Income Tax Appellate Tribunal - Chandigarh
Sh. Amit Jindal, Chandigarh vs Dcit, Chandigarh on 18 January, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "ए" , च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'A' , CHANDIGARH
ी संजय गग , याय क सद य एवं ीमती अ नपणा
ू ग#ता
ु , लेखा सद य
BEFORE: SHRI SANJAY GARG, JM & SMT.ANNAPURNA GUPTA, AM
आयकर अपील सं./ ITA Nos.44 to 47/Chd/2014
नधा रण वष / Assessment Years : 2006-07 to 2009-10
Sh.Amit Jindal, बनाम The D.C.I.T.,
Prop. M/s Spicy Products Central Circle-1,
R/o House No.21, NAC Chandigarh.
Manimajra, Chandigarh
थायी लेखा सं./PAN NO: ACGPJ8215N
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No.108/Chd/2014
नधा रण वष / Assessment Years : 2007-08
The D.C.I.T., बनाम Sh.Amit Jindal,
Circle-1, Chandigarh. Prop. M/s Spicy Products R/o
House No.21, NAC Manimajra,
Chandigarh
थायी लेखा सं./PAN NO: ACGPJ8215N
अपीलाथ /Appellant यथ /Respondent
&
आयकर अपील सं./ ITA No.1171/Chd/2016
नधा रण वष / Assessment Year : 2007-08
Sh.Amit Jindal, बनाम The D.C.I.T.,
Prop. M/s Spicy Products Central Circle-1,
R/o House No.21, NAC Chandigarh.
Manimajra, Chandigarh
थायी लेखा सं./PAN NO: ACGPJ8215N
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Sudhir Sehgal, Adv.
राज व क ओर से/ Revenue by : Shri Ashish Gupta, CIT DR
सनवाई
ु क तार#ख/Date of Hearing : 12.11.2018
उदघोषणा क तार#ख/Date of Pronouncement: 18.01.2019
आदे श/ORDER
PER ANNA PURNA GUPTA, A M:
Al l the above appeal s pertai n to the same assessee. The appeal s i n I TA Nos.44 to 47 & 108/Chd/2014 have been fi l ed 2 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 agai nst the con sol i dated order of the Commi ssi oner of I ncome Ta x ( Appeal s) ( Central ) , Gurgaon (in short CI T( A) dated 27.11.2013 passed u/s 250 ( 6) of the I ncome Ta x Act, 1961 (in short referred to as 'Act') and rel ati ng to assessment years 2006-07 to 2009-10. For A.Y 2007- 08,cross appeal s have been fi l ed by the assesse e and the Revenue i n I TA No. 45 & 108 /Chd/14 respecti vel y. The appeal of the as sessee i n I TA No .1171/Chd/2016 i s agai nst the order of th e CI T( A) dated 22.8.2016, rel at i ng to A.Y 2007-08,confi rmi ng the l ev y of penal t y u/s 271( 1) ( c) of the Act .
2. At the outset i t was poi nted o ut that search a nd sei zure operati on was conducted on 15.7.2008 at the resi denti al and busi ness premi ses of Ji ndal group of cases and the assessee was al so covered. That thereaft er assessment order was passed u/s 153 B( 1) ( b) r. w.s. 143( 3) of the Act for al l the i mpugned years maki ng si mi l ar addi ti ons. I t was common ground therefore that common i ssues arose i n al l the sai d appeal s. The y w ere therefore he ard together and are bei ng di sposed of by thi s common & consol i dated order.
We shal l fi rst be taki ng up the appeal of the assessee i n I TA No.44/Chd/2014.
ITA No.44/Chd/2014 (A.Y. 2006-07):
3. G r o u n d N os . 1 a n d 2 r a i s e d b y t h e a s s es s e e r ea d as under:
3 ITA Nos.144 to 47 & 108/Chd/2014ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10 "1. That the Worthy CIT (A) has also erred in dismissing the grounds of appeal pertaining to objection of assessee with regard to reference to the Special Auditor in terms of section 142 (2A).
2. That the Worthy CIT (A) has erred in not considering that the conditions for reference to the special audit have not been fulfilled and since the assessee had not been maintaining any personal books of accounts, no complexity was there for the purpose of referring the case to the special audit and, as such, the assessment having been completed beyond the limitation time deserves to be quashed."
4. Th e s a i d g r o u n d s w e r e n o t p r e s se d b e f o r e u s a nd a r e , t h e r e f o r e, t r e at ed a s d i s mi s s e d .
5. G r o u n d N o. 3 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"3. That the Worthy CIT(A) has erred in confirming the addition of deemed dividend U/s 2(22)(e) amounting to Rs.69,998/- (out of Rs.1,48,998/-) in respect of amount shown as alleged advance to the assessee in different Companies."
6. Th e a b o v e g ro u nd i s i n r el a t i o n t o t h e a d d i ti o n m a d e o n a c c o u n t o f d e e m e d d i vi d e n d a s p e r t h e p r ov i s i o n s of s e c t i o n 2( 2 2 ) ( e) o f t h e Ac t a n d t he b r i e f f a c t s r e l at i n g t o t h e i s s u e a r e t h a t t he a s s e s s e e w a s di r e c t e d t o g e t h i s a c c o u n t s audited from th e duly a p p o i nt e d S p e ci a l A ud i t o r u /s 1 4 2 ( 2 A ) o f t h e Ac t . Th e S p e c i a l A u d i t o r p oi n t e d o u t i n i t s r e p o r t t h at t h e a s s e s s e e wa s a s h a r e h o l de r i n a n u m b e r o f c o m p a n i e s h av i ng s u b s t a n t i a l i n te r e s t a n d t h e se c o m p a n i e s h a d g i v e n l o a n s t o t h e a s s e s s e e o r t h e c o n c e r ns i n w h i c h t h e a s s es s e e h ad s u b s t an t i a l i nt e r e s t . Th e de t a i l s o f th e s e l o a n s a s r e p ro d uc e d a t p a g e 4 o f t h e a ss e s s m en t o r d e r a r e as under:
"8. It was pointed out by the special auditor that the assessee was a shareholder in number of companies in which the assessee had a substantial interest. These companies had given loans to the assessee or to the concerns in 4 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 which the assessee had substantial interest. The details of these loans are as under:
Company which Substantial List of Substantial Loan given to Assessee's Loan Amount Proportionate is giving loan interest of Interested the assessee or interest in given being Share of Deemed the Assesses shareholders in to any concern said concern treated as Dividend on the in the said the company in which Deemed basis of company which is giving assessee is Dividend u/s shareholding (Minimum1 loan substantially 2(22)(e) among the 0% required) Interested. substantially interested shareholders in the company 600/5800 Amit Jindals = Heera Moti 100% 50000 50000 share 600 shares Spicy Products =10.34% Urmil Jindal = 1000 shares, Heera 600 / 5800 Amit Jindal = Hiramoti agro Moti Health shares = 600 shares, products 20% 113322 19998 Care Product 10.34% Sunita Jindal = Ltd. 600 shares, (Accumulated Roshan Lal Profits of Jindal = 1200 3740308) shares Amit Jindal = 600 Swami Devi 600 / 5800 shares, Ashok Dayal Hi-
shares = Jindal = 1200 tech
10.34% shares, Roshan Lal Education Member 395000 79000
Jindal = 1200 society
shares
Total 1,48,998
7. Th e A . O . h e l d th a t a s p e r th e a f o r e s a i d d e t ai l s, t h e c o n d i t i o ns e n u me r a t e d i n s e c t i o n 2 ( 2 2 ) ( e ) o f t he A c t , o f th e i m p u g n e d p a y m en t s b e i n g i n th e n a t u r e o f d e em ed d i v i d e n d , stood fully s a ti s f i e d in the ca s e of the a s se s s e e and c o n f r o n t ed t h e sa m e t o t h e a s s e ss e e . I n r e s p o n se , d u e r e p l y w a s f i l e d b y t h e a s s e s s e e s t at i n g t h a t t h e i m p u g n ed a d v a n c e d i d n o t q u a l i f y a s d e e me d d i v i de n d u / s 2 ( 2 2) ( e ) o f t he A c t s i n c e t h e y h a d be e n m a d e o ut o f b u s i n e s s e x p e d i en c y a n d i n the ordinary course of b u si n e s s . F i n di n g the said explanation u na c c e p t a b l e and not s u p p o r t ed by any e v i d e n c e , t h e A .O . t r e a t e d a n a m o u n t o f R s . 1 , 48 , 9 9 8 / - as deemed d i v i de nd in the hands of the a s s e s s ee , as per s e c t i o n 2( 2 2 ) ( e) of t h e A c t, a n d s ub j e c t e d th e s a me t o t a x .5 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
8. Th e m a t t e r w a s c a r r i e d i n a p p eal b e f o r e t h e L d.C I T( A ) w h o , u p h e l d t h e a m o u n t a d va n ce d t o M / s He e r a M o t i S p i c y P r o d u c t s & M / s H e e r a M o t i A g ro P r o d u c t s b y M / s H e e ra M o t i H e al t h C ar e P r o d u c t L t d . , am o u n t i n g t o R s .6 9 , 9 9 8 / - i n a l l o u t o f t h e i mp u g n e d ad v a n c e, a s d ee m e d d i v i de n d , w hi l e the a m o un t ad v a n c e d to S wa m i D e vi D a y al H i - Te ch E d u c a t i o n S o c i e t y o f R s . 7 9 ,0 0 0 / - w a s t r e a t ed t o b e o u t s i d e t h e s c o p e o f s e ct i o n 2 ( 2 2 ) ( e ) o f th e A c t a n d a d d i t i o n m a de o n t h i s ac c o u n t w a s d e l e te d .
9. A g g r i e v e d b y t he a d d i ti o n u ph el d b y t h e CI T( A) t h e a s s e s s e e h a s c om e u p i n a p p ea l b e f o r e u s . Du r i n g t h e c o u r s e o f h e a r i n g b e f o r e u s t he L d . c o u n s e l fo r a s s e s s ee r e i t e r a t ed t h e c on t e n t i o n s ma d e b e f o r e t h e l o w e r a u t h o r i t i e s s t a t i n g t h a t t h e a m o u n t g i v e n t o M / s H e r o Mo t i S p i cy P r o d u c t s a n d M/ s H e r a M o t i A gr o P r o d u c t s w as n o t i n t h e n a t u r e o f a ny l o a n s o r a d v an c es b u t w a s d o n e o n l y i n a s i t u a t i o n w he r e t h e b a n k b a l a n ce w a s s h o r t i n o n e o f t h e b a n k a c c o u n t of g r o u p c o n c e r ns a n d t h e r e w as n e e d t o c o v e r t h e b a nk b a l a n c e i n o rd e r t o h o n o u r t h e c h e q u e . I t w a s c o n t e n d ed th a t t h e a m o u n t w a s g i v e n i n o r de r t o a v o i d a n y l o s s o f g o o dw i l l o f t h e c o n c er n a n d t h u s th e t r a n s a c t i o n w a s o n a c c o u n t o f c o m m e r c i a l e xp e d i e n c y o nl y b ei n g i n t h e n a t u r e o f f i n a n ci a l h e l p b y on e c o n c e r n t o an o th e r i n t h e g r o u p . Re l i a n ce w a s p l a ce d i n t hi s r e g a rd o n t h e j u d g m e nt o f t h e H o n ' b l e J u r i s d i c ti o n a l Hi g h C o u r t i n t he c a s e o f B r i g h t E n t er p r i se s P v t . L t d . V s . C I T ( 2 0 1 6 ) , 3 81 I TR 1 07 ( P & H ) p oi n t i n g ou t t h e r ef r o m t ha t i t wa s h el d i n t h e sa i d 6 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 j u d g m e n t t ha t no t o n l y t h e p ur ch a s e a n d s a l e tra n s a c t i o ns amounted to bu s i n e s s tr a n s a ct i o n s but also where one concern a dv a n ce s money to o th e r c o n c er n to tide over certain d i ff i c u l ti e s it would be treated as co m m e r c i a l e x p e d i e n c y . Th e L d . c o u n se l f o r as s e s s e e fu r t h e r st a t e d t h at t h o u g h t h e j u d gm e n t w a s r e n d e re d i n t h e c o n t e x t o f s e c t i on 3 6 ( 1 ) ( i i i ) b u t t h e p r i n c i p l e l ai d do w n i n t h e s a i d j u d g m e nt t h a t h e l p i n g g r ou p c o m p an i e s by w a y of p r ov i di n g f u n ds w a s i n t h e n a t u re o f co m m e r ci a l e x p e d i e n c y w a s re l e v a n t f or t h e p u r p o s e o f se c t i o n 2 ( 2 2 ) ( e ) o f t h e A c t a l s o . R el i a n c e w a s a l s o p l a c e d o n t h e f o l l o w i n g j ud g m e n t s w h er e i n t h e L d . c o u n s e l f o r a s s es s e e p o i n t e d o ut , i t w a s h e l d t h a t w h e re t r a n s a c t i o n s a r e i n t h e n a t u r e o f c o m m e r c i al e x p e d i e n c y, t h e r e i s n o q u es ti o n o f d ee m e d di v i d e n d :
1) C I T V s . C r e a t i v e D y e i n g & P r i n ti ng P . L t d. , 3 1 8 I TR 4 7 6
2) M / s B a g m an e C on s t r u c t i on s P v t. L t d .
V s . A CI T, I TA N o. 4 4 6 / B a n g/ 2 0 1 0
10. C o p i e s o f t h e o rd e r s w e r e a l s o pl a c e d b e f o r e u s a n d i t w a s p o i n t e d o u t t h a t a g a i n s t t he d e c i s i o n o f t he H o n ' b l e D e l h i H i g h C ou rt i n t h e c a s e o f C r e a t i v e D ye i n g & P r i n t i n g P . L t d . ( s u p r a ) th e R e v e n u e h a d g o n e i n a p p e a l b e f o r e t h e H o n ' b l e S up r e me C o u r t , wh i c h h a d i n t u r n d i sm i s s e d t h e S L P f i l e d b y t he R e v e n u e. Th e L d . c o u ns e l f or a s s e s s ee further drew ou r a t t e nt i o n to the su b m i s si o n s m a de proving c o m me rc i a l expediency of the t r a n s ac t i o n s as r e p r o d u c ed i n par a 8 . 4 o f t h e as se s s m e n t or d e r as u n d e r :
"8.4 in response to the said show cause notice, the counsel of the assessee vide its letter no. nil dated 06.06.2011 field a written reply. In the written submission the assessee 7 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 reiterated that the amounts debited to the firm M/s Heera Moti Agro Products, in the books of the company M/s Heera Moti Health Care product Ltd & M/s Himland Agro Foods (India) Ltd were provided out of commercial/ business expediencies and there was no intention of providing a loan or advance. It was further submitted that the amounts provided to the firms in which Smt. Urmil Jindal is partner have not been personally withdrawn by Smt. Urmil Jindal. No individual benefit has been obtained by Smt. Urmil Jindal. The assessee submitted that the entries in the books of accounts need to be examined. The assessee produced the ledger accounts of the following parties and made the following submissions.
A perusal of ledger a/c of M/s Heera Moti Spicy Products in the Books of M/s Heera Moti Health Care products Ltd. reveals that funds amounting to Rs 50,000/- have been transferred, to OBC a/c of M/s Heera Moti Spicy Products by the Company. A perusal of bank a/c OBC of M/s Heera Moti Spicy Products reveals that funds were transferred, to M/s Heera Moti Spicy Products to keep the cash credit a/c within limit and to clear the cheques /Drafts issued by M/s Heera Moti Spicy Products. A perusal of ledger a/c of M/s Heera Moti Agro Products in the Books Of M/s Heera Moti Health Care products Ltd. reveals that funds amounting to Rs 75,000/- have been trfd, to OBC a/c of M/s Heera Moti agro Products by the Company. A perusal of bank a/c OBC of M/s Heera Moti agro Products reveals that funds were trfd to M/s Heera Moti agro Products to keep the cash credit a/c within limit and to clear the cheques /Drafts issued by M/s Heera Moti agro Products. Balance entries amounting to Rs 38,322/- are just transfer entries because of common parties in both the books and are just adjustment entries not involving any actual flow of cash from the Company to the shareholder During the year under consideration, Rs 3,95,000 was advanced to Swami Devi Dayal Hi-tech Education Society in the Books of M/s Heera Moti Health Care Products Ltd. In the present case, the payment has been made to a charitable Trust. Although, assesee is trustee in the trust, he is not entitled to 20% or more of the income of the trust. Therefore, the basic condition to treat the amount as deemed dividend has not been fulfilled. No personal benefit has been received by the assessee."
11. Th e L d . D R , o n t h e o t h e r h a n d , r e l i e d u p o n t h e o r d e r of the lower a u t h o r i t i es . Drawing our a t t e n ti o n to the f i n d i n g s o f th e A. O . a t p a r a 8 . 7 of t h e o r d e r , L d. DR p o i n t e d o u t t h a t un d i s pu t e d l y t he f u n d s h a d b e e n t r a n s fe r r e d f r om 8 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 t h e c o m p a n y to th e f i r m a s t h e re w a s s h o r t a ge o f fu n d s a n d t h e y w e r e, t h e re f o r e , c l e a r l y no t i n t h e n a t u re o f t r a de advances or a dv a n c e s given in the ordinary course of b u s i n e s s a n d wer e c l e a rl y i n t h e f o r m o f l o a n s a nd a d v a n ce s w h i c h w e r e c o ve r e d b y s e c t i o n 2 ( 2 2 ) ( e ) o f t h e A c t t o b e t r e a t e d as d e e m ed d i v i d e nd . O u r a t t e n t i o n w a s d ra w n t o t he r e l e v a n t f i n di n gs o f t h e A . O . a t p a r a 8 . 7 o f t he o r d e r a s under:
"8.7 The ledger accounts (copy enclosed) produced by the assessee in support its contention reveal the following transactions between the companies (in which the assessee is a substantial shareholder) and the concerns in which the assessee is substantial partner. A perusal of ledger account filed by the assessee and admission in her written reply reveals that the transactions between the two concerns are of the following nature:
• The funds were transferred from the company to the firm to keep the keep the cash credit a/c within limit.
• The funds were transferred by the away of transfer entries transfer because of common parties in books of account of both the parties • The funds were transferred to the bank account of the concern by the way of bank transfer or through cheques.
The above indicates that the funds have been transferred from the company to the firm as there was shotage of funds, therefore, these can be only treated as loans and advances. The transactions are not simple transfer entries but through cheuqes/bank transferred which were issued as funds were short of firm. The transfer of funds has not been done in the ordinary course of business. In this regard the assessee failed to demonstrate that advances were trade advances and were done to the ordinary course of business. A perusal of ledger account shows that there has not been any purchase /sale between the two parties. Mere assertion by the assessee loan were provided out commercial and business expediency is not enough. The onus lies the assessee to provide the necessary proof to this effect. As the assessee has contended that the there was no intention of providing of loans and advance can not be accepted. The department has to look into the actual transaction whatever be the 'intention'. As regards the contention of the assessee that during the year under consideration, the money was advanced to Swami Devi Dyal Hi Tech Education Academy in the Books of M/s Heera Moti Health Care Products Ltd. and payment has been made to 9 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 Charitable Trust. The assessee has not derived any personal benefit. It is also submitted that the assessee is not entitled to 20% or more of the Income of the society. In this regard it may be mentioned that the accounts and the documents seized during the course of search show that the funds of the society have been utilized by the members of the society and their family members. Therefore the contention of the assessee that no personal benefit has been derived by the assessee is not correct."
12. Th e L d . D R f u r t h e r p o i n t e d o u t t ha t t h e d e c i s i o n of t h e H o n ' b l e D e l h i H i g h C o u r t r e l i e d u p o n b y t h e Ld . c o u n s e l f o r a s s e s s e e i n t he c a s e o f C r e a ti v e D y e i n g & P r i n ti n g P . L t d . ( s u p r a ) ha d b e en d i s t i n gu i s h e d b y t h e A. O . s ta ti n g t h a t i n t h e s a i d c a se t he a d v a nc e h ad be e n g i ve n i n t h e o r d i n ar y c o u r s e o f b u si ne s s a n d h a d , th e r e f o r e , be e n t r e a t e d a s b u s i n e s s ad v a n ce s n o t c o v er e d u/ s 2 ( 2 2 ) ( e) o f t h e A c t b y t he H o n ' b l e H i g h C ou r t , w h i l e i n t h e p r e s e n t c as e , t he a s s e s s e e h a d f a i l e d t o d em o n s t r a t e t ha t th e t r a n s a c t i o n w a s i n t h e o r d i n a r y c o u r s e o f b u s i n es s .
13. We have h e a rd the rival c o n te n t i o n s , p e r us ed the o r d e r s o f th e a ut h o r i t i e s b e l o w a n d g o n e t hr o u gh t h e c a se l a w s r e f e r re d t o b e f o r e u s . Th e i ss u e b e f o r e u s r ela t e s t o t h e p r o v i s i o ns o f s ec t i o n 2 ( 2 2 ) ( e ) o f t h e A c t w h i c h d e f i n e s t h e t e r m " di v i d e nd " a n d a s p e r t h e s a i d c l a u s e a ny p a y m e nt made by a c o mp a n y by way of a d v a n ce or l oa n s to a s h a r e h o l de r w h o i s t h e b e n e f i c i al o w n e r o f s h ar es h o l d i n g n o t l e s s t ha n 10 % o f v o t i ng p o w e r o r t o a ny co n c e r n i n w h i c h s u c h s h ar e h o l d e r i s a me m b e r h a v i n g su b s t a n t i al i n t e r e s t i s t o b e t r e a t e d a s d i v i d e n d . Th u s t h e q u a l i f y i ng c o n d i t i o ns f o r t re a t i n g a n y p a y me n t i s d i v i d e n d a s p e r t h e p r o v i s i o ns o f se ct i o n 2 ( 2 2) ( e ) o f th e A c t a re ;
i ) t h e p a y m e n t i s i n t h e n a t u r e of l o a n o r a d v a nc e; 10 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10 i i ) t h e p a y m en t i s m a d e t o a s h ar e h o l d e r w h o h as n o t l e s s t h a n 1 0 % vot i n g p o w er i n t er es t h e c o mp a n y ; i i i ) or t h e p a yme n t i s m a d e t o a n o t h er c om p an y i n which such s ha r e h o l d e r has substantial i n t er e s t , w h i c h h a s b e e n d e f i n e d as b e i ng b e n e f i c i al a n d e nt i t l e d t o n o t l e s s t h an 2 0 % i n c o me o f th e s a i d co m p a n y.
14. Th e p r e s e n t c a s e b e f o r e u s f a l l s i n t h e t h i r d c a t eg o r y , t h e l o a n s an d a dv a n c e s h a vi n g be e n m a d e b y a co m p a n y i n which th e as s es s e e h as b e ne fi c i a l i n t e r e st to a n o t he r c o m p a n y i n w hi c h t h e a s s e s se e h a s s u b s t a n ti al i n t e r e s t. Th e f a c t o f t h e a s s e s s e e b e i n g a b e n e f i c i a l s har e h o l d e r i n the company gi v i n g the l o ans and a d v a n c es and a substantial s h ar e h o l d e r in t he company r e ce i v i n g t he l o a n s / a d va n c e s i s n o t d i s p ut e d . Th e o n l y d i s p u t e b e f o r e us i s v i s - à- v i s t h e n a t u r e of t h e am o u n t g i v e n . I t i s a l s o n o t d i s p u t e d b y b o th t h e p a r t i e s t ha t t h e l o a n s a nd a d v a n c es w h i c h q u a l i f y a s d e e m e d d i v i d e nd u / s 2 ( 2 2 ) ( e ) o f t h e A c t d o n o t i n c l u d e th o se g i v e n i n th e or d i n a r y c o u r s e of b u s i n es s o r w h i c h a r e i n t h e n a t u r e of b us i n e s s a d va n c e s . Th e s o l e d i s p u t e b e f o r e us i s w he t h e r t he a m o u n t a d v a nc e d i n t h e p r e s e n t ca s e q ual i f y a s b u s i n e ss a d v a n c e s o r n o t. W h i l e th e c o n t e n t i on o f t h e a s s e s s e e i s t ha t t h e i m p u g n e d tra n s a c t i o n h a s t a k en p l ac e b e t w e en t h e g ro u p c o n ce r n s t o t i d e o v e r s h o r t t e r m f i na nc i a l d i f f i cu l t i e s an d t o k e e p t h e ca s h c r e d i t account wi t h i n limit an d c l ear the c h eq u e s and d r a f ts issued, w hi c h showed that the a d v a n c es were for c o m m e r c i al p u r po s e s / b u s i n e s s on l y , t h e c on t e n ti o n o f t he R e v e n u e , o n t h e o t h e r h a n d, w as t h a t t h e a m o un t s h a vi ng b e e n a d v a n c e d fo r m e e t i n g s h o r t t e r m d e f i c i e n c y o f f u n d s , 11 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 w e r e c l ea r l y i n th e n a t u r e o f l o an s a n d a dv a n c e s a s s t a te d i n s e c t i o n 2 ( 2 2) ( e ) o f t h e A c t a nd w e r e n o t i n t he n a t u r e o f t r a d e a d v a n c es g i v e n i n t h e o r d i na r y c o u r s e o f b us i n e s s a n d t h e r e we r e no p ur c h a s e o r s al e tra n s a c t i o n b e t w e en t h e t w o parties, nor a ny agreement f or making the i m p u g n ed a d v a n c e s a nd , th e r e f o r e , t h e s am e d i d n o t q ua l i f y a s a b u s i n e s s a d v a n ce .
15. Th e f a c t t h a t t h e a d v a n c e s w e r e m a d e t o the concerns w h i c h f e l l i n t h e s a m e g r o u p i . e . J i n d a l G r ou p o f C a s e s , h a s n o t b e e n di s p u te d a n d , t he r e f o re , a l s o , t h e f a ct t h a t t h e D i r e c t o rs And s h a r e h o l de r s in the said c o nce r n s were c o m m o n . Th a t t he b u s i n e s s i n te re s t o f a l l t h e c on c e r n s w a s i n t e r r e l at e d c a n b e s a f e l y d e r i v e d f r o m t h e a b o v e f a c t . A l s o n o t d i s pu t e d i s t h e f a c t t h a t t he i m p u g ne d a d va n c e s w er e g i v e n to k e ep t h e c a s h c r e d i t a c c ou n t o f t h e r e c e i ve r i n l i m i t a n d t h u s c l e a r th e c h e q u e s i s s ued b y i t . In the light of the s a i d f a c t s, w e ag r e e w i t h t he L d. c o u n s e l f or a s se s s e e t h a t t h e a d v a n c e s g i v e n b y o n e c o n ce r n t o a n o t h e r c o n c e r n to t i d e o v e r sh o r t te r m d e f i c i e n c y o f f u n d s w a s i n t he n a t u r e o f c o m m e r c i al e xp ed i e n c y s i n c e t h e f i na n c i a l p o s i ti o n o f a l l t h e g r o u p c o n c er n s w e r e i n t e r r el a t e d a n d i n t e r l i n k e d a n d u n d i s p u t ed l y the g o o d w i l l of t he g r o u p a l s o r e st e d o n t h e f i n a n c i a l r e su l t s a n d s t a b i l i t y of t h e a l l g r o u p c o n c e r n s . Any f i na n c i a l instability in on e c o m pa n y ef fe c t i n g its r e s u l t s w o u l d h a v e i m p a c t e d t h e g o o d w i l l a n d u l ti m a t e l y t h e b u s i n e s s o f t h e o t h e r c o nc e r n s i n t h e g ro u p . The r e f o r e t h e a d v a n c e s m a d e i n t h e pr e s e n t c as e t o ti d e ov e r sh o r t t e rm 12 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 d e f i c i e n ci e s o f fu n d ,i n ou r vi e w , q u a l i f i e d a s ad v a n c e s f o r b u s i n e s s pu r p o se . W e d r a w s u p po r t t o o u r a b o v e v i e w f r o m t h e j u d gm e n t of t h e H o n' b l e Jur i s d i c t i o n a l Hi g h C o u r t i n t h e c a s e o f B r i gh t E n t e rp r i s e s Pv t . L t d. ( s up r a ) , a s p o i nt e d o u t b y th e L d . c o u n s e l f o r a ss es s e e , w he r e i n i t h a s b e en h e l d t h at h e l p i ng t h e g r o u p c o nc e r n s b y w a y o f p r o v i di n g f u n d s i s p u r e l y i n t h e n a t u r e o f co m m e r c i a l e xp e di e n c y . Th e r e l e v a n t fi n d i n gs o f t h e H o n 'b l e H i g h C o u r t i n th i s r e g a r d a r e a s u nd e r :
"The following facts, therefore, stand established. M/s Kolkatta Hotels Private Limited is a sister concern of the appellant by virtue of the appellant holding 88.75% of its equity shares. The appellant invested a huge amount of about Rs.18 crores in the sister concern. The appellant and its sister concern are in the same business. For the point under consideration, it may not have made any difference even if they were not in the same business. However, the fact that they are in the same business is a further aspect in the appellant's favour. The parties admit that the appellant advanced the said sum of about Rs.10.29 crores to the appellant's sister concern free of interest. The share purchase agreement and in particular Article-3, clause 3.3(b) indicates that the appellant had to pay various amounts towards discharging the liabilities of the sister concern including towards voluntary retirement scheme under implementation by ITDC to its employees, dues of the municipality, electricity charges and lease rent.
9. Whether the amount of Rs.10.29 crores was debited to the account of the sister concern in respect of the payment made under Clause 3.3(b) of Article 3.1 of the share purchase agreement or whether the amount was actually paid to the sister concern and used by it for the purpose of business, is immaterial. Either way the amount was used for the business of the sister concern. It is not even suggested that the advance was used by the sister concern for any purpose other than for the purposes of its business. Nor was such a case raised before us.
The doubt, if any, is set at rest by the memorandum of appeal and the written submissions filed by the appellant before the CIT (Appeals). As Mr. Jain rightly pointed out, in the memorandum of appeal, the appellant expressly stated that it had advanced the amount of about Rs.10.29 crores to its sister concern as a measure of commercial expediency for the purpose of business. In the written submissions, the appellant 13 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 inter alia stated that the appellant and the sister company were in the hotel business; that the Board of Directors of the two companies was the same; that the appellant purchased the shares of the sister company as an investment and that the investment and advances were made for the purposes of business. From the order of the CIT (Appeals), it is evident that the department never contended that the amounts were not advanced for commercial expediency. Nor was it contended that the amounts advanced were used by the sister company for any purpose other than for the purpose of its business. Indeed, such a case was not even advanced before the Tribunal.
10. The CIT (Appeals) was, therefore, entirely justified in coming to the conclusion that the amount was advanced by the appellant to its sister concern on account of commercial expediency and that the advance was used by its sister concern for the purposes of its business. The additional facts further establish the findings.
11. The Tribunal's observation that there is nothing on record that the money advanced by the appellant to its sister company had been used as a measure of commercial expediency, was not justified. The appellant furnished all the documents in this regard. The appellant expressly stated that the amounts had been utilized for commercial activity. This assertion was never denied. The appellant was not required to do anything further to establish its assertion that its sister company had utilized the amounts for the purposes of its business. The finding of the Tribunal is not based on any material. It is important to note that the Tribunal had not even suggested that such a case was put to the appellant or its authorized representative and that despite the same the appellant failed to establish the same.
12. The view of the Tribunal that the CIT (Appeals) had not considered the decision of the Supreme Court in S.A. Builders Ltd. vs. Commissioner of Income-Tax (Appeals) and another (supra) in "right spirits" and that the CIT had wrongly interpreted the judgment is not well-founded. In S.A Builder vs. CIT (supra), the Supreme Court observed:-
"It is true that the borrowed amount in question was not utilized by the assessee in its own business, but had been advanced as interest free loan to its sister concern. However, in our opinion, that fact is not really relevant. What is relevant is whether the assessee advanced such amount to its sister concern as a measure of commercial expediency."
(emphasis supplied) It is precisely this test that was applied by the CIT (Appeals).
13. The commercial expediency in advancing the amount is established beyond doubt. The appellant owns about 89% of the equity capital. A Division Bench of this Court in CIT vs. 14 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 Marudhar Chemicals & Pharmaceuticals (P) Ltd., (2009) 319 ITR 75 (P&H) held:-
"15. Section 36(1)(iii) of the Act provides that "the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession" has to be allowed as a deduction in computing the income under section 28 of the Act. The expression "for the purpose of business" has been held to be wider in scope than the expression "for the purpose of earning income, profits or gains". It has been held in S.A. Builders Ltd.'s case (supra) that when the assessee borrowed the fund from the bank and lent some of it to its sister concern as an interest free loan, then the real test to allow the interest as deduction under section 36(1)(iii) of the Act is whether this was done as a measure of commercial expediency. It has been held that in order to claim a deduction, it is enough to show that the money is expended, not on necessity and with a view to direct and immediate benefit, but voluntarily and on account of commercial expediency and in order to indirectly to facilitate the carrying on the business. The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. In S.A. Builders Ltd.'s case (supra), it was held that in order to decide whether it was for commercial expediency, the authorities and the courts should have examined the purpose for which the assessee advanced money to its sister concern and what the sister concern did with the money. It was further held that it is not relevant whether the assessee has utilized the borrowed amount in its own business or has advanced the same as interest free loan to its sister concern. What is relevant is whether the amount, so advanced was as a measure of commercial expediency or not. It is not necessary that the amount so advanced is earning profit or not but there must be some nexus between expenses and the purpose of business."
It is important to note that the Division Bench in arriving at its conclusion followed the judgment of the Supreme Court in S.A. Builders Ltd. vs. Commissioner of Income-Tax (Appeals) and another (supra). The Division Bench, in fact, after remanding the matter, expressly directed the Tribunal to consider the matter in the light of the principles laid down by the Supreme Court in S.A. Builders Ltd. vs. Commissioner of Income-Tax (Appeals) and another (supra).
14. The appellant's case meets each of the tests stipulated by the Division Bench. In fact, it meets a higher test. When a holding company invests amounts for the purpose of the business of its subsidiary, it must of necessity be held to be an expense on account of commercial expediency. A financial benefit of any nature derived by the subsidiary on account of the amounts advanced to it by the holding company would not 15 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 merely indirectly but directly benefit its holding company. In the case before us, the subsidiary had to be funded to a large extent for otherwise it would not have survived. If it had not survived and had gone into liquidation, the appellant would have suffered directly on account of an erosion of its entire investment in the subsidiary. In this case, the financial assistance was not only prudent but of utmost necessity for without it the subsidiary would have suffered grave financial prejudice.
15. The Tribunal, therefore, erred in coming to the conclusion that the CIT (Appeals) had not considered the judgment of the Supreme Court in the correct perspective. With respect, we find that the Tribunal has not even analyzed the judgment of the Supreme Court in S.A. Builders Ltd. vs. Commissioner of Income-Tax (Appeals) and another (supra).
16. F u r t h e r we d r a w s u p p o r t f o r m t h e j u d gm e n t o f t he H o n ' b l e S u p re m e C o u r t i n t h e c as e o f S . A . B u i l d er s L t d . V s . C I T & A n o t h e r , 2 8 8 I TR 1 ( S C ) w h e r e i n t h e H on' b l e C o u r t held that t o det e r m i n e wh e t h e r t h e l o a n w a s gi v e n a s a m e a s u r e o f co mm e r c i a l e xp e d i en c y t h e p u r p os e f o r w h i c h t h e a m o u n t w as a d v a n c e d a n d w h a t t h e s i s te r c o n c e r n d i d t h a t t h e m o n e y i s r el e v a n t. Th e r e l e v an t fi n d i n g s o f t h e H o n ' b l e Su p r e m e C o u r t i n t h i s r eg a r d a r e a s u n der :
"It has been repeatedly held by this Court that the expression "for the purpose of business" is wider in scope than the expression "for the purpose of earning profits" vide CIT vs. Malayalam Plantations Ltd. (1964) 53 ITR 140 (SC), CIT vs. Birla Cotton Spinning & Weaving Mills Ltd. (1971) 82 ITR 166 (SC), etc.
27. The High Court and the other authorities should have examined the purpose for which the assessee advanced the money to its sister-concern, and what the sister-concern did with this money, in order to decide whether it was for commercial expediency, but that has not been done.
28. It is true that the borrowed amount in question was not utilized by the assessee in its own business, but had been advanced as interest-free loan to its sister-concern. However, in our opinion, that fact is not really relevant. What is relevant is whether the assessee advanced such amount to its sister- concern as a measure of commercial expediency.
29. Learned counsel for the Revenue relied on a Bombay High Court decision in Phaltan Sugar Works Ltd. vs. CIT (1995) 127 CTR (Bom) 359 : (1994) 208 ITR 989 (Bom) in which it 16 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 was held that deduction under s. 36(1)(iii) can only be allowed on the interest if the assessee borrows capital for its own business. Hence, it was held that interest on the borrowed amount could not be allowed if such amount had been advanced to a subsidiary company of the assessee. With respect, we are of the opinion that the view taken by the Bombay High Court was not correct. The correct view in our opinion was whether the amount advanced to the subsidiary or associated company or any other party was advanced as a measure of commercial expediency. We are of the opinion that the view taken by the Tribunal in Phaltan Sugar Works Ltd. (supra) that the interest was deductible as the amount was advanced to the subsidiary company as a measure of commercial expediency is the correct view, and the view taken by the Bombay High Court which set aside the aforesaid decision is not correct.
30. Similarly, the view taken by the Bombay High Court in Phaltan Sugar Works Ltd. vs. CIT (1994) 122 CTR (Bom) 344 : (1995) 215 ITR 582 (Bom) also does not appear to be correct.
31. We agree with the view taken by the Delhi High Court in CIT vs. Dalmia Cement (Bharat) Ltd. (2002) 174 CTR (Del) 188 : (2002) 254 ITR 377 (Del) that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. The IT authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own viewpoint but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister-concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits.
32. We wish to make it clear that it is not our opinion that in every case interest on borrowed loan has to be allowed if the assessee advances it to a sister-concern. It all depends on the facts and circumstances of the respective case. For instance, if the directors of the sister-concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as a measure of commercial expediency. However, money can be said to be advanced to a sister-concern for commercial expediency in many other circumstances (which need not be enumerated here). However, where it is obvious that a holding company has a deep interest in its subsidiary, and hence if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans." 17 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
17. S i n c e i n t h e p re s e n t c a s e a d v an c e s h a v e b e e n m a d e a d m i t t e d l y t o t i d e o v e r s h o r t t er m d e f i ci e n c y i n t h e c as h c r e d i t l i m i t s , u sa g e o f f un d s f or t h e p u r p os e o f bu s i n e s s of t h e s a i d c o n c e rn , w h i c h a d m i t te d l y a r e a l l i n t er r e l a t e d , i s e s t a b l i s he d . A nd s i n c e th e g oo d wi l l o f t h e e nt i r e gr o u p r e st s o n t h e p r o p er f un c t i o n i n g o f a l l th e c o m p a n i e s i n t h e g r o u p , w h i c h i n t ur n a ff e c t s t h e bu s i n es s o f t h e a l l c om p a n i e s i n t h e g r o u p al s o , t h e i m p u g ne d ad v a n c e s , we u n he s i t a t i n gl y h o l d , a r e f o r t he p u r p o s e o f b us i n e s s o nl y a n d n o t i n the n a t u r e o f l oa n s a n d ad v a n c es s i m p l i c i t e r be n ef i t i n g a n y s u b s t a n t i a l o r b e n e f i c i al s h a r e ho l d e r o n l y . W e , t h e r e f o r e, hold that th e impugned ad v an c e s in the p re s e n t case amounting to Rs . 6 9 , 9 9 8 /- do not qualify as loans and a d v a n c e s f o r t he p u r p o s e o f t re a t i n g them as deemed d i v i d e n d as p e r th e p r o v i s i o n s o f s e c t i o n 2 ( 2 2 ) ( e ) o f t h e A c t . Th e a d d i t i o n mad e i n th i s r eg a rd i s , th e r e f or e , d i r e c t e d t o b e d e l e t ed . G r oun d o f a p pe a l N o.3 r a i s e d b y t h e as s e s s e e i s , t h e r e f o r e, a l l o w ed .
18. G r o u n d N o. 4 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"4. That the Worthy CIT (A) has erred in restricting the addition amounting to Rs.10,36,124/- out of addition of Rs. 28,16,098/- made by the Assessing Officer on account of unexplained cash credit u/s 68 as per 10.1.2 of her order."
19. B r i e f f ac t s r el e va n t t o t he i s s ue a r e t h a t t h e Sp e c i a l A u d i t o r s a p po i n te d h a d p o i n t e d ou t t h a t p a g e N o s. 1 t o 6 5 o f A n n e x u r e -A - 2 De l t a 2 w as a diary m a i n t a i n ed by t he a s s e s s e e r e g a r di n g d a y - t o- d a y c as h r e c e i pt s a n d p a y m e n t s . I t w a s p o i n t e d o u t b y t h e a u d i t o r s t h a t t h e a ss e s s e e h a d 18 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 m a i n t a i n ed an opening cash ba l a n c e an d was c a r r y i ng closing ba l a n c e to the next day after considering t he r e c e i p t s a n d p a ym e n t s o f e v e r y da y . W h e n c o n f ro n t e d w i t h t h e s a m e t h e a s s e s s e e a d m i t te d t h a t t h e d o c u m e n t w a s a r e c e i p t a n d p a ym e n t a c co u n t ma i n t a i n e d b y hi m b u t s t at e d t h a t s i nc e t he p e r i o d to w hi c h i t r el a t e d p e r ta i n e d w a y b a c k , h e w as u na b l e t o k e ep e x ac t t r a c k o f t h e re c e i p t s a nd p a y m e n t s a n d t he s o u r c e b e h i n d i t . Th e a s s e ss e e , t h e r e f or e , v o l u n t a r i l y s u r ren d e r e d t h e p e a k c r e d i t o n t h e b as i s o f t h i s d i a r y a m o u n t i n g t o R s . 1 , 8 5 , 8 41 / -. Th e A . O . , h o w e v e r , f o u n d t h a t t he a u di t or s h a d r e p o rt e d t h e sa i d t r a n sa c t i o n s a s relating to th e u n a c c o un t e d ca s h r e c ei v e d an d u t i l iz e d towards v a r i ou s m i s c e l l a ne o u s p e r s o n s/ s t a t u t o r y o b l i g a t i on s / e x pen d i t u r e . H e , t he r e f o r e , r e je c t e d t h e p e a k c r e d i t t h eo r y o f t h e a s s e s se e , o n f i n d i n g t ha t u na c c o u n t e d c a s h h a d b ee n sp e n t b y t h e a s s es s e e a l s o an d n ot r o t a t e d i n t h e n o r m al c o u rs e o f b u si n e s s a n d m a d e a d d i t i o n o f t he e n t i r e am o u n t of c a s h s o r e ce i ve d e x c l ud i n g t he a m o u n t already r e t u r n ed by the a s s es s e e , w hi c h am o u n t e d to R s . 2 8 , 1 6 ,0 9 8 / - , t r e a t i n g i t a s u ne x p l a i n e d c as h cr e d i t u / s 68 of the Act.
20. B e f o r e t h e L d . CI T( A ) d e t a i l e d s u b m i s s i o n s w er e m a de b y t h e a s s e s s ee s h o w i n g t h a t m a j o r i t y o f t he t r a n s a c t i o n w e r e e n t er e d i n v a r i o u s b o o k s o f a c c o un t o f t h e g r o up concerns a nd a chart was submitted s h o wi n g that s u b s t a n t i a l t r a ns a c t i o n s w e r e i n f a c t c a s h s a l e s to d i f f e r e n t concerns an d th a t other no t i n g s r e l a t ed to the bank 19 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 a c c o u n t s o f t h e g r o u p a s a w h o l e . Th e d e t a i l e d w o r k i n g in t h i s r e g a r d w a s s u b m i t t e d t o t h e C I T( A ) . Th e L d . C I T( A ) o n t h e b a s i s o f th e s u b m i s s i on s m a de b y t h e a s s e ss ee h e l d t h a t o u t o f t h e t ot a l e n t r i e s o f Rs .3 0 , 0 1 , 9 3 9/ - s h o w n i n t h e d i a r y , t h e en t r i es t o t h e tu n e of R s . 1 9 ,0 3 , 0 3 3 /- , w h er e i n n a r r a t i o ns a n d ot h e r d r a f t s w er e s u b m i t t e d b y th e a s s e s s e e t o t h e CI T( A ) t o s u b s t a n t i a t e th e f a c t s , w e r e a l l a c c o u n t e d f o r a n d w e r e a cc e p t e d b y t h e CI T( A ) . W i t h r e g ar d t o t h e e n t r i e s a m o un t i n g t o R s . 6 , 1 5 , 29 8 / - t h e c o n t e nt i o n o f t he assessee that th e y were p u r cha s e s which c oul d not be r e c o n c i l ed w a s a l s o a c c e p t e d b y t h e C I T( A ) a n d G P r a t e o f 20% was applied to the same and ad d i t i o n of R s . 1 , 2 3 , 05 9 / - wa s made on a cc o u n t of th e sa m e . Th u s total a d di t i o n of R s.1 0 , 3 6 , 1 2 4/ - ( 2 8 , 1 6 , 0 9 8- 1 9 , 0 3 , 0 3 3+ 1 , 2 3 ,0 5 9 ) w a s s u s t a i ne d b y t h e CI T( A ) .
21. B e f o r e u s , t he Ld . c o u n s e l f or a ss e s s e e c o n te n d ed t h a t i d e n t i c a l i s s u e ha d a r i s e n i n a s se s s m e n t y e a r 2 00 7 - 0 8 a l so wherein the D ep a r t m e n t had also come up in appeal challenging the r e s t r i ct i o n of addition and where t he D e p a r t m e nt h a s r a i s e d a d d i t i on al g r o u n d s e e k i ng r e s t o r i n g t h e m a t t e r t o th e A . O . s i n c e th e e v i d e n c e s f i l e d b y t h e assessee explaining the e nt r i es in the diary, were n ot c o n f r o n t ed to th e A.O. Th e Ld. counsel f or assessee c o n t e n d e d t h a t th e i s s u e b e ad j ud i c a t e d i n a s s e ss m e n t y e a r 2 0 0 7 - 0 8 a n d t he d e c i s i on r e nd e re d t h e r ei n b e a pp l i e d t o t h e p r e s e n t g r ou n d al s o . Th e L d . D R d i d n o t o b j e ct t o t h e s a m e . A c c e p t i n g t h e r eq u e s t o f t he L d . c o u n s e l f or a ss e s s e e we 20 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 s h a l l b e ad j u d i ca t i n g t h i s g r o u nd a l o n g w i t h g r ou n d r a i s ed b y t h e a s s e ss e e a n d R e v e n u e i n a s s e s s m e nt y e a r 2 0 0 7 - 0 8 i n I TA N o . 4 5 /C hd / 2 0 1 4 and I TA N o . 1 08 / C h d / 2 0 14 r e s p e c t i ve l y .
22. Th e a s s e s s e e h as r a i s e d a d d i t i on a l g r o u nd b e f or e us v i d e i t s l e tt e r da t e d 1 0 . 1 0 .2 0 1 5, w h i c h w e r e rev i s e d v i d e l e t t e r d at e d 2 3- 07 - 1 6 a n d r e a d s as u n d e r :
"1. That the Worthy Commissioner of Income Tax(Appeals) has erred in confirming the addition on various issues as per ground of appeal despite the fact that no incriminating evidence was found during the course of search conducted on 15.07.2008 by the department on account of various additions which have been challenged by the assessee."
23. Th e s a m e w a s n ot p r e s se d b ef o r e u s a n d , t h e re f o re , t he s a m e i s di s m i s sed a s n o t p r e s s ed .
24. W e s h a l l n o w t ak e u p cr o s s a pp e a l s o f t h e a s se s s e e a n d t h e R e v e n u e r e l a t i n g t o a s s es s m e n t y e a r 2 0 07 - 0 8 i n I TA N o . 4 5 / C h d/ 2 0 1 4 a n d I TA N o . 1 0 8/ C h d / 2 0 1 4. I T A N o . 4 5/ C h d /2 0 1 4 ( A . Y . 2 0 0 7 -0 8 )
25. Ta k i n g u p a s s e ss e e ' s a p pe a l i n I TA N o . 4 5/ C h d /2 0 1 4, g r o u n d N os . 1 a nd 2 r a i s ed b y th e a s s e s s e e r e a d as u n d e r :
"1. That the Worthy CIT (A) has also erred in dismissing the grounds of appeal pertaining to objection of assessee with regard to reference to the Special Auditor in terms of section 142 (2A).
2. That the Worthy CIT (A) has erred in not considering that the conditions for reference to the special audit have not been fulfilled and since the assessee had not been maintaining any personal books of accounts, no complexity was there for the purpose of referring the case to the special audit and, as such, the assessment 21 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 having been completed beyond the limitation time deserves to be quashed."
Th e same were not pressed before us and are, t h e r e f o r e, d i s mi ss e d a s n ot p r e sse d .
26. G r o u n d N o. 3 r a i se d b y t h e a s s e sse e r e a d s a s u n der "3. That the Worthy CIT(A) has erred in confirming the addition of deemed dividend U/s 2(22)(e) amounting to Rs.2,42,317/- (out of Rs.3,42,317/-) in respect of amount shown as alleged advance to the assessee in different Companies."
27. It w a s c o m m o n g r o u n d t h a t t h e i s s u e a n d t h e f a c ts r e l a t i n g t o t h i s g r o u n d w e r e i d e n ti c a l t o g r o u n d No . 3 r a i s ed b y t h e a s se s s e e i n h i s a p p ea l i n I TA N o . 4 4 / C h d / 20 1 4 . S i n ce w e h a v e d e c i de d t h i s i s s u e i n t he s a i d a p p e a l i n f a v o u r o f t h e a s s e s s e e at p a r a s 1 3 t o 1 7 o f o u r o r d e r a b o v e , o u r d e c i s i o n re n d e r ed t h e r e i n s ha l l a p p l y m u t at i s mu t a n d i s t o this g r o u nd a l so . Th i s ground of appeal ra i se d by the a s s e s s e e i s , t he re f o r e , al l o w e d.
28. G r o u n d N o. 5 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"5. That the worthy CIT(A) has erred in confirming addition of Rs.3,77,667/- on account of provision 40(a)(ia) as per 11.2.1 of her order"
29. B r i e f f ac t s re l e va n t t o th e i ss u e a r e t h at w h i l e g o i n g t h r o u g h t h e b o ok s o f a c c o u n t t he S p e c i a l A u d i t or o b s e r v ed t h a t t h e a s s es se e h a d m a d e pa y m e n t s a s b ran d c h a r ge s amounting to Rs . 3 , 7 7 , 6 67 / - on which it w as liable to d e d u c t TD S a s p e r t h e p r o v i si on s o f C h a p t e r - XV I I of t h e A c t , b ut n o TD S h a d b e e n d e d u ct e d . W he n co n f ro n t e d wi th t h e s a m e, n o rep l y w a s f u r n i sh ed b y t h e a s s e sse e a n d th e A . O . , t he r e f o re , a d d e d t h e s a i d s u m t o th e i n com e o f t he 22 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 a s s e s s e e a s p e r t h e p r ov i s i o n s o f s e c t i o n 4 0 ( a) ( i a ) o f th e Act.
30. Th e m a t t e r w a s c a r r i e d i n a p p e a l b e f o r e t h e CI T( A ) w h o u p h e l d t h e or d er o f t h e A . O. s ta t i n g t h a t t h e b r a n d w a s r e g i s t e r ed i n t h e n a m e o f M / s H e e r a M o t i S p i c e s P v t . L t d . w h o w a s c h a rg i ng 4 . 1 % r o y a l t y on t h e t o t a l t u r no v e r a nd s i n c e n o TD S w a s d e d u c t e d o n th e s a m e , t h e a dd i t i o n h a d b e e n r i g ht l y m ade b y t h e A . O . u/s 4 0 ( a ) ( i a ) o f t h e A c t .
31. B e f o r e u s th e L d. c o u n se l fo r a sse s s e e co n t e n d ed t h a t t h e b r a n d c h a rg e s h a d b e e n r e f l e c t e d a s i n c om e b y t h e r e c i p i e n t of t h e s a m e a n d h a d a l s o b e e n p a i d t a xe s o n t h e same. Th e p r e s c r i b e d c e r ti f i c at e o f a n a c c o u n t a n t u /s 2 0 1 ( 1 ) of t h e A c t , i n F o r m N o . 2 6A , i n th i s re g a r d w a s fi l ed b e f o r e u s. Th e Ld. counsel for a s s es s e e , t h e r e fo r e, c o n t e n d e d t h a t i n v i e w o f t he a me n d e d p ro v i s i on s o f s e ct i o n 4 0 ( a ) ( i a) o f t h e Ac t a s p e r w h i c h w h e r e t a x e s ha v e b e e n p a i d b y t h e r e c i p i e n t o f th e i n c o m e s, t h e a s s e ss e e c a n n o t be t r e a t e d a s a n a ss e s s e e i n d e f au l t f o r n o t h a v i n g d e d u c t ed TD S o n t h e s a m e a n d n o a d d i t i on , t h e r e f o r e, c a n b e m a d e u / s 4 0 ( a ) ( i a ) o f th e A c t . Th e L d . c o u n s e l f or a s s es s e e s t a te d t h a t i ts s o l e p r a y e r w a s t h a t t h e m a t t e r b e r e s t o re d b a c k to t h e A . O . t o v er i f y t h e d o cu m e n t s n o w f i l e d b y t he a s s e s s ee a n d t h e re a f t e r de c i d e t he i s su e i n a c c o r da n c e wi th l a w . Th e L d . D R d i d n o t ob j e c t t o t h e s am e.
32. I n v i e w o f t h e ab o v e , w e re s t o r e t h e i s s u e b a c k t o t he A . O . t o ve r i f y the d o c u m e n ts f i l ed b y t h e as s e s se e p r o v i ng t h a t t h e t a x e s h a v e b e e n p ai d b y t h e r e c i pi en t o f b r a n d 23 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 c h a r g e s a n d t her e a f t e r t o d e ci de t h e i s s u e i n a c c o r d a n ce w i t h l a w . W e m a y a d d t h a t th e a s s e s s e e be g i v e n d u e o p p o r t u n i t y o f he a r i n g i n t h i s reg a r d . Th e g r o u nd o f a p p e al N o . 5 i s a l l o w ed fo r s t a t i s t i c a l p u rp o s e s .
33. G r o u n d N o. 6 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"6. That the Worthy CIT (A) has erred in confirming the addition amounting to the tune of Rs.9,52,812/- out of addition of Rs.34,14,326/- in respect of sundry creditors as per para 7.4.2 of her order."
3 4 . Th e R e v e n u e , i t w a s p o i n t e d o u t h a s a l s o r a i se d g r o u n d o f a p p e a l N o . ( i v ) o n t h i s i s s u e wh i c h r e a d s a s u n der :
(iv) "Whether on the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs.24,90,514/- which was made on account of unexplained sundry creditors?"
35. B r i e f f a c ts r e l a ti n g t o t h e i s s ue a r e t h a t d u r i ng t h e c o u r s e o f a s s es sm e n t p r o ce e d i n gs t h e a ss e s s e e wa s a s k e d t o f u r n i s h c on f i r m at i o n o f t h e su n d r y c r e d i t o rs a s a pp e a r i n g i n t h e b o o k s o f a cc o u n t s . No d e t ai l s w e r e f u r n i she d b y t h e assessee. Th e A.O., t h e re f o r e , treated the increase in sundry cr e d i t or s during t he year a m o un t i n g to R s . 3 4 , 4 3 ,3 2 6 / - as i n c o m e o f t h e a s s e s s e e . Th e L d . CI T( A ) r e s t r i c te d t h e a dd i t i o n t o R s . 9 ,5 2, 8 1 2 / - o n f i n d i ng t h a t t h e A.O. h ad a cc ep t e d s un d r y c re d i t o r s to the extent of R s . 7 0 , 6 2 ,4 5 9 / - i n t h e s uc c e e d i ng a s s e s s m en t y ear i . e . A. Y .
2 0 0 9 - 1 0 a nd s om e o f t h o se p a rt i e s a l s o a p p e a re d i n t he impugned year which a m o u n te d to Rs . 4 3 , 72, 8 3 9 / - as d e t a i l e d i n t h e or d e r o f t h e CI T( A ) a t p a g e 1 5 o f t h e o r d e r .
A c c o r d i n gl y , th e a d d i t i on t o t h i s e x t e n t w a s de l et e d b y t h e C I T( A ) , w h i l e t h e b a l a n c e o f R s .9 ,5 2 , 8 1 2 / - w a s u ph e l d .24 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
36. B e f o r e u s th e L d. c o u n se l fo r a sse s s e e co n t e n d ed t h a t i d e n t i c a l i s s u e h a d a r i s e n i n th e c a s e o f M / s H e e r a M o t i Agro I n d us t r i e s & M/s H ee r a Moti A g ro P ro d u c t s , in a s s e s s m e nt y e a r 2 0 0 7 - 0 8 , t h e a p p e a l o f t h e as s e s s e e i n w h i c h c a s e wa s d e c i d e d b y t he I . T. A . T. v i d e i t s o r d e r d a t e d 2 0 . 9 . 2 0 1 6 i n I TA N o s . 7 3 9 & 7 5 6 / C h d / 2 01 3 r es p e c t i v e l y , r e s t o r i n g t h e i s su e t o t h e fi l e of th e A . O . w i t h t h e d i r e c t i o ns t o r e d e c i d e th e i s s u e b y f o l l o w i ng t h e r e a s o n s for d e c i s i o n g i v e n b y t h e CI T( A ) f o r a s s e s sm e n t y e a r 2 0 0 3- 0 4 w h e r ei n i d e n t i c a l a d di t i on h a d b e e n d e l e t e d . Th e L d . c o u n s e l f or a s s e s s e e p o i n te d o u t t ha t i n t h e s a i d c a se i t w a s b r o u g h t t o t h e n o t i c e o f t he I . T. A . T. t h a t i n a s s e s sm e n t y ea r 2 0 0 3 -0 4 the entire b a l an c e outstanding in the name of sundry c r e d i t o r s h a d b ee n a d d e d b a ck w h i c h h a d b ee n d e l e t e d b y t h e L d . CI T( A ) n ot i n g t h at t h e s a i d a d d i t i o n w as no t t e n a bl e s i n c e t r a d i n g r es u l t s h a d o t h er w i s e b e e n a c c ept e d b y t h e A . O . f o r t h e i m pu g n e d y ea r a n d, t h e r e f o r e, i t d e f i e d l o gi c t o a d d b a c k e n ti r e b a l a n c e i n th e ac c o u n t . I t wa s al s o n o t e d t h a t m a n y o f t h e p a r t i e s w e r e h av i n g r u n n i n g a c co u n t p r i o r t o 1 . 4 . 2 0 0 2 a nd C I T( A ) , t h er e f o r e, h e l d t h a t b y a dd i n g b a ck e n t i r e b a l a n c e o f s u n d r y c r ed i t o rs t h e e n t i r e t r a di n g r e s u l ts of the a s s e s s ee would be abnormal. A c co rd i n g l y , t he L d . CI T( A ) a l l o w ed a s s e s s e e 's a p pe a l r e l a t i n g t o as s e s s m e n t y e a r 2 0 0 3 -0 4 bu t f o r t h e a s s e ss m e n t y e a r 2 0 07 - 0 8 f r e s h c r e d i t a dd i t i o ns w e r e f o un d t o b e i n o rd e r an d a d d i t i o n m a d e b y t h e A.O . w a s c o n f i rme d b y th e CI T( A ) . I t w a s p o i n t e d o u t f r om t h e o r d e r t h a t th e I . T. A . T. h e l d t h a t h a v i n g d e l e t e d ad d i t i on m a d e i n a s s e s sm e n t y e a r 2 0 0 3- 0 4 , t h e re 25 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 w a s n o r e a so n to c o n f i r m th e ad d i t i o n a l c r e d i t b a l a n c e i n t h e s u c ce e d i n g ye a r s i n ce t h es e pa r t i e s w e r e ha v i ng r u n n i ng a c c o u n t s a n d b y m a k i n g th e s e ad d i t i o n s i t w o ul d m a k e t he e n t i r e tr a d i n g r es u l t s a bn o r m a l . Th e I . T. A . T. i n th e l i g h t o f t h e s a m e r e st o r ed t h e i s s u e t o t he A . O . t o r e d ec i de i t i n t h e l i g h t o f t h e d e c i si o n g i v e n b y t h e C I T( A ) f o r a s s es sm e n t y e a r 2 0 0 3 - 0 4 . Th e r e l e v a n t f i nd i n g s of t h e I . T. A . T. a t p a r a 9 t o 9 . ( i i ) ar e a s u n d er :
"9. We have considered rival submissions. It is a c ase of search and it is no t ind ic ated if any m a t e r i a l wa s f o u n d d u r i n g t h e c o u r s e o f s e a r c h against the assessee to prove that assessee had b o g u s l i a b i l i t y s h o wn i n t h e b o o k s o f a c c o u n t o n account of purchase of material. The books of account including the ledger account we r e a l r e a d y i n p o s s e s s i o n o f t h e d e p a r t me n t a n d according to the assessee, all the materials purchased have been supported by purchase bills a n d p a y me n t s a r e e v i d e n c e d b y b a n k s t a t e me n t s . T h e A s s e s s i n g O f f i c e r h a s n o wh e r e me n t i o n e d i n t h e a s s e s s me n t o r d e r a s t o h o w m a n y p a r t i e s we e h a v i n g t r a d e b a l a n c e s f o r wh i c h a d d i t i o n h a s b e e n m a d e a n d e v e n n o s p e c i f i c a mo u n t o f e a c h p a r t y h a s b e e n me n t i o n e d . Theref ore, no s p e c i f i c f i n d i n g o f f ac t h a v e b e e n g i v e n a g a i n s t the assessee f or making the addition. The ld. CIT (Appeals ) held in the impugned order th at th e issue in assessment year under appeal i.e. 2007- 0 8 i s c o v e r e d b y h i s o r d e r f o r a s s e s s me n t y e a r 2003-04. The facts are identical as have been c o n s i d e r e d i n a s s e s s me n t y e a r 2 0 0 3 - 0 4 . T h e l d . C I T ( A p p e a l s ) i n a s s e s s me n t y e a r 2 0 0 3 - 0 4 d e l e t e d the entire addition because entire sundry creditors outstanding on end of the f inancial year cannot be addede. The ld. CIT(Appeals) noted t h a t t h e t r a d i n g r e s u l t s f o r a s s e s s me n t y e a r 2003-04 have been accepted by the Assessing Off icer theref ore, there is no logic to mak e addition of the entire balance in this account.
9 ( i ) T h e l d . C IT ( A p p e a l s ) a l s o n o t e d t h a t m a n y o f the parties are having running accounts f rom prior to 01.04.2002. The ld. CIT(Appeals) also h e l d t h a t i f a d d i t i o n o f t h i s n a t u r e i s c o n f i r me d , t h e t r a d i n g r e s u l t s o f t h e a s s e s s e e wo u l d b e abnormal. T he ld. counsel f or the assessee d u r i n g t h e c o u r s e o f a r g u me n t s s u b m i t t e d t h a t 26 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 t h e d e p a r t me n t a l a p p e a l f o r a s s e s s me n t y e a r 2003-04 had been dismissed by the Tribunal in group cases. When according to the ld.
CIT(Appeals), the issue is covered by his order f o r a s s e s s me n t y e a r 2 0 0 3 - 0 4 , t h e r e s h o u l d n o t b e an y reason to conf ir m the add ition ag ains t the a s s e s s e e i n a s s e s s me n t y e a r u n d e r a p p e a l , b e c a u s e t h e f ac t s a r e i d e n t i c a l . the assessee pleaded that purchases have been made f rom various parties and assessee has running a c c o u n t s wi t h t h e m. A l l e n t r i e s a r e s h o wn i n t h e b o o k s o f a c c o u n t wh i c h h a v e b e e n s e i z e d b y t h e d e p a r t me n t . The assessee has produced the c h a r t i n t h e P a p e r B o o k f r o m a s s e s s me n t y e a r 2002-03 to 2008-09 to show that these are r u n n i n g a c c o u n t s wi t h v a r i o u s p a r t i e s s i n c e l o n g . According to ld. counsel f or the assessee, even in s o me o f t h e c a s e s o f t h e g r o u p , wh o we r e t r a d e c r e d i t o r s i n a s s e s s me n t y e a r u n d e r a p p e a l , a r e assessed by the same Assessing Off icer, t h e r e f o r e , f ac t s s h o u l d h a v e b e e n v e r i f i e d f r o m their record available wi t h the Revenue D e p a r t me n t . I n a s s e s s me n t y e a r u n d e r a p p e a l also, trading results have been accepted by Assessing Off icer, theref ore, f or balance trading amount, the ld. CIT(Appeals) should not have c o n f i r me d t h e a d d i t i o n . T h e p a r t i e s h a v e r u n n i n g a c c o u n t s wi t h t h e a s s e s s e e a n d i f s i m i l a r a d d i t i o n i s m a d e , i t wo u l d g i v e e n t i r e t r a d i n g results of the assessee, to be abnormal. T h e r e f o r e , t h e l d . C IT ( A p p e a l s ) s h o u l d h a v e f o l l o we d t h e o r d e r f o r a s s e s s me n t y e a r 2 0 0 3 - 0 4 for the purpose of deleting the addition against the assessee. H o we v e r , l d . C I T ( A p p e a l s ) n o t e d that addition is limited to f resh additions only. This reason is also incorrect because ld. counsel f o r t h e a s s e s s e e d e mo n s t r a t e d t h a t e v e n i f t h e r e a r e s o me f r e s h c r e d i t o r s f r o m t h e s a me p a r t i e s appearing in the books of account of the assessee but these are running accounts f rom the earlier y e a r s , t h e r e f o r e , f o r d i f f e r e n c e o f t h e a mo u n t itself , no such addition should be made against the assessee. Since, no details have been given i n t h e a s s e s s me n t o r d e r a n d t h e c h a r t n o w f i l e d have not been considered by the authorities b e l o w a n d a l s o a c c o r d i n g t o t h e a s s e s s e e , wh e n no proper opportunity have been given by the A s s e s s i n g O f f i c e r , i t wo u l d b e r e a s o n a b l e a n d appropriate to restore this issue to the f ile of A s s e s s i n g O f f i c e r wi t h d i r e c t i o n t o r e - d e c i d e t h i s issue by giv ing reasonable suff icient o pportunity of being heard to the assessee.
9(ii) We, accordingly, set aside the orders of the authorities below and restore this issue to the 27 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 f i l e o f A s s e s s i n g O f f i c e r wi t h d i r e c t i o n t o r e - d e c i d e t h i s i s s u e b y f o l l o wi n g t h e r e a s o n s f o r d e c i s i o n g i v e n b y l d . C IT ( A p p e a l s ) f o r a s s e s s me n t year 2003-04 (supra) wh e r e b y a d d i t i o n o n identical issue have been deleted. The Assessing Off icer shall give reasonable suff icient opportunity of being heard to the assessee."
37. Th e L d . c o u n s e l f o r a s s e ss e e c ont e n d e d t ha t t h e f a c t s i n t h e p r e s en t c as e w e r e i d e nt i c a l t o t h a t i n t h e cas e o f M / s H e e r a M o t i A g r o P r o d u c t s an d co n s i d e r i ng t h e fi n d i n g s o f t h e I . T. A . T. i n th e s a i d c a s e t h e m a t t e r i n t h e pr e s e n t ca se also be r e s t or ed back to the A.O. in the light of the d i r e c t i o ns g i ve n b y t h e I . T. A . T. i n t h a t ca s e . Th e L d . D R di d n o t o b j e ct t o th e s a m e .
38. I n v i e w o f t h e s a m e , w e r e s t o r e th e i s s u e t o t h e A . O . t o d e c i d e a f r e s h i n a c c o r d a n ce w i t h t h e d i r e c t i o ns g i v e n b y t h e I . T. A . T. i n t h e ca s e o f M / s He e ra M o t i A g r o I n du s t r i e s a nd M / s H e e r a M o t i A g r o P r o du c t s ( su p r a ) .
39. Th e g r o u n d o f ap p e a l N o .6 , r a i sed b y t h e as s e s s ee a n d ground of a pp ea l no.(iv) of t he Revenue a re therefore a l l o w e d f o r s ta t i s t i c a l p ur p o s e s.
40. G r o u n d N o. 4 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"4. That the Worthy CIT (A) has erred in restricting the addition amounting to Rs.38,12,800/- out of addition of Rs.88,50,148/- made by the Assessing Officer on account of unexplained cash credit u/s 68 as per 10.1.1 of her order."
41. It was p o i nt e d o u t t h a t t h e R e ve n u e h a s a l s o ra i s e d g r o u n d o f a p p e al N o . i i a n d a l s o a n a d d i t i o n a l g r o u n d o n t h i s i s s ue a s u nd e r :
42. G r o u n d N o. i i ra i s e d b y t he R e v enu e r e a d s a s u n der : 28 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10 "(ii) Whether on the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs.50,37,348/-
made by the AO on account of seized documents as pages 1- 65 of Annexure-2 of Delta 2 and pages 1-54 of Annexure-7 of Delta 2?"
43. Th e a d d i t i o n a l g r o u n d r ai s e d by t h e R e v en u e v id e i ts l e t t e r d at e d 1 7. 04 . 2 0 1 8 r ea d s a s u n d e r :
" W h e th e r o n th e f ac ts an d i n th e c ir c u ms t an c e s o f th e c as e , th e C IT ( A ) e r re d in l a w wh i l e g iv i n g r e l ie f wi th o u t af f or d in g an o p p o r tu n i t y to th e A O f or e x ami n a t io n o f ad d i t i o n al e v i d e n c e p r o d u c ed d u r in g ap p e l l ate p r o c e e d in g s wh i c h we r e n o t f il e d b e f or e th e A O e ar l ie r an d wi th o u t i n v o k in g th e p r o v is i o n s o f R u l e 4 6A of th e In c o me T ax R u l e s , 1 9 62 . "
44. Th e i s s u e i n t he a b o v e g ro u n d s re l a t e s t o t h e ad di t i o n made on a c c ou n t of a s e i ze d document, admittedly reflecting cash t r a n s a c t i o ns of receipts a nd p a y m e nt u n d e r t a k en b y th e a s s e s s ee , w hi c h i n t h e a bs en c e o f a n y p l a u s i b l e e x p l ana t i o n a v ai l a b l e w e r e s u r re n d e r ed b y t h e a s s e s s e e to t h e e x t e n t of peak credit b ut w e re t r e a t e d e n t i r e l y a s u n e xp l a i n e d a n d t h e e n t i r e r e c e i p t s ad d e d t o t h e i n c o m e of t h e as s e s s e e . B e f o re t h e L d . CI T( A ) t he a s s e s se e f i l e d e x p l a n at i o n o f th e e nt r i e s r e f l e c t e d i n t h e d o c u m e n t a n d d u l y s u b s t an t i a t e d t h e s a me , c o n t e n d i n g t ha t m o s t o f them were b a nk entries r ef l ec t e d in the bo o k s . Th e L d . CI T( A ) , p a r t l y d e l e t e d t h e a ddi t i o n m a d e o n the b a s i s o f t h e e v i d e n ce f i l ed b y t h e a s s e s se e . A g g r i e ve d b y t h e s a m e b o t h t he a s se s s ee a n d t h e R e v e nu e h a v e c o m e u p i n ap p e al b e f o r e u s r a i s i n g t h e a b o ve g r o und s .
45. Th e R e v e n u e i n t h e a d di t i o n al gr o u n d h as c on t en d e d that the a s s e s se e has b ee n g ra n t e d relief wi th o u t t he a d d i t i o n al evidences p r od u ce d during as s e s s m e n t 29 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 p r o c e e d i ng s being c o n f r on t e d to the A. O . as per t he p r o v i s i o ns o f R ul e 4 6 A o f t h e I nc o m e Ta x R u l e s , 1 9 6 2 . The assessee wa s unable to co n tr o v e r t the fact that the a d d i t i o n al e v i de nc e s f i l ed w e r e n ot c o n f r o nt e d t o th e A . O .
46. I n t he l i g h t o f th e s a m e , w e c on s i d e r i t f i t to r e s t o re t h i s i s s u e b a c k t o t h e A . O . t o a d j u d i c a t e i t af r e s h a f t e r considering and verifying t h e a dd i t i o n a l e v i d e n c es f i l e d b y t h e a s s e ss e e . We m a y a d d t h a t t h e a s s e ss e e b e g i v e n d ue o p p o r t u n i t y o f he a r i n g i n t h i s r eg a r d .
47. A s s t a t e d i n t he e a r l i e r pa r t of o u r o r d e r, i d en t i c a l issue has ar i s en in I TA N o . 44 / C h d / 2 0 14 filed by the a s s e s s e e i n g r o un d N o . 4 o f t he sa i d a p p e a l be f o re u s . Th e i s s u e i n t h e s a i d a p p e a l i s a l s o re s t o r e d b a c k t o th e A . O . to b e a d j u d i c a t e d a f r e s h a ft e r c o ns i d e r i n g a n d v er i f y i n g the a d d i t i o n al e v i d en c e s filed by the a s s e s se e . Th e r e f o r e , ground No.4 of I TA N o . 4 4/ C h d / 2 0 1 4 and of I TA N o . 4 5 / C h d/ 2 0 1 4 a n d g r o u n d N o .( i i ) an d a dd i t i o na l g r o und raised by t he Revenue in its appeal in I TA N o . 1 0 8 / C hd / 2 0 14 a r e a l l o w e d f o r s t a t i s ti c a l pu r po s e s .
48. Th e a s s e s s e e h as r a i s e d a d d i t i on a l g r o u nd b e f or e us v i d e i ts l et t e r da t e d 1 0. 1 0 . 2 01 5 w h i c h w e r e r ev i s e d vi d e l e t t e r d at e d 2 3. 07 . 2 0 1 6 a nd r e a ds a s u n d er :
"1. That the Worthy Commissioner of Income Tax(Appeals) has erred in confirming the addition on various issues as per ground of appeal despite the fact that no incriminating evidence was found during the course of search conducted on 15.07.2008 by the department on account of various additions which have been challenged by the assessee."30 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
49. Th e s a m e w a s n ot p r e s se d b ef o r e u s a n d , t h e re f o re , t he s a m e i s di s m i s sed a s n o t p r e s s ed .
5 0 . Th e a p p e a l o f t h e a s s e s s e e i n I TA n o 44 & 45/Chd/14 i s t h e r ef o r e p ar t l y a l l o w ed f o r s t at i s t i c a l p u r p o se s.
51. W e n o w t a k e up t h e ap p e a l o f t h e R ev e n u e i n I T A N o . 1 0 8 / C hd / 2 01 4 .
52. G r o u n d N o. ( i ) r a i s e d b y t he R e v enu e r e a d s a s u n der :
"(i) "Whether on the facts and in the circumstances of the case, the CIT(A)has erred in deleting the addition of Rs.1,00,000/- made by the AO on account of deemed Income u/s 2(22)(e) of the IT. Act, 1961?"
53. In the a bo v e gr o u n d the R e v en u e has c h a l l en g e d d e l e t i o n o f a d di t i o n m a d e o n ac c o u n t o f d e e m ed d i v i d e nd u / s 2 ( 2 2 ) ( e) o f th e A c t o n a c c o un t o f l o a n s a n d a d v a n c es g i v e n t o S wa m i D e v i D a y al H i - t ec h E d u c a t i o n A ca d e m y . Th e A . O . h a d m a d e ad d i t i o n o f t h e a dv a n c e s m ad e b y M / s H e e ra M o t i H e al t h C ar e P r o d u c t L t d . i n w h i c h th e a s s ess e e w a s a b e n e f i c i al s h a r eho l d e r h o l di n g 1 0 .3 4 % s h a r e s of Sw a m i D e v i D a y a l H i - t e ch E d u c a t i o n A c a dem y i n w h i c h t he a s s e s s e e w a s a m e m be r ho l d i n g t ha t i t h ad s u b s t a n ti a l i nte r e s t i n i t s i n c e d o cu m e n t s s e i z e d d ur i n g th e c o u r s e o f s e ar c h s h o w ed t h a t t h e f u n ds o f t h e s o c i e t y h a d b e e n u t i l i z e d b y t h e members of the society an d th e i r family m em b e r s . Th e L d . CI T( A ) d e l e ted t h e i m p ug n e d a d d i t i o n s t a t i ng t h a t t he t r a n s a c t i o n w a s o u t s i d e t he s c o pe o f s e c t i on 2 ( 2 2) ( e ) o f t h e A c t s i n c e t h e as s e s s e e w a s o n l y a m e m b e r a nd w a s n o t h a v i n g s ub s t a n ti a l i n t e re s t i n t h e t r u s t . 31 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
54. D u r i n g t h e co u r se o f he a r i n g b e f or e u s t h e Ld . c ou n s el f o r a s s e ss e e p oi n t e d o u t t h a t i de n t i c a l i s s u e had a r i s e n i n the c a se of R os h a n L al J i nd a l wherein the CI T( A ) ha d d e l e t e d th e i d e nt i c a l a d di t i o n ma d e o n a c co u n t o f a m o u n ts a d v a n c e d t o s a me s o c i e t y i . e . t o S w a m i D e v i D a ya l H i - t e ch Education A c a de m y which w as upheld by t he I . T. A . T. s t a t i n g t h a t i t w a s n o t c o v e r e d u n d e r t h e p r o vi s i o n s of s e c t i o n 2 ( 22 ) ( e ) o f t h e A c t . O ur a t t e n t i o n w a s d ra w n t o t he r e l e v a n t f i nd i n gs o f t h e I . T. A . T. a t p a r a s 1 1 t o 1 3 o f t h e order as under:
" 1 1 . W e h av e h e ar d th e c o n te n ti o n s o f b o th th e p ar ti e s . T h e is s u e in h an d p e r t ai n s to ad d i t io n mad e o n ac c o u n t o f d e e me d d iv id e n d as p e r p r o v is i o n s o f s ec tio n 2 ( 2 2 ) ( e ) o f th e A c t. B e i n g a d e e mi n g p r o v is i o n , b r in g i n g to t a x s u ms wh i c h ar e n o t ac tu al l y i n t h e n atu r e o f in c o me b u t ar e o n l y d e e me d to b e s o , i t i s to b e s tr i c tl y i n te r p r e te d . S e c ti o n 2 ( 2 2 ) ( e ) o f th e A c t r e ad s as u n d e r :
"2(22)(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) 5 made after the 31st day of May, 1987 , 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 shareholder, to the extent to which the company in either case possesses accumulated profits."
1 2 . A r e ad i n g o f th e s e c ti o n in r e v e al s th a t an y s u m ad v an c e d b y a c o mp an y i n wh i c h a p e r s o n h o l d s v o ti n g r ig h ts o f 1 0 % o r mo r e to an o th e r c o n c e r n in wh i c h s u c h s h ar e h o l d er is a me mb e r o r p ar tn e r h av in g s u b s tan t i al in te r e s t, th e s u m s o ad v an c e d is tr e ate d as d e e me d d iv i d e n d .
S u b s tan t i al in te r e s t h as b e e n d e f in e d u n d e r th e s aid s e c ti o n to b e in g b e n ef ic i al e n ti tl e me n t to n o t l e s s th an 2 0 % o f th e i n c o me o f s u ch c o n c e r n . In th e 32 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 p r e s e n t c as e th e f ac t th a t th e as s e s s e h o l d s mo r e th an 1 0 % v o tin g r ig h ts in H e r r a M o ti H e al th C ar e P r o d u c t L td . & H e e r a M o t i S p ic y P v t. L td . , wh o h ad ad v an c e d th e i m p u g n e d su m, is n o t d is p u te d . W h at i s r e q u ir e d to b e s e e n is wh e th e r th e as s e s s e e was b e n ef ic i al l y e n ti t l e d to 2 0 % o r mo r e of th e in c o me o f S wa mi D e v i D ay al H i- te c h E d u c ati o n A c ad e my. I t i s n o t d is p u te d th a t S wa mi D e v i D ay al H i- te c h E d u c at i o n A c ad e my i s a c h ar i t ab l e tr u s t r e g i s te r e d u / s 1 2 AA of th e A c t. T h at th e as s e s s e e is a tr u s te e in th e s ai d tr u s t h a s al s o n o t b e e n d is p u te d an d th e f ac t th at th e r e ar e n o i n te r e s t o f an y me mb e r o f th e s ai d s o c ie ty i n th e T r u s t is al s o n o t d is p u te d . I n th e s ai d c ir c u ms t an c e s , we ar e l ef t wi th n o o p tio n b u t to ag r e e wi th t h e L d . C IT ( A pp e al s ) t h at s e c o n d l i mb o r r e q u ir e me n t o f s e c ti o n 2 ( 2 2 ) ( e ) o f th e as s e s s e e h av in g s u b s tan ti al i n te r e s t i n th e c o n c e r n to wh i c h l o an o r ad v an c e h as b e e n g iv e n h as n o t b e e n e s tab l i s h e d an d , th e r e f o r e, th e s a i d ad v an c e c an n o t b e tr e a te d as d e e me d d i v id e n d in th e h an d s o f th e as s e s s e e . T h e ar g u me n ts o f th e L d . D R th at th e d o c u me n ts s e iz e d d u r in g th e c o u r s e of s e ar c h s h o w th a t th e f und s h ad b e e n u til i z e d b y th e me mb e r s o f th e s o c ie ty , an d th e r ef o r e , as s e s s e e d e r iv e d p e r s o n al b e n ef i t i s o f n o c o n s e q u e n ce s in c e th e r e q u ir e me n t o f se c ti o n 2 ( 2 2 ) ( e ) is n o t wh e t h e r th e as s e s s e e h as ac tu al l y d e r i v e d an y p e r s o n al b e n e f it f r o m th e s aid c o n c e r n b u t is th a t t h e as s e s s e e i s b e n ef ic i al l y e n t i t l e d to n o t l e s s th an 2 0 % o f th e i n c o me o f th e s a i d c o n c e r n . T he wo r k " e n ti tl e d "
me an s h av i n g a l e g al r ig h t to s o me th i n g . S in c e s u c h l e g al r i g h t is ab s e n t i n t h e c as e o f th e p r e s e n t s o c i e ty, i n th e ab s e n c e o f s u c h l e g al r ig h t o f th e as s e s s e e in th e s a id s o c ie ty th e a mo u n t ad v an c e d c an n o t b e tr e ate d as d e e me d i n c o me as p e r s e c ti o n 2 ( 2 2 ) ( e ) of th e A c t. M o r e o v e r e ve n as p e r th e ar g u me n t o f th e R e v e n ue th e d o c u me n ts f oun d d u r in g s e ar c h o n l y e s tab l is h th a t th e as s e s s e e h as d e r iv e d b e n e f i t f r o m th e s ai d s o c ie t i e s an d n o t " s u b s tan t i al " b e n ef i t, as i s th e r e q u ir e me n t o f th e s e c ti o n .
1 3 . In v ie w o f th e a b o v e , we u p h o l d th e o r d e r o f th e L d . C IT ( A p p e al s ) d e l e tin g th e ad d i t i o n mad e o n ac c o u n t of d ee me d d iv i d e n d a mo u n ti n g to R s . 2 , 0 9 , 14 0 / - on ac c o u n t o f l o an s an d ad v an c e s g iv e n to s o c ie ti e s r e g is te r e d u / s 12 A of th e A c t.
55. Th e L d . D R w as u n a b l e t o p o i n t a n y d i s ti n g u i s h i n g f a c t s i n t h e s ai d c a s e .33 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
56. I n vi e w o f t he s a m e s i n c e i d e nt i c a l i s s ue h a s b e e n a d j u d i c a te d in the case of R os h a n Lal Ji n d al in I TA N o . 1 1 0 / C hd / 2 0 14 vide o r d er of the I . T. A . T. dated 1 4 . 2 . 2 0 1 7, t h e p r e s e n t i s s u e s ta n d s c o ve r e d b y t h e sa i d d e c i s i o n , f o l l o w i n g w h i c h w e u p h o l d t h e o r d e r of t h e C I T( A ) deleting the a dd i t i o n m ad e u /s 2 ( 2 2 ) ( e) of th e Act on a c c o u n t o f a d v an c e s m a d e o f R s. 1 , 0 0 , 0 0 0/ - t o Swa mi D e v i D ay al H i- te c h E d u c at i o n A c ad e my. G r o u n d o f a pp e a l N o .( i ) r a i s e d b y t h e Rev e n u e i s , t h e r ef or e , d i s mi s s e d .
57. Ground No . ( i i ) raised by t he Revenue has b e en a d j u d i c a te d b y u s a l o n g wi t h gr o u n d n o . 4 r a i se d b y t he a s s e s s e e i n i t s a p p e a l i n I TA No . 4 5 / C h d /1 4 , res t o r i n g t h e issue back to the A.O. for ad j u d i c a t i o n a f r es h after considering a nd v e r i f yi n g th e e v i d e n ce s fi l ed by t he a s s e s s e e b e f or e t h e C I T( A ) . Th i s g r o u n d o f a p p e a l t h e r e f o re s t a n d s a l l o w e d fo r s t a t i s t i c a l p u rp o s e s .
58. G r o u n d o f a p p e al N o . ( i i i ) r a i s e d b y t h e R ev e n u e r e a ds as under:
"(iii) "Whether on the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs.71,450/- which was made on repayment of loan to SBI?"
59. B r i e f f a c t s r e l a t i n g t o t h e i s s u e ar e t h a t t h e A . O . m a d e a d d i t i o n o f an am o u n t o f R s . 71 ,4 5 0 / - t o t h e i n co m e o f t h e a s s e s s e e o n f i nd i n g t ha t t he re p a y m e n t o f p e rs o n a l l o a n t a k e n b y t h e a s se s s e e f r o m S t a t e B a n k O f I n d i a, S a i R o a d , B a d d i i n c as h to t h i s e x t e nt h a d n o t b e e n r e f l ec te d i n t h e b o o k s o f t h e a ss e s s e e . N o de t a i l s w e r e f u r ni s he d b y t h e 34 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 a s s e s s e e d u r i n g a s s e s s m e nt p r o ce e d i n g s , n o r an y c a s h f l o w s t a t e m e n t f i l e d a n d , t h er e f o r e, t h e A . O. m a d e a d d i t i o n o f t h e i m p u g n e d su m t o t h e i n c om e o f t h e a s s e ss e e . D u r i n g a p p e l l a t e p r o c e ed i n g s t h e as s e s se e f i l e d a d e t a i l ed c a s h f l o w s t a t e m e n t r e f l ec ti n g r e p a ym e n t of t h e i m p ug n e d s u m , a f t er c o n s i d e r i n g w h i ch t h e CI T( A ) al l o w e d t h e a s s e s see ' s a p p e al o n t h i s co u n t and d e l e t e d t h e add i t i o n m ad e .
60. B e f o r e u s t he Ld . D R c o n t e n ded t h a t t h e a d di t i o n a l e v i d e n c e fu r n i s he d b y t h e a s se s se e b e f o r e th e L d. CI T( A ) i n t h e f o r m o f c a s h f l o w st a t e m en t w a s n o t c o n f ro nt e d t o t h e A . O . a nd , th e r e fo r e , t he CI T( A ) h a d e r re d i n a l l o w i n g re l i e f t o t h e a s s e s se e o n t h e b a s i s of t h i s c a s h f l o w s t a t e m e n t w h i c h wa s n ot i n a c c o r da n c e w i t h t h e p r o v i s i o ns o f Ru l e 4 6 A o f t he I n c om e Ta x R u l e s , 19 6 2 . Th e L d . D R c o n t e n d ed t h a t t h e i ss u e , th e r e f o r e , n e e d e d t o b e r e s t or e d ba c k t o t he A . O . a n d t h e r e aft e r b e a dj u d i c at ed .
61. Th e L d . c o u n s e l f o r a s s e s se e di d n o t o b j ec t t o t h e s a m e , n o r w as he a b l e t o c o nt r ov e r t t h e f a ct t h at t h e c a s h flow s ta t e m e n t was not c o n f ron t e d to the A .O . d u r i ng a p p e l l a t e p r o c eed i n g s .
62. I n v i e w o f t h e ab o v e , we c o ns i de r i t f i t t o re s t or e t h e i s s u e b a ck t o th e A . O . t o v e ri f y t h e c on t e n t s o f t h e ca s h flow s ta t e m e n t and t he r e a f te r a d j u d i ca t e th e issue in a c c o r d a n ce w i t h l a w . Th i s g r o u n d o f a p p e a l i s , t h e r e f o r e , a l l o w e d f o r s ta t i s t i c a l p ur p o s e s.
35 ITA Nos.144 to 47 & 108/Chd/2014ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
63. G r o u n d o f a p p ea l N o . ( i v ) has been dealt with in the a p p e a l o f t h e as s e s s e e i n I TA N o . 4 5 / C h d/ 2 0 1 4 a l o n g w i th g r o u n d N o . 6 r a i s e d , w h e r e i n t h e m a t t e r h a s b e e n r e s t o r ed b a c k t o t h e A . O. f o r f r e s h a d j ud i c a t i o n . Gr o u nd o f a p p e al N o . ( i v ) , t h e r ef o r e, s t a n d s a l l o w ed f o r s t a ti s t i c al p ur p o s e s .
I n ef f e c t t he a p pe a l o f t h e R ev e nu e i s p a r t l y a l l o w e d f o r s t a t i s t i c a l p u rp os e s .
6 4 . W e n o w t ak e u p t h e a p p ea l o f t h e a s s e ss e e i n I T A N o . 4 6 / C h d/ 2 0 14 .
65. G r o u n d N o s. 1 an d 2 r a i s e d b y t h e a s s e s se e r e ad s a s under:
"1. That the Worthy CIT (A) has also erred in dismissing the grounds of appeal pertaining to objection of assessee with regard to reference to the Special Auditor in terms of section 142 (2A).
2. That the Worthy CIT (A) has erred in not considering that the conditions for reference to the special audit have not been fulfilled and since the assessee had not been maintaining any personal books of accounts, no complexity was there for the purpose of referring the case to the special audit and, as such, the assessment having been completed beyond the limitation time deserves to be quashed."
66. Th e s a i d g r o u n ds w e r e n ot p r e s se d b e f o r e u s a nd t he s a m e a r e t h e r e for e d i s m i s s e d a s n o t p r e s se d .
67. G r o u n d N o. 3 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"3. That the Worthy CIT(A) has erred in confirming the addition of deemed dividend U/s 2(22)(e) amounting to Rs.3,75,078/-(inadvertently written as Rs.3,57,078/-) in respect of amount shown as alleged advance to the assessee in different Companies."
68. It was c om m o n ground that th e issue and facts r e l a t i n g t o t hi s g r o u n d w as i d e nt i c a l t o g r o u n d N o . 3 r a i s e d 36 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 b y t h e a s se s s e e i n i t s a pp e a l i n I TA N o . 4 4/ C h d /2 0 1 4 . S i n ce t h e i s s u e h as b ee n a d j u d i c at e d i n f a v o u r o f t he as s e s s e e a t paras 13 to 17 o f o u r o r d e r a b ov e i n I TA N o . 4 4 /C h d / 2 0 1 4 , t h e d e c i s i o n r e nd e r e d t he r e i n s ha l l a p pl y m ut a t i s m u t a n di s t o t h i s g r o u n d a l s o . Th i s g r o u nd o f a p p e a l r a i se d b y t h e a s s e s s e e i s , t he re f o r e , al l o w e d.
69. G r o u n d N o. 4 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"4. T h at th e W o r th y C IT ( A) h as erred in r e s tr i c ti n g th e ad d i t i o n a mo u n ti n g to R s . 4 , 6 1 , 81 8 / - on ac c o u n t o f p r o v is i o n o f s e c ti o n 4 0 ( a) ( i a) o f th e In c o me T ax A c t as p e r p ar a 8 . 2 o f h e r or d e r . "
70. It was c om m o n ground that th e facts and issue i n v o l v e d i n t h i s g r o u n d w a s i d e nt i c a l t o g r o u n d N o . 5 r a i s e d b y t h e a s se s s e e i n h i s a p p ea l i n I TA N o . 4 5 / C h d / 20 1 4 . S i n ce t h e i s s u e i n t h e s a i d c a s e h a s b e e n r e s t o r e d ba c k t o t h e A . O . f o r f r es h a dj u d i c a t i on , a t p a ra 3 2 o f o u r o r d e r a b o v e , i n t h e l i g h t o f t h e pl e a d i n g a nd e v i de n c e s f i l e d b y t he a s s e s s ee to the e f f ec t th a t s i nc e ta x e s have been p ai d by t he recipient of i n co m e n o d i s a l l o w a n c e was w arr a n t e d u / s 4 0 ( a ) ( i a) i n t h e c a s e o f t he a s s es s e e , t h e d e c i s i on r e n d e r e d t h e r e i n s h al l a p p l y m u t a t i s m ut a n d i s t o t h i s gro u n d a l s o . Th i s ground of appeal No.4 raised by the assessee i s, t h e r e f o r e, a l l o w ed f o r s t at i s t i c a l p u r p o s e s .
71. G r o u n d N o . 5 ( a) & ( b ) r a i s e d b y t h e a s s e s s e e r e ad s a s under:
"5 a). That the Worthy CIT (A) has erred in restricting addition of Rs.3,98,000/- out of addition of Rs.7,27,000/-(Being excess of payment of Rs.7,27,000/- over cash receipts of Rs.3,29,000/-) 37 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 made by the Officer on account of unexplained expenditure u/s 69 C as per para 9.2 of her order.
b). That the Worthy CIT(A) has also erred in directing the Assessing Officer to apply gross profit rate of 20.17% on cash receipts of Rs.3,29,000/- a n d m a k e addition of the said su m ( which works t o Rs.66,359/-) as per para 9.2. of her order."
72. I t wa s c o m m on gr o u n d t h a t th e fa c t s a n d i s su e i n t h i s g r o u n d w er e i d en t i c a l t o g r o u n d N o . 4 r a i se d b y th e a s s e s s ee i n a s s e s s e e 's a pp e a l i n I TA N o s .4 4 & 4 5 / C h d / 20 1 4 . S i n c e w e h a v e r e s to r ed t h e i s s u e b a ck t o t h e A . O . i n t h e a b o ve a p p e a l s a t p a ra 4 6 - 4 7 o f o u r o r de r a b o v e w i t h t he d i r e c ti o n t o v e r i f y t he e vi d e n c e s f i l e d b y t h e a ss e s s e e be f o r e t he C I T( A ) f o r e xp l a i n i n g t h e c a s h r ec e i p t s a n d t h er ea f t e r d e c i de t h e i s s u e , th e d ec i s i o n r e nd e r e d th e r e i n s h al l a p p ly m u t a t i s m u t a n d i s t o t hi s g r o u n d al s o . Thi s g r o u n d o f ap pe a l r a i se d by the a s s e s se e is, t h e r e f ore allowed for s t a t i s t i c al purposes.
73. G r o u n d N o s . 6, 7 a n d 8 r a i s e d b y t h e a s s e s s e e r ea d a s under:
"6. That the Worthy CIT(A) has also erred in directing the Assessing Officer to apply gross profit rate of 20.17% on cash receipts of Rs.9,50,636/-a n d m a k e addition of the said su m ( which works t o Rs.1,91,743/-) thereby restricting the addition to Rs.1,91,743/- out of addition of Rs.9,50,636/- made on account of unexplained amount u/s 69 as per para 10.3 of her order.
7. That the Worthy CIT (A) has erred in confirming the addition of Rs.24,432/- on account of certain transactions as per para 12.2 of her order.
8. That the Worthy CIT (A) has erred in confirming the addition of Rs. 81,640/- on account of certain documents as per para 13.2 of her order."38 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
74. Th e s e g r o u n d s we r e n o t p r e ss e d before us and hence a r e d i s m i s s e d as n o t p r e ss e d .
75. G r o u n d N o. 9 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
" 9 . T h at th e wo r t h y C IT ( A ) h as e r r e d in r e s tr i c ti n g th e ad d i t io n o f R s . 7 , 6 2 , 43 6 / - o ut o f ad d i ti o n of R s . 1 3 , 4 1 , 7 5 4 / - mad e o n ac c o u n t o f in c r e as e i n s u n d r y c r e d i to r s as p e r p ar a 1 5 . 2 o f h e r or d e r "
76. I t wa s c o m m on gr o u n d t h a t th e fa c t s a n d i s su e i n t h i s g r o u n d w er e i d en t i c a l t o g r o u n d N o . 6 r a i se d b y th e a s s e s s ee i n a s s e s se e ' s a pp e a l i n I TA N o . 45 / C h d / 2 0 14 . S i n c e w e h ave r e s t o r e d t he i s s ue b a c k t o t h e A O i n t h e a f o r e st a te d a p p e al a t p a r a s 3 8 & 3 9 o f o u r o r d e r ab o v e t h e d e c i s i on r e n d e r e d t h e r e i n s h a l l a p p l y m u t a t i s m u ta n d i s t o t h i s g ro u n d a l s o. Th i s g r o u n d o f a p p e a l r ai s e d b y t h e a s s e ss e e i s, t h e r e f ore a l l o w e d f o r s ta t i s t i c a l p ur p o s e s.
77. Th e a s s e s s e e h as r a i s e d a d d i t i on a l g r o u nd b e f or e us v i d e i t s l e t t er d at e d 1 0 . 1 0. 2 0 1 5 w h i c h r e ad s a s un d e r :
"1. That the Worthy Commissioner of Income Tax(Appeals) has erred in confirming the addition on account of sundry creditors as outstanding in the books of accounts despite the fact that no evidence was found during the course of search that the creditors were not existing
2. That the addition is otherwise not sustainable because of number of judgements in favour of assessee"
78. Th e s a m e w a s no t p r e s s ed b e f ore u s a n d, i s th er e f o r e d i s m i s s e d a s n ot p r e s s e d .
I n e f f ec t t h e a p pe a l o f t h e as s e ss e e i s p a r tl y al l o w e d f o r s t a ti s t i c al p ur p o s e s .
79. W e n o w t ak e up t h e a p pe a l o f t h e a s s es s e e i n I TA N o . 4 7 / C h d/ 2 0 14 .
39 ITA Nos.144 to 47 & 108/Chd/2014ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
80. G r o u n d N o .1 a nd 2 r a i s e d b y th e a s s e s s ee r e ad s a s under:
"1. That the Worthy CIT (A) has also erred in dismissing the grounds of appeal pertaining to objection of assessee with regard to reference to the Special Auditor in terms of section 142 (2A).
2. That the Worthy CIT (A) has erred in not considering that the conditions for reference to the special audit have not been fulfilled and since the assessee had not been maintaining any personal books of accounts, no complexity was there for the purpose of referring the case to the special audit and, as such, the assessment having been completed beyond the limitation time deserves to be quashed."
81. Th e s e g r o u n d s w e r e n o t p r e s s ed b e f o r e u s a nd t h e s a m e a r e d i s m i sse d a s n o t p r e s sed .
82. G r o u n d N o. 3 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"3. That the Worthy CIT(A) has erred in confirming the addition of deemed dividend U/s 2(22)(e) amounting to Rs.50,000 in respect of amount shown as alleged advance to the assessee in different Companies."
83. It was c om m o n ground that th e issue and facts r e l a t i n g t o t hi s g r o u n d w as i d e nt i c a l t o g r o u n d N o . 3 r a i s e d b y t h e a s se s s e e i n i t s a pp e a l i n I TA N o . 4 4/ C h d /2 0 1 4 . S i n ce t h e i s s u e h as b ee n a d j u d i c at e d i n f a v o u r o f t he as s e s s e e a t p a r a s 1 3 t o 1 7 o f o u r o r d e r a b ov e i n I TA No . 4 4/ C h d / 2 0 1 4 t h e d e c i s i o n r e nd e r e d t he r e i n s ha l l a p pl y m ut a t i s m u t a n di s t o t h i s g r o u n d a l s o . Th i s g r o u nd o f a p p e a l r a i se d b y t h e a s s e s s e e i s , t he re f o r e , al l o w e d.
84. G r o u n d N o. 4 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"4. That the Worthy CIT (A) has erred in confirming addition of Rs. 4,29,694/- on account of provision 40
(a)(ia) as per para 12.4.1 of her order."40 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10
85. It was c om m o n ground that th e facts and issue i n v o l v e d i n t h i s g r o u n d w a s i d e nt i c a l t o g r o u n d N o . 5 r a i s e d b y t h e a s se s s e e i n h i s a p p ea l i n I TA N o . 4 5 / C h d / 20 1 4 . S i n ce t h e i s s u e i n t h e s a i d c a s e h a s b e e n r e s t o r e d ba c k t o t h e A.O. fo r f r es h ad j u d i c a t i o n , at pa r a 3 2 of o u r o rd e r a b o ve , i n t h e l i g ht o f t h e p l e a d i ng an d e v i d e n ce s f i l e d b y t h e a s s e s s e e t o t h e ef f e c t t h a t s i nc e ta x e s h a v e b e e n pa i d b y t h e recipient of i n co m e n o d i s a l l o w a n c e was w arr a n t e d u / s 4 0 ( a ) ( i a) i n t h e c a s e o f t he a s s es s e e , t h e d e c i s i on r e n d e r e d t h e r e i n s h al l a p p l y m u t a t i s m ut a n d i s t o t h i s gro u n d a l s o . Th i s ground of appeal No.4 raised by the assessee i s, t h e r e f o r e, a l l o w ed f o r s t at i s t i c a l p u r p o s e s .
86. G r o u n d N o. 5 r a i se d b y t h e a s s e sse e r e a d s a s u n der :
"5. That the Worthy CIT (A) has erred in confirming the addition of Rs. 19,70,494/- in respect of sundry creditors as per para 7.4.2 of her order."
87. I t wa s c o m m on gr o u n d t h a t th e fa c t s a n d i s su e i n t h i s g r o u n d w er e i d en t i c a l t o g r o u n d N o . 6 r a i se d b y th e a s s e s s ee i n a s s e s se e ' s a pp e a l i n I TA N o . 45 / C h d / 2 0 14 . S i n c e w e h ave r e s t o r e d t he i s s ue b a c k t o t h e A O i n t h e a f o r e st a te d a p p e al a t p a r a s 3 8 & 3 9 o f o u r o r d e r ab o v e t h e d e c i s i on r e n d e r e d t h e r e i n s h a l l a p p l y m u t a t i s m u ta n d i s t o t h i s g ro u n d a l s o. Th i s g r o u n d o f a p p e a l r ai s e d b y t h e a s s e ss e e i s, t h e r e f ore a l l o w e d f o r s ta t i s t i c a l p ur p o s e s.
88. Th e a s s e s s e e h as r a i s e d a d d i t i on a l g r o u nd b e f or e us v i d e i t s l e t t er d at e d 1 0 . 1 0. 2 0 1 5 w h i c h r e ad s a s un d e r :
"1. That the Worthy Commissioner of Income Tax(Appeals) has erred in confirming the addition on account of sundry 41 ITA Nos.144 to 47 & 108/Chd/2014 ITA No.1171/Chd/2016 A.Ys.2006-07 to 2009-10 creditors as outstanding in the books of accounts despite the fact that no evidence was found during the course of search that the creditors were not existing
2. That the addition is otherwise not sustainable because of number of judgements in favour of assessee"
89. Th e s a m e w a s no t p r e s s ed b e f ore u s a n d, i s th er e f o r e d i s m i s s e d a s n ot p r e s s e d .
I n e f f ec t t h e a p pe a l o f t h e as s e ss e e i s p a r tl y al l o w e d f o r s t a ti s t i c al p ur p o s e s .
90. W e n o w t ak e up t h e a p pe a l o f t h e a s s es s e e i n I TA N o . 1 1 7 1 / Ch d / 20 1 6 .
91. Th e present ap p e a l has b e en filed a g a i n st t he c o n f i r m a ti o n o f p e n a l t y l ev i e d u/ s 2 7 1 ( 1 ) ( c ) o f th e A c t a nd t h e g r o u nd s r a i se d b y t h e a s s e sse e a r e a s u n d e r:
"1. That the Worthy C1T (A)-3, Gurgaon has erred in upholding penalty u/s 271(1)(c) levied by the Assessing Officer on the following amounts: -
i). Unexplained cash credit Rs.38,12,800/-
ii). Sundry Creditors Rs.9,52,812/-
2. That the Worthy CIT (A) has erred in not considering that the penalty u/s 271(1)(c) is not leviable as there is neither any concealment of Income nor furnishing of any inaccurate particulars of income.
3. That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off."
92. D u r i n g t h e c ou rs e o f h e a r i n g be fo r e u s , i t w a s po i n t e d o u t t h a t t h e p en a l t y h a d b e e n l e v i e d o n a c c ou n t o f t h e a d d i t i o n s m a d e o f u n e x p l a i n e d c a s h c r e di t s an d s u n d r y c r e d i t o r s. I t w a s p o i n t e d o u t t ha t b o t h t h e s e i ss u e s h a ve b e e n r a i s e d i n t h e a p p e al s f i l ed b y t h e a s s e sse e f o r th e impugned year.
42 ITA Nos.144 to 47 & 108/Chd/2014ITA No.1171/Chd/2016
A.Ys.2006-07 to 2009-10 W e f i n d t h a t b o th t h e s e i s s ue s ha v e b e e n r e st o r ed b a ck t o t h e A . O . f o r a d j u d i c a ti n g a f re s h v i d e o u r o rd e r i n I TA N o . 4 5 / C h d/ 2 0 1 4 i n gr o u n d N o . 4 & 6 a t p a r a s 46 & 47 & 3 8 - 3 9 . Th e r e f o re , t h e r e r e m a i ns n o b a s i s f o r l e v y o f p e n a l t y u / s 2 7 1 ( 1 ) ( c) o f t h e A c t a n d t h e p e n a l t y l e vi e d i s , t h e r e f o r e , deleted.
I n e f f e ct t h e a p pe a l o f th e a s s es se e i s a l l o w e d
93. I n t h e r es u l t ;
i) Th e appeals of the a s se s s e e in I TA N o s . 44 to 4 7 / C h d / 2 01 4 are p a rt l y al l o w e d f or s t ati s t i c a l purposes.
ii) Th e a p p e a l o f t he R e v e n u e i n I TA N o . 1 0 8 /C h d / 2 01 4 i s p a r t l y a l l o w e d f or s t a t i st i c a l p u r po s e s .
vi) Th e a p p e a l o f t he a s s e s s ee i n I TA N o . 1 1 7 1/ C h d /2 0 1 6 is allowed.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
संजय गग अ नपणा
ू ग#ता
ु
(SANJAY GARG ) (ANNAPURNA GUPTA)
याय क सद य/ Judicial Member लेखा सद य/ Accountant Member
)दनांक /Dated: 18th January, 2019
*रती*
आदे श क त*ल+प अ,े+षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय-त
ु / CIT
4. आयकर आय-त
ु (अपील)/ The CIT(A)
5. +वभागीय त न0ध, आयकर अपील#य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File
आदे शानसार
ु / By order,
सहायक पंजीकार/ Assistant Registrar