TaxTMI 
TaxTMI 
2025 (5) TMI 94
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.... 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.6,43,935/- 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. 6,43,935/- 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 of the matter, action of Ld. CIT(A) in confirming the action of Ld. A.O. in passing the impugned assessment order without there being requisite approval in terms of section 153D and in any ca....
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....ion, there has been fund flow of more than Rs. 50 crore from M/s Orient Craft Ltd. to M/s Super Connection India Pvt. Ltd. (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." 3. Since similar issues are involved and the above Appeals are pertaining to single Assessee, both the Appeals are heard together and decided in this common order. For the sake of convenience, brief facts of the case for Assessment Year 2014-15 are considered, which are as under: - A search was conducted on 29/04/2015 at the various premises for Orient Craft group of cases. The Assessee was also covered u/s 132 of the Income Tax Act, 1961, ('Act' for short). An assessment order u/s 153A r.w. Section 143(3) of the Act came to be passed on 26/12/2017 by making addition of Rs. 6,60,000/- on account of deemed dividend u/s 2(22) (e) of t....
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....efore we discuss the merits of the arguments of the assessee& hat of the revenue, we consider it expedient to reproduce the relevant portion of the written submissions filed by the assessee for A.Y. 2014-15 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. 17,78,30,000/- 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 appellant and 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 additio....
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....ll along been accepted in their assessments. Thus, action of Ld. AO in making the impugned addition in the hands 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. 6) Without prejudice to above, it is submitted that PB 524 would show that assessee paid Rs. 10 Crore on 12.03.2013( 3.75 Crore+ 3.50 crore + Rs. 2.75 Crore )and therefore, to this extent in A.Y. 2014-15 deemed divided amount should be reduced. PB 526-527 is the copy of account of the assessee in the books of M/s ....
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....bove, this finding is not correct. b) Ld. AO has mentioned that statements of Mr. Dhanda and Mr. Nagpal directors of SCPL revealed during search that SCPL is paper 38 company as books are maintained at the premises of OCL and so on and so forth. In reply, it is submitted that SCPL is a company registered with ROC and is assessed to tax for number of years as is evident from its income tax assessment orders of earlier years enclosed at PB 439- 446. Merely because the shareholders of SCPL were employees 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 arb....
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.... first ingredient 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 7.3.2 of the appeal order that Orient Craft P Ltd. had given advance of Rs. 28,84,90,373/- to M/s Super Connection India P. Ltd. It is important to submit that there is no appeal filed by the revenue against such finding of fact recorded by CIT (A). 25. Moreover, it is also seen that advance was given by M/s Orient Craft Ltd. to M/s Super Connection India P. Ltd. The said M/s Super Connection India P Ltd. has been held by us as an independent and unrelated company in our order for A.Y. 2010-11 to A.Y. 2013-14 passed separately in ITA No. 6356 to 6359/Del/2018. Therefore, when M/s Super Connection India P. Ltd. which was an independent assessee and has been assessed to tax and when advance has admittedly been given by M/s Orient Craft Ltd. to M/ s Super Connection India P. Ltd., how can it be assumed or held that the assessee received any loans and advance from M/s Orient Craft Ltd. After all the c....
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....ade on behalf of the revenue. Therefore, when investment was made by M/s Olympus 42 Realtors P. Ltd. in M/s SKA Enterprises and assessee as partner has withdrawn amount from the partnership firm namely M/s SKA Enterprises in which assessee was one of the partners, there was no question of treating such amount received by the assessee as loan or advance that too from M/s Orient Craft Ltd. and / or from M/s Olympus Realtors P. Ltd. A.O. has disregarded the nature of payment made by each entity to the other entityregarding which the factual findings recorded by CIT(A) in his order have attained finality in the absence of any rebuttal or any appeal preferred by Revenue. Ld. AO has disregarded also the effect of legal character of all the entities more so when there was nothing adverse found in the assessments of these entities. 26. We have already mentioned earlier that section 2(22)(e) creates deeming fiction which gets triggers when the conditions mentioned in the section are met and not otherwise. It is settled principle of law that the deeming provisions are required to be construed strictly and nothing beyond which has been contemplated in the section can be inferred nor ....
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....ority. No other ground was argued before us. Hence appeal of the assessee is partly allowed. 6.2 Order of the Tribunal in Assessment Year 2015-16 in the case of Sudhir Dhingra: "34. We have heard both the parties and have gone through the orders passed by the authorities below and also gone through the written 47 submissions filed by the assessee and also the relevant documents referred to from the paper book filed before us. We have summed up the findings of the assessment order and appellate order hereinabove. 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 ....
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....drew the amount as partner of SKAE and thus, how could the amount received by the appellant from M/s SKAE be treated as loan given by M/s OCLso as to constitute deemed dividend in the hands of the appellant. In fact Ld. AO is going entity after entity and that too by disregarding the nature of payment made by each entity/person to other. Ld. AO is disregarding the legal character of the entities also which is not permissible in law particularly when legal character of such entities have all along been accepted in their assessments. Thus, action of Ld. AO in making the impugned addition in the hands 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 maki....
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....ties to other entities/persons. Thus, this averment/finding by Ld. AO is only to show that but for the search this could not come to be known to him. But as submitted above, this finding is not correct. b) Ld. AO has mentioned that statements of Mr. Dhanda and Mr. Nagpal directors of SCPL revealed during search that SCPL is paper company as books are maintained at the premises of OCL and so on and so forth. In reply, it is submitted that SCPL is a company registered with ROC and is assessed to tax for number of years as is evident from its income tax assessment orders of earlier years enclosed at PB 439- 446. Merely because the shareholders of SCPL were employees 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. Ot....
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.... 9 Consequential GROUND NO. 10 General 35. According to the case of revenue, there was loan or advance from M/s Orient Craft Ltd. (OCL) & Olympus Realters P Ltd.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. 36. In order to attract the fiction of section 2(22(e), it is essential that the elements mentioned in the 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. Looking to 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 fir....
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....Orient Craft Ltd. to Super Connection India P Ltd. during the year under consideration which we have already taken note of hereinabove. It is also noticed by us 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 even 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. and where was the question of applying the 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 56 Olympus Realtors P. Ltd. to M/ s SKA Enterprises. Assessing O....