TMI Blog2021 (2) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... established that there is no benefit accrued to the assessee out of the loan transactions as discussed above, the provisions of section 2 (22)(e) of the Act cannot be attracted. We find that the contention of the assessee has not been disputed by the AO. Similarly, the learned CIT (A) has also observed that the company has advanced money to the parties as inter corporate deposits which has not been disputed by the learned DR appeared for the revenue. In the absence of any adverse finding from the side of the AO and the favorable finding of the learned CIT (A), it seems that the loans and advances were made as inter corporate deposits in ordinary course of its business which are not subject to the provisions of deemed dividend as provided under section 22(2) - No reason to interfere in the finding of the learned CIT (A) and thus we set aside the same with the direction to the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is dismissed Reopening of assessment u/s 147 - HELD THAT:- On perusal of the reasons recorded by the AO, we find that the AO at the threshold has recorded that it is seen that the assessee is having substantial share in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident u/s. 2(22)(e) of the I.T. Act, 1961. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) ought to have upheld the order of the A.O. 3. It is, therefore, prayed that the order of the Ld.CIT(A) be set aside and that of the A.O be restored to the above extent. 3. The only issue raised by the Revenue is that the learned CIT (A) erred in deleting the addition made by the AO amounting to ₹ 2,62,33,800/- on account of deemed dividend under section 2(22)(e) of the Act. 4. Briefly stated facts are that the assessee in the present case is an individual and having income from salary, rent, interest and short term capital gain. The assessee, among other companies, is a registered shareholder and carrying voting rights not less than 10% in the companies as detailed under: S. No. Name of the company % of holding 1 JP Iscon Pvt. Ltd (Formerly JP Infrastructure Pvt. Ltd.) 22 2 Gujarat Mall Management Company Pvt. Ltd. 50 3 Dev Infratrade Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y/ indirectly out of the loan given to the companies as discussed above. As per the AO it was sufficient enough to attract the provisions of section 2(22)(e) of the Act to the assessee in a situation where the company has advanced loan to the parties/entities/companies wherein the assessee has the substantial interest. 4.7 In view of the above, the AO treated the amount of ₹2,62,33,800/- as deemed dividend under the provisions of section 2(22)(e) of the Act and added the same the total income of the assessee. 5. Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the addition made by the AO by observing as under: The AO has held that deemed dividend is always taxed in the hands of shareholders. I am agreed with the contentions of the appellant that he has not receifed any loan either from JPIL (loan given company) or from DIPL and/or from GMMCPL (loan taken companies) and Gujarat Mall Management Company Pvt. Ltd. and Devinfratrade Pvt. Ltd. are not shareholders of JPIL and further loan given by JPIL to Gujarat Mall Management Company Pvt. Ltd. and Devinfratrade Pvt. Ltd. are ultimately not been received or benefited to appellant. Hence the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made by the AO for the reasons as discussed in the aforesaid paragraphs. 9.1 The 1st question before us arises whether it is sine qua non that the assessee, being a registered shareholder has to obtain the benefit out of the loan provided to the companies in which he was holding the substantial interest. In this regard we find pertinent to refer the provisions of section 2(22)(e) of the Act which reads as under: (22) dividend includes - XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXX (e) 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 participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan receiver company. Therefore, in the absence of any benefit having been received by the petitioner, there was no obligation cast upon him to disclose such transactions. Once it is established that there is no benefit accrued to the assessee out of the loan transactions as discussed above, the provisions of section 2 (22)(e) of the Act cannot be attracted. 9.4 Moving further, we also note that the assessee has contended before the AO that the loans has been advanced by the company, JP infrastructure to the parties as discussed above as inter corporate deposits. The relevant submission of the assessee stands as under: Without prejudice to the above submissions, it is further submitted that in the present cae, inter corporate deposits (ICD) ICD during the normal course of the business for the business transaction by one company JPIL to group companies (Gujarat Mall Mgt Company Pvt. Ltd. and Aryan Arcade Pvt. Ltd.) and where the assessee is the common shareholder in above specified companies, the same cannot be treated as deemed dividend in the hands of the assessee. 9.5 However, on perusal of the order of the assessment order, we find that the contention of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 2(22)(e) of the I.T. Act is not applicable and the Ld.CIT(A) has rightly deleted the addition made by the AO for an amount of ₹ 2,62,33,800/- in th case of Respondent as deemed dividend u/s.2(22)(e) of the I.T. Act. 3. Your Respondent craves right to add, amend, alter, substitute, delete or modify all or any of the above grounds of cross objection. 11. The assessee in the CO has challenged the validity of the assessment framed under section 147 read with section 143(3) of the Act on the ground that there was no fresh tangible material available with the AO viz a viz there was no application of mind for arriving at the conclusion that the income of the assessee has escaped assessment. 12. The assessee, an individual, in the present case has filed return of income declaring total income at ₹ 1,11,44,950/- which was processed under Section 143(1) of the Act. Subsequently, the AO found that M/s JP Infrastructure Pvt. Ltd., in which the assessee is holding 22% registered shareholding, has extended loans to the companies namely Gujarat Mall Management Co. Pvt. Ltd. and M/s Aryan Arcade Pvt. Ltd in which the assessee has substantial interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings under Section 147 of the Act are well within the provisions of law. 13. Aggrieved assessee preferred an appeal to the Learned CIT (A) who dismissed the ground of appeal of the assessee by observing as under: I have gone through the observation of the AO in the assessment order and submission filed by the appellant carefully. The appellant has challenged the validity of notice issued u/s.148 of the I.T. Act stating that figures mentioned in the reason recorded is not ascertainable how it is arrived and observation of the A.O. that assessee having 22% share in Aryan Arcade Pvt. Ltd. which is factually wrong as the assessee is not holding any share in Aryan Arcad^ Pvt. Ltd. Hence the AO's believe is merely on the basis of presumption and surmises and without there being any material on record and the basic requirement of section 148 of reasons to believe fails.Having considered the fact of the case. The A.O. formed an opinion on the basis of information available with him and the reasons to believe that income has escaped assessment has already been conveyed. In this case, the original return filed was processed under section 143(1 )(a) and no assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome as well as from the Return of income filed by companies in which appellant is shareholder. Further, Ld AO in reasons recorded has stated that appellant has 22% share in Aryan Arcade Pvt. Ltd. Which is factually wrong as the appellant is not as shareholder in Aryan Arcade Pvt. Ltd. Hence, it is evident that Ld AO has without application of mind on incorrect facts reopened the case of the apepllant which is not tenable and bad in law. (iv) It is further submitted before your honour that Ld AO merely for verification of details available on records in the form of return of income and without bringing on record any new tangible material for making inquiry has reopened the case of appellant which is also bad in law. (v) The power to reopen an assessment is conditional on the formation of a reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangible material is necessary to ensure against an arbitrary exercise of power. Ld AO nowhere mentioned in the reasons recorded that any tangible material either from assessment record or from other source has come in the notice of Ld AO for reason to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether as representing a pqrt 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(no.t being shares entitled to a fixed rate 'of dividend whether with or without a right to participate in profits) holdi9ng not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest-(hereafter in this clause referred to as the said concern) or nay payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case prossesses accumulated profit. (iii) The accumulated profit in the case of M/s. J.P. /scon Ltd. .(formerly known as M/s. J.P. Infrastructure Ltd.) is ₹ 7,38,54,215/-, whereas the assesse'-s share with respect to the loan given to Gujarat Mall, management Co. Pvt. Ltd. and Aryan Arcade Pvt. Ltd. comes to ₹ 2,91, 70,712/-. Hence, ₹ 2,91,70,712/- is to be required to he taxed as per provisions of Section 2(22)(e) in view explanation 2(b) of Section 147 in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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