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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri Sudhanshu Srivastava & Shri Amarjit Singh
Date of hearing : 27-06-2019 Date of pronouncement : 28-06-2019 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee’s appeal for A.Y. 2012-13, arises from order of the CIT(A)-6, Ahmedabad dated 24-03-2017, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The solitary ground of appeal of the assessee is against the decision of ld. CIT(A) in confirming the action of assessing officer in making an addition of Rs. 25,60,001/- as deemed dividend u/s. 2(22)(e) of the act.
Page No 2 Ashokkumar H. Rathod vs. ITO
The fact in brief is that assessee has filed return of income declaring income of Rs. 10,57,480/- on 12th Sep, 2012. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 9th August, 2013. The assessee is a proprietor and engaged in the business of cast iron. The assesse is also a director and substantial shareholder in company, M/s. Adhyashakti Alloys Pvt. Ltd. i.e. 59%. During the year under consideration on verification of record, the assessing officer has noticed that the company has given loan to the assessee of Rs. 58,86,222/-. The assessing officer has also noticed on verification of the balance sheet of the company that company was having opening reserves and surplus at Rs. 30,16,673/- and closing reserve and surplus at Rs. 38,35,334/-. Therefore, assessee was issued show cause to explain why not the amount of Rs. 38,35,334/- to the extent of reserves and surplus available with the assessee company should be treated as deemed dividend in the hand of the assessee as per provision of section 2(22)(e) of the act. The assessee has responded that he has not received any loan or advances from the company during the year under consideration and transaction was of the nature of routine business transaction, therefore, no addition u/s. 2(22)(e) of the act should be made. The assessee has also explained that assessee had agreed to purchase a plot of land jointly with the company with equal shareholding by the assessee and the company. It was also explained that the total investment in the plot of land was to be made to the amount of R. 1.30 crores. For the said purposes, an advance of Rs. 5,50,000/- was given by the company while Rs. 12 lacs advance was given by the assessee for the purchase of the plot of land and further amount of Rs. 50 lacs was to be received from the company as its share towards cost of land and development at initial stage. It is also Page No 3 Ashokkumar H. Rathod vs. ITO stated that the company had given under routine business transaction Rs. 38,68,580/- at the end of earlier year. Subsequently, the company has decided not to purchase the share of land and development and the company had withdrawn more than the amount given for share of purchase of land. Therefore, the assessee has stated that it was purely business transaction for purchase of land and development with the company and proprietary concern of the assessee named Adhyashakti Techno Plast, therefore, the provision of section 2(22)(e) is not applicable. The assessing officer has not accepted the explanation of the assessee and treated running balance in the ledger account of the assessee M/s. Adhyashakti techno Plast in the books of the assessee to the amount of Rs. 25,60,001/- as deemed dividend u/s. 2(22)(e) of the act.
Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.
During the course of appellate proceedings before us, the ld. counsel has filed paper book containing detail and copies of document furnished before the assessing officer and ld. CIT(A) during the course of assessment order and appellate proceedings. He has vehemently contended that nature of transaction of the assessee with the company in which he was shareholder was of commercial transaction which was not liable for addition u/s. 2(22)(e) of the act. The ld. counsel has also referred page no. 5 and 6 of the paper book containing extract of the ledger account of the company in the books of account of the assessee which demonstrate that during the year under consideration assessee has paid an amount of Rs. 98,10,515/- as Page No 4 Ashokkumar H. Rathod vs. ITO against an amount of Rs. 97,50,802/- received from the company. The ld. counsel has also referred the decision of Co-ordinate bench of the ITAT, Ahmedabad vide in the case of ITO vs. Mehulbhai D. Zhaveri dated 23-12-2016 on similar fact and issue decided in favour of the assessee. On the other hand, ld. departmental representative has supported the order of assessing officer and ld. CIT(A).
We have heard both the sides and perused the material on record. The assessing officer has made addition of Rs. 25,60,001/- u/s. 2(22)(e) of the act in respect of certain funds received by the assessee from the company claimed Adyashakti Alloys Pvt. Ltd. wherein assessee was holding share of 59%. The ld. counsel has referred the page no. 5 & 6 in the paper book to demonstrate that the transactions were taken place for the purpose of business between the assessee and the company. The ld. counsel has also referred page no. 7 in the paper book as a board resolution allowing the company to purchase a piece of land in which the assessee was a 50% co- owner. In the paper book at page no. 9,10,13 & 15 copies of memorandum of understanding was also placed indicating that assessee and the company were agreed to purchase the land as a 50% shareholding of each party. We have gone through the copy of ledger account of the assessee in the books of the assessee and the extract of the copies ledger account of the company in the books of the account of the assessee is as under:- Account: ADHYASHAKTI ALLOYS (P) LTD Date Book Doc. No. Particular Debit Credit Balance 01/14/11 OpBal Opening Balance ..... 38,64,580.00 38,64,580.00 (Cr) 29/04/11 Paymt To B.O.I.-C.C-320430110000007 75,000.00 37,89,580. 00 (Cr) BEING AMTTRANSFERRED THROUGH NET BANKING Page No 5 Ashokkumar H. Rathod vs. ITO 12/05/11 Paymt To B.O.I.-C.C-320430110000007 2,50,000.00 35,39,580.00 (Cr) BEING AMTTRANSFERRED THROUGH NET BANKING 03/06/11 Paymt 1 To B.O.I.-C.C-320430110000007 2,00,000.00 33,39,580.00 (Cr) BEING RTGS TO EVERSHINE ON BEHALF .OF ADHYASHAKT1 ALLOYS PVT. LTD., 08/06/11 Recpt By B,O.I.-C.C-320430110000007 3,60,000.00 36,99,580.00 (Cr) BEING AMTTRANSFERRED THROUGH NET BANKING 09/06/11 Recpt By B.O.I.-C.C-320430110000007 5,00,000.00 41, 99,580. 00 (Cr) BEING AMTTRANSFERRED THROUGH NET BANKING 05/07/11 Paymt To B.O.I.-C.C-320430110000007 10,50,000.00 31,49,580.00 (Cr) BEING AMTTRANSFERRED THROUGH NET BANKING 16/07/11 Paymt To B.O.I.-C.C-320430110000007 9,00,000.00 22,49,580.00 (Cr) 16/07/11 Paymt 1 To B.O.I.-C.C-320430110000007 16,00,000.00 6,49, 580. 00 (Cr) rtgs 16/07/11 Paymt 2 To B.O.I.-C.C-320430110000007 6,49,579.00 1.00 (Cr) 16/07/11 Paymt To B.O.I.-C.C-320430110000007 9,00,000.00 8,99, 999.00 (Dr) rtgs 20/07/11 Recpt By B.O.I.-C.C-320430110000007 2,60,000.00 6,39,999.00 (Dr) BEING AMTTRANSFERRED THROUGH NET BANKING 04/08/11 Recpt By B.O.I.-C.C-320430110000007 6,00,000.00 39,999.00 (Dr) BEING AMTRECEIVED THROUGH RTGS 16/09/11 Recpt By B.O.I.-C.C-320430110000007 4,00,000.00 3,60,001.00 (Cr) BEING AMTTRANSFERRED THROUGH RTGS 28/09/11 Paymt To B.O.I.-C.C-320430110000007 1,30,000.00 2,30,001.00 (Cr) BEING AMTTRANSFERRED THROUGH RTGS '\ 12/10/11 Recpt 2378 By B.O.I.-C.C-320430110000007 13,00,000.00 15,30,001.00 (Cr) BEING AMTRECEIVED BY CHEQUE 19/10/11 Recpt By B.O.I.-C.C-320430110000007 40,000.00 15,70,001,00 (Cr) BEING AMTRECEIVED THROUGH NET Page No 6 Ashokkumar H. Rathod vs. ITO
BANKING 03/11/11 Paymt To B.O.I.-C.C-320430110000007 7,00,000.00 8,70,001.00 (Cr) BEING AMTTRANSFERRED THROUGH NET BANKING 04/11/11 Paymt To B.O.I.-C.C-320430110000007 4,50,000.00 4,20,001.00 (Cr) BEING AMTTRANSFERRED THROUGH NET BANKING 10/11/11 Paymt To B.O.I.-C.C-320430110000007 6,00,000.00 1,79,999.00 (Dr) 4 BEING AMTTRANSFERRED THROUGH NET BANKING 23/11/11 Paymt To B.O.I.-C.C-320430110000007 3,00,000.00 4,79,999.00 (Dr) BEING AMTTRANSFERRED THROUGH NET BANKING ' Account: ADHYASHAKTI ALLOYS (P) LTD ~ 3* o Book Doc. No. Par cular Debit Credit Balance Date 28/11/11 Paymt To B.O.I.-C.C-320430110000007 1,00,000.00 5,79,999.00 (Dr) BEING AMT TRANSFERRED 14/12/11 Paymt To B.O.I.-C.C-320430110000007 9,51,088.53 15,31,087. 53 (Dr) BEING AMTTRANSFERRED THROUGH RTGS 03/01/12 Paymt 6925 To B.O.I.-C.C-320430110000007 15,000.00 15,46,087.53 (Dr) BEING AMTTRANSFERRED 03/01/12 Paymt 6927 To B.O.I.-C.C-320430110000007 2,19,500.00 17,65,587. 53 (Dr) BEING AMTTRANSFERRED 03/01/12 Paymt To B.O.I.-C.C-320430110000007 5,945.00 17,71,532.53 (Dr) BEING AMTTRANSFERRED 12/01/12 Recpt By B.O.I. -C.C-320430110000007 10,00,000.00 7,71,532. 53 (Dr) BEING AMTRECIEVED THROUGH NET BANKING 18/01/12 Jrnl 1 To BHAGYLAXMI STEEL INDUSTRIES 95,781.00 8,67,313.53 (Dr) BEING AMTRECEIVED IN AAPL VIDE CH.NO.95781 OF HDFC BANK Page No 7 Ashokkumar H. Rathod vs. ITO 18/01/12 Jrnl 2 By I.G.STEEL 1,30,000.00 7,37,313.53 (Dr) BEING AMTTRANSFERRED TO ADHYASHAKTI ALLOYS PVT. LTD., 03/02/12 Paymt 114764 ToSBI-32147318554 2,00,000.00 9,37,313.53 (Dr) BEING AMTTRANSFERRED 07/02/12 Recpt By B.O.I.-C.C-320430110000007 10,000.00 9,27,313.53 (Dr) BEING AMTTRANSFERRED 13/02/12 paymn ToSBI-32147318554 3,50,000.00 12,77,313.53 (Dr) t BEING AMTTRANSFERRED 23/02/12 Recpt 45981 BySBI-32147318554 5,50,000.00 7,27,313.53 (Dr) BEING AMT RECEIVED BY CHEQUE 12/03/12 paymn To B.O.I.-C.C-320430110000007 50,000.00 7,77,313.53 (Dr) t BEING ADVANCE TAX DEPOSITON BEHALF OF AAPL VIDE CHALLAN r N0.02098 BSR CODE 0222833 15/03/12 Jrnl 2 By DIPSINGBHAI MORI-ADV 1,75,000.00 6,02,313.53 (Dr) BEING AMTPAID TO DIPSINHBHAI MORI \ ON BEHALF OF US BY AAPL VIDE CH.NO. 1640 DT.10.06.10 15/03/12 Jrnl 3 By RAMSANGBHAI MORI 3,75,000.00 2,27,313.53 (Dr) BEING AMTPAID TO RAMSANG MORI ON BEHALF OF US BY AAPL VIDE CH.NO. 901909/1639 Rs.2.00+1.75 LACD ON 08.01.10 & 28.06.10 31/03/12 Jrnl 4 By INTERESTTO OTHERS 1,86,222.00 41,091.53 (Dr) BEING INTEREST GIVEN CREDIT @ 12% FOP. THE YEAR ON PRODUCT BASIS AS PER WORKING STATEMENT 31/03/12 Jrrnl 5 To TDS ON INTEREST 18,622.00 59,713.53 (Dr) BEING TDS DEDUCTED FROM INTEREST CREDITED @ 10% Total ..... 98,10,515.53 97,50,802.00 Closing Balance ..... 59,713.53 (Dr)
Page No 8 Ashokkumar H. Rathod vs. ITO
The aforesaid copy of the account clearly demonstrates that assessee was having a current account with the said company. We have also gone through the decision of the Co-ordinate Bench of the ITAT vide dated 23-12-2016 in the case of ITO vs. Mehulbhai D. Zhaveri as supra wherein after following the decision of Hon’ble Jurisdictional High Court in the case of Schutz Dishman Bio-Tech Pvt. Ltd. in Tax Appeal No. 958 & 959 of 2015 held that looking to the large number of adjustment entries in the accounts between two entities, the amounts were not in the nature of loan or deposit but merely adjustment. Relevant part of decision of Co-ordinate Bench of the ITAT is reproduced as under:- “11. We have given a thoughtful consideration to the orders of the authorities below. We have also carefully gone through the decisions relied upon by the rival parties. There is no dispute that the assessee is holding substantial interest in Kadam Exports (P) Ltd., the relevant extract of the copy of the ledger account of the assessee in the books of accounts of M/s. Kadam Exports (P). Ltd. is as under:- Date Particulars Vch Type Vch Debit Credit No. 30.05.2007 By HDFC Bank Receipt 89 9,50,000.00 Ch. NO. 300195 BOI Rec. M.D. Zaveri 04.06.2007 To HDFC Bank Payment 216 9,50,000.00 Ch. No. 721890 PAID TO M.D. Zaveri 05.07.2007 By HDFC Bank Receipt 153 29,10,000.00 Ch. No. 353578 HDFC Bank REC. M.D. Zaveri By HDFC Bank Receipt 154 20,90,000.00 Ch. No. 300197 BOI Rec. M.D. Zaveri 26.07.2007 By HDFC Bank Receipt 182 40,00,000.00 Ch. No. 300199 31.07.2007 To HDFC Bank Payment 534 15,00,000.00 Ch. No. 816791 Paid To M.D.
Page No 9 Ashokkumar H. Rathod vs. ITO
Zaveri 11.09.2007 To HDFC Bank Payment 753 20,00,000.00 Ch. No. 817102 Paid To M.D. Zaveri 23.10.2007 To HDFC Bank Payment 951 25,00,000.00 Ch. No. 30.10.2007 To HDFC Bank Payment 991 5,00,000.00 Ch. No. 817106 02.11.2007 To HDFC Bank Payment 1018 25,00,000.00 Ch. No. 817108 11.01.2008 To CITI Bank Payment 1266 35,00,000.00 Current A/C. Ch. No. 89402 30.01.2008 To CITI Bank Payment 1336 3,00,000.00 Currect A/C. Ch. No. 89403 To HDFC Bank Payment 1337 7,00,000.00 Ch. No. 817112 13.02.2008 By HDFC Bank Receipt 573 25,00,000.00 Ch. No. 941377 15.03.2008 By HDFC Bank Receipt 621 3,00,000.00 31.03.2008 By HDFC Bank Receipt 642 17,00,000.00 Ch. No. 941393 HDFC Bank 1,44,50,000.00 1,44,50,000.00
A perusal of the afore-stated copy of the account clearly shows that the assessee was having a current account with the said company. It can be seen that there are several debits and credits entries in the said account. The Hon’ble Jurisdictional High Court in the case of Schutz Dishman Bio-Tech Pvt. Ltd. (supra) was seized with the following question of law:- "Whether on facts and in law the ITAT was right in cancelling the order passed u/s 201(1) and 201(A) of the Act, without appreciating that the amount advanced was in the nature of deemed dividend u/s 2(22)(e) of the Act?" 13.And the relevant findings of the Hon’ble High Court reads as under:- 4. It can thus be seen that the Commissioner as a matter of fact found that the payments were not in the nature of current adjustment. There was movement of fund both ways on need basis. The transactions in the nature of loans and advances are usually very few in numbers whereas in the present case, such transactions are in the form of current accommodation adjustment entries. The Commissioner therefore, held that the transactions were not in the nature of loans and advances. The Revenue carried the matter in appeal. The Tribunal concurred with the view of the CIT (Appeals) and held that the amounts were not in the nature of Inter Corporate Deposits and were therefore, not to be treated as loans or advances as contemplated in section 2(22)(e) of the Act. 5. The issue is substantially one of appreciation of facts. When the CIT(Appeals) as well as Tribunal concurrently held that looking to large number of adjustment entries in the accounts between two entities, the amounts were not in the nature of loan or deposit, but merely adjustments, application of section Page No 10 Ashokkumar H. Rathod vs. ITO 2(22)(e) of the Act would not arise. Consequently, no question of law arises. Tax appeals are dismissed. ` 14. If the aforementioned copy of accounts is considered in the light of the decision of the Hon’ble Jurisdictional High Court (supra), we find that facts are similar debits and credits to the facts considered by the Hon’ble Jurisdictional High Court. Respectfully following the findings of the Hon’ble Jurisdictional High Court, we decline to interfere with the findings of the First Appellate Authority.
15. Before parting, as mentioned elsewhere, the ld. D.R. has relied upon several decisions. In our considered opinion, none of the decisions relied upon by the ld. D.R. The Hon’ble Courts had considered a transaction which was in the nature of current account where there were several debits and credits. Therefore, the facts of the case in hand are clearly distinguishable from the facts of the cases relied upon by the ld. D.R.
Since the facts of the case decided by the Hon’ble Jurisdictional High Court squarely apply to the facts of the case in hand, we have respectfully followed the same.” Respectfully following the decision of Co-ordinate Bench of the ITAT as supra on identical issue and similar fact, the appeal of the assessee is allowed.