TaxTMI 
TaxTMI 
2026 (4) TMI 1532
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....hat the assessee is an individual and was one of the Directors of M/s Shukriya Travels Pvt. Ltd. and admittedly holding 25% shareholding therein. For the impugned assessment year, the assessee filed return of income declaring total income of Rs. 11,51,177. The case was selected for scrutiny and an assessment order came to be passed under section 143(3), wherein the Assessing Officer made aggregate additions of Rs. 99,94,002, comprising the aforesaid three items. The Ld. CIT(A), NFAC, in the impugned order, has confirmed all the additions, against which the assessee is now in further appeal before the Tribunal. 4. At the outset, it has also been brought on record that during the course of hearing before the Tribunal, the assessee has filed an application under Rule 29 of the ITAT Rules seeking admission of additional evidences. The additional evidences, inter alia, consist of sanction letter dated 16.08.2013 issued by Axis Bank sanctioning overdraft facility, Board Resolution of M/s Shukriya Travels Pvt. Ltd. dated 18.01.2014 authorising the assessee to furnish security to Axis Bank for securing the overdraft facility, loan account statement of the company and balance sheets of t....
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.... regarded as one given in the ordinary course of business. He observed that the provisions of section 2(22)(e) do not exempt such transaction merely by reason of the assessee's stated intention or utilisation of funds. Proceeding on this reasoning, he concluded that all the conditions specified under section 2(22)(e) stood fulfilled, and therefore the amount of loan received, to the extent of accumulated profits of the company, was taxable in the hands of the assessee as deemed dividend. He accordingly added Rs. 75,48,839. 6. The Assessing Officer then dealt with the second issue concerning cash deposits reflected in the AIR information amounting to Rs. 23,07,410. In response to the query, the assessee stated that the source of such cash deposits was sale of land in his native place and his savings for the last five to six years, and had also submitted land sale agreements showing that the sale had been made in the year 2011. The Assessing Officer rejected the explanation holding that even if the sale of land were to be accepted as a source, the sale had taken place in 2011 whereas the cash had been deposited in financial year 2013-14, and it was impractical to accept that such ....
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....'s operations, whereas here the company's funds were used to enable the shareholder to purchase a personal property, and the subsequent mortgaging of the property was merely a separate and later arrangement which could not retrospectively legitimise a transaction that was essentially of personal benefit to the shareholder. The Ld. CIT(A) also observed that the language of section 2(22)(e) is plain and that all the statutory conditions stood satisfied, namely, the company was a closely held company, the assessee was a beneficial shareholder holding 25% voting power, the company had accumulated profits of Rs. 75,48,839, and its business activity was not money lending or financing. He thus concluded that the assessee's plea of "mutual benefit" does not detract from the primary fact that the immediate benefit was to the assessee who acquired a personal asset, and the company's subsequent benefit through mortgage arrangement was only contingent and derivative. On this reasoning, the addition under section 2(22)(e) was confirmed. 9. In so far as the addition under section 68 in respect of cash deposits is concerned, the Ld. CIT(A) examined the assessee's plea that the amount of Rs. 23....
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....rces. On this reasoning, the Ld. CIT(A) upheld the disallowance and dismissed the ground. 11. Before us, the Ld. Counsel for the assessee submitted that the entire edifice of the addition under section 2(22)(e), as sustained by the lower authorities, suffers from a fundamental infirmity inasmuch as the crucial evidences which demonstrate the true character of the transaction as a commercial arrangement undertaken for benefit of the company could not be brought on record before the lower authorities, and have now been filed before the Tribunal by way of application for admission of additional evidence. It was submitted that in financial year 2013-14, a flat was purchased by the assessee for an overall consideration of Rs. 1,40,00,000, and for the purpose of such purchase, the company had granted a loan of Rs. 1,06,50,000 on the condition that the said property would subsequently be mortgaged for availing overdraft facility in favour of the company for an amount of Rs. 1,75,00,000. It was submitted that the necessity for the company to avail such overdraft facility had arisen because of the changes made by IATA in its policy of flight ticket bookings requiring payments to be settl....
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....it of cash, without rebutting the evidences brought on record and without conducting any proper enquiry. Reliance has also been placed on the decision in DCIT v. Sri Nikhil Nanda. On the third issue, it was submitted that the deduction under section 57 pertained to professional fees and interest paid to father on amounts borrowed from him for making fixed deposit, and such expenditure having been incurred for earning income from other sources ought not to have been disallowed. 14. Per contra, the Ld. Departmental Representative strongly relied upon the orders of the Assessing Officer and the Ld. CIT(A) and submitted that the lower authorities have correctly appreciated the facts and applied the law. However, on the aspect of additional evidences, it was submitted that the matter may be considered in accordance with law. 15. We have heard the rival submissions, perused the orders of the authorities below, the material brought on record, and the additional evidences sought to be adduced by the assessee. We have also given our thoughtful consideration to the entire factual and legal matrix. At the very outset, we find that the central controversy in this appeal, particularly qua....
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.... the company's business requirements, then in all fairness such evidences deserve full factual verification and proper consideration by the Assessing Officer. The assessee cannot be non suited without examination of such documents merely because they were not before the lower authorities, particularly when the assessee has sought to explain their relevance and has invoked Rule 29. Accordingly, in the interest of substantial justice, we deem it fit to admit the additional evidences for the limited purpose of remanding the matter for fresh examination. 17. Once that be so, then, in our considered opinion, the first issue relating to addition under section 2(22)(e) requires to be restored to the file of the Assessing Officer for de novo adjudication after considering the additional evidences, after granting proper opportunity to the assessee to substantiate the commercial rationale of the transaction, and after examining the applicability of CBDT Circular No. 19/2017 and the judicial precedents relied upon by the assessee in the light of the facts as emerge upon such verification. The Assessing Officer shall independently examine whether the advance was merely a shareholder loan or....