Smt. Kavita D. Jain, Ahmedabad V. The Dy.CIT.,Cent.Circle-2(2), Ahmedabad

ITSSA 412/AHD/2011

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1855 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 25-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 15-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Principle of natural justice; Peak credit; Question of law; Deemed dividend; Accommodation entries
• Section: 143(3); 133A; 153A; 147

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER IT(SS)A NOS. 407 TO 409/AHD/2011 / ASSESSMENT YEAR: 2005-06 TO 2007-08 & ITA NOS. 1648 & 1649/AHD/2011 / ASSESSMENT YEAR: 2008-09 & 2009-10 SHRI DINESH JAIN, SWAGAT BUNGALOWS, GANDHINAGAR CIRCLE, NR. PARIMAL GARDEN, AHMEDABAD .. APPELL ANT PAN : ABNPJ 6717 D VS DCIT, CENTRAL CIRCLE 2(2), AHMEDABAD .. RESPONDENT ITA NO. 1692/AHD/2011 / ASSESSMENT YEAR: 2005-06 ACIT, CENTRAL CIRCLE-2(2), AHMEDABAD .. APPELLANT VS SHRI DINESH JAIN, SWAGAT BUNGALOWS, GANDHINAGAR CIRCLE, NR. PARIMAL GARDEN, AHMEDABAD .. RESPONDENT PAN : ABNPJ 6717 D IT(SS)A NOS. 410 TO 412/AHD/2011 / ASSESSMENT YEAR: 2005-06 TO 2007-08 & ITA NOS. 1650/AHD/2011 / ASSESSMENT YEAR: 2008-09 SMT. KAVITA D. JAIN, SWAGAT BUNGALOWS, GANDHINAGAR CIRCLE, NR. PARIMAL GARDEN, AHMEDABAD .. APPELL ANT PAN : ACCPJ 1769 P IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 2 - VS DCIT, CENTRAL CIRCLE 2(2), AHMEDABAD .. RESPONDENT ITA NOS. 1690 & 1691/AHD/2011 / ASSESSMENT YEAR: 2005-06 & 2006-07 ACIT, CENTRAL CIRCLE-2(2), AHMEDABAD .. APPELLANT VS SMT. KAVITA D. JAIN, SWAGAT BUNGALOWS, GANDHINAGAR CIRCLE, NR. PARIMAL GARDEN, AHMEDABAD .. RESPONDENT PAN : ACCPJ 1769 P ASSESSEE(S) BY SHRI TUSHAR HEMANI, AR REVENUE BY SMT. SONIA KUMAR, SR DR / DATE OF HEARING 25/02/2016 /DATE OF PRONOUNCEMENT 05/04/2016 / O R D E R PER BENCH : IT(SS)A NOS. 407 TO 412/AHD/2011 & ITA NOS. 1648 T O 1650/AHD/2011 ARE THE APPEALS FILED BY TWO DIFFEREN T ASSESSEES AGAINST A CONSOLIDATED ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS)-III, AHMEDABAD, DATED 15.04.20 11, PASSED FOR ASSESSMENT YEARS 2005-06 TO 2009-10 IN T HE CASE OF DINESH JAIN AND FOR ASSESSMENT YEARS 2005-06 TO 200 8-09 IN THE CASE OF KAVITA JAIN; WHEREAS ITA NOS. 1690 TO 1692/AHD/2011 ARE THE CROSS-APPEALS FILED BY THE RE VENUE FOR ASSESSMENT YEARS 2005-06 IN THE CASE OF DINESH JAIN AND ASSESSMENT YEARS 2005-06 & 2006-07 IN THE CASE OF KAVITA IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 3 - JAIN. ALL THESE APPEALS INVOLVE COMMON ISSUES, THE SE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. FOR THE FACILIT Y OF REFERENCE, WE TAKE THE LEAD CASE AS IT(SS)A NO.407/AHD/2011 FO R AY 2005-06. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS:- 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FAC TS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN REOPENIN G OF ASSESSMENT U/S 147 OF THE ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ACTION OF REOPENING I S WITHOUT JURISDICTION AND NOT PERMISSIBLE EITHER IN LAW OR ON FACT. THE PRESENT PROCEEDINGS, THEREFORE, ARE RE QUIRED TO BE QUASHED. 2 THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN HOLDING THAT PROVISIONS OF S. 2(22)(E) OF THE ACT I S APPLICABLE TO THE APPELLANT IN THE FACTS OF THE PRE SENT CASE. 3 BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS OF THE CASE BY NOT APPRECIATING THE FACTS THA T THE TRANSACTIONS ENTERED INTO ARE IN THE NATURE OF CURR ENT ACCOMMODATION ADJUSTMENTS ACCOUNTS AND ARE NOT IN T HE NATURE OF LOAN OR ADVANCE AND THEREFORE THE VERY PROVISIONS OF S. 2(22)E OF THE ACT WOULD NOT APPLY. 4. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AN D ON THE FACTS OF THE CASE IN NOT APPRECIATING THE FACTS THAT THE APPELLANT SHAREHOLDER HAS NOT RECEIVED ANY PAYMENT FROM THE COMPANY FOR HIS INDIVIDUAL BENEFIT AND THEREFO RE PROVISIONS OF S. 2(22)(E) OF THE ACT CANNOT BE INVO KED AT ALL. 5. THE LD.CIT(A) FURTHER ERRED IN LAW AND ON THE F ACTS OF CASE IN ENHANCING THE INCOME OF THE APPELLANT BY A SUM OF RS.2,50,730/- FIRSTLY WITHOUT ISSUANCE OF THE MANDA TORY NOTICE PRESCRIBED UNDER THE SCHEME OF THE ACT AND SECONDLY ERRED IN CHANGING THE VERY BASIS OF THE COMPUTATION OF DEEMED DIVIDEND AS ADOPTED BY THE LD . AO. IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 4 - 6. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN HOLDING THAT THE COMPANY, IN WHICH THE APPE LLANT IS SHAREHOLDER, HAS MADE PAYMENT TO THE PARTNERSHIP FIRM, WHEREIN THE APPELLANT IS A PARTNER, IS ON BEH ALF OF OR FOR THE INDIVIDUAL BENEFIT OF THE APPELLANT AND ACC ORDINGLY THE CIT(A) HAS ERRED IN INVOKING THIRD LIMB OF S.2( 22)(E) OF THE ACT WITHOUT BRINGING ON RECORD ANY MATERIAL TO PROVE THAT THE PAYMENT TO PARTNERSHIP FIRMS HAD BEEN MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF THE APPE LLANT. 7. IN ANY CASE, LD. CIT(A) HAS ERRED IN CONFIRMING THE AMOUNT OF DEEMED DIVIDEND WHICH HAS ALLEGEDLY FLOWN FROM THE PARTNERSHIP FIRMS INTO THE HANDS OF THE AP PELLANT WITHOUT ESTABLISHING ANY NEXUS BETWEEN THE AMOUNT P AID BY THE COMPANY TO THE FIRM AND THE AMOUNT LENT BY T HE FIRMS TO THE INDIVIDUAL APPELLANT WHILE CONFIRMING THE ADDITION. 8 BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPREC IATING THE FACT AND THAT HE FURTHER ERRED IN GROSSLY IGNOR ING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CL EAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 9. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234B/C OF THE ACT. 10. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN CONFIRMING THE INITIATION OF PENALTY PROCEE DINGS U/S 271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINA L ASSESSMENT UP TO ASSESSMENT YEAR 2007-2008 WAS COMPLETED BY TH E ASSESSING OFFICER UNDER SECTION 153A READ WITH SECT ION 143(3) OF THE INCOME-TAX ACT. A SURVEY ACTION UNDER SECTIO N 133A OF THE INCOME TAX ACT WAS CARRIED OUT BY THE INVESTIGA TION WING OF IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 5 - THE DEPARTMENT AT THE BUSINESS PREMISES OF M/S ORNE T INTERMEDIATES LTD (OIL IN SHORT) ON 06.08.2009. DUR ING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE SAID COMP ANY HAD GIVEN ADVANCES TO M/S. OBA SPECIALITY CHEMICALS (M/ S OBA IN SHORT), A PARTNERSHIP FIRM IN WHICH SHRI DINESH JAI N WAS A PARTNER HAVING 30% SHARE. FOR THE PERIOD RELEVANT T O ASSESSMENT YEAR 2007-2008 ONWARDS THE SHAREHOLDING OF SHRI DINESH JAIN WAS 85.30% IN THE COMPANY M/S ORNET INTERMEDIATES LTD. SIMILARLY, THIS COMPANY HAD ALSO GIVEN LOANS AND ADVANCES TO ANOTHER FIRM NAMELY M/S ORNET CORPO RATION (OC IN SHORT) IN WHICH MRS.KAVITA DINESH JAIN HAD 4 5% INTEREST. SHE WAS ALSO HOLDING 23.50% SHARES OF THE COMPANY TILL 06.03.2006 AND 14.50% SHARES THEREAFTER. ON TH E BASIS OF THIS INFORMATION, THE ASSESSING OFFICER REOPENED TH E ASSESSMENT ORDERS FOR ASSESSMENT YEARS 2005-06 TO 2 007-08 AND HELD THAT THE AMOUNT OF LOANS AND ADVANCES GIVE N BY THE COMPANY M/S ORNET INTERMEDIATES LTD TO M/S ORNET CORPORATION REPRESENT THE DEEMED DIVIDEND IN THE HA NDS OF MRS KAVITA DINESH JAIN AND LOANS GIVEN BY THE CO. TO M/ S M/S OBA SPECIALITY CHEMICALS REPRESENTED THE DEEMED DIV IDEND IN THE HANDS OF SHRI DINESH JAIN. HE ACCORDINGLY MADE THE ADDITION OF PEAK BALANCES AS THE DEEMED DIVIDEND IN THE HANDS OF SHRI DINESH JAIN AND MRS K'AVITA DINESH JAIN AS UNDER: STATEMENT SHOWING PEAK VALUE CONSIDERED BY ASSESSIN G OFFICER FOR DEEMED DIVIDEND PARTICULARS / F.Y 2004-05 2005 -06 2006-07 2007 -08 2008-09 TOTAL M/S ORNET CORPORATION- MRS KAVITA JAIN 33,800,000 31,875,000 3,162,618 850,000 - 69,687,618 M/S OBA SPECILITY CHM -DINESH JAIN 18,200,000 2,200,000 5,400,000 2,000,000 1,500,000 29,300,000 IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 6 - NAVKAR SYNTHCHEM PVT LTD- DINESH JAIN 0 3,000 ,000 0 0 0 3,000,000 GROSS TOTAL 101,987,618 3.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 AND 2007-08 AND ALLOWED THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2009-10; WHEREAS INCOME HAS BEEN ENHANCED BY T HE CIT(A) FOR ASSESSMENT YEARS 2006-07 AND 2008-09, FO R THE REASONS STATED BY THE CIT(A) IN THE APPELLATE ORDER . 3.2 SIMILARLY, IN THE CASE OF MRS. KAVITA JAIN, THE CIT(A) GRANTED PARTIAL RELIEF FOR ASSESSMENT YEARS 2005-06 TO 2007- 08, WHEREAS THE INCOME HAS BEEN ENHANCED BY THE CIT (A) FOR ASSESSMENT YEAR 2008-09. 3.3 AGAINST THE AFORESAID ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US FOR ALL ASSESSMENT YEARS AS IND ICATED ABOVE, I.E. AYS 2005-06 TO 2009-10 IN CASE OF DINESH JAIN AND AYS 2005-06 TO 2008-09 IN CASE OF KAVITA JAIN; WHILE TH E REVENUE IS IN CROSS APPEAL AGAINST THE DELETION OF ADDITION MADE BY THE ASSESSING OFFICER U/S 2(22)(E) FOR AYS 2005-06 AND 2006-07 IN THE CASE OF KAVITA JAIN AND FOR ASSESSMENT YEAR 200 5-06 IN THE CASE OF DINESH JAIN. IT(SS)A NOS. 407 TO 412/AHD/2011 & ITA NOS. 1648 TO 1650/AHD/20111- ALL ASSESSEES APPEALS 4. AT THE OUTSET, LD. AUTHORIZED REPRESENTATIVE SUB MITTED THAT GROUND NO.1 IN IT(SS)A NOS. 407 TO 412/AHD/201 1 WITH IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 7 - RESPECT TO REOPENING IS NOT PRESSED, ACCORDINGLY, S AME IS DISMISSED AS NOT PRESSED. 5. GROUND NOS. 2 & 3 IN IT(SS)A NOS. 407 TO 412/AH D/201 1 AND GROUND NOS. 1 & 2 IN ITA NOS. 1648 TO 1650/AHD/ 2011 ARE WITH RESPECT TO CHALLENGING ADDITION U/S 2(22)( E) OF THE ACT ON THE GROUND THAT THE PROVISIONS OF SECTION 2(22)( E) OF THE ACT ARE NOT AT ALL APPLICABLE TO THE ASSESSEES IN THE F ACTS OF THE PRESENT CASE AS THE TRANSACTIONS ENTERED INTO ARE I N THE NATURE OF CURRENT ACCOMMODATION ADJUSTMENTS ACCOUNTS AND A RE NOT IN THE NATURE OF LOAN OR ADVANCE AND THEREFORE THE VERY PROVISIONS OF SECTION 2(22)(E) OF THE ACT WOULD NOT APPLY. 5.1 THE ASSESSING OFFICER FOUND THAT THERE WERE S EVERAL TRANSACTIONS BETWEEN M/S. ORNET INTERMEDIATES LTD., M/S. OBA SPECIALTY CHEMICAL AND M/S. ORNET CORPORATION. ASSE SSING OFFICER FURTHER FOUND THAT THE ASSESSEES HELD MORE THAN 10% SHARES IN OIL AND ALSO HAD SUBSTANTIAL INTEREST IN BOTH OBA AND OC. HENCE, THE ASSESSING OFFICER INVOKED SECOND LIMB OF SECTION 2(22)(C) IN RESPECT OF DEEMED DIVIDEND, I.E ., ANY LOAN OR ADVANCE BY A COMPANY TO ANY CONCERN IN WHICH ITS SH AREHOLDER IS A MEMBER PARTNER AND HAS SUBSTANTIAL INTEREST; A ND MADE ADDITION IN RESPECT OF FUNDS ADVANCED BY OIL TO OC AND OBA BY ADOPTING THE PEAK THEORY. AGGRIEVED BY THE ASSES SMENT ORDER, ASSESSEES PREFERRED APPEAL BEFORE CIT(A) WHO HELD THAT AMOUNT ADVANCED BY OIL TO OC AND OBA CANNOT BE TREA TED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22) (E) OF THE ACT. HE THEREFORE DELETED ADDITIONS MADE BY THE ASS ESSING OFFICER ON THIS GROUND. HOWEVER, HE WENT A STEP FUR THER AND IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 8 - QUANTIFIED THE DEEMED DIVIDEND TO THE EXTENT OF WIT HDRAWAL OF FUNDS BY THE ASSESSEES FROM OC & OBA. ACCORDINGLY, CIT(A) INVOKED THIRD LIMB OF SECTION 2(22 )(E), I.E., ANY PAYMENT BY COMPANY ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF THE SHAREHOLDER; AND DEEMED DIVIDEND U/S 2(22)(E) WAS WORKED OUT BASED ON SUCH WITHDRAWAL FROM OC AND OBA BY THE ASSESSEES. 5.2 THE STAND OF THE ASSESSEE HAS BEEN THAT THE TR ANSACTIONS IN QUESTION ARE ALL IN THE NATURE OF CURRENT ACCOMM ODATION ADJUSTMENT ENTRIES WHICH ARE DIFFERENT FROM LOANS A ND ADVANCES. THE DISTINCTION OF LOAN, MUTUAL, OPEN AND CURRENT ACCOUNT HAS BEEN DEFINED IN THE LIMITATION ACT, 196 3, WHICH IS DIFFERENT IN THE CASE OF LOAN & ADVANCE AS COMPARED TO THE MUTUAL, OPEN AND CURRENT ACCOUNT. THERE WAS NEVER A NY INTEREST CHARGED ON THE OUTSTANDING BALANCES ITSELF WAS TESTIMONY TO THE FACT THAT SUCH ACCOUNT WAS NOT IN THE NATURE OF 'LOANS AND ADVANCES'. MOREOVER, CURRENT ACCOUNT ENTRIES WERE MANY, WHEREAS LOANS AND ADVANCES ENTRIES WERE FEW. IN CURRENT ACCOUNT, FUNDS MOVE BOTH WAYS WHEREAS IN TH E LOANS AND ADVANCES, IT USUALLY MOVES FROM LENDER TO BORRO WER. 5.3 AS PER THE MUTUAL ARRANGEMENT OIL, OC AND OBA WOULD PARK THEIR SURPLUS FUNDS WITH EACH OTHER FOR THEIR MUTUAL BENEFIT ON NEED BASIS. WITH THIS UNDERSTANDING THER E WERE LARGE NUMBERS OF TRANSACTIONS BETWEEN THESE ENTITIES. THI S WAS EXPLAINED BY THE ASSESSEE BEFORE THE FIRST APPELLAT E AUTHORITY. THEREFORE, THERE WAS NO INTENTION OF ADVANCING ANY LOAN TO THE SAID PARTNERSHIP CONCERNS OUT OF ACCUMULATED PROFIT S BY THE IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 9 - SAID COMPANY-OIL. THE SAID AMOUNT WAS IN THE NATURE OF OPEN, CURRENT ACCOMMODATION ACCOUNT AND NOT AS A LOAN OR ADVANCE BY THE COMPANY-OIL. AS PER LEDGER ACCOUNTS, THE T RANSACTIONS BETWEEN OIL AND OC REVEALS THAT FOR THE PERIOD UNDE R CONSIDERATION THERE WERE AS MANY AS 62 DEBIT TRANSA CTIONS AMOUNTING TO RS.16,32,75,000 AND 60 CREDITS TRANSAC TIONS AMOUNTING TO RS. 14,94,62,382/-. THE LEDGER ACCOUNT S OF THE TRANSACTIONS BETWEEN OIL AND OBA FURTHER REVEALED T HAT FOR THE PERIOD UNDER CONSIDERATION THERE WERE AS MANY AS 74 DEBIT TRANSACTIONS AMOUNTING TO RS.4,74,38,45 AND 30 CRED ITS TRANSACTIONS AMOUNTING TO RS.2,49,38,455/-. IN SHOR T THERE WERE LARGE NUMBERS OF BOTH DEBIT AND CREDIT TRANSAC TIONS SHOWING MOVEMENT OF FUNDS 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 EASE SUC H TRANSACTIONS WERE LARGE IN NUMBERS AND BOTH WAYS, I NDICATING THAT SUCH TRANSACTIONS ARE IN THE FORM OF CURRENT ACCOMMODATION ADJUSTMENT ENTRIES. 5.4 SUCH MUTUAL, OPEN, CURRENT, RUNNING & TRADE AC COUNT TRANSACTIONS MADE IN NORMAL COURSE OF BUSINESS CAN BY NO STRETCH OF IMAGINATION PARTAKE THE CHARACTER OF A P AYMENT BY WAY OF LOANS OR ADVANCES. THE DEEMING PROVISIONS OF LAW CONTAINED IN SECTION 2(22)(E) BEING VERY MUCH CONFI NED AND LIMITED TO THE PARTICULAR PURPOSE FOR WHICH IT HAS BEEN ENACTED AND CANNOT ASSUME ANY ROLE BEYOND THE SAID RESTRICT ED AND CONFINED LIMIT. IN ORDER TO COVER ANY AMOUNT WITHIN THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME-TAX AC T, 1961, IT IS IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 10 - NECESSARY THAT THE AMOUNT INVOLVED SHOULD EITHER BE 'LOAN OR ADVANCE'. 5.5 THE CIT(A) HAS REJECTED THIS CONTENTION OF THE ASSESSEE ONLY ON THE GROUND THAT THE SAID OIL IS NOT IN THE BUSINESS OF MONEY LENDING; THEREFORE ITS TRANSACTIONS WITH OC A ND OBA CANNOT BE TREATED AS CURRENT ACCOMMODATION ADJUSTME NT ENTRIES. HOWEVER, FOR ENTERING INTO CURRENT ACCOUNT TRANSACTIONS, A PARTY NEED NOT BE IN THE BUSINESS O F MONEY LENDING. SIMPLE FREQUENT MOVEMENT OF FUNDS BETWEEN TWO OR MORE PARTIES ON NEED BASIS WITHOUT CHARGING OF INTE REST IS CURRENT ACCOMMODATION ADJUSTMENT ENTRIES. FOR ENTER ING INTO SUCH TRANSACTIONS, ASSESSEE NEED NOT CARRY ON MONEY LENDING BUSINESS. IN FACT, UNDER IDENTICAL FACTS AND NATURE OF TRANSACTIONS, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SCHUTZ DISHMAN BIO-TECH PVT LTD. IN TAX APPEAL NOS. 958-959 OF 2015, HELD AS UNDER: '3. THE COMMISSIONER (APPEALS) HOWEVER, DELETED TH E ORDER OF ASSESSING OFFICER MAKING THE FOLLOWING OBSERVATIONS:- '6. I HAVE CAREFULLY CONSIDERED THE IMPUGNED ORDERS AND THE SUBMISSIONS OF THE APPELLANT. I AM OF THE VIEW THAT THE PROVISIONS OF S.2(22)(E) OF THE ACT ARE NOT APPLICA BLE AT ALL AND THEREFORE THE QUESTION OF DEDUCTION OF TAX AT S OURCE DOES NOT ARISE AND THEREFORE, THE LIABILITY U/S.201 (L) AND 201(A) OF THE ACT ALSO DOES NOT ARISE. FOR BOTH THE YEARS UNDER CONSIDERATION, I HAVE PERUSED THE COPIES OF T HE LEDGER ACCOUNTS PLACED ON RECORD. IT CAN BE SEEN TH AT THERE ARE LARGE NUMBER OF DEBIT AND CREDIT TRANSACT IONS. MEANING THEREBY, THE APPELLANT HAS GIVEN AND RECEIV ED FUNDS AS AND WHEN REQUIRED TO AND FROM ITS ASSOCIAT E CONCERN. IT IS NOT AN ACCOUNT WHEREBY LOANS AND ADV ANCES HAVE BEEN GIVEN TO THE ASSOCIATE CONCERN. IT IS AN ACCOUNT IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 11 - WHICH IS IN THE NATURE OF CURRENT ADJUSTMENT ACCOMMODATION ACCOUNT WHEREIN THERE IS A MOVEMENT O F FUND BOTH WAYS, ON NEED BASIS. UNLIKE TRANSACTIONS OF LOANS AND ADVANCES, IN THIS KIND OF CURRENT ADJUSTM ENT ACCOMMODATION ACCOUNT, THE MOVEMENT OF FUNDS IS BOT H WAYS AND THE SAME IS MORE IN THE NATURE OF CURRENT ACCOUNT RATHER THAN A LOAN ACCOUNT. TRANSACTIONS IN THE NATURE OF LOANS AND ADVANCES ARE USUALLY VERY FEW A ND FOR A LONGER DURATION. IN THE FACTS OF THE PRESENT CASE , THE NATURE OF THE TRANSACTION IS IN THE FORM OF CURRENT ACCOMMODATION ADJUSTMENT ACCOUNT AND THEREFORE, THE SAME IS NOT A TRANSACTION IN THE NATURE OF LOANS AN D ADVANCES. IN THE ABSENCE OF ANY LOANS AND ADVANCES, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN RESPEC T OF DEEMED DIVIDED ARE NOT ATTRACTED AND THEREFORE, THE QUESTION OF DEDUCTION OF TAX AT SOURCE ALSO WOULD N OT ARISE. THIS VIEW IS SUPPORTED BY THE FOLLOWING DIRE CT DECISIONS : CIT VS. CREATIVE DYEING & PRINTING (P) LTD. 318 ITR 476 (DEL) CIT VS. RAJ KUMAR318 ITR 462 (DEL) NH SECURITIES LTD V. DCIT (2007) 11 SOT 302 (BOM) ACIT V. GLOBAL AGENCIES (P) LTD. (2005) 87 TTJ 1086 (DELHI) CIT V. NAGINDAS M. KAPADIA (1989) 177 ITR 393 (BOM) EVEN OTHERWISE, IF THE TRANSACTIONS ARE NOT IN THE NATURE OF CURRENT ACCOMMODATION ADJUSTMENT ACCOUNT, THE SA ME ARE IN THE NATURE OF DEPOSITS AS IT APPARENT FROM T HE NOMENCLATURE OF THE LEDGER ACCOUNT. IF THE TRANSACT IONS ARE IN THE NATURE OF DEPOSITS AND THE SAME ARE BETW EEN TWO CORPORATE, IT IS NOTHING BUT INTER CORPORATE DE POSITS (ICD) WHICH IN ANY CASE WOULD BE OUTSIDE THE PURVIE W OF SECTION 2(22)(E) OF THE ACT. THIS VIEW SUPPORTED BY IHE FOLLOWING DIRECT BINDING DECISIONS OF THE ITATS. M/S. UTKARSH FINCAP (P) LTD., VS. ITO 7288 ITR 38 ( TRI. AHMEDABAD) M/S. BOMBAY OIL INDUSTRIES LTD, V. DCIT, CENTRAL CI RCLE 35 MUMBAI 128 SOT 383 (MUM.) 4. IT CAN THUS BE SEEN THAT THE COMMISSIONER AS A M ATTER OF FACT FOUND THAT THE PAYMENTS WERE NOT IN THE NAT URE OF CURRENT ADJUSTMENT. THERE WAS MOVEMENT OF FUND BOTH IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 12 - WAYS ON NEED BASIS. THE TRANSACTIONS IN THE NATURE OF LOANS AND ADVANCES ARE USUALLY VERY FEW IN NUMBER WHEREAS IN THE PRESENT CASE, SUCH TRANSACTIONS ARE IN THE FORM OF CURRENT ACCOMMODATION ADJUSTMENT ENTRIES. T HE COMMISSIONER THEREFORE, HELD THAT THE TRANSACTIONS WERE NOT IN THE NATURE OF LOANS AND ADVANCES. THE REVENU E CARRIED THE MATTER IN APPEAL. THE TRIBUNAL CONCURRE D WITH THE VIEW OF THE CIT (APPEALS) AND HELD THAT THE AMO UNTS WERE NOT IN THE NATURE OF INTER CORPORATE DEPOSITS AND WERE THEREFORE, NOT TO BE TREATED AS LOANS OR ADVAN CES AS CONTEMPLATED IN SECTION 2(22)(E) OF THE ACT. 5. THE ISSUE IS SUBSTANTIALLY ONE OF APPRECIATION O F FACTS. WHEN THE CIT(APPEALS) AS WELL AS TRIBUNAL CONCURREN TLY HELD THAT LOOKING TO LARGE NUMBER OF ADJUSTMENT ENT RIES IN THE ACCOUNTS BETWEEN TWO ENTITIES, THE AMOUNTS WERE NOT IN THE NATURE OF LOAN OR DEPOSIT, BUT MERELY ADJUST MENTS, APPLICATION OF SECTION 2(22)(E) OF THE ACT WOULD NO T ARISE. CONSEQUENTLY, NO QUESTION OF LAW ARISES. TAX APPEAL S ARE DISMISSED.' 5.6 THE ASSESSING OFFICER HAS INVOKED SECTION 2(22 )(O) ONLY BECAUSE THE ACCOUNT CONTAIN TRANSACTIONS OF PAYMENT AND REPAYMENT BETWEEN THE SAID COMPANY OIL AND FIRMS OC AND OBA. FURTHER, HE HAS NOWHERE ASCERTAINED THAT THE P AYMENT RECEIVED AND THE PAYMENTS MADE ARE TOWARDS PAYMENT BY WAY OF LOANS OR ADVANCES. THEREFORE, SIMPLY BECAUSE THE RE WERE TRANSACTIONS OF CHEQUES RECEIVED AND CHEQUES PAID I N THE MUTUAL, OPEN, CURRENT, RUNNING ACCOUNT WITH THE SIS TER CONCERNS, THE SAME CANNOT BE CONSIDERED AS PAYMENT BY WAY OF LOANS OR ADVANCES SO AS TO ATTRACT PROVISIONS OF SE CTION 2(22)(E) AS HELD IN THE CASE OF SCHUTZ DISHMAN BIO-TECH PVT LTD (SUPRA). SIMILAR TRANSACTIONS HAVE BEEN MADE IN EARLIER YEAR ALSO BUT NEVER IN PAST THE SAME HAS BEEN CONSIDERED TO BE TR ANSACTION ATTRACTING SECTION 2(22)(E). THEREFORE, IN VIEW OF THE BINDING IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 13 - DECISION IN THE CASE OF SCHUTIZ DISHMAN BIO-TECH PV T LTD (SUPRA), THE TRANSACTIONS IS REQUIRED TO BE HELD I N THE NATURE OF MUTUAL CURRENT ACCOMMODATION ENTRIES AND THEREFORE OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 2(22)(E) OF TH E ACT. WE HOLD ACCORDINGLY. 5.7 ONCE THE IMPUGNED TRANSACTIONS BETWEEN OIL & O BA ARE TREATED AS CURRENT ACCOMMODATION ADJUSTMENT ENTRIES , THE OTHER GROUNDS BECOME ACADEMIC AND THEREFORE, NO SEP ARATE ADJUDICATION IS REQUIRED. IN THE RESULT, ALL THE A PPEALS FILED BY THE ASSESSEE ARE ALLOWED. ITA NOS. 1690 TO 1692/AHD/2011 - DEPARTMENT'S APPE ALS 6. IN ALL THESE APPEALS FILED BY THE DEPARTMENT, THE ONLY GROUND IS WITH RESPECT TO DELETION OF ADDITION US 2 (22)(E) OF THE ACT BY APPLYING THE THIRD LIMB OF SECTION 2(22)(C), WHEREIN THE HE HELD THAT PAYMENT MADE BY OIL TO OC AND OBA WHIC H HAS ULTIMATELY NOT BEEN USED BY THE ASSESSEE CANNOT BE ADDED AS DEEMED DIVIDEND IN ITS HANDS. AS WE HELD IN ASSESSE ES APPEAL ABOVE THAT THE IMPUGNED TRANSACTIONS ARE NOT IN THE NATURE OF LOANS AND ADVANCES SO AS TO ATTRACT PROVISIONS OF S ECTION 2(22)(E) OF THE ACT WHILE ADJUDICATING UPON ASSESSE ES' APPEALS, THIS GROUND IN ALL THESE DEPARTMENT APPEALS HAS TO BE DISMISSED SINCE IT DEALS WITH QUANTIFICATION OF DEE MED DIVIDEND IN THE HANDS OF THE ASSESSEE. WHEN THE VERY PROVISI ON OF S.2(22)(E) OF THE ACT ARE NOT AT ALL ATTRACTED, THE QUESTION OF QUANTIFYING THE ADDITION WOULD NOT ARISE. THEREFOR E, ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. IT(SS)A NOS. 407 TO 412/AHD/2011, ITA NOS.1648 TO16 50 & 1690-1692/AHD/2011 ASSESSEES : SHRI DINESH JAIN & KAVITA D. JAIN AYS : 2005-06 TO 2009-10 - 14 - 7. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSE SSEE ARE ALLOWED, WHEREAS ALL THE APPEALS FILED BY THE REVEN UE ARE DISMISSED AS DISCUSSED ABOVE. ORDER PRONOUNCED IN THE COURT ON 5 TH OF APRIL, 2016 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (SHAILENDRA K . YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 05/04/2016 *BT / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. && ' / CONCERNED CIT 4. ' ( ) / THE CIT(A), 5. ()* $++ , , / DR, ITAT, AHMEDABAD 6. *, / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) ! , / ITAT, AHMEDABAD