ACIT, CENTRAL CIRCLE- 15, NEW DELHI V. NEENA KANDHARI, NEW DELHI

ITA 812/DEL/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5186 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2015-2016
• Appeal Filed On: 02-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revision of order; Deemed dividend; TDS
• Section: 263; 11; 2(22)(e); 201; 13; 2(22); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO.812/DEL/2018 ASSESSMENT YEAR: 2015-2016 ACIT, CENTRAL CIRCLE-15, NEW DELHI. VS. NEENA KANDHARI, B-1643, POCKET-I, VASANT KUNJ, NEW DELHI. TAN/PAN: AEKPK5577N (APPELLANT) (RESPONDENT) APPELLANT BY: MS. RINKU SINGH, SR.D.R. RESPONDENT BY: SHRI V.K. AGARWAL, A.R. AND MS. SWETA BANSAL, CA DATE OF HEARING: 04 03 2021 DATE OF PRONOUNCEMENT: 20 04 2021 O R D E R PER AMIT SHUKLA, JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 03.11.2017, PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXVI, NEW DELH I FOR THE QUANTUM OF ASSESSMENT PASSED U/S.143(3) FOR THE ASSESSMENT YEAR 2015-16. IN VARIOUS GROUNDS OF APPE AL, THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS.1,97,99,254/- MADE U/S. 2(22)(E) BY TREATING IT TO BE BUSINESS ADVANCE IN THE HANDS OF THE ASSESSEE. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSING OFFICE R ON THE PERUSAL OF THE BALANCE SHEET AND LEDGER ACCOUNT OF THE COMPANY, M/S. ENRICH AGRO FOODS PRODUCTS PVT. LTD. NOTED I.T.A. NO.812/DEL/2018 2 THAT THE COMPANY HAS GIVEN REGULAR ADVANCE/LOANS TO MAJOR SHAREHOLDERS, WHEREIN THE ASSESSEES HUSBAND (SHRI VARINDER PAL SINGH KHANDARI) WAS HAVING 32.29%; AND ASSESSEE (NEENA KHANDARI) WAS HAVING 18.95% SHAREHOLDING IN M/S. EN RICH AGRO FOODS PRODUCTS PVT. LTD. IN RESPONSE TO SHOW C AUSE NOTICE, THE ASSESSEE SUBMITTED THAT IT WAS A BUSINE SS ADVANCE FOR THE PURPOSE OF ACQUISITION OF PROPERTY AND A DE TAIL REPLY WAS SUBMITTED WHICH HAS BEEN INCORPORATED IN THE ASSESSMENT ORDER FROM PAGES 3 TO 5. LD. ASSESSING O FFICER HAS TREATED THE LOANS AND ADVANCES GIVEN TO THE ASSESSE E FOR SUMS AGGREGATING TO RS.1,97,99,254/- AS DEEMED DIVIDEND U/S.2(22)(E). 3. LD. CIT (A) AFTER DETAILED DISCUSSION AND ON PER USAL OF THE MATERIAL PLACED ON RECORD HAS DELETED THE SAID ADDITION AFTER OBSERVING AND HOLDING AS UNDER: THE AO MENTIONED ON PAGE 5 OF THE ASSTT. ORDER THA T M/S ENRICH AGRO FOOD PRODUCTS PVT. LTD. HAD GIVEN THE MONEY TO THE APPELLANT FOR PURCHASE OF PROPERTY. UNDER THE CIRCUMSTANCES, I AGREE WITH THE ARGUMENTS OF THE LD. AR THAT THERE IS NO QUESTI ON OF THE AMOUNT BEING UNEXPLAINED. FURTHER, THE LD. AO HAS A LSO NOT GIVEN ANY REASONED FINDING TO ESTABLISH THAT THE IMPUGNED AMOUNT IS UNEXPLAINED. THE LD. AO HAS MADE THE ADDITION U/S 2(22)(E) ON TH E GROUND THAT ADVANCE FOR PROPERTY IS COVERED U/S 2(22)(E). HE HA S REJECTED THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT NO S UCH EXPLANATION WAS EVER OFFERED BY THE ASSESSEE DURING THE COURSE OF SEARCH AND SURVEY PROCEEDINGS. THE LD. AO SHOULD HA VE I.T.A. NO.812/DEL/2018 3 CONSIDERED THE EXPLANATION GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS INSTEAD OF OUTRIGHT REJECTING THE SAME. M/S ENRICH AGRO FOOD PRODUCTS PVT. LTD IS MAINTAINI NG THREE LEDGER ACCOUNTS IN THE NAME OF THE ASSESSEE AS UNDE R: I. LOAN ACCOUNT WHICH HAS AN OPENING CREDIT BALANCE OF RS. 1,05,10,980/- AND CLOSING BALANCE AT RS. 1,33,00,74 6/-. THERE IS CREDIT BALANCE THROUGH OUT THE YEAR WHICH MEANS THAT IT IS THE ASSESSEE WHO HAS GIVEN MONEY TO THE COMPANY. IT IS THE COMPANY WHICH HAS DERIVED THE BE NEFIT BECAUSE OF THE TRANSACTIONS IN THIS ACCOUNT AND NOT THE ASSESSEE. II. ADVANCE FOR PROPERTY ACCOUNT WHICH WAS INITIATED ON 23/04/2014. IT HAS A CLOSING DEBIT BALANCE OF RS. 3,31,00,000/- III. SALARY ACCOUNT WHICH HAS NIL OPENING AS WELL AS CLO SING BALANCE. THE APPELLANT HAS FILED CONSOLIDATED LEDGER ACCOUNT BY AMALGAMATING THE ABOVE THREE ACCOUNTS. IT IS NOTICE D THAT THE CONSOLIDATED LEDGER ACCOUNT HAS 56 ENTRIES THROUGHO UT THE YEAR. THE LD. AR ARGUED THAT THIS INDICATES THAT IT IS A RUNNING / CURRENT ACCOUNT AND NOT AN ACCOUNT FOR LOANS OR ADVANCE WHE RE ENTRIES ARE JUST A FEW. IT WILL BE SEEN THAT DURING THE WHO LE YEAR, THE BALANCES WERE FLUCTUATING BETWEEN CREDIT AND DEBIT. IN FACT, THE CREDIT BALANCE OF THE APPELLANT IN THE BOOKS OF THE COMPANY CONTINUES RIGHT FROM 01/04/2014 TO 07/10/214 WHICH INDICATES THAT CREDIT BALANCE WAS FOR MORE THAN SIX MONTH AS COMPARED TO DEBIT BALANCE. THEREFORE, IT IS THE COMPANY ALSO WH ICH BENEFITED BY THE MONEY GIVEN TO IT BY THE APPELLANT. EVEN IN THE EARLIER I.T.A. NO.812/DEL/2018 4 YEARS THE APPELLANT HAD BEEN ADVANCING MONEY TO THE COMPANY. HE RELIED ON THE FOLLOWING CASE LAWS TO EMPHASIS TH AT SECTION 2(22)(E) IS NOT APPLICABLE TO RUNNING/CURRENT ACCOU NT. SHRI SATISH KUMAR GUPTA VS. ACIT, TS-631-ITAT-20 16 (DEL) CIT (TDS) SCHUTZ DISHMAN BIO-TECH PVT. LTD., 201 6- TIOL-09-HC- AHM M/S THE HOOGHLY MILLS CO LTD VS. DCIT, 2016- TIOL-1472-ITAT- KOL ITO VS. GAYATRI CHAKRABORTY, 2015-TIOL-2115- ITAT-KOL I HAVE GONE THROUGH ALL OF THE ABOVE CASE LAWS. IT HAS BEEN CLEARLY HELD THAT THE TRANSACTIONS IN THE NATURE OF LOANS A ND ADVANCES ARE USUALLY VERY FEW IN NUMBER WHEREAS IN THE CURRE NT ACCOUNT, THERE WILL BE COMPARATIVELY MANY MORE ENTRIES. IT W AS ALSO HELD THAT LOOKING TO LARGE NUMBER OF ENTRIES IN THE ACCO UNTS BETWEEN TWO ENTITIES, THE AMOUNTS WERE NOT IN THE NATURE OF LOAN OR DEPOSIT AND HENCE SECTION 2(22)(E) IS NOT TO BE INVOKED? IT WAS FURTHER HELD THAT SECTION 2(22)(E) OF THE ACT COVERS ONLY S UCH SITUATIONS, WHERE THE SHAREHOLDER ALONE BENEFITS FROM THE LOAN BUT IF THE COMPANY BENEFITS FROM THE SAID TRANSACTION, IT WILL TAKE THE CHARACTER OF A COMMERCIAL TRANSACTION AND HENCE WIL L NOT QUALIFY TO BE DIVIDEND. IT HAS ALSO BEEN EMPHASIZED THAT TH E LOAN ACCOUNT IS DIFFERENT FROM A CURRENT ACCOUNT AND THE PROVISI ONS OF SEC. 2(22)(E) WILL NOT BE APPLICABLE TO THE CURRENT ACCO UNT. THEREFORE, THESE CASE LAWS ARE SQUARELY APPLICABLE TO THE CASE OF THE APPELLANT. THEREFORE, NO ADDITION CAN BE MADE UNDER SECTION 2(22)(E). I.T.A. NO.812/DEL/2018 5 FURTHER, IT IS OBSERVED THAT THE COMPANY HAD DECIDE D TO INVEST IN A RESIDENTIAL PROPERTY AT GURGAON. IT IS EVIDENT FR OM THE BOARD RESOLUTION PASSED ON 12/03/2014 BY M/S ENRICH AGRO FOOD PRODUCTS PVT. LTD. THAT CONSENT OF THE BOARD WAS AC CORDED FOR MAKING PAYMENT UPTO RS. 5 CRORE TO SMT. NEENA KANDH ARI FOR THE SPECIFIC PURPOSE OF PURCHASE OF RESIDENTIAL PROPERT Y IN GURGAON, HARYANA FOR THE PURPOSE OF COMPANYS BUSINESS. BALA NCE AMOUNT WAS TO BE INVESTED BY THE APPELLANT THROUGH HER OWN SOURCES. THE PROPERTY WAS TO BE USED FOR THE RESIDENCE OF THE DI RECTORS. IT WAS EXPLAINED THAT UNDER THE GIVEN CIRCUMSTANCES AND AV AILABILITY OF THE FUNDS, THE INVESTMENT WAS NOT FEASIBLE WITHOUT TAKING HOUSING LOAN WHICH WAS THE ONLY ECONOMICAL OPTION. UNDER TH E RBI GUIDELINES, HOUSING LOAN CAN BE GRANTED ONLY TO THE INDIVIDUAL AND NOT TO THE COMPANY. THEREFORE, IT WAS DECIDED TO BU Y PROPERTY IN THE INDIVIDUAL NAME OF THE DIRECTORS ON BEHALF OF T HE COMPANY WHICH CAN BE USED AS RENT FREE ACCOMMODATION BY THE M. I HAVE SEEN THAT THE BUILDER HAS BEEN REQUESTED VIDE LETTE R DT. 04/02.2015 TO REGISTER THE PROPERTY IN THE JOINT NA ME OF THE DIRECTOR AND THE COMPANY, IF POSSIBLE. EVEN THE HOU SING LOAN WAS SANCTIONED BY THE HDFC BANK WITH THE COMPANY AS CO- 'BORROWER. UNDER THE CIRCUMSTANCES, AMOUNT WAS GIVEN FOR ACQUI RING THE PROPERTY ON BEHALF OF THE COMPANY AND NOT FOR THE P ERSONAL USE OF THE DIRECTORS. THEREFORE, SECTION 2(22)(E) CANNOT B E INVOKED. THE LD. AR HAS PLACED RELIANCE ON THE FOLLOWING CASE LA WS:- GREEN VALLEY HOUSING AND LAND DEVELOPMENT PVT. LTD. VS ACIT, 2015-TIOL- 1144-ITAT-DEL ITO VS. ABP ENTERTAINMENT PVT. LTD., 2016-TIOL-311- ITAT- KOL I.T.A. NO.812/DEL/2018 6 IT HAS BEEN CLEARLY HELD IN THE CASES CITED ABOVE T HAT ADVANCE GIVEN BY THE COMPANY FOR PURCHASE OF LAND CANNOT AM OUNT TO DEEMED DIVIDEND. IT WAS FURTHER HELD THAT SEC 2(22) (E) CANNOT BE INVOKED IN THE CASE OF BUSINESS ADVANCE. IN THE CAS E OF THE APPELLANT ALSO, THE ADVANCE WAS GIVEN FOR PURCHASE OF PROPERTY FOR THE COMPANYS BUSINESS AS LAID DOWN IN THE BOAR D RESOLUTION. THEREFORE, IN THE CASE OF THE APPELLANT, ALSO IT IS A BUSINESS ADVANCE. THEREFORE, ON THIS GROUND ALSO, NO ADDITION CAN BE MADE UNDER SECTION 2(22)(E). THE ADDITION ON ITS COUNT IS DIRE CTED TO BE DELETED. 3. BEFORE US, LD. DR RELYING UPON THE ORDER OF THE ASSESSING OFFICER SUBMITTED THAT HERE THE MONEY HAS BEEN GIVE N AS AN ADVANCE TO THE SHAREHOLDER HAVING MORE THAN 10% OF SHAREHOLDING IN THE SAME COMPANY FOR THE PURPOSE OF PURCHASE OF PROPERTY WHICH WAS IN THE NAME OF THE A SSESSEE, AND THEREFORE, DEEMING PROVISION OF SECTION 2(22)(E ) IS CLEARLY APPLICABLE. 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT ON THE PERUSAL OF THE LEDGER ACCOUNT OF THE ASSESSEE W ITH THE COMPANY, NAMELY, M/S. ENRICH AGRO FOODS PRODUCTS PV T. LTD., IT IS SEEN THAT IT IS A CURRENT ACCOUNT AND NOT A L OAN/ADVANCE WHICH IS EVIDENT FROM PAGE 63 OF THE PAPER BOOK, WH EREIN THERE WAS OPENING CREDIT BALANCE AMOUNTING TO RS.1,05,10,980/-, WHICH CLEARLY SHOWS THAT IT IS AN ASSESSEE WHO HAS GIVEN MONEY TO THE COMPANY AND NOT THE COMP ANY HAS GIVEN THE MONEY TO THE ASSESSEE. THERE ARE MORE THAN 56 I.T.A. NO.812/DEL/2018 7 ENTRIES IN THE LEDGER ACCOUNT WHICH CLEARLY INDICAT ES THAT IT IS A RUNNING/CURRENT ACCOUNT AND NOT AN ACCOUNT FOR LO ANS OR ADVANCES WHERE ENTRIES ARE JUST A FEW. FOR A LARGE PERIOD, THERE WAS A CREDIT BALANCE AS COMPARED TO THE DEBIT BALANCE, AND THEREFORE, IT WAS THE COMPANY WHICH IS BENEFITT ED MORE. IN SUPPORT, HE RELIED UPON THE FOLLOWING CASE LAWS. SHRI SATISH KUMAR GUPTA VS. ACIT, TS-631-ITAT-2016 (DEL) 'CONCLUSION DELHI ITAT ALLOWS ASSESSEES APPEAL AY 2006-07, DEL ETES ADDITION MADE U/S 2(22)(E) TOWARDS DEEMED DIVIDEND; OBSERVES THAT FOR THE APPLICABILITY OF SEC. 2(22)(E), APART FROM OTHER CONDITIONS, THE AMOUNT RECEIVED BY THE SHAREHOLDER SHOULD BE IN THE NATURE OF LOAN OR ADVANCE; ON PERUSAL OF COMPAN YS ACCOUNT IN ASSESSEE'S BOOKS NOTES THAT IT WAS A 'RUNNING AC COUNT WITH REGULAR RECEIPT / PAYMENT OF MONEY BETWEEN THE ASSE SSEE AND THE COMPANY; ' CIT (TDS) VSSCHUTZDISHMAN BIO-TECH PVT. LTD., 2016- TIOL-09- HC-AHM '++ IT IS SEEN THAT THE CIT(A) AS A MATTER OF FACT FOUND THAT THE PAYMENTS WERE NOT IN THE NATURE OF CURRENT ADJUSTME NT. THERE WAS MOVEMENT OF FUND BOTH WAYS ON NEED BASIS. THE TRANSACTIONS IN THE NATURE OF LOANS AND ADVANCES AR E USUALLY VERY FEW IN NUMBER WHEREAS IN THE PRESENT CASE, SUCH TRA NSACTIONS ARE IN THE FORM OF CURRENT ACCOMMODATION ADJUSTMENT ENT RIES. THE CIT(A) THEREFORE, HELD THAT THE TRANSACTIONS WERE NOT IN THE NATURE OF LOANS AND ADVANCES. THE REVENUE CARRIED THE MATT ER IN APPEAL. THE TRIBUNAL CONCURRED WITH THE VIEW OF THE CIT(A) AND HELD THAT THE AMOUNTS WERE NOT IN THE NATURE OF INTER CORPORA TE DEPOSITS I.T.A. NO.812/DEL/2018 8 AND WERE THEREFORE, NOT TO BE TREATED AS LOANS OR A DVANCES AS CONTEMPLATED U/S 2(22)(E). THE ISSUE IS SUBSTANTIAL LY ONE OF APPRECIATION OF FACTS. WHEN THE CIT(A) AS WELL AS T RIBUNAL CONCURRENTLY HELD THAT LOOKING TO LARGE NUMBER OF A DJUSTMENT ENTRIES IN THE ACCOUNTS BETWEEN TWO ENTITIES, THE A MOUNTS WERE NOT IN THE NATURE OF LOAN OR DEPOSIT, BUT MERELY AD JUSTMENTS, APPLICATION OF SECTION 2(22)(E) WOULD NOTARISE.' M/S THE HOOGHLY MILLS CO LTD VS. DC1T, 2016-TIOL-14 72- ITAT-KOL ++ BOTH THE PARTIES ARE BENEFICIARY OF THE TRANSAC TION BEING CURRENT ACCOUNT OF THE ABOVE TRANSACTIONS. SO AS PE R THE LEGAL PROPOSITION DECIDED BY JURISDICTIONAL HIGH COURT, I T IS CLEAR THAT SECTION 2(22)(E) OF THE ACT WAS INSERTED TO BRING W ITHIN THE PURVIEW OF TAXATION THOSE AMOUNTS WHICH ARE ACTUALLY A DIST RIBUTION OF PROFITS BUT ARE DISBURSED AS A LOAN SO THAT TAX THE REON CAN BE AVOIDED. IT IS PERTINENT TO NOTE HERE THAT WHEN DIV IDENDS ARE DECLARED BY A COMPANY, IT IS SOLELY THE SHAREHOLDER S WHO BENEFIT FROM THE TRANSACTION. NO BENEFITS ACCRUE TO THE COM PANY BY WAY OF DIVIDEND DISTRIBUTION. THUS, SECTION 2(22)(E) OF TH E ACT COVERS ONLY SUCH SITUATIONS, WHERE THE SHAREHOLDER ALONE BENEFI TS FROM THE LOAN. IN THE INSTANT CASE THE COMPANY BENEFITS FROM THE SAID TRANSACTION, IT WILL TAKE THE CHARACTER OF A COMMER CIAL TRANSACTION AND HENCE WILL NOT QUALIFY TO BE DIVIDEND. NOW IT C AN BE SAID THAT SEC. 2(22)(E) OF THE ACT COVERS ONLY THOSE TRANSACT IONS WHICH BENEFIT THE SHAREHOLDER ALONE AND RESULTS IN NO BEN EFIT TO THE COMPANY. ON THE OTHER HAND, IF THE TRANSACTION IS M UTUAL BV WHICH BOTH SIDES ARE BENEFITED, IT IS UNDOUBTEDLY O UTSIDE THE PURVIEW OF PROVISIONS OF SEC. 2(22)(E) OF THE ACT. FROM THE ABOVE, IT IS CLEAR THAT THE LOAN ACCOUNT DIFFERS FROM CURRENT ACCOUNT AND THE I.T.A. NO.812/DEL/2018 9 PROVISIONS OF SECTION 2(22)(E) OF THE ACT, BEING A DEEMING SECTION, CANNOT BE APPLIED TO CURRENT ACCOUNT. IN SUCH CIRCU MSTANCES, THE ORDER OF THE CIT U/S 263 OF THE ACT IS NOT SUSTAINA BLE IN LAW;' ITO VS. GAYATRICHAKRABORTY, 2015-TIOL-2115-ITAT-KOL '++ NEITHER THE ASSESSEE OWES BAPL NOR BAPL OWES AS SESSEE ANY SUM. THE ASSESSEE WAS BENEFICIARY OF THE SUMS G IVEN BY BAPL AT SOME POINT OF TIME DURING THE PREVIOUS YEAR AND BAPL WAS THE BENEFICIARY OF THE SUMS GIVEN BY THE ASSESS EE AT ANOTHER POINT OF TIME DURING THE PREVIOUS YEAR. IT WAS THER EFORE A CASE OF MUTUAL RUNNING OR CURRENT ACCOUNT WHICH CREATED IND EPENDENT OBLIGATIONS ON THE OTHER. THERE WERE RECIPROCAL DEM ANDS BETWEEN THE PARTIES AND THE ACCOUNT WAS MUTUAL. THE TRANSAC TIONS IN QUESTION DOES NOT BENEFIT THE SHAREHOLDER I.E., THE ASSESSEE ALONE. THE LOAN ACCOUNT IS DIFFERENT FROM A CURRENT ACCOUN T WITH A SHAREHOLDER AND THE TRANSACTIONS BETWEEN THE ASSESS EE AND BAPL ARE IN THE NATURE OF CURRENT ACCOUNT AND PROVI SIONS OF SEC 2(22)(E) WILL NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE.' 5. WITHOUT PREJUDICE TO THE ABOVE, HE FURTHER SUBMITTED THAT THE LD. AO HAS MENTIONED THAT M/S ENRICH AGRO FOOD PROD UCTS PVT. LTD. HAS GIVEN LOAN OF RS. 1,97,99,254/- TO THE ASSESSEE. THE ASSESSEE IS HOLDING 14.57% OF SHARES IN THE COMPANY. IT WAS EXPLAINED TO THE LD. AO THAT THE COMPANY HAD DECIDED TO INVEST IN A RESIDENTIAL PROPERTY AT GURGAON. EVEN THE BUILDER HA S BEEN REQUESTED TO REGISTER THE PROPERTY IN THE JOINT NAME OF THE DIRECTOR AND THE COMPANY AND NOT IN THE SINGLE NAME OF THE ASS ESSEE; BECAUSE PART PAYMENT WAS MADE BY THE COMPANY AND REMAI NING AMOUNT WAS PAID BY THE ASSESSEE THROUGH HOUSING LOAN. UNDER THE CIRCUMSTANCES, AMOUNT WAS GIVEN FOR ACQUIRING THE PROP ERTY ON BEHALF OF THE COMPANY AND NOT FOR THE OWNERSHIP OF THE DIRECTORS. I.T.A. NO.812/DEL/2018 10 HENCE, IT IS A COMMERCIAL TRANSFER. THEREFORE, SECTION 2(22)(E) CANNOT BE INVOKED. 6. LD. COUNSEL FURTHER DREW OUR ATTENTION TO BOARD RES OLUTION PASSED ON 12/03/2014 BY M/S ENRICH AGRO FOOD PRODUC TS PVT. LTD. FOR MAKING PAYMENT UP TO RS. 5 CRORE TO SMT. NEENA KANDHARI FOR THE SPECIFIC PURPOSE OF PURCHASE OF RESIDENTIAL P ROPERTY IN GURGAON, HARYANA FOR THE PURPOSE OF COMPANY'S BUSINE SS. BALANCE AMOUNT WAS TO BE INVESTED BY THE APPELLANT THROUGH HER OWN SOURCES AS WELL AS HOUSING LOAN. THE PROPERTY WAS J OINTLY PURCHASED BY MRS. NEENA KANDHARI AND M/S ENRICH AGR O FOOD PRODUCTS PVT. LTD. HOWEVER, INADVERTENTLY THE ALLOTMENT LE TTER WAS ISSUED IN THE NAME OF MRS. NEENA KANDHARI ONLY. THER EAFTER, LETTERS WERE WRITTEN TO THE VENDOR/BUILDER FOR ADDING THE NAME OF THE COMPANY ALONG WITH THE NAME OF THE ASSESSEE. IT WAS ALSO REQUESTED THAT THE REGISTRATION OF THE PROPERTY SHOULD A LSO BE DONE IN THE JOINT NAME. 7. THUS, THE AMOUNT WAS GIVEN TO THE ASSESSEE BY THE COM PANY FOR BUSINESS PURPOSES, BECAUSE IT WAS THE DUTY OF THE COMPANY TO PROVIDE RESIDENTIAL ACCOMMODATION TO THE DIRECTORS, IF TH E BOARD SO APPROVES. IT WAS PURELY A COMMERCIAL TRANSACTION. ANY AMOUNT GIVEN TO A SHAREHOLDER FOR BUSINESS PURPOSES DOES NO T ATTRACT SECTION 2(22)(E). RELIANCE WAS PLACED ON THE FOLLOWIN G CASE LAWS: - GREEN VALLEY HOUSING AND LAND DEVELOPMENT PVT. LTD. VS ACIT, 2015- TI0L-1144-ITAT-DEL '22. NOW THE DEPARTMENT IS IN APPEAL. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIAL AVAILA BLE ON THE RECORD, IT APPEARS THAT THE ASSESSEE HAD SHOWN THE IMPUGNED AMOUNT IN ITS BALANCE SHEET AS CURRENT LIABIL ITY WHICH WAS RECEIVED AS AN ADVANCE AGAINST THE PURCHASE OF SUITABLE LAND. THE AO ALTHOUGH INVOKED THE PROVISIONS OF I.T.A. NO.812/DEL/2018 11 SECTION 2(22)(E) OF THE ACT BUT COULD NOT BRING ANY MATE RIAL ON RECORD TO SUBSTANTIATE THAT THE AMOUNT IN QUESTION WAS A LO AN OR DEPOSIT AND NOT THE ADVANCE RECEIVED FROM ASSOCIATE S CONCERN M/S COUNTRYWIDE PROMOTERS PVT. LTD.. WE, THERE FORE, BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORESAID REFERRED TO CASE OF CIT VS. ANKITEK PVT. LTD. (SUPRA), DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE ID. CIT(A). IN TH AT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL.' ITO VS. ABP ENTERTAINMENT PVT. LTD., 2016-TIOL-311-ITAT -KOL '++ THE ADVANCE HAS BEEN GIVEN BY ONE GROUP COMPANY TO ANOTHER SO THAT COMPANY IS ABLE TO CARRY OUT AND PURSUE ITS BUSINESS ACTIVITIES WITH ANOTHER PARTY. THIS HAS NOT B EEN DOUBTED BY THE AO. IT THEREFORE, IMPLIES THAT THIS WAS A G ENUINE BUSINESS ADVANCE AND NOT A PLOY TO PASS ON THE PROFITS OF M/S. ABP PVT. LTD AS AN ADVANCE AND NOT AS DIVIDEND IN ORDE R TO SAVE PAYMENT OF TAX ON DIVIDEND DISTRIBUTION. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER O F THE CIT (A) IN DELETING THE ADDITION MADE BY THE AO U/S 2(22)(E);' 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS A S WELL AS THE MATERIAL REFERRED TO BEFORE US AT THE TIME OF H EARING. THE ASSESSING OFFICER HAS TAXED AMOUNT RECEIVED FROM M/ S. ENRICH AGRO FOODS PRODUCTS PVT. LTD. AMOUNTING TO RS.1,97,99,254/- AS UNEXPLAINED DEEMED DIVIDEND U/S 2(22)(E). THE COMPANY AS NOTED BY THE LD. CIT(A) HA S MAINTAINED THREE LEDGER ACCOUNTS IN THE NAME OF THE ASSESSEE, WHEREIN LOAN ACCOUNT WHICH HAD AN OPENING CREDIT BA LANCE OF RS. 1,05,10,980/- AND CLOSING BALANCE AT RS. 1,33,0 0,746/-. LD. CIT(A) FURTHER NOTED THAT, THERE WAS CREDIT BAL ANCE THROUGHOUT THE YEAR WHICH MEANS THAT IT IS THE ASSE SSEE WHO I.T.A. NO.812/DEL/2018 12 HAS GIVEN MONEY TO THE COMPANY. IT IS THE COMPANY W HICH HAS DERIVED THE BENEFIT BECAUSE OF THE TRANSACTIONS IN THIS ACCOUNT AND NOT THE ASSESSEE. HOWEVER, WHEN ADVANCE FOR PROPERTY ACCOUNT WAS GIVEN ON 23/04/2014, THERE WAS A CLOSING DEBIT BALANCE OF RS. 3,31,00,000/- AND SALA RY ACCOUNT WHICH HAS OPENING AS WELL AS CLOSING BALANCE AT NIL . 9. THOUGH THE CONSOLIDATED LEDGER ACCOUNT SHOWS 56 ENTRIES WHICH LD. CIT (A) HAS HELD TO BE RUNNING/CU RRENT ACCOUNT AND NOT AN ACCOUNT FOR LOAN AND ADVANCES, B UT THAT ITSELF WILL NOT ABSOLVE THE ASSESSEE FROM ATTRACTIN G THE DEEMING PROVISION, ALBEIT EACH AND EVERY ADVANCE NE EDS TO BE EXPLAINED. WE DO NOT AGREE WITH THE CONTENTION THAT LOOKING TO LARGE NUMBER OF ENTRIES IN THE ACCOUNT BETWEEN COMP ANY AND SHAREHOLDER, THEN IT SHOULD NOT BE TREATED IN THE N ATURE OF LOAN AND ADVANCES AS STIPULATED U/S.2(22)(E). 10. HOWEVER, IF THE INVESTMENT IN THE RESIDENTIAL PROPERTY AT GURGAON FOR WHICH BOARD RESOLUTION WAS PASSED ON 12.03.2014 WAS FOR AND ON BEHALF OF THE COMPANY THE N ONLY ANY SUCH ADVANCE WILL NOT BE TREATED IN THE NATURE OF DEEMED DIVIDEND U/S.2(22)(E). THE BOARD OF DIRECTORS HAVE PASSED A RESOLUTION FOR MAKING PAYMENT UP TO RS.5 CRORE TO S MT. NEENA KANDARI FOR THE SPECIFIC PURPOSE OF PURCHASE OF RES IDENTIAL PROPERTY, SOLELY FOR THE PURPOSE OF COMPANYS BUSIN ESS OR ASSET AND EVEN IF THE BALANCE AMOUNT WAS INVESTED B Y THE ASSESSEE THROUGH HER OWN SOURCES, THEN ALSO IT DOES NOT LEAD TO INFERENCE THAT PROPERTY IS OF THE ASSESSEE ONLY. THE PROPERTY I.T.A. NO.812/DEL/2018 13 WAS MEANT TO BE USED FOR THE RESIDENCE OF THE DIREC TORS PROVIDED BY THE COMPANY. TO JUSTIFY THE NAME OF ASSE SSEE IN THE SAID PROPERTY, THE CONTENTION OF THE ASSESSEE H AS BEEN THAT, UNDER THE RBI GUIDELINES, HOUSING LOAN CAN BE GRANTED ONLY TO THE INDIVIDUAL AND NOT TO THE COMPANY, AND THEREFORE, INSTEAD OF BUYING THE PROPERTY IN COMPANYS NAME, I T WAS DECIDED TO BUY THE PROPERTY IN THE INDIVIDUAL NAME OF THE DIRECTORS ON BEHALF OF THE COMPANY. IN SUPPORT OF T HIS CONTENTION, IT HAS BEEN SHOWN BEFORE US THAT THE BU ILDER OF THE FLAT WHERE THE ASSESSEE COMPANY INTENDED TO PUR CHASE THE FLAT HAD WRITTEN A LETTER DATED 04.02.2015 TO REGIS TER THE PROPERTY IN THE JOINT NAME OF THE COMPANY AS WELL AS THE DIRECTORS. EVEN THE HOUSING LOAN SANCTIONED BY THE HDFC BANK SHOWS THE COMPANY AS A CO-BORROWER. THUS, AS C ULLED OUT FROM THE RECORDS PLACED, THE PROPERTY WAS JOINT LY PURCHASED BY THE ASSESSEE AND M/S. ENRICH AGRO FOOD S PRODUCTS PVT. LTD. 11. NOW BEFORE US IT HAS BROUGHT TO OUR NOTICE TH AT, LATER ON, THE BUILDER VIDE LETTER DATED 26.11.2019 HAS MADE T HE ALLOTMENT OF THE FLAT IN THE NAME OF M/S. ENRICH AGRO FOODS PRODUCTS PVT. LTD., THRU. MR. TARAN PAL SINGH KANDA RI (DIRECTOR) . HOWEVER, THIS LETTER HAS BEEN FILED BEFORE US FOR THE FIRST TIME AND THEREFORE THE VERACITY OF THE SAID L ETTER NEEDS TO BE EXAMINED BY THE ASSESSING OFFICER. LOOKING TO TH E FACTS AND CIRCUMSTANCES AND NEW EVIDENCE BROUGHT ON RECOR D, WE THINK IT PROPER TO SET-ASIDE THE MATTER TO THE ASSE SSING OFFICER FOR LIMITED PURPOSE, KEEPING IN MIND THAT:- I.T.A. NO.812/DEL/2018 14 THE PROVISION OF DEEMED DIVIDEND U/S. 2(22)(E) CAN BE INVOKED ONLY WHEN ANY LOAN AND ADVANCE HAS BEEN GIV EN TO THE SHAREHOLDER WHICH IS NOT FOR THE PURPOSE OF THE BUSINESS OF THE COMPANY OR OTHERWISE FOR THE COMPAN Y ITSELF, BUT AS ADVANCE SOLELY TO THE SHAREHOLDERS W HICH IS IN THE NATURE OF LOAN. IF THE ADVANCE HAS BEEN GIVEN FOR THE PURCHASE OF PROPERTY WHICH IS ULTIMATELY BEING ALLOTTED OR BELO NGS TO THE COMPANY AND ONLY NAME OF THE SHAREHOLDER HAS BE EN PUT ON RECORD, THEN OSTENSIBLY IT IS IN THE NATURE OF ADVANCE FOR THE PURPOSE OF COMPANYS BUSINESS OR FO R THE PURPOSE OF COMPANY AND IN SUCH A CASE IT CANNOT BE TAXED AS DEEMED DIVIDEND U/S.2(22)(E) IN THE HANDS OF SHAREHOLDER. NOW THAT, LATER ON THE ENTIRE ALLOTMENT HAS BEEN MA DE IN THE NAME OF THE COMPANY, M/S. ENRICH AGRO FOODS PRODUCTS PVT. LTD. THROUGH ANOTHER DIRECTOR, SHRI T ARAN PAL SINGH KANDARI AND PROPERTY IS NO LONGER ALLOTTE D TO THE ASSESSEE, AND IF THAT MAY BE THE CASE, THEN UND ER NO CIRCUMSTANCES DEEMING PROVISION OF SECTION 2(22)(E) CANNOT BE ATTRACTED. 12. ACCORDINGLY, WE ARE REMANDING THIS ISSUE TO T HE FILE OF THE ASSESSING OFFICER ONLY FOR THE PURPOSE OF EXAMI NING, FIRSTLY WHETHER THE COMPANY HAD GIVEN THE ADVANCE TO THE AS SESSEE FOR THE PURPOSE OF ACQUISITION OF AN ASSET/ PROPERT Y TO BE USED FOR THE PURPOSE OF COMPANY AND; SECONDLY, IN WHOSE NAME PROPERTY HAS BEEN FINALLY REGISTERED. THE ASSESSING OFFICER I.T.A. NO.812/DEL/2018 15 SHALL PROVIDE SUFFICIENT OPPORTUNITY TO THE ASSESSE E TO ESTABLISH AND SUBSTANTIATED THE AFORESAID FACTS. WI TH THIS OBSERVATION, THE APPEAL OF THE REVENUE IS TREATED A S PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH APRIL, 2021 SD/- SD/- [O.P. KANT] [AMIT SHUKLA] [ACCOUNTANT MEMBER] JUDICIAL MEMBER DATED: 20/04/2021 PKK: