TaxTMI 
TaxTMI 
2014 (2) TMI 425
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....rder of CIT(A), the Assessee is now in appeal before us and has raised the following grounds:- 1. The ld. CIT(A) erred on facts and in law in confirming action of Assessing Officer in making addition of Rs. 21,71,160/- by invoking provisions of section 2(22)(e) of the Act. 2. The ld. CIT(A) erred on facts and in law in confirming action of Assessing Officer in denying deduction of interest paid on borrowings used for repayment of housing loan taken in earlier year from the bank amounting to Rs. 1,13,176/- while computing 'Income from House Property'. 1st ground is with respect to invoking provision of Section 2(22)(e) of the Act. 4. A.O. noticed that Assessee was a Director of B. Patel Infrastructure Pvt. Ltd. and was holding more than 10% of its voting power. He also noticed that B. Patel Infrastructure Pvt. Ltd. was having accumulated reserves, had granted loan of Rs. 21,71,160/- to the Assessee. A.O. was of the view that as per the provisions of Section 2 (22)(e) of the Act, any payment by a Pvt. Ltd. Company to a person holding not less than 10% of the voting power would be chargeable to tax as deemed dividend. The Assessee was asked to show cause as to why the amount grant....
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.... addition of Rs.21,71,160/- was well justified and therefore the same is confirmed. 5. Aggrieved by the order of A.O., Assessee is now in appeal before us. 6. Before us, the ld. A.R. reiterated the submissions made before A.O. and CIT(A). He further submitted that on the request of the Board of Directors of B. Patel Infrastructure Pvt. Ltd. Assessee had given personal guarantee as well as his Bungalow together with the land to the bank as security for the purpose of extending credit facilities to the company and for which the Assessee was not paid any guarantee commission. The amount received from B. Patel Infrastructure Pvt. Ltd. was returned to the company after it had repaid the loan to the bank. He therefore submitted that the funds were received under the business compulsion and cannot be considered as loans and advance within the meaning of section 2(22)(e) of the Act. He further placed reliance on the decisions in the case of CIT vs. Rajkumar 318 ITR 462 (Del.), CIT Vs. Creative Dying and Printing Pvt. Ltd. 318 ITR 476 (Del.), ACIT vs. Harshad V Doshi 130 ITD 137 (Chennai) and Pradip Kumar Malohatra vs. CIT 338 ITR 538 (Calcutta). In view of the aforesaid decisions he subm....
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....Ltd. for advancing of various credit facilities to it and therefor the loan received by the Assessee is during the normal course of business and not a gratuitous loan and therefore it cannot be considered to be deemed dividend and in support of which reliance has been placed on the decision of Pradip kumar Malhotra (supra) and other decisions. However we find that in the case of Pradip Kumar Malhotra (supra) the fact was that the Assessee had permitted his property to be mortgaged to bank for enabling the company to take the benefit of loan. Later on inspite of the request of the Assessee, the company was unable to release the property from the mortgage. In such a situation it was held that the advance given was not a gratuitous advance to the shareholder but was given to protect the interest of the Company and therefore the advance was held not to be in the nature of deemed dividend. In the present case it is not the case that the Assessee had requested for release of his properties which was kept as security with the bank and the same was not released when requested by Assessee and therefore the facts of Pradip Malhotra (supra) are not identical and therefore the ratio of the dec....
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....rdingly denied the claim of interest of Rs. 1,13,176/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) confirmed the addition made by the A.O. by holding as under:- 4.2 The matter has been considered but it is difficult to agree with the Authorised Representative. To start with, there cannot be an estoppel in the Income-tax proceedings particularly when it has not been shown that there has been a specific acceptance of the assessee's stand in any scrutiny assessment completed by the assessing authorities. The theory of the assessee regarding the so called replacement of bank fund by private funding remains unproved- Whereas the replacement of the money borrowed from the bank is a different transaction and the payments have been made from the funds available with the assessee, at no stage it has been proved that the funds received from private parties led to this replacement. The appellant has a number of sources of income which includes income from interest, salary from partnership firm etc. Therefore, unless it is specifically shown that the funds from the bank got replaced by the private funds, inference could as well be drawn that the private ....