TaxTMI 
TaxTMI 
2014 (12) TMI 801
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....s in IT(SS)A Nos.60-62/Kol/2011. 2. The first common issue in IT(SS)A Nos. 60 & 61/Kol/2011 of assessee is against the order of CIT(A) confirming the addition made by Assessing Officer on account of deemed dividend. For the sake of convenience, we reproduce following ground nos. 2 and 3 of IT(SS)A No. 60/Kol/2011:- "2) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the addition of an amount of Rs. 5,00,833/- on account of alleged loan taken from M/s. Mima Flour Mills (P) Ltd., as 'Deemed Dividend' u/s. 2(22)(e) of the Income tax Act, 1961. 3) On the facts and in the circumstances of the case, the Ld. CITA) erred in confirming the addition of an amount of Rs. 16,79,938/- on account of alleged loan taken from M/s. Ganesh Wheat Products Ltd., as 'Deemed Dividend' u/s. 2(22)(e) of the Incometax Act, 1961." 3. Briefly stated facts are that the AO during the course of assessment proceedings made addition of advances taken from Mima Flour Mills Pvt. Ltd. at Rs. 5,00,833/- and from Ganesh Wheat Products Pvt. Ltd. at Rs. 16,79,938/-. Similarly, in AY 2007-08 assessee received loan of Rs. 19,26,577/- from Ganesh Wheat Products Pvt. Ltd. and Rs. 792/....
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....ces. Similarly, in respect of Mima Flour Mills opening balance was Nil and there were several shifting of balance and the resultant debit balance was Rs. 5,00,833/-. For A.Y. 2007-08, in respect of Mima Flour Mills, opening balance was Rs. 5,00,833/- and after shifting balance, the debit balance came to nil. In respect of Ganesh Wheat Products, opening balance was Rs. 18,87,522/- and after shifting balance the credit balance came to Rs. 9 lakhs. On perusal of the ledger account of the assessee in the books of M/s. Mima Flour Mills (P) Ltd. it is seen that on several dates there were shifting balances. On many occasions the balance was in favour of the assessee and on some other occasions the balance was in favour of Ganesh Wheat Products (P) Ltd. It is thus evident that there were reciprocal demands between the parties and thus mutual in characteristic. The account so maintained in respect of such mutual transfer of amount by way of giving and taking financial assistance is, therefore, a current account and this current account is different from a loan account for the sole reason that feature of mutuality is not present in a loan transaction. 5. Here in the present case, from the ....
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....th such business transaction. From the above discussions it can be said that sec. 2(22)(e) of the Act covers only those transactions which benefit the shareholder alone and results in no benefit to the company. On the other hand, if the transaction is mutual by which both sides are benefited, it is undoubtedly outside the purview of provisions of sec. 2(22)(e) of the Act. From the above, it is clear that the loan account differs from current account and the provisions of section 2(22)(e) of the Act, being a deeming section, cannot be applied to current account. In such circumstances, we delete the addition and this common issue of assessee's appeals is allowed. 6. The next common issue in these three appeals of assessee is as regards to the order of CIT(A) in confirming the disallowance of interest payment made by assessee on the ground of utilization of borrowed fund by giving interest free advances to the relatives of the assessee and other group companies. For this assessee has raised identically worded grounds, except variance in amount, and for the sake of convenience, we reproduce ground no. 4 of AY 2006-07 as under: "4. On the facts and in the circumstances of the case, th....
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...." 9. We have heard rival submissions and gone through facts and circumstances of the case. Briefly stated facts are that during the course of search on the residence of assessee on 04.10.2007 jewellery consists of 39 items valuing Rs. 24,51,316/- was found out of which jewellery valuing Rs. 17,26,660/- was seized. The assessee was required to explain the jewellery found. The assessee explained and filed reconciliation statement stating that the item at Sl. No. 1 to 11 amounting to Rs. 5,22,400/- belongs to Smt. Sushila Devi and filed evidences qua that. The assessee also claimed that jewellery to the extent of Rs. 6,40,328/- belongs to Panna Devi Mimani, items at Sl. No. 12 to 14. These details are described in the assessment order but the AO has not believed the explanation of the assessee and made addition but CIT(A) deleted the addition after considering the explanation of the assessee. The CIT(A) only sustained the addition made by AO of jewellery valuing at Rs. 3,95,859/- as given in para 7.1 of the assessment order, item at Sl. No. 1 to 4. According to AO, the assessee failed to reconcile these items. The CIT(A) also observed for confirming the addition that, "However the as....
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....(A) in para-3.1 of his order in AY 2002-03 has observed as under:- "3.1. In the assessee's case, as on the date of search, assessment for the year under consideratíon had already been completed. At the time of original assessment, the income declared had been accepted by the AO. In course of the search action in the group case, nothing incriminating in respect of such addition /disallowance were found. Since the above claims had been accepted in course of normal assessments, and since there ìs no change ín the facts arid circumstances compared to the past, the AO was not justìfied in reviewing the completed assessment of the said year merely because a search action has been carried out in the premises of the company. S. 153A does not authorize the making of a de novo assessment. Whìle under the first proviso, the AO is empowered to frame assessment for six years, under the 2nd proviso, only the assessments which are pendìng on the date of initiation of search abate. The effect ìs that completed assessments do not abate. Since the disallowance on account of demat charges and additíon on account of deemed dividend doesn't emana....
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.... abatement of the pending assessment or reassessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same alongwith assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. 20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271 (1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment r....
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....ount of disallowance of Demat Charges. For this revenue has raised following ground no.4: "4. That the Ld. CIT(A) is erred in deleting the addition on account of disallowance of Demat Charges of Rs. 45,365/- relying on the case law of M/s. LMJ International 119 TTJ (Kol) 214 as the addition was not made by digging the books of accounts of the assessee." 13. We have heard rival submissions and gone through facts and circumstances of the case. Briefly stated facts are that there was a search and seizure operation carried out on the business and residential premises of the assessee on 04-10-2007 along with the Memani Group of cases. Accordingly, notice u/s 153A of the Act was issued and in response to the same, assessee filed return of income. The AO while framing the assessment made additions of above noted expenses. The contention of the assessee was that this has already been considered in the original assessment framed u/s 143(3) of the Act and no new facts came to the knowledge of the revenue or any incriminating material was found during the course of search which suggests that assessee has not disclosed the income. The CIT(A) deleted the addition by holding that since there i....
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....evenue came in appeal before Tribunal on the above issue. 17. Admittedly, there is no seized incriminating materials found during the course of search in this case, and without any evidence the AO has made additions of the above expenses. The issue is squarely covered in favour of assessee and against the Revenue by the decision of Special Bench in the case of All Cargo Global Logistics Ltd., v. DCIT(2012) 181 ITR (Trib) 106 (Mum) (SB) as well as by the decision of Hon'ble Rajasthan High Court in the case of Jai Steel (India) supra. As the issue is covered in favour of assessee, we confirm the order of CIT(A) deleting the addition. This issue of Revenue's appeals is dismissed. 18. The next issue in IT(SS)A No. 76/K/2011 of the revenue is against the order of CIT(A) deleting the addition under the head Capital Gain. For this, revenue has raised following ground no. 4: "4. That the Ld. CIT(A), Central-1, Kolkata is erred in deleting the addition of Capital Gain of Rs. 2,50,000/- relying on the case law of M/s. LMJ International 119 TTJ(Kol) 214 as the addition was not made by digging the books of accounts of the assessee." 19. We have heard rival submissions and gone through fact....