Director's appeal allowed, transactions deemed as adjustments not loans, Sec. 2(22)(e) deletion invalidates demand.

The ITAT allowed the director's appeal, deleting the addition on account of deemed dividend u/s 2(22)(e) of the Income Tax Act, considering the transactions as current accommodation adjustments rather than loans. Consequently, the company's appeal challenging the demand under Sec. 201(1)/201(1A) was dismissed as the basis for the demand was invalidated by the deletion of the deemed dividend addition.

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Issues:
1. Addition on account of deemed dividend u/s 2(22)(e) of the Income Tax Act.
2. Confirmation of order invoking provisions of Sec. 201(1)/201(1A) of the Act and raising a demand.

Analysis:
1. Issue 1 - Addition on account of deemed dividend u/s 2(22)(e) of the Income Tax Act:
- The assessee, a director of a company, received a loan of Rs. 21,77,500 from the company, which was treated as deemed dividend under section 2(22)(e) of the Act by the Assessing Officer.
- The assessee contended that the amount was not a loan but a current running account in the normal course of business, supported by interest transactions with the company.
- The CIT(A) upheld the addition as deemed dividend, leading to the appeal before the ITAT.
- The ITAT considered the nature of transactions, shareholder's history, and business needs, concluding that the transactions were not loans but current accommodation adjustments. Citing relevant case law, the ITAT allowed the appeal, deleting the addition.

2. Issue 2 - Confirmation of order invoking provisions of Sec. 201(1)/201(1A) of the Act and raising a demand:
- The company, in a related appeal, challenged the order invoking Sec. 201(1)/201(1A) due to the addition of deemed dividend to the director.
- The ITAT, referring to the decision in the director's appeal, held that since the addition of deemed dividend was deleted, the demand under Sec. 201(1)/201(1A) did not stand. Consequently, the demand was cancelled, and the appeal was dismissed as infructuous.

In conclusion, the ITAT allowed the appeal of the director, deleting the addition on account of deemed dividend, and dismissed the company's appeal concerning the demand under Sec. 201(1)/201(1A) as the basis for the demand was no longer valid.

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