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2016 (11) TMI 1296

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..... assessed income, since there was no incriminating material. Therefore, we direct the A.O. to delete the additions made towards deemed dividend u/s 2(22)(e) of the Act, for the A.Y. 2010-11 and 2011-12. The transaction between the assessee and his company are not coming within the meaning of loans and advances as defined u/s 2(22)(e) of the Act. The facts remain unchanged. The revenue has failed to brought on record any evidences to prove that the findings of the fact recorded by the CIT(A) is incorrect. Therefore, we are of the view that the CIT(A) has rightly deleted additions made towards deemed dividend under the provisions of section 2(22)(e) of the Act. We do not see any reason to interfere with the order of the CIT(A). - Decided in favour of assessee - I.T.A. Nos. 435 to 441/Vizag/2014, C. O. Nos. 21 to 27/Vizag/2016 - - - Dated:- 9-9-2016 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member Appellant by : Shri M.B. Reddy, DR Respondent by : Shri G.V.N. Hari, AR ORDER Per G. Manjunatha, Accountant Member These appeals filed by the revenue and cross objections filed by the assessee are directed against the common order pa .....

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..... ted amount withdrawn by me, the net effect of which appears debit, therefore, the same cannot be called as gracious payments which attracts deemed provision provided u/s 2(22)(e) of the Act. The assessee further submitted that he had given his personal property as collateral security for availing loan in the name of the company with an understanding that the company should accommodate funds to him wherever such need arises. In fact, he had facilitated his company M/s. Sampath Vinayak Steel Pvt. Ltd., to open a current account with the bank for availing credit facilities against the mortgage of personal properties belongs to him and the assessee in turn opened current account with the company for accommodation of funds to him with a mutual understanding. If he had not mortgaged his personal properties with the bank for availing credit facilities, he himself would have enjoyed credit facilities with the bank directly, however, in the interest of his company and also in his own interest, he gave his personal property as collateral security by mortgaging to the bank for availing credit facilities, therefore, whatever amount received from the company cannot be considered as loans/advanc .....

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..... pleted assessments in the absence of incriminating documents. In the case of assessments which are pending and abated as on the date of search, the A.O. gets jurisdiction to assess/re-assess the income in respect of those assessments based on the books of accounts and other incriminating documents found during the course of search. The assessee further submitted that the assessments for the assessment year 2005-06 to 2009-10 are not pending as on the date of search, therefore, when the assessments are not pending, no additions can be made for the returned income in the absence of seized materials. The department could not found any seized documents to show that the additions made by the A.O. towards deemed dividend u/s 2(22)(e) of the Act is on account of non-disclosure of said advances in the regular return of income filed for the respective assessment years. In the absence of incriminating documents, the return filed by the assessee, which is not pending as on the date of search cannot be tinkered with. 6. As regards the merits of the issue, the assessee submitted that transactions between the assessee and the company were recorded in the books of accounts of M/s. Sampath Vina .....

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..... er, held that even on merits also, it is noted that the appellant has mortgaged his personal property to the banks and obtained loans for the business of the company. The documents filed by the assessee reveals that the assessee has mortgaged his personal property for the purpose of obtaining over draft loan from bank for the business purpose of the company. In turn, the assessee has received certain amount from the company which cannot be considered as gracious payment and does not come under the purview of section 2(22)(e) of the Act. With these observations, deleted additions made by the A.O., towards deemed dividend under the provisions of section 2(22)(e) of the Act. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 9. The Ld. D.R. submitted that the order of the Ld. CIT(A) is contrary to law and facts. The D.R. further submitted that the CIT(A) is not justified in holding that the transactions between assessee and his company is not a gracious payment which is coming within the meaning of loan or advance or defined u/s 2(22)(e) of the Act. The Ld. CIT(A) failed to appreciate the fact that once a search is taken place, the assessment of 6 years gets re-open .....

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..... and his company is a gracious payment or not, which attracts the provisions of section 2(22)(e) of the Act, cannot be decided based on the fact that the assessee has mortgaged his property to the loan availed by the company. The A.O. has rightly invoked the provisions of section 2(22)(e) of the Act towards loan and advances and his order should be upheld. 11. The Ld. A.R. for the assessee, strongly supported the order of Ld. CIT(A). The Ld. A.R. further submitted that the Ld. CIT(A) is justified in holding that the additions made by the A.O. towards deemed dividend is outside the scope of assessments u/s 143(3) r.w.s. 153A of the Act. The A.R. further submitted that the CIT(A) is justified in holding that the amount paid to the assessee by his company is not a gracious payment and as such outside thes scope of section 2(22)(e) of the Act. The A.R. further submitted that the issue is squarely covered by the decision of ITAT, Visakhapatnam bench, in the case of L. Suryakantham Vs. ACIT 300 to 305/Vizag/2012 dated 19.4.2016, wherein the coordinate bench held that in the case of concluded assessments, the A.O. has no jurisdiction to make any additions towards returned income in the .....

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..... re is no limitation or restriction provided in the new procedure of search assessment on the powers of the A.O. for making assessment/re-assessment and the A.O. is not required to confine his assessments on the materials found during the course of search as was the case in the old procedure of block assessments. It is the contention of the assessee that the A.O. cannot disturb the completed assessment unless there was a seized material. The assessee further contended that where assessments are not pending as on the date of search and time limit for issue of notice u/s 143(2) of the Act has been expired, irrespective of the fact that those assessments have been completed u/s 143(1) or 143(3) of the Act, then the A.O. has no power to re-assess the income of those completed assessment years. We find force in the arguments of the assessee, for the reason that the coordinate bench of this Tribunal in ITA Nos.300 to 305/Vizag/2012, in case of L. Suryakantham Vs. ACIT, has considered similar issue and held that the A.O. had no jurisdiction to make additions u/s 153A of the Act, for the assessments which are not pending as on the date of search and also the time limit for issue of notice u .....

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..... year in which search was conducted. According to the A.O., as per the provisions of section 153A of the Act, there is no limitation or restriction provided in the new procedure of search assessments on the powers of A.O. for making assessment/reassessment and the A.O. is not required to confine his assessments on the material found during the course of search as was the case in the old procedure of block assessments. The new procedure of block assessment was explained by way of provisions of section 153A of the Act. As per section 153A of the Act, the A.O. shall assess or reassess the total income of the specified six assessment years irrespective of the fact that the assessment of the said years were completed or pending as on the date of search. Therefore, the A.O. has reassessed the income of six assessment years and recomputed the profits afresh after considering the relevant facts available on record. It was the contention of the assessee that the A.O. cannot disturb the completed assessments unless there was a seized material. The assessee further contended that where assessments are not pending as on the date of search and time limit for issue of notices u/s 143(2) of the Ac .....

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..... fore, we are of the opinion that the A.O. was not correct in reassessing the total income of the assessment year 2004-05 to 2007-08 in the absence of any seized materials. Accordingly, we direct the A.O. to delete the additions made for the assessment year 2004-05, 2005-06 2007-08. 23. It is pertinent to discuss herein the case laws relied upon by the assessee. The assessee has relied upon the ITAT, special bench decision in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 137 ITD 287. The coordinate bench of this Tribunal, while deciding the issue in favour of the assessee held as under: In assessments that are abated, the AO aretains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property disc .....

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..... esh High Court has also upheld by the orders passed by the Tribunal by following the decision rendered by the Special bench in the case of All Cargo Global logistics Ltd (supra) in the following cases:- (a) Sree Lalitha Constructions (J1TA No 368 of 2014) (b) M/s. Hyderabad House Pvt Ltd (ITTA No.266 of 2013) (c)M/s. AMR India ltd (FITA No.357 /v/2014) Further we agree with the contentions of the assessee that the decision rendered by the jurisdictional High Court in the case of Gopal Das Bhadruka (supra) have been rendered on the facts prevailing in those cases, since the issue relating to concluded assessments and pending assessments was not before the I1on'ble Andhra Pradesh High Court On the contrary, the above said three decisions of the jurisdictional High Court comes to the support of the assessee's contentions with regard to the legal proposition agitated before us, besides the decisions rendered by various other High Courts. Accordingly, we are of the view that the scope of enquiry in the case of unabated assessments, i.e., the assessment years in which proceedings are not pending, is that the undisclosed income should be ascertained only on th .....

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..... nt year 2004-05, 2005-06 2007-08. Accordingly, the ground raised by the assessee is allowed. 14. In this view of the matter and considering facts and circumstances of this case and also respectfully following the decision of co-ordinate bench of Visakhapatnam, in the case of L. Suryakantham Vs. ACIT, in ITA Nos.300 to 305/Vizag/2012, we are of the view that the A.O. has made reassessment u/s 153A/153C of the Act, on the basis of information/material available in the return of income, without referring to any seized material. Therefore, following the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act, for the assessments which are not pending as on the date of search. The assessment for the assessment years 2005-06 to 2009-10 were not pending as on the date of search. The time limit for issue of notice under sec. 143(2) has been expired. Therefore, the A.O. has no jurisdiction to reassess the income for the assessment year 2005-06 to 2009-10 in the absence of any incriminating materials. The CIT(A) has rightly deleted the additions. We do not see any reason to interfere with the order of CIT(A). Hence, we inclined to .....

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..... u/s 2(22)(e) of the Act has no application, as the debit balance appearing in the company s books of accounts is a normal current account, wherein the company has credited amounts payable to him and debited amounts withdrawn by him and net result of which is shown debit balance which cannot be considered as gracious payment. The assessee further contended that he had given his personal properties as collateral security to the bank for the purpose of availing credit facilities to the company, in turn the company has given certain advances, therefore, the same cannot be considered as gracious payments which are coming within the meaning of loans and advances as defined u/s 2(22)(e) of the Act. 17. Having heard both the parties and having considered the materials available on record, we find that the A.O. has made additions towards loans and advances under the provisions of section 2(22)(e) of the Act, on the ground that transaction between the assessee and his company is coming within the definition of loans and advances. The assessee claims that transaction between himself and his company is not a gracious payment which is coming within the meaning of loans and advances as define .....

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..... e of (a) Hari Prasad Bhararia (b) Shivlal Bhararia (brothers) (2) VUDA Apartment admeasuring 1485 sq.ft. situated at MMTC colony, Seethammadhara, Vizag in the name of Hari Prasad Bhararia. Renewal The Dhanalakshmi Bank, VIP Road, Vizag M/s. Sampath Vinayak Steels Pvt. Ltd. 150 lakhs (1) 4 storeyed building on 555 sq.yds. situated at Rajendranagar, Vizag in the name of (a) Hari Prasad Bhararia (b) Shivlal Bhararia (brothers) (2) VUDA Apartment admeasuring 1485 sq.ft. situated at MMTC Colony, Seethammadhara, Vizag in the name of Hari Prasad Bhararia. 13.11.2009 Axis Bank Ltd., Ramnagar, Vizag M/s. Sampath Vinayak Steels Pvt. Ltd. 300 lakhs (1) 4 storyed building on 555 sq.yds situated at Rajendranagar, Vizag in the name of (a) Hari Prasad Bhararia (b) Shivlal Bhararia (brothers) (2) VUDA Apartment admeasuring 1485 sq.ft. situated at MMTC colony, Seethammadhara, Vizag in the name of Hari Prasad Bhararia. 12.11.2010 Axis Bank Ltd. Ramnagar, Vizag .....

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..... deposit. Out of the amount, a sum of ₹ 20 lakhs was subsequently returned by the assessee to the company. In the assessment made for 1999 2000 the Assessing Officer added the sum of ₹ 20,75, 000 as deemed dividend. This was upheld by the Tribunal. On appeal to the High Court Held, allowing the appeal, that for retaining the benefit of loan availed of from the bank, if decision was taken to give advance to the assessee such decision was not to give gratuitous advance to its shareholder but to protect the business interest of the company. The sum of ₹ 20,75,000 could not be treated as deemed dividend, 07.4 Since in the present case also, the appellant has mortgaged his property to various banks and obtained loans for the business of the company. Even though there is a personal element of individual benefit to the appellant, the Company from which the advances were taken also benefited by using the property as collateral security to the bank. Thus, as observed by the Hon'ble Calcutta High Court that the loan or advance given in return to an advantage conferred upon the Company by a shareholder is not a gratuitous loan or advance given by the Compa .....

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