TaxTMI 
TaxTMI 
2017 (2) TMI 284
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.... on NCC Ltd. and its group on 06-10-2010. M/s. RRV Infrastructure Ltd., being the sub contractor of NCC Ltd., was also covered under the above search. During the search proceedings, certain loose sheets and documents were seized. In view of the same, a notice u/s 153C was issued to the assessee. In response to the said notice, the assessee filed his return of income, returning Rs. 15.29,210/- and Rs. 1,68,61,090/-, as his income for the assessment years 2009-10 & 2010-11 respectively. The Assessing Officer observed that the ledger account of copies of Shri R.R. Varma in the books of M/s. RRV Infrastructure Ltd., showed a debit balance of Rs. 20,34,665/-as on 10-02-2009. The assessee was, therefore, asked to explain why this amount should not be treated as deemed dividend in the hands of the assessee u/s 2(22)(e) of the Act. The assessee could not explain the entries and therefore the Assessing Officer treated the said amount as deemed dividend in the hands of the assessee and brought it to tax. Similarly, for the A.Y 2011-12 also, similar addition was made during the assessment completed u/s 143(3) of the Act. Aggrieved, the assessee filed appeals before the CIT(A), for the both as....
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...., the additional ground of appeal for the A.Y 2009-10 is rejected. 5. On merits, for both the A.Ys, the Ld. counsel for the assessee relied upon the submissions made by the assessee before the CIT(A) and also on the copies of the ledger account and the bank statements of the assessee filed before us, while the Ld. DR supported the orders of the authorities below. 6. Having regard to the rival contentions and the material on record, we find that undisputedly, the assessee is having a running current account with the company and also that it is always the assessee who has been advancing interest free loans and advances to the company. As pointed out by the Ld. counsel for the assessee, the debit balances have been for a very brief period, i.e only for less than 50 days for an amount of Rs. 20,34,665/- and less than 21 days for an amount of Rs. 1,57,200/- as is evident from the books of account produced before us. We find that the Hon'ble Punjab & Haryana High Court in the case of CIT Vs Suraj Dev Dada (cited supra) as considered the exactly similar situation and at paras 8 to 10 has held as under: "8. In view of the f indings recorded by the Commissioner of Income-tax (Appeals) as....
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....tail the misuse of the funds belonging to a private limited company by its shareholders but not when there is running current account of the appellant with the company and the appellant has in fact for most the time lent the money to the company. This section had been inserted to stop the misuse of the taxing provisions by the assessees by taking the funds out of the company by way of loans or advances instead of dividends and thus avoid tax. But in this case where there is no such intention of the appellant and he had in fact advanced money to the company, credit in that account for some days cannot be treated as deemed dividend under section 2(22)(e). It is evident fact that the appellant in real sense not derived any benef it from the funds of the company and, therefore, by no stretch of imagination it can be said that the company has disbursed or given dividend to its shareholder/director in the guise of loan. It will be travesty of law to apply the provisions of section 2(22)(e) of the Act to the facts of the present case whether in fact the person concerned has not gained any benef it from the funds of the company and one has to consider the totality of the facts and circum....
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....-10 & 2011-12 respectively. The Assessing Officer completed the assessment by invoking the deeming provision of Sec. 2(22)(e) of the Act, against which the assessee filed an appeal before the CIT(A). The CIT(A) confirmed the assessments and the assessee is in second appeal before us. 9. The Ld. Counsel for the assessee submitted that in the case of the assessee in this case, Assessing Officer found that there was a debit balance in the assessee's ledger account in the books of the company M/s RRV Infrastructure Ltd and the assessee's explanation was called for. It is submitted that, since the assessee could not explain the said entry in the books, the Assessing Officer treated it as deemed dividend u/s 2(22)(e) of the Act, in the hands of the assessee and brought it to tax. On appeal to the CIT(A), the assessee submitted that the sum of Rs. 53,80,801/- was an advance received by the assessee as a consideration for the development agreement entered into by the assessee with the company and therefore it cannot be treated as deemed dividend u/s 2(22)(e) of the Act. The CIT(A), however, did not accept the assessee's contentions and the assessee is in second appeal before us. 10. The ....