Income Tax Appeal v. Shri Kailashchandra Nuwal

IN THE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH, NAGPUR INCOME TAX APPEAL NO.52 OF 2010The Commissioner of Income Tax-IV, MECL Building, Nagpur ..vs.. Shri Kailashchandra Nuwal WITH INCOME TAX APPEAL NO.108 OF 2010The Commissioner of Income Tax-IV, MECL Building, Nagpur ..vs.. Shri Kailashchandra Nuwal .......................................................................................................................................................Office Notes, Office Memoranda of Coram,appearances, Court orders or directions Court's or Judge's Orderand Registrar's orders Court's or Judge's Order ....................................................................................................................................................... Shri S.N. Bhattad, counsel with Shri Bhushan Mohta, counsel forthe appellant. Shri Pardiwale, senior counsel with Shri N.R. Saboo, counsel forthe respondent. CORAM: B.P. DHARMADHIKARI & V.M. DESHPANDE, JJ.DATED: JANUARY 25, 2016. Heard. Following two questions are sought to beraised in Income Tax Appeal No.52 of 2010, thus: (1) Whether on the facts and in thecircumstances of the case the ITAT wasjustified in law in holding that thepayment of Rs.17,00,000/- received bythe assessee's proprietary concern from M/s. Economic Explosives Ltd. Was onaccount of discount and a regular basis transactionandconsequentlyprovisions of section 2(22)(e) of the ITAct were not applicable? (2) Whether on the facts and in thecircumstances of the case the ITAT wasjustified in law in holding that theopening balance should be exluded incomputing the deemed dividendu/s.2(22)(e) of the IT Act in respect ofthe payments received by assessee'sproprietorship concern from M/s. SolarExplosives Ltd.? Following two substantial questions of laware sought to be raised in Income Tax Appeal No.108 of2010, thus : (1) Whether on the facts and in thecircumstances of the case the ITAT wasjustified in law in holding that thepayment of Rs.25,65,000/- received bythe assessee's proprietary concern from M/s. Economic Explosives Ltd. was onaccount of discount and a regular basistransactionandconsequentlyprovisions of section 2(22)(e) of the ITAct were not applicable? (2) Whether on the facts and in thecircumstances of the case the ITAT wasjustified in law in confirming theCIT(A)'sorderdeletingthedisallowance of proportionate interestof Rs.17,554/- Insofar as Question No.1 in both appeals isconcerned, it is not in dispute that it is discount whichhas been extended to assessee after achieving particulartarget. We find that this aspect has been looked into inparagraph No.3.8 in the order of CIT appeal. Its natureas incentive is not in dispute. It is not an exceptionshown only to assessee. Insofar as later question is concerned, thereasons given by CIT in paragraph No.3.8 forAssessment Year 2004-05 and in paragraph No.2.34 forAssessment Year 2005-06. About accepting opening balance as valid figure for working out the quantum of advance duringthese assessment years, we find that in Assessment Year2004-05 as there was a transaction in respect of sum ofRs.2,10,000/-, it has been treated as deemed dividendunder Section 2(22)(e). The assessee has notquestioned this finding further. In Assessment Year 2005-06, there was notransaction at all. Recurring effect, if such openingbalance is permitted to be counted is apparent and hasbeen rightly looked into by CIT. It has been maintainedeven by ITAT. We, therefore, do not find any substantialquestion of law arising in both these appeals. TheIncome Tax Appeals are rejected. JUDGEJUDGE !! BRW !!