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2021 (4) TMI 200 - AT - Income TaxDeemed dividend addition u/s 2(22)(e) - HELD THAT:- There is merit in the argument of the assessee's counsel that assessee has established that it is a business transaction for purchase of property belonging to FDITPL in favour of the assessee and such business transactions outside the purview of section 2(22)(e) of the Act. The alternative argument of the assessee is that Costal Construction Company is not a shareholder in FDITPL. As such, section 2(22)(e) of the Act cannot be applied. For this purpose, he relied on the judgment of the Hon'ble High Court of Karnataka in the case of CCIT-III v. Sarva Equity P. Ltd. [2014 (4) TMI 788 - KARNATAKA HIGH COURT] wherein it was held that it is only where a loan advanced by a company to registered shareholder and other conditions set out in section 2(22)(e) are satisfied, such amount of loan would be liable to regarded as deemed dividend within the meaning of the said section - Being so, in our opinion, the case is squarely covered by the judgment of Hon'ble High Court of Karnataka (supra). Accordingly, we are inclined to delete the addition made by the AO. Initiation of proceedings u/s. 153C of the Act on the reason that initiation of search in the case of searched person is illegal and ultra vires the provisions of section 132(1)(a),(b) & (c) of the Act and framing assessment is also bad in law in view of the judgment of the Supreme Court in the case of Ajit Jain[2003 (1) TMI 97 - SC ORDER] - As before us, the assessee raised a specific ground that framing assessment u/s. 143(3) r.w.s. 153A r.w.s. 153C is bad in law. Being so, it is appropriate to remit this issue to the file of CIT (Appeals) for fresh adjudication after examining the seized material, if any, and to decide in accordance with law, after providing assessee opportunity of being heard.
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