TMI Blog2002 (2) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... read with section 263 on28-2-1989at Rs. 6,19,940. 3. The first grievance of the assessee in this appeal relates to the addition of Rs. 3,84,544 on account of foreign gifts. During the course of search operations, some documents containing receipts of certain amounts in foreign currency were recovered. It was observed by the Assessing Officer that the gifts of Rs. 1,92,307 each appeared in the bank accounts of Master Sanjeev Anand and Sandeep Anand, the minor sons of assessee with Canara Bank, Lajpat Nagar,New Delhion26-3-1982. It was further noticed that there was a withdrawal of Rs. 1,90,000 each in the two accounts on 29-3-1982 in favour of M/s. Dior International Pvt. Ltd. and M/s. Kapri International Pvt. Ltd. as a result of which 1900 shares of Rs. 100 each were allotted to Master Sandeep Anand in Kapri International and 1900 shares of Rs. 100 each of Dior International were allotted in the name of Master Sanjeev Anand. The Assessing Officer called upon the assessee to establish the genuineness of the gifts and file full evidence regarding alleged gifts received from foreigners with respect to the identity, capacity to advance and the evidence that the amount of gifts emanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the amount in question was liable to be assessed as deemed dividend under section 2(22)(a) (e) of the Act. Taking us through the order of the CIT, the ld. counsel asserted that the direction of the CIT was only to consider the taxability of the amount in question under section 2(22) and not otherwise examining the genuineness of the gifts received by the minor sons of the assessee. He, therefore, vehemently argued that the Assessing Officer exceeded his jurisdiction when, in addition to considering the applicability of section 2(22), he also proceeded to examine the genuineness of the foreign gifts which was not the subject-matter of direction given by the CIT. Referring to decisions in CIT v. Mansa Ram [1991] 190 ITR 453 (All.), Surendra Overseas Ltd. v. CIT [1979] 120 ITR 872 (Cal.) and Cawnpore Chemical Works (P.) Ltd. v. CIT [1992] 197 ITR 296 (All.), the ld. counsel urged that the action of the Assessing Officer in considering the genuineness of the foreign gifts in the hands of assessee did not have the sanction of law. The ld. counsel submitted that the CIT(A) had sustained the addition only on the issue of ingenuineness of the foreign gifts while holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). On a specific query raised from the Bench to the effect if the Department was also in appeal against the order of CIT(A), she expressed her inability to point out any evidence of having filed the appeal by the revenue despite the fact that one day's time was given to her to consult the concerned officer. 8. We have considered the rival submissions in the light of material placed before us and precedents relied upon. First of all we will deal with the legal arguments raised by the assessee's counsel as regards the embargo on the power of the Assessing Officer to consider the genuineness of the foreign gifts received by minor sons of the assessee when the direction of the CIT under section 263 was to consider the taxability only under section 2(22). We have perused the order of the CIT. After examining the various facts and the submissions the assessee, the CIT vide para 8 of his order cancelled the assessment to be framed afresh after considering the taxability of the amounts in question under section 2(22) of the Act. The concluding line of the order of the CIT reads as under:-- "The ITO is directed to frame the assessment afresh de novo, in accordance with law and pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minor sons of the assessee to be ingenuine and held the same to be the undisclosed income of the assessee. This action of the Assessing Officer was confirmed by the CIT(A) by holding that the decision arrived at in the meeting was not binding on Assessing Officer and no authority could give an undertaking on behalf of the Assessing Officer. On perusal of the minutes of settlement, it is noted that the Income-tax Officer was party to the settlement inasmuch as he had signed the settlement along with Chief Commissioner and other authorities of the Department. Once an agreement was entered into by the assessee with the Department for surrendering a specific amount on account of under-invoicing by the company and consequently acceptance by the Deptt. of the foreign gifts received by the assessee and his minor sons, which settlement was honoured by the assessee, we fail to understand as to how the Assessing Officer can go back from the stand taken by the Department. It was open to the Revenue not to accept any surrender and proceed to make additions in accordance with law. Having made the settlement with the assessee on a particular point and taxed the same accordingly, it can't be hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvanced loans to him amounting to Rs.69,000 and Rs.72,185 respectively. The Assessing Officer held that section 2(22) was applicable with respect to these two amounts and added the same to the income of assessee resulting into addition of Rs.1,41,185. Before the first appellate authority it was contended on behalf of the assessee that one of the important conditions for applicability of section 2(22)(e) was that shareholder should have a requisite shareholding in the company and since the assessee was not holding 20% of shares as was the mandate of the section at the relevant time, he was not liable to be considered for this purpose. The CIT(A) held that the shares purchased out of the foreign gifts by the minors were the shares of the assessee held in the benami names of minors and when shareholding of the assessee was considered along with such benami shares, the assessee became a beneficial shareholder to comply with the provisions of section 2(22) of the Act. Considering the facts of the case, the CIT(A) sustained the addition made by the Assessing Officer on this issue. 13. Before us the ld. counsel for the assessee reiterated that the assessee was not holding requisite numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minors. In the present case, viewed either from the angle of the ratio decidendi of T.P.S.H. Sokkalal's case or its own facts, the shares held by minors are liable to be clubbed with the shareholding of assessee in his own name and when so clubbed the case of assessee clearly comes within the purview of the limit as contained in section 2(22)(e) of the Act. 16. As regards the applicability of section 2(22)(e) on account of amount advanced to the assessee is concerned, we find that no evidence has been brought on record to show that the amount in question was advanced on account of imprest to meet business expenses. Nothing was shown as to which expenses were incurred out of the so called imprest. We therefore hold that the amount in question was not imprest. However we find force in the submissions of the ld. counsel that all the debit entries appearing in assessee's account with the companies can't be considered as deemed dividend under section 2(22)(e) for the reason that this section, inter alia, refers to advance or loan to a shareholder and not repayment of deposit. If any amount is deposited by the shareholder with the company, its repayment does not attract the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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