2018 (1) TMI 1079 - HC - Income Tax

Addition u/s 69B - assessee enjoying cash credit facility from Dena Bank against hypothecation of stock - assessee had shown excess stock to the bank - Tribunal deleted the addition - Held that - There is nothing on record to show that the bank officials have physically verified stock as on 31.3.2010 and were of the view that on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of accounts and the statement furnished to the banking authorities. More so, when the stock statement given to the bank reflects inflated value of the stock otherwise there being no difference in the quantity. Commissioner (Appeals) as well as the Tribunal have recorded a concurrent finding of fact that there was no difference in the quantity of stock as reflected in the books of account and in the statement submitted to the bank, it is not possible to state that the conclusion arrived at by the Tribunal suffers from any legal infirmity. - Decided in favour of assessee Deemed dividend addition u/s 2(22)(e) - ITAT allowed the claim - Held that - In the present case, the assessee has not made any payment by way of advance or loan to a shareholder, but on the contrary, has received a loan from Akik Tiles Pvt. Ltd. and Marbolite Granito India Ltd. Therefore, if at all the provisions of section 2(22)(e) of the Act were applicable, it would be applicable to the companies who have made such payments, provided the assessee had the requisite share holding. In the present case, the assessee is a recipient of such amounts and hence, the Tribunal was wholly justified in holding that there was no question of invoking section 2(22)(e) of the Act.- Decided in favour of assessee

Summary

Issues Involved:
1. Challenge to the order of the Income Tax Appellate Tribunal under section 260A of the Income Tax Act, 1961 regarding deletion of additions under sections 69B and 2(22)(e) of the Act.

Analysis:
1. The appellant-revenue challenged the Tribunal's order regarding the addition of ?1,19,23,142 under section 69B of the Act and ?97,56,376. The appellant contended that the stock shown to the bank was inflated, leading to the suppression of closing stock. The Commissioner (Appeals) and the Tribunal found no difference in the quantity of stock as per the books of accounts and the statement submitted to the bank. They held that the inflated valuation was for availing credit facilities and no addition could be made based on this difference. The Tribunal's decision was upheld as there was no legal infirmity in their conclusion.

2. The Assessing Officer found that the assessee received loans from certain companies and applied section 2(22)(e) of the Act, treating the loans as deemed dividends. The Commissioner (Appeals) ruled in favor of the assessee, stating that section 2(22)(e) did not apply. The Tribunal also upheld this decision. The appellant argued that section 2(22)(e) should apply as the assessee had substantial interest in the lending companies. However, the Tribunal justified its decision by stating that the provision applies to companies making payments, not receiving them. Therefore, the Tribunal's ruling was deemed appropriate, and the appeal was dismissed.

3. The Tribunal's order was upheld as it was found to be legally sound and did not give rise to any substantial question of law warranting interference. The appeal was summarily dismissed, affirming the Tribunal's decision on both issues raised by the appellant.

By analyzing the issues raised by the appellant regarding the additions under sections 69B and 2(22)(e) of the Income Tax Act, 1961, the judgment provides a detailed account of the facts, arguments, and decisions made at various stages of the legal proceedings. The Tribunal's findings were upheld based on the lack of legal infirmity in their conclusions, leading to the dismissal of the appeal.