TaxTMI 
TaxTMI 
2016 (10) TMI 584
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....ssessee and the assessee in response to the said notice requested the learned AO to treat the original returned filed earlier as return in response to notice u/s 153A of the Act. In the said assessment , the learned AO added back an amount of Rs. 15,36,337/- representing advances received by the assessee from M/s. Ganesh Wheat Product Pvt. Ltd as deemed dividend u/s 2(22)(e) of the Act. However, learned CIT initiated proceedings u/s 263 of the Act for enhancement of the additional amount towards deemed dividend by Rs. 27,68,646/- and passed an order u/s 263 of the Act treating the original order passed u/s 153A of the Act by the learned AO as erroneous and prejudicial to the interest of the revenue. Pursuant to the orders of the learned CIT, u/s 263 of the Act, learned AO by order dated 29.11.2011 added Rs. 27,68,646/- also to the income of assessee thus reaching the gross total income of the assessee at Rs. 53,54,040/- 3. Challenging these orders, the assessee preferred an appeal before the learned CIT in appeal No 301/CC-V/CIT(A) C-I/11-12. However, observing that the assessee has no interest in pursuing the appeal, because of non representation on the dates of hearing, the lear....
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....s and withdrawals, another coordinate Bench of this Tribunal in IT(SS)A Nos 57 and 58/Kol/2011 held that they are not hit by Section 2(22)(e) of the Act and the additions have to be deleted. He filed the copies of the above orders to substantiate his contention. On the other side, learned DR vehemently relied upon the orders of the authorities below. 6. Basing the on the above rival contention, the issue that arises for our consideration is whether the additions made by the learned AO treating the transactions of assessee with Ganesh Wheat Products (P) Ltd as deemed dividend within the meaning of section 2(22(e) of the Act? 7. We have carefully gone through the orders produced by the learned AR. In the order dated 22.11.2011 in ITA 301/Kol/2012 while quashing the orders of the learned CIT passed under section 263 of the Act a Coordinate Bench of this Tribunal observed as follows: "4. The learned AR argued that this tribunal had already disposed off the original appeal emanating out of original section 153A proceedings in IT(SS)A.57& 58/Kol/2011 for A.Yrs. 2006-07 & 2007-08 respectively dated 17.10.2014 wherein the addition made towards deemed dividend was deleted by this Tribuna....
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....ger 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 independent of one another. No interest was charged by either sidefor advancing money on mutuality inasmuch as the loan account was a current account in nature. It is thus evident that there were reciprocal demands between the parties and thus mutual in characteristic. At the close of accounting year as on 31-03-2006, debit balance stood at a sum of Rs. 18,87,522/- which was duly reflectedin the balance sheet under the head Loans & Advances. 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 MimaFlour 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....
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..... 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 transaction, because if the company also benefits from the said transaction, it will take the character of a commercial transaction and hence will not qualify to be dividend. In the case of the assessee, by giving and taking financial assistance from each other, both the assessee and the company were benefited and such transactions between them were nothing but commercial transactions and dividend attributable to the shareholder is nothing to do with 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 acc....