Sh. Kabul Chawla, New Delhi V. ACIT, New Delhi

ITA 780/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6359 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-05-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 06-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SULEKHA VERMA
• Assessee Lawyers: V S RASTOGI; AJAY BHAGWANI
• Keywords: Search and seizure; Deemed dividend
• Section: 143(3); 153A; 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. R. S. SYAL, AM AND SH. I. C. SUDHIR, JM ITA NO. 779/DEL/2013 : ASSTT. YEAR : 2002-03 ITA NO. 780/DEL/2013 : ASSTT. YEAR : 2005-06 ITA NO. 781/DEL/2013 : ASSTT. YEAR : 2006-07 ITA NO. 782/DEL/2013 : ASSTT. YEAR : 2007-08 & ITA NO. 783/DEL/2013 : ASSTT. YEAR : 2008-09 SHRI KABUL CHAWLA, 7, AMRITA SHERGILL MARG, NEW DELHI-110011 VS ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-23, NEW DELHI-110001 (APPELLANT) (RESPONDENT) PAN NO. AAFPC6879C ASSESSEE BY : SHRI V. S. RASTOGI & AJAY BHAGWANI REVENUE BY : MS. SULEKHA VE RMA, CIT DR DATE OF HEARING : 21.5.2014 DATE OF PRONOUNCEMENT : 23.5.2014 ORDER PER R. S. SYAL, AM: THESE FIVE APPEALS BY THE ASSESSEE RELATE TO THE AS SESSMENT YEARS 2002-03 AND 2005-06 TO 2008-09. SINCE SOME COMMON I SSUES RAISED IN THIS BATCH OF APPEALS, WE, ARE, THEREFORE, PROCEEDI NG TO DISPOSE THEM OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. A.YS. 2002-03, 2005-06 & 2006-07 2. A LEGAL ISSUE HAS BEEN RAISED IN THESE THREE APP EALS FOR THE ASSESSMENT YEARS 2002-03, 2005-06 AND 2006-07 TO TH E EFFECT THAT THE ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 2 ADDITIONS MADE IN THESE THREE YEARS U/S 2(22)(E) O F THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) ARE NOT SU STAINABLE BECAUSE NO INCRIMINATING MATERIAL CONCERNING SUCH ADDITIONS WA S FOUND DURING THE COURSE OF SEARCH AND FURTHER THE ASSESSMENTS FOR SU CH YEARS WERE NOT PENDING ON THE DATE OF SEARCH. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS SUBJECTED TO SEARCH AND SEIZURE ACTION ON 15.11.200 7. NOTICES U/S 153A WERE ISSUED REQUIRING THE ASSESSEE TO FILE RETURNS OF TOTAL INCOME FOR THE RELEVANT SIX ASSESSMENT YEARS. IN SO FAR AS THE AS SESSMENT YEAR 2002-03 IS CONCERNED, THE ASSESSEE FILED HIS RETURN ON 19.1 .2009 DECLARING TOTAL INCOME OF RS. 12,42,740/-. THE ASSESSMENT WAS FINAL LY COMPLETED ON TOTAL INCOME OF RS. 68,31,740/-, WHICH INTER ALIA INCLUDED AN ADDITION OF RS. 3.89 LAKH ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THEREAFTER, THE ASSESSEE FILED RECTIFICATION APPLIC ATION U/S 154 AGAINST SUCH ASSESSMENT ALLEGING THAT THE ACCUMULATED PROFI TS OF THE PAYER COMPANIES WERE LESS THAN THE AMOUNT OF LOAN OR ADVA NCE GIVEN TO THE RECIPIENT COMPANIES. THE AO GOT CONVINCED WITH SUC H APPLICATION AND REDUCED THE ADDITION UNDER THIS SECTION TO RS.37,16 2. THE FACTS OF THE OTHER TWO ASSESSMENT YEARS ARE MUTATIS MUTANDIS SIMILAR QUA THE ADDITIONS MADE U/S 2(22)(E) OF THE ACT. THE ASSESS EE TOOK SIMILAR LEGAL GROUND BEFORE THE LD. CIT(A) AS WELL, WHO CHOSE TO DISMISS THE SAME BY OBSERVING THAT SEC. 153A OF THE ACT AUTHORIZES THE ASSESSING OFFICER TO ASSESS `TOTAL INCOME AND ACCORDINGLY, SUCH ASSESS MENT U/S 153A IS NOT ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 3 RESTRICTED ONLY TO THE DETERMINATION OF THE UNDIS CLOSED INCOME, WHICH WAS THE POSITION UNDER CHAPTER XIV-B OF THE ACT. 4. THE CASE OF THE ASSESSEE BEFORE US THROUGH SUCH LEGAL GROUND TAKEN FOR THESE THREE ASSESSMENT YEARS IS THAT THE ADDITI ONS U/S 2(22)(E) OF THE ACT ARE NOT SUSTAINABLE BECAUSE NO INCRIMINATING MA TERIAL CONCERNING THESE ADDITIONS WAS FOUND DURING THE COURSE OF SEAR CH. THE LD. DR COUNTERED THIS CONTENTION BY REITERATING THE OPINIO N EXPRESSED BY THE LD. FIRST APPELLATE AUTHORITY AND ALSO PUTTING FORTH TH AT THE SCOPE OF SEC. 153A OF THE ACT IS NOT LIMITED TO THE ADDITIONS ON THE B ASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH, BUT T O ADDITIONS OF ANY KIND MADE WITH OR WITHOUT ANY INCRIMINATING MATERIAL FOU ND DURING THE COURSE OF SEARCH. SHE TRIED TO JUSTIFY HER VIEW BY ACCENTU ATING ON THE REQUIREMENT OF DETERMINING THE `TOTAL INCOME OF T HE ASSESSEE U/S 153A OF THE ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD IN THE LIGHT OF THE PRECEDENTS C ITED AT THE BAR. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS ON THIS LEGAL I SSUE, IT WOULD BE APT TO CONSIDER SEC. 153A, THE RELEVANT PART OF WHICH READ S AS UNDER:- `153A. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SE CTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASS ETS ARE ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 4 REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO F URNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTH ER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASS ESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FAL LING WITHIN SUCH SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN THIS SUB-SECTION PENDING ON TH E DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKIN G OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE : .. 6. A CAREFUL PERUSAL OF THE ABOVE PROVISION BRINGS TO LIGHT THAT WHERE A SEARCH IS INITIATED U/S 132 OF THE ACT ETC., THE A.O SHALL ISSUE A NOTICE REQUIRING THE PERSON SEARCHED ETC. TO FURNISH HIS R ETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. ONCE SUCH ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 5 RETURNS ARE FILED, THE ASSESSING OFFICER HAS TO ASS ESS OR REASSESS THE TOTAL INCOME OF SUCH SIX ASSESSMENT YEARS. THE DECISIVE WORDS USED IN THE PROVISIONS ARE TO ASSESSEE OR REASSESS THE TOTAL I NCOME. THUS, IT IS MANIFEST THAT A DUTY HAS BEEN CAST ON THE ASSESSING OFFICER TO DETERMINE THE TOTAL INCOME OF THE ASSESSEE FOR SUCH SIX ASS ESSMENT YEARS. OBVIOUSLY TOTAL INCOME REFERS TO THE SUM TOTAL OF INCOME IN RESPECT OF WHICH A PERSON IS ASSESSABLE. IT COVERS NOT ONLY TH E INCOME EMANATING FROM DECLARED SOURCES OR ANY MATERIAL PLACED BEFORE THE ASSESSING OFFICER BUT FROM ALL SOURCES INCLUDING THE UNDECLAR ED ONES, OR UNPLACED MATERIAL BEFORE THE AO. THE POSITION WHICH EMERGES ON A READING OF CLAUSES (A) OR (B) OF SEC. 153A(1) ALONG WITH THE FIRST PROVISO IS THAT THE ASSESSING OFFICER IS SUPPOSED TO DETERMINE THE `TOT AL INCOME OF THE ASSESSEE IN RESPECT OF THE RELEVANT SIX ASSESSMENT YEARS. SECOND PROVISO TO SEC. 153A(1) ECLIPSES THE AFORE DISCUSSED DETERM INATION OF TOTAL INCOME. THE SECOND PROVISO PROVIDES THAT ANY PEND ING ASSESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR FALLIN G WITHIN THE PERIOD OF SIX YEARS REFERRED TO IN SUB-SEC. (1) ON THE DATE O F INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION UNDER SE CTION 132A, AS THE CASE MAY BE, SHALL ABATE. THE EFFECT OF THE SECOND PROVISO IS THAT ANY PENDING ASSESSMENT OR REASSESSMENT ON THE DATE OF S EARCH FOR ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF RELEVA NT SIX ASSESSMENT YEARS SHALL ABATE AND A FRESH DETERMINATION OF TOT AL INCOME WOULD BE REQUIRED. NOW A QUESTION ARISES THAT WHAT IS THE E FFECT OF SECOND PROVISO ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 6 ON THE ASSESSMENTS FOR ANY ASSESSMENT YEARS FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS WHICH ARE NOT PENDING ON THE DATE OF SEARCH. 7. THE LD. AR RELIED ON CERTAIN TRIBUNAL ORDERS I NCLUDING THE SPECIAL BENCH ORDER IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT (2012) 137 ITD 287(MUM)(SB) AND ACIT VS. PRATIBHA INDUSTRIES LTD. (2013) 141 ITD 151 (MUMBAI) TO BUTTRESS HIS CONTENTION THAT NO ADDITION CAN BE MADE IN RESPECT OF ASSESSMENTS CONCLUDED ON THE DATE OF SEARCH UNLESS SOME INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH. IN THE OPPUGNATION, THE LD. DEPARTMENTAL REPRESENTA TIVE RELIED ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS ANIL KUMAR BHATIA (2013) 352 ITR 493 (DEL) AND ANOTHER UNREPORTED JUDGMENT DATED 14.12.2012 OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MADUGULU VENU VS DIT (A COPY PLACED ON RECORD) TO ASSERT THAT THE COMPLETED ASSESSMENT ON THE DATE OF SEARCH SHALL ST AND ON THE SAME FOOTING AS THE PENDING ASSESSMENTS WITHIN THE MEANI NG OF SECOND PROVISO TO SEC. 153A(1). 8. WE ARE UNABLE TO ACCEPT THE CONTENTION ADVAN CED ON BEHALF OF THE REVENUE FOR THE REASON THAT IF BOTH THE PENDING AND COMPLETED ASSESSMENT WERE TO BE TAKEN ON SAME PEDESTAL, THEN THERE WAS NO NEED TO ENSHRINE SECOND PROVISO TO SEC. 153A(1) PROVIDING T HAT THE PENDING ASSESSMENTS WITHIN THE PERIOD OF SIX ASSESSMENT YEA RS SHALL ABATE. THE HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 7 DEALT WITH A SITUATION IN WHICH SOME INCRIMINATING MATERIAL WAS FOUND IN RESPECT OF A NON-PENDING ASSESSMENT. IT WAS IN TH AT BACKGROUND THAT THE HONBLE HIGH COURT HELD THAT SEC. 153A APPLIES IF INCRIMINATING MATERIAL IS FOUND EVEN IF ASSESSMENTS ARE COMPLETED . THE QUESTION AS TO WHETHER ANY ADDITION CAN BE MADE IN RESPECT OF COMP LETED ASSESSMENTS WHEN NO INCRIMINATING MATERIAL WAS FOUND, WAS APPA RENTLY LEFT OPEN. HOWEVER, WE FIND THAT THERE ARE SUFFICIENT INDIRECT HINTS GIVEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) ABOUT NOT MAKING OF ANY ADDITION IN RESPECT OF AN A SSESSMENT YEAR FOR WHICH THE ASSESSMENT IS ALREADY COMPLETED UNLESS SO ME INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH. THIS CAN BE SEEN FROM THE FOLLOWING OBSERVATIONS OF THE HONBLE HIGH COURT :- 20. A QUESTION MAY ARISE AS TO HOW THIS IS SOUGHT TO BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED I N RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UN DER SECTION 143(1)(A) OR SECTION 143(3) OF THE ACT. IF SUCH AN ORDER IS ALREADY IN EXISTENCE, HAVING OBVIOUSLY BEEN PASSED PRIOR TO THE INITIATION OF THE SEARCH/REQUISITION, THE ASSESSING OFFICER IS EM POWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INC OME, TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH. 9. THE ABOVE EXTRACTED OBSERVATIONS OF THE HON BLE HIGH COURT, WHICH ARE THOUGH OBITER DICTA , MAKE THE POINT CLEAR THAT WHERE AN ASSESSMENT ORDER HAS ALREADY BEEN PASSED FOR A YEAR (S) WITHIN THE RELEVANT SIX ASSESSMENT YEARS, THEN ALSO THE A.O IS DUTY BOUND TO REOPEN ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 8 THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME BUT BY TAKING NOTE OF THE UNDISCLOSED INCOME IF ANY, UNEARTHED DURING THE SEARCH . THE EXPRESSION UNEARTHED DURING THE SEARCH IS QUITE SIGNIFICANT TO DENOTE THAT IN RESPECT OF COMPLETED OR NON-PENDING ASSESSM ENTS, THE ASSESSING OFFICER IS ALBEIT DUTY BOUND TO ASSESS OR REASSESS THE TOTAL INCOME BUT THERE IS A CAP ON THE SCOPE OF ADDITIONS IN SUCH AS SESSMENT, BEING THE ITEMS OF INCOME UNEARTHED DURING THE SEARCH. IN O THER WORDS, THE DETERMINATION OF TOTAL INCOME IN RESPECT OF THE A SSESSMENT YEARS FOR WHICH THE ASSESSMENTS ARE ALREADY COMPLETED ON THE DATE OF SEARCH, SHALL NOT BE INFLUENCED BY THE ITEMS OF INCOME OTHER THAN THOSE BASED ON THE MATERIAL UNEARTHED DURING THE COURSE OF SEARCH. THE RE IS NOT AND CANNOT BE ANY QUARREL OVER THE PROPOSITION THAT THE ASSESS ING OFFICER HAS NO OPTION BUT TO DETERMINE THE TOTAL INCOME OF THE ASS ESSEE IN RESPECT OF THE RELEVANT SIX ASSESSMENT YEARS. HOWEVER, THE SCOPE O F SUCH DETERMINATION OF TOTAL INCOME IS DIFFERENT IN RESPECT OF THE YEAR S FOR WHICH THE ASSESSMENTS ARE PENDING VIS-VIS THE YEARS FOR WHICH ASSESSMENTS ARE NON- PENDING. IN RESPECT TO THE ASSESSMENT YEARS FOR WH ICH THE ORIGINAL ASSESSMENTS HAVE ALREADY BEEN COMPLETED ON THE DATE OF SEARCH, THE TOTAL INCOME SHALL BE DETERMINED BY RESTRICTING ADDITIONS ONLY TO THOSE WHICH FLOW FROM INCRIMINATING MATERIAL FOUND DURING THE C OURSE OF SEARCH. IF NO INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SU CH COMPLETED ASSESSMENT, THEN THE TOTAL INCOME IN THE PROCEEDING S U/S 153A SHALL BE COMPUTED BY CONSIDERING THE ORIGINALLY DETERMINED I NCOME. IF SOME ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 9 INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH ASSESSMENT YEARS FOR WHICH THE ASSESSMENT IS NOT PENDING, THEN THE TOTA L INCOME WOULD BE DETERMINED BY CONSIDERING THE ORIGINALLY DETERMINED INCOME PLUS INCOME EMANATING FROM THE INCRIMINATING MATERIAL FO UND DURING THE COURSE OF SEARCH. IN THE OTHER SCENARIO OF THE ASSE SSMENTS PENDING ON THE DATE OF SEARCH WHICH WOULD ABATE IN TERMS OF SECOND PROVISO TO SEC. 153A(1), THE TOTAL INCOME SHALL BE COMPUTED AFRESH UNINFLUENCED BY THE FACT WHETHER OR NOT THERE IS ANY INCRIMINATING MATE RIAL. IN FACT, THIS IS THE POSITION WHICH FOLLOWS WHEN WE READ THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN ANIL KUMAR BHATIA (SUPRA) IN JUXTAPOSITION TO THE SPECIAL BENCH ORDER IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD.(SUPRA). THE OTHER JUDGMENT RELIED BY THE LD. DR IN THE CASE OF MADUGULU VENU (SUPRA) ALSO TALKS ABOUT THE NEED FOR MAKING FRESH ASSESSME NT IN RESPECT OF THE ASSESSMENT YEARS FOR WHICH THE ASSESSMENTS ARE NOT PENDING ON THE DATE OF SEARCH BUT DOES NOT SET OUT THE SCOPE O F SUCH ASSESSMENT, WHICH IS THE ISSUE BEFORE USE. 10. ADVERTING TO THE FACTS OF THE INSTANT CASE FOR THE ASSESSMENT YEAR 2002-03, WE FIND THAT THE DISPUTE IN THE PRESENT AP PEAL IS ONLY IN RESPECT OF CONFIRMATION OF ADDITION OF RS. 37,162/- ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT FOR WHICH A DMITTEDLY NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. THE FACTUAL POSITION IS SIMILAR FOR THE A.YS. 2005-06 A ND 2006-07 FOR WHICH THE ADDITIONS TO THE TUNE OF RS. 50,31,375/- AND R S. 1,03,03,582/- ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 10 RESPECTIVELY MADE U/S 2(22)(E) OF THE ACT ARE IN CH ALLENGE BEFORE US. WE FIND THAT THE LD. CIT(A) HAS NOT CONTROVERTED TH E CONTENTION ADVANCED ON BEHALF OF THE ASSESSEE DESPITE THE FACT THAT THE ASSESSEE CATEGORICALLY STATED THAT NO INCRIMINATING MATERIA L WAS FOUND ON THIS SCORE DURING THE SEARCH OPERATION. EVEN THE LD. DR HAS ALSO NOT INVITED OUR ATTENTION TOWARDS ANY SUCH MATERIAL. IN VIEW O F THE FOREGOING DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT T HESE ADDITIONS MADE U/S 2(22)(E) OF THE ACT ARE NOT SUSTAINABLE SINCE T HESE WERE MADE WITHOUT REFERENCE TO ANY INCRIMINATING MATERIAL FOU ND DURING THE COURSE OF SEARCH AND FURTHER THE ASSESSMENTS FOR THESE THR EE YEARS WERE NOT PENDING ON THE DATE OF SEARCH. ERGO, THE IMPUGNED O RDERS FOR THESE THREE YEARS ON THIS ISSUE ARE SET ASIDE AND THE ADD ITIONS ARE DIRECTED TO BE DELETED. A.YS. 2007-08 & 2008-09 11. IN THESE TWO APPEALS, THE ADDITIONS MADE U/ S 2(22)(E) OF THE ACT IN THE ASSESSMENT ORDERS AS CONFIRMED IN THE FIRST APP EALS FOR THE A.YS. 2007-08 AND 2008-09 AMOUNTING TO RS.28,17,430 AND RS.2,96,060 RESPECTIVELY ARE CHALLENGED ON MERITS BECAUSE RECOU RSE TO THE ABOVE DISCUSSED LEGAL GROUND IS NOT AVAILABLE HERE. AS T HE FACTS AND CIRCUMSTANCES OF BOTH THE YEARS ARE ALMOST SIMILAR, WE ARE ESPOUSING THE FACTUAL MATRIX RELEVANT FOR THE A.Y. 2007-08. THE A SSESSING OFFICER OBSERVED DURING THE COURSE OF ASSESSMENT PROCEEDING S THAT THE ASSESSEE ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 11 IS A CHAIRMAN OF BPTP GROUP AND A REGISTERED SHAREH OLDER IN MOST OF THE COMPANIES OF THIS GROUP. THE ASSESSEE IS A SUBS TANTIAL SHAREHOLDER IN M/S UAG BUILDERS PVT. LTD., M/S RAINBOW PROMOTERS P VT. LTD. AND M/S GENIOUS PROMOTERS PVT. LTD. WHICH HAD RECEIVED LOAN S FROM CERTAIN OTHER GROUP CONCERNS. IN THE SEPARATE ASSESSMENTS MADE OF THESE THREE COMPANIES, ADDITIONS AMOUNTING TO RS. 21,59,430/- , 4,58,000/- AND RS. 2,00,000/- RESPECTIVELY WERE MADE ON ACCOUNT OF DEE MED DIVIDEND U/S 2(22)(E) OF THE ACT ON PROTECTIVE BASIS. IN SUCH A SSESSMENTS, THE ASSESSING OFFICER HELD THAT THE SUBSTANTIVE ADDITIO NS WOULD BE MADE IN THE HANDS OF THE REGISTERED SHAREHOLDER, WHO IS MR. KABUL CHAWLA, THE PRESENT ASSESSEE. THE SAID COMPANIES CONTENDED IN THEIR RESPECTIVE FIRST APPEALS THAT THE PROVISIONS OF DEEMED DIVIDEND WERE NOT ATTRACTED IN THEIR CASES AND THE ADDITION SHOULD BE CONSIDERED O NLY IN THE HANDS OF THE REGISTERED SHAREHOLDER. THE LD. CIT(A) ORDERED FOR THE DELETION OF SUCH ADDITIONS IN THE HANDS OF THE COMPANIES. IN TH E PRESENT PROCEEDINGS, THE ASSESSEE CHANGED THE STAND BY ARGUING THAT THE ADDITIONS WERE NOT CALLED FOR EVEN IN HIS HANDS. NOT CONVINCED, THE AS SESSING OFFICER MADE ADDITIONS U/S 2(22)(E) OF THE ACT IN THE HANDS OF T HE ASSESSEE ON SUBSTANTIVE BASIS. THE LD. CIT(A) NOTICED THAT SHRI KABUL CHAWLA, THE PRESENT ASSESSEE, IS BENEFICIAL OWNER HAVING MORE THAN 20% OF THE VOTING RIGHT IN BOTH THE PAYER AS WELL AS THE RECIP IENT COMPANIES. THE LD. AR RELIED ON THE JUDGMENT OF THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF CIT VS ANKITECH PVT. LTD. (2011) 11 TAXMANN.COM 100 (DEL) ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 12 TO CONTEND BEFORE THE LD. CIT(A) THAT NO ADDITION C OULD BE MADE IN THE HANDS OF THE ASSESSEE. THE LD. CIT(A) OBSERVED THA T THE HONBLE HIGH COURT IN THIS CASE HAS HELD THAT IF MONEY IS ADVANC ED TO A CONCERN BY A COMPANY WHERE THERE IS SHAREHOLDER HAVING SHARES M ORE THAN 10% OF VOTING RIGHT AND THE SAME SHAREHOLDER HAS SUBSTANTI AL INTEREST IN SUCH CONCERN, THEN SUCH ADVANCES CANNOT BE TREATED AS DE EMED DIVIDEND IN THE HANDS OF SUCH CONCERN AS SUCH CONCERN IS NOT A REGI STERED SHAREHOLDER OF THE PAYER COMPANY. CONSIDERING THE MANDATE CONTAINE D IN PARA 24 OF THE JUDGMENT IN THE CASE OF ANKITECH PVT. LTD. (SUPRA), THE LD. CIT(A) HELD THAT THE AMOUNTS WERE RIGHTLY TAXED AS DEEMED DIVI DEND U/S 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF SUCH ADDITION FOR BOTH THE YEARS. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. IT CAN BE SEEN FROM THE RELEVAN T ASSESSMENT ORDERS OF THE RECIPIENT COMPANIES, NAMELY, M/S GENIOUS PROMOT ERS PVT. LTD., M/S UAG BUILDERS PVT. LTD. AND M/S RAINBOW PROMOTERS PV T. LTD., COPIES OF WHICH HAVE BEEN PLACED BY THE LD. AR ON RECORD, THAT M/S GENIOUS PROMOTERS PVT. LTD. RECEIVED A SUM OF RS. 2 LAKH AS LOAN/ADVANCE FROM M/S RAINBOW PROMOTERS PVT. LTD. DURING THE YEAR. S IMILARLY, M/S UAG PROMOTERS PVT. LTD. RECEIVED LOAN AND ADVANCES AMOU NTING TO RS. 3,16,1,400/- FROM OTHER TWO COMPANIES FOR WHICH THE A.O MADE ADDITION OF RS. 21.59 LAKH BY CONSIDERING THE AVAILABILITY O F ACCUMULATED PROFITS. SIMILAR IS THE POSITION ABOUT THE THIRD COMPANY. IT IS PERTINENT TO NOTE ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 13 THAT THE PRESENT ASSESSEE, NAMELY, SHRI KABUL CHAWL A, A REGISTERED SHAREHOLDER OF THE BOTH THE PAYER COMPANIES OF LOA NS OR ADVANCES AND ALSO THE RECIPIENT COMPANIES, IS HOLDING MORE THAN 50% SHARE CAPITAL IN BOTH THE SETS OF COMPANIES. THE ARGUMENT THAT THE AMOUNT SHOULD NOT BE TAXED IN THE HANDS OF THESE COMPANIES BECAUSE THEY WERE NOT THE SHAREHOLDERS IN THE PAYER COMPANIES FOUND FAVOUR WI TH THE FIRST APPELLATE AUTHORITIES OF SUCH RECIPIENT COMPANIES AND THE PRO TECTIVE ADDITIONS MADE IN THEIR HANDS HAVE BEEN FINALLY DELETED. NOW THE QUESTION IN THE EXTANT APPEALS IS WHETHER THE AMOUNT RECEIVED BY TH E RECIPIENT COMPANIES FROM THE PAYER COMPANIES, IN BOTH OF WHIC H THE ASSESSEE IS HAVING SHAREHOLDING OF MORE THAN 50%, CAN BE TAXED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT ? 13. IN ORDER TO FIND AN ANSWER TO THIS QUESTION , WE NEED TO HAVE A GLANCE AT THE PROVISIONS OF SECTION 2(22) OF THE A CT DEALING WITH THE DEFINITION OF `DIVIDEND. THIS INCLUSIVE DEFINITIO N OF `DIVIDEND HAS FIVE CLAUSES FROM (A) TO (E). CLAUSE (A) ENCOMPASSES THE DEFINITION OF `DIVIDEND AS IS UNDERSTOOD IN COMMON PARLANCE, BEI NG ANY DISTRIBUTION BY A COMPANY OF ACCUMULATED PROFITS , WHETHER CAPIT ALISED OR NOT, IF SUCH DISTRIBUTION ENTAILS THE RELEASE BY THE COMPANY TO ITS SHAREHOLDERS OF ALL OR ANY PART OF THE ASSETS OF THE COMPANY. NEXT THRE E CLAUSES DEAL WITH ANY DISTRIBUTION TO ITS SHAREHOLDERS BY A COMPANY OF DEBENTURES, DEBENTURE-STOCK, OR DEPOSIT CERTIFICATES IN ANY FOR M; ANY DISTRIBUTION ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 14 MADE TO THE SHAREHOLDERS OF A COMPANY ON ITS LIQUID ATION; AND ANY DISTRIBUTION TO ITS SHAREHOLDERS BY A COMPANY ON T HE REDUCTION OF ITS CAPITAL. THESE FOUR CLAUSES FROM (A) TO (D) CLEARLY REFER TO THE DIRECT DISTRIBUTION OF PROFITS MADE BY THE COMPANY TO ITS SHAREHOLDERS IN DIFFERENT CIRCUMSTANCES. THEN COMES CLAUSE (E), WHI CH DOES NOT DEAL WITH THE DIRECT DISTRIBUTION OF PROFIT TO ITS SHARE HOLDERS BUT WITH THE AMOUNT INDIRECTLY REACHING THE SHAREHOLDERS BY WAY OF ADVANCE OR LOAN OR OTHERWISE THROUGH SOME INDIRECT PAYMENT. AT THIS JUNCTURE, IT WILL BE RELEVANT TO NOTE DOWN THE PRESCRIPTION OF CLAUSE (E ) OF SECTION 2(22) OF THE ACT, AS UNDER :- `( E ) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WH ETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER , BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHA RES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVID END WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHIC H SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFE RRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEH ALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PR OFITS ; 14. A CLOSE SCRUTINY OF THE ABOVE PROVISION IND ICATES THAT IT IS ATTRACTED WHEN ANY PAYMENT IS MADE BY A COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED, OF THE AMOUNTS P AID UNDER ANY OF THE FOLLOWING THREE CATEGORIES : - ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 15 (A) TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFIC IAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND W HETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS T HAN TEN PER CENT OF THE VOTING POWER, OR (B) TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEM BER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER I N THIS CLAUSE REFERRED TO AS THE SAID CONCERN) OR (C) ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR T HE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS ; 15. IT CAN BE SEEN THAT THESE THREE CATEGORIES CONTEMPLATE, FIRSTLY, A LOAN OR ADVANCE GIVEN TO THE SHAREHOLDER HIMSELF ; OR SECONDLY A LOAN OR ADVANCE GIVE TO A CONCERN IN WHICH HE IS INVOLVED A ND HAS A SUBSTANTIAL INTEREST ; OR THIRDLY ANY PAYMENT FOR THE BENEFIT O F SUCH SHAREHOLDER. THOUGH IN THE SECOND AND THIRD CATEGORIES, THE AMOU NT IS NOT DIRECTLY REACHING THE SHAREHOLDER, STILL IT IS DEEMED AS DIV IDEND TO SUCH SHAREHOLDER. AS IT IS PALPABLE THAT THE DIVIDEND CA N BE TAXED ONLY IN THE HANDS OF A SHAREHOLDER, THERE CAN BE NO QUESTION OF TREATING THIS AMOUNT AS DIVIDEND GIVEN TO THE ACTUAL RECIPIENT IN THE LA TER TWO CATEGORIES. THE CRUX IS THAT THESE THREE CATEGORIES ARE MUTUALLY EX CLUSIVE OF EACH OTHER AND IN ALL THESE SITUATIONS, THE AMOUNT IS A DEEME D DIVIDEND IN THE HANDS OF THE SHAREHOLDER. IT IS FURTHER PARAMOUNT TO NOT E THAT AS THE ABOVE THREE CATEGORIES ARE COMPLEMENT BY THE WORD `OR, THE FAL LING OF A CASE IN ONE OF SUCH CATEGORIES BRINGS IT WITHIN THE DEFINITION OF DEEMED DIVIDEND U/S 2(22)(E). WE ARE NOT CONCERNED WITH THE FIRST CA TEGORY. ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 16 16. THE SECOND CATEGORY DEALS WITH THE GIVING OF ADVANCE OR LOAN BY A COMPANY TO ANY `CONCERN IN WHICH SUCH SHAREHOLDE R IS A MEMBER OR PARTNER AND IN WHICH HE HAS SUBSTANTIAL INTEREST. THE TERM `SUCH SHAREHOLDER AS USED IN THE SECOND CATEGORY DRAWS REFERENCE FROM THE FIRST CATEGORY, BEING A PERSON WHO IS THE BENEFICI AL OWNER OF SHARES HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING PO WER. EXPLANATION 3(A) TO SEC. 2(22)(E) DEFINES THE TERM CONCERN TO MEAN : A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY. FROM THE ABOVE DEFINITION OF THE TERM CONCERN, IT IS CLEAR THAT A `COMPANY IS ALSO INCLUDED WITHIN ITS AMBIT. COMING BACK TO THE SECOND CATEGORY AND BY READING IT IN THE LIGHT OF T HE DEFINITION OF THE TERM CONCERN, IT CAN BE SEEN THAT ANY PAYMENT MAD E BY THE COMPANY OF ANY SUM BY WAY OF ADVANCE OR LOAN TO ANY COMPANY (C ONCERN) IN WHICH THE SHAREHOLDER HOLDING NOT LESS THAN 10% OF THE VO TING POWER OF THE PAYER COMPANY IS HAVING SUBSTANTIAL INTEREST IN THE RECIPIENT COMPANY, SHALL BE INCLUDED WITHIN THE SECOND CATEGORY OF THE DEFINITION OF DEEMED DIVIDEND U/S 2(22)(E) OF ACT . 17. AT THIS STAGE IT IS RELEVANT TO CONSIDER TH E OBSERVATIONS MADE BY THE HONBLE DELHI HIGH COURT IN THE CASE OF ANKITECH PVT. LTD. (SUPRA) AS UNDER:- `24. THE INTENTION BEHIND ENACTING PROVISIONS OF S. 2(22)(E) IS THAT CLOSELY-HELD COMPANIES (I.E. COMPANIES IN WHICH PUB LIC ARE NOT ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 17 SUBSTANTIALLY INTERESTED), WHICH ARE CONTROLLED BY A GROUP OF MEMBERS, EVEN THOUGH THE COMPANY HAS ACCUMULATED PR OFITS WOULD NOT DISTRIBUTE SUCH PROFIT AS DIVIDEND BECAUS E IF SO DISTRIBUTED THE DIVIDEND INCOME WOULD BECOME TAXABL E IN THE HANDS OF THE SHAREHOLDERS. INSTEAD OF DISTRIBUTING ACCUMULATED PROFITS AS DIVIDEND, COMPANIES DISTRIBUTE THEM AS L OANS OR ADVANCES TO SHAREHOLDERS OR TO CONCERN IN WHICH SUC H SHAREHOLDERS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SUCH SHA REHOLDER. IN SUCH AN EVENT, BY THE DEEMING PROVISIONS, SUCH PAYM ENT BY THE COMPANY IS TREATED AS DIVIDEND. THE INTENTION BEHIND THE PROVISIONS OF S. 2(22)(E) OF THE ACT IS TO TAX DIVI DEND IN THE HANDS OF SHAREHOLDERS. THE DEEMING PROVISION AS IT APPLIE S TO THE CASE OF LOANS OR ADVANCES BY A COMPANY TO A CONCERN IN WHIC H ITS SHAREHOLDER HAS SUBSTANTIAL INTEREST, IS BASED ON T HE PRESUMPTION THAT THE LOANS OR ADVANCES WOULD ULTIMATELY BE MADE AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY GIVING THE LOAN OR ADVANCE. (EMPHASIS SUPPLIE D BY US) 18. REVERTING TO THE FACTS OF THE INSTANT CASE, I T CAN BE SEEN THAT THE PRESENT ASSESSE, NAMELY, SHRI KABUL CHAWLA IS A B ENEFICIAL OWNER OF MORE THAN 10% SHARES IN THE PAYER COMPANIES AND FUR THER HAS SUBSTANTIAL INTEREST OF MORE THAN 20% IN THE RECIPIENT COMPANIE S. PATENTLY, THE CASE IS COVERED IN THE SECOND CATEGORY OF SEC. 2(22)(E) OF THE ACT AND AS SUCH THE AMOUNT HAS BEEN RIGHTLY TAXED IN THE HANDS OF T HE ASSESSEE. 19. THE LD. AR FORCEFULLY CONTENDED THAT IN ORD ER TO COVER ANY AMOUNT WITHIN THE AMBIT OF DEEMED DIVIDEND IT IS SINE QUA NON THAT THE AMOUNT MUST REACH THE SHAREHOLDER. HE ARGUED THAT ONCE THE CONDITIONS OF ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 18 SECOND CATEGORY ARE SATISFIED, THE CASE SHOULD NOT IPSO FACTO BE COVERED UNDER THE THIRD CATEGORY, BEING ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER. HE EMPHASIZED ON THE WORD `OR EMPLOYED BETWEEN THE FI RST AND SECOND; AND SECOND AND THIRD CATEGORIES OF THIS PROVISION. A CASE WAS MADE OUT THAT EVEN THOUGH THE AMOUNT FALLS UNDER THE SECOND CATEGORY, IT SHOULD NOT BE DEEMED AS DIVIDEND UNLESS IT SPECIFICALLY FA LLS IN THE THIRD CATEGORY AS WELL. TO PUT IT SIMPLY, THE CONTENTION WAS THAT EVEN IF A CASE FALLS IN THE SECOND CATEGORY, IT CANNOT BE DEEMED A S DIVIDEND IN THE HANDS OF SHAREHOLDER UNLESS IT IS SHOWN THAT THE LO AN OR ADVANCE GIVEN TO THE SAID CONCERN WAS FOR THE BENEFIT OF THE REGISTE RED SHAREHOLDER. BOLSTERING HIS POINT OF VIEW IN THIS LIGHT, HE STAT ED THAT THERE CAN BE NO PRESUMPTION THAT THE AMOUNT OF SUCH LOAN OR ADVANCE RECEIVED BY THE CONCERNS WAS HANDED OVER TO THE ASSESSEE-SHAREHOLDE R. AS THE REVENUE HAD NOT SHOWN THAT THE AMOUNT OF LOAN OR ADVANCE RE CEIVED BY THE RECIPIENT COMPANIES DID ACTUALLY PASS OVER TO THE A SSESSEE, THE PROVISIONS OF SECTION 2(22)(E) WERE CLAIMED TO BE NOT APPLICAB LE. 20. WE ARE NOT PERSUADED WITH THIS LINE OF A RGUMENT. TO THE EXTENT IT WAS ARGUED THAT THE WORD `OR USED BETWEEN THESE CA TEGORIES SHOULD MEAN THAT ALL THE CATEGORIES ARE TO BE SEPARATELY E XAMINED, WE FULLY AGREE. BUT THERE IS A FALLACY IN THE OTHER PART OF THE SUBMISSION THAT IF A CASE FALLS IN THE SECOND CATEGORY, THEN UNLESS IT I S SPECIFICALLY SHOWN THAT IT ALSO FALLS UNDER THE THIRD CATEGORY ALSO, THERE CAN BE NO PRESUMPTION OF ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 19 DEEMED DIVIDEND. IN FACT, BOTH THE CONTENTIONS MADE RUN COUNTER TO EACH OTHER. WE HAVE NOTICED ABOVE THAT IF A CASE IS COVE RED UNDER EITHER OF THE THREE CATEGORIES, THEN THE MATTER ENDS THERE AND TH EN. IN SUCH A SITUATION, THERE IS NO NEED TO EXAMINE THE OTHER CATEGORIES. AT THE COST OF REPETITION, WE ARE MENTIONING THAT WHEN A COMPANY G IVES LOAN OR ADVANCE TO ANY CONCERN COVERED UNDER THE SECOND CAT EGORY, THE DIVIDED IS DEEMED AS INCOME IN THE HANDS OF THE SHAREHOLDER AND NOT SUCH CONCERN. POSITION IS SIMILAR FOR THE THIRD CATEGORY AS WELL. IF THE AMOUNT IS GIVEN TO A THIRD PERSON, WHICH IS FOR THE BENEFI T OF THE SHAREHOLDER, THE DIVIDEND IS NOT DEEMED IN THE HANDS OF SUCH RECIPIE NT BUT THE SHAREHOLDER. IN ALL THE THREE CATEGORIES, IT IS THE SHAREHOLDER WHOSE INCOME IS AFFECTED WITH THE DEEMED DIVIDEND. 21. WE HAVE NOTICED ABOVE THAT THE INSTANT CAS E IS SQUARELY COVERED WITHIN THE SECOND CATEGORY. CERTAIN LOANS OR ADVA NCES WERE GIVEN BY SOME COMPANIES TO SOME OTHER COMPANIES (CONCERNS) O F THE SAME GROUP AND THE ASSESSEE IS HAVING SUBSTANTIAL SHAREHOLDING IN BOTH THE SETS OF THE PAYER AND THE RECIPIENT COMPANIES. IT IS BECAUSE OF SUCH REASONING THAT THE CASE FALLS UNDER THE SECOND CATEGORY AND THE AM OUNT IS DEEMED AS DIVIDEND IN THE HANDS OF THE ASSESSEE SHAREHOLDER. WE ARE NOT HOLDING THE AMOUNT TO BE TAXABLE IN THE HANDS OF THE ASSESS EE BECAUSE OF THE CASE FALLING IN THE THIRD CATEGORY AS MANIFESTLY IT IS N OT A CASE OF PAYMENT BY THE PAYER COMPANIES FOR THE INDIVIDUAL BENEFIT OF T HE ASSESSEE- SHAREHOLDER, WHICH IS A SITUATION CONTEMPLATED IN T HE THIRD CATEGORY. A ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 20 CAREFUL LOOK AT THE PROVISION INDICATES THAT WHEREA S `PAYMENT BY WAY OF ADVANCE OR LOAN IS RELEVANT IN THE FIRST AND SECON D CATEGORIES, THE THIRD CATEGORY SIMPLY PROVIDES FOR `ANY PAYMENT, WHICH MAY OR MAY NOT BE BY WAY OF ADVANCE OR LOAN. SINCE THE THIRD CATEGOR Y ENCOMPASSES ANY PAYMENT BY SUCH COMPANIES ON BEHALF OR FOR THE INDI VIDUAL BENEFIT OF ANY SUCH SHAREHOLDER, THERE CAN ALSO BE PAYMENT FAL LING UNDER THIS CATEGORY DE HORS ADVANCE OR LOAN. AS THE AMOUNTS UNDER CONSIDERAT ION ARE ADVANCES OR LOANS BY ONE SET OF COMPANIES TO AN OTHER SET AND THE REVENUE HAS NOT MADE OUT A CASE THAT THESE WERE FOR THE INDIVIDUAL BENEFIT OF THE ASSESSEE-SHAREHOLDER, NATURALLY, TH E CASE DOES NOT FALL IN THE THIRD CATEGORY. ONCE A CASE FALLS UNDER THE SE COND CATEGORY, THERE IS NO FURTHER NEED TO SHOW THAT IT SHOULD ALSO FALLS I N THE THIRD CATEGORY. IF THIS CONTENTION OF THE LD. AR IS ACCEPTED AND TAKEN TO A LOGICAL CONCLUSION, THEN IT WOULD REQUIRE SUBSTITUTING THE WORD `AND FOR THE WORD `OR USED IN THE PROVISION BETWEEN THE SECOND AND THIRD CATEGORIES, WHICH IS OBVIOUSLY CONTRARY TO THE UNEQUIVOCAL LANG UAGE OF THE PROVISION. THIS CONTENTION IS, THEREFORE, REPELLED AS BEREFT OF ANY FORCE. 22. WE, THEREFORE, HOLD THAT THE SUMS OF RS. 28 ,17,430/- FOR THE ASSESSMENT YEAR 2007-08 AND RS. 2,96,060/- FOR THE ASSESSMENT YEAR 2008-09 ARE DEEMED DIVIDEND OF THE ASSESSEE-SHAREHO LDER UNDER THE SECOND CATEGORY OF SECTION 2(22)(E) OF THE ACT AND EX CONSEQUENTI THE LD. CIT(A) WAS FULLY JUSTIFIED IN SUSTAINING THESE ADDITIONS. ITA NO. 779 TO 783/DEL/2013 KABUL CHAWLA 21 23. IN THE RESULT, THE APPEALS FOR THE A.YS. 2002-0 3, 2005-06 AND 2006- 07 ARE ALLOWED AND FOR THE A.Y.S. 2007-08 AND 2008- 09 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/5/2014. (I. C. SUDHIR) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: 23/5 /2014 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 21.5.2014 PS 2. DRAFT PLACED BEFORE AUTHOR 23.5.2014 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *