Kaushik B.Patel, Mehsana vs Assessee

आयकर अपील सं./I.T.A. No.3163/Ahd/2011 ( नधा रण वष / Assessment Year : 2006-07) Shri Kaushik B.Patel बनाम/ The Dy.CIT C/o.B.Patel Infrastructure Vs. Mehsana Circle Pvt.Ltd.,Sardar Sociewty Mehsana Visnagar Mehsana - 384 315 थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : ABXPP 2970 Q (अपीलाथ /Appellant) .. ( यथ / Respondent)

अपीलाथ ओर से /Appellant by : Shri Sunil H.Talati, AR यथ क ओर से/Respondent by : Shri M.K. Singh, Sr.DR

ु वाई क तार ख / सन Date of Hearing 20/05/2015 घोषणा क तार ख /Date of Pronounce ment 09/06/2015

आदे श / O R D E R

PER S.S. GODARA, JUDICIAL MEMBER :

This Assessee's appeal for assessment year 2006-07 arises from order of the CIT(A)-Gandhinagar, Ahmedabad dated 01/09/2011 in case No.118/2010-11 upholding deemed dividend addition of Rs.11,24,237/- u/s.2(22)(e) of the Income Tax Act, 1961 (in short "the Act").

ITA No.3163/Ahd/2011 Shri Kaushik B.Patel vs. DCIT Asst.Year - 2006-07 -2-

2. Facts of the case are in a narrow campus. The assessee is a director in M/s.B.Patel Infrastructure Pvt.Ltd. He holds more than 10% of its shares. The Assessing Officer noticed him to have withdrawn excess amount of Rs.11,24,237/-. He sought to invoke deemed dividend addition u/s.2(22)(e) of the Act by treating the same as loans and advances. The assessee pleaded to have worked as a sub-contractor giving his tractor car machinery on hire basis to the company having value of more than Rs.55 lacs. He submitted that the company had taken possession thereof by paying him a refundable deposit sum of Rs.12.50 lacs. The Assessing Officer observed in order dated 30/11/2010 that the assessee had withdrawn excess amount to the tune of Rs.9,81,400/- from 01/04/2005 onwards. Accordingly, he treated the impugned sum of Rs.11,24,237/- as deemed dividends and made the consequential addition.

3. The CIT(A) has upheld the Assessing Officer's action as under:-

"4.2 1 have gone through the rectification order and the submissions of the appellant. The following pertinent observations are made on the issue:

a) the assessee is one of the Director holding more than 10% of share holding of B. Patel Infrastructure Pvt Ltd.

b) Assessee has withdrawn excess amount of Rs.1124237/- from the company as per ledger account in the books of the Company. ITA No.3163/Ahd/2011

Shri Kaushik B.Patel vs. DCIT Asst.Year - 2006-07 -3-

c) The appellant has contended that the Company have given Rs.12.50 lakhs in lieu of the possession of vehicles valuing about Rs.41lakhs. He further contended that the value of the assets given is more than Rs 41 lakhs against which there is debit balance in his account of Rs.20 lakhs. As such it was submitted that amount outstanding is for the purpose of business.

d) However, the account proves otherwise from the face of it. The assessee has shown outstanding as on 1/4/2005 at Rs.880519/-. Against the outstanding of Rs.880519/- assessee has repaid Rs.595000/- till 30/4/2005. The assessee had not received any advance of Rs.12,50,000/- against the vehicles as claimed although the vehicles were given on rent during the period. In the month of May, 2005 from 1/4/2005 to 31/5/2005, assessee had withdrawn Rs.9,78,800/- out of which Rs.2,91,000/- were adjusted by way of salary & machinery rent. From 1/8/2005 to 30/11/2005, assessee had withdrawn Rs.9,78,800/- out of which Rs.2,91,000/- were adjusted by way of salary & machinery rent. From 1/8.2005 to 30/11/2005 assessee has withdrawn Rs.289000/-, Rs.200000/- by way of salary adjustment were recovered. From 1/12/2005 to 31/12/2005, Rs.480000/- were received, Rs.190000/-were adjusted by way of salary & machinery rent. From 1/1/2006 to 28/2/2006 assessee has received Rs.249077. In the month of March, assessee has received Rs.981400/-.

Not only is the claim of the appellant is proved wrong from the accounts but also it is clearly an afterthought and a story when viewed from the angle of probabilities of human behavior and business practices. It is seen that the total value of these assets i.e. car and tractors rented out to the company is only Rs.41,00,000/- on which the assessee is getting rent of Rs.16.45 lacs p.a. which itself is very high. No one will give another 12.5 lacs rupees as advance in such a deal. The addition u/s.2(22)(e) made by the AO is therefore totally justified on- the facts of the case. The reliance placed by the appellant on the two judgments i.e. CIT vs Nagindas Kapadia 177 UR 393(Mum) and CIT vs Rajkumar 318 ITR 462 (Del) is totally misplaced because in those cases the amounts were held to be advances against trade and not loan. In the present case, it is not even the claim of the appellant that any amount was advanced towards purchases. The Hon'ble Supreme Court in the case of ITA No.3163/Ahd/2011 Shri Kaushik B.Patel vs. DCIT Asst.Year - 2006-07 -4-

Tarulata Shyam & Ors 108 ITR 345 has held that once the income is taxable within the law, the hardship caused to the appellant ceases to be an issue. In that case, the amount was loaned / advanced for a very short time, but still it was held taxable. The ground of appeal is therefore dismissed.

4. We have heard both the parties and gone through the case file. The sole issue that arises for our consideration is validity of the impugned addition of deemed dividends. The assessee has filed a paper- book on record. The same reveals that he gets a monthly salary of Rs.50,000/- and also tractor rental income of Rs.1,01,000/- in May-2005 and Rs.1,40,000/- from June-2005 upto March-2006. It is further seen that the assessee has also received Qualish car rental income of Rs.1,44,000/-. His books record tractor rental income as Rs.15,01,000/-. The Revenue does not dispute the assessee's fixed assets in the shape of aforesaid vehicles. We find value of its tractor-trolly to be Rs.37,45,500/- and Qualish Car that of Rs.3,98,496/-. The assessee's books nowhere treat the sums received as loans and advances to have been received from the aforesaid company. The company's report at page-16 does not disclose any such loan or advance to the assessee. The authorities below nowhere observe anything about accumulated profits so as to invoke section 2(22)(e) of the Act. We reiterate that this section stipulates addition of a deemed income statute liable to be strictly interpreted. The case file indicates that the impugned sums are routine ITA No.3163/Ahd/2011 Shri Kaushik B.Patel vs. DCIT Asst.Year - 2006-07 -5-

business transactions/salary payments made between the company and the assessee-appellant not coming within the purview of deemed dividends u/s. 2(22)(e) of the Act. The assessee has filed a catena of case-laws. We quote (2014) 29 ITR 36 (Bang.Trib.) DCIT vs. Chariot International Pvt.Ltd. holding that routine commercial transactions involving trade advances are not to be treated as deemed dividends. The Revenue fails to point out any distinction on facts or law. We accept the assessee's arguments in these facts. The impugned addition of deemed dividends amounting to Rs.11,24,237/- is deleted.

5. In the result, assessee's appeal is allowed.

Order pronounced in the Court on 9th June, 2015 at Ahmedabad.

Sd/- Sd/- ( G.D. AGARWAL) ( S.S. GODARA ) VICE PRESIDENT (AZ) JUDICIAL MEMBER Ahmedabad; Dated 09 / 06 /2015 ट .सी.नायर, व.(न.स./T.C. NAIR, Sr. PS आदे श क त"ल#प अ$े#षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संब*ं धत आयकर आय, ु त / Concerned CIT 4. आयकर आय,

ु त(अपील) / The CIT(A)-Gandhinagar, Ahmedabad

5. /वभागीय (त(न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड5 फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स या/पत (त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad