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Mr. Manish Mimani Versus C.I.T., Central-I, Kolkata

2016 (5) TMI 1095 - ITAT KOLKATA

Revision u/s 263 - enhancement of income in the form of deemed dividend u/s 2(22)(e) - Held that:- The assessee is holding more than 10% of the voting power in M/s. Ganesh Wheat Product (P)Ltd. It is not in dispute that the said company is having accumulated profits of ₹ 81,57,815/-. We find that the assessee had frequently drawn moneys from the said company and has also repaid moneys to the said company on several dates. Both the transactions are interest free and we also find that on sev .....

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our of assessee - ITA No. 301/Kol/2012 - Dated:- 4-5-2016 - Shri Mahavir Singh, JM And Shri M. Balaganesh, AM For the Appellant : Shri Ravi Tulsiyan, FCA For the Respondent : Shri Angam Shaiza, CIT (DR) ORDER Per Shri M.Balaganesh, AM 1. This appeal of the assessee arises out of the order of the Learned CIT, Central- I, Kolkata in Proceedings M.No.CIT-(C-1)/263/Manish Kr Mimani/Tech/11- 12/Kol8287-89 dated 22.11.2011 passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act .....

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ome from other sources. A search and seizure operation was carried out in the case of Mimani group on 4.10.2007. During the course of search operation no incriminating materials were found relevant to assessment year under appeal. The learned however initiated proceedings u/.s 153A of the assessee and the assessee in response to the said notice requested the learned AO to treat the original returned filed earlier as return in response to notice u/s 153A of the Act. In the said assessment , the l .....

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he Act by the learned AO as erroneous and prejudicial to the interest of the re venue. Against this 263 order the assessee has preferred appeal before us on the following grounds : 1. The Order passed by the CIT U/S 263 of the Income tax Act, 1961, on 22.11.2011, is arbitrary, erroneous, invalid and bad in law. 2. On the facts and in the circumstances of the case, the learned CIT erred in holding that the appellant was further liable to be assessed on 'Deemed Dividend' U/S 2(22)(e) of th .....

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ting aside the aforesaid order, U/S 263 of the Act with a direction to the A.O. to complete it as per law. 4. The appellant craves leave to amend, alter, modify, add to, abridge and or rescind any or all of the above grounds. 4. The learned AR argued that this tribunal had already disposed off the original appeal emanating out of original section 153A proceedings in IT(SS)A.57& 58/Kol/2011 for A.Yrs. 2006-07 & 2007-08 respectively dated 17.10.2014 wherein the addition made towards deemed .....

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er in M/s. Ganesh Wheat Product (P)Ltd. It is not in dispute that the said company is having accumulated profits of ₹ 81,57,815/-. We find that the assessee had frequently drawn moneys from the said company and has also repaid moneys to the said company on several dates. Both the transactions are interest free and we also find that on several occasions that the balance outstanding is in favour of the assessee and also in favour of the said company. Hence it is in the nature of running acco .....

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actly identical and we have considered the issue in para 4 and 5 of our order of even date in the case of Mr. Purushottam Das Mimani, which reads as under: "4. We have heard rival submissions and gone through facts and circumstances of the case. We have gone through the facts of the case and found from the perusal of ledger account of assessee in the books of account of Ganesh Wheat Products (P) Ltd., the lender company, it is seen that as on the first day of the relevant accounting year 20 .....

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y loan creditor is followed by a repayment by the loan debtor and, in fact, the payments by the assessee and Ganesh Wheat Products (P) Ltd. are independent of one another. No interest was charged by either side for advancing money on mutuality inasmuch as the loan account was a current account in nature. It is thus evident that there were reciprocal demands between the parties and thus mutual in characteristic. At the close of accounting year as on 31-03-2006, debit balance stood at a sum of  .....

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shifting balance the credit balance came to.Rs.9 lakhs. On perusal of the ledger account of the assessee in the books of M/s. Mima Flour Mills (P) Ltd. it is seen that on several dates there were shifting balances. On many occasions the balance was in favour of the assessee and on some other occasions the balance was in favour of Ganesh Wheat Products (P) Ltd. It is thus evident that there were reciprocal demands between the parties and thus mutual in characteristic. The account so maintained in .....

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Hon 'ble Calcutta High Court in the case of Pradip Kumar Malhatra v, CIT 338 ITR 538 (Cal) wherein Hon'ble High Court held as under: "The phrase "by way of advance or loan" appearing in sub-clause (e) of section 2(22) of the Income-tax Act, 1961, must be construed to mean those advances or loans which a shareholder enjoys simply on account of being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without .....

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but not cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. " From the above facts and legal proposition decided by Hon 'ble jurisdictional High Court, it is clear that section 2(22)(e) of the Act was inserted to bring within the purview of taxation those amounts which are actually a distribution of profits but are disbursed as a loan so that tax thereon can be avoided. It is pertinent to note here that when dividends are de .....

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