TaxTMI 
TaxTMI 
2013 (7) TMI 220
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. Rival contentions have been heard and records perused. Brief facts of the case are that a Search and Seizure operation was conducted on 30-5-2008 at Residential premises of Shri Arun Sehlot at E-3/10, Arera Colony, Bhopal. During the course of search total cash found' was Rs, 15,350/- and Jewellery found was valued at Rs, 1,71,740/-. Shri Arun Sehlot stated in his statement that his source of income from business/director of company in M/s. Raj Homes Pvt. Ltd., MIs Raj Events and Entertainment Pvt. Ltd. and M/s. Raj Industries. Shri Arun Sehlot stated in his statement that cash found of Rs. 6,550/- during search proceedings from possession is withdrawal from salary. Smt. Sandhya Sehlot w/o Shri Arun Sehlot has Stated in her statement that her source of income from director in M/s MinaI Builders. Ltd., Bhopal. M/s Raj Homes Pvt. Ltd., Bhopal and M/s Raj Events and Entertainment Pvt. Ltd., Bhopal. On being asked about cash found of Rs. 15,350/- and Jewellery 369.710 grams, valued of Rs. 1,71,740/-, she stated that out of cash of Rs. 15,350/-found during search Rs. 6550/- found from possession from husband Arun Sehlot and balance Rs. 8.800/- is from old saving. Jewellery were....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rimarily a business man involved in the business of buildings, newspaper running and salary income from various companies and firms. He is also a proprietor of M/s. Arun Sehlot and Associates and M/s. Raj Industries. A perusal of the returns filed for earlier years shows that he has not claimed any agriculture income up to the A Y 2000-01. A.Y. 2001-02 was the first year in which the assessee has claimed agriculture income. In A.Y. 2001-02 the assessee has claimed agriculture income of Rs. 2,55,400/- The perusal of return income of the assessee from year 2000-01 to 2009-10 shows that his returned income has increased steadily over the period. A detailed analysis of the return shows that increase in return income is primarily through increase his income from salary and income from business. This indicates that during this period the assessee was getting more involved with his businesses from which he was getting profits from contract receipts, as well as in the affairs of Raj Home Pvt. Ltd. and other group industries from which he was getting incremental salary. A person who is getting more involved with affairs of running a business and working as full time director of a Pvt. Ltd. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ribunal was as under :- "7.Rival contentions have been heard and records perused. We had also gone through the additional documents filed before the CIT(A) under rule 46A. 8. With regard to agricultural income declared by the assessee, the observation of the Assessing Officer for decline of assessee's contention regarding agricultural income was that the assessee had not shown agricultural income up to assessment year 2000-01. That assessee was mainly in the business and also having salary income, therefore, it is unlikely to have time for agricultural operation. The Assessing Officer declined the claim also by observing that only photocopy of lease agreements were filed and not the original lease agreements. The thrust of Assessing Officer for declining the assessee's claim was also based on the surrender of agricultural income made by three group companies in the assessment year 2005-06, namely, Raj Homes Private Limited, Minal Builders and Raj Event and Entertainment Private Limited. The Assessing Officer observed that these companies have surrendered agricultural income in the assessment year 2005-06, therefore, claim of other assessees belonging to sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... claim of agricultural income and same are placed at page 230 to 457 of the paper book. The assessee has also filed original receipts of payment of lease rent, which are placed at page 230 to, 457 of the paper book. We found that assessee was prevented by sufficient cause for not submitting the same before Assessing Officer, since these documents were misplaced due to shifting of office. If assessee could file photocopy before the Assessing Officer, he could file original also, as filed before the CIT(A). The assessee by not filing these documents before the Assessing Officer cannot spoil his case. Since these documents were necessary to determine the correct nature of income having been offered by the assessee, the CIT(A) was not justified in not accepting these documents which goes to the root of the issue. After accepting the documents filed under rule 46A, the CIT(A) could have called for remand report from the Assessing Officer and after considering the same he should have arrived at correct conclusion with regard to the nature of income offered by the assessee. As per record, the claim of assessee was that the agricultural operation of the assessee was being looked after by A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of original lease agreement and khasra khatauni, the Assessing Officer could make inquiry even on photocopy. The assessee had furnished addresses of all the farmers, the farmers in the agreement are residents of village and full address was given. Many summons were served as per the observation of the Assessing Officer himself, but no effective efforts were made to ensure about the farmers presence. Even a request was filed by the assessee before the Assessing Officer to summon farmers u/s 131. The assessee has also requested the Assessing Officer to summon Mr.Ajab Singh Raghuvanshi who was taking care of assessee's agricultural activity and its sales realization etc. However, Mr. Ajab Singh was not called for. Copy of khasra issued by Patwari confirming the production of crop was filed before the Assessing Officer which has not been disproved by him. It was also contention of ld. Authorized Representative that statement of mandi persons which were recorded behind the back of the assessee, hence cannot be used against him, as the same were not confronted to him. For this purpose reliance was placed on the decision of Hon'ble Supreme Court in the case Kishan Chand Chelaram....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on account of deemed dividend on payment by RHPL to Arun Sehlot and Associates have been dealt by the Assessing Officer at page 67 to 89 para 5 onwards. The CIT(A) has dealt with the issue at page 63 to 67, para 10 - 10.5. Deemed dividend on payment by RHPL to Meenal Builders Private Limited) has been dealt by the Assessing Officer at page 67 to 89. The CIT(A) has dealt with the issue from page 71 to 75. Deemed dividend of payment by RHPL to M/s. Raj Industries have been dealt by the Assessing Officer at page 67 to 89. The ld. CIT(A) has dealt with the issue at page 68 to 71. 10. Before the lower authorities, contention of the assessee was that the amount advanced by RHPL was not assessable u/s 2(22)(e). From the record, we found that M/s. Raj Homes Pvt.Limited has given advances to various concerns of the group controlled by assessee during the years in appeal. The advances are given to following concerns :- (i) Minal Builders Private Limited (ii) Arun Sahlot and Associate - a Proprietary concern of Arun Sahlot. (iii) Raj Industries - a Proprietary concern of Arun Sahlot. (iv) Raj Events and Entertainments Pvt. Limited. The assessee is su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re than 10 % of the voting powers in RHPL. Accordingly, additions made by the Assessing Officer were confirmed by the ld.CIT(A). 13. In respect of loan given by RHPL to Raj Industries by giving similar findings, the ld. CIT(A) has confirmed the addition. 14. In respect of loan given by RHPL to Minal Builders Private Limited after giving following observations, the CIT(A) confirmed the addition :- " 12.4 I have examined the issue. The appellant holds 55.2 % shares in the payer company RHPL. He also holds 63.39 % shares in recipient company MBPL, not being a company in which public arte substantially interested. The appellant holds more than 10 % shares in the payer company and more than 20 % shares in the recipient company. This shows that the appellant has substantial interest in MBPL, the recipient company. These facts clearly show that the loans given by RHPL to MBPL are covered under the second limb of Section 2(22)(e). The appellant has not debit balance in the books of RHPL hence it is clear that loans given to him are not out of his own funds held with RHPL. The appellants argument that the loans were given for business purposes are not plausible for the reason....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 20% shareholding in REEPL. Deemed dividend, if any, can be taxed only in the hands of recipient and since assessee did not receive the amounts which where received by REEPL only, it can not be taxed into his hands. Payments were due to legitimate business considerations. No accumulation of figures can be done. There are calculation mistakes also, as credit amounts have been considered as debit amount. The ld. Assessing Officer brushed aside the explanations of assessee and made the additions without giving any further opportunity. ii) Provisions of deemed dividend are not applicable to the facts of the case primarily because:- a) No incriminating material was found or brought on record for subject addition. b) The impugned facts were disclosed in the return /Balance Sheet/ audit report of each year mostly prior to search. c) Most of the assessment, as above, stood concluded on the date of search and hence cannot be treated as abated. d) The issue cannot and should not be considered in the search assessment as it may at the best be a matter of regular assessment income. 1. Payment by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted those sums as dividend to its shareholders. 17. Thus, the impugned advances were not given with the purpose to avoid tax, which is the underlying object of provisions of Section 2(22)(e) of the Act. 18. In the following decisions, it has been propounded that amount paid for the genuine purpose of the business or for protecting business interest or in view of commercial expediencies/exigencies are outside the purview of Section 2(22)(e) of the Act. CIT vs. Creative Dyeing (2009) 318 ITR 476 (Del.H.C.) Important Note : SLP of the Department rejected by Hon'ble Supreme Court in ITR (Statutes) (2010), 328 ITR (ST.) 10 CIT VS. Nagin Das M. Kapadia, (1989) 177 ITR 393 (Bom) CIT vs. Rajkumar (2009) 318 ITR 462 (Del H. C.) 2. Shareholder' means registered shareholder to whom money is given:- It was propounded in the following cases that shareholder referred in Section 2(6A)(e) of' 1922 A ct. which is synonymous to present Section 2(22)(e) meant by registered shareholders and not only to a beneficial! owner because Section 206 of Companies Act talks of registered shareholder only:- CIT v. C.P. Strathy Mudal....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4.5 Further, on facts, the rationale and basis adopted by AO for clubbing the shareholding of wife Smt. Sandhya Sahlot with the assessee is also uncalled for. The observations of AO and assessee's explanation are already given in the tabulated form in the CIT(A)s order. Shareholding of two different registered shareholders/entities (including wife and husband) cannot be clubbed for the purpose of sec. 2(22)(e). CIT vs, Kunal Organics (2007) 164 Taxman 169 (And.) Smt. Gunvanti R. Mehta v, ITO (1993) 45 ITD 382, 385 (Born) (SMC) CIT vs. Ankitech Pvt.Ltd., [2011] 199 Taxman 341( Delhi HC) In view of the above, the calculation of the Assessing Officer by resorting to indirect calculation of voting power as well as clubbing of shareholding of different registered shareholders/entities are not in accordance with law and deserves to be struck down. 5. Payments do not confer individual benefits on assessee - shareholders, hence not deemed dividend in the hands of assessee. 5.1 Section 2(22)(e) intends to tax the monies taken by substantially interested persons in the guise of loans and advances to avoid payment of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2.2012 which is as under:- .. The section 2(22) talks about the definition of dividends and also clearly defines what is not dividends. The exception clause are quoted under far reference (22) "dividend" includes- (a) .................... : (b) .......... : (c) ................ . (d) ............. : (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 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 possesses accumulat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es 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 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 possesses accumulated profits; The act clearly says that the share holder has to be beneficial owner of shares i.e. the benefits have to be derived by him. In the present case, has disc used on page 72 of the assessment order Mr. Arun Sahlot holds more than 20 % of beneficial shares. This fact has been held by the Hon'ble High Court of Delhi in its recent judgment CIT vs. National Travel services, 202 TAXMAN 327, (Del) July 11, 2011, where the Court clearly says that for the purpose of Section 2(22)(e) it is not necessary to be registered share holder of the Company. In this regard, it is pertinent to note that the Hon'ble Supreme Court judgment quoted by the AR are before 1987 when the Section....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... within the expression "deemed dividend". Obviously, income from dividend, is taxable as income from other sources, u/s 56 of the Act, and in the very nature of things, the income has to be, of the person earning the income. The assessee in the present case is not shown to be one of the persons, being shareholder. Of course the two individuals being Roop Kumar and Devendra Kumar, are the common persons, holding more than requisite amount of shareholdings, and are having requisite interest, in the firm, but then, thereby the deemed dividend would not be deemed dividend in the hands of the firm, rather it would obviously be deemed dividend in the hands of the individuals, on whose behalf, or on whose individual benefit, being such shareholder, the amount is paid by the company to the concern."(Copy enclosed). This matter has been dealt in the assessment order. Mrs. Sandhya Sahlot was found to be a house wife in her statement recorded during search. She had no idea about the business of the company not even knowing the salary receive d by her. It can be clearly seen that she was acting on the directions of her husband and as such had no independent sources of income. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s purchased shares of REEPL by investing her own funds. Smt. Sahlot is a regular income tax payer. Salary income earned by her as Director RHPL, REEPL and MBPL has been taxed in her hand. In the assessment order passed u/s 153A row's. 153C in case of Smt. Sahlot on 30.12.2010 the A.O. has assessed the loans received by her from RHPL as deemed dividend u/s 2(22)(e). This shows that on the two orders passed on the same day the A.O. has taken contradictory decisions. In the case of loan received by Smt. Sahlot from RHPL he has assessed the loans as deemed dividend u/s 2(22)(e) which means that he has accepted that Smt. Sahlot is a bona fide holder of shares of RHPL. While in case of her holding in REEPL the A.O. has held that she is not true owner of her shares. It is important to note that Smt. Sahlot has purchased shares of RHPL. REEPL, MBPL from same source of income. In order to clear the contradiction I have examined the facts of the matter keeping in view the relevant provisions of Corporate Law and judicial precedence. In the Corporate Law, a company is an artificial juridical person. The Hon'ble Privy Council in the case of Solomon Vs Solomon had held that a Company....
X X X X Extracts X X X X
X X X X Extracts X X X X
....corporal law, a company is a legal Juridical person independent of its shareholder, unlike partnership firm which does not have a status separate from it's partners. Since the appellant and RHPL are altogether different registered shareholders of REEPL and are separate legal entities! shareholding of these two different and independent registered shareholders can not be considered or clubbed indirectly for determining voting power of the appellant in REEPL. Section 2(22)(e) is a legal fiction and has to be construed strictly. Nothing can be presumed or read in to it. 5.9 In his comment on the appellants submissions the A.O.has stated that only beneficial shareholding is required and registered shareholding is not required at all for the purpose of sec. 2(22)(e). This is not correct interpretation of law. It is well settled that for the purpose of sec. 2(22)(e) a shareholder has to be both, a registered shareholder as well as a beneficial shareholder. Since the appellant is not registered share holder of the shares of REEPL held by RHPL and Smt Sandhya Sahlot the shares held by them can not be clubbed with his share- holdings in order to work his voting power in REEPL. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come of the assessee. Smt. Sandhya Sahlot had her own independent source of income and she had purchased shares of REEPL by investing her own funds. We also found that salary income earned by Smt. Sandhya Sahlot as a Director of RHPL and REEPL and MBPL has been taxed in her hands. We also found that in the assessment order passed u/s 153A read with Section 153C in the case of Smt. Sandhya Sahlot on 30.10.2010, the Assessing Officer has assessed loan received by her from RHPL being deemed dividend u/s 2(22)(e). Thus, a contradictory view has been taken by the Assessing Officer in the two orders passed on the very same day. In respect of loan received from RHPL, the Assessing Officer has assessed the loan as deemed dividend in the hands of Smt. Sandhya Sahlot u/s 2(22)(e), which means the Assessing Officer has accepted that Smt. Sahlot is a bona fide holder of shares of RHPL. However, in case of her holdings in REEPL, the Assessing Officer has held that she is not true owner of its shares. It is not in dispute that Smt. Sandhya has purchased shares of RHPL and REEPL and MBPL from same source of income. While reaching to the conclusion that holdings of Smt. Sandhya Sahlot was not to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther assessments were framed u/s 143(3)/143(1) or the time for issue of notice u/s 143(2) has expired. The ld. Authorized Representative further argued that in view of the fact that no incriminating material was found during the course of search and that assessment for assessment year 2003-04 to 2006-07, was not abating, no addition was warranted while framing assessment u/s 153A. For this purpose, reliance was placed on the decision of Mumbai I.T.A.T. in the case of Gurendra Singh Baba in I.T.A. No. 2075/Mum/2010, order dated 16.11.2012, wherein the issue was exactly same i.e. addition on account of deemed dividend u/s 2(22)(e). It was observed by the Bench that under provisions of Section 153A, in all cases, where search is conducted u/s 132 of the Act, the Assessing Officer is empowered to assess or re-assess total income of six assessment years preceding the assessment year in which search was conducted. As no incriminating documents were found during search with regard to additions made u/s 2(22)(e) and the subject assessments were not pending the additions so, made were held to be not justified. The precise observation of the Bench was as under :- "6. We have peru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. 6.2 In this case, the AO had made assessment on the information/material available in the return of income. The information regarding the gift was available in the return of income as capital account had been credited by the assessee by the amount of gift. Similar was the position in relation to addition under section 2(22)(e). The AO had not referred to any incriminating material found during the search based on which addition had been made. Therefore following the decision of the Special Bench (supr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 143(1), the due date of notice u/s 143(2) was expired on 31.3.2007. Similarly for assessment year 2006-07, the return was filed on 24.1.2007. The same was processed u/s 143(1) and the time limit for issuance of notice u/s 143(2) expired on 31.1.2008. In this case, search was conducted on 30.5.2008. Thus, for the assessment year 2003-04 to 2006-07, it can be said that no assessments were pending, applying the proposition of law discussed hereinabove. However, with respect to no incriminating material found during course of search, the observation of the Assessing Officer was as under :- "It was found during the course of assessment proceedings the assessee has received loans and advances of various amounts from three Private Limited Companies, either in his individual capacity or as proprietor of his firms Raj Industries and Arun Sahlot & Associates. Further it was noticed that Raj Homes Private Limited ( RHPL) has been giving loans to various companies. It was found that the assessee was substantially interested both in the affairs of RHPL and these other companies which were the recipient of such loans. Further it was noticed that these loans were not for business purpo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. The Assessing Officer is directed to decide the legal issue taking into considering the decision of Special Bench and the decision in the case of Gurinder Singh Baba (supra) as discussed above. We direct accordingly. 32. With regard to deemed dividend, the assessee asked the Assessing Officer to give very short time of one day only for further reply, which he did not provide and close the assessment proceedings. Therefore, the assessee furnished the following documents under Rule 46A before the CIT(A). 1. Copy of MOU between RHPL and MBPL, which are placed at page 1279 to 1280. 2. Copy of Resolution of Minal Builders, as placed at page 1281. 3. Resolution of Raj Homes as placed at page 1282. 4. Copy of ledger account in the books of Raj Homes which are placed at page 771 to 807 of paper book Volume V. 5. Copy of ledger account in the books of Minal Builders at page 902 to 941 - Volume V. 6. In respect of payment made by RHPL to Raj Industries, Copy of ledger account in the books of Raj Homes are placed at page 942 to 972 of Volume V. 7. In respect of payments made by RHPL to Arun Sahlot & Associates. 8. C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lot. It was further submitted that all these evidences go to the root of the matter and are relevant material for adjudication of the issue of deemed dividend. As per ld. Authorized Representative , arguments taken before the Assessing Officer and CIT(A) were based on these evidences available with the assessee, but filed now only, are in support of the same. In respect of Board Resolution, it was submitted that these are permanent records to be maintained and kept by the company without which it cannot function. Since the issue of deemed dividend is a legal issue and the relevant facts are already on record, in the substantial interest of justice, these additional evidences should be accepted. In support of its contention the ld. Authorized Representative relied on the decision of Jurisdictional High Court in the case of Govind Bhai reported in 232 ITR 900, and Ku. Satya Sethia, reported in 143 ITR 486. Reliance was also placed on the decision of Coordinate Bench in the case of V.K. Brahmankar, 1 ITJ 176, and Bridge Stone, 14 ITJ 663. 36. We have considered the rival submissions. We had also gone through the additional evidences filed by the assessee under rule 29. We have appr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ings, we accept these additional evidences and direct the Assessing Officer to examine these documents while deciding afresh the nature of advance given by these companies to the assessee vis-à-vis conditions subject of which loans and advances have been given by bank/financial institution to these companies with respect to the addition made by Assessing Officer, u/s 2(22)(e) of the Act. We direct accordingly. 37. Alongwith the application under rule 29, the assessee has also filed an affidavit. 38. While verifying the additional documents in the form of sanction letter issued by State Bank of Indore dated 27.9.2005, we found that Bank has sanctioned a loan of Rs. 5 crores to M/s. Raj Homes Private Limited. Loan was sanctioned subject to mortgage of various properties including House No. E-3/10A, in the name of Arun Sahlot, Director of Raj Homes Private Limited House No. E-3/10-C, in the name of Arun Sahlot. In addition to the above collateral securities, the Bank have also insisted for guarantee of Arun Sahlot. Accordingly, the loan was sanctioned in favour of Raj Homes Private Limited only after collateral securities of Directors' personal property was given alon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d equitable mortgage of personal property of assessee. Arun Sehlot to the Bank, these companies have advanced some loan to assessee, which in terms of decisions of the business purpose. 40. It was argued by the ld. Authorized Representative that business expediency to advance given to assessee by the company is required to be examined before invoking deeming provisions of Section 2(22)(e) of the Income-tax Act, 1961. It was further submitted that since the advances to the assessee's director was given by the company in which he was having substantial interest, in terms of the Board's resolution and which is further supported by the stipulations given in the bank sanction letter, it was clear that loan was not given to assessee director as a gratuitous but only as a business commitment to honour the terms and conditions of Board's resolution and loan sanction letter in which it was insisted by Bank before granting loan that assessee will furnish personal guarantee and provide his personal property as equitable mortgage with bank. Our attentions were also invited to the condition imposed by the Bank/financial institution in their loan sanction letter, which clearly pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the company to the shareholder, will not be hit by deeming provisions of Section 2(22)(e). Reliance was also placed on the decision of Hon'ble Delhi High Court in the case of CIT vs. Creative Dyeing and Printing P.Ltd., (2009) 318 ITR 476 (Del), wherein it was held that amount paid for genuine purpose of business or for protecting business or in view of commercial expediency are outside the purview of Section 2(22)(e). It was further submitted that against this order of Delhi High Court, Revenue approached to the Hon'ble Supreme Court through SLP and the Hon'ble Supreme Court has rejected the SLP filed by the Department and the same had been reported at (Statute)(2010)328 ITR (ST) 10. 42. In our considered view before bringing any loans or advances within the meaning of Section 2(22)(e), the nature of transaction is to be examined in the light of any benefit received by the company in consideration of loans so advanced and which the Assessing Officer wanted to bring within the mischief of Section 2(22)(e). If it is found that an advance by company had been given to fulfill some commercial obligation casted on it as per the Board's resolution and also in terms of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... wherein it was resolved that Minal Builders private Limited is having around 2 acres of land in the middle of the city which is very suitable for the purpose of developing shopping complex. As the Minal Builders does not have financial resources to start such projects, therefore, approached to Raj Homes Private Limited for financial supports. Attention was also invited to the ledger account in the books of MBPL, indicating implementation of the Board resolution for advancing loan. We found that some of these documents were filed under Rule 46A, which requires the Assessing Officer's attention and deliberation. While deciding issue on deemed dividend, the Assessing Officer is directed to examine all the documents discussed hereinabove. The Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotra vs. CIT, (2011) 338 ITR 538 (Cal), held that loan advanced by the company to a shareholder, where shareholders had permitted company to mortgage his immovable property for enabling the company to secure bank loan. The same did not amount to dividend within the meaning of Section 2(22)(e) and that only gratuitous loan advanced by the company to shareholders can be treated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment by RHPL to Raj Industries cannot be treated as deemed dividend without considering the business necessities discussed hereinabove. In so far as these amounts were given by RHPL to assessee for business purposes, which were to be adjusted against future supplies of these items, while deciding the issue afresh, the Assessing Officer should consider these observations. We direct accordingly. 45. In view of the above, the matter is restored to the file of Assessing Officer in respect of grounds raised by the assessee for the additions made u/s 2(22)(e) in all the years under consideration for examination and for deciding afresh, keeping in view the observations made herein above. 46. Thus, the matter with regard to the addition made on account of deemed dividend is to be decided afresh after taking into account additional documents accepted by us under Rule 29 as discussed hereinabove. 47. Without prejudice to the above, in view of the finding given by us at para 22, we confirm the order of CIT(A) for deleting the addition on account of deemed dividend. 48. Grievance of the assessee also relates to addition made on account of investment made in purchase of house no. HI....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cted in the books of Arun Sahlot and Associates. Similarly, we found at page 150, payments were shown as having been made for bath tub as well as for registration charges. In the matter of addition made on account of investment in house No. HIG 38, Old Subhash Nagar in the assessment year 2003-04, the assessee has filed additional evidence under rule 29. This additional evidence is in the form of letter of Housing Board regarding transfer of house from Prabhakar Dwivedi to the assessee and also agreement with Prabhakar Dwivedi for purchase of house. This agreement was done with Mr. Prabhakar Dwivedi for purchase of house, which was part of registration done with the Housing Board but it remained to be attached with the Deed filed with the Department that is why no sale value was given in the registration done by the Housing Board. As the relevant facts are available on record and do not require any investigation, in the substantial interest of justice, we accept these additional evidences and direct the Assessing Officer to examine these evidences while deciding afresh the issue with regard to the addition made in the assessment year 2003-04 in respect of house HIG 38, Old Subhash ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on this account is justified. In view of the above, addition of Rs. 15,350/- on account of cash found during search also is deleted. In view of the above, impugned addition of Rs. 1,87,090/- is deleted. This ground of appeal is allowed. " 54. The facts of the issue in brief are that jewellery weighing 125.300 gms. Was found in Locker No.309 of Bank of Baroda, Habibgang and jewellery weighing 369.77 gms. was found at the residence of the assessee. The Assessing Officer held that source of al jewellery found was unexplained and made addition of Rs. 1,71,740/-. During the course of search cash totaling to Rs. 15,350/- was found. The Assessing Officer treated the same as unexplained and made addition of Rs. 15,350/-. The Assessing Officer made substantive additions in hands of Shri Arun Sahlot and protective addition in hands of his wife, Smt. Sandhya Sahlot. 55. We have considered the rival contentions and found that cash of Rs. 15,350/- found that the assessee was duly explained and the same was very reasonable in view of various incomes shown by the assessee in his return of income in the past. Similarly, jewellery of Rs. 1,712,740/- was deleted by the ld.CIT(A) in terms of CB....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5 is pending disposal. Presently the company is assessed with the A.O. of the appellant. In case of any change of incumbent the A.O. should inform the A.O. of the limited company to investigate the issue of cost of purchase, construction and improvement etc. in hands of the company and make additions in hands of the company on account of unexplained investment as determined in the case of company. The DVOs report should also be forwarded to the A.O. of the companies. A note regarding this direction should be placed in the records of the company pending disposal. Since the subject property belongs to M/s. Raj Homes Pvt. Ltd, and it does not belong to the appellant addition of Rs. 4951800/- is deleted. This ground of appeal is allowed." 59. It is clear from the above findings of CIT(A) that property belongs to M/s. Raj Homes Private Limited, hence investment for this property is required to be examined in the hands of the said company and no addition is warranted in the hands of the assessee in his individual capacity. No interference is required in this order of CIT(A). 60. In the assessment year 2004-05, the assessee is aggrieved for addition made on account of contract recei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Premises of Shri Arun Sahlot, HIG-38, Old Subhash Nagar, Bhopal. During the time of search one Mr. Kamlesh Harode S/o Mr. Mohanlal Harode was present. When asked about his occupation Mr. Kamlesh mentioned that he was employed with "Minal residency " of Raj Homes pvt. Ltd. as a supervisor since May 2005, earning salary income of Rs. 3500/- p.m. He mentioned that he was living in this house since 2006 as a caretaker. He was occupying one of the rooms of the house. He mentioned in his statement recorded during the time of search the t the name board outside the house mentioned the owner of the house as Mr. Arun Sahlot. He specifically mentioned in his statement that Mr. Surendra Mehta or anyone by the surname Mehta does not live in this house and he has never seen Mr. Surendra Mehta. He also mentioned that Mr. Arun Sahlot presently resides in Arera colony. " During the course of search, statement of Mr. Kamlesh was recorded on 30//05/2008 and he was asked the Q.8 about the ownership of the diary. In his reply he mentioned that the diary did not belong to him, he does not know who it belongs to and that the diary was kept In one of the peti (box) which have been here since he ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctual transactions. (iii) Assessee filed explanation before Assessing Officer denying his allegations. (iv) Assessee further filed an affidavit on oath solemnly affirming the facts and denying the allegations of Assessing Officer. (v) Without disproving the same, the Assessing Officer made additions on pure surmises and conjectures without bringing any corroborative evidence on record." 66. However, the ld. CIT(A) did not agree with the assessee's submission and confirmed the action of the Assessing Officer. 67. Rival contentions have been heard and records perused. Both the lower authorities have recorded detailed finding with regard to various payments, which were found to be recorded in the diary found and seized from residential premises of the HIG 38, Old Subhash Nagar, Bhopal. The Assessing Officer has dealt with each and every payment made. The diary was written by the assessee and found at his residence. As the assessee could not substantiate the source of payment, the Assessing Officer has made addition under the head "Unexplained expenditure". In principle, we are in agreement with the observation of the lower authorities to the effect....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 4.5 L for purchase of Opel Car at Rs. 4500000/-. This shows that L means Lakh. The diary seized at E3/10, Arera Colony, Bhopal is also written by the appellant and the amount is written as 1 L. This shows that the amount written in this diary also are written in lakhs. The entries in the diaries are self speaking. They are evidently entries of expenditure. The expenditure entered in the diary are not accounted. In these circumstances the appellant's admission in affidavit is nothing more than a self serving document created by him and is not a reliable evidence. Since the entries in diary are self speaking evidence of unaccounted expenditure, the examination of recipient u/s 131 is not warranted. The appellant's plea that the additions are made for repetitive entries cannot be admitted since the appellant has not given any specific information as to which payment made on earlier date is repeated on a later date or which payment mentioned at one page is repeated on another page. The appellant has not admitted the facts of payment as appearing in the diary , hence the working of repetitive addition is not possible. There is no infirmity in the working of unaccounted expe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k to the extent or additions confirmed will amount to double addition. In view of the above, It is held that the addition made on account of cash deposits made in bank account is to be reduced by the additions confirmed on account or claim or agriculture income and contract receipt. The amount or addition for various years is reduced as under :- A.Y. Addition on account of Cash deposit Amount of Addition confirmed on account of agricultural income and contract receipt Amount of confirmed addition on account of cash deposit in bank 2003-04 5,50,000 5,59,383 Nil 2004-05 4,00,000 8,02,100 Nil 2005-06 7,00,000 5,22,237 1,77,763 2006-07 1,19,400 7,38,522 Nil 2007-08 11,40,000 9,09,538 2,30,462 2008-09 4,30,510 34,432 3,96,078 The additions for assessment years 2003-04, 2004-05 and 2006-07 are deleted. The addition for assessment year 2005- 06 is reduced from Rs. 7,00,000/- to Rs. 1,77,763/-, for assessment year 200....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the case of other members of the same group in its order dated 22nd March, 2013, which reads as under :- "Common grounds have taken by the assessee with regard to levy of interest u/s 234B. This issue has been decided by the Tribunal in the case of other group members of the assessee vide its order dated 22.03.2013 in the case of Hitesh Mehta and Others, wherein the Tribunal observed as under : "74. A common ground has been taken regarding charging of interest u/s 234B in case of all the aforesaid assessees in all the years under consideration. 75. Plea of ld. Authorized Representative was that in view of the decision of I.T.A.T. Mumbai Bench in the case of Datamatics Limited vs. ACIT, (2008) 299 ITR 286 (A.T.) (Mum. I.T.A.T.), where there was no default on the part of the assessee in payment of advance tax, no interest was liable u/s 234B in regular assessment. Following was the precise observation of the Bench :- "The charging of interest u/s 234B is mandatory. Mandatory does not mean that it is mandatory under all circumstances. It is mandatory when the conditions are fulfilled. The condition is that the assessee should have defaulted. A ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... infirmity in the order of Assessing Officer for making assessments in individual capacity rather than in capacity of AOP. In the result, ground taken by all the assessees in all the years under consideration are dismissed. " 75. Thus, both the issues are squarely covered by the above decision of the Tribunal. Respectfully following the same matter with regard to computation of interest u/s 234B is restored to the file of Assessing Officer with the same direction as contained in order dated 22.3.2013. However, assessee's ground in all the years under consideration with regard to framing assessment in capacity of AOP is dismissed. 76. In the result, appeals filed by assessee are allowed partly in terms indicated hereinabove in all the years under consideration. SMT.SANDHYA SAHLOT - I.T(SS).A.Nos. 193 to 199/Ind/2012:- 77. These are appeals filed by the assessee against the order of CIT(A) dated 1.3.12. for the assessment years 2003-04 to 2008-09 in the matter of order passed u/s 153A read with Section 143(3) of the Income-tax Act, 1961. 78. Rival contentions have been heard and records perused. On 30.5.2008, search and seizure u/s 132(1) was conducted at the resid....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Officer has validly framed assessment u/s 153A. Accordingly, we uphold the action of CIT(A) for confirming the validity of assessment framed u/s 153A. 82. The Assessing Officer has also made addition in respect of agricultural income offered during the assessment year 2004-05 to 2008-09. The Assessing Officer conducted inquiry and recorded his observation at page 2 - 29 of his order. The ld. CIT(A) confirmed the action of the Assessing Officer by dealing the issue at page 4 to 42 of his order. The ld. CIT(A) observed that during the course of appellate proceedings, the assessee has relied upon some of documents not submitted before the Assessing Officer. By observing that the assessee has not shown sufficient cause, he declined to admit the additional evidence filed under rule 46A. 83. We have considered the rival submissions and have gone through the orders of the authorities below and found from record that similar issue with regard to agricultural income has been dealt by the Tribunal in the case of other group members of the assessee i.e. Hitesh Mehta and Others vide its order dated 22nd March, 2013. It was argued by the ld. Authorized Representative that additional docu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tainment Private Limited. The Assessing Officer observed that these companies have surrendered agricultural income in the assessment year 2005-06, therefore, claim of other assessees belonging to same group with respect to the same nature of income cannot be accepted. The Assessing Officer also observed that some farmers, were cross examined by counsel of Raj Group of Industries during penalty proceedings u/s 271(1)(c), wherein they have denied having any land given on lease. The Assessing Officer stated that photocopy of khasra, khatauni and form P-II were filed and the assessee did not produce original of these certificates, hence authenticity of these documents were doubtful. The Assessing Officer also stated that bills of expenditure like seeds, fertilizers, pesticides, labour and other related details like transportation warehouse etc. were not filed. We found that the CIT(A) broadly confirmed the observation of the Assessing Officer. To overcome the findings of Assessing Officer, the assessee has filed documents under rule 46A before the CIT(A), but he declined to accept the same on the plea that despite opportunity, the assessee did not produce these documents before the Ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t correct conclusion with regard to the nature of income offered by the assessee. As per record, the claim of assessee was that the agricultural operation of the assessee was being looked after by Ajab Singh, who was employed by the assessee. Inspite of making request to Assessing Officer and CIT(A), the none of the authorities have called Ajab Singh to verify the work undertaken by him and correctness of agricultural income having been earned by the assessee. We also found that conclusion of Assessing Officer was more influenced by the surrender of agricultural income by three group companies. Through the documents placed on record, it was clarified by the assessee that farmers, who have declined to give loan to the assessee were of different villager and the land was also situated at different location. As the farmers from whom land was taken by the assessee was different from farmers, who have given land to the three companies, which have surrendered their claim of agricultural income, therefore, no fruitful purpose was serve by relying on the statement of those farmers, who had given land to these three companies and not the assessee before us. We found that in the assessment y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee, hence cannot be used against him, as the same were not confronted to him. For this purpose reliance was placed on the decision of Hon'ble Supreme Court in the case Kishan Chand Chelaram, 125 ITR 713. Ld. Authorized Representative also clarified that there is no practice of mentioning names of Bataidar/lessee on the khasra, khatauni and form P-II, because this at times has given rise to plethora of civil suits being filed by the bataidar/lessee for ownership of land due to cultivation done by them for longer period. Hence, not mentioning the name of lessee, bataidar in khasra , khatauni and form no. P-II cannot be viewed against the assessee. Thus, the observation of Assessing Officer in this regard do not carry much force. He further submitted that it was duly stated before the Assessing Officer that entire agricultural operation on the land were done by Mr. Ajab Singh Raghuvanshi, Bazar Mohalla, Village Deori, Tahsil Udaipur, Distt. Raisen. Mr. Ajab Singh was given imprest and he used to pay sale proceeds to the assessee. As the entire work was being taken care of by Ajab Singh Raghuvanshi, the assessee did not know the purchaser of the crop. The intermediary sold the cr....
X X X X Extracts X X X X
X X X X Extracts X X X X
...." 87. The Assessing Officer further observed that the assessee's holdings in these companies were more than 10 % and that the assessee has a net debit balance in the books of RHPL, the Assessing Officer added the entire amount of loan given by RHPL to the assessee u/s 2(22)(e). By the impugned order, the ld. CIT(A) confirmed the addition. However, while confirming the addition, the CIT(A) observed as under :- "The information that RHPL has given loan to appellant's proprietory concern, came to the knowledge of the authorized officers during the course of search. This information is material gathered during the course of search, hence the Assessing Officer had valid jurisdiction to examine the issue in the impugned assessment proceedings and to decide the issue and make warranted addition u/s 2(22)(e)." 88. It was contended by the ld. Authorized Representative that no incriminating material was found during the course of search to indicate that there was any violation of provisions of Section 2(22)(e). He further submitted that assessment for assessment year 2004-05 was completed and time period for issue of notice u/s 143(2) has also been expired. Accordingly....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in favour of assessee. 93. In view of the above discussion, we restore the matter back to the file of Assessing Officer for deciding afresh by considering the judicial pronouncement as discussed above and after applying the proposition laid down therein to the facts of the instant case. We direct accordingly. The balance addition of Rs. 28,66,466/- made u/s 2(22)(e) is hereby confirmed in the assessment year 2007-08. 94. In the assessment year 2008-09 and 2009-10, the addition has been made by the Assessing Officer by observing that the loan given to assessee was more than accumulated profit by RHPL and that she was holding more than 10 % beneficial shares in RHPL. The Assessing Officer has also observed that there is no component of business expediency involved in RHPL. The detailed finding recorded by both lower authorities with regard to making addition u/s 2(22)(e) could not be controverted by the ld. Authorized Representative . Accordingly, we confirm the action of the CIT(A) for upholding the addition made u/s 2(22)(e) in assessment year 2008-09 and 2009-10. 95. Before parting with the matter, it is held that total addition u/s 2(22)(e), cannot exceed accumulated r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otaling to Rs. 15,350/- only were found. The quantum of the cash found in the search is reasonable in view of socio-economic stature of the appellant and his family hence no addition on this account is justified. In view of the above, addition of Rs. 15,350/- on account of cash found during search also is deleted. In view of the above, impugned addition of Rs. 1,87,090/- is deleted. This ground of appeal is allowed. " 98. In view of our discussion in para no. 55 in the case of Arun Sahlot, we do not find any infirmity in the order of CIT(A) for deleting protective addition in the hands of Sandhya Sahlot. 99. The assessee is also aggrieved for taxing the entire contract receipts in the assessment years 2005-06 and 2006- 07 instead of taxing profit at 8 % on presumptive basis. In this regard, the Assessing Officer found that during the assessment year 2005-06 and 2006-07, the assessee has deposited a sum of Rs. 80,000/- and Rs. 1 lakh in her bank account. It was claimed that these were contract receipts and profit on these contract receipts should be assessed at 8 %. As no evidence to prove that the amount so deposited in the Bank were contract receipt, the Assessing Officer ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the bank to the extent of availability of cash on account of additions confirmed will amount to double addition. In view of the above, it is held that the addition made on account of cash deposits made in bank account is to be reduced by the additions confirmed on account of claim of agriculture income and contract receipt and that the source of balance amount deposited in bank is not explained. The amount of addition for various years is reduced as under :- Assessment year Addition on account of Cash deposit Amount of addition confirmed on account of agriculture income and contract receipt Amount of confirmed addition on account of cash deposit in bank 2003-04 530000 577636 Nil 2004-05 930000 649000 281000 2005-06 251000 461503 +80000 Nil 2006-07 600000 699099+100000 Nil 2007-08 400000 1174351 Nil 2008-09 750000 40704 709296 The additions for assessment years 2003-04, 2005-06 to 2007-08 are deleted. The additions for 2004-05....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated 22.03.2013 in the case of Hitesh Mehta and Others, wherein the Tribunal observed as under : "74. A common ground has been taken regarding charging of interest u/s 234B in case of all the aforesaid assessees in all the years under consideration. 75. Plea of ld. Authorized Representative was that in view of the decision of I.T.A.T. Mumbai Bench in the case of Datamatics Limited vs. ACIT, (2008) 299 ITR 286 (A.T.) (Mum. I.T.A.T.), where there was no default on the part of the assessee in payment of advance tax, no interest was liable u/s 234B in regular assessment. Following was the precise observation of the Bench :- "The charging of interest u/s 234B is mandatory. Mandatory does not mean that it is mandatory under all circumstances. It is mandatory when the conditions are fulfilled. The condition is that the assessee should have defaulted. A reading of Section 234B(3) makes it clear that where, as a result of an order of order of reassessment or re-computation u/s 147 or Section 153A, the amount on which interest was payable under sub Section (1) is increased, the assessee shall be liable to pay simple interest at the rate of one percent. The Section ....