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2015 (5) TMI 717 - ITAT DELHI

2015 (5) TMI 717 - ITAT DELHI - TMI - Addition on account of deemed dividend u/s 2(22)(e) - Held that:- After going through the provision of section 2(22)(e) and conditions thereof, we are of the considered view that the a 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 the facts and circumstances of the present case, we find that the Company had not received any loans from an .....

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fic direction of the ITAT for examining the credit worthiness of the parties, the A.R of the assesse has not provided any detail like Balance Sheet, regular source of income or the reason why such huge amount of loan was given, in some cases, interest free also. Thus find considerable force in the finding of the Ld. CIT(A) that assessee has not discharged the onus of establishing the creditworthiness of the parties. Accordingly, Ld. CIT(A), has rightly dismissed this ground of the assesse - Deci .....

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ed 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 ₹ 2,40,00,000/-, which had been taken by the Appellant, Company as Unsecured Loans from various parties, u/s Section 68 of the Income Tax Act, 1961 on the ground that the Appellant Company has allegedly not been able to discharge the onus of establishing the credi .....

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visions 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 s .....

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0/- ii) Gauri Gupta : ₹ 27,25,000/- iii) Navneet Gupta HUF ₹ 5,75,000/- iv) Cactus Menswear Fashion P Ltd. ₹ 20,00,000/- v) Nirvana India P Ltd. ₹ 1,40,00,000/- vi) Parul Gupta ₹ 12,00,000/- The AO further observed that except for persons mentioned at Serial No. (iv) and (v) all the notices were duly served. However, none have submitted the details called for. Lastly, AO held that in the instant case although the details as furnished lead to the conclusion that thes .....

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10 passed in ITA 05/Del/2010 (A.Y. 2006-07) has set aside the order on two grounds to the file of the Ld. CIT(A). In pursuance to the ITAT order dated 14.5.2010, Ld. CIT(A) vide his order dated 17.1.2013 has dismissed the appeal of the assessee and aggrieved with the aforesaid order dated 17.1.2013, assessee is in appeal before the Tribunal. 3. Ld. Counsel of the assessee has filed the Paper Book containing pages 1 to 113 having copy of ITAT order dated 14.5.2010 passed in ITA No. 05/Del/2010; c .....

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of the lowers authorities may be quashed. 4. On the contrary, Ld. DR relied upon the order of the Ld. CIT(A) and stated that the impugned order is a well 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 .....

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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 ₹ 96,98,457/- and the company had given advances of ₹ 5,31,50,OOO/-. Accordingly, the A.O added an amount of ₹ 96,98,457/- u/s 2(22)(e) of the Income Tax Act. 5.3 On earlier occasion the CIT(A) in his order d .....

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d. Counsel of the assessee has stated that the assessee has elaborately argued the case before the Ld. CIT(A) and also submitted written submission before him which has not been considered and the Ld. CIT(A) has decided the issue against the assessee which is contrary to the provisions of law. 6.1 On the contrary, Ld. DR relied upon the orders of the revenue authorities and requested that the same may be upheld. 6.2 After considering the arguments of both the parties and the provisions of law, w .....

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f dividend whether with or without a right to participate in profit holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner in which he has a substantial interest (hereinafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholders, to the extent to which the company in either case possesses accumulated profits For a dividend to arise .....

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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&q .....

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the present case, we find that the Company had not received any loans from any of the persons falling within the ambit of sec 2(22)(e) of the Income-Tax Act, 1961 and accordingly the addition in dispute is not sustainable in the eyes of law. Therefore, we delete the addition of ₹ 96,98,457/- in dispute made by the AO and confirmed by the Ld. CIT(A) and allow the ground no. 2 raised by the assessee in its appeal. 7. With regard to addition of ₹ 2,40,00,000/- u/s 68 of the Income Tax .....

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the Creditworthiness and genuineness of the transactions. The AO has emphasized that issue of the creditworthiness of the parties which could not be fulfilled by the assessee. 7.1. During the earlier proceedings before the CIT(A), the CIT(A) had deleted this addition by observing that these creditors had been identified that they had lent money to the company. However, the ITAT had specifically given directions that the creditworthiness of these parties needs to be established. In this regard, .....

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.4 The A.R of the assessee provided details regarding PAN No., Bank A/c details etc. With regard to all these 6 parties, the main submissions of the A.R of the assessee can be summarized as follows: (a) The details regarding the PAN No., Bank A/c, ITRs, etc. of the various parties had been provided to establish the credit worthiness of the parties. In view of the same there was no justification for upholding the addition made by the Assessing Officer. (b) The A.R also submitted that copies of co .....

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TAT 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. Thes .....

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Fully paid 3 Navneet Gupta, HUF 1824-25, Bhagirath Place, Chandni Chowk, New Delhi AACHN3752L 575,000 131,000 2,20,634 Indian Bank, Chandni chowk, New Delhi, SB/4528 Fully paid 4 Cactus Manesa r Fashion Pvt. Ltd. 191, Udani Layout, Cambridg e Road, Near Frank Atony AABCC1576 D 2,000,000 9,25,880 491 Fully paid School, Bangalore 5 Nirvana India Pvt. Ltd. B-10, Okhla Industrial Estates, New Delhi AABCN0782 C 14,000,000 15,84,540 Jammu & Kashmir Bank Ltd., Okhla, New Delhi 38701010000044 0 Ful .....

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n going through the Bank Alc of Sonali Gupta with the Indian Bank, Chandni Chowk A/c No.5581/1256, it is observed that immediately before the issue of this loan there is a deposit of RS.35,00,000/- in the Bank A/c. (d) On going through the Bank Account of Ms Gauri Gupta in Indian Bank A/c N0. 4528/862, there are large deposits in this account on 27-03-2006 and 24-04-2006 after which the amount of loan has been given to the assessee amounting to ₹ 27,25,OOO/-. It is pertinent to note that t .....

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s 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 ₹ 1.40 crores was advanced to the appellant in January 2006 and an amount of ₹ 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 ₹ 15,84,5OOI-. There was no evidence to show .....

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