TaxTMI 
TaxTMI 
2011 (9) TMI 100
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....ction with the applicability of provisions of Section 2(22)(e) of the Income-tax Act,1961. 4. The brief facts relating to the issue are that during the course of assessment proceedings, the AO noted that there was a credit balance of Rs. 26,44,795/- on 25.02.2008 in the books of the assessee, which was subsequently repaid by the assessee on 31.03.2008. The copy of account of M/s. Pee Jay Fabrics Pvt.Ltd. was filed on record. The AO further noted that Shri Sanjeev Gupta was the proprietor of M/s. Payare Lal Bansal & Company, and was beneficial owner in the share holding of M/s. Pee Jay Fabrics Pvt.Ltd. as substantial shareholder of 50% shares. The said concern was a closely held company in which public were not substantially interested. The AO, thus, observed that Shri Sanjeev Gupta was the beneficial owner holding shares of 50% of the voting power and fulfilled the condition of shareholding ratio of more than 10% as provided u/s 2(22)(e) of the Act. The second condition of possessing accumulated profits to the extent of advance or loan given, were found to be fulfilled by the said concern which had reserves and surplus of Rs. 72,40,281/- as on 31.03.2008. Vide order-sheet entry ....
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....e by M/s Pee Jay Fabrics (P) Ltd." 5. Accordingly, a sum of Rs. 28,28,016/- was treated as deemed dividend under the provisions of Section 2(22)(e) of the Act in the hands of the assessee and was added to the income of the assessee. 6. The CIT(A) held as under : 'I have carefully gone through the assessment order and the written submissions filed by the appellant's counsel, during the course of appellate proceedings. Facts of the case in hand are that the appellant and M/s Pee Jay Fabrics Pvt.Ltd. are consignee agents of M/s Raymonds Ltd. The appellant holds 30% share in M/s Pee Jay Fabrics Pvt.Ltd., is also not in dispute. Both the concerns i.e. Proprietary concern of the appellant and M/s. Pee Jay Fabrics Pvt.Ltd. have to pay/receive amounts against the bills issued and commission earned from M/s Raymonds Ltd. On a particular date M/s Raymonds Ltd. passed an entry debiting Rs. 26,44,795/- and crediting Rs. 26,44,795/- with identical amount. Nothing has been brought on record to show that the appellant had instructed/requested M/s Raymonds Ltd. to pass any such entry. As per the appellant, it was only at the time of reconciliation of accounts that the factum of such entri....
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....2)(e) of the Act. Reliance was placed on the ratio laid down in the Dy. CIT v. Lakra Brothers [2007] 106 TTJ 250/162 Taxman 170 (Chd.) (Mag.). 8. We have heard the rival contentions and perused the record. 9. The assessee is carrying on the business as sole proprietor of M/s Payare Lal Bansal & Company and is a consignee agent of M/s Raymond Ltd. The assessee is also beneficial owner of shareholding to the extent of 50% shares of M/s Pee Jay Fabrics Pvt. Ltd. The said company is also the consignee agent of M/s Raymond Ltd. Both the concerns have transactions with M/s Raymonds Ltd. and have to pay/receive amounts against the bills issued and commission earned. During the year under consideration, the assessee had made purchases from M/s Raymonds Ltd. However, the payment in connection with the said purchases was taken by M/s Raymonds Ltd. from M/s Pee Jay Fabrics Pvt.Ltd. On reconciliation of the account, the assessee thereafter repaid M/s Pee Jay Fabrics Ltd. on 31.03.2008. In the abovesaid circumstances, the AO invoked the provisions of Section 2(2)(e) of the Income-tax Act and was of the opinion that M/s Pee Jay Fabrics Pvt.Ltd. had made the payment to M/s Raymonds Ltd. on ....
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.... the company to its shareholder, subject to fulfilment of other conditions. The ld. AR stressed that no such payment was ever made by the said company to M/s Payare Lal Bansal & Company of which the assessee is the proprietor. The entry was passed by M/s Raymonds Ltd. by debiting one party and crediting the other. Further plea of the ld. AR was that only at the time of reconciliation of the account, the factum of the entries passed by M/s Raymonds Ltd. came to his knowledge and thereafter consequent entries were passed in the account with M/s Pee Jay Fabrics Pvt.Ltd. These transactions/entries were passed as per the assessee in the normal course of business. The case of the AO is that the payment in the present case had been made by the company on behalf of the assessee, who is holding substantial shareholding in the said company and the payment was made within the extent of the accumulated profits. As per the AO, the balance-sheet of M/s Pee Jay Fabrics Ltd. filed by the assessee relating to assessment year 2008-09 reflected reserves and surplus at Rs. 72,40,281/- as on 31.03.2008. 13. The provisions of Section 2(22)(e) of the Act are applicable under different circumstances. T....