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TMI Blog2020 (4) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... the cross objections are filed by the assessee in support of the order of the Ld.CIT(A). 2. All the grounds of appeal are related to the deletion of addition made by the Assessing Officer (AO) u/s 2(22)(e) of the Income Tax Act, 1961 (in short 'Act'). During the course of assessment proceedings, the AO found that the assessee received advances from M/s Lalith Mohan Spices Pvt. Ltd to the extent of Rs. 2,50,22,099/- and it was also observed that the assessee is a director having more than 20% of share in the company. The AO further found that the assessee was running his own business of trading in chilles and using the funds of the company for his own purpose. Therefore, the AO has asked the assessee to explain as to why the advances recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding more than 20% of the share holding. The funds were used for his own business purposes and made the profit. The Ld.DR referred section 188 of the Companies Act which places restrictions on the related party transactions. The Ld.DR further argued that as per section 188 of the Act, the Director is not permitted to take any advances from the company or enter into contract / arrangement with related party. Therefore, argued that the assessee having fully known the provisions of the Companies Act, entered into the transaction against the Company Law. The Ld.DR further submitted that Hon'ble Supreme Court in the case of P.Sarada Vs. Commissioner of Income Tax (Central), Madras, 229 ITR 444 held that the advances made by the company to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Spices Pvt. Ltd., therefore, viewed that the same required to be taxed u/s 2(22)(e) of the Act. We observe from the order of the AO that the assessee did not fail to furnish any information which was called for by the AO. The Ld.AR submitted the paper book and as per page No.21 of the paper book, the assessee furnished the account copy of Lalith Mohan Spices (P) Ltd., in the books of Lalith Kumar Bagrecha as per which the assessee has received the advances and out of the same purchased chillies from M/s Religare Commodities Ltd. through NCMSL and supplied the same to the company. We, observe from the account copy of M/s Lalith Mohan Spices Pvt. Ltd., placed in the paper book that the advances were received for purchase of chillies to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we, remit the matter back to the file of the AO for limited purpose of verification of genuineness of transactions submitted in the paper book with regard to sales made to the company. If the sales are supported by the books of accounts of the assessee as well as the company the transactions would not treated as deemed dividend and covered by the circular cited. Otherwise, the AO is free to decide the issue on merits after giving opportunity to the assessee. Accordingly, the order of the Ld.CIT(A) is set aside and the issue is remitted to the file of the AO . The appeal of the Revenue is allowed for statistical purposes. 7. The cross objections filed by the assessee are in support of the order of the Ld.CIT(A). Since the appeal of the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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