Income Tax Appellate Tribunal - Delhi
Ito, New Delhi vs Sh. Vikram Krishna, New Delhi on 23 August, 2018
ITA No. 481/Del/2016
ITO V Vikram Krishna
A Y 2010-11
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'G' NEW DELHI
BEFORE SH. S. K. YADAV, JUDICIAL MEMBER
AND
SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 481/DEL/2016 ( A.Y 2010-11)
ITO Vs Vikram Krishna
Ward-6(1), Room No. 380C, 12, School Lane
C. R. Building New Delhi
New Delhi AADPK4288P
(RESPONDENT)
(APPELLANT)
Appellant by Sh. S. L. Anuragi, Sr. DR
Respondent by Sh. Gagan Kumar, Adv & Mr.
Manoj Nagreth, CA
Date of Hearing 22.05.2018
Date of Pronouncement 23.08.2018
ORDER
PER PRASHANT MAHARISHI, JM
01 This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-2, New Delhi [ The Ld CIT - A] dated 30/10/2015 for Assessment Year 2010-11 wherein he has deleted the addition of Rs. 101,36,328/- made by the Assessing Officer as deemed dividend u/s 2(22)(e) of the Income Tax Act, on account of sum received by the assessee from M/s Charu Home Products Pvt. Ltd.
02 The Revenue has raised effectively two grounds of appeal which are as under:-
i. "On the facts and in the circumstances of the case and in law, the Page 1 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 Ld. CIT(A) has erred in deleting the addition of Rs.1,01,36,328/- on account of disallowances u/s 2(22)(e) of the Income Tax Act, 1961.
ii. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in admitting additional evidence in the shape of agreement to sell purportedly executed on 08.06.2009, simply because it was deliberately not filed by the assessee before the AO during the course of assessment proceedings. Nor any explanation, nay satisfactory explanation for not having done so had been filed.
03 The brief facts of the case are that the assessee is an individual deriving income from salary, house property, capital gain, and interest from bank. He is also a Director in one Company M/s Charu Home Products Pvt. Ltd. During the year assessee has received sums from above company where assessee is a director and also a shareholder holding 50 % shares.
04 The assessee filed its return of income on 30/7/2010 declaring income of Rs. 50,32,223/-. The assessment u/s 143(3) of the Act was passed on 25/3/2013 wherein the Ld. Assessing Officer made an addition of Rs. 10136328/- u/s 2(22) (e) of the Act. The assessee preferred appeal before the Ld. CIT (A) and deleted the same, and therefore, the Ld. A.O is in appeal before us.
05 The brief facts of the issue is that the assessee has made financial transactions with the M/s Charu Home Products Pvt. Ltd. as a loan of Rs. 1,81,54,741/- taken by the assessee. The assessee is holding 50% share in the above Company. The Ld. Assessing Officer dealt with the whole issue as under:-
"During the course of assessment proceedings in the case of M/s Charu Home Products. P) Ltd. for the A.Y 2010-1 1, it was noticed that the assessee has made following transaction with the above company during the financial year 2009-10 relevant to the Asst.Page 2 of 23 ITA No. 481/Del/2016
ITO V Vikram Krishna A Y 2010-11 Year 2010-11 as per the ledger account of the assessee in the Books of M/s Charu Home Products (P) Ltd.
Charu Home Products (P) Ltd. 12, School Lane New Delhi- 110001 PAN NO. AACCC3020H Vikram Krishna (Director) Ledger Account Date Particular Vch Debit Credit Type 8/6/200 To HDFC Bank Payme 35,00,000 A/c nt 0032320010421( Div of CHP) 11/6/20 To HDFC Bank Payme 10,24,241 09 A/c nt 32320008802 24/6/20 To HDFC Bank Payme 82,00,000 09 A/c nt 32320008802 To 4,00,000 HDFC Bank A/c 0032320010421( Div of CHP) 3/7/200 To HDFC Bank Payme 3,08,000 9 A/c nt 32320008802 21/7/20 S. L. Marwah & Payme 2,500 09 co. nt 22/7/20 To HDFC Bank Journal 46,50,000 09 A/c 0032320010421( Div of CHP) Page 3 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 27/7/20 To HDFC Bank Payme 70,000 09 A/c nt 0032320010421( Div of CHP) 1/8/200 To HDFC Bank Receipt 70,00,000 9 A/c 0032320010421( Div of CHP) 6/10/20 To HDFC Bank Receipt 27,22,000 09 A/c 0032320010421( Div of CHP) 30/3/20 To HDFC Bank Receipt 54,00,000 10 A/c 32320008802 By Receipt 24,00,000 Kotak A/c No. 01832001000029 6 31/3/20 By Director's Journal 2,50,000 10 remuneration By Receipt Varanasi office 3,95,500 cash book 1,81,54,7 1,81,67,5 41 00 To Closing 12,759 Balance From the above transaction, it is seen that the assessee has received an amount of Rs. 1,81,54,741/- from the period 08-06-09 to 27-07-09 from M/s Charu Home Products (P) Ltd. in which the assessee is a Director and is holding 50% of its share. If we reduce an amount of Rs 2,500/- on account of M/s J. L. Marwah & Co. the assessee has received an' amount of Rs 1,81,52.241/- directly Page 4 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 from M/s Charu Home Products (P) Ltd. from the period 08- 06/2009 to 27/7/2009. As per the Balance Sheet of M/s Charu Home Products (P) Ltd. this company has opening Reserve & Surplus as on 01-04-2009 of Rs. 1,01,36,328/-
Therefore, during the course of assessment proceedings, the assessee was asked to explain the applicability of section 2(22) (e) on the amount received from M/s Charu Home Products (P) Ltd. In response to the above, the assessee's counsel vide his letter dated 27- 2-2013 has merely replied that there is no implication of deemed dividend during the year in the -and of the Director.
The reply of the assessee is considered which appears to be a very general and cannot be I accepted.
As per the provisions of section 2(22)(e), dividend" includes-
(a) ....
(b) ....
(c )
(d) ....
(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) 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 Page 5 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 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;
but "dividend" does not include-
.......................................
(ii) any advance or loan made to, a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial pan of the business of the company;
From the ledger accounts of the assessee in the Books of M/s Charu Home Products Pvt. Ltd, it is seen that there was no opening debit or credit balance in these accounts and fresh amounts were received by the assessee on dates mentioned therein as shown above. Therefore, these amounts are definitely in the nature of loans or advances.
The balance sheet, profit & loss a/c. tax audit report and the shareholding pattern of the above mentioned Company, M/s Charu Home Products (P) Ltd. in which the assessee's Director we have heard both the parties and perused the material available on record perused. The following facts emerged from the Financial statements of M/s Charu Home Products (P) Ltd.
The business of the company. M/s Charu Home Products (P) Ltd as shown in the tax audit report is "Manufacturing of garments / import of textile machinery".
Page 6 of 23 ITA No. 481/Del/2016ITO V Vikram Krishna A Y 2010-11 The shareholding pattern of the company. M/'s Charu Home Products (P) Ltd shows that out of total 10000 shares of Rs. 10 each (total value Rs. 1.00,000), the assessee is holding 50% shares of the company and the balance 50% shares are held by his wife, Smt. Priya Krishna.
As per the balance sheet of M/s Charu Home Products (P) Ltd. the opening Reserves and Surplus are Rs. 1,01,36,328/-. Regarding whether the payer company i..e M/s Charu Home Products (P) Ltd. is covered by exception contained in Section 2(22)(e) (ii) i.e. whether where lending of money is a substantial part of business, a cursory perusal of the balance sheet of the above company will also reveal that the company's principal business is not granting of loans and advances but as stated earlier manufacturing of garments / import of textile machinery.
It is, therefore, seen that the assessee is a shareholder having a stake of more than 10 per cent in the payer company M/s. Charu Home Products (P) Ltd. and the payer company is not covered by any of the exceptions in section 2(22)(e). The assessee also could not give proper If reply as to how the provisions of section 2(22)(e) were not applicable in his case. Nature of receipt was also not stated by the assessee. It is seen that any payment by the Company by way of advance or loan is covered under the provisions of Section 2(22)(e) .
The use of words "any payment" in the beginning of section 2(22)(e) in the context of "advance or loan" signifies that each of the payments made when the payee is not already a creditor constitutes advance, h only when the payee is a creditor of die payer that the payment can be constructed as repayment of the Page 7 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 debit not falling in the category of payment by way of advance or loan.
The amount of Rs. 1,81,52,241/- paid by M/s Charu Home Products (P) Ltd. and received by the assessee during the period 08-06-2009 to 27-07-2009 is, therefore, squarely covered by the section of 2(22)(e). However, considering that the accumulated profit of the company is Rs. 1,01,36,328/- only I hold that the deemed dividend of Rs. 1.01,36.328/- is assessible in the hands of the assessee u/s 2(22)(e) of the Income Tax Act as its income for AY 2010-11.
(Addition of Rs.1,01,36,328/-)"
06 The Ld. CIT(A) deleted the above addition vide Para No. 3.7 of his order which is as under :-
"3.7. Findings
a) 1 have gone through the facts of the case as given in the assessment order, the remand reports of the A.O. as well as the appellant's submissions including the rejoinders to the A.O's reports. The A.O. is of the view that the money received by the appellant from M/s.
Charu Home Products Pvt. Ltd., a company in which the appellant was director and having substantial interest, falls within the definition of deemed dividend under section 2 (22) (e) of the I.T. Act and that there is no justification for admission of the additional evidence submitted by the appellant under rule 46A during appellate proceedings, as nothing prevented the Page 8 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 appellant from producing the same at the assessment stage/ However, it is observed that vide letter dated 27.02.2013, the appellant's AR informed the Assessing Officer that there was no implication of deemed dividend as per the provisions of section 2 (22) (e) in the appellant's case during the year. This was done in response to query dated 22.02.2013 of the Assessing Officer, who asked the appellant's AR to explain the applicability of the section in respect of the amount received by the appellant from M/s. Charu Home Products Pvt. Ltd.
b) Subsequent to this reply dated 27.02.2013 of the appellant, no further query on the issue was raised by the A.O., before finalisation of the impugned assessment. Accordingly, 1 am of the view that the appellant's case falls under sub-rule(l) (d) of rule 46A since the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to the grounds of appeal. The AR of the appellant has placed reliance on judgements of Hon'ble Courts to support his case for admission of additional evidence. Hon'ble 1TAT, Bench D, New Delhi, have held in the case of ACIT Vs. Shri Joginder Singh in ITA No. 2942 (Del) of 2011, that powers of first appellate authority are co-terminus with those of the assessing officer, and that it is incumbent on him to exercise the same if the facts and circumstances justify. Further, Hon'ble Delhi High Court in the case of CIT vs. Virgin Page 9 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 Securities Credit P. Ltd. (2011) 332 ITR 396 (Del) have held that evidence which is crucial in disposing a case can be admitted. Since the documents filed by the appellant as additional evidences are crucial in nature and go to the root of the matter, in order to adjudicate the issues involved in an effective manner, and in the interest of natural justice, and also because an opportunity has been provided to the AO to examine and comment on them the same need to be admitted and considered. Therefore, the documents filed as additional evidence in the course of appeal proceedings are admitted for consideration and adjudication of the issues.
c) Coming to the documents submitted by the appellant as additional evidence, the averment of the appellant is that he had entered into an agreement to sell property number 41, Sector-15, Noida dated 8th June, 2009 with M/s. Charu Home Products Pvt. Ltd. and it was in pursuance of this agreement that payments aggregating to Rs.1,81,52,241/- were received by the appellant from the Company as follows:
Date Receipt by the
appellant
8/6/2009 35,00,000/-
11/6/2009 10,24,241/-
24/6/2009 82,00,000/-
4,00,000
3/7/2009 3,08,000/-
22/7/2009 46,50,000/-
27/7/2009 70,000
Total 1,81,52,241/-
Page 10 of 23
ITA No. 481/Del/2016
ITO V Vikram Krishna
A Y 2010-11
d) It has been further submitted by the appellant
during the appellate proceedings that since the purchaser company was not able to make further arrangement of Rs. 6.1 crores of funds for the property, which had been agreed to be sold for Rs. 8 crores to M/s. Charu Home Products Pvt. Ltd., the appellant, on 01.08.2009, entered into a deed for cancellation of the agreement dated 08.06.2009 to sell. Thereafter, the amount of Rs.l,81,52,241/- received by the appellant from M/s. Charu Home Products Pvt. Ltd. upto 27.07.2009, was returned in the following manner:-
Date Payment by the
appellant
01/08/2009 70,00,000
06/10/2009 27,22,000
03/03/2010 54,00,000
24,00,000
31/03/2010 2,50,000
(JV) 3,95,500
Total 1,81,67,500
e) The Assessing Officer, apart from opposing the
admission of additional evidence, has raised doubts about the veracity of the two agreements firstly, for the reason that no date is stated to have been mentioned at the backs of the photocopies of the two agreements discussed above. However, the appellant in his rejoinder Page 11 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 has clarified that at the time of submitting the photocopies of the agreements, the zerox copies of their back portions were inadvertently not filed and the same have subsequently been produced, duly certified to be true copies by the appellant. Similarly, the objections of the Assessing Officer about the signatures on the two agreements to have been made with the same ink, the names of the witnesses being the same, the fathers' names and addresses of the witnesses not having been mentioned on the agreements, have been countered by the appellant by stating that the complete details of the witnesses including their fathers' names and addresses were furnished later on and it was open to the A.O. to make enquiries about them and also that it is habitual for a person to use the same pen/ink while writing. On verification of the copies of the back pages of the two agreements, alongwith the original documents, which were called for by me u/s 250 (4) of the Act, it is found that the agreements have been signed on stamp papers bearing dates 2nd June, 2009 & 27th July, 2009, and hence the A.O. in the absence of any evidence to the contrary, cannot controvert dates of signing of the agreements i.e., 9th June, 2009 and 1st August, 2009 respectively, merely on the basis of unsubstantiated suspicions.
f) It has been claimed by the appellant before me that as per the agreement dated 8th June, 2009, he undertook to sell his property bearing number 41, Sector-15, Noida to Page 12 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 the company M/s. Charu Home Products Pvt. Ltd., in pursuance of which a total of Rs. 1,81,52,241/- was paid by the company to the appellant between 8lh June, 2009 and 27lh July, 2009 but due to the inability of the company to arrange further funds for the transaction (to the tune of Rs.6.1 crores), the deal for the sale of the property was cancelled vide agreement dated lsl August, 2009 and the advance of Rs. 1,81,52,241/- so received wars returned to the company by March, 2010. In fact the schedule of repayment given above reveals that major part of the advance was returned within a few days of cancellation of the agreement to sell (Rs. 70 lacs by 01.08.2009, total Rs.97.22 lacs by 06.10.2009 and the entire amount by the end of the financial year 2009-10). It has been explained by the appellant's AR that there was no clause in the agreement dated lsl August, 2009 (cancelling the agreement to sell the property) for repayment of the advance of Rs. 1.81 crores within a given time frame and that in any case, the said agreement provided for reversion to the original legal positions., thereby giving the company a right in the property in question in case the entire amount was not returned by the appellant and was, therefore, in no way inimical to the interest of M/s. Charu Home Products Pvt. Ltd. This explanation of the appellant appears to be feasible and hence the argument taken by the Assessing Officer regarding the alleged delay in repayment of the advance is not tenable.
Page 13 of 23 ITA No. 481/Del/2016ITO V Vikram Krishna A Y 2010-11
g) The A.O., during the remand proceedings, has recorded the statement of the appellant and in the remand report has stated that the appellant could not explain during the course of recording of his statement as to what efforts were made by him in his capacity as director of the company to arrange funds from the bank, to obtain permission from authorities to convert the lease hold property into freehold property or to clear the dues in respect of the property. It has been explained by the appellant that negotiations with banks for procuring loan against the property were verbal negotiations and that necessary follow-up for converting the lease hold property into freehold and for clearing the dues would have been taken but since balance funds to the tune of Rs.6.1 crores could not be arranged by M/s. Charu Home Products Pvt. Ltd., the agreement to sell the property to the company was cancelled, rendering any further efforts in the direction to be unnecessary. In order to attract the provisions of section 2 (22) (e) i.e. if a sum received by a shareholder from a company in which he has substantial interest is to be treated as deemed dividend, the sum so received should have been in the nature of loan or advance, the shareholder must have substantial interest (more than 20% shareholding in the company) and the company giving the loan/advance must have accumulated reserves/surplus. In fact, the loan given by the company is to be treated as deemed dividend only to the extent of accumulated reserves/surplus. It is found that the amount of Rs. 1,81,52,241 /- was received by the appellant from M/s. Charu Home Products Pvt. Ltd. in Page 14 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 pursuance of the agreement to sell to the company a property belonging to the appellant i.e. out of business/commercial expediency and therefore, it does not fall within the meaning of loan/advance as used in that section, since it was to be in consideration for the property proposed to be sold by the appellant. Therefore, its treatment by the A.O. as deemed dividend u/s 2 (22)
(e) was, in my opinion, not justified. In view of the foregoing discussion, the addition to income made by the Assessing Officer u/s 2 (22) (e) is directed to be deleted and grounds nos. 2 to 5 of the appeal are allowed."
07 The Ld. Departmental Representative submitted that the assessee has obtained loan from the above Company wherein he is a Director and having the substantial interest. Before the Assessing Officer the assessee did not submit any explanation about the loan, however, before the Ld. CIT(A) assessee submitted additional evidences which were admitted by the Ld. CIT(A) erroneously. He further submitted that explanation given by the assessee before the Ld. CIT (A) that the above transactions were the business advances is devoid of any merit. He submitted that agreement to sell the property at Noida with the Company is a sham document. He stated that property itself is a leasehold property and it needs some permission before transfer/ sales. He stated that the explanation given by the assessee that the transaction was subsequently cancelled as the purchaser i.e. M/s Charu Home Products Pvt. Ltd. could not get the balance 6.1 crore of the agreed sell consideration does not show any justification. He Page 15 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 stated that the assessee entered into Agreement to sell on 8 June 2009 for Rs. 8 Crores and immediately on 1/8/2009, agreement was cancelled. Assessee also did not repay the sum to the company back immediately but only on 30 March of FY. This itself shows that the whole transaction cancelled within one and half month for a property that the transaction is sham. He further stated that above agreement was made merely for the purposes of justification of loan given to the assessee by the Company. He stated that even otherwise for a property of Rs. 8 Crores. The advances were given by the assessee of this small amount also shows that the whole transaction is not proper and the assessee has merely created the Agreement to Sell and subsequent cancellation for the purposes of avoiding deemed dividend in the hands of the assessee. He, therefore, submitted that the whole transaction entered into by the assessee shows that the assessee has received advances from the above Company. He further stated that during the remand proceedings the assessee was summoned. The assessee could not explain that what effort was made by the Company, as he being the Director, to arrange for the balance funds. He, therefore, submitted that the amount of loan was given by the Company to the assessee who is a substantial shareholder and, therefore, is rightly taxed by the A.O as deemed dividend. The Ld. CIT (A) has deleted the addition without any reasons. He submitted that the Ld. CIT (A) has never examined the fact that whether the property was really agreed for sale. He further stated that copy of the agreements was also not placed before the Co-ordinate Bench. He referred to the statement of the assessee dated 20/2/2015 wherein in Question No. 7, no evidence could be produced such as the name of the Bank or from whom the Company was arranging further funds. He further referred to Question No. 9, with respect Page 16 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 to the permission of transfer of leasehold property as well as the property, electricity and water tax bills. He further stated that no funds were forfeited by the assessee from the Company despite cancelation of such a huge transaction. There is no evidence whether the property was required by the company or not or assessee was in need to sale it or not. No evidence was placed whether the company purchased some other property or assessee sold the property to somebody else. Therefore, he submitted that ld CIT (A) has allowed the submission of the assessee without probing. He, therefore, submitted that the order of the Ld. CIT (A) does not deserve to be held.
08 The Ld. Authorized Representative reiterated the submission made before the Ld. CIT(A) He further submitted a paper book wherein Synopsis of the facts were also placed. He further submitted that the advances were given by the Company to the assessee for the purpose of business for purchase of property. Therefore, same are business advances and cannot be taxed as deemed dividend. He further placed heavy reliance on the decision of Hon'ble Madhya Pradesh High Court in 46 Taxman.com 122 and decision of the Coordinate Bench in ITA No. 274/Del/2016 wherein on identical facts and circumstances, it was claimed that the issue is squarely cove red in favour of the assessee.
09 In rejoinder, the Ld. Departmental Representative vehemently relied upon the decision of the Hon'ble Delhi High Court in CIT vs. Sunil Chopra 12 Taxman.com 496 to show that the order of the Ld. CIT (A) is for us. He further relied upon the decision of Hon'ble Delhi High Court in case of Prasidhi Leasing Ltd. in 403 ITR 129. 10 We have carefully considered the rival contentions and perused the order of the Lower Authorities. The assessee has received sums from M/s Charu Home Products Pvt. Ltd. from 8/6/2009 to Page 17 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 27/7/2009 to the extent of Rs. 18154741/- as the assessee is holding more than 50% shares and the Company has reserve and surpluses as on 1/4/2009 of Rs. 10136328/-, The Ld. Assessing Officer issued show cause notice to the assessee that why the above amount should not be taxed u/s 2(22)(e) of the act as deemed dividend. Before the A.O the assessee did not submit that the above transaction is a business transaction and, therefore, the Ld. A.O taxed the above sum as deemed dividend. Before the Ld. CIT (A) , the assessee submitted one agreement to sale dated 8/6/2009 and another cancellation deed of the same agreement dated 1/8/2009 for a property owned by the assessee to state that the above transaction is a business transaction and the sum is business advance, hence provision of section 2(22)(e) does not apply. It was stated that sum has been received by the assessee in terms of Agreement to sell dated 8th June 2009 between the assessee and the Company for purchase of property at 41, Sector 15, Noida. Such Agreement to sell dated 8th June 2009 for an agreed sale consideration of Rs. 8 crores. On 8/6/2009, the assessee entered into a deed of cancellation stating that buyer could not arrange Rs. 6.1 Crores for purchase of the property and hence the Agreement to sell original entered between the assessee and the Company stood cancelled. The assessee stated that the above sum of advance of Rs. 1.81 Crores is, therefore, a business advance to which the provisions of deemed dividend does not apply. During the course of remand proceedings, the assessee was summoned and asked that the property was a leasehold property and was to be used for the development. The Company could not raise the funds from the banks, which resulted into cancellation of the agreements. The assessee could not explain being the Director that which bank was approached and what efforts were made.
Page 18 of 23 ITA No. 481/Del/2016ITO V Vikram Krishna A Y 2010-11 Even the assessee himself could not show which bank was approached. No documentary evidences could be produced before the A.O. Further, the property was leasehold property what efforts were made by the assessee Director to sell the property and transfer lease rights; he submitted that as the property could not be sold he did not do and efforts for lease. On many other questions, he expressed his ignorance about the efforts, bank approached, etc. The assessee was also asked that the money was received by him from the Company and cancellation deed was entered into on 1/8/2009 why payments could not be returned by the assessee up to 31/3/2010 completely. To this, the assessee merely stated that 96 lakhs were paid back in the months of August and October 2009 and the balance sum was paid on 30th March 2010 and 31st March 2010. The Agreement clause did not also have any forfeiture clause and further despite having the right of enforcement, the assessee did not make any effort. On analysis of the loan transaction between the assessee and the company, from the copy of the account at Page No. 2 of the Assessment Order it is apparent that assessee started receiving loans from the company from 8/6/2009 from the Company. The assessee tried to justify that there was an agreement to sell the property to the Company. The moment, the assessee repaid the sum in part there was a Deed of Cancellation of Agreement to Sale. It is apparent that the assessee also received on 3/7/2009 a sum of Rs. 308000 and on 27/7/2009 a sum of Rs. 70,000/- only. It is also interesting to note that on 22/7/2009 the assessee was paid 46.50 lacs by the Company and on 27/7/2009 assessee was also paid Rs. 70,000/- and within 4 days the Company came to know that it is not in a position to raise the further sum of Rs. 6.1 Crores. No evidence or explanation is forthcoming on this point Page 19 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 from assessee. The repayment of the sum was also made on 30/3/2010 of Rs. 78 lacs after 8 months of the cancellation deed, which should have been otherwise repaid immediately. There is no claim of interest by the company or any efforts to recover the above sum from the director. Not all these facts inspire any confidence that Agreement to sell, subsequent cancellation entered into within merely one, and half months by the assessee and the Company is a business transaction. The LD AO in remand report has specifically stated that the documents produced shows lack of genuineness. It is also apparent that there is no whisper before the Assessing Officer about any such transaction of the Agreement to sell by the assessee. These entire documents have come as additional evidence before the CIT (A), which were examined by the dl AO and raised serious doubt after examining the assessee on oath. It is also interesting to note that the deed of cancellation was made on stamp paper dated 27th July 2009 where as on 22nd July 2009, the assessee was paid 46.50 lacs and even on 27th July 2009, the assessee was made paid 70,000/- towards the purchase of the property. It is surprising that on the one side on the same date, the assessee was paid advance for the purchase of property and on the same date, the Agreement to sell is being cancelled. The assessee being a Director of the Company was also not aware that how Rs. 8 Crore could be arranged by the Company for the payment of above land. The assessee could not show what efforts were made by the Company and which bankers were approached for the loan. Therefore, in view of the above peculiar facts it is apparent that Agreement to Sell dated 8/6/2009 and cancellation of such deed by Agreement dated 1/8/2009 for the purchase of property is merely cover up and a camouflage for giving loan to the assessee by the above Company to avoid contravention of the provisions of Page 20 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 Section 2(220(e) of the Act. Assessee also failed to give the adequate evidence and cogent, reliable, and credible evidences about the transaction. The ld. CIT (A) has completely brushed aside finding of the A.O in remand report and the statement of the assessee and further has not applied his mind to find out the true nature of the transaction.
11 Further several decisions were relied upon by the Ld. AR, which are not applicable to the facts of the case. The decision in the case of ITA No. 274/Del/2016 dated 29/11/2017 relied upon by the Ld. AR ahs distinguishing facts. In that particular case, it was noted by the Coordinate Bench that in that case, the assessee Director was providing advances to the Company and has credit balance. The post dates cheques were also issued at the time of execution of the agreement itself where as in the present case, there is no such fact existing. In the present case, there is a doubt on the substance of the agreements itself. The statement recorded of the assessee also shows that there is no information coming on the nature of transaction itself. Further, the LD A.O has raised serious doubt about genuineness of the documents. Therefore, it is apparent that the facts of the case are more similar to the facts before the Hon'ble Delhi High Court in the case of CIT (A) Vs. Sunil Chopra (supra).
12 The Board circular and the line of reasoning adopted by the various honourable High Courts undoubtedly indicate that the trading transactions or advances would fall outside the mischief of sums that are to be treated as deemed dividends. To this extent, there can be no dispute. Nevertheless, as to whether amounts advanced by a company to assessee in which the public does not have any substantial shareholding or in which the public is not interested to a shareholder, to an entity or individual holding Page 21 of 23 ITA No. 481/Del/2016 ITO V Vikram Krishna A Y 2010-11 shares in excess of 10 per cent amounts to a trading transaction or falls within the aspect and, therefore, deemed commercial, there can be no deemed dividend income in the hands of the receiver of the sum. The revenue has to conduct a fact-based inquiry each time such contention is urged by the assessee. These facts were analyzed meticulously by the Assessing Officer were completely overlooked by the ld CIT (A) who virtually negated findings recorded with respect to the applicability of section 2(22)(e) of the act. All indications were that the assessee used money for its own purposes as it did by advancing substantial amounts enjoying the profits of the company. In view of above facts, we reverse the finding of the ld CIT (A) and restore the order of the ld AO. Accordingly, both the grounds of appeal of revenue are allowed. 13 Appeal of revenues is allowed.
Order pronounced in the Open Court on 23.08.2018.
Sd/- -Sd/-
(S. K. YADAV) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 23/08/2018
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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