ACIT Vs Shri Anumod Sharma (ITAT Delhi)
Analysis of the facts of the case referred by the AO and facts of the case of the assessee, it is quite evident that the facts of the referred cases in the impugned order are altogether different from the facts of the assessee, keeping in view of the fact that the assessee has never taken any loan during the financial year under consideration from M/s Apra Auto (India) Private Limited and also did not have any debit balance in the name of the assessee in the books of account of the said company.
In nutshell, the assessee has also not received any advance in the nature of loan or advances as contemplated in the section 2(22)(e) of the Income tax Act, 1961 but received advance against sale of commercial space developed by the assessee on his own land in collaboration with M/s Unitech Limited as per Buyer’s agreement. We find that provisions of section 2(22)(e) of the Income tax Act, 1961 are not applicable in case of the assessee as the assessee has received advance of Rs.5,62,00,000/-from the said company against sale of commercial space in Signature Tower – II, Sector – 15, Gurgaon, Haryana. Since, the said receipts of advance of Rs.5,62,00,000/- against sale of commercial space is not a receipt in the nature of loan or advance as contemplated in section 2(22)(e) of the Income tax Act, 1961 which attracts the provisions of in that section as the said advance is in the nature of business advance which did not fall within the ambit of provisions of section 2(22)(e) of the Income tax Act, 1961.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal has been filed by the revenue against the order of ld. CIT (A)-XXVI, New Delhi dated 12.10.2015.
2. The only one ground raised in this appeal reads as under:
“1. On the facts and in the circumstances of the case, the ld. CIT (A) has erred in law in deleting the additions of Rs.10,57,01,194/- made u/s 2(22)(e) of the I.T. Act on account of deemed dividend.”
3. The facts have been taken from the order of the ld. CIT (A), the record of the revenue and the paper book filed. The AO, in the assessment order, has highlighted the fact that the assessee was holding 86.67% shares in M/s Apra Auto India P. Ltd and had been in receipt of amount running into Rs.10.57 crores from the account of M/s Apra auto India P. Ltd. Keeping in view the fact, that the said company that is M/s. Apa Auto India p. Ltd. was also having accumulated profits of Rs. 21.65 crore, the amount so received by the assessee has been treated as deemed dividend as per the Section 2(22)(e) of the Income Tax Act, 1961.
4. The assessee claimed before the AO that the amount received from M/s Apra Auto India Pvt. Ltd. represented following three distinct transactions:
“i) Advance against commercial building Rs. 5,62,00,000/-
ii) Anumod Sharma (expense account) Rs. 73,76,584/-
iii) Anumod Sharma ledger account 6,00,84,793/-“ (showing Rs. 1,95,390/- as credit Balance)
5. The AO after considering the assessee’s explanation on the issue highlighted that claim of receiving advance against commercial building was a ploy to escape the deeming provision of section 2(22)(e). The AO highlighted that agreement to sell between the assessee and M/s Apra Auto India Pvt. Ltd. was dated 03.04.2011 in which reference of bank transaction dated 08.04.2011 was recorded representing a sum of Rs.1.40 crore given as advance payment and credited in assessee’s bank account on 08.04.2011. The impugned agreement also recorded that the balance payment of Rs.5.60 crore had to be paid by 31st December 2011 and in the event of non compliance the agreement was to be terminated leading to refund of advance payment without interest. The AO concluded that the claim of an agreement to sell put forward by the assessee was a colourable device intended to escape the provision of section 2(22)(e). It was also highlighted that similar pattern of receipt of amount running into crores was evident from the bank statement of early years. The AO also held that the expenses paid or amount transferred to different persons by M/s Apra Auto India Pvt. Ltd. on behalf of the assessee also came under the purview of deemed dividend. The AO placed reliance on the following judgments:
> Walchand & Co. Ltd. vs CIT (1975) 100 ITR 598(Bom)
> CIT vs. K. Shrinavasan 50 ITR 788
> CIT vs. P. Sarada 154ITR 387 (1985) (Mad)
> MD Jindal vs. CIT 164 1TR 028 (Cal) (1987)
> Tarulata Shyam vs. CIT 108 ITR 345 (1977)(SC)
> Rajesh P. Ved vs. AC1T 001 ITR 275 (ITAT Mumbai) (2010)
> Ms. Sarada P vs. CIT 229 ITR 444(SC) (1998)
6. During the arguments before us, the ld. DR argued that the trifurcation of the total amount into three different heads as
i) Advance against commercial building Rs. 5,62,00,000/-
ii) Anumod Sharma (expense account) Rs. 73,76,584/-
iii) Anumod Sharma ledger account 6,00,84,793/-
is a cover up exercise to camouflage the issue of deemed dividend u/s 2(22)(e) of the Act. The assessee has re-casted his account into receipts, loans, advances, expense account and ledger accounts. It was argued that the initial submissions, there was no such differentiation such loans and advances rather the entire amount is shown as advance. It is the afterthought of the assessee to built a story of advance against commercial building in support of which buyer’s agreement dated 03.04.2011 has been prepared on a non-judicial stamp paper of Rs.100/-which was purchased on 17.09.2010 between the assessee who is the main promoter and holding 86.67% of shares in M/s Apra Auto (India) Pvt. Ltd. the ld. DR vehemently argued that the buyer’s agreement does not even bear complete details of the two witness, not been verified by the oath commissioner and also not registered. It is a ploy to escape the rigors of provisions of Section 2(22)(e). The documents like buyer’s agreement and the trifurcated ledger accounts of the assessee in the books of said company appear to have been prepared in so haste that in those ledger accounts the name of the bank in all entries (Debit/Credit) has been mentioned as bank of Baroda whereas all the transactions have been made through bank account of assessee as well as of the company in Nainital bank. She has taken us to the contents of the assessment order along with the Annexures which have been duly perused by us.
7. The ld. AR relied on the submissions made before the ld. CIT (A) and reiterated the same and relied on the order of the ld. CIT (A).
8. Heard the arguments of both the parties and perused the material available on record. The assessee is also engaged in the business of real estate development in collaboration with M/s Unitech Limited and was developing Signature Tower – II, Sector – 15, Gurgaon, Haryana. The assessee entered into buyer’s agreement with intending buyers in respect of commercial space in the said property and received advances during the financial year under consideration. The assessee has also entered into Buyer’s Agreement with M/s Apra Auto (India) Private Limited for sale of 7000 Sq. Ft. commercial space at Signature Tower – II, Sector – 15, Gurgaon, Haryana for a consideration of Rs.7,00,00,000/- and has received advance of Rs.5,62,00,000/- against sale of such commercial space from M/s Apra Auto (India) Private Limited. However, the said company was unable to pay the total consideration upto scheduled date as per Clause 5 and 6 of Buyer’s agreement, therefore the said agreement was terminated and the assessee refunded the said advance received to the said company during the financial year under consideration. The amount of Rs.10,87,21,000/- shown as given to the assessee and amount of Rs.10,84,00,000/- received from the assessee includes amount paid on account of advance of Rs.5,62,00,000/- against purchase of commercial space and also refund of Rs.5,62,00,000/- after termination of the said agreement.
9. We find that the assessing officer has invoked section 2(22)(e) of the Income tax Act, 1961 by treating the entire payments made by M/s Apra Auto (India) Private Limited only on the basis that the assessee has received huge amount throughout the year from the said company. We also note that the assessee has not taken any loan from M/s Apra Auto (India) Private Limited during the financial year under consideration and had credit balance during the entire financial year in the books of the said company. Details of loan given by the assessee to M/s Apra Auto India Private Limited and repayment received from the said company during the financial year under consideration along detail of balance is as under:
