Asstt. Commissioner of Income Tax-II, Kanpur V. Shri Praveen Kumar Misra, Kanpur

ITA 73/LKW/2012

• Counselvise Citation: 7323714 RSA 2012
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.73/LKW/2012 ASSESSMENT YEAR:2007-08 ASSTT. CIT-II KANPUR V. SHRI. PRAVEEN KUMAR MISRA 123/372, FAZAL GANJ KANPUR TAN/PAN:AFYPM1852K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. ALOK MITRA, D.R. RESPONDENT BY: SHRI. RAKESH GARG, ADVOCATE DATE OF HEARING: 15 10 2014 DATE OF PRONOUNCEMENT: 17 12 2014 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.13,83,753/- UNDER SECTION 2(22)(E)(V) OF THE ACT WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE FACTS BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE, BEING OWNER OF THE LAND AT RAKWA NO.324 SITUATED IN KUKRADEO VILLAGE, TEHSIL BILLHAUR, DISTT. KANPUR, HAD ENTERED INTO AN AGREEMENT WITH M/S GEETIKA SEEDS (P) LTD. VIDE AGREEMENT TO SALE DATED 17.8.2006 FOR A CONSIDERATION OF RS.30 LAKHS. THE SALE HAS NOT BEEN REGISTERED, BUT PART PAYMENT OF RS.20 LAKHS WAS GIVEN BY M/S GEETIKA SEEDS (P) LTD. DURING THE YEAR TO THE ASSESSEE WHO IS HOLDING 68.58% SHAREHOLDING IN THE SAID COMPANY. THE :- 2 -: ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 2(22)(E)(V) OF THE ACT AND HAS MADE AN ADDITION OF RS.13,83,753/- TO THE EXTENT OF ACCUMULATED PROFIT OF THE COMPANY AS ON 31.3.2006, HAVING OBSERVED THAT THE ASSESSEE HAS RECEIVED ADVANCES FROM THE COMPANY, IN WHICH HE HAD SHAREHOLDING OF 65.58%. THE ASSESSEE HAS TAKEN A PLEA BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAS RECEIVED THE AFORESAID AMOUNT AS SALE CONSIDERATION OF HIS LAND ON EXECUTION OF SALE AGREEMENT FOR SALE, WHICH COULD NOT BE MATERIALIZED ON ACCOUNT OF ACQUISITION OF THE LAND BY THE GOVERNMENT. ACCORDINGLY A CANCELLATION AGREEMENT WAS EXECUTED AND THE SAID MONEY WAS RETURNED BACK TO THE COMPANY. SINCE THE AMOUNT OF RS.20 LAKHS WAS RECEIVED DURING THE COURSE OF BUSINESS TRANSACTION, THE PROVISIONS OF SECTION 2(22)(E)(V) OF THE ACT IS NOT ATTRACTED. IN SUPPORT OF HIS CONTENTION, THE ASSESSEE HAS FILED COPY OF THE AGREEMENT TO SALE, CANCELLATION AGREEMENT AND GAZETTE NOTIFICATION DATED 10.10.2007. BEING NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.13,83,753/-. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND REITERATED HIS CONTENTIONS. THE LD. CIT(A) RE-EXAMINED THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE AFORESAID DOCUMENTS FILED BY THE ASSESSEE AND WAS OF THE VIEW THAT SINCE THE ADVANCE WAS RECEIVED DURING THE COURSE OF BUSINESS TRANSACTION OR ON ACCOUNT OF SALE OF LAND, THE PROVISIONS OF SECTION 2(22)(E)(V) OF THE ACT CANNOT BE INVOKED. HE ACCORDINGLY DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER:- THE ASSESSEE IS STATED TO BE ENGAGED IN THE BUSINESS IN COMMODITY EXCHANGE, FRANCHISES REAL ESTATE BUSINESS. IN RESPONSE TO NOTICE U/S.250 OF THE I.T. ACT, 1961 SHRI SUNIL TRIVEDI, ADVOCATE CAME AND FILED THE DETAILS AS PER HIS LETTER DATED 28/06/2011 AND 28/11/2011. THE CASE IS DISCUSSED WITH HIM. :- 3 -: THE GROUNDS OF APPEAL RELATE TO ONLY ADDITION OF RS.13,83,753/- ONLY ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E)(V). THE A.R OF THE ASSESSEE HAS EXPLAINED THAT THE ASSESSEE SHRI PRAVEEN KUMAR MISHRA, BEING THE OWNER OF LAND AT RAKWA NO.324 AND 325 SITUATED IN KUKRADEO VILLAGE, TEHSIL BILLHAUR, DISTT. KANPUR (TOTAL AREA AMOUNTING TO 1.049 HECTARE), HAD ENTERED INTO THE AGREEMENT WITH M/S. GEETIKA SEEDS (P) LTD. VIDE THE AGREEMENT TO SALE DATE 17/08/2006 FOR CONSIDERATION OF RS.30.00 LAKH. THE SALE HAS NOT BEEN REGISTERED BUT THE PART PAYMENT OF RS.24.00 LAKH WAS GIVEN BY M/S. GEETIKA SEEDS (P) LTD. TO SHRI PRAVEEN KUMAR MISHRA DURING THE YEAR WHO IS HOLDING 65.58% SHARE HOLDING IN THE SAID COMPANY. ON CONSIDERATION OF THESE TRANSACTIONS, THE A.O HAS REACHED TO THE CONCLUSION REGARDING APPLICABILITY OF PROVISIONS OF SECTION 2(22)(E)(V) AND HAS MADE ADDITION OF RS.13,83,753/- TO THE EXTENT OF ACCUMULATED PROFIT OF THE COMPANY AS ON 31/03/2006. THE A.R OF THE ASSESSEE HAS PLACED THAT THIS AGREEMENT OF SALE DATED 17/08/2006 FOR THE CONSIDERATION OF RS.30.00 LAKH, REACHED BETWEEN THE ASSESSEE SHRI PRAVEEN KUMAR MISHRA AND THE COMPANY M/S. GEETIKA SEEDS (P) LTD., HAD BEEN CANCELLED AS PER THE CANCELLATION DEED DATED 06/10/2008 IN VIEW OF THE GAZETTE NOTIFICATION DATED 10/10/2007 FOR ACQUISITION OF LAND, SITUATED IN KUKRADEO VILLAGE, TEHSIL BILLHAUR, DISTT. KANPUR WHICH INCLUDES THE ASSESSEE'S LAND PLOT NO.324 AND 325 ADMEASURING 0.525 HECTARE EACH (TOTAL ADMEASURING TO 1.049 HECTARE). THE COPY OF THE GAZETTE NOTIFICATION, DATED 10/10/2007 HAS BEEN ENCLOSED WHICH MENTIONS THE PURPOSE OF ACQUISITION FOR THE PLANNED INDUSTRIAL DEVELOPMENT IN DISTRICT KANPUR NAGAR THROUGH UTTAR PRADESH STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD., KANPUR. ON CANCELLATION OF THE ORIGINAL AGREEMENT THE SALE OF RS.24.00 LAKH HAS BEEN RETURNED BACK BY THE APPELLANT TO THE COMPANY M/S. GEETIKA SEEDS (P) LTD. THE A.R OF THE ASSESSEE HAS FURTHER ARGUED AND SUBMITTED AS PER HIS LETTER DATED 28/11/2011 THAT THE NOTIFICATION HAS NOT BEEN WITHDRAWN AND THE COMPENSATION HAS NOT BEEN RECEIVED BY :- 4 -: SOME OF THE LAND OWNERS OF THE NOTIFIED LAND AREA. THEREFORE, THE NOTIFICATION HAS ALREADY BEEN ENFORCED. IN THESE CIRCUMSTANCES THE TRANSACTION WAS PURELY A BUSINESS TRANSACTION AND CANNOT BE INFERRED AS AN ADVANCE FOR THE PURPOSE OF APPLICATION OF PROVISION OF SECTION 2(22)(E)(V) UNDER THE CONCEPT OF DEEMED DIVIDEND. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE ALONGWITH ARGUMENTS PLACED BY THE A.R OF THE ASSESSEE, IT IS OBVIOUS THAT THE TRANSACTION OF SALE COULD NOT BE MATERIALIZED BECAUSE OF THE ACQUISITION NOTIFICATION DATED 10/10/2007 OF GOVERNMENT OF UP., THEREFORE, THE TRANSACTION CARRIES THE CHARACTERS OF PURCHASE AND SALE OF LAND RATHER THAN AN ADVANCE AS PERCEIVED BY THE A.O DURING THE ASSESSMENT PROCEEDING. IN THESE CIRCUMSTANCES, THE PROVISIONS OF SECTION 2(22)((E)(V) HAVE WRONGLY BEEN APPLIED FOR RS.13,83,753/-. THE A.R OF THE ASSESSEE HAS RIGHTLY RELIED ON THE FOLLOWING CASES:- (I) 228 CTR 506 (DELHI), 2010- CIT VS RAJKUMAR (II) 318 ITR 376 (DELHI), 2009-CIT VS AMBASSADOR TRAVELS (P) LTD (III) 318 ITR 476 (DELHI)- CIT VS CREATIVE DYING & PRINTING (P) LTD IN VIEW OF THE ABOVE CONSIDERATION, ADDITION OF RS.13,83,753/- MADE BY THE A.O ON ACCOUNT OF DEEMED DIVIDEND U/S. 2(22)(E)(V) IS HEREBY DELETED. 4. AGGRIEVED THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. 5. THE LD. COUNSEL FOR THE ASSESSEE, BESIDES PLACING HEAVY RELIANCE UPON THE ORDER OF THE LD. CIT(A), HAS INVITED OUR ATTENTION TO THE GAZETTE NOTIFICATION DATED 10.10.2007 APPEARING AT PAGES 5 TO 13, SALE AGREEMENT DATED 17.8.2006 APPEARING AT PAGES 18 TO 21 AND COPY OF CANCELLATION OF SALE AGREEMENT DATED 6.10.2008 APPEARING AT PAGES 14 TO 16 OF THE COMPILATION OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER :- 5 -: INVITED OUR ATTENTION TO THE COPY OF THE LETTER DATED 4.3.2010 ADDRESSED TO THE A.D.M (LAND ACQUISITION) BY THE ASSESSEE. COPY OF THE KHATONI AND COPY OF THE ORDER DATED 17.2.2010 OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF PRAVEEN KUMAR MISHRA VS. STATE OF U.P. IN WRIT C. NO.8491 OF 2010, IN WHICH THE COURT HAS DIRECTED THE PARTIES TO MAINTAIN STATUS QUO WITH REGARD TO THE POSSESSION OF THE LAND IN QUESTION. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT ON ACCOUNT OF ACQUISITION OF THE LAND WHICH WAS AGREED UPON FOR SALE TO THE COMPANY, COULD NOT BE FINALLY SOLD OUT AND FOR THAT REASON THE ADVANCE RECEIVED ON EXECUTION OF SALE AGREEMENT WAS RETURNED TO THE COMPANY. THEREFORE, IT IS A CASE OF COMMERCIAL TRANSACTION AND NO LOAN OR ADVANCE WAS GIVEN TO THE PERSON HAVING SHAREHOLDING IN THE COMPANY. OUR ATTENTION WAS ALSO INVITED TO THE FOLLOWING JUDGMENTS:- 1. CIT VS. SATYANARAYAN NUWAL, ORDER DATED 17.9.2010 I.T.A. NO. 19 OF 2009 (BOMBAY). 2. CIT VS. AMBASSADOR TRAVELS PVT. LTD., 318 ITR 376 (DELHI) 3. CIT VS. CREATIVE DYEING AND PRINTING PVT. LTD., 318 ITR 376 (DELHI). 6. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES AND THE DOCUMENTS PACED ON RECORD IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE ASSESSEE HAS RECEIVED A SUM OF RS.20 LAKHS FROM THE COMPANY, IN WHICH HE IS HAVING 65.58% SHAREHOLDING ON EXECUTION OF SALE AGREEMENT FOR HIS LAND. IT IS ALSO EVIDENT FROM THE RECORD THAT THIS LAND WAS LATER ON ACQUIRED BY THE GOVERNMENT AND THE ASSESSEE HAD TO APPROACH THE HON'BLE HIGH COURT SEEKING STAY ON TRANSFER OF POSSESSION OF THE LAND TO THE GOVERNMENT. THEREFORE, AFTER SALE AGREEMENT, THE ASSESSEE DID NOT HAVE THE TITLE IN THE PROPERTY AND THESE ARE SUFFICIENT GROUNDS FOR CANCELLATION OF THE SALE AGREEMENT. UNLESS AND UNTIL THE ASSESSEE ACQUIRES ABSOLUTE TITLE OF THE PROPERTY, IT CANNOT BE SOLD OUT AND THE ASSESSEE HAS FINALLY RETURNED THE :- 6 -: AMOUNT RECEIVED AS ADVANCE FOR EXECUTION OF SALE DEED TO THE COMPANY. UNDER THIS SITUATION, CAN IT BE CALLED THAT THE ADVANCE WAS GIVEN BY THE COMPANY TO THE SHAREHOLDER ATTRACTS THE PROVISIONS OF SECTION 2(22)(E)(V) OF THE ACT? THIS ASPECT WAS EXAMINED BY THE HON'BLE BOMABY HIGH COURT IN THE CASE OF CIT VS. SATYANARAYAN NUWAL (SUPRA), IN WHICH THEIR LORDSHIPS HAVE HELD THAT WHERE AN AMOUNT IS ADVANCED BY A COMPANY TOWARDS PART CONSIDERATION OF PROPERTY INTENDED TO BE SOLD BY THE ASSESSEE TO THE COMPANY, IT CANNOT BE SAID THAT THE COMPANY HAS ADVANCED MONEY TO ITS SHAREHOLDERS WITHIN THE MEANING OF SECTION 2(22)(E)(V) OF THE ACT; MERELY BECAUSE THE SELLER OF THE PROPERTY HAPPENS TO BE A SHAREHOLDER OF THE COMPANY. 7. IN THE CASE OF CIT VS. AMBASSADOR TRAVELS PVT. LTD. (SUPRA), THE HON'BLE DELHI HIGH COURT HAS ALSO HELD THAT WHERE THE ASSESSEE WAS INVOLVED IN THE BOOKING FOR RESORTS OF THE CUSTOMERS OF THESE COMPANIES AND ENTERED INTO NORMAL BUSINESS TRANSACTIONS AS A PART OF ITS DAY-TO-DAY BUSINESS ACTIVITIES, THE FINANCIAL TRANSACTION IN ANY CIRCUMSTANCES COULD NOT BE TREATED AS LOANS OR ADVANCES WITHIN THE MEANING OF PROVISIONS OF SECTION 2(22)(E)(V) OF THE ACT. 8. SIMILAR VIEW WAS AGAIN EXPRESSED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. CREATIVE DYEING AND PRINTING PVT. LTD. (SUPRA). 9. IN THE CASE OF SHALIMAR INFONET PVT. LTD. VS. INCOME TAX OFFICER, 90 DTR 66, THE TRIBUNAL HAS RE-EXAMINED THIS ISSUE AND HAS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE-COMPANY FROM THE SISTER CONCERN ON A SPECIFIC UNDERSTANDING FOR PURCHASE OF PLOT WITH DEFINITE SHARES OF BOTH THE COMPANIES, CANNOT BE CALLED A LOAN OR ADVANCE AND THE SAID PAYMENT IS NOT HIT BY SECTION 2(22)(E)(V) OF THE ACT AND IS NOT TAXABLE. 10. IN THE LIGHT OF THE AFORESAID JUDICIAL PRONOUNCEMENTS, WE ARE OF THE VIEW THAT THE AFORESAID ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE DID :- 7 -: NOT FALL WITHIN THE DEFINITION OF DEEMED DIVIDEND. WE ACCORDINGLY FIND OURSELVES IN AGREEMENT WITH THE ORDER OF THE LD. CIT(A) AND WE, THEREFORE, CONFIRM THE SAME. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 TH DECEMBER, 2014 JJ:0512 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR