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The Income Tax Officer Company Ward Versus M/s Evershine Timber International Ltd

2015 (9) TMI 485 - ITAT CHENNAI

Reopening of assessment - deemed dividend addition - CIT(A) deleted the addition - Held that:- We find from the case file that the assessment order is completely silent on the nature of the impugned loans in the shape of business advances. The CIT(Appeals) had examined all material on record for concluding that loans in question in the shape of business transactions / advances could not be treated as deemed dividends. The Revenue neither challenges the CIT(Appeals)’s order on the ground of admit .....

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the findings under challenge. - Decided in favour of assessee. - ITA Nos.2138 & 2139/Mds/2014 - Dated:- 5-3-2015 - Shri A. Mohan Alankamony And Shri S.S. Godara JJ. For the Appellant : Shri A.V. Sreekanth, JCIT For the Respondent : None ORDER Per bench: These Revenue s appeals for assessment years 2006-07 and 2008-09 arise from common order of the Commissioner of Income Tax (Appeals)-II, Chennai, dated 18.03.2014 passed in ITA Nos.913 & 1217/2013-14 deleting deemed dividend additions of  .....

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come of ₹ 7,50,000/-. The Assessing Officer took up scrutiny . He found the assessee to have taken unsecured loans of ₹ 2,95,35,000/- from its sister concern M/s Evershine Wood Packaging Pvt. Ltd. It is an undisputed fact that both these entities have some common shareholders, i.e. Shri Shanthilal K. Patel, Shri Dharam C.K. Patel and Shri Karam C.K. Patel. The former two stakeholders have 5000 shares each in the two companies. The third one holds 2500 shares in the assessee company a .....

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eek to prove in lower appellate proceedings that this amount ₹ 12,30,510/- was only in the shape of business advances. The CIT(Appeals) accepted its contentions as follows:- 4.2.3 Further, from the above details filed by the assessee it is seen that there are common share holders between the assessee company and M/s. Evershine Wood Packaging Ltd. Shri Shanthilal K. Patel, Shri Dharam C.K. Patel and Shri Karam C.K. Patel three common shares holders between these two companies. The share hol .....

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e of invoking the provisions of section 2(22)(e) of the Act. 4.2.4 As per the provisions of section 2(22)(e) of the Act, any amount received by way of loans / advances during the year, is to be considered as deemed dividends. In the instant case, the amounts received from M/s.. Evershine Wood Packaging Ltd are not pure loans or advances. They are received during the course of regular business sanctions of supplying timber by the assessee to M/s. Evershine Wood Packaging Ltd. The assessee has bee .....

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Evershine Wood Packaging Ltd are under the same management and to have better control over the transactions, the assessee company is assigned the work of coordinating the supplies and, controlling the payments. These facts can be clearly visualized from the details of monies received from M/s.. Evershine Wood Packaging Ltd, the supplies of timber made to M/s.. Evershine Wood Packaging Ltd, etc. in various years, the details of which are as under: Particulars Account-1 Account-2 Net Opening Bal. .....

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₹ 3,11,08,978/-, as against which the assessee made sales (supplies) of timber for ₹ 51,83,302/- during the year, leaving a closing credit balance (net) of ₹ 2,59,25,676 (Cr] as on 31.03.2006. During the financial year 2006-07, the assessee further received an amount of ₹ 1,09,68,643/-. As against these receipts, the assessee made timber sales of ₹ 4,65,17,191/- to M/s. Evershine Wood Packaging Ltd during the financial year 2006-07. This has resulted in the net debi .....

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n F.Y.2007- 08 are in turn advances to various suppliers for supply of timber. The details of the advances received, supplies (sales) of timber and the closing balances during the financial years 2005-06, 2006- 07 and 2007-08 are as under: Fin. Year Opening Bal Receipts during the year Sales made during the year Closing Balance as on 31st March 2005-06 0 3,11,08,978 51,83,302 2,59,25,676 2006-07 2,59,25,676 1,09,68,643 4,65,17,191 (-)96,22,872 2007-08 (-) 96,22,872 2,90,44,311 0 1,94,21,439 (-) .....

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