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Issues involved: Appeal against deletion of addition u/s.2(22)(e) of the IT Act for assessment year 2008-09.
Summary: The appeal was filed by the Revenue challenging the deletion of an addition made by the Assessing Officer u/s.2(22)(e) of the IT Act. The assessee, an individual and partner in various concerns, received salary from M/s. Laxmi Diamond Pvt. Ltd. The Assessing Officer observed significant investments and deposits in Laxmi Diamond Pvt. Ltd. by the assessee. It was noted that the assessee had withdrawn a substantial amount from the company and transferred funds between accounts. The Assessing Officer treated the loan advance as a deemed dividend u/s.2(22)(e) of the IT Act and made an addition of Rs.13,27,00,000. The CIT(A) allowed the appeal, stating that the amount deposited by the director in the company should not be considered a loan under the provisions of the IT Act. The CIT(A) emphasized that the nature of the transactions did not violate any laws and cited relevant case laws to support the decision. The Revenue contested the CIT(A)'s decision, arguing that the assessee had maintained various accounts with the company and had a debit balance as of a certain date. The Revenue relied on the conditions required for disallowance u/s.2(22)(e) of the IT Act. The appellant's counsel argued that after merging all accounts, the final balance was nil, citing relevant case laws to support their stance. The Tribunal examined the contentions and the material on record, noting that all conditions for disallowing deemed dividend u/s.2(22)(e) were met. Referring to a previous decision, the Tribunal held that the assessee did not owe any money to the company, and thus, there was no deemed dividend. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the addition made by the Assessing Officer u/s.2(22)(e) of the IT Act. In conclusion, the Revenue's appeal was dismissed, affirming the decision to delete the addition u/s.2(22)(e) of the IT Act.
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