ACIT, CIR-8, Pune v. RASHMI KIRAN VIADYA, Pune

ITA 1065/PUN/2008 | 2004-2005
Pronouncement Date: 18-03-2011

Appeal Details

RSA Number 106524514 RSA 2008
Assessee PAN ACHPV3436G
Bench Pune
Appeal Number ITA 1065/PUN/2008
Duration Of Justice 2 year(s) 7 month(s) 7 day(s)
Appellant ACIT, CIR-8, Pune
Respondent RASHMI KIRAN VIADYA, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Department
Bench Allotted A
Tribunal Order Date 18-03-2011
Assessment Year 2004-2005
Appeal Filed On 11-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JM AND SHRI D. KARUNAKARA RAO AM ITA NO. 1065/PN/2008 : A.Y. 2004-05 ASSTT. CIT CIR. 8 AKURDI PUNE APPELLANT VS. MRS. RASHMI KIRAN VAIDYA C/O. TOOL ROOM AND ENGG. SERVICES J-1 S BLOCK MIDC BHOSARI PUNE-411 026. PAN ACHPV 3436 G RESPONDENT APPELLANT BY : SHRI HARESHWAR SHARMA CIT DR RESPONDENT BY : SHRI S.N. DOSHI CA O R D E R PER D. KARUNAKARA RAO A.M. THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF THE CIT(A)-III PUNE DATED 9 TH MAY 2008 A.Y. 2004-05 ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S 80- IB(2) OF RS. 12 05 452/- WHEN IN FACT NO SALES/PURC HASE OF RAW MATERIAL IS SEEN FROM THE PROFIT AND LOSS AC COUNT WHICH IS REQUIRED FOR MANUFACTURING ACTIVITY AND NO PAYMENT ON ACCOUNT OF WAGES ARE REFLECTED IN THE PR OFIT AND LOSS ACCOUNT WHICH MAKES IT CLEAR THAT THERE WA S NEITHER MANUFACTURING ACTIVITY NOR THERE WERE ANY L ABOURS DURING THE YEAR UNDER CONSIDERATION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S 2(22)(E) OF DEEMED DIVIDEND OF RS. 1 34 23 89/- WIT HOUT CONSIDERING THE REPORT OF THE AUDITOR IN FORM NO. 1 0-CCB FILED WITH RETURN FOR A.Y. 2003-04 AND 2004-05 ACC ORDING TO WHICH THE ASSESSEE IS HAVING NOT LESS THAN 10% SHAREHOLDING INTEREST IN M/S. PINNACLE EDUCATION AN D OPPORTUNITIES PVT. LTD. A CLOSELY HELD COMPANY. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE REPORT IN FORM NO. 10CCB DOES NOT GIVE THE CORRECT STATE OF AFFAIRS AND SHOULD BE IGN ORED EVEN THOUGH SAME HAS BEEN SIGNED BY CHARTERED ACCOUNTANT ONLY. ITA 1065/PN/2008 MRS RASHMI KIRAN VAIDYA A.Y. 2004-05 2 2. GROUND NO. 1 RELATES TO ALLOWING THE DEDUCTION U /S 80-IB(2) WHEN THERE ARE NO SALES PURCHASE OF RAW MATERIAL OF RAW MATERIALS FOR EVIDENCING MANUFACTURING ACTIVITY. THERE ARE O THER ISSUES INCIDENTAL TO THIS ISSUE. 3. THE RELEVANT FACTS ARE THAT THE ASSESSING OFFICER F OUND THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB(2) OF THE L T. ACT AT RS.12 05 452/-. REFERRING TO THE PROVISIONS OF SECTION 801B HE OBS ERVED THAT IN ORDER TO CLAIM DEDUCTION U/S 801B FOLLOWING CONDITIONS MUST BE SA TISFIED BY TILE UNDERTAKING (I) IT SHOULD BE A NEW UNDERTAKING (II) IT SHOULD NOT BE FORMED BY TRANSFER OF OLD PL ANT AND MACHINERY (III) IT SHOULD MANUFACTURE OR PRODUCE ARTICLES OTH ER THAN NON-PRIORITY SECTOR ITEMS GIVEN IN THE ELEVENTH SCHEDULE (IV) MANUFACTURE OR PRODUCTION SHOULD BE STARTED WI THIN A STIPULATED TIME LIMIT I.E. BEFORE 31-3-2002. (V) IT SHOULD EMPLOY 10/20 WORKERS. THE A.O OBSERVED THAT THE FIRST CONDITION WAS SATIS FIED IN THE CASE OF THE ASSESSEE. 4.2 WHILE EXAMINING IF THE SECOND CONDITION IS FULF ILLED IN THE CASE OF ASSESSEE THE A.O OBSERVED THAT THE ASSESSEE HAS PU RCHASED OLD PLANT AND MACHINERY WORTH RS. 15 LAKHS FROM MS. TECHSER T OOLS PVT. LTD. WHICH AMOUNTED TO 20.63% OF THE PLANT AND MACHINERY OF RS . 72 69 279/- ACQUIRED BY THE ASSESSEE. HE THEREFORE HELD THAT THE SECOND CONDITION THAT THE UNDERTAKING SHOULD NOT BE FORMED BY TRANSF ER OF OLD PLANT AD MACHINERY IS NOT SATISFIED IN THE CASE OF THE ASSES SEE. 4.3 THE A.O FURTHER OBSERVED THAT THE CONDITION THA T THE ASSESSEE HAS STARTED MANUFACTURING ACTIVITY BEFORE 31-3-2002 IS ALSO NOT SATISFIED IN THE CASE OF THE ASSESSEE FOR THE FOLLOWING REASONS: (A) THE BALANCE SHEET AS AT 31-3-2002 SHOWS THAT TH E ASSESSEE DOES NOT HAVE ANY PLANT AND MACHINERY. IT WAS ALSO OBSE RVED THAT HE ASSESSEE ITA 1065/PN/2008 MRS RASHMI KIRAN VAIDYA A.Y. 2004-05 3 OBTAINED SALES TAX REGISTRATION NUMBER IN THE F.Y. 2002-3 AND SMALL SCALE INDUSTRY REGISTRATION IN THE F.Y. 2003-04. (B) THE P & L ACCOUNT FOR THE YEAR ENDING 31-3-2002 SHOWED THAT THE ASSESSEE HAD RECEIVED LABOUR CHARGES AND HAD PAID L ABOUR CHARGES DESIGNING CHARGES CONSULTANCY CHARGES ETC. NO SALE S AND PURCHASE OF RAW MATERIAL WHICH IS REQUIRED FOR THE MANUFACTURIN G ACTIVITY IS SEEN FROM THE P & L ACCOUNT. FURTHER N PAYMENT ON ACCOUNT O F WAGES WAS REFLECTED MEANING THEREBY THAT THERE WERE NO WORKERS IN THE Y EAR ENDING 31-3-2002. 4.4 IN THE LIGHT OF THESE OBSERVATIONS THE A.O CON CLUDED THAT THE MANUFACTURING ACTIVITY HAD NOT STARTED PRIOR TO 31- 3-2002 NOR THE CONDITION THAT THE UNDERTAKING SHOULD EMPLOY 10/20 WORKERS WA S SATISFIED. ACCORDINGLY FOR WANT OF FULFILLMENT OF THE CONDITI ONS ENVISAGED UNDER THE PROVISIONS OF SECTION 80-IB OF THE ACT THE A.O DIS ALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 80-IB(2) IN AN AMOUNT OF RS. 12 05 452/-. 4. DURING THE FIRST APPELLATE PROCEEDINGS THE ASSE SSEE DEMONSTRATED AS TO HOW THE P & L A/C FOR THE PERIOD 31-3-2002 REFERRED TO THE LABOUR CHARGES PAID/PROCESSED WHICH IN FACT ARE THE PURCHASE AND S ALE OF MATERIAL. THE ASSESSEE FURTHER MENTIONED THAT THE SSI REGISTRATIO N WAS NOT AVAILABLE AT THE RELEVANT POINT OF TIME AND IN ANY CASE DEDUCTION U/ S 80-IB IS INDEPENDENT OF SUCH REGISTRATION. THE ASSESSEE ALSO DEMONSTRATED THE IN ADEQUACY MENTIONED IN FORM NO. 10-CCB OF THE AUDITORS REPORT. THE CIT(A) CONS IDERED THE ABOVE SUBMISSION AND GRANTED RELIEF TO THE ASSESSEE AS PER THE DISCU SSION IN PARA 4.6 TO 4.8 OF THE IMPUGNED ORDER. AGGRIEVED WITH THE SAME THE REVEN UE IS IN APPEAL BEFORE US. 5. DURING THE PROCEEDINGS THE LEARNED CIT DR ARGUE D STATING THAT THE CIT(A) DID NOT APPRECIATE THE FACT THAT THE SSI REGISTRATI ON WAS NOT AVAILABLE TO THE ASSESSEE AND THEREFORE THE ASSESSEE CANNOT BE GIVE N DEDUCTION U/S 80-IB OF THE ACT. ON THE OTHER HAND THE LEARNED COUNSEL FOR TH E ASSESSEE RELIED ON THE DISCUSSIONS GIVEN BY THE CIT(A) IN PARA 4.6 TO 4.8 OF IMPUGNED ORDER. 6. REGARDING DISCREPANCY OF SALE AND PURCHASE FOR T HE YEAR ENDING MARCH ITA 1065/PN/2008 MRS RASHMI KIRAN VAIDYA A.Y. 2004-05 4 2002 THE LEARNED COUNSEL TOOK US THROUGH THE PAGE 97-B OF THE PAPER BOOK AND MENTIONED THAT THE LABOUR CHARGES PAID/RECEIVED ARE IN FACT RELATABLE TO THE PURCHASE AND SALE OF MATERIAL. THEREFORE THE EXIS TENCE OF MANUFACTURING ACTIVITY IS NOT TO BE DOUBTED REGARDING OLD PLANT AND MACHIN ERY. THE LEARNED COUNSEL TOOK US THROUGH PAGES30 TO 36 OF THE PAPER BOOK TO DEMONSTRATE THAT THE COMPONENT OF PLANT AND MACHINERY IS 20% OF THE TOTA L PLANT AND MACHINERY AND THEREFORE THERE IS NO VIOLATION OF THE PROVISIONS IN THIS REGARD. 7. WE HAVE BOTH THE PARTIES. PARAS 4.6 TO 4.9 OF TH E IMPUGNED ORDER READ AS UNDER: 4.6 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. AS REGARDS A.OS OBSERVATION THAT THE ASSESSEE HAS PUR CHASED OLD PLANT AND MACHINERY WORTH RS. 15 LAKH FROM M/S. TECHSOR TOOLS PVT. LTD. WHICH AMOUNTED TO 20.63% OF THE PLANT AND MACHINERY ACQUI RED BY THE ASSESSEE IT IS SEEN FROM THE INVOICE NO. 1001 DATE D 9.10.2003 OF M/S. TECHSOR TOOLS PVT. LTD. THAT PLANT AND MACHINERY I NCLUDING FURNITURE COMPUTERS OFFICE EQUIPMENTS AND ELECTRICAL FITTING S (AS PER LIST ENCLOSED WITH THE INVOICE) WERE PURCHASED BY THE ASSESSEE FR OM MIS TECHSOR TOOLS PVT. LTD. FOR RS.15 OO OOOI-. THE LIST ENCLOSED WITH THE INVOICE CONTAINS VARIOUS ITEMS LIKE TABLES CHAIRS DRAWING BOARDS DISPLAY BOARDS LOCKERS FILING CABINETS FANS PEDESTAL FANS CUPBOARDS CO MPUTERS TYPEWRITERS PRINTERS STABILIZERS UPS TELEPHONES FIRE EXTING UISHERS STOOLS DINING TABLES AND CHAIRS STORES GAS CYLINDERS FAX MACHI NES AIR CONDITIONERS WATER TANK GENSET WATER PURIFIER TROLLEY CHAIN P ULLEY BLOCK ETC. WHICH CANNOT BE PUT IN THE CATEGORY OF PLANT AND MACHINER Y. ALTHOUGH SEPARATE COST FOR THESE ITEMS HAS NOT BEEN MENTIONED THEIR PROPORTION AND QUALITY (AS SEEN FROM THE LIST ENCLOSED WITH THE INVOICE) I S SO LARGE THAT AFTER EXCLUSION OF SUCH ITEMS FROM THE CATEGORY OF PLANT AND MACHINERY IT CANNOT BE SAID THAT THE OLD PLANT AND MACHINERY EXC EEDED TWENTY PERCENT OF THE TOTAL VALUE OF PLANT AND MACHINERY USED BY T HE ASSESSEE DURING THE YEAR. 4.7 COMING TO THE OBSERVATION MADE BY THE A.O THAT MANUFACTURING ACTIVITY HAD NOT STARTED ON OR BEFORE 31.3.2002 IT IS SEEN FROM THE INVOICES OF MIS ARVIND INDUSTRIES AND MIS MINTU ENGINEERS FI LED BY THE APPELLANT THAT THE ASSESSEE HAD PURCHASED MATERIAL DURING THE YEAR 2001-02. SIMILARLY THE SALE INVOICES ISSUED TO MIS KBX LTD. MIS KALYANI BRAKES LTD. MIS SAR INDUSTRIES AND MIS PARANJAPE AUTO CAST SHOW THAT THE ASSESSEE HAD SUPPLIED MANUFACTURED ITEMS TO THESE P ARTIES PRIOR TO 1.4.2002. THESE DOCUMENTS SUPPORT THE CLAIM OF THE APPELLANT THAT MANUFACTURING ACTIVITY HAD STARTED PRIOR TO 1.4.200 2. THUS THERE IS MERIT IN APPELLANT'S SUBMISSION THAT ALTHOUGH ON ACCOUNT OF THE NON-REGISTRATION OF THE CONCERN WITH SALES-TAX DEPARTMENT THE INCOME H AS BEEN ACCOUNTED FOR AS LABOUR CHARGES RECEIVED A CLOSER SCRUTINY O F THE TRANSACTIONS WOULD REVEAL THAT THE LABOUR CHARGES RECEIVED INCLUDING T HE SALE COMPONENT ALSO. 4.8. FURTHER THE APPELLANT HAS ALSO PRODUCED BEFO RE ME THE COPY OF THE MUSTER ROLE OF M/S. TOOLROOM & ENGINEERING SERVICES WHICH SHOWS THAT THE UNDERTAKING EMPLOYED MORE THAN 10 WORKERS. 4.9. THE EXPLANATION FURNISHED BY THE APPELLANT AT THE APPELLATE STAGE IN RESPECT OF THE CLAIM OF DEDUCTION U/S 80LB ALONG W ITH THE SUPPORTING WAS ITA 1065/PN/2008 MRS RASHMI KIRAN VAIDYA A.Y. 2004-05 5 BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER W HO AFTER CONSIDERATION OF THE SAME HAS NOT REFUTED THE CLAIM OF THE APPELL ANT AND HAS SUBMITTED THAT THE ISSUE COULD BE DECIDED ON MERITS. UNDER TH ESE CIRCUMSTANCES SINCE IN VIEW OF THE AFORESAID THE CONDITIONS ENV ISAGED UNDER THE PROVISIONS OF SECTION 80IB(2) ARE FULFILLED I HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM OF DEDUCTION U/S 80IB(2) AND ACC ORDINGLY THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAME. THIS GROUND OF APPEAL SUCCEEDS. 8. FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURING ACTIVITY PRIOR TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE DESCRIPTION IN P & L A/C DOES NOT ACTUALLY REFLECT THE REAL NATURE OF TRANSACTION IN VIEW OF THE EVIDENCE AVAILABLE BEFORE US. THE ASSE SSEE ALSO FURNISHED A COPY OF SALE AND PURCHASES RELATABLE TO THE YEAR ENDING MAR CH 2002 WHICH WAS DULY TAKEN INTO ACCOUNT BY US FOR COMING TO THE ABOVE CO NCLUSION. CONSIDERING THE ABOVE SPEAKING ORDER OF THE CIT(A) ON THIS ISSUE W E ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERE NCE ON THIS ISSUE. ACCORDINGLY GROUND NO. 1 OF APPEAL IS DISMISSED. 9. GROUND NO. 2 RELATES TO APPLICABILITY OF PROVISI ONS OF SECTION 2(22)(E) IN RESPECT OF LOANS OR ADVANCES AMOUNTING TO RS. 1 34 23 892/-. THE RELEVANT FACTS ARE IN PARAS 8.1 TO 8.5 OF THE IMPUGNED ORDER WHIC H ARE REPRODUCED AS BELOW: 8.1 DURING THE YEAR THE ASSESSEE RECEIVED ADVANCE /LOAN OF RS. 1 34 23 892/- FROM M/S. PINNACLE EDUCATION AND OPPO RTUNITIES PVT. LTD. ON VERIFICATION OF THE FORM NUMBER 10CCB SUBMITTED ALONG WITH THE RETURN FOR A.Y. 2003-04 AND 2004-05 THE A.O FOUND THAT TH E ASSESSEE WAS HAVING 49% OF THE SHARES AND WAS HAVING 20% VOTING RIGHTS AND SHAREHOLDING IN M/S. PINNACLE EDUCATION AND OPPORTU NITIES PVT. LTD. THE A.O ALSO OBSERVED THAT MS. PINNACLE EDUCATION AND O PPORTUNITIES PVT. LTD. HAD RESERVE AND SURPLUS OF RS. 2.25 CRORES AS ON 31-3-2004. UNDER THESE CIRCUMSTANCES THE A.O INVOKED THE PROVISIONS OF SECTION 2(22)(E) AND MADE AN ADDITION OF RS. 1 34 23 892/- TO THE IN COME OF THE ASSESSEE AS DEEMED DIVIDEND. 8.2. BEFORE ME THE APPELLANT CONTENDED THAT THE RE PORT OF THE CHARTERED ACCOUNTANT AS GIVEN IN FORM 10CCB REGARDING 49% ASS ESSEE'S SHAREHOLDING DOES NOT GIVE THE CORRECT STATE OF AFF AIRS AND SHOULD BE IGNORED AS THE SAME HAS BEEN SIGNED BY THE CHARTERE D ACCOUNTANT ONLY AND HAS NOT BEEN SIGNED BY THE ASSESSEE. THE APPELL ANT EXPLAINED THAT THE COMPANY MIS PINNACLE EDUCATION AND OPPORTUNITIE S PVT. LTD. WAS FLOATED BY MR. KIRAN VAIDYA AND MR. NILESH VAIDYA H AVING 100 SHARES EACH OF RS.10 IN THE YEAR 2000. THE COMPANY ALLOTTED 495 0 SHARES OF RS.1 01- EACH TO THE ASSESSEE ON 18.1.2001. THESE SHARES WER E SOLD TO MR. KIRAN VAIDYA FOR CONSIDERATION OF RS.49 5001- ON 6.2.2002 . THEREFORE DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD NO S HAREHOLDING IN THE COMPANY MIS PINNACLE EDUCATION AND OPPORTUNITIES PV T. LTD. THE APPELLANT CONTENDED THAT AS SHE DID NOT HOLD ANY SH ARES IN THE COMPANY THE AMOUNT OF RS.1 34 23 892/- RECEIVED BY HER IS NOT HIT BY THE PROVISIONS OF SECTION 2(22)(E) OF THE 1.1. ACT. IN SUPPORT OF HER CONTENTION THE ITA 1065/PN/2008 MRS RASHMI KIRAN VAIDYA A.Y. 2004-05 6 APPELLANT FILED COPY OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION AND CONFIRMATION LETTER FROM THE COMPANY MIS PINNACLE E DUCATION AND OPPORTUNITIES PVT. LTD. AS WELL AS A COPY OF THE SH ARE TRANSFER FORM. THE APPELLANT PLEADED THAT THE ADDITIONAL EVIDENCE FILE D IN THE SHAPE OF THE ABOVEMENTIONED DOCUMENTS SHOULD BE ADMITTED AS THE SAME COULD NOT BE PRODUCED AT THE ASSESSMENT STAGE ON ACCOUNT OF THE FACT THAT THE QUERY REGARDING APPLICATION OF PROVISIONS OF SECTION 2(22 )(E) WAS RAISED BY THE A.O AT THE FAG END OF THE YEAR AND THE ASSESSEE WAS NOT ALLOWED SUFFICIENT TIME TO PRODUCE THE ADEQUATE EXPLANATION/EVIDENCE. 8.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT IN THE LIGHT OF THE FACTS OF THE CASE. IT IS SEEN FROM THE ASSES SMENT RECORDS THAT THE QUERY REGARDING INVOKING OF PROVISIONS OF SECTION 2 (22)(E) WAS RAISED BY THE ASSESSING OFFICER ON 12.12.2006 ALLOWING LITTLE TIME TO THE ASSESSEE TO FURNISH HER EXPLANATION AND NOT ALLOWING FURTHER TI ME AS REQUESTED FOR. THEREFORE THE APPELLANT WAS PREVENTED BY SUFFICIEN T CAUSE FROM PRODUCING THE EVIDENCE WHICH SHE WAS CALLED UPON TO PRODUCE B Y THE A.O. DURING APPELLATE PROCEEDINGS THE ADDITIONAL EVIDENCES FIL ED BY THE APPELLANT WERE BROUGHT TO THE KNOWLEDGE OF THE A.O WHO AFTER EXAMI NATION OF THE SAME HAS NOT GIVEN ANY ADVERSE FINDING AND SUBMITTED THA T THE ISSUE COULD BE DECIDED ON MERITS. 8.4. THE RETURN OF ALLOTMENT PURSUANT TO PROVISO TO SECTION 75( 1) OF THE COMPANIES ACT 1956) SHOWS THAT 4 950 SHARES WERE A LLO1'TED BY THE COMPANY MIS PINNACLE EDUCATION AND OPPORTUNITIES PV T. LTD. TO THE ASSESSEE ON 18.1.2001. THE SHARE TRANSFER FORM (PUR SUANT TO SECTION 108(1A) OF THE COMPANIES ACT) SHOWS THAT ASSESSEE T RANSFERRED 4 950 SHARES OF MIS PINNACLE EDUCATION AND OPPORTUNITIES PVT. LTD. TO MR. KIRAN V. VAIDYA ON 6.2.2002 FOR CONSIDERATION OF RS.49 50 01-. FURTHER THE CONFIRMATION FILED BY THE APPELLANT FROM MIS PINNAC LE EDUCATION AND OPPORTUNITIES PVT. LTD. SHOWS THAT THE SHAREHOLDING PATTERN OF THE COMPANY DURING THE PERIOD 1-4-2003 TO 31-3-2004 WA S AS FOLLOWS: SR.NO. NAME NO. OF SHARES HELD PERCENTAGE 1. MR. KIRAN V VAIDYA 10 000 99.9% 2. MR. NILESH V. VAIDYA 100 0.01% 8.5 ALL THESE DOCUMENTS PROVE THAT THE ASSESSEE WAS NOT A SHAREHOLDER IN THE COMPANY DURING THE PREVIOUS YEAR RELEVANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. SINCE AT THE TIME OF RECEIPT OF THE AMOUNT OF RS. 1 34 23 892/- FROM M/S. PINNACLE EDUC ATION AD OPPORTUNITIES PVT. LTD. THE ASSESSEE WAS NOT A SHA REHOLDER OF THE COMPANY THE QUESTION OF INVOKING THE PROVISIONS OF SECTION 2(22)(E) AND MAKING ADDITION OF RS. 1 34 23 892/- AS DEEMED DIVI DEND DOES NOT ARISE. ACCORDINGLY THE ADDITION OF RS. 1 34 23 892/- IS O RDERED TO BE DELETED. 10. THE CASE OF THE REVENUE IS THAT THE ASSESSEE WA S A SHAREHOLDER IN M/S. PINNACLE EDUCATION AND OPPORTUNITIES PVT. LTD. WHI CH GAVE LOANS/ADVANCES TO THE ASSESSEE. AS PER THE REVENUE THE ASSESSEE IS A SHAREHOLDER IN THE SAID COMPANY. THEREFORE THE PROVISIONS OF SECTION 2(22) (E) ARE APPLICABLE TO THE SAID TRANSACTION OF LOANS/ADVANCES. DURING THE FIRST AP PELLATE PROCEEDINGS THE ASSESSEE DEMONSTRATED THAT THE ASSESSEE CEASED TO BE THE SHAREHOLDER OF THE COMPANY AS ON 31-3-2004. PRIOR TO THIS DATE THE A SSESSEES 4950 SHARES WERE ITA 1065/PN/2008 MRS RASHMI KIRAN VAIDYA A.Y. 2004-05 7 DIS-INVESTED. CONSIDERING THE FACT THAT THE ASSESS EE IS NOT HE SHAREHOLDER OF THE COMPANY THE CIT(A) HELD THAT THE SAID LOANS ADVANC E IS OUTSIDE THE SCOPE OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT. DURING THE PROCEEDINGS BEFORE US THE LEARNED DR FOR THE REVENUE RELIED ON THE ORDER OF T HE A.O. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE CONTENTS OF PARA 8.3 TO 8.5 OF THE IMPUGNED ORDER AND PRAYED THAT THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE BEFORE US. FROM THE FACTS IT IS NOTICED THAT THE ASSESSE E WAS ORIGINALLY HAVING SHARES IN THE SAID COMPANY ON 18-1-2001 AND THESE SHARES WERE SOLD BY THE ASSESSEE FOR A CONSIDERATION OF RS. 49 500/- ON 6-2-2002. SINCE THEN THE ASSESSEE IS NO LONGER SHAREHOLDER IN THE SAID COMPANY ESPECIALLY T HE TIME WHEN THE ASSESSEE GOT LOAN OF RS. 1 34 23 892/-. THEREFORE IN OUR V IEW WHEN THE ASSESSEE IS NO LONGER SHAREHOLDER OF THE COMPANY AT THE TIME OF RE CEIVING LOANS/ADVANCES THE LIMITED ISSUE FOR OUR CONSIDERATION IS WHETHER THE PROVISIONS O SECTION 2(22)(E) OF THE ACT HAS ANY ROLE TO THE IMPUGNED TRANSACTION. IN OUR OPINION THE ANSWER IS NEGATIVE AND IS IN FAVOUR OF THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE RELEVANT PARAGRAPH 8.2 TO 8.5 OF THE IMPUGNED ORDER REPRODUCED ABOVE. CONSIDERING THE ABOVE FACTUAL ASPECT OF THE CASE W E ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERE NCE. GROUNDS NO. 2 AND 3 ARE ACCORDINGLY DISMISSED. 12. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON THE 18 TH MARCH 2011 SD/- SD/- ( SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER PUNE DATED THE 18 TH MARCH 2011 ANKAM ITA 1065/PN/2008 MRS RASHMI KIRAN VAIDYA A.Y. 2004-05 8 COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ACIT 3. CIT-IV PUNE 4. CIT(A)-III PUNE 5. D.R. ITAT A BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE