Hari Kishan Nandwani, New Delhi V. ACIT, Circle-37(1), New Delhi

ITA 7458/DEL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7294 (ITAT-DELHI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 26-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Deemed dividend
• Section: 2(22)(e)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER ITA NO. 745 8 /DEL/201 8 [ASSESSMENT YEAR: 2 0 1 3 - 1 4 ] SHRI HARI KISHAN NANDWANI VS. THE A.C. I .T. B 165, SECOND FLOOR, CIRCLE 37 ( 1 ) SARASWATI VIHAR, PITAMPURA NEW DELHI NEW DELHI PAN: AACPN 8710 E [APPELLANT] [RESPONDENT] DATE OF HEARING : 2 3 . 0 4 .201 9 DATE OF PRONOUNCEMENT : .0 4 .201 9 ASSESSEE BY : SHRI R.S. SINGHVI, C A. SHRI SATYAJEET GOEL, CA REVENUE BY : SHRI S.L. ANURAGI, SR. DR ORDER PER N .K. BILLAIYA, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] 13 , NEW DELHI DATED 25 .0 9 .2018 PERTAINING TO A.Y 20 1 3 - 1 4 . 2 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 14,11,762/ - MADE BY THE ASSESSING OFFICER U/S 2(22)(E) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT']. 3. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED RS. 2,55,64,457/ - FROM HDA BUILDCON [P] LTD. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE SAID RECEIPT OF MONEY BE NOT TAXED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 4. IN RESPONSE, THE ASSESSEE FILE DETAILED REPLY EXPLAINING THE TRANSACTIONS WHICH IS AS UNDER: S. NO. DETAILS OF THE PROPERTY AMOUNT REMARKS 1. SB - 1302, PENT HOUSEJDI, KUNDLI RS 34.55 LACS THE PAYMENT WAS RECEIVED ON 09.11.2012 VIDE CHEQUE NO. 731408 THE ABOVE PROPERTY WAS SOLD/TRANSFER RIGHTS TO M/S HDA BUILDCON PVT LTD DURING AY AND NET INCOME OF RS 9 LACS WAS DECLARED IN THE AY. THE COPY OF THE TRANSFER DOCUMENT WERE GIVEN VIDE LETTER DATED 05,01,2016 2 B19/9JDI CITY, KUNDLI RS 20.48 LACS THE PAYMENT WAS RECEIVED ON 09.11.2012 VIDE CHEQUE NO. 731407 THE ABOVE PROPERTY WAS SOLD/TRANSFER RIGHTS TO M/S HDA BUILDCON PVT LTD DURING AY AND NET INCOME OF RS 0.99 LACS WAS DECLARED IN THE AY. THE COPY OF THE TRANSFER DOCUMENT WERE GIVEN VIDE LETTER DATE D 05.01.2016. 3 3 DLF, CAPITAL GREENS, NEW DELHI RS 92.88 LACS THE PAYMENT WAS RECEIVED ON 21.11.2012 VIDE CHEQUE NO. 731413 THE ABOVE PROPERTY/TRANSFER RIGHTS WAS PURCHASED VIDE AGREEMENT DATED 04.06.2012. COPY OF AGREEMENT WAS GIVEN TO YOUR OFFICE VIDE YOUR LETTER DATED 03.02.2016.. 4 D6/903 PARSVANATH EXOTICA SEC - 53 GURGAON RS 68 LACS THE PAYMENT WAS RECEIVED ON 21.11.2012 VIDE CHEQUE NO. 731413 THE ABOVE PROPERTY/TRANSFER RIGHTS WAS PURCHASED VIDE AGREEMENT DATED 04.06.2012. COPY OF AGREEMENT WAS GIVEN TO YOUR OFFICE VIDE YOUR LETTER DATED 03.02.2016. 5. IN THE LIGHT OF THE AFOREMENTIONED DETAILS, THE ASSESSEE EXPLAINED THAT THE MONEY RECEIVED FROM HDA BUILDCON [P] LTD. IS NOTHING BUT ADVANCE RECEIVED BY THE ASSESSEE AGAINST THE PROPERTY AND BEING A BUSINESS TRANSACTION, AND HENCE THE SAME CANNOT BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 6. AFTER CONSIDERING THE SUBMISSIONS, THE ASSESSING OFFICER OBSERVED AS UNDER: THE REPLY OF THE ASSESSEE IS CONSIDERED AND ANALYSED . BUT IT IS NOT FOUND COMPLETELY SATISFACTORY. THE ASSESSEE IN HIS LETTER DATED 03/12/2015 PROVIDED A LEDGER OF HDA BUILDCON (P) LTD FROM WHICH IT IS CLEAR THAT ASSESSEE RECEIVED RS 2,55,64,457/ - DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD DEBIT BALANCE OF RS 25,61,310/ - AS ON 4 01/04/2012 AND THE ASSESSEE IN HIS REPLY DATED 25/02/2016 TO THE SHOW CAUSE NOTICE DATED 15/02/2016 EXPLAIN AMOUNT OF RS 2,15,91,385/ - AS ADVANCE RECEIVED AGAINST VARIOUS PROPERTIES AS LISTED ABOVE. THE ASSESSEE COULD NOT EX PLAIN WHY THE SEC. 2(22)(E) SHOULD NOT BE APPLICABLE FOR THE BALANCE AMOUNT OF RS. 14,11,762/ - RECEIVED DURING THE YEAR FROM M/S HDA BUILDCON (P) LTD. 5 . AS THE ASSESSEE HAS 22.22% SHAREHOLDING IN HDA BUILDCON (P) LTD AS ON 31.03.2013. THE ASSESSEE ALSO HAS S UBSTANTIAL INTEREST (MORE THAN 20%) IN THE PROPRIETARY FIRM - DEEPAK EXPORTS. FURTHER, HDA BUILDCON IS A CLOSELY HE ID' COMPANY( NOT A PUBLIC COMPANY) AND AS PER BALANCE SHEET OF THE COMPANY AS ON 31/03/2013, THE COMPANY HAS RESERVE & SURPLUS OF RS. 2,89,32 ,903/ - . THEREFORE, AS PER SEC 2{22)(E) OF IT ACT,1961, THE BALANCE AMOUNT RS 14,11,762/ - RECEIVED BY THE ASSESSEE FROM HDA BUILDCON PVT. LTD. DURING THE YEAR UNDER CONSIDERATION IS CONSIDERED AS DEEMED DIVIDEND AND ADDED BACK TO TOTAL INCOME OF THE ASSESSE E. PENALTY PROCEEDINGS U/S 271(1) (C) OF THE INCOME TAX ACT, 1961 IS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME 7. AGGRIEVED, T HE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) , BUT WITHOUT ANY SUCCESS. 5 8 . BEFORE ME, THE LD. AR STATED THAT THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THE RECEIPT OF MONEY FROM HDA BUILDCON [P] LTD. AS ADVANCE TOWARDS PURCHASE OF PROPERTY. IT IS THE SAY OF THE LD. AR THAT ONCE THE ASSESSING OFFICER HAS ACCEPTED THE BUSINESS TRANSACTION, HE SHOULD NOT HAVE TAKEN A DIFFERENT VIEW. 9 . PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 10 . I HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THE RE IS NO DISPUTE THAT THE ASSESSEE WAS HAVING BUSINESS TRANSACTION WITH HDA BUILDCON [P] LTD. THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THE TRANSACTION TO THE EXTENT OF RS. 2.15 CRORES. I FIND THAT THE CBDT VIDE CIRCULAR NO. 19/2017 DATED 12.06.2017 ISSUED THE CIRCULAR TO THE EXTENT THAT ADVANCES WHICH ARE IN THE NATURE OF COMMERCIAL TRANSACTIONS WOULD NOT FALL WITHIN THE AMBIT OF THE WORD ADVANCE IN SECTION 2(22)(E) OF THE ACT. 6 11. THE HONBLE DELHI HIGH COURT IN THE CASE OF CREATIVE DYEING AND PRINTING PVT. LTD. (SUPRA) HAS HELD THAT AMOUNTS ADVANCED FOR BUSINESS TRANSACTION DO NOT FALL WITHIN THE DEFINITION OF DEEMED DIVIDEND U/S 2(22)(E) OF THE IT ACT. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ARVIND KUMAR JAIN (SUPRA) HAS HELD THA T AMOUNT RECEIVED BY THE ASSESSEE SHAREHOLDER FROM A COMPANY AS A RESULT OF TRADING TRANSACTION COULD NOT BE REGARDED AS DEEMED DIVIDEND 12. I FIND THAT VIDE AGREEMENT DATED 20.11.2012 BETWEEN THE APPELLANT AND HDA BUILDCON [P] LTD., HDA BUILDCON [P] LTD. HAS GIVEN A SUM OF RS. 14 LAKHS AS AN EARNEST MONEY IN ADVANCE AGAINST THE SALE OF PROPERTY BEING ENTIRE THIRD FLOOR WITH ITS ROOF/TERRACE RIGHTS UPTO THE SKY OF THE BUILT - UP PROPERTY BEARING NO. C - 377, SITUATED IN THE LAYOUT PLAN OF GOVERNMENT TEACHERS C O - OPERATIVE HOUSE BUILDING SOCIETY LTD ., KNOWN AS SARASWATI VIHAR, PITAMPURA, DELHI. 13. IN THE LIGHT OF THE CBDT CIRCULAR [SUPRA] AND THE DECISION OF THE HON'BLE DELHI HIGH COURT [SUPRA] , MONEY RECEIVED FROM HDA BUILDCON [P] LTD. IS A BUSINESS TRANSACTIO N AND, THEREFORE, OUTSIDE THE AMBIT OF THE DEFINITION OF 7 DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. I, THEREFORE, DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. 1 4 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 7458 /DEL/201 8 IS ALLOWED . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON . 0 4 .201 9 . [N.K. BILLAIYA] ACCOUNTANT MEMBER DATED: APRIL, 2019. VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) ASST. REGISTRAR, 5. DR ITAT, NEW DELHI 8 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER