2022 (9) TMI 863 - AT - Income Tax

Deemed dividend u/s. 2(22)(e) - share application money received as deemed dividend in the hands of the assessee - HELD THAT - We have carefully pursued the assessment order as well as the order of the ld. CIT(A) and find that the ld. CIT(A) has taken into consideration the entirety of the facts and circumstances of the case and has, thereafter, recorded the findings stating that the real nature of the share application money is interest free loan and advance parked in the books of the assessee company and the same is clearly covered u/s. 56 r.w.s. 2(22)(e) - we do not see any infirmity in the findings of the ld. CIT(A), which are hereby confirmed and the grounds of appeal taken by the assessee is dismissed. Disallowance of depreciation on sewing machine - HELD THAT - It is apparent that the AR of the assessee company has miserably failed to rebut the findings of the AO. These assets have been received at the last day of the financial year. The assessee cannot take undue advantage of the plea that once the assets are merged into the block of assets it loses its identity and the question of actual use of a particular asset in the year should not be relevant for allowing depreciation in respect of the same. Here the AO has given specific findings on the basis of bills produced by the assessee. No positive evidence has been brought on record by the AR of the assessee during assessment or appellate proceedings to rebut AO's findings. Ground No. 3 of the assessee's appeal is hereby dismissed.

Summary

Issues:
1. Challenge to the order of the Commissioner of Income Tax (Appeals)-1, Chandigarh.
2. Share application money treated as deemed dividend u/s. 2(22)(e).
3. Disallowance of depreciation on sewing machines.

Analysis:

Issue 1: Challenge to CIT(A) Order
The appellant challenged the order of the Commissioner of Income Tax (Appeals)-1, Chandigarh, dated 01.01.2019, for assessment year 2013-14. Despite multiple adjournments and notices served, the appellant did not appear for the hearing. Consequently, the Tribunal decided to proceed based on the available record.

Issue 2: Share Application Money as Deemed Dividend
The appellant contested the upholding of share application money as deemed dividend u/s. 2(22)(e) by the CIT(A). The Tribunal examined the facts and found that the share application money was interest-free and treated as an advance, falling under the provisions of the Act. The appellant's explanations regarding fund requirements and refunding the money for investment opportunities were not accepted. The Tribunal upheld the CIT(A)'s findings, dismissing the appellant's grounds of appeal.

Issue 3: Disallowance of Depreciation on Sewing Machines
The appellant challenged the disallowance of depreciation on sewing machines by the CIT(A). The Tribunal reviewed the assessment order and the appellant's submissions. It noted discrepancies in the timing of machine receipt and usage for business purposes. The appellant failed to provide substantial evidence to counter the Assessing Officer's findings. The Tribunal affirmed the CIT(A)'s decision, dismissing the appellant's appeal on this ground.

In conclusion, the Tribunal upheld the CIT(A)'s orders on both issues, dismissing the appeal filed by the appellant. The judgment was pronounced on the 12th day of July, 2022, in Chandigarh.