2022 (9) TMI 1317 - AT - Income Tax

Deemed dividend u/s 2(22)(e) - advance towards supply of Material Reimbursement of statutory due paid on behalf - HELD THAT - Though the AO has mentioned that no submissions were filed by the assessee in response to various queries raised during the course of assessment proceedings, however, submissions dated 17/05/2016 and 24/08/2016 were in fact filed by the assessee before the AO on 20/05/2016 and 24/08/2016, respectively. Acknowledged copy of submissions form part of the paper book at page no.15 17 - we deem it appropriate to remand this issue to the file of AO for de novo adjudication after necessary examination/verification of details. We further direct the assessee to produce the bills, delivery challans, agreement etc. in respect of the material supplied by Sri Jaya Jewellery and M/s Alex Jewellery Private Limited to M/s Jaya Jewellery Private Ltd. against the advance given. Since this issue is remanded for adjudication afresh, the assessee shall be at liberty to adduce any other evidence to support its case. AO shall also have the liberty to call for or examine any other documents/detail as may be necessary for complete adjudication of this issue. As a result, grounds no. 1 3 raised in assessee s appeal are allowed for statistical purpose. Income computed for the assessment years before the Income Tax Settlement Commission after taking into account the additional income offered by the assessee - Disallowance as cost of improvement of shop owned by the assessee - HELD THAT - Since, it is not clear whether the property in Mayur Tower, Mumbai, which is referred in Income Tax Department s report under section 245D(3) of the Act, is the same property, which is sold during the year under consideration, therefore, we deem it appropriate to remand this issue to the file of AO for de novo adjudication after necessary examination/verification of details. We further direct the assessee to furnish before the AO all the material/evidence in support of its aforesaid claim. The AO shall also have the liberty to call for or examine any other documents/detail as may be necessary for complete adjudication of this issue. Further, since, the claim of the assessee is based on the proceedings before the Income Tax Settlement Commission, the record pertaining to same are likely to be also available with the Income Tax Department, the AO may also make necessary endeavour to call for such records for verification of facts relevant for deciding this issue. As a result, grounds no. 4 raised in assessee s appeal is allowed for statistical purpose. Disallowance u/s 14A - AO has mentioned the investment in shares on the basis of which disallowance under section 14A of the Act was computed in the case of the assessee - HELD THAT - From perusal of the aforesaid balance sheet of the assessee we find that the investment in shares is only Rs. 5,66,752. Thus, from the above, it is evident that the AO has not correctly appreciated the facts of the case, while computing the disallowance under section 14A of the Act read with Rule 8D of the Rules. Therefore, we deem it appropriate to remand this issue to the file of AO for de novo adjudication as per law, after necessary verification of facts available on record. As a result, ground no. 5 raised in assessee s appeal is allowed for statistical purpose. Levy of interest under section 234A - HELD THAT - As we deem it appropriate to remand this aspect to the file of AO for de novo adjudication after necessary examination of the fact whether the return of income was filed by the assessee within the prescribed time under the Act. While, interest levied under section 234B and 234C of the Act are consequential in nature. Therefore, ground allowed for statistical purpose.

Issues Involved:
1. Addition of Rs. 1,02,25,291 as deemed dividend under section 2(22)(e) of the Income Tax Act, 1961.
2. Disallowance of Rs. 79,24,051 as cost of improvement of Shop B1 at Mayur Tower.
3. Disallowance of interest of Rs. 1,79,996 under section 14A of the Income Tax Act, 1961.
4. Setting off business loss against capital gains instead of income from other sources.
5. Charging of interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 1,02,25,291 as Deemed Dividend under Section 2(22)(e):
The assessee challenged the addition of Rs. 1,02,25,291 as deemed dividend under section 2(22)(e) of the Act. The AO noted that the assessee received loans from M/s Jaya Jewellery Private Limited and M/s Alex Jewellery Private Limited, where the assessee held significant shareholdings. The AO treated these advances as deemed dividends due to the lack of submissions from the assessee. The CIT(A) upheld this view, rejecting the assessee's claim of business advances due to insufficient evidence. The Tribunal remanded the issue to the AO for de novo adjudication, directing the assessee to produce supporting evidence such as bills, delivery challans, and agreements to substantiate the claim of business advances.

2. Disallowance of Rs. 79,24,051 as Cost of Improvement:
The assessee claimed a deduction for the cost of improvement of Shop B1, Mayur Tower, based on an amount offered before the Income Tax Settlement Commission. The AO disallowed this claim due to the absence of documentary evidence linking the disclosed income to the capital asset sold. The CIT(A) upheld this disallowance, noting the lack of evidence and the nature of the disclosed income as undisclosed stock rather than investment. The Tribunal remanded the issue to the AO for further verification and directed the assessee to provide necessary documentation to support the claim.

3. Disallowance of Interest of Rs. 1,79,996 under Section 14A:
The AO disallowed interest expenditure under section 14A, considering the assessee's investments in shares and partnership firms that generated exempt income. The CIT(A) upheld this disallowance due to the lack of the assessee's balance sheet in an individual capacity. The Tribunal found discrepancies in the AO's computation of investments and remanded the issue for de novo adjudication, directing the AO to verify the correct facts and recompute the disallowance as per law.

4. Setting off Business Loss Against Capital Gains:
The Tribunal remanded this issue to the AO for de novo adjudication, in line with the remand of other related issues. The AO is to re-examine the facts and adjudicate the matter as per law.

5. Charging of Interest under Sections 234A, 234B, and 234C:
The Tribunal remanded the issue of interest under section 234A to the AO for verification of whether the return of income was filed within the prescribed time. Interest under sections 234B and 234C was deemed consequential and was also remanded for de novo adjudication.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, remanding all issues to the AO for fresh adjudication after necessary verification and examination of details. The assessee is directed to provide all relevant evidence to support its claims, and the AO is granted the liberty to call for additional documents as required.

← Previous Next →