Dr. Manju Dang, New Delhi V. DCIT, New Delhi

ITA 6421/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7010 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 16-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Salary income; Opportunity of being heard; Principle of natural justice; Cost of acquisition; Deemed dividend; Assessment record; Commercial expediency

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH E, NEW DELHI BEFORE : SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 6421/DEL/2016 ASSESSMENT YEAR: 2012-13 DR. MANJU DANG, D - 1, HAUZ KHAS, NEW DELHI (PAN-AASPD3534E) (APPELLANT) VS. DCIT, CIRCLE 7(1), NEW DELHI. (RESPONDENT) ITA NO. 4538/DEL/2017 ASSESSMENT YEAR: 2012-13 DR. NAVIN DANG, C - 2/1, SAFDARJUNG DEVELOPMENT AREA, NEW DELHI.( PAN-AASPD3538J) (APPELLANT) VS. DCIT, CIRCLE 7(1), NEW DELHI. (RESPONDENT) A PPELLANT BY DR. RAKESH GUPTA, ADVOCATE RE SPONDENT BY SH. S.R. SENAPATI, SR. DR ORDER PER L.P. SAHU, A.M.: THESE TWO APPEALS HAVE BEEN FILED BY DIFFERENT ASS ESSEES AGAINST THE ORDERS OF LD. CIT(A)-37 DATED 19.10.2016 AND CIT(A) -III DATED 29.05.2017 FOR THE ASSESSMENT YEAR 2012-13. THE ISSUES INVOLVED IN BOT H THE THESE APPEALS ARE COMMON AND THE SAME WERE HEARD TOGETHER. THEREFORE, FOR THE SAKE OF BREVITY AND CONVENIENCE, WE TAKE UP THE APPEAL OF DR. MANJU DANG, THE DECISION ON WHICH SHALL BE EQUALLY APPLICABLE TO THE APPEAL OF DR. NA VIN DANG, AS ADMITTED BY BOTH THE PARTIES. DR. MANJU DANG HAS RAISED FOLLOWING GR OUNDS IN HER APPEAL : DATE OF HEARING 27.06.2018 DATE OF PRONOUNCEMENT 31 .07.2018 ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 2 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACT ION OF LD. AO IN MAKING ADDITION OF RS. 11,34,0007- ON ACCOUNT OF INCOME FR OM HOUSE PROPERTY AND THAT TOO ON NOTIONAL BASIS AND THAT TOO BY RECORDIN G INCORRECT FACTS AND FINDINGS AND WITHOUT OBSERVING THE PRINCIPLES OF NA TURAL JUSTICE. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, T HE ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.L 1,34,0007- ON ACCOUNT OF INCOME FROM HOUSE PROPERTY ON NOTIONAL B ASIS FOR THE BASEMENT FLOOR, GROUND FLOOR AND THE FIRST FLOOR AT PAR IGNO RING THE RENT AGREEMENT, MUNICIPAL VALUATIONS AND THE LEGAL DISPUTES AGAINST THE PROPERTY; IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACT ION OF LD. AO IN DISALLOWING RS.6,06,650/- ON ACCOUNT OF COMMISSION EXPENSES PAI D ON THE SALE OF HOUSE PROPERTY. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACT ION OF LD. AO IN MAKING ADDITION OF RS.2,50,00,000/- ON ACCOUNT OF DEEMED D IVIDEND U/S 2(22)(E) AND THAT TOO BY RECORDING INCORRECT FACTS AND FINDINGS AND WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE. 5. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, A CTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.2,50,00,000/- ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) IS BAD IN L AW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, T HE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO IN NOT TREATING THE 'RENT SECURITY DEPOSIT' TO BE A BUSINESS / COMMERCIAL TRANSACTION AND THUS WRO NGLY TERMED IT TO BE IN THE NATURE OF AN 'ADVANCE AS ENVISAGED IN SECTION 2(22)(E) IN THE HANDS OF THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND DOCTOR BY PROFESSION DECLARING INCOME FROM SALARY, HOUSE P ROPERTY, INCOME FROM CAPITAL GAIN AND OTHER SOURCES. THE ASSESSEE FILED HER RETU RN OF INCOME ON 30.09.2012 ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 3 DECLARING INCOME OF RS.1,44,99,560/-.. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. IN T HE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS RE CEIVED RENT FROM M/S. MEDICAL DIAGONOSTIC CENTRE AS PER RENT AGREEMENT DATED 01.1 0.2009 FOR LETTING OUT THE PROPERTY AT D-1 HAUZ KHAS, NEW DELHI AND RECEIVED R S.1.5 LACS PER MONTH AS RENT. THE ASSESSEE HAD ALSO RECEIVED A SECURITY DEPOSIT O F RS.1.00 CRORE FROM THE TENANT. IN THIS REGARDING THE ASSESSEE ISSUED SHOW CAUSE NOTICE. IN RESPONSE, THE ASSESSEE SUBMITTED AS UNDER : 'DR. DANGS LAB PRIVATE LIMNED HAS BEEN OPERATING A PATHOLOGY LABORATORY FROM D-1, HAUZ KHAS, NEW DELHI SINCE LONG. THE ASSES SES HAS RECEIVED A RENT SECURITY OF RS. 1 CRORE AGAINST PROPERTY NO. D-1, H AUZ KHAS, NEW DELHI. IT IS SUBMITTED THAT THE ASSESSEE RECEIVED SECURITY DEPOS IT FROM M/S MEDICAL DIAGNOSTIC CENTRE UNDER A RENT AGREEMENT DATED 01.1 0.2009 FOR RENTING OUT BASEMENT, GROUND FLOOR AND FIRST FLOOR OF PROPERTY NO D-1, HAUS KHAS NEW DELHI. THE ASSESSES HAS PRESENTLY RECEIVED A MONTHLY RENT OF RS. 1.50 LACS FROM DR. DANGS LAB PRIVATE LIMITED. AS REGARDS THE JUSTIFICATION OF RENT SECURITY, IT I S SUBMITTED THAT THE TOTAL COVERED AREA OF THE PROPERTY IS 5700 SQ. FT APPROX AND THE PROPERTY IS A CORNER PLOT WITH TWO SIDE OPENING. THUS, KEEPING IN VIEW THE MARKET RENT TO BE RS. 100/- PER SQFT, THE 50% OF THE RENT IN OPEN MARKET WOULD WORK OUT TO RS. 2,85,000/- PER MONTH. THUS THE INTEREST COMPONEN T @ 9% PER ANNUM OF THE RENT SECURITY OF RS. 1 CRORES KEEPING IN VIEW T HE BANK RATES, WOULD WORK OUT TO RS. 75,000/- PER MONTH. IN VIEW OF THIS, THE RENT SECURITY STANDS JUSTIFIED AS THE PAYMENT OF RENT IS ON THE LOWER SIDE.' THE ASSESSEE VIDE LETTER DATED 18.03.2015 ALSO SUBM ITTED AS UNDER : 3. AS REGARDS THE JUSTIFICATION OF INCOME FR OM RENT, THE ASSESSEE HEREBY BRINGS NEW FACTS IN THE CASE AND IT IS REQUESTED TH AT THE SAME MAY PLEASE BE CONSIDERED BEFORE COMPLETING THE ASSESSMENT. IT IS VERY IMPORTANT TO NOTE THE FOLLOWING FACTS:- A) THAT THE PROPERTY IS A RESIDENTIAL PROPERTY AND THAT NONCOMMERCIAL ACTIVITIES COULD BE CARRIED IN THE RESIDENTIAL AREA . ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 4 B) THAT THE BASEMENT WAS SANCTIONED FOR A DOMESTIC STORAGE USE AND NOT PERMISSIBLE AS A DWELLING UNIT AS PER THE MASTER PL AN. C) THAT THE COMPANY CARRIED COMMERCIAL ACTIVITIES F ROM THE GROUND FLOOR WITH OPEN SPACE ONLY AND THE FIRST FLOOR WAS USED F OR THE RESIDENCE OF ITS JUNIOR STAFF MEMBERS ONLY. D) THAT THE AVERAGE RENT RATES FOR A RESIDENTIAL PR OPERTY WERE RS.30-37 PER SQFT AND FOR AN APPROVED COMMERCIAL PROPERTY RS .102-124 PER SQFT DURING THE PERIOD ENDED 31.03.2012. 3.1 IT IS SUBMITTED THAT THE ASSESSEE ALONG WITH TH E OTHER CO-OWNER HAS LET OUT THE RESIDENTIAL PROPERTY SITUATED AT D-1, HAUZ KHAS, NEW DELHI TO DR. DANGS LAB PRIVATE LIMITED IN THE PAST. THE COMPA NY PAID A MONTHLY RENT OF RS. 2 LACS EACH UP TO THE PERIOD ENDED ON 3 1-3-2011. THERE WAS A SEALING DRIVE CARRIED BY MCD AS PER THE ORDERS OF THE APEX COURT AND THE LAB WAS UNDER A THREAT OF CLOSURE ALL THE TIMES . SINCE, NO COMMERCIAL ACTIVITIES COULD BE CARRIED ON, THE SAID PROPERTY; THE COMPANY STILL USED THE GROUND FLOOR FOR ITS BUSINES S ACTIVITIES. THUS, IT REDUCED THE RENT FROM RS. 2 LACS TO RS.1.5 LACS PE R MONTH WEF 1-4- 2011. 3.2 IT IS SUBMITTED THAT A PROPERTY WHICH IS UNDER A SEALING DRIVE, WILL NEVER FETCH COMMERCIAL RENT RATES OF RS. 100 PER SQFT. THU S IT WOULD BE JUSTIFIED TO TAKE AN AVERAGE OF THE TWO RATES (RESI DENTIAL & COMMERCIAL PROPERTIES) AS GIVEN IN PARA 3(C) ABOVE IE, RS. 80/ - PER SQFT. 3.3 IT IS SUBMITTED THAT OUT OF THE TOTAL COVERED A REA OF 5,700 SQFT APPROX IN THE PROPERTY, THE TENANT USED 1,900 SQ FT APPROXIMA TELY SPACE AT GROUND FLOOR AND THE OPEN SPACE. THE FIRST FLOOR WAS USED FOR THE RESIDENCE OF ITS JUNIOR STAFF MEMBERS ONLY & THE AV ERAGE RENT RATES HAVE ADOPTED AT RS. 37/-.THE FLOOR WAS USED FOR STORAGE O F DISCARDED GOODS ETC ONLY. IT IS HEREBY CONFIRMED THAT THE BASEMENT FLOOR HAS NOT BEEN USED FOR OFFICE AND ANY OTHER BUSINESS ACTIVITIES. THUS, IT IS REQUESTED THAT THIS FACT MAY PLEASE BE KEPT IN MIND WHILE COM PLETING THE ASSESSMENT. 3.4 YOUR HONOUR KIND ATTENTION IS FURTHER INVITED T O THE RELEVANT PROVISIONS OF SECTION 23 ARE REPRODUCED AS UNDER- ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 5 SECTION 23 (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALU E OF ANY PROPERTY SHALL BE DEEMED TO BE- (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PERVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR R ECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM R EFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE : 3.5 I) IT MAY BE NOTED THAT THE VS. SHARE OF THE AS SESSEE IN THE ANNUAL VALUE AS PER MCD VALUATION IS RS. 865,9047- (1/2 OF RS. 1 7,31,8087-) FOR THE PERIOD ENDED 31-3-2012. II) THE ACTUAL RENT RECEIVED BY THE ASSESSEE IS RS. 18,00,000/- AS PER RENT AGREEMENT EXECUTED BETWEEN THE PARTIES. IN THIS CAS E, THE PROPERTY WAS ALREADY LET OUT AT THE BEGINNING OF THE ASSESSMENT YEAR. A PHOTOCOPY OF RENT AGREEMENT IS ALSO ENCLOSED HEREWITH. III) A DETAILED CHART OF RENT RECEIVED KEEPING IN V IEW THE STANDARD RATE IN OPEN MARKET ON AVERAGE BASIS ALONG WITH EXPLANAT ION IS ENCLOSED HEREWITH. THE 50% OF THE RENT IS ESTIMATED TO BE RS. 1,50,000/- PER MONTH. IN VIEW OF THIS, THE ACTUAL RENT RECEIVED PLUS INTE REST COMPONENT ON RENT SECURITY IS MORE THAN MUNICIPAL VALUATION AND THE S TANDARD RENT. THUS THE SAME MAY PLEASE BE ACCEPTED. 3.6 YOUR HONOUR'S KIND ATTENTION IS INVITED TO THE DECISION GIVEN IN CASE OF ADDL. CIT V. MRS. LEELA GOVINDAN [(1978) 113 ITR 136 (MAD)], THE ASSESSEE PURCHASED A HOUSE PROPERTY SUBJECT TO A LEASE YIELDING A SPECIFIC SUM OF MONTHLY RENT. SHE FILED HER RETURN OF INCOME ON THE BASIS OF THE ACTUAL RENT RECEIVED. THE ITO TOOK THE FIGURE ON THE BASIS OF THE MUNICIPAL VALUATION WHICH WAS HIGHER. THE AAC AND TH E TRIBUNAL ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 6 ACCEPTED THE ASSESSEE'S BASIS. IT WAS HELD, ON FACT S, THAT AS IT COULD NOT BE SAID THAT THE RENT FIXED UNDER THE LEASE DEED WA S NOT GENUINE OR HAD BEEN FIXED UNDER THE LEASE DEED AT A LOWER FIGURE F OR SOME ULTERIOR REASON BY OR OTHER, IT WAS NOT OPEN TO THE REVENUE TO IGNORE THE RENT ACTUALLY RECEIVED BY THE ASSESSEE. IT IS BROUGHT TO YOUR KNOWLEDGE THAT DURING THE COU RSE OF ASSESSMENT PROCEEDING IN THE CASE OF DR DANG_LAB PATH. LTD, TH E RENT AGREEMENT EXECUTED WITH THE OWNERS AND TENANT WAS ACCEPTED AS GENUINE. THE RENT WAS NOT FIXED WITH ANY ULTERIOR REASON; THE IN COME FROM SUCH PROPERTY HAS TO BE COMPUTED ON THE BASIS OF ACTUAL RENT AND NOT ON THE BASIS OF MUNICIPAL VALUATION OR STANDARD RENT EVEN WHEN THE SAME ARE LESS THAN THE ACTUAL RENT. 3.7 IT MAY NOT BE OUT OF PLACE TO SUBMIT HERE THAT BOTH THE ASSESSEE AND THE COMPANY ARE IN THE MAXIMUM TAX BRACKET AND NO LOSS TO REVENUE HAS BEEN CAUSED BY NOT CHARGING RENT FROM T HE COMPANY. THAT IF THE RENT WAS TO BE CHARGED, THE SAME COULD HAVE BEEN CLAIMED AS A DEDUCTION BY THE COMPANY U/S 30 OF THE INCOME TAX AC T, 1961. NO NOTIONAL INCOME CAN BE TAXED UNDER THE HEAD 'HOUSE PROPERTY' EXCEPT U/S 23(4) WHICH IS APPLICABLE FOR RESIDENTIAL PROPE RTIES ONLY. ALSO THE ASSESSEE WOULD HAVE BEEN BENEFITED BY CLAIMING 30% DEDUCTION UNDER SECTION 24 AND PAYING TAX ONLY ON THE 70% OF THE RE NT. 3.8. IN VIEW OF THIS, THE ACTUAL RENT DECLARED BY T HE ASSESSEE FROM D-1, HAUZ KHAS, NEW DELHI STANDS JUSTIFIED AND THE SAME MAY P LEASE BE ACCEPTED. FROM THE ABOVE SUBMISSIONS, THE ASSESSING OFFICER W AS NOT CONVINCED AND HE REFERRED TO SECTION 23 OF THE ACT. ACCORDINGLY, AS PER SUBMISSIONS OF THE ASSESSEE DATED 12.03.2015, IN WHICH THE ASSESSEE HAD SUBMITT ED THAT MARKET RENT OF THE PROPERTY IS RS.100/- SQ. FT. . TOTAL COVERED AREA O F THE PROPERTY WAS 5700 SQ. FT.. THEREFORE, THE TOTAL RENT OF THE PROPERTY WORKED OU T TO RS.5,70,0000/- PER MONTH, 50% OF THE ASSESSEES SHARE COMES TO RS.2,85,000/- PER MONTH WHEREAS THE ASSESSEE HAD SHOWN THE RENT RECEIPT AT RS.1,50,000/ - PER MONTH. THEREFORE, THE DIFFERENCE OF THE NOTIONAL RENT AFTER GIVING STANDA RD DEDUCTION OF RS.11,34,000/- ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 7 WAS ADDED TO THE INCOME OF THE ASSESSEE UNDER THE H EAD INCOME FROM HOUSE PROPERTY. 2.1 THE ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE HAD SOLD TWO PROPERTIES E-3 AND E-4, HAUZ KHAS MARKET, NEW DELHI , ON WHICH THE ASSESSE CLAIMED CAPITAL LOSS OF RS.1,56,43,467/-. THE ASSES SEE HAD CLAIMED COST OF FURNITURE AS COST OF ACQUISITION, BUT THE AO OBSERV ED THAT IN THE SALE DOCUMENT, FURNITURE WAS NOT SOLD WITH HOUSE PROPERTY. THEREFO RE, THE ASSESSING OFFICER DISALLOWED THE COST OF FURNITURE CLAIMED AS COST OF ACQUISITION. ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD PAID COMMISS ION EXPENSE FOR BOTH THE PROPERTIES OF RS.3,03,325/- EACH TO LALJI PROPMART, THE PROOF OF COMMISSION EXPENSES TOWARDS SALE OF PROPERTIES IS PLACED AT PA PER BOOK PAGES 89 TO 92. THE COMMISSION EXPENSES WAS NOT CLAIMED IN THE ORIGINAL RETURN, BUT SUCH EXPENSES HAVE BEEN CLAIMED BY THE ASSESSEE IN THE REVISED CO MPUTATION FILED BY THE ASSESSEE. THE ASSESSEE FAILED TO PRODUCE ANY EVIDEN CE TO WHOM SUCH PAYMENT WAS MADE BEFORE THE ASSESSING OFFICER. ACCORDINGLY, THE ASSESSING OFFICER RECOMPUTED THE CAPITAL LOSS OF RS.16,63,777/- WHICH INCLUDES DISALLOWANCE OF COMMISSION EXPENSES OF RS.6,06,650/-. 2.2 FURTHER, THE ASSESSING OFFICER NOTED THAT ON TH E ASSESSMENT RECORD OF DR. DANGS LAB. PVT. LTD. OF ASSESSMENT YEAR 2012-13, IT REVEALS THAT THIS COMPANY HAS GIVEN A SECURITY DEPOSIT OF RS.5.00 CRORES TO A BUI LDER M/S. USUAL LEASING FINANCE PVT. LTD. (ULFPL) FOR TAKING ON LEASE A PROPERTY SI TUATED AT C-2/1 SDA, NEW DELHI AS PER AGREEMENT DATED 07.04.2011 WHICH IS PLACED A T PB 102 TO 105, BUT THE TRANSACTION WAS NOT MATERIALIZED. THEREAFTER, THE S AID SECURITY DEPOSIT WAS TRANSFERRED IN THE NAME OF ASSESSEE ALONG WITH DR. NAVIN DANG. THEREAFTER A NEW AGREEMENT WAS EXECUTED BETWEEN TWO CO-OWNERS AND DR . DANG LAB. PVT. LTD. ON ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 8 25.05.2011 WHICH IS PLACED AT PAGE NOS. 110 TO 111 OF THE PAPER BOOK. AN AGREEMENT WAS ALSO MADE BY SHRI PRASHANT JAIN WITH DR. NAVIN DANG ON 14.05.2011 FOR PURCHASE OF PROPERTY, WHICH IS PLACE D AT PAGE 108-109. THE AMOUNT OF SECURITY DEPOSIT OF RS.5 CRORES WAS KEPT AS A SECURITY DEPOSIT BY SMT. MANJU DANG AND DR. NAVIN DANG. THE SAID PROPERTY WA S PURCHASED IN THE NAME OF BOTH THE DIRECTORS (NAVIN DANG AND MANJU DANG). THI S PROPERTY WAS LET OUT TO M/S. DANGS LAB. PVT. LTD. THE ASSESSEE ALSO FILED W RITTEN SUBMISSIONS ON THIS ISSUE. THE ASSESSING OFFICER TREATED THE SECURITY D EPOSIT OF RS.5 CRORES AS DEEMED DIVIDEND U/S. 2(22)(E) IN THE HANDS OF BOTH THE DIR ECTORS AND MADE ADDITION OF RS.2,50,00,000/- IN THE HANDS OF EACH AS DEEMED DIV IDEND. FEELING AGGRIEVED FROM THE ABOVE ADDITION, THE ASSESSEE APPEALED BEFO RE THE LD. CIT(A) WHERE THE ASSESSEE SUBMITTED DETAILED SUBMISSIONS AND RELIED ON CASE LAWS. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DISMISSED THE APPEAL. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 3. THE LD. AR REITERATED THE SUBMISSIONS MADE BEFOR E THE LOWER AUTHORITIES AND HE SUBMITTED A CASE LAW COMPILATION CONTAINING 135 PAGES. HE HAS ALSO SUBMITTED A WRITTEN SYNOPSIS, INTER ALIA, STATING T HAT THAT ACTUAL RENT RECEIVED WAS RS. 18,00,000/- WHEREAS IT HAS BEEN ASSESSED BY LD. AO AT RS. 30.20 LACS ON NOTIONAL BASIS BY ADOPTING THE FAIR MARKET RENTAL O F RS. 2,85,000/- PER MONTH. IT WAS SUBMITTED THAT RENT OF RS. 1,50,000/- PER MONTH WAS THE ACTUAL RENT RECEIVED IN A.Y. 2010-11, A.Y. 2011-12 AND DR. DANG LABS P. LTD. RUNNING A DIAGNOSTIC LAB AND IT WAS RESIDENTIAL PROPERTY, NO COMMERCIAL ACTI VITY WAS CARRIED OUT AND BECAUSE OF THIS THERE WAS SERIOUS DISPUTE WITH NEIG HBORS AND THAT HON'BLE SUPREME COURT ULTIMATELY ORDERED TO CLOSE DOWN THE LAB AND THEREFORE, IN SUCH CIRCUMSTANCES, THE RENTAL VALUE RECEIVED BY THE ASS ESSEE WAS MORE THAN FAIR MARKET. IT WAS, THEREFORE, SUBMITTED THAT THE ASSES SEE HAS BROUGHT ON RECORD ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 9 EVIDENCES TO PROVE THAT THE RENT RECEIVED AT RS.1,5 0,000/- PER MONTH WAS FAIRLY REASONABLE. IN SUPPORT THE ASSESSEE HAD SUBMITTED T HE DETAILS OF RENT RECEIVED (PB-86), COPY OF LEASE DEED (PB-29-31), ORDER OF HO NBLE SUPREME COURT (PB-32- 81). HE HAS ALSO RELIED ON THE FOLLOWING DECISIONS : (I). SHYAM UDYOG P. LTD. VS. ACIT, 3 SOT 98 (DELHI ) (II). ADDL. CIT VS. MRS. LEELA GOVINDAN, 113 ITR 1 36 (MAD.) (III). SHEILA KOUSHISH VS. CIT, 131 ITR 435 (SC) (IV). AMOLAK RAM KHOSLA VS. CIT, 131 ITR 589(SC) (V). CIT VS. KISHANALAL & SONS(UDYOG) P. LTD., 260 ITR 481(CAL) (VI). CIT V. SARDAR EXHIBITORS P. LTD., 203 TAXMAN N 640 (VII). CIT VS. VINAY BHARAT RAM & SONS (HUF) 261 I TR 632 (DEL) (VIII). DEWAN DAULAT RAI KAPOOR VS. N. DELHI MUNICI PAL COMMITTEE, 122 ITR 700 (SC) (IX). CIT VS. L. BANSIDHAR & SONS, 209 ITR 465 (DEL ) SEVERAL OTHER DECISIONS HAVE BEEN REFERRED TO IN TH E WRITTEN SYNOPSIS BY THE ASSESSEE. 3.1 REGARDING THE SECOND ISSUE, IT WAS SUBMITTED TH AT THE PAYMENT OF COMMISSION WAS MADE THROUGH CHEQUE ON SALE OF PROPE RTY TO M/S. LALJI PROPMART AND WAS REFLECTED IN THE CAPITAL ACCOUNT OF THE ASS ESSEE. HE HAS SUBMITTED CAPITAL ACCOUNT AT PAGE 28 OF THE PAPER BOOK, IN WHICH THE COMMISSION WAS ADJUSTED IN THE CAPITAL. THE ASSESSEE HAS SUBMITTED SUBSTANTIAL EVIDENCES AT PAGE 89-92 TO JUSTIFY THE PAYMENT OF COMMISSION AND THE ASSESSING OFFICER WAS NOT JUSTIFIED TO OBSERVE THAT NO SUCH EVIDENCE WAS FILED. 3.2 IT WAS NEXT CONTENDED THAT THAT DDLPL WAS RUNNI NG A LABORATORY IN THE PREMISES NAMELY D-1 HAUZ KHAS (OWNED BY THE APPELLA NT ONLY) WHICH WAS THE RESIDENTIAL AREA DUE TO WHICH THERE WAS INTENSE DIS PUTE WITH THE NEIGHBORS WHO WERE INSISTING THAT THE COMMERCIAL ACTIVITY BE NOT UNDERTAKEN FROM THE ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 10 RESIDENTIAL AREA AND INTENSE LITIGATION WAS GOING O N. DUE TO THESE FACTORS, DDLPL WAS LOOKING FOR SOME OTHER PREMISES AND THUS THIS A MOUNT WAS PAID BY DDLPL TO AN UNRELATED COMPANY M/S USUAL LEASING & FINANCE P LTD. (ULFPL) AS INTEREST FREE SECURITY FOR THE PREMISES WHICH WAS TO BE OWNE D BY ULFPL AND WHICH DDLPL AGREED TO TAKE ON RENT FOR SHIFTING ITS LAB F ROM THE EXISTING RESIDENTIAL AREA. BUT THE PROPERTY COULD NOT BE ACQUIRED BY ULF PL DUE TO RESOURCE CONSTRAINT AT THEIR END AND THEN IT WAS EVENTUALLY PURCHASED B Y THE APPELLANT & HER HUSBAND TO BE USED FOR GIVING ON RENT TO DDLPL FOR SHIFTING THE LABORATORY FROM EXISTING RESIDENTIAL AREA & WHICH IN FACT LATER ON WAS SHIFT ED TO SUCH NEWLY PURCHASED BUILDING TOO & RENTAL INCOME RECEIVED BY THE APPELL ANT FROM DDLPL AND HENCE SUCH SECURITY WAS TRANSFERRED/ADJUSTED IN THE NAME OF THE APPELLANT & HIS WIFE BY DDLPL THROUGH BOOK ENTRY. IT WAS SUBMITTED THAT FIRSTLY, THERE WAS NO FLOW OF MONEY FROM DDLPL TO THE APPELLANT WHICH IS MUST SO AS TO ATTRACT SECTION 2(22)(E) AND IN ANY CASE, EVEN IF THERE WAS FLOW OF MONEY FROM DDLPL TO THE APPELLANT, IT WAS A PAYMENT FOR BUSINESS TRANSACTIO N I.E. SECURITY DEPOSIT FOR LETTING OUT THE PROPERTY IN AS MUCH AS THE SAID PRE MISES PURCHASED BY THE APPELLANT WAS TAKEN ON RENT BY DDLPL BY SHIFTING IT S LAB FROM EXISTING RESIDENTIAL AREA TO THE PRESENT PREMISES. IT WAS SUBMITTED THAT IT WAS BUSINESS TRANSACTION AS IS EVIDENT FROM ABOVE PLEADINGS AND EVIDENCES AN D COULD NOT BE TERMED AS LOAN/ADVANCE GIVEN TO THE SHAREHOLDER AND HENCE PRO VISION OF SECTION 2(22)(E) IS NOT APPLICABLE. RELIANCE IS PLACED ON SEVERAL DECIS IONS AS UNDER: (I). CIT VS. RAJ KUMAR 228 CTR 506(DEL)/ 318 ITR 46 2(DEL) (II). CIT VS. CREATIVE DYEING & PRINTING P LTD. 229 CTR 250(DEL)/318 ITR 476(DEL) SECOND CONTENTION IS THAT IN ANY CASE, NO PAYMENT W AS MADE BY DDLPL IN THE YEAR UNDER APPEAL AS NOTED BY AO AT PAGE 12 OF THE ASSESSMENT ORDER AND SUPPORTED BY PB 102-103 AND THUS, NO ADDITION CAN B E MADE IN THE HANDS OF THE ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 11 APPELLANT IN THE YEAR UNDER CONSIDERATION IN VIEW O F THE FOLLOWING JUDICIAL DECISIONS:- 332 ITR 63 (BOM) 120 TTJ 1004 (KOL) 133 TTJ 490 (DEL) 3.3 THIRD CONTENTION ON BEHALF OF THE ASSESSEE HAS BEEN THAT THERE WAS NO FLOW OF MONEY FROM DDLPL TO THE APPELLANT AND TRANSFER W AS BY WAY OF BOOK ENTRY, HENCE, PROVISIONS OF SECTION 2(22)(E) IS NOT APPLI CABLE AS HELD IN: (I). CIT VS. SMT. SAVITHRI SAM 144 CTR 17 (MAD)/ 23 6 ITR 1003 (MAD) (II). ACIT VS. LAKSHMI KUTTY NARAYAN 112 TTJ 396 (C OCHIN) IT IS ALSO SUBMITTED THAT ULFPL ENTERED INTO AGREE MENT WITH THE REAL OWNERS FOR THE PURCHASE OF PROPERTY AND PAID AN AGGREGATE AMOU NT OF RS. 5 CRORES TOO, AND IF ON THE STRENGTH OF SUCH ARRANGEMENT, THEY ENTERED I NTO AGREEMENT TO LEASE OUT THE PROPERTY TO BE ACQUIRED, THERE IS NOTHING WHICH COULD BE READ AS ADVERSE. SIMILARLY, IF PROPERTY COULD NOT BE PURCHASED BY UL FPL AND IT WAS REALIZED BY THEM AND THEY FOUND THE APPELLANT TO BUY THE PROPER TY AND AGREED TO ADJUST THE SECURITY RECEIVED INTO THE ACCOUNT OF THE APPELLANT , WHAT ADVERSE COULD BE READ INTO IT IS BEYOND COMPREHENSION. RELIANCE IS ALSO P LACED ON THE FOLLOWING DECISIONS : (I). AR CHADHA & CO. INDIA (P) LTD. VS. DCIT, 133 TTJ 490 (II). ITO VS. USHA COMMERCIAL PVT. LTD., 120 TTJ 1 004. ON THE STRENGTH OF THE ABOVE CONTENTIONS, THE LD. AR URGED FOR ALLOWING THE APPEAL OF ASSESSEE. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE HAS HIMSELF ACCEPTE D THAT THERE WAS A MARKET RATE FOR LETTING OUT THE PROPERTY AT RS.100 PER SQ. FT. THEREFORE, THE LD. ASSESSING ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 12 OFFICER HAS RIGHTLY DETERMINED THE ANNUAL VALUE OF PROPERTY OF RS.2,85,000/- PER MONTH. THE ASSESSEE WAS ALSO UNABLE TO PRODUCE ANY EVIDENCE BEFORE THE ASSESSING OFFICER AND THE SUBMISSION THAT PAYMENT H AS BEEN PAID BY CHEQUES FOR COMMISSION EXPENSES IS NOT ACCEPTABLE BECAUSE THE P AYMENT THROUGH CHEQUE WOULD NOT PROVE THAT THE COMMISSION HAS BEEN PAID F OR SALE OF THE PROPERTY. IT WAS ALSO SUBMITTED THAT PAYMENT OF RS.5 CRORES BY T HE COMPANY TO ULFP AS SECURITY DEPOSIT LATER ON PASSED TO THE DIRECTORS, IS CLEARLY IN THE NATURE OF DEEMED DIVIDEND. THE LD. AUTHORITIES BELOW HAVE DEA LT WITH THE ISSUE IN DETAIL AND HAVE RIGHTLY HELD IT AS DEEMED DIVIDEND U/S. 2( 22)(E) OF THE ACT. THE CASE LAWS RELIED BY THE ASSESSEE ARE NOT APPLICABLE TO T HE PRESENT CASE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. THE FIRST ISSU E WHICH NEEDS ADJUDICATION IS WHETHER THE FAIR MARKET RENT RECEIVED BY THE ASSESS EE FOR LETTING OUT THE IMPUGNED PROPERTY @ 1,50,000/- PER MONTH WAS JUSTIF IED OR NOT. A PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW REVEAL THAT THEY HA VE DETERMINED THE FAIR MARKET RENT OF THE SAID PROPERTY AT RS.2,85,000/- PER MONT H AND ACCORDINGLY, CONSIDERED THE AMOUNT OF DIFFERENCE AMOUNTING TO RS.1,35,000/- PER MONTH FOR ADDITION TO THE TOTAL INCOME OF ASSESSEE. IT ALSO REVEALS THAT THE ASSESSING OFFICER HAS GIVEN BENEFIT OF STANDARD DEDUCTION OF 30% OF THE TOTAL R ENT WORKED OUT FOR THE WHOLE YEAR AND ACCORDINGLY WORKED OUT THE NOTIONAL RENT O F RS.11,34,000/-. WHILE EXAMINING THE WORKING OF NOTIONAL RENT MADE BY THE ASSESSING OFFICER, WE FIND THAT THE ASSESSEE HAD RECEIVED RENT SECURITY OF RS. 1,00,00,000/- FROM THE TENANT. THE ASSESSEE WAS ASKED TO JUSTIFY THE AMOUNT OF THI S SECURITY RECEIVED WITH REFERENCE TO THE FAIR MARKET RENT OF THE IMPUGNED P ROPERTY. WHILE JUSTIFYING THE RENT SECURITY RECEIPT, THE ASSESSEE ITSELF ADMITTED THE FAIR MARKET RENT OF THE PROPERTY LET OUT, AT RS.100/- PER SQ. FT. VIDE REPL Y DATED 12.03.2015 SUBMITTED ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 13 BEFORE THE ASSESSING OFFICER AND AS REPRODUCED ABOV E. AT THE COST OF REPETITION, THE RELEVANT PART OF THE SAID REPLY IS AGAIN REPROD UCED AS UNDER : AS REGARDS THE JUSTIFICATION OF RENT SECURITY, IT I S SUBMITTED THAT THE TOTAL COVERED AREA OF THE PROPERTY IS 5700 SQ. FT APPROX AND THE PROPERTY IS A CORNER PLOT WITH TWO SIDE OPENING. THUS, KEEPING IN VIEW THE MARKET RENT TO BE RS. 100/- PER SQ. FT., THE 50% OF THE RENT IN OP EN MARKET WOULD WORK OUT TO RS. 2,85,000/- PER MONTH. THUS THE INTEREST COMPONEN T @ 9% PER ANNUM OF THE RENT SECURITY OF RS. 1 CRORES KEEPING IN VIEW T HE BANK RATES, WOULD WORK OUT TO RS. 75,000/- PER MONTH. IN VIEW OF THIS, THE RENT SECURITY STANDS JUSTIFIED AS THE PAYMENT OF RENT IS ON THE LOWER SIDE.' 6. IN VIEW OF THE ABOVE REPLY OF ASSESSEE, WE DO NO T FIND ANY JUSTIFICATION TO DISCARD THE FOLLOWING FINDINGS OF THE LD. CIT (APPE AL) REACHED IN THE IMPUGNED ORDER : WHAT IS INTERESTING TO NOTE IS THAT THE APPELLANT WHILE JUSTIFYING THE RECEIPT OF SECURITY DEPOSIT OF RS 1 CRORE AGAINST THE SAID PROPERTY HAS EMPHASIZED THE FACT THAT SAID PREMISES BEING RENTED OUT TO DR DANG LAB PVT. LTD AND THAT SAID PREMISES WOULD FETCH A MONTHLY RENT OF RS 2,85,000/ - PER MONTH . BUT IN SECOND BREATH WHEN ASKED TO JUSTIFY LOWER ACTUAL RE NT REALIZED THEREFROM, HARPS ON RESIDENTIAL ASPECT OF PROPERTY COMPLETELY MASKING THE FACTUM OF MCD REGULARIZATION CERTIFICATE GRANTED WEF 11/7/200 6 FOR ITS MIXED LAND USE (IE FOR COMMERCIAL ACTIVITY FOR RUNNING THE PATHOLO GICAL LAB ) GRANTED AND OPERATING IN FAVOUR OF APPELLANT (RESPONDENT OWNERS ) AS IN AY 12-13 ( SAY TILL 20/4/2015). THE APPELLANT CASE HOLISTICALLY APPRECIA TING THE MATRIX HENCE MUST FAIL. 7. IN VIEW OF THE CANDID ADMISSION OF THE ASSESSEE REGARDING FAIR MARKET RENT OF THE ABOVE REFERRED PROPERTY AT THE RATE OF 2,85, 000/- PER MONTH, IN OUR OPINION, THE LD. AUTHORITIES BELOW HAVE RIGHTLY TAK EN INTO ACCOUNT THIS RATE AS FAIR MARKET RATE FOR THE PURPOSE OF DETERMINING THE NOTI ONAL RENT OF THE PROPERTY RECEIVED BY THE ASSESSEE. IN FACT, THE WORKING OF T HE ASSESSING OFFICER IN THIS REGARD IS COMPLETELY BASED ON THE WORKING OF FAIR M ARKET RENT GIVEN BY THE ASSESSEE WHILE JUSTIFYING THE RENT SECURITY RECEIVE D. THE ASSESSEE, THUS, CANNOT BE ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 14 ALLOWED TO BLOW HOT AND COLD IN THE SAME BREATH. IN SUCH VIEW OF THE MATTER, THE LD. CIT(A) WAS QUITE JUSTIFIED TO SUSTAIN THE CONCL USION OF THE ASSESSING OFFICER IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MONI KUMAR SUBBA, 333 ITR 23 (DEL) WITH REFERENCE TO THE DECIS ION OF HONBLE SUPREME COURT IN CORPN. OF CALCUTTA VS. SMT. PADMA DEBIT, AIR 196 2 SC 151. SINCE THE FACTS INVOLVED IN THE CASE IN HAND, AS NOTED ABOVE, ARE N OT PREVAILING IN THE DECISIONS RELIED BY THE ASSESSEE, THE SAME ARE NOT APPLICABLE , BEING DISTINGUISHABLE ON FACTS. 8. APART FROM THE ABOVE, IT IS WORTHWHILE TO NOTE T HAT THE ASSESSEE WHILE JUSTIFYING THE LOWER RENT RECEIPTS, THE ASSESSEE HA S CATEGORICALLY SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE COMPANY PAID A MONTH LY RENT OF RS.2 LACS UPTO THE PERIOD ENDED ON 31.03.2011 AND IT WAS ON ACCOUNT OF SEALING DRIVE CARRIED BY MCD THAT THE RENT WAS REDUCED FROM RS.2 LACS TO RS. 1.5 LACS PER MONTH W.E.F. 1.04.2011. THIS VERSION OF THE ASSESSEE IS ALSO FOU ND CONTRADICTORY TO THE CONTENTS OF AGREEMENT DATED 01.10.2009, WHICH WAS E XECUTED IN THE YEAR 2009 FOR THREE YEARS AT THE RENT OF RS.1.5 LACS PER MONT H, WHEREAS THE ASSESSEE HAS STATED THAT RENT OF RS.2 LACS PER MONTH WAS BEING R ECEIVED UPTO 31.03.2011 AND IT WAS REDUCED TO RS.1.5 LACS PER MONTH FROM 01.04.201 1. IN VIEW OF THESE FACTS, WE FIND NO INFIRMITY IN THE DECISION REACHED BY THE LD . CIT(A) ON THIS COUNT. ACCORDINGLY, GROUND NO. 1 RAISED BY THE ASSESSEE DE SERVES TO FAIL. 9. IN RESPECT OF COMMISSION EXPENSES CLAIMED BY THE ASSESSEE FOR WORKING OUT THE CAPITAL GAINS/LOSSES ON THE SALE OF ABOVE REFER RED PROPERTIES, THE ASSESSEE HAS SUBMITTED THE INVOICE ISSUED BY BROKERS (PB 89-92), IN WHICH THE RECIPIENT HAS ACKNOWLEDGED THE RECEIPT OF COMMISSION BY WAY OF CH EQUE REGARDING SALE OF ABOVE PROPERTIES. BOTH THE PARTIES WERE AGREED FOR VERIFICATION OF THE PAYMENT RECEIVED BY THE RECIPIENT AND HAVE NO OBJECTION IN SETTING ASIDE THE MATTER BACK ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 15 TO THE FILE OF ASSESSING OFFICER FOR THIS PURPOSE. THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THE MATTER BACK TO THE ASSESSIN G OFFICER FOR EXAMINATION, WHETHER THE PAYMENT MADE TO THE RECIPIENT WAS IN TH E NATURE OF COMMISSION EXPENSES OR RELATED TO THE SALE OF ABOVE REFERRED P ROPERTY. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE SAME TO DECIDE THE ISSUE AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDI NGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 10. ADVERTING TO THE LAST ISSUE WITH RESPECT TO DEE MED DIVIDEND U/S. 2(22)(E) OF THE ACT, IT IS BORN OUT OF THE RECORDS BEFORE US THAT THE LD. ASSESSING OFFICER HAS TREATED THE INTEREST FREE RENT SECURITY GIVEN BY M/ S. DR. DANGS LAB. PVT. LTD. (DDLPL) TO M/S. USUAL LEASING & FINANCE P. LTD. (UL FPL) WHICH WAS LATER ON ADJUSTED IN THE ACCOUNT OF ASSESSEE AND HER HUSBAND , WHO WERE HAVING SUBSTANTIAL INTEREST IN THE SAID COMPANY. THE CONTE NTION OF THE ASSESSEE HAS BEEN FROM THE BEGINNING THAT DDLPL WAS RUNNING A LABORAT ORY IN THE PREMISES NAMELY D-1 HAUZ KHAS, OWNED BY ASSESSEE. IT IS ALSO PROVED ON RECORD THAT THE SAID PREMISES WAS IN THE RESIDENTIAL AREA DUE TO WHICH T HERE WAS INTENSE DISPUTE WITH THE NEIGHBORS WHO WERE INSISTING THAT THE COMMERCIA L ACTIVITY BE NOT UNDERTAKEN FROM THE RESIDENTIAL AREA, AS ALSO HELD BY HONBLE SUPREME COURT VIDE THEIR ORDER DATED 20.03.2015. UNDER THESE CIRCUMSTANCES, IT CAN NOT BE DOUBTED THAT, DDLPL WAS LOOKING FOR SOME OTHER PREMISES. THE CONTENTIO N OF ASSESSEE HAS BEEN THAT THIS AMOUNT OF RS.5.00 CRORES WAS PAID BY DDLPL TO AN UNRELATED COMPANY M/S USUAL LEASING & FINANCE P LTD. (ULFPL) AS INTEREST FREE SECURITY FOR THE PREMISES WHICH WAS TO BE OWNED BY ULFPL, WHICH DDLPL AGREED TO TAKE ON RENT FOR SHIFTING ITS LAB FROM THE EXISTING RESIDENTIAL AREA . HOWEVER, THE PROPERTY TO BE LET OUT COULD NOT BE ACQUIRED BY ULFPL DUE TO RESOURCE CONSTRAINT AT THEIR END AND THEN IT WAS EVENTUALLY PURCHASED BY THE ASSESSEE AN D HER HUSBAND TO BE USED FOR ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 16 GIVING ON RENT TO DDLPL FOR SHIFTING THE LABORATORY FROM EXISTING RESIDENTIAL AREA. IT WAS ALSO THE CONTENTION OF THE ASSESSEE THAT THE SAID LABORATORY WAS LATER ON SHIFTED TO SUCH NEWLY PURCHASED BUILDING AND RENTAL INCOME RECEIVED BY THE ASSESSEE FROM DDLPL. WHEN THE PROPERTY WAS PURCHASE D BY ASSESSEE AND HER HUSBAND, THE SECURITY GIVEN BY DDLPL WAS TRANSFERRE D/ADJUSTED IN THE NAME OF THE ASSESSEE AND HER HUSBAND BY DDLPL THROUGH BOOK ENTRY. IT IS ALSO CLEAR FROM THE SUBMISSIONS OF THE ASSESSEE THAT THE PROPERTY H AS BEEN PURCHASED AT RS.15 CRORES BY THE DIRECTORS OF THE DDLPL AND EARLIER TH E AGREEMENT FOR PURCHASE WAS MADE BY ULFPL WITH KUSUM JAIN & OTHERS AT RS.15.00 CRORES. FROM THE ABOVE FACTS, IT IS CLEAR THAT THERE WAS NO FLOW OF MONEY FROM DDLPL TO THE APPELLANT, WHICH IS IMPERATIVE TO ATTRACT THE PROVISIONS SECT ION 2(22)(E) AND IN ANY CASE, EVEN IF IT IS TAKEN FOR GRANTED THAT THERE WAS FLOW OF MONEY FROM DDLPL TO THE APPELLANT, IT SHOULD BE TREATED AS A PAYMENT OF DDL PL TO THE ASSESSEE FOR BUSINESS TRANSACTION, I.E., SECURITY DEPOSIT FOR GE TTING THE PROPERTY ON LEASE. THE AFORESAID FACTS, ALSO INSPIRE COMMERCIAL EXPEDIENCY BEFORE THE COMPANY, M/S. DDLPL, UNDER WHICH THEY GAVE RENT SECURITY UNDER CO NSIDERATION AND THEREFORE, SUCH A TRANSACTIONS COULD NOT BE BROUGHT UNDER THE SWEEP OF SECTION 2(22)(E) OF THE ACT IN VIEW OF CBDT CIRCULAR NO. 19/2017 DATED 12.06.2017. IT IS ALSO WORTHWHILE TO NOTE THAT THE ASSESSEE HAD ALSO RECEI VED RENT SECURITY OF RS. 1 CRORE FROM DDLPL FOR LETTING OUT HER RESIDENTIAL PR OPERTY AT D-1, HAUZ KHAS, NEW DELHI AND THE DEPARTMENT DID NOT CONSIDER IT RELEVA NT FOR DEEMED DIVIDEND U/S. 2(22)(E). WE, THEREFORE, OBSERVE THAT THE LD. AUTHO RITIES BELOW WERE NOT JUSTIFIED TO TREAT THIS AMOUNT OF SECURITY AS INTEREST FREE L OANS AND ADVANCES GIVEN TO THE ASSESSEE SO AS TO BRING THE ABOUT RELEVANT FOR DEEM ED DIVIDEND U/S. 2(22)(E) OF THE ACT. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVO UR OF THE ASSESSEE AND THE REVENUE. THEREFORE, GROUNDS NOS. 4 TO 6 OF APPEAL D ESERVE TO BE ALLOWED. AS A RESULT, THE APPEAL OF THE ASSESSEE DESERVES TO BE P ARTLY ALLOWED. ITA NOS. 6421/DEL/2016 & 4538/DEL/2017 17 11. AS ALREADY NOTED, THE ISSUES INVOLVED IN APPEAL OF DR. MANJU DANG ARE IDENTICAL TO THOSE INVOLVED IN APPEAL OF DR. NAVIN DANG, OUR ABOVE DECISION SHALL APPLY MUTATIS MUTANDIS IN APPEAL FILED BY DR. NAVIN DANG. ACCORDINGLY, TH E APPEAL IN ITA NO.4538/DEL/2017 ALSO DESERVES TO BE ALLOWED IN PART. 12. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2018. SD/- SD/- (AMIT SHUKLA) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 ST JULY, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI