AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 61
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....additional evidence in the shape of agreement to sell purportedly executed on 08.06.2009, simply because it was deliberately not filed by the assessee before the AO during the course of assessment proceedings. Nor any explanation, nay satisfactory explanation for not having done so had been filed. 03 The brief facts of the case are that the assessee is an individual deriving income from salary, house property, capital gain, and interest from bank. He is also a Director in one Company M/s Charu Home Products Pvt. Ltd. During the year assessee has received sums from above company where assessee is a director and also a shareholder holding 50 % shares. 04 The assessee filed its return of income on 30/7/2010 declaring income of Rs. 50,32,223/-. The assessment u/s 143(3) of the Act was passed on 25/3/2013 wherein the Ld. Assessing Officer made an addition of Rs. 10136328/- u/s 2(22) (e) of the Act. The assessee preferred appeal before the Ld. CIT (A) and deleted the same, and therefore, the Ld. A.O is in appeal before us. 05 The brief facts of the issue is that the assessee has made financial transactions with the M/s Charu Home Products Pvt. Ltd. as a loan of Rs. 1,81,54,741/- taken....
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....e assessee was asked to explain the applicability of section 2(22) (e) on the amount received from M/s Charu Home Products (P) Ltd. In response to the above, the assessee's counsel vide his letter dated 27- 2-2013 has merely replied that there is no implication of deemed dividend during the year in the -and of the Director. The reply of the assessee is considered which appears to be a very general and cannot be I accepted. As per the provisions of section 2(22)(e), dividend" includes- (a) .... (b) .... (c ) (d) .... (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being 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) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern....
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....(22)(e). The assessee also could not give proper If reply as to how the provisions of section 2(22)(e) were not applicable in his case. Nature of receipt was also not stated by the assessee. It is seen that any payment by the Company by way of advance or loan is covered under the provisions of Section 2(22)(e) . The use of words "any payment" in the beginning of section 2(22)(e) in the context of "advance or loan" signifies that each of the payments made when the payee is not already a creditor constitutes advance, h only when the payee is a creditor of die payer that the payment can be constructed as repayment of the debit not falling in the category of payment by way of advance or loan. The amount of Rs. 1,81,52,241/- paid by M/s Charu Home Products (P) Ltd. and received by the assessee during the period 08-06-2009 to 27-07-2009 is, therefore, squarely covered by the section of 2(22)(e). However, considering that the accumulated profit of the company is Rs. 1,01,36,328/- only I hold that the deemed dividend of Rs. 1.01,36.328/- is assessible in the hands of the assessee u/s 2(22)(e) of the Income Tax Act as its income for AY 2010-11. (Addition of Rs. 1,01,36,328/-)" 06 The....
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....y the appellant as additional evidences are crucial in nature and go to the root of the matter, in order to adjudicate the issues involved in an effective manner, and in the interest of natural justice, and also because an opportunity has been provided to the AO to examine and comment on them the same need to be admitted and considered. Therefore, the documents filed as additional evidence in the course of appeal proceedings are admit ted for consideration and adjudication of the issues. c) Coming to the documents submitted by the appellant as additional evidence, the averment of the appellant is that he had entered into an agreement to sell property number 41, Sector-15, Noida dated 8th June, 2009 with M/s. Charu Home Products Pvt. Ltd. and it was in pursuance of this agreement that payments aggregating to Rs. 1,81,52,241/- were received by the appellant from the Company as follows: Date Receipt by the appellant 8/6/2009 35,00,000/- 11/6/2009 10,24,241/- 24/6/2009 82,00,000/- 4,00,000 3/7/2009 3,08,000/- 22/7/2009 46,50,000/- 27/7/2009 70,000 Total 1,81,52,241/- d) It has been further submitted by the appellant during the appellate proc....
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....reement dated 8th June, 2009, he undertook to sell his property bearing number 41, Sector-15, Noida to the company M/s. Charu Home Products Pvt. Ltd., in pursuance of which a total of Rs. 1,81,52,241/- was paid by the company to the appellant between 8lh June, 2009 and 27lh July, 2009 but due to the inability of the company to arrange further funds for the transaction (to the tune of Rs. 6.1 crores), the deal for the sale of the property was cancelled vide agreement dated lsl August, 2009 and the advance of Rs. 1,81,52,241/- so received wars returned to the company by March, 2010. In fact the schedule of repayment given above reveals that major part of the advance was returned within a few days of cancellation of the agreement to sell (Rs. 70 lacs by 01.08.2009, total Rs. 97.22 lacs by 06.10.2009 and the entire amount by the end of the financial year 2009-10). It has been explained by the appellant's AR that there was no clause in the agreement dated lsl August, 2009 (cancelling the agreement to sell the property) for repayment of the advance of Rs. 1.81 crores within a given time frame and that in any case, the said agreement provided for reversion to the original legal positions.....
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.... A.O. as deemed dividend u/s 2 (22) (e) was, in my opinion, not justified. In view of the foregoing discussion, the addition to income made by the Assessing Officer u/s 2 (22) (e) is directed to be deleted and grounds nos. 2 to 5 of the appeal are allowed." 07 The Ld. Departmental Representative submitted that the assessee has obtained loan from the above Company wherein he is a Director and having the substantial interest. Before the Assessing Officer the assessee did not submit any explanation about the loan, however, before the Ld. CIT(A) assessee submitted additional evidences which were admitted by the Ld. CIT(A) erroneously. He further submitted that explanation given by the assessee before the Ld. CIT (A) that the above transactions were the business advances is devoid of any merit. He submitted that agreement to sell the property at Noida with the Company is a sham document. He stated that property itself is a leasehold property and it needs some permission before transfer/ sales. He stated that the explanation given by the assessee that the transaction was subsequently cancelled as the purchaser i.e. M/s Charu Home Products Pvt. Ltd. could not get the balance 6.1 crore of....
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....r property or assessee sold the property to somebody else. Therefore, he submitted that ld CIT (A) has allowed the submission of the assessee without probing. He, therefore, submitted that the order of the Ld. CIT (A) does not deserve to be held. 08 The Ld. Authorized Representative reiterated the submission made before the Ld. CIT(A) He further submitted a paper book wherein Synopsis of the facts were also placed. He further submitted that the advances were given by the Company to the assessee for the purpose of business for purchase of property. Therefore, same are business advances and cannot be taxed as deemed dividend. He further placed heavy reliance on the decision of Hon'ble Madhya Pradesh High Court in 46 Taxman.com 122 and decision of the Coordinate Bench in ITA No. 274/Del/2016 wherein on identical facts and circumstances, it was claimed that the issue is squarely cove red in favour of the assessee. 09 In rejoinder, the Ld. Departmental Representative vehemently relied upon the decision of the Hon'ble Delhi High Court in CIT vs. Sunil Chopra 12 Taxman.com 496 to show that the order of the Ld. CIT (A) is for us. He further relied upon the decision of Hon'ble Delhi High ....
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....ghts; he submitted that as the property could not be sold he did not do and efforts for lease. On many other questions, he expressed his ignorance about the efforts, bank approached, etc. The assessee was also asked that the money was received by him from the Company and cancellation deed was entered into on 1/8/2009 why payments could not be returned by the assessee up to 31/3/2010 completely. To this, the assessee merely stated that 96 lakhs were paid back in the months of August and October 2009 and the balance sum was paid on 30th March 2010 and 31st March 2010. The Agreement clause did not also have any forfeiture clause and further despite having the right of enforcement, the assessee did not make any effort. On analysis of the loan transaction between the assessee and the company, from the copy of the account at Page No. 2 of the Assessment Order it is apparent that assessee started receiving loans from the company from 8/6/2009 from the Company. The assessee tried to justify that there was an agreement to sell the property to the Company. The moment, the assessee repaid the sum in part there was a Deed of Cancellation of Agreement to Sale. It is apparent that the assessee a....
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....the adequate evidence and cogent, reliable, and credible evidences about the transaction. The ld. CIT (A) has completely brushed aside finding of the A.O in remand report and the statement of the assessee and further has not applied his mind to find out the true nature of the transaction. 11 Further several decisions were relied upon by the Ld. AR, which are not applicable to the facts of the case. The decision in the case of ITA No. 274/Del/2016 dated 29/11/2017 relied upon by the Ld. AR ahs distinguishing facts. In that particular case, it was noted by the Coordinate Bench that in that case, the assessee Director was providing advances to the Company and has credit balance. The post dates cheques were also issued at the time of execution of the agreement itself where as in the present case, there is no such fact existing. In the present case, there is a doubt on the substance of the agreements itself. The statement recorded of the assessee also shows that there is no information coming on the nature of transaction itself. Further, the LD A.O has raised serious doubt about genuineness of the documents. Therefore, it is apparent that the facts of the case are more similar to the f....