PRAVEEN BAJAJ,NEW DELHI vs. ACIT, CIRCLE- 51(1), NEW DELHI

Briefly the facts of the case are that the assessee is an individual and filed return of income of Rs.24,44,783/- 2 ITA.No.5066/Del./2018 Shri Praveen Bajaj, New Delhi. The assessing officer noted that assessee has received loan of Rs.35 lacs from M/s. Superfine Translogistics Pvt. Ltd. The assessee was asked to file details of the same. Assessee filed confirmation to explain that loan from M/s. Superfine Translogistics Pvt. Ltd., was taken on 22nd August 2013 through banking channel. The assessing officer noted that assessee has 40% share in this company and has accumulated profits as well. Therefore provisions of section 2(22)(e) are applicable in this case. The assessing officer did not accept the explanation of assessee about the amount taken for business expediency. The assessing officer further found that Rs.35 lacs includes the amount of Rs.10 lacs given by the assessee to the aforesaid company. Therefore, addition of Rs.25 lacs was made under section 2(22)(e) of the Income Tax Act 1961.

I have heard the Learned Representatives of both the parties and perused the material available on record.

Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that on 31st March 2013 the Company M/s. Superfine has received Rs.10 lacs from the assessee during the period on 30th March 2013 PB 71, which continued as loan in assessment year under appeal, in which, assessee is Director and substantial shareholder. On 22nd August 2013 M/s. Superfine wanted to place order to M/s. Century for development of engineering products to be supplied to the Executive Engineer, Roorkee and also for its business i.e., Radio Remote Control Panel Hydraulic Turbine and Gear Box for Turbine which needed R & D by M/s. Century. It has to return loan of the assessee and so instead of issuing separate cheques, one cheque was issued for Rs.35 lacs including Rs.25 lacs for development of the product. Copies of all the ledger accounts and bank statements are filed in the paper book. On 22nd August 2013 itself, assessee immediately paid Rs.35 lakhs to M/s. Century and further paid Rs.10 lacs [PB-124]. On 25th February 2014 assessee again paid Rs.50 lacs to M/s. Century in which he has also 5 ITA.No.5066/Del./2018 Shri Praveen Bajaj, New Delhi. major shares [PB 124]. On 15th November 2014 M/s. Century supplied material to M/s. Superfine, but, did not ask for payment as it has already received advance. But due to Accountant’s error, it was shown as loan. On 09th April 2015 and 24th June 2015. M/s. Superfine again purchased raw material [PB 123]. On 17th July 2015 and 2nd November 2015 M/s. Superfine paid Rs.2,54,864/- and Rs 4 lacs as advance, other than Rs.25 lacs paid [PB 123]. On 30th November 2015 and 19th December 2015, M/s. Superfine received its order for developing Engineering Product from M/s. Century. Bills of the same are filed in the paper book. M/s. Superfine again made payment to M/s. Century and adjusted Rs.25 lacs against M/s. Century after finding error by the Accountant [PB 123]. Similarly, M/s. Century also rectified the error and adjusted Rs.25 lacs and shown in the account of M/s. Superfine [PB 120 and 121]. Learned Counsel for the Assessee, therefore, submitted that amount in question was given to assessee for making further payment to M/s. Century for business purposes. It is supported by VAT return and all other statutory records.

On the other hand, Learned D.R. relied upon the orders of the authorities below.

I have considered the rival submissions. The assessee has placed sufficient material on record to prove that initially assessee has given advance to the company M/s. Super Fine in a sum of Rs.10 lacs. The assessee is having substantial shareholding in this company. M/s. Super Fine, later on, it gave Rs.35 lacs to the assessee, which includes return of Rs.10 lacs advanced by assessee to 7 ITA.No.5066/Del./2018 Shri Praveen Bajaj, New Delhi. the said company. Rs.25 lacs was meant for transmitting to M/s. Century for purchase of engineering products. The assessee explained that M/S. Super Fine wanted to place order to M/s. Century for development of Engineering Products to be supplied to the Executive Engineer, Roorkee and for its business which needed Research and Development by M/s. Century. Therefore, there were no justification for the Learned CIT(A) to hold that material supplied was an afterthought. Since the engineering products was to be supplied after research and development by M/s. Century, therefore, immediate supply of material would not be possible. This was the sole reason given by the Learned CIT(A) for rejecting the claim of assessee. These facts, therefore, show that it was a bonafide business transaction between M/s. Super Fine and M/s. Century through the Assessee. The explanation of assessee is supported by documentary evidences like Bank statement, Ledger Account, VAT returns and bills/invoices etc. Therefore, it was clearly a business transaction through the assessee and as such it could not be treated as loan or 8 ITA.No.5066/Del./2018 Shri Praveen Bajaj, New Delhi. advance so as to attract the provisions of section 2(22)(e) of the Income Tax Act, 1961. I, accordingly, set aside the orders of the authorities below and delete the addition.

In the result, appeal of assessee allowed. Order pronounced in the open Court.