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Income Tax Appellate Tribunal, DELHI ‘SMC’ BENCH,
Before: SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:
This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] – 13, New Delhi dated 25.09.2018 pertaining to A.Y 2013-14.
The solitary grievance of the assessee is that the CIT(A) erred in confirming the addition of Rs. 14,11,762/- made by the Assessing Officer u/s 2(22)(e) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'].
During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has received Rs. 2,55,64,457/- from HDA Buildcon [P] Ltd. The assessee was asked to explain why the said receipt of money be not taxed as deemed dividend u/s 2(22)(e) of the Act.
In response, the assessee file detailed reply explaining the transactions which is as under:
Details of the S. No. property Amount Remarks 1. Sb-1302, Pent Rs 34.55 The payment was The above property was sold/transfer Lacs received on rights to M/s HDA Buildcon Pvt Ltd houseJDI, Kundli 09.11.2012 vide during AY and net income of Rs 9 Lacs cheque No. 731408 was declared in the AY. The copy of the transfer document were given vide letter dated 05,01,2016 2 Rs 20.48 The payment was The above property was sold/transfer B19/9JDI city, Kundli Lacs received on rights to M/s HDA Buildcon Pvt Ltd 09.11.2012 vide during AY and net income of Rs 0.99 cheque No. 731407 Lacs was declared in the AY. The copy of the transfer document were given vide letter dated 05.01.2016.
3 Rs 92.88 The payment was The above property/transfer rights was DLF, Capital Greens, New Delhi Lacs received on purchased vide agreement dated 21.11.2012 vide 04.06.2012. Copy of agreement was cheque No. 731413 given to your office vide your letter dated 03.02.2016.. 4 Rs 68 The payment was The above property/transfer rights was D6/903 Parsvanath Exotica Lacs received on purchased vide agreement dated 21.11.2012 vide 04.06.2012. Copy of agreement was Sec-53 Gurgaon cheque No. 731413 given to your office vide your letter dated 03.02.2016.
In the light of the aforementioned details, the assessee explained that the money received from HDA Buildcon [P] Ltd. is nothing but advance received by the assessee against the property and being a business transaction, and hence the same cannot be treated as deemed dividend u/s 2(22)(e) of the Act.
After considering the submissions, the Assessing Officer observed as under:
The reply of the assessee is considered and analysed. But it is not found completely satisfactory. The assessee in his letter dated 03/12/2015 provided a ledger of HDA Buildcon (P) Ltd from which it is clear that assessee received Rs 2,55,64,457/- during the year under consideration. The assessee had debit balance of Rs 25,61,310/- as on 01/04/2012 and the assessee in his reply dated 25/02/2016 to the show cause notice dated 15/02/2016 explain amount of Rs 2,15,91,385/- as advance received against various properties as listed above. The assessee could not explain why the Sec. 2(22)(e) should not be applicable for the balance amount of Rs. 14,11,762/- received during the year from M/s HDA Buildcon (P) Ltd. As the assessee has 22.22% shareholding in HDA 5. buildcon (p) Ltd as on 31.03.2013. The assessee also has substantial interest (more than 20%) in the proprietary firm - Deepak exports. Further, HDA buildcon is a closely he id" company( not a public company) and as per balance sheet of the company as on 31/03/2013, the company has reserve & surplus of Rs. 2,89,32,903/-. Therefore, as per sec 2{22)(e) of IT Act,1961, the balance amount Rs 14,11,762/- received by the assessee from HDA buildcon Pvt. Ltd. during the year under consideration is considered as deemed dividend and added back to total income of the assessee. Penalty proceedings u/s 271(1) (c) of the Income Tax Act, 1961 is initiated for furnishing inaccurate particulars of income”
Aggrieved, the assessee carried the matter before the CIT(A), but without any success.
Before me, the ld. AR stated that the Assessing Officer himself has accepted the receipt of money from HDA Buildcon [P] Ltd. as advance towards purchase of property. It is the say of the ld. AR that once the Assessing Officer has accepted the business transaction, he should not have taken a different view.
Per contra, the ld. DR strongly supported the findings of the lower authorities.
I have given thoughtful consideration to the orders of the authorities below. There is no dispute that the assessee was having business transaction with HDA Buildcon [P] Ltd. The Assessing Officer himself has accepted the transaction to the extent of Rs. 2.15 crores. I find that the CBDT vide Circular No. 19/2017 dated 12.06.2017 issued the Circular to the extent that advances which are in the nature of commercial transactions would not fall within the ambit of the word ‘advance’ in section 2(22)(e) of the Act.
The Hon’ble Delhi High Court in the case of Creative Dyeing and Printing Pvt. Ltd. (supra) has held that amounts advanced for business transaction do not fall within the definition of ‘deemed dividend’ u/s 2(22)(e) of the IT Act. The Hon'ble Delhi High Court in the case of CIT vs. Arvind Kumar Jain (supra) has held that amount received by the assessee shareholder from a company as a result of trading transaction could not be regarded as deemed dividend
I find that vide agreement dated 20.11.2012 between the appellant and HDA Buildcon [P] Ltd., HDA Buildcon [P] Ltd. has given a sum of Rs. 14 lakhs as an earnest money in advance against the sale of property being entire third floor with its roof/terrace rights upto the sky of the built-up property bearing No. C-377, situated in the layout plan of Government Teachers Co-operative House Building Society Ltd., known as Saraswati Vihar, Pitampura, Delhi.
In the light of the CBDT Circular [supra] and the decision of the Hon'ble Delhi High Court [supra], money received from HDA Buildcon [P] Ltd. is a business transaction and, therefore, outside the ambit of the definition of ‘deemed dividend’ u/s 2(22)(e) of the Act. I, therefore, direct the Assessing Officer to delete the impugned addition.
In the result, the appeal filed by the assessee in is allowed.
The order is pronounced in the open court on .04.2019.
[N.K. BILLAIYA] ACCOUNTANT MEMBER Dated: April, 2019.