TaxTMI 
TaxTMI 
2018 (9) TMI 61
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....the case and in law, the Ld. CIT(A) has erred in admitting 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 C....
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....Charu Home Products (P) Ltd. from the period 08- 06/2009 to 27/7/2009. As per the Balance Sheet of M/s Charu Home Products (P) Ltd. this company has opening Reserve & Surplus as on 01-04-2009 of Rs. 1,01,36,328/- Therefore, during the course of assessment proceedings, the 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....
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.... reveal that the company's principal business is not granting of loans and advances but as stated earlier manufacturing of garments / import of textile machinery. It is, therefore, seen that the assessee is a shareholder having a stake of more than 10 per cent in the payer company M/s. Charu Home Products (P) Ltd. and the payer company is not covered by any of the exceptions in section 2(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....
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....ingh in ITA No. 2942 (Del) of 2011, that powers of first appellate authority are co-terminus with those of the assessing officer, and that it is incumbent on him to exercise the same if the facts and circumstances justify. Further, Hon'ble Delhi High Court in the case of CIT vs. Virgin Securities Credit P. Ltd. (2011) 332 ITR 396 (Del) have held that evidence which is crucial in disposing a case can be admitted. Since the documents filed by 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. ....
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....es of the two agreements, alongwith the original documents, which were called for by me u/s 250 (4) of the Act, it is found that the agreements have been signed on stamp papers bearing dates 2nd June, 2009 & 27th July, 2009, and hence the A.O. in the absence of any evidence to the contrary, cannot controvert dates of signing of the agreements i.e., 9th June, 2009 and 1st August, 2009 respectively, merely on the basis of unsubstantiated suspicions. f) It has been claimed by the appellant before me that as per the agreement 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 advanc....
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....deemed dividend only to the extent of accumulated reserves/surplus. It is found that the amount of Rs. 1,81,52,241 /- was received by the appellant from M/s. Charu Home Products Pvt. Ltd. in pursuance of the agreement to sell to the company a property belonging to the appellant i.e. out of business/commercial expediency and therefore, it does not fall within the meaning of loan/advance as used in that section, since it was to be in consideration for the property proposed to be sold by the appellant. Therefore, its treatment by the 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 t....
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....of the Bank or from whom the Company was arranging further funds. He further referred to Question No. 9, with respect to the permission of transfer of leasehold property as well as the property, electricity and water tax bills. He further stated that no funds were forfeited by the assessee from the Company despite cancelation of such a huge transaction. There is no evidence whether the property was required by the company or not or assessee was in need to sale it or not. No evidence was placed whether the company purchased some other 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 rel....
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....y was a leasehold property and was to be used for the development. The Company could not raise the funds from the banks, which resulted into cancellation of the agreements. The assessee could not explain being the Director that which bank was approached and what efforts were made. Even the assessee himself could not show which bank was approached. No documentary evidences could be produced before the A.O. Further, the property was leasehold property what efforts were made by the assessee Director to sell the property and transfer lease rights; 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 ha....
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....anged by the Company for the payment of above land. The assessee could not show what efforts were made by the Company and which bankers were approached for the loan. Therefore, in view of the above peculiar facts it is apparent that Agreement to Sell dated 8/6/2009 and cancellation of such deed by Agreement dated 1/8/2009 for the purchase of property is merely cover up and a camouflage for giving loan to the assessee by the above Company to avoid contravention of the provisions of Section 2(220(e) of the Act. Assessee also failed to give 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 ....