Abhijit Vivekanand Patil, Panvel V. ACIT, Panvel

ITA 833/PUN/2011

• Counselvise Citation: 83324514 RSA 2011
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 14-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: SUBODH RATNAPARAKHI
• Keywords: Opportunity of being heard; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 833 / P N/ 20 1 1 ASSESSMENT YEAR : 2008 - 09 ABHIJIT VIVEKANAND PATIL, PROP. M/S . ABHIJIT TRANSPORT, PLOT NO. 25, ASWAD, VIJAY PATH, PANVEL, DISTT. - RAIGAD VS. ADDL. CIT, PANVEL RANGE, PANVEL (APPELLANT) (RESPONDENT) PAN NO. AJWPP2808E APPELLANT BY: SHRI SUBODH RATNAPARAKHI RESPONDENT BY: SHRI S.P. WALIMBE DATE OF HEARI NG : 0 3 - 07 - 2014 DATE OF PRONOUNCEMENT : 22 - 0 7 - 2014 ORDER PER R.S . PADVEKAR , JM : - IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A) - I, THANE DATED 15 - 03 - 2011 FOR THE A.Y. 2008 - 09 . THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS IN APPEAL: 1A. THE HON. CIT (A) ERRED IN SUSTAINING THE ADDITION MADE BY THE LD. A.O. BY HOLDING THAT THE SUM OF RS.100,00,000/ - ADVANCED BY M/S. KARNALA INFRASTRUCTURE PROJECTS PVT. LTD. TO THE APPELLANT FOR ACQUISITION OF LAND AT VILLAGE PALASPE , TALUKA PANVEL, DIST. RAIGAD ATTRACTED THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT 1961 AS DEEMED DIVIDEND. 1B . THE HON. CIT (A) ERRED IN NOT APPRECIATING THAT THE PROPOSED TRANSACTION FOR PURCHASE OF LAND ON BEHALF OF M/S. KARNALA INFRASTRUCTURE P ROJECT PVT. LTD. WAS A GENUINE TRANSACTION SUPPORTED BY A WRITTEN DOCUMENT AND THAT THERE WAS NO CAUSE TO DISPUTE THE SAME. 1C. THE HON. CIT (A) FAILED TO APPRECIATE THAT THE APPELLANT UNDER THE AGREEMENT (MOU) WITH M/S. KARNALA INFRASTRUCTURE PROJECTS PVT . 2 ITA NO. 833/PN/2011, ABHIJIT VIVEKANAND PATIL, PANVEL LTD. WAS REQUIRED TO ACQUIRE FOR AND ON BEHALF OF THE COMPANY, LAND AT VILLAGE PALASPE, TALILKA PANVEL, DIST. RAIGAD FOR WHICH A FIXED RATE PER GUNTHA WOULD BE PAID TO THE APPELLANT AND AS PART OF THE LAND WAS ALREADY OWNED BY THE APPELLANT IN THE GIVEN LOCATION, TO THAT EXTENT THE ADVANCE RECEIVED WAS NOT REQUIRED TO BE DIRECTLY APPLIED FOR MAKING PAYMENT TO FARMERS. 1 D. THE HON. CIT (A) FAILED TO APPRECIATE THAT THE ADVANCE RECEIVED BY THE APPELLANT WAS A GENUINE 'TRADE ADVANCE' AND DID NOT ATTRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE 1.T. ACT 1961. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS AN INDIVIDUAL AND FILED THE RETURN OF INCOME OF THE A.Y. 2008 - 09 DECLARING TOTAL INCOME AT RS.56,63,460/ - ON 30 - 09 - 2008. THE ASSESSEES ASSESSMENT HAS BEEN COMPLETED BY THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 16 - 09 - 2010 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS.1,64,71,340/ - . THE ISSUE ARISING FROM THE GROUNDS TAKEN BY THE ASSESSEE IS IN RESPECT OF THE ADDITION OF RS.1 CRORE MADE BY THE ASSESSING OFFICER TREATING THE SAME AS DEEMED DIVIDEND U/S. 2(22)( E ) OF THE ACT. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORTATION AND RESALE OF SAND AND KHADI IN THE NAME AND STYLE OF M/S. ABHIJ I T TRANSPORT. THE ASSESSE E HOLDS 45% SHARE IN A CONCERN NAMELY M/S. KARNALA INFRASTRUCTURE PVT. LTD. ON EXAMINATION OF B ALANCE S HEET , AS NOTED BY THE ASSESSING OFFICER , IT WAS REVEALED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.1 CRORE FROM M/S. KARNALA INFRASTRUCTURE PVT. LTD. D URING THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2008 - 09. THE ASSESSING OFFICER TREATED THE SAME AMOUNT AS A DEEMED DIVIDEND WITHIN MEANING OF SEC. 2(22)(E) OF THE ACT. 3. THE ASSESSEE STATED BEFORE THE ASSESSING OFFICER THAT HE HAS ENTERED INTO AN AGREEME NT WITH M/S. KARNALA INFRASTRUCTURE PVT. LTD. TO GIVE SERVICES OF ACQUIRING OF 10 ACRES OF CONTINUOUS LANDS AT PALASPE, TAL. - PANVEL . IT IS STATED THAT THE ASSESSEE HAD TO DEVELOP THE LAND AFTER 3 ITA NO. 833/PN/2011, ABHIJIT VIVEKANAND PATIL, PANVEL ACQUISITION AND TRANSFER THE SAME TO THE COMPANY FOR ITS PRO JECT. AS CLAIMED BY THE ASSESSEE HE RECEIVED RS.1 CRORE AS ADVANCE FROM THE COMPANY FOR ACQUIRING LANDS ON ITS BEHALF. THE ASSESSEE ALSO CLAIMED THAT PROVISIONS OF SEC. 2(22)(E) ARE NOT ATTRACTED AS THE SAID AMOUNT REPRESENTED TRADE ADVANCE. THE ASSESS ING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. AS NOTED BY THE ASSESSING OFFICER THE LANDS HAD BEEN PURCHASED BY THE ASSESSEE PRIOR TO ENTERING INTO AGREEMENT WITH THE COMPANY AND THE LANDS WERE SHOWN IN THE BALANCE SHEET OF M/S. ABHI JIT AUTOMOBILES ON THE ASSET SIDE. THE ASSESSING OFFICER MADE AN ADDITION OF RS.1 CRORE TREATING THE ADVANCE RECEIVED FROM M/S. KARNALA INFRASTRUCTURE PVT. LTD. AS A DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE WITHIN THE MEANING OF SEC. 2(22)(E) OF THE A CT. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT(A) BUT WITHOUT SUCCESS. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL FAIRLY SUBMITS THAT THE IDENTICAL ISSUE HAS COME FOR THE CONSIDERATION BEFORE THIS T RIBUNAL IN RESPECT OF THE PRECEDING YEAR IN THE ASSESSEES OWN CASE AND THE MATTER HAS BEEN REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR THE PURPOSE OF FRESH ADJUDICATION. THE LD. COUNSEL ALSO FILED THE COPY OF THIS TRIBUNALS ORDER IN THE CASE OF ASSESSEE IN ITA NO. 452/PN/2011 FOR THE A.Y. 2007 - 08 DATED 30 - 05 - 2014 WHICH IS PLACED ON RECORD. 5. IN THE PRECEDING YEAR I.E. A.Y. 2007 - 08 , THE IDENTICAL ADDITION WAS MADE BY THE ASSESSING OFFICER WHICH WAS SUBJECT MATTER OF THE APPEAL BEFORE THIS T RIBUNAL AND THE TRIBUNAL REMITTED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER AND OPERATIVE PART OF THE REASONS AND FINDINGS ARE AS UNDER: 16. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE 4 ITA NO. 833/PN/2011, ABHIJIT VIVEKANAND PATIL, PANVEL VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE ASSESSING OFFICER MADE THE ADDITION OF RS.1.00 CRORE BY INVOKING THE PROVISIONS OF SEC.2(22)(E) ON THE GROUND THAT THE COMPANY KIPL HAVING SUFFICIENT RESERVES HAS ADVANCED AN AMOUNT OF RS. 1 CRORE TO A DIRECTOR HAVING SUBSTANTIAL INTEREST IN THE COMPANY WHO HOLDS ABOUT 45% OF THE SHARE. WE FIND THE LEARNED CIT(A) UPHELD THE ACTION OF THE AO IN INVOKING THE PROVISIONS OF SEC. 2(22)(E) AND DIRECTED THE AO TO RESTRICT SUCH ADDITION TO THE EXTENT OF ACCUMULATED PROFITS UPTO THE DATE OF PAYMENT OF ADVANCE. 16.1 IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THIS IS A TRADE TRANSACTION AND THE ADVANCE WAS GIVEN BY THE COMPANY TO THE ASSESSEE FOR PURCHASE OF CONTIGUOUS LAND ADMEASURING OF ABOUT 10 ACRES OR THEREABOUTS SINCE THE COMPANY WAS NOT AUTHORISED TO PURCHASE AGRICULTURAL LAND. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSES SEE THAT SINCE THE ASSESSEE WAS ALREADY HAVING 4.78 ACRES OF LAND AND THE ASSESSEE HAD UNDERTAKEN TO ACQUIRE LAND FOR A FIXED CONSIDERATION OF RS.30 LAKHS PER ACRE, THEREFORE, TO THIS EXTENT HE WAS NOT REQUIRED TO MAKE ANY ADVANCE TO VARIOUS FARMERS FOR AC QUIRING CONTIGUOUS LAND OF 10 ACRES. SINCE THE ASSESSEE WAS UNABLE TO ACQUIRE CONTIGUOUS LAND OF 10 ACRES, THEREFORE, ULTIMATELY, THE MOU WAS CANCELLED AND MONEY WAS REFUNDED TO THE COMPANY. SINCE IT IS A COMMERCIAL TRANSACTION THE PROVISIONS OF SECTION 2(22)(E), ACCORDING TO THE LD. AR ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. SINCE THE LOWER AUTHORITIES HAVE NOT ADJUDICATED FROM THIS ANGLE AND THE COMPANY DIRECTORS WERE NOT EXAMINED, THEREFORE, WE FIND MERIT IN THE ALTERNATE CONTENTION OF TH E LD. COUNSEL FOR THE ASSESSEE THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE - ADJUDICATION OF THE ISSUE. WE ACCORDINGLY RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 6. WE, THEREFORE, IN THIS YEAR ALSO REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF DIRECTIONS GIVEN IN ASSESSEES OWN CASE REFERS (SUPRA) FOR THE A.Y. 2007 - 08. 5 ITA NO. 833/PN/2011, ABHIJIT VIVEKANAND PATIL, PANVEL ACCORDINGLY, GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED FOR THE STATISTICAL PURPOSES. 7. I N THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR THE STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 22 - 07 - 20 1 4 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 22 ND JULY, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 4 THE CIT(A) - I, THANE THE CIT - II, THANE 5 THE DR, ITAT, B BENCH, PUNE. 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE