2012 (12) TMI 1160 - AT - Income Tax

Summary

Issues involved: Revenue's appeal against deletion of addition u/s. 2(22)(e) of the Income-tax Act, 1961 for assessment year 2006-07.

Summary:

Issue 1: Addition u/s. 2(22)(e) of the Act

The revenue contended that the CIT(Appeals) erred in deleting the addition of Q 25 lakhs made by the Assessing Officer u/s. 2(22)(e) of the Act, alleging circumvention of provisions. The assessee, a director of a company, received an advance of Q 50 lakhs, triggering the application of section 2(22)(e). The Assessing Officer reopened the case, noting the substantial interest held by the assessee in the company. The dispute arose from the transaction involving the purchase of land and the advance received.

Details:
- The company debited Q 50 lakhs to the assessee's account.
- The assessee held over 10% shares in the company.
- Accumulated reserves of the company were Q 12,47,07,765.
- The assessee acquired land for Q 40 lakhs and entered into an agreement to sell it for Q 1.5 crores.
- The delay in transferring the land was due to disputes and conversion issues.
- The Assessing Officer treated Q 25 lakhs as deemed dividend u/s. 2(22)(e) and added it to the income.

Issue 2: CIT(Appeals) Decision

The CIT(Appeals) allowed the appeal, considering the transaction as a property purchase and accepting explanations for the delay in land transfer. The revenue challenged this decision, leading to the appeal before the ITAT Bangalore.

Details:
- The revenue relied on the Assessing Officer's order, while the assessee cited the CIT(Appeals) decision and a Tribunal case.
- The ITAT found the agreement genuine for land purchase and not a loan or advance to avoid dividend distribution.
- The increase in land price was justified due to conversion requirements and legal disputes.
- Referring to a similar case, the ITAT upheld the CIT(Appeals) decision, dismissing the revenue's appeal.

Conclusion:

The ITAT upheld the CIT(Appeals) decision, emphasizing the genuine nature of the land transaction and rejecting the revenue's appeal. The judgment was pronounced on December 26, 2012.