2019 (5) TMI 96 - AT - Income Tax

Undisclosed interest income - difference between the interest income shown by assessee and reflected in Form No. 26AS - HELD THAT - Computation of interest as shown in Form 26AS by the bankers may be based on the difference in the accrual date taken by the banker as against the interest calculated by the assessee on FDR as on 31st March of each year. Therefore, it appears that there is a double taxation to the extent of ₹ 41,611/- which was offered to tax by the assessee in the return of income more than the computation of interest in the statement of affairs. Difference due to the computation by taking the different accrual dates will be subsume to the extent of extra interest income offered to tax by the assessee for the assessment years 2015-16 and 16-17. Accordingly, the addition made by the AO of ₹ 14,285/- is covered by the additional interest income offered by the assessee to tax for the assessment years 2015-16 and 16-17. Hence the same is deleted. Assessment u/s 153A - Addition of deemed dividend u/s 2(22)(e) - advance against salary payment - HELD THAT - In the absence of any incriminating material the addition made by the AO u/s 2(22)(e) is not sustainable in law. The same is liable to be deleted. Addition u/s 2(24)(iv) - assessee has purchased the villa from the company at lower price than the market price - Receipts of benefit/perquisite from the company - search and seizure operations - unrecorded consideration of 94.86% of the recorded consideration - CIT (A) deleted the addition by considering FMV and stamp duty value which is lower than price paid bu assessee - HELD THAT - AO without considering the fact of the rate declared in the case of the assessee has applied the ratio of recorded and unrecorded value in case of sale of other plots wherein the recorded consideration was very less, if it is taken in terms of per sq. ft. It is clear that for the plot D-12, the rate per sq. ft. as recorded is ₹ 650/- and as per seized document it is ₹ 1550/- whereas in the case of assessee the recorded consideration itself is ₹ 1922/- per sq. ft. Hence the ratio applied by the AO without considering the relevant facts is not justified Sale of the villa to the assessee is at a price more than the price determined by the sub registrar. This represents fair market value as recognized u/s 50C and 43CA. Further the assessee has also filed comparative case of villa sold to other parties at a price lower than to the assessee which proves that no extra benefit is given to the assessee - no illegality in the order of ld. CIT (A) in deleting the addition made by the AO under section 2(24)(iv) of the IT Act. Deemed dividend addition u/s 2(22)(e) - assessee received ₹ 53,20,000/- from M/s. Bhatia Corporation Pvt. Ltd. and the said money was utilized by the assessee for investment in the shares of the same company - HELD THAT - The law is clear that once the loan/advance has been given to the substantial shareholders, the same has to be treated as deemed dividend unless the same falls in exceptional circumstances as enumerated in the various case laws and CBDT circular. It may be mentioned that transaction made by the appellant does not fall in any way in to trade advance/commercial transactions described in CBDT in Circular No. 19/2017 dated 12 June 2017 and therefore, the said circular cannot help the appellant to take out the transaction from the ambit of the word advance in section 2(22)(e) - addition made by the AO by treating the advance taken by the assessee from the company as deemed dividend is confirmed. Paper transaction of exchanging the cheques - no actual movement of the fund - loan or advance as per provisions of section 2(22)(e) - HELD THAT - We find from the record that there is no actual movement of the fund from either party and, therefore, there is no payment of any amount either by the company to the assessee or by the assessee to the company but it was only a paper transaction of exchanging the cheques of equal amount by the parties. Therefore, to that extent, we do not find any error or illegality in the order of the CIT (A) when the actual movement of fund has not happened which can be termed as the loan or advance as per provisions of section 2(22)(e).

Summary

Issues Involved:

1. Addition of ?14,285/- on account of undisclosed interest income.
2. Addition of ?17,30,520/- under section 2(22)(e) of the IT Act.
3. Advance of ?23,30,520/- received from M/s. Bhatia Corporation Pvt. Ltd.
4. Addition of ?26,089/- on account of undisclosed interest income.
5. Addition of ?67,35,153/- under section 2(22)(e) of the IT Act.
6. Addition of ?85,37,400/- under section 2(24)(iv) of the IT Act.
7. Addition of ?3,42,002/- under section 2(22)(e) of the IT Act.
8. Addition of ?53,20,000/- under section 2(22)(e) of the IT Act.
9. Addition of ?1,02,00,000/- under section 2(22)(e) of the IT Act.
10. Addition of ?5,85,625/- under section 2(22)(e) of the IT Act.

Issue-wise Detailed Analysis:

1. Addition of ?14,285/- on account of undisclosed interest income:
The assessee argued that the difference in interest income was due to different computation methods by the banker and the assessee. The Tribunal noted that the interest income declared by the assessee for assessment years 2012-13 to 16-17 and the income shown in the statement of affairs were almost the same. The addition of ?14,285/- was covered by the additional interest income offered by the assessee for the assessment years 2015-16 and 16-17. Hence, the addition was deleted.

2. Addition of ?17,30,520/- under section 2(22)(e) of the IT Act:
The AO considered the differential amount received from M/s. Bhatia Corporation Pvt. Ltd. as deemed dividend. The Tribunal held that since the assessment was not pending on the date of search and no incriminating material was found, the addition was not sustainable. The addition was deleted.

3. Advance of ?23,30,520/- received from M/s. Bhatia Corporation Pvt. Ltd.:
The AO treated the advance as deemed dividend under section 2(22)(e). The Tribunal noted that no incriminating material was found during the search, and the transactions were already recorded in the books. Thus, the addition was not sustainable and was deleted.

4. Addition of ?26,089/- on account of undisclosed interest income:
Similar to the issue for the assessment year 2012-13, the Tribunal found that the addition was covered by the excess interest income offered by the assessee for the assessment years 2015-16 and 16-17. The addition was deleted.

5. Addition of ?67,35,153/- under section 2(22)(e) of the IT Act:
The AO made the addition based on the differential amount received from M/s. Bhatia Corporation Pvt. Ltd. The Tribunal held that since the assessment was not pending on the date of search and no incriminating material was found, the addition was not sustainable. The addition was deleted.

6. Addition of ?85,37,400/- under section 2(24)(iv) of the IT Act:
The AO applied a ratio of unrecorded consideration found in seized material to determine the benefit received by the assessee. The Tribunal found that the declared purchase consideration was more than the consideration indicated in the seized documents. The addition was deleted.

7. Addition of ?3,42,002/- under section 2(22)(e) of the IT Act:
The AO treated the excess amount received by the assessee as deemed dividend. The Tribunal held that the addition was not sustainable as it was made without any incriminating material found during the search. The addition was deleted.

8. Addition of ?53,20,000/- under section 2(22)(e) of the IT Act:
The AO made the addition based on the amount received by the assessee from M/s. Bhatia Corporation Pvt. Ltd. The Tribunal held that the amount was given for business consideration and commercial expediency, and not for personal use. The addition was deleted.

9. Addition of ?1,02,00,000/- under section 2(22)(e) of the IT Act:
The Tribunal found that the amount was only a contra entry in the bank accounts of the assessee and the company, with no actual movement of funds. The addition was deleted.

10. Addition of ?5,85,625/- under section 2(22)(e) of the IT Act:
The Tribunal noted that the AO had already given credit for the salary of ?6,00,000/- and the balance amount was treated as loan or advance. The addition was upheld.