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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
PER OM PRAKASH KANT, AM
1. This appeal by the assessee is directed against order dated 29.11.2019 passed by the Ld. Commissioner of Income-tax (Appeals)-16, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2006-07, raising following ground:
Rekha A. Barot 2 ITA No. 472/M/2020
Invalid assessment U/S 143(3) r.w.s. 254 of the Income Tax 1. Invalid assessment U/S 143(3) r.w.s. 254 of the Income Tax 1. Invalid assessment U/S 143(3) r.w.s. 254 of the Income Tax Act, 1961
1.1 On the facts of the case and in the circumstances of the case On the facts of the case and in the circumstances of the case On the facts of the case and in the circumstances of the case that the CIT(A) t the CIT(A) - 16 erred in passing the order U/S 143(3) r.w.s. 254 16 erred in passing the order U/S 143(3) r.w.s. 254 of the Act without appreciating the fact that during the course of of the Act without appreciating the fact that during the course of of the Act without appreciating the fact that during the course of search proceedings no incrementing documents were found in search proceedings no incrementing documents were found in search proceedings no incrementing documents were found in respect of the additions made U/S 2(22)(e) of the Act. Therefor respect of the additions made U/S 2(22)(e) of the Act. Therefor respect of the additions made U/S 2(22)(e) of the Act. Therefore the additions of ₹19,00,000/ ₹19,00,000/- made U/S 2(22)(e) of the Act made in the made U/S 2(22)(e) of the Act made in the assessment order passed U/S 143(3) r.w.s. 254 of the Act is beyond assessment order passed U/S 143(3) r.w.s. 254 of the Act is beyond assessment order passed U/S 143(3) r.w.s. 254 of the Act is beyond the scope of section 153A of the Act and therefore needs to be the scope of section 153A of the Act and therefore needs to be the scope of section 153A of the Act and therefore needs to be deleted. of the Income 2. Addition of Rs. 19,00,000/ Addition of Rs. 19,00,000/- U/S 2(22)(e) of the Income Tax Act, 1961 Tax Act, 1961
2.1 On the facts and circumstances of the case, the On the facts and circumstances of the case, the On the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) Commissioner of Income Tax (Appeals)-16, Mumbai, erred in 16, Mumbai, erred in confirming the addition of Rs. 19,00,000/ confirming the addition of Rs. 19,00,000/- U/S 2(22)(e) of the U/S 2(22)(e) of the Income Tax Act, 1961 (the Act). Income Tax Act, 1961 (the Act).
2.2 The said CIT(A) er The said CIT(A) erred in not considering the fact that the red in not considering the fact that the said amount represent the trade advances which was paid under a said amount represent the trade advances which was paid under a said amount represent the trade advances which was paid under a contractual obligation and therefore does not fall within the ambit contractual obligation and therefore does not fall within the ambit contractual obligation and therefore does not fall within the ambit of word (advance) as mentioned in section 2(22)(e) of the Act. If of word (advance) as mentioned in section 2(22)(e) of the Act. If of word (advance) as mentioned in section 2(22)(e) of the Act. If further erred in further erred in treating the trade advance as a loan and treating the trade advance as a loan and considered the same as deemed dividend in the hands of your considered the same as deemed dividend in the hands of your considered the same as deemed dividend in the hands of your appellant.
Rekha A. Barot 3 ITA No. 472/M/2020
At the outset, the Ld. Counsel of the assessee submitted that At the outset, the Ld. Counsel of the assessee submitted that At the outset, the Ld. Counsel of the assessee submitted that issue-in-dispute is covered in favour of the assessee by the order of dispute is covered in favour of the assessee by the order of dispute is covered in favour of the assessee by the order of the Tribunal in the case of the assessee for assessment year 2007 nal in the case of the assessee for assessment year 2007 nal in the case of the assessee for assessment year 2007-08 in ITA No. 473/M/2020. The Ld. DR could not controvert the above in ITA No. 473/M/2020. The Ld. DR could not controvert the above in ITA No. 473/M/2020. The Ld. DR could not controvert the above argument of the Ld. Counsel of the assessee. argument of the Ld. Counsel of the assessee.
We have heard the rival submissions of the parties on the We have heard the rival submissions of the parties on the We have heard the rival submissions of the parties on the issue-in-dispute and per dispute and perused the material on record. We find that used the material on record. We find that the Assessing Officer has made addition of the Assessing Officer has made addition of ₹19 lakhs 19 lakhs, for advances received by M/s Bharat Infrastructure & Engineering P. Ltd. (BIEPL) M/s Bharat Infrastructure & Engineering P. Ltd. (BIEPL) M/s Bharat Infrastructure & Engineering P. Ltd. (BIEPL) from M/s Ideal Toll Road Investments and Operations Pvt. Ltd. The M/s Ideal Toll Road Investments and Operations Pvt. Ltd. The M/s Ideal Toll Road Investments and Operations Pvt. Ltd. The assessee is a beneficial shareholder in the both these companies and assessee is a beneficial shareholder in the both these companies and assessee is a beneficial shareholder in the both these companies and therefore, according to the Assessing Officer, the said advances therefore, according to the Assessing Officer, the said advances therefore, according to the Assessing Officer, the said advances qualify for deemed dividend u/s 2(22)(e) of the Act. Whereas qualify for deemed dividend u/s 2(22)(e) of the Act. Whereas qualify for deemed dividend u/s 2(22)(e) of the Act. Whereas, contention of the assessee is that the advances are in the nature of contention of the assessee is that the advances are in the nature of contention of the assessee is that the advances are in the nature of the ‘trade’ advances given by M/s Ideal Toll Road Investments and advances given by M/s Ideal Toll Road Investments and advances given by M/s Ideal Toll Road Investments and Operations Pvt. Ltd. to M/s Bharat Infrastructure Pvt. Ltd. for Operations Pvt. Ltd. to M/s Bharat Infrastructure Pvt. Ltd. for Operations Pvt. Ltd. to M/s Bharat Infrastructure Pvt. Ltd. for Rekha A. Barot 4 ITA No. 472/M/2020 booking of a flat in a proposed project booking of a flat in a proposed project ‘Madhuban Madhuban’ at Andheri (West), Mumbai. The assessee claimed that said amount (West), Mumbai. The assessee claimed that said amount (West), Mumbai. The assessee claimed that said amount is advanced under contractual obligation for booking a flat under contractual obligation for booking a flat, which was under which was under development and construction. We find that identical advances in development and construction. We find that identical advances in development and construction. We find that identical advances in the assessment year 2007 the assessment year 2007-08 has been held by the Trib has been held by the Tribunal in as not liable for deemed dividend u/s 2(22)(e). No. 473/M/2020 as not liable for deemed dividend u/s 2(22)(e). No. 473/M/2020 as not liable for deemed dividend u/s 2(22)(e). The relevant finding of the Tribunal is reproduced as under: The relevant finding of the Tribunal is reproduced as under: The relevant finding of the Tribunal is reproduced as under:
Considered the rival submissions and material placed on record, “8. Considered the rival submissions and material placed on record, 8. Considered the rival submissions and material placed on record, we observed that assessee is the most beneficial sha we observed that assessee is the most beneficial shareholder in both reholder in both the companies “Bharat” and “Ideal” and we observed that the the companies “Bharat” and “Ideal” and we observed that the the companies “Bharat” and “Ideal” and we observed that the advances for booking of flat was given by “Ideal” to “Bharat”. Since advances for booking of flat was given by “Ideal” to “Bharat”. Since advances for booking of flat was given by “Ideal” to “Bharat”. Since the advance given by a company to the another company which is the advance given by a company to the another company which is the advance given by a company to the another company which is for the purpose of purchase of a flat, it clear for the purpose of purchase of a flat, it clearly indicates that the ly indicates that the transactions between two companies for the purpose of common transactions between two companies for the purpose of common transactions between two companies for the purpose of common business transactions. It is not the case of tHe Assessing Officer that business transactions. It is not the case of tHe Assessing Officer that business transactions. It is not the case of tHe Assessing Officer that the advance paid were enjoyed by the assessee or indirectly benefit the advance paid were enjoyed by the assessee or indirectly benefit the advance paid were enjoyed by the assessee or indirectly benefit was enjoyed by the assessee in th was enjoyed by the assessee in these transactions. Even though ese transactions. Even though assessee is a most beneficial owner however nothing was brought assessee is a most beneficial owner however nothing was brought assessee is a most beneficial owner however nothing was brought on record to show that assessee is indirectly enjoyed the benefit out on record to show that assessee is indirectly enjoyed the benefit out on record to show that assessee is indirectly enjoyed the benefit out of these transactions. Therefore, we are inclined to agree with the of these transactions. Therefore, we are inclined to agree with the of these transactions. Therefore, we are inclined to agree with the submissions of the asses submissions of the assessee that it is the business transactions see that it is the business transactions between two companies. We observed that several cases in which between two companies. We observed that several cases in which between two companies. We observed that several cases in which various courts have held that the transactions in the normal course various courts have held that the transactions in the normal course various courts have held that the transactions in the normal course
Rekha A. Barot 5 ITA No. 472/M/2020 of business, the assessee company having received the advances of business, the assessee company having received the advances of business, the assessee company having received the advances from another company from another company in the normal course of business, the same in the normal course of business, the same cannot be treated as dividend u/s. 2(22)(e) of the Act . Further in cannot be treated as dividend u/s. 2(22)(e) of the Act . Further in cannot be treated as dividend u/s. 2(22)(e) of the Act . Further in the normal course of transactions if the advances are received or the normal course of transactions if the advances are received or the normal course of transactions if the advances are received or given to another company without there being any finding that the given to another company without there being any finding that the given to another company without there being any finding that the beneficiary is directly or indirectly enjoyed by the shareholder, s directly or indirectly enjoyed by the shareholder, s directly or indirectly enjoyed by the shareholder, provisions of section u/s. 2(22)(e) of the Act cannot be invoked. provisions of section u/s. 2(22)(e) of the Act cannot be invoked. provisions of section u/s. 2(22)(e) of the Act cannot be invoked. Accordingly, Ground raised by the assessee in this regard is Accordingly, Ground raised by the assessee in this regard is Accordingly, Ground raised by the assessee in this regard is allowed.” 3.1 Respectfully following the same, the order of the Ld. CIT(A)in Respectfully following the same, the order of the Ld. CIT(A)in Respectfully following the same, the order of the Ld. CIT(A)in the issue-in-dispute is set aside and the addition of dispute is set aside and the addition of dispute is set aside and the addition of the deemed dividend is deleted. The ground No. 2 of the appeal is accordingly dividend is deleted. The ground No. 2 of the appeal is accordingly dividend is deleted. The ground No. 2 of the appeal is accordingly allowed. Since, we have already deleted the addition on merit, the allowed. Since, we have already deleted the addition on merit, the allowed. Since, we have already deleted the addition on merit, the ground No. 1 of the appeal is merely rendered academic, ground No. 1 of the appeal is merely rendered academic, ground No. 1 of the appeal is merely rendered academic, hence dismissed as infructuous. dismissed as infructuous.
In the result, the appeal filed by the assessee is allowed. In the result, the appeal filed by the assessee is allowed. In the result, the appeal filed by the assessee is allowed.