2024 (2) TMI 46 - AT - Income Tax

Addition of advance received considered as accommodation entry - Before CIT(A), the assessee filed details relating to advances and also confirmation obtained from mentioned company but he rejected the same by observing that the same will not serve any purpose - HELD THAT - CIT(A) has not given proper reasoning for rejecting the documents filed by the assessee. CIT(A) did not call for remand report from the AO in respect of the documents filed by the assessee, which is usually done. Accordingly, we are of the view that the order passed by CIT(A) cannot be sustained and further, this issue requires fresh examination at the end of the AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining it afresh. We also direct the assessee to fully co-operate with the AO for expeditious completion of assessment proceedings. Deemed dividend u/s 2(22)(e) - According to the AO, the assessee is a director in a closely held company and during the year under consideration, she has taken advance besides salary - HELD THAT - Admittedly, the shareholding pattern of above said company at the time of taking of advance by the assessee was not examined by the AO, which would have determined the applicability of sec.2(22)(e) - According to the assessee, she has resigned from the Board and also does not hold substantial interest. Assessee has not furnished any supporting documents to substantiate above submissions. Besides the above, the provisions of sec.2(22)(e)exclude advances given to a shareholder during the course of carrying on business for business purposes. It is the contention of the assessee that the above said advance was given to her in the capacity of an employee and hence it was so given during the course of carrying on business for business purposes. We notice that this contention of the assessee also was also not examined - this issue also requires examination at the end of the AO. Addition u/s 56(2)(vii) - Assessee has purchased a flat less than stamp duty value, hence the AO added the difference amount as deemed income u/s 50C - assessee submitted that there are certain deficiencies in the property and hence she could purchase the property at a price lower than the stamp duty value - HELD THAT - Under the provisions of sec. 50C, the AO is bound to refer the matter of valuation to the DVO, if the assessee is disputing the valuation determined by Stamp duty authorities. Though the assessee has demanded for referring the matter to the DVO before the Ld CIT(A), yet the Ld CIT(A) rejected the same, which, in our view, is in violation of sec. 50C of the Act. We notice that the CIT(A) has relied upon internet information about the valuation of property in the year 2023, for determining the value of property as on 2012. In our view, this approach of the CIT(A) is also not correct and the provisions of sec. 50C do not contemplate such an approach. CIT(A) did not call for remand report from the AO with regard to the sources explained by the assessee. Accordingly, we are of the view that this issue requires fresh examination at the end of the AO. Accordingly, we set aside the order passed by CIT(A) on this issue and restore the same to the file of the AO for both the issues, viz., addition made u/s 50C and u/s sec. 56(2)(vii) afresh. We also direct the assessee to fully co-operate with the AO for expeditious completion of assessment proceedings.

Summary

Issues Involved:
The judgment involves challenges to additions/disallowances made under sections 69C, 2(22)(e), and 56(2)(vii) of the Income Tax Act for the Assessment Years 2011-12, 2012-13, and 2013-14 respectively.

AY 2011-12:
The issue pertains to the addition of Rs. 15.00 lakhs as an accommodation entry by the AO regarding an advance received by the assessee. The CIT(A) rejected the documents filed by the assessee without proper reasoning or calling for a remand report. The ITAT set aside the CIT(A) order and directed fresh examination by the AO.

AY 2012-13:
The challenge is against the addition of Rs. 14,85,000/- as deemed dividend under section 2(22)(e) of the Act. The AO assessed the amount based on the directorship of the assessee in a company without considering substantial interest or business purpose. The ITAT found the AO's application of sec. 2(22)(e) incorrect and directed fresh examination by the AO.

AY 2013-14:
The dispute involves an addition under section 56(2)(vii) for the purchase of a flat. The AO added the difference between purchase price and stamp duty value as deemed income. The CIT(A) rejected the request to refer valuation to DVO and enhanced the assessment. The ITAT found the CIT(A)'s actions in violation of sec. 50C and directed a fresh examination by the AO.

In summary, the ITAT Mumbai addressed challenges related to additions/disallowances under different sections of the Income Tax Act for multiple assessment years. The tribunal found procedural and substantive errors in the orders of the CIT(A) and directed fresh examinations by the Assessing Officer for all issues raised by the assessee.