TMI Blog2021 (4) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). Accordingly, we are inclined to delete the addition made by the AO. Initiation of proceedings u/s. 153C of the Act on the reason that initiation of search in the case of searched person is illegal and ultra vires the provisions of section 132(1)(a),(b) (c) of the Act and framing assessment is also bad in law in view of the judgment of the Supreme Court in the case of Ajit Jain [ 2003 (1) TMI 97 - SC ORDER] - As before us, the assessee raised a specific ground that framing assessment u/s. 143(3) r.w.s. 153A r.w.s. 153C is bad in law. Being so, it is appropriate to remit this issue to the file of CIT (Appeals) for fresh adjudication after examining the seized material, if any, and to decide in accordance with law, after providing assessee opportunity of being heard. - ITA No. 1005/Bang/2013 and C.O. No. 40/Bang/2014 (in ITA No.1005/Bang/2013) - - - Dated:- 16-3-2021 - SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K , JUDICIAL MEMBER For the Appellant : Narendra Sharma , Advocate For the Respondents : Muzaffar Hussain , CIT ( D. R. ) ORDER PER SHRI CHANDRA POOJARI , AM This appeal by the revenue is directed against the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and above the total income reported by the Respondent/Cross Objector of Rs. NIL under the facts and circumstances of the case. 5. The order passed by the learned Commissioner of Income-tax [Appeals] is just and proper. Without prejudice the Respondent/Cross Objector denies itself liable towards the addition made by the learned assessing officer under the provisions of section 2[22][e] of the Act of ₹ 4,14,57,934/- under the facts and circumstances of the case. 6. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Respondent/Cross Objector denies itself liable to be charged to interest under section 234 A Ft 234 B of the Income Tax Act under the facts and circumstances of the case. Further the levy of interest under section 234 A 234 B of the Act is also bad in law as the period, rate, quantum and method of calculation adopted on which interest is levied are all not discernable and are wrong on the facts of the case. 7. The Respondent/Cross Objector craves leave of this Hon'ble Tribunal to add, alter, delete or substitute any of the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having 95% share in M/s. Coastal Construction. The transfer of property by FDITPL to the firm in which Sri B M Farookh is having substantial interest is only passing on a 'benefit' from the company to Sri B M Farookh through his partnership firm. 6. The AO noted that the total amount of consideration paid by the assessee for the above properties is ₹ 3,59,40,000/-. However, from the ledger account it was noticed that the total amount debited by the company to the assessee's account, which apparently included the expenditures incurred in connection with the transfer of the property, is ₹ 4,14,57,934/. On perusal of the record he observed that the payments totalling to 4,14,57,934/- towards the purchase of the property made on behalf of the assessee by FDITPL are profits which the company could have distributed to its shareholders. The facts of the case clearly indicates that there was a device to circumvent the provision of section 2(22)(e) of the Income Tax Act, 1961. The fund of FDITPL that was available to be declared as dividend was not given, but the same was made available to the assessee for purchase of a property in the name of his partnership firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Company. Being so, the assessee company cannot be treated as a shareholder receiving the dividend. Further he submitted that the transaction between the assessee and FDITPL is a business transaction in the normal course. He relied on the following judgments: i) Chief Commissioner of Income Tax-III Vs. Sarva Equity (P) Ltd. 44 taxmann.com 28 (Kar) ii) CIT Vs. Madhur Housing Development Co. 93 taxmann.com 502 (SC) iii) Bagmane Construction (P.) Ltd. Vs. CIT 57 taxmann.com 120 (Kar). 12. We have heard the rival contentions, perused and carefully considered the material on record. The first argument of the ld. AR is that this is a business transaction between assessee and FDITPL on account of purchase of property as mentioned in facts of case as such there is no applicability of section 2(22)(e) of the Act being a business transaction and he supported the order of the CIT (Appeals). We have gone through the case records. As seen from the ledger account of the assessee in the books of FDITPL which is reproduced herein, which suggests the assessee bought the property on 19.9.2005 and for which the assessee made payment on various dates vide Cheque as well as by Cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not to be extended for enlarging the concept of shareholders. Dividend is to be given by any company, to its shareholders. Thus, in the second category under Section 2(22)(e) of the Act, loan or advances given to a concern, like the assessee in the present case, which is admittedly not a shareholder of the payee company, under no circumstances, could be treated as shareholder receiving dividend. As observed by Delhi High Court, if the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of deeming shareholder, then the legislature would have inserted deeming provision in respect of shareholder as well. The legislature has not done so. 15. Being so, in our opinion, the case is squarely covered by the judgment of Hon'ble High Court of Karnataka (supra). Accordingly, we are inclined to delete the addition made by the AO. 16. Now we will take up the CO filed by the assessee. In the CO the assessee challenged the initiation of proceedings u/s. 153C of the Act on the reason that initiation of search in the case of searched person is illegal and ultra vires the provisions of section 132(1)(a),(b) (c) of the Act and framing assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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