TMI Blog2013 (7) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... to the file of AO for deciding afresh after considering the documents filed before CIT(A) under rule 46A. Addition on account of deemed dividend u/s 2(22)(e)- Held that:- Additions made u/s 2(22)(e) while framing assessment u/s 153A, was not justified in so far as no incriminating material was found during the course of search. As per the finding recorded by AO in the assessment order u/s 153A, the fact that advances having not been made for business purposes by the alleged company to the assessee came to the notice of Department only during the assessment and not during course of search - the additions made u/s 2(22)(e) in the assessment years 2003-04 to 2006-07 are restored back to the file of A0 for deciding afresh. It appears that the AO has made cumulative addition u/s 2(22)(e) without reducing addition made on account of deemed dividend in earlier years. AO has made addition on account of deemed dividend in excess of accumulated profits in RHPL, which is in violation of provisions of Section 2(22)(e). It appears that the AO has not reduced deemed dividend assessed in the hands of assessee shareholder in past assessment year from the surplus while determining the accum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to interfere in the order of lower authorities for treating the entire contract receipt as assessee's income from other sources. Unexplained expenditure on marriage of niece - Held that:- As nothing was found during the course of search to indicate expenditure was incurred on marriage by the assessee no infirmity in the order of CIT(A) for deleting addition made in the hands of the assessee. Unexplained expenditure as mentioned in diary BS-3 found and seized from residential premises at HIG 38, Old Subhash Nagar, Bhopal - Held that:- Keeping in view cash flow statement filed before AO to substantiate the cash deposits in bank account wherein assessee was having surplus cash in hand to verify repetitive nature of entry and the expenditure which was found in the diary also found recorded in the regular books of account and the surplus cash found available with assessee restore the matter to the file of Assessing Officer. Unexplained expenditure in diary A-3 - Held that:- entries were found to the effect that payments were made for purchase of Open Car. The entry was done in the handwriting of the assessee. After giving due opportunity, the Assessing Officer made addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in the business of Sehlot Group, wherein search was conducted, all these appeals were heard together and are most of the appeals were disposed of by a consolidated order dated 22.03.2013. 3. Rival contentions have been heard and records perused. Brief facts of the case are that a Search and Seizure operation was conducted on 30-5-2008 at Residential premises of Shri Arun Sehlot at E-3/10, Arera Colony, Bhopal. During the course of search total cash found' was Rs, 15,350/- and Jewellery found was valued at Rs, 1,71,740/-. Shri Arun Sehlot stated in his statement that his source of income from business/director of company in M/s. Raj Homes Pvt. Ltd., MIs Raj Events and Entertainment Pvt. Ltd. and M/s. Raj Industries. Shri Arun Sehlot stated in his statement that cash found of ₹ 6,550/- during search proceedings from possession is withdrawal from salary. Smt. Sandhya Sehlot w/o Shri Arun Sehlot has Stated in her statement that her source of income from director in M/s MinaI Builders. Ltd., Bhopal. M/s Raj Homes Pvt. Ltd., Bhopal and M/s Raj Events and Entertainment Pvt. Ltd., Bhopal. On being asked about cash found of ₹ 15,350/- and Jewellery 369.710 grams, valued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002-03 498920 371468 4. Arun Sehlot 2003-04 559383 364628 5. Arun Sehlot 2004-05 702100 373829 6. Arun Sehlot 2005-06 522237 847811 7. Arun Sahlot 2006-07 738522 1057909 8. Arun Sehlot 2007-08 909538 2622710 9. Arun Sehlot 2008-09 34432 2846914 10. Arun Sehlot 2009-10 0 3124216 The Assessing Officer further observed that the assessee is primarily a business man involved in the business of buildings, newspaper running and salary income from various companies and firms. He is also a proprietor of M/s. Arun Sehlot and Associates and M/s. Raj Industries. A per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of ₹ 5,48,820/-. He further contended that even in assessment year 2004-05, the assessment was framed u/s 143(3) i.e. under scrutiny scheme, wherein agricultural income of ₹ 7,02,100/- shown by the assessee were fully accepted by the Assessing Officer after detailed inquiry. As per ld. Authorized Representative, even in the block return, the assessee has offered the same agricultural income, which were already offered in the regular return which was accepted by the Assessing Officer u/s 143(3), accordingly, disallowance of entire agricultural income by the Assessing Officer and treating the same as income from other sources were not justified. 6. We have considered the rival submissions and have gone through the orders of the authorities below. The issues under consideration have already been decided by the Tribunal vide its order dated 22nd March, 2013, in the case of other group members, Mr.Hitesh Mehta Others, wherein observation and finding of the Tribunal was as under :- 7.Rival contentions have been heard and records perused. We had also gone through the additional documents filed before the CIT(A) under rule 46A. 8. With regard to agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer and CIT(A) for decline of deduction and after verifying the additional evidence filed before the CIT(A) under rule 46A, we found that the assessee has filed original lease agreements before the CIT(A). One of the reasons given by the Assessing Officer for decline was that original lease agreement was not produced. It was submitted by the assessee that due to change in office address, the original lease agreements were not traceable during the relevant point of time, therefore, they were filed before the CIT(A). The other reason given by the Assessing Officer was that original khasra, khatauni and form P-II was not filed, therefore, claim of agricultural income cannot be accepted. Before the CIT(A), the assessee has filed original khasra, khatauni and form no. P-II to substantiate its claim of agricultural income but the same were not accepted. Before the CIT(A), the assessee has filed original khasra, khatauni and form P-II to substantiate its claim of agricultural income and same are placed at page 230 to 457 of the paper book. The assessee has also filed original receipts of payment of lease rent, which are placed at page 230 to, 457 of the paper book. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the search right from assessment year 2001-02. In the assessment year 2003-04 and 2004- 005, there was scrutiny assessment order, wherein agricultural income of ₹ 4,99,400/- during the assessment year 2003-04 was accepted by the Assessing Officer at ₹ 4,70,790/-. Similarly, in the assessment year 2004-05, the assessee's case was decided u/s 143(3) and agricultural income of ₹ 8,52,569/- was accepted at ₹ 8,20,530/-. Thus, in both the scrutiny assessments keeping in view the land taken on lease, agricultural income at ₹ 9000/- per acre was accepted by the Assessing Officer. When in the scrutiny assessment, the income has been accepted, without giving cogent reasoning, the same cannot be declined. Since original and Xerox copy of lease agreements are same, no reason for assessee not to submit original before the Assessing Officer, if he could submit it before CIT(A). Similar is the position with regard to khasra, khatauni and form P-II. Even in absence of original lease agreement and khasra khatauni, the Assessing Officer could make inquiry even on photocopy. The assessee had furnished addresses of all the farmers, the farmers in the agreement ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A) under rule 46A, which goes to the root of the issue. We direct accordingly. 7. As the facts and circumstances in the case of present assessee is pari materia to the facts and circumstances discussed by the Tribunal in aforementioned order, respectfully following the decision of the Tribunal in the case of other group members as discussed hereinabove, issue in all the years under consideration is also restored back to the file of the Assessing Officer with the same directions. 8. In all the years under consideration, the assessee is also aggrieved for addition made on account of deemed dividend u/s 2(22)(e) of the Act. Issue with regard to payments made by Raj Homes Private Limited (RHPL) to Raj Events and Entertainment Private Limited ( REEPL ) have been dealt by the Assessing Officer at page 67 to 89, para 5 onwards. The CIT(A) has dealt with the issue at page 75 to 105 and conclusions have been narrated at page 103 to 105 stated in para 5.6 to 5.11. 9. Addition on account of deemed dividend on payment by RHPL to Arun Sehlot and Associates have been dealt by the Assessing Officer at page 67 to 89 para 5 onwards. The CIT(A) has dealt with the issue at page 63 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Before the CIT(A), it was contended by the ld. Authorized Representative that no incriminating material was found or brought on record for the subject addition made by the Assessing Officer and that the facts were duly disclosed in the return/balance sheet/audit report of each year mostly prior to the search. Further contention was that in a most of the cases, assessment stood concluded on the date of search and hence cannot be treated as abated. It was further submitted that the issue cannot be considered in the search assessment as it may at best be a matter of regular assessment because it is not represented undisclosed. 12. However, the CIT(A) did not agree with the assessee's contention and held that loan given by RHPL to M/s. Arun Sahlot and Associates - a Proprietary concern of the assessee are covered in the first limb of Section 2(22)(e) of the Act. The assessee holds 45 % shares in the payer company RHPL and that assessee was having more than 10 % of the voting powers in RHPL. Accordingly, additions made by the Assessing Officer were confirmed by the ld.CIT(A). 13. In respect of loan given by RHPL to Raj Industries by giving similar findings, the ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely a rubber stamp which is exercised by her husband , the appellant to divert money from the business. That after clubbing the holding of his wife with that of the appellant, the total holding of the appellant in REEPL comes to 23.96%. He held that since the total holding of the appellant including shares held by his wife is more than 20% the appellant has substantial interest in REEPL. That through 45% holding in RHPL the appellant is indirect beneficial owner of 28.33% shares of REEPL in 2004-05 and similarly in other years. After giving these findings the A.O. held that the loans given to REEPL comes under the preview of the second limb of section 2(22)(e). He assessed the loans given by RHPL to REEPL in hands of the appellant u/s 2(22)(e). 16. Before the CIT(A), following submissions were made by the assessee :- 5.3. During the hearing before me written arguments were submitted which is as under: Assessee does not hold required 20% shareholding in REEPL. Deemed dividend, if any, can be taxed only in the hands of recipient and since assessee did not receive the amounts which where received by REEPL only, it can not be taxed into his hands. Payments were du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-05 2005-06 58.29 Profit 2005-06 2006-07 (-)1095.37 Loss 2006-07 2007-08 (-)1120.18 Loss 2007-08 2008-09 (-)678.38 Loss 2008-09 2009-10 688.44 Profit 2009-10 2010-11 381.82 Profit 2010-11 2011-12 171.30 Profit 1.4 Expansion of the business of REEPL was thus in the mutual interest of both RHPL REEPL which necessitated continuous funding by RHPL. 1.5 Money funded by RHPL to REEPL has not been withdrawn or used by the assessee shareholder. On the contrary, assessee, Mr. Arun Sahlot, has provided funds to REEPL without interest as its owners, as also done by RHPL. 1.6 No advance could have been given by RHPL to REEPL without such business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2(22)(e). Hence, provisions of Section 2(22)(e) are not applicable on this count also. 4. Substantial interest -holding of different entities cannot be club bed for the purpose of Section 2(22)(e) :- 4.1 It is settled law that share holder referred to in sec. 2(22)(e) is registered shareholder as well as beneficial shareholder. 4.2 In the present case, assessee Mr. Arun Sahlot is registered shareholder of REEPL in his individual capacity. Similarly, RHPL is registered shareholder of REEPL in its capacity as a company. Company is treated as a person and different entity u/s 2(31). Both, RHPL and Arun Sahlot, are hence different separate shareholders legal entities and, therefore, their own registered shareholding can not be clubbed for the purpose of Section 2(22)(e). 4.3 Moreover, Sec.2 (22)(e) nowhere uses the expression directly or' indirectly . Hence, it cannot be read or presumed. 4.4 It is the settled legal position that sec. 2(22)(e) is a deeming legal fiction whose provisions have to be strictly construed. Relied on: CIT v, C.P, Sarathy Mudaliar [1972]83 ITR 170 (SC) CIT vs. Ankitech (P) Ltd., [2011] 199 Taxman 341 (Del. H.C.). 4.5 Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w provisions have been made applicable only in cases where loans or advances are given after 31st May, 1987. (emphasis supplied.) From the above circular also, Your honour will kindly agree that no addition is required to be made in the hands of appellant herein. In the light of the above facts and legal position, we humbly request your honour to kindly delete the addition, on payments by RHPL to REEPL, made by the A, 0. under section 2(22)(e) and oblige. Without prejudice to our above submissions, it is humbly submitted that the ratio of the decision of Hon'ble Bombay High Court in Navnitlal C. Jhavari V CIT (1971) 80 ITR 582 (Bom) should also be considered according to which while calculating accumulated profits an allowance for depreciation at the rates provided by the Income-tax Act itself has to be made by way of deduction. The relevant details are available with the Assessing Officer who may kindly be directed accordingly by yourhonour.: 5.4 A copy of the appellant written arguments were given to the A.O. for comment. The A.O.s comment wax received vide letter dtd. 23. 2.2012 which is as under:- .. The section 2(22) talks about the definition of divid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company). The above except ion clause of what is not dividend clearly mentions that only if the Company is in the business of money landing can a advance or loan he treated as in the ordinary course of its business The details as submitted by the AR about RHPL giving to REEPL for business expediency holds no relevance as the act provides exception only to money landing Companies. (2) Assessee's submission Share holders means registered share holder (0 whom money, is given AO's Comment :- The section 2(22) (e) is reproduced as under :-. (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent. of the voting power, or to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to point out that even the Rajasthan High Court in the case of CIT v. Hotel Hilltop [IT Appeal No. 25 of 2005, dated 17-3-2008] had interpreted the provision in identical manner, It would be apt to quote Para 7 of the said judgment which contains the relevant discussion:- The more important aspect, being the requirement of section 2(22)( e) is, that the payment may be made to any concern, in which such shareholder is a member, or the partner, and in which he has substantial interest, or any payment by any such company, on behalf, or for the individual benefit of any such shareholder .... Thus, the substance of the requirement is, that the payment should be made on behalf of, or for the individual benefit of any such shareholder, obviously, the provision is intended to attract the liability of tax on the person, on whose behalf or for whose individual benefit, the amount is paid by the company, whether to the shareholder, or to the concern firm. In which event, it would fall within the expression deemed dividend . Obviously, income from dividend, is taxable as income from other sources, u/s 56 of the Act, and in the very nature of things, the income has to be, of the pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has clubbed the share holdings of the appellant's wife Smt. Sandhya Sahlot with the holding of the appellant to arrive at a conclusion that the appellant holds more than 20% shares in REEPL. 5.7 The crucial issue to be decided in the matter is whether the shares held by Smt. Sandhya Sahlot can be clubbed with those held by the appellant for the purpose of holding that he has substantial interest in REEPL, The A.O, has referred to the statement of Smt. Sahlot recorded during the course of search and on the basis of that statement he has given a finding that the appellant is true owner of the shares held by Smt. Sandhya Sahlot also. The deposition of Smt. Sahlot made in her statement is not adequate and sufficient to support the finding that the shares held by Smt. Sahlot arc truly held by the appellant. Smt. Sandhya Sahlot is also assessed by the same A.O. Her income is not clubbed u/s 68 with the appellant. She has her own independent source of income and has purchased shares of REEPL by investing her own funds. Smt. Sahlot is a regular income tax payer. Salary income earned by her as Director RHPL, REEPL and MBPL has been taxed in her hand. In the assessment order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) a person has to be both registered share holder as well as beneficial share holder. In the case of shares held by Smt. Sahlot, the appellant is not a registered share holder. In view of the above it is held that shares held by Smt. Sahlot cannot be treated as held by the appellant. Since the share holding of Smt. Sahlot cannot be clubbed with the share holding of the appellant who holds only 16.25 % shares in the previous year relevant to A.Y. 2004-05 to 2006-07 and holds only 10.45% shares in the previous years relevant to A.Y.s 2007-08 to 2009-10, it is held that the appellant does not have substantial interest in REEPL. 5.8 Another issue to be decided in this case is as to whether shareholding of RHPL in REEPL can be considered or clubbed indirectly to determine requisite 20% voting power. The appellant is registered shareholder of RHPL and REEPL as individual. RHPL is registered shareholder of REEPL as a company holding shares in its own name. As per corporal law, a company is a legal Juridical person independent of its shareholder, unlike partnership firm which does not have a status separate from it's partners. Since the appellant and RHPL are altogether differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43,60,70,067 2009-10 59,93,87,933 This ground of appeal is allowed for all years. 21. Against the above deletion of addition, the Revenue is in appeal before us. 22. We have considered the rival submissions and have gone through the orders of the authorities below as well as submissions filed before the CIT(A) and Assessing Officer's comments thereon. We found that the assessee was having 45 % shares of RHPL in all the years under consideration. He held 16.97 % shares of REEPL from assessment year 2004-05 to 2006-07 and 10.5 % from assessment year 2007-08 to 2009-10. In terms of provisions of Section 2(32) a person can be treated as having substantial interest of the company if he holds 20 % shares or more. However, while reaching to the holding of 20 %, the Assessing Officer has clubbed the shares as held by the assessee's wife Smt. Sandhya Sahlot, which was 7.71 %. We found that Smt. Sandhya Sahlot was also assessed as an independent assessee with the same Assessing Officer, wherein her income was not clubbed u/s 68 with the income of the assessee. Smt. Sandhya Sahlot had her own independent source o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion that the Assessing Officer was not justified in clubbing the shares held by wife into the shares of the assessee. As the holding by the assessee was below 20 %, the ld. CIT(A) concluded that no addition can be made in the hands of the assessee in respect of loans given by RHPL to REEPL in the assessment year 2004-05 to 2009-10. We found that detailed finding recorded by the ld.CIT(A) with regard to holding of shares and independent status of Smt. Sandhya Sahlot are as per material on record and do not require any interference on our part. Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the addition made in respect of payments made by RHPL to REEPL during the assessment years 2004-05 to 2009-10. 23. In the result, ground taken by the Revenue in all the years are dismissed. 24. The ld. Authorized Representative has also challenged addition made u/s 2(22)(e) while framing assessment u/s 153A on the plea that no incriminating material was found during course of search and that assessment for the assessment year 2003-04 to 2006-07 were not abating in the sense that either assessments were framed u/s 143(3)/143(1) or the time for issue of no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be made in assessment/reassessment only when some incriminating material has been found. All these aspects had been referred to the Special Bench of the Tribunal in case of All Cargo Global Logistics Ltd. and order of Special Bench dated 6.7.2012 has been referred. 6.1 The Special bench in the case of All Cargo Global Logistics Ltd. (supra), has held that provisions of section 153A come into operation if a search or requisition is initiated after 31.5.2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or properly discovered in the course of search. 27. As per ld. Authorized Representative , in view of the above decision of Hon'ble Special Bench and other co- ordinate benches as discussed above, additions made u/s 2(22)(e) while framing assessment u/s 153A, was not justified in so far as no incriminating material was found during the course of search. Our attention was also invited to the copy of the panchnama placed at page 2(28) -2(29/Volume II of the paper book to indicate that no incriminating material was referred with respect to any contravention of Section 2(22)(e) of the Act. 28. We have considered the rival submissions and found from record that assessment for assessment year 2003-04 and 2004-05 was completed u/s 143(3). In respect of assessment year 2005-06, for which the return was filed on 31.3.2006, the same was processed u/s 143(1), the due date of notice u/s 143(2) was expired on 31.3.2007. Similarly for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riminating material indicating contravention of provisions of Section 2(22)(e) as found during the course of search. Even during the course of hearing before us, the ld. CIT DR did not refer to any incriminating material found during course of search to substantiate the observation of CIT(A). On the other hand, the ld. Authorized Representative has vehemently argued that as per the finding recorded by the Assessing Officer in the assessment order u/s 153A, the fact that advances having not been made for business purposes by the alleged company to the assessee came to the notice of Department only during the assessment and not during course of search. 31. In view of the above contradiction in the findings recorded by the Assessing Officer and CIT(A), the additions made u/s 2(22)(e) in the assessment years 2003-04 to 2006-07 are restored back to the file of Assessing Officer for deciding afresh this legal issue after giving clear finding with regard to incriminating documents, if any, found during the course of search indicting contravention of provisions of Section 2(22)(e) of the Act. The Assessing Officer is directed to decide the legal issue taking into considering the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to examine the Board Resolution and sanction letters of all these financial institution, who have sanctioned various amount of loans in favour of M/s. Raj Homes Pvt. Limited, who in turn given some loan to assessee Arun Sahlot and his other concerns. We direct accordingly. 35. During the course of hearing before us, the assessee has filed application under rule 29 with respect to addition made under the heading Dividend in respect of payment by RHPL to Arun Sahlot Associates, proprietor Arun Sahlot and payment by RHPL to Raj Industries, Proprietor Arun Sahlot. It was submitted by the ld. Authorized Representative that these documents go to the root of the issue, which comprises of copy of resolution in RHPL and copy of sanction letter of the Bank/Financial institution. As per ld. Authorized Representative, all the sanction letters of Banks and financial institutions are much prior to the date of search and the same goes to the root of the issue to explain the commercial expediency of giving advances by these companies to assessee Arun Sahlot. It was further submitted that all these evidences go to the root of the matter and are relevant material for adjudication of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or at part up to ₹ 5 crores from the company as and when required. These terms and conditions were deliberated at length in the Board meeting and in view of the business needs of the company, it was decided that the company should agree for the same. Board's resolution is dated 5.12.2001. These resolutions constitute permanent record to be maintained and kept by the company, without which it cannot function. Thus, this evidence also goes to the root of the issue for justifying the action of these companies for advancement loan to the assessee Shri Arun Sahlot, who is Director in these companies while deciding the addition made in terms of Section 2(22)(e). Since the loans were given by the financial institutions to RHPL not only on the personal guarantee of Shri Arun Sahlot but also on the condition of providing equitable mortgage of his personal property to be mortgaged to the bank for such loan, while deciding the nature of transaction of loans by the company RHPL to Arun Sahlot, these documents are required to be considered. In the fitness of things, we accept these additional evidences and direct the Assessing Officer to examine these documents while deciding afresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006 have also sanctioned a loan of ₹ 25 crores in favour of Raj Homes Pvt.Limited on the personal guarantee of Arun Sahlot. A further loan of ₹ 30 crores was also sanctioned by Bank of Baroda in favour of Raj Homes Pvt.Limited, vide sanction letter dated 11.10.2007, wherein personal guarantee of Arun Sahlot was insisted. 39. All the above sanction letters clearly stipulate the terms and conditions of sanction and the purpose for which loan was sanctioned in favour of Raj Homes Private Limited. As per the sanction letter, a loan has been sanctioned for the various projects undertaken by M/s. Raj Homes Pvt.Limited, which is the main business of it. For completing these projects the company was in need of funds and the funds were provided by various scheduled bank and term lending institution. As the loans were advanced to Raj Homes Private Limited, on the equitable mortgage of personal property of Arun Sahlot alongwith his personal guarantee, the nature of advance given to Raj Homes Pvt.Limited to Arun Sahlot indicate that in consideration of providing personal guarantee and equitable mortgage of personal property of assessee. Arun Sehlot to the Bank, these companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arun Sahlot and also mortgage of personal property of Shri Arun Sahlot. The Board's resolution also provided that Shri Arun Sahlot, Director of the company should be suitably compensated for providing their personal guarantee for loans so sanctioned by the financial institution. The resolution also provided that in lieu of providing such bank guarantee, the Director will be allowed to withdraw funds up to ₹ 5 crores from the company as and when required. Thus, the advance given by Raj Homes Private Limited to Shri Arun Sahlot and the concerns controlled by Arun Sahlot cannot be termed as a gratuitous payment but was a payment under commercial consideration, which does not come within the mischief of deemed dividend u/s 2(22)(e) of the Act. 41. Reliance was also placed on the decision of Coordinate Bench in the case of Shri Vaidya, I.T.A.No. 1270/Mad/2011, order dated 28th June, 2012, wherein it was held that shareholders offering personal bank guarantee and collateral securities for loan for the benefit of company was out of business expediency. Hence, any finance or loan given by the company to the shareholder, will not be hit by deeming provisions of Section 2(22)(e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of RHPL to MBPL placed at page 771 to 807 of the Vol. V of the paper book. Our attention was also invited to copy of ledger account of financial year 2006-07, showing sale of two floors to RHPL which are placed at page 7899, Vol. V of paper book. Attention was also invited to relevant year's schedule of balance sheet of RHPL and MBPL to indicate the advance given by these companies to Arun Sahlot. Attention was also invited to Board's resolution dated 15.5.2004, passed by MBPL, wherein approval of MOU with Raj Homes Private Limited was taken on record and it was resolved that MOU agreement between Raj Homes Pvt. Limited for construction of shopping complex in Minal Residency at Village Narela Sankaria, J.K. Road, Bhopal, was to be undertake. Board's resolution passed by Raj Homes Pvt. Ltd. dated 15.5.2004 was also placed on page 905 Vol. V of paper book, which evidenced MOU agreement between the Company and Minal Builders Private Limited, for construction of shopping complex in Minal Residency. Board's resolution of the same dated was also placed at page 906/Vol. V of paper book, wherein it was resolved that Minal Builders private Limited is having around 2 acres of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted profit in the hands of company in the next year. However, while deciding the issue afresh as directed above, the Assessing Officer should take this in to account. We direct accordingly. 44. With respect to advance given by RHPL to M/s. Raj Industries, we found that Raj Industries is in the business of manufacturing of holo blocks, paving blocks, solid blocks, grave stone, channels etc. It mainly does manufacturing all these items on job work basis for Raj Homes, which is clear from the copy of ledger account placed at pages 942 to 972 of the paper book. Raw materials for these items is provided by Raj Homes. Raj Homes is a builder and developer of houses and required these items on large scale for its housing project on regular basis. However, direct purchases of these items from other suppliers would have been of much higher rates as the other supplier would have added his margins on supply which was saved by Raj Homes to have un-interrupted and regular supply of these blocks on large scale basis for its construction activities, which was catered by Raj homes only. Thus, the impugned payment by RHPL to Raj Industries cannot be treated as deemed dividend without considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is shown that payment of ₹ 1,50,000/- was made by Raj Homes on assessee's behalf. This account shows advance payment to Shri Prabhakar Dwivedi. As per the details filed before the lower authorities payment of ₹ 13,58,500/- was made in the financial year 2001-02 relevant to assessment year 2002-03. Further, the expenditure of ₹ 1,30,400/- was incurred for bath tub and ₹ 27,000/- on account of registration charges in the assessment year 2003-04. Thus, as per the assessee, total investment of ₹ 15,15,900/- was made. The assessee has also filed copy of ledger account in the books of Arun Sahlot Associates indicating date-wise payment made between 1.4.2001 to 31.3.2002. As per the ledger account as placed at page 1148, various payments were made to Shri Prabhakar Dwivedi vide cheque no. 228238 dated 7.4.2001 of ₹ 1.50 lakhs, cheque no. 228000 dated 1.5.2001 of ₹ 1.50 lakhs and cheque no. 22833 dated 1.6.2001 of ₹ 1.50 lakhs. We found that other payments were also made by account payee cheques to Shri Dwivedi. Total payment of ₹ 13,08,500/- was made during this period and all these were reflected in the books of Arun Sahlot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order, the ld. CIT(A) deleted the addition after having the following observations :- On examination it is found that during the course of search at the residence of the appellant gold ornaments weighing 369.770 gms. Only were found. Both the appellant and his spouse are Directors of M/s. Raj Homes Pvt. Ltd. and other group companies. Arun Sahlot had total returned income of ₹ 81,13,801/- during assessment year 2003-04 to 2008-09 and Smt. Sandhya Sahlot had total returned income of ₹ 4227626/- during assessment year 2003-04 to 2008-09. The appellant's family comprises of his wife and children. The quantum of gold jewellery and silver items are reasonable in view of the socio-economic stature of the appellant. The quantum of jewellery is within the limit prescribe din CBDT's circular No. 1916. In view of the above, it is held that the source of gold ornament is explained hence addition of ₹ 171740/- on this account is deleted. During the course of search, cash totaling to ₹ 15,350/- only were found. The quantum of the cash found in the search is reasonable in view of socio-economic stature of the appellant and his family hence no addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject property belongs to M/s. Raj Homes Private Limited and Minal Builders Private Limited and hence investment for this property for purchase, construction, improvement etc. is to be investigated in the case of the two companies. As per the finding recorded by the ld.CIT(A) vis- - vis documents placed on record, it is clear that entire investment in this house came out of the books of M/s. Raj Homes Private Limited and Minal Builders Private Limited. Accordingly, the direction issued by the ld.CIT(A) for examining the source of investment in the hands of these two companies are fully justified and no interference is required therein. 58. Similarly, addition made on account of unexplained investment in House No. A-1304, Vinayaka Hiranandani Complex, Mumbai, amounting to ₹ 49,51,800/- in the assessment year 2005-06 was deleted by the ld.CIT(A) in the hands of the assessee by observing as under :- 7.3 I have examined the issue. It is found that the subject property belongs to M/s. Raj Homes Pvt. Ltd hence investment for this property for purchase, construction, improvement etc. is to be investigated in the case of the company. The assessment of RHPL u/s 153A for as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal of Shri Surendra Mehta, wherein part of the addition made by the Assessing Officer were sustained in the hands of Surendra Mehta, father of Alka Mehta. As nothing was found during the course of search to indicate expenditure was incurred on marriage by the assessee. Accordingly, we do not find any infirmity in the order of CIT(A) for deleting addition made in the hands of the assessee. 62. In the assessment year 2004-05, an addition of ₹ 6,07,82,700/- was made on account of alleged unexplained expenditure as mentioned in diary BS-3 found and seized from residential premises at HIG 38, Old Subhash Nagar, Bhopal. Relevant observations of lower authorities were as under :- 9.1 The facts of the issue in brief arc that during the course of search some seized materials were found in which the appellant has written the details of payments made to various persons on various dates. The A. O. held that the expenditure described in the seized documents were unexplained expenditure hence he made addition of ₹ 60782700/-. 9.2 The A.O.s finding on the issue is reproduced below:- (a) Diary found at HIG-38, Inventorised as BS-3 : Search operation was conducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary were already cut and it was a dump documents, out of which nothing can be worked out to show that the assessee has made any unaccounted payment. It was further submitted that the Assessing Officer has not brought any corroborative material on record to indicate that such payments were actually made by the assessee. 65. Before the CIT(A), the contention of the assessee was as under :- 9.3 Before me the following submissions are made: (i) The assessee is managing director of Raj Homes Pvt.Ltd. (RHPL), which deals in the business of property development and real estate. He is also Director of Raj Events and Entertainment Pvt.Ltd.(REEPL), which in the business of cable TV distribution and publishing a Hindi daily. REEPL was started only in the F.Y.2003-04. (ii) The impugned diaries contained various reminders, appointments, rough notings/jottings in respect of proposals, plannings, projections, business targets of advertisement given to persons for new business of cable TV distribution, general property related discussions, what he intends to get done/or to do and what he intends to look into, which any businessman in normal course would make note of. It had noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, the Assessing Officer is directed to verify and decide such addition after giving due opportunity to the assessee. We direct accordingly. 68. The assessee is also aggrieved by addition of ₹ 2 lakhs made on account of alleged unexplained expenditure in diary A-3, in the assessment year 2009-10. The facts of the issue in brief are that during the course of search diary was found at appellant's residence at E-3/10, Arera Colony, Bhopal, which is seized as Annexure A-3 in which the appellant has written the details of payments of ₹ 200000/-. The A.O. held that the expenditure described in the seized diary was unexplained expenditure hence he made addition of ₹ 200000/-. 69. By the impugned order, the ld. CIT(A) confirmed the action of the Assessing Officer after having the following observations :- 9.4 I have examined the issue. It is found that the entries in the diary are written by the appellant in his own handwriting. The entries in the diary clearly show that the payments are made in lakhs. The decoding done by the A.O. is valid. Entry on serial no. 21 of diary seized at appellant's house at HIG 38, Old Subhash Nagar, Bhopal, show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years 2003-04, 2004-05 and 2006-07. However, part of the addition was retained in the assessment year 2005-06, 2007-08 and 2008-09. The precise observation of CIT(A) was as under :- 7.4 I have examined the matter. The additional evidences submitted before me not considered for deciding the issue due to the reason given above. The facts or the cash deposit made in various bank accounts were deposit during the course or search hence the appellants pled that the impugned addition is not based on any material found during the course of search is not valid. During the hearing I have examined the source of all deposits both above ₹ 50000/- and below ₹ 50000/-. Before the Assessing Officer the appellant has claimed that the cash deposits made in these bank accounts were out of agriculture income and contract receipt. In this appeal order the additions on account or agriculture income and contract receipt have been confirmed, In the appellants case the ratio laid in ACIT Vs. Kulwant Singh and others IT(SS) 57 to 63/Ind/2008 (Indore ITAT) is directly applicable. The unaccounted income claimed as agriculture income and contract receipt have been brought to tax hence taxing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al addition made on account of agricultural income and contract receipt during the assessment years 2003-04 to 2008-09 was at ₹ 35,66,212/- against which the total amount deposited from assessment year 2003-04 to 2008-09 was only ₹ 33,39,910/-. Since addition made on account of agricultural income and contract receipt was more than the amount of cash deposit, no addition is warranted in any of the year. The modified chart of availability of cash is as under :- Assessment Year Amount of addition confirmed on account of agriculture income and contract receipt Cumulative balance of cash available with assessee Addition on account of cash deposit Cumulative balance of cash deposited by assessee 2003-04 5,59,383 5,59,383 5,50,000 5,50,000 2004-05 8,02,100 13,61,483 4,00,000 9,50,000 2005-06 5,22,237 18,83,720 7,00,000 16,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in the regular assessment and the assessee should have been held liable to pay interest u/s 234B. In that case, if there was reassessment or re-computation u/s 147 or 153A, the liability of the assessee is increased and not otherwise. In the instant case, there was no default on the part of the assessee, in paying the advance tax. For the first time, the dispute arose consequent to the reassessment done u/s 143(3) read with Section 147, interest could not be charged u/s 234B. 76. It was further argued that in view of the decision of Kerala High Court in the case of B.Lakshmikanthan , (2011) 198 Taxman 485, interest should be charged on incremental income only i.e., additional income assessed u/s 153A as compared to the income determined u/s 143(1)/143(3). 77. We have considered the rival contentions. In view of decision of Kerala High Court in the case of Lakshmikanthan (supra), we direct the Assessing Officer to recompute the interest u/s 234B which provides that where original assessment completed u/s 143 is revised either u/s 147 or u/s 153A, then interest for non-payment or short payment of advance tax is payable only for the period mentioned in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Income a. 2003-04 3,04,954/- b. 2004-05 2,80,912/- c. 2006-07 3,17,520/- d. 2007-08 6,09,297/- e. 2007-08 13,80,359/- f. 2008-09 13,34,584/- 79. While framing assessment u/s 153A read with Section 143(3), the Assessing Officer declined assessee's claim of agricultural income offered in all the years under consideration and treated the same as income from other sources. The Assessing Officer also made addition on account of deemed dividend u/s 2(22)(e) in respect of loan taken from the Companies in which she was having substantial interest. Contract receipt was added by the Assessing Officer as income from other sources. Addition was also made in respect of cash deposited in the Bank account. 80. Before the CIT(A), the assessee has alleged framing of assessment u/s 153A as well as merit of the addition made by the Assessing Officer. By the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer, the ld. CIT(A) has not considered the same and did not give any opportunity to explain the additional documents so filed before the CIT(A) under Rule 46A. Our attention was also invited to scrutiny assessment order passed by the Department wherein agricultural income offered during the assessment year 2003- 04 amounting to ₹ 3,89,000/- was accepted by the Department while framing assessment u/s 143(3), wherein agricultural income at ₹ 8479/- per acre was accepted. Similary, assessment in the year 2004-05 was also framed u/s 143(3), wherein agricultural income offered at ₹ 4,99,425/- was accepted by the Department at ₹ 4,12,920/-. Thus, agricultural income @ 9000/- per acre was accepted by the Department in scrutiny assessment. Both these assessments are covered in the block period. Thus, it is evident that returns wherein agricultural income was offered much prior to the date of search, were accepted by the Department under scrutiny assessment. By considering all these facts in the case of other group assessees, the Tribunal vide its order dated 22nd March, 2013, had set aside the issue for deciding afresh after considering the additional evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nominal agricultural income was shown, therefore, the assessee's claim of agricultural income in earlier years cannot be accepted. It was also observed by CIT(A) that all the Directors in business reside in Bhopal, while agricultural land was situated at a distant area. 9. After going through the reasoning given by the Assessing Officer and CIT(A) for decline of deduction and after verifying the additional evidence filed before the CIT(A) under rule 46A, we found that the assessee has filed original lease agreements before the CIT(A). One of the reasons given by the Assessing Officer for decline was that original lease agreement was not produced. It was submitted by the assessee that due to change in office address, the original lease agreements were not traceable during the relevant point of time, therefore, they were filed before the CIT(A). The other reason given by the Assessing Officer was that original khasra, khatauni and form P-II was not filed, therefore, claim of agricultural income cannot be accepted. Before the CIT(A), the assessee has filed original khasra, khatauni and form no. P-II to substantiate its claim of agricultural income but the same were not accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of those companies had given adverse statement to the effect that they had not given land to the companies and do not know their directors. As per ld.Authorized Representative, these farmers became hostile and were misled under intimidation. We found that the assessee have already declared agricultural income much prior to the search right from assessment year 2001-02. In the assessment year 2003-04 and 2004-005, there was scrutiny assessment order, wherein agricultural income of ₹ 4,99,400/- during the assessment year 2003-04 was accepted by the Assessing Officer at ₹ 4,70,790/-. Similarly, in the assessment year 2004-05, the assessee's case was decided u/s 143(3) and agricultural income of ₹ 8,52,569/- was accepted at ₹ 8,20,530/-. Thus, in both the scrutiny assessments keeping in view the land taken on lease, agricultural income at ₹ 9000/- per acre was accepted by the Assessing Officer. When in the scrutiny assessment, the income has been accepted, without giving cogent reasoning, the same cannot be declined. Since original and Xerox copy of lease agreements are same, no reason for assessee not to submit original before the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorized Representative , there was no reason for assessee to doubt the mandi receipts given by him. 10. In view of the above discussion, we restore the matter of agricultural income in all the years under consideration to the file of Assessing Officer for deciding afresh after considering the documents filed before CIT(A) under rule 46A, which goes to the root of the issue. We direct accordingly. 84. Facts and circumstances during the years are same, respectfully following the order of the Tribunal in the case of other group members, we restore the matter back to the file of the Assessing Officer in respect of all the years under consideration for deciding afresh as per the directions given in the order of the Tribunal dated 22.3.2013. 85. With regard to the addition made u/s 2(22)(e), the Assessing Officer observed that the assessee is having substantial share holding in M/s. Raj Homes Private Limited (RHPL), wherein she held 30.76 % shares during the previous year relevant to assessment year 2004-05 and 13.75 % during the assessment year 2007-08 to 2009-10. By observing that RHPL has given loan to the assessee during the said period, the addition was made u/s 2(22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king assessment u/s 143A when no incriminating material was found during course of search. 89. This issue has been examined in the case of Arun Sahlot in para 28 to 31 hereinabove. Relevant observations were as under :- 90. As the facts and circumstances during the assessment year 2004-05 are the same, following the same reasoning, we restore the addition to the file of Assessing Officer for the assessment year 2004-05 with the similar direction as contained in the order of Arun Sahlot (supra). 91. In the assessment year 2007-08, the contention of the assessee was that the advance was given for the business purposes. He further submitted that ₹ 1 crore was given by RHPL directly to REEPL for allotment of shares, but the Assessing Officer has added the same in the hands of assessee. Relying on the decision in the Alpex Export ( Del. I.T.A.T. ) in I.T.A.No. 2858/Del/2012, order dated 28.8.2012, it was contended that share application money is outside the provisions of Section 2(22)(e), our attention was also invited to the decision of Hon'ble Delhi High Court in the case of Sunil Chopra in I.T.A.No. 106/Del/2011 order dated 27.4.2010, wherein it was held that recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plus in each year, the amount of addition also made u/s 2(22)(e) in earlier years are required to be reduced out of total accumulated reserve and surplus and addition should be confined to the net credit balance in the account of reserves and surplus. Furthermore, addition made in the hands of husband u/s 2(22)(e) is also to be taken into account while computing the net amount of reserve and surplus remaining thereafter. Meaning thereby total addition u/s 2(22)(e) in the hands of the shareholders should not exceed the total amount of accumulated profit during the entire period under consideration. We direct accordingly. 96. In the assessment year 2009-10, Revenue is aggrieved by the decision of CIT(A) for deleting addition ₹ 15,350/- made by Assessing Officer on account of cash found during course of search and jewellery of ₹ 1,71,740/- found during course of search. The facts of the issue in brief are that cash amounting to ₹ 15,350/- and jewellery valued at ₹ 1,71,740/- was found during the course of search at the residence of the assessee. Assessing Officer treated the same as unexplained and made addition of ₹ 1,87,090/-. The Assessing Officer m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as assessee's income from other sources. By the impugned order, the ld. CIT(A) confirmed the action of the Assessing Officer. 100. We have considered the rival submissions and have gone through the orders of the authorities below. The detailed findings recorded by both the lower authorities with regard to the fact that the assessee could not bring any evidence on record to prove the receipts as contract receipt, we do not find any reason to interfere in the order of lower authorities. Accordingly, we confirm the action of the CIT(A) for treating the entire contract receipt as income from other sources. 101. In the result, ground taken by the assessee both in assessment years 2005-06 and 2006-07 are dismissed. 102. The assessee is also aggrieved for addition made on account of cash deposited in the Bank account during the assessment years 2003-04 to 2008-09 103. By the impugned order, the CIT(A) deleted addition in all the years except the assessment years 2004-05 and 2008-09. In the assessment year 2004-05, the CIT(A) has retained addition of ₹ 2,81,000/- whereas in the assessment year 2008-09, he has retained addition of ₹ 7,09,296/-. The precise obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 400000 1174351 Nil 2008-09 750000 40704 709296 The additions for assessment years 2003-04, 2005-06 to 2007-08 are deleted. The additions for 2004-05 and 2008-09 are reduced to ₹ 2,81,000/- and ₹ 7,09,296/-. 104. We have considered the rival submissions and have gone through the orders of the authorities below and found from record that before the lower authorities, the assessee has filed cash flow statement to substantiate availability of cash on the respective date of deposit in the bank account. This cash was available to assessee out of income from agriculture contract receipt and cash withdrawals from other bank account. The CIT(A) has deleted addition in most of the years by observing that the cash was available with assessee out of agricultural income and contract receipt which have already brought to tax net, therefore, again adding the same by referring to the Bank statement will amount to double addition. Revenue is not in appeal before us in the years where CIT(A) deleted the addition and only the assessee is in appeal for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) makes it clear that where, as a result of an order of order of reassessment or re-computation u/s 147 or Section 153A, the amount on which interest was payable under sub Section (1) is increased, the assessee shall be liable to pay simple interest at the rate of one percent. The Section further makes it clear that first of all there should be a default on the part of the assessee in the regular assessment and the assessee should have been held liable to pay interest u/s 234B. In that case, if there was reassessment or re-computation u/s 147 or 153A, the liability of the assessee is increased and not otherwise. In the instant case, there was no default on the part of the assessee, in paying the advance tax. For the first time, the dispute arose consequent to the reassessment done u/s 143(3) read with Section 147, interest could not be charged u/s 234B. 76. It was further argued that in view of the decision of Kerala High Court in the case of B.Lakshmikanthan , (2011) 198 Taxman 485, interest should be charged on incremental income only i.e., additional income assessed u/s 153A as compared to the income determined u/s 143(1)/143(3). 77. We have considered the rival conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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