M/ Kewal Krishan Chhabra, Ludhiana v. DCIT, Ludhiana

ITA 104/CHANDI/2013 | 2008-2009
Pronouncement Date: 29-04-2015 | Result: Partly Allowed

Appeal Details

RSA Number 10421514 RSA 2013
Assessee PAN AATPC8001G
Bench Chandigarh
Appeal Number ITA 104/CHANDI/2013
Duration Of Justice 2 year(s) 2 month(s) 21 day(s)
Appellant M/ Kewal Krishan Chhabra, Ludhiana
Respondent DCIT, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 29-04-2015
Date Of Final Hearing 27-04-2015
Next Hearing Date 27-04-2015
Assessment Year 2008-2009
Appeal Filed On 07-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI T.R.SOOD ACCOUNTANT MEMBER ITA NO. 104/CHD/2013 ASSESSMENT YEAR: 2008-09 SHRI KEWAL KRISHAN CHHABRA VS THE DCIT 805 RAM NIWAS CIRCLE VII BAGH KHAZANCHIAN LUDHIANA. CIVIL LINES LUDHIANA. PAN: AATPC8001G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGA L RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 27.04.2015 DATE OF PRONOUNCEMENT : 29.04.2015 O R D E R PER BHAVNESH SAINI JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS)-II LUDHIANA DATED 11.12.2012 FOR ASSE SSMENT YEAR 2008-09. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO. 1 IS GENERAL IN NATURE AND CALLS FOR NO FURTHER FINDINGS AND IS REJECTED. 4. ON GROUND NOS. 2 AND 3 ASSESSEE CHALLENGED THE ADDITION OF RS. 18 22 923/- ON ACCOUNT OF DEEMED DIVIDEND UN DER SECTION 2(22)(E) OF THE INCOME TAX ACT. THE BRIEF FACTS AR E THAT THE ASSESSING OFFICER NOTED THAT THE APPELLANT SHRI KEW AL KRISHAN 2 CHHABRA HAD A DEBIT BALANCE OF RS.18 22 923/- IN TH E BOOKS OF M/S CHHABRA WINES LTD. THE AO FURTHER NOTED THAT SH RI KEWAL KRISHAN CHHABRA WAS A DIRECTOR OF M/S CHHABRA WINES LTD. AND HELD 51.98% SHARES OF M/S CHHABRA WINES LTD. THE AS SESSING OFFICER ACCORDINGLY ASKED THE APPELLANT TO EXPLAIN WHY PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX AC T MAY NOT BE INVOKED. THE APPELLANT VIDE ITS LETTER DATED 10.12. 2010 SUBMITTED THAT PAYMENT OF RS. 15.60 LACS WAS RECEIV ED AS ADVANCE AGAINST AGREEMENT TO SELL A PROPERTY SITUAT ED AT JAIL ROAD LUDHIANA. THE REST OF THE PAYMENTS ARE CONTRA CTUAL PAYMENTS MADE BY THE COMPANY ON BEHALF OF THE APPEL LANT AGAINST WHICH PAYMENT OF RS.5.00 LACS WAS MADE ON 23.03.2008. THE ASSESSING OFFICER CONSIDERED THE AP PELLANT'S SUBMISSIONS BUT FOUND IT TO BE NOT SATISFACTORY. TH E ASSESSING OFFICER POINTED OUT THAT NO DOCUMENTS RELATING TO P URCHASE OF PROPERTY HAD BEEN FURNISHED. THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT IF ADVANCE HAS BEEN GIVEN AGAINST PUR CHASE OF PROPERTY THEN THE ENTRY SHOULD HAVE BEEN MADE IN TH E PROPERTY ACCOUNT AND NOT IN THE ACCOUNT OF SHRI KEWAL KRISHA N CHHABRA. THE ASSESSING OFFICER ACCORDINGLY REJECTED THE APPE LLANT'S CONTENTION AND HELD THAT DEBIT BALANCE OF RS.18 22 923/- REPRESENTED LOANS GIVEN TO SHRI KEWAL KRISHAN CHHAB RA. THE ASSESSING OFFICER ACCORDINGLY ADDED THIS AMOUNT TO THE TOTAL INCOME OF THE APPELLANT U/S 2(22)(E) OF THE INCOME TAX ACT. 5. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER IN WHICH THE ASSE SSEE BRIEFLY EXPLAINED THAT THE ACTUAL FACTS REGARDING THE PROPE RTY ARE THAT 3 ASSESSEE IS 1/3 RD OWNER OF THE PROPERTY SITUATED IN JAIL ROAD LUDHIANA WHICH WAS AGREED TO BE SOLD BY THE ASSESSE E TO THE COMPANY M/S CHHABRA WINE LTD. VIDE AGREEMENT DATED 17.04.2007. THE AMOUNT RECEIVED FROM THE COMPANY I S DULY RECORDED IN THE BOOKS OF ACCOUNT. THE COMPANY HAD GIVEN ADVANCE TO THE ASSESSEE FOR PURCHASE OF THE PROPERT Y BUT THE PROPERTY IS NOT YET TRANSFERRED BY THE ASSESSEE TO THE COMPANY DURING THE YEAR UNDER CONSIDERATION. SINCE AMOUNT IS GIVEN FOR TRANSFER OF THE PROPERTY THEREFORE ADDITION IS WH OLLY UNJUSTIFIED. THE ASSESSEE ALSO REQUESTED FOR ADMIS SION OF ADDITIONAL EVIDENCE UNDER RULE 46A OF THE IT RULES FOR ADMISSION OF THE COPY OF THE AGREEMENT TO SELL. TH E LD. CIT(APPEALS) ADMITTED HIS ADDITIONAL EVIDENCE UNDER RULE 46A AND ALSO DIRECTED TO FILE COPY OF THE OWNERSHIP OF THE PROPERTY IN QUESTION AS WELL AS CURRENT STATUS OF THE PROPERTY. THE ASSESSEE ULTIMATELY PLEADED BEFORE LD. CIT(APPEALS) THAT THE CONDITIONS OF UNDER SECTION 2(22)(E) OF THE ACT ARE NOT SATISFIED IN THIS CASE BEING THE ADVANCE IN THE NATURE OF COMMERCIAL TRANS ACTION. 6. THE LD. CIT(APPEALS) CONSIDERING THE MATERIAL ON RECORD DECIDED THE ISSUE AGAINST THE ASSESSEE. THE FINDIN GS OF LD. CIT(APPEALS) IN PARA 4.3 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 4.3 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISSI ONS. THE FOLLOWING FACTS ARE NOTEWORTHY :- I) AS PER APPELLANT'S REPLY TO THE ASSESSING OFFICER VIDE HIS LETTER DATED 10.12.2010 WHICH HAS BEEN QUOTED ON PAGE-3 OF THE ASSESSMENT ORDER THE APPELLANT WAS PAID THE APPELLANT WAS PAID AN AMOUNT OF RS. 15.60 LACS AS ADVANCE AGAINST SALE AGREEMENT. II) AS PER THE COPY OF AGREEMENT TO SELL FILED BY T HE APPELLANT DATED 17.04.2007 THE APPELLANT HAD RECEIVED AN ADVANCE O F RS.8.00 4 LACS PERTAINING TO AFORESAID AGREEMENT TO SELL. COPY OF THIS AGREEMENT IS ENCLOSED AS ANNEXURE-'A'. III) AS PER THE WRITTEN SUBMISSIONS OF THE APPELLANT THE APPELLANT IS L/3 RD OWNER OF THE PROPERTY SITUATED AT JAIL ROAD LUDHI ANA WHICH WAS AGREED TO BE SOLD BY THE APPELLANT TO M/S CHHABRA WINES LTD. IV) AS PER AGREEMENT TO SELL DATED 17.04.2007 THE APP ELLANT IS COMPLETE OWNER OF THE PROPERTY NO.B-XIII-124 JAIL ROAD FIE LD GANJ LUDHIANA'. V) AS PER THE COPY OF OWNERSHIP DOCUMENTS SUBMITTE D BY THE APPELLANT PROPERTY NO.B-XIII-125 JAIL ROAD FIELD GAN J LUDHIANA WAS PURCHASED BY THE FOLLOWING PERSONS JOI NTLY: (A) SH. KEWAL KRISHAN CHHABRA. (B)SH. HARISH KUMAR (C) SH. GULSHAN KUMAR. COPY OF THIS SALE DEED IS ENCLOS ED AS ANNEXURE-'B'. VI) THE AGREEMENT TO SELL IS FOR PROPERTY NO.B-XII I-124 WHILE OWNERSHIP DOCUMENTS ARE FOR PROPERTY NO.B-XIII-125. VII) AS EXPLAINED BY THE AR OF THE APPELLANT NO F URTHER ACTION TOWARDS REGISTRATION OF PROPERTY BY THE APPELLANT HAD BEEN TAKEN EVEN AFTER EXPIRY OF MORE THAN 5 YEARS FROM TH E DATE OF AGREEMENT TO SELL. FROM THE AFORESAID FACTS IT IS APPARENT THAT THE WHO LE ISSUE OF CLAIM BY THE APPELLANT THAT THE AMOUNT OF RS.15.60 LACS W AS RECEIVED TOWARDS ADVANCE FOR PURCHASE OF PROPERTY IS AN AFTER THOUGHT AND A SHAM TRANSACTION. THERE ARE NUMBER OF FACTUAL DISCR EPANCIES IN THE DOCUMENTS SUBMITTED BY THE APPELLANT AND THE SUBMISSI ONS OF THE APPELLANT. FROM THE FACTS REFERRED TO ABOVE IT IS C LEAR THAT WHILE IN THE AGREEMENT TO SELL THE TOTAL ADVANCE IS CLAIMED TO B E RS.8.00 LACS WHILE IN THE REPLY DATED 10.12.2010 BEFORE THE AO THE S AME WAS CLAIMED TO BE RS.15.60 LACS. FURTHER IN THE WRITTEN SUBMISSIONS IT HAS BEEN CLAIMED THAT THE APPELLANT IS L/3 RD OWNER OF THE PROPERTY FOR WHICH AGREEMENT TO SELL HAS BEEN SIGNED WHILE AS P ER THE AGREEMENT TO SELL THE APPELLANT IS SOLE OWNER OF TH E PROPERTY. MOREOVER THE OWNERSHIP DOCUMENTS WHICH WERE SUBMITT ED BY THE AR OF THE APPELLANT ARE FOR PROPERTY NO.B-XIII-125 WHILE AGREEMENT TO SELL IS FOR PROPERTY NO.B-XIII-124. THE PROPER TY BEARING NO.B-XIII-124 IS INFACT IN THE NAME OF SMT. ABINASH KUMA RI WIFE OF THE APPELLANT. THE PROPERTY BEARING NO. B-XIII-125 IS JO INTLY OWNED BY 3 PERSONS. NO PRUDENT PERSON WOULD ENTER INTO AN AGREE MENT TO PURCHASE SUCH A PROPERTY' FROM ONLY ONE PERSON. THIS IS FURTHER PROVED BY THE FACT THAT EVEN AFTER EXPIRY OF MORE TH AN 5 YEARS FROM THE DATE OF SO CALLED AGREEMENT TO SELL SIGNED ON 17.04.2007 THE PROPERTY HAS NOT YET BEEN REGISTERED IN THE NAME OF THE COMPANY. ALL THESE FACTS POINT OUT TOWARDS COLLUSIVE ARRANGEMENT B ETWEEN THE APPELLANT AND M/S CHHABRA WINES LTD. WHEREIN A LO AN TRANSACTION HAS BEEN SHOWN AS ADVANCE AGAINST PROPERTY TO AVOID T HE RIGORS OF THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TA X ACT. MOREOVER EVEN BY THE APPELLANT'S SUBMISSIONS AND THE DOCUMENT S SUBMITTED DURING THE COURSE OF APPELLATE PROCEEDINGS ONLY RS.8 .00 LACS WERE RECEIVED AS ADVANCE ON ACCOUNT OF PURCHASE OF PROPE RTY. NO EXPLANATION REGARDING THE REMAINING AMOUNT OF RS. 10 2 2 923/- HAS BEEN SUBMITTED. 5 KEEPING IN VIEW THE FACTUAL SITUATION THE AO WAS F ULLY JUSTIFIED IN MAKING THE ADDITION OF RS. 18 22 923/- U/S 2(22)(E) OF THE INCOME TAX ACT. THIS GROUND OF APPEAL IS ACCORDINGLY DISMISSE D 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE L D. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BE FORE AUTHORITIES BELOW AND ALSO FILED COPY OF THE AGREEM ENT TO SELL DATED 17.04.2007 AND ALSO FURTHER RECEIPTS OF PAYME NTS TO SHOW THAT RS. 15 60 000/- WAS PAID BY THE COMPANY TO THE ASSESSEE ON ACCOUNT OF ADVANCE AGAINST THE AGREEMENT. ON TH E OTHER HAND LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. IT IS NOT IN DISPUTE THE FACTUAL FINDINGS RECORDED BY THE AUTHOR ITIES BELOW WITH REGARD TO APPLICABILITY OF THE PROVISIONS OF S ECTION 2(22)(E) OF THE ACT IN THE MATTER. DURING THE COURSE OF ARG UMENTS IT IS NOT DISPUTED THAT CONDITIONS OF SECTION 2(22)(E) OF THE ACT ARE SATISFIED IN THE PRESENT CASE. THE ASSESSEE ALSO P LEADED BEFORE THE AUTHORITIES BELOW THAT SINCE ADVANCE AGAINST TH E PROPERTY IS IN THE NATURE OF COMMERCIAL TRANSACTION THEREFORE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT SATISFIED. THI S IS EXCEPTION PRO VIDED TO PROVISIONS OF SECTION 2(22)(E) OF THE ACT BECAUSE THE PROVISIONS OF DEEMED DIVIDEND WOULD NOT COVER ANY A DVANCE OR LOAN MADE TO THE SHAREHOLDER BY A COMPANY IN THE OR DINARY COURSE OF ITS BUSINESS WHERE THE LENDING OF MONEY I S A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. T HE ASSESSEE EXCEPT PLEADING THAT ADVANCE AGAINST PROPERTY IS IN THE NATURE OF COMMERCIAL TRANSACTION HAS NOT PLEADED BEFORE AUTHO RITIES BELOW THAT LENDING OF MONEY IS SUBSTANTIAL PART OF THE BU SINESS OF THE COMPANY. 6 9. THE LD. CIT(APPEALS) ON GOING THROUGH THE AGREE MENT TO SELL IN QUESTION SPECIFICALLY FOUND THAT PART OF TH E AMOUNT IS STATED AS ADVANCE AND THAT ASSESSEE IS 1/3 RD OWNER OF THE PROPERTY IN QUESTION. HOWEVER IN THE AGREEMENT TO SELL ASSESSEE CLAIMED TO BE OWNER OF THE PROPERTY IN QUE STION. IN THE AGREEMENT TO SELL IT IS STATED THAT ASSESSEE SHALL RECEIVE THE BALANCE AMOUNT AT THE TIME OF EXECUTION AND REGISTR ATION OF THE SALE DEED. HOWEVER TILL DATE NO SALE DEED IS EXE CUTED BY ASSESSEE IN FAVOUR OF THE ASSESSEE. THEREFORE THE RE IS NO QUESTION OF MAKING FURTHER PAYMENT TO THE ASSESSEE AS ADVANCED AGAINST THE PROPERTY IN QUESTION. THE OTHER CO-OWN ER HAVE NEVER ENTERED INTO ANY AGREEMENT TO SELL WITH THE COMPANY . THERE WAS A DIFFERENCE IN THE PROPERTY NUMBER ALSO AS NOTED B Y THE LD. CIT(APPEALS). THEREFORE LD. CIT(APPEALS) WAS JUST IFIED IN HOLDING THAT ASSESSEE'S CONTENTION IS AFTER-THOUGHT AND THE ENTIRE TRANSACTION RELATE TO SHAM TRANSACTION. THE FACTUAL DISCREPANCIES HAVE NOT BEEN EXPLAINED DURING THE CO URSE OF ARGUMENTS BEFORE US AS WELL. THE LD. CIT(APPEALS) WAS THEREFORE JUSTIFIED IN DECIDING THE ISSUE AGAINST THE ASSESSEE. 10. IN VIEW OF THE ABOVE WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE ON THESE GROUNDS. GROUND NOS. 2 AN D 3 OF THE APPEAL OF THE ASSESSEE ARE DISMISSED. 11. THE LD. COUNSEL FOR THE ASSESSEE SEEKS PERMISSI ON TO WITHDRAW GROUND NO. 4. THE SAME IS ACCORDINGLY DI SMISSED AS NOT PRESSED. 12. ON GROUND NO. 5 ASSESSEE CHALLENGED THE ADDITIO N OF RS. 67 785/- OUT OF MOBILE EXPENSES CAR DEPRECIATION F OR PERSONAL 7 PURPOSES. THE ASSESSING OFFICER WITHOUT POINTING OUT AS TO WHICH OF THE EXPENSES WERE USED FOR PERSONAL PURPOS ES MADE DISALLOWANCE OF 1/5 TH OF THE EXPENDITURE ON THIS ISSUE. THE LD. CIT(APPEALS) CONFIRMED THE ADDITION AND DISMISSED T HIS GROUND OF APPEAL OF THE ASSESSEE. THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT IT IS ADHOC ADDITION WITHOUT POINTIN G OUT ANY DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND IN THE ALTERNATE CONTENTION SUBMITTED THAT ADDITION IS EX CESSIVE IN NATURE. 13. CONSIDERING THE EXPLANATION OF THE ASSESSEE AND FINDINGS OF THE AUTHORITIES BELOW WE ARE OF THE VIEW IT IS ADH OC ADDITION IN NATURE. HOWEVER CONSIDERING ASSESSEE'S STATUS TO BE INDIVIDUAL PERSONAL USE OF THESE FACILITIES I.E. MOBILE CHARGE S AND CAR DEPRECIATION COULD BE USED FOR PERSONAL PURPOSES W E MODIFY THE ORDERS OF AUTHORITIES BELOW AND DIRECT THAT 1/10 TH DISALLOWANCE MAY BE MADE OUT OF THIS ADDITION. IN THE RESULT T HIS GROUND IS PARTLY ALLOWED. 14. NO OTHER POINT IS ARGUED OR PRESSED. 15. I N THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH APRIL 2015. POONAM COPY TO: THE APPELLANT THE RESPONDENT THE CIT(A) THE CIT DR ASSISTANT REGISTRAR ITAT CHANDIGARH