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TMI Blog2020 (2) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... sit are not satisfied. 4. The Ld. Commissioner of Income Tax (Appeals) grossly erred in relying the decision of Hon'ble Mumbai Tribunal in the case of Bombay Oil Industries Ltd. Vs. DCIT, however, the facts of the present case is not identical. 5. The Ld. Commissioner of Income Tax (Appeals) erred in passing the order by accepting the assessee's version without giving any concrete finding and not passed a speaking order on the ground of exclusion of amount of Rs. 2,53,59,490/- being cash component of investment in flat at Surat. 6. The Ld. Commissioner of Income Tax (Appeals) erred in giving the telescopic benefit to the assessee as the assessee made voluntary disclosures based on incriminating material detected during the survey action. 7. The Ld. Commissioner of Income Tax (Appeals) erred in allowing the amount of Rs. 2,53,59,490/- by way of telescopic benefit as the assessee had made the disclosure without any force or coercion and confirmed by the Director many times during the assessment proceedings. 8. For these and such other grounds as may be urged at the time of hearing, the order of the Ld. Commissioner of Income Tax (Appeals) may be vacated and that of the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Section 2(22)(e) of the Income Tax Act, 1961 (hereinafter referred to as "the Act‟) were involved and the amount was brought to the tax by the Assessing Officer. 2.2 The Ld. CIT(Appeals) had accepted the contention of the assessee by treating the amount received by the assessee as Inter-Corporate Deposit and held that it was not in the nature of loan/advances. The Ld. CIT(Appeals) relying on the decisions of Hon‟ble Madhya Predesh High Court in the case of Sharda Talkies (Firm) Vs. Smt. Madhulata Vyas AIR 1966 MP 68 and also in the matter of Pennwalt (India) Pvt. Ltd. Vs. Registrar of Companies (1987) 62 Comp Case 112 ( Bom.) had granted relief to the assessee. For the sake of completeness, the observation of the Ld. CIT(Appeals) were reproduced herein below: "5. I have carefully considered the facts of the case as well as reply of the appellant. In this case undisputed fact remains that the amount of Rs. 2,93,26,224/- received from Dhariya Infrastructure Pvt. Ltd. is in the nature of "Inter Corporate Deposit" as claimed before the Assessing Officer too. This claim remains uncontrovered by the AO in the assessment order while invoking the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the assessee and M/s. Dhariya Infrastructure Development Pvt. Ltd. to treat the amount as "Inter Corporate Deposit". Further, Ld. DR submitted that the assessee was not able to establish that M/s. Dhariya Infrastructure Development Pvt. Ltd. was having sufficient/ surplus finds of its own which can be given to the assessee for the purpose of keeping it as deposit and were not borrowed funds. 3. The Ld. AR of the assessee has submitted that the amount given was in the nature of "Inter Corporate Deposit" and was not loan/advances. For that purpose, the Ld. AR of the assessee has drawn our attention to the decisions relied on by the Ld. CIT(Appeals) while giving relief to the assessee. 4. We have heard the rival contentions and perused the material available on record. In the present case, the assessee company namely, M/s.Dhariya Construction Pvt. Ltd. had received loan/advances amounting to Rs. 2,93,26,224/- from M/s. Dhariya Infrastructure Development Pvt. Ltd. for which during the assessment year under consideration, interest of Rs. 3,26,224/- was paid to lender company. Further, it was mentioned that the assessee company was beneficial owner of 50% shares in the lender com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch and the conditions subject to which deposits may be invited or accepted by a company either from the public or from its members. (2) No company shall invite, or allow any other person to invite or cause to be invited on its behalf, any deposit unless- (a) such deposit is invited or is caused to be invited in accordance with the rules made under sub- section (1), and (b) an advertisement, including therein a statement showing the financial position of the company, has been issued by the company in such form and in such manner as may be prescribed." 4.5 In our opinion, though there is distinction between "Inter Corporate Deposits" and loan/advances, but for that purpose, the assessee was required to substantiate that the amount received by the assessee was in the form of "Inter Corporate Deposits". As mentioned herein above, the assessee was failed to bring on record any documentary evidences except oral submission that the amount received by it was in the form of "Inter Corporate Deposit". No evidence towards the nature of amount received by the assessee was brought on record or laid before the Ld. CIT(Appeals) or before us. No confirmations on "Inter Corporate Deposit" or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Inter Corporate Deposit" ,as it continues to be loan/advances. Hence required to be taxed for the purposes of deemed dividend. We may rely upon the Jurisdictional High Court in the Durga Prasad Mandelia v. Registrar of Companies [1987] 61 Comp. Cas. 479 (Bom., has noticed the distinction between deposits and loans in the context of section 370 of the Companies Act. The Court held as under : "There can be no controversy that in a transaction of a deposit of money or a loan, a relationship of a debtor and creditor must come into existence. The terms "deposit" and "loan" may not be mutually exclusive, but nonetheless in each case what must be considered is the intention of the parties and the circumstances. In the present case, barring the assertion of the respondent that the moneys advanced by the company to the Associated Cement Companies Ltd. constitute a loan and offend section 370 of the Companies Act, there is nothing else to show that these moneys have been advanced as a "loan". In the context of the statutory provisions, the word "loan" may be used in the sense of a "loan" not amounting to a deposit. The word "loan" in section 370 must now be construed as dealing with loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid. Your attention is also drawn to the bundle No.2 impounded during the course of survey which is a green file leveled as "AC Sub contractor Dank Statement file". As you can see that the file contains banks account extracts and income tax records of one Shri Mahendra Devkate. Please elaborate as to how, you are in the possession a/these records and what is your relation with these said individual ; Ans. I confirm having seen the above said document, which forms the part of bundle No.2. The three individuals mentioned above are my sub contractors and my company i.e. DCPL awards labour contracts to the above individuals. However, I am not aware of these records. The assessee was confronted about the above facts on the basis of evidences impounded from the survey premises. d) The point No. 7 is extracted as below- "Q. 7 I am showing you the statement of Shri Mahendra Devkate recorded on oath U/s 131 of the IT Act, 1961 during the course of Survey proceedings. Shri Devkate has stated that there has been no written order made by your company to him as a sub contractor and that he has been receiving only oral communication tcepser ni of the labour work executed by him at ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actor is also on record. e) The facts regarding investment in flat is elaborated in point No.8, as under: "Q.8: Please refer to the bundle NO.3 which is a Mahavir folder pertaining to ENN ENN Corporation Ltd. Your attention is invited to the page NO.9 of the said bundle and page 5 of the said bundle. PI. explain the entries made at page 9 specially in respect of entry cash Rs. 2,53,59,490/-. Ans. I confirm having seen the above said document which forms the part of bund No.3. The entries mace at page No.9 is related to purchase of a flat No. 302 of B Building in Four Season at Surat. The said property was originally booked by Shri Anup Namdeo Dultani and Mrs. Bharti Dultani. I have purchased the said property at an amount agreed at Rs. 3,64,59,990/- out of which an amount of Rs. 1,06,00,500/- was given through cheque. Again Rs. 5,00,000 was also paid through cheque to Anup Dultani. The balance amount of Rs. 2,53,59,490/- was paid against the cost of property by way of cash, which I am offering as additional income for the FY 2011-12 in the hands of Dhariya Construction Pvt. Ltd." The assessee was thus, confronted about the above facts on the basis of evidences impounded fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the facts of the case as well as reply of the appellant. In this case it is seen that amount of Rs. 2,53,59,490/-was offered as additional income vide answer to question No.8 of the statement of Shri Mukund Dhariya recorded u/s 133A of the Income Tax Act, 1961 on 10/10/2012. The Assessing Officer has reproduced the same on page 9 of the assessment order. However, for ready ref; the same is reproduced here again: "Q.8: Please refer to the bundle NO.3 which is a Mahavir folder pertaining to ENN ENN Corporation Ltd. Your attention is invited to the page NO.9 of the said bundle and page 5 of the said bundle. PI. explain the entries made at page 9 specially in respect of entry cash Rs. 2,53,59,490/-. Ans. I confirm having seen the above said document which forms the part of bund No.3. The entries mace at page NO.9 is related to purchase of a flat No. 302 of B Building in Four Season at Surat. The said property was originally booked by Shri Anup Namdeo Dultani and Mrs. Bharti Dultani. I have purchased the said property at an amount agreed at Rs. 3,64,59,990/- out of which an amount of Rs. 1,06,00,500/- was given through cheque. Again Rs. 5,00,000 was also paid through chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the assessee for A.Y.2010-11, 2011-12 and 2012-13 amounting to Rs. 64,20,637/-, Rs. 10,391,626/-, and Rs. 16,729,248/- were not shown in the income of the assessee. (Para 8 of the CIT(A)‟s order). However, after accepting the said amount as income for the periods it was declared by the assessee , the assessee has not pressed these grounds before CIT(A) however he had requested for telescoping of these amounts . The Ld. CIT(Appeals) has granted benefit of telescoping for purchasing flat in cash in the name of Director of the company amounting to Rs. 2,53,59,490/-. 5.4 It was also submitted by the Ld. DR that firstly the assessee had accepted the net amount as mentioned including the amount of Rs. 2,53,59,490/- in the statement recorded during the course of survey of which taxes were duly paid by the assessee by filing revised return of income. Secondly, it was submitted that the telescoping for the assessment year i.e. A.Y.2012-13 can at all be considered where the assessee filed revised return of income including additional income of Rs. 4,20,88,738/- for A.Y.2012-13 which is the assessment year under consideration. Once the Ld. CIT(Appeals) has accepted various amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e actually not being executed hut the payments are being made after proper documentation and considering the facts that these are your long trusted employees, the amounts credited into their accounts are ultimately given hack to you in cash after withdrawal rieht morf accounts. Also the presence of extract of bank accounts, IT returns etc in your premises clearly shows the extent of control exercised over your 'employees sub contractors thereby creating the doubts that no work was executed and the money was paid and routed back to the company in cash. Ans. I have gone through the statement of Shri Mahendra Devkate and the facts brought out by you in respect of the extract of the bank accounts and IT returns of Shri Devkate, Shri Prasad and Shri Pradeep nrakluK i. It is wrong to state that no work was executed by these sub contractors. Although all the proof of work done must be available at the site office and the genuineness call be proved. However, to buy peace of mind "voluntarily declare the stnemyap to each of these individuals in the respective Financial years i.e. 09-10, 10-11 and 11-12 relevant to AY 2010-11, 2011-12 and 2012-13 respectively given as under: Sr. No N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flat is held to be unexplained cash investment then it cannot be taxed in the hands of the assessee company because flat was purchased in the name of Director of the company and amount was invested by the Director. Now the question arises whether the amount spent by the Director in cash for purchasing flat in his own name can be added in the hands of Assessee Company. The answer to this question is "No". As the amount was used by the Director and the said amount was invested individually. 7.3. It is not the case that the said amount of Rs. 2,53,59,490/- was generated as unexplained cash by the assessee company over and above the amount declared by the assessee company for assessment year 2010-11 of Rs. 64,20,637/-, for assessment year 2011-12 of Rs. 1,03,91,626/- and also for assessment year 2012-13 of Rs. 1,67,29,248/- as income from sub-contract work and thereafter, invested by the assessee company for purchasing the flat in the name of the company. In fact the case of the revenue could be the money so generated was invested in buying flat in Surat by making the payment in cash. 7.4. The concept of telescoping was discussed by the Hon‟ble Madras High Court in the matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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