TMI Blog2017 (2) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee being afforded any opportunity of cross examination of those persons for non-response to information called for under section 133(6) of the Act. In the factual matrix of the case on hand, where the AO failed to cause any enquiry to be made to establish his suspicions that the said purchases are bogus, the assessee has brought on record documentary evidences to establish the genuineness of the said purchase transactions, the action of the AO in brushing aside these evidences cannot be accepted. - Decided in favour of assessee Deemed dividend under section (2)(22)(e) - Held that:- On identical facts was before the Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2009-10, wherein the Coordinate Bench dismissed Revenue’s appeal on this issue holding that the authorities below erred in law in treating the advance given by the company to the assessee by way of compensation to the assessee for keeping his property as mortgage on behalf of the company to reap the benefit of loan as deemed divined within the meaning of section 2(22)(e) of the Act. - Decided in favour of assessee - ITA No. 5194/Mum/2014 - - - Dated:- 31-1-2017 - Shri Jason P. Boaz, Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Pvt. Ltd. without appreciating that the facts involved in the of the appellant's case are different from the facts of the above case laws. 3. On the fact and in the circumstances of the case and in law, the Ld CIT(A) has grossly erred in not appreciating the fact that the notices under section 133(6) issued to parties from whom alleged bills were received were returned undelivered by the postal authorities and the assessee has also failed to produce the parties before the AO. 4. On the facts and in the circumstances of the case and law, the Ld CIT (A) has grossly erred in deleting the disallowance made by the AO overlooking the explicit finding of the investigation carried out by the Sales Tax Department and corroborated by the enquiries of the AO. 5. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the addition of ₹ 1,23,75,485/- which was made by invoking the provisions of section u/s 2(22)(e) of the income tax act by treating the loan taken by the appellant's proprietary concern M/s Giriraj Corporation and in his personal capacity from M/s Giriraj Civil Developers Pvt. Ltd. where the assessee is a Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Bombay High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. (supra) and other decisions of the ITAT, Mumbai Benches held that addition made by the AO under section 69C of the Act as unexplained expenditure is unsustainable and thereby dismissed Revenue, appeal. 4.3.1. We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. The facts that emerge from the record are that the assessee (Prop: M/s. Giriraj Corporation) is engaged, inter alia, in business as civil contractor. On the basis of information obtained from the website of the Sales Tax Department of Government of Maharashtra, by the AO in the course of assessment proceedings, the AO found that certain parties/ dealers were issuing only bills without delivering any goods or materials, for a commission. On going through the list of such suspicious dealers listed by the Sales Tax Department, the AO noted that the assessee had made purchases from the following dealers, the list/details of which are as under: - Sr. No. Name of the Party Amount of alleged purchase (Rs. ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, brushing these aside, as he was of the view that the documentary evidence put forth was not supported by delivery challans, lorry receipts; that the said 12 parties from whom purchases were allegedly made did not attend in response to notices issued under section 133(6) of the Act; the said parties were not produced by the assessee and placed reliance on the statements, depositions, affidavits made before the Sales Tax Department. In that view of the matter, the AO treated the purchases from the aforelisted 12 parties (supra) amounting to ₹ 96,45,645/- as unexplained expenditure under section 69C of the Act in respect of alleged bogus purchases. 4.3.3 On appeal, the learned CIT(A), inter alia, placing reliance on the decision of the Hon'ble Bombay High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. (372 ITR 619) (Bom), by which she held the assessee s case was covered, allowed the assessee s appeal by deleting the addition of ₹ 96,45,645/- made under section 69C of the Act as unexplained expenditure, holding as under: - 5.1. I have gone through the AO's contention and the submission of the appellant in this regard. The main contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Maharashtra that the AO issued the show cause notice to the assessee to explain the said purchases and issued notices under section 133(6) of the Act to the said 12 parties from whom the said purchases were made, to which there was no response. We find that the AO primarily relying on the information obtained from Sales Tax Department, i.e. statements/affidavits given before them by these parties, held the said purchases amounting to ₹ 96,45,645/- to be bogus. While it may be true that the said parties did not appear before the AO, for whatever reason, the fact remains that the assessee had filed copies of purchase invoices; extracts of stock ledger showing entry/exit of materials, copies of bank statements to evidence that payments for these purchases were made through normal banking channels, etc. to establish genuineness of the aforesaid purchases. From the record it is evident that the AO has not doubted the sales affected by the assessee and therefore it would be logical to conclude that without corresponding purchases being made, the assessee could not have effected sales. 4.3.5 In our considered view, the AO has not brought on record any material evidence to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, we find no reason for interference in the order of the learned CIT(A) and consequently uphold her order deleting the addition of ₹ 96,45,645/- made under section 69C of the Act as unexplained expenditure in respect of the aforesaid purchases. Consequently, ground 1 to 4 of the Revenue s appeal are dismissed. 5. Grounds 5 6 Deemed dividend under section (2)(22)(e) of the Act 5.1 In these grounds (supra), Revenue assails the impugned order of the learned CIT(A) in deleting the addition of ₹ 1,23,75,485/- as deemed dividend made under section 2(22)(e) of the Act in respect of loans taken by the assessee s proprietary concern and in his personal capacity from M/s. Giriraj Civil Developers Pvt. Ltd. where the assessee is a Director holding more than 10% of equity shareholding. It is contended that in doing so the learned CIT(A) relying on various judicial pronouncements without appreciating that the facts of the case on hand were different from those of the case s relied upon. The learned D.R. was heard and without elaborating on the grounds raised, placed reliance on the order of the AO in the matter. 5.2 Per contra, the learned A.R. of the assessee subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o assets against which he could have received loan from the bank, he approached the company for a loan. The said company on the basis of its board resolution, advanced loan to the assessee for sum of ₹ 83,60,000, on interest. The said loan has also been repaid back in the subsequent year. Now, these facts, whether it can be held that the provisions of deemed dividend under section 2(22)(e), can be held to be attracted. Under the deeming provisions of sub-clause (e) of section (2(22), a distinction has to be made in the cases, where the loan and advance has been given to shareholder merely because such a person is a beneficial owner of shares and from the cases where loan or advance has been given as the matter of commercial consideration which has been given as the matter of commercial consideration which has benefited the company from such a shareholder i.e., the loan or advance has been given in return of an advantage conferred upon the company by such shareholder. If in the course of any business transaction between the company and the shareholder which is very beneficial to the company, then in such situation, the deeming fiction under section 2(22)(e) cannot be invoked. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the advance of ₹ 20,75,000 as a deemed dividend. 7. Thus, in view of the facts of the case and also the ratio laid down by the Hon'ble Calcutta High Court, which is again based on the decision of the Hon'ble Delhi High Court in ICT v/s Creative Dying and Printing Pvt. Ltd., (2009) 318 ITR 476 (Del.) and the decision of the Hon'ble Jurisdictional High Court in CIT v/s Nagin Das M. Kapaida, [1989] 177 ITR 393 (Bom.), we affirm the findings of the learned Commissioner (Appeals) and accordingly, grounds raised by the Department are dismissed. 5.3.2 In view of the legal and factual matrix, being identical to those in A.Y. 2009-10 in the assessee s own case, and following the ratio laid down by the Hon'ble Calcutta High Court in Pradeep Kumar Malhtora (2011) 338 ITR 538 (Cal.), the Hon'ble Delhi High Court in Creative Dyeing and Printing Pvt. Ltd. (2009) 318 ITR 476 (Del.), of the Hon'ble Bombay High Court in CIT vs. Nagin Das M. Kapadia (1989) 177 ITR 398 (Bom.) and the decision of the Coordinate Bench in the assessee s own case for A.Y. 2009- 10 (ITA No. 6216/Mum/2012 dated 08.10.2014) and A.Y. 2011-12 (IT No. 6865/Mum/2014 dated 21.09.2016) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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