TMI Blog2012 (12) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to assessment year 2007-08. 2. The assessee in its Grounds of Appeal has challenged the order of the CIT(A) in sustaining the addition of Rs. 1 Crore made by the AO u/s. 2(22)(e) of the Income Tax Act, 1961. 3. Facts of the case, in brief, are that the assessee is an employee of Karnala Infrastructure Project Pvt. Ltd. (in short KIPL ) and is also engaged in business of Transport and re-seller of sand and metal in the name and style of Abhijit Transport . The assessee also operates petrol pump called Aswad Petroleum which is owned by uncle of the assessee Sri Manohar Shankar Patil. The assessee during the impugned assessment year was holding 45% share of the company KIPL and received salary of Rs. 26 Lakhs from the said company. During the course of assessment proceedings the AO on perusal of the balance sheet of Sri Abhijit Patil noted that he has received a loan of Rs. 1 Crore from KIPL. From the various details furnished by the assessee the AO noted that the company KIPL has reserves to the tune of Rs. 2,04,75,496. He therefore asked the assessee to explain as to why the provisions of section 2(22)(e) should not be applicable to him. 4. The assessee vide his rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 5,00,000 1,55,00,730 Do 20-06-06 10,00,000 1,49,05,589 Do 28-06-06 5,00,000 1,74,14,629 Do 23-08-06 5,00,000 1,86,55,879 Do 07-10-06 5,00,000 1,69,55,749 Do 09-11-06 5,00,000 1,51,86,142 Do 50,00,000 8. On further analysis of the bank statement the AO noted that the other transactions include payments to Vivek Automobiles, expenditure on bunglow and foreign visit of Sri Abhijit Patil. Due to these payments to Patel and Patil, Vivek Automobiles and Personal expenditure the credit limit with the bank was Rs. 2,17,66,142/- on 07-11-06 which came down to Rs. 1,67,66,142/- after the advance of Rs. 1 Crore was received. On 11-11-06 an amount of Rs. 1,52,74,816/- was received from Vivek Automobiles which reduced the credit balance to Rs.55,192/-. On perusal of other bank account of the assessee (Account No. 222 with KNS Bank) the AO observed that during the year advances of Rs. 29,50,523/- was given, the details of which are under : Date Amount advanced Credit balance with bank Purpose of advance 25-08-06 9,64,580 1,97,162 Aswad Petroleum 20-10-06 6,66,060 1,42,48, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment could have been made directly to the farmers as and when the land was purchased. He noted that as per the accounts the advance was not meant for purchase of land as the land in the name of Abhijit had already been purchased and no further land was purchased or transferred in name of company after the advance was taken. Therefore, he was of the opinion that the said agreement is only a ploy to show that the advance has been given for purchase of land for the company and to escape provisions of Section 2(22)(e). Rejecting the explanation given by the assessee and distinguishing the decisions cited before him he held that the provisions of section 2(22)(e) are clearly attracted. He accordingly made addition of Rs. 1.00 Cr. to the total income of the assessee. 10. Before the CIT(A) the assessee reiterated the same submissions as made before the AO. It was submitted that the company KIPL had engaged the assessee to acquire for them a contiguous land admeasuring of about 10 acres at Village Palaspe, Taluke Panvel, District Raigad. As per the MOU dated 07-11-2006, the land to be acquired for the above company was Agricultural land and due to restrictions placed under land reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the assessee drew the attention of the Bench to the lay out plan and submitted that the assessee has already acquired a portion of the land and for the remaining portion he was engaged with various other farmers so as to make a contiguous plot. Since the assessee is a Private Limited Company it was not eligible to buy Non-Agricultural land and the same has to be purchased through some individual in view of the provisions of Section 63 of the Bombay Tenancy Act. He submitted that the assessee company entered into an MOU with the assessee on 07-11-06 which was subsequently cancelled on 01-08-08 since the assessee was unable to acquire contiguous piece of land admeasuring about 10 acres or thereabouts. Referring to Page 19 of the Paper Book the learned counsel for the assessee drew the attention of the Bench to the land acquired by the assessee. Referring to Page 28 of the Paper Book the learned counsel for the assessee drew the attention of the Bench to the profit declared by the assessee on account of sale of land at Akurli which has been shown under the head Income from Business/Profession . Referring to the following decisions he submitted that trade advance is outside th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for the assessee that this is a trade transaction and the advance was given by the company to the assessee for purchase of contiguous land admeasuring of about 10 acres or thereabouts since the company was not authorised to purchase non-agricultural land. However, from the various details furnished by the assessee during the course of assessment proceedings we find an amount of Rs. 50 lacs was received by the assessee on 07- 11-06 and another amount of Rs. 50 lacs on 08-11-06 whereas the assessee has paid an amount of Rs. 7,74,000/- during A.Y. 2006-07 and an amount of Rs. 8 lacs during A.Y. 2007-08 towards purchase of land and the details of which are already given at Para 9 of this order. From the above details it is clear that the payments made by the assessee to the so called farmers are prior to the date of receipt of advance. Since the assessee has received advance from the company on 07-11-06 and 08-11-06 and whereas the payments have been made on 08-06-06 and 26-10- 06, therefore, we do not find much force in the submission of the learned counsel for the assessee that the advance received from the company was utilised for payment to the farmers for purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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