2012 (2) TMI 679 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition in net profit made by the Assessing Officer.
2. Deletion of addition on account of deemed dividend.

Summary:

Issue 1: Deletion of Addition in Net Profit
The revenue challenged the deletion of the addition in net profit by the Commissioner of Income Tax (Appeals). The Assessing Officer had rejected the books of account of the assessee, a firm engaged in the retail sale of Indian Made Foreign Liquor (IMFL), beer, and Country Liquor (CL), on the grounds that sales were not supported by proper vouchers and invoked provisions of section 145(3) of the Act. The Commissioner of Income Tax (Appeals) reversed this decision, noting that the books of account were regularly maintained, audited, and no significant defects were pointed out by the Assessing Officer. The Tribunal upheld this view, referencing previous cases like ACIT vs. M/s Avinash Chalana & Co., where it was established that in the absence of significant defects, books of account could not be rejected merely for not issuing cash memos. The Tribunal directed the Assessing Officer to accept the income declared by the assessee.

Issue 2: Deletion of Addition on Account of Deemed Dividend
The revenue also contested the deletion of Rs. 22,59,970/- added by the Assessing Officer as deemed dividend u/s 2(22)(e) of the Act. The Commissioner of Income Tax (Appeals) ruled in favor of the assessee, relying on the Special Bench decision in ACIT vs. Bhaumik Colour Private Limited, which held that deemed dividend could only be assessed in the hands of a registered and beneficial shareholder of the lender company. Since the assessee was neither a registered nor a beneficial shareholder of the lender companies, the Tribunal confirmed the deletion of the addition, aligning with judicial precedents and the interpretation of section 2(22)(e).

Conclusion:
The Tribunal dismissed the revenue's appeal, confirming the order of the Commissioner of Income Tax (Appeals) on both issues, thereby directing the acceptance of the income declared by the assessee and holding that the addition on account of deemed dividend was not justified.