2020 (8) TMI 800 - AT - Income Tax

Deemed dividend u/s 2(22)(e) - loan advanced by the company - HELD THAT - Ultimate beneficiary of a part of loan advanced by M/s. Maplewood Trading Pvt. Ltd. is either the assessee himself or a concern wherein the assessee has substantial interest. Therefore, to that extent, the decision of Commissioner (Appeals) deserves to be upheld. As regards the contention of that in Miramac Properties Pvt. Ltd. the assessee is having 50% shareholding, hence, only 50% of the amount advanced as loan should be treated as deemed dividend, we are unable to accept the same. In the facts of the present case it has been established beyond doubt that assessee has been benefitted by the loan advanced. As regards the contention of AR that an amount being securities premium reserve cannot form part of accumulated profit of M/s. Maplewood Trading Pvt. Ltd., to attract the provisions of section 2(22)(e) of the Act as well as the additional evidence filed to support such contention, we decline to accept the aforesaid plea of the assessee as well as the additional evidence at this stage considering the fact that the assessee had never raised this issue at any stage before the Departmental Authorities and it requires investigation into fresh facts which were never part of record. The decisions relied upon by learned Authorised Representative, on careful examination, were found to be inapplicable to the facts of the present appeal, hence, there is no need to discuss them in detail.

Summary

Issues Involved:
1. Addition made/deleted on account of deemed dividend under section 2(22)(e) of the Income Tax Act, 1961.

Detailed Analysis:

1. Addition Made/Deleted on Account of Deemed Dividend under Section 2(22)(e) of the Income Tax Act, 1961:

Facts and Background:
The assessee, an individual deriving income from salary and interest, filed a return declaring total income of ?21,51,450 for the assessment year 2014-15. The Assessing Officer (AO) completed the assessment under section 144 of the Act, based on available records, due to non-compliance by the assessee with statutory notices. The AO found deposits amounting to ?11,36,60,019 in joint bank accounts with the assessee's wife, originating from M/s. Maplewood Trading Pvt. Ltd., where the assessee is a director and majority shareholder. The AO treated this amount as deemed dividend under section 2(22)(e) of the Act and added it to the assessee's income.

First Appellate Authority's Findings:
The Commissioner of Income Tax (Appeals) [CIT(A)] found that ?53,10,000 directly received by the assessee should be treated as deemed dividend under section 2(22)(e). The CIT(A) also noted that ?4,05,00,000 was paid to Vinotak Investments and ?4,50,71,119 to Miramac Properties Pvt. Ltd. The CIT(A) directed the AO to verify if the assessee had substantial interest in these concerns to determine if these amounts should also be treated as deemed dividend.

Assessee's Arguments:
The assessee argued that the joint bank accounts were primarily controlled by his wife, and the amounts deposited were loans to his wife, not for his exclusive benefit. He admitted to utilizing ?53,10,000 but denied any connection with the remaining amounts, particularly ?4,05,00,000 paid to Vinotak Investments and ?4,50,71,119 paid to Miramac Properties Pvt. Ltd. The assessee contended that only 50% of the amount paid to Miramac Properties Pvt. Ltd. should be treated as deemed dividend, corresponding to his shareholding. Additionally, the assessee argued that the securities premium reserve of ?14,46,00,000 should not be included in accumulated profits for deemed dividend calculation.

Revenue's Arguments:
The Revenue argued that the assessee had substantial control over the company and the bank accounts, fulfilling the conditions of section 2(22)(e). Therefore, the entire loan amount should be treated as deemed dividend, irrespective of the subsequent utilization of funds.

Tribunal's Findings:
The tribunal concluded that the assessee had effective control over the company and the bank accounts, making the provisions of section 2(22)(e) applicable. The tribunal upheld the CIT(A)'s decision to treat ?53,10,000 as deemed dividend. It also agreed with the CIT(A)'s direction to verify the assessee's interest in Vinotak Investments and Miramac Properties Pvt. Ltd. The AO's subsequent verification revealed no shareholding in Vinotak Investments, excluding ?4,05,00,000 from deemed dividend, but confirmed 50% shareholding in Miramac Properties Pvt. Ltd., treating ?4,50,71,119 as deemed dividend.

Additional Evidence and Arguments:
The tribunal declined to accept the assessee's additional evidence and arguments regarding the exclusion of securities premium reserve from accumulated profits, as these issues were not raised earlier and required fresh investigation.

Conclusion:
The tribunal dismissed both appeals, upholding the CIT(A)'s decision that only the amounts directly benefiting the assessee or concerns where he had substantial interest should be treated as deemed dividend under section 2(22)(e) of the Act.

Final Order:
Both appeals were dismissed, and the decision was pronounced in the open court on 18.03.2020.