NILESH SINGHI, Jaipur V. ACIT, Jaipur

ITA 898/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5480 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 29-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH JCIT DR DHK
• Keywords: Business income; Salary income; Opportunity of being heard; Deemed to accrue or arise in india; Deemed dividend; Commercial expediency
• Section: 148; 56

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE:SHRI T.R. MEENA,AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 898/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2008-09 SHRI NILESH SINGHI C/O M/S. GAD FASHION (P) LTD. G-152, INDL. AREA, MANSAROVAR, JAIPUR CUKE VS. THE ACIT CIRCLE- 7 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AESPS 9601 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 899/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2008-09 SHRI ASHOK SINGHI C/O M/S. GAD FASHION (P) LTD. G-152, RIICO INDL. AREA, MANSAROVAR, JAIPUR CUKE VS. THE ITO WARD- 7 (2) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ABWPS 6603 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL , CA JKTLO DH VKSJ LS@ REVENUE BY: MRS. NEENA JEPH, JCIT -DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16/12/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 12 /02/2016 VKNS'K@ ORDER PER T.R. MEENA, AM:- BOTH THESE ASSESSEE'S HAVE FILED RESPECTIVE APPEAL S AGAINST SEPARATE ORDERS OF THE LD. CIT(A)-III, JAIPUR DATED 18-11-20 14 FOR THE ASSESSMENT YEAR 2008-09. ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 2 2.1 THE ASSESSEE SHRI NILESH SINGHI IN ITA NO. 898/ JP/2014 HAS RAISED FOLLOWING GROUNDS 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF AO IN TREATING THE AMOUNT OF RS. 20,00,000/- RECEIVED FROM M/S. GAD FASHIONS (INDIA) PVT. LTD. AS DEEMED DIVIDEND U/S 2(22)(E) IN THE HANDS O F THE ASSESSEE. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 4,42,800/- BY TREAT ING THE AMOUNT OF RS. 20,00,000/- GIVEN BY M/S. ECOTUNES IN DIA (P) LTD. TO GAD FASHIONS (INDIA) PVT. LTD. AS DEEMED DI VIDEND U/S 2(22)(E) IN THE HANDS OF THE ASSESSEE 3.1 THE ASSESSEE SHRI ASHOK SINGHI IN ITA NO. 899/J P/2014 HAS RAISED FOLLOWING GROUNDS 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF AO IN TREATING THE AMOUNT OF RS. 20,00,000/- RECEIVED FROM M/S. GAD FASHIONS (INDIA) PVT. LTD. AS DEEMED DIVIDEND U/S 2(22)(E) IN THE HANDS O F THE ASSESSEE. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 4,43,200/- BY TREAT ING THE AMOUNT OF RS. 20,00,000/- GIVEN BY M/S. ECOTUNES IN DIA (P) LTD. TO GAD FASHIONS (INDIA) PVT. LTD. AS DEEMED DI VIDEND U/S 2(22)(E) IN THE HANDS OF THE ASSESSEE 4.1 THE ISSUES RAISED BY THE ABOVE ASSESSEE'S ARE C OMMON IN RESPECTIVE APPEALS. HOWEVER, FOR THE SAKE OF CONVENIENCE, THES E APPEALS ARE BEING DECIDED THROUGH A COMMON ORDER. ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 3 5.1 FIRST OF ALL, WE TAKE UP THE APPEAL OF SHRI NIL ESH SINGH (ITA NO. 898/JP/2014) WHEREIN GROUND NO. 1, THE AO OBSERVED THAT THE CASE OF THE ASSESSEE WAS REOPENED U/S 148 OF THE ACT. THE AO FU RTHER OBSERVED THAT THE ASSESSEE DERIVED INCOME FROM SALARY FROM M/S. G AD FASHIONS (INDIA) PVT. LTD. AND M/S. R FASHIONS AND INCOME FROM OTHER SOURCES. THE ASSESSEE HAS 26.13% SHARES IN M/S. ECOTUNES INDIA P VT. LTD. AND 22.14 SHARES IN M/S. GAD FASHIONS (INDIA) PVT. LTD. FOR T HE ASSESSMENT YEAR 2008-09. IT WAS NOTICED BY THE AO THAT ADVANCE OF 2 0.00LACS WAS MADE TO THE ASSESSEE BY M/S. GAD FASHIONS (INDIA) PVT. LTD. AND THE ASSESSEE WAS HAVING SHAREHOLDING OF MORE THAN 10% IN THE SAI D COMPANY. FURTHER THE ASSESSEE WAS HAVING 26.13% SHARES IN M/S. ECTOT UNES INDIA (P) LTD. AND M/S. GAD FASHIONS (INDIA) PVT. LTD. ADVANCED RS . 20.00 LACS DURING THE YEAR UNDER CONSIDERATION TO M/S. ECOTUNES INDIA PVT. LTD. BOTH OF THESE TRANSACTIONS ARE COVERED UNDER THE DEFINITION OF DEEMED DIVIDEND AS DEFINED U/S 2(22)(E) OF THE I.T. ACT, 1961.THE AO G AVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASS ESSEE ALSO FURNISHED THE REPLY VIDE LETTER DATED 21-01-2013 WHICH HAS BE EN REPRODUCED AT PAGES 2 TO 7 OF THE ASSESSMENT ORDER. AFTER CONSIDE RING THE REPLY AND CASE LAWS ON THIS ISSUE, THE AO HELD THAT THE ADVANCE IS COVERED U/S 2(22) (NOT TAXABLE IN THE HANDS OF SHAREHOLDERS BY VIRTUE OF SECTION 10(34)/33 OF ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 4 THE ACT THEN ON SUCH DIVIDEND, THE COMPANY DECLARIN G INCOME WILL PAY DIVIDEND TAX U/S 115O. IF A LOAN OR ADVANCE IS GIVE N WHICH IS DEEMED AS DIVIDEND U/S 2(22)(E) THEN SUCH LOAN OR ADVANCE IS TAXABLE U/S 56 AS DIVIDEND IN THE HANDS OF THE RECIPIENT. IT IS ES TABLISHED THAT ALL THE CONDITIONS AS LAID DOWN U/S 2(22)(E) ARE SATISFIED IN CASE OF THE ASSESSEE TO TREAT THE LOANS AND ADVANCES BY M/S. GAD FASHIONS ( INDIA) PVT. LTD. TO THE ASSESSEE AND LOANS BY M/S. ECOTUNES INDIA (P) L TD. TO M/S. GAD FASHIONS (INDIA) PVT. LTD. AS DEEMED DIVIDEND IN HI S HANDS. THE HON'BLE BOMBAY HIGH COURT IN THE CASE BY FOLLOWING DECISIO N OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. HOTE L HILLTOP , 313 ITR 116 WHEREIN IT HAS BEEN HELD THAT THE DEEMED DIVIDEND WOULD NOT BE DEEMED DIVIDEND IN THE HANDS OF THE FIRM, RATHER IT WOULD OBVIOUSLY BE DEEMED DIVIDEND IN THE HANDS OF THE INDIVIDUAL OR WHOSE BE HALF, OR ON WHOSE INDIVIDUAL BENEFIT, BEING SUCH SHAREHOLDER, THE AMO UNT IS PAID BY THE COMPANY TO SUCH CONCERN ACCORDINGLY, THE AO MADE AN ADDITION OF RS. 20.00 LACS U/S 2(22)( E) OF THE ACT. 5.2 BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASS ESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ADDITION BY FOLLOWING OBSERVATION. 4.3 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF T HE AO AS ALSO THE SUBMISSION OF THE APPELLANT. IT MAY BE NOTED ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 5 THAT THE AO HAS TREATED TWO TRANSACTIONS TO BE THE DEEMED DIVIDEND U/S. 2(22)(E) OF THE I.T. ACT. THE ONE TRA NSACTION IS THAT M/S GAD FASHIONS INDIA PVT. LTD. HAS ADVANCED RS. 20,00,000/- TO THE ASSESSEE. THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE WAS HAVING 22.14% SHARE HOLDING I N M/S GAD FASHIONS INDIA PVT. LTD. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION 208-09 AND THEREFORE AS PER THE AO THE ADVANCEMENT OF LOAN OF RS. 20,00,000/- WAS DEEMED D IVIDEND AS PER PROVISION OF SECTION 2(22)(E) OF I.T. ACT. A NOTHER PROVISION WAS IN RESPECT OF LOAN OF RS. 20,00,000/ - ADVANCED BY M/S. ECTOTUNES INDIA PVT. LTD. TO M/S GAD FASHIO NS INDIA PVT. LTD.. THE ASSESSEE WAS HAVING 26.13% SHARE HOL DING THAT IN M/S. ECOTUNES INDIA PVT. LTD. THE AO PLACIN G RELIANCE ON THE DECISION OF HON'BLE HON'BLE JURISDI CTONAL HIGH COURT IN THE CASE OF CIT VS. HOTEL HILL TOP, 3 16 ITR 116 HELD THAT LOAN BY M/S. ECOTUNES INDIA PVT. LTD. TO M/S GAD FASHIONS INDIA PVT. LTD. WAS IN THE NATURE OF D EEMED DIVIDEND, TO BE IN THE HANDS OF THE DIRECTORS HAVIN G SUBSTANTIAL INTEREST IN THE RECIPIENT COMPANY. AS T HE ASSESSEE WAS HAVING SHARE HOLDING OF 22.14% IN M/S GAD FASHI ONS INDIA PVT. LTD. THEREFORE AS PER AO THE DEEMED DIVI DEND WAS TO BE TAXED IN THE HANDS OF THE ASSESSEE. THE AO FU RTHER NOTED THAT THERE WAS THREE COMMON SHARE HOLDERS IN M/S GAD FASHIONS INDIA PVT. LTD., THEREFORE THE AMOUNT OF R S. 20,00,000/- WAS TAXED IN THE HANDS OF THREE DIRECTO RS IN THE RATIO OF 1.3 RD OF RS. 20,00,000/- AND ACCORDINGLY, IN APPELLANT CASE ADDITION OF RS. 666666/- WAS MADE. BEFORE ADJU DICATING THE ISSUE UNDER CONSIDERATION THE PROVISIONS OF SEC TION 2(22)(E) ARE TO BE CONSIDERED. IT MAY BE NOTED THAT FOR APPLICATION OF PROVISIONS OF SECTION 2(22)(E), THE ESSENTIAL CONDITIONS CAN BE S UMMARIZED AS UNDER:- (I) THERE SHOULD BE PAYMENT BY THE COMPANY NOT BEIN G A COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTE D. (II) THE PAYMENT SHOULD BE OF A SUM BY WAY OF ADVAN CE OR LOAN TO A SHARE HOLDER. ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 6 (III) THE SHARE HOLDER BEING A PERSON WHO IS BENEFI CIAL OWNER OF SHARE WITH OR WITHOUT A RIGHT TO PARTICIPA TE HOLDING LESS THAN 10% OF THE VOTING POWER THE ISSUE WHETHER THE LOAN TRANSACTIONS WERE COVERE D U/S. 2(22)(E) AND THE ABOVE MENTIONED ESSENTIAL CON DITIONS WERE FULFILLED OR NOT IS TO BE EXAMINED ACCORDINGLY . FIRST OF ALL THE ISSUE AS TO WHETHER THE LOAN OF RS. 20,00,0 00/- MADE BY M/S GAD FASHIONS INDIA PVT. LTD. TO THE ASSESSEE WAS DEEMED DIVIDEND OR NOT IS TO BE EXAMINED. IT MAY BE NOTED THAT THERE IS NO DISPUTE ON THE FACT THAT M/S GAD F ASHIONS INDIA PVT. LTD. HAS MADE PAYMENT OF RS. 20,00,000/- TO THE A AS ALSO THE FACT THAT THE ASSESSEE WAS HAVING BENEF ICIAL OWNER AND SHAREHOLDING OF 22.14% SHARES IN M/S GAD FASHIONS INDIA PVT. LTD.. IT IS ALSO FACT THAT AS P ER THE AUDITORS REPORT AS ALSO IN THE BOOKS OF ACCOUNTS S UCH AMOUNT OF RS. 20,00,000/- ADVANCED BY M/S GAD FASHI ONS INDIA PVT. LTD. IS SHOWN AS LOAN/ ADVANCE. M/S GAD FASHIONS INDIA PVT. LTD. IS ALSO A COMPANY IN WHICH PUBLIC A RE NOT SUBSTANTIALLY INTERESTED. THE ABOVE FACTS WILL INDI CATE THAT SUCH PAYMENT OF RS. 20,00,000/- WAS DEFINITELY COVE RED UNDER THE PROVISIONS OF SECTION 2(22)(E) OF I.T. AC T. HOWEVER, THE APPELLANT CASE IS THAT SUCH TRANSACTION OF RS. 20,00,000/- WAS NOT EXACTLY THE LOAN AND ADVANCE TRANSACTION BU T IT WAS A TRANSACTION RELATED TO THE BUSINESS IN AS MUCH AS M/S GAD FASHIONS INDIA PVT. LTD. WAS HAVING BUSINESS RELATI ON WITH M/S. MANPASAND TEXTILES PROCESSORS PVT. LTD. FROM W HOM PRINTING WORK WAS BEING GOT DONE AND THAT M/S.GAD FASHIONS INDIA PVT. LTD. INTENDED TO MADE INTEREST FREE ADVANCES TO M/S. MANPASAND TEXTILES PROCESSORS PVT. LTD. FOR MODERNIZATION OF ITS MANUFACTURING PLANT FOR EN SURING BETTER PRINTING QUALITY. ACCORDINGLY AS M/S GAD FAS HIONS INDIA PVT. LTD. WAS NOT HAVING IMMEDIATE AVAILABILI TY OF FUND THEREFORE THE COMPANY REQUESTED ITS DIRECTOR I.E. A PPELLANT TO MAKE ADVANCES TO M/S. MANPASAND TEXTILES PROCESSORS PVT. LTD. ACCORDINGLY ON BEHALF OF M/S GAD FASHIONS INDI A PVT. LTD. THE ASSESSEE MADE ADVANCES OF RS.2500000/- TO M/S. MANPASAND TEXTILES PROCESSORS PVT. LTD. SUBSEQUENTL Y, M/S GAD FASHIONS INDIA PVT. LTD. RETURNED RS.20 LAC TO THE ASSESSEE OUT OF RS.25,00,000/- ADVANCED TO M/S. MAN PASAND ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 7 TEXTILES PROCESSORS PVT. LTD. AS PER THE ASSESSEE S UCH TRANSACTIONS WERE ESSENTIAL FOR THE BUSINESS AND TH ESE SHOULD NOT BE TREATED AS DEEMED DIVIDEND WITHIN THE DEFINI TION OF SEC. 2(22)(E) OF IT ACT. THE ASSESSEE HAS ALSO PLAC ED RELIANCE ON VARIOUS CASE LAWS AS MENTIONED IN THE WRITTEN SU BMISSION. HOWEVER THE SUBMISSION OF THE APPELLANT APPEARS TO BE DEVOID OF MERIT AND NOT SUPPORTED BY ANY DOCUMENTAR Y EVIDENCE. FIRST OF ALL IT MAY BE NOTED THAT THOUGH THE ASSESSEE HAS CLAIMED THAT ADVANCE OF INTEREST FREE LOAN TO M/S. MANPASAND TEXTILES PROCESSORS PVT. LTD. WAS TO BE MADE BY M/S GAD FASHIONS INDIA PVT. LTD. BUT AS FUN DS WERE NOT IMMEDIATELY AVAILABLE TO M/S. GAD FASHIONS INDI A PVT. LTD. THEREFORE TEMPORARILY ADVANCE OF RS.25,00,000/ - WAS MADE BY THE ASSESSEE OUT OF WHICH RS.20,00,000/- WA S REPAID BY M/S GAD FASHIONS INDIA PVT. LTD. HOWEVER, AS MEN TIONED BY THE A.O. M/S. GAD FASHIONS INDIA PVT. LTD. IS A CASH RICH COMPANY AND THERE IS NOTHING ON RECORD WHICH MAY IN DICATE THAT M/S. GAD FASHIONS INDIA PVT. LTD. WAS NOT HAVI NG ADEQUATE MONEY TO MAKE ADVANCES TO M/S. MANPASAND TEXTILES PROCESSORS PVT. LTD. SIMILARLY THERE IS NO EVIDENCE ON RECORD WHICH MAY INDICATE THAT M/S. MANPASAND TE XTILES PROCESSORS PVT. LTD. WAS IN NEED OF MONEY FOR MODERNIZATION OF ITS PLANT AND ANY REQUEST WAS MADE FOR MAKING SUCH INTEREST FREE ADVANCE. MOREOVER, AS NOT ED BY THE A.O. THERE WERE OTHER PARTIES/CONCERNS FROM WHO M PRINTING WORK WAS BEING GOT DONE AND IT IS NOT KNOW N WHY M/S. MANPASAND TEXTILES PROCESSORS PVT. LTD. WAS SE LECTED FOR MAKING SUCH INTEREST FREE ADVANCES. THERE IS NO DOCUMENTARY EVIDENCE IN SUPPORT OF THE SUBMISSION T HAT INTEREST FREE ADVANCES ON BEHALF OF M/S. GAD FASHIO NS INDIA PVT. LTD. WILL BE INITIALLY MADE BY THE ASSESSEE AN D SUBSEQUENTLY M/S GAD FASHIONS INDIA PVT. LTD. WILL RETURN THE AMOUNT TO THE ASSESSEE. SIMILARLY THERE IS NOTH ING ON RECORD WHICH MAY INDICATE AS TO HOW M/S. GAD FASHIO NS INDIA PVT. LTD WAS TO BE BENEFITED BY WAY OF REGULA R PRINTING WORK FROM THIS CONCERN. THE ABOVE FACTS WILL INDICA TE THAT THE LOAN TRANSACTIONS BETWEEN ASSESSEE AND M/S MANP ASAND TEXTILES PROCESSORS PVT. LTD. AS ALSO WITH M/S GAD FASHIONS INDIA PVT. LTD. ARE PRIMA FACIE INDEPENDENT AND IT CANNOT BE SAID THAT SUCH LOAN TRANSACTIONS WERE RELATED TO TH E BUSINESS ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 8 INTEREST OF M/S. GAD FASHIONS INDIA PVT. LTD. IS ST ATED TO BE WITH M/S. MANPASAND TEXTILES PROCESSORS PVT. LTD. W HEREAS LOAN IS BEING ADVANCED TO THE ASSESSEE BY M/S. GAD FASHIONS INDIA PVT. LTD. KEEPING IN VIEW THE ABOVE MENTIONED FACTS IT IS HEL D THAT THE A.O. HAS RIGHTLY TAXED SUCH AMOUNT OF RS.2 000000/- AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. 5.3 NOW THE ASSESSEE IS BEFORE US PRAYING WITH THE FOLLOWING WRITTEN SUBMISSION PRODUCED BEFORE THE LD. CIT(A) THAT THE ADDITION CONFIRMED BY THE LD. CIT(A) MAY BE DELETED. 1. SECTION 2(22)(E) APPLIES TO ANY PAYMENT BY A C OMPANY TO A SUBSTANTIAL SHARE HOLDER BY WAY OF ADVANCE OR LOAN. WHERE PAYME NT IS MADE FOR BUSINESS CONSIDERATION, THESAME IS NOT COVERED BY DEEMING FI CTION OF SECTION 2 (22)(E). IT BEING A DEEMING FICTION NEEDS TO BE CONSTRUED ST RICTLY. FOR APPLICABILITY OF THIS SECTION, FOLLOWING CONDITIONS SHOULD BE SATISF IED:- (I) THERE SHOULD BE A PAYMENT. (II) PAYMENT SHOULD BE OF A SUM. (III) SUCH PAYMENT SHOULD BE BYWAY OF LOAN OR ADVANCE. THEREFORE UNLESS &UNTIL ALL THE ABOVE CONDITIONS AR E SATISFIED, DEEMING FICTION WOULD NOT BE ATTRACTED. 2. IN ORDER TO COVER ANY AMOUNT WITHIN THE PROVISIO NS OF SECTION 2(22)(E) OF THE I.T. ACT, 1961, IT IS NECESSARY THAT THE AMO UNT INVOLVED SHOULD EITHER BE LOAN OR ADVANCE. (I) THE WORD ADVANCE HAS NOT BEEN DEFINED. HOWEVE R, IN CASE OF CIT VS. RAJ KUMAR 318 ITR 462 (DEL.) (HC), IT WAS HELD THAT APPLYING THE RULE OF NOSCITUR A SOCIIS WHICH MEANS THAT THE WORDS IN A N ACT OF PARLIAMENT IS TO BE CONSTRUCTED WITH REFERENCE TO THE WORDS FOUND IN IM MEDIATE CONNECTION WITH THEM, THE WORD ADVANCE HAS TO BE READ IN CONJUNCTION WI TH THE WORD LOAN. USUALLY ATTRIBUTES OF A LOAN ARE THAT (I) IT INVOLVES A POS ITIVE ACT OF LENDING COUPLED WITH ACCEPTANCE BY THE OTHER SIDE OF THE MONEY AS LOAN ( II) GENERALLY CARRIES AN INTEREST (III) OBLIGATION OF REPAYMENT. THEREFORE, THE WORD ADVANCE WHICH APPEARS IN THE COMPANY OF THE WORD LOAN COULD ONLY BE SUCH ADVAN CE WHICH CARRIES WITH IT AN OBLIGATION OF REPAYMENT. THUS, TRADE ADVANCES WHICH IS IN THE NATURE OF MONEY TRANSACTED TO GIVE EFFECT TO A COMMERCIAL TRANSACTI ON WOULD NOT FALL WITHIN THE AMBIT OF SECTION 2(22)(E). ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 9 (II) THE TRANSACTION OF LOAN INVOLVES LENDING DELIV ERY BY ONE PARTY & RECEIPT BY ANOTHER PARTY OF SUM OF MONEY UPON EXPRE SS OR IMPLIED AGREEMENT TO REPAY IT WITH OR WITHOUT INTEREST. IN CASE OF BOMBA Y STEAM NAVIGATION CO. (P.) LTD. 56 ITR 52, 57 (SC), IT WAS HELD THAT A LOAN OF MONEY RESULTS IN DEBT BU T EVERY DEBT DOES NOT INVOLVE A LOAN. LIABILITY TO PAY A DE BT MAY ARISE FROM DIVERSE SOURCES & LOAN IS ONLY ONE OF SUCH SOURCE. EVERY CR EDITOR WHO IS ENTITLED TO RECEIVE A DEBT CAN NOT BE REGARDED AS A LENDER. (III) IN CASE OF ARDEEFINVSET (P.) LTD. VS. DCIT 79 ITD 547 (TRIB.) (DEL.) IT WAS HELD THAT LOAN MEANS A LENDING; DELIVERY BY ON E PARTY TO AND RECEIPT BY ANOTHER PARTY OF SUM OF MONEYS UPON AGREEMENT, EXPR ESS OR IMPLIED, TO REPAY WITH OR WITHOUT INTEREST. FOR A LOAN THERE MUST BE A LEN DER, A BORROWER, A THING LOANED FOR USE, AS WELL AS A CONTRACT BETWEEN THE PARTIES FOR THE RETURN OF THE THING LOANED. A LOAN CONTRACTED NO DOUBT CREATES A DEBT, BUT THERE MAY BE A DEBT WITHOUT CONTRACTING A LOAN. IN A LOAN THE MIND AND INTENTION OF THE TWO PARTIES, THE LENDER AND THE BORROWER MUST BE AD IDEM. THE EXPRE SSION ADVANCE MEANS SOMETHING WHICH IS DUE TO A PERSON, BUT WHICH IS PA ID TO HIM AHEAD OF TIME WHEN IT IS DUE TO BE PAID. IN THE DICTIONARY OF ACCOUNTS BY ERIC L. KOHLER (5 TH EDN.), THE EXPRESSION ADVANCE WAS DEFINED AS PAYMENT OF CASH OR THE TRANSFER OF GOODS FOR WHICH ACCOUNTMUST BE RENDERED BY THE RECIPIENT AT S OME LATER DATE. LOAN AND ADVANCES COULD ONLY BE CONSIDERED DEEMED DIVIDEND FOR THE PURPOSE OF SECTION 2(22)(E). IT IS, THEREFORE, SINE QUA NON, TO ASCERT AIN THE CORRECT NATURE OF THE PAYMENTS. IN THIS CASE THE ASSESSEE COMPANY RECEIVE D APPLICATION MONEY FOR THE ALLOTMENT OF SHARES. THERE IS NOTHING ON RECORD TO INDICATE THAT APPLICATION MONEY WAS RECEIVED OR ALLOTMENT OF SHARES WAS MADE CONTRA RY TO THE PROVISIONS OF COMPANIES ACT, 1956. THE AMOUNT WAS REFLECTED AS SU CH IN THE BALANCE SHEET. ACCOUNTS WERE PREPARED PERFECTLY IN ACCORDANCE WITH THE NORMS SET OUT UNDER THE COMPANIES ACT, 1956. THESE WERE FILED WITH THE REGI STRAR OF COMPANIES. THE CHIEF INGREDIENT OF S. 2(22)(E) IS THAT ONE SHOULD BE SHA REHOLDER ON THE DATE THE LOAN WAS ADVANCED TO HIM. WHERE SUCH INGREDIENT IS NOT E STABLISHED, THE ADVANCE COULD NOT BE TAKEN AS DEEMED DIVIDEND UNDER S. 2(22)(E). IT IS SETTLED RULE OF INTERPRETATION OF A FICTION THAT THE COURT SHOULD A SCERTAIN FOR WHAT PURPOSE THE FICTION IS CREATED AND AFTER ASCERTAINING THE PURPO SE, THE COURT HAS TO ASSUME ALL FACTS WHICH ARE INCIDENTAL TO GIVE EFFECT TO THAT F ICTION. IT WILL NOT BE GIVEN A WIDER MEANING THAN WHAT IT PURPORTS TO DO. LAW DEALING WI TH FICTION RELATES TO THAT BREACH OF JURISPRUDENCE WHICH SHOULD BE NARROWLY WA TCHED, ZEALOUSLY REGARDED AND NEVER TO BE PRESSED BEYOND ITS TRUE LIMITS. TAK ING INTO CONSIDERATION THE ENTIRE CONSPECTUS OF THE CASE, THE RECEIPT FROM H LTD. WAS IN THE NATURE OF SHARE APPLICATION MONEY. IT CANNOT BE CONSTRUED LOAN OR A DVANCE. AS SUCH, THE CASE OF THE ASSESSEE FALLS BEYOND THE KEN OF S. 2(22)(E). 3.. IN THE PRESENT CASE THE TRANSACTION BETWEEN AS SESSEE AND M/S GAD FASHIONS INDIA PRIVATE LIMITED IS NOT IN THE NATURE OF LOANS OR ADVANCES AS EVIDENT FROM THE FOLLOWING:- ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 10 (I) THE COMPANY, M/S GAD FASHIONS (INDIA) PVT. LTD. IS A 100% MANUFACTURER EXPORT OF HOME FURNISHING MADE UPS. TH E MANUFACTURING PROCESS OF THE COMPANY PRODUCTS INCLUDES PRINTING & DYING OF F ABRIC WHICH IS THE VERY IMPORTANT PROCESS. THE COMPANY WAS FACING CONTINUOU S PROBLEM IN GETTING CONSISTENT & GOOD QUALITY IN DESIRED QUANTITY PRINT ING OF FABRIC TO COMPLETE ITS ORDER AND HENCE IT MADE AN ARRANGEMENT WITH ONE OF THE PRINTER PROCESSOR NAMELY M/S MANPASAND TEXTILES PROCESSORS PVT. LTD. TO INST ALL MORE MACHINERY AND MODERNIZE ITS PLANTS TO COMPLETE THE CONSISTENT REQ UIREMENT OF GOOD QUALITY OF PRINTING. THEY AGREED TO MODERNISE THE MACHINERY AN D PROVIDE CONSISTENTLY PRINTING OF GOOD QUALITY OF MATERIAL SUBJECT TO THE CONDITION THAT GAD FASHIONS INDIA PRIVATE LIMITED FINANCE THE MODERNISATION COS T. (II) ACCORDINGLY FOR THE BENEFIT OF THE BUSINESS OF THE COMPANY, THE ASSESSEE PROVIDED LOAN OF RS.25,00,000/- TO M/S MANPASAND TE XTILES PROCESSORS PVT. LTD. ON 08.03.2007 (A.Y. 2007-08) WITHOUT INTERESTON BEH ALF OF M/S GAD FASHIONS INDIA PRIVATE LIMITED AS THE COMPANY WAS NOT HAVING IMMEDIATE LIQUID FUND TO GIVE ADVANCE DIRECTLY TO MANPASAND TEXTILE PROCESSO RS PRIVATE LIMITED WITH THE UNDERSTANDING THAT AS AND WHEN ASSESSEE REQUIRE THE FUND, THE SAME WOULD BE PAID BY IT. COPY OF THE ACCOUNT OF M/S MANPASAND TEXTILE PROCESSORS PRIVATE LIMITED IN THE BOOKS OF THE ASSESSEE IS AT P.B.2. (III) IN THE YEAR UNDER CONSIDERATION M/S GAD FASHI ON INDIA PRIVATE LIMITED REQUIRED TEMPORARLY MORE FUNDS FOR ITS BUSI NESS AND THEREFORE ASSESSEE AS A TEMPORARY ACCOMMODATION PROVIDED RS.50 LACS TO TH E COMPANY IN THE MONTH OF DECEMBER 2007. THIS AMOUNT WAS PAID BACK BY THE COM PANY TO THE ASSESSEE ON 06-02-2008. THEREAFTER WHEN THE ASSESSEE WAS IN NEE D OF THE FUND, THE COMPANY PAID RS.20,00,000/- TO THE ASSESSEE ON 11-02-2008 I N AS MUCH AS ASSESSEE HAS ALREADY PAID RS.25,00,000/- TO MANPASAND TEXTILE PR OCESSORS PRIVATE LIMITED ON 08-03-2007. THIS AMOUNT WAS ALSO GIVEN BACK BY THE ASSESSEE TO THE COMPANY ON 31-03-2008. COPY OF THE ACCOUNT OF ASSESSEE IN THE BOOKS OF M/S GAD FASHIONS INDIA PRIVATE LIMITED IS AT P.B.1 . FROM THIS COPY OF ACCOUNT IT CAN BE NOTED THAT IN A.Y. 2009-10 ALSO ASSESSEE GAVE TEMPORARY ACCOMMODA TION OF RS.50 LACS ON 3-11- 2008 WHICH WAS REPAID BACK BY THE COMPANY ON 11-11- 2008. (IV) IT MAY BE NOTED GAD FASHIONS INDIA PRIVATE LIM ITED HAVE REGULAR TRANSACTIONS WITH MANPASAND PROCESSORS PRIVATE LIMI TED. IN THE YEAR UNDER CONSIDERATION M/S MANPASAND TEXTILE PROCESSORS PRIV ATE LIMITED HAS CARRIED OUT PRINTING JOB WORK OF RS.40,05,278/- AND AT THE YEAR END RS.28,05,567/- WAS PAYABLE BY GAD FASHIONS INDIA PRIVATE LIMITED TO MANPASAND TEXTILE PROCESSORS PRIVATE LIMITED (P.B.3-10.). THUS A SUBSTANTIAL AMOUNT WAS PAYABLE BY GAD FASHIONS INDIA PRIVATE LIMITED TO MANPASAND TEXTILE PROCESSORS PRI VATE LIMITED AGAINST THE PRINTING JOB WORK WHEREAS RS.25,00,000/- IS PROVIDED AS ADV ANCE BY THE ASSESSEE TO MANPASAND TEXTILE PROCESSORS PRIVATE LIMITED. ALL THESE FACTS SHOWS THAT GAD FASHIONS INDIA PRIVATE LIMITED IN COURSE OF BUSINES S, ON OCCASIONS, REMAINS SHORT OF FUNDS AND THEREFORE IN BUSINESS INTEREST ASSESSEE P ROVIDED ADVANCE TO MANPASAD TEXTILE PROCESSORS PRIVATE LIMITED AND ATTHE SAME T IME GAD FASHIONS INDIA PRIVATE LIMITED WITHHELD THE AMOUNT PAYABLE TO MANPASAND TE XTILE PROCESSORS PRIVATE LIMITED AGAINST THE PRINTING JOB. ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 11 4. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, ONLY BECAUSE ON 11-02-2008 ASSESSEE HAS RECEIVED RS.20 LACS FROM GAD FASHIONS INDIA PRIVATE LIMITED, THE SAME CANT BE CONSIDERED AS A LOAN OR ADVANCE PARTICULAR LY WHEN THE AMOUNT SO RECEIVED BY THE ASSESSEE IS WITH REFERENCE TO THE ADVANCE GIVEN BY THE ASSESSEE TO MANPASAND TEXTILE PROCESSORS PRIVATE LIMITED CONSIDERING THE BUSINESS INTEREST OF GAD FASHIONS INDIA PRIVATE LIMITED AND ON EARLIER OCCASION AND A LSO SUBSEQUENTLY ASSESSEE HAS PROVIDED FUNDS TO GAD FASHINS INDIA PRIVATE LIMITED TO MEET ITS TEMPORARY BUSINESS NEEDS. THUS THE TRANSACTION BETWEEN ASSESSEE AND GA D FASHIONS INDIA PRIVATE LIMITED IS A MUTUAL, OPEN, CURRENT AND RUNNING ACCO UNT WHICH IS NOT A LOAN OR ADVANCE AS ENVISAGED U/S 2(22)(E). FOR THIS RELIANC E IS PLACED ON THE FOLLOWING CASES:- (1) CIT VS. CREATIVE DYEING & PRINTING P. LTD. 318 ITR 476 (DEL.) (HC) (2) MTAR TECHNOLOGIES (P.) LTD. VS. ACIT 39 SOT 46 5 (TRIB.) (HYD.) (2010) (3) CIT VS. AMBASSADOR TRAVELS (P.) LTD. 318 ITR 3 76 (DEL.) (HC) (4) DCIT VS. LAKRA BROTHERS 106 TTJ 250 (CHAND.) ( TRIB.) (5) SRI SATCHINDANANAD S. PANDITVS. ITO 19 SOT 213 (TRIB.) (MUM.) IN VIEW OF THE ABOVE THE AMOUNT OF RS.20 LACS PROVI DED BY GAD FASHION INDIA PRIVATE LIMITED TO THE ASSESSEE ON 06-02-2008 CANT BE TREATED AS A LOAN OR ADVANCE GIVEN TO THE ASSESSEE AND CONSEQUENTLY SECTION 2(22 )(E) IS NOT ATTRACTED AND THEREFORE AO BE DIRECTED TO DELETE THE ADDITION MADE BY HIM. 5.4 DURING THE COURSE HEARING, THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 5.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE RECORD THAT A SSESSEE DERIVES SALARY INCOME FROM M/S. GAD FASHIONS (INDIA) PVT. LTD. AND REMUNERATION INTEREST INCOME FROM M/S. GAD FASHIONS (INDIA) PVT. LTD. AND M/S. R. FASHIONS. THE ASSESSEE HOLDS 22.14% SHARES OF M/S. GAD FASHIONS (INDIA) PVT. LTD. AND 26.13% SHARES OF M/S. ECOTUNES INDIA (P) LTD. HOWEVER, THE AO OBSERVED DURING ASSESSMENT PROCEEDINGS THAT ADVANCE OF RS. ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 12 20.00LACS WAS GIVEN TO THE ASSESSEE BY M/S. GAD FAS HIONS (INDIA) PVT. LTD. AS THE ASSESSEE IS HAVING SHAREHOLDING OF MORE THAN 10% IN THE SAID COMPANY AND THUS THE TRANSACTION IS COVERED UNDER T HE DEFINITION OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE AO TH US TREATED THE A AMOUNT OF RS. 20.00 LACS AS RECEIVED FROM M/S. GAD FASHIONS INDIA PVT. LTD. AS DEEMED INCOME U/S 2(22)(2) AND MADE THE ADD ITION WHICH WAS CONFIRMED BY THE LD. CIT(A). THE BENCH OBSERVED FRO M THE RECORD THAT THE TRANSACTION IS NOT IN THE NATURE OF LOAN OR ADV ANCE BUT IT IS ONLY A REIMBURSEMENT OF AMOUNT PAID BY THE ASSESSEE TO M/S . MANPASND TEXTILE PROCESSORS (P) LTD. ON BEHALF OF M/S. GAD FASHIONS (INDIA) (P) LTD. IT IS FURTHER OBSERVED THAT THE AMOUNT OF RS. 20.00 LACS SO RECEIVED BY THE ASSESSEE FROM M/S. GAD FASHIONS INDIA PVT. LTD. WAS WITH REFERENCE TO THE ADVANCE GIVEN BY THE ASSESSEE TO M/S. MANPASAD TEXT ILE PROCESSORS (P) LTD. CONSIDERING THE BUSINESS INTEREST. IT IS FURTH ER OBSERVED THAT THE TRANSACTION BETWEEN ASSESSEE AND M/S. GAD FASHIONS INDIA PVT. LTD. IS A MUTUAL, OPEN, CURRENT AND RUNNING ACCOUNT WHICH IS NOT A LOAN OR ADVANCE AS ENVISAGED U/S 2(22)(E). IN VIEW OF THE ABOVE FAC TS AND CIRCUMSTANCES OF THE, CASE THE ORDERS OF THE LOWER AUTHORITIES ARE R EVERSED AND GROUND NO. 1 OF THE ASSESSEE IS ALLOWED. ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 13 6.1 NOW WE TAKE UP GROUND NO. 2 OF THE ASSESSEE WHE REIN THE AO NOTICED THAT THERE WERE THREE COMMON SHAREHOLDERS I N BOTH THE COMPANIES AND ALL OF THEM ARE FACING SAME ACTION UNDER THE AC T FOR THE YEAR UNDER CONSIDERATION. THE AO OBSERVED IN SUCH BACKGROUND G ROUND OF THE CASE THAT IT WILL BE JUST AND SENSIBLE IF THE AMOUNT OF DEEMED DIVIDEND BE DISTRIBUTED 1/3 RD OF THE TOTAL AMOUNT OF LOAN OR ADVANCE I.E. RS. 20 .00 LACS IN THE HANDS OF EACH OF SUCH DIRECTORS WHICH RESULT ED AN ADDITION OF RS. 6,66,666/- TO THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 6.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHO HAS PARTLY ALLOWED THIS GROUND OF THE ASSESSEE BY OBSERVING AS UNDER: AS REGARDS ANOTHER TRANSACTION OF RS.20,00,000/- GIVEN BY M/S ECOTUNES INDIA LTD. TO M/S. GAD FASHIONS INDIA PVT. LTD. THERE IS NO DISPUTE ON THE FACT THAT THE ASSESSEE WAS HAV ING 26.13% SHARE HOLDING OF M/S ECOTUNES INDIA LTD. AND 22.14% IN M/ S GAD FASHIONS INDIA PVT. LTD. IT IS ALSO FACT THAT LOANS OF RS.20,00,000/- TAKEN BY M/S. GAD FASHIONS INDIA PVT. LTD. WAS PRIM A FACIE WITHOUT ANY BUSINESS RELATION. THE APPELLANT CASE I S THAT THE TRANSACTIONS BETWEEN M/S.GAD FASHIONS INDIA PVT. LT D. AND M/S ECOTUNES INDIA LTD. WERE IN THE NATURE OF CURRENT A ND RUNNING ACCOUNT BEING OF TEMPORARY NATURE. HOWEVER, SUCH SU BMISSION IS ALSO DEVOID OF ANY MERIT IN AS MUCH AS THE TRANSACT ION WAS PRIMA FACIE COVERED UNDER THE DEFINITION SEC. 2(22)(E) OF IT ACT. IT IS ALSO FACT THAT TOTAL LOAN OF RS.2000000/- HAS BEEN ADVAN CED BY M/S. ECOTUNES INDIA LTD. TO M/S. GAD FASHIONS INDIA PVT. LTD. THEREFORE THE TOTAL AMOUNT OF RS.2000000/- IS TO BE TREATED A S DEEMED DIVIDEND AND NOT THE NET AMOUNT OF RS.1000000/-. IT IS ALSO FACT THAT THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HOTEL HILL TOP (SUPRA) HAS HELD THAT THE DEEMED DIVIDEND IS TO BE TAXED IN ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 14 SHARE HOLDERS CASE SHOULD BE IN THE RATION OF THEIR SHARE HOLDING AS THE BENEFICIAL OWNERSHIP WAS TO THE EXTENT OF THE S HARE HOLDING. THE APPELLANT WAS HAVING SHARE HOLDING OF 22.14% IN M/S GAD FASHIONS INDIA PVT. LTD. AND THEREFORE THE DEEMED D IVIDEND TO BE TAXED IN THE HANDS OF THE APPELLANT WOULD BE RS.442 800/- (22.14% OF RS.2000000/-). ACCORDINGLY ADDITION TO THE EXTEN T OF RS.442800/- IS CONFIRMED OUT OF TOTAL ADDITION OF RS.666666/-. THE APPELLANT GETS RELIEF OF RS.223866/- 6.3 NOW THE ASSESSEE IS BEFORE US PRAYING WITH FOL LOWING WRITTEN SUBMISSION PRODUCED BEFORE THE LD. CIT(A) THAT THE ADDITION AMOUNTING TO RS. 4,42,800/- PARTLY CONFIRMED BY THE LD. CIT(A) MAY BE DELETED. COPY OF THE ACCOUNT OF THE ASSESSEE IN THE BOOKS O F M/S ECOTUNES PRIVATE LIMITED IS AT P.B.11 . FROM THE COPY OF THE ACCOUNT IT CAN BE NOTED THAT THE TRANSACTION BETWEE N GAD FASHIONS INDIA PRIVATE LIMITED AND ECOTUNE INDIA PRIVATE LIM ITED IS IN THE NATURE OF MUTUAL, OPEN, CURRENT AND RUNNING ACCOUNT AND NOT A LOAN OR ADVANCE AS ENVISAGED U/S 2(22)(E) IN AS MUC H AS ECOTUNE INDIA PRIVATE LIMITED HAS PROVIDED FUNDS TO GAD FAS HIONS INDIA PRIVATE LIMITED ON TEMPORARY BASIS TO MEET ITS REQU IREMENT. SUCH MUTUAL, OPEN, CURRENT AND RUNNING ACCOUNT ARE NOT L OANS OR ADVANCES AS DISCUSSED IN GROUND NO. ABOVE AND THERE FORE SECTION 2(22)(E) IS NOT ATTRACTED TO SUCH TRANSACTION. IT IS POINTED OUT THAT DURING THE YEAR ONLY A NET AMOUNT OF RS.10,00,000/- WAS PROVIDED BY ECOTUNE INDIA PRIVATE LIMITED TO GAD FASHIONS IN DIA PRIVATE LIMITED AS EVIDENT FROM THE COPY OF THE ACCOUNT ENC LOSED ABOVE. THEREFORE ADDITION MADE BY THE AO CONSIDERING THE A MOUNT OF DEEMED DIVIDED AT RS.20 LACS IS INCORRECT. 6.4 THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A ) 6.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE RECORD THAT W HEN TRANSACTION BETWEEN M/S. GAD FASHIONS INDIA PVT. LTD. AND M/S. ECOTUNE INDIA LTD. ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 15 IS NOT IN THE NATURE OF LOAN OR ADVANCE AS ENVISAGE D U/S 2(22)(E) OF THE ACT THEN IT DOES NOT ARISE TO MAKE ANY FURTHER ADDITION IN THE HANDS OF THE ASSESSEE. THUS BY CONSIDERING OVERALL SCENARIO OF T HE CASE, THE GROUND NO. 2 OF THE ASSESSEE IS ALLOWED. 6.6 IN THE RESULT, THE APPEAL OF THE ASSESSEE SHRI NILESH SINGHI IS ALLOWED. 7.1 NOW WE TAKE UP THE APPEAL OF SHRI ASHOK SINGHI WHEREIN FOLLOWING GROUNDS ARE RAISED. 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF AO IN TREATING THE AMOUNT OF RS. 20,00,000/- RECEIVED FROM M/S. GAD FASHIONS (INDIA) PVT. LTD. AS DEEMED DIVIDEND U/S 2(22)(E) IN THE HANDS O F THE ASSESSEE. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 4,43,200/- BY TREAT ING THE AMOUNT OF RS. 20,00,000/- GIVEN BY M/S. ECOTUNES IN DIA (P) LTD. TO GAD FASHIONS (INDIA) PVT. LTD. AS DEEMED DI VIDEND U/S 2(22)(E) IN THE HANDS OF THE ASSESSEE 7.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUES AS RAISED BY THE AS SESSEE SHRI NILESH SINGH IN ITS APPEAL FOR THE ASSESSMENT YEAR 2008-09 ARE SIMILAR TO THE ISSUES OF APPEAL OF SHRI ASHOK SINGHI FOR THE ASSES SMENT YEAR 2008-09 WHEREIN THE ORDER OF THE LD. CIT(A) WAS REVERSED. H OWEVER, WE FIND THAT ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 16 ASHOK SINGHI HAD ADVANCED A SUM OF RS. 25.00 LACS T O M/S. MANPASAD TEXTILE PROCESSORS (P) LTD. ON BEHALF OF M/S. GAD FASHIONS (INDIA) PVT. LTD. FOR WHICH PRINTING WORK HAD BEEN DONE BY M/S. MANPASAD TEXTILE PROCESSORS (P) LTD. M/S. GAD FASHIONS (INDIA) PVT. LTD. HAD REPAID RS. 25.00 LACS TO THE ASSESSEE WHO IS ALSO SHAREHOLDER IN BOTH THE COMPANIES. THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT M/ S. GAD FASHIONS (INDIA) PVT. LTD. WAS CASH RICH COMPANY AS THE ASSE SSEE PAID RS. 20.00 LACS TO M/S. MANPASAD TEXTILE PROCESSORS (P) LTD. I T IS THE BUSINESS DECISION OF M/S. GAD FASHIONS (INDIA) PVT. LTD. TH AT IT WOULD GET THE PRINTING WORK DONE EITHER FROM M/S. MANPASAD TEXTIL E PROCESSORS (P) LTD. OR OTHERS. THE DEPARTMENT DOES NOT HAVE JURISD ICTION TO PUT THE LEG INTO SHOES OF THE ASSESSEE AS TO HOW THE ASSESSEE C ONDUCTS HIS BUSINESS. THE RELEVANT EVIDENCES WERE FILED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE ASSESSEE HAD PAID THE AMOUNT T O M/S. MANPASAD TEXTILE PROCESSORS (P) LTD. WHICH WAS SUBSEQUENTLY REPAID BY M/S. GAD FASHIONS (INDIA) PVT. LTD. THUS THESE TRANSACTIONS WERE BUSINESS IN NATURE AND COMMERCIAL EXPEDIENCY OF THE ASSESSEE AND IT DO ES NOT COVER U/S 2(22)(E) OF THE ACT. SIMILARLY THE PAYMENT MADE BY M/S. ECOTUNES INDIA (P) LTD. TO M/S. GAD FASHIONS (INDIA) PVT. LTD. WE RE BUSINESS RECEIPTS AS M/S. ACCENT CORPORATION HAD SENT THIS AMOUNT IN THE NAME OF M/S. ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 17 ECOTUNES INDIA (P) LTD. INSTEAD OF M/S. GAD FASHIO NS (INDIA) PVT. LTD. ACCORDINGLY M/S. ECOTUNES INDIA (P) LTD. HAD TRANSF ERRED THIS AMOUNT TO M/S. GAD FASHIONS (INDIA) PVT. LTD. WHICH IS SELF PROVED THAT PAYMENT OF RS. 20 LACS PERTAINS TO M/S. GAD FASHIONS (INDIA ) PVT. LTD. AND THIS TRANSFER OF AMOUNT IS BUSINESS TRANSACTION WHICH WA S SUPPORTED BY EVIDENCE BY THE ASSESSEE BEFORE THE LOWER AUTHORITI ES. THE CASE LAWS RELIED ON BY THE ASSESSEE ARE SQUARELY APPLICABLE T O THE CASE OF THE ASSESSEE. TO THIS EFFECT, THE DECISION OF THE HON'B LE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SURAAAJ DEV DADA (2014) 367 ITR 78 IS RELIED ON FROM WHICH IT EMERGES THAT CIT(A) AND THE TRIBUNAL HAD CONCURRENTLY RECORDED THAT THE ASSESSEE HAD RUNNING ACCOUNT WITH THE COMPANY - M/S DADA MOTORS PVT. LIMITED AND HAD BEEN ADVANCING MONEY TO IT. IT WAS FURTHER OBSERVED THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT ATTRACTED IN THE PRESENT CASE AS THIS PROVISION WAS INSERTED TO STOP THE MISUSE BY THE ASSESSEE BY TAKING THE FU NDS OUT OF THE COMPANY BY WAY OF LOAN ADVANCES INSTEAD OF DIVIDENDS AND TH EREBY AVOID TAX. IN THE PRESENT CASE, THE ASSESSEE HAD IN FACT ADVANCED MONEY TO THE COMPANY AND THERE WAS CREDIT FOR ONLY 55 DAYS FOR W HICH PROVISIONS OF SECTION 2(22) (E) OF THE ACT COULD NOT BE INVOKED. THESE FINDINGS WERE NOT SHOWN TO BE ERRONEOUS OR PERVERSE IN ANY MANNER. THUS IN VIEW OF THE ITA NO. 898//JP/2014 SHRI NILESH SINGI VS. ACIT , CIRCLE- 7, JAIPUR . 18 ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL A S LEGAL POSITION THE GROUND NO. 1 AND 2 OF THE ASSESSEE ARE ALLOWED. THE REFORE, THE APPEAL OF SHRI ASHOK SINGHI IS ALLOWED. 8.0 IN THE RESULT, THE APPEALS OF BOTH THE ASSESSEE 'S ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 /02/20 16. SD/- SD/- (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 12 /02/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- (1) SHRI NILESH SINGHI AND SHRI ASHO K SINGHI (2), JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE- 2, JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 3. VK;DJ VK;QDR@ CIT, 4. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 5. XKMZ QKBZY@ GUARD FILE (ITA NO. 898/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR