TaxTMI 
TaxTMI 
2014 (10) TMI 897
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....IT(SS)A Nos.57 & 58/Kol/2011. 2. The first common issue in IT(SS)A Nos. 57 & 58/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. 57/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. 2,06,214/- on account of alleged advance 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. 5,21,010/- on account of alleged advance 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 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 ....
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....ave now adjudicated (which is a group case). The issue being exactly identical and we have considered the issue in para 4 and 5 of our order of even date in the case of Mr. Purushottam Das Mimani, which reads as under: "4. We have heard rival submissions and gone through facts and circumstances of the case. We have gone through the facts of the case and found from the perusal of ledger account of assessee in the books of account of Ganesh Wheat Products (P) Ltd., the lender company, it is seen that as on the first day of the relevant accounting year 2005- 06 (A.Y. 2006-07) opening balance is at Rs. 28,07,584/-. Thereafter, on several dates during the entire financial year there were several transactions through cheques and some in cash by either parties, i.e. the assessee and the loan giving company, resulting in 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. The ledger of the assessee further reveals that no payment by loan creditor is followed by a repayment by the loan debtor and, in fact, the payments by the assessee and Ganesh Wheat Products (P) Ltd. are i....
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....he voting power; but if such loan or advance is given to such shareholder as a consequence of any further consíderation which is beneficial to the company received from such a share-holder, in such case, such advance or loan cannot be said to be deemed dividend withín the meaning of the Act. Thus, gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of section 2(22) but not cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder." From the above facts and legal proposition decided by Hon'ble jurisdictional High Court, it is clear that section 2(22)(e) of the Act was inserted to bring within the purview of taxation those amounts which are actually a distribution of profits but are disbursed as a loan so that tax thereon can be avoided. It is pertinent to note here that when dividends are declared by a company, it is solely the shareholders who benefit from the transaction. No benefits accrue to the company by way of dividend distribution. Thus, section 2(22)(e) of the Act covers only such situations, where the shareholder alone benefits from the loan tra....
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....opportunity was provided to the assessee. Even now before us the assessee failed to provide any evidence or made no argument. Hence, this issue of assessee's appeal is dismissed. 8. The next common issue in IT(SS)A Nos. 70 to 72/Kol/2011 by revenue is against the order of CIT(A) deleting the addition made by Assessing Officer on account of deemed dividend. For this, Revenue has raised similar grounds in all the three appeals, except variance in amount. For the sake of convenience, we reproduce ground no. 3 in IT(SS)A 70/Kol/2011, which reads as under:- "3) That the Ld. CIT(A), Central-I, Kolkata is erred in deleting the addition of deemed dividend of Rs. 55,000/- relying on the case law of M/s. LMJ International 119 TTJ(Kol) 214." 9. We find that this issue is now squarely covered in favour of assessee and against Revenue by the decision of Hon'ble Rajasthan High Court in the case of Jai Steel (India) Vs. ACIT reported in (2013) 88 DTR (Raj) 1, wherein it is held as under:- "The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of incom....
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....s arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. Income Tax Officer : (1981) 131 ITR 597 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided." The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded upto the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been clai....