TMI Blog2016 (6) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... were in the nature of trade advance and in such a case respectfully following the findings of the Hon’ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Rajkumar (2009 (5) TMI 17 - DELHI HIGH COURT ), we hold that the money advanced to give effect to a commercial transaction would not fall within the ambit of the provision of section 2(22)(e) of the Act. - Decided in favour of assessee - ITA No. 514/Del/2012 - - - Dated:- 14-6-2016 - Sh. I. C. Sudhir, Judicial Member And Sh. O. P. Kant, Accountant Member For the Appellant : Sh. K.V.S.R. Krishna, CA For the Respondent : Smt. Rishpal Bedi, Sr. DR ORDER Per O. P. Kant, A. M. This appeal by the assessee is directed against order dated 29/11/2011 of the learned Commissioner of Income-tax (Appeals)-XXVI, Laxmi Nagar Delhi- 92 for assessment year 2008-09 raising following grounds: 1. The Ld. CIT(A) has erred in law and on facts in upholding the addition made by the AO of ₹ 26,71,222/-, as deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961. The addition made by the assessing officer and upheld by the CIT(A) is on assumptions without any basis, without understanding the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r short the Act ). The assessee, however, submitted that the advance was for the purpose of supply of material. The Assessing Officer did not accept the submission of the assessee and held the amount to the extent of accumulated profit of the company amounting to ₹ 26,71,222/- as deemed dividend under section 2(22)(e) of the Act. Before the learned Commissioner of Income-tax(Appeals), the assessee reiterated the submission that amount of ₹ 28,52,941/- received from M/s Cosmo Tribology (I) Private Limited was a trade advance against supply of goods, namely, waxes. In support of the proposition that trade advances do not fall within the ambit of section 2(22)(e) of the Act, the assessee relied on the Jurisdictional High Court decision in the case of CIT Vs. Rajkumar reported in (2009) 318 ITR 462 (Del). The learned Commissioner of Income-tax (Appeals), on the basis of the bill books of the proprietary concern of the assessee, the Ledger account of the company and no VAT registration of the assessee, held that the transaction between the assessee and company was not of a trade advance and, therefore, the learned Commissioner of Income-tax (Appeals) upheld the findings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax(Appeals) on cheques issued by the company, the learned. AR submitted that all the cheques received were deposited in the bank account of the proprietary concern M/s. Flair Impex and in fact six cheques were issued and not the three as observed by the learned Commissioner of Income Tax(Appeals). As regard to the observation of the learned Commissioner of Income Tax(Appeals) that no transport bills were furnished by the company to prove that goods were actually lifted from the premises of the assessee, the learned AR submitted that the assessee did not incur any transport cost and as mentioned in the bills, the party used to arrange their own transports for lifting goods from the premises of the assessee. As regard to the observation of the learned Commissioner of Income Tax(Appeals) that the assessee did not furnish any VAT registration number, the ld. AR submitted that in the bills submitted to the learned Commissioner of Income Tax(Appeals), the VAT registration number was clearly mentioned as TIN 07910136693. In view of above, the learned AR submitted that learned Commissioner of Income Tax(Appeals) arrived at wrong conclusion that the transaction between the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continuity in ledger account. Similarly, on 17.9.2007 goods were supplied vide invoice no.Ti/165 from the bill book no.-4 and on the very next date i.e. 18/9/2007 vide invoice no.TI/069 material was supplied to the company. Similarly, from book no.-2 on 4/2/2008, 12/2/2008 and 1.3.2008 against the invoice numbers TI/092, 094, 097 goods were supplied and from bill book no.-6 on 8.2.2008 16.2.2008 against the invoice no. TI/251 and 253 goods were supplied. On perusal of the bills for the year under consideration and also for the subsequent years, it is seen that this modus operandi adopted by the appellant was to record transactions in such a manner to confuse the authorities to make believe that these are the transactions where supplies were made against the trade advances. It is also seen from these examples that bills were drawn according to the adjustments to be made rather than in the regular course of business. On perusal of the ledger account furnished by the appellant it is seen, that cheques were issued by the company and credited in the accounts in the following manner against their dates:- DATE CHEQUES NOS. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Cosmo Tribology (I) Pvt. Ltd. A perusal of the same showed the appellant maintain 6 bill books which are serially numbered but the transactions were recorded in an irregular manner spreading the transactions to be covered in all the 6 Bill books . Reply:- The fact of assessee maintaining 6 Bill books is correct. However, it is clarified that the transactions are not recorded irregularly but are recorded according to the requirement of the material namely Paraffin Wax or Slack wax by the company. The assessee caters to other buyers also. The 6 bound bill books of the assessee is produced to clarify this fact. At line no.12 of your Honours order it is noted that: For instance, book no. 1 consists of 200 invoices. However it is seen on 30.4.2007 supplies were made to the company vide invoice no. TI/008 from Book No.1 and again on the same date another Invoice No.TI/053 the supplies were booked from Bill Book No.2 instead of bill book no.1. In fact the supplies should have been rendered datewise on the serial no. provided in the bill books rather than one supply recorded on one bill book number and the second one is on the another book no. on the same date . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008 T1/253 Book No. 6 Paraffin wax It may please be noted that the Assessing Officer has meticulously seen our books of accounts including the bill books and was satisfied. The AO did not doubt that the supplies were made against trade advances. At page 12, last line onwards continued up to page 13, it is noted in the order as under:- On perusal of the ledger account furnished by the appellant it is seen that cheques were issued by the co. and credited in the account since the following manner against their dates: Date Cheque Nos. 10.4.2007 22614 7.5.2007 221617 17.7.07 221620 5.11.2007 221627 etc. From the above it is seen that the company is maintaining only one single cheque book to issue the cheques to the appellant as they are in serial number almost throughout the year. There are no cheques issued for months together to any other person as only 3 cheque lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Authorized Representative of the assessee that the assessee was registered to VAT and transport expenses were borne by the purchase parties. We also find from page 31 of the assessee s paper book dated 21/04/2016 that the purchases made by the company M/s Cosmo Tribology (I) Private Limited were duly mentioned in the notes to annual statement of the company for the year under consideration. In view of above facts, we are of the opinion that the transaction between the assessee and company was a commercial transaction and the payments advanced were in the nature of trade advance and in such a case respectfully following the findings of the Hon ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Rajkumar (supra), we hold that the money advanced to give effect to a commercial transaction would not fall within the ambit of the provision of section 2(22)(e) of the Act. Accordingly, the grounds No. 1 to 4 of the appeal are allowed. 5. The grounds No. 5 and 6 are general in nature and, therefore, not required to adjudicate upon at our end. 6. In the result, the appeal of the assessee is allowed. The decision is pronounced in the open court on 14th June, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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