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2017 (9) TMI 1098 - AT - Income TaxDeemed dividend income u/s 2(22)(e) - loans and advances given to societies registered u/s 12A - whether the assessee was beneficially entitled to 20% or more of the income of Swami Devi Dayal Hi-tech Education Academy ? - Held that - Swami Devi Dayal Hi-tech Education Academy is a charitable trust registered u/s 12AA of the Act. That the assessee is a trustee in the said trust has also not been disputed and the fact that there are no interest of any member of the said society in the Trust is also not disputed. In the said circumstances, we are left with no option but to agree with the Ld. CIT(Appeals) that second limb or requirement of section 2(22)(e) of the assessee having substantial interest in the concern to which loan or advance has been given has not been established and, therefore, the said advance cannot be treated as deemed dividend in the hands of the assessee. The arguments of the Ld. DR that the documents seized during the course of search show that the funds had been utilized by the members of the society, and therefore, assessee derived personal benefit is of no consequence since the requirement of section 2(22)(e) is not whether the assessee has actually derived any personal benefit from the said concern but is that the assessee is beneficially entitled to not less than 20% of the income of the said concern. The word entitled means having a legal right to something. Since such legal right is absent in the case of the present society, in the absence of such legal right of the assessee in the said society the amount advanced cannot be treated as deemed income as per section 2(22)(e) of the Act. Moreover even as per the argument of the Revenue the documents found during search only establish that the assessee has derived benefit from the said societies and not substantial benefit, as is the requirement of the section. - Decided in favour of assessee. Unexplained deposit in Oriental Bank of Commerce - addition on account of advance received on sale of land - CIT-A deleted both addition - Held that - Above additions have been deleted by the CIT(A) on the basis of the cash flow statement which was never produced before the AO and was furnished for the first time before the CIT(A). The cash flow statement clearly is an additional evidence the admittance of which is governed by Rule 46A. The Revenue has not challenged the admission of the additional evidence. However, sub clause 3 of Rule 46 clearly requires the CIT(A) to allow the AO a reasonable opportunity to examine the evidence or document before taking it into account. In view thereof, we consider it fit to restore both the issues back to the file of the Assessing Officer to examine the additional documents/evidences filed by the assessee with respect to both the grounds and thereafter adjudicate the issue in accordance with law.- Decided in favour of revenue for statistical purposes. Addition in respect of capital introduced by assessee - CIT-A deleted disallowance - Held that - Since the Revenue has pleaded that the cash flow statement was accepted by the CIT(Appeals) without confronting it to the Assessing Officer, the same ought to be sent back to the Assessing Officer for verification, in the interest of justice and drawing parity from the same, the issues in the present appeal also should be sent back to the Assessing Officer to decide after verifying the cash flow statement submitted by the assessee. Addition on account of seized documents - Held that - Undeniably, during assessment proceedings the assessee had not been able to produce its cash flow statement to explain various transactions which were noticed by the Assessing Officer during the course of search which was undertaken at the assessee premises. The cash flow statement was subsequently submitted to the Ld.CIT(Appeals) during the course of hearing before him and on the basis of which the Ld.CIT(Appeals) upheld certain additions/disallowances and also deleted certain additions/disallowances. Further it is also a fact that the Ld.CIT(Appeals) did not confront the said cash flow statement to the Assessing Officer before passing his appellate order. Thus we accept the pleadings of the Ld. DR to restore the additions deleted by the Ld.CIT(Appeals) to the Assessing Officer for verification of the cash flow statement.
Issues Involved:
1. Deletion of addition on account of deemed income under section 2(22)(e) of the IT Act, 1961. 2. Deletion of addition on account of unexplained credit in the bank account. 3. Deletion of addition on account of seized documents. 4. Reference to the Special Auditor under section 142(2A). 5. Confirmation of addition of deemed dividend under section 2(22)(e). 6. Confirmation of addition on account of capital introduced. 7. Confirmation of addition on account of certain seized documents. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Deemed Income under Section 2(22)(e): The Revenue challenged the deletion of an addition of ?2,09,140 made by the Assessing Officer (AO) on account of deemed dividend under section 2(22)(e) of the IT Act, 1961. The AO found that the assessee, being a shareholder in various companies, had received loans from these companies. The assessee argued that these advances were out of commercial expediency and not loans. The CIT(A) deleted the addition, noting that the loans were to a charitable trust registered under section 12AA of the Act and the assessee was only a trustee without substantial interest. The Tribunal upheld the CIT(A)'s decision, stating that the requirement of the assessee having substantial interest in the concern was not met, and therefore, the advance could not be treated as deemed dividend. 2. Deletion of Addition on Account of Unexplained Credit in the Bank Account: The AO added ?3,75,000 to the income of the assessee, which was deposited in the Oriental Bank of Commerce, as unexplained. The assessee claimed it was from regular savings and withdrawals from other accounts, supported by a cash flow statement. The CIT(A) accepted the cash flow statement and deleted the addition. The Tribunal, noting that the cash flow statement was not presented to the AO, remanded the issue back to the AO for examination. 3. Deletion of Addition on Account of Seized Documents: The AO added ?30,00,000 based on a seized agreement to sell land, which the assessee claimed was an advance received and subsequently returned. The CIT(A) accepted the assessee's explanation based on additional evidence. The Tribunal remanded the issue back to the AO for examination, as the additional evidence was not presented to the AO initially. 4. Reference to the Special Auditor under Section 142(2A): The assessee contested the reference to a Special Auditor, arguing that the conditions for such a reference were not met, and the assessment was completed beyond the limitation period. The Tribunal dismissed this ground as it was not pressed before them. 5. Confirmation of Addition of Deemed Dividend under Section 2(22)(e): The assessee contested the confirmation of an addition of ?85,636 as deemed dividend. This ground was not pressed before the Tribunal and was dismissed. 6. Confirmation of Addition on Account of Capital Introduced: The AO added ?6,00,000 as unexplained capital introduced in M/s Heera Moti Agro Products. The assessee explained the source as withdrawals and LIC receipts, supported by a cash flow statement. The CIT(A) found the cash flow statement lacking and confirmed the addition. The Tribunal remanded the issue back to the AO for examination of the cash flow statement. 7. Confirmation of Addition on Account of Certain Seized Documents: The AO added ?43,000 based on seized documents reflecting cash receipts. The assessee explained it as regular withdrawals supported by a cash flow statement. The CIT(A) rejected this explanation and upheld the addition. The Tribunal remanded the issue back to the AO for examination of the cash flow statement. Conclusion: The Tribunal partly allowed the appeals of the Revenue and the assessee for statistical purposes, remanding several issues back to the AO for re-examination based on additional evidence. The appeals of the assessee in ITA Nos. 52 & 54/Chd/2014 were dismissed as withdrawn. The Tribunal emphasized the need for due process and examination of all evidence by the AO before making determinations.
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