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2019 (7) TMI 666 - AT - Income TaxDeemed dividend u/s 2(22)(e) - security deposits received for lease of land - CBDT Circular No. 19 of 2017 dated 12.6.2017 - trade advances which are in the nature of commercial transactions - security was disproportionate in respect of land holding and not mentioned in Balance Sheet of company - HELD THAT:- In the case in hand, the assessee have established that there is a contractual relationship of lessor and lessee with the company, the land rented out is a high value land , the rent paid by the company has been returned in the income tax returns of the lessors and duly accepted by the Department, there is no question to doubt the payment of security deposits also. The assessee, thus, have proved that it was commercial transaction between the assessee and the company, hence, the deeming fiction of deemed dividend as per the provisions of section 2(22(e) cannot be applied in this case. DR said that the amount paid as security deposits to different assessee is disproportionate vis-a vis to the share of the assessee in property in question, it is undisputed that the assessee herein are family members and the total security deposits paid by the company to the assessee never exceeded the limit as stipulated in the lease agreement. It is up to the assessee to settle between them as to in which assessment year what amount of the security deposit will be retained by either or any of them. This cannot be a ground to doubt or to reject the transaction in question. It is held that the assessee have established that the payments received by them as security deposits were paid by the company in the course of its business, hence, the deeming fiction of deemed dividend to section 2(22)(e) is not applicable to these transactions. This common ground taken by the assessee in all the appeals is allowed and additions made by the AO on this issue are hereby ordered to be deleted. Additions u/s 68 - cash deposit in bank account - contended that cash is available with the assessee to meet the deposits - cash flow statement show more withdrawals than the cash deposits in the bank account - HELD THAT:- Assessee has invited our attention in this respect Reconciliation of the Cash Account / cash flow statement to show the date wise cash available with the assessee to meet the deposits made in the bank account. Assessee has submitted that each and every entry has been reflected in the consolidated cash flow chart. The aforesaid cash flow statement furnished by the assessee could not be rebutted by the DR. A perusal of the cash flow statement as well as opening and closing balance of the year proves that the assessee had funds available on the relevant dates to make the deposits in the bank account of the assessee. The source of the deposits in the bank account of the assessee, thus, stands explained by the assessee. In view of this, the addition made by the lower authorities on this issue is also held to be not justified and the same is accordingly ordered to be deleted. - Decided in favour of assessee.
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