TaxTMI 
TaxTMI 
2016 (2) TMI 159
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....arranted observation while not allowing the claim of the assessee as per the direction of the Hon'ble ITAT." Grounds of ITA No. 235/JP/2014 (A.Y. 2005-06) "1. The ld CIT(A) has erred on facts and in law in confirming the action of the A.O. in making addition of Rs. 20,45,362/- by holding the advance given by M/s Chrome International Company Ltd. to the assessee as deemed dividend U/s 2(22)(e)." 2. In the assessee's appeal for A.Y. 1999-2000 the sole ground of appeal is against not allowing the opening stock by the amount of excise duty of Rs. 16,20,151/- in giving effect of Section 145A of the Income Tax Act, 1961 (in short the Act). In this case, the Coordinate Bench vide order dated 25/2/2009 in ITA No. 1123/JP/2008 had set aside the issue of adjustment of excise duty U/s 145A as under:- "6. Considering the above submissions, we find that upto the introduction of section 145A in the I.T. Act, 1961 by Finance (No.2) Bill 1998 with effect from 01/4/1999, the assessee had been following exclusively method of valuation of closing stock whereby the tax was not included in the value of purchase and sale of stock. In the assessment year under consideration i.e. a....
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....xtract whereof has been reproduced herein above is relevant. In this case after discussing the issue in view of Finance No. 2 Bill, 1998 as well as guidance note on tax audit under section 44AB issued by ICAI, the Hon'ble Delhi High Court has been pleased to hold that section 145A of the Act begins with a non-obstante clause, and therefore, to give effect to section 145A of the Act, if it is a change in the closing stock as on March 31, 1999, there must necessarily be a corresponding adjustment made in the opening stock as on April 1, 1998. The Hon'ble High Court has been also pleased to hold that if any adjustment is required to be made by a statute (as for example 145A of the Act), effect to the same should be given irrespective of any consequences on the computation of income for tax purposes. We thus in the interest of justice while setting aside the orders of the lower authorities in this regard remand the matter to the file of A.O. to examine the approach of the assessee while applying the provisions of Section 145A of the Act. In view of the above decision of Hon'ble Delhi High Court in the case of CIT Vs. Mahavir Alluminium Ltd. (supra), the A.O. is also directed to....
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....en. The A.O. was correct in not allowing such set off of Rs. 5,33,354/- on account of excise duty element of opening stock. When on principle it is not allowed then it makes no difference that whether such excise duty element in opening stock was Rs. 5,33,354/- or Rs. 21,53,505." The profit shown for the A.Y. 1999-2000 is thus found to be under stated by Rs. 5,33,354/- and accordingly addition of Rs. 5,33,354/- is made the ld Assessing Officer had not allowed the adjustment of excise duty from the opening stock. 3. Being aggrieved by the order of the ld Assessing Officer, the assessee carried the matter before the ld CIT(A), who had allowed the appeal partly by observing as under:- "2.3 I have considered the facts of the case; assessment order and appellant's written submissions. ITAT set aside the issue of adjustment of excise duty to the opening stock on the basis of Delhi High Court decision in the case of Mahavir Alluminium Ltd. to the A.O.. Assessing Officer while completing set aside assessment, did not allow any adjustment to the opening stock as on 01/4/1998 on the ground that opening stock has to the same as the closing stock as on 31/3/1998. Logically, I agree....
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....ld CIT(A) as well as before the Hon'ble ITAT. Even direction given by the Hon'ble ITAT that this amount is further to be reduced Rs. 16,20,151/- on the basis of adjustment as per Section 145A of the Act. The ld AR has further drawn our attention on decision of Hon'ble Delhi High Court in the case of CIT Vs. Mahavir Alluminum Ltd. (2008) 297 ITR 77 and prayed to allow the assessee's appeal. 5. At the outset, the ld DR has vehemently supported the order of the ld CIT(A) and argued that the assessee was not in position to explain enhanced adjustment on account of excise duty U/s 145A of the Act, therefore, the ld CIT(A) has rightly rejected the claim of the assessee. 6. We have heard the rival contentions of both the parties and perused the material available on record. Principally the ld CIT(A) had accepted the assessee's adjustment of excise duty on opening stock U/s 145A but full amount has not been allowed by him on the ground that since the excise duty is not included in the closing stock of last year. It is not possible to verify and allow the higher claim of adjustment. The AR of the assessee furnished all the details before the lower authorities at the time of appell....
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....nition of deemed dividend U/s 2(22)(e) of the Act. The maximum amount outstanding any time during the year, the closing balance of Rs. 20,45,326/-. The assessee submitted before the Assessing Officer as under:- "a. M/s Chrome International Ltd. is an associate concern of the assessee. With this company assessee has numerous business transaction like payment/receipt of rent, purchase and sale of goods as also temporary financial accommodation. For the sake of convenience these transactions are recorded in separate accounts according to the nature of transaction. b. All the above transactions are business transactions or the transactions in the nature of current account. If all the transactions in different account are consolidated then it can be noted that as on 01/4/2004, M/s Chrome International Company Ltd. is a debtor of assessee for Rs. 11,00,951/- whereas as on 31/3/2005, it is a creditor for Rs. 20,58,481/-. From a look to this account, it can be noted that there are numerous business transactions and payment/receipt of funds there against or otherwise. c. All these transactions when seen in totality lead to only conclusion that prove these transact....
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.... the addition to the file of AO for considering appellant's submissions. Assessing officer again made the addition by referring the relevant provisions of the Act and appellant's submissions. lt is not in dispute that appellant is a shareholder and was having substantial shareholding in chrome international company Ltd. The said company was not the company in which public are substantially interested. Therefore provisions of section 2 (22)(e) are attracted in the case of appellant. The only dispute between AO and appellant is that transactions between appellant and Chrorne international were treated as loan and advances by the AO but appellant claims the same to be on account of current account or business transactions. There are multiple financial transactions between the appellant and the company. However in the books of chrome international company Ltd, there are separate accounts of the appellant in respect of business transactions and in respect of financial transactions. The title of the account with financial transactions is "KG Petro chem Ltd (short term loan)". From the heading of the account itself, it is clear that appellant's account is in the natur....
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....e other day the balance is in debit. These business transactions cannot partake the character of a payment by way of loans or advances. The deeming provision of law contained in this Section being very much confined and limited to the particular purpose for which it has been enacted cannot assume any role beyond the said restricted and confined limit and it can never interfere in the normal business of the companies carried out in the ordinary course of business. The ld Assessing Officer treated Rs. 20,45,426/- as short term loan but it is a temporary accommodation to meet the business requirement of the funds of each other and therefore the same cannot be considered as payment by way of loans or advances. In consolidated account there is an opening debit balance of Rs. 11,00,950/- and closing debit balance of Rs. 20,58,481/- with the assessee if all the transactions are consolidated together. He further relied on the decision in the case of NH Securities Ltd. Vs. DCIT 11 SOT 302 (Trib) (Mum) (2007) wherein it has been held that payment made by the company to this shareholder is proved by the characteristic as other than loan/advance, in other words, the payment is for the purpose ....