TaxTMI 
TaxTMI 
2025 (4) TMI 724
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....ut considering the submission filed by the assessee on 24.09.2024. 3. The Ld. CIT(A) has erred in law as well as on facts in sustaining an addition of Rs. 44,62,938/- under section 2(22)(e) of the Income Tax Act. 4. The Appellant craves leave to take additional grounds of appeal before or at the time of hearing of the appeal and/or modify any of the above grounds." 3. Succinctly, the fact as culled out from the records is that a search & seizure operation under section 132(1) of the Act was carried out on 07.09.2017 at the various premises of 'Resonance Group, Kota' to which the assessee belongs. Several persons / premises were covered under that search and in that process cash, jewellery and other documents found and seized from some persons residence and business premises and the case of assessee was also covered by that search proceeding. Consequent to that search action, the case of the assessee was centralized to Central Circle-Kota by the Principal. Commissioner of Income-tax, Kota vide his order dated 12.10.2017. 3.1 Assessee is an individual and derives income from business or profession and other sources. As the case was covered by search operation ....
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.....12.2019, wherein he stated that these transactions are business transactions between the group companies having similar nature of business, hence provisions of section 2(22)(e) were not applicable. Ld. AO considered the reply of the assessee but found not satisfactory and thereby he quoted the provision of section 2(22)(e) of the Act and stated that since the assessee is director in Millenium Technocrat Colonisers Pvt Ltd holding 25.93% of shares and proprietor in M/s Nav Bharat Nirman Co. and partner in Joint venture M/s Vinarma Entreprises and Nav Bharat Nirman Co., the company in which the assessee is director has provided loans to the joint venture and proprietor concern in which he is partner and proprietor himself respectively. These transaction were in violation of provision of section 2(22)(e) of the Act and to support that view ld. AO relied on the decision of CIT vs Mukundray K Shah [2007] 160 Taxman 276 (SC) considered that the loan provided by the company at Rs. 2,72,26,500/- (6,76,000 + 2,65,50,500) requires to be added in the total income of the assessee as deemed dividend as per provision of section 2(22)(e) of the Act. 4. Feeling dissatisfied with that order of ....
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....issued notice u/s 148 of the IT Act, 1961 on 18.03.2017 after recording the reason & necessary approval from the competent authority. 4.7.1 Assessee failed to disclose true & correct facts during the course of original assessment proceedings The appellant has stated that notice u/s 148 could not be issued on the same set of circumstances which already stood considered in the assessment completed u/s 143(3) on 31.03.2015. On perusal of the assessment order, it is observed that the issue related to deemed dividend was not examined by the AO. The information which was available with the AO was made available by the audit party in the case of other assessee. The assessee has not disclosed these facts that the concerns where he is having substantial interest received loan from the Company M/s Millenium Technocrat Colonizers Pvt. Ltd. where he is having shareholding of 25.93%. The appellant has not established the fact by way of some note to the account that though he was liable for deemed dividend but because of the reasons or legal basis the deemed dividend is not offered for taxation as per law. The assessee instead did not disclose this fact in the return o....
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....t was seen that the amounts given by company SBL to the assessee were in the nature of loan transactions on which section 2(22) (e) was clearly applicable; that on a perusal of the accounts of the assessee it was seen that the assessee held 22.3 per cent shareholdings of SBL and for relevant year also, the assessee had taken loan from SBL; and that on that basis the Assessing Officer had reason to believe that income in the form of deemed dividend as per section 2(22)(e) had escaped assessment. Held that the fact necessary to ascertain whether payment in question could be and should be treated as 'deemed dividend under section 2(22)(e) was whether the assessee was holding shares of not less than 10 per cent of the voting power in SBL. From the return filed and the documents annexed with the retum, nowhere it could be ascertained what was the holding of the assessee-company (in terms of voting power) in SBL. If upon further inquiry by the Assessing Officer, such details could be gathered and the nature of payment received by the assessee from SBL could be ascertained, to find out whether the same should be treated as "deemed dividend under section 2(22)(e) or not, the same, woul....
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....e contended that in the balance sheet it had disclosed a sum of Rs. 2 crores as deposit received from ITL and the investment in shares of ITL However, from these details it was not clear as to what percentage of share capital was held by the assessee in ITL as the balance sheet had not been filed before the Assessing Officer. Moreover, as per the Explanation to section 147, mere production before the Assessing Officer of the books of account or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the said section. Therefore, even if the balance sheet of ITL had been filed before the Assessing Officer from which necessary details could have been gathered by the Assessing Officer, this did not mean disclosure of information by the assessee within the meaning of the proviso. Since the assessee had received loan/advance from ITL, it was required to give details before the Assessing Officer at the time of original assessment that it was holding more than 10 per cent of the share capital in ITL but, it was not declaring the amount received during the ye....
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....d. [2024] 163 taxmann.com 294 (Calcutta) (21-05-2024] held that where Assessing Officer while passing original assessment order under section 143(3) was totally silent on liability of assessee to tax under section 115JB and he neither noticed provisions of section 115JB nor formed any opinion with regard to liability to tax of assessee on book profit, assessment order was nonspeaking and cryptic and, therefore, reassessment proceedings initiated by Assessing Officer under section 147 was not based on change of opinion. The head notes of the decision is read as under- "Section 115JB, read with section 148, of the Income-tax Act, 1961-Minimum alternate tax Payment of (Reassessment) - Assessment year 2005-06-Assessing Officer issued a notice under section 147/148 to assessee to reopen assessment on ground that assessee was liable to be taxed under section 115JB and, accordingly, passed reassessment order Tribunal held that reassessment proceedings initiated by Assessing Officer was based in change of opinion It was noticed that while passing original assessment order under section 143(3) Assessing Officer was totally silent on liability of assessee to be taxed under section 1....
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.... objection could not be treated as a change of opinion as Assessing Authority had proceeded strictly in accordance with provisions of clause (ii) of Explanation 1 to section 148. The head notes of the decision read as under- "Section 11, read with section 148, of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under (Audit objection) - Assessment year 2016-17 Assessment of assessee-trust was completed under section 143(3) at 'Nil' income - Revenue audit party, however, objected to finalization of retum of assessee-trust at 'Nil' for reason that during year, assessee received corpus donations which were not included in income for application under section 11 On basis of revenue audit objection, Assessing Officer decided to reopen assessment of assessee by issuing notice under section 148-Whether with effect from 1-4-2022, audit objection is one of reasons for reopening assessment as per clause (ii) of Explanation 1 to section 148 Held, yes Whether therefore, where revenue audit raised an objection that assessment was not completed in accordance with provisions of Act, it could not be treated as a change of op....
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....e is conceptual difference between section 143(1) and section 143(3), High Court wrongly applied Adani Export's case (supra) - Held, yes" The ITAT Delhi Bench 'B' in the case of Deputy Commissioner of Incometax v. B.R. Industries Ltd. [2005] 1 SOT 283 (Delhi)/[2005] 96 TTJ 962 (Delhi)[06- 10-2004] held that audit objection was material on basis of which Assessing Officer could definitely form a belief about escapement of income, even though earlier assessments were completed under section 143(3), challenge to validity of reassessment proceedings was rightly rejected by Assessing Officer. In view of above discussion, the arguments of the assessee with regard to change of opinion are found to be without any merit. It is held that the AO was justified in making verification of facts after receipt of audit objection and the AO formed his belief about escapement of income after verification of facts. The AO has acted as per the established procedure and formed his belief after verification of facts. Hence, the objections raised by the assessee are not found to be acceptable and rejected 4.7.3 Notice under section148 can be issued on mistake identif....
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.... the return probably because the assessee being a Government of Kerala concern was not expected to make a bogus claim in the return filed. However, the question to be considered was whether the assessee could be the beneficiary of its own fraud or mistake and whether the Assessing Officer was prevented from correcting the same under section 147. It was to be noted that the Explanation to section 147(2) specifically provides that the excessive relief granted under the Act leading to escapement of chargeable income is a ground for reopening of assessment to bring to tax the escaped income. This was a clear case of the assessee claiming deduction which it was not entitled and, therefore, escapement of income was on account of the excessive relief claimed by the assessee and allowed by the officer by mistake. The assessee could not contend that there was a change of opinion on the part of the Assessing Officer. Therefore, the reassessment was valid. In the present case also, the question to be considered was whether the assessee could be the beneficiary of its own mistake by not offering the deemed dividend for tax and whether the Assessing Officer was prevented from correctin....
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....o the assessee In the above facts, no prejudice is caused to the assessee as the reasons of reopening were not demanded by the assessee during the assessment proceedings The AO has provided the reasons of reopening on request of the assessee. Hence, the arguments are not found to be relevant now. 4.7.6 Abatement of Assessment Proceedings The appellant argued that there was no abatement of assessment proceedings. As per provisions of section 153A of the IT Act assessment of reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this (sub-section) pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be shall abate. In view of above provision, the assessment proceedings. which was initiated as per the provision of section 147 of the Act and notice u/s 148 of the Act was issued earlier on 18.03.2017 is abated. The reopening of assessment is already held as valid in this order. Hence, the objections of the appellant are not found to be acceptable. Hon'ble Apex Court held in the Civil Appeal No. 6580 OF 2021 in t....
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....ng the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act. subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12 If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with th....
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....for the abated assessment or reassessment. Hence, the arguments of the appellant are not found to be relevant with regard to incriminating material found during search. This issue raised by the appellant is found to be without any merit. The decisions relied upon by the appellant are on different facts and not found to be applicable on the facts of the case of the assessee. In view of above discussion, the ground no. 1 raised by the appellant is treated as dismissed. Finding of ld. CIT(A) on the merits of the case for the addition u/s 2(22)(e): 6.6 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under- In this case, the AO noted that the assessee is director in Millenium Technocrat Colonisers Pvt Ltd holding 25.93% of shares and proprietor in M/s Nav Bharat Nirman Co. and partner in Joint venture M/s Vinarma Entreprises and Nav Bharta Niman Co. The company in which the assessee is director has provided loans to the joint ve....
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.... 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 profits," Thus, as per the provisions of aforesaid section, loan or advance paid by a company shall be considered as deemed dividend on fulfillment of following conditions (i) the company must be a company in which the public is not substantially interested; (ii) such a company has given advance or loan: (iii) such payment has been made to a shareholder: and (iv) such shares hold not less than 10% of the voting power. From the facts available on record, it is evident that the company was not a company in which public was substantially interested. Further, the assessee, being shareholder, was holding shares more than 10% in the company. The company have credited loan to the proprietorship concern of the assessee and JV where the assessee is having substantial interest. Thus, the basic conditions of section 2(22)(e) of the Act are satisfied in the present case. The argument ....
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....ssing Officer during course of original scrutiny assessment proceedings Whether, on facts, Assessing Officer was justified in invoking jurisdiction under section 148 Held, yes [Paras 6.2 and 6.12][In favour of revenue] The ITAT Visakhapatnam Bench in the case of M. Amareswara Rao v. Deputy Commissioner of Income-tax, Central Circle, Vijayawada [2016] 67 taxmann.com 15 (Visakhapatnam Trib)/[2016] 157 ITD 657 (Visakhapatnam Trib)/[2016] 178 TTJ 700 (Visakhapatnam - Trib)[08-01-2016) held that where assessee, having beneficial ownership of more than 10 per cent shares in a closely held company, claimed to have received certain amount from company for purchase of land for company but failed to prove same by furnishing relevant details, such amount would come within ambit of section 2(22)(e). In the present case also the assessee failed to prove the transaction of business purpose by fumishing relevant details, such amount would come within ambit of section 2(22)(e) The head notes of the decision read as under- "Section 2(22) of the Income-tax Act, 1961- Deemed dividend (Loans) - Assessment years 2007-08 to 2009-10-Assessee, who was a shareholder and director ....
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....eously, unlawfully and illegally The perusal of the aforesaid section reveals that the deemed dividend would not exceed accumulated profits. The argument of the appellant are considered. For the purpose of section 2(22)(e) of the Act, the amount of deemed dividend should be to the extent to which the company possesses accumulated profits. Explanation 2 to section 2(22) of the Act, elaborates the term "accumulated profits" and same reads as under. "Explanation 2- The expression "accumulated profits" in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place." As per the provision of Explanation 2, a....
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.... is related with the determination of total income of Rs. 3,41,19,854/-. 7.1 The A/R of the appellant submitted written submission during the appellate proceedings on 02.12.2022, the same is reproduced as under: "As discussed above 7.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under.- This is general ground of appeal without any specific argument. The specific grounds of appeal are already decided while deciding other grounds of appeal. No seperate adjudication is required on this ground of appeal, This ground is treated as dismissed. 8. The last Ground of Appeal is that the appellant craves to add/alter/ amend the grounds of the appeal before the final hearing is completed. 8.1 The A/R of the appellant submitted written submission during the appellate proceedings on 02.12.2022, the same is reproduced as under: "Not pressed" 8.2 The appellant has not added, altered or amended any of....
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....t Party is not absolutely barred. In Transworld International Inc. v. Joint Commissioner of Income tax, the Delhi High Court Court has observed that factual information can come from various sources including an audit objection. But a blanket reliance should not be placed on such objection to initiate reassessment proceedings and the AO must apply its own mind. Here, in this case, the AO without conducting any further inquiry or examining any other documents, straightaway issued notice u/s 148, after obtaining approval u/s 151, which too, was given mechanically. In FIS Global Bus. Sol. India Pvt. Ltd. v. Asst. CIT, Delhi High Court has held that the audit objection constitutes merely an information and no more. Moreover, in CIT v. Simbhaoli Sugar Mills Ltd, it was held that audit report objections cannot be a solitary basis to initiate reassessment proceedings. Since the reassessment proceedings were initiated solely on the basis of an observation made by the Internal Audit Party, it is pertinent to examine the scope and extent of such information constituting fresh tangible material. In the case of Indian & Eastern Newspaper Society v. CIT, the Supreme Court has held that....
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.... a catena of judgments to the effect that initiation of reassessment proceedings on the basis of audit report objections is bad in law. A reference in this regard can be made to the judgment of our High Court titled Transworld International Inc. v. Joint CIT (2005) 273 ITR 242 (Delhi) and also the judgments of the Supreme Court in Indian and Eastern Newspaper Society v. CIT (1979) 119 ITR 996 (SC) and CIT v. Lucas T.V.S. Ltd. (2001) 249 ITR 306 (SC). The sum and substance of the discussion is that reassessment proceedings under section 147 read with section 148 of the Act cannot be initiated merely based on the audit report. An audit is principally intended for the purpose of satisfying the auditor with regard to the sufficiency of rules and procedures prescribed for the purpose of securing an effective check on the assessment, collection and proper allocation of revenue. As per paragraph (3) of the circular issued by the Board on July 28, 1960, also an audit department should not in any way substitute itself for the Revenue authorities in the performance of their statutory duties." The Competent authority giving approval simply mentioned Yes, it is a fit case to issue not....
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....mal rather than meaningful. The Court also relied on Central India Electric Supply Co. Ltd. v. ITO, (2011) 333 ITR 237, wherein it was opined that merely rubber stamping of "Yes" would suggest that the decision was taken in a mechanical manner. The Court further relied on Chhugamal Rajpal v. S.P. Chaliha, (1971) 1 SCC 453, wherein the Supreme Court refused to consider the affixing of signature along with the noting "Yes" as valid approval. It would also be pertinent to mention that the reasons for reopening, which ought to have been provided along with the notice u/s 148, were never made available to the assessee, even during the course of assessment u/s 153A. It is settled law that the Assessing Officer is duty-bound to supply the reasons recorded in the reasonable time period as held by the Hon'ble Supreme Court in the case of GKN Driveshaft (India) Ltd. vs. CIT (2003) 259 ITR 19 (SC). In the case of Commissioner of Income Tax vs. Videsh Sanchar Nigam Ltd, the Hon'ble High Court of Bombay has held as under: "2. The finding of fact recorded by the Tribunal is that in the present case the reasons recorded for reopening of the assessment though repeatedly asked by ....
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....ing the reasons actually recorded by the A.O. for reopening of assessment is not sustainable in law because the A.O. is duty bound to supply the same within reasonable time as held by the Hon'ble Supreme Court in case of GKN Driveshafts (India) Ltd (supra). The subsequent supply of the reasons would not make good of the illegality suffered by the reopening of assessment. It may be stated that, nowhere in the assessment order, the Ld.AO has demonstrated or proved that the assessee had a substantial interest in the concern, M/s Vinamra Enterprises & Nav Bharat Nirman Co.(JV) Section 2(22)(e) of the Income-tax Act, 1961 (the Act) is a deeming fiction that seeks to consider the following transactions briefly listed, which are otherwise not in the nature of income to be deemed dividend income, to the extent of accumulated profits: * Any payment by a closely held company (i.e., a private company) of any sum by way of advance or loan to a shareholder, who is the beneficial owner of equity shares holding not less than 10% of the voting power (hereinafter referred to as 'such company' and 'such shareholder' respectively); (First limb); * Or to any concern in w....
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....t is the percentage of profits of this concern to which the assessee is entitled to, so as to bring him in the ambit of beneficial owner. He neither questioned the assessee as to his (assessee's) profit sharing ratio in the concern nor called for the deed prevalent during the year. As a matter of fact, the AO did not have any evidence in his possession to conclude that the assessee had substantial interest in M/s Vinamra Enterprises & Nav Bharat Nirman Co. Simply, on the strength of the audit observation as pointed out by the IAP, the AO also held that being a partner in M/s Vinamra Enterprises & Nav Bharat Nirman Co.(JV), the assessee has a substantial interest in it. His order is absolutely silent on the percentage of income to which the assessee was entitled, to make the deeming provision u/s 2(22)(e) applicable in his case. The Ld.CIT(A) also failed to give a finding in this respect before upholding the addition to the extent of the accumulated profits. In view of the above facts, the addition sustained by the CIT(A) is erroneous and may kindly be deleted. Coming to the facts of the case, it is stated that M/s Millenium Technocrat Colonisers Pvt. Ltd. was formed in the....
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....rrect presentation in it's books of accounts. The payment shown as Short term advance to Vinamra Enterprises & Nav Bharat Nirman Co. being an incorrect presentation in it's books by the Company, should not be treated as Deemed dividend as the transaction is not in the nature of advance. As the incorrect and incomplete presentation was in the books of account of Millenium Technocrat Colonisers Pvt. Ltd, the assessee should not be made to suffer and taxed under deeming provisions. When the loan was sanctioned in the name of Ajay Bakliwal, the repayment of the loan through EMIs was made by Ajay Bakliwal, all the incidental charges of loan were claimed by Ajay Bakliwal, just due to payment received by the M/s Millenium Technocrat Colonisers Pvt. Ltd in the capacity of third party should not be treated as deemed dividend. It is an undisputed fact that the loan stood in the name of Ajay Bakliwal, and the Bankers took his cheque (Nav Bharat Nirman Company - his proprietory concern) for ECS. It is also an undisputed fact that the amount received by Millenium Technocrat Colonisers Pvt. Ltd. in its bank account was transferred to Vinamra Enterprises & Nav Bharat Nirman Co.(....
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....ave accommodated each other. It may further be mentioned that Nav Bharat Nirman Co. has given a loan of Rs. 50,10,388/- which is appearing as Unsecured loan in the books of M/s Millenium Technocrat Colonisers Pvt. Ltd. As a matter of fact, the Company had made a repayment against the outstanding loan from Nav Bharat Nirman Company. The audited books of the assessee for FY 2010-11 and 2011-12 vouch this fact. Apart from this, the assessee, Shri Ajay Bakliwal has also given an unsecured loan of Rs. 3,80,644/- to M/s Millenium Technocrat Colonisers Pvt. Ltd. during the year, as is evident from the Balance sheet of the assessee. In view of the above legal and factual position, the addition sustained by the CIT(A) may kindly be set aside." 6. Per contra, ld. DR heavily relying on the contention so recorded in the orders of the lower authority stated that the assessment was abated assessment and were re-opened prior to the search and therefore, the addition is considering the facts on record required to be sustained. To support her contention, she also filed a written submission after considering the submission of the assessee. The written submission so filed by ld. DR reads ....
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....ect. The issue was not examined earlier and new material come in knowledge. 2.4. Audit Objection as Information Audit objections constitute "information" under Section 147(b) of the Act, as held in CIT v. A.L.A. Firm [(1991) 189 ITR 285 (SC)]. The AO can validly reopen an assessment based on such information if it reveals escapement of income. 2.5 Once objection is decided, the procedure laid down in landmark judgement of Apex Court in GKN Drive Shaft is applicable. There is no procedural lapse is mentioned by the appellant. 3. Addition Under Section 2(22)(e) (Ground Nos. 2 & 3) 3.1. Nature of Deemed Dividend Section 2(22)(e) of the Income Tax Act provides that any loan or advance given by a company to a shareholder having substantial interest in the company is deemed to be a dividend, to the extent of the company's accumulated profits. 3.2. Facts of the Case * The AO held that loans/advances of 22,65,50,500/- and 6,76,000/- provided by M/s Millenium Technocrat Colonizers Pvt. Ltd. to M/s Vinamra Enterprises & Nav Bharat Nirman Co. (JV) and Nav Bharat Nirman Company, respectively, were covered under Section....
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.... Dividend under Section 2(22)(e): * The transactions between the companies and the recipient entities were correctly treated as deemed dividends by the AO. * The Appellant has failed to prove that these were genuine business advances. 3. Order of the Ld. CIT(A): * The Ld. CIT(A) has correctly upheld the reassessment proceedings and the addition under Section 2(22)(e). The Appellant's objections are unsupported by facts and legal precedents. 5. Prayer In light of the above submissions, the Revenue respectfully prays that: 1. The reassessment proceedings initiated under Section 148 be upheld as valid and in accordance with the law. 2. The addition of Rs.44,62,938/- under Section 2(22)(e) be upheld, as the Appellant has failed to disprove the findings of the AO. 3. The appeal of the Appellant be dismissed, and the order of the Ld. CIT(A) be upheld. 4. Any other relief deemed fit in the interest of justice may also be granted. 7. Further, the ld. AR appearing on behalf of the assessee has placed their rejoinder to written submission so filed ld. DR which is extracted here in below; ....
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....y the Company to a concern in which the share holder is a partner having substantial interest. The Ld. DR has emphasized on the entries in the books of accounts. The entries in the books of accounts are not sacrosanct for drawing any inference, as held by a number of Judicial forums- * H.M Kashiparekh & Co. Ltd. v. Commissioner of Income-tax [1960] 39 I.T.R 706 (Bom.): This case reiterated that while mercantile accounting provides prima facie evidence of income accrual, it is not definitive. Courts must examine the substance over form, especially when discrepancies exist between account entries and actual transactions. * Commissioner of Income-Tax v. Shoorji Vallabhdas and Co. [1959] 36 I.T.R 25 (Bom.): The Bombay High Court decision elucidated that the accrual of income is not solely determined by book entries. The court emphasized that a credit entry under the mercantile system does not conclusively establish that income has accrued, especially if there is evidence to the contrary. * Commissioner Of Income-Tax, Gujarat II v. Western India Engineering Co.[1970] 77 ITR 165(Guj.) The Gujarat High Court held that while book entrie....
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.... 6. Bank statement of Vinamra Enterprises 21-22 7. Bank Statement of Nav Bharat Nirman Company 23-26 8. Confirmation of Vinamra Enterprises 27 9. Copy of ledger A/c of Vinamra Enterprises in the books of Technocrat Colonizers Pvt. Ltd. 28 10. Copy of ledger A/c Nay Bharat Nirman Company in the books of Technocrat Colonizers Pvt. Ltd. 29 11. Copy of ledger A/c Nav Bharat Nirman Company in the books of Vinamra Enterprises 30-32 12. Copy of acknowledgement of submission filed to CIT(A) on 24.09.24 33 9. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee has taken loan from ICICI Bank. Sanction letter was placed on record at page 12 of the paper book. That loan was sanctioned by the bank in the name of the applicant and Mr. Kiran Singh, Usha Jain and Millenium Technocrat & Colonizers Private Limited were co applicant of the loan. The loan was disbursed to the company and in turn was transferred to the assessee and therefore, the source needs to be considered. It is not the loan out of the accumulated profit of that company it was the loan wherein the assessee....
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....rat Nirman Co. is a proprietary concern of Shri Ajay Bakliwal and he is also a partner in M/s Vinarma Enterprises and Nav Bharat Nirman Co. Hence, consider that for those transactions provisions of section 2(22)(e) are applicable on the advances so given for an amount of Rs. 2,72,26,500/-. On that observation ld. AO issued a show cause notice to the assessee on 14.12.2019. The assessee submitted a reply on 20.12.2019, wherein he stated that these transactions are business transactions between the group companies having similar nature of business, hence provisions of section 2(22)(e) were not applicable as it involves the loan taken as from bank and in that the assessee was one of the applicant. Ld. AO considered the reply of the assessee but found not satisfactory and thereby he quoted the provision of section 2(22)(e) of the Act and stated that since the assessee is director in Millenium Technocrat Colonisers Pvt Ltd holding 25.93% of shares and proprietor in M/s Nav Bharat Nirman Co. and partner in Joint venture M/s Vinarma Entreprises and Nav Bharat Nirman Co., the company in which the assessee is director has provided loans to the joint venture and proprietor concern in which h....
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....o. 110471 and 110472. The said cheques were deposited into the bank account of the Millenium Technocraft Colonisers Private Limited [ page 18 of the paper book ] which shows that disbursement of the money was in the account of that company though the loan was in the name of the assessee but the company was co-applicant. The relevant page of the bank statement reads as under: As is evident from the above bank statement that money so credited in the account of the company on 17.11.2011 is the credit represented by cheque no. 110471 which is reflected in the sanction letter in the name of Shri Ajay Bakliwal (assessee) as referred at page 12 of the paper book [scanned herein above]. Thus, when the money so given to the assessee from the account of the company Millenium Technocraft Colonisers Private Limited is not out of the accumulated profit and thereby it does not attract the provision of section 2(22)(e) of the Act. Therefore, we see no reason to sustain the addition even to the extent of accumulated profit as observed by ld. CIT(A). Based on that observation ground no. 2 & 3 raised by the assessee is allowed. 11. Since we have decided appeal of the assessee on the merits of ....