TMI Blog2015 (6) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... holder; being a person who is the beneficial owner of shareholding of not less than 10% of the voting power or to any concern in which such shareholder is a member / partner and in which he has a substantial interest or any payment by any such company on behalf of any such shareholder. A plain reading of this section would seem to indicate that the payment of loan / advance should be to the shareholder, to come under the purview of deemed dividend. From the shareholding pattern, as recorded in the order of assessment, it appears that CPIPL is not a shareholder of CPPL. It is not clear as to how the Assessing Officer determined the applicability of the provisions of section 2(22) (e) of the Act to the facts of the case on hand. Also if additional evidence submitted to substantiate the assessee’s claim, it would be in the interest of equity and justice if the additional evidence is admitted and adjudicated, particularly when the addition is made because the assessee did not submit evidence to substantiate his claim. Thus we deem it fit to remand the matter back to the file of the Assessing Officer for de novo examination of this issue - Decided in favour of assessee for statistical p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the addition was not based on any incriminating materials found at the time of search. 3. The learned CIT (Appeals) erred in holding that the appellant has no right to appeal. 4. The learned CIT (Appeals) erred in treating the amount of ₹ 5,21,69,348 as deemed dividend under Section 2(22)(e) of the Act. 4.1 The learned CIT (Appeals) failed to appreciate the fact that the inter-corporate loan between the companies was a business advance and will not fall within the purview of the deemed dividend. 4.2 The learned CIT (Appeals) erred in not accepting the additional evidence produced by the appellant. 4.3 The learned CIT (Appeals) failed to appreciate the fact only 7 days was given to the appellant to reply. 4.4 The learned CIT (Appeals) erred in rejecting the additional evidence on surmises and conjectures. 4.5 Without prejudice to ground 4.1, the learned CIT (Appeals) failed to appreciate the fact that inter-corporate deposits are not covered by section 2(22)(e) of the Income Tax Act, 1961. 5. For the above mentioned grounds and any other grounds that may be mentioned at the time of the hearing, the appellant prays that the appeal be allowed and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case, as pointed out by the learned CIT(A), the details of loans / advances were not directly reflected in the assessee's individual books of accounts and therefore it can be inferred that this issue came to light only pursuant to search action and therefore it is not incorrect to state that this issue came to light/arose on account of the search action under Section 132 of the Act. In this view of the matter, respectfully following the decision of the Hon'ble Karnataka High Court in the case of Canara Housing Development Co. (supra), we concur with and uphold the finding of the learned CIT(A) that the Assessing Officer had validly invoked the jurisdiction under Section 153A of the Act. Consequently, Ground No.2 of the assessee's appeal is dismissed. 6. Ground No.3 : Assessee has no right to appeal. 6.1 As per the details on record, it is seen that in the course of assessment proceedings, the assessee had filed a letter before the Assessing Officer voluntarily offering an amount of ₹ 5,21,69,348 towards the payments / advances as deemed dividend. In accordance with the assessee's admission, the Assessing Officer brought this amount of ₹ 5,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 11,51,00,000 advanced by one group company, Cornerstone Properties Pvt. Ltd. ( CPPC ) to another group company, Cornerstone Property Investment Pvt. Ltd. ( CPIPL ) during the year. In the course of assessment proceedings, the Assessing Officer examined the shareholding pattern of the two group companies and observed that the assessee is a shareholder in both; holding 40% and 50% shares respectively in the two companies as on 31.3.2007. In this factual matrix, the Assessing Officer concluded that the provisions of section 2(22)(e) of the Act would be attracted. It would appear, from an appreciation of the details on record, that the assessee took the stand that these advances are in the nature of trade advances but the Assessing Officer rejected the stand of the assessee on the grounds that there is nothing on record to prove the commercial expediency of these advances. Though the assessee took the stand that these advances would not fall within the ambit of deemed dividend, subsequently, the assessee agreed to offer the amount for tax as deemed dividend. During the previous year relevant to Assessment Year 2007-08, CPPL had made profits of ₹ 5,37,30,037 and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer to render a finding on the applicability of the provisions of section 2(22) (e) of the Act to the assessee, on the given factual matrix of the case. 7.4.2 In terms of section 2(22) (e) of the Act, dividend includes any payment by a company of any sum by way of advance or loan to a shareholder; being a person who is the beneficial owner of shareholding of not less than 10% of the voting power or to any concern in which such shareholder is a member / partner and in which he has a substantial interest or any payment by any such company on behalf of any such shareholder. A plain reading of this section would seem to indicate that the payment of loan / advance should be to the shareholder, to come under the purview of deemed dividend. From the shareholding pattern, as recorded in the order of assessment, it appears that CPIPL is not a shareholder of CPPL. It is not clear as to how the Assessing Officer determined the applicability of the provisions of section 2(22) (e) of the Act to the facts of the case on hand. 7.4.3 We are also of the considered opinion that if additional evidence submitted to substantiate the assessee s claim, it would be in the interest of equity and j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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