TaxTMI 
TaxTMI 
2018 (4) TMI 445
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....0-11 -do- -do- Shri Mitin A. Patel 2007-08 -do- -do- -do- 2008-09 -do- -do- -do- 2009-10 -do- -do- 2. The issue involved for all assessee herein being interconnected, all the matters were heard together for disposal by common order. 3. We shall first take up the grievance of the Revenue in respect of Assessee - Prima Transformers Pvt. Ltd. in ITA No. 573/Ahd/2016 concerning A.Y. 2007-08 for adjudication purposes. 3.1. The grounds of appeal raised by the Revenue concerning assessment years 2007-08 read as under:- The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 25,00,0007- made on account of deemed divided u/s.2(22)(e) of the Act. The Ld, CIT(A) has erred in law and on facts by not appreciating that M/s Prima Automation Pvt. Ltd., in which both Shri Mitin A. Patel and Shri Vinod V Patel were substantial shareholders holding more than 20% of the paid up capital, had advances loan of Rs. 24 lacs to the assessee company in which Shri Mitin A. Patel and Shri Vinod V Patel were substantial shareholders and held more than 20% of the paid up capital and further, the lending company named Prima Automa....
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....is the lender company a share holder of the assessee company. The Authorised Representative accordingly contended that since the basic condition of recipient of the money to be a 'share holder' is not satisfied at the first instance, question the applicability of section 2(22)(e) in the hands of the assessee does not arise at all. The Ld. Authorised Representative accordingly submitted that the CIT(A) has appreciated the facts in perspective and in accord with plethora of judicial precedents available on the issue and accordingly found no justification for such additions. The Ld. Authorised Representative thereafter pointed out that the identical issue arose in the case of the DCIT vs. M/s. Corrtech Energy Limited ITA No. 113/Ahd/2013 where the Co-ordinate bench of Tribunal has taken a view in favour of the assessee in sync with the decision of various High Courts including judgment of Hon'ble Gujarat High Court in Corrtec Energy Limited. The Ld. Authorised Representative submitted that in view of the judgment of Hon'ble Gujarat High Court in its order dated 24.03.2014 in Tax Appeal No. 238 of 2014 relevant to A.Y. 2009-10 in the case of Corrtech Energy Limited and host of other si....
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....nd other long line of judicial precedents. Consequentially, the issue is no longer res integra. In the absence of assessee holding the shares in lending-company, the money received by assessee is thus not qualified to be taxed as 'deemed dividend' in the hands of assessee-company. Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) absolving the assessee from the clutches of s.2(22)(e) of the Act. Thus, we decline to interfere with the relief granted by the CIT(A). 10. In the result, appeal of the Revenue in ITA No. 573/Ahd/2016 stand dismissed. 11. The appeal of the Revenue in ITA No. 574/Ahd/2016 and 575/Ahd/2016 concerning A.Y. 2008-09 & 2009-10 also stands on the same footing with A.Y. 2007-08. The assessee are not a shareholder of lending-company and other facts are also similar. The facts being similar, our view in A.Y. 2007-08 shall apply mutatis mutandis to other appeals noted above for parity of reasons Revenue appeal in ITA No. 573/Ahd/2016 & 574/Ahd/2016 are also dismissed. 12. We shall now turn to other appeals in ITA No.576/Ahd/2016, 577/Ahd/2016, 578,579,580/Ahd/2016 concerning applicability of s.2(22)(e) and consequent additions in ....
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.... Prima Transformers Pvt.Ltd. It is also a matter of fact that Prima Transformers Pvt.Ltd. is not a registered shareholder of Prima Automation Pvt.Ltd. No loan has been received by the appellant i.e. Shri Vinod V.Patel from Prima Automation Pvt.Ltd. The provisions of sec.2(22)(e) of the Act in respect of deemed dividend are applicable in case of a registered shareholder as decided in several judgments. There is a direct judgment of jurisdictional Hon'ble Gujarat High Court in the case of CIT Vs. Daisy Packers Pvt.Ltd. (TA No.212 of 2010) apart from other judgments relied upon by the appellant. In the present case, the appellant who is the shareholder of Prima Automation Pvt.Ltd. has not received any loan from Prima Automation Pvt.Ltd. Hence, on the facts and circumstances of the case as well as considering the legal position, the addition of Rs. 25,00,000/- in the hands of the appellant as deemed dividend u/s.2(22)(e) of the Act on protective basis made by the A.O. is not justified. Accordingly the A.O. is directed to delete the same. Thus, this ground of appeal is allowed." 13.3. The CIT(A) accordingly reversed the action of the AO and deleted the additions so made on protective....
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....re also duly taken before the lower authorities. It is a different matter that this alternative contention was not adjudicated by the CIT(A) while granting relief on the substantive ground that the assessee is not the beneficiary of the loan and thus not susceptible to section 2 (22)(e) of the Act. Thirdly, the Ld.AR contended that the assessee being a shareholder of the lender-company as well as borrower-company has provided bank guarantee on behalf of the lender-company in the course of carrying on of its business. Therefore, apart from the transactions being commercial in nature, the element of quid pro quo do exists between the lender-company Prima Automation and borrower-Prima Transformer. The Ld.AR thereafter raised fourth alternative ground that such protective additions in the hands of the assessee could not have been made on protective basis merely to protect the interest of the revenue in the proceedings carried out under s.147 of the Act. In elaboration, the Ld.AR submitted that a protective assessment inevitably implies a case of probable escapement. Thus, a firm belief which is indispensible for invoking s.147 of the Act is found absent in the action of the AO. The Ld.....
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....nkitech (P) Ltd.(supra) as approved by Hon'ble Supreme Court in Madhur Housing. The decision continues to hold the field as on date although issue has been referred to larger bench by the Hon'ble Supreme Court. 14.3. We shall now advert to the second alternative plea raised on behalf of the assessee that the transactions are open, mutual and current and are in the nature of trade advances. The plea taken in this regard before lower authorities have not been rebutted. Thus, in view of the CBDT Circular, the trade advances stand excluded from the ambit of section 2(22)(e) of the Act. 14.4. We now next turn to another plea of the assessee that the advances made by the lender-company to the borrower-company is not a loan/advance simplicitor but is beset with the character of quid pro quo owing to the personal guarantees of the shareholder for benefit of the lender-company. 14.5. We also take note of the fourth plea on behalf of the assessee that a protective assessment under s.147 of the Act to merely safe-guard the interest of the Revenue is not sustainable in re-assessment proceedings under s.147 of the Act. A protective assessment impliedly means that the AO is not sure abo....