TaxTMI 
TaxTMI 
2017 (8) TMI 1564
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.... of ITA No.18/Chd/2017 relating to assessment year 2009-10. ITA No.18/Chd/2017: 3. Briefly stated, the assessee during the impugned year had received advances amounting to Rs. 12,87,115/- from M/s Emdis Healthcare Pvt. Ltd. ,a company in which he had a shareholding of 49.95%. On being confronted during assessment proceedings as to why the said amount be not treated as deemed dividend as per section 2(22)(e) of the Act, the assessee submitted that the aforesaid advances had been given by the company for purchase of land on its behalf in Himachal Pradesh for setting up a resort. The assessee further explained that since the deal could not materialize the entire amount was refunded back to the company during the year itself. The Assessing Officer rejected the assessee's contention and treated the impugned advance as deemed dividend and added the same to the income of the assessee. 4. The Ld.CIT(Appeals) restricted the addition made to the peak of the advance given, which worked out to Rs. 10,99,518/-. The I.T.A.T. in its turn upheld the addition confirmed by the Ld.CIT(Appeals). On this addition, the Assessing Officer initiated and levied penalty u/s 271(1)(c) of the Act, hol....
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....o Products (supra), it would be worthwhile to ponder on this judgement because it discusses and carries forward the logic of two very important judgements of the Hon'ble Apex Court on this issue, namely, M/s Dharmendra Textile Processors (295 ITR 244) and Dilip N. Shroff (291 ITR 519). The most important terms relevant for the present case are "incorrect claim" and "inaccurate particulars". The judgement concludes that "incorrect claim in law cannot tantamount to furnishing of inaccurate particulars". It refers to a point that "everything would depend upon the return filed because that is the only document where the assessee can furnish the particulars of his income; when such particulars are found inaccurate, the liability would arise" It was held in the case of Dilip N. Shroff (supra) that "the explanation (with respect to inaccurate particulars) must be preceded by a finding as to how and in what manner the assessee had furnished the particulars of his income". 4.8 In the present case, it cannot be stated with certainty, whether the default was willful, but was is not debatable. Being a civil liability, mensrea is not a requirement to impose penalty, however, when the a....
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....8/-, which was added due to holding the receipt of amount from the Company as taxable deemed dividend u/s 2(22) (e) in the hands of the appellant. 3. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same." 6. During the course of hearing before us, the Ld. Counsel for the assessee vehemently contested the levy of penalty stating that the assessee had harboured a bonafide belief that the impugned advance received was not his income since it had been advanced for acquiring land for the company which had given the said advance and since the deal could not fructify the same amount had been returned during the year also. The Ld. counsel for assessee argued that the addition in the present case had been made by invoking deeming provisions u/s 2(22)(e) of the Act and no penalty in such circumstances was leviable. The Ld. counsel for assessee relied upon the following case laws in support of its contention: 1) CIT Vs. Fortune Hotels and Estates Pvt. Ltd. (2015) 232 Taxman 481 (Bom HC) 2) CIT Vs. Madan Teatres Ltd. (2013) 260 CTR 75 (Kol HC) 3) CIT Vs. Baroda T....
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....nation also that the said sum was advanced in the case of money lending business of company which was found by the I.T.A.T. to be false. 10. Having heard both the parties, we find merit in the contention of the assessee. The explanation of the assessee, that the sum was advanced for purchasing land for the company, we find was not accepted since the assessee had failed to substantiate the same. The relevant findings of the I.T.A.T. in this regard in its order 10.9.2014 in ITA Nos.1030 & 1031/Chd2013 for assessment years 2009-10 and 2010-11 at para 9 are as under: "9. The plain reading of the above clearly shows that if a person who is a substantial share holder takes a loan or advance from a company in which he is substantial share holder i.e. more than 10% share holder then such advance has to be treated as deemed dividend income upto the extent of accumulated reserves of the said company. It is not disputed that assessee is a substantial share holder and the company which has given the advance possessed substantial accumulated profits. The dispute has been raised on two counts. Firstly, it was a business transaction. We do not find any force in these submissions. Ther....
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....rovided by s. 271(1)(c)(iii) of the Act. Accordingly, in addition to any tax payable by him, a sum 'which shall not be less than, but which shall not exceed twice the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income'. Expln. 1 to s. 271(1)(c)(iii) raises a presumption in cases where such person (a) fails to offer an explanation or offers an explanation which is found by the ITO or the AAC or CIT(A) to be false, or (b) offers an explanation which he is not able to substantiate, in respect of any facts material to the computation of the total income of such person. This presumption is to the effect that the amount added or disallowed in computing the total income by the ITO, AAC or CIT(A) in the quantum proceedings shall be deemed to represent the income in respect of which particulars have been concealed. By its very nature, the expression 'fails to offer an explanation' or 'offers an explanation which is found by the ITO or AAC or the CIT(A) to be false' occurring in sub-cl. (A) of Expln. 1 to cl. (iii) of s. 271(1)(c) refers to the quantum proceedings. Therefore, the cases where n....
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....and by rejecting his explanation, the ITO, AAC and/or CIT(A) added or disallowed the amount in computing the total income and it is not a case of 'no explanation' or an explanation already found to be false by the ITO, AAC or the CIT as contemplated by cl. (B) of Expln. 1, then there still remains a scope to examine the bona fides of the explanation already given by the assessee in the quantum proceedings. The rationale behind not giving similar consideration to cases falling in subcl. (A) of Expln. 1 to a person who 'fails to offer a explanation before the ITO during the proceedings' appears to be the legal assumption underlying the provision that in fact, there existed no explanation which could have been offered and to rule out any possibility of bringing into existence, explanations which in fact were not there. In cases where explanation was offered, but was rejected as it could not be substantiated by the assessee, there would arise no presumption of concealment of the particulars of income that was added or disallowed and such assessee can show that the said explanation offered by him was a bona fide one and that he had disclosed all facts relating to such explanation and ma....