TMI Blog2013 (9) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... ainting by the father of the assesse has not been denied. It has been the contention of the assessee that it was purchasing paintings in the regular course, as after purchasing the paintings from the father other purchases of painting are also made. No material whatsoever has not been brought on record by the revenue to suggest that the letter written by the father of the assessee to the company was an afterthought move. The AO could have examined the assessee as well as his father and also the company on this issue. This exercise has neither been done by A.O nor by CIT(A) to establish that the letter written by the father of the assessee to the company is after thought. If the genuineness of the purchase of painting by the company from the father of the assessee is not denied then in absence of any material it cannot straightaway be held that the letter written by the father of the assessee to the company was after-thought. The matter was required to be examined - Matter restored back - Decided in favour of assessee. - ITA NO. 7694/MUM/2010 - - - Dated:- 6-6-2012 - SHRI R.S.SYAL SHRI I.P.BANSAL JJ. Appellant by : Shri J.P.Bairagra Respondent by : Shri Pravin Var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of above accounts as per letter attached J 10370760.12 --------------- ------------- 0.00 CR Total 27000000.00 27000000.00 Cls. Bal. 0.00 0.00 27000000.00 27000000.00 2.1 Before AO,the assessee claimed that Shri S.J. Marshall (SJM), the father of the assessee had instructed the company to gift a sum of Rs. 1.60 crores to his son ( the assessee). A letter dated 18/4/2006 to the said effect was written by the father of the assessee to the company a copy of which was also filed with the AO. From these contentions of the assessee the AO noticed that there was no trace towards a corresponding adjustment entry in the account of SJM. The AO also noticed that through another letter dated 31/3/2007 SJM had instructed the company to square off the outstanding debit balance of Rs. 1.03 crores in his sons (assessee s) account by debiting his account. The account of the father with the assessee company is also reproduced in the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intings were personal effects owned by the father of the assessee and said purchase of painting was appearing in the balance sheet of the said company in the fixed asset schedule. It was claimed that the amount of Rs. 1.60 cores was received by him on account of gift from his father and was not paid to him by the company. The A.O rejected such contentions of the assessee on the following grounds: (i) The amount of Rs. 1.60 crores is clearly reflected as debit balance, therefore, the assessee owed a huge sum to the company right from 20/4/2006 till the end of the year until such adjustment was made on the direction of SJM vide letter dated 31/3/2007. The said amount was not a gift as the said amount was not debited to the account of the father on the same day i.e. 20/4/2006, when the actual bank transfer was made from the company s bank account. The letter dated 18/4/2006 written by SJM to the aforementioned company was just an afterthought. The letter was self serving and was to be discarded as having no evidentiary value. There was no confirmation from the company either for the receipt of such request from SJM or the acknowledgement on the successful execution of the said reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot substantially interest. (ii) Mr.Navroze S. Marshall, the assessee, is the beneficial owner of equity shares holding 76% of the voting power. (iii) The company possesses accumulated profits of more than Rs.3.25 crores throughout the year. (iv) The payment made to the assessee by the company is not done in its ordinary course of business since lending of money is not a substantial part of the business of the company. 2.4 The AO made reference to the following decisions to come to the conclusion that such amount was taxable in the hands of the assessee. (i) Smt. Tarulata Shyam Others , 108 ITR 345(SC) (ii) Ms P. Sarada, 229 ITR 444(SC) In this manner the AO added a sum of Rs. 2,63,70,760/- to the income of the assessee under section 2(22)(e) of the Act being the total amount of Rs. 2,70,00,000/- drawn by the assessee from the aforementioned company minus the opening credit balance of Rs.6,29,240/-. 3. The submissions made before AO were reiterated before the CIT(A). From the copy of the account of the assessee with the company it was noticed by CIT(A) that the assessee had owed a large sum to the company right from 20/4/2006 till the end of the year until adjustme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned that an application has filed by the ld. A.R filing some additional evidence, which during the course of hearing was not pressed by ld. A.R and accordingly not considered. 5. After narrating the facts it was pleaded by the ld. A.R that the father of the assessee had sold paintings which were articles of personal effects in the hands of the father and those were sold for a sum of Rs. 1.73 crores. The father of the assessee had directed the company to pay a sum of Rs. 1.60 cores out of the sale proceeds of those painting to the assessee and thus the amount received by the assessee of Rs. 1.60 crores from the company could not be termed as loan or advances made by the company to the assessee and thus provisions of section 2(22)(e) of the Act could not be applied. He submitted that the sale of the painting has not been denied or doubted by the AO. He submitted that the only objection of the AO is that the letter written by the father of the assessee is an after thought move. He submitted that no material whatsoever has been brought on record by the AO to hold that the letter written by the father of the assessee was after thought. He submitted that this fact was duly brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions ld. A.R relied upon the following decisions: (1) CIT vs. Raj Kumar 318 ITR 462 (Del) to content that in section 2(22)(e) of the Act the word advance has to be read in conjunction with the word loan . Usually a loan involves positive act of lending coupled with acceptance of money as loan by the other side and there is an obligation of repayment . The term advance in its widest meaning may or may not include lending. Advance , if not found in the company or in conjunction with loan may or may not include the obligation of repayment and applying rule of noscitur a sociis the word advance which appears in the company of the word loan could only mean such advance which carries with it an obligation of repayment. He submitted that the amount taken by the assessee from the company had no obligation for repayment, therefore, the amount obtained by the assessee from the company was outside the ambit of section 2(22)(e) of the Act. (2) CIT vs. Arvind Kumar Jain 205 Taxman 44 (Del) to contend that mere nomenclature of an entry in the books of accounts is not determinative of the true nature of transaction. This plea was taken by ld. A.R for the contention that non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 2(22)(e) being deeming provision is required to be strictly construed and for the purpose ld. A.R relied upon the decision in the case of CIT vs. C.P. Sarathy Mudaliar 83 ITR 170 (SC). 5.4 In this manner ld. A.R concluded his arguments and pleaded that the addition made by the AO and sustained by ld. CIT(A) should be deleted. 6. Ld. D.R submitted that the entries made in the account of the assessee as well as father of the assessee reproduced in the assessment order have not been disputed by the assessee. The case of the assesee is entirely rest upon the letter dated 18/04/2006 written by the father of the assessee. He submitted that sale of painting is not denied but the authenticity of letter has been doubted by the AO as well as CIT(A). He submitted that relying upon the finding recorded by AO and CIT(A) it is the submission of the revenue that the letter written by the father of the assessee to the company is after thought and, therefore, addition has rightly been sustained by CIT(A). He submitted that once entry is made it is conclusive and the case law relied upon by the ld. A.R are not applicable to the facts of the case. 7. We have carefully considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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