Assistant Commissioner of Income tax, Central Circle-2(3), Bengaluru V. Sri Prakash Ladhani, Bengaluru

ITA 69/BANG/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2900 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 05-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained investment; Capital asset; Loose papers; Additional evidence; Deemed dividend
• Section: 143(3); 153A; 2(22)(e); 119; 132

Judgement Text

ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.69/BANG/2018 ASSESSMENT YEAR : 2007-08 ACIT CENTRAL CIRCLE-2(3) BANGALORE VS. SRI PRAKASH LADHANI 12, 3 RD MAIN ROAD JAYAMAHAL EXTENSION BENGALURU 560 046 PAN NO : ABAPL8912B APPELLANT RESPONDENT APPELLANT BY : MS. NEERA MALHOTRA, D.R. RESPONDENT BY : SHRI V. SRINIVASAN, A.R. DATE OF HEARING : 03.08.2021 DATE OF PRONOUNCEMENT : 25.10.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 30-10-2017 PASSED BY LD CIT(A)-11, BANGALORE AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE GROUNDS URGED BY THE REVENUE RELATES TO T HE FOLLOWING TWO ISSUES:- (A) DEEMED DIVIDEND ASSESSED U/S 2(22)(E) OF THE ACT RS.1,00,00,000/- (B) ADDITION OF UNEXPLAINED INVESTMENT RS.3,13, 69,040/- 3. THE FACTS RELATING TO THE CASE ARE DISCUSSED IN BRIEF. THE ASSESSEE IS ONE OF THE DIRECTORS IN M/S. BRINDAVAN BEVERAGES PVT. LTD. (BBPL) ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 2 OF 12 AND ALSO IN M/S. CAUVERI AQUA PVT. LTD. (CAPL). A SEARCH U/S 132 OF THE ACT WAS CARRIED OUT IN THE HANDS OF THE ASSESSE E AND OTHER GROUP CONCERNS ON 18.12.2012. CONSEQUENTLY, THE ASSESSMEN T OF THE ASSESSMENT YEAR UNDER CONSIDERATION WAS COMPLETED B Y THE A.O. U/S 143(3) R.W.S. 153A OF THE ACT. 4. THE FIRST ISSUE RELATES TO ADDITION MADE U/S 2(22)(E) OF THE ACT AS DEEMED DIVIDEND. THE A.O. NOTICED THAT THE ASSE SSEE HELD 33% OF SHARES IN CAPL AND 65% OF SHARES IN BBPL. THUS, TH E ASSESSEE HEREIN IS A SHAREHOLDER HAVING SUBSTANTIAL INTEREST IN BOTH THE ABOVE SAID COMPANIES. THE A.O. NOTICED THAT M/S. BBPL HA S RECEIVED LOAN OF RS.1.00 CRORE FROM M/S. CAPL IN THE FINANCIAL YE AR RELEVANT TO THE ASSESSMENT YEAR 2007-08. SINCE THE LOAN WAS RECEIVE D BY A CONCERN, IN WHICH THE ASSESSEE IS SUBSTANTIALLY INTERESTED, THE A.O. TOOK THE VIEW THAT THE LOAN RECEIVED BY THE BBPL FROM CAPL S HALL BE ASSESSABLE AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE, BEING A SHAREHOLDER HAVING SUBSTANTIAL INTEREST, IN TERMS OF SEC. 2(22)(E) OF THE ACT. 5. THE ASSESSEE SUBMITTED BEFORE AO THAT M/S. CAPL HAS GIVEN FUNDS TO M/S. BBPL FOR BUSINESS PURPOSES AND HENCE THE PROVISIONS OF SEC. 2(22)(E) ARE NOT ATTRACTED. IT WAS EXPLAIN ED THAT M/S. CAPL HAD ENTERED INTO AN AGREEMENT WITH M/S. BBPL, AS PE R WHICH, BOTH THE COMPANIES HAVE AGREED TO MAKE INVESTMENTS JOINT LY IN PROPERTY DEVELOPMENT PROJECTS OF M/S. EMBASSY GROUP. IT WAS SUBMITTED THAT THE PAYMENTS WERE MADE BY CAPL TO BBPL IN CONNECTIO N WITH THE ABOVE SAID BUSINESS ACTIVITIES. THE A.O. DID NOT A CCEPT THE ABOVE SAID EXPLANATIONS OF THE ASSESSEE. HE TOOK THE VIEW THA T M/S. CAPL SHOULD HAVE GIVEN MONEY DIRECTLY TO M/S. EMBASSY GR OUP AND NOT TO ITS SISTER CONCERN. HE ALSO EXPRESSED THE VIEW THA T THE ABOVE ARRANGEMENT DOES NOT HAVE ACKNOWLEDGEMENT OF EMBASS Y GROUP. ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 3 OF 12 ACCORDINGLY, THE AO HELD THAT THE AMOUNT RECEIVED B Y M/S. BBPL FROM CAPL IS DEEMED DIVIDEND ASSESSABLE U/S 2(22)(E ) OF THE ACT. UNDER THE PROVISIONS OF SEC.2(22)(E) OF THE ACT, TH E LOAN AMOUNT IS ASSESSABLE TO THE EXTENT OF ACCUMULATED PROFITS AVA ILABLE WITH LENDER COMPANY AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. IN THE INSTANT YEAR, THE ACCUMULATED PROFITS AVAILABLE WITH THE LE NDER COMPANY WERE MORE THAN THE AMOUNT OF LOAN. ACCORDINGLY, THE AO ASSESSED THE LOAN AMOUNT OF RS.1.00 CRORE AS DEEMED DIVIDEND IN THE H ANDS OF THE ASSESSEE. 6. THE LD. CIT(A), HOWEVER, ACCEPTED THE EXPLANA TIONS OF THE ASSESSEE THAT THESE TRANSACTIONS ARE BUSINESS TRANS ACTIONS AND ACCORDINGLY, DELETED THE ADDITION MADE U/S 2(22)(E) OF THE ACT INA COMMON ORDER PASSED FOR ASSESSMENT YEARS 2007-08 TO 2013-14. THE REVENUE IS AGGRIEVED. 7. THE LD D.R SUBMITTED THAT M/S CAPL HAS GIVEN LOANS TO BBPL IN VARIOUS YEARS AND THE AGGREGATE AMOUNT OF LOANS SO GIVEN FROM AY 2007-08 TO 2013-14 WAS RS.13.84 CRORES. THE ASSES SEE HAD PLACED RELIANCE ON ASSIGNMENT AGREEMENTS DATED 28-03-2015 FOR SALE OF UNDIVIDED INTEREST IN LAND AND BUILT UP SPACE, AS P ER WHICH PROPERTIES WORTH RS.13.64 CRORES WERE ASSIGNED IN FAVOUR OF CA PL BY BBPL. ACCORDINGLY, THE LD CIT(A) HAS GRANTED RELIEF TO TH E ASSESSEE. THE LD D.R SUBMITTED THAT A CLOSE PERUSAL OF THE ASSIGNMEN T AGREEMENTS WOULD SHOW THAT THE FACTS ARE NOT AS CLAIMED BY THE ASSESSEE BEFORE LD CIT(A). SHE SUBMITTED THAT THE CAPL GOT FOLLOWI NG PROPERTIES AS PER ASSIGNMENT AGREEMENTS:- CONSTRUCTION AGREEMENT ASSIGNED - 10,63,17,108 UNDIVIDED INTEREST IN LAND ASSIGNED - 3,00,86,10 0 ----------------- 13,64,03,208 ============= ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 4 OF 12 HOWEVER, IN THE CONSTRUCTION AGREEMENT, IT IS MENTI ONED THAT THE ASSIGNEE/S HAVE ALREADY PAID A SUM OF RS.8,84,36,26 6/- AND IT HAS AGREED TO PAY THE BALANCE OF RS.1,78,80,842/- TO TH E ASSIGNOR ON OR BEFORE 20-06-2015. IN ADDITION TO THE ABOVE, IT IS STATED THAT THE ASSIGNEE HAS AGREED TO REIMBURSE A SUM OF RS.34,35, 100/- TO THE ASSIGNOR TOWARDS THE ADDITIONAL IN RESPECT OF SCHED ULE B APARTMENT, WHICH HAS BEEN PAID BY THE ASSIGNORS TO THE DEVELOP ERS. THE LD D.R CONTENDED THAT THERE WAS NO NECESSITY TO MAKE FURTH ER PAYMENTS, WHEN THE LOANS GIVEN BY CAPL TO BBPL IS MORE THAN T HE ASSIGNED VALUE. 8. THE LD D.R SUBMITTED THAT THE ASSIGNMENT AGRE EMENTS DO NOT SPECIFICALLY MENTION THAT THE LOANS AND ADVANCES PA ID BY M/S CAUVERY AQUA P LTD WERE ADJUSTED IN ASSIGNMENT AGRE EMENT. ACCORDINGLY, THE LD DR CONTENDED THAT THE LOANS AND ADVANCES WERE NOT ADJUSTED AGAINST ACQUISITION OF PROPERTY BY WAY OF ASSIGNMENT AGREEMENTS DATED 28-03-2015. ACCORDINGLY, THE LD D R CONTENDED THAT THE LOANS GIVEN BY CAPL TO BBPL WERE SEPARATE TRANSACTIONS AND HENCE THE ASSESSMENT OF DEEMED DIVIDEND MADE U/S 2( 22)(E) OF THE ACT SHOULD BE UPHELD. 9. THE LD. A.R., HOWEVER, SUBMITTED THAT THERE W ERE TRADING TRANSACTIONS BETWEEN CAPL & BBPL IN THE PAST. THE TRADING OPERATIONS WERE SUSPENDED AND FROM THE YEAR 2002 ON WARDS BBPL OWED A SUM OF RS.1.97 CRORES TO M/S. CAPL. AT THAT POINT OF TIME, AN AGREEMENT DATED 14.11.2005 WAS ENTERED BETWEEN B OTH THE COMPANIES WITH THE OBJECTIVE OF MAKING INVESTMENT I N PROPERTY DEVELOPMENT ACTIVITIES. AS PER THE AGREEMENT, CAPL SHALL GIVE FURTHER MONEY TO BBPL FOR BUSINESS PURPOSES OF MAKING INVES TMENTS IN REAL ESTATE ACTIVITIES. ACCORDINGLY, CAPL HAS GIVEN MON EY TO BBPL IN CONNECTION WITH THE ABOVE SAID BUSINESS ACTIVITIES OVER THE YEARS. ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 5 OF 12 BOTH THE COMPANIES HAVE KEPT THE ACCOUNT OF OTHER C OMPANY AS RUNNING ACCOUNT ONLY IN CONNECTION WITH THE BUSINES S ACTIVITIES. FROM ASSESSMENT YEARS 2007-08 TO 2013-14, CAPL HAS GIVEN AN AGGREGATE SUM OF RS.13.85 CRORES. THE ASSIGNMENT A GREEMENTS WERE ENTERED ON 28-03-2015 BY BBPL IN FAVOUR OF M/S. CAP L WHICH WAS ALSO ENDORSED BY EMBASSY GROUP (THE DEVELOPERS). A S PER THE ABOVE SAID AGREEMENT, BBPL HAS ASSIGNED PROPERTY VALUE OF RS.13.64 CRORES TO CAPL. HENCE, M/S. CAPL HAS OBTAINED PROPERTIES ALMOST EQUAL TO THE AMOUNT ADVANCED BY IT FROM ASSESSMENT YEARS 200 7-08 TO 2013- 14. THESE FACTS PROVE THAT BOTH THE COMPANIES HAV E JOINED TOGETHER TO CARRYING BUSINESS ACTIVITIES OF MAKING INVESTMEN T IN REAL ESTATE ACTIVITIES. FINALLY, CAPL WAS GIVEN PROPERTIES ALM OST EQUAL TO THE INVESTMENTS MADE. ACCORDINGLY, THE LD A.R SUBMITTE D THAT THE AO WAS NOT CORRECT IN CONSIDERING THESE TRANSACTIONS A S LOAN TRANSACTIONS. HE SUBMITTED THAT THE LD CIT(A) HAS CORRECTLY APPRECIATED THESE TRANSACTIONS AS BUSINESS TRANSACT IONS. ACCORDINGLY, HE SUBMITTED THAT THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE DOES NOT CALL FOR ANY INTERFERENCE IN ALL THE THREE YEARS. 10. THE LD. A.R. FURTHER SUBMITTED THAT THE A.O., IN THE GROUNDS OF APPEAL FILED BY THE REVENUE, HAS TAKEN A CONTENTION THAT THERE IS NO DISTINCTION BETWEEN AN ADVANCE AND BUSINESS ADVANCE . HE SUBMITTED THIS CONTENTION IS CONTRARY TO THE PROVIS IONS OF SECTION 2(22)(E) OF THE ACT AND ALSO THE DECISIONS RENDERED BY JURISDICTIONAL KARNATAKA HIGH COURT. 11. WE HEARD THE PARTIES AND PERUSED THE RECORD. T HERE IS NO DISPUTE WITH REGARD TO THE FACT THAT BOTH CAPL AND BBPL HAD ENTERED INTO AN AGREEMENT DATED 14 TH NOVEMBER, 2005. THE OBJECT OF ENTERING INTO THE ABOVE SAID AGREEMENT IS MENTIONED AS UNDER IN THE AGREEMENT:- ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 6 OF 12 WHEREAS BBPL HAS MADE INVESTMENT IN PROPERTY DEVEL OPMENT MAINLY WITH THE EMBASSY GROUP IN BANGALORE AND BBPL HAS AG REED TO INVOLVE CAPL IN SOME OF THESE VENTURES TO SHARE THE BENEFIT S OF SUCH INVESTMENT IN REAL ESTATE VENTURES OF THE EMBASSY GROUP. IN THE AGREEMENT, IT IS ALSO SPECIFICALLY MENTIONED AS UNDER:- 2. CAPL SHALL MAKE FURTHER INVESTMENTS AS AND WHE N REQUIRED TO SUPPORT THIS REAL ESTATE INVESTMENT OF BBPL IN THE EMBASSY GROUP UPON THE REQUEST MADE BY BBPL FROM TIME TO TIME AND ANY SUCH INVESTM ENT SHALL NOT CARRY ANY INTEREST. .. 9. THE AMOUNT INVESTED BY CAPL IN BBPL FROM TIME TO TIME SHALL BE PROPORTIONATELY ADJUSTED AS AND WHEN DEVELOPED PROP ERTIES ARE TRANSFERRED INTO CAPL. THE AGREEMENT DATED 14.11.2005 ENTERED BETWEEN BOTH THE COMPANIES MAKES IT CLEAR THAT BBPL HAS MADE INVESTM ENTS IN VARIOUS PROJECTS OF THE EMBASSY GROUP AND CAPL IS I NVOLVED IN THESE VENTURES. IT IS FURTHER MENTIONED THAT CAPL SHALL PAY MONEY TO BBPL AS AND WHEN REQUIRED TO SUPPORT THE REAL ESTATE INV ESTMENT ACTIVITIES IT HAS ALSO BEEN MENTIONED THAT THE AMOUNT INVESTED BY CAPL SHALL BE ADJUSTED AGAINST THE PROPERTIES. 12. IT IS AN UNDISPUTED FACT THAT THE AMOUNTS I NVESTED BY CAPL HAS BEEN ADJUSTED AGAINST THE PROPERTIES ASSIGNED T O CAPL BY BBPL, VIDE ASSIGNMENT AGREEMENTS DATED 28.03.2015. THUS THE ORIGINAL AGREEMENT DATED 14.11.2005 STANDS CORROBORATED BY T HE ASSIGNMENT AGREEMENTS DATED 28-03-2015. THESE UNCONTROVERTED DOCUMENTS SUPPORTS THE SUBMISSIONS OF THE ASSESSEE THAT THE A MOUNTS GIVEN BY CAPL TO BBPL ARE NOT LOANS OR ADVANCES CONTEMPLATED IN SEC.2(22)(E) OF THE ACT. 13. THE LD DR CONTENDED THAT THE ASSIGNMENT AGR EEMENTS DO NOT MENTION ABOUT ADJUSTMENT OF LOAN AND ADVANCES GIVEN EARLIER BY CAPL TO BBPL. SHE ALSO STATED THAT THE AGREEMENTS MENTION ABOUT FURTHER PAYMENTS, WHICH WAS ACTUALLY NOT NECESSARY, WHEN THE AMOUNTS ALREADY GIVEN BY CAPL TO BBPL WERE IN EXCES S OF THE ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 7 OF 12 ASSIGNED VALUE OF PROPERTIES. HOWEVER, WE ARE OF THE VIEW THAT WHAT IS REQUIRED TO BE SEEN IS WHETHER CAPL HAS ADVANCED MONEYS AS PURE LOAN AMOUNTS OR FOR BUSINESS PURPOSES. THE AGREEME NTS PRODUCED BY THE ASSESSEE BEFORE LD CIT(A), WHICH WERE ALSO C ONFRONTED WITH THE AO, WOULD PROVE THAT THE TRANSACTIONS ENTERED BETWE EN THE PARTIES ARE BUSINESS TRANSACTIONS. THE LD A.R ALSO SUBMITT ED THAT BOTH THE COMPANIES ARE MAINTAINING ACCOUNTS AS RUNNING ACCOU NTS ONLY AND REAL ESTATE INVESTMENT ACTIVITY WAS AGREED TO BE A CONTINUOUS ACTIVITY. HENCE THE QUESTION OF MAKING ONE TO ONE RECONCILIAT ION, AS CONTENDED BY LD DR. WOULD NOT ARISE IN THESE TYPES OF TRANSAC TIONS. 14. AT THIS JUNCTURE, WE FEEL IT PERTINENT TO EX TRACT THE ORDER PASSED BY LD. CIT(A) IN THIS REGARD:- 7.4 I CONSIDERED THE SUBMISSIONS MADE AND MATERIAL S ON RECORD. THE CONTENTION OF THE APPELLANT IS THAT THE DEEMED DIVI DEND CANNOT BE ASSESSED FOR THE ASSESSMENT YEARS 2007-08, 2008-09, 2010-11 & 2011-12 BECAUSE IT WAS NOT BASED ON ANY MATERIALS FOUND AT THE TIME OF SEARCH AND THESE ASSESSMENTS HAD NOT ABATED ON THE DATE OF SEARCH. T HE SECOND CONTENTION OF THE APPELLANT IS THAT THE ADVANCE PAID BY M/S. C AUVERY AQUA PVT. LTD., TO M/S. BRINDAVAN BEVERAGES PVT. LTD., IS NOT A LOA N OR ADVANCE SINCE IT WAS GIVEN IN CONNECTION WITH PROPERTY INVESTMENTS T O BE MADE AFTER TERMINATION OF THE DISTRIBUTION BUSINESS BETWEEN TH E 2 COMPANIES WHEN AN AMOUNT OF RS. 1,97,11,809/-WAS DUE TO M/S. CAUVERY AQUA PVT. LTD., FROM M/S. BRINDAVAN BEVERAGES PVT. LTD. 7.5 I FIND THAT THE APPELLANT HAS BEEN ABLE TO SUB STANTIATE ITS EXPLANATION THAT THE AMOUNTS ADVANCED BY M/S. CAUVERY AQUA PVT. LTD., TO M/S. BRINDAVAN BEVARAGESPVT. LTD., IS NOT A LOAN OR ADVA NCE BUT A BUSINESS TRANSACTION BETWEEN THESE 2 COMPANIES FOR PURCHASE OF REAL ESTATE PROPERTIES. IT IS NOT IN DISPUTE THAT M/S. CAUVERY AQUA PVT. LTD., WAS A DISTRIBUTOR OF M/S. BRINDAVAN BEVERAGES FOR PRODUCT S MANUFACTURED FROM 1999 TO 2002 AND THERE WAS A SUM OF RS. 1,97,11,809 /- OUTSTANDING AT THAT TIME. THERE WAS AN AGREEMENT DATED 14/11/2005 BETWE EN THE 2 COMPANIES TO INVEST THE ABOVE AMOUNT DUE IN REAL ESTATE DEVEL OPMENT PROJECTS OF EMBASSY GROUP WITH WHOM M/S. BRINDAVAN BEVERAGES PV T. LTD., WAS ALREADY HAVING SUBSTANTIAL INVESTMENTS. THIS CLAIM OF THE APPELLANT IS NOT SHOWN TO BE INCORRECT IN THE ASSESSMENT ORDER WITH REGARD TO ANY MATERIALS THAT SHOWS A DIFFERENT PICTURE. RATHER, THE A.O. HA S SIMPLY DISBELIEVED THE ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 8 OF 12 EXPLANATION OF THE APPELLANT THAT THE TRANSACTIONS BETWEEN THESE COMPANIES WERE BUSINESS TRANSACTIONS AND HAS HELD THAT THE EX PLANATION WAS NOT A SATISFACTORY ONE BY OBSERVING THAT M/S. CAUVERY AQU A PVT. LTD., NEED NOT HAVE MADE INVESTMENTS THROUGH M/S. BRINDAVAN BEVERA GES PVT. LTD., AND COULD HAVE DIRECTLY GONE TO EMBASSY GROUP. THE A.O. HAS ALSO MENTIONED THAT THERE WAS NO ACKNOWLEDGMENT FROM EMBASSY GROUP SHOWING PAYMENTS FROM MI.S. CAUVERY AQUA PVT. LTD., FOR ANY PROJECT AND A.O. REGARDED THE EXPLANATION OF THE APPELLANT AS GIVING A COLOUR OF BUSINESS TRANSACTIONS TO LOANS THAT WERE ADVANCED. 7.6 I FIND THE ABOVE BASIS STATED BY THE A.O. TO DISBELIEVE THE EXPLANATION OF THE APPELLANT IN THE ASSESSMENT ORDE R IS NOT CORRECT. THE FACT THAT M/S. BRINDAVAN BEVERAGES HAD ALREADY MADE SUBSTANTIAL INVESTMENTS WITH EMBASSY GROUP AND THAT M/S. CAUVER Y AQUA PVT. LTD., HAD EXPRESSED ITS DESIRE TO JOIN IS VERY CLEAR FROM THE AGREEMENT DATED 14.11.2005, THE VERACITY OF WHICH HAS NOT BEEN IMPE ACHED IN THE ASSESSMENT PROCEEDINGS. MERELY BECAUSE THE A.O. IS OF THE VIEW THAT THE INVESTMENTS COULD HAVE BEEN MADE DIRECTLY AND NOT T HROUGH M/S. BRINDAVAN BEVERAGES PVT. LTD., CANNOT BE A REASON T O DISCARD THE BUSINESS ARRANGEMENT BETWEEN THE PARTIES. HENCE, I DO NOT FI ND THE REASONS MENTIONED BY THE A.O. IN THE ASSESSMENT ORDER THAT THE APPELLANT HAS TRIED TO GIVE A COLOUR OF BUSINESS TRANSACTION TO A LOAN ADVANCED VERY CONVINCING. 7.7 THE APPELLANT HAS PRODUCED BEFORE ME TWO ASSI GNMENT AGREEMENTS DATED 28.03.2015 BY WHICH M/S. BRINDAVAN BEVERAGES PVT. L TD., HAS ASSIGNED ITS RIGHTS IN THE PURCHASE AGREEMENT WITH EMBASSY GROUP IN RESPECT OF UNDIVIDED INTEREST IN LAND AS WELL AS CONSTRUCTION OF THE APARTMENT NO. 5211 IN THE PROJECT OF EMBASSY GROUP CALLED 'EMBASSY LAK E TERRACES'. THIS ASSIGNMENT AGREEMENT IS ALSO ENDORSED BY M/S. EMBAS SY GROUP WHO HAS SIGNED AS CONSENTING WITNESS. THIS DOCUMENT WAS PRO DUCED TO SUBSTANTIATE THE CLAIM THAT THERE WAS AN AGREEMENT BETWEEN THE C OMPANIES TO ACQUIRE REAL ESTATE PROPERTIES AS PER THE AGREEMENT DATED 1 4.11.2005 ENTERED EARLIER. SINCE THE SAID DOCUMENT HAS BEEN EXECUTED ON 28.03.2015 AND VERY CLOSE TO THE ASSESSMENT ORDER DATED 30.03.2015, THE PRAYER OF THE APPELLANT FOR ADMISSION OF THE SAME UNDER RULE 46A OF THE I.T . RULES IS CONSIDERED. NO SPECIFIC OBJECTION HAS ALSO BEEN RAISED BY THE A .O. FOR ADMISSION OF THIS ADDITIONAL EVIDENCE. 7.8 TAKING INTO CONSIDERATION THE MATERIALS ON RECO RD, I HOLD THAT THE APPELLANT HAS BEEN ABLE TO ESTABLISH THAT THE AMOUN TS ADVANCED BY M/S. CAUVERY AQUA PVT. LTD., TO M/S. BRINDAVAN BEVERAGES PVT. LTD., ARE NOT MERE LOANS OR ADVANCES BUT THE SAID ADVANCES CONSTI TUTE A BONAFIDE BUSINESS TRANSACTION BETWEEN THE 2 COMPANIES FOR AC QUISITION AND INVESTMENTS TO BE MADE IN REAL ESTATE DEVELOPMENT P ROJECTS WITH EMBASSY GROUP. THE A.O. OBSERVATION THAT THERE WAS NO ACKNO WLEDGEMENT OF THIS ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 9 OF 12 ARRANGEMENT FROM EMBASSY GROUP IS ALSO ADDRESSED SI NCE IN THE ASSIGNMENT AGREEMENT DATED 28.3.2015, EMBASSY GROUP HAS SIGNED AS A CONSENTING WITNESS. HENCE, THE GROUNDS ON WHICH THE A.O. HAS DISBELIEVED THE STAND OF THE APPELLANT IN THE ASSESSMENT PROCEE DINGS ARE REJECTED. 7.9. I ALSO FIND THAT THE STAND OF THE A.O. IN THE REMAND REPORT IS ALSO NOT THAT THE ADVANCES ARE NOT BUSINESS ADVANCES. TH E A.O. HAS SUBMITTED IN THE REMAND REPORT THAT THERE IS NO DIFFERENCE BETWE EN AN ADVANCE AND BUSINESS ADVANCE AND ONCE THE PARAMETERS MENTIONED IN SEC. 2(22)(E) ARE FULFILLED, THE LIABILITY TO TAX AS DEEMED DIVIDEND ARISES. HOWEVER, THIS STAND OF THE A.O. IS CONTRARY TO THE RULING OF THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF BAGMANE CONSTRUCTIONS PVT. LTD., IN 119 DTR 49 (KAR.) WHERE IT HAS BEEN HELD AS UNDER:- '27. IN THIS BACKGROUND WHEN WE LOOK AT THE AFORESA ID PROVISION, IT IS CLEAR THAT ANY PAYMENT MADE BY A COMPANY BY WAY OF ADVANCE OR LOAN HAS TO BE UNDERSTOOD IN THE CONTEXT OF THE OBJ ECT WITH WHICH THE SAID PROVISION IS INTRODUCED THOUGH THE LEGISLATURE HAS INTRODUCED `ADVANCE' AS WELL AS 'LOAN' WHICH ARE TW O DIFFERENT WORKS, THE MEANING OF EACH OF THOSE WORKS HAVE TO BE UNDER STOOD IN THE CONTEXT IN WHICH THEY ARE USED EACH WORK TAKES ITS COLOUR FROM THE OTHER. THE MEANING OF THE WORD 'ADVANCE ' IS TO BE UNDERSTOOD BY THE MEANING OF THE WORD LOAN WHICH IS USED IMMEDIATELY THEREAFTER. ASSOCIATED WORDS TAKEN THEIR MEANING FROM ONE ANOTH ER UNDER THE DOCTRINE OF NOSCITUR A SOCITS, THE PHILOSOPHY OF WH ICH IS THAT THE MEANING OF A DOUBTFUL WORD MAY BE ASCERTAINED BY RE FERENCE TO THE MEANING OF WORDS ASSOCIATED WITH IT. THIS RULE, ACC ORDING TO MAXWELL MEANS THAT, WHEN TWO OR MORE WORDS WHICH ARE SUSCEP TIBLE OF ANALOGOUS MEANING ARE COUPLED TOGETHER THEY ARE UND ERSTOOD TO BE USED IN THEIR COGNATE SENSE. THEY TAKE AS IT WERE T HEIR COLOUR FROM EACH OTHER, THAT IS, THE MORE GENERAL IS RESTRICTED TO A SENSE ANALOGOUS TO A LESS GENERAL. IN THE CASE OF A LOAN, MONEY IS ADVANCED GENERALLY ON PAYMENT OF INTEREST. IN OTHER WORDS THE LOAN ADV ANCED GENERALLY ON PAYMENT OF INTEREST. IN OTHERWORDS THE LOAN ADVA NCE HAS TO BE REPAID WITH INTEREST. IN THE CASE OF AN ADVANCE ALS O, THE ELEMENT OF REPAYMENT IS THERE BUT SUCH A REPAYMENT MAY BE WITH INTEREST OR WITHOUT INTEREST. THEREFORE, WHEN THE SAID TWO WORD S ARE USED IN THE AFORESAID PROVISION WITH THE PURPOSE OF LEVYING TAX , IF THE INTENTION OF SUCH ADVANCE OR LOAN IS TO AVOID PAYMENT OF DIVIDEN D DISTRIBUTION TAX UNDER S. 115-0 OF THE ACT, SUCH A PAYMENT BY A COMP ANY CERTAINLY CONSTITUTES A DEEMED DIVIDEND BUT IF SUCH A PAYMENT IS MADE FIRSTLY NOT OUT OF ACCUMULATED PROFITS AND SECONDLY EVEN IF IT IS OUT OF ACCUMULATED PROFITS BUT AS TRADE ADVANCE AS A CONSI DERATION FOR THE GOODS RECEIVED OR FOR PURCHASE OF A CAPITAL ASSET W HICH INDIRECTLY WOULD BENEFIT THE COMPANY ADVANCING THE LOAN, SUCH ADVANCE CANNOT BE BROUGHT WITHIN THE WORD 'ADVANCE' USED IN THE AF ORESAID PROVISIONS. THE TRADE ADVANCE WHICH IS IN THE NATUR E OF MONEY ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 10 OF 12 TRANSACTED TO GIVE EFFECT TO COMMERCIAL TRANSACTION S WOULD NOT FALL WITHIN THE AMBIT OF THE PROVISIONS OF S.2(22)(E) OF THE ACT'. 7.10 RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT [SUPRA] I HOLD THAT A TRADE ADVANCE FOR PURCHASE OF CAPITAL ASSETS OR PURCHASE OF GOODS CANNOT BE CONSIDERED AS A LOAN OR ADVANCE WITHIN THE SCOPE OF SEC. 2(22)(E) OF THE ACT. I HAV E ALREADY HELD THAT THE APPELLANT HAS BEEN ABLE TO SUBSTANTIATE ITS EXPLANA TION THAT THE AMOUNTS ADVANCED BY M/S. CAUVERY AQUA PVT. LTD., TO M/S. BR INDAVAN BEVERAGES PVT. LTD., WAS FOR PURPOSES OF MAKING INVESTMENTS I N REAL ESTATE DEVELOPMENT PROJECTS OF EMBASSY GROUP AND THAT THER E IS NO MATERIAL TO DISBELIEVE THE SAID CLAIM OF THE APPELLANT. HENCE, THE ADDITIONS MADE BY THE A.O. OF RS.1,00,00,000/-, RS.59,68,494/-,RS.59, 72,492/-, RS.81,76,829/-, RS.1,30,44,602/- AND RS.50,31,297/- FOR THE ASSESSMENT YEARS 2007-08, 2008-09, 2010-11, 2011-12, 2012-13 A ND 2013-14 ARE DELETED. 15. IN VIEW OF THE FOREGOING DISCUSSIONS, IN OUR C ONSIDERED VIEW, THE FINDINGS ARRIVED AT BY LD CIT(A) DO NOT CALL FO R ANY INTERFERENCE. ACCORDINGLY, WE CONFIRM THE ORDER OF LD CIT(A) IN D ELETING THE ADDITIONS MADE U/S 2(22)(E) OF THE ACT IN THIS YEAR . 16. THE NEXT ISSUE CONTESTED BY THE REVENUE RELA TES TO THE ADDITION OF UNEXPLAINED INVESTMENT OF RS.3,13,69,040/-. OU T OF THE THREE ADDITIONS RELATING TO UNEXPLAINED INVESTMENT AGGREG ATING TO RS.3,13,69,040/- MADE BY THE AO, THE LD CIT(A) HAS GRANTED RELIEF TO THE EXTENT OF RS.2,60,00,000/- AND CONFIRMED ADDITI ON OF BALANCE AMOUNT OF RS.53.69,040/-. HENCE THE REVENUE SHOULD BE AGGRIEVED ONLY TO THE EXTENT OF RS.2,60,00,000/-. 17. THE FACTS RELATING TO THE ADDITION OF THE ABOVE SAID AMOUNT OF RS.2,60,00,000/- ARE STATED IN BRIEF. DURING THE C OURSE OF SEARCH PROCEEDINGS, TWO LOOSE PAPERS WERE FOUND FROM A BAN K LOCKER BELONGING TO THE ASSESSEE. THOSE PAPERS CONTAINED CERTAIN TRANSACTIONS ENTERED BY M/S BRINDAVAN BEVERAGES P L TD IN CONNECTION WITH PURCHASE OF A PROPERTY. THE CHEQUE PAYMENTS WERE ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 11 OF 12 FOUND TO HAVE BEEN SHOWN AS ADVANCE IN THE BOOKS OF ABOVE SAID COMPANY, BUT THE CASH PAYMENTS NOTED DOWN IN THE LO OSE PAPERS WERE NOT REFLECTED. HENCE THE AO ASSESSED THE ABOV E SAID AMOUNT OF RS.2,60,00,000/- IN THE HANDS OF M/S BRINDAVAN BEVE RAGES P LTD ON SUBSTANTIVE BASIS AND PROTECTIVELY IN THE HANDS OF THE ASSESSEE. 18. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A ) NOTICED THAT THE ADDITION MADE ON SUBSTANTIVE BASIS IN THE HANDS OF BRINDAVAN BEVERAGES P LTD HAS SINCE BEEN CONFIRMED BY LD CIT( A), VIDE HIS ORDER DATED 26-09-2016 PASSED IN 91/DCIT,CC-2(3)/CIT(A)-1 1/2015-16. ACCORDINGLY, THE LD CIT(A) DELETED THE PROTECTIVE A DDITION MADE IN THE HANDS OF THE ASSESSEE. THE REVENUE IS AGGRIEVED. 19. THE LD A.R SUBMITTED THAT THE COMPANY, M/S BRINDAVAN BEVERAGES P LTD HAD CHALLENGED THE DECISION RENDERE D BY LD CIT(A) IN RESPECT OF THE ABOVE SAID ADDITION BY FILING APP EAL BEFORE ITAT AND THE SAME WAS NUMBERED AS ITA 1989/BANG/2016. THERE AFTER, THE ABOVE SAID COMPANY HAS OPTED TO SETTLED THE ISSUE U NDER DIRECT TAXES VIVAD SE VISHWAS ACT AND ACCORDINGLY FILED RELEVANT FORMS. HE SUBMITTED THAT THE ASSESSEE HAS SINCE RECEIVED FORM NO.3 FROM PCIT. ACCORDINGLY, HE SUBMITTED THAT THE IMPUGNED ISSUE H AS SINCE BEEN SETTLED BY M/S BRINDAVAN BEVERAGES P LTD ACCEPTING THE ADDITIONS MADE IN ITS HANDS ON SUBSTANTIVE BASIS. ACCORDINGL Y, HE CONTENDED THAT THE PROTECTIVE ADDITION MADE IN THE HANDS OF T HE ASSESSEE HAS RIGHTLY BEEN DELETED BY LD CIT(A). 20. SINCE THE ADDITION MADE ON SUBSTANTIVE BASI S IN THE HANDS OF BRINDAVAN BEVERAGES P LTD HAS BEEN UPHELD BY LD CIT (A), THE PROTECTIVE ADDITION MADE IN THE HANDS OF THE ASSESS EE OF THE VERY SAME AMOUNT IS LIABLE TO BE DELETED. IT WAS FURTHER SUBMITTED THAT THE ABOVE SAID COMPANY HAD FILED APPEAL BEFORE ITAT CHA LLENGING THE ITA NO.69/BANG/2018 SRI PRAKASH LADHANI, BANGALORE PAGE 12 OF 12 DECISION RENDERED BY LD CIT(A) AND FURTHER THE SAID COMPANY HAS OPTED TO SETTLE THE ISSUE UNDER DTVSV SCHEME. THE ASSESSEE HAS FILED COPY OF FORM NO.3 GIVEN UNDER THE ABOVE SAID SCHEME. UNDER THE ABOVE SAID SCHEME, THE ABOVE SAID COMPANY IS RE QUIRED TO PAY TAX SHOWN IN FORM NO.3 AND FINAL CERTIFICATE IN FOR M NO.5 IS REQUIRED TO ISSUED IN PROOF OF SETTLEMENT OF DISPUTE. SINCE THESE MATTERS ARE PENDING, WE RESTORE THIS ISSUE TO THE FILE OF AO WI TH THE DIRECTION TO DELETE THIS PROTECTIVE ADDITION UPON FURNISHING OF FORM NO.5 BY THE ASSESSEE. 21. IN THE RESULT, THE APPEAL FILED BY THE RE VENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCT, 2021. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 25 TH OCT, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE