TaxTMI 
TaxTMI 
2018 (7) TMI 218
X X X X Extracts X X X X
X X X X Extracts X X X X
....the case the order u/s. 144 r.w.s. 147 of the I. T, Act, is bad in law. 2) That on the facts and circumstances of the case there was no service of notice/s 148 of I T Act within the stipulated time , hence the assessement order is bad in law . 3) That on the facts and circumstances of the case the learned A.O. is erred in passing ex-parte order without considering the submissions and objections of the assessee and the learned CIT(A)-I has further erred in confirming the same. 4) That on the facts the learned A.O. has erred in making addition of Rs. 77,26,899/- u/s. 2(22)(e) of the I. T. Act. which is totally unjustified and deserves to be deleted and further the learned CIT(A)-I has also erred in confirming the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce on 09.11.2006 and treated the same as deemed dividend in the hands of the assessee. The ld. Counsel of the assessee submitted that in several case laws, it has been expounded that the running account of a director/shareholder of the company with the company cannot be treated as loan or advance account. In this regard, he referred to the following case laws: 1. ITAT Kolkata Bench decision in the case of ITO vs. Smt. Gayatri Chakraborty vide order dated 30.10.2015 (in ITA No. 151/Kol/2013); 2. ITAT Mumbai Bench decision in the case of Ravindra R. Fotedar vs. Asst. CIT vide order dated 11.09.2017 (167 ITD 100)(Mum); and 3. CIT vs. M/s. Idhayam Publications in Tax Case (Appeal) No.1315 of 2005 vide order dated 23.0....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 3Jst day of March, 1964, and before the 1st day of April, 1965; (ii) any advance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ; (iii) any dividend paid by a company which is set off by the. company against the whole or any part of any sum previously paid by i! and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ls or a company ; (b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is. at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern : Section 2(32) defines the expression "person who has a substantial interest in the company", in relation to a company, means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty percent of the voting power. 9. The provisions of Sec.2(22)(e) treats "loan or advance" given by a company in which public are not substantially interest as distrib....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and receipt entries. The Assessing Officer has taken up one credit balance on 09.11.2006 and treated the same as deemed dividend u/s. 2(22)(e) of the Act. In this regard, we note that in several case laws, it has been held that the running/current account of director/shareholders of the company with the company cannot be treated as loan or advance. 11. In the case of M/s. Idhayam Publications (supra), the Hon'ble Madras High Court had held that the deposit and withdrawal of the money from the current account from such a director/shareholder would not be considered as loan or advance. 12. Similar view was taken by the ITAT Kolkata Bench in the case of Smt. Gayatri Chakraborty (supra). In the said decision, the ITAT has referred to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s further observed that the provisions of section 2(22)(e) of the Act were not attracted in the present case; this provision was inserted to stop the misuse by the assessee by taking the funds out of the company by way of loan advances instead of dividend and thereby avoid tax. In the present case, the assessee had in fact advanced money to the company and there was credit for only 55 days for which the provisions of section 2(22)(e) of the Act could not be invoked. These findings were not shown to be erroneous or perverse in any manner." 14. From the above case laws, it is clear that the running account or current account of the Director & shareholder of the company cannot be treated as loan or advance account. In this case, the perusal....