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Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM ]
ORDER This is an appeal by the Assessee against the order dated 07.08.2015 of CIT(A)-Jalpaiguri, relating to AY 2010-11.
The only issue for consideration in this appeal by the assessee is as to whether the revenue authorities was justified in making addition of Rs.10,00,000/- to the total income of the assessee invoking the provision of section 2(22)(e) of the Act.
The Assessee is an individual. In the course of assessment proceedings the AO noticed that the assesee had received a sum of Rs.10,00,000/- from a company by name M/s Abani Rice Mill Pvt. Ltd.. The assessee was a director in the said company and held 55% of the paid up share capital. The company had reserves of more than Rs.30,00,000/-. In these circumstances AO was of the view that a sum of Rs.10,00,000/- received by the assessee as loan from M/s. Abani Rice Mill Pvt. Ltd had to be taxed as deemed dividend in the hands of the assessee u/s 2(22)(e) of the Act. Before AO the assessee filed a Xerox copy of the minutes of the meeting of the board of directors of M/s. Abani Rice Mill Pvt. Ltd in and by which a sum of Rs.10,00,000/- was given as interest free loan for a term of five years. The loan was Tapan Kr.Saha-A.Y.2010-11 1 either to be repaid or adjusted against the remuneration of the assessee as a director. The loan was however repaid by the assessee to the company on 19.12.2013. Taking note of the aforesaid evidence AO brought to tax a sum of rs.10,00,000/- as deemed dividend in the hands of the assessee.
Before CIT(A) the assessee submitted he received an Advance of Rs. 10,00,000/- on 01/06/2009 from the company for acquisition of various Rice Milling Plant & Machinery. Accordingly machinery worth Rs. 252861/- was also supplied to the Rice Mill during the next financial year i.e. in FY 2010-11. The said plant & machinery was duly imported by ABANI ENTERPRlSE (Prop: Sri Tapan Kumar Saha) and copies of import documents and invoices were filed before CIT(A). It was contended that the remaining advance money being unutilized was also refunded during the following two years. The said advance was made under circumstances which are very much in the ordinary course of business and not for any kind of benefit of the assessee. The Assessee placed reliance on a decision of the Hon’ble Karnataka High Court in the case of Bagmane Constructions Pvt. Ltd., wherein it was held that "Trade advances which is in the nature of money transact ted to give effect to commercial transactions would not fall within the of the provisions of section 2(22) (e) of the I.T. Act' 1961.
4.1. CIT(A) however confirmed the order of AO by observing as follows :- “5. I have duly considered the submission of Ld. AR of the appellant in the light of issues involved and the case laws cited and not inclined to accept his arguments. The Ld. AR has given utmost importance on the recent decision of the Karnataka High Court where it has been decided that advance given to a share holder or to any sister concern as a consideration for the goods or for purchase of a capital asset, cannot be treated as deemed dividend under section 2(22)(e) of the Act. In this case, as per appellant's own admission, he had received Rs.10.00 lakhs on 01/06/2009 from the company and claimed to have supplied machinery worth of Rs.2,52,861/- in the next financial year. The balance amount claimed to have returned in the next two financial years. This cannot be termed as 'advance' in any manner. So far as the machinery is concerned, it is seen from the copy of the bill that same was purchased on 26/04/2008 i.e. much before taking the so called advance from the company. Basically, said machinery was purchased in the name of M/s. Abani Enterprise, proprietary concern of the appellant engaged in same rice mill business. It is clear that the AR made a cooked story that the appellant had taken advance from the company to take shelter under the recent decision of the Hon'ble Karnataka High Court.
In view of the above, it has been clearly proved that the appellant had taken interest- free loan of Rs.10.00 lakhs from the company where he was a major shareholder and enjoyed the same for about three years. The AO was right in taxing that loan as deemed Tapan Kr.Saha-A.Y.2010-11 2
dividend as per provisions of section 2(22)(e) of the Act. The addition of Rs.10.00 lakhs is confirmed.”
Aggrieved by the order of CIT(A) assessee has preferred the present appeal before the Tribunal.
6. I have heard the submissions of the learned counsel for the assessee, who reiterated the stand of the assessee as was put forth before CIT(A). The evidence on record shows that the assessee in his capacity is a proprietor of M/s. Haque Enterprises, imported parts of rice mill machinery old and used from Bangladesh. A sum of Rs.2,52,861/- was the cost of the parts of rice mill machinery so imported by the assessee. The import was on 26.04.2008. A sum of Rs.10,00,000/- received by the assessee from M/s. Abani Rice Mill Pvt.Ltd. on 01.06.2009 much after the import of parts of rice mill machinery by the assessee. Therefore the conclusion drawn by CIT(A) that a sum of Rs.10,00,000/- was an advance for the purchase of machinery through the assessee was rightly held to be an after-thought by CIT(A). The other circumstance namely return of the remaining sum of advance also goes to show that the plea of Rs.10,00,000/- was advance for purchase of machinery was not true. Besides the above such a plea was not put forth before AO by the assessee. There is no evidence on record to show that Rs.10,00,000/- was given to the assessee by M/s. Abani Rice Mill Pvt.Ltd. for the purpose of purchase of machinery. In the given circumstances we do not find any infirmity in the conclusions arrivedat by CIT(A). Consequently appeal by the assessee is dismissed.