TaxTMI 
TaxTMI 
2017 (10) TMI 1477
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....e during the search that the amount was paid out of books. (ii). Whether on the facts and in the circumstances of the case and in law, the ITAT was right in deleting the addition of Rs. 50,26,604/- made by the assessing officer on account of deemed dividend under Section 2(22) (e) of the Income Tax Appeal, 1961." 3. Learned counsel for the appellant, Mr. Anil Mehta has taken us to the order of AO, wherein it has been observed as under:- 8.1 During the course of search proceedings Sh. Agarwal has admitted in his statement recorded u/s 132(4) at the time of search on 22.09.2010 that he had made payment to Sh. Gulam Farooq Ansari for purchase of land at Delhi Road amounting to Rs. 1.50 Crores, which was not recorder in his books of A/c. The relevant portion of the statement Sh. Ashok Agarwal is reproduced as under:- 8.2 Sh. Gulam Farooq Ansari has also admitted this fact during the course of search proceedings as well as assessment proceedings. However, he submitted that the money was returned within span of one month as the deal could not materialize. No documentary evidences to prove that the amount has been returned by him was furnished despite b....
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.... availability to cash-in-hand in cash book of various group persons/companies now produced now produced before me. The entry of advance given to Sh. Gulam Farooq Ansari was not found in the cash book available before the search party. The reason stated was that the accountant was busy with other work due to which the regular books of account could not be completed, and were therefore not complete on date of search, is merely a statement cannot form the basis of availability of cash of Rs. 1.50 Crores on the day of the search. 8.7 As regard to treating Rs. 1.50 Crores paid to Sh. Gulam Ansari out of his undisclosed income, the assessee stated that there was no material with department that the payment was made out of undisclosed income of the assessee. The assessee group was having sufficient cash balance as on the date of search which was not physically found to the search party, therefore no addition can be made on this a/c is not at all acceptable. The assessee's explanation is not accepted for the following reasons:- a) In respect of this transaction, the assessee had admitted during search that he paid Rs. 1.50 Crores outside his books of A/c. He has further r....
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....The Assessee is not only required to make entries in books of A/c during the regular course of business on regular basis and also expected to draw balance at regular interval to lend reliability to the books of A/c which in this case is obviously has not been done. From the perusal of the books of account and P&L A/c for all the years covered by block assessment never ever such huge payment in cash have been made through books of account, so it was otherwise also not a regular practice of the assessee to make such huge payment in cash for purchase of land. h) The assessee is well established businessman who knows very well that any expenditure over Rs. 20,000/- in cash is not allowable u/s 40A (3) of the Income Tax Act, 1961. Therefore he is not expected to make huge cash payment of Rs. 1.5 crores for purchase of land when dealing in land is his business. I) The pattern of cash payment from the books of account of the assessee is reflected from the disallowance of 40A (3) of the Income Tax Act, 1961, which is as under for various years. Disallowance u/s 40A (3) A.Y. Ashok Agarwal Renu Agarwal 2011-12 30,54,560/- 6,85,200/- 2010-11 ....
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....l) The legal value of an admission is that it is the best evidence that an opposite party can rely upon, and though not conclusive, is decisive of the matter unless unsuccessfully with drawn or proved erroneous. 82 ITR 540 (SC) C.I.T. Vs DURGA PRASAD MORE(SC) It is true that an apparent must be considered real. Until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. It all that an assessee who wants to evade tax is to have some recitals made in a documents executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. Th....
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....as per section 2(22) (e) of the IT Act, 1961. 9.4 The assessee in his reply submitted as under:- "The assessee received many form the company from time to time against agreement to sale the land to the company. When the 90B proceedings could not be got from JDA, the agreement was cancelled and amount was refunded to the Company. The copy of agreement to sale is enclosed herewith. The assessee is regular dealer in the land and company is also dealer in the land. The advance transaction is normal business transaction. The normal business advance cannot be treated as deemed dividend as held by Hon'ble Delhi High Court in the case of CIT vs. Creative Dyeing and Printing Pvt. Ltd. ITA No.250/2009 decision dated 22/09/2009. 9.5 The contention of the assessee is not tenable. The provisions of deemed dividend are applicable not only to loans and advances but rather to "any payment" in the nature of loans and advances. In fact, the provisions of Section 2(22) (e) are also applicable to day to day transactions between a company and a share holder. 9.6 In the landmark judgment in the case of Miss P. Sarda vs. CIT reported at 2209 ITR 444, the Hon'ble Suprem....
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....ok Agarwal ii) Renu Agarwal iii) Ashok Agarwal HUF iv) Ashish Agarwal v) Ashish Buildcon Pvt Ltd vi) M/s Arber Technologies Pvt. Ltd (Copy of letter enclosed) Therefore, reconciliation of entries as per seized books and audited books were done before AO during the course of personal hearings. For this purpose, vouchers, bank statement, copy of registered sale deed, copy of receipts, copy of agreements etc were produced before the AO. Since the vouchers were in bulky, therefore the photocopy of the vouchers were not kept by the AO. The chart showing the reconciliation of entries in seized books viz a viz audited books of account has been filed before your honor. The relevant documents in support of the entries in reconciliation chart are submitted before your honor for verification. After the examination of the books of account in details, the id AO accepted the sales, expenses, and entries in the audited books of account. Therefore, the entry as regard the payment of Rs. 1,50,00,000/- recorded in the audited books of account should also be accepted and no addition in this regard deserves to be made." ....
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....book with vouchers. The reconciled statement can be referred at PB Page 402 and reconciled chart showing entry to entry book vis a vis audited cash book was as under:- Name As per Seized Cash Book As per Audited Cash Book Date Amount Date Amount Ashok Agarwal 03-09-2010 56,47,690,09 03-09-2010 85, 82,342,09 Renu Agarwal 08-09-2010 92,18,620.38 08-09-2010 82,29,062.38 Ashok Agarwal HUF 06-08-2010 6,54,841.17 06-08-2010 6,91,341.17 Ashish Agarwal 02-04-2010 9,99,820.00 02-04-2010 9,99,820.00 Ashish Buildcon Pvt Ltd 06-08-2010 22,89,479.00 06-08-2010 26,47,631.00, Total 1,88,10,450.64 2,11,51,196,64 The above chart shows that as per the seized cash book, the total cash balance available to the group was Rs. 1,88,10,450.64 which became to Rs. 2,11,51,196.64 as the result of incorporating all the entries of cash inflow and outflow. The claim of the assessee is that cash books has to be completed after recording all the unrecorded entries based on bank statement and seized material which was subsequently done by the assessee on the basis of bank ....
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....e produced the re-casted audited cash book (after duly incorporating all entries) before the Ao. There were sufficient cash balance available with assessee and his family members/group concern to cover the payment of Rs. 1,50,00,000/- to Ansari. Therefore, respectfully following the decision of Hon'ble ITAT Jaipur bench in the case of Shri Tara Chand Jain (supra) and Shri Rajendra Kumar Kedia (supra), I hold that the payment of Rs. 1,50,00,000/- was made out of the cash balance reflected in the cash book of the assessee and other group members and I direct the AO to delete the addition of Rs. 1,50,00,000/-. This ground of the assessee stands as allowed." 4. Further, he has also taken us to the observations made by the Tribunal, wherein it has been observed as under: "We have heard the rival contentions of both the parties and perused the material available on the record. During the course of the first appellant proceedings, the assessee has contended that no incriminating document was found during the search operation showing payment of Rs. 1.50 crore to Ghulam Farooq Ansari. Further, no documents was found from assessee's premises, showing generation of undisclosed inc....
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....inting out any discrepancies therein. Based on his detailed examination, the Id CIT(A) has held in his order that "the assessee has successfully shown that the statement made before the search party was not correct as some entries were not incorporated in the seized cash book, therefore, it can be said that the cash book was not upto date as on the date of search. Assessee had produced the re-casted audited cash book after incorporating all entries before the AO. There were sufficient cash balance available with assessee and his family members/group concern to cover the payment of Rs. 1,50,00,000/- to Ansari." During the course of the arguments, the Revenue has not brought anything further to our notice and the findings of Id CIT(A) remain uncontroverted before us. The assessee has successfully demonstrated through its explanation and documentation in terms of recasted books of accounts that the statement made during the course of the search cannot be made the sole basis for making the addition of Rs. 1,50,00,000 in his hands as there was sufficient cash balance in the books of accounts to make the said payment and discharged its onus as laid down by the decision of Hon'ble supreme....
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....ards payment of old advances taken by the company from the assessee, in such a situation, the provisions of section 2(22)(e) are clearly not attracted in respect of Rs. 20,46,604." 5. He has also relied upon the decision of Supreme Court in case Gopal and Sons (HUF) vs. Commissioner of Income Tax Kolkata-XI, (2017) 3 SCC 574, wherein Apex Court observed, reads as under: 11. Section 2(22)(e) of the Act creates a fiction, thereby bringing any amount paid otherwise than as a dividend into the net of dividend under certain circumstances. It gives an artificial definition of 'dividend'. It does not take into account that dividend which is actually declared or received. The dividend taken note of by this provision is a deemed dividend and not a real dividend. Loan or payment made by the company to its shareholder is actually not a dividend. In fact, such a loan to a shareholder has to be returned by the shareholder to the company. It does not become income of the shareholder. Notwithstanding the same, for certain purposes, the Legislature has deemed such a loan or payment as 'dividend' and made it taxable at the hands of the said shareholder. It is, therefore,....
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.... from out of his account. The Tribunal found that Mahesh owed some money to the assessee and as Mahesh had directed repayments of the amount due to the assessee from out of his credit balance in the company, the withdrawals made by the assessee had to be treated as withdrawals from the account of Mahesh and not from the accumulated profits of the company. 3. At the instance of the Commissioner of Income Tax, the following question of law was referred to the High Court Under Section 256(1) of the Income Tax Act. "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the withdrawals made by the assessee from Messers Universal Radiators Private Limited totalling Rs. 93,027 cannot be assessed Under Section 2(22)(e) of the Income- Tax Act, 1961 for the year 1973-74." The High Court answered the question in the negative and in favour of the Revenue. 4. The High Court took note of the fact that the accounting period for the relevant assessment year 1973-74 was 1.4.1.972 to 31.3.1973. The asses-see was a substantial shareholder of the company and was drawing funds from the company till 22.3.1....
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....ng the relevant accounting period. 9. It was held by this Court in the case of Smt. Tarulata Shyam and Ors. v. Commissioner of Income Tax, West Bengal MANU/SC/0195/1977 : [1977]108ITR345(SC) that the statutory fiction created by Section 2(6A)(e) of the Indian Income Tax Act, 1922 would come into operation at the time of the payment of advance or loan to a shareholder by the company. The legislature had deliberately not made the subsistence of the loan or advance, or its remaining outstanding, on the last date of the previous year relevant to the assessment year a prerequisite for raising the statutory fiction. 10. In the instant case, excess withdrawals were made by the assessee on various dates between 3.7.1972 to 22.3.1973 when the account of Mahesh had not been debited. The assessee's account was consequently overdrawn. On the very last day of accounting year some adjustment was made but that will not alter the position that the assessee had drawn a total amount of Rs. 93,027 between 3.7.1972 to 22.3.1973 from the company when her account with the company did not have any credit balance at all. That means these advances made by the company to the assessee w....
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.... 4. We have heard counsel for the appellant. 5. Tribunal while considering the case in Paragraph 6 more particularly internal page 10 has discussed in detail as under: "On 21.8.2009 again he paid Rs. 2 lakhs to compnay, Rs. 9.5 lakhs on 28.7.2009, Rs. 3 lakhs on 13.10.2009, Rs. 1.25 lakhs on 15.10.2009, Rs. 5 lakhs on 26.10.2009, Rs. 5 lakhs on 29.10.2009, Rs. 20 lakhs on 10.2.2010 and Rs. 60 lakhs on 10.3.2010 (Rs. 20 lakhs each) and Rs. 13 lakhs on 10.3.2010 and Rs. 1.25 lakhs on 10.3.2010 which show that there are numbers of transactions between the assesse and company. Finally, the assessee's account has been squared up. The assessee and company are in real estate business. It is a general practice in the line of business that most of the land are purchased and sold on agreement to sale basis to save the stamp duty and to increase the profit on the transactions. These facts have been accepted by the AO in scrutiny assessment also in number of years. The condition laid down in the Section 2(22)(e) are squarely applied in case of the assessee but only issue disputed is whether these advances were loan for business purpose or otherwise. The prima facie co....
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....e 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 & Paper Mills Ltd. v. Collector of Central Excise AIR 1991 SC 754 and State of Bombay v. Hospital Mazdoor Sabha AIR 1960 SC 610. Therefore, we hold that the Tribunal was correct in holding that the amounts advanced for business transact....
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.... A close examination of the judgment of the Bombay High Court in the case of Nagindas M. Kapadia (supra) would show that the Court excluded from the ambit of "dividend', monies which the assessee had received towards purchases. In our view both the CIT(A) and the Tribunal have correctly appreciated this aspect of the matter in the said judgment of the Bombay High Court. The relevant portion of the judgment of the Bombay High Court which sets out this aspect of the matter is already extracted by us in the narrative give by us hereinabove. We are also in agreement with the view of the Tribunal that the judgment of the Supreme Court in the case of Ms. P. Sarada (supra) and Smt. Tarulata (supra) has no applicability to the present case. Both the judgments establish the principle that once the payment made to a shareholder is deemed as dividend then the mere fact that it is repaid would not take it out of the ambit of the tax net. In the instant case, however, a discussion with respect to which has been made hereinabove, the issue is whether the payment received by the shareholder would at all fall within the four corners of provisions of Section 2(22)(e) of the Act. Having held oth....
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....venue. In view of these facts, we are not in agreement with the conclusion drawn in the assessment order and affirm the stand of the learned Commissioner of Income Tax (Appeals) in accepting the claim of the assessee, resultantly, there is no merit in the appeal of the Revenue. Finally, the appeal of the Revenue is dismissed. 9. He has further contended that recent CBDT Circulars, Circular No.19 of 2017, dated 12th June, 2017, reads as under:- " Section 2(22) clause (e) of the Income Tax Act, 1961 (the Act) provides that "dividend" includes any payment by a company, not being a company in which the public are substantially interested, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member 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....