TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 885
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....ch for various assessment years are reproduced as under:- Assessment Year- 2010-11 (i) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has failed to appreciate that addition of Rs. 5,13,00,000/- on account of deemed dividend u/s 2(22)(e) of the Act in an assessment order framed u/s 153A can be made by the Assessing Officer on the basis in the documents found and seized during search u/s 132, information of fund flow collected during the enquiries conducted by the Investigation Wing/Assessing Officer and statements of Sh. Akshay Dhanda and Sh. Ajay Nagpal recorded on 22.06.2015 and 07.07.2015. (ii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Mukundray K. Shah, 290 ITR 433 under identical circumstances has upheld the addition of deemed dividend u/s 2(22)(e) made by the AO in a block assessment u/s 158BC, the provisions of which are restrictive than those of section 153A. (iii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was right in concluding that there was a difference in scope of proceedings under section 153A of t....
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....ify any grounds of appeal at the time of hearing. Assessment Year 2011-12 (i) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has failed to appreciate that addition of Rs. 15,44,11,500/- on account of deemed dividend u/s 2(22)(e) of the Act in an assessment order framed u/s 153A can be made by the Assessing Officer on the basis in the documents found and seized during search u/s 132, information of fund flow collected during the enquiries conducted by the Investigation Wing/Assessing Officer and statements of Sh. AkshayDhanda and Sh. Ajay Nagpal recorded on 22.06.2015 and 07.07.2015. (ii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Mukundray K. Shah, 290 ITR 433 under identical circumstances has upheld the addition of deemed dividend u/s 2(22)(e) made by the AO in a block assessment u/s 158BC, the provisions of which are restrictive than those of section 153A. (iii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was right in concluding that there was a difference in scope of proceedings under section 153A of the Income....
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....ny grounds of appeal at the time of hearing. Assessment Year- 2012-13 (i) Whether on the facts and in the circumstances of the case the Ld CIT(A) has failed to appreciate that addition of Rs. 12,30,65,000/- on account of deemed dividend u/s 2(22)(e) of the Act in an assessment order framed u/s 153A can be made by the Assessing Officer on the basis in the documents found and seized during search u/s 132, information of fund flow collected during the enquiries conducted by the Investigation Wing/Assessing Officer and statements of Sh. AkshayDhanda and Sh. Ajay Nagpal recorded on 22.06.2015 and 07.07.2015. (ii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Mukundray K. Shah, 290 ITR 433 under identical circumstances has upheld the addition of deemed dividend u/s 2(22)(e) made by the AO in a block assessment u/s 158BC, the provisions of which are restrictive than those of section 153A. (iii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was right in concluding that there was a difference in scope of proceedings under section 153A of the Income Tax ....
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....ds of appeal at the time of hearing. Assessment Year-2013-14 (i) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has failed to appreciate that addition of Rs. 6,57,50,000/- on account of deemed dividend u/s 2(22)(e) of the Act in an assessment order framed u/s 153A can be made by the Assessing Officer on the basis in the documents found and seized during search u/s 132, information of fund flow collected during the enquiries conducted by the Investigation Wing/Assessing Officer and statements of Sh. AkshayDhanda and Sh. Ajay Nagpal recorded on 22.06.2015 and 07.07.2015. (ii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Mukundray K. Shah, 290 ITR 433 under identical circumstances has upheld the addition of deemed dividend u/s 2(22)(e) made by the AO in a block assessment u/s 158BC, the provisions of which are restrictive than those of section 153A. (iii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was right in concluding that there was a difference in scope of proceedings under section 153A of the Income Tax Act, 1961....
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....ppeal at the time of hearing. 2. In the appeals of Sh. Anoop Thatai, also similar grounds have been raised which for the sake of ready reference are reproduced herein below:- Assessment Year- 2011-12 (i) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has failed to appreciate that addition of Rs. 4,50,50,000/- on account of deemed dividend u/s 2(22)(e) of the Act in an assessment order framed w/s 153A can be made by the Assessing Officer on the basis in the documents found and seized during search u/s 132, information of fund flow collected during the enquiries conducted by the Investigation Wing/Assessing Officer and statements of Sh. Akshay Dhanda and Sh. Ajay Nagpal recorded on 22.06.2015 and 07.07.2015. (ii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Mukundray K. Shah, 290 ITR 433 under identical circumstances has upheld the addition of deemed dividend u/s 2(22)(e) made by the AO in a block assessment u/s 158BC, the provisions of which are restrictive than those of section 153A. (iii) Whether on the facts and in the circumstances of the c....
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.... dividend u/s 2(22)(e) of the Income Tax Act, 1961 on merits. (x) The appellant craves to add, amend, alter or modify any grounds of appeal at the time of hearing Assessment Year- 2012-13 (i) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has failed to appreciate that addition of Rs. 3,00,00,000/- on account of deemed dividend u/s 2(22)(e) of the Act in an assessment order framed u/s 153A can be made by the Assessing Officer on the basis in the documents found and seized during search u/s 132, information of fund flow collected during the enquiries conducted by the Investigation Wing/Assessing Officer and statements of Sh. Akshay Dhanda and Sh. Ajay Nagpal recorded on 22.06.2015 and 07.07.2015. (ii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Mukundray K. Shah, 290 ITR 433 under identical circumstances has upheld the addition of deemed dividend u/s 2(22)(e) made by the AO in a block assessment u/s 158BC, the provisions of which are restrictive than those of section 153A. (iii) Whether on the facts and in the circumstances of the case the Ld.....
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.... u/s 2(22)(e) of the Income Tax Act, 1961 on merits. (x) The appellant craves to add, amend, alter or modify any grounds of appeal at the time of hearing. Assessment Year- 2013-14 (i) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has failed to appreciate that addition of Rs. 7,60,10,000/- on account of deemed dividend u/s 2(22)(e) of the Act in an assessment order framed u/s 153A can be made by the Assessing Officer on the basis in the documents found and seized during search u/s 132, information of fund flow collected during the enquiries conducted by the Investigation Wing/Assessing Officer and statements of Sh. AkshayDhanda and Sh. Ajay Nagpal recorded on 22.06.2015 and 07.07.2015. (ii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Mukundray K. Shah, 290 ITR 433 under identical circumstances has upheld the addition of deemed dividend u/s 2(22)(e) made by the AO in a block assessment u/s 158BC, the provisions of which are restrictive than those of section 153A. (iii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) w....
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....(e) of the Income Tax Act, 1961 on merits. (x) The appellant craves to add, amend, alter or modify any grounds of appeal at the time of hearing. 3. Cases of the revenue were represented by Ld. CIT (DR) Mr. H.K Chaudhary, whereas those of the assessee were represented by Ld. Counsel, Dr. Rakesh Gupta, Advocate. 3. The facts in brief as mentioned in the assessment orders are that during the course of search proceeding various incriminating documents / books of accounts relating to Orient Craft Ltd. and various other entities were found and seized from the business premises of M/s Orient Craft Ltd., the details of which were as under:- 5.1 During the course of search proceedings various incriminating documents/ Books of Accounts related to Orient Craft Limited and various other entities were found and seized from the business premises of M/s Orient Craft Ltd 7D, Maruti Industrial area sector 18 Gurgaon, detailed as under: S.No. Name of the Concern Details of Seized documents, i.e. Page No./ Annexure/ Party 1 Orient Craft Limited 1-40/ A-8/ OS-I 2 Super Connection (P) Ltd. 41-51/ A-7/ OS-I 3 Olympus Realtors 78-92/ A-8/ OS-I (P) Ltd. 4 SKA Enterprises 10-....
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....2)(e) of the Income Tax Act. Accordingly, the additions were made in the hands of Mr. Sudhir Dhingra and Mr. Anoop Thatai in various years as deemed dividend u/s 2(22)(e). 4. Both the Assessees namely, Sh. Sudhir Dhingra and Sh. Anoop Thatai preferred appeals before CIT (A)-3, Gurgaon and challenged the additions made in appeal both in law and on facts on the grounds mentioned in the appeal order passed by learned first appellate authority. 5. The finding recorded by Ld. CIT (A) in the appeal order arementioned therein in para 6-12 of the appeal order, whereby Ld. CIT(A) found in respect of these two assessee and in respect of the years involved in appeals before him that in these cases, search took place on 29.04.2015, whereas returns of income filed by these two assessee in various years were as under:- SH. SUDHIR DHINGRA FOR A.Y. 2010-11 to 2013-14 - Appellant filed his return of income originally on 30.07.2010 which is enclosed in the paper book at PB-1 For A.Y. 2010-11 - Appellantfiled his return of income originally on 31.07.2011 which is enclosed in the paper book at PB 538 for A.Y. 2011-12 - Appellant filed his return of income originally on 30.07.2012 which is enc....
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....eedings. It was submitted by him that there was no incriminating material found in the course of search and the seized material were nothing but copies of balance sheet, Trial balance, returns of income of various entities, which was already in the knowledge of tax department by way of returns of income andbalance sheet filed by these entities and thus, these documents cannot be said to be incriminating in nature. He drew our attention to these seized documents filed in the paper book. It was further submitted that these seized documents do not pertain to previous years relevant to AY 2010-11, 2011-12, 2012-13 and these are in any case relating to AY 2013-14. It was further submitted by him all the four entities namely M/s Orient Craft Ltd. and Super Connection India P Ltd., M/s OlympusRealtorsIndia P Ltd. and M/s SKA Enterprises were assessed to tax. The decision of the Delhi High Court in the case of, Meeta Gutgutia Prop. Ferns 'N' Petals & Ors.(2017) 395 ITR 526 (Delhi) was specifically referred and relied upon. In sub and substance his submissions were that there was no incriminating material found as a result of search and whatever was found was part of books of accoun....
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.... to 2010-11 & 2011-12 to 2016-17; paper book pages 405-438, 951-1017 are the copies of the audited balance sheets and profit and loss accounts for the years ended on 31.3.2007, 2008, 2009, 2010, 2011 to 2016; and paper book page 439 to 446 are the copies of assessment order passed under section 143(3) dated 10.12.2007 for AY 2005-06 and order under section 143(3) dated 28.12.2010 for AY 2008-09. There is no ground to say that M/s Super Connection India P Ltd was some kind of paper company/concern. Its directors are also not remotely related to the assessees. There is nothing adverse even in the statements of the directors of Super Connection India P Ltd. to which our attention was drawn. We are unable to appreciate, how the said company can be held to be paper company more so when it is being assessed and that too from earlier years and its assessment has been made under section 143(3) with no adverse observations. After all a company is incorporated entity and is borne on the register of companies, who had been complying to statutory compliances. AO could not bring even an iota of evidence on record to hold validly in support of his allegation about this company. Merely because bo....
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....mpany is paper company. We have referred the statements of the directors of Super Connection India P Ltd. and we do not find anything adverse which proves that Super Connection India P Ltd. was a paper company. Thus, We are not in agreement with the assessing officer's finding in this regard. 13. We have taken ourselves through the seized material also and it is seen that these seized documents are copies of balance sheet, Trial balance, returns of income of the above-said four entities and therefore such seized material is the material which was already in the knowledge of the tax department through their returns of income and balance sheet of respective years. These seized documents have been filed at page 28-121 of the paper book which we have seen ourselves. 14. First of all these documents are not relating to AY 2010-11 to 2012-13, then how can these documents be said to be relating to these years involved in the present appeals. In any case these documents are not incriminating in any manner to the assessees' cases involved in the present appeals. Merely because the final accounts which are part of the returns of income are found and seized in search do not make such docume....
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.... page 94-121 of the paper book which are balance sheet and profit and loss account of M/s SKA Enterprises for the years ending 31.3.2010, 2011, 2012, 2013, 2014, together with the schedules. These are the documents already part of the returns of income filed by the said firm for the respective years. There is nothing incriminating relating to the respondent-assessees and that too for the years under appeal. Nothing has been spelt out in the assessment order. 15. Therefore, the entire seized material based on which the impugned addition was made under section 2(22)(e) as deemed dividend in the assessment orders involved in the present appeals, is not incriminating in nature for the cases of the both the respondent-assessees involved in the present appeals. We have taken note of the dates of filing of returns of income by both the respondent assessees for various years and on the date of search i.e. on 29.4.2015, these assessments covered by the present appeals, attained finality and were not abated assessments and there being no incriminating material found as a result of search relating to the years involved relating to the assesses involved in the present appeals, no addition and....
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.... circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. A.O. in assuming jurisdiction u/s 153A and the consequent assessment proceedings in the case are bad in law and against the facts and circumstances of the case and void- ab-initio and basic jurisdictional conditions and pre-requisites under section 153A were not met. 2) That in any case and in any view of the matter, the assessment framed under section 153A of the Act, is bad in law and against the facts and circumstances of the case. 3) That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in restricting the addition to the extent of Rs. 17,33,98,000/- u/s 2(22)(e) and that too by recording incorrect facts and without any basis, material or evidence and more so when no incriminating material was found as a result of search. 4) That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs. 17,33,98,000/- u/s 2(22)(e) is bad in law and against the facts and circumstances of the case. 5) That in any case and in any view ....
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....5,21,49,537/- However, Ld. CIT(A) recorded that payment by a company with reference to deemed dividend has tobe restricted to accumulated profits and according to CIT(A) accumulated profits of M/s Olympus Realtors P. Ltd. as on 31.03.2014 was Rs. 6,83,78,062/- and therefore total payment of Rs. 35,68,68,435/- from these companies to the shareholders having substantial interest in these companies will be covered under the definition of deemed dividend u/s 2(22)(e) but such deemed dividend will be restricted to the accumulated profits. Accordingly, CIT (A) confirmed the additions in the hands of the three shareholders namely Sh. Sudhir Dhingra of Rs. 17,33,98,000/- and Sh. Anoop Thatai Rs. 18,28,26,500/- and Sh. Krishan Kant Kohliof Rs. 6,43,935/-. Ld. CIT (A) relied upon the decision of Hon'ble Supreme Court in the case of CIT Vs Mukundray K. Shah, [2007] 290 ITR 433 (SC). 20. In the setting of the above facts the present appeal has been preferred by the assessee, whereas there is no appeal preferred by the revenue. 21. Ld. CIT (DR) has relied upon the assessment order and the order of the first appellate authority, whereas Ld. Counsel for the assessee relied upon the written sub....
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....iven by OCL to SCPL which is an independent company and that too during the course of business. It goes without saying that M/s SCPL is an independent assessee, which has been assessed to tax even in earlier years which is evident from the copies of assessment orders of SCPL for A.Y 2005-06 & 2008-09 which are enclosed at PB439-446. Therefore when amount has been given by M/s OCL to M/s SCPL, where is the question of holding that the amount was given by OCL to the appellant instead, and where is the question of assessing that amount as deemed dividend in the hands of the appellant Individual. Thus, action of Ld. AO in disregarding the corporate character of SCPL is misplaced on facts and in law and so is the action of making impugned addition in the hands of the appellant. It is thus requested that the addition under appeal may please be deleted for the above stated submissions too. 4) Without prejudice to above, it is submitted that M/s ORPL was one of the partners in M/s SKAE and infused its capital and no loan or advance was given to M/s SKAE by ORPL. Appellant too is the partner in SKAE. Appellant withdrew the amount as partner of SKAE and thus, how could the amount received ....
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....adings and evidences:- PB 150, 151, 152-153 are copies of submissions made to Ld. AO PB 526-527,536 is the copy of account of the appellant in the books of SKAE Therefore viewed from any angle the impugned addition made is liable to be deleted and it is prayed that the same may please be deleted. However, certain adverse observations have been made by Ld. AO which are met as under:- a) Ld. AO has mentioned that perusal of books of accounts of OCL, SCPL, ORPL & SKAE seized during search revealed that OCL is routing huge amount of funds through some fictitious entities of the group and finally to the shareholders of OCL, appellant being one of the three shareholders. In reply, it is submitted that first of all there is no fictitious entities as alleged. All the entities are artificial juridical persons, which have been assessed to tax in all these years as is evident from copies of their income tax assessment orders of earlier years enclosed at PB 341-376, 439-446. Thus, this allegation of there being any fictitious entity is absolutely denied and is contrary to material on record. Second, the fact of the payments made by these entities to other entities/persons are part ....
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....were different and hence the same could not be applied here. Thus, all the objections of Ld. AO may please be rejected and the case of the appellant may please be accepted in view of the above submissions. 23. According to the revenue, there was loan or advance from M/s Orient Craft Ltd. (OCL) to the appellant, whereas the case of the assessee was that there was no loan or advance received by the assessee, much less from M/s OrientCraft Ltd. and further, for that matter, no loan was received by the assessee from M/s Olympus Realtors P. Ltd. and hence there was no question of any deemed dividend to be assessed in his hands. 24. It is noted that in order to attract the fiction of section 2(22(e), it is essential that the elements of that section must be found applicable. Since section 2(22)(e) treats the loan or advance as dividend, hence it is essential to give a strict interpretation to such fiction.We have gone through section 2(22)(e) and the facts of the present case. There is no loan or advance received by the assessee from M/s Orient Crafts Ltd. It is seen that even as per the case of the A.O. made in the assessment order, the loan or advance has been received by the asses....
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....ng to Rs. 26,24,50,000/- was given by M/s Super Connections India P. Ltd. to M/s Olympus Realtors P. Ltd. Therefore, when there was specific finding of the nature of capital advance given by M/s Super Connection India P. Ltd. to M/s Olympus Realtors P. Ltd. as capital advance, where was the question of saying in the same breath that assessee received the advance and that too from M/s Orient Craft P. Ltd. and where was the question of applying the deeming fiction of section 2(22)(e) in the hands of the assessee. Therefore, for this reason also we are unable to uphold the order of Ld. CIT (A) in the case of the assessee in so far it relates to the confirmation of addition made under section 2(22)(e) of the Income Tax Act. Going further on the next argument on behalf of the assessee, it is noticed that, there was no loan or advance given by M/s Olympus Realtors P. Ltd. to M/s SKA Enterprises. Assessee was also partner in M/s SKA Enterprises and withdrew the amount as partner. In our considered opinion, such amount so withdrawn by the assessee in the capacity of the partner of the said firm cannot be covered within the meaning of deemed dividend under section 2(22)(e) of the Income Tax....
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....Supreme Court decision in the case of "CIT Vs Mukundray K. Shah, Citation No. [2007] 160 Taxman 276 (SC)/[2007J 290 ITR 433 (SC)/[2007] 209 CTR 97 (SC): is misplaced in the background of the facts of this case and the fact of that case more so when in the instant case the nature of payment by one entity to another has been held to be of a particular character by CIT(A) against which revenue is not in appeal. We have dealt this aspect in fair elaborate manner hereinabove and do not consider to repeat. 28. Ld. CIT (A) despite recording a clear cut finding as to the nature of payments made by one entity to another in para 7.3.2 of the appeal order has committed grave error in concluding without any basis, material or evidence that M/s Super Connections India P. Ltd., M/s Olympus Realtors P. Ltd. andM/s SKA Enterprises were used as conduits. Therefore, we are unable to subscribe to this bald conclusion of CIT(A). We thus hold that the additions sustained on account of deemed dividend u/s 2(22)(e) were sustained by CIT(A) contrary to the factual position and contrary to the law contained in this regard. Hence, we reverse the Order of CIT(A) and delete the addition of Rs. 17,33,98,000/-....
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..... (vi) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has failed to appreciate that such advances/loans which have been routed through different entities to the assessee with the only intention to subvert the provisions of sections 2(22)(e) would constitute deemed dividend. (vii) The appellant craves to add, amend, alter or modify any grounds of appeal at the time of hearing. 30. In this year, Assessing Officer has made additions of Rs. 23,71,65000/- on account of deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961 on the ground that there was flow of funds from M/s Orient Craft Ltd. to M/s Super Connections India P. Ltd. and then to M/s Olympus Realtors P. Ltd. and then M/s SKA Enterprises. Therefore, A.O. treated the said amount received by the assessee from M/s SKA Enterprises as deemed dividend u/s 2(22)(e). Assessing Officer's Order in this regard is identical to one passed by him for earlier assessment years i.e. 2010-11, 2011-12, 2012-13 and 2013-14. 31. In first appeal preferred by the assessee before Commissioner of Income Tax (Appeals)-3 Gurgaon (hereinafter called as 'CIT(A)' also), CIT(A) in para 3.5 of the appeal order held that di....
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....above. Before we discuss the merits of the arguments of the assessee& those of the revenue, we consider it expedient to reproduce the relevant portion of the written submissions filed by the assessee for A.Y. 2015-16 as under:- GROUND NO. 1 General and specific submissions have been under the respective grounds of appeals. GROUND NO. 2 to 5 Ld. A.O. made addition of Rs. 23,71,65,000/- on account of deemed dividend u/s 2(22)(e) on the ground that the said amount was transferred by M/s Orient Craft Ltd. (OCL) during the year under appeal to the appellant, through M/s Super Connections P. Ltd. (SCPL), which in turn was given to M/s Olympus Realtors P Ltd . (ORPL) which in turn has been paid to M/s SKA Enterprises (SKAE) which in turn has been received by the appellantand thus, according to Ld. A.O. amount received by the appellant was deemed dividend assessable u/s 2(22)(e) of the Income Tax Act, 1961. Since it has been treated as taxable income in the hands of the appellant, hence the present appeal. 1).................. 2) Without prejudice to above, it is submitted that in fact the impugned addition could not be made u/s 2(22)(e) as there was no 'loan' or 'advance'from M/s ....
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....s of the appellant as deemed dividend is neither here nor there and it is thus prayed that the addition made may please be deleted. 5) Without prejudice to above, it is submitted further that going by the logic of Ld. AO though denied vehemently but accepting for the sake of arguments, if at all there was any deemed dividend, it could be in the hands of M/s ORPL which received the amount first, and three Individuals who are the shareholders in M/s OCL for more than 10% were also having substantial interest in M/s ORPL. Thus, from this standpoint also, there was no question of making impugned addition as deemed dividend in the hands of the appellant. It is therefore prayed that the same may please be deleted in view of the above submissions also. Reliance is placed on the following:- Commissioner of Income Tax vs. Francis Wacziarg High court of Delhi (2013) 353 ITR 0187: (2011) 203 taxman 0391 asst. Year 2003-04 Dividend-Deemed dividend under s. 2(22)(e)-Credit balance in accounts-Confirmations and copies of accounts showing that the amounts appearing in the accounts were in fact receipts due to assessee, in his normal course of business dealings with the companies-Such rece....
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....loyees of OCL and books were being maintained at the premises of OCL do not make SCPL as paper-company. Operational conveniences of these two shareholders of SCPL to maintain books at the premises of OCL may have led this but merely for that reason, SCPL cannot become paper company to the utter disregard to the past assessment orders and scale of business conducted by SCPL. Attempt of Ld. AO to show closeness of the shareholders of SCPL with OCL group does not make substantive SCPL to turn to a paper company. Other allegations of Ld. AO qua SCPL too stems from the colored vision of Ld. AO. Even statements if carefully gone through do not support what Ld. AO has inferred arbitrarily. c) Ld. AO has mentioned that advance or loan to SCPL was just to by pass the provision of section 2(22)(e) and money trail clearly established that the ultimate beneficiaries are the shareholders of OCL or companies/firms in which they have substantial interest. In reply, it is submitted that advance was given by OCL to SCPL as advance against trade and thus inference that provision of section 2(22)(e) was sought to be bye passed is misconceived. Moreover, when the case of Ld. AO is that beneficiari....
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....o the facts of the present case, we find that, there is no loan or advance received by the assessee from M/s Orient Crafts Ltd. or the matter of fact from the other company namely, Olympus Realters P Ltd. It is seen that even as per the case of the A.O. made in the assessment order, the loan or advance has been received by the assessee from M/s SKA Enterprises which was a partnership firm. Therefore, as per the admitted case of the A.O., such loan or advance having not been received by the assessee from a closely held company, i.e., from Orient Craft Ltd. or Olympus Realters P Ltd. hence cannot be treated as dividend u/s 2(22)(e), since the first ingredient or any of the other conditions, of section 2(22)(e) itself is not met in this case. As per the case of made out by Ld. A.O. in the assessment order, amount in question has not been received by the assessee from M/s Orient Craft Ltd. Rather it is seen that CIT (A) has recorded a finding at para 7.1.2 (a) of the appeal order that Orient Craft P Ltd. had not given advance to M/s Super Connection India P. Ltd during the year under appeal. It is important to note here that there is no appeal filed by the revenue against such finding ....
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....e deeming fiction of section 2(22)(e) in the hands of the assessee on such wrong presumption of facts. Therefore, for this reason also we uphold the order of Ld. CIT(A) in the case of the assessee in respect of the deletion of addition made under section 2(22)(e). Ergo, there was no loan or advance given by M/s Olympus Realtors P. Ltd. to M/s SKA Enterprises. Assessing Officer case is that Assessee was also partner in M/s SKA Enterprises and withdrew the amount as partner and therefore it should be inferred as loan from M/s Orient Craft P. Ltd. In our considered opinion, such amount so withdrawn by the assessee in the capacity of the partner of the said firm cannot be covered within the meaning of deemed dividend under section 2(22)(e) Act as it tantamount to going beyond the deeming fiction envisaged in the section. Even CIT(A) in para 7.1.2(c) of the appeal order has recorded a factual finding that M/s Olympus Realtors P. Ltd. has made investment in M/s SKA Enterprises amounting to Rs. 39,90,40,000/-. Against this finding of fact also, no appeal has been filed by the revenue nor has any rebuttal been made on behalf of the revenue. Therefore, when investment was made by M/s Olympu....
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....ly, we hold that the addition of Rs. 23,71,65,000/- deleted on account of deemed dividend u/s 2(22)(e) by CIT(A) was rightly deleted. Hence, we uphold the Order of CIT(A) who deleted the addition made u/s 2(22)(e). No other arguments were made. In the result the appeal of the revenue is dismissed. Mr. Sudhir Dhingra A.Y. 2016-17 40. This is Revenue's appeal bearing ITA No. 6361/Del/2018 in the case of Mr. Sudhir Dhingra for A.Y. 2016-17.Assessee is also in appeal and his appeal bears ITA 5722/Del/2018. Revenue has raised following grounds of appeal which are reproduced as under:- (i) Whether on the facts and in the circumstances of the case, the Ld. CITA) has erred in concluding that the accumulated profits of M/s Olympus Realtors Pvt. Ltd. shall be taken into consideration for the purpose of working out the deemed dividend without appreciating that the flow of fund originates from M/s Orient Craft Ltd.and the accumulated profits of this company was relevant and required to be taken into consideration to determine the quantum of deemed dividend . (ii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in working out and taking into considerati....
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....cording to CIT (A), case of the appellant is squarely covered by this limb as it is payment by a company for the individual benefits of any such shareholder to the extent which the company possesses accumulated profits. According to CIT(A), payment has been received by the assessee from M/s SKA Enterprises, which in turn has received the payments from two companies in which public are not substantial interested and assessee is holding not less than 10% voting power. CIT (A) recorded that M/s SKA Enterprises received payments from under:- M/s Olympus Realtors P. Ltd. Rs. 21,50,49,264/- 44. However, CIT(A) recorded that payment by a company with reference to deemed dividend has to be restricted to accumulated profits and according to CIT(A) accumulated profits of M/s Olympus Realtors P. Ltd. was Rs. 7,52,95,592/-. Therefore total payment of Rs. 21,50,49,264/-was received from M/s SKA Enterprises but there was accumulated profits to the tune of Rs. 7,52,95,592/-. It was also held by CIT (A) in para 6.3.2(a) that there has been no fund flow from M/s Orient Craft Ltd. but there were fund flow from Super Connection India P Ltd. to Olympus Realters P Ltd. and by Olympus Realters P Ltd....
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....m the ledger account filed to Ld. A.O during the course of assessment proceedings vide letter dated 10.11.2017 enclosed in the paper book at PB 151, 533.Therefore, this fact was not considered by the Ld. A.O while making the impugned addition..Therefore, first submission of the appellant is that the amount of advances of Rs. 21,80,50,000 should be reduced to Rs. 21,50,50,000/. 2).......................... 3) Without prejudice to above, it is submitted that in fact the impugned addition could not be made u/s 2(22)(e) as there was no 'loan' or 'advance'from M/s OCL to the appellant. According to Ld. A.O. also as mentioned in the impugned order, the loan or advance has been received by the appellant from M/s SKAE. That being so, where is the question of applying and invoking section 2(22)(e), which requires that the loan should be advanced by a closely held company. It goes without saying that M/s SKAE is not a company and impugned loan has not been received by the appellant from M/s OCL. Therefore, impugned addition made does not stand to the test of law as explained above and it is thus requested that the addition made may please be deleted. 4) Without prejudice to above, it i....
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....n the hands of the appellant. It is therefore prayed that the same may please be deleted in view of the above submissions also. Reliance is placed on the following:- Commissioner of Income Tax vs. Francis Wacziarg High court of Delhi (2013) 353 ITR 0187: (2011) 203 taxman 0391 asst. Year 2003-04 Dividend-Deemed dividend under s. 2(22)(e)-Credit balance in accounts-Confirmations and copies of accounts showing that the amounts appearing in the accounts were in fact receipts due to assessee, in his normal course of business dealings with the companies-Such receipts from these companies cannot be treated as loans and advances-AO was not justified in treating these receipts as deemed dividend under s. 2(22)(e) 7) The above, factual and legal situations were explained during the course of assessment proceeding also and are explained before your goods also with the help of following pleadings and evidences:- PB 150, 151, 152-153 are copies of submissions made to Ld. AO PB 533,537 is the copy of account of the appellant in the books of SKAE Therefore viewed from any angle the impugned addition made is liable to be deleted and it is prayed that the same may please be deleted. ....
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....do not support what Ld. AO has inferred arbitrarily. c) Ld. AO has mentioned that advance or loan to SCPL was just to by pass the provision of section 2(22)(e) and money trail clearly established that the ultimate beneficiaries are the shareholders of OCL or companies/firms in which they have substantial interest. In reply, it is submitted that advance was given by OCL to SCPL as advance against trade and thus inference that provision of section 2(22)(e) was sought to be bye passed is misconceived. Moreover, when the case of Ld. AO is that beneficiaries are company (ORPL)/firm (SKAE) first, deemed dividend could be taxed in the hands of such company/firm and not in the hands of the appellant. This is being submitted on without prejudice basis without conceding anything. d) Ld. AO has relied upon the decision CIT vs. Mukundray K Shah 209 CTR 97 (SC) but the facts of that case were different and hence the same could not be applied here. Thus, all the objections of Ld. AO may please be rejected and the case of the appellant may please be accepted in view of the above submissions GROUND NO. 6............................ 47. According to the case of revenue, there was loan or....
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....mitted to be breached, more so when M/s Super Connection India P. Ltd. is an independent assessee, in which there was no control of any of the shareholders of M/s Orient Craft Ltd. Therefore, there was no question of treating any amount as deemed dividend u/s 2(22(e) in the hands of the assessee in the background of the facts of the present case and more so in the light of the finding recorded by the first appellate authority that no advance or sum has been given during the year under appeal by Orient Craft Ltd. to Super Connection India P Ltd. Therefore, for this reason also we are unable to uphold the order of Ld. CIT(A) in the case of the assessee in so far it relates to the confirmation of part addition made under section 2(22)(e) of the Income Tax Act. Going further on the next argument on behalf of the assessee, it is noticed that There was no loan or advance given by M/s Olympus Realtors P. Ltd. to M/s SKA Enterprises. Assessee was also partner in M/s SKA Enterprises and withdrew the amount as partner. In our considered opinion, such amount so withdrawn by the assessee in the capacity of the partner of the said firm cannot be covered within the meaning of deemed dividend und....
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....allowed. SH. ANOOP THATIA FOR 2014-15 ITA No. 5719/DEL/2018 50. This appeal has been filed by the assessee against the Order passed by Commissioner of Income Tax (Appeals)-3, Gurgaon, dated 28.07.2018 and assessee has preferred the following grounds of appeal, whereas revenue is not in appeal. 1) That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. A.O. in assuming jurisdiction u/s 153A and the consequent assessment proceedings in the case are bad in law and against the facts and circumstances of the case and void abinitio and basic jurisdictional conditions and pre-requisites under section 153A were not met. 2) That in any case and in any view of the matter, the assessment framed under section 153A of the Act, is bad in law and against the facts and circumstances of the case. 3) That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in restricting the addition to the extent of Rs. 18,28,26,500/- u/s 2(22)(e) and that too by recording incorrect facts and without any basis, material or evidence and more....
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....s SKA Enterprises, which in turn has received the payments from two companies in which public are not substantial interested and assessee is holding not less than 10% voting power. CIT(A) recorded that M/s SKA Enterprises received payments from two companies as under:- M/s Orient Craft Ltd. Rs. 28,84,90,373/- M/s Olympus Realtors P. Ltd. Rs. 35,21,49,537/- 53. However, CIT(A) recorded that payment by a company with reference to deemed dividend has to be restricted to accumulated profits and according to CIT(A) accumulated profits of M/s Olympus Realtors P. Ltd. as on 31.03.2014 was Rs. 6,83,78,062/- and therefore total payment of Rs. 35,68,68,435/- from these companies to the shareholders having substantial interest in these companies will be covered under the definition of deemed dividend u/s 2(22)(e) but such deemed dividend will be restricted to the accumulated profits. Accordingly, CIT(A) confirmed the additions in the hands of the three shareholders namely Sh. Sudhir Dhingra of Rs. 17,73,98,000/- and Sh. Anoop Thatai Rs. 18,28,26,500/- and Sh. Krishan Kant Kohli of Rs. 6,43,935/-. Ld. CIT(A) relied upon the decision of Hon'ble Supreme Court in the case of CIT Vs Mukundr....
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....mpany and that too during the course of business. It goes without saying that M/s SCPL is an independent assessee, which has been assessed to tax even in earlier years which is evident from the copies of assessment orders of SCPL for A.Y 2005-06 & 2008-09 which are enclosed at PB 452-459. Therefore when amount has been given by M/s OCL to M/s SCPL, where is the question of holding that the amount was given by OCL to the appellant instead, and where is the question of assessing that amount as deemed dividend in the hands of the appellant Individual. Thus, action of Ld. AO in disregarding the corporate character of SCPL is misplaced on facts and in law and so is the action of making impugned addition in the hands of the appellant. It is thus requested that the addition under appeal may please be deleted for the above stated submissions too. 4) Without prejudice to above, it is submitted that M/s ORPL was one of the partners in M/s SKAE and infused its capital and no loan or advance was given to M/s SKAE by ORPL. Appellant too is the partner in SKAE. Appellant withdrew the amount as partner of SKAE and thus, how could the amount received by the appellant from M/s SKAE be treated as ....
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....dings and evidences:- PB 158-161 are copies of submissions made to Ld. AO PB 529,531,535A & 535B is the copy of account of the appellant in the books of SKAE Therefore viewed from any angle the impugned addition made is liable to be deleted and it is prayed that the same may please be deleted. However, certain adverse observations have been made by Ld. AO which are met as under:- a) Ld. AO has mentioned that perusal of books of accounts of OCL, SCPL, ORPL & SKAE seized during search revealed that OCL is routing huge amount of funds through some fictitious entities of the group and finally to the shareholders of OCL, appellant being one of the three shareholders. In reply, it is submitted that first of all there is no fictitious entities as alleged. All the entities are artificial juridical persons, which have been assessed to tax in all these years as is evident from copies of their income tax assessment orders of earlier years enclosed at PB 354-411, 452-459. Thus, this allegation of there being any fictitious entity is absolutely denied and is contrary to material on record. Second, the fact of the payments made by these entities to other entities/persons are part of au....
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....e different and hence the same could not be applied here. Thus, all the objections of Ld. AO may please be rejected and the case of the appellant may please be accepted in view of the above submissions 56. According to the case of revenue, there was loan or advance from M/s Orient Craft Ltd. (OCL) to the appellant, whereas the case of the assessee was that there was no loan or advance received by the assessee, much less from M/s Orient Craft Ltd. and further, for that matter, no loan was received by the assessee from M/s Olympus Realtors P. Ltd. and hence there was no question of any deemed dividend to be assessed in his hands. 57. We have gone through the facts of the present case and find that, there is no loan or advance received by the assessee from M/s Orient Crafts Ltd. It is seen that even as per the case of the A.O. made in the assessment order, the loan or advance has been received by the assessee from M/s SKA Enterprises which was a partnership firm. Therefore, as per the admitted case of the A.O., such loan or advance having not been received by the assessee from a closely held company i.e. from Orient Craft Ltd. or Olympus Realters P Ltd. cannot be treated as divide....
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....s Realtors P. Ltd. as capital advance, where was the question of saying in the same breath that assessee received the advance and that too from M/s Orient Craft P. Ltd. & where was the question of applying the deeming fiction of section 2(22)(e) in the hands of the assessee. Therefore, for this reason also we are unable to uphold the order of Ld. CIT(A) in the case of the assessee in so far it relates to the confirmation of addition made under section 2(22)(e) of the Income Tax Act. Going further on the next argument on behalf of the assessee, it is noticed that, there was no loan or advance given by M/s Olympus Realtors P. Ltd. to M/s SKA Enterprises. Assessee was also partner in M/s SKA Enterprises and withdrew the amount as partner. In our considered opinion, such amount so withdrawn by the assessee in the capacity of the partner of the said firm cannot be covered within the meaning of deemed dividend under section 2(22)(e) of the Income Tax Act. Even CIT(A) in para 7.3.2(c) of the appeal order has recorded a factual finding that M/s Olympus Realtors P. Ltd. has made investment in M/s SKA Enterprises amounting to Rs. 35,21,49,597/-. Against this finding of fact, no appeal has be....
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.... we are unable to subscribe to this bald conclusion of CIT(A). We have on identical facts allowed the appeal of other assessee namely Mr. Sudhir Dhingra in ITA no. 5721/Del/2018. We thus hold that the additions sustained on account of deemed dividend u/s 2(22)(e) were sustained by CIT(A) contrary to the factual position and contrary to the law contained in this regard. Hence, we reverse the Order of CIT(A) and delete the addition made u/s 2(22)(e). In the result, appeal of the assessee is allowed and entire addition of Rs. 18,75,00,373 is deleted. Mr. Anoop Thatai A.Y. 2015-16 60. This is Revenue's appeal bearing ITA No. 6362/Del/2018 in the case of Mr. Anoop Thatai for A.Y. 2015-16.Revenue has raised following grounds of appeal which are reproduced as under:- (i) Whether on the facts and in the circumstances of the case the Ld.CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Mukundray K. Shah, 290 ITR 433 under identical circumstances has upheld the addition of deemed dividend u/s 2(22)(e) made by the AO. (ii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in concluding that the case of appellant(s) is....
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....13-14. 62. In first appeal preferred by the assessee before Commissioner of Income Tax (Appeals)-3 Gurgaon (hereinafter called as 'CIT(A)' also), CIT(A) in para 3.5 of the appeal order held that dividend u/s 2(22)(e) consists inter-alia as the last limb ".......any payment by any such company on behalf, or for the individual benefit of any such shareholder to the extent to which the company neither case possesses accumulated profits" . According to CIT (A), case of the appellant is squarely covered by this limb as it is payment by a company for the individual benefits of any such shareholder to the extent which the company possesses accumulated profits. According to CIT(A), payment has been received by the assessee from M/s SKA Enterprises, which in turn has received the payment from company in which public are not substantial interested and assessee is holding not less than 10% voting power. CIT(A) recorded that M/s SKA Enterprises received payments from under:- M/s Olympus Realtors P. Ltd. Rs. 39,90,40,000/- 63. However, CIT(A) recorded that payment by a company with reference to deemed dividend has to be restricted to accumulated profits and according to CIT(A) accumulated ....
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...., which requires that the loan should be advanced by a closely held company. It goes without saying that M/s SKAE is not a company and impugned loan has not been received by the appellant from M/s OCL. Therefore, impugned addition made does not stand to the test of law as explained above and it is thus requested that the addition made may please be deleted. 3) Without prejudice to above, it is submitted further that the amount was given by OCL to SCPL which is an independent company and that too during the course of business. It goes without saying that M/s SCPL is an independent assessee, which has been assessed to tax even in earlier years which is evident from the copies of assessment orders of SCPL for A.Y 2005-06 & 2008-09 which are enclosed at PB 452-459. Therefore when amount has been given by M/s OCL to M/s SCPL, where is the question of holding that the amount was given by OCL to the appellant instead, and where is the question of assessing that amount as deemed dividend in the hands of the appellant Individual. Thus, action of Ld. AO in disregarding the corporate character of SCPL is misplaced on facts and in law and so is the action of making impugned addition in the h....
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....usiness dealings with the companies-Such receipts from these companies cannot be treated as loans and advances-AO was not justified in treating these receipts as deemed dividend under s. 2(22)(e) 6) The above, factual and legal situations were explained during the course of assessment proceeding also and are explained before your goods also with the help of following pleadings and evidences:- PB 158-161 are copies of submissions made to Ld. AO PB 533,535B is the copy of account of the appellant in the books of SKAE Therefore viewed from any angle the impugned addition made is liable to be deleted and it is prayed that the same may please be deleted. However, certain adverse observations have been made by Ld. AO which are met as under:- a) Ld. AO has mentioned that perusal of books of accounts of OCL, SCPL, ORPL & SKAE seized during search revealed that OCL is routing huge amount of funds through some fictitious entities of the group and finally to the shareholders of OCL, appellant being one of the three shareholders. In reply, it is submitted that first of all there is no fictitious entities as alleged. All the entities are artificial juridical persons, which have been....
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....Ld. AO is that beneficiaries are company (ORPL)/firm (SKAE) first, deemed dividend could be taxed in the hands of such company/firm and not in the hands of the appellant. This is being submitted on without prejudice basis without conceding anything. d) Ld. AO has relied upon the decision CIT vs. Mukundray K Shah 209 CTR 97 (SC) but the facts of that case were different and hence the same could not be applied here. Thus, all the objections of Ld. AO may please be rejected and the case of the appellant may please be accepted in view of the above submissions 66. Thus, according to the case of revenue, there was loan or advance from M/s Orient Craft Ltd. (OCL) to the appellant, whereas the case of the assessee was that there was no loan or advance received by the assessee, much less from M/s Orient Craft Ltd. and further, for that matter, no loan was received by the assessee from M/s Olympus Realtors P. Ltd. and hence there was no question of any deemed dividend to be assessed in his hands. 67. Here again in this year's facts also we find that, there is no loan or advance received by the assessee from M/s Orient Crafts Ltd. It is seen that even as per the case of the A.O. made in....
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.... Orient Craft Ltd. to Super Connection India P Ltd. It is also noticed that CIT(A) has recorded a finding in para 7.1.2 (b) of the appeal order against which revenue is not in appeal that during the year under consideration that no fresh advance was given by M/s Super Connections India P. Ltd. to M/s Olympus Realtors P. Ltd during the year under appeal. Therefore, when there was specific finding that no advance was given by M/s Super Connection India P. Ltd. to M/s Olympus Realtors P. Ltd. during the year under appeal, where was the question of saying in the same breath that assessee received the advance and that too from M/s Orient Craft P. Ltd. and/or Olympus Realters P Ltd.& where was the question of applying the deeming fiction of section 2(22)(e) in the hands of the assessee. Therefore, for this reason also we uphold the order of Ld. CIT (A) in the case of the assessee. Further, there was no loan or advance given by M/s Olympus Realtors P. Ltd. to M/s SKA Enterprises. Assessee was also partner in M/s SKA Enterprises and withdrew the amount as partner. In our considered opinion, such amount so withdrawn by the assessee in the capacity of the partner of the said firm cannot be c....