TMI Blog2018 (2) TMI 2083X X X X Extracts X X X X X X X X Extracts X X X X ..... tected during search could be brought to tax in respect of those years. As the assessment for the AY 2006-07 was already finalized by the AO by making the assessment u/s 143(3) dated 14.07.2008, following the above decision of the Hon ble Bombay High Court, we delete the addition confirmed by the Ld. CIT(A). Disallowance u/s 2(22)(e) as deemed dividend - HELD THAT:- It is agreement by choice. In the present case it is tinged heavily with personal disputes. In the instant case, the assessee had received Rs.2,50,00,000/- from ISSCPL in which he was having 50% shareholding. Also ISSCPL is not a party to the consent term dated 15.12.2009. The present factual matrix is to tested on the anvil of the aforesaid enunciation of law. Examined on the touch-stone of the afore-noted legal principles, we confirm the order of the Ld. CIT(A) restricting the disallowance u/s 2(22)(e) to the accumulated profit as on 15.12.2009 of Rs.1,66,80,010/-. Unexplained jewellery - streedhan of assessee s wife - Scope of CBDT Instruction No. 1916 of 11.05.1994 - HELD THAT:- We are of the considered view that the Ld. CIT(A) has rightly confirmed an addition and deleted the balance addition on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its return of income for the AY 2006-07 on 09.03.2012 declaring total income at Rs.3,84,497/-. During the course of assessment proceedings, the AO found that amount of Rs.5,00,000/-, Rs.15,00,000/- and Rs.25,00,000/- were credited in the account of the assessee in HSBC Bank Account No. 37679. The assesseemade the following submission before the AO: Sir, the said receipt of Rs.45,00,000/- is the amount received by Mr. Zakauallah Siddiqui as an executor of the Will. Sir, I very humbly bring to your honours kind attention the fact that the said amount was raised as per the WILL of late Abdul Aziz Habib Currimbhoy, a friend of Mr. Zakaullah Siddiqui. The copy of the THE WILL is enclosed herewith for your honours kind reference. Sir, I humbly submit that the said money is lying in the Account of Mr. M.Z. Siddiqui as a custodian only. However, the AO was not convinced with the above explanation of the assessee as there was no co-relation between the cash credit and the Will . The said Will was executed in the year 2000-01 and the deposits were appearing in the financial year 2005-06. The AO found it highly improbable that the amount was received after lapse of five years fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nental Warehousing Corporation(supra), a search was carried out on the premises of the assesseeand a notice u/s 153A was issued. The assessee declared a total income of Rs.5,54,63,220/- while claiming the deduction u/s 80-IA(4) of Rs.1,25,77,637/-. The Assessing Officer held that the assessee was not entitled to the deduction u/s 80-IA. The Commissioner (Appeals) upheld the order of the Assessing Officer. The Special Bench of the Tribunal held that by the clear language of section 153A together with its provisos, pending assessments abated and that the Assessing Officer was required to make one assessment for each of the six years on the basis of the search and any other material existing or brought on record by the Assessing Officer, that in other cases assessments would be made on the basis of the books of account and other documents found during the search and not produced during assessment and also on any other undisclosed income or property found during the search. On appeals, the Hon ble High Court held dismissing the same that the notice u/s 153A was founded on search. If there was no incriminating material found during the search then the Tribunal was right in holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad received Rs.52,00,000/- from M/s Zaireen Travels (Partnership Firm) and Rs.2,50,00,000/- from M/s Indo Saudi Services (Carrier) Pvt. Ltd(in short ISSCPL ). The assessee was holding 50% of shares in ISSCPL. The assessee explained to the AO that these payments were received by him to dispose off the liability in pursuance of the order of Hon ble Bombay High Court. The AO observed that the assessee was a party in the said dispute whereas ISSCPL was not a party. The AO thus concluded that as ISSCPL was not a party in the said dispute. As the available reserve and surplus in the balance sheet of ISSCPL was Rs.1,95,51,394/-, the AO restricted the deemed dividend to the above sum and made an addition of it u/s 2(22)(e) of the Act. 3.3 Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) held that in the case of the assessee, there were certain incriminating materials that were seized during the course of search and brought on record by the AO in the assessment order. She found the action of the AO as correct because inquiries were conducted on the basis of such seized materials. On the above reasons, the Ld. CIT(A) dismissed the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct its business interests, ISSCPL paid the impugned sum. Furthermore, the beneficiary of the said sum is not the assessee but ISSCPL and other companies of the group. To sum up, it is submitted that it was a commercial and business decision to protect the business interest of all the parties. Reliance is placed by him on the decision in S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 (SC) and the CBDT Circular No. 19/2017. 3.5 Per contra, the Ld. DR supports the order of the Ld. CIT(A). He submits that it is a pure case of deemed dividend to be taxed u/s 2(22)(e) of the Act. He also relies on the decision in CIT v. Mukundray K. Shah (2007) 290 ITR 433 (SC) and files a copy of it. 3.6 We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. It is found that the assessee has filed his return of income for the AY 2010-11 on 25.07.2010. The AO can issue notice u/s 143(2) within six months from the end of the financial year in which the return is furnished i.e. 2010-11. The search took place on 22.02.2011. Therefore, the ratio laid down in Continental Warehousing Corporation (supra) is not applicable to the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 24th March 1995, before the Company Law Board, Principal Bench, New Delhi (Interim Application No 14 of 1995 in C.P. No. 2 of 1995) (Page 80-86 of the P/B). The Respondents are ISSTPL, Mr. Mohammad Zakaulla Siddiqui (the assessee) and others. Therein the petitioner has submitted that the respondents, in criminal conspiracy, abetment and collusion with one another have been steadfastly terrorizing her minor children so as to evict her from the premises where she had been residing since the past decade or more (Page 81 of the P/B). Mrs Michelle Jawad-AI-Fahoum also filed a petition on 12th July 1995, before the Company Law Board (CA No. 14 of 1995 in C.P.No. 2 of 1995) (Page 166-174 of the P/B). The Respondent are ISSTPL and others. In that petition, Mrs Michelle Jawad-AI-Fahoum (the Petitioner) has alleged that the funds of the company were maliciously and intentionally transferred from the company to the concerns in which the Directors were interested; challenged the authenticity of the records; apprehended that the records had been manipulated to the detriment of the interest of the petitioner and alleged siphoning of funds of the company (Page 171 of the P/B). We may re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mrs Michelle Jawad-AI-Fahoum and others (Appeal No. 581 of 1998 in Company Appeal No. 3 of 1998) vide order dated 15th December 2009 disposed off the appeal in view of the consent terms (Page 281-283 of the P/B). 3.6.3 The CBDT Circular 19/2017 relied on by the Ld. Counsel clarifies that trade advances, which are in the nature of commercial transactions would not fall within the ambit of the word advance in section 2(22)(e) of the Act. An examination of the factual matrix delineated at para 3.6.2 hereinbefore clearly tells us that the subject matter in the instant case is not of commercial transaction. Rather it is a case of personal disputes. 3.6.4 Now we discuss the following judgements of the Hon ble Supreme Court which clarify the issue in the instant case. In Mukundray K. Shah (supra), the Hon ble Supreme Court held that the concept of deemed dividend u/s 2(22)(e) postulated two factors : (i) whether the payment was a loan and (ii) whether on the date of payment there existed accumulated profits. These two factors had to be co-related. In Tarulata Shyam v. CIT (1971) 82 ITR 485, 494 (Cal), affirmed in (1997) 108 ITR 345 (SC), again the Hon ble Supreme Court he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Kalmadi for the payment of Rs.7 lacs. Further it is written that Rs.6 lacs are already paid. And total is Rs.12 lacs appeared on the sheet. In this regard, he asked the assessee to explain the details of transaction appearing on the paper. The assessee submitted that: this piece of paper is pertaining to the operations of the Islam Gymkhana. Shri Zakaullah Siddiqui is the president of the Islam Gymkhana. This Gymkhana is available for the marriage ceremony and other functions. This page is nothing to do with the business of the Zakagroup of companies. This is a mere rough jotting and notting of estimate for decorate related expenses. The AO observed that the assessee could not furnish supporting documents substantiating its statement given during the course of search. Therefore, he treated Rs.19 lacs as the unaccounted cash receipts and made an addition of it to the total income. 4.3 In appeal, the Ld. CIT(A) held that in the case of the assessee, there were certain incriminating materials that were seized during the course of search and brought on record by the AO in the assessment order. She found the action of the AO as correct because inquiries were conducted o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(2) within six months from the end of the financial year in which the return is furnished i.e. 2011-12. The search took place on 22.02.2011. Therefore, the ratio laid down in Continental Warehousing Corporation (supra) is not applicable to the AY 2011-12. The additional ground of appeal is therefore dismissed. 4.7 We find that the AO has failed to co-relate the amount written in the loose sheet of papers with any transaction. Rarely a transaction remains in isolation. The AO could have examined Mr. Karmali to find out the genuineness of transaction. He could have made further inquiry. He failed to do so. In view of the above, we delete the addition of Rs.19,00,000/- made by the AO and allow the 1st ground of appeal of the assessee. 5. The 2nd ground raised by the assessee reads as under: The Ld. CIT(A) erred in sustaining the disallowance u/s 2(22)(e) of Rs.28,87,984/- without appreciating that the provision of deemed dividend was not applicable to the transaction in question, therefore, the addition ought to be deleted. 5.1 The AO, while going through the bank statement of Bombay Mercantile Bank, found that the assessee had received Rs.1,00,00,000/- from ISSCPL in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the addition of Rs.44,10,240/- made on account of Gold, Diamond and jewellery without appreciating the fact that the assessee in the statement u/s 132(4) has accepted that the jewellery was acquired through his unaccounted income and offered for tax. 3. On the facts and in the circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the addition of Rs.44,10,240/- made on account of Gold, Diamond and jewellery without appreciating the fact that the assessee has submitted the working by taking the average value of gold jewellery in place of valued done by the valuer. 6.2 In a nutshell the facts are that during the course of search at the premises of the assessee, gold and diamond jewellery valued at Rs.54,96,155/- was found in the wardrobe at 604, A-Wing, Shimla House, CHS, Napean Sea Road, Mumbai. The AO took into account the statement of the assessee recorded during the course of search and made an addition of Rs.54,96,155/- as undisclosed income. 6.3 In appeal, the assessee filed before the Ld. CIT(A) on 14.10.2014 the following submissions: 2. The appellant is from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Daud Ally daughter of the appellant. She is an Australian Citizen, (Pg. no.239 to 241 of paper book II). Mrs. Tasneem kept her jewellery in India with her parents for safe custody and for use when she comes in India to attend social function/celebrations. At Australia there is no culture of wearing gold jewellery, hence she considers the carrying this gold jewellery a burden as well as risk The chart giving the valuation worked out by the Department and by the appellant is also reproduced below : The list of jewellery which was seized from Mr. Zakaullah Siddiqui s Residence amounted to Rs.54,96,155/- in AY 2011-12. As per Department valuation Net weight Valued at Rs. 2849 Gms 54,96,155 As per Average rate 2849 Gms 30,96,870 Total Net weight as per valuer 2849 Gms Less to be exempted 1850 Gms Balance 999 Gms The break up of exemption for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... social occasions, he failed to file any documentary/supporting evidence in support of his new claim, (vi) even the reliance placed by the assessee on CBDT Instruction No. 1916 is misplaced as the said instruction lays down certain guidelines for the non-seizure of jewellery in respect of various persons in a family, such as married lady, unmarried lady and male members in order to stipulate how much quantum of jewellery is to be exempted from the seizure. The said Instruction also states that a quantity greater than the specified amount for non-seizure may be decided by the authorized officer, having regard to the status of family as well as customs and practices of the community. Thus the Ld. DR submits that the Ld. CIT(A) failed to appreciate the fact that the assessee during his first statement on oath clearly admitted the jewellery being unaccounted. It is submitted that the Ld. CIT(A) failed to elaborate as to how in view of the chart giving bifurcation of jewellery in the appellate proceedings, does the jewellery stand explained and also as to what exact documentary evidence was given so as to make her arrive at the conclusion that the jewellery stand explained. Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the family including the father and mother of the assessee. Both the assessee as well as the Revenue challenged the order the CIT(A) before the ITAT. The Tribunal found from the statement of the assessee and particularly the answer to the question no. 17 that the entire jewellery claimed to have been received by the wife of the assessee on various occasions and some part of the jewellery was purchased by the assessee himself. The Tribunal held that the Ld. CIT(A) has taken a correct and proper view in granting the benefit vide CBDT Circular No. 1916 dated 11.05.1994. The Tribunal dismissed the appeals filed by the assessee and the revenue. In Ratanlal Vyparilal Jain (supra), the Hon ble Gujarat High Court held: Instruction No. 1916, dated 11th May 1994 which lays down guidelines for seizure of jewellery in the course of search takes into account the quantity of jewellery which would generally be held by the family members of an assessee and, therefore, unless anything contrary is shown, it can be safely presumed that the source to the extent of the jewellery stated in the circular stands explained. In M.S. Agarwal (HUF) (supra), the Hon ble High Court held that in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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