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2019 (4) TMI 359

essment has happened, the income to that extent has escaped assessment. The Assessing officer thus has the tangible material in his possession to form a prima facie view that the advances are in nature of deemed dividend u/s 2(22)(e) and income to that extent has escaped assessment. It is a trite law that before invoking jurisdiction u/s 147 AO has to record a prima facie belief that income has escaped taxation and there should be a nexus between the material and the formation of belief that income has escaped taxation. In the instant case, the necessary nexus has been established between the material in possession of the Assessing officer and the formation of a prima facie belief that the income has escaped assessment. - Decided against assessee - Deemed dividend addition u/s 2(22)(e) - HELD THAT:- In case of M/s Raj Auto Wheels Private Limited advances to the tune of ₹ 51 lacs for the purposes of business and therefore, to that extent, the same would not be considered and reduced for the purposes of determining the deemed dividend in hands of the assessee. Further, there is a payment of ₹ 18.50 lacs made on 18.01.2010 which has been returned on the very next day o .....

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ccess to the records of the HUF and is being controlled by the assessee. We accordingly believe that where the HUF is the right full owner of the subject rental income and it has already included the same in its return of income, the same cannot be brought to tax in the hands of the assessee. - Addition on account of interest income - HELD THAT:- Interest income has been shown in other income of ₹ 1,63,317/- in the books of account of the proprietary concern M/s Govind Garg & Co as clear from the journal entry and P & L A/c and the same cannot be brought to tax in the hands of the assessee. The matter is accordingly set-aside to the file of the AO to examine the aforesaid contention so raised and where the same is found to be correct and duly offered to tax in hands of M/s Govind Garg & Co, delete the impugned addition. In the result, ground is allowed for statistical purposes. - ITA No. 614/JP/2018 - 2-4-2019 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Mahendra Gargieya (Adv.) For the Revenue : Shri K C Meena (Add.CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Ajmer d .....

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AO was to deem a fact, though it was not really so, strict interpretation was required. The law is well settled that when the law creates deeming fiction, very strict interpretation of the law is required and the scope of the fiction is also limited to the particular purpose. It was submitted that there must be something to show that the amount given was in the nature of loan. On the contrary, from a bare perusal of the assessee s ledger account in the books of the company, it is evident that there are frequent giving and taking back (debits & credits), absence of charging any interest and absence of any fixed/stipulated period of repayment. In other words, there are no attributes to term the amount given was in the nature of loan, even remotely. It was submitted that how the AO could have assumed such receipt to be in the nature of loan is not clear. It was further submitted that even assuming that subjected amount were in the nature of loan, the net amount given was ₹ 51 lakhs only and not ₹ 1.02 crores as wrongly stated in the reasons recorded by the AO. It was accordingly submitted that the fact simpliciter that there was receipt of the amount by the assessee d .....

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rder passed u/s 147 need to be upheld. 6. We have heard the rival contentions and perused the material available on record. In order to appreciate the rival contentions, it would be relevant to refer to the reasons so recorded by the Assessing Officer before issuance of notice u/s 148 of the Act and the same are reproduced as under:- The assessee is one of the directors of the company namely M/s Raj Auto Wheels Pvt. Ltd., Ajmer. During the course of assessment proceedings for AY 2010-11 in the case of M/s Raj Auto Wheels Pvt. Ltd., it was noticed that the company has given advances of ₹ 1.02 Crores to its director Shri Govind Garg during the year under consideration. Section 2(22)(e) of the I.T. Act says as under: any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to particular in profits) holding not less than ten percent of th .....

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ome has escaped assessment. We therefore donot find any infirmity in assumption of jurisdiction u/s 147 and the consequent order passed by the AO u/s 147 r/w 143(3) of the Act. In the result, ground no. 2 of the assessee s appeal is dismissed. 8. In Ground No. 3, the assessee has challenged the addition of ₹ 28,35,265/- on account of being dividend u/s 2(22)(e) of the Act. 9. The ld. AR submitted that section 2(22)(e) applies to any payment made by a company to a substantial share holder by way of loan or advance however trade/business advance which is nature of the money transacted to give effect to a commercial transaction doesn t fall within ambit of provisions of section 2(22)(e). It was further submitted that the word advance which appears in the company of the word loan given only mean such advance which carries with it an obligation of repayment. Trade advance which is in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provision of section 2(22)(e) of the Act. In the facts of the present case, it was submitted that ₹ 51 lakhs was given to the assessee director for the purchase of land for constructi .....

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and the same are contained at paras 3.11 and 3.12 of the assessment order which is reproduced as under:- 3.11 From the above sequence of events, it can be seen that many discrepancies, contradictions are being emanated from the submissions filed by the assessee from time to time which are discussed as under:- a) Initially the stand of the assessee was that he had entered into an agreement (registered) with M/s Raj Auto Wheels (P) Ltd on 04/07/2009 for sale of his property AMC No. 402/4 situated at Mission Press Bungalow, Harbilas Sharda Marg, Civil Lines, Ajmer. As per this agreement, he had received an advance of ₹ 16,85,000/- & ₹ 15,60,000/- on 3.7.2009 & on 24.7.2009 respectively (total comes to ₹ 32,45,000/-). As per this agreement assessee had to receive another ₹ 1 crore within 6 months from the date of agreement i.e. by February, 2010. b) Due to the above, initially it was consistently argued by the assessee that the amount received was a trade advance and hence sec. 2(22)(e) is not at all applicable in his case. (see objection letter filed on 12/08/2010). c) On being specifically asked to furnish the proof of receipt of ₹ 1 crore as per .....

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e for particular minimum duration. Reliance is placed on Hon'ble Bombay High Court's decision rendered in the case of Walchand & Co. Ltd. vs. CIT (1975) 100 ITR 598. g) Vide letter filed on 02/01/2015 it was argued that the advance was temporarily given for purchase of premises for company for which the deal was cancelled later and the amount of advance received back by the company. This is against the facts on records due to the simple reason that the argument of 'agreement to purchase of a premise' has already been proven a blatant lie put forth by the assessee as discussed above. Further, assessee did not furnish any evidence to support his argument that the 'agreement' was cancelled at a later stage. h) In the letter filed on 02/01/2015, assessee came up with a formula for calculation of deemed dividend in. assessee's hands and worked out the same at ₹ 17,82,120/- as against the reserves and surplus shown in the balance sheet of the company as on 31.03.2010 at ₹ 28,35,265/-. This is also proves to be totally wrong and unacceptable. Section 2(22)(e) is unambiguous and states ……..payment by any such company on behalf, or f .....

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llate proceedings in case of M/s Raj Auto Wheels Private Limited has held advances to the tune of ₹ 51 lacs for the purposes of business and therefore, to that extent, the same would not be considered and reduced for the purposes of determining the deemed dividend in hands of the assessee. Further, there is a payment of ₹ 18.50 lacs made on 18.01.2010 which has been returned on the very next day on 19.01.2010 and the same appears to be a current account transaction and not to be considered for determining the deemed dividend. There is nothing on record in terms of remaining advances either for business purposes or any current account transaction. Further, the fact that such advances have been repaid in the subsequent financial year will not provide any relaxation from the rigours of section 2(22)(e) of the Act. Therefore, remaining advances to the tune of ₹ 32.45 lacs will be considered for determining deemed dividend. The AO has determined the accumulated profits at ₹ 28.35 lacs of M/s Raj Auto Wheels Private Limited which has not been disputed by the assessee. The lower of the two i.e, ₹ 28.35 lacs has thus been rightly brought to tax as deemed divid .....

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he capital account of the assessee and even the cash book was not produced. It was accordingly submitted that the action of the lower authorities and the addition so made should be confirmed. 17. We have heard the rival contentions and perused the material available on record. It is a trite law that when an amount is found deposited in the assessee s bank account, the onus is on the assessee to explain the source of such deposits. In the instant case, the explanation of the assessee is that source of such deposits is the withdrawal of cash from his capital account maintained with his proprietary concern M/s Govind Garg & Co. The AO s finding is that the assessee has not produced the cash book in support of the said explanation to which the assessee has contended that he was never asked to produce the cash book at first place. In view of the contradictory stand taken by both the parties, we believe that it would be just and fair that the assessee is given one more opportunity to produce the cash book of his proprietary concern M/s Govind Garg & Co. before the AO. The matter is accordingly set-aside to the file of the AO to examine the same afresh. In the result, the ground i .....

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TDS. It was accordingly submitted that the rental income has already been assessed in hands of Govind Swaroop Garg (HUF) and the same cannot be added in the hands of assessee. It was further submitted that on enquiry made by the AO u/s 133(6), the bank reported through its letter dated 29.11.2016 that the rent was being paid to Shri Govind Garg HUF in the A/c 08110100004176. It was further submitted that the assessee has not claimed the TDS on the rental income as income legally and factually belonged to the HUF, therefore, it was the HUF alone who could have made a claim of the TDS. It was further submitted that the rental income in the past and the subsequent years has been declared and assessed in the hands of the HUF and the following rule of consistency, the same cannot be brought to tax in the hands of the assessee. 20. We have heard the rival contentions and perused the material available on record. It has been contended before us that the rent has been paid in HUF bank account however, by mistake, the TDS has been deducted by the Bank by quoting assessee s PAN and it has wrongly been reflected in assessee s Form 26AS. It has further been contended that HUF has shown the re .....

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