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2015 (12) TMI 1529 - ITAT VISAKHAPATNAM

2015 (12) TMI 1529 - ITAT VISAKHAPATNAM - TMI - Deemed dividend u/s 2(22)(e) - whether the debit balance and the accumulated profits in the books of accounts of the company in the name of the assessee in the company’s books, is a loan or deposit which attracts provisions of section 2(22)( e) or which is merely a sale advance? - Held that:- We are of the opinion that the assessee is trying to circumvent the loan taken by her from the company by creating the sale agreement. On perusal of the sale .....

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ideration. The assessee is continuing to enjoy the benefits of the property by getting rent from the company. The assesse contention is that the property is given as collateral security to bank to avail the loan for the company business purpose. But, from this fact alone we cannot come to the conclusion that the company is having the possession of the property and the assessee has entered into a sale agreement. Therefore, in our opinion, the assessee is trying to circumvent the alleged loan and .....

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ACCOUNTANT MEMBER For the Appellant: Shri G.V.N. Hari, AR For the Respondent: Shri M. Narayana Rao, DR O R D E R PER G. MANJUNATHA, Accountant Member: This appeal filed by the assessee is directed against the order of the CIT(A)-1, Hyderabad dated 25.1.2011 for the assessment year 2007-08. The assessee has raised the following grounds: 1. The Ld. CIT(A)-I, Hyderabad has not considered the facts and circumstances of the case whil .....

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ter called as the Act ) was issued on 27.11.2007, requesting assessee to file return of income on or before 17.12.2007. In response to this notice, the assessee filed a return of income on 20.3.2009 declaring total income of ₹ 6,55,900/-. The case was selected for scrutiny and accordingly notice u/s 142(1) of the Act along with questionnaire was issued to the assessee. In response to show cause notice, the assessee s authorized representative appeared from time to time and furnished the in .....

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otice, the assessee submitted that the amount received from the company was towards sale of the property, therefore, the provisions of section 2(22)(e) of the Act cannot be applied. She further explained that due to lack of liquidity of cash, she had decided to sell her property to the company and entered into an agreement of sale, for a consideration of ₹ 80 lakhs and received advance towards sale of property. She further claims that the said property was given to bank as a collateral sec .....

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eemed dividend within the meaning of section 2(22)(e) of the Act. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before CIT(A), the assessee submitted that the A.O. made the additions purely on guess and surmises without considering the fact that all debit balances cannot be considered as loan or deposit. The assesse further submitted that she had received the amount from the company towards sale of property, to this effect furnished a copy o .....

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true that the company had made payment of income tax, insurance premium, municipal taxes, etc. on behalf of the assessee. Due to lack of liquidity the assessee agreed to sell her property to the company and received the amount periodically from the company towards sale advance. She further claimed that since, the company is unable to pay the sale advance in one stretch, she has accepted periodical payment as and when she required the money. Therefore, this cannot be considered as loan or deposi .....

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sale is entered in 2005, even at this stage, the sale is not complete. Therefore, the sale agreement cannot be accepted as a document in support of her claim. The CIT(A), further held that the assessee is trying to cover up the said advance by creating a fictitious sale agreement which cannot be accepted. Therefore, confirmed the additions made by the A.O. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 4. The Authroised representative of the assesse, s .....

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for the company business. The A.R. further submitted that just because the amount was shown as director s advance in the company s books of accounts, it cannot be considered as loan or advance to the assesse within the meaning of section 2(22)( e ) of the Act. On the other hand, the D.R. strongly supported the orders of CIT(A). 4. We have heard both the parties and perused the materials available on record. The facts with regard to the debit balance and the accumulated profits in the .....

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ated profits of the company. The A.O. was of the opinion that the assessee has periodically drawn the amount towards her personal expenditure, like payment of insurance premium, income tax and repayment of loans and these amounts were debited to her account in the company s books of accounts, therefore, invoked the provisions of section 2(22)(e) of the Act. The assessee s contention is that she has received the amount from the company towards sale of property and furnished a copy of sale agreeme .....

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the copy of sale agreement filed by the assessee and noticed that the said sale agreement is unregistered one, which is also entered in the year 2005, on the stamp paper which was purchased in the year 2003. The assessee could not adduce any reasons for using the stamp paper purchased almost 2 years back for entering the sale agreement. As stated by the CIT(A) in his order, the sale transaction is not completed even now. The assessee contended is that since, the company is unable to pay the agr .....

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