLDER IN THE SAID COMPANY. HIS SHARE HOLDING PA TTERN OF THE COMPANY MORE THAN THE SPECIFIED PERCENTAGE. THE COMPANY HAS SUF FICIENT RESERVE AND SURPLUS AS PER BALANCE SHEET. ACCORDINGLY, THE AMOUNT OF RS. 57,75,019/- WAS ADDED AS DEEMED DIVIDEND UNDER SECTION 2 (22) (E) OF THE INCOME TAX ACT,1961 IN THE HANDS OF THE ASSESSEE. 5. BEING, AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). 6. THE LD. CIT (A) OBSERVED THAT AS PER THE BANK ACCOUNT OF GURUDEV CORPORATION IN DENA BANK, THE ASSESSEE RECEIVED RS. 1 CRORE FROM LKBPL ON SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 5 OF 14 08.02.2008. AS A RESULT, THERE WAS A CREDIT BALANCE OF RS. 1 CRORE ON 08.02.2008. THIS AMOUNT WAS RETURNED BACK ON SAME DAY BUT IT WAS R ECEIVED ON 12.02.2008 IN ACCOUNT OF GURUDEO CORPORATION, A PROP RIETARY CONCERN OF THE ASSESSEE AS CHEQUE COULD NOT BE CLEARED BEING SATURDAY AND SUNDAY. THE AO DID NOT AGREE WITH THIS PROPOSITION. HOWEVER, IN A PPEAL THE ASSESSEE HAS TAKEN DIFFERENT STAND THAT THE AMOUNT WAS NOT A LOAN OR ADVANCE FROM LKBPL BUT IT WAS RECOVERED FROM THIS COMPANY ON BEHALF OF ONE OF ITS DEBTORS NAMELY KANDLA EXPERT CORPORATION (KEC). IF L KBPL HAS PAID RS. 1 CRORE TO THE APPELLANT ON BEHALF OF KEC, THEN IN THE LEDGER ACCOUN T OF APPELLANT`S PROPRIETARY CONCERN, I.E. M/S. GURUDEV CORPORATION (GC ) ,THERE SHOULD BE A DEBIT ENTRY IN BOOKS OF LKBPL AND THERE HAS TO BE A CO RRESPONDING CREDIT ENTRY IN LEDGER ACCOUNT OF KEC ON 08.02.2008. IN THE BOOK S OF ACCOUNT OF M/S. LKBPL AND M/S. GC DOES NOT DRAW ANY CREDIT ON 08. 02. 200 8. SIMILARLY, NO ENTRY OF RS. 1 CRORE IS SEEN IN THE BOOKS OF THE APPELLANT I.E. G C. IN FACT NO DEBIT OR CREDIT ENTRIES THERE IN ACCOUNT OF KEC FOR THE WHOLE OF FE BRUARY 2008. NOT ONLY THAT WITHOUT SUCH TRANSACTION OF RS. 1 CRORE BEING ENTERE D IN LEDGER ACCOUNT OF KEC BY THE APPELLANT, THE BALANCE DEBIT COMES TO RS. 5, 02,12,141/- IN ACCOUNT OF KEC AND APPELLANT HAS SHOWN EXACTLY THE SAME BALANC E IN ITS RETURN OF INCOME IN SCHEDULE 6 OF WHICH DID DEAL SUNDRY DEBTOR S. HENCE IT IS VERY CLEAR THAT SUCH TRANSACTION OF RS. 1 CRORE HAS NOTHING TO MOVE WITH KEC AND THAT IS WHY SUCH ARGUMENT WAS NEVER TAKEN BEFORE AO. THEREFOR E, THE NEW ARGUMENT TAKEN BY THE APPELLANT IS DISAPPROVED FROM THE LE DGER ACCOUNT OF THE APPELLANT HIMSELF AND ALSO FROM THE FACT THAT THE KEC DID NOT COME FROM THE SAME. THE CONFIRMATION OR COPY ON COMPANY LKBPL IN THIS REGARD AND THEIR SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 6 OF 14 AFFIDAVIT IS OF NO HELP TO THE APPELLANT BECAUSE THIRD PARTY KEC HAS NOT CONFIRMED THAT THEY WERE TOLD LKBPL TO PAY SUCH AMOUNT OF RS. 1 CRORE TO THE APPELLANT ON 08.02.2008 AND EVEN IF SUCH ENTRY IS REV ERSED SUBSEQUENTLY SHOULD APPEAR IN THE LEDGER ACCOUNT OF ALL THREE PARTIES, NAME LY THE APPELLANT, LKBPL, AND KEC, BUT SUCH ENTRIES ARE NOT REFLECTED I N THEIR LEDGER ACCOUNTS. THE LD. CIT (A) FURTHER OBSERVED THAT EVEN AMOUNT OF RS. 1 CRORE RECEIVED ON 8.2.2008 AND RETURNED BACK ON 12.02.2008 , EVEN THEN IT AMOUNTS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT IN THE LIGHT OF RA TIO LAID DOWN IN THE CASE OF WALCHAND & CO. LTD. [1975] 100 ITR 598(BOM) . HENCE , TEMPORARY LOANS OR SHORT HOLDING OF LOAN AMOUNTS TO DEEMED DIVIDEND WITH IN THE MISCHIEF OF SECTION 2(22) (E) OF THE ACT. FURTHER THE SAID COMPA NY HAD SUFFICIENT SURPLUS AND RESERVE, HENCE, CONDITIONS OF SECTION 2(22) (E) ARE FULFILLED. ACCORDINGLY, CIT (A) HAD CONFIRMED THE ADDITION MADE BY THE AO. 7. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. 8. THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE LEARNED AO HAS NOT BROUGHT ON RECORD THAT THE ASSESSEE WAS HAVING MORE T HAN 10% OF THE VOTING WAS OF THE COMPANY OF LKPBL ON THE DATE OF TRANSACTI ON AND ACCUMULATED PROFIT TO THE EXTENT OF RS. 57, 75, 019/-ON THE DATE OF TRANSACTION I.E. 08-02-2008 THE AO HAS NOT DISCHARGE HIS INITIAL ONUS OF PROVING THAT THE CASE OF THE ASSESSEE FALLS WITHIN THE PROVISIONS OF SECTION 2 (2 2) (E). THEREFORE, THE RESULTANT ACTION OF THE AO IN MAKING ADDITION DESERVED TO BE QU ASHED. WITHOUT PREJUDICE TO THE ABOVE, IT WAS CONTENDED THAT THE AS SESSEE HAD NEVER TAKEN ANY LOAN OR ADVANCE FROM THE SUBJECT COMPANY I.E. LKBP L TO FALL WITHIN THE PROVISIONS OF SECTION 2 (22) (E), CONTRARY, IT WAS T HE ASSESSEE WHO & HAD GIVEN SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 7 OF 14 LOAN AND ADVANCES FROM TIME TO TIME TO LKBPL. IT WA S SUBMITTED THAT, ON THE DATE OF SUBJECT TRANSACTION, THE APPELLANT OWED THE SUM OF RS. 3, 60, 24, 122/- FROM KEC AGAINST THE SALE OF GOODS MADE BY HIM FROM TIM E TO TIME TO KEC. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED PB PAGE N O 8 TO ESTABLISH THAT THE ASSESSEE WAS TO RECEIVE THE ABOVE AMOUNT FROM KEC ON 0 8.02.2008. THE LEARNED COUNSEL REFERRED PB PAGE NO 7B, TO SUBMIT THA T THE ASSESSEE WAS HAVING DEPOSIT WITH LKBPL OF RS. 42, 24, 981/- AS O N 08.02.2008 I.E. THE BEFORE ENTERING THE SUBJECT TRANSACTION OF RS. 1 CRORE ON 08. 02. 2008. THEREFORE, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE`S PROPRIET ORSHIP CONCERN M/S. GC HAD RECEIVED THE SUM OF RS.1 CRORE FROM THE COMPAN Y LKBPL NOT ON ITS OWN ACCOUNT BUT ON BEHALF OF ONE OF ITS CUSTOMER NAMEL Y KEC. SIMILARLY, ON THE SAME DAY, THE SAME COSTUMERS I.E. KEC OWED A SUM OF RS. 5, 11, 00,440/- FROM THE LKBPL IN TWO SEPARATE ACCOUNTS. THE LKBPL WA S SHOWING CREDIT BALANCE OF RS.1,50,46,318/- AND OF RS. 3,60,54,122/- IN THE NAME OF KEC AS REFLECTED PB PAGE 10 AND PB PG15 RESPECTIVELY. IT WAS SUBMITTED THAT SUCH COSTUMERS I.E. KEC WAS DEALING WITH THE ASSESSEE WAS ALSO CARING ON BUSINESS OF FORWARD TRADING THROUGH THE COMPANY LKBPL. IN ADDI TION, DURING THE COURSE OF CARRYING OUT DAY-TO-DAY REGULAR BUSINESS TRANSACT IONS, KEC OWED THE ABOVE STATED SUM FROM LKBPL. THUS, , IN AGGREGATE, A SUM OF RS. 5,11,00.440/- [ 1,50,46,318+N3,60,54,122] WAS PAYABLE BY M/S. LKBPL TO M/S. KEC, IMMEDIATELY BEFORE THE HAPPENING OF THE IMPUGNED TRANSACTION. THE A SSESSEE RAISED A DEMAND ON 7.2.2008 TO KEC TO MAKE SOME PAYMENT. ON TH E OTHER HAND, KEC RAISED DEMAND WITH LKBPL AND VERBALLY ASKED THE LKBPL TO MAKE PAYMENT OF RS. 1 CRORE THROUGH RTGS TO THE ASSESSEE AGAINST IT S DUES. ACCORDINGLY, LKBPL SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 8 OF 14 HAD TRANSFERRED A SUM OF RS. 1 CRORE THROUGH RTGS O N 08.02.2008 FROM ITS AXIS BANK TO THE ACCOUNT OF GC WITH DENA BANK (PB-21). S UBSEQUENTLY, THEIR LEGAL COUNSEL, ADVISED THE KEC THAT AFTER AMENDMENT IN THE PROVISIONS OF SECTION 40A, (3) OF THE ACT, THE KEC WAS NOT ENTITLED TO MAK E PAYMENT TO ONE CREDITOR BY ROTATING THE FUNDS THROUGH ONE DEBTOR. IT WAS THE REFORE, THE KEC IMMEDIATELY A DAY AFTER I.E. ON 09.02.2008, MADE VERBA L REQUEST TO THE ASSESSEE TO REVERSE THE EARLIER INSTRUCTION FOR TRA NSACTION DTD. 08.02.2008. ACCORDINGLY, GC HAS REFUNDED THE SAME AMOUNT OF RS. 1 CRORE BY ISSUING CHEQUE NO. 293484 DTD. 09.02.2008 IN FAVOUR OF LKBPL . HOWEVER, AS 10 TH AND 11 TH FEBRUARY 2008 BEING SATURDAY AND SUNDAY, LKBPL HAS PRESENTED THE CHEQUE ON 11 TH FEBRUARY WITH SBI AND SAID CHEQUE WAS DULY REALIZED ON 12.02.2008. (PB PG21].IT WAS FURTHER SUBMITTED THAT THE ABOVE FUND REMAINED WITH THE ASSESSEE JUST FOR A ONE DAY INASMUCH AS ON 08.02.2008, IT WAS RECEIVED AND ON 09.02.2008, IT WAS REFUNDED THROUGH CHEQUE BY THE ASSESSEE. THE LEARNED COUNSEL SUBMITTED THAT DUE TO INADVERTEN T MISTAKE ON THE PART OF ACCOUNTANT OF GC, THE RECEIPT OF RS. 1 CRORE WAS WRO NGLY CREDITED IN THE ACCOUNT OF LKBPL ON 08.02.2008 AND CONSEQUENTLY, THE DEBIT ENTRY REGARDING REPAYMENT WAS MADE ON 12.02.2008 IN THE NAME OF LKBP L. HOWEVER, BOTH THESE ENTRIES OUGHT TO HAVE BEEN MADE IN THE ACCOUNT OF KEC AS THE ASSESSEE BECAUSE OF KEC CARRIED OUT THESE TRANSACTIONS ONLY. WITH REGARD TO CIT (A) IS OBSERVATION THAT THE TRANSACTION MADE ON BEHALF OF K EC IS NOT REFLECTED IN THE BOOKS OF ACCOUNTS OF LKBPL , IT WAS SUBMITTED THAT A S BE PB PAGE NO 12 , WHICH IS COPY OF KEC IN THE BOOKS OF LKBPL CLEARLY SH OWED THAT THE COMPANY HAS DULY DEBITED THE ACCOUNT OF KEC ONLY AND NOT THA T OF THE ASSESSEE WHILE SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 9 OF 14 GIVING A SUM OF RS. 1 CRORE ON 08.02.2008 AND THE DU E CREDIT WAS GIVEN TO THE ACCOUNT OF KEC ONLY AND NOT THE ACCOUNT OF THE ASSE SSEE. THESE FACTS SPEAKS THAT THE LKBPL HAS NEVER GIVEN ANY LOAN OR ADVANCE TO THE ASSESSEE. CONSEQUENTLY, QUESTION OF DEEMED DIVIDEND U/S. 2(22) (E ) DOES NOT ARISE. FURTHER THE PAYMENT VOUCHERS AND RECEIPT VOUCHERS PREPA RED BY LKBPL PLACED AT PB PAGE NO 22 & 23 AND AFFIDAVIT OF DIRECT OR OF LKBPL PLACED AT PB PAGE NO 24 & 25 ALSO SHOWED THAT THE ASSESSEE HAS N OT TAKEN ANY LOAN AND ADVANCE FROM LKBPL. THE LEARNED COUNSEL ALSO FILED AN AFFIDAVIT OF CA SACHIN BHAIJI WHO WAS REPRESENTING THE ASSESSEE BEFORE THE A O STATING THAT THE SUBMISSION WERE MADE BY HIM BEFORE THE AO WITHOUT CONSU LTING THE ASSESSEE AND HE WAS NOT FULLY AWARE ABOUT ACTUAL FACTS. THE REFORE, IT WAS CONTENDED THAT THE TRANSACTION WERE ENTERED IN TO DURING NORM AL COURSE OF BUSINESS OF TRADING OF THE ASSESSEE AND THEREFORE, SUCH TRANSA CTION CANNOT BE HELD AS FALLING WITHIN THE AMBIT OF SECTION 2(22)(E) OF THE ACT. THE LEARNED COUNSEL ALSO PLACED RELIANCE ON FOLLOWING DECISION IN SUPPORT OF HI S PROPOSITION. I) CIT VS. CREATIVE DYEING AND PRINTING (P) LTD. [2009] 318 IT R 476(DEL), II) CIT VS. AMBASSADOR TRAVELS (P) LTD. (2009) 318 ITR 476(DEL),I II) CIT VS. VIKRAM VED (2014) 367 ITR 365(BOM), IV) MUKUNDRAY K SHAH VS. C IT (2005) 277 ITR 128(KOL), V) CIT VS. ANKITECH PVT. LTD. & ORS (2011) 242 CTR 10 29(DEL). , VI) JAMU V SUNGAND VS. DCIT (2006) 100 TTJ (MUM) 1034 VII) DCIT VS. LA KRA BROTHERS (2007) 106 TTJ (CHD) 250. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HA S NOT DERIVED ANY MATERIAL BENEFIT FROM THIS TRANSACTION AS DURING THE INTERVENING PERIOD THE ASSESSEE HAS UTILIZED ONLY A SUM OF RS. 4 LAKH AND ODD AND REMAINING BALANCE WAS LYING IN HIS BANK ACCOUNT. WITHOUT PREJUDICE TO ABOVE, IT WAS SUBMITTED SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 10 OF 14 THAT ACCUMULATED BALANCE IN PROFIT & LOSS ACCOUNT A T THE BEGINNING OF THE YEAR WAS AT RS. 37,19,911/- ONLY AND THE AO WITHOU T BRINGING ON RECORD ANY MATERIAL THAT THE ACCUMULATED PROFIT AS ON THE DATE OF IMPUGNED TRANSACTION RAISED AN AMOUNT OF RS. 57,75,019/- EQUIVALENT TO SUB JECT ADDITION WAS COMPUTED, HENCE, THE AO IS NOT JUSTIFIED. 9. THE LD. D.R. RELIED ON THE ORDER OF LOWER AUTHORITI ES AND SUBMITTED THAT THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE AS THE A SSESSEE IS NOT ABLE TO JUSTIFY THAT THE TRANSACTION ENTERED IN TO WITH LKB PL, IS ROTATED THROUGH KEC FOR PURPOSE NORMAL BUSINESS TRANSACTIONS. THEREFORE, THE FI NDING AS GIVEN BY THE LOWER AUTHORITIES BE UPHELD. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTI ES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE K EC OWED THE ASSESSEE AN AMOUNT OF RS. 3.60 CRORE BECAUSE OF BUSINESS TRANSAC TION WITH THE ASSESSEE. SIMILARLY, LKBPL OWED AN AMOUNT OF RS. 5.11 CRORE TO KEC BECAUSE OF BUSINESS TRANSACTIONS. WE ALSO FIND THAT THE ASSESSEE HAS RA ISED A DEMAND AGAINST KEC ON 07.02.2008. ACCORDINGLY, ON VERBAL INSTRUCTION OF KEC, M/S. LKBPL HAS TRANSFERRED A SUM OF RS. 1 CRORE ON 08.02.2008 BY RTG S TO THE ASSESSEE. THEREFORE, THIS AMOUNT WAS RECEIVED FROM LKBPL ON BEH ALF OF M/S. KEC IS IN THE NATURE OF BUSINESS RECEIPTS OF THE ASSESSEE ROUTED TH ROUGH LKBPL , HENCE, IT CANNOT BE REGARDED AS LOAN AND ADVANCE FROM LKBPL. W E ALSO FIND THAT WHEN THE KEC WAS ADVISED BY ITS LEGAL COUNSEL THAT S UCH TRANSFER IS NOT ALLOWABLE AS PER AMENDED PROVISIONS OF SECTION 40A (3) OF THE ACT. CONSEQUENTLY, THE KEC HAS REQUESTED THE ASSESSEE T O REFUND THE SAID AMOUNT TO LKBPL. HOWEVER, THE ASSESSEE COULD NOT RE FUND THE SAME SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 11 OF 14 IMMEDIATELY AS 10 TH AND 11 TH OF FEBRUARY THERE BEING SATURDAY AND SUNDAY, HENCE, THE SAID AMOUNT COULD BE REFUNDED BY CHEQUE IS SUED ON 11.02.2008 TO LKBPL, WHICH WAS CLEARED ON 12.02.2008. THE LEAR NED COUNSEL HAS RELIED IN THE CASE OF CIT VS. AMBASSADOR TRAVELS (P) LTD. (2009 ) 318 ITR 476(DEL), WHEREIN IT WAS HELD THAT WHERE ASSESSEE, A TRAVEL AGENCY, B OOKING RESORTS FOR CUSTOMERS OF THE COMPANIES, THEY WERE NORMAL BUSINESS T RANSACTIONS AND COULD NOT BE TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) BECAUSE OF SHARE HOLDING PATTERN. SIMILAR IN THE CASE OF BOTH THE ASSES SEE AS WELL AS LKBPL AND KEC WERE DEALING IN SAME LINE OF BUSINESS AND AMOUN T WAS RECEIVED FROM LKBPL ON ACCOUNT OF BUSINESS TRANSACTIONS ON BEHALF O F KEC AS LKBPL HAD TO PAY A SUM OF RS. 5.11 CRORES TO KEC AND IN TURN THE ASSESSEE WAS TO RECEIVE RS. 3.60 CRORES FROM KEC. THEREFORE, THIS BEING NOT IN T HE NATURE OF LOAN AND ADVANCE , HENCE, DOES NOT FALLS UNDER THE PROVISION OF SECTION 2(22)(E) OF THE ACT. WE ALSO NOTE THAT THE ASSESSEE HAD DEBIT BALAN CE WITH LKBPL AND NEVER RECEIVED ANY LOAN AND ADVANCE FROM LKBPL. THIS VIEW OF US IS ALSO SUPPORTED BY DECISION ACIT VS. C. RAJINI (SMT) ( 2011) 9 ITR ( TRIB) 487 (CHENNAI )( TRIB) AND DY. CIT VS. C. SUBBA REDDY (HUF) ( 2011 ) 9 ITR (TR IB) 487 ( CHENNAI) (TRIB) WHEREIN THE A SSESSEE WAS A DIRECTOR IN TWO COMPANIES HOLDING SUBS TANTIAL SHAREHOLDING IN BOTH. CERTAIN SUM WAS TRANSFERRED FRO M ONE COMPANY TO ANOTHER AT INSTANCE OF ASSESSEE. ASSESSEE HAVING SU BSTANTIAL CREDIT BALANCE WITH COMPANY, CANNOT HELD AS LOAN OR DEPOSIT NOR CAN B E ASSESSED AS DEEMED DIVIDEND . FURTHER THE CASE LAWS RELIED BY THE A.R. ALSO SUPPOR TS HIS VIEW. THUS, THE CIRCUMSTANTIAL EVIDENCES SHOWS THA T THE ASSESSEE HAD RECEIVED THE SUM OF RS. 1 CRORE ON 08.02.2008 ON ACC OUNT OF BUSINESS RECEIPTS SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 12 OF 14 ON BEHALF OF KEC WHO IN TURN TO RECEIVE THE SAID SUM FROM LKBPL. WE ALSO FIND FROM THE COPY OF BANK ACCOUNT THAT THE ENTRIES OF THI S TRANSACTION ARE DULY REFLECTED IN RESPECTIVE ACCOUNTS. WE ALSO FIND THAT THE ASSESSEE HAS NOT AVAILED ANY BENEFIT BECAUSE OF THIS TRANSACTION AS ON LY A SUM OF RS. 4 LAKH WAS ONLY PAID AND BALANCE AMOUNT WAS LYING IN BANK AC COUNT OF THE LKBPL. THUS, IT APPEARS TO BE GENUINE BUSINESS TRANSACTION CARRIED OUT IN THE NORMAL COURSE OF BUSINESS. WE ALSO FIND THAT THE DIRECTOR OF LKBPL HAS FURNISHED AN AFFIDAVIT IN THIS REGARD. FURTHER, THE CA SHRI SACH IN BHAIJI ALSO GIVE AN AFFIDAVIT STATING THAT HE HAS NOT CONSULTED THE ASSESSEE REGA RDING FACTS AND COULD NOT BRING BEFORE THE AO PROPER FACTS. THEREFORE, THIS WAS INADVERTENT MISTAKE TOOK PLACE DUE TO NEGLIGENCE OF EMPLOYEE OF KEC. IN VIEW O F THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE AO WAS NOT JUSTIFIED IN TREATING SUCH A SINGLE ENTRY OF RECEIPTS AS DEE MED DIVIDEND U/S. 2(22)(E) OF THE ACT. ACCORDINGLY, GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. GROUND NO. 2 RELATES TO CONFIRMING THE ADDITION OF R S.15,57,894/- BEING SPECULATION TRANSACTION WITHOUT CONSIDERING MATERIAL FACTS. 12. BRIEFLY STATED THE FACTS APROPOS OF THIS GROUND ARE THAT THE AO NOTICED SOME CREDIT NOTES GIVEN TO VARIOUS PARTIES. ACCORDING TO THE AO, THE ASSESSEE ENTERED IN TO SUPPLY OF GOODS AT FUTURE DATE BUT DID N OT DELIVER THE GOODS AND PAID THE DIFFERENCE OF AMOUNT OF AGREED RATE WITH CU RRENT RATE CURRENT, HENCE, THIS WAS IN THE NATURE OF SPECULATION TRANSAC TION. IT WAS ALSO FOUND THAT THERE WAS NO REFERENCE OF PURCHASE AND SALE OF GOODS WITH RESPECT OF THREE PARTIES WITH WHOM SETTLEMENT WAS MADE. HENCE, THE AO TREATED THE SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 13 OF 14 AGGREGATE SUM OF RS. 15,57,894/- AS SPECULATION TRANS ACTION AND CONSEQUENTLY, SAME WERE ADDED TO TOTAL INCOME. 13. BEING, AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE T HE LD. CIT (A). THE LD. CIT (A) NOTED THAT PARTIES IN RESPECT OF WHICH CREDI T NOTES ISSUED , THE ASSESSEE HAS NOT CARRIED OUT ANY TRANSACTION OTHER THAN SETTLEMENT , HENCE, THE ASSESSEE WAS NOT ELIGIBLE FOR CLAIM OF SET-OFF I N RESPECT OF SPECULATION LOSS AGAINST OTHER TRANSACTION. 14. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFOR E THE TRIBUNAL. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THE ASSESSEE HAS ENTERED IN TO CONTRACTS IN NORMAL COURSE OF BUSINESS BUT IN SOME CA SES DUE TO UNFORESEEN CIRCUMSTANCES NORMAL AND BUSINESS, COMPULSION ACTUAL DEL IVERY DOES NOT TAKE PLACE. IN SUCH CASE CONTRACT BETWEEN PARTIES GETS RESC IND BUT IN ORDER TO AVOID LEGAL SUITS AND PROTRACTED LITIGATION, SOME MUT UAL SETTLEMENT IS MADE. THE LD. A.R. ARGUED THAT THE ASSESSEE HAD RECEIVED CREDIT OF RS. 1,15,84,725/- FROM VARIOUS PARTIES AND LIKEWISE HE ALSO COMPELLED TO MAKE PAYMENT TO VARIOUS PARTIES OF RS. 17,55,161/- BY WAY OF SETTLEME NT AND EARNED PROFIT OF RS. 98,29,564/- WHICH DULY INCLUDED IN GROUNDS PROFIT O F RS. 2,02,75,422/- SHOWN IN AUDITED ACCOUNTS AND SUCH FACT WAS NOT DISBELIEVED BY THE AO. THEREFORE, THE AO SHOULD HAVE CONSIDERED THE SAME ALLOWED THE D EDUCTION EVEN ON ACCOUNT OF SPECULATION TRANSACTION LOSS. 15. THE LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIE S. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTI ES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSES SEE HAD CARRIED OUT CERTAIN TRANSACTION, WHICH ARE NOT DELIVERY BASED HE NCE; THE AO HAS RIGHTLY SHRI HEMANT JAIN / I.T.A. NO. /632IND/2013/A.Y.:08- 09 PAGE 14 OF 14 TREATED THE SAME AS SPECULATION TRANSACTION. HOWEVER , WE FIND FROM THE CONTENTION OF THE LD. A.R. THAT THE ASSESSEE HAS AL SO RECEIVED A SUM OF SIMILAR IN NATURE FROM VARIOUS PARTIES, WHICH HAS BEEN DULY CLAIMED TO HAVE BEEN REFLECTED IN PROFIT & LOSS ACCOUNT AND INCLUDED IN GROSS PROFIT SHOWN BY THE ASSESSEE. WE THEREFORE, CONSIDER IT APPROPRIATE TO RES TORED THIS ISSUE TO THE FILE OF THE AO TO VERIFY WHETHER THE ASSESSEE HAS ALSO S HOWN PROFIT ON ACCOUNT OF SPECULATION TRANSACTION , AND IF FOUND CORRECT , THE AO MAY ALLOW SET-OFF OF LOSS ON ACCOUNT OF SPECULATION TRANSACTION OR BALANCE MAY ALLOWED TO BE CARRIED FORWARD . THIS GROUND OF APPEAL IS THEREFORE , SET-ASIDE TO THE FILE OF THE AO. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. 18. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.01.2017 SD/- SD/- (D.T.GARASIA) JUDICIAL MEMBER (O.P.MEENA) ACCOUNTANT MEMBER DATED : 16TH JANUARY, 2016.