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TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 599
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....ppeal is that the appellant's assessment for the relevant AY was completed u/s 143(3) on income of Rs. 54,42,550/- as against the returned income of Rs. 9,42,550/-. The appellant, as one of the partners, derives income from the partnership firm M/s Chopra Properties. In the Return of Income (ROI) of the Levant AY, Capital Gains ontransfer of shares, dividend and interest income have also been shown. During the assessment proceedings, the AO came to know that the appellant was having substantial interest In M/s Beacon Logicwares Pvt. Ltd. (BLPL for short) and M/s SKVR Software Solutions Pvt. Ltd. (SKVR for short). The AO, on perusal of the Balance Sheets of these two companies; M/s BLPL and M/s SKVR, found that M/s BLPL has given loan and advance of Rs. 45,00,000/- to M/s SKVR, therefore, she issued a so-cause notice to the appellant that why not the sum of Rs. 45,00,000/- should be charged to tax u/s 2(22)(e) in the hands of the appellant. In response to the socause notice, the appellant tried to explain that the loan and advance of Rs. 000/- given by M/s BLPL to M/s SKVR was actually share application money and therefore, the provisions of section 2(22)(e) are not attracted. H....
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....planation referring to the case laws in the exact manner and it would not make any significant difference in the state of law as it existed at the time of filing the return. 4. The second proposition placed by the learned counsel of the assessee is that for attracting provisions of section 2(22)(e) of the Act, there has to be a payment of loans or advance and that too out of accumulated profits. Ld. Counsel further pointed out that in the given case, the amount was paid by M/s Beacon Logicwares Pvt. Ltd. to M/s SRVR Software Solutions Pvt. Ltd. and assessee was nowhere involved in the said transaction, therefore, it would be far stretched to expect the assessee to know while filing return of her income on 29.10.2007 that some advances or loans have been given by M/s Beacon Logic waves Pvt. Ltd. to SRVR Software Solutions Pvt. Ltd. and M/s Beacon Logicwares Pvt. Ltd. has accumulated profits in order to attract said deeming provision which may treat the amount of loan as deemed dividend in the hands of assessee u/s 2(22)(e) of the Act and consequently making the assessee liable to tax on account of deemed dividend. Learned counsel of the assessee pointed out that merely because addi....
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.... in the penalty order, it is clear that the Assessing Officer has alleged against the assessee that the assessee has concealed the income and has furnished inaccurate particulars of income, therefore, the penalty is leviable on the assessee u/s 271(1)(c) of the Act, however, in the beginning of this operative part of the penalty order, the Assessing Officer has noted that the impugned amount has been extended by M/s Beacon Logicwares Pvt. Ltd. to SRVR Software Solutions Pvt. Ltd. as unsecured loan and alleged transaction was held between two companies wherein the assessee was a director of both the companies. Before the Assessing Officer, the assessee submitted vide submission dated 22.12.09 wherein she explained that the share application money deposited by one company is neither a loan nor advance and more so, since both the companies have their individual identities, PANs, registration number issued by the Ministry of Corporate Affairs, Govt. Of India. A corporate entity is an artificial person created by law and is capable of doing everything in business with the only difference it is represented by the directors or other human beings. It was also accepted that once an amount i....
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....n it be said that assessee had furnished any inaccurate particulars of income. As regards contention of the Learned DR that assessee had not offered any explanation before the Ld. CIT(A) or the AO we find from the penalty order that assessee had vide it's letter dt. 03.04.2004 given explanations vis-a-vis the deemed dividend. However, Learned AO had proceeded to levy the penalty based on the Tribunal order upholding the addition of deemed dividend. No doubt, as per law laid down by the Hon'ble Apex Court in Dharmendra Textile Processors case (supra), levy of penalty is a culmination of civil proceedings and such penalty is only compensatory in nature, and there is not question of any element of mensrea. But where an assessee bonafide believes a sum as not chargeable to tax and subsequent orders of the appellant authority show that such a stand was a justifiable one, in our opinion, it cannot be deemed as a case of concealment or furnishing inaccurate particulars. Just because an assessee could not offer explanation referring to the concerned case laws in an exact manner, it would not make any significant difference in the state of law as it existed at the time of filing the....
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....advance taken by the assessee was purely for a business connection and not with any intention to violate the provisions of section 2 (22)(e) of the Act. The Ld. counsel for the assessee before us also argued that the issue is covered by Hon'ble jurisdictional High Court in the case of Dr. Minati Chakraborty in ITA No. 98 of 2009 dated 16.07.2010 wherein following question of law was referred: "Whether, on the facts and in the circumstances of the case, the Income- tax Appellate Tribunal is correct in deleting penalties of Rs. 15,05,548/- and Rs. 3,33,802/- imposed under section 271(l)(c) with reference to non-inclusion of the interest free advances of Rs. 27,50, 162/- and Rs. 11,00,000/- received as interest free advances in the period relevant to the assessment years 2001-02 and 2002-03, respectively from Nitrile India Pvt. Ltd., in which she had substantial interest in terms of provisions of section 2(22)(e) of the Income-tax Act, 1961, to the effect that the amounts would be deemed to be dividend and would be includible in the income of the recipient, in view of the decision of the decision of the Hon'ble Supreme Court in case of Union of India v. Dharmendra Textile p....
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....reason was assigned by the tax authorities to dispute the bona fides of the explanation. Under the peculiar facts and circumstances and in the light of decisions cited by the learned counsel for the assessee, we are of the view that the explanation of the assessee is bonafide and hence the case falls outside the ambit of Expln. 1 to s. 271(1) (c) of the Act. In other words, no case was made out by the tax authorities to levy penalty under s. 271(l)(c) of the Act. We, therefore, set aside the orders of the tax authorities and cancel the penalty levied by the AO. In the result, appeal filed by the assessee is allowed." From the above, it seems that the issue is squarely covered in favour of the assessee and against the revenue by the jurisdictional High Court decision in the case of Dr. Minati Chakraborty, supra and the decision of Coordinate Bench of Mumbai Tribunal in the case of Sunil Chandra Vohra, supra. Respectfully following all the propositions stated above, we confirm the order of CIT(A) deleting the penalty levied u/s. 271(l)(c) of the Act. Appeal of revenue is dismissed." 12. In view of above, we are inclined to hold that the in the present case, the alleged amount wa....