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TMI Blog2016 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. Appeal No. Assessee Deemed Dividend Amount Penalty u/s 271(1)(c) 2002-03 661/JP/2011 Trimurty Buildcon Pvt. Ltd 75,825 27,069 2003-04 662/JP/2011 Trimurty Buildcon Pvt. Ltd 38,442 14,127 2004-05 663/JP/2011 Trimurty Buildcon Pvt. Ltd 105,000 37,668 2006-07 664/JP/2011 Trimurty Buildcon Pvt. Ltd 79,510 26,783 2007-08 665/JP/2011 Trimurty Buildcon Pvt. Ltd 180,000 60,558 2008-09 468/JP/2011 Trimurty Buildcon Pvt. Ltd 3,929,017 1,214,066 2007-08 667/JP/2011 Geeta Mishra (B) 527,768 202,537 2005-06 668/JP/2011 Abhishek Estate Pvt. Ltd.(C) 80,000 29,274 2005-06 666/JP/2011 Trimurty Farms & Retreats (D) 11,005 4,027 Total (A+B+C+D) : 5,026,567 1,616,109 Before imposing penalty under section 271(1)(c) of the IT Act, the AO gave reasonable opportunity of being heard to all the assessees. The Director of the Company Shri Abhishek Mishra vide written submission dated 08.05.2009 had admitted that the intra group fund transfers were falling within the ambit of section 2(22)(e) of the IT Act. Thus additions in all the cases were made on account of deemed dividend. The assessee had not preferred appeal before appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India vs. Dharmendra Textiles Processors & Others, 306 ITR 277 (SC) for mens rea, Union of India vs. Rajasthan Spinning & Weaving Mills (2009) 180 Taxman 609 (SC) for penalty is compensatory in nature. Thereafter, he relied on the case of Atul Bindal,317 ITR 1 (SC) wherein the Apex Court has equated civil liability with a strict liability. After considering the explanation-1 to section 271(1)(c), the AO imposed penalty in A.Y. 2008-09 at Rs. 12,14,066/- which is 100% of tax sought to be evaded. Similar penalty was also imposed by the AO from A.Y. 2002-03 to 04-05 and A.Y. 2006-07 to 07-08, but amount penalty vary to year to year, the findings of the AO are the same. 3. Being aggrieved by the order of AO, assessee carried the matter before ld. CIT (A) who had confirmed the addition after considering the assessee's reply and held that assessee's claim that these were the business transactions between the group companies were not supported by facts, figures and details. He further held that even these advances were for business purposes, which are not differentiated under section 2(22)(e) of the Act. The assessee's action was also not voluntary as the AO had gathered these evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x voluntarily. These loans received for business purposes, all group companies are engaged in similar line of real estate business and that Deemed Dividend law is not applicable on business advances. The loans were re-paid back. On business advances made by the company to its shareholders for business purposes are held by various courts that such advances are not covered under section 2(22)(e) of the Act as deemed dividend. This issue is debatable, the assessee at the time of assessment proceedings as well as penalty proceedings had raised this issue before the AO which was not considered by both the AO. Even at the time of imposing the penalty under section 271(1)(c) of the Act, both the authorities i.e. AO as well as ld. CIT (A) has held that section 2(22)(e) does not differentiate between advances claimed to be business advance or any other type of advance. The assessee submitted before the AO that the funds received by the assessee company were used for acquiring development rights in land at Tehsil Phagi, Jaipur for their real estate township project and that such fund was on several occasions given back to the other group companies. The ld. CIT (A) was also not justified by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nakshi (2009) 319 ITR (AT) 262 (Chennai) He argued that deeming provisions are technical in nature and which should be applied only for some definite purposes for which fiction was created and not to be extended beyond that legitimate. He further argued that Hon'ble Mumbai High Court decision in the case of Alkesh K. Patel (supra) is not applicable in the case of the assessee as Hon'ble High Court has not expressed any view in this judgment as matter was restored back to the ITAT. The deeming law is a complex law even specialist cannot calculate income correctly. Finally, he summarized his argument as under :- " In view of the above, to summarize, penalty confirmed by the ld. CIT (A) deserves to be reversed for the following reasons - 1. The advances have not been disputed to be business advances. Business Advances do not attract provision of Section 2(22)(e) is supported by the judicial pronouncements. Thus it is a possible view and a debatable one. Where two views are possible no penalty can be imposed. 2. The transaction in reality was a loan repayable contractually and the lender by force of law could recover it back and the same have been repaid back. It is only a deemi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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