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Mr. Manish Mimani Versus Joint Commissioner of Income Tax (OSD) , Central Circle-V, Kolkata

2016 (10) TMI 584 - ITAT KOLKATA

Deemed dividend u/s 2(22) - revision u/s 263 - Held that:- As decided in assessee’s own case where such a finding that the transactions of assessee with Ganesh Wheat Products (P) Ltd, where the assessee alone does not stand to benefit from such loan transaction, but the company also derives benefit there from, as such transactions assumes the character of a commercial transaction and will not qualify to be dividend to come within the purview of Section 2(22)(e) of the Act. - Respectfully fol .....

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learned CIT cannot be sustained. - Decided in favour of assessee - I.T.A. No. 2873 /KOL/ 2013 - Dated:- 26-8-2016 - Shri Waseem Ahmed, Accountant Member and Shri K. Narasimha Chary, Judicial Member For The Assessee : Shri Ravi Tuls iyan, FCA, For The Department : Shri Debashis Banerjee, JCIT, Sr. D.R. ORDER Per Shri K. Narasimha Chary, J .M. : This appeal by the assessee is challenging the order dated 29.11.2013 passed by the ld. Commissioner of Income Tax (Appeals), Central-1, Kolkata (hereinaf .....

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appeal. Learned AO 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 learned AO added back an amount of ₹ 15,36,337/- representing advances received by the assessee from M/s. Ganesh Wheat Product Pvt. Ltd as deemed dividend u/s 2(22)(e) of the Act. However, learned CIT initiated proceedi .....

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377; 53,54,040/- 3. Challenging these orders, the assessee preferred an appeal before the learned CIT in appeal No 301/CC-V/CIT(A) C-I/11-12. However, observing that the assessee has no interest in pursuing the appeal, because of non representation on the dates of hearing, the learned CIT by way of impugned order dismissed the appeal, confirming the additions made by the learned AO. 4. Aggrieved by the learned CIT(A), assessee preferred this appeal on the following grounds: (1) The order passed .....

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,646/- u/s. 2(22)(e) of the Income Tax Act, 1961, simply by following the direction of the CIT given in his order u/s 263 of the Act, dated 22.11.2011, without applying his own mind. (4) In specific, on the facts and in the circumstances of the case, the ld. CIT(A) failed to appreciate that the Assessing Officer had erred in failing to see through that the appellant had regular business dealings with M/s Ganesh Wheat Products (P) Ltd., which do not come under the purview of section 2(22)(e) of t .....

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e appellant craves leave to amend, alter, substitute, modify, abridge, add to and/or rescind any or all of the above grounds. 5. Ld. AR argues that the drawing and deposits made by the assessee with Ganesh Wheat Products Pvt. Ltd are in the nature of current account and do not amount to deemed dividend under Section 2(22)(e) of the Act. He further submits that such by way order dated 04.05.2016. On this ground he submits that the additions made on the bases of such quashed order will not survive .....

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e orders of the authorities below. 6. Basing the on the above rival contention, the issue that arises for our consideration is whether the additions made by the learned AO treating the transactions of assessee with Ganesh Wheat Products (P) Ltd as deemed dividend within the meaning of section 2(22(e) of the Act? 7. We have carefully gone through the orders produced by the learned AR. In the order dated 22.11.2011 in ITA 301/Kol/2012 while quashing the orders of the learned CIT passed under secti .....

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for following the same order in respect of enhancement proposed in section 263 order of the ld.CIT. In response to this the learned DR vehemently supported the order of the ld.CIT. 5. We have heard the rival submissions and perused the materials available on record. It is not in dispute 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/-. Wefind that th .....

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We have heard rival submissions and gone through facts and circumstances of the case. We find from the facts narrated above as well as argued by both the sides, that the facts are exactly identical to the case of Mr. Purushottam Das Mimani in IT(SS)A No. 60 to 62/Ko112011, which we have now adjudicated (which is a group case). The issue being exactly 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 und .....

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ctions through cheques and some in cash by either parties, i.e. the assessee and the loan giving company, resulting in shifting balances. On many occasions the balance was in favour of the assessee and on some other occasions the balance was ill favour of Ganesh Wheat Products (P) Ltd. The ledger of the assessee further reveals that no payment by 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 independe .....

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ce was Nil and there were several shifting of balance and the resultant debit balance was ₹ 5,00,833/-. For A.Y. 2007-08, in respect of MimaFlour Mills, opening balance was ₹ 5,00,833/- and after shifting balance, the debit balance came to nil. In respect of Ganesh Wheat Products, opening balance was ₹ 18,87,522/- and after 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 i .....

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erent from a loan account for the sole reason that feature of mutuality is not present in a loan transaction. 5. Here in the present case, from the facts narrated above, it is clear that both the parties are beneficiary of the transaction being current account of the above transactions i.e. shifting balances. This issue hasbeen answered by 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 .....

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equence of any further consideration which is beneficial to the company received from such a share-holder, in such case, such advance or loan cannot be said to be deemed dividend within the meaning of the Act. Thus, gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of section 2(22) 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 leg .....

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section 2(22)(e) of the Act covers only such situations, where the shareholder alone benefits from the loan transaction, because if the company also benefits from the said transaction, it will take the character of a commercial transaction and hence will not qualify to be dividend. In the case of the assessee, by giving and taking financial assistance from each other, both the assessee and the company were benefited and such transactions between them were nothing but commercial transactions and .....

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