TMI Blog2018 (9) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... ll indications were that the assessee used money for its own purposes as it did by advancing substantial amounts enjoying the profits of the company. - Decided in favour of revenue. - ITA No. 481/DEL/2016 - - - Dated:- 23-8-2018 - SH. S. K. YADAV, JUDICIAL MEMBER AND SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER Appellant by : Sh. S. L. Anuragi, Sr. DR Respondent by : Sh. Gagan Kumar, Adv Mr. Manoj Nagreth, CA ORDER Per Prashant Maharishi, JM 01 This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-2, New Delhi [ The Ld CIT A] dated 30/10/2015 for Assessment Year 2010-11 wherein he has deleted the addition of ₹ 101,36,328/- made by the Assessing Officer as deemed dividend u/s 2(22)(e) of the Income Tax Act, on account of sum received by the assessee from M/s Charu Home Products Pvt. Ltd. 02 The Revenue has raised effectively two grounds of appeal which are as under:- i. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 1,01,36,328/- on account of disallowances u/s 2(22)(e) of the Income Tax Act, 1961. ii. On the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24/6/20 09 To HDFC Bank A/c 32320008802 To HDFC Bank A/c 0032320010421( Div of CHP) Payment 82,00,000 4,00,000 3/7/200 9 To HDFC Bank A/c 32320008802 Payment 3,08,000 21/7/20 09 S. L. Marwah co. Payment 2,500 22/7/20 09 To HDFC Bank A/c 0032320010421( Div of CHP) Journal 46,50,000 27/7/20 09 To HDFC Bank A/c 0032320010421( Div of CHP) Payment 70,000 1/8/200 9 To HDFC Bank A/c 0032320010421( Div of CHP) Receipt 70,00,000 6/10/20 09 To HDFC Bank A/c 0032320010421( Div of CHP) Receipt 27,22,000 30/3/20 10 To HDFC Bank A/c 32320008802 By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; but dividend does not include- (ii) any advance or loan made to, a shareholder or the said concern by a co mp any in the ordinary course of its business, where the lending of money is a substantial pan of the business of the company; From the ledger accounts of the assessee in the Books of M/s Charu Home Products Pvt. Ltd, it is seen that there was no opening debit or credit balance in these accounts and fresh amounts were received by the assessee on dates mentioned therein as shown above. Therefore, these amounts are definitely in the nature of loans or advances. The balance sheet, profit loss a/c. tax audit report and the shareholding pattern of the above mentioned Company, M/s Charu Home Products (P) Ltd. in which the assessee s Director we have heard both the parties and perused the material available on record perused. The following facts em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessible in the hands of the assessee u/s 2(22)(e) of the Income Tax Act as its income for AY 2010-11. (Addition of ₹ 1,01,36,328/-) 06 The Ld. CIT(A) deleted the above addition vide Para No. 3.7 of his order which is as under :- 3.7. Findings a) 1 have gone through the facts of the case as given in the assessment order, the remand reports of the A.O. as well as the appellant's submissions including the rejoinders to the A.O s reports. The A.O. is of the view that the money received by the appellant from M/s. Charu Home Products Pvt. Ltd., a company in which the appellant was director and having substantial interest, falls within the definition of deemed dividend under section 2 (22) (e) of the I.T. Act and that there is no justification for admission of the additional evidence submitted by the appellant under rule 46A during appellate proceedings, as nothing prevented the appellant from producing the same at the assessment stage/ However, it is observed that vide letter dated 27.02.2013, the appellant s AR informed the Assessing Officer that there was no implication of deemed dividend as per the provisions of section 2 (22) (e) in the appellant' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- 11/6/2009 10,24,241/- 24/6/2009 82,00,000/- 4,00,000 3/7/2009 3,08,000/- 22/7/2009 46,50,000/- 27/7/2009 70,000 Total 1,81,52,241/- d) It has been further submitted by the appellant during the appellate proceedings that since the purchaser company was not able to make further arrangement of ₹ 6.1 crores of funds for the property, which had been agreed to be sold for ₹ 8 crores to M/s. Charu Home Products Pvt. Ltd., the appellant, on 01.08.2009, entered into a deed for cancellation of the agreement dated 08.06.2009 to sell. Thereafter, the amount of Rs.l,81,52,241/- received by the appellant from M/s. Charu Home Products Pvt. Ltd. upto 27.07.2009, was returned in the following manner:- Date Payment by the appellant 01/08/2009 70,00,000 06/10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... range further funds for the transaction (to the tune of ₹ 6.1 crores), the deal for the sale of the property was cancelled vide agreement dated lsl August, 2009 and the advance of ₹ 1,81,52,241/- so received wars returned to the company by March, 2010. In fact the schedule of repayment given above reveals that major part of the advance was returned within a few days of cancellation of the agreement to sell (Rs. 70 lacs by 01.08.2009, total ₹ 97.22 lacs by 06.10.2009 and the entire amount by the end of the financial year 2009-10). It has been explained by the appellant s AR that there was no clause in the agreement dated lsl August, 2009 (cancelling the agreement to sell the property) for repayment of the advance of ₹ 1.81 crores within a given time frame and that in any case, the said agreement provided for reversion to the original legal positions., thereby giving the company a right in the property in question in case the entire amount was not returned by the appellant and was, therefore, in no way inimical to the interest of M/s. Charu Home Products Pvt. Ltd. This explanation of the appellant appears to be feasible and hence the argument taken by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the assessee has obtained loan from the above Company wherein he is a Director and having the substantial interest. Before the Assessing Officer the assessee did not submit any explanation about the loan, however, before the Ld. CIT(A) assessee submitted additional evidences which were admitted by the Ld. CIT(A) erroneously. He further submitted that explanation given by the assessee before the Ld. CIT (A) that the above transactions were the business advances is devoid of any merit. He submitted that agreement to sell the property at Noida with the Company is a sham document. He stated that property itself is a leasehold property and it needs some permission before transfer/ sales. He stated that the explanation given by the assessee that the transaction was subsequently cancelled as the purchaser i.e. M/s Charu Home Products Pvt. Ltd. could not get the balance 6.1 crore of the agreed sell consideration does not show any justification. He stated that the assessee entered into Agreement to sell on 8 June 2009 for ₹ 8 Crores and immediately on 1/8/2009, agreement was cancelled. Assessee also did not repay the sum to the company back immediately but only on 30 March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the submission made before the Ld. CIT(A) He further submitted a paper book wherein Synopsis of the facts were also placed. He further submitted that the advances were given by the Company to the assessee for the purpose of business for purchase of property. Therefore, same are business advances and cannot be taxed as deemed dividend. He further placed heavy reliance on the decision of Hon ble Madhya Pradesh High Court in 46 Taxman.com 122 and decision of the Coordinate Bench in ITA No. 274/Del/2016 wherein on identical facts and circumstances, it was claimed that the issue is squarely cove red in favour of the assessee. 09 In rejoinder, the Ld. Departmental Representative vehemently relied upon the decision of the Hon ble Delhi High Court in CIT vs. Sunil Chopra 12 Taxman.com 496 to show that the order of the Ld. CIT (A) is for us. He further relied upon the decision of Hon ble Delhi High Court in case of Prasidhi Leasing Ltd. in 403 ITR 129. 10 We have carefully considered the rival contentions and perused the order of the Lower Authorities. The assessee has received sums from M/s Charu Home Products Pvt. Ltd. from 8/6/2009 to 27/7/2009 to the extent of ₹ 1815474 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and cancellation deed was entered into on 1/8/2009 why payments could not be returned by the assessee up to 31/3/2010 completely. To this, the assessee merely stated that 96 lakhs were paid back in the months of August and October 2009 and the balance sum was paid on 30th March 2010 and 31st March 2010. The Agreement clause did not also have any forfeiture clause and further despite having the right of enforcement, the assessee did not make any effort. On analysis of the loan transaction between the assessee and the company, from the copy of the account at Page No. 2 of the Assessment Order it is apparent that assessee started receiving loans from the company from 8/6/2009 from the Company. The assessee tried to justify that there was an agreement to sell the property to the Company. The moment, the assessee repaid the sum in part there was a Deed of Cancellation of Agreement to Sale. It is apparent that the assessee also received on 3/7/2009 a sum of ₹ 308000 and on 27/7/2009 a sum of ₹ 70,000/- only. It is also interesting to note that on 22/7/2009 the assessee was paid 46.50 lacs by the Company and on 27/7/2009 assessee was also paid ₹ 70,000/- and within 4 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o find out the true nature of the transaction. 11 Further several decisions were relied upon by the Ld. AR, which are not applicable to the facts of the case. The decision in the case of ITA No. 274/Del/2016 dated 29/11/2017 relied upon by the Ld. AR ahs distinguishing facts. In that particular case, it was noted by the Coordinate Bench that in that case, the assessee Director was providing advances to the Company and has credit balance. The post dates cheques were also issued at the time of execution of the agreement itself where as in the present case, there is no such fact existing. In the present case, there is a doubt on the substance of the agreements itself. The statement recorded of the assessee also shows that there is no information coming on the nature of transaction itself. Further, the LD A.O has raised serious doubt about genuineness of the documents. Therefore, it is apparent that the facts of the case are more similar to the facts before the Hon ble Delhi High Court in the case of CIT (A) Vs. Sunil Chopra (supra). 12 The Board circular and the line of reasoning adopted by the various honourable High Courts undoubtedly indicate that the trading transactions or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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