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2017 (5) TMI 60 - AT - Income TaxDeemed dividend u/s 2(22)(e) - proof of transactions commercial in nature - related party transactions - Held that - Facts of the transaction of loan/advance of ₹ 11 crore by M/s Merry Gold to M/s Nova are identical to facts of transaction of loan/advances discussed by the Tribunal in the case of Sh. Basant Bansal (2015 (4) TMI 1168 - ITAT JAIPUR), wherein the Tribunal has upheld the finding of the Ld. CIT-A, that the transactions are commercial in nature and cannot be considered as loan or advances for the purpose of 2(22)(e) of the Act. Thus, respectfully, following the finding of the Tribunal in the case of Sh. Basant Bansal (supra), we uphold the finding of the Ld. CIT-A that transaction in question between M/s Merry Gold and M/s Nova was a commercial transaction, not hit by the provisions of section 2(22)(e) Admission of additional evidence - Held that - CIT(A) has admitted the additional evidence after examining the circumstances under which those evidences could not be filed before the Assessing Officer. The Ld. CIT-A has recorded the reasons in writing for admission of those evidences and allowed a reasonable opportunity to the Assessing Officer to examine those evidences, and thus Ld. CIT-A has complied the procedure laid down in Rule 46A of Income Tax Rules. We do not find any violation of Rule 46A of the Income Tax Rules in admitting those evidences Addition of deemed dividend - substantial shareholding in M/s. Zenith as on the date of loan transaction - Held that - In the remand proceeding, the Assessing Officer himself has verified the fact of assessee not fulfilling the required shareholdings in M/s Zenith as on the date of loan transaction. In such circumstances, when the Assessing Officer himself has verified the fact that assessee was not satisfying the condition of holding substantial shareholding in M/s Zenith , which is one of the prerequisite for invoking section 2(22)(e) of the Act, and then only ld. CIT(A) has allowed relief to the assessee, filing the appeal on the same issue is not justified on the part of the Revenue. Addition of deemed dividend - Whether date of loan transaction M/s Mikado i.e the company who gave loan was not having accumulated profit and thus one of the condition of section 2(22)(e) of the Act was not satisfied - Held that - We find that this fact of M/s Mikado not having accumulated profit at the time of giving loan to M/s Orange has been duly verified by the Assessing Officer in remand proceedings and the Ld. CIT(A) has allowed relief relying on the factual verification made in remand report. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute. Once the fact of M/s Mikado having accumulated losses of ₹ 1.47 crores at the beginning of the year and losses of ₹ 1.41 crores at the end of the year has been verified by the Assessing Officer, then, one of the required condition of section 2(22)(e) of the Act is not fulfilled and thus, we uphold the finding of the Ld. CIT(A) in deleting the addition
Issues Involved:
1. Deletion of additions made on account of deemed dividend under section 2(22)(e) of the Income-tax Act. 2. Admission of additional evidence by the CIT(A) during appellate proceedings. Detailed Analysis: Issue 1: Deletion of Additions on Account of Deemed Dividend under Section 2(22)(e) Assessment Year 2008-09: 1. Amount of ?16,71,302 as Deemed Dividend: - Facts: - M/s Manglam Multiplex Private Limited paid ?13.30 crores to M/s Martial Buildcon Pvt. Ltd., which was repaid within the same month. - The assessee held significant shares in both companies. - Accumulated profits of M/s Manglam were ?2,28,38,532. - AO’s View: - Deemed the amount as dividend under section 2(22)(e) since all conditions were satisfied. - CIT(A)’s Decision: - Deleted the addition, noting the transaction was a business transaction, supported by additional evidence. - Tribunal’s Conclusion: - Upheld CIT(A)’s decision, referencing a similar case involving the assessee’s brother, Sh. Basant Bansal, where the Tribunal had ruled in favor of the assessee. 2. Amount of ?40,23,050 as Deemed Dividend: - Facts: - M/s B&B Mercantile Private Limited paid ?80,46,100 to M/s Martial Buildcon Pvt. Ltd., which was repaid within the same month. - The assessee held significant shares in both companies. - Accumulated profits of M/s B&B included capital receipts from the sale of agricultural land. - AO’s View: - Deemed the amount as dividend under section 2(22)(e). - CIT(A)’s Decision: - Deleted the addition, noting the transaction was a business transaction, supported by additional evidence. - Tribunal’s Conclusion: - Upheld CIT(A)’s decision, referencing the case of Sh. Basant Bansal. 3. Amount of ?11,00,00,000 as Deemed Dividend: - Facts: - M/s Marigold Merchandise Pvt. Ltd. advanced ?11 crores to M/s Nova Realtor Pvt. Ltd. - The assessee held significant shares in both companies. - Accumulated profits of M/s Marigold were ?38,01,14,730. - AO’s View: - Deemed the amount as dividend under section 2(22)(e). - CIT(A)’s Decision: - Deleted the addition, noting the transaction was a business transaction, supported by additional evidence. - Tribunal’s Conclusion: - Upheld CIT(A)’s decision, referencing the case of Sh. Basant Bansal. Assessment Year 2009-10: 1. Amount of ?20,25,00,000 as Deemed Dividend: - Facts: - M/s Marigold Merchandise Pvt. Ltd. paid ?20.25 crores to M/s Zenith Realtech Pvt. Ltd. - The assessee held significant shares in M/s Marigold but not in M/s Zenith during the relevant year. - Accumulated profits of M/s Marigold were ?36,46,89,763. - AO’s View: - Deemed the amount as dividend under section 2(22)(e). - CIT(A)’s Decision: - Deleted the addition, noting the assessee was not a shareholder in M/s Zenith during the relevant year. - Tribunal’s Conclusion: - Upheld CIT(A)’s decision, based on verified facts. 2. Amount of ?1,10,00,000 as Deemed Dividend: - Facts: - M/s Marigold paid ?1.10 crores to M/s Mikado Realtors Pvt. Ltd. - The assessee held significant shares in both companies. - Accumulated profits of M/s Marigold included share premium. - AO’s View: - Deemed the amount as dividend under section 2(22)(e). - CIT(A)’s Decision: - Deleted the addition, noting the transaction was a business transaction, supported by additional evidence. - Tribunal’s Conclusion: - Upheld CIT(A)’s decision, referencing similar circumstances in the case of Sh. Basant Bansal. 3. Amount of ?3,62,772 as Deemed Dividend: - Facts: - M/s Mikado paid ?1.7 crores to M/s Orange Spa Hotels and Resort Pvt. Ltd. - The assessee held significant shares in both companies. - M/s Mikado had accumulated losses. - AO’s View: - Deemed the amount as dividend under section 2(22)(e). - CIT(A)’s Decision: - Deleted the addition, noting M/s Mikado had accumulated losses. - Tribunal’s Conclusion: - Upheld CIT(A)’s decision, based on verified facts. Issue 2: Admission of Additional Evidence by CIT(A) Assessment Year 2008-09 and 2009-10: - CIT(A)’s Approach: - Admitted additional evidence after noting the circumstances under which they were not produced during assessment. - Forwarded the additional evidence to the AO for comments. - AO provided comments on the merits of the evidence, but did not dispute their relevance or genuineness. - Tribunal’s Conclusion: - Found no violation of Rule 46A of the Income Tax Rules. - Upheld CIT(A)’s decision to admit additional evidence, noting the proper procedure was followed. Conclusion: Both appeals by the Revenue were dismissed. The Tribunal upheld the CIT(A)’s decisions to delete the additions made on account of deemed dividend under section 2(22)(e) and to admit additional evidence during appellate proceedings.
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