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2016 (4) TMI 71 - ITAT JAIPUR

2016 (4) TMI 71 - ITAT JAIPUR - [2016] 47 ITR (Trib) 50 - Penalty under section 271(1)(c) - deemed dividend addition u/s 2(22) - assessment u/s 153A - Held that:- The assessee filed the return under section 139 for all the years and disclosed the particulars of shareholding pattern, advances taken and given by the assessee company/individual in return itself. The accumulated profit also has been disclosed. Thereafter assessee filed return under section 153A of the IT Act wherein also all the det .....

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ness transaction is not covered under section 2(22)(e) of the Act. Various other case laws cited by the assessee has also made this issue debatable. The case relied on by the AO i.e. Mak Data P. Ltd. is not applicable as assessee at every stage had filed the explanation before the AO as well as CIT (A) i.e. these transactions were made for the purpose of business and commercial expediency, is bonafide. Penalty imposed by the AO and confirmed by ld. CIT (A) are not justified. Accordingly we delet .....

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A.Y. 2002-03, 03-04, 04-05, 05-06, 06-07, 07-08 & 08-09. The sole ground in all the appeals is against confirming the penalty under section 271(1)(c) of the I. T. Act. 2. The A.O. in all the penalty orders has observed that M/s. Trimurty Buildcon Pvt. Ltd., Geeta Mishra (B), Abhishek Estate Pvt. Ltd. (C) and Trimurty Farms & Retreats (D) which are part of Udaikant Mishra Group were searched on 03.05.2007. In this case assessment was made under section 143(3) of the I.T. Act. The AO made .....

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,929,017 1,214,066 2007-08 667/JP/2011 Geeta Mishra (B) 527,768 202,537 2005-06 668/JP/2011 Abhishek Estate Pvt. Ltd.(C) 80,000 29,274 2005-06 666/JP/2011 Trimurty Farms & Retreats (D) 11,005 4,027 Total (A+B+C+D) : 5,026,567 1,616,109 Before imposing penalty under section 271(1)(c) of the IT Act, the AO gave reasonable opportunity of being heard to all the assessees. The Director of the Company Shri Abhishek Mishra vide written submission dated 08.05.2009 had admitted that the intra group f .....

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s an active element in the imposition of penalty and that is lacking in this case. The ld. AO held that even advances made during the course of business do not absolve from the application of section 2(22)(e) of the IT Act. The section does not distinguish an advance into a business advance or any other kind. In taxation law, the meaning understood in the plain reading has to be accepted. One cannot import words to suit one s convenience into a legal provision when it is absent. This is the supr .....

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e also substantial shareholders in the company. Taking that queue, the website of the Registrar of Companies was accessed and the share holding pattern was seen. The suspicion proved right and the shareholding pattern was taken down from the website. The AO has found out the details of advances/loans, accumulated profits. Accordingly this group has offered ₹ 39.29 lacs under section 2(22)(e) of the Act. There was no voluntary surrender of the assessee but this was due to investigation made .....

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represented his income and/that it represented his concealed income. He further relied on the case of Union of India vs. Dharmendra Textiles Processors & Others, 306 ITR 277 (SC) for mens rea, Union of India vs. Rajasthan Spinning & Weaving Mills (2009) 180 Taxman 609 (SC) for penalty is compensatory in nature. Thereafter, he relied on the case of Atul Bindal,317 ITR 1 (SC) wherein the Apex Court has equated civil liability with a strict liability. After considering the explanation-1 to .....

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e the business transactions between the group companies were not supported by facts, figures and details. He further held that even these advances were for business purposes, which are not differentiated under section 2(22)(e) of the Act. The assessee s action was also not voluntary as the AO had gathered these evidences from ROC and quantum of advances/loans were worked out for seven years from A.Y. 2002-03 to 08-09. These facts were confronted with the appellant. Thereafter he surrendered the .....

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also held not applicable in the case of the assessee. He further distinguished case laws cited by the ld. A/R in the matter of CIT vs. Rajiv Garg, 313 ITR 256 (P&H), CIT vs. Haryana Warehousing Corporation, 314 ITR 215 (P&H), CIT vs. VIP Industries Ltd., 21 DTR 153 (ITAT Mumbai). He further held that Hon ble Mumbai High Court on the issue of penalty under section 271(1)(c) on addition of income under section 2(22)(e) in case of CIT vs. Alkesh K. Patel, 325 ITR 118, has not found favour .....

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the assessee is before us. 4.1. It is submitted that assessee is engaged in the business of real estate development and part of Udaikant Mishra group whom were searched on 03.05.2007. Thereafter assessment was completed under section 153A of the IT Act. During these years assessee company raised loans from its sister concerns Trimurty Landcon (India) Pvt. Ltd., Abhishek Finlease Pvt. Ltd., Abhishek Estate Pvt. Ltd. and Trimurty Colonisers & Builders Pvt. Ltd. These loans received were offer .....

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any to its shareholders for business purposes are held by various courts that such advances are not covered under section 2(22)(e) of the Act as deemed dividend. This issue is debatable, the assessee at the time of assessment proceedings as well as penalty proceedings had raised this issue before the AO which was not considered by both the AO. Even at the time of imposing the penalty under section 271(1)(c) of the Act, both the authorities i.e. AO as well as ld. CIT (A) has held that section 2(2 .....

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purposes by facts, figures and details, but all details were submitted before the AO during the course of assessment proceedings which is evident from the assessment order that AO asked to supply the information from the assessee. The ld. A/R further relied on the Hon ble Delhi High Court decision in case of Creative Dyeing & Printing (P) Ltd. (2009) 318 ITR 0476 (Del.) wherein it has been held that section 2(22)(e) can be applied to loans or advances simplicitor and not to those transactio .....

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ided this issue in favour of the assessee. The assessee was having bonafide belief that these business advances are not under the purview of section 2(22)(e) of the Act. He further relied on the case of Reliance Petroproducts (supra) and CIT vs. Raj Overseas, 336 ITR 261 (P&H) and argued that assessee has disclosed full particulars of income in the return about shareholding pattern, loans and advances & accumulated profit. Therefore, there is no concealment of any particulars of income. .....

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tax. He further argued that no penalty can be imposed where addition is based on deeming provision, for which he relied on the following decisions :- S.V. Kalyanam v. ITO (2010) 327 ITR 477 (Mad.) Renu Hingorani vs. ACIT, (ITA No. 2210/Mum/2010) Shri chimanlal Manilal Patel vs. ACIT, Circle-6, (ITA No. 508/Ahd/2010) ACIT vs. Mrs. N. Meenakshi (2009) 319 ITR (AT) 262 (Chennai) He argued that deeming provisions are technical in nature and which should be applied only for some definite purposes for .....

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confirmed by the ld. CIT (A) deserves to be reversed for the following reasons - 1. The advances have not been disputed to be business advances. Business Advances do not attract provision of Section 2(22)(e) is supported by the judicial pronouncements. Thus it is a possible view and a debatable one. Where two views are possible no penalty can be imposed. 2. The transaction in reality was a loan repayable contractually and the lender by force of law could recover it back and the same have been re .....

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by the ld. CIT (A) deserves to be reversed. 4.2. At the outset, the ld. D/R vehemently supported the order of ld. CIT (A) and argued that assessee has not disclosed deeming dividend income in the computation of income in the return filed under section 139, even in return filed under sec. 153A of the IT Act. The AO made investigation on this point and had come to the conclusion that assessee has violated section 2(22)(e) of the Act. The disclosure was not voluntary. He further relied on the case .....

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