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TMI Blog2015 (5) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... he Unsecured Loans were taken. (2) That the order dated 17.01.2013 passed u/s 250 of the Income Tax Act, 1961 by the Learned Commissioner of Income -Tax (Appeals) -X, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Learned Income Tax Officer, Ward 7(3), New Delhi in making an addition of Rs. 96,98,457/- as the income of the Appellant Company as deemed dividend by taking the recourse to the provisions of Section 2(22)(e) of the Income Tax Act, 1961." 2. The brief facts of the case are that the return of income was filed on 30.11.2006, declaring Income at NIL. The case of the assessee was processed u/s. 143(1)(a). Subsequently, the case was selected for scrutiny under CASS. In response to statutory notices u/s. 143(2) and 142(1) of the I.T. Act, 1961, assessee's counsel attended the assessment proceedings. During the year the assessee company has earned dividend income and has claimed statutory expenses against the said income. The assessee company has taken unsecured loans of Rs. 4,14,30,000/-. The assessee was asked to furnish the details of the unsecured loans alongwith the confirmation of the parties supported with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll reasoned order and the same should be upheld. 5. We have heard both the counsel and perused the records, especially the orders of the revenue authorities; order of the Tribunal; Paper Book filed by the assessee and Rejoinder to the Remand Report filed by the assessee. 5.1 We find that this Appeal has been instituted on account of the order of the ITAT-G- Bench, New Delhi in ITA No. 5/Del/2010 dated 14.5.2010. The ITAT has set aside the order on two grounds to the file fo the CIT(A): (a) The first ground was relating to the applicability of provisions of section 2(22)(e) and (b) The issue regarding creditworthiness of the loan creditors for which the ITAT had directed that the CIT(A) should considered the creditworthiness of the parties and then passed a speaking order in this regard. 5.2 This ground relates to the addition of Rs. 96,98,457/- which was made by the Assessing Officer in the original assessment order after making the observations that the assessee had not furnished the share holding pattern of the companies. The A.O has observed that the company had accumulated profit to the extent of Rs. 96,98,457/- and the company had given advances of Rs. 5,31,50,OOO/-. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv) it may be paid either by way of advance or loan; v) (a) the payee must be a beneficial shareholder of the company holding not less than ten percent of the voting power; or (b) the payee must be any concern in which such shareholder is a member or a partner in which he has a substantial interest ;or (c) the payment by any such company should be on behalf, or for the individual benefit of any such shareholder. The expression "person who has a substantial interest in the company" is defined to mean "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, carrying not less than twenty per cent of the voting power". If these conditions are fulfilled, then a dividend would arise to the extent to which the company possesses accumulated profit in the hands of the recipient. 6.3 After going through the above provision of section 2(22)(e) and conditions thereof, we are of the considered view that the aforesaid provisions makes it clear that deemed dividend is to be brought to tax in the hands of the recipient company and not in the hands of the entity granting the loan. Under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no justification for upholding the addition made by the Assessing Officer. (b) The A.R also submitted that copies of confirmation and the bank account of the parties had also been provided to establish the credit worthiness and genuineness of the transactions. In view of the same, there was no reason for the assessing officer to make this addition. On the basis of the above submissions, the A.R of the assessee argued that these were genuine transactions and the addition u/s 68 was not justified. 7.5. We find that the Ld. CIT(A) have gone through the facts of the case, observations of the A.O, directions of the ITAT and subsequent submissions of the A.R of the appellant for establishing the credit worthiness of the parties. These grounds are being finalized after making the following observations at page 6 to 8 vide Para 5.3 (a) to (h) of the impugned order:- "5.3(a) The A.R of the assessee has submitted details regarding the Bank A/c, PAN No., and returned income of the various parties from whom the loan have been taken. Details regarding the interest paid have also been shown in case of 3 parties. These details are being produced as follows: S. No. Name Address PAN Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Chowk, the amount of Rs. 12 lakhs has also been preceded by amounts deposited in the Bank Alc only few days back. (g) With regard to M/s Nirvana Indian Pvt. Ltd, on going through the Bank Alc of Jammu & Kashmir Bank Ltd. Okhla, an amount of Rs. 1.40 crores was advanced to the appellant in January 2006 and an amount of Rs. 2 crores on just been deposited in the amount on 12th January 2006. Further, it is pertinent to note that the returned income of this party was only Rs. 15,84,5OOI-. There was no evidence to show as to what was the regular source of income of this person which could justify its credit worthiness. (h) It is important to keep in mind, no interest was paid to Cactus these loans or receiving any amounts from any other parties. Menswear Fashion Pvt. Ltd., Nirvana India Pvt. Ltd and Parul Gupta. It is very difficult to imagine that these unsecured loans would have been given on genuine grounds without even payment of any interest. On examining all the 6 parties, it is clear that the appellant was not in a position to establish the credit worthiness of these parties to the extent that they had any regular source of Income or the capability on the basis of any asset f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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