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TMI Blog2016 (6) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... (e) will not be applicable at all and the addition made of Rs. 26,71,222/- deserves to be cancelled. 3. It is contended that the word 'advance' as mentioned in sec. 2(22)(e) has to be read in conjunction with the word 'loan' which means that there should be attributes of money lend coupled with the acceptance by the other side as a borrower on specific terms which normally includes payment of interest at a fixed percentage, obligation of repayment, tenure of the amount advanced or loaned etc. No such features exit in the present transaction. Hence, the provisions of sec. 2(22)(e) would not apply. 4. The Ld. CIT(A) has relied upon irrelevant material, incorrect appreciation of facts and has drawn adverse conclusion on genuineness of trade advance which was accepted by the AO. Thus the order of the CIT(A) is perverse, wrong and bad in law. 5. The above grounds are independent and without prejudice to one another. 6. The appellant prays that he may be allowed to add, amend, alter, modify or forego any of the grounds at the time of hearing. 2. The facts in brief are that the assessee was the proprietor of two concerns, namely, M/s DK Traders and M/s Flair Impex during rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Authorized Representative of the assessee addressing the grounds submitted that the proprietary concern of the assessee M/s. Flair Impex, was having a running account with the company M/s Cosmo Tribology (I) Private Limited and the assessee received payment against supply of materials on continuous basis which was supported by the bills. Further, he submitted that the word 'advance' as mentioned in section 2(22)(e) of the Act had to be read in conjunction with the word 'loan' that there should be attributes of money lend coupled with the acceptance by the other side as a borrower on the specific terms which, normally, includes payment of interest at a fixed percentage, obligation of repayment, tenure of amount advanced etc. and no such features were observed in the transaction of the assessee and, therefore, the provisions of section 2(22)(e) of the Act were not applicable in the case of the assessee. The learned Authorised Representative further rebutting the findings of the learned Commissioner of Income-tax(Appeals) that modus operandi adopted by the assessee was to record transactions in such a manner as to confuse the authorities to make-believe that these transactions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record including the paper book filed by the assessee. The only issue in dispute is whether the amount of Rs. 28,52,941/- advanced by the company M/s Cosmo Tribology (I) Private Limited was a trade advance or not. The learned Commissioner of Income-tax(Appeals) has decided the issue as under : "The above three situations in the section 2(22)(e) have to be seen separately. On perusal of the details, it is seen, that the appellant is a shareholder in M/s. Cosmo Tribology (l)Pvt. Ltd. having more than 10% voting rights. The other two shareholders are also apparently the family members of the appellant. The appellant is a proprietor of two concerns namely M/s. Flair Impex and M/s. D.K. Traders. M/s. D.K. Trader is in the business of manufacture of wax and candles and M/s. Flair Impex is engaged in trading in all kinds of waxes like paraffin wax, Slack wax etc. The company and the above two concerns are under the control and management of the appellant. The AR of the appellant furnished the bills for supplying the material to M/s. Cosmo Tribology India Pvt. Ltd. A perusal of the same showed that the appellant maintained six bill books which are serially numbered but the transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.11.2007. The AR of the appellant has not provided the bank statement to substantiate whether the above cheques were actually encashed and recorded in the respective account. No transport bills were furnished by the company to prove that the goods were actually lifted from the appellant's premises because on the bill it is mentioned "party own transport". The appellant also has not furnished the VAT registration number of the appellant because the goods those were supplied were subjected to VAT in the appellant's bills. Therefore, the appellant could not conclusively prove that the transactions between the appellant and the company M/s. Cosmo Tribology (I) Pvt. Ltd. is strictly a commercial transaction where the trade advances were extended by the company to the appellant. Since the appellant is a proprietor of a concern who benefitted to the extent of the accumulated profits in the garb of trade advances, the Assessing Officer has rightly held it to be a deemed dividend under section 2(22)(e). In view of this, the addition made by the Assessing Officer is upheld and is confirmed." 4.4 In respect of the observations of the learned Commissioner of Income Tax(Appeals), the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent they are handpick and recorded in different Bill books and arranged in such a manner as if they are in continuity in ledger account. Similarly, on 17.9.2007 goods were supplied vide Invoice No. TI/165 from the Bill Book No.4 on the very next day i.e. 18.9.2007 vide invoice No. TI/069 material was supplied to the company. Similarly, from Bill Book No.2 on 4.2.2008, 12.2.2008 and 1.3.2008 against the voice No. TI/092, 094, 097 goods were supplied and from Bill book no.6 on 8.2.2008, 16.2.2008 against the invoice no. TI/251 and 253 goods were supplied. Reply:- Again the appellant submits that as and when there was requirement from the Company, the supply of material was made. It is also evident from the Bill Books that there are many buyers from the assessee and the Bill books are kept in a bound manner so that there is absolute control by the assessee. As regards the reference to the specific bills, attention is again drawn to the same bills which are forming part of the record. The perusal of the bills clearly show that they are for different quality of wax material as stated below:- 17.9.2007 T1/165 Book No. 4 Paraffin wax 18.9.2007 T1/069 Book No.2 slack wax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the assessee is having proper VAT registration which is evident from the bills already filed by the assessee. In view of the above submissions, since there is a mistake which is apparent from record, your Honours' are requested to rectify the order incorporating the said facts which go to the root of the matter and conclusively prove that the transaction between the appellant and the company M/s. Cosmo Tribology (I) Pvt. Ltd. is a commercial trans action and the trade advance is against supply of material and cannot be treated deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961." 4.5 In support of the contentions, the learned AR during the hearing of the case, also produced original bill books of the proprietary concern of the assessee, i.e., M/s Flair Impex. On examination of the bill books, we found that the assessee has maintained separate bill books for paraffin wax and slack wax and due to that bills of the same date are not having running serial numbers. We also agree with the other contentions raised by the learned Authorized Representative of the assessee that the assessee was registered to VAT and transport expenses were borne by the purchase parties ..... X X X X Extracts X X X X X X X X Extracts X X X X
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