2015 (8) TMI 1141 - AT - Income Tax

Addition u/s 68 - Held that - Considering the fact that assessee before us has produced relevant bank statements and explained the source of deposits in the bank account of Shri Ankit Singh and subsequent transfer to assessee s bank account, we are inclined to remit the matter back to the file of AO for verifying this aspect after examining the relevant bank accounts and decide the issue after due opportunity of being heard to assessee. We make it clear if on verification of the bank statements, assessee s claim is found to be correct, then, no addition can be made on this count. - Decided in favour of assessee for statistical purposes Addition as deemed dividend u/s 2(22)(e) - Held that - There is no dispute to the fact that assessee on different dates during the relevant FY has received an amount of ₹ 45 lakh from M/s Euro Constructions Pvt. Ltd. wherein assessee is the Managing Director and majority shareholder. It is also not disputed that the said company is a company wherein public are not substantially interested. It is also a fact on record that during the year the company had accumulated profits. Therefore, all the conditions of section 2(22)(e) are satisfied. Though, assessee has claimed that the amount received was not in the nature of loan/advance, but, towards purchase of land in the name of company, however, assessee has not produced even a single evidence to justify the aforesaid claim. In these circumstances, assessee s claim that the amount received was not in the nature of loan/advance cannot be accepted. However, as can be seen from assessee s account in the books of M/s Euro Construction Pvt. Ltd. there is a credit balance of ₹ 7,55,896.50 in February, 2009. Therefore, assessee deserves to get credit for the said amount by setting it off against total advance of ₹ 45 lakh. In the aforesaid view of the matter, we direct AO to reduce the amount of ₹ 7,55,896.50 from the total loan/advance of ₹ 45 lakh and treat the balance amount as deemed dividend u/s 2(22)(e) of the Act. - Decided partly in favour of assessee.

Summary

Issues:
1. Addition of Rs. 21,50,000 u/s 68 of the Act - Unexplained credit.
2. Addition of Rs. 45 lakh as deemed dividend u/s 2(22)(e) of the Act.

Issue 1: Addition of Rs. 21,50,000 u/s 68 of the Act - Unexplained credit:

The assessee received an unsecured loan of Rs. 21,50,000 from his minor son, which the AO treated as unexplained credit due to lack of proper explanation and supporting evidence. The AO observed discrepancies in the bank statements of the son and noted large deposits without clear sources. The CIT(A) upheld the AO's decision. The assessee argued that the loan was actually his own money transferred to his son's account and then returned. The AR submitted detailed explanations and produced relevant bank statements before the Tribunal, which supported the claim. The Tribunal remitted the matter back to the AO for verification based on the new evidence, stating that if the claim is verified, no addition should be made. The ground was allowed for statistical purposes.

Issue 2: Addition of Rs. 45 lakh as deemed dividend u/s 2(22)(e) of the Act:

The AO found that the assessee, a director in a company, received Rs. 45 lakh as a loan/advance, which was used for personal purposes. As the company had accumulated profits and the conditions of section 2(22)(e) were met, the amount was treated as deemed dividend. The CIT(A) affirmed the AO's decision. The assessee contended that the amount was not a loan/advance but for property investment on behalf of the company, which did not materialize. However, no supporting evidence was provided. The Tribunal noted that all conditions of section 2(22)(e) were satisfied, and the claim of property investment was unsubstantiated. A credit balance in the company's books was set off against the total advance, resulting in a partial allowance of the grounds.

In conclusion, the Tribunal partly allowed the appeal of the assessee, remitting one issue back to the AO for verification and adjusting the deemed dividend amount in the other issue based on the available credit balance.