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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: MS SUCHITRA KAMBLE & SHRI PRASHANT MAHARISHI
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order of the Commissioner of Income Tax [Appeals]-XXXIII, New Delhi dated 17.07.2014 under section 143(3) of the Income Tax Act, 1961 for Assessment Year 2011- 12.
The Grounds of appeal
are as under:-
1. That the order passed by the CIT(Appeal), XXXIII, New Delhi is bad on facts and in law and is therefore void ab-initio. 1.1 Without effecting the generality of Ground No.l, the order of the Assessing Officer violates rules of natural justice and as such is vitiated.
2. That the CIT(Appeal), XXXIII, New Delhi erred in confirming the addition of Rs.7,00,000/- on account of deemed dividend income u/'s 2(22)(e) of Income Tax Act, 1961, despite the fact that no payment was made by the payer company either to appellant or on behalf of the appellant or for the individual benefit of the appellant. 2.1 That the CIT(Appeal), XXXIII, New Delhi erred in confirming the addition of Rs.7,00,000/- on account of deemed dividend income u/s 2(22)(e) of Income Tax Act, 1961, despite the fact that appellant was not a party to the transactions entered into between two companies. 2.2 That the CIT(Appeal), XXXIII, New Delhi erred in confirming the addition of Rs.7,00,000/- by way of deemed dividend income u/s 2(22)(e) of Income fax Act, 1961 in the hands of the appellant as taxing the said amount in the hands of appellant arising from the transactions between the two concerned companies inter se amounts to creating another deeming fiction, which is neither envisaged nor permissible in law.
The appellant craves permission to add, amend, alter or vary all or any grounds of appeal
on or before the date of hearing of the appeal.”
3. A search and seizer operation was carried out at various premises of M/s BPTP Ltd. and its group concerns and associated persons (hereinafter called BPTP group of cases) on 07.12.2010 and was finally concluded on 05.02.2011. As per Assessing Officer’s observation, the assessee is associated with BPTP group of cases. The assessee filed its return of income on 27.07.2011 declaring an income of Rs.8,73,87,120/-. Subsequently, the case was taken up for scrutiny and notice u/s 143(2) was issued on 13.09.2012. In response to the said notice from time to time CA of the assessee attended the office and submitted the details and clarification. During assessment proceedings, the Assessing Officer has obtained ledger of various Associate concerns of BPTP group and found that the assessee has substantial interest in payer & recipient companies for following advances: Payer company Recipient Amount Accumulated Amount to be company received (Rs.) profit (Rs.) taxed deemed dividend [lowest between (c) and (d)] Rs. (a) (b) (c) (d) (e) BPTP Ltd. Visual Builders 7,00,000 1,32,70,14,000 7,00,000 Pvt. Ltd. Total amount to be added as deemed dividend u/s 2(22)(e) of the 7,00,000 Income Tax Act, 1961
The Assessing Officer observed that the assessee is having substantial interest in the above payer company as well as in recipient company. During the assessment proceedings, the assessee company mainly objected to the application of Section 2(22)(e) on the ground that the amount advance is for purchase of suitable land and the said amount is shown in its Balance Sheet as current liability. After considering the reply, the Assessing Officer made addition of Rs.7,00,000/- as deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961.
Being aggrieved by the order, the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted that an amount of Rs.7,00,000/- was received by Visual from M/s BPTP Ltd. The Ld. AR submitted that the copy of account of CITI Bank along with copy of bank statement showing the amount received by Visual from BPTP Ltd and payment by Visual to Mr. Rishipal Sharma was produced before the Assessing Officer. The amount was received by Visual from BPTP Ltd. in normal course of business for making payment to Mr. Rishipal Sharma against purchase of land from him. The Ld. AR submitted that the copy of sale deed in respect of land purchased by Visual from Mr. Rishipal Sharma as well as copy of account of Mr. Rishipal Sharma in books of Visual showing purchase of land and payment made was produced before the Assessing Officer. The development rights in respect of land purchased by Visual from Mr. Rishipal Sharma was assigned to M/s Countrywide Promoters Pvt. Ltd (CWP) and in turn by CWP to BPTP Ltd. The Ld. AR further submitted that the copy of ledger account in the books of Visual and CWP showing assignment of development rights in land by Visual to CWP by CWP to BPTP was produced before the Assessing Officer. The payment received from BPTP Ltd. by Visual was used to make payment to Mr. Rishpal Sharma from whom land was purchased by Visual. The Ld. AR submitted that the copy of account of Mr. Rishpal Sharma and CITI Bank with copy of Bank statement was produced before the Assessing Officer by the assessee. The Ld. AR submitted that these facts and documents clearly shows that amount was received by Visual Builders Pvt. Ltd. from BPTP Ltd. in ordinary course of business for purchase of land and against assignment of development rights in land and does not fall within purview of provision of Section 2(22)(e) of IT Act, 1961. The Ld. AR relied upon the decision of Hon’ble Jurisdictional High Court of Delhi in following decisions:-
i) CIT Vs Ambassador Travels Pvt. Ltd 173 Taxmann 407 (2008) (Del.) ii) CIT Vs Creative Dying and Painting Pvt. Ltd. in 184 Taxman 483(Delhi) iii) CIT vs. Ankitech Pvt. Ltd. [2011] 11 taxmann.com 100 (Delhi) 7. The Learned DR relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused all the relevant materials available on record. The amount was received by Visual from BPTP Ltd. during the course of business for making payment to Mr. Rishipal Sharma against purchase of land from him. The payment received from BPTP Ltd. by Visual was used to make payment to Mr. Rishpal Sharma from whom land was purchased by Visual. It is pertinent to note that documents produced before the Assessing Officer establishes that amount was received by Visual Builders Pvt. Ltd. from BPTP Ltd. in ordinary course of business for purchase of land and against assignment of development rights in land and does not fall within purview of provision of Section 2(22)(e) of IT Act, 1961. These facts were not disputed by the Revenue at any point of time. The Assessing Officer observed in the Assessment Order that the assessee is having substantial interest in the above payer company as well as in recipient company. But the same was not elaborated or discussed by the Assessing Officer in the Assessment Order. Thus, nothing has been established against the assessee for application of Section 2(22)(e) on the ground that the amount advance is for purchase of suitable land and the said amount is shown in its Balance Sheet as current liability. The assessee has given all the details but the same was not at all taken into account in the context of applicability of Section 2(22)(e) of the Act. In fact, Section 2(22)(e) will not be applicable in assessee’s case as where loans and advaces are given in normal course of business and transaction in question benefits both payer and payee companies as held in case of CIT vs. Ankitech (P.) Ltd. (supra). Thus, the Assessing Officer as well as the CIT(A) was not correct in applying Section 2(22)(e) in the present assessee’s case. Therefore, the appeal of the assessee is allowed.