TaxTMI 
TaxTMI 
2019 (8) TMI 651
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....ue common and identical issues are involved therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The appeal filed by the Revenue in I.T(SS)A No. 114/Kol/2017 for A.Y. 2011-12 is taken as the lead case. 4. We note that in both the appeals filed by the revenue, the revenue has raised multiple grounds of appeal, however, to meet the end of justice we confine ourselves to the core controversy in these appeals therefore we summarize and concise the grounds raised by the revenue as follows: i) Ground no. 1 raised by the revenue relates to deletion of addition of Rs. 6,42,07,965/- made by the Assessing Officer on account of deemed dividend u/s 2(22)(e) of the Act. This is common issue in both the appeals. ii) Ground No. 2 raised by the revenue relates to deletion of addition of Rs. 11,96,88,790/- made by the Assessing Officer on account of sale of unaccounted raw material goods (This ground relates to only for A.Y. 2011-12) 5. Now we shall take common ground raised by the revenue in both the appeals which relate to deletion of addition of Rs. 6,42,07,965/- made by the Assessing Officer on account of de....
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....hether 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) or any payment by any such company on behalf, or for the individual benefit of any such shareholder, to the extent to which the company in either case possesses accumulated profit." Considering the above, since in the instant case, M/s Abhijeet Ventures Limited (formerly known as Parichay Power Limited) was holding more than 10% of the paid up equity share capital of the lender company i.e. M/s AIL and also had substantial interest in the borrower company M/s CIAL by holding above 20% of the paid up equity share capital (Abhijeet Ventures Limited acquired such shares in the both lender and borrower companies on 31st May, 2010) and the lender....
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....s Ltd.. The loan was taken by the company which did not have any share in the lending company. We note that based on the above identical facts the case laws brought on record by the ld. Counsel wherein it has been held in the case of CIT v. Sharman. Woolen Mills Ltd.(2012) 204 TAXMAN 82(P&H-HC] that the assessee company had received unsecured loan from a company in which it is not a shareholder AO held that such loan amount should be treated as deemed dividend under section 2 (22)(e) , as shareholders of both the companies are same. The Hon'ble Court held that it was not justified. Dividend income is assessable only in the hands of shareholders of the lending company. Assessee Company is a separate entity than its shareholders. Therefore, the said amount cannot be assessed in the hands of assessee under section 2(22)(e) of the Act. Similarly in the case of CIT v. MCC Marketing (P) Ltd.(2012) 343 ITR 350(Del-HC] assessee company had received an unsecured loan from another sister-concern. There was common shareholder in both sister concerns. Revenue taxed the said loan by invoking provisions of section 2(22)(e). Assessee contended that where the recipient of the loan or advance was....
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....atuitous in nature. Accordingly, respectfully following the ratio decided by the Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotra (supra). We do not find any infirmity in the order passed by ld. CIT(A). 15. We note that first of all the assessee is not the shareholder in M/s Abhijeet Infrastructure Ltd. (AIL) therefore the provisions of section 2(22)(e) of the Act does not apply to the assessee. We note that in order to substantiate assessee's claim the ld. Counsel for the assessee has relied on the following judgments: i) M/s Golani Brothers vs. DCIT in I.T.A. No. 2615/M/2017 order dated 07.02.2019 (ITAT Mumbai) wherein it was held as follows: 8. We have heard the rival submissions of both the parties and perused the material on record. The undisputed facts are that the assessee is a registered firm who has taken loan from another company namely M/s. Golani Construction India Pvt. Ltd. of Rs. 2.10 crores. The firm has following shareholders: NAME OF PARTNER SHARE OF PROFIT FROM SHARE OF PROFIT FROM 01.04.2010 TO 17.02.2011 18.02.2011 TO 31.03.2011 MIRA .S. GOLANI 7% 7% KISHORE .S. GOLANI 50% 68.5% RAVI.S.GOLANI 7% 24.5% NARSINGLAL D. GOLANI 36% - The share....
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....f was not shareholder of those lending companies, impugned addition made by Assessing Officer by invoking provisions of section 2(22)(e) was not sustainable. 12. Hon'ble Karnataka High Court in the case of Sarva Equity (P) Ltd., (2014) 44 Taxmann.com 28 observed as under: M/s. Gulani Brothers "Whether in terms of section 2(22)(e), it is only person whose name is entered in Register of shareholders of company as holder of shares who can be said to be a shareholder qua company and- not a person beneficially entitled to shares - Held, yes - Whether, therefore, it is only where a loan is advanced by company to registered shareholder and other conditions set out in section 2(22}(e) are satisfied, said amount of loan would be liable to be regarded as deemed dividend within meaning of said section - Held, yes." 13. In the case of CIT vs. AR Magnetics (P) Ltd., (2014) 220 Taxman 209 (Delhi) (HC) & CIT vs. Daisy Packers (P) Ltd., (2014) 220 Taxman 331 (Guj) (HC), the Court observed as under:- "The assessee company had received loan from another company. The assessee was not a shareholder of the other company. However, there was a common shareholder (individual) who held more tha....
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....concerns being current and inter banking accounts, additions made to assessee's income under section 2(22)(e) in respect of amounts received from various group companies could not be considered as loans and advances as contemplated under section 2(22)(e), hence, no additions could be made as deemed dividend under section 2(22)(e)." 17. In view of the above judicial pronouncements since transaction between group companies were carried as inter banking accounts containing both the types of entries i.e., receipts and payments, having entitled these two transactions, the amount cannot be treated as deemed dividend in the hands of the assessee company." In the case of Gopal And Sons (HUF) Vs CIT [2017] 77 taxmann.com 71 (SC) , the facts are distinguishable as in that case assessee was registered as well as beneficial shareholder whereas in the present the assessee is neither a registered nor beneficial shareholder of M/S Golani Construction India Pvt Ltd. Similarly the facts in CIT vs. National Travel Services (supra) are also distinguishable on facts. In view of the above legal position vis a vis the ratio laid down by various judicial forums , we are of the opinion that the pr....
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....d by the Assessing Officer as deemed dividend under section 2(22)(e), but the ld. CIT(Appeals) did not approve the action of the Assessing Officer after having noticed that interest at the rate of 9% per annum was paid by the assessee on such loan, which, according to him, was a consideration received from her shareholders, which was beneficial to the Company and the order of the ld. CIT(Appeals) giving relief to the assessee was upheld by the Tribunal vide its order dated 29.06.2015 passed in ITA No. 1124/KOL/2012 by relying on the decision of the Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotra (supra). Keeping in view the said decision of the Hon'ble Calcutta High Court which has been followed by the Coordinate Bench of this Tribunal in the case of M/s. Zenon (India) Pvt. Limited I . T. A . N o. 1 8 1 7 / KO L . / 2 0 0 9 Assessment year: 2006-2007 (supra), we hold that the addition made by the Assessing Officer and sustained by the ld. CIT(Appeals) under section 2(22)(e) on account of loan received by the assessee from M/s. Surya Business Pvt. Limited on which consideration in the form of interest was paid by the assessee to the benefit of the Company is....
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....a (supra) held that where loan and advance is given in return to an advantage (interest) then provisions of section 2(22)(e) does not apply. Therefore, respectfully following the judgment of Hon'ble Calcutta High Court (supra), we uphold the order of ld. CIT(A), and the ground nos. 1 and 2 raised by the Revenue in IT(SS)A No. 114/Kol/2017 and Ground nos. 1 and 2 raised by the Revenue in IT(SS)A No. 113/Kol/2017 are dismissed. 16. Now we shall take ground no. 2 which is reproduced below for ready reference: ii) Ground no. 2 raised by the revenue relates to deletion of addition of Rs. 11,96,88,790/- made by the Assessing Officer on account of sale of unaccounted finished goods (This ground relates to only for AY 2011-12) 17. Brief facts qua the issue are that during the search and seizure operation, Shri Manoj Jaiswal, Chairman of Abhijeet Group, in a disclosure petition u/s 132(4) of Act made on 28.01.2011 disclosed an aggregate sum of Rs. 125 crores on behalf of himself, his family members and some of the group companies and in a letter submission dated 16.05.2011 of Rs. 71,03,79,670/- out of the above disclosure was specifically identified as income of the assessee company all....
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.... over a period of time before the date of carrying out physical verification. Till the date of search, the company did not reduce the quantity of shortages of stock in its books even though there was physical withdrawal of stock. These sales were recorded in the regular books of accounts by the assessee company in March, 2011 only i.e. after the date of search. The amount of such sales as per the submission of the company stood at Rs. 63,02,27,350/-. c) There were only two options left with the company to deal with the shortages. One option was to book the entire shortage as consumption and charge the same in its books owing to the fact that the company did not have physical possession of stock and also it was not possible for the company to manufacture a single ton of finished goods against such consumption as the said quantity of materials were not in physical possession of the company. The assessee submitted notional trading account showing a gross profit of Rs. 102.73 crores considering the above option. The second option with the company was to voluntarily disclose the shortages as sales without booking it as consumption as it would not have been possible for the company t....
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.... Rs. 95,000/- PMT of the company would have been Rs. 74,99,16,140/- (7,893.85 MT * Rs. 95,000/- PMT). The Chairman of the Group made a disclosure of Rs. 63,02,27,350/- on account of sale of raw materials of the company in his disclosure petition. Thus, there is an undisclosed income to the tune of Rs. 11,68,88,790/- (Rs. 74,99,16,140/- less Rs. 63,02,27,350/- = 11,96,88,790/-) which was added back to the taxable income of the assessee. 20. Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer. Aggrieved by the order of the ld. CIT(A) the revenue is in appeal before us. 21. The ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity and on the other hand, the ld. Counsel for the assessee has defended the order of the ld. CIT(A). 22. We have heard both the parties and perused the material available on record. We note that from the perusal of the assessment order of the A.O. and the written submission filed by the A.R. following facts emerged. ....