2014 (5) TMI 187 - AT - Income Tax

Deletion of deemed dividend u/s 2(22)(e) of the Act Loans and advances Held that - The addition made by AO was deleted by CIT(A) - on the submissions that were made by Assessee before CIT(A), no remand report or comments from the AO was obtained by CIT(A) - the AO should be granted an opportunity to examine the submissions made by the Assessee before CIT(A) thus, the matter is remitted back to the AO for fresh adjudication and to decide the issue in the light of the submissions made before CIT(A) and any other additional evidence Decided in favour of Revenue.

Summary

Issues Involved:
1. Deletion of addition on account of deemed dividend under Section 2(22)(e) of the Income Tax Act.
2. Legality and jurisdiction of the notice issued under Section 153A of the Income Tax Act.
3. Treatment of journal entries and advances for business purposes.

Detailed Analysis:

Issue 1: Deletion of Addition on Account of Deemed Dividend under Section 2(22)(e)

Revenue's Appeal:
The Revenue contested the deletion of an addition of Rs. 15,00,000 made by the Assessing Officer (AO) as deemed dividend under Section 2(22)(e) of the Income Tax Act. The AO had noted that the assessee was a shareholder holding more than 10% of shares in John Oil & Gas Ltd, which had paid a loan/advance of Rs. 21,00,000 to the assessee. The AO considered this amount as deemed dividend since it was out of accumulated profits. The CIT(A) partially allowed the appeal, holding that Rs. 6,00,000 was merely a journal entry and Rs. 15,00,000 was an advance for business purposes, thus not attracting Section 2(22)(e).

The Tribunal observed that the submissions made by the assessee before the CIT(A) were not presented to the AO, and no remand report was obtained by the CIT(A). Therefore, the Tribunal remitted the issue back to the AO to examine the submissions and decide the issue afresh.

Assessee's Appeal:
The assessee contended that the addition of Rs. 6,00,000 as deemed dividend was unlawful, arguing that it was merely a journal entry and not an actual payment. The Tribunal, noting the interconnected nature of the issues with the Revenue's appeal, remitted the matter back to the AO for a fresh examination.

Issue 2: Legality and Jurisdiction of the Notice Issued under Section 153A

The assessee argued that the notice issued under Section 153A was illegal and without jurisdiction. The Tribunal did not provide a separate analysis for this issue but remitted it along with the main grounds to the AO for a fresh decision.

Issue 3: Treatment of Journal Entries and Advances for Business Purposes

The CIT(A) had accepted the assessee's submission that Rs. 6,00,000 was a journal entry and Rs. 15,00,000 was an advance for business purposes, specifically for the use of land owned by the assessee as a godown for the company's storage. The Tribunal directed the AO to verify these claims and decide the issue in accordance with the law.

Conclusion:
All the appeals by both the Revenue and the assessee were allowed for statistical purposes, with the Tribunal remitting the issues back to the AO for a fresh examination and decision, ensuring that the AO considers the submissions made before the CIT(A) and any additional evidence the assessee may present. The Tribunal emphasized the need for a fair and just examination of all the facts and submissions.