TaxTMI 
TaxTMI 
2025 (6) TMI 803
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....d by the assessee is that the learned CIT(A) erred in confirming the AO's action of treating cash belonging to the company M/s Kanva Diagnostic Services Pvt Ltd found from the assessee's residence and office of auditor as deemed dividend u/s 2(22)(e) of the Act. 3. The facts in brief are that the assessee is an individual, majority shareholder and managing director of M/s Kanva Diagnostic Services Pvt Ltd (hereafter KDSPL). The company was subject to search in connection with the residence of the assessee and the office of auditor Shri H.B. Sunil was also covered under the search. Consequence to search, the proceedings under section 153C of the Act were initiated in case of the assessee. 4. During the assessment proceedings, the AO ob....
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....d cash found at Shri H.B. Sunil's office and his own residence was still in the company's possession, and had not been used as a loan or advance by him. He denied any personal utilization or diversion of funds from the company. However, the AO rejected the assessee's contention, citing that the cash amounting to Rs.1,61,98,000/- was already handed over to Shri H.B. Sunil for the purchase of property in the name of Dr. Venkatappa's (assessee) and his son's personal names, which constituted a personal benefit. Shri H.B. Sunil admitted in his sworn statement the purpose of the cash, which was not disputed by assessee. As such, the AO held that the cash, though unaccounted, was withdrawn from the company for personal use and hence, qualifies as....
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....garded as the owner of the property held by the company. In the present case, he (the assessee) also kept cash of the company M/s KDSPL as mere custodian. 8.1 Furthermore, he emphasized that the cash in question belonged to the company, generated through suppressed sales, and was acknowledged in the assessment of M/s KDSPL. The assessee referred to the Supreme Court ruling in Shree Ram Mills Ltd. v. Commissioner of Excess Profits Tax (1953 23 ITR 120 SC), reiterating that a valid loan or advance requires a clear agreement between borrower and lender, which was absent in his case. He maintained that there was no debit in the company's books treating the amount as loan or advance to him, and hence the transaction does not qualify as deemed....
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.... residence and Rs.1,61,98,000 was given to an auditor for handling property matters. The assessee holds more than 10% voting rights in the company, which means he is a substantial shareholder. Based on the facts, the ld. CIT(A) concluded that the total withdrawal of Rs.2,29,85,400/- from the company was used for his personal benefit. Even though the transaction was not formally recorded as a loan or advance in the company's books, the cash was clearly diverted for personal use. 13. The learned CIT(A) pointed out that the appellant did not provide any solid proof to show that the cash was not used personally. The assessee submitted Board Resolution merely stating that he had custody of the company's assets, but that alone did not prove th....
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....of the business, otherwise the company would not have used the fund for its activities. 17. On the other hand, the learned DR submitted that there was found an agreement to sale which strongly suggests that the cash belonging to the company was used by the assessee for his personal benefit. Accordingly, the learned DR vehemently supported the order of the authorities below. 18. We have heard the rival contentions of both the parties and perused the materials available in record. Form the materials available on record, we note that the main question is whether the cash seized during the search should be treated as a deemed dividend under section 2(22)(e) of the Act in the hands of the assessee. The cash amounting to Rs.2,29,85,400/- wa....
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....onal accounts of the assessee and his son. There is no finding and material on record suggesting any amount was paid over and above the disclosed consideration. Hence this proves that no cash was used for the purchase of said property by the assessee. The allegation that the seized cash was diverted for personal use is, therefore, without any basis. 18.4 We find merit in the assessee's reliance on judicial precedents, including the Pune ITAT decision in ACIT v. Anilkumar Phoolchand Sanghvi (supra). In that case, it was held that where a director holds funds on behalf of the company and does not use them for personal benefit, the provision of section 2(22)(e) of the Act does not apply. 18.5 We are also conscious to the fact that the bo....