TaxTMI 
TaxTMI 
2015 (8) TMI 119
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.... CIT(A) erred in declining to justly and fairly adjudicate appellant's contention that since there was no separate search warrant in appellant's case the search appellant u/s 132 was illegal; 3 The ld. CIT(A) erred in holding that there was no violating of the principles of natural justice by the AO in completing the assessment without giving adequate opportunity and issuing show cause regarding the additions made; 4 The learned CIT(A) erred in confirming the addition of Rs. 51,92,469/ on account of deemed dividend u/s 2(22)(e) of the I.T. Act ignoring the material evidences to the effect that the outstanding amount was on account of trade transaction and not loan or advances; 5 The ld. CIT(A) erred in making improper and unjustified observation about the invoices which were of excisable goods and were of the relevant period prior to the assessment and not after and which established the fact that the outstanding amount was on account of trade transaction and not loan or advances; 6 The ld. CIT(A) erred in considering the material evidences in the form of invoices and excisable goods which proved that the amount was on account of trade transaction and not loan or advanc....
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....Y. 2007-08 at Rs. 1,28,04,200/- by making an additions of Rs. 78,85,954/- u/s 2(22)(e) of the Act and Rs. 45,00,000/- u/s 68 of the Act. These additions have been confirmed by CIT(A) except in A.Y. 2007-08 whereby addition of Rs. 78,85,954/- u/s 2(22)(e) of the Act has been enhanced by Rs. 9,59,87,046/- to Rs. 10,78,73,000/-. Hence these appeals by the appellant. Thus, the basic issue involved on merits as raised in Ground No. 4 to 5 of both appeals relates to additions of Rs. 51,92,470/- for A.Y. 2005-06 and Rs. 10,78,73,000/- for A.Y. 2007-08 under section 2(22)(e) of the Act. Apart from the above another issue involved in Ground No. 3 of A.Y. 2007-08 relates to addition of Rs. 45,00,000/- u/s 68 of the Act. 5. With this background we firstly take up Ground No. 4 and 5 in both the appeals relating to addition of Rs. 51,92,469/- and Rs. 10,78,73,000/- in A.Y. 2005-06 and A.Y. 2007-08 u/s 2(22)(e) of the Act. 6. The facts in brief as emerging from the order of assessment for A.Y. 2005-06 are that during the year M/s. B.R. Associates Pvt. Ltd. in which, assessee held 64.84% shares, has given a loan of Rs. 51,92,469/- to M/s. Deluxe Alloys Pvt. Ltd. in which, the assessee held ....
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....rrect picture is nothing but an afterthought. So long as the two companies have treated the impugned transaction as that of 'unsecured loan', the appellant cannot claim that it was not so particularly in the absence of any certificate from the respective auditors that there was actually such a mistake as contended by the appellant which was subsequently corrected. 5.3.3 In view of the above factual position, it is held that the appellant has not been successful in controverting the findings of the AO on this issue with any independent contemporaneous evidence and, therefore, I see no reason to interfere with the action of the AO on this ground. The addition of Rs. 51,92,469/- u/s 2(22)(e) is therefore confirmed." 7. Before us, the learned AR for the appellant contended that the addition is based on the fundamental misconception of facts and law. It was submitted that during the financial year 2004-05 relevant to assessment year 2005-06, there were business transactions between M/s. B.R. Associates Pvt. Ltd. and M/s. Deluxe Alloys Pvt. Ltd. It was contended on the basis of the above that no sum was advanced by M/s. Deluxe Alloys Pvt. Ltd. to M/s. B.R. Associates Pvt. Ltd. and ....
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....nt framed in the case of M/s. B.R. Associates Pvt. Ltd. and M/s. Deluxe Alloys Pvt. Ltd. Copies of orders of assessment of M/s. B.R. Associates Pvt. Ltd. dated 30.12.2011 for assessment year 2005-06 is placed at pages 116-123 and copy of order of assessment in the case of M/s. Deluxe Alloys Pvt. Ltd. dated 28.12.2011 for assessment year 2005-06 is placed at pages 106 to 115 of Paper Book. It is relevant to add here that both orders are framed by the same officer who have framed the impugned order of assessment. Then apparently, the learned Assessing Officer having accepted the business transactions between M/s. Deluxe Alloys Pvt. Ltd. and M/s. B.R. Associates Pvt. Ltd. in their impugned orders of assessment could not have classified them as a loan or advance for invoking section 2(22)(e) of the Act. The AO has held this sum to be deemed dividend only on the ground that said sum has been classified as loan in the balance sheet of M/s. Deluxe Alloys Pvt. Ltd. In this regard, Hon'ble Delhi High Court in the case of CIT vs. Arvind Kumar Jain (supra) has held as under: "6 Learned counsel for the appellant hammered the fact that the amount was shown by the assessee himself in his book....
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.... answered in favour of the assessee and against the Revenue. We hold that trade advance does not fall within the ambit of the provisions of Section 2(22)(e) of the Act. Resultantly, the appeal is dismissed. There shall be, however, no order as to costs." 12. Also in the case of CIT vs. Creative Dyeing and Printing (P) Ltd. (supra) it was held as under: "The counsel for the appellant has very strenuously urged that neither the Tribunal nor the judgment of this Court in Rajkumar's case(supra) deals with that part of the definition of deemed dividend under Section 2(22)(e) which states that deemed dividend does not include an advance or loan made to a shareholder by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the company [Section 2(22)(e)(ii)] i.e. there is no deemed dividend only if the lending of moneys is by a company which is engaged in the business of money lending. Dilating further the counsel for the appellant contended that since M/s. Pee Empro Exports Pvt. Ltd. is not into the business of lending of money, the payments made by it to the assessee company would therefore be covered by Section 2(2....
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....advance' has to be read in conjunction with the word 'loan'. Usually attributes of a loan are that it involves positive act of lending coupled with acceptance by the other side of the money as loan: it generally carries an interest and there is an obligation of repayment. On the other hand, in its widest meaning the term 'advance' may or may not include lending. The word 'advance' if not found in the company of or in conjunction with a word 'loan' may or may not include the obligation of repayment. If it does then it would be a loan. Thus, arises the conundrum as to what meaning one would attribute to the term 'advance'. The rule of construction to our minds which answers this conundrum is noscitur a sociis. The said rule has been explained both by the Privy Council in the of Angus Robertson v. George Day (1879) 5 AC 63 by observing "it is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them" and our Supreme Court in the case of Rohit Pulp and Paper Magnum International Ltd.ls Ltd. v. Collector of Central Excise, AIR 1991 SC 754 and State of Bombay v. H....
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....pellant, he enhanced the addition for the reasons stated in para 6.8 to 6.14 of the order to Rs. 10,14,44,000/- which are summarized as under: a) That perusal of the copy of account would show that Rs. 9,59,87,046/- is advance by M/s Magnum Steels Ltd. to M/s Magnum International Ltd.. and Rs. 10,14,44,000/- is advance by M/s Magnum International Ltd. to M/s Magnum Steels Ltd.; b) That out of the amount of Rs. 9,59,87,046/- sum of Rs. 4,27,16,756/- and Rs. 86,80,000/- aggregating to Rs. 5,13,96,756/- represents reversal entries which should be excluded from total advances and as such, he held that sum of Rs. 4,42,90,290/- (Rs. 9,59,87,046/- - Rs. 5,13,96,756/-) is the advance given by Magnum Steels Ltd.. to M/s Magnum International Ltd.; c) Apart from the above he held that Magnum International Ltd. had advance sum of Rs. 10,14,44,000/- to Magnum Steels Ltd., out of which he excluded the advance by Magnum Steels Ltd. to Magnum International Ltd. of Rs. 4,42,90,290/-. Thus net advance by Magnum International Ltd. to Magnum Steels Ltd. was of Rs. 5,71,53,710/- (Rs. 10,14,44,000/- - Rs. 4,42,90,209) 16. Before us, the learned AR submitted that the addition made and dispute....
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....) 19. Apart from the above, it was submitted that payments made by M/s Magnum International Ltd. to M/s Magnum Steels Ltd. and M/s Magnum Steels Ltd. to M/s Magnum International Ltd. are mutual reciprocally transactions entered in the ordinary course of business and, not advance or loan u/s 2(22)(e) of the Act as reference was made to the following judgments: i) CIT vs. Raj Kumar 318 ITR 462 (Del) ii) CIT vs. Ambassador Travels (P) Ltd. 318 ITR 376 (Del) iii) CIT vs. Creative Dyeing and Printing (P) Ltd. 318 ITR 476 (Del) iv) Pradip Kumar Malhotra vs. CIT 38 ITR 538 (Cal) v) CIT vs. International Land Development Pvt. Ltd. ITA NO. 1296, 1297/2011 (Del) dated 2.2.2012 20. It was further submitted that learned Commissioner of Income Tax (Appeals) has incorrectly held at page 21 that assessee had not contended that both the companies were not engaged in the ordinary course of business of lending of money in terms of clause (ii) of proviso to section 2(22)(e) of the Act. In fact, specific contention was raised in para 9 at page 10 of the order, which is extract of submissions dated 15.1.2013. It was also submitted that Rs. 3 crores had been given as an advance for ....
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.... Tribunal has considered similar transactions as Current Account transactions and has not as deemed dividend. The relevant findings are contained in para 6 & 7 of this order which are reproduced for the sake of convenience. "6. We have carefully considered the arguments of both the sides and perused the material placed before us. The copy of the assessee's account in the books of M/s Daisy Motors Pvt. Ltd. is placed at pages 19 & 20 of the assessee's paper book. For ready reference, the same is annexed herewith as Annexure 1. From a perusal of the above account, it is seen that there was opening credit balance, then debit balance occurred due to certain payments made by M/s Daisy Motors Pvt. Ltd. to the assessee in the month of April and July. Thereafter, from July 2005 to 22nd March, 2006, there was a credit balance and again on 30th March, 2006, there was a debit balance. If we further analyze the accounts, we find that the maximum debit balance of the account of the assessee was only `2,08,212/- while the maximum credit balance was more than `2 crores. That the debit balance of `2 lakhs was only for a period of ten days i.e. from 23rd July to 8th August, 2006 while the credit....
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....ure of Rs. 54,98,908/- being advance given from 3.9.2007 to 30.3.2007. It is thus evident that there are mutual transactions between two group companies and the account being the two companies is current account transaction. It is thus held that once the transactions between two companies are current account transactions which are entered in the ordinary course of business, the same cannot be classified as advance or loan under section 2(22)(e) of the Act. 25. The Mumbai Bench of the Tribunal in the case of NH Securities Ltd. vs. DCIT 11 SOT 302 has held as under. "37. In the light of the discussion made in paragraphs above, it is to be seen that payments made by a company through a running account in discharge of its existing debts or against purchases or for availing services, such payments made in the ordinary course of business carried on by both the parties could not be treated as deemed dividend for the purpose of section 2(22)(e). The deeming provisions of law contained in section 2(22)(e) apply in such cases where the company pays to a related person an amount as advance or a loan as such and not in any other context. The law does not prohibit business transactions be....
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....Rs. 7,00,000/-) u/s 2(22)(e) being amounts advanced by M/s Courage Finance Services Pvt. Ltd. to M/s Magnum International Ltd. and M/s BR Associates Pvt. Ltd. is confirmed." 28. We have considered the facts of the case and submissions made by the parties. We have already held above that the transactions between group companies are in the nature of current account transactions and cannot be regarded as deemed dividend. In this case, the admitted position is that there was opening balance of Rs. 4,33,000/- in the books of M/s. Magnum International of M/s. Courage Financial Services Pvt. Ltd. This opening balance of Rs. 4,33,000/- increased to Rs. 21,62,000/- on account of fresh amount of Rs. 17,29,000/- received during the instant year. Likewise in the audited balance sheet of M/s. B.R. Associates, there was opening balance of Rs. 36,52,000/- of M/s. Courage Financial Services Pvt. Ltd. which balance increased to Rs. 43,25,000/- at the close of the year on account of Rs. 7,00,000/- received during the year. Thus, apparently, these are transactions between group companies which are on year to year basis and therefore, the current account transactions and business transactions. 2....
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.... Since the advances had been proved the identities of the parties had been established and the parties had also confirmed the advances the addition of the amount was unjustified and illegal. 5.2 The statement of I.C. Jindal recorded during the search operation on 27.3.2010 was not valid in law because it was given under pressure, threat and coercion, I.C. Jindal was also not in proper state of mind at that time. The surrender of amount of Rs. 51 crores was obtained by pressure, threat and coercion and as such it was not valid in the search. No incriminating materal was found during the search which could indicate so much undisclosed income. Such surrender is not valid in law as held by the Hon'ble Supreme Court in Pullangade Rubber Produce Co. Ltd. 91 ITR 18. Nagubai Anand vs. Sharma Rao (AIR) 1956 SC 100. 5.3 Similarly, the statement of Aseem Gupta is not valid in law as the same was also obtained under pressure, threat and coercion. Infact Aseem Gupta stated that he has never received any cash from I.C. Jindal he mentioned only that he had received approximately Rs. 20 crores from the employees for giving cheque to I.C. Jindal group of companies. During the period 2004-2010....
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....fterthought in view of the categorical admission of accommodation entries both by the appellant as well as by Sh. Aseem Kumar Gupta 7.3.2 From the aforesaid facts it can be concluded that the appellant has failed to discharge his onus to prove the genuineness of the transactions. The whole apparatus was nothing but a conduit to plough back the money of the appellant in the group of advances for land. Mere payment of money by account payee cheques is not sacrosanct nor can it make a non genuine transaction genuine. 7.3.3 The contention of the appellant that the statements of Shri I. C. Jindal and that of Shri Aseem Kumar Gupta were not valid in law as the same were recorded under pressure, threat and coercion is not borne out of the records. There is no sign of application of any such tactics as alleged by the appellant nor the latter has brought any material on record to support his allegation. 7.4 The argument of the appellant that the ratio of the judgment in the case of Nova Promoters is not applicable in his has not been found to be convincing. The plea of the appellant that unlike Nova's case, the AO did not link the amount with any accommodation entry with share appl....
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....e had surrendered sum of Rs. 51 crores. A perusal of the said statement in Q.No. 20 would show that he has stated as under: "Q.20 On examination of documents/loose papers, it is seen that you have made huge investments in property transaction and you have made cash sales in your group of companies. Further you have received share capital and capital gain also. Please explain whether you are offering any tax for above mentioned transactions/investments? Ans. Yes I agree that I have these transactions and I am surrendering Rs. 51 (Rs. Fifty One Crores) crores as additional undisclosed income for buying piece of mind and offering this amount in the following heads in addition to regular income. 1) Magnum Steels Ltd. Rs. 2.80 crores as introduction in share capital. 2) Other flagship concerns. Rs. 48.20 crores as income from operations of group of companies i.e. i) M/s. Magnum Steel Ltd. ii) M/s. Magnum International Ltd. iii) M/s. Courage Financial Services P. Ltd. iv) M/s. N.R. Sponge Pvt. Ltd. The details of above mentioned surrender company-wise will be submitted later on. For this purpose, I am presenting the following cheques for payments of taxes on su....
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....lowing judgments: - Sanjay Aggarwal vs. DCIT 47 taxmann.com 210 (Del) wherein Hon'ble Tribunal after referring to para 20 of the judgment of the Hon'ble High Court of Delhi in the case of CIT v. Anil Kumar Bhatia 352 ITR 493 (Del) - Rajat Trade Com (India) Ltd. 120 ITD 48 - CIT vs. Murli Agro Products Ltd. ITA No. 36/2009 dated 29.10.2009 - Kusum gupta vs. DCIT ITA No. 3647/D/2010 wherein the Hon'ble Tribunal following the decision of Special Bench in the case of M/s All Cargo Global Logistics Ltd. vs. DCIT reported in 137 ITD 287 (SB) (Mum) - Marigold Merchandise (P) Ltd. vs. DCIT ITA Nos 2666 and 2667/D/2013 Assessment Years 2008-09 and 2007-08 dated 27.12.2013 - ACIT vs. Shri Manoj Narain Aggarwal ITA No(s) 5518 to 5524/D/2012 Assessment Years 2003-04 to 2009-10 dated 30.1.2014 - Divine Infraction (P) Ltd. vs. DCIT ITA No. 2393/Del/2014 A.Y. 2008-09 dated 12.6.2014 - CIT vs. Lachman Dass Bhatia Dass 254 CTR 383 (Del) -- ACIT vs. PACL India Ltd. ITA No. 2637/D/201 dated 20.6.2013 - Gurinder Singh Bawa vs. DCIT 28 taxmann.com 328 (Mum) - ACIT vs. Pratibha Industries Ltd. 23 ITR 766 (Trib) (Mum) - Jai Steel India vs ACIT 259 CTR 281 (Raj) - CI....