ITO 2(3)(2), MUMBAI V. SATURN ADVISORY SERVICES P.LTD, MUMBAI

ITA 802/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9676 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN DR
• Keywords: Capital asset; Search and seizure; Source of fund; Retrospective amendment; Question of law; Fair market value; Difference of opinion; Deemed dividend; Block assessment; Onus to prove
• Section: 260A; 131; 69; 56; 132

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.802/MUM/2015 ASSESSMENT YEARS: 2006-07 INCOME TAX OFFICER - 2(3)(2), ROOM NO. 518A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S SATURN ADVISORY SERVICES PVT. LTD., 44, STRATEGIC HOUSE, MINT ROAD, FORT, MUMBAI-400001 ( / REVENUE) ( !' # /ASSESSEE) PAN NO.:-AAJCS2674N / REVENUE BY SHRI V. JUSTIN-DR !' # / ASSESSEE BY SHRI VIMAL PUNAMIYA ( ) # * / DATE OF HEARING : 12/09/2017 ) # * / DATE OF ORDER: 12/09/2017 ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 27/10/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. GROUND NO. 1 & 2, RAISED BY THE REVENUE PERTAINS TO DELETING THE ADDITION MADE ON ACCOUNT OF ON MONEY CASH PAYME NT FOR PURCHASE OF PROPERTY AT DELHI IGNORING THE INCRIMIN ATING DOCUMENTS/EVIDENCES RECEIVED FROM DRI, MUMBAI AS TH E ASSESSEE WAS UNABLE TO EXPLAIN THE TRANSACTION OR R EBUT THE PRESUMPTION THAT ON MONEY WAS PAID FOR THE PURCHASE OF THE PROPERTY. 2. DURING HEARING, THE LD. DR, SHRI V. JUSTIN, ADVANCED ARGUMENTS, WHICH IS IDENTICAL TO THE GROUN D RAISED BY SUBMITTING THAT NO EXPLANATION WAS ADDUCED BY TH E ASSESSEE WITH RESPECT TO CASH PORTION AND MERELY CL AIMED THAT MONEY WAS PAID THROUGH DEMAND DRAFT. IT WAS CONTENDED THAT WHILE GRANTING RELIEF TO THE ASSESSE E CIRCUMSTANTIAL EVIDENCE WERE NOT CONSIDERED BY THE FIRST APPELLATE AUTHORITY. RELIANCE WAS PLACED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF INCOME TAX OFFICER V S M/S DIAMOND INVESTMENT & PROPERTIES (ITA NO. ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 3 5537/MUM/2009) ORDER DATED 29/07/2010. ON THE OTHE R HAND, SHRI VIMAL PUNAMIYA, LD. COUNSEL FOR THE ASSE SSEE FILED WRITTEN SUBMISSIONS DEFENDING THE CONCLUSION DRAWN IN THE IMPUGNED ORDER BY EXPLAINING THE FACTS. RELIAN CE WAS PLACED UPON THE DECISION FROM HON'BLE APEX COURT IN THE CASE OF K. P. VERGHESE VS INCOME TAX OFFICER (1981) 7 TAXMAN. 13(SC) BY SUBMITTING THAT THE FACTUM OF PAY MENT OF CASH AS ON MONEY IS UPON THE REVENUE AND THE ASSESS EE HAS NEVER ACCEPTED OR TENDERED IN THE STATEMENT THAT CA SH MONEY WAS TRANSACTED FOR PURCHASE OF THE PROPERTY. OUR ATTENTION WAS INVITED TO THE FACTUAL FINDING RECORD ED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL). FURTHER, RELIANCE WAS MADE UPON THE DECISION IN THE CASE OF CIT VS GU LSHAN KUMAR (2002) 257 ITR 703 (DEL.), CIT VS P. V. KALYANSUNDARAM (2007) 294 ITR 49 (SC), DUA AUTO COMPONENTS PVT. LTD. (ITA NO.4802/DEL./2009), CIT V S INDICATION INSTRUMENTS LTD. (ITA NO.603/2011) AND P RAMOD PANDEY VS ACIT (ITA NO.4295/DEL./2012) AND VARIOUS OTHER DECISIONS MENTIONED IN THE WRITTEN SUBMISSIONS. TH E CRUX OF THE ARGUMENT IS IN SUPPORT OF THE IMPUGNED ORDER . ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 4 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE PURCHASE A PROPERTY AT DELHI, DID NOT START ANY BUSINESS ACTIVITY AND WAS ALSO NOT HAVING ANY OTHER SOURCE OF INCOME. THE ASSESSEE ACQUIRED LOAN OF ` 40 LAKHS FROM STRATEGIC GROUP TRUST FOR PURCHASE OF TH IS PROPERTY WORTH OF ` 39,25,000/-. THE ASSESSEE DECLARED LOSS OF ` 7276/- IN ITS RETURN, WHICH WAS PROCESSED U/S 143( 1) OF THE ACT. THERE WAS NO SCRUTINY ASSESSMENT IN THE PR ESENT ASSESSMENT YEAR. THE LD. ASSESSING OFFICER RECEIVE D INFORMATION FROM DRI, MUMBAI, WITH RESPECT TO DEMAN D DRAFT/CASH TRANSACTION FOR PURCHASE OF THE SAID PRO PERTY VIDE LETTER DATED 15/03/2013. SEARCH WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF M/S ZAVER CYRUS DADINA, NIT COS DY. MANAGER (ACCOUNTS), WHEREIN, A HARD DISC AND A PEN DRIVE WERE RECOVERED. IN THE HARD DISC, THERE WERE DETAI LS OF PURCHASE AND PURCHASE OF PROPERTY /PAYMENTS IN MAID AN GADI (POPULARLY KNOWN SANIK FARM) IN DELHI. AS PER THE INFORMATION, CERTAIN PORTION OF CASH WAS TRANSACTED ALONG WITH DEMAND DRAFT FOR PURCHASE OF THE PROPERTY. THE LD. ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 5 ASSESSING OFFICER, ON THE BASIS OF THE INFORMATION, REOPENED THE ASSESSMENT AND MADE THE ADDITION. 2.2. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE FACTUAL MATRIX WAS CONSIDE RED AND ULTIMATELY THE ADDITION MADE BY THE ASSESSING OFFIC ER WAS NOT FOUND SUSTAINABLE, RESULTANTLY DELETED, WHICH I S UNDER CHALLENGE BEFORE THIS TRIBUNAL. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, IT SEEMS THAT THE WHOLE ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING AN D WAS PURELY BASED UPON PRESUMPTION, BECAUSE, NO DOCUMENT ARY EVIDENCE WAS BROUGHT ON RECORD SUBSTANTIATING THAT ANY CASH WAS TRANSACTED IN THE PURCHASE. THE INFORMATIO N RECEIVED BY THE ASSESSING OFFICER WAS EXPECTED TO B E CORROBORATED WITH EVIDENCE. IT IS AN ESTABLISHED L AW THAT THE CONDITIONS OF TAXABILITY OR THE PRESUMPTION OF ON M ONEY ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 6 TRANSACTION HAS TO BE PROVED BY THE REVENUE AND THE BURDEN SO LIES UPON THE DEPARTMENT WAS NEVER DISCHARGED. I N SUCH A SITUATION THE RATIO LAID DOWN BY HON'BLE APEX COU RT IN K. P. VERGHESE VS INCOME TAX OFFICER CLEARLY SUPPORTS THE CASE OF THE ASSESSEE. THE RELEVANT PORTION FROM THE AFOR ESAID ORDER IS REPRODUCED HEREUNDER FOR READY REFERENCE:- 13. THUS, IT IS NOT ENOUGH TO ATTRACT THE APPLICABILIT Y OF SUB-S. (2), THAT THE FAIR MARKET VALUE OF THE CAPITAL ASSE T TRANSFERRED BY THE ASSESSEE AS ON THE DATE OF THE TRANSFER EXCEEDS THE FULL VALUE OF THE CONSIDERATION DECLARED IN RESPECT OF THE TRA NSFER BY NOT LESS THAN 15% OF THE VALUE SO DECLARED, BUT IT IS FURTHE RMORE NECESSARY THAT THE FULL VALUE OF THE CONSIDERATION IN RESPECT OF THE TRANSFER IS UNDERSTATED OR, IN OTHER WORDS, SHOWN AT A LESSER F IGURE THAN THAT ACTUALLY RECEIVED BY THE ASSESSEE. SUB-S. (2) HAS N O APPLICATION IN THE CASE OF AN HONEST AND BONA FIDE TRANSACTION WHE RE THE CONSIDERATION IN RESPECT OF THE TRANSFER HAS BEEN C ORRECTLY DECLARED OR DISCLOSED BY THE ASSESSEE, EVEN IF THE CONDITION OF 15% DIFFERENCE BETWEEN THE FAIR MARKET VALUE OF THE CAP ITAL ASSET AS ON THE DATE OF THE TRANSFER AND THE FULL VALUE OF THE CONSIDERATION DECLARED BY THE ASSESSEE IS SATISFIED. IF, THEREFOR E THE REVENUE SEEKS TO BRING A CASE WITHIN SUB-S. (2), IT MUST SH OW NOT ONLY THAT THE FAIR MARKET VALUE OF THE CAPITAL ASSET AS ON TH E DATE OF THE TRANSFER EXCEEDS THE FULL VALUE OF THE CONSIDERATIO N DECLARED BY THE ASSESSEE BY NOT LESS THAN 15% OF THE VALUE SO DECLA RED, BUT ALSO THAT THE CONSIDERATION HAS BEEN UNDERSTATED AND THE ASSESSEE HAS ACTUALLY RECEIVED MORE THAN WHAT IS DECLARED BY HIM . THERE ARE TWO DISTINCT CONDITIONS WHICH HAVE TO BE SATISFIED BEFORE SUB-S. (2) CAN BE INVOKED BY THE REVENUE AND THE BURDEN OF SHO WING THAT THESE TWO CONDITIONS ARE SATISFIED RESTS ON THE REV ENUE. IT IS FOR THE REVENUE TO SHOW THAT EACH OF THESE TWO CONDITIO NS IS SATISFIED AND THE REVENUE CANNOT CLAIM TO HAVE DISCHARGED THI S BURDEN WHICH LIES UPON IT, BY MERELY ESTABLISHING THAT THE FAIR MARKET VALUE OF THE CAPITAL ASSET AS ON THE DATE OF THE TR ANSFER EXCEEDS BY 15% OR MORE THE FULL VALUE OF THE CONSIDERATION DEC LARED IN RESPECT OF THE TRANSFER AND THE FIRST CONDITION IS, THEREFO RE, SATISFIED. THE REVENUE MUST GO FURTHER AND PROVE THAT THE SECOND C ONDITION IS ALSO SATISFIED. MERELY BY SHOWING THAT THE FIRST CO NDITION IS SATISFIED, THE REVENUE CANNOT ASK THE COURT TO PRES UME THAT THE SECOND CONDITION TOO IS FULFILLED, BECAUSE EVEN IN A CASE WHERE THE FIRST CONDITION OF 15% DIFFERENCE IS SATISFIED, THE TRANSACTION MAY BE A PERFECTLY HONEST AND BONA FIDE TRANSACTION AND THERE MAY BE NO UNDERSTATEMENT OF THE CONSIDERATION. THE FULFILM ENT OF THE SECOND CONDITION HAS, THEREFORE, TO BE ESTABLISHED INDEPENDENTLY OF THE FIRST CONDITION AND MERELY BECAUSE THE FIRST CO NDITION IS SATISFIED, NO INFERENCE CAN NECESSARILY FOLLOW THAT THE SECOND ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 7 CONDITION IS ALSO FULFILLED. EACH CONDITION HAS GOT TO BE VIEWED AND ESTABLISHED INDEPENDENTLY BEFORE SUB-S. (2) CAN BE INVOKED AND THE BURDEN OF DOING SO IS CLEARLY ON THE REVENUE. I T IS A WELL- SETTLED RULE OF LAW THAT THE ONUS OF ESTABLISHING T HAT THE CONDITIONS OF TAXABILITY ARE FULFILLED IS ALWAYS ON THE REVENU E AND THE SECOND CONDITION BEING AS MUCH A CONDITION OF TAXABILITY A S THE FIRST, THE BURDEN LIES ON THE REVENUE TO SHOW THAT THERE IS AN UNDERSTATEMENT OF THE CONSIDERATION AND THE SECOND CONDITION IS FULFILLED. MOREOVER, TO THROW THE BURDEN OF SHOWING THAT THERE IS NO UNDERSTATEMENT OF THE CONSIDERATION, ON THE ASSESSE E WOULD BE TO CAST AN ALMOST IMPOSSIBLE BURDEN UPON HIM TO ESTABL ISH A NEGATIVE, NAMELY, THAT HE DID NOT RECEIVE ANY CONSI DERATION BEYOND THAT DECLARED BY HIM. THE HON'BLE APEX COURT FINALLY HELD AS UNDER:- THE OBJECT OF IMPOSING THE CONDITION OF DIFFERENCE OF 15% OR MORE BETWEEN THE FAIR MARKET VALUE OF THE CAPITAL ASSET AND THE CONSIDERATION DECLARED IN RESPECT OF THE TRANSFER C LEARLY IS TO SAVE THE ASSESSEE FROM THE RIGOUR OF SUB-S. (2) IN MARGI NAL CASES WHERE DIFFERENCE IN SUBJECTIVE VALUATION BY DIFFERENT IND IVIDUALS MAY RESULT IN AN APPARENT DISPARITY BETWEEN THE FAIR MA RKET VALUE AND THE DECLARED CONSIDERATION. IT IS A WELL-KNOWN FACT BORNE OUT BY PRACTICAL EXPERIENCE THAT THE DETERMINATION OF FAIR MARKET VALUE OF A CAPITAL ASSET IS GENERALLY A MATTER OF ESTIMATE B ASED TO SOME EXTENT ON GUESS WORK AND DESPITE THE UTMOST BONA FI DES, THE ESTIMATE OF THE FAIR MARKET VALUE IS BOUND TO VARY FROM INDIVIDUAL TO INDIVIDUAL. IT IS OBVIOUS THAT IF THE RESTRICTIV E CONDITION OF A DIFFERENCE OF 15% OR MORE BETWEEN THE FAIR MARKET V ALUE OF THE CAPITAL ASSET AS ON THE DATE OF THE TRANSFER AND TH E CONSIDERATION DECLARED IN RESPECT OF THE TRANSFER WERE NOT PROVID ED IN SUB-S. (2), MANY MARGINAL CASES WOULD, HAVING REGARD TO THE POS SIBILITY OF DIFFERENCE OF OPINION IN SUBJECTIVE ASSESSMENT OF T HE FAIR MARKET VALUE, FALL WITHIN THE MISCHIEF OF THAT SUB-SECTION AND THE STATUTORY MEASURE ENACTED IN THAT SUB-SECTION FOR DETERMINING THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE WOU LD BE APPLICABLE IN ALL ITS RIGOUR IN SUCH CASES. THIS CO NDITION OF 15% OR MORE DIFFERENCE IS MERELY INTENDED TO BE A SAFEGUAR D AGAINST THE UNDUE HARDSHIP WHICH WOULD BE OCCASIONED TO THE ASS ESSEE IF THE INFLEXIBLE RULE OF THUMB ENACTED IN SUB-S. (2) WERE APPLIED IN MARGINAL CASES AND IT HAS NOTHING TO DO WITH THE QU ESTION OF BURDEN OF PROOF, FOR, THE BURDEN OF ESTABLISHING TH AT THERE IS AN UNDERSTATEMENT OF THE CONSIDERATION IN RESPECT OF T HE TRANSFER ALWAYS RESTS ON THE REVENUE. THE POSTULATE UNDERLYI NG SUB-S. (2) IS THAT THE DIFFERENCE BETWEEN ONE HONEST VALUATION AND ANOTHER MAY RANGE UPTO 15% AND THAT CONSTITUTES THE CLASS O F MARGINAL CASES WHICH ARE TAKEN OUT OF THE PURVIEW OF SUB-S. (2) IN ORDER TO AVOID HARDSHIP TO THE ASSESSEE. 2.4. IF THE OBSERVATION MADE BY HON'BLE APEX COURT ARE ANALYZED WITH THE FACTS OF THE PRESENT APPEAL, THE CASE OF THE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 8 REVENUE IS THAT THE ASSESSEE DID NOT EXPLAIN THAT C ASH WAS TRANSACTED FOR PURCHASING THE PROPERTY. IT IS WELL SETTLED RULE OF LAW THAT THE ONUS OF ESTABLISHING THAT THE CONDITIO NS OF TAXABILITY ARE FULFILLED IS ALWAYS UPON THE REVENUE AND THE ONUS IS UPON THE REVENUE TO SHOW THAT THERE IS UNDE R STATEMENT OF CONSIDERATION AND THE ASSESSEE CANNOT BE FASTENED WITH THE LIABILITY TO ESTABLISH THE NEGATI VE, NAMELY THAT THE ASSESSEE DID NOT TRANSACTED IN CASH BEYOND THE DECLARATION MADE BY HIM. IN SUCH A SITUATION NO AD DITION CAN BE SUSTAINED IN THE ABSENCE OF CORROBORATIVE MATERI AL. THE ASSESSING OFFICER NEITHER STATED NOR PROVIDED ANY E VIDENCE THAT THE ASSESSEE PAID ANY ON MONEY FOR PURCHASE OF LAND . THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE SALE CONSIDE RATION WAS UNDERSTATED OR THE ASSESSEE RECEIVED ANYTHING DIREC TLY OR INDIRECTLY OVER AND THE ABOVE THE DECLARED VALUE. T HUS, THE DECISION FROM THE HON'BLE DELHI HIGH COURT AND THE RATIO LAID DOWN THEREIN CIT VS GULSHAN KUMAR (2002) 257 ITR 70 3 (DEL.) COMES TO THE RESCUE OF THE ASSESSEE. IDENTICAL RATI O WAS LAID DOWN BY HON'BLE APEX COURT IN CIT VS P. V. KALYANSU NDARAM (2007) 294 ITR 49 (SC). THE RELEVANT PORTION FROM T HE ORDER IS REPRODUCED HEREUNDER:- ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 9 3. THE RESPONDENT ASSESSEE VIDE A REGISTERED SALE DEED DT. 26TH OCT., 1998 PURCHASED CERTAIN LAND AT BRINDAVAN ROAD , FAIRLANDS, SALEM FOR A SUM OF RS. 4.10 LAKHS. DURING A SEARCH OF THE OFFICE AND RESIDENTIAL PREMISES OF POLIMER NET WORK, CERTAIN N OTES ON LOOSE SHEETS ALLEGEDLY IN THE HANDS OF THE RESPONDENT WER E FOUND AND SEIZED BY THE DEPARTMENT. IN HIS STATEMENT RECORDED ON 8TH DEC., 1998, THE ASSESSEE SUBMITTED THAT HE COULD NOT REME MBER AS TO WHY THE NOTINGS HAD BEEN MADE. THE STATEMENT WAS FU RTHER CONFIRMED BY ANOTHER STATEMENT ON 11TH DEC., 1998. THE DEPARTMENT ALSO RECORDED THE STATEMENT OF THE VENDO R RAJARATHINAM ON 8TH DEC., 1998 WHICH TOO WAS CONFIR MED ON 11TH DEC., 1998 IN WHICH HE ADMITTED THAT HE HAD IN FACT RECEIVED A TOTAL CONSIDERATION OF RS. 34.35 LAKHS AND THAT THE SUM O F RS. 4.10 LAKHS REFLECTED IN THE SALE DEED HAD BEEN RECEIVED BY HIM BY WAY OF A DEMAND DRAFT AND THE BALANCE IN CASH. RAJARATHINAM HOWEVER RETRACTED FROM HIS STATEMENT ON 8TH JAN., 1999 AND FILED AN AFFIDAVIT DEPOSING THAT THE SALE PRICE WAS RS. 4.10 LAKHS ONL Y AND THAT HIS STATEMENTS EARLIER GIVEN TO THE AUTHORITIES WERE IN CORRECT. IN A SUBSEQUENT STATEMENT RECORDED ON 20TH NOV., 2000 RA JARATHINAM AGAIN REVERTED TO HIS EARLIER PORTION AND DEPOSED T HAT THE SALE PRICE WAS RS. 34.85 LAKHS. THE AO CONCLUDED THAT THE SALE CONSIDERATION WAS ACTUALLY RS. 34.85 LAKHS AND NOT RS. 4.10 LAKHS AS HAD BEEN RECITED IN THE SALE DEED. HE ACCORDINGLY ADOPTED TH E AFORESAID ENHANCED FIGURE FOR THE PURPOSE OF ASSESSMENT AND M ADE AN ADDITION OF RS. 3,75,005 AS UNDISCLOSED INCOME FOR THE BROKEN PERIOD 1ST APRIL, 1998 TO 8TH DEC., 1998. THE MATTE R WAS THEREAFTER TAKEN TO THE CIT(A), WHO AFTER EXAMINING THE ENTIRE MATTER, OBSERVED THAT THE STATEMENTS GIVEN BY RAJARATHINAM COULD NOT BE RELIED UPON MORE PARTICULARLY AS THE FLOOR PRICE FI XED BY THE AUTHORITIES FOR SUCH PROPERTY WAS MUCH LOWER THAN T HE VALUE WHICH WOULD RESULT IF THE SALE DEED HAD BEEN REGISTERED A T RS. 34.85 LAKHS. THE CIT ACCORDINGLY DELETED THE ADDITION MADE. AN A PPEAL WAS THEREAFTER PREFERRED BY THE REVENUE AGAINST THE ORD ER OF THE CIT BEFORE THE TRIBUNAL. THE TRIBUNAL IN ITS ORDER DT. 6TH JULY, 2005 HELD THAT THE NOTINGS ON THE LOOSE PIECES OF PAPER ON TH E BASIS OF WHICH THE INITIAL SUSPICION WITH REGARD TO THE UNDERVALUA TION HAD BEEN RAISED WERE VAGUE AND COULD NOT BE RELIED UPON AS I T APPEARED THAT THE TOTAL AREA WITH RESPECT TO THE SALE DEEDS AND T HAT REFLECTED IN THE LOOSE SHEET WAS DISCREPANT. IT WAS ALSO OBSERVE D THAT AS PER THE GUIDELINES FOR REGISTRATION THE FAIR VALUE FOR REGI STRATION ON THE RELEVANT DATE WAS RS. 244 TO RS. 400 PER SQ. FT. AN D THE SALE CONSIDERATION FOR RS. 850 PER SQ.FT. CLAIMED BY THE REVENUE WAS UNREALISTIC AND IGNORED THE GROUND SITUATION. IT WA S FURTHER HELD THAT THE TAX OF APPROXIMATELY RS. 1,84,000 DETERMINED ON THE BASIS OF THE ADDITION WOULD NOT SHOW THAT THE ASSESSEE HAD A CQUIESCED IN THE ADDITION MADE BY THE DEPARTMENT OR THAT IT WAS CONC LUSIVE EVIDENCE OF THE SALE PRICE AS THE DEPOSIT HAD BEEN MADE IN A N OBVIOUS EFFORT TO SAVE HIMSELF FROM FURTHER HARASSMENT FROM THE RE VENUE AND TO ESCAPE A MUCH HIGHER LIABILITY TO THE PAYMENT OF TA X ON UNDISCLOSED INCOME SHOULD PROCEEDINGS UNDER S. 158BD OF THE ACT BE INITIATED. ON THESE FINDINGS, THE TRIBUNAL DISMISSED THE APPEA L. IT IS IN THESE CIRCUMSTANCES THAT AN APPEAL UNDER S. 260A WAS FILE D IN THE HIGH COURT. BEFORE THE HIGH COURT THE FOLLOWING SUBSTANT IAL QUESTIONS OF LAW WERE RAISED : ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 10 (A) WHETHER OR NOT WHEN THE RETURNS AND THE STATEME NTS OF THE SELLER ADMIT HIGHER SALE CONSIDERATION ACTUALLY REC EIVED, THE REVENUE IS JUSTIFIED IN FIXING THE SALE CONSIDERATION AT TH E HIGHER AMOUNT THAN WHAT HAS BEEN DECLARED ? (B) WHEN THE ASSESSEE DID NOT GIVE ANY EXPLANATION TO THE NOTINGS FOUND AND AT THE SAME TIME THE REVENUE IS ABLE TO C ORROBORATE THE SAME WITH THE STATEMENT OF THE SELLER FOR THE PURPO SE OF DETERMINATION OF ACTUAL SALE VALUE, WOULD THE LOWER AUTHORITY BE JUSTIFIED IN INTERFERING WITH THE SAME ? (C) WHEN CONSISTENT SWORN (STATEMENTS) WERE TAKEN I NTO CONSIDERATION ALONG WITH EVIDENCES FOUND AT THE TIM E OF SEARCH, WOULD (THEY) ALL BE LIABLE TO BE REJECTED ON THE BA SIS OF ONE STATEMENT IN BETWEEN CONTRADICTING THE EARLIER ONES WHICH WAS ALSO EXPLAINED AWAY AS A RESULT OF INTIMIDATION ? 4. THE HIGH COURT RELYING HEAVILY ON THE ORDER OF THE CIT AND THE TRIBUNAL HELD THAT NO SUBSTANTIAL QUESTIONS OF LAW HAD BEEN RAISED AND ACCORDINGLY DISMISSED THE APPEAL. IT IS THIS SI TUATION THAT THE PRESENT MATTER IS HERE BEFORE US. 5. MR. G.N. VAHANVATI, THE LEARNED SOLICITOR GENERAL H AS AT THE VERY OUTSET RAISED SERIOUS OBJECTION TO THE ORDER OF THE HIGH COURT POINTING OUT THAT DIVISION BENCH HAD MERELY PLAGIAR IZED SUBSTANTIAL PORTIONS FROM THE ORDER OF THE CIT AND TRIBUNAL IN ARRIVING AT ITS CONCLUSION AND NO INDEPENDENT ASSESSMENT ON THE QUE STIONS OF LAW THAT AROSE FOR CONSIDERATION, HAD BEEN MADE. HE ALS O POINTED OUT THAT SEVERAL QUESTIONS OF LAW PERTAINING TO THE IMP LICATIONS OF THE STATEMENTS AND THE COUNTER STATEMENTS MADE BY RAJAR ATHINAM DID ARISE IN THE CASE AND THE MATTER HAD NOT BEEN DEALT WITH BY THE HIGH COURT IN THAT PERSPECTIVE AND IT WAS THEREFORE APPR OPRIATE THAT THE MATTER BE REMITTED FOR FRESH DECISION. THE LEARNED COUNSEL REPRESENTING THE ASSESSEE RESPONDENT HAS HOWEVER PO INTED OUT THAT THE CIT IN PARTICULAR, HAD AFTER A VERY ELABORATE D ISCUSSION OF THE MATTER, CONCLUDED ON A FINDING OF FACT WITH REGARD TO THE NATURE OF THE TRANSACTION AND THIS VIEW HAD BEEN ACCEPTED BY THE TRIBUNAL AS WELL. HE HAS ACCORDINGLY SUBMITTED THAT NO SUBSTANT IAL QUESTIONS OF LAW HAVE BEEN RAISED IN THIS MATTER AND THE ISSUES RAISED WERE PURELY QUESTIONS OF FACT. 6. WE HAVE HEARD THE LEARNED COUNSEL FOR THE PARTIES A ND HAVE GONE THROUGH THE RECORD. IT IS TRUE THAT THE DIVISION BE NCH OF THE HIGH COURT HAS BORROWED EXTENSIVELY FROM THE ORDERS OF T HE TRIBUNAL AND THE CIT AND PASSED THEM OFF AS IF THEY WERE THEMSEL VES THE AUTHORS. WE FEEL THAT QUOTING FROM AN ORDER OF SOME AUTHORIT Y PARTICULARLY A SPECIALIZED ONE CANNOT PER SE BE FAULTED AS THIS PROCEDURE CAN OFTEN HELP IN MAKING FOR BREVITY AND PRECISION, BUT WE AG REE WITH MR. VAHANAVATI TO THE EXTENT THAT ANY BORROWED WORDS USED IN A JUDGMENT MUST BE ACKNOWLEDGED AS SUCH IN ANY APPROP RIATE MANNER AS A COURTESY TO THE TRUE AUTHOR(S). BE THAT AS IT MAY, WE ARE OF THE OPINION THAT THE THREE QUESTIONS REPRODUCED ABOVE C AN, IN NO WAY, BE CALLED SUBSTANTIAL QUESTIONS OF LAW. THE FACT AS TO THE ACTUAL SALE PRICE OF THE PROPERTY, THE IMPLICATION OF THE CONTR ADICTORY STATEMENTS MADE BY RAJARATHINAM OR WHETHER RELIANCE COULD BE PLACED ON THE LOOSE SHEETS RECOVERED IN THE COURSE OF THE RAID ARE ALL ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 11 QUESTIONS OF FACT. WE THEREFORE FIND NO INFIRMITY I N THE ORDER OF THE HIGH COURT. ACCORDINGLY, WE DISMISS THE APPEAL. 2.5. IN THE AFORESAID CASE, THERE WERE ALLEGATION OF ON MONEY TRANSACTION, ON THE BASIS OF NON-CONVINCING L OOSE SEATS FOUND DURING THE COURSE OF SEARCH AND CONFLICTING S TATEMENT OF THE SELLER. THE ADDITION WAS DELETED BY THE TRIBUNA L WHICH WAS AFFIRMED BY HON'BLE HIGH COURT AND HON'BLE APEX COU RT. 2.6. IDENTICAL RATION WAS LAID DOWN IN THE CASE OF DUA AUTO COMPONENTS PVT. LTD. (ITA NO.4802/DEL/2009), C IT VS INDICATION INSTRUMENTS LTD. (ITA NO.603 OF 2011), C IT VS PREM PRAKASH NAGPAL (ITA NO.570 OF 2012), PRAMOD PANDEY VS ACIT (ITA NO.1295/DEL./2012), CIT VS VISHAL RUBBER PRODU CTS (2004) 136 TAXMAN 151 (P & H). THE RELEVANT PORTION FROM THE ORDER FROM HON'BLE PUNAJAB HARYANA HIGH COURT IS RE PRODUCED HEREUNDER FOR READY REFERENCE:- 5. WE HAVE HEARD DR. N.L. SHARDA AND PERUSED THE RECOR D. A READING OF THE ORDER ANNERURE A2 PASSED BY THE CIT( A), JALANDHAR, SHOWS THAT WHILE DELETING THE ADDITIONS MADE BY THE AO, HE MADE THE FOLLOWING OBSERVATIONS : 'ON MERITS HOWEVER I FIND SUBSTANTIAL FORCE IN THE SUBMISSIONS OF THE APPELLANT BECAUSE NO MATERIAL COULD BE FOUND BY THE LEARNED ASSTT. CIT TO CORROBORATE THE ENTRIES MADE IN THE I MPUGNED BALANCE SHEET. NEITHER IT IS SUPPORTED BY THE ENTRI ES IN THE BOOKS OF ACCOUNT OF THE THREE PARTNERSHIP FIRMS NOR BY AN Y OTHER MATERIAL. IT COULD NOT BE ESTABLISHED THAT THE IMPU GNED BALANCE SHEET FOUND IN THE COURSE OF THE SEARCH FROM THE RE SIDENTIAL PREMISES OF SHRI O.P. SEHGAL IS A GENUINE BALANCE S HEET BECAUSE NO OTHER EVIDENCE COULD BE FOUND LIKE ACCOUNT BOOKS OR ANY OTHER MATERIAL FROM WHERE THE BALANCE SHEET HAS BEEN WITH DRAWN. NO ADDITION THEREFORE, CAN BE MADE IN THE HANDS OF THE FIRMS ON THE BASIS OF THAT DOCUMENT. THE SAME WAS THE VIEW HELD BY MY LEARNED PREDECESSOR WHILE DISPOSING OF THE APPEAL I N THE INDIVIDUAL ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 12 CASE OF SHRI O.P. SEHGAL. THE LEARNED ASSTT. CIT AT TEMPTED TO GATHER SOME SUPPORT FROM THE ENTRIES IN THE INDIVID UAL BALANCE SHEETS OF THE FIRMS FILED WITH THE RETURN OF INCOME WHICH ARE BASED ON THE REGULAR BOOKS OF ACCOUNT AS MENTIONED BY HIM IN PARAS 5 AND 6 OF THE ASSESSMENT ORDER, BUT WHILE EXAMINING THESE POINTS IN HIS PRESENCE IT IS FOUND THAT THE AMOUNT AND THE NA RRATIONS DO NOT AGREE. SIMILARLY, THE COPIES OF THE ACCOUNT CALLED FOR BY HIM FROM THE FOUR DIFFERENT PARTIES DULY AGREE WITH THE ACCO UNT MAINTAINED IN THE REGULAR BOOKS OF ACCOUNT WHICH FORM THE BASIS O F FILING THE RETURN OF INCOME EXCEPT MINOR VARIATIONS LIKE THE E NTRIES MADE IN THE BOOKS OF THE PARTY IS AGAINST THE NAME OF VISHA L RUBBER PRODUCTS BUT THE ASSESSEE HAS MADE IN THE BOOKS AS VIKAS RUBBER ROLL PRODUCTS. IT IS BECAUSE OF SUCH DISCREPANCIES THAT THE LEARNED ASSTT. CIT HAS REJECTED THE BOOK VERSION AND MADE T HE ADDITIONS ON THE BASIS OF THE ENTRIES SHOWN IN THE IMPUGNED B ALANCE SHEET FOUND IN THE COURSE OF THE SEARCH. CONSIDERING THER EFORE, THE FACTS OF THE CASE, I AM OF THE OPINION THAT THE IMPUGNED BALANCE SHEET CANNOT BE RELIED UPON WITHOUT CORROBORATIVE MATERIA L TO HOLD THAT THE BALANCE SHEET IS A GENUINE DOCUMENT AND IS BASE D ON EITHER IN THE BOOKS OF ACCOUNT FOUND IN THE COURSE OF THE SEA RCH OR ANY DOCUMENT WHEREFROM IT COULD HAVE BEEN DRAWN. FROM T HE RECORD I FIND THAT THE LEARNED ASSTT. CIT HAS EXAMINED UNDER S. 131 OF THE IT ACT THE MANAGING PARTNERS OF THE THREE CONCERNS AND ALSO GATHERED THE COPIES OF THE ACCOUNT FROM THIRD PARTI ES IN ORDER TO HAVE SOME MATERIAL TO HOLD THAT THE IMPUGNED BALANC E SHEET IS A GENUINE DOCUMENT BUT HE COULD NOT GATHER ANY MATERI AL ADVERSE TO THE ASSESSEE. IN THE CIRCUMSTANCES THE ADDITIONS MA DE ON THE BASIS OF THE IMPUGNED BALANCE SHEET CANNOT BE SUSTA INED AND ACCORDINGLY THE ADDITION OF RS. 7,16,322 (1,54,879 + 4,32,702 + 1,28,741) IS HEREBY DELETED. SINCE THE ENTIRE ADDIT ION MADE IS DELETED, THE OTHER GROUNDS IN THE APPEAL BECOME INF RUCTUOUS.' 6. LEARNED COUNSEL FOR THE REVENUE COULD NOT POINT OUT ANY PATENT ERROR IN THE REASONS ASSIGNED BY THE CIT(A) WHICH W ERE APPROVED BY THE TRIBUNAL. THE FINDING RECORDED BY THE AO THA T THE ASSESSEE HAD CONCEALED THE INCOME IS NOT SUPPORTED BY ANY TA NGIBLE EVIDENCE AVAILABLE ON RECORD. THEREFORE, WE DO NOT FIND ANY MERIT IN THE APPEAL AND DISMISS THE SAME. 2.7. IN ANOTHER CASE OF CIT VS SHIVAKAAMI CO. PVT . LTD. (1986) 25 TAXMAN 80K (SC) (1986) 52 CTR 0108 : (1986) 159 ITR 0071, THE HON'BLE APEX COURT OBSERVED/HELD AS U NDER:- THE ONUS WAS ON THE REVENUE TO PROVE THAT THERE WA S UNDERSTATEMENT IN THE DOCUMENT NOT THAT THE GOODS W ERE SOLD AT UNDERVALUE. UNDERSTATEMENT OF A VALUE IS A MIS-STAT EMENT OF VALUE. SELLING GOODS AT AN UNDERVALUE TO DEFEAT REVENUE IS DIFFERENT FROM UNDERSTATING THE VALUE IN THE DOCUMENT OF SALE. THE PROVISO TO S. 12B(2) OF 1922 ACT PROVIDES FULL VALUE OF THE CONS IDERATION FOR WHICH THE SALE, EXCHANGE, RELINQUISHMENT OR TRANSFER IS M ADE' TO BE TAKEN AS THE BASIS FOR THE COMPUTATION OF THE CAPITAL GAINS. THEREFORE, UNLESS ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 13 THERE IS EVIDENCE THAT MORE THAN WHAT WAS STATED WA S RECEIVED, NO HIGHER PRICE CAN BE TAKEN TO BE THE BASIS FOR COMPU TATION OF CAPITAL GAINS. THE ONUS IS ON THE REVENUETHE INFERENCE MIG HT BE DRAWN IN CERTAIN CASES BUT TO COME TO A CONCLUSION THAT A PA RTICULAR HIGHER AMOUNT WAS IN FACT RECEIVED MUST BE BASED ON SUCH M ATERIAL FROM WHICH SUCH AN IRRESISTIBLE CONCLUSION FOLLOWS. IN T HE INSTANT CASE, NO SUCH ATTEMPT WAS MADE. THE SECOND INGREDIENT THAT I S TO SAY THAT THE WORD DECLARED' IN SUB-S. (2) OF S. 52 OF THE 1961 ACT CORRESPONDING TO THE FIRST PROVISO TO S. 12B OF THE 1922 ACT IS VERY ELOQUENT AND REVEALING. IT CLEARLY INDICATED THAT THE FOCUS OF S UB-S.(2) WAS ON THE CONSIDERATION DECLARED OR DISCLOSED BY THE ASSESSEE AS DISTINGUISHED FROM THE CONSIDERATION ACTUALLY RECEIVED BY HIM AND IT CONTEMPLATED A CASE WHERE THE CONSIDERATION RECEIVED BY THE ASSESS EE IN RESPECT OF THE TRANSACTION WAS NOT TRULY DECLARED OR DISCLOSED BY HIM BUT WAS SHOWN AT A DIFFERENT FIGURE. CAPITAL GAINS WAS INTE NDED TO TAX THE GAINS OF AN ASSESSEE, NOT WHAT AN ASSESSEE MIGHT HAVE GAI NED. WHAT IS NOT GAINED CANNOT BE COMPUTED AS GAINED. IN CONCLUSION THE PROVISO TO S. 12B(1) CAN BE INVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER OF CAPITAL ASSET HAS BEEN UNDERSTATED BY THE ASSESSEE. THERE IS NO EVIDENCE DIRECT OR INFERENTIAL THAT THE CONSIDERATI ON ACTUALLY RECEIVED BY THE ASSESSEE WAS MORE THAN WHAT WAS DISCLOSED OR DECLARED BY HIM. THE RELATIONSHIP BETWEEN THE PARTIES HAS BEEN ESTAB LISHED. THE DESIRE TO DEFEAT THE CLAIMS OF THE REVENUE HAS ALSO BEEN E STABLISHED BUT THAT FACT THAT FOR THIS THE ASSESSEE HAD STATED A FALSE FACT IN THE DOCUMENT IS NOT ESTABLISHED. WHAT APPEARS FROM THE TRIBUNAL' S ORDER WAS THAT THE REAL AND MAIN OBJECT WAS TO SAFEGUARD THESE SHARES FROM BEING TAKEN OVER BY THE GOVERNMENT IN SETTLEMENT OF TAX DUES, A ND ALSO THAT THE BUYER AND SELLER WERE INDIRECTLY CONNECTED WITH EAC H OTHER. THE REVENUE HAS MADE NO ATTEMPT TO ESTABLISH THAT THERE WAS ANY UNDERSTATEMENT THOUGH IT MIGHT BE THAT SHARES HAD B EEN SOLD AT AN UNDERVALUE. THE PROVISO HELPS OR ENABLES THE DEPART MENT BY PROVIDING A WAY TO DETERMINE THE MARKET VALUE. BUT THE PROVIS O IS APPLICABLE ONLY WHERE THE FULL VALUE FOR THE CONSIDERATION HAS NOT BEEN STATED. THERE IS NO EVIDENCE, DIRECT OR INFERENTIAL, IN THESE CASES THAT THE FULL CONSIDERATION HAD NOT BEEN STATED IN THE DOCUMENT. CAPITAL GAINS TAX WAS NOT, THEREFORE, TAXABLE ON THE PRESENT CASE. K.P. VARGESE VS. ITO & ANR . (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC) : TC22R.105 FOLLOWED; SHIVAKAMI CO. (P) LTD. & ORS. VS. CIT (1973) 88 ITR 311 (MAD) : TC22R.151 AFFIRMED ON DIFFERENT GROUNDS. 2.8. LIKEWISE, HON'BLE DELHI HIGH COURT IN CIT VS NAVI GERA (2010) 328 ITR 516 (DEL.) HELD AS UNDER:- THE PRESENT APPEAL HAS BEEN FILED UNDER S. 260A OF IT ACT, 1961 (FOR BREVITY 'ACT, 1961') CHALLENGING THE ORDER DT. 11TH SEPT., 2009 PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL (IN SHORT 'TRI BUNAL') IN ITA NO. 66/DEL/2001, FOR THE BLOCK PERIOD 1ST APRIL, 1988 T O 20TH AUG., 1998. 2. BRIEFLY STATED THE RELEVANT FACTS OF THE CASE ARE THAT THE RESPONDENT- ASSESSEE HAD MADE INVESTMENT IN TWO PLOTS OF AGRICU LTURAL LAND IN DECEMBER, 1996. THE INVESTMENT IN THE FARM HOUSES W ERE MADE BY THE ASSESSEE IN THE NAME OF HIS FATHER, NAMELY, MR. L.D . GERA FOR A TOTAL ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 14 CONSIDERATION OF RS. 41,35,700. THE ABOVESAID PROPE RTIES WERE BROUGHT FROM SAM AVIATION (P) LTD. OF WHICH THE ASSESSEE WA S ONE OF THE DIRECTORS. IT IS AN ADMITTED FACT THAT THE SOURCES AND THE INVESTMENT MADE THEREOF IN THESE TWO PLOTS HAD BEEN DECLARED B Y THE RESPONDENT- ASSESSEE UNDER VOLUNTARY DISCLOSURE OF INCOME SCHEM E, 1997 (FOR SHORT 'VDIS'). ON 20TH AUG., 1998, A SEARCH AND SEIZURE U NDER S. 132 OF ACT, 1961 WAS CARRIED OUT AT BOTH THE RESPONDENT ASSESSE E'S RESIDENTIAL AND BUSINESS PREMISES. THE SALE DEEDS OF THE ABOVESAID PROPERTIES WERE FOUND DURING THE SEARCH. 3. THE AO REFERRED THE PROPERTIES FOR VALUATION TO TH E DISTRICT VALUATION OFFICER (IN SHORT 'DVO') ALLEGING THAT RESPONDENT-A SSESSEE HAD INVESTED HUGE AMOUNT IN THE PURCHASE OF THE FARM HOUSE OVER AND ABOVE THE INVESTMENT DISCLOSED IN VDIS. ON THE BASIS OF THE D VO'S REPORT, THE AO MADE AN ADDITION OF RS. 2,24,08,820. 4. ON AN APPEAL BEING FILED BY THE RESPONDENT-ASSESSE E, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) [FOR SHORT CIT (A)] ALLOWED THE SAME AND DELETED THE ADDITION MADE BY THE AO. THE R EVENUE CHALLENGED THE CIT(A)'S ORDER, WHICH WAS DISMISSED BY THE TRIB UNAL BY OBSERVING AS UNDER : '63....BEING AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER IN THE APPEAL BEFORE LEARNED CIT(A) WHO HAS DELETED THIS ADDITION ON THE BASIS THAT THE ASSESSEE IN FACT HAS PURCHASED THE PROPERTY FRO M M/S SAM AVIATION (P) LTD. WHERE THE ASSESSEE WAS ALSO A DIRECTOR. IT IS ALSO NOTED BY HIM THAT THE PURCHASE WAS MADE BY M/S SAM AVIATION (P) LTD. AND IN THE CASE OF COMPANY, THERE IS NO ACTION TAKEN FOR EXTRA PAYMENT. IT IS ALSO NOTED BY HIM THAT THERE IS NO EVIDENCE THAT ACTION HAS BEEN TAKEN IN THE HANDS OF THE SELLER FOR EXTRA RECEIPTS. IT IS ALSO SUBMITTED THAT THERE WAS NO MATERIAL FOUND DURING THE SEARCH THAT ANY EXTRA PAYMENT WAS MADE BY THE ASSESSEE TO THE SELLER COMPANY OR BY THE SEL LER COMPANY TO THE ORIGINAL SELLER. ON THIS BASIS, THIS ADDITION AND N OW, THE REVENUE IS IN FURTHER APPEAL BEFORE US............ 65. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD AND THE TRIBUNALS DEC ISION CITED BY LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE. WE FIND THAT THIS IS UNDISPUTED FACTUAL POSITION THAT NO EVIDENCE WHATSO EVER WAS FOUND IN THE COURSE OF THE SEARCH INDICATING ANY UNDISCLOSED INVESTMENT IN AGRICULTURAL LAND. THE FACTUM OF PURCHASE OF LAND W AS DISCLOSED BY THE ASSESSEE BEFORE THE DEPARTMENT IN VDIS, 1997 AND IN THE ABSENCE OF ANY ADVERSE MATERIAL FOUND IN THE COURSE OF SEARCH, THE ADDITION MADE BY THE AO IN THE PRESENT CASE, ON THE BASIS OF VALU ATION REPORT OF DVO CANNOT BE SUSTAINED IN THE ABSENCE OF ANY ADVERSE M ATERIAL FOUND IN THE COURSE OF SEARCH. WE, THEREFORE, DECLINE TO INTERFE RE IN THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE.' (EMPHASIS, ITALICIZED IN PRINT, SUPPLIED) 5. MS. SURUCHII AGGARWAL, LEARNED COUNSEL FOR THE REV ENUE SUBMITTED THAT BOTH CIT(A) AND TRIBUNAL HAVE ERRED IN LAW IN DELETING THE ADDITION OF RS. 2,24,08,820 MADE BY THE AO ON THE GROUND THA T ADDITION BASED ON DVO'S REPORT COULD NOT BE SUSTAINED AS NO ADVERS E MATERIAL HAD BEEN FOUND DURING THE SEARCH. SHE ALSO RELIED UPON THE S UPREME COURT'S ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 15 DECISION IN CIT VS. MUKUNDRAY K. SHAH (2007) 209 CT R (SC) 97 : (2007) 290 ITR 433 (SC) TO CONTEND THAT THE BLOCK ASSESSME NT OF UNDISCLOSED INCOME CAN BE BASED ON THE EVIDENCE FOUND IN THE SE ARCH AND/OR MATERIAL OR INFORMATION GATHERED IN POST-SEARCH INQ UIRIES MADE ON THE BASIS OF EVIDENCE FOUND IN THE SEARCH. 6. MR. PIYUSH KAUSHIK, LEARNED COUNSEL FOR THE RESPON DENT-ASSESSEE CONTENDED THAT NO ADDITION COULD BE MADE BY AO IN T HE ABSENCE OF ANY INCRIMINATING EVIDENCE FOUND DURING THE SEARCH. HE SUBMITTED THAT NO ADVERSE MATERIAL WAS FOUND DURING THE SEARCH WHICH COULD SHOW THAT RESPONDENT-ASSESSEE HAD MADE MORE INVESTMENT IN THE PROPERTY THAN WHAT HAD BEEN DECLARED IN THE SALE DEED AND CONSEQU ENTLY, NO REFERENCE COULD BE MADE TO THE DVO. 7. MR. KAUSHIK FURTHER SUBMITTED THAT THE REFERENCE T O THE VALUATION OFFICER AND CONSEQUENT ADDITION MADE ON THE BASIS O F SAID VALUATION OFFICER'S REPORT IS ITSELF BAD IN LAW AS THE PROVIS O TO S. 142A OF ACT, 1961 ITSELF STIPULATES THAT THE SAID SECTION DOES NOT AP PLY IN RESPECT OF ASSESSMENTS MADE ON OR BEFORE 30TH SEPT., 2004. TO FORTIFY THE SAID SUBMISSION, LEARNED COUNSEL RELIED UPON THIS COURT' S DECISION IN CIT VS. JUPITER BUILDERS (P) LTD. (2006) 205 CTR (DEL) 553 : (2006) 287 ITR 287 (DEL). 8. WE HAVE HEARD THE LEARNED COUNSEL FOR THE PARTIES AND ALSO PERUSED THE RECORD. 9. WE DO NOT FIND MERIT IN THE SUBMISSION MADE BY MS. SURUCHI AGGARWAL THAT THE CONCEALED INCOME WAS DETECTED DUR ING THE COURSE OF SEARCH OR ANY EVIDENCE WAS FOUND WHICH WOULD INDICA TE SUCH CONCEALMENT. THE SEIZED MATERIAL CONTAINING THE SAL E DEEDS OF THE PROPERTIES, WHICH HAVE BEEN RELIED UPON TO MAKE REF ERENCE TO DVO, HAD ALREADY BEEN DECLARED TO THE REVENUE BY THE RESPOND ENT-ASSESSEE UNDER VDIS. WE ARE ALSO IN AGREEMENT WITH THE SUBMI SSION MADE BY MR. PIYUSH KAUSHIK THAT IT IS SETTLED LAW THAT IN THE A BSENCE OF ANY INCRIMINATING EVIDENCE THAT ANYTHING HAS BEEN PAID OVER AND ABOVE THAN THE STATED AMOUNT, THE PRIMARY BURDEN OF PROOF IS O N THE REVENUE TO SHOW THAT THERE HAS BEEN AN UNDERSTATEMENT OR CONCE ALMENT OF INCOME. IT IS ONLY WHEN SUCH BURDEN HAS BEEN DISCHARGED, WO ULD IT BE PERMISSIBLE TO RELY UPON THE VALUATION GIVEN BY THE DVO. FURTHER, THE OPINION OF DVO, PER SE, IS NOT AN INFORMATION AND C ANNOT BE RELIED UPON IN THE ABSENCE OF OTHER CORROBORATIVE EVIDENCE [SEE K.P. VARGHESE VS. ITO (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC ), ASSTT. CIT VS. DHARIYA CONSTRUCTION COMPANY, CIVIL APPEAL NO. 9468 OF 2003, DECIDED BY THE APEX COURT ON 16TH FEB., 2010, [REPORTED AT (2010) 236 CTR (SC) 226 : (2010) 47 DTR (SC) 288ED.], CIT VS. SMT . SHAKUNTALA DEVI (2009) 224 CTR (DEL) 79 : (2009) 316 ITR 46 (DEL), CIT VS. ASHOK KHETRAPAL (2007) 211 CTR (DEL) 576 : (2007) 294 ITR 143 (DEL) AND CIT VS. MANOJ JAIN (2006) 200 CTR (DEL) 327 : (2006) 28 7 ITR 285 (DEL)]. 10. FURTHER, THE RELIANCE OF LEARNED COUNSEL FOR THE RE VENUE ON THE SUPREME COURT'S DECISION IN MUKUNDRAY K. SHAH (SUPR A) IS MISPLACED. IN THE SAID CASE, THE ENTIRE PICTURE REGARDING THE WOR KING OF CIRCULAR TRADING BECAME APPARENT ONLY AFTER SEEING THE CASH FLOW STA TEMENT WHICH EMERGED IN THE INQUIRY CONDUCTED BY THE DEPARTMENT ON THE BASIS OF EVIDENCE FOUND DURING THE SEARCH. IN THE PRESENT CA SE, SINCE THE DETAILS OF THE PROPERTIES HAD ALREADY BEEN DISCLOSED UNDER VDIS, IT CANNOT BE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 16 SAID THAT THE DEPARTMENT CAME IN POSSESSION OF ANY INFORMATION WHICH IT DID NOT POSSESS EARLIER. 11. WE ARE FURTHER IN AGREEMENT WITH THE SUBMISSION MA DE BY MR. KAUSHIK THE PROVISO TO S. 142A OF THE ACT, 1961, HA S NO RETROSPECTIVE EFFECT. THE RELEVANT EXTRACT OF S. 142A OF THE ACT, 1961 READS AS UNDER : '142A. ESTIMATE BY VALUATION OFFICER IN CERTAIN CAS ES.(1) FOR THE PURPOSES OF MAKING AN ASSESSMENT OR REASSESSMENT UN DER THIS ACT, WHERE AN ESTIMATE OF THE VALUE OF ANY INVESTMENT RE FERRED TO IN S. 69 OR S. 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OT HER VALUABLE ARTICLE REFERRED TO IN S. 69A OR S. 69B OR FAIR MARKET VALU E OF ANY PROPERTY REFERRED TO IN SUB-S. (2) OF S. 56 IS REQUIRED TO B E MADE, THE AO MAY REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMATE O F SUCH VALUE AND REPORT THE SAME TO HIM. (2) ....... (3) ....... PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY IN RESPECT OF AN ASSESSMENT MADE ON OR BEFORE THE 30TH SEPT., 200 4, AND WHERE SUCH ASSESSMENT HAS BECOME FINAL AND CONCLUSIVE ON OR BE FORE THAT DATE, EXCEPT IN CASES WHERE A REASSESSMENT IS REQUIRED TO BE MADE IN ACCORDANCE WITH THE PROVISIONS OF S. 153A.' (EMPHASIS, ITALICIZED IN PRINT, SUPPLIED) 12. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSMEN T WAS MADE BY THE AO ON 30TH AUG., 2000 AND THE CIT(A) DECIDED TH E APPEAL ON 30TH JAN., 2001, WHICH IS CLEARLY PRIOR TO THE CUT OFF D ATE OF 30TH SEPT., 2004. CONSEQUENTLY, IT WAS NOT OPEN TO THE AO TO ORDER VA LUATION OF THE PROPERTY BY DVO. 13. ACCORDINGLY, THE PRESENT APPEAL, BEING BEREFT OF M ERIT, IS DISMISSED IN LIMINE. 2.9. TOTALITY OF FACTS, IF KEPT IN JUXTAPOSITION, WITH THE FACTS AND THE RATIO LAID DOWN IN THE AFORESAID CASE S ARE ANALYZED, THE LD. ASSESSING OFFICER IS ASKING THE A SSESSEE TO PROVE THE NEGATIVE WHICH IS NOT PERMITTED AND THE W HOLE ASSESSEE OF THE DEPARTMENT IS BASED UPON THE PRESUM PTION THAT THE ASSESSEE COULD NOT EXPLAIN THAT NO CASH WA S TRANSACTED IN THE SALE CONSIDERATION. IT IS ALSO N OTED THAT THE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 17 LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS DULY AN ALYZED THE STATEMENT OF SHRI ATUL SUD, MS. ZAVER CYRUS DAD INA, DY. MANAGER (ACCOUNTS) OF NITCO, FROM WHOSE PREMISES TH E HARD DISC WAS FOUND AND SEIZED AND SHRI ATUL SUD ADMITTE D TO HAVE PURCHASE THE LAND FROM THE CONCERNED TWO PARTIES ON A CONSIDERATION OF ` 39 TO 40 LAKHS AND PAYMENTS WAS MADE BY DEMAND DRAFT HE HAS NOWHERE ADMITTED/TENDERED THAT ANY CASH PAYMENTS WAS MADE. LIKEWISE, MS. ZAVER CYRUS DADINA HAS SPECIFICALLY TENDERED THAT SHE HAD NO ROLE TO P LAY EITHER TO ISSUE CHEQUE OR CASH. IN REPLY TO QUESTION NO.12, W HETHER ANY CASH PAYMENT WAS MADE, SHE SPECIFICALLY DENIED OF A NY TRANSACTION. A COMMISSION U/S 131(1)(D) OF THE ACT WAS ISSUED AND THE ASSESSEE WAS NOT ABLE TO PROVIDE ANY DETAILS/INFORMATION/CONFIRMATION IN THIS REGARD. TOTALITY OF FACTS CLEARLY INDICATES THAT THE LD. ASSESSING OFFI CER COULD NOT COLLECT ANY EVIDENCE TO SUBSTANTIATE THAT IN FACT A NY CASH WAS TRANSACTED FOR PURCHASE OF PROPERTY. THE CASE OF TH E ASSESSEE IS FURTHER FORTIFIED BY THE FACTS THAT THE DEMAND D RAFTS ISSUED FOR PURCHASE OF PROPERTY WERE REFLECTED IN THE DOCU MENTS, NO STATEMENT WAS RECORDED BY DRI EITHER OF MS. ZAVER C YRUS DADINA OR OF ANY OTHER PERSON DURING THE COURSE OF SEARCH IN RESPECT OF THE DETAILS CONTAINED IN THE HARD DISC. EVEN, THE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 18 INFORMATION RECEIVED FROM THE INVESTIGATION WING WA S NEVER CORROBORATED WITH ANY EVIDENCE, STATEMENT THAT ANY CASH CHANGED HANDS FOR THE TRANSACTION. WHEN THE LD. ASS ESSING OFFICER RECORDED THE STATEMENT OF SHRI ATUL SUD, DI RECTOR OF THE ASSESSEE COMPANY, THOUGH HE ADMITTED THE TRANSACTIO N TO BE MADE THROUGH DEMAND DRAFT BUT HE NEVER TENDERED THA T ANY CASH WAS TRANSACTED. MS. ZAVER CYRUS DADINA COMPLET ELY EXPRESSED OR IGNORANCE WITH REGARD TO DETAILS OF LA ND DEALINGS AS HAS BEEN ALLEGED. THE EFFORTS OF ASSESSING OFFIC ER TO RECORD THE STATEMENT OF MISS DAMINI VADHWA, AND MISS REETA BHATIA ALSO COULD NOT PROVIDE ANY INFORMATION LEADING TO T HE ADDITION. THE SEIZED MATERIAL/PRINT OUT WAS NOT IN THE HANDWR ITING OF THE ASSESSEE AND EVEN THERE IS NO MATERIAL TO SUGGE ST THAT THE SEIZED MATERIAL WAS MAINTAINED EITHER BY THE ASSESS EE OR ITS OF OR EMPLOYEES. EVEN THE STATEMENT OF RAJARATANAM WA S DISCARDED BY THE LD. COMMISSIONER OF INCOME TAX (AP PEAL) AS THE FLOOR PRICE, FIXED BY THE AUTHORITIES, FOR SUCH PROPERTY WAS FOUND MUCH LOWER THAN THE VALUE. CONSIDERING THE FA CTUAL MATRIX AND THE JUDICIAL PRONOUNCEMENTS, DISCUSSED HEREINABOVE, WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. FIRST APPELLATE AUTHORITY. OUR VIEW IS FURTHER FORT IFIED BY THE FACT THAT THE CONCERNED DATA WAS EVEN NOT FOUND FRO M THE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 19 PREMISES OF THE ASSESSEE AND FURTHER THE ASSESSEE H AS NOT STARTED ANY SUBSTANTIAL BUSINESS ACTIVITY AND FOR A CQUISITION OF THE LAND TO INTER CORPORATE LOAN OF ` 40 LAKH FROM STRATEGIC CAPITAL CORPORATION. THUS, THE PRESUMPTION OF THE L D. ASSESSING OFFICER FOR MAKING THE ADDITION ON PRESUM PTIVE BASIS WAS RIGHTLY DELETED BY THE LD. COMMISSIONER OF INCO ME TAX (APPEAL). THUS, ADDITION CANNOT BE MADE ON THE BAS IS OF PRESUMPTION, WHICH CANNOT BE SUSTAINED IN LAW. EVE N OTHERWISE, PRESUMPTION CANNOT TAKE THE SHAPE OF THE EVIDENCE HOWEVER STRONG IT MAY BE UNLESS AND UNTIL SUCH PRES UMPTION OR STATEMENT, IF ANY, IS CORROBORATED WITH MATERIAL EVIDENCE. THE RATIO LAID DOWN IN DR. ANITA SAHAI VS DIT 266 I TR 597 (ALL.), DHEERAJLAL GIRDHARILAL VS DCIT 26 ITR 734 ( SC), CIT VS CALCUTTA DISCOUNT CO. LTD. 91 ITR 8(SC), CIT VS RAM AN & CO. 67 ITR 11 (SC), MODI CREATIONS PVT. LTD. VS INCOME TAX OFFICER (2011) 13 TAXMAN.COM 114(DEL.), CIT VS SHREE RAMA M ULTITECH LTD. (2013) 34 TAXMAN.COM 32 (GUJ.) AND CIT VS DEVI NE LEASING AND FINANCE LTD. 158 TAXMAN 440 (DEL.) SUPP ORTS OUR VIEW. THUS, WE AFFIRM THE STAND OF THE FIRST APPEL LATE AUTHORITY, RESULTING INTO DISMISSAL OF THE IMPUGNED GROUNDS, RAISED BY THE REVENUE. ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 20 3. THE NEXT GROUND PERTAINS TO HOLDING THAT THE DIVIDEND INCOME IS TAXABLE ONLY IN THE REGISTERED S HARE HOLDERS, IGNORING THE DEEMING FICTION THAT IT CAN BE TAXED I N THE HANDS OF THE RECIPIENT CONCERN THOUGH MAY NOT BE SHARE HO LDER IGNORING THE PROVISION OF SECTION 2(22)(E) OF THE A CT, SINCE, THE DIRECTOR OF THE ASSESSEE COMPANY WAS HOLDING MORE T HAN 10% OF THE VOTING POWER IN THE COMPANY WHICH ADVANCE LO AN TO THE ASSESSEE. 3.1. THE LD. DR ADVANCED ARGUMENTS, WHICH IS IDENT ICAL TO THE GROUND RAISED. ON THE OTHER HAND, THE LD. C OUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER BY CONTEND ING THAT THE ASSESSEE IS HAVING LESS THAT 10% OF THE VOTING POWER/SHARE AND IT IS MERELY A TRUST AND NOT A COMPANY AND THE ASSESSEE IS HAVING ONLY 9% SHARE. IN TURN, THE LD. DR, RELIED UPON THE DECISION IN THE CASE OF GOPAL & SONS (HUF) VS CIT ( CIVIL APPEAL NO. 12274 OF 2016) (ARISING OUT OF SLP(C) NO.22059 OF 2015). 3.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S, BRIEF, ARE THAT THE ASSESSEE WAS INCORPORATED AND WAS NOT HAVI NG ANY BUSINESS, BORROWED LOAN OF ` 40 LAKH ON 17/01/2006. THE ASSESSEE REPAID THE BORROWED FUNDS. DURING REASSES SMENT PROCEEDINGS, APPLIED SECTION 2(22)(E) OF THE ACT ON THE FUNDS ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 21 ACQUIRED BY THE ASSESSEE FROM SCCPL. THE ASSESSEE V IDE LETTER DATED 11/12/2013 EXPLAINED THAT THE PROVISION OF TH E DEEM DIVIDEND IS NOT ATTRACTED AND FURTHER VIDE LETTER D ATED 30/01/2014 ASSERTED THAT THE TRUST IS NOT A PRIVATE LIMITED COMPANY THEREFORE THE PROVISION IS NOT APPLICABLE. HOWEVER, THE LD. ASSESSING OFFICER ASSESSED ` 40 LAKH AS DEEMED DIVIDEND ON THE PLEA THAT THE COMMON DIRECTORS HOLD MORE THAN 10% SHARE HOLDING EVEN THOUGH THE ASSESSEE IS NOT REGISTERED SHARE HOLDER OF THE COMPANY. BEFORE ADVE RTING FURTHER, WE ARE EXPECTED TO ANALYZE SECTION 2(22)(E ) OF THE ACT, WHICH IS REPRODUCED HEREUNDER FOR READY REFERENCE:- 2(22)(E) ANY PAYMENT BY A COMPANY, NOT BEING A COM PANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER 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 9 TO A SHAREHOLDER 9 , 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 PROFIT S: WE ARE ALSO ANALYZING THE SHAREHOLDING OF SCCPL A ND THE ASSESSEE WHICH IS AS UNDER:- NAME OF THE SHARE HOLDER % OF HOLDING IN SCCPL % OF HOLDING IN SATURN ADVISORY SERVICES PVT. LTD. ATUL SUD 9% 99 .89% SNEHA JAIN .01% KAMYA SUD 2% RAYAN SUD 2% ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 22 STRATEGIC TRADING 27% GROWELL CONSULTANTS 3% COLVA TRADE PLACE 21% STRATEGIC GROUP TRUST .10% KETAN PATEL 2% VELERIAN INV. & CONS. PVT. LTD. 34% 3.3. IF THE AFORESAID TABLE IS ANALYZED, IT IS CLE AR THAT THE ASSESSEE IS NOT A SHAREHOLDER IN SCCPL, THEREFORE, SECTION 2(22)(E) OF THE ACT IS NOT APPLICABLE IN THE PRESEN T APPEAL. OUR VIEW FIND SUPPORT FROM THE DECISION OF THE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS UNIVERSAL MEDICARE PVT. LTD. (2010) 190 TAXMAN. 144 (BOM.). THE RELEVANT PORTION FROM T HE ORDER IS REPRODUCED HEREUNDER:- 3. THE FIRST AND SECOND QUESTIONS ARE NOW TAKEN UP. B RIEFLY STATED, THE ADMITTED FACTS ARE THAT AN AMOUNT OF RS. 32,00, 000 WAS TRANSFERRED FROM THE BANK ACCOUNT OF A COMPANY BY T HE NAME OF CAPSULATION SERVICES (P) LTD. (CSPL) TO THE ACCOUNT OF THE ASSESSEE MAINTAINED IN THE CHEMBUR BRANCH OF THE SBI. MR. VI KRAM TANNAN WAS A DIRECTOR OF CSPL. HE HELD OVER 10 PER CENT OF THE EQUITY CAPITAL OF CSPL AND OVER 20 PER CENT OF THE EQUITY CAPITAL OF THE ASSESSEE. THE AO, IN THE COURSE OF THE ORDER OF ASS ESSMENT, RELIED ON THE PROVISIONS OF S. 2(22)(E) AND TREATED THE AM OUNT OF RS. 35,00,000 AS DEEMED DIVIDEND IN THE HANDS OF THE AS SESSEE AND DIRECTED THAT THE AMOUNT BE ADDED BACK TO ITS TOTAL INCOME. THE ASSESSEE CONTENDED THAT ONE MR. TEREDESAI, VICE PRE SIDENT (FINANCE) HAD MISAPPROPRIATED LARGE SUMS OF MONEY BY OPENING BANK ACCOUNTS AND THE TRANSACTION BY WHICH AN AMOUNT OF RS. 32,00,000 WAS TRANSFERRED FROM CSPL WAS PART OF THE MISAPPROP RIATION. ACCORDING TO THE ASSESSEE, THE AMOUNT WAS NOT REFLE CTED IN THE BOOKS OF THE ASSESSEE SINCE IT HAD BEEN MISAPPROPRI ATED BY THE VICE PRESIDENT (FINANCE). THE FACT THAT THE AMOUNT HAS B EEN DEFALCATED COULD NOT, ACCORDING TO THE ASSESSEE, BE DISPUTED I N VIEW OF THE FACT THAT IT HAS BEEN ALLOWED BY THE AO AS A BUSINESS LO SS DURING THE ASST. YR. 2006-07. HENCE, THE CONTENTION OF THE ASS ESSEE WAS TWO- FOLD. FIRST, ACCORDING TO THE ASSESSEE, FOR S. 2(22 )(E) TO APPLY THE AMOUNT OUGHT TO HAVE BEEN RECEIVED AS AN ADVANCE OR LOAN FROM A COMPANY TO A CONCERN IN WHICH THE SHAREHOLDER HAD S UBSTANTIAL INTEREST. THIS CONDITION, ACCORDING TO THE ASSESSEE , WAS NOT MET SINCE THE AMOUNT WAS NEITHER AN ADVANCE NOR A LOAN TO THE ASSESSEE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 23 BUT REPRESENTED MISAPPROPRIATION OF FUNDS BY THE VI CE PRESIDENT (FINANCE). CONSEQUENTLY, EVEN IF THE AMOUNT IS TREA TED AS DEEMED DIVIDEND WITHIN THE MEANING OF S. 2(22)(E), IT IS T AXABLE IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE HANDS OF THE ASSE SSEE. SECONDLY, EVEN ON THE ASSUMPTION THAT THIS WAS AN AMOUNT ADVA NCED TO THE ASSESSEE BY THE CSPL, FOR THE PURPOSES OF TAXATION, A DEEMED DIVIDEND WOULD BE TAXABLE IN THE HANDS OF THE SHARE HOLDER AND NOT THE ASSESSEE TO WHOM THE PAYMENT WAS ADVANCED. 4. THE AO CAME TO THE CONCLUSION THAT THE PROVISIONS OF S. 2(22)(E) ARE ATTRACTED THE MOMENT A LOAN OR ADVANCE IS MADE AND THE SUBSEQUENT DEFALCATION OF FUNDS WAS IMMATERIAL. THE AO HELD THAT THE LOAN WAS RECEIVED FROM THE BANK ACCOUNT OF CSPL ; THE MONEY WAS DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE A ND THE SUBSEQUENT DEFALCATION OF THE FUNDS AFTER THE RECEI PT OF MONEYS BY THE ASSESSEE WAS AN EXTRANEOUS CIRCUMSTANCE WHICH M ADE NO DIFFERENCE TO THE APPLICATION OF S. 2(22)(E). THE A O FOUND THAT MR. VIKRAM TANNAN WHO WAS A DIRECTOR OF THE ASSESSEE HE LD MORE THAN 20 PER CENT OF THE EQUITY CAPITAL OF CSPL. THE AO C AME TO THE CONCLUSION THAT ALL THE CONDITIONS FOR THE APPLICAT ION OF S. 2(22(E) WERE FULFILLED AND THE LOAN OF RS. 35,00,000 FROM C SPL WOULD HAVE TO BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF TH E ASSESSEE. 5. IN APPEAL, THE CIT(A) AFFIRMED THE ORDER OF THE AO , SAVE AND EXCEPT WITH A MODIFICATION THAT THE ACTUAL AMOUNT W HICH HAS BEEN RECEIVED BY THE ASSESSEE WAS HELD TO BE RS. 32,00,0 00 AND NOT RS. 35,00,000 AS DETERMINED BY THE AO. 6. THE TRIBUNAL IN APPEAL HAS REVERSED THE FINDINGS O F THE CIT(A) ON TWO COUNTS. FIRSTLY, THE TRIBUNAL HELD THAT THE PRO VISIONS OF S. 2(22)(E) WOULD BE ATTRACTED IF A LOAN WAS TAKEN BY THE SHAREHOLDER FROM ANY CLOSELY HELD COMPANY. IN THE PRESENT CASE, THE TRIBUNAL NOTED THAT THE AMOUNT WAS PART OF A FRAUD COMMITTED ON THE ASSESSEE AND THE TRANSACTION WAS NOT REFLECTED IN I TS BOOKS OF ACCOUNT. IN THE CIRCUMSTANCES, S. 2(22)(E) WAS HELD NOT TO APPLY. SECONDLY, THE TRIBUNAL HELD THAT EVEN OTHERWISE, TH E AMOUNT WOULD HAVE TO BE TAXED IN THE HANDS OF THE SHAREHOLDER WH O OBTAINED THE BENEFIT AND NOT IN THE HANDS OF THE ASSESSEE. 7. UNDER S. 56, INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THE ACT IS CHARGEABLE T O INCOME-TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', IF IT I S NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN I TEMS (A) TO (E) OF S. 14. UNDER CL. (1) OF SUB-S. (2), INCOME BY WAY O F DIVIDEND IS CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FRO M OTHER SOURCES'. SEC. 2(22) PROVIDES AN INCLUSIVE DEFINITI ON OF THE EXPRESSION 'DIVIDEND' FOR THE PURPOSES OF THE ACT. SEC. 2(22)(E) IS AS FOLLOWS : '(22) DIVIDEND INCLUDES (A) TO (D) ........... (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY I N WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OR ANY SUM (WH ETHER AS ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 24 REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL O WNER OF SHARES (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 BEHA LF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PR OFITS;' 8. CLAUSE (E) OF S. 2(22) IS NOT ARTISTICALLY WORDED. FOR FACILITY OF EXPOSITION, THE CONTENTS CAN BE BROKEN DOWN FOR ANA LYSIS : (I) CLAUSE (E) APPLIES TO ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED OF ANY SUM, WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE MADE AFTER THE 31ST MAY 1987; (II) CLAUSE (E) COVERS A PAYMENT MADE BY WAY OF A LOAN OR ADVANCE TO (A) A S HAREHOLDER, BEING A BENEFICIAL OWNER OF SHARES (NOT BEING SHARE S ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RI GHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF T HE VOTING POWER; OR (B) ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMB ER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST; (III) C LAUSE (E) ALSO INCLUDES IN ITS PURVIEW ANY PAYMENT MADE BY A COMPA NY ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHARE HOLDER; (IV) CLAUSE (E) WILL APPLY TO THE EXTENT TO WHICH THE COMPANY, IN EITHER CASE, POSSESSES ACCUMULATED PROFITS. THE REMAINING PART O F THE PROVISION IS NOT MATERIAL FOR THE PURPOSES OF THIS APPEAL. BY PROVIDING AN INCLUSIVE DEFINITION OF THE EXPRESS ION 'DIVIDEND', CL. 2(22) BRINGS WITHIN ITS PURVIEW ITEMS WHICH MAY NOT ORDINARILY CONSTITUTE THE PAYMENT OF DIVIDEND. PARLIAMENT HAS EXPANDED THE AMBIT OF THE EXPRESSION 'DIVIDEND' BY PROVIDING AN INCLUSIVE DEFINITION. 9. IN ORDER THAT THE FIRST PART OF CL. (E) OF S. 2(22 ) IS ATTRACTED, THE PAYMENT BY A COMPANY HAS TO BE BY WAY OF AN ADVANCE OR LOAN. THE ADVANCE OR LOAN HAS TO BE MADE, AS THE CASE MAY BE, EITHER TO A SHAREHOLDER, BEING A BENEFICIAL OWNER HOLDING NOT L ESS THAN TEN PER CENT OF THE VOTING POWER OR TO ANY CONCERN TO WHICH SUCH A SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST. THE TRIBUNAL IN THE PRESENT C ASE HAS FOUND THAT AS A MATTER OF FACT NO LOAN OR ADVANCE WAS GRANTED TO THE ASSESSEE, SINCE THE AMOUNT IN QUESTION HAD ACTUALLY BEEN DEFA LCATED AND WAS NOT REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESS EE. THE FACT THAT THERE WAS A DEFALCATION SEEMS TO HAVE BEEN ACCEPTED SINCE THIS AMOUNT WAS ALLOWED AS A BUSINESS LOSS DURING THE CO URSE OF ASST. YR. 2006-07. CONSEQUENTLY, ACCORDING TO THE TRIBUNAL TH E FIRST REQUIREMENT OF THERE BEING AN ADVANCE OR LOAN WAS N OT FULFILLED. IN OUR VIEW, THE FINDING THAT THERE WAS NO ADVANCE OR LOAN IS A PURE FINDING OF FACT WHICH DOES NOT GIVE RISE TO ANY SUB STANTIAL QUESTION OF LAW. HOWEVER, EVEN ON THE SECOND ASPECT WHICH HA S WEIGHED WITH THE TRIBUNAL, WE ARE OF THE VIEW THAT THE CONSTRUCT ION WHICH HAS BEEN PLACED ON THE PROVISIONS OF S. 2(22)(E) IS COR RECT. SEC. 2(22)(E) DEFINES THE AMBIT OF THE EXPRESSION 'DIVID END'. ALL ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 25 PAYMENTS BY WAY OF DIVIDEND HAVE TO BE TAXED IN THE HANDS OF THE RECIPIENT OF THE DIVIDEND NAMELY THE SHAREHOLDER. T HE EFFECT OF S. 2(22) IS TO PROVIDE AN INCLUSIVE DEFINITION OF THE EXPRESSION DIVIDEND. CLAUSE (E) EXPANDS THE NATURE OF PAYMENTS WHICH CAN BE CLASSIFIED AS A DIVIDEND. CLAUSE (E) OF S. 2(22) INCLUDES A PA YMENT MADE BY THE COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALL Y INTERESTED BY WAY OF AN ADVANCE OR LOAN TO A SHAREHOLDER OR TO AN Y CONCERN TO WHICH SUCH SHAREHOLDER IS A MEMBER OR PARTNER, SUBJ ECT TO THE FULFILMENT OF THE REQUIREMENTS WHICH ARE SPELT OUT IN THE PROVISION. SIMILARLY, A PAYMENT MADE BY A COMPANY ON BEHALF, O R FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER IS TREA TED BY CL. (E) TO BE INCLUDED IN THE EXPRESSION 'DIVIDEND'. CONSEQUENTLY , THE EFFECT OF CL. (E) OF S. 2(22) IS TO BROADEN THE AMBIT OF THE EXPR ESSION 'DIVIDEND' BY INCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MADE BY WAY OF A LOAN OR ADVANCE OR PAYMENTS MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF A SHAREHOLDER. THE DEFINITION DOES NOT ALTER THE LEGAL POSITION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHAREHOLDER. CONSEQUENTLY, IN THE PRESENT CASE, THE PAYMENT, EVEN ASSUMING THAT IT WAS A DIVIDEND, WOULD HAVE TO BE T AXED NOT IN THE HANDS OF THE ASSESSEE BUT IN THE HANDS OF THE SHARE HOLDER. THE TRIBUNAL WAS, IN THE CIRCUMSTANCES, JUSTIFIED IN CO MING TO THE CONCLUSION THAT, IN ANY EVENT, THE PAYMENT COULD NO T BE TAXED IN THE HANDS OF THE ASSESSEE. WE MAY IN CONCLUDING NOTE TH AT THE BASIS ON WHICH THE ASSESSEE IS SOUGHT TO BE TAXED IN THE PRE SENT CASE IN RESPECT OF THE AMOUNT OF RS. 32,00,000 IS THAT THER E WAS A DIVIDEND UNDER S. 2(22)(E) AND NO OTHER BASIS HAS BEEN SUGGE STED IN THE ORDER OF THE AO. 10. FOR THE AFORESAID REASONS, THE FIRST AND SECOND QU ESTIONS WILL NOT GIVE RISE TO ANY SUBSTANTIAL QUESTIONS OF LAW. 3.4. IN THE AFORESAID CASE, HELD THAT THE FIRST PART OF CL. (E) OF S. 2(22) IS ATTRACTED, THE PAYMENT BY A COMP ANY HAS TO BE BY WAY OF AN ADVANCE OR LOAN. THE ADVANCE OR LOA N HAS TO BE MADE, AS THE CASE MAY BE, EITHER TO A SHAREHOLDE R, BEING A BENEFICIAL OWNER HOLDING NOT LESS THAN 10% OF THE VOTING POWER OR TO ANY CONCERN TO WHICH SUCH A SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTI AL INTEREST. THE TRIBUNAL IN THE PRESENT CASE HAS FOUN D THAT AS A MATTER OF FACT NO LOAN OR ADVANCE WAS GRANTED TO THE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 26 ASSESSEE, SINCE THE AMOUNT IN QUESTION HAD ACTUALLY BEEN DEFALCATED AND WAS NOT REFLECTED IN THE BOOKS OF AC COUNT OF THE ASSESSEE. THE FACT THAT THERE WAS A DEFALCATION SEEMS TO HAVE BEEN ACCEPTED SINCE THIS AMOUNT WAS ALLOWED AS A BUSINESS LOSS DURING THE COURSE OF ASST. YR. 2006-0 7. CONSEQUENTLY, ACCORDING TO THE TRIBUNAL THE FIRST REQUIREMENT OF THERE BEING AN ADVANCE OR LOAN WAS N OT FULFILLED. THE FINDING THAT THERE WAS NO ADVANCE OR LOAN IS A PURE FINDING OF FACT WHICH DOES NOT GIVE RISE TO AN Y SUBSTANTIAL QUESTION OF LAW. EVEN ON THE SECOND ASP ECT WHICH HAS WEIGHED WITH THE TRIBUNAL, THE CONSTRUCTI ON WHICH HAS BEEN PLACED ON THE PROVISIONS OF S. 2(22) (E) IS CORRECT. SEC. 2(22)(E) DEFINES THE AMBIT OF THE EXP RESSION 'DIVIDEND'. ALL PAYMENTS BY WAY OF DIVIDEND HAVE TO BE TAXED IN THE HANDS OF THE RECIPIENT OF THE DIVIDEND NAMEL Y THE SHAREHOLDER. THE EFFECT OF S. 2(22) IS TO PROVIDE A N INCLUSIVE DEFINITION OF THE EXPRESSION DIVIDEND. CLAUSE (E) E XPANDS THE NATURE OF PAYMENTS WHICH CAN BE CLASSIFIED AS A DIV IDEND. CLAUSE (E) OF S. 2(22) INCLUDES A PAYMENT MADE BY T HE COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY IN TERESTED BY WAY OF AN ADVANCE OR LOAN TO A SHAREHOLDER OR TO ANY ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 27 CONCERN TO WHICH SUCH SHAREHOLDER IS A MEMBER OR PA RTNER, SUBJECT TO THE FULFILMENT OF THE REQUIREMENTS WHICH ARE SPELT OUT IN THE PROVISION. SIMILARLY, A PAYMENT MADE BY A COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, O F ANY SUCH SHAREHOLDER IS TREATED BY CL. (E) TO BE INCLUDED IN THE EXPRESSION 'DIVIDEND'. CONSEQUENTLY, THE EFFECT OF CL. (E) OF S. 2(22) IS TO BROADEN THE AMBIT OF THE EXPRESSION 'DI VIDEND' BY INCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MA DE BY WAY OF A LOAN OR ADVANCE OR PAYMENTS MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF A SHAREHOLDER. THE DE FINITION DOES NOT ALTER THE LEGAL POSITION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHAREHOLDER. CONSEQUENTLY , IN THE PRESENT CASE THE PAYMENT, EVEN ASSUMING THAT IT WAS A DIVIDEND, WOULD HAVE TO BE TAXED NOT IN THE HANDS O F THE ASSESSEE BUT IN THE HANDS OF THE SHAREHOLDER. THE T RIBUNAL WAS, IN THE CIRCUMSTANCES, JUSTIFIED IN COMING TO T HE CONCLUSION THAT, IN ANY EVENT, THE PAYMENT COULD NO T BE TAXED IN THE HANDS OF THE ASSESSEE. 3.5. IF THE FACTS AND THE RATIO LAID DOWN IN THE AFORESAID CASE ARE ANALYZED WITH THE FACTS OF THE P RESENT APPEAL, THE FIRST REQUIREMENT OF SECTION (2(22)(E) OF THERE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 28 BEING AND ADVANCE OR LOAN WAS NOT FULFILLED AND EVE N ASSUMING THAT IT WAS A DIVIDEND, IT HAS TO BE TAXED IN THE HANDS OF THE SHAREHOLDERS AND NOT IN THE HANDS OF T HE ASSESSEE. THE RATIO LAID DOWN IN CIT VS IMPACT CONT AINERS PVT. LTD. (2014) 48 TAXMAN.COM 294 (BOM.); 367 ITR 346 (BOM.), WHEREIN, CERTAIN COMPANIES ADVANCE MONEY TO THE ASSESSEE COMPANY IN WHICH ONE DIRECTOR OF THE ASSES SEE WAS HOLDING MORE THAN 10% OF EQUITY SHARES AND SINCE TH E ASSESSEE ITSELF WAS NOT THE SHAREHOLDER OF THOSE LE NDING COMPANIES, THE ADDITION MADE BY THE ASSESSING OFFIC ER INVOKING SECTION 2(22)(E) OF THE ACT WAS NOT SUSTAI NABLE. THE RELEVANT PORTION FROM THE ORDER IS REPRODUCED HEREU NDER:- 13. A BARE PERUSAL THEREOF, WOULD INDICATE THAT TER M DIVIDEND INCLUDES ANY DISTRIBUTION BY A COMPANY OF ACCUMULAT ED PROFITS, ANY DISTRIBUTION TO ITS SHAREHOLDERS BY A COMPANY OF DE BENTURES, DEBENTURESTOCK, OR DEPOSIT CERTIFICATES IN ANY FORM , WHETHER WITH OR WITHOUT INTEREST, ANY DISTRIBUTION MADE TO THE SHAR EHOLDERS BY THE COMPANY ON ITS LIQUIDATION, ANY DISTRIBUTION MADE T O THE SHAREHOLDER BY A COMPANY ON THE REDUCTION OF ITS CAPITAL AND ALL T HIS IS DEALT WITH BY CLAUSES (A) TO (D) OF SECTION 2(22) OF THE I. T. AC T. 14. THEN COMES CLAUSE (E) WHICH SAYS THAT ANY PAYME NT BY A COMPANY AND NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUB STANTIALLY INTERESTED, OF ANY SUM (WHETHER AS REPRESENTING A P ART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER 31ST MAY 1987, BUT BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL OWNER OF THE SHARES NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE IN PROFITS HOLDING NOT LESS THAN 10% OF THE VOTING POWER. THIS IS ONE CATEGORY AND SECOND ONE IS A PAYMENT BY WAY OF ADVANCE OR LO AN TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR PA RTNER AND IN WHICH HE HAS SUBSTANTIAL INTEREST. THE THIRD CATEGORY IS ANY PAYMENT BY ANY SUCH COMPANY FOR INDIVIDUAL BENEFIT OF ANY SUCH SHA REHOLDERS TO THE EXTENT OF WHICH THE COMPANY IN EITHER CASE POSSESSE S ACCUMULATED PROFITS. ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 29 15. LATER PART OF THIS DEFINITION STATES AS TO WHAT IS NOT INCLUDED IN DIVIDEND AND THE LEGISLATURE HAS CAREFULLY SPECIF IED THAT ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER OR CONCERN IN WHICH S HAREHOLDER IS A MEMBER OR PARTNER AND IN WHICH HE HAS SUBSTANTIAL I NTEREST, BY THE COMPANY IN ORDINARY COURSE OF HIS BUSINESS WHERE TH E LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY OR ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUBCLAUSE (E) TO THE EXTENT TO WHICH IT IS SO SET OFF, IS NOT DIVIDEND WITHIN THE MEANING O F THIS DEFINITION. 16. WE ARE STRICTLY NOT CONCERNED WITH CLAUSES (IV) AND (V) WHICH PAYMENTS ARE NOT TERMED AS DIVIDEND OR EXPLANATIONS 1 AND 2. EXPLANATION (3) STATES THAT FOR THE PURPOSE OF THIS CLAUSE NAMELY CLAUSE (A) 'CONCERN MEANS A HINDU UNDIVIDED FAMILY OR A F IRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY. THE EXPLANATION ALSO STATES AND EXPLAINS THAT A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN, OTHER THA N A COMPANY, IF HE IS, AT ANY TIME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN 20% OF INCOME OF SUCH CONCERN. 17. WE WOULD, FOR THE SAKE OF APPRECIATION OF THE R IVAL CONTENTIONS NOTE THE FACTS IN THE APPEAL WHICH IS STYLED AS INCOME T AX APPEAL NO.114 OF 2012. THERE, RETURN OF INCOME WAS FILED BY THE ASSE SSEE DECLARING TOTAL INCOME OF RS.3,77,11,467/. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE I. T. ACT. THE ASSESSMENT WAS SUBSEQU ENTLY RECTIFIED DETERMINING THE ASSESSED INCOME AT RS.3,32,31,204/ . THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE COMPANY IS ENGA GED IN THE BUSINESS OF MANUFACTURE AND SALE OF PRINTED ALUMINU M COLLAPSIBLE TUBES AND AUXILIARY MACHINE USED IN MANUFACTURE OF TUBE. WHAT IS RELEVANT AND MATERIAL FOR OUR PURPOSE IS DISALLOWAN CE UNDER SECTION 2(22)(E) OF THE I. T. ACT. DURING THE ASSESSMENT YE AR UNDER CONSIDERATION NAMELY 20062007, CREDIT ENTRIES WERE FOUND IN THE BOOKS OF THE ASSESSEE COMPANY. M/S BHAVIN CONTAINERS PVT LTD, M/S PATEL ALUMINIUM PVT LTD, M/S. LANS METAL PVT LTD AND M/S. PATCART PACKAGING PVT LTD HAD LENT AN ADVANCED MONIES TO THE ASSESSEE COMPANY. ONE M. I. PATEL, DIRECTOR OF THE ASSESSEE COMPANY HOLDS MO RE THAN 10% OF EQUITY SHARES IN ALL THE COMPANIES NOTED ABOVE. HE ALSO HOLDS MORE THAN 20% OF THE SHARES OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER PERUSED THE BALANCE SHEET OF THE RESPECTIVE COMPANIES AND IT REVEALED THAT THE RESERVES AND SURPLUSES IN ALL THE SE COMPANIES ARE MORE THAN THE AMOUNT STANDING TO THE CREDIT OF THES E COMPANIES. THIS IS THE POSITION IN THE CASE OF ALL COMPANIES EXCEPT M/S. PATCART PACKAGING PVT LTD AND THAT IS HOW HE ARRIVED AT THE CONCLUSION THAT THE REQUIREMENT OF SECTION 2(22) (E) OF THE I. T. ACT I S SATISFIED AND THE BALANCE NAMELY CREDIT ENTRIES FOUND IN THE BOOKS OF THE ASSESSEE COMPANY WERE CONSIDERED FOR DISALLOWANCE UNDER SECT ION 2(22)(E) OF THE ACT. 18. AGGRIEVED AND DISSATISFIED WITH THE ADVERSE ORD ER PASSED BY THE ASSESSING OFFICER ALSO TO THE ABOVE EFFECT SO ALSO INITIATION OF PROCEEDINGS FOR IMPOSITION OF PENALTY THAT THE MATT ER WAS CARRIED IN APPEAL INTERALIA ON THIS GROUND. WE ARE NOT CONCERN ED WITH THE OTHER DISALLOWANCES MADE BY THE ASSESSING OFFICER AND WHI CH WERE ALSO SUBJECT MATTER OF THE APPEAL BEFORE THE COMMISSIONE R OF INCOME TAX, MUMBAI. IN THE APPELLATE ORDER, THE COMMISSIONER NO TED GROUND NO.6 ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 30 WHICH IS THE ADDITION MADE OF RS.96,16,924/ AS DEEM ED DIVIDEND. THE COMMISSIONER REFERRED TO THE FACTUAL POSITION AND T HE ARGUMENTS AND FOUND THAT THE IMPUGNED CREDIT BALANCES ARE NOT THE SUMS RECEIVED FROM THE RELATED CONCERN, HAVING COMMON SHAREHOLDER S AS A LOAN OR ADVANCE SO THAT IT COULD ATTRACT THE PROVISIONS OF SECTION 2(22) (E) OF THE I. T. ACT. THE CREDIT BALANCES REPRESENT COST O F GOODS OR SERVICES RECEIVED BY THE APPELLANTS AND WHICH CANNOT BE TREA TED AS AN ADVANCE OR LOAN. HOLDING THUS, HE COULD HAVE CONCLUDED THAT THE CREDIT ENTRIES ARE NOT COVERED BY THIS PROVISION AND THE PAYMENT D OES NOT FALL THEREIN. HOWEVER, HE ASSUMED THAT THE SHARE HOLDING PATTERN IS SUCH THAT THE PROVISIONS OF SECTION 2(22)(E) WILL BE ATT RACTED, BUT CONCLUDED THAT THE OTHER ARGUMENT, NAMELY, DEEMED DIVIDEND CA N BE ASSESSED ONLY IN THE CASE OF A PERSON WHO IS A SHAREHOLDER O F THE LENDER COMPANY AND NOT IN THE HANDS OF THE PERSON OTHER TH AN THE SHAREHOLDER, DESERVES ACCEPTANCE. THAT IS HOW PARAG RAPH NOS.6.3 AND 6.4 OF THE ORDER OF THE COMMISSIONER WOULD READ. IN COMING TO THIS CONCLUSION, HE RELIED UPON THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ASSISTANT COMMISSIONER OF I NCOME TAX V/S BHAUMIK COLOUR PVT LTD. 19. THE RESULT OF THIS DISCUSSION WAS THAT THE COMM ISSIONER OF INCOME TAX(APPEALS) PARTLY ALLOWED THE APPEAL OF THE ASSES SEE. 20. THE DEPUTY COMMISSIONER OF INCOME TAX(REVENUE) CARRIED THE MATTER IN APPEAL. THE INCOME TAX APPELLATE TRIBUNAL , IN INCOME TAX APPEAL NO.1597 OF MUM/2010 AND IN DEALING WITH THIS GROUND, IN PARAGRAPH NO.6 OF THE ORDER DATED 13TH APRIL 2011, HELD AS UNDER: THE SECOND GROUND IS THAT THE CIT(A) ERRED IN DELE TING THE ADDITION OF RS.96,16,924/ MADE UNDER SECTION 2(22) (E) OF THE I NCOME TAX ACT, 1961. ON THIS POINT THERE IS AN ORDER OF THE TRIBUN AL IN THE CASE OF DCIT V/S M/S. PATEL ALUMINIUM PVT LTD IN ITA NO.159 8/MUM/2010 DATED 19.01.2011. THE CONTROVERSY IN THIS CASE WAS WHETHER AN ADDITION FOR DEEMED DIVIDEND CAN BE MADE IN THE HAN DS OF THE RECIPIENT OF THE AMOUNT EVEN THOUGH HE IS NOT A SHAREHOLDER O F THE LENDER COMPANY. IT WAS HELD, FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S BHAUMIK COLOUR P. LTD (2009) 313 ITR (AT) 146 (MUM)(SB) THAT IN ORDER TO ATTRACT THE APPLICABILITY OF SECTION 2 (22) (E) THE RECIPIENT OF THE AMOUNT FROM THE COMPANY HAS TO BE A REGISTERED SHAREHOLDER OF THE COMPANY. IN THE PRESENT CASE THE FOLLOWING CREDIT BALANCES WERE SHOWN IN THE ASSESSE E'S ACCOUNT IN THE FOLLOWING COMPANIES: (I)M/S. BHAVIN CONTAINERS P.LTD RS.38,75,412/ (II)M/S.PATEL ALUMINIUM PVT LTD RS.93,978/ (III)M/S LANS METAL PVT LTD RS.28,94,357/ (IV)M/S.PATCART PACKAGING PVT LTD RS.44,31,466/ ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 31 THE FINDING OF THE CIT(A) IS THAT THE ASSESSEE IS N OT A SHAREHOLDER IN ANY OF THE AFORESAID COMPANIES. ACCORDING TO THE AS SESSING OFFICER, ONE M. I. PATEL WHO WAS A DIRECTOR OF THE ASSESSEE COMPANY HELD MORE THAN 10% OF THE EQUITY SHARES OF THE ABOVE FOUR COM PANIES AND HE ALSO HELD MORE THAN 20% OF THE SHARES OF THE ASSESS EE COMPANY. BUT EVEN THE ASSESSING OFFICER HAS NOT FOUND THAT THE A SSESSEE COMPANY WAS A SHAREHOLDER OF ANY OF THE FOUR COMPANIES. IN SUCH CIRCUMSTANCES THE CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE UNDER SECTION 2(22)(E) FOLLOWING THE ORDER OF THE SPECIAL BENCH C ITED ABOVE. IT IS ALSO TO BE NOTED THAT THE REASONING OF THE SPECIAL BENCH HAS BEEN UPHELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PRIVATE LIMITED (2010) 324 ITR 263(BOM). B OTH THE ORDER OF THE SPECIAL BENCH AND THE JUDGMENT OF THE HON'BLE B OMBAY HIGH COURT HAVE BEEN NOTICED AND FOLLOWED IN THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. PATEL ALUMINIUM PVT LTD(SUPRA). RESPECTFULL Y FOLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT, WE CONFI RM THE DECISION OF THE CIT(A) AND DISMISS THE SECOND GROUND. 21. AS A RESULT OF THE ABOVE QUOTED CONCLUSION THE REVENUE'S APPEAL WAS DISMISSED. 22. WE FIND THAT IN IDENTICAL FACTUAL POSITION, THE REVENUE IN THE CASE OF UNIVERSAL MEDICARE FORMULATED TWO QUESTIONS AND TERMED THEM AS SUBSTANTIAL QUESTIONS OF LAW. THEY WERE POSED FOR C ONSIDERATION AND DETERMINATION OF THIS COURT. THEY WERE PRESSED DURI NG THE COURSE OF ARGUMENTS, AS WELL. THE JUDGMENT IN THE CASE OF UNI VERSAL MEDICARE TAKES NOTE OF THE QUESTIONS OF LAW AND PARTICULARLY , QUESTION NO.2. THE RATIO OF THE DECISION OF THE SPECIAL BENCH OF THE T RIBUNAL IN THE CASE OF BHAUMIK COLOUR PVT LTD., WAS ALSO A QUESTION POSED FOR ANSWER BY THIS COURT IN UNIVERSAL MEDICARE (SUPRA). 23. THEREAFTER, THE TRIBUNAL'S FINDINGS HAVE BEEN R EFERRED TO AT PAGE NO.267 OF THE REPORT. IN PARAGRAPH NO.7, THE DIVISI ON BENCH REFERRED TO THE DEFINITION OF THE TERM DIVIDEND AS APPEARING IN THE I. T. ACT AND WHICH WE HAVE REPRODUCED ABOVE, AND THEN HELD AS UN DER: THE TRIBUNAL IN APPEAL HAS REVERSED THE FINDINGS O F THE COMMISSIONER OF INCOME TAX (APPEALS) ON TWO COUNTS. FIRSTLY, THE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 2(22)(E) WOULD BE ATTRACT ED IF A LOAN WAS TAKEN BY THE SHAREHOLDER FROM ANY CLOSELY HELD COMP ANY. IN THE PRESENT CASE, THE TRIBUNAL NOTED THAT THE AMOUNT WA S PART OF A FRAUD COMMITTED ON THE ASSESSEE AND THE TRANSACTION WAS N OT REFLECTED IN ITS BOOKS OF ACCOUNT. IN THE CIRCUMSTANCES, SECTION 2(2 2)(E) WAS HELD NOT TO APPLY. SECONDLY, THE TRIBUNAL HELD THAT EVEN OTH ERWISE, THE AMOUNT WOULD HAVE TO BE TAXED IN THE HANDS OF THE SHAREHOL DER WHO OBTAINED THE BENEFIT AND NOT IN THE HANDS OF THE ASSESSEE. 7. UNDER SECTION 56, INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THE ACT IS CHARGEABLE T O INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES, IF IT IS NOT CH ARGEABLE TO INCOME TAX UNDER ANY OF THE HEADS SPECIFIED IN ITEMS (A) T O (E) OF SECTION 14. UNDER CLAUSE (1) OF SUBSECTION (2), INCOME BY WAY O F DIVIDEND IS CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 32 SECTION 2(22) PROVIDES AN INCLUSIVE DEFINITION OF T HE EXPRESSION 'DIVIDEND' FOR THE PURPOSES OF THE ACT. SECTION 2(2 2)(E) IS AS FOLLOWS: (22) 'DIVIDEND' INCLUDES - (A) TO (D).... (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY I N WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OR 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 O WNER 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 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 HE HAS A SUBS TANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID C ONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE I NDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS; 8. CLAUSE (E) O F SECTION 2(22) IS NOT ARTISTICALLY WORDED. FOR FACILITY OF EXPOSITION , THE CONTENTS CAN BE BROKEN DOWN FOR ANALYSIS: (I) CLAUSE (E) APPLIES TO ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC IS SUBSTANTIALLY INTERESTED OF ANY SUM, WHETHER AS REPRESENTING A PA RT OF THE ASSETS OF THE COMPANY OR OTHERWISE MADE AFTER THE 31 MAY 1987 ; (II) CLAUSE (E) COVERS A PAYMENT MADE BY WAY OF A LOAN OR ADVANCE T O (A) A SHAREHOLDER, BEING A BENEFICIAL OWNER OF SHARES (NO T BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH O R WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN P ER CENT OF THE VOTING POWER; OR (B) ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST; (III) CLAUSE (E) ALSO INCLUDES IN ITS PURVIEW ANY PAYMENT MADE BY A COMPA NY ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOL DER; (IV) CLAUSE (E) WILL APPLY TO THE EXTENT TO WHICH THE COMPANY, IN E ITHER CASE, POSSESSES ACCUMULATED PROFITS. THE REMAINING PART O F THE PROVISION IS NOT MATERIAL FOR THE PURPOSES OF THIS APPEAL. BY PR OVIDING AN INCLUSIVE DEFINITION OF THE EXPRESSION 'DIVIDEND', CLAUSE 2(2 2) BRINGS WITHIN ITS PURVIEW ITEMS WHICH MAY NOT ORDINARILY CONSTITUTE T HE PAYMENT OF DIVIDEND. PARLIAMENT HAS EXPANDED THE AMBIT OF THE EXPRESSION 'DIVIDEND' BY PROVIDING AN INCLUSIVE DEFINITION. 9. IN ORDER THAT THE FIRST PART OF CLAUSE (E) OF SE CTION 2(22) IS ATTRACTED, THE PAYMENT BY A COMPANY HAS TO BE BY WA Y OF AN ADVANCE OR LOAN. THE ADVANCE OR LOAN HAS TO BE MADE, AS THE CASE MAY BE, EITHER TO A SHAREHOLDER, BEING A BENEFICIAL OWNER H OLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER OR TO ANY CONCERN TO WHICH SUCH A SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST. THE TRIBUNAL IN THE PRESENT CASE HAS FOUN D THAT AS A MATTER OF FACT NO LOAN OR ADVANCE WAS GRANTED TO THE ASSESSEE , SINCE THE AMOUNT IN QUESTION HAD ACTUALLY BEEN DEFALCATED AND WAS NO T REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE FACT THAT THE RE WAS A DEFALCATION SEEMS TO HAVE BEEN ACCEPTED SINCE THIS AMOUNT WAS A LLOWED AS A BUSINESS LOSS DURING THE COURSE OF ASSESSMENT YEAR 20062007. CONSEQUENTLY, ACCORDING TO THE TRIBUNAL THE FIRST R EQUIREMENT OF THERE BEING AN ADVANCE OR LOAN WAS NOT FULFILLED. IN OUR VIEW, THE FINDING THAT THERE WAS NO ADVANCE OR LOAN IS A PURE FINDING OF F ACT WHICH DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. HOWEV ER, EVEN ON THE SECOND ASPECT WHICH HAS WEIGHED WITH THE TRIBUNAL, WE ARE OF THE VIEW ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 33 THAT THE CONSTRUCTION WHICH HAS BEEN PLACED ON THE PROVISIONS OF SECTION 2(22) (E) IS CORRECT. SECTION 2(22)(E) DEFI NES THE AMBIT OF THE EXPRESSION 'DIVIDEND'. ALL PAYMENTS BY WAY OF DIVID END HAVE TO BE TAXED IN THE HANDS OF THE RECIPIENT OF THE DIVIDEND NAMELY THE SHAREHOLDER. THE EFFECT OF SECTION 2(22) IS TO PROV IDE AN INCLUSIVE DEFINITION OF THE EXPRESSION DIVIDEND. CLAUSE (E) E XPANDS THE NATURE OF PAYMENTS WHICH CAN BE CLASSIFIED AS A DIVIDEND. CLA USE (E) OF SECTION 2(22) INCLUDES A PAYMENT MADE BY THE COMPANY IN WHI CH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED BY WAY OF AN ADVANCE O R LOAN TO A SHAREHOLDER OR TO ANY CONCERN TO WHICH SUCH SHAREHO LDER IS A MEMBER OR PARTNER, SUBJECT TO THE FULFILLMENT OF THE REQUI REMENTS WHICH ARE SPELT OUT IN THE PROVISION. SIMILARLY, A PAYMENT MA DE BY A COMPANY ON BEHALF, OF FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER IS TREATED BY CLAUSE (E) TO BE INCLUDED IN THE EXPRESSION 'DIV IDEND'. CONSEQUENTLY, THE EFFECT OF CLAUSE (E) OF SECTION 2 (22) IS TO BROADEN THE AMBIT OF THE EXPRESSION 'DIVIDEND' BY INCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MADE BY WAY OF A LOAN OR ADVA NCE OR PAYMENTS MADE ON BEHALF OF OR FOR THE INDIVIDUAL BE NEFIT OF A SHAREHOLDER. THE DEFINITION DOES NOT ALTER THE LEGA L POSITION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHAREH OLDER. CONSEQUENTLY IN THE PRESENT CASE THE PAYMENT, EVEN ASSUMING THAT IT WAS A DIVIDEND, WOULD HAVE TO BE TAXED NOT IN THE HANDS O F THE ASSESSEE BUT IN THE HANDS OF THE SHAREHOLDER. THE TRIBUNAL WAS, IN THE CIRCUMSTANCES, JUSTIFIED IN COMING TO THE CONCLUSIO N THAT, IN ANY EVENT, THE PAYMENT COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE. WE MAY IN CONCLUDING NOTE THAT THE BASIS ON WHICH THE ASSE SSEE IS SOUGHT TO BE TAXED IN THE PRESENT CASE IN RESPECT OF THE AMOUNT OF RS. 32,00,000/ IS THAT THERE WAS A DIVIDEND UNDER SECTION 2(22)(E) AN D NO OTHER BASIS HAS BEEN SUGGESTED IN THE ORDER OF THE ASSESSING OF FICER. WE ARE OF THE OPINION THAT THE REVENUE CANNOT URGE BEFORE US THAT THE CONCLUSION RENDERED BY THE DIVISION BENCH IN THE CA SE OF UNIVERSAL MEDICARE ON THE SECOND ASPECT WHICH HAD WEIGHED WIT H THE TRIBUNAL IN THAT CASE, IS MERELY AN OBSERVATION OR IN THE NATUR E OF OBITER DICTUM AND THAT CANNOT BE SAID TO BE THE RATIO OF THE JUDG MENT IS THE FIRST CONTENTION BEFORE US. WE ARE UNABLE TO ACCEPT THIS CONTENTION FOR MORE THAN ONE REASON. THE UNIVERSAL MEDICARE'S CASE ALSO WAS A REVENUE'S APPEAL. IN UNIVERSAL MEDICARE, THE COURT WAS DEALIN G WITH THREE QUESTIONS TERMED AS SUBSTANTIAL QUESTIONS OF LAW ON BEHALF OF THE REVENUE. THE REVENUE SPECIFICALLY URGED THAT THE TR IBUNAL'S FINDINGS ON THE FIRST AS WELL AS THE SECOND ASPECT ARE ERRONEOU S AND RAISED SUBSTANTIAL QUESTIONS OF LAW. IT WAS CONTENDED THAT THE TRIBUNAL COULD NOT HAVE ARRIVED AT A FACTUAL CONCLUSION THAT SECTI ON 2 (22) (E) COULD NOT BE ATTRACTED. IF A LOAN WAS TAKEN BY A SHAREHOL DER FROM ANY CLOSELY HELD COMPANY AND FINDINGS OF FACT ARE THAT THE AMOU NT WAS A PART OF THE FRAUD COMMITTED ON THE ASSESSEE AND THE TRANSAC TION WAS NOT REFLECTED IN ITS BOOKS OF ACCOUNTS WOULD NOT MEAN T HAT SECTION 2(22)(E) IS NOT APPLICABLE OR ATTRACTED. THE TRIBUNAL HELD T HAT IT DOES NOT APPLY IN THE LIGHT OF SUCH FACTUAL POSITION. HOWEVER, IT WAS ALSO URGED THAT THE TRIBUNAL'S SECOND CONCLUSION THAT EVEN IF THE FACTU AL ASPECT DENOTES PAYMENT WITHIN THE MEANING OF SECTION 22(2) (E) OF THE I. T. ACT, THAT WOULD HAVE TO BE TAXED IN THE HANDS OF THE SHAREHOL DER WHO OBTAINED THE BENEFIT AND NOT IN THE HANDS OF THE ASSESSEE, R AISES SUBSTANTIAL QUESTIONS OF LAW. ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 34 24. IT IS IN THAT REGARD THAT THE ABOVE REPRODUCED OBSERVATIONS OF THE HON'BLE DIVISION BENCH HAVE BEEN MADE. THE DIVISION BENCH HELD THAT EVEN ON THE SECOND ASPECT, THE CONSTRUCTION WHICH H AS BEEN PLACED ON THE PROVISION (SECTION 2(22)(E)) BY THE TRIBUNAL IS CORRECT. ALL PAYMENTS BY WAY OF DIVIDEND HAVE TO BE TAXED IN THE HANDS OF THE RECIPIENT OF THE DIVIDEND NAMELY THE SHAREHOLDER. T HE SECTION PROVIDES INCLUSIVE DEFINITION OF TERM DIVIDEND AND RATHER EX PLAINING THE NATURE OF PAYMENT WHICH CAN BE CLASSIFIED AS SUCH, THEREFORE, THE DIVISION BENCH CONCLUDED THAT THIS DEFINITION DOES NOT ALTER THE L EGAL POSITION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHAREH OLDER. IN THE FACTS OF THE CASE NOTED BY THE DIVISION BENCH ASSUMING TH E PAYMENT WAS DIVIDEND, IT WOULD HAVE TO BE TAXED NOT IN THE HAND S OF THE ASSEESSEE NAMELY UNIVERSAL BUT IN THE HANDS OF THE SHAREHOLDE R. 25. ONCE THE CORRECTNESS OF THIS CONCLUSION IS PUT IN ISSUE BEFORE US AND IT IS STRENUOUSLY URGED THAT IT REQUIRES RECONS IDERATION, THEN, WE CANNOT ACCEPT THE FIRST CONTENTION OF THE REVENUE T HAT THE OBSERVATIONS IN THE DIVISION BENCH JUDGMENT ON THE SECOND ASPECT ARE MERE OBITER DICTUM AND NOT A RATIO AND THUS BINDING ON US. THEY ARE A BINDING PRECEDENT AS THE DIVISION BENCH WAS DIRECTLY CALLED UPON TO ANSWER THE QUESTION BASED ON THE SECOND ASPECT OR THE CONCLUSI ON ON THE SECOND POINT/GROUND URGED BEFORE THE TRIBUNAL. 26. IT IS THEN URGED THAT THE DIVISION BENCH JUDGME NT IN UNIVERSAL MEDICARE DOES NOT TAKE INTO CONSIDERATION THE AMEND MENTS THAT HAVE BEEN MADE TO THE STATUTE FROM TIME TO TIME. IT IS U RGED THAT THE AMENDMENT SPECIFICALLY REFERS TO A PERSON WHO IS A BENEFICIAL OWNER OF THE SHARES. IT IS SUBMITTED THAT THERE ARE SEVERAL WORDS WHICH HAVE BEEN SUBSTITUTED BY THE AMENDMENT. THE WORDS BEIN G A PERSON WHO IS A BENEFICIAL OWNER OF SHARE, THEREFORE, CANNOT BE GIVEN THE SAME MEANING AS IS ASSIGNED TO IT IN THE JUDGMENT DELIVE RED BY THE HON'BLE SUPREME COURT IN THE CASE OF RAMESHWARLAL SAMWARMAL VS. CIT (ASSAM) REPORTED IN (1979) 122 ITR PAGE 1 . IN OTHER WORDS, ANY INTERPRETATION OF THE PROVISION PRIOR TO ITS AMENDM ENT CANNOT SERVE AS A GUIDE EVEN IF THE SAME FALL FOR INTERPRETATION AG AIN. THE COURT WILL HAVE TO BEAR IN MIND THAT THE LEGISLATURE STEPPED I N TO AMEND THE SUB- CLAUSE WITH SOME DEFINITE INTENT AND PURPOSE. THE P URPOSE WAS NOT TO ALLOW CIRCUMVENTION OR BYE PASSING A STATUTE LIKE T HE I. T. ACT 1961. THEREFORE, ANY REFERENCE TO THE POSITION OF THE SHA REHOLDERS/MEMBERS OF A COMPANY AS IS TO BE FOUND IN THE INDIAN COMPAN Y ACT, 1956 IS WHOLLY UNWARRANTED AND UNCALLED FOR. THE WORDS SHA REHOLDER BEING A PERSON WHO IS THE BENEFICIAL OWNER OF THE ASSESSEE , THEREFORE, MUST RECEIVE AN INTERPRETATION IN CONSONANCE WITH THE LE GISLATIVE INTENT. THAT BEING NOT TO RESTRICT IT TO A SHAREHOLDER REGISTERE D AS SUCH, THAT WE WILL HAVE TO TAKE A SECOND LOOK AT THE VIEW TAKEN BY THI S COURT IN UNIVERSAL (SUPRA). THIS ARGUMENT IS OPPOSED BY THE COUNSEL OF THE ASSESSEE BY POINTING OUT NOT ONLY THE JUDGMENT IN THE UNIVERSAL MEDICARE TAKES CARE OF ALL THESE ASPECTS BUT INTERPRETATION PLACED ON THE PROVISION IN THAT JUDGMENT HAS FOUND FAVOUR WITH SEVERAL HIGH CO URTS AND THE LEADING JUDGMENT OF THE DELHI HIGH COURT WHICH FOLL OWS THE VIEW TAKEN IN UNIVERSAL MEDICARE IS RELIED UPON. 27. WE HAVE PERUSED THE PROVISION CAREFULLY AND EQU ALLY THE JUDGMENT IN THE CASE OF UNIVERSAL MEDICARE AND THE VIEW FOLL OWING THE SAME RENDERED BY SEVERAL HIGH COURTS. WE ARE OF THE OPIN ION THAT THERE IS NO MERIT IN THE CONTENTIONS OF THE REVENUE THAT UNIVER SAL MEDICARE WAS ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 35 EITHER ERRONEOUSLY DECIDED OR THAT THE VIEW TAKEN I N UNIVERSAL MEDICARE REQUIRES RECONSIDERATION. IN THAT REGARD, WE MUST N OT BRUSH ASIDE THE BINDING PRECEDENT OR THE JUDGMENT OF A COORDINATE B ENCH SIMPLY BECAUSE SOME OF THE ARGUMENTS CANVASSED BEFORE US W ERE EITHER NOT CANVASSED OR IF CANVASSED WERE NOT CONSIDERED. THE BINDING PRECEDENT CAN BE IGNORED ONLY IF IT IS PER-INCURIAM. SUCH IS NOT THE STAND BEFORE US. ALL THAT IS URGED IS SEVERAL FACETS AND WHICH E MERGE FROM A READING OF SECTION NAMELY SECTION 2(22) TOGETHER WITH ITS S UB-CLAUSES HAVE NOT BEEN NOTICED BY THE DIVISION BENCH WHILE DECIDING U NIVERSAL'S CASE. 28. WE ARE UNABLE TO AGREE WITH THE REVENUE IN THIS BEHALF. WHAT WE HAVE NOTED IS THAT THE LEGISLATURE HAS INCORPORATED AND INSERTED THE DEFINITION OF THE TERM DIVIDEND. IT IS MADE INCLU SIVE OF DISTRIBUTION OF PROFITS, ANY DISTRIBUTION TO THE SHAREHOLDERS BY A COMPANY OF DEBENTURES, DEBENTURE-STOCK, OR DEPOSIT CERTIFICATE IN ANY FORM, OR DISTRIBUTION MADE TO THE SHAREHOLDERS UPON LIQUIDAT ION OF A COMPANY. EQUALLY, AMOUNT DISTRIBUTED ON REDUCTION OF CAPITAL IS TERMED AS DIVIDEND. WHAT IS ALSO THEN INCLUDED IS A PAYMENT M ADE BY A COMPANY TO ITS SHAREHOLDER. THAT IS BY WAY OF ADVANCE OR LO AN TO HIM. THIS IS INCLUDED SO AS TO VISIT THE SHAREHOLDER WITH A LIAB ILITY TO PAY TAX. IT IS EVENTUALLY, THE SHAREHOLDER WHO WILL PAY TAX ON THE SAME. THE SHAREHOLDER CANNOT ESCAPE THAT LIABILITY MERELY BEC AUSE THE LOAN OR ADVANCE HAS BEEN MADE OVER TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS SUBSTA NTIAL INTEREST. EARLIER, LEGISLATURE NOTED THAT THE SHAREHOLDER WOU LD RECEIVE THE SUM FROM A COMPANY AND WHICH IS NOT STRICTLY FALLING WI THIN THE CONCEPT OF DIVIDEND. FIRSTLY, BECAUSE THAT WAS RECEIVED BY W AY OF ADVANCE OR LOAN, SECONDLY, AN ATTEMPT WAS MADE TO SHOW THAT TH E ADVANCE OR LOAN IS NOT TO THE SHAREHOLDER WHO IS REGISTERED AS SUCH BUT TO A CONCERN IN WHICH HE IS A MEMBER OR A PARTNER AND IN WHICH HE M AY HAVE A SUBSTANTIAL INTEREST BUT THAT CANNOT BE TERMED AS A DVANCE OR LOAN TO THE SHAREHOLDER. WITH A VIEW TO TAKE CARE OF SUCH S TAND OF THE SHAREHOLDERS AND NOT ALLOW THEM TO ESCAPE THE LIABI LITY TO PAY TAX THAT THE DEFINITION CAME TO BE BROADLY WORDED BY INDICAT ING THEREIN THE REFERENCE TO ANY CONCERN. EQUALLY, ANY PAYMENT MADE BY SUCH COMPANY ON BEHALF OF THE SHAREHOLDER OR FOR INDIVID UAL BENEFIT OF ANY SHAREHOLDER TO THE EXTENT TO WHICH THE COMPANY IN O THER CASE POSSESSES ACCUMULATED PROFITS HAS ALSO BEEN BROUGHT IN. THUS, IN ADDITION TO DISTRIBUTION OF ACCUMULATED PROFIT, DEB ENTURE STOCK OR DEPOSIT CERTIFICATE ETC, A PAYMENT OF THE AFORESAID NATURE HAS BEEN TERMED AS DIVIDEND AND INCLUDED IN THE DEFINITION . AT THE SAME TIME, THE LEGISLATURE HAS TAKEN CARE NOT TO INCLUDE ANY A DVANCE OR LOAN MADE TO A SHAREHOLDER OR THE SAID CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS SUBSTANTIAL INTEREST IN THE ORDINARY COURSE OF THE BUSINESS OF THE COMPANY AND WHERE LENDING OF MONEY IS SUBSTANTIAL PART OF THE BUSINESS OF THE CO MPANY. EQUALLY, ANY DIVIDEND PAID BY THE COMPANY WHICH IS SET OFF BY TH E COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUBCLAUSE (E), TO TH E EXTENT TO WHICH IT IS SO SET OFF, IS ALSO EXCLUDED ADVISEDLY. 29. WE ARE ALSO OF THE OPINION THAT ANY REFERENCE T O EXPLANATION 3 AND PARTICULARLY THE DEFINITION OF TERM CONCERN WILL NOT ADVANCE OR CARRY THE REVENUE'S CASE ANY FURTHER. EVENTUALLY, IT IS T HE SHAREHOLDER WHO IS REGISTERED AS SUCH WHO IS ENTITLED TO RECEIVE THE D IVIDEND. MERELY BECAUSE THE PAYMENT IS MADE TO HIM BY WAY OF ADVANC E OR LOAN WAS ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 36 NOT TERMED AS SUCH EARLIER THAT THE LEGISLATURE HAS INSERTED SUCH A PAYMENT IN THE DEFINITION OF THE TERM DIVIDEND AN D MADE THE DEFINITION WIDE AND BROAD SO ALSO INCLUSIVE. 30. WE DO NOT SEE HOW WITH THIS LEGAL POSITION AND THE STATUS OF THE SHAREHOLDER RECOGNIZED IN LAW CAN BE IGNORED WHILE INTERPRETING SECTION 2 (22) (E) OF THE I. T. ACT. PRECISELY, THIS IS WHA T HAS BEEN DONE BY THIS COURT IN THE JUDGMENT RENDERED IN THE CASE OF UNIVE RSAL MEDICARE. IT IS NOT NECESSARY FOR US TO MAKE A DETAILED REFERENCE T O THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMI K COLOUR PVT LTD. SUFFICE IT TO HOLD THAT THE VIEW TAKEN BY THIS COUR T IN THE CASE OF M/S. UNIVERSAL MEDICARE DOES NOT REQUIRE ANY RECONSIDERA TION. WE ARE NOT IN AGREEMENT WITH SHRI GUPTA THAT THE DEFINITION DOES NOT CONTEMPLATE OR DOES NOT STIPULATE ANY REQUIREMENT OF ASSESSEE BEIN G A SHAREHOLDER OF THE ASSESSEE LIKE THE ONE IN THE PRESENT CASE. THE VIEW TAKEN IN THE PRESENT CASE THAT THE RECIPIENT/ASSESSEE WAS NOT A SHAREHOLDER, THUS IS IN CONSONANCE WITH THE LEGAL POSITION NOTED BY US H EREINABOVE. 31. WE ARE OF THE FURTHER VIEW THAT THIS COURT MERE LY RESTATED THIS PRINCIPLE AND WHICH REMAINS UNALTERED THROUGHOUT FR OM THE CASE OF RAMESHWARLAL SANWARMAL V/S COMMISSIONER OF INCOME T AX REPORTED IN 1980 (122) I. T. R. PAGE 1 (SC) . THE HON'BLE SUPREME COURT HELD THAT IT IS ONLY WHERE A LOAN IS ADVANCED BY THE COMPANY TO THE REGISTERED SHAREHOLDER AND OTHER CONDITIONS SET OUT IN SECTION 2 (6A) (E) OF THE THEN PREVAILING I.T. ACT 1922 ARE S ATISFIED THAT THE AMOUNT OF THE LOAN WOULD BE LIABLE TO BE REGARDED A S DEEMED DIVIDEND WITHIN THE MEANING OF THAT PROVISION. THE LOAN GRAN TED TO THE BENEFICIAL OWNER OF THE SHARE, WHO IS NOT REGISTERED SHAREHOLD ER WOULD NOT FALL WITHIN THE MEANING OF SECTION 2 (6A) (E) OF THE I. T. ACT. WHAT THE SECTION IS DESIGNED TO STRIKE AT IS ADVANCE OR LOAN TO A SHAREHOLDER AND THE WORD SHAREHOLDER CAN MEAN ONLY THE REGISTERED S HAREHOLDER. THE HON'BLE SUPREME COURT FOLLOWING THE JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME TAX V/S C. P. SARATHY REPORTE D IN 1972 (83) ITR 170(SC) HELD THAT THE BENEFICIAL OWNER OF SHARES WHOSE NAME DOES NOT APPEAR IN THE REGISTER OF THE SHAREHO LDERS OF THE COMPANY CANNOT BE SAID TO BE A SHAREHOLDER THOUGH H E MAY BE BENEFICIALLY ENTITLED TO THE SHARES BUT HE IS NOT A SHAREHOLDER. MR. GUPTA, APPEARING BEFORE US FOR THE REVENUE WOULD SU BMIT THAT MUCH WATER HAS FLOWN AFTER THE DECISION IN THE CASE OF R AMESHWARLAL AND C. P. SARATHY(SUPRA) BECAUSE THE PROVISION HAS BEEN AM ENDED SINCE THEN. THE FICTION THEREFORE MUST BE CARRIED TO ITS LOGICA L END AND ITS PURPOSE SHOULD NOT BE DEFEATED BY NARROW CONSTRUCTION AS WA S PLACED ON THE PROVISION PRIOR TO ITS AMENDMENT. IN OTHER WORDS, T HE AMENDMENT WAS BROUGHT IN ONLY BECAUSE OF SUCH VIEW HAVING TAKEN E ARLIER, IS HIS SUBMISSION. 32. WE ARE UNABLE TO ACCEPT IT BECAUSE OF THE CONSI STENT VIEW TAKEN AND THAT EVEN IF THE WORDS AS NOTED BY US HEREINABO VE HAVE BEEN INSERTED IN THE DEFINITION SO AS TO MAKE REFERENCE TO THE BENEFICIAL OWNER OF THE SHARES, STILL THE DEFINITION ESSENTIAL LY COVERS THE PAYMENT TO THE SHAREHOLDER AND THE POSITION OF THE SHAREHOL DER AS NOTED IN THE SUPREME COURT'S DECISION, CANNOT UNDERGO ANY CHANGE . THAT LEGAL POSITION AND STATUS OF THE SHAREHOLDER BEING THE SA ME, WE DO NOT SEE HOW THE VIEW PREVAILING FROM COMMISSIONER OF INCOME TAX V/S C. P. SARATHY(SUPRA) IS IN ANY WAY SAID TO BE CHANGED. TH AT IS HOW ALL THE JUDGMENTS SUBSEQUENT THERETO HAVE BEEN RENDERED. TH E RELIANCE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 37 PLACED BY MS. VISSANJEE ON THE JUDGMENT OF THE DIVI SION BENCH OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX, PATIALA V/S SHAHZADA NAND AND SONS AND ORS, REPORTED IN (1966) 177 ITR 393, IS THEREFORE, APPOSITE. EQUALLY, HER RELIANCE ON TH E JUDGMENT OF THE DIVISION BENCH OF DELHI HIGH COURT IS WELL PLAC ED. WE HAVE NOTED THAT THE DELHI HIGH COURT AND EVEN AFTER EXHAUSTIVE AMENDMENT TO SECTION 2(22)(E) HELD THAT THE PAYMENT MADE TO ANY CONCERN WOULD NOT COME WITHIN THE PURVIEW OF THIS SUBCLAUSE SO LO NG AS IT CONTEMPLATED SHAREHOLDERS. THE DIVISION BENCH OF DE LHI HIGH COURT HAS MADE DETAILED REFERENCE TO ALL THE DECISIONS IN THE FIELD. IT HAS ALSO REFERRED TO THE ORDER PASSED BY THE SPECIAL BENCH O F THE TRIBUNAL IN ARRIVING AT THE SAME CONCLUSION. IN THE COMMISSIONER OF INCOME TAX V/S ANKITECH PVT LTD REPORTED IN 2012 (340) ITR P AGE 14, THE HON'BLE DELHI HIGH COURT REFERRED TO BOTH SARAT HY MUDALIAR AND RAMESHWARLAL SANWARMAL (SUPRA), EXTENSIVELY. IT ALS O REFERRED TO THE ARGUMENTS OF THE REVENUE WHICH ARE SOMEWHAT SIMILAR TO THOSE RAISED BEFORE US. IT IS IN DEALING WITH THESE ARGUMENTS TH AT THE DIVISION BENCH CONCLUDED THAT ALL THE THREE LIMBS OF THE SECTION A NALYZED IN UNIVERSAL MEDICARE DENOTE THE INTENTION THAT CLOSELY HELD COM PANIES NAMELY COMPANIES IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INT ERESTED WHICH ARE CONTROLLED BY A GROUP OF MEMBERS, EVEN THOUGH HAVIN G ACCUMULATED PROFITS WOULD NOT DISTRIBUTE SUCH PROFIT AS DIVIDEN D BECAUSE IF SO DISTRIBUTED THE DIVIDEND INCOME WOULD BECOME TAXABL E IN THE HANDS OF THE SHAREHOLDERS. INSTEAD OF DISTRIBUTING ACCUMULAT ED PROFITS AS DIVIDEND, COMPANIES DISTRIBUTE THEM AS LOAN OR ADVA NCES TO SHAREHOLDERS OR TO CONCERN IN WHICH SUCH SHAREHOLDE RS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BEHALF OF OR FOR TH E INDIVIDUAL BENEFIT OF SUCH SHAREHOLDER. IN SUCH AN EVENT, BY THE DEEMI NG PROVISION, SUCH PAYMENT BY THE COMPANY IS TREATED AS DIVIDEND. THE PURPOSE IS TO TAX DIVIDEND IN THE HANDS OF THE SHAREHOLDER. 33. WE DO NOT SEE HOW SUCH A VIEW TAKEN BY THE DELH I HIGH COURT AND WHICH REAFFIRMS THAT OF THIS COURT IN UNIVERSAL MED ICARE CAN BE SAID TO BE CONTRARY TO THE LEGAL FICTION OR THE INTENT AND PURPOSE OF THE LEGISLATURE IN ENACTING IT. THE VIEW TAKEN BY THE D ELHI HIGH COURT IN THE COMMISSIONER OF INCOME TAX V/S ANKITECH PVT LTD (SU PRA) HAS THUS OUR RESPECTFUL CONCURRENCE. 34. WE DO NOT MAKE REFERENCE TO THE OTHER JUDGMENTS BECAUSE THIS LINE OF REASONING HAS BEEN FOLLOWED IN THE SAME. IT IS N OT NECESSARY TO MULTIPLY OUR JUDGMENT BY MAKING REFERENCE TO EACH O F THE ORDERS FOLLOWING THE JUDGMENT IN ANKITECH PVT LTD AND REND ERED BY DELHI HIGH COURT OR BY THE ALLAHABAD HIGH COURT AND GUJRAT HIG H COURT. 35. WE ARE OF THE VIEW THAT SO LONG AS THE TRIBUNAL IN THE MATTERS AND THE APPEALS WHICH ARE BROUGHT BEFORE US HOLDS THAT THE ASSESSEE COMPANY BEFORE IT WAS NOT A SHAREHOLDER IN ANY OF T HE ENTITIES WHICH HAVE ADVANCED AND LENT SUMS, THEN, THE ADDITION IS REQUIRED TO BE DELETED AND FOLLOWING THE JUDGMENT IN UNIVERSAL MED ICARE(SUPRA) OF THIS COURT. SUCH A VIEW TAKEN IN THE PRESENT CASE B Y THE TRIBUNAL, THEREFORE, CANNOT BE TERMED AS PERVERSE OR VITIATED BY ANY ERROR OF LAW APPARENT ON THE FACE OF RECORD. THE APPEAL, THEREFO RE, DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 36. OUR JUDGMENT PASSED TODAY, SHALL COVER ALL SUCH CASES IN WHICH RECIPIENT IS NOT SHAREHOLDER OF THE LENDER COMPANY. THE APPEALS RAISING ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 38 SUCH GROUNDS, THEREFORE, WOULD FOLLOW THIS ORDER AN D EVEN THEY WOULD STAND DISMISSED AS THEY DO NOT RAISE ANY SUBSTANTIA L QUESTION OF LAW. 37. EQUALLY, IF THE PAYMENT CANNOT BE TERMED AS LOA N OR ADVANCE TO THE SHAREHOLDER, THEN, EVEN SUCH A VIEW CANNOT BE TERME D IN THE GIVEN FACTS AND CIRCUMSTANCES AND WITHOUT ANYTHING MORE A S PERVERSE OR VITIATED BY ERROR OF LAW APPARENT ON THE FACE OF TH E RECORD. EVEN THE APPEALS IMPUGNING SUCH ORDERS OF THE TRIBUNAL, THER EFORE, WILL HAVE TO BE DISMISSED AND THEY ACCORDINGLY STAND DISMISSED. 3.6. IN OTHER CASES, IT WAS HELD THAT THE DEEM DIV IDEND CANNOT BE TAXED IN THE HANDS OF PERSON WHO ARE NOT SHAREHOLDERS OF THE COMPANY. THE HON'BLE SUPREME CO URT IN CIT VS MUKUNDRAY K. SHAH (2007) 290 ITR 433 (SC) HE LD AS UNDER:- 3. AGGRIEVED BY THE ASSESSMENT ORDER DT. 29TH NOV., 20 02, THE ASSESSEE WENT IN APPEAL TO COMMISSIONER OF INCOME-T AX (APPEALS) [FOR SHORT, CIT(A)] UNDER S. 158BC(C) R/W S. 143( 3) OF THE ACT. BY THE ORDER DT. 21ST FEB., 2003, IT WAS HELD BY CIT(A ) THAT THE ASSESSEE DID NOT POSSESS ANY SUBSTANTIAL INTEREST IN MKTPL O R IN SCPL DURING FINANCIAL YEAR 1999-2000; THAT MKF AND MKI HAD NO S UBSTANTIAL INTEREST IN MKSEPL, SCPL AND MKTPL DURING FINANCIAL YEAR 1999- 2000; THAT SCPL DID NOT MAKE ANY LOAN TO MKI DURING THE FINANCIAL YEAR 1999-2000; THAT SCPL HAD BORROWED MONEY FROM M KI AND ALL PAYMENTS MADE BY SCPL DURING FINANCIAL YEAR 1999-20 00 WERE REPAYMENTS OF LOANS ADVANCED BY MKI; THAT THE ASSES SEE HAD 16 PER CENT SHARE IN MKF; THAT MKSEPL HAD A CURRENT ACCOUN T IN THE BOOKS OF MKF AND THAT IN MOST CASES MKF HAD ADVANCED LOANS T O MKSEPL. ACCORDING TO CIT(A), MKSEPL HAVE REPAID THOSE LOANS TO MKF IN WHICH THE ASSESSEE HAD SUBSTANTIAL INTEREST. ACCORDING TO CIT(A), THE NATURE OF TRANSACTIONS BETWEEN MKF AND MKSEPL CONSISTED OF A RUNNING ACCOUNT; IT CONSISTED OF GIVING OF LOANS AND REPAYM ENTS THEREOF. ACCORDING TO CIT(A), NONE OF THE TWO FIRMS HAD ANY SUBSTANTIAL INTEREST IN MKSEPL, SCPL AND MKTPL. ACCORDING TO CI T(A), ALL WITHDRAWALS MADE BY THE ASSESSEE FROM MKF AND MKI I NCLUDING THE IMPUGNED SUM WERE DEBITED TO THE ASSESSEES CAPITAL ACCOUNT IN THE BOOKS OF MKF AND MKI. ACCORDING TO CIT(A), MKSEPL A ND SCPL HAD A REGULAR ACCOUNT IN MKF AND MKI EVEN BEFORE THE PURC HASE OF THE SAID BONDS AND THAT THE SAID TWO FIRMS HAD ADVANCED LOAN S TO MKSEPL AND SCPL EVEN IN THE EARLIER YEARS AS WELL AS IN THE FI NANCIAL YEAR 1999- 2000 AND, THEREFORE, THERE WAS NO MOTIVE IN THE DEB TOR COMPANIES REPAYING THEIR DEBTS TO MKF AND MKI. ACCORDING TO C IT(A), MERELY BECAUSE REPAYMENTS WERE MADE BY MKSEPL AND SCPL THR OUGH MKF AND MKI IN JANUARY/FEBRUARY, 2000 AND MERELY BECAUS E THE SAID AMOUNTS WERE PARTLY UTILIZED BY THE SAID TWO FIRMS IN MAKING PAYMENTS TO THE ASSESSEE WHO BOUGHT 9% RBI RELIEF B ONDS ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 39 THEREFROM, DID NOT NECESSARILY MEAN THAT THE ASSESS EE HAD ROUTED THE FUNDS OF MKSEPL THROUGH MKF AND MKI FOR HIS INDIVID UAL BENEFIT. ACCORDING TO CIT(A), MKF AND MKI WERE TWO SEPARATE ENTITIES; THAT THERE WAS NO MATERIAL TO SHOW THAT MKF AND MKI WERE USED AS CONDUITS FOR ROUTING THE MONEY FROM MKSEPL TO THE A SSESSEE. ACCORDING TO CIT(A), WHILE THE TOTAL INVESTMENT MAD E BY THE ASSESSEE IN PURCHASE OF BONDS DURING FINANCIAL YEAR 1999-200 0 WAS RS. 26.35 CRORES, THE DEPARTMENT HAS SOUGHT TO ASSESS ONLY RS . 5.99 CRORES AS DEEMED DIVIDEND AND, THEREFORE, ACCORDING TO CIT, T HE ALLEGATION MADE BY THE AO WAS BASELESS. ACCORDING TO CIT(A) TH ERE WAS NO MATERIAL TO SHOW THAT MKSEPL AND SCPL HAD MADE PAYM ENTS TO THE SAID TWO FIRMS FOR THE BENEFIT OF THE ASSESSEE ENAB LING HIM TO PURCHASE THE SAID BONDS IN FINANCIAL YEAR 1999-2000 . ACCORDING TO CIT(A), MKSEPL AND SCPL WERE THE DEBTORS OF MKF AND MKI IN THE REGULAR COURSE OF BUSINESS AND, THEREFORE, PAYMENTS MADE BY MKSEPL TO MKF AND MKI WERE REPAYMENTS OF LOANS AND THAT THE SAID PAYMENTS WERE NOT FOR PURCHASE OF BONDS BY THE ASSE SSEE. ACCORDINGLY, THE APPEAL WAS ALLOWED BY CIT(A). 4. AGGRIEVED BY THE DECISION DT. 21ST FEB., 2003, THE MATTER WAS CARRIED IN APPEAL BY THE DEPARTMENT TO THE TRIBUNAL . BY THE JUDGMENT DT. 28TH JAN., 2005, THE TRIBUNAL HELD THAT IN THIS CASE S. 2(22)(E) WAS ATTRACTED SINCE DISBURSEMENT WAS MADE BY MKSEPL (COMPANY); THAT SCPL HAD NO INDEPENDENT EXISTENCE IN LAW IN JA NUARY/FEBRUARY, 2000 WHEN PAYMENTS WERE MADE BY MKI AND MKF TO THE ASSESSEE WHO BOUGHT THE SAID BONDS; THAT SCPL DISBURSED RS. 2.04 CRORES AND RS. 75 LAKHS IN JANUARY, 2000; THAT SCPL STOOD MERG ED IN MKSEPL VIDE ORDER OF THE HIGH COURT DT. 5TH JULY, 2001 WIT H RETROSPECTIVE EFFECT, I.E. 18TH MAY, 1998; THAT IN JANUARY, 2000 SCPL HAD NO LEGAL EXISTENCE SINCE THE MERGER HAD TAKEN PLACE W.E.F. 1 8TH MAY, 1998; THAT MERGER HAD TAKEN PLACE UNDER A VOLUNTARY SCHEM E IN WHICH EVERY SHAREHOLDER OF THE TWO COMPANIES AGREED; THAT , THEREFORE, THERE WAS NO MERIT IN THE CONTENTION OF THE ASSESSE E THAT HIS SHAREHOLDING IN SCPL AND THE ACCUMULATED PROFITS OF SCPL WERE NOT LIABLE TO BE TAKEN INTO ACCOUNT; ACCORDING TO THE T RIBUNAL, IN THE AFORESTATED CIRCUMSTANCES, ALL PAYMENTS SHOULD BE T AKEN TO HAVE ORIGINATED FROM MKSEPL; THE TRIBUNAL FURTHER FOUND THAT THE ACCUMULATED RESERVES OF MKSEPL WAS RS. 55 CRORES, N EARLY TEN TIMES IN EXCESS OF RS. 5.99 CRORES TAXED AS DEEMED DIVIDE ND. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD MORE THAN 10 PER CENT OF THE TOTAL VOTING POWER IN MKSEPL. IN THE CIRCUMSTANCES, THE T RIBUNAL TOOK THE VIEW THAT MKSEPL MADE PAYMENT TO THE SAID TWO FIRMS FOR THE BENEFIT OF THE ASSESSEE WHO THEREAFTER BOUGHT THE SAID BOND S. ACCORDING TO THE TRIBUNAL, MKSEPL WAS THE ONLY COMPANY WHICH MAD E THE DISBURSEMENT THROUGH MKF AND MKI. ACCORDING TO THE TRIBUNAL, IT IS TRUE THAT THE ASSESSEE BOUGHT THE SAID BONDS FOR RS . 26.35 CRORES BUT THE AO HAD TAXED ONLY A FRACTION OF RS. 5.99 CRORES . HOWEVER, ACCORDING TO THE TRIBUNAL, FOR THE PURPOSES OF APPL ICABILITY OF S. 2(22)(E) OF THE SAID ACT PAYMENT HAS TO ORIGINATE F ROM A COMPANY. AFTER EXCLUDING KNOWN COMPANY SOURCES, ACCORDING TO THE TRIBUNAL, THE AO WAS RIGHT IN RESTRICTING THE DEEMED DIVIDEND AMOUNT TO RS. 5.99 CRORES SINCE KNOWN COMPANY SOURCES HAD TO BE E LIMINATED. ACCORDING TO THE TRIBUNAL, THE AO WAS RIGHT IN IDEN TIFYING MKSEPL AS THE ORIGINATING COMPANY, THE IDENTITY OF THE ULTIMA TE BENEFICIARY, THE AMOUNT TO BE TAXED, THAT IS, RS. 5.99 CRORES AND TH E SUFFICIENCY OF ACCUMULATED PROFITS OF MKSEPL IN WHICH THE ASSESSEE HAD MORE THAN ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 40 10 PER CENT VOTING POWER. ACCORDINGLY THE TRIBUNAL ALLOWED THE DEPARTMENTS APPEAL. 5. AGGRIEVED BY THE DECISION OF THE TRIBUNAL DT. 28TH JAN., 2005, THE ASSESSEE CARRIED THE MATTER IN APPEAL TO THE HIGH C OURT UNDER S. 260A OF THE SAID ACT. BY THE IMPUGNED JUDGMENT THE HIGH COURT HELD IN FAVOUR OF THE ASSESSEE ON TWO COUNTS. ACCORDING TO THE HIGH COURT, THE ASSESSEE HAD DECLARED THE PRIMARY FACTS IN THE RETURNS. ACCORDING TO THE HIGH COURT, THE PRESENT CASE DID NOT FALL UN DER CHAPTER XIV-B OF THE SAID ACT. ACCORDING TO THE HIGH COURT, THIS WAS NOT THE CASE OF UNDISCLOSED INCOME. ACCORDING TO THE HIGH COURT, TH IS WAS A MATTER OF REGULAR ASSESSMENT. ACCORDING TO THE HIGH COURT, NO NE OF THE AUTHORITIES BELOW HAVE HELD THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS WERE FICTITIOUS. ACCORDING TO THE HIGH COURT, FULL DETAILS WERE DISCLOSED DURING THE BLOCK PERIOD IN THE RETURNS FILED BY THE ASSESSEE. ACCORDING TO THE HIGH COURT, ALL PAYMENTS WERE MADE BY CHEQUE . ACCORDING TO THE HIGH COURT, MONEYS WERE LENT AND ADVANCED BY MK SEPL TO MKF AND MKI IN NORMAL COURSE OF BUSINESS. ACCORDING TO THE HIGH COURT, THE TRIBUNAL HAD ERRED IN HOLDING THAT MKF AND MKI WERE CONDUITS FOR ROUTING THE MONEY FROM MKSEPL THROUGH THE TWO FIRMS TO THE ASSESSEE; THAT THERE WAS NO EVIDENCE IN THAT REGARD ; THAT THE TWO FIRMS DID NOT HAVE SUBSTANTIAL INTEREST IN MKSEPL; THAT THERE WAS NO EVIDENCE TO SHOW THAT PAYMENTS WERE MADE BY MKSEPL FOR THE INDIVIDUAL BENEFIT OF THE ASSESSEE AND TO ENABLE HI M TO PURCHASE 9% RBI RELIEF BONDS; THAT CIT(A) WAS RIGHT IN HOLDING THAT WHEN RS. 26.35 CRORES WAS INVESTED IN THE ABOVE FINANCIAL YE AR THEN AO HAD NO REASON TO TREAT RS. 5.99 CRORES AS DEEMED DIVIDEND UNDER S. 2(22)(E) AND FOR THE ABOVE REASONS THE HIGH COURT SET ASIDE THE JUDGMENT OF THE TRIBUNAL DT. 28TH JAN., 2005. HENCE THIS CIVIL APPEAL. 6. ACCORDING TO MR. MOHAN PARASARAN, LEARNED ADDL. SOL ICITOR GENERAL APPEARING FOR THE APPELLANT (DEPARTMENT), THE HIGH COURT SHOULD NOT HAVE INTERFERED WITH THE FINDINGS OF FACTS RECORDED BY THE TRIBUNAL; THAT THERE WAS NO SUBSTANTIAL QUESTION OF LAW; THAT NO PERVERSITY IN THE FINDINGS RECORDED BY THE TRIBUNAL SO AS TO WARR ANT INTERFERENCE UNDER S. 260A OF THE ACT; THAT THE DEPARTMENT HAD S EARCHED THE PREMISES, IT HAD SEIZED THE DIARY 'ML-20' WHICH CON TAINED ENTRIES SUBSEQUENTLY CORROBORATED BY CASH FLOW CHART WHICH INDICATED THAT MONEY HAD ORIGINATED FROM MKSEPL TO THE TWO FIRMS T HROUGH WHICH IT HAD GONE TO THE ASSESSEE AND, THEREFORE, THE DEPART MENT WAS RIGHT IN ASSESSING RS. 5.99 CRORES AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE UNDER S. 2(22)(E). LEARNED COUNSEL URGED T HAT THE FIVE ENTRIES DISCOVERED IN THE SEARCH REPRESENTED FIVE TRANSACTIONS/PAYMENTS FOR PURCHASE OF 9% RBI RELIEF BONDS. THESE, ACCORDING TO THE LEARNED COUNSEL, WERE NOT REPAYMEN T OF LOANS, THEY WERE PAYMENTS FOR PURCHASE OF THE SAID BONDS DURING THE FINANCIAL YEAR 1999-2000. 7. ON BEHALF OF THE ASSESSEE (RESPONDENT), MR. N.K. PO DDAR, LEARNED SENIOR COUNSEL, SUBMITTED THAT THE IMPUGNED BLOCK A SSESSMENT WAS WHOLLY WITHOUT JURISDICTION HAVING REGARD TO THE FA CT THAT THE ALLEGED DEEMED DIVIDEND OF RS. 5.99 CRORES RELATE TO TRANSA CTIONS RECORDED AND REFLECTED IN THE REGULAR BOOKS AND TAX RECORDS EVEN BEFORE THE SEARCH; THAT NO INCRIMINATING DOCUMENT OR EVIDENCE WAS FOUND BY THE DEPARTMENT DURING THE SEARCH WHICH FALSIFY SUCH TRA NSACTIONS ENTERED INTO BY THE ASSESSEE IN THE NORMAL COURSE; THAT THE EXPRESSION ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 41 'UNDISCLOSED INCOME' HAS BEEN DEFINED IN S. 158B(B) OF THE SAID ACT AND SINCE BLOCK ASSESSMENT WAS RELATABLE TO SUCH EV IDENCE RECOVERED DURING SEARCH IN THE PRESENT CASE S. 158BB(1) WAS N OT APPLICABLE IN THIS CASE SINCE NO SUCH EVIDENCE WAS RECOVERED DURI NG THE SEARCH. LEARNED COUNSEL SUBMITTED THAT CHAPTER XIV-B WAS PU T ON THE STATUTE BOOK TO ENABLE ASSESSMENT OF UNDISCLOSED INCOME DET ECTED ON EVIDENCE FOUND DURING THE SEARCH. ACCORDING TO THE LEARNED COUNSEL, THE BLOCK ASSESSMENT WAS INTENDED TO BE AN ASSESSME NT IN ADDITION TO THE REGULAR ASSESSMENT. LEARNED COUNSEL SUBMITTE D THAT IN THE PRESENT CASE FOR WANT OF SUCH EVIDENCE, THE DEPARTM ENT WAS NOT ENTITLED TO MAKE ADDITIONS ON ACCOUNT OF DEEMED DIV IDEND TO THE TUNE OF RS. 5.99 CRORES. DURING THE SEARCH, ACCORDING TO THE LEARNED COUNSEL, NOTHING EXCEPT A CASH FLOW CHART GIVING DE TAILS OF INVESTMENTS MADE BY THE ASSESSEE IN PURCHASE OF THE SAID BONDS OF THE VALUE OF RS. 26.35 CRORES WAS FURNISHED. ACCORD ING TO THE LEARNED COUNSEL, THE DIARY 'ML-20' WAS THE LEDGER COPY OF T HE INVESTMENT ACCOUNT IN 9% RBI RELIEF BONDS WHICH COPY WAS A PRI NT-OUT FROM THE REGULAR ACCOUNTS OF THE ASSESSEE; THAT THE INVESTME NT OF RS. 26.35 CRORES, REFLECTED IN ML-20, WAS MADE BY THE ASSESSE E OUT OF HIS DISCLOSED FUNDS AND THROUGH REGULAR BOOKS OF ACCOUN TS, AND THAT THE SEIZED DIARY DID NOT CONTAIN ANY INCRIMINATING INFO RMATION. LEARNED COUNSEL URGED THAT IN THE COURSE OF BLOCK ASSESSMEN T PROCEEDINGS THE AO DIRECTED THE ASSESSEE TO FURNISH DETAILS AS TO T HE SOURCE OF FUNDS OUT OF WHICH RS. 26.35 CRORES WAS MADE AND WHEN IT WAS EXPLAINED TO THE AO THAT THE ASSESSEE HAD MADE SUCH INVESTMENTS IN 9% RBI RELIEF BONDS OUT OF THE MONEYS WITHDRAWN FROM MKF A ND MKI AND THAT BOOKS OF ACCOUNTS MAINTAINED REGULARLY BY THE SAID TWO FIRMS INDICATED SUCH WITHDRAWALS THE AO DIRECTED THE AUTH ORIZED REPRESENTATIVES OF THE ASSESSEE TO PREPARE A STATEM ENT INDICATING THE SOURCE FROM WHICH MONEYS CAME IN THE HANDS OF THE T WO FIRMS AND OUT OF WHICH WITHDRAWALS WERE MADE BY THE ASSESSEE TO MAKE INVESTMENT IN THE 9% RBI RELIEF BONDS, THEREFORE, A CCORDING TO THE LEARNED COUNSEL, NO INCRIMINATING MATERIAL WHATSOEV ER WAS FOUND IN THE COURSE OF THE SEARCH WHICH COULD ENABLE THE AO TO INVOKE S. 2(22)(E) OF THE ACT. ACCORDING TO THE LEARNED COUNS EL, IN THE ABOVE CIRCUMSTANCE, CHAPTER XIV-B DEALING WITH BLOCK ASSE SSMENT WAS WRONGLY INVOKED BY THE AO. ON THE NATURE OF THE TRANSACTIONS, LEARNED COUNSEL URGED THAT DURING THE FINANCIAL YEAR 1999-2000, THE ASSESSEE HAD INVE STED RS. 26.35 CRORES IN THE PURCHASE OF BONDS; THAT THE SAID INVE STMENT WAS MADE OUT OF THE DISCLOSED SOURCES THROUGH CHEQUES AND TH AT THE SAID INVESTMENT WAS MENTIONED IN THE BANK ACCOUNTS AND I N THE TAX RECORDS OF THE ASSESSEE LONG BEFORE THE SEARCH. LEA RNED COUNSEL URGED THAT THE IMMEDIATE SOURCE OF INVESTMENT WAS T HE WITHDRAWAL OF RS. 26.35 CORES FROM THE PARTNERS CAPITAL ACCOUNT WITH MKF AND MKI. IT WAS URGED THAT THE CASH FLOW STATEMENT WAS NOT A N ADMISSION ON THE PART OF THE ASSESSEE AND, THEREFORE, IT WAS NOT OPEN TO THE DEPARTMENT TO INVOKE CHAPTER XIV-B. LEARNED COUNSEL SUBMITTED THAT THE TRIBUNAL HAD ERRED IN HOLDING THAT THE FACT THA T SCPL HAD A RUNNING CURRENT ACCOUNT WITH MKI IN THE USUAL COURS E OF BUSINESS, WAS IRRELEVANT. LEARNED COUNSEL SUBMITTED THAT SCPL HAD BORROWED SUBSTANTIAL AMOUNTS FROM MKI AND IN JANUARY, 2000 S CPL REPAID RS. 2.79 CRORES TO MKI WHICH WERE NOT ON BEHALF OF OR F OR THE BENEFIT OF THE ASSESSEE. IT WAS URGED THAT MKI HAD NEVER BORRO WED MONEY FROM SCPL AT ANY TIME. LEARNED COUNSEL URGED THAT THE TR IBUNAL WAS WRONG ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 42 IN HOLDING THAT THE FACT THAT MKI HAD NEVER BORROWE D MONEY FROM SCPL, WAS IRRELEVANT. LEARNED COUNSEL URGED THAT RS . 2.79 CRORES WERE WITHDRAWN BY THE ASSESSEE FROM HIS FIRM STYLED MKI ON 28TH JAN., 2000 AND SUCH WITHDRAWAL WAS DEBITED BY MKI T O THE CAPITAL ACCOUNT OF THE ASSESSEE. IT WAS URGED THAT MKSEPL H AD BORROWED SUBSTANTIAL AMOUNTS FROM MKF; AND MKSEPL HAD MADE R EPAYMENTS TO MKF DURING THE FINANCIAL YEAR 1999-2000 AGAINST THE EARLIER DEBT OWED BY MKSEPL TO MKF. LEARNED COUNSEL SUBMITTED TH AT THE ASSESSEE HAD A CREDIT BALANCE OF RS. 6.72 CRORES IN HIS CAPITAL ACCOUNT STANDING IN THE BOOKS OF PARTNERSHIP FIRM OF MKF AS ON 1ST APRIL, 1999. LEARNED COUNSEL URGED THAT THE WITHDRAWALS MA DE BY THE ASSESSEE FROM MKF WERE ONLY OUT OF HIS CAPITAL ACCO UNT WITH MKF AND THAT THE SAID WITHDRAWALS WERE DEBITED BY MKF TO TH E CAPITAL ACCOUNT OF THE ASSESSEE. LEARNED COUNSEL FURTHER URGED THAT THERE WAS NO EVIDENCE ON RECORD TO SHOW THAT PAYMENTS BY SCPL TO MKI AND/OR THE PAYMENT BY MKSEPL TO MKF WAS FOR THE BENEFIT OF THE ASSESSEE. LEARNED COUNSEL SUBMITTED THAT PAYMENTS WERE MADE B Y EACH OF THE TWO COMPANIES, NAMELY, SCPL AND MKSEPL TO MKI AND M KF RESPECTIVELY IN LIQUIDATION OF THEIR RESPECTIVE DUE S OWED BY EACH OF THE TWO COMPANIES TO THE SAID TWO FIRMS. LEARNED CO UNSEL URGED THAT NO PAYMENT WAS EVER MADE BY SCPL AND MKSEPL TO THE ASSESSEE. LEARNED COUNSEL URGED THAT THE EXISTENCE OF RESERVE S IN THE BALANCE SHEET OF MKSEPL IN THE SUM OF RS. 55 CRORES AS ON 3 1ST MARCH, 1999 IS WHOLLY IRRELEVANT FOR THE PURPOSES OF S. 2(22)(E ) OF THE ACT. LEARNED COUNSEL URGED THAT SIMILARLY THE FACT THAT THE ASSE SSEE OWED RS. 8.18 CRORES TO MKI AS ON 31ST MARCH, 2000, WAS WHOLLY IR RELEVANT FOR THE PURPOSES OF S. 2(22)(E) OF THE ACT. LEARNED COUNSEL SUBMITTED THAT S. 2(22)(E) HAD NO APPLICATION IN THE MATTER OF THE AB OVE TWO FACTS. LEARNED COUNSEL URGED THAT THE TRIBUNAL FAILED TO A PPRECIATE THAT THE ASSESSEE DID NOT HOLD ANY SHARES IN SCPL ON OR AFTE R 1ST APRIL, 1999 AND, THEREFORE, HE DID NOT HAVE ANY INTEREST IN SCP L ON THE DATES WHEN RS. 2.79 CRORES WERE REPAID BY SCPL TO MKI. 8. LEARNED COUNSEL CONTENDED THAT THE ACCUMULATED PROF ITS OF MKSEPL COULD NOT BE TREATED IN LAW AS THE ACCUMULAT ED PROFITS OF SCPL IN SPITE OF THE ORDER DT. 5TH JULY, 2001 PASSE D BY THE HIGH COURT APPROVING THE MERGER OF SCPL WITH MKSEPL, EVEN WHEN SUCH MERGER WAS MADE EFFECTIVE FROM 18TH MAY, 1998. LEARNED COU NSEL SUBMITTED THAT THE TRIBUNAL HAD FAILED TO APPRECIATE THAT MKS EPL HAD NOT MERGED WITH SCPL BUT IT IS SCPL WHICH HAD MERGED WI TH MKSEPL. AS A RESULT OF THE SAID MERGER THE ACCUMULATED PROFITS OF MKSEPL DID NOT VEST IN SCPL. LEARNED COUNSEL, THEREFORE, SUBMITTED THAT THE SUBSEQUENT EVENT OF THE COURTS ORDER DT. 5TH JULY, 2001 APPROVING MERGER OF SCPL WITH MKSEPL CANNOT ENABLE THE REVENU E TO TREAT THE ACCUMULATED PROFITS OF MKSEPL AS PART OF THE ACCUMU LATED PROFITS OF SCPL. LEARNED COUNSEL FURTHER SUBMITTED THAT MKF NE VER HELD ANY SHARES IN MKSEPL. LEARNED COUNSEL URGED THAT RS. 2. 04 CRORES WERE PAID ON 11TH JAN., 2000 AND RS. 75 (LAKHS) WERE PAI D ON 28TH JAN., 2000 BY SCPL TO MKI. THEREFORE, ACCORDING TO THE LE ARNED COUNSEL, IF SCPL WANTED TO DECLARE DIVIDENDS IT COULD HAVE DONE SO ONLY TO THE EXTENT OF ACCUMULATED PROFITS IN ITS OWN HANDS AND SINCE SCPL ON THE ABOVE TWO DATES COULD NOT HAVE DECLARED DIVIDENDS I N EXCESS OF ITS ACCUMULATED PROFITS, THE DEPARTMENT WAS WRONG IN TR EATING THE ACCUMULATED PROFITS OF MKSEPL AS ACCUMULATED PROFIT S OF SCPL MERELY BECAUSE THE MERGER BECAME EFFECTIVE RETROSPECTIVELY W.E.F. 18TH MAY, 1998. ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 43 9. WE FIND MERIT IN THIS CIVIL APPEAL. THE COMPANIES H AVING ACCUMULATED PROFITS AND THE COMPANIES IN WHICH SUBS TANTIAL VOTING POWER LIES IN THE HANDS OF THE PERSON OTHER THAN TH E PUBLIC (CONTROLLED COMPANIES) ARE REQUIRED TO DISTRIBUTE ACCUMULATED P ROFITS AS DIVIDENDS TO THE SHAREHOLDERS. IN SUCH COMPANIES, T HE CONTROLLING GROUP CAN DO WHAT IT LIKES WITH THE MANAGEMENT OF T HE COMPANY, ITS AFFAIRS AND ITS PROFITS. IT IS FOR THIS GROUP TO DE CIDE WHETHER THE PROFITS SHOULD BE DISTRIBUTED AS DIVIDENDS OR NOT. THE DECL ARATION OF DIVIDEND IS ENTIRELY WITHIN THE DISCRETION OF THIS GROUP. TH EREFORE, THE LEGISLATURE REALIZED THAT THOUGH FUNDS WERE AVAILAB LE WITH THE COMPANY IN THE FORM OF PROFITS, THE CONTROLLING GRO UP REFUSED TO DISTRIBUTE ACCUMULATED PROFITS AS DIVIDENDS TO THE SHAREHOLDERS BUT ADOPTED THE DEVICE OF ADVANCING THE SAID PROFITS BY WAY OF LOAN TO ONE OF ITS SHAREHOLDERS SO AS TO AVOID PAYMENT OF T AX ON ACCUMULATED PROFITS. THIS WAS THE MAIN REASON FOR ENACTING S. 2 (22)(E) OF THE ACT. 10. IN THE CASE OF CIT VS. L. ALAGUSUNDARAM CHETTIAR 1977 CTR (MAD) 410 : (1977) 109 ITR 508 (MAD) , THE MADRAS HIGH COURT HELD THAT THE WORD 'PAYMENT' IN THE SAID SECTION MEANS THE ACT OF PAYING AND, THEREFORE, IN THAT CASE IT WAS HELD THAT PAYMENT BY THE COMPANY TO KARUPPIAH CHETTIAR WAS FOR THE BENEFIT OF THE ASSES SEE, THE MANAGING DIRECTOR OF THE COMPANY, L. ALAGUSUNDARAM CHETTIAR, AND WAS THEREFORE ASSESSABLE AS DIVIDEND IN THE HANDS OF TH E ASSESSEE. IN THE SAID JUDGMENT IT HAS BEEN HELD THAT THE BASIC TEST TO BE APPLIED IN SUCH CASES IS NOT WHETHER LOAN GIVEN IS A BENEFIT B UT WHETHER PAYMENT BY THE COMPANY TO KARUPPIAH CHETTIAR WAS FO R THE BENEFIT OF THE ASSESSEE WHO WAS THE MANAGING DIRECTOR OF THE P AYING COMPANY. APPLYING THE ABOVE TEST TO THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE TRIBUNAL WAS RIGHT IN HOLDING, ON EXA MINATION OF THE CASH FLOW STATEMENT, THAT MKSEPL HAD MADE PAYMENTS TO MKF AND MKI FOR THE BENEFIT OF THE ASSESSEE WHICH ENABLED T HE ASSESSEE TO BUY 9% RBI RELIEF BONDS IN THE FINANCIAL YEAR 1999- 2000. IT IS IN THIS SENSE THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT T HE TWO FIRMS WERE USED AS CONDUITS BY THE ASSESSEE. IT IS NOT IN DISP UTE THAT THE ASSESSEE HAD MORE THAN 10 PER CENT OF VOTING POWER IN MKSEPL DURING THE BLOCK PERIOD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD SUBSTANTIAL INTEREST OF ABOUT 16 PER CENT IN MKF. I T IS NOT IN DISPUTE THAT THE THREE COMPANIES WERE THE CONTROLLED COMPAN IES. THERE IS ONE MORE POINT WHICH NEEDS TO BE MENTIONED. THE TIMING OF SO-CALLED REPAYMENTS BY THE COMPANY TO MKF AND MKI AND THE IM MEDIATE WITHDRAWAL OF THE FUNDS BY THE ASSESSEE-CUM-DIRECTO R-CUM- SHAREHOLDER-CUM-PARTNER AND THE TIMING OF INVESTMEN T IN PURCHASE OF BONDS WERE AROUND THE SAME TIME. MOREOVER, IN MKSEP L THE ASSESSEE IS NOT ONLY A SHAREHOLDER HAVING MORE THAN 10 PER CENT OF TOTAL VOTING POWER, HE IS ALSO A DIRECTOR OF THAT C OMPANY. THE SAID COMPANY IS ALSO A PARTNER IN MKF AND MKI WHICH EXPL AINS WHY THE AMOUNT OF RS. 5.99 CRORES WAS ROUTED BY SPLITTING T HE SAID AMOUNT INTO TWO PARTS OF RS. 2.79 CRORES AND RS. 3.20 CROR ES. IN THE PRESENT CASE, THE MOST IMPORTANT ASPECT, WHICH HAS NOT BEEN CONSIDERED BY THE HIGH COURT, WAS THAT WITHDRAWAL OF MONEY BY THE ASSESSEE FROM HIS CAPITAL ACCOUNT, IN THE BOOKS OF MKI, DURING FI NANCIAL YEAR 1999- 2000 LED TO A DEBIT BALANCE OF RS. 8.18 CRORES AS O N 31ST MARCH, 2000. TO THIS EXTENT, THE FINDING GIVEN BY THE AO A ND BY THE TRIBUNAL REMAINS UNCHALLENGED. LASTLY, ON THE MAINTAINABILIT Y OF THE BLOCK ASSESSMENT, WE ARE OF THE VIEW THAT THE DEPARTMENT WAS RIGHT IN ASSESSING THE SAID AMOUNT AS DEEMED DIVIDEND IN THE HANDS OF THE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 44 ASSESSEE UNDER S. 2(22)(E) OF THE ACT. THE IMPUGNED ASSESSMENT ORDER WAS PASSED UNDER S. 158BC. THAT ASSESSMENT OR IGINATED ON ACCOUNT OF A SEARCH CONDUCTED UNDER S. 132(1) OF TH E ACT. IN THAT SEARCH THE DIARY 'ML-20' WAS IDENTIFIED. THAT IDENT IFICATION WAS THE STARTING POINT OF CONNECTED ENQUIRIES RESULTING IN THE DETECTION OF UNDISCLOSED INCOME OF RS. 5.99 CRORES. IN OTHER WOR DS, UNDISCLOSED INCOME, IN THE NATURE OF DEEMED DIVIDEND, DID NOT A RISE FROM ANY SCRUTINY PROCEEDINGS, TAX EVASION PETITIONS, SURVEY S, INFORMATION RECEIVED FROM EXTERNAL AGENCY, ETC. THE UNDISCLOSED INCOME WAS DETECTED BY THE AO WHOLLY AND EXCLUSIVELY AS A RESU LT OF A SEARCH AND, THEREFORE, THE DEPARTMENT WAS RIGHT IN INVOKING THE PROVISIONS OF CHAPTER XIV-B. THERE IS ONE MORE ASPECT IN THIS REG ARD. FROM THE FACTS, INDICATED ABOVE, THE DEPARTMENT HAS ESTABLIS HED A SORT OF CIRCULAR TRADING IN THIS CASE. ONE OF THE IMPORTANT FEATURES OF CIRCULAR TRADING IS TO ROUTE THE FUNDS THROUGH CONDUITS. IN SUCH CASES THE PICTURE EMERGES ONLY AFTER SEEING THE CASH FLOW STA TEMENTS. IN THE PRESENT CASE, ML-20 MADE THE AO TO HOLD ENQUIRIES A ND IN THAT ENQUIRY THE CASH FLOW STATEMENT EMERGED, THEREFORE, THE DEPARTMENT WAS RIGHT IN INVOKING THE PROVISIONS OF CHAPTER XIV -B IN THE PRESENT CASE. THE FIVE PAYMENTS HAD DIRECT CO-RELATION WITH RS. 5.99 CRORES PAID BY MKSEPL TO MKF AND MKI AND PAYMENTS BY THE S AID TWO FIRMS TO THE ASSESSEE WHO USED THE SAID MONEY TO BUY 9% R BI RELIEF BONDS. THEREFORE, THE SAID PAYMENT BY THE COMPANY T HROUGH THE TWO FIRMS WAS FOR THE BENEFIT OF THE ASSESSEE. THEREFOR E, THE SAID FUNDS WERE NOT REPAYMENT OF LOANS, THEY WERE FOR PURCHASE OF 9% RBI RELIEF BONDS BY THE RESPONDENT. 11. AS REGARDS THE CONTENTION ADVANCED ON BEHALF OF THE ASSESSEE THAT THE ACCUMULATED PROFITS OF MKSEPL COULD NOT BE TREATED AS THE ACCUMULATED PROFITS OF SCPL IN SPITE OF THE ORDER O F MERGER W.E.F. 18TH MAY, 1998, WE AGREE WITH THE VIEW EXPRESSED BY THE AO THAT ON MERGER THE ACCOUNTS OF THE TWO COMPANIES HAD MERGED AND, THEREFORE, THE RESERVES HAD TO BE TAKEN ON THE BASI S OF MERGED ACCOUNT. MOREOVER, THE ASSESSEE HAD SUBSTANTIAL INT EREST IN MKSEPL RIGHT FROM THE INCEPTION. LASTLY, IN THE PRESENT CA SE, WE ARE CONCERNED WITH THE BLOCK ASSESSMENT WHICH COVERS TH E PERIOD 1ST APRIL, 1990 TO 24TH AUG., 2000. 12. BEFORE CONCLUDING, WE QUOTE HEREINBELOW THE RELEVAN T PARAGRAPHS FROM THE JUDGMENT OF THE CALCUTTA HIGH COURT IN THE CASE OF NANDLAL KANORIA VS. CIT, (1980) 122 ITR 405 (CAL) AT P. 415 : 'THE ONLY QUESTION WHICH REMAINS TO BE CONSIDERED I S THAT WHETHER THE SAID COMPANY MADE THE PAYMENTS OF THE SAID SUM OF RS. 75,000 AND RS. 4,80,000 TO INDIRA & CO. FOR THE BENEFIT OF THE ASSESSEE. SO FAR AS RS. 75,000 IS CONCERNED IT IS FOUND BY THE T RIBUNAL, THOUGH NOT VERY CLEARLY, THAT THIS AMOUNT WAS RECEIVED BY INDI RA & CO. FROM THE SAID COMPANY AND THE SAME AMOUNT WAS GIVEN TO THE A SSESSEE BY INDIRA & CO. THE TRIBUNAL INFERRED FROM THE SAID FA CTS THAT THIS WAS A PAYMENT BY THE SAID COMPANY MEANT FOR THE BENEFIT O F THE ASSESSEE. THIS CONCLUSION INVOLVES TWO FINDINGS OF FACT , NAMELY, THE FACTUM OF PAYMENT BY THE COMPANY AND THE MOTIVE OR INTENTION OF THE COMPANY MAKING SUCH PAYMENT, NAMELY, A BENEFIT ACCRUING TO THE ASSESSEE. THESE ARE ESSENTIALLY FINDINGS OF FACT AND HAVE NOT BEEN CHALLENGED BY THE ASSESSEE BY AN APPROPRIATE QUESTION.' ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 45 (EMPHASIS, ITALICISED IN PRINT, SUPPLIED) WE ALSO QUOTE HEREINBELOW PARA 19 AND PARA 21 OF TH E JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. P.K. BADIANI (1970) 76 ITR 369 (BOM) : '19. NOW, THE ASSESSEES ACCOUNT FOR 1ST APRIL, 195 7, TO 31ST MARCH, 1958, SHOWS THAT THERE ARE CREDITS AS WELL AS DEBIT S. WHAT HAS TO BE ASCERTAINED IS WHETHER THE DEBITS ARE LOANS, SO T HAT THEY CAN BE DEEMED AS DIVIDENDS. THE ACCOUNT IS A MUTUAL, OPEN, AND CURRENT ACCOUNT. EVERY DEBIT, I.E., EVERY PAYMENT BY THE CO MPANY TO THE ASSESSEE, MAY NOT BE A LOAN. TO BE TREATED AS A LOA N, EVERY AMOUNT PAID MUST MAKE THE COMPANY A CREDITOR OF THE ASSESS EE FOR THAT AMOUNT. IF, HOWEVER, AT THE TIME WHEN THE PAYMENT I S MADE BY THE COMPANY IS ALREADY A DEBTOR OF THE ASSESSEE, THE PA YMENT WOULD BE MERELY A REPAYMENT BY THE COMPANY TOWARDS ITS ALREA DY EXISTING DEBT. IT WOULD BE A LOAN BY THE COMPANY ONLY IF THE PAYME NT EXCEEDS THE AMOUNT OF ITS ALREADY EXISTING DEBT AND THAT TOO ONLY TO THE EXTENT OF THE EXCESS. THEREFORE, THE POSITION AS REGARDS EACH DEBIT WILL HAVE TO BE INDIVIDUALLY CONSIDERED , BECAUSE IT MAY OR MAY NOT BE A LOAN. THE TWO BASIC PRINCIPLES ARE, THAT ONLY A L OAN, WHICH WOULD INCLUDE THE OTHER PAYMENTS MENTIONED IN S. 2(6A)(E) , CAN BE DEEMED TO BE DIVIDEND AND THAT TOO ONLY TO THE EXTENT THAT THE COMPANY HAS AT THE DATE OF THE PAYMENT ACCUMULATED PROFITS AF TER DEDUCTING THEREFROM ALL ITEMS LEGITIMATELY DEDUCTIBLE THEREFR OM. XXXX 21. AS REGARDS QUESTION NOS. 3 AND 4, MR. RAJGOPAL CONTENDED THAT THE DEBIT BALANCE, IF ANY, AT THE LAST DATE OF THE ASSESSEES ACCOUNTING YEAR 1ST APRIL, 1957 TO 31ST MARCH, 1958, SHOULD BE TAKEN AS THE AMOUNT TO BE TREATED AS DIVIDEND AND AS THE ASSESSE ES ACCOUNT IS ON THE LAST DAY TO HIS CREDIT, NO AMOUNT CAN BE DEEMED TO BE DIVIDEND. AS ALREADY POINTED OUT, THE POSITION HAS TO BE ASCE RTAINED AT THE DATE OF EACH PAYMENT BY THE COMPANY TO THE ASSESSEE AND THIS CONTENTION MUST, THEREFORE, BE REJECTED. IF MR. RAJGOPALS CON TENTION WAS TO BE ACCEPTED, THE RESULT WOULD BE THAT IF A SHAREHOLDER BORROWS A LARGE AMOUNT DURING THE YEAR, BUT REPAYS IT ON THE LAST D AY OF THE YEAR, IT WOULD NOT BE CONSIDERED TO BE A LOAN, THOUGH THE FA CTS SHOW THAT HE DID BORROW A LOAN. SUCH A CONTRADICTION OF THE REAL FACT WOULD RESULT IF MR. RAJGOPALS CONTENTION WERE TO BE ACCEPTED. MR. RAJGOPAL FURTHER CONTENDED THAT IN ANY EVENT THE HIGHEST AMOUNT TO T HE ASSESSEES DEBIT ON ANY DAY OF THE YEAR SHOULD BE THE AMOUNT T O BE DEEMED TO BE DIVIDEND. THIS ARGUMENT, AGAIN, IGNORES THE PRIN CIPLE LAID DOWN BY US, THAT THE POSITION AT THE DATE OF EACH PAYMENT M UST BE CONSIDERED. MOREOVER, THERE IS ANOTHER REASON AND THAT IS THAT IF IT WERE TO BE SO DONE, IT WOULD NOT ENABLE THE POSITION OF THE BALAN CE OF THE ACCUMULATED PROFITS BEING TAKEN INTO ACCOUNT, AS MORE THAN ONE SHAREHOLDER MAY HAVE BORROWED LOANS FROM THE COMPAN Y IN AN ACCOUNT SIMILAR TO THAT OF THE ASSESSEE. ALL THESE CONTENTIONS OF MR. RAJGOPAL IGNORE THE BASIC FACT THAT S. 2(6A)(E) USES THE WORDS ANY PAYMENT WHICH MEANS, EVERY PAYMENT, AND S. 2(6A)(E ) REQUIRES THE DETERMINATION OF TWO FACTORS, VIZ., WHETHER THE PAY MENT IS A LOAN AND WHETHER AT THE DATE WHEN THE PAYMENT IS MADE THERE WERE ACCUMULATED PROFITS AND THAT THESE TWO FACTORS AR E TO BE CORRELATED ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 46 AND THE RESULT MUST BE ASCERTAINED AT THE DATE OF E ACH SUCH PAYMENT.' (EMPHASIS, ITALICISED IN PRINT, SUPPLIED) 13. THE ABOVE TWO JUDGMENTS INDICATE THAT THE QUESTION AS TO WHETHER PAYMENT MADE BY THE COMPANY IS FOR THE BENE FIT OF THE ASSESSEE IS A QUESTION OF FACT. IN THIS CASE, THE T RIBUNAL HAS CONCLUDED THAT THE PAYMENT ROUTED THROUGH MKF AND M KI WAS FOR THE BENEFIT OF THE ASSESSEE. THIS WAS A FINDING OF FACT . IT WAS NOT PERVERSE. THEREFORE, THE HIGH COURT SHOULD NOT HAVE INTERFERED WITH THE SAID FINDING. FURTHER, THE ABOVE TWO JUDGMENTS LAY DOWN THAT THE CONCEPT OF DEEMED DIVIDEND UNDER S. 2(22)(E) OF THE ACT POSTULATES TWO FACTORS, NAMELY, WHETHER PAYMENT IS A LOAN AND WHETHER ON THE DATE OF PAYMENT THERE EXISTED 'ACCUMULATED PROFITS' . THESE TWO FACTORS HAVE TO BE CORRELATED. THIS CORRELATION HAS BEEN DONE BY THE TRIBUNAL COUPLED WITH THE FACT THAT ALL WITHDRAWALS WERE DEBITED IN THE CAPITAL ACCOUNT OF THE FIRM LEADING TO THE DEBIT BA LANCE OF RS. 8.18 CRORES. THE HIGH COURT HAS ERRED IN DISTURBING THE FINDINGS OF FACT. 14. FOR THE ABOVE REASONS, WE SET ASIDE THE IMPUGNED JU DGMENT OF THE HIGH COURT. ACCORDINGLY, THE APPEAL STANDS ALLO WED WITH NO ORDER AS TO COSTS. 3.7. IF THE JUDICIAL PRONOUNCEMENTS ARE ANALYZED W ITH THE FACTS OF THE PRESENT APPEAL, THE ADDITION MADE BY THE ASSESSING OFFICER IS ON THE ASSUMPTION THAT THE COM MON DIRECTOR HOLD MORE THAN 10% IN SCCPL, WHICH IS FACT UALLY INCORRECT. BOTH COMPANIES HAVE COMMON DIRECTORY NAM ELY SHRI ATUL SUD, WHO IS HAVING 9% STAKES IN SCCPL (SISTER CONCERN) WHICH HAS GIVEN LOAN TO THE ASSESSEE TO BRING THIS AMOUNT WITHIN THE AMBIT OF DEEMED DIVIDEND U/S 2(22)(E) IT HAS TO BE ESTABLISHED THAT THE SAME HAS TO BE GIVEN TO SHAREH OLDERS OUT OF THE ACCUMULATED PROFIT AND FURTHER IT WAS IN THE NATURE OF LOAN OR ADVANCE. THE RATIO LAID DOWN BY THE SPECIAL BENCH IN CIT VS BHAUMIK COLOUR LAB, [2009] 118 ITD 1 (MUM.) (SB) ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 47 FAVOURS THE ASSESSEE, THE RELEVANT PORTION OF THE O RDER IS REPRODUCED HEREUNDER:- SECTION 2( 32 ) DEFINES THE EXPRESSION PERSON WHO HAS A SUBSTANT IAL INTEREST IN THE COMPANY, IN RELATION TO A COMPANY, MEANS A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES, NOT BEING SH ARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RI GHT TO PARTICIPATE IN PROFITS, CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER. [PARA 15] UNDER THE INDIAN INCOME-TAX ACT, 1922, TWO CATEGORI ES OF PAYMENT WERE CONSIDERED AS DIVIDEND, VIZ., ( A ) ANY PAYMENT BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER WAS CONSIDERED AS DIVIDEND PAID TO SHAREHOLDER OR ( B ) ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF A SHAREHOLDER WAS CON SIDERED AS DIVIDEND. [PARA 16] IN THE 1961 ACT, THE VERY SAME TWO CATEGORIES OF PA YMENT WERE CONSIDERED AS DIVIDEND, BUT AN ADDITIONAL CONDITION , THAT PAYMENT SHOULD BE TO A SHAREHOLDER BEING A PERSON WHO IS TH E BENEFICIAL OWNER OF SHARES AND WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY, VIZ., SHAREHOLDING WHICH CARRIES NOT LESS THAN TWENTY PE R CENT OF THE VOTING POWER, WAS INTRODUCED. [PARA 17] BY THE 1987 AMENDMENT WITH EFFECT FROM 1-4-1988, TH E CONDITION THAT PAYMENT SHOULD BE TO A SHAREHOLDER WHO IS THE BENEF ICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE O F DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER WAS SUBSTITUTED. T HUS, THE PERCENTAGE OF VOTING POWER WAS REDUCED FROM TWENTY PER CENT TO TEN PER CENT. BY THE VERY SAME AMENDMENT A NEW CATEGORY OF PAYMENT WAS ALSO CONSIDERED AS DIVIDEND, VIZ., PAYMENT TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST. SUBSTANTIAL INTEREST HAS BE EN DEFINED TO MEAN HOLDING OF SHARES CARRYING 20 PER CENT OF VOTING PO WER. [PARA 18] THE PROVISIONS OF SECTION 2( 22 )( E ) CREATE A FICTION BRINGING IN AMOUNTS PAID OTHERWISE THAN AS DIVIDEND INTO THE NE T OF DIVIDENDS. THEREFORE, CLAUSE ( E ) OF SECTION 2( 22 ) MUST BE GIVEN A STRICT INTERPRETATION. IN THE INSTANT CASE, THERE WAS NO D ISPUTE THAT THE COMPANIES WHICH GAVE THE LOAN OR ADVANCE WERE ONE I N WHICH PUBLIC WAS NOT SUBSTANTIALLY INTERESTED. NOR WAS THERE ANY DISPUTE THAT THESE COMPANIES POSSESSED ACCUMULATED PROFITS TO THE EXTE NT OF THE LOAN OR ADVANCE. [PARA 19] IN VIEW OF THE JUDGMENTS OF THE SUPREME COURT IN TH E CASES OF CIT V. C.P. SARATHY MUDALIAN [1972] 83 ITR 170 AND RAMESHWARLAL SANWARLAL V. CIT [1980] 122 ITR 1/3 TAXMAN 1 (AP), IT IS CLEAR THAT TO ATTRACT THE FIRST LIMB OF THE PROVISIONS OF SECTION 2( 22 )( E ) THE PAYMENT MUST BE TO A PERSON WHO IS A REGISTERED HOLDER OF S HARES. AS ALREADY MENTIONED THE CONDITION UNDER THE 1922 ACT AND THE 1961 ACT REGARDING THE PAYEE BEING A SHAREHOLDER REMAINS THE SAME AND IT IS THE CONDITION THAT SUCH SHAREHOLDER SHOULD BE BENEF ICIAL OWNER OF THE SHARES AND THE PERCENTAGE OF VOTING POWER THAT SUCH SHAREHOLDER SHOULD HOLD HAS BEEN PRESCRIBED AS AN ADDITIONAL CO NDITION UNDER THE ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 48 1961 ACT. THE WORD SHAREHOLDER ALONE EXISTED IN T HE DEFINITION OF DIVIDEND IN THE 1922 ACT. THE EXPRESSION SHAREHOLD ER HAS BEEN INTERPRETED UNDER THE 1922 ACT TO MEAN A REGISTERED SHAREHOLDER. THIS EXPRESSION SHAREHOLDER FOUND IN THE 1961 ACT HAS TO BE, THEREFORE, CONSTRUED AS APPLYING ONLY TO REGISTERED SHAREHOLDER. [PARA 22] IN THE 1961 ACT THE WORD SHAREHOLDER IS FOLLOWED BY THE FOLLOWING WORDS BEING A PERSON WHO IS THE BENEFICIAL OWNER O F SHARES. THIS EXPRESSION USED IN SECTION 2( 22 )( E ) BOTH IN THE 1961 ACT AND IN THE AMENDED PROVISIONS WITH EFFECT FROM 1-4-1988 ONLY Q UALIFIES THE WORD SHAREHOLDER AND DOES NOT IN ANY WAY ALTER THE POS ITION THAT THE SHAREHOLDER HAS TO BE A REGISTERED SHAREHOLDER. THE SE PROVISIONS ALSO DO NOT SUBSTITUTE THE AFORESAID REQUIREMENT TO A REQUIREMENT OF MERELY HOLDING A BENEFICIAL INTEREST IN THE SHARES WITHOUT BEING A REGISTERED HOLDER OF SHARES. THE EXPRESSION BEING IS A PRESENT PARTICIPLE. A PARTICIPLE IS A WORD WHICH IS PARTLY A VERB AND PARTLY AN ADJECTIVE. IN SECTION 2( 22 )( E ), THE PRESENT PARTICIPLE BEING IS USED TO DESCRIBE THE NOUN SHAREHOLDER LIKE AN ADJECTIVE. TH E EXPRESSION BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHAR ES IS, THEREFORE, A FURTHER REQUIREMENT BEFORE A SHAREHOLDER CAN BE SAI D TO FALL WITHIN THE PARAMETERS OF SECTION 2( 22 )( E ). IN THE 1961 ACT, SECTION 2( 22 )( E ) IMPOSES A FURTHER CONDITION THAT THE SHAREHOLDER HA S ALSO TO BE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITL ED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING PO WER. THUS, IT WAS NOT POSSIBLE TO ACCEPT THE CONTENTION OF THE REVENU E THAT UNDER THE 1961 ACT THERE WAS NO REQUIREMENT OF A SHAREHOLDER BEING A REGISTERED HOLDER AND THAT EVEN A BENEFICIAL OWNERS HIP OF SHARES WOULD BE SUFFICIENT. [PARA 23] THE EXPRESSION SHAREHOLDER BEING A PERSON WHO IS T HE BENEFICIAL OWNER OF SHARES REFERRED TO IN FIRST LIMB OF SECTI ON 2( 22 )( E ) REFERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHAREH OLDER. IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER THAN THE PROVISIONS OF SECTION 2( 22 )( E ) WOULD NOT APPLY. SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHARE HOLDER THEN ALSO THE FIRST LIMB OF PROVISIONS OF SECTION 2( 22 )( E ) WOULD NOT APPLY. [PARA 24] THE NEW CATEGORY OF PAYMENT WHICH WAS CONSIDERED AS DIVIDEND INTRODUCED BY THE FINANCE ACT, 1987 WITH EFFECT FRO M 1-4-1988 BY THE SECOND LIMB OF SECTION 2( 22 )( E ) IS PAYMENT TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WH ICH HE HAS A SUBSTANTIAL INTEREST. [PARA 25] THE FOLLOWING CONDITIONS ARE REQUIRED TO BE SATISFI ED FOR APPLICATION OF THE ABOVE CATEGORY OF PAYMENT TO BE REGARDED AS DIV IDEND : ( A )THERE MUST BE A PAYMENT TO A CONCERN BY A COMPANY. ( B )A PERSON MUST BE SHAREHOLDER OF THE COMPANY BEING A REGISTERED HOLDER AND BENEFICIAL OWNER OF SHARES (NOT BEING SH ARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RI GHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER. THIS IS BECAUSE OF THE EXPRESSION SUCH SHAREHOLDER FOUND IN THE RELEVANT PROVISION. THIS EXPRESSION ONLY REFERS TO THE SHARE HOLDER REFERRED TO IN ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 49 THE EARLIER PART OF SECTION 2( 22 )( E ), VIZ., A REGISTERED AND A BENEFICIAL HOLDER OF SHARES HOLDING 10 PER CENT VOTING POWER. ( C )THE VERY SAME PERSON REFERRED TO IN ( B ) ABOVE MUST ALSO BE A MEMBER OR A PARTNER IN THE CONCERN HOLDING SUBSTANT IAL INTEREST IN THE CONCERN VIZ., WHEN THE CONCERN IS NOT A COMPANY, HE MUST AT ANY TIME DURING THE PREVIOUS YEAR, BE BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN; AND WHERE THE CONCERN IS A COMPANY HE MUST BE THE OWNER OF SHARES , NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS, CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER. ( D )IF THE ABOVE CONDITIONS ARE SATISFIED THEN THE PAY MENT BY THE COMPANY TO THE CONCERN WILL BE DIVIDEND. [PARA 26] IN THE CASE OF THE ASSESSEE, AFORESAID CONDITIONS ( B ) AND ( C ) WERE NOT SATISFIED INASMUCH AS NNT HELD SHARES IN UPPL AND B CPL ONLY AS A LEGAL AND REGISTERED OWNER BUT NOT AS A BENEFICIAL OWNER. THE THREE TRUSTEES OF NNT HELD SHARES IN UPPL AND BCPL ONLY A S A LEGAL AND REGISTERED OWNER. THEY HELD SHARES FOR AND ON BEHAL F OF 5 BENEFICIARIES OF THE TRUST WHO WERE DIFFERENT INDIV IDUALS. THEY WERE, THEREFORE, NOT BENEFICIAL OWNERS OF THE SHARES. TRU ST OWNERSHIP IS A PECULIAR INSTANCE OF DUPLICATE OWNERSHIP. TRUST PRO PERTY IS, IN FACT, OWNED BY TWO PERSONS SIMULTANEOUSLY IN THE SENSE TH AT ONE IS UNDER AN OBLIGATION TO USE THE PROPERTY FOR THE BENEFIT O F THE OTHER. THE OWNERSHIP OF THE TRUSTEE CALLED TRUST OWNERSHIP IS NOMINAL RATHER THAN REAL. THE BENEFICIARY INTEREST IS CALLED THE BENEFI CIAL INTEREST. THE TRUSTEE IS TO ADMINISTER THE PROPERTY OF ANOTHER PE RSON BUT THE OWNERSHIP RIGHT IN THE TRUSTEE IS TO BE USED ONLY O N BEHALF OF THE REAL OWNER. AS BETWEEN TRUSTEE AND THIRD PARTY OWNERSHIP CONFERRED ON THE TRUSTEE FICTITIOUSLY BY LAW PREVAILS, THAT IS, THE TRUSTEE IS CLOTHED WITH THE RIGHTS OF THE BENEFICIARY AND IS SO ENABLE TO P ERSONATE OR REPRESENT HIM IN DEALINGS WITH THE WORLD AT LARGE. THE MAIN PURPOSE OF TRUSTEESHIP IS TO PROTECT THE RIGHTS AND INTEREST O F PERSONS WHO FOR ANY REASON ARE UNABLE EFFECTIVELY TO PROTECT THEM F OR THEMSELVES. SUCH PROTECTION IS REQUIRED FOR FOUR CLASSES OF PEO PLE, ( A ) UNBORN PERSONS; ( B ) INFANTS, LUNATICS, OR OTHER DISQUALIFIED PERSONS; ( C ) A LARGE NUMBER OF PERSONS WHO ARE INTERESTED IN COMMON; AND ( D ) PERSONS HAVING CONFLICTING INTEREST IN THE SAME PROPERTY, I.E., AN OWNER AND AN ENCUMBRANCER OR DIFFERENT KINDS OF ENCUMBRANCERS. T HEREFORE, THE FIRST REQUIREMENT OF HOLDING OF SHARES BOTH AS A LE GAL REGISTERED OWNER AND BENEFICIAL OWNER OF SUCH SHARES WAS NOT SATISFI ED IN THE CASE OF THE ASSESSEE. THEREFORE, PROVISIONS OF SECTION 2( 22 )( E ) WOULD NOT BE APPLICABLE AT ALL TO THE CASE OF THE ASSESSEE. [PAR A 27] THE PROVISIONS OF SECTION 2( 22 )( E ) WHICH BROUGHT IN A NEW CATEGORY OF PAYMENT WHICH WAS TO BE CONSIDERED AS DIVIDEND AS I NTRODUCED BY THE FINANCE ACT, 1987 WITH EFFECT FROM 1-4-1988, VIZ., PAYMENT BY A COMPANY TO ANY CONCERN IN WHICH SUCH SHAREHOLDER I S A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST DO NOT SAY AS TO IN WHOSE HANDS THE DIVIDEND HAS TO BE BROUGHT TO TAX, WHETHER IN THE HANDS OF THE CONCERN OR THE SHAREHOLDER. [PARA 30] THE INTENTION BEHIND ENACTING PROVISIONS OF SECTION 2( 22 )( E ) ARE THAT CLOSELY HELD COMPANIES ( I.E., COMPANIES IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED), WHICH ARE CONTROLLED BY A GROUP OF MEMBERS, ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 50 EVEN THOUGH THE COMPANY HAS ACCUMULATED PROFITS WOU LD NOT DISTRIBUTE SUCH PROFIT AS DIVIDEND BECAUSE IF SO DI STRI-BUTED THE DIVIDEND INCOME WOULD BECOME TAXABLE IN THE HANDS O F THE SHAREHOLDERS. INSTEAD OF DISTRIBUTING ACCUMULATED P ROFITS AS DIVIDEND, COMPANIES DISTRIBUTE THEM AS LOAN OR ADVANCES TO SH AREHOLDERS OR TO CONCERN IN WHICH SUCH SHAREHOLDERS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BEHALF OF OR FOR THE INDIVIDUAL BENE FIT OF SUCH SHAREHOLDER. IN SUCH AN EVENT, BY THE DEEMING PROVI SIONS SUCH PAYMENT BY THE COMPANY IS TREATED AS DIVIDEND. THE INTENTION BEHIND THE PROVISIONS OF SECTION 2( 22 )( E ) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDER. THE DEEMING PROVISIONS AS IT APPLIES T O 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 LOAN OR ADVANCES WOULD ULTIMATELY BE MADE AVAIL ABLE TO THE SHAREHOLDERS OF THE COMPANY GIVING THE LOAN OR ADVA NCE. THE INTENTION OF THE LEGISLATURE IS, THEREFORE, TO TAX DIVIDEND ONLY IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE HANDS OF TH E CONCERN. [PARA 35] THE BASIS OF BRINGING IN THE AMENDMENT TO SECTION 2 ( 22 )( E ) BY THE FINANCE ACT, 1987 WITH EFFECT FROM 1-4-1988 IS TO E NSURE THAT PERSONS WHO CONTROL THE AFFAIRS OF A COMPANY AS WELL AS THA T OF A FIRM CAN HAVE THE PAYMENT MADE TO A CONCERN FROM THE COMPANY AND THE PERSON WHO CAN CONTROL THE AFFAIRS OF THE CONCERN CAN DRAW THE SAME FROM THE CONCERN INSTEAD OF THE COMPANY DIRECTLY MAKING PAYMENT TO THE SHAREHOLDER AS DIVIDEND. THE SOURCE OF POWER TO CON TROL THE AFFAIRS OF THE COMPANY AND THE CONCERN IS THE BASIS ON WHICH T HESE PROVISIONS HAVE BEEN MADE. IT IS, THEREFORE, PROPER TO CONSTRU E THOSE PROVISIONS AS CONTEMPLATING A CHARGE TO TAX IN THE HANDS OF TH E SHAREHOLDER AND NOT IN THE HANDS OF A NON-SHAREHOLDER, VIZ., CONCERN. A LOAN OR ADVANCE RECEIVED BY A CONCERN IS NOT IN THE NATURE OF INCOME. IN OTHER WORDS, THERE IS A DEEMED ACCRUAL OF INCOME EVEN UND ER SECTION 5( 1 )( B ) IN THE HANDS OF THE SHAREHOLDER ONLY AND NOT IN T HE HANDS OF THE PAYEE, VIZ., NON-SHAREHOLDER (CONCERN). SECTION 5( 1 )( A ) CONTEMPLATES THAT THE RECEIPT OR DEEMED RECEIPT SHO ULD BE IN THE NATURE OF INCOME. THEREFORE, THE DEEMING FICTION CA N BE APPLIED ONLY IN THE HANDS OF THE SHAREHOLDER AND NOT THE NON-SHA REHOLDER, VIZ., THE CONCERN. [PARA 36] THE DEFINITION OF DIVIDEND UNDER SECTION 2( 22 )( E ) IS AN INCLUSIVE DEFINITION. SUCH INCLUSIVE DEFINITION ENLARGES THE MEANING OF THE TERM DIVIDEND ACCORDING TO ITS ORDINARY AND NATURAL ME ANING TO INCLUDE EVEN A LOAN OR ADVANCE. ANY LOAN OR ADVANCE CANNOT BE DIVIDEND ACCORDING TO ITS ORDINARY AND NATURAL MEANING. THE ORDINARY AND NATURAL MEANING OF THE TERM DIVIDEND WOULD BE A S HARE IN PROFITS TO AN INVESTOR IN THE SHARE CAPITAL OF A LIMITED COMPA NY. TO THE EXTENT THE MEANING OF THE WORD DIVIDEND IS EXTENDED TO L OANS AND ADVANCES TO A SHAREHOLDER OR TO A CONCERN IN WHICH A SHAREHOLDER IS SUBSTANTIALLY INTERESTED DEEMING THEM AS DIVIDEND I N THE HANDS OF A SHAREHOLDER THE ORDINARY AND NATURAL MEANING OF THE WORD DIVIDEND IS ALTERED. TO THIS EXTENT THE DEFINITION OF THE TE RM DIVIDEND CAN BE SAID TO OPERATE. IF THE DEFINITION OF DIVIDEND IS EXTENDED TO A LOAN OR ADVANCE TO A NON-SHAREHOLDER, THE ORDINARY AND NATU RAL MEANING OF THE WORD DIVIDEND IS TAKEN AWAY. IN THE LIGHT OF THE INTENTION BEHIND THE PROVISIONS OF SECTION 2( 22 )( E ) AND IN THE ABSENCE OF INDICATION IN ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 51 SECTION 2( 22 )( E ) TO EXTEND THE LEGAL FICTION TO A CASE OF LOAN OR ADVANCE TO A NON-SHAREHOLDER ALSO, THE LOAN OR ADVA NCE TO A NON- SHAREHOLDER CANNOT BE TAXED AS DEEMED DIVIDEND IN T HE HANDS OF A NON-SHAREHOLDER. [PARA 37] THE BASIC CHARACTERISTIC OF DIVIDEND IS A SHARE OF PROFITS OF THE COMPANY GIVEN TO ITS SHAREHOLDERS. FURTHER, SECTION 206 OF THE COMPANIES ACT, 1956 PROHIBITS PAYMENT OF DIVIDEND T O ANY PERSON OTHER THAN THE REGISTERED SHAREHOLDER. IF ONE WAS T O BREAK UP THE NATURAL MEANING THE FOLLOWING COMPONENTS EMERGE ( A ) DIVIDEND IS A SHARE OF PROFITS OF THE COMPANY ( B ) PAID TO ITS SHAREHOLDERS. SECTION 2( 22 ) ARTIFICIALLY EXTENDS THE SCOPE OF DIVIDEND FROM B EING MORE THAN ONLY A DISTRIBUTION OF PROFITS TO COVER CERTAIN OTH ER TYPES OF DISBURSEMENTS SUCH AS LOANS PAID ETC. (THE FIRST IN GREDIENT MENTIONED ABOVE). IT DOES NOT, HOWEVER, ALTER THE SECOND COMP ONENT OF ITS NATURAL MEANING, VIZ., PAID TO ITS SHAREHOLDER. IN OTHER WORDS ALL THAT SECTION 2( 22 ) SEEKS TO DO IS TO EXPAND THE VARIOUS TYPES OF PAY MENTS THAT MAY BE REGARDED AS DIVIDEND. THE CONTENTION OF THE REVENUE THAT PROVISIONS OF SE CTION 8( A ) CREATED A FICTION BY WHICH EVEN PAYMENTS TO NON-SHAREHOLDER S COULD BE CONSTRUED AS DIVIDEND COULD NOT BE ACCEPTED. THOSE PROVISIONS MERELY FIX THE YEAR IN WHICH DIVIDEND HAS TO BE TAX ED. IT IS, THEREFORE, CLEAR THAT THE SHAREHOLDER ALONE CAN, IF AT ALL, BE SUBJECTED TO TAX FOR HAVING EARNED DIVIDEND. [PARA 38] FURTHER, IN THE EVENT OF THE PAYMENT OF LOAN OR ADV ANCE BY A COMPANY TO A CONCERN BEING TREATED AS DIVIDEND AND TAXED IN THE HANDS OF THE CONCERN THEN, THE BENEFIT OF SET OFF CANNOT BE ALLO WED TO THE CONCERN, BECAUSE THE CONCERN CAN NEVER RECEIVE DIVIDEND FROM THE COMPANY WHICH IS ONLY PAID TO THE SHAREHOLDER, WHO HAS SUBS TANTIAL INTEREST IN THE CONCERN. THE ABOVE PROVISIONS ALSO, THEREFORE, CONTEMPLATE DEEMED DIVIDEND BEING TAXED IN THE HANDS OF A SHARE HOLDER ONLY. [PARA 40] IN VIEW OF AFORESAID, IT WAS OPINED THAT DEEMED DIV IDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHA REHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTH ER THAN A SHAREHOLDER. FURTHER, THE EXPRESSION SHAREHOLDER REFERRED TO IN SECTION 2( 22 )( E ) REFERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER. IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER THEN THE PROVISIONS OF S ECTION 2( 22 )( E ) WOULD NOT APPLY. SIMILARLY, IF A PERSON IS A BENEFI CIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THEN ALSO THE PROVISIO NS OF SECTION 2( 22 )( E ) WOULD NOT APPLY. [PARA 41] IN VIEW OF AFORESAID, THERE WAS NO MERIT IN APPEAL FILED BY THE REVENUE AND, THEREFORE, SAME WAS TO BE DISMISSED. [PARA 42] THE LD. ASSESSING OFFICER MADE THE ADDITION U/S 2(2 2)(E) OF THE ACT OF ` 40 LAKH, TAKEN AS A LOAN BY THE ASSESSEE FROM SISTER CONCERN, SCCPL BY HOLDING THAT THE SHAREHOLD ING IS ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 52 MORE THAN 10%. IT IS UNDISPUTED FACT THAT THE ASSE SSEE IS NOT A SHAREHOLDER IN THE SISTER CONCERN (SCCPL). HOWEV ER, BEFORE INVOKING SECTION 2(22)(E) OF THE ACT, IT HAS TO BE ESTABLISHED THAT THE SAME WAS GIVEN TO THE SHAREHOLDER OUT OF T HE ACCUMULATED PROFIT AND FURTHER IT WAS IN THE NATURE OF LOAN OR ADVANCE. THIS ISSUE HAS BEEN ELABORATELY DEALT WIT H BY HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS UNIVERSAL MEDIC ARE PVT. LTD.(SUPRA). THUS, THE DEEMED DIVIDEND CANNOT BE IN VOKED IN THE HANDS OF THE PRESENT ASSESSEE, RESULTANTLY, WE AFFIRM THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL ). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH SIDES AT TH E CONCLUSION OF THE HEARING ON 12/09/2017. SD/- SD/- ( G. MANJUNATHA ) (JOGIND ER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER ( MUMBAI; , DATED :-12/09/2017 F{X~{T? P.S / - %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ./01 / THE APPELLANT 2. 2301 / THE RESPONDENT. 3. 4 4 ( 5# ( ./ ) / THE CIT, MUMBAI. ITA NO.802/MUM/2015 M/S SATURN ADVISORY SERVICES PVT. LTD. 53 4. 4 4 ( 5# / CIT(A)- , MUMBAI 5. 67 2# , 4 ./* . 8 , ( / DR, ITAT, MUMBAI 6. 9! : / GUARD FILE. / BY ORDER, 36/# 2# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ( / ITAT, MUMBAI,