TaxTMI 
TaxTMI 
2016 (5) TMI 542
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....se of Dinesh Jain and Assessment Years 2005-06 & 2006-07 in the case of Kavita Jain. All these appeals involve common issues, these were heard together and are being disposed of by this consolidated order for the sake of convenience. For the facility of reference, we take the lead case as IT(SS)A No.407/Ahd/2011 for AY 2005-06. 2. In this appeal, the assessee has taken following grounds:- "1 The ld. CIT(A) has erred in law and on the facts of the case in confirming the action of ld. AO in reopening of assessment u/s 147 of the Act. Under the facts and circumstances of the case the action of reopening is without jurisdiction and not permissible either in law or on fact. The present proceedings, therefore, are required to be quashed. 2 The ld. CIT(A) has erred in law and on the facts in holding that provisions of S. 2(22)(e) of the Act is applicable to the appellant in the facts of the present case. 3 Both the lower authorities have erred in law and on facts of the case by not appreciating the facts that the transactions entered into are in the nature of current accommodation adjustments accounts and are not in the nature of loan or advance and therefore....
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.... original assessment up to Assessment Year 2007-2008 was completed by the Assessing Officer under section 153A read with section 143(3) of the Income-tax Act. A survey action under section 133A of the income tax act was carried out by the investigation wing of the Department at the business premises of M/s Ornet Intermediates Ltd (OIL in short) on 06.08.2009. During the course of survey, it was noticed that the said company had given advances to M/s. OBA Speciality Chemicals (M/s OBA in short), a partnership firm in which Shri Dinesh Jain was a partner having 30% share. For the period relevant to Assessment Year 2007-2008 onwards the shareholding of Shri Dinesh Jain was 85.30% in the company M/s Ornet Intermediates Ltd. Similarly, this company had also given loans and advances to another firm namely M/s Ornet Corporation (OC in short) in which Mrs.Kavita Dinesh Jain had 45% interest. She was also holding 23.50% shares of the company till 06.03.2006 and 14.50% shares thereafter. On the basis of this information, the Assessing Officer reopened the assessment orders for Assessment Years 2005-06 to 2007-08 and held that the amount of loans and advances given by the company M/s Ornet In....
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.... 2 & 3 in IT(SS)A Nos. 407 to 412/Ahd/201 1 and Ground Nos. 1 & 2 in ITA Nos. 1648 to 1650/Ahd/2011 are with respect to challenging addition u/s 2(22)(e) of the Act on the ground that the provisions of Section 2(22)(e) of the Act are not at all applicable to the assessees in the facts of the present case as the transactions entered into are in the nature of current accommodation adjustments accounts and are not in the nature of loan or advance and therefore the very provisions of Section 2(22)(e) of the Act would not apply. 5.1 The Assessing Officer found that there were several transactions between M/s. Ornet Intermediates Ltd., M/s. OBA Specialty Chemical and M/s. Ornet Corporation. Assessing officer further found that the assessees held more than 10% shares in OIL and also had substantial interest in both OBA and OC. Hence, the Assessing Officer invoked second limb of Section 2(22)(c) in respect of deemed dividend, i.e., any loan or advance by a company to any concern in which its shareholder is a member partner and has substantial interest; and made addition in respect of funds advanced by OIL to OC and OBA by adopting the peak theory. Aggrieved by the assessment order, asse....
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....,74,38,45 and 30 credits transactions amounting to Rs. 2,49,38,455/-. In short there were large numbers of both debit and credit transactions showing movement of funds both ways on need basis. The transactions in the nature of loans and advances are usually very few in number; whereas in the present ease such transactions were large in numbers and both ways, indicating that such transactions are in the form of current accommodation adjustment entries. 5.4 Such mutual, open, current, running & trade account transactions made in normal course of business can by no stretch of imagination partake the character of a payment by way of loans or advances. The deeming provisions of law contained in section 2(22)(e) being very much confined and limited to the particular purpose for which it has been enacted and cannot assume any role beyond the said restricted and confined limit. In order to cover any amount within the provisions of section 2(22)(e) of the Income-tax Act, 1961, it is necessary that the amount involved should either be "loan or advance". 5.5 The CIT(A) has rejected this contention of the assessee only on the ground that the said OIL is not in the business of money lendi....
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....This view is supported by the following direct decisions : CIT vs. Creative Dyeing & Printing (P) ltd. 318 ITR 476 (Del) CIT vs. Raj Kumar318 ITR 462 (Del) NH Securities Ltd v. DCIT (2007) 11 SOT 302 (BOM) ACIT v. Global Agencies (P) ltd. (2005) 87 TTJ 1086 (Delhi) CIT v. Nagindas M. Kapadia (1989) 177 ITR 393 (BOM) Even otherwise, if the transactions are not in the nature of current accommodation adjustment account, the same are in the nature of deposits as it apparent from the nomenclature of the ledger account. If the transactions are in the nature of deposits and the same are between two corporate, it is nothing but Inter Corporate Deposits (ICD) which in any case would be outside the purview of section 2(22)(e) of the Act. This view supported by ihe following direct binding decisions of the ITATs. M/s. Utkarsh Fincap (P) Ltd., vs. ITO 7288 ITR 38 (Tri. Ahmedabad) M/s. Bombay Oil Industries Ltd, v. DCIT, Central Circle 35 Mumbai 128 SOT 383 (Mum.) 4. It can thus be seen that the Commissioner as a matter of fact found that the payments were not in the nature of current adjustment. There was movement....