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2016 (6) TMI 735 - ITAT JAIPUR

2016 (6) TMI 735 - ITAT JAIPUR - TMI - Deemed dividend addition u/s 2(22)(e) - Assessment made by the Assessing Officer U/s 153A - Held that:- Assessment U/s 153A read with Section 143(3), the ld Assessing Officer has to assess the income in abated year only where incriminating documents were found and seized and no regular addition can be made under this section as the Coordinate Bench has decided this identical issue in the case of M/s Jadau Jewellers and Manufacturers P. Ltd. (2015 (12) TMI 1 .....

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of the transactions are being made on the basis of agreement to sale and to avoid the stamp duty payment. In real estate business number of transactions of purchase and sale of the plots are being made and stamp duty finally is to be borne by the actual user of the plot at the time of registration. Therefore, generally the transactions made on agreement to sale basis. It is also a fact that this transaction was in between director of the company and company even as per this agreement, the asses .....

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the transaction made between the assessee and the company are business transactions and is not covered U/s 2(22)(e) of the Act. Accordingly, we reverse the order of the ld CIT(A) - Decided in favour of assessee - ITA No. 312/JP/2015 - Dated:- 15-6-2016 - Shri R. P. Tolani, JM And Shri T. R. Meena, AM For the Assessee : Shri Vijay Goyal (CA) For the Revenue : Shri M.S. Meena (CIT) ORDER PER T. R. MEENA, AM This is an appeal filed by the assessee against the order dated 25/02/2015 passed by the l .....

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tra Real Estates Private Limited amounting to ₹ 24,80,911/- represents loan and provisions of section 2(22)(e) of Income Tax Act, 1961 were attracted. 3. That the order of the ld CIT(A), confirming the addition made by the ld Assessing Officer on account of deemed dividend by applying the provisions of Section 2(22)(e) of Income Tax Act is arbitrary, whimsical, capricious, perverse and against the law and facts of the case. The order of ld CIT(A) in this regard deserves to be set aside and .....

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the addition is found as a result of search. 2. The assessee has income from salary, capital gain and other sources. A search and seizure operation was carried out by the department U/s 132 of the Income Tax Act, 1961 (in short the Act) and survey U/s 133 of the Act was carried out by the department on the members of KGK Group on 06/5/2010. Assessee is a member of Prateek Kothari sub-group. The ld Assessing Officer observed that during the course of search, cash jewellery, stock in trade, valua .....

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brought forward long term capital loss of A.Y. 2005-06 at ₹ 5,65,025/- was filed on 25/10/2011. The original return filed by the assessee U/s 139(1) of the Act on 26/10/2007 and identical income had been disclosed in the return. In response to notice U/s 153A, no undisclosed income pertaining to the relevant year had been declared by the assessee. The ld Assessing Officer further observed that during the course of scrutiny proceedings, it was noticed that the assessee had taken loan of &# .....

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ng Officer held that the assessee sold the land to the company, which has been transferred back to the assessee in form of loan. Therefore, he made addition U/s 2(22)(e) of the Act at ₹ 24,80,911/-. 3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing that the assessee was not able to give evidence before the Assessing Officer, therefore, he accepted the additional evidence under Rule 46A .....

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s i.e. up to 10/3/2007 and the balance of ₹ 12,51 lacs was to be paid after the appellant completed the JDA procedure of conversion and patta. As per Assessing Officer, within such conditions, sum a ₹ 24,80,911/- claimed to have been received as advance, had not been provided inasmuch as only ₹ 12.51 lacs was remaining to be paid as on 10/3/2007 whereas the appellant received total sum of ₹ 31.65 lacs. It is submitted by the assessee before the ld CIT(A) that the appellan .....

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us other documents including the copy of the letter received from JDA, Jaipur dated 07/6/2006 addressed to appellant. It is noted that the appellant had paid and received amount from M/s Nakshatra Real Estates Developers Pvt. Ltd. on regular basis. It is found from the copy of account in the books of the company that initially the assessee paid on 09/10/2006 ₹ 31.75 lacs and ₹ 30.00 lacs to M/s Nakshatra Real Estates Developers Pvt. Ltd. and in subsequent period of financial year 200 .....

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at the amount received from 8/11/2006 to 30/12/2006 were not loans but were amount of advances received on account of the sale of two plots. However, such contention of the appellant prima facie does not appear to be genuine inasmuch as, as per this agreement the two plots which were to be sold to M/s Nakshatra Real Estates Developers Pvt. Ltd. were never sold and the transaction was never materialized. Moreover, it may also be noted that in the letter dated 07/6/2007 written by the JDA, Jaipur .....

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. Ltd.. When both the plots were not saleable why the company would make payment to the assessee. All the facts of the transaction established that these payments were regular loans. When the assessee noticed this fact that loan taken from the company is a violation of Section 2(22)(e) of the Act then he made attempt to show that these payments were for sale of two plots. Therefore, he confirmed the addition U/s 2(22)(e) of the Act at ₹ 24,80,911/- up to reserve and surplus. However, outst .....

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wable as held by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 0383. He further relied on the decision of Hon ble Jurisdictional High Court in the case of Zakir Hussain Vs. CIT & Anr. (2006) 202 CTR (Raj) 40 wherein the Hon'ble High Court has held that additional ground is to be allowed, which had a bearing on correct determination of tax liability on the ground of limitation. Various other case laws also referred. After considering bo .....

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ere found, therefore, no notice can be issue U/s 153A read with Section 143(2) of the Act because no proceeding was pending before the Assessing Officer. The ld Assessing Officer made addition on the basis of entries recorded in the audited books of account of the assessee. There was no evidence found during the course of search that the assessee had received loan from M/s Nakshatra Real Estates Developers Pvt. Ltd.. The scope of Section 153A is limited to an assessment made on the basis of incr .....

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dated 14/12/2015 wherein identical issue has been considered by the Hon ble Bench and the order U/s 153A read with Section 143(3) as held void ab-initio. He further relied various decisions on this issue as under:- a) CIT V/s Smt. Shaila Agarwal, 204 Taxman 276 (Allahabad High Court) b) Vishal Dembla Vs Deputy Commissioner of Income Tax ITAT, JODHPUR BENCH ITA Nos. 304 to 308/Jd/2013; 22nd July, 2013 (2013) 93 DTR (Jd)(Trib) 1 (2013) 36 CCH 484 JodhTrib (2014) 61 SOT 10 (Jodhpur)(URO). c) Marigo .....

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e ITAT Mumbai held that:- h) Vee Gee Industrial Enterprises vs. ACIT, ITA No. 1/Del/2011 & ITA No.2/Del/2011 (ITAT Delhi) i) ITA Nos. 1153 to 1159/Hyd/2012 Mir Mazharuddin, 24.1.2013 (ITAT Hyderabad). j) Asha Kataria, I.T.A. Nos. 3105, 3106 & 3107/Del/2011 20.5.2013 Hon ble ITAT Delhi Held that:- k) Natvar Parikh & Co Pvt Ltd Vs Deputy Commissioner of Income Tax (ITAT MUMBAI) ITA No. 2143/Mum./2009, 2144/Mum./2009 & 2145/Mum./2009 22nd January, 2014 (2014) 39 CCH 031 MumTrib. 5. .....

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d Assessing Officer. Otherwise the ld Assessing Officer should have referred the incriminating documents with him for this technical ground as such this technical ground has also not been raised before the ld CIT(A). Therefore, the technical ground raised by the assessee is deserved to be dismissed. 6. We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the return U/s 139(1) of the Act was filed on 26/10/2007 by the .....

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before the Hon'ble High Court if it goes to the root of the matter and to assess the correct income of the assessee. It is a fact that on time for selection of the case for scrutiny had already been elapsed and no proceedings were pending before the Assessing Officer. Therefore, the proceedings for the year under consideration were not abated. This issue has been considered by the various ITATs as well as Hon'ble High Courts. It has been held that assessment U/s 153A read with Section 1 .....

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referred by the assessee is also squarely applicable. Therefore, we have considered view that assessment made by the Assessing Officer U/s 153A read with Section 143(3) of the Act is out of jurisdiction. Accordingly, we allow the assessee s appeal on this ground. 7. On merit, the ld AR of the assessee has submitted that the assessee as well as the company are in real estate business. During the year under consideration, the company namely M/a Nakashatra Real Estates Developers Pvt. Ltd. sold it .....

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four months from signing the agreement and balance amount of ₹ 12,51,000/- was to be paid after conversion of land for commercial purpose and at the time of execution of registered sales deed. As per terms and conditions of agreement the conversion of land for commercial purpose was to be completed within six month from signing the agreement and in case the assessee failed to do so, the deal deemed to be cancelled and the assessee had to return all the advances received from company. The .....

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company was against the purchase of plot from the assessee. He has further drawn our attention from the copy of account, which shows that initially the assessee has given amount to the company on 09/10/2006 ₹ 31,75,000/- and on 10/10/2006 ₹ 30,00,000/-. Thereafter, the assessee received refund of ₹ 40 lacs from the company out of the earlier advances made to the company. On 09-11-2006, the assessee received ₹ 25,00,000/- against the agreement to sale of two plots to the .....

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out any basis even disputed property has its saleable value in the market. Therefore, this observation is made by the ld CIT(A) without any basis. The assessee also ppurchased these plots through registered sale deed which has been declared in the closing stock by the assessee, which has been accepted by the department. He further argued that expression used in Section 2(22)(e) is advanced or loan which has been considered by the Hon ble ITAT, Agra Bench in the case of Shri Krishan Murari Lal Ag .....

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company received from a shareholder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. He further argued that trade advances which are in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provisions of S. 2(22)(e) of the Act. For which he relied on the decision of Hon'ble Delhi High Court in the case of CIT V/s Raj Kumar 318 ITR 462 (Delhi). He further argued that the Hon ble D .....

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ase of ACIT V Smt. G. Sreevidya 138 ITD 427. (iii) The Hon ble Calcutta High Court in the case of Pradip Kumar Malhotra V CIT 338 ITR 538. (iv) Hon ble Delhi High Court in the case of CIT Vs. Ambassador Travels P. Ltd. [2009] 318 ITR 376 (Delhi) (v) In the case of CIT V Arvind Kumar Jain 2011-TIOL-790- HC-Del-II (vi) 2016 (1) TMI 84 Gujarat High Court CIT Vs Schutz Disman Bio Tech Pvt Ltd. (vii) 2015 (12) TMI 763 ITAT Delhi ACIT Vs Ashok Kumar Garg. (viii) 2015 (12) TMI 1371 ITAT Mumbai ACIT Vs .....

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on 2(22)(e) of the Act applicable. All the facts have been given by the ld CIT(A) in his appeal order clearly indicates that the assessee s agreement to sale with the company is an afterthought, therefore, he prayed to confirm the order of the ld CIT(A). 9. We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the assessee as well as the company are in the real estate business. In initially, the assessee had advanced .....

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1.00 lac on 12/12/2006 and ₹ 40,000/- on 30/12/2006. Thus, total amount received from the company against the plots at ₹ 31.65 lacs up to 30/12/2006. Thereafter again the assessee paid ₹ 1,01,000/- to the company on 26/3/2007. The copy of accounts shows that the assessee and company as regular transaction and appears to be current account maintained by both. Finally the assessee has liability against the company at ₹ 30.64 lacs as on 31/3/2007. It is fact that there was a .....

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