2024 (3) TMI 1003 - AT - Income Tax

Deemed dividend u/s 2(22)(e) - amount received as part of salary/remuneration paid to the assessee - as per AO date of survey the said amount was not part of remuneration paid to assessee and no TDS was deducted before the date of survey for such salary as no documentary evidence etc. were produced before the AO for the aforesaid salary amount - double taxation on one receipt - as submitted Junior accountant of the company has made the wrong entries of advance remuneration to assessee in the account of short term loan account by mistake HELD THAT - The contention of the appellant is found to be correct with regard to salary received from WaghadInfraprojects Pvt. Ltd. as salary income as evident from the copy of ledger account of Shri Ashok Jain in the books of assessee company. The Ld. DR failed to rebut the contention of the appellant which were found to be factually correct on record. Therefore, the observation made by the AO that claim of the assessee is not supported by the documentary evidences is factually incorrect observation and cannot be acceptable. In view of that matter we hold that it is established by the appellant that the amount incorrectly shown as loan, was in fact an advance towards remuneration which is adjusted later on and TDS was also deducted by the company. Therefore, in our view, this amount cannot be treated as deemed dividend. As pertinent to mention here that in the present case, there is no loss to the revenue because even if this advance is treated as deemed dividend, then it would be reduced from the salary/remuneration amount being paid to the assessee as the assessee is paying tax at maximum marginal rate and he has not taken any deduction out of salary/remuneration received. It is settled law that there cannot be the double taxation on one receipt/income and therefore, this amount is once treated deemed dividend then it would be reduced from the salary income shown by the assessee in computation of income. In our view, the action of the learned AO was not justified and thus, the addition is rightly deleted by the Ld. CIT(A). Appeal filed by the Revenue is dismissed.

Summary

Issues Involved
1. Whether the amount of Rs. 1,82,00,000/- should be treated as deemed dividend under section 2(22)(e) of the Income Tax Act, 1961.
2. Whether the claim of the assessee that the amount was an advance against remuneration is substantiated by documentary evidence.

Summary of Judgment

Issue 1: Deemed Dividend under Section 2(22)(e)
The primary issue was whether the amount of Rs. 1,82,00,000/- received by the assessee from M/s Wagad Infraprojects Pvt. Ltd. should be treated as deemed dividend under section 2(22)(e) of the Income Tax Act, 1961. The Assessing Officer (AO) had added this amount to the assessee's income as deemed dividend, arguing that it was shown as a loan and advance in the company's books and not as remuneration.

The CIT(A) observed that the amount was actually an advance against remuneration and not a loan. The CIT(A) noted that the assessee had shown this amount as part of his salary income and TDS had been deducted. Therefore, the addition made by the AO was not sustainable and was deleted.

Issue 2: Substantiation by Documentary Evidence
The AO contended that the claim of the assessee was not supported by documentary evidence, such as TDS deduction before the date of the survey. However, the CIT(A) found that the books of accounts were incomplete at the time of the survey, and the junior accountant had mistakenly posted the advance remuneration in the short-term loan account. The CIT(A) verified the computation of income and found that the assessee had correctly shown the salary income, including the disputed amount.

The Tribunal upheld the CIT(A)'s decision, stating that the amount incorrectly shown as a loan was actually an advance towards remuneration, which was later adjusted, and TDS was also deducted. Thus, the amount could not be treated as deemed dividend.

Conclusion
The Tribunal concluded that there was no loss to the revenue as the assessee was paying tax at the maximum marginal rate and had not taken any deductions out of the salary income. Double taxation on the same receipt was not permissible. Therefore, the addition made by the AO was rightly deleted by the CIT(A).

The appeal filed by the Revenue was dismissed, and the order of the CIT(A) was sustained.

Order pronounced on 03.01.2024 at ITAT Amritsar Bench, Amritsar.