9911796707
TMI Blog2013 (7) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... eal against the judgement of the Income Tax Appellate Tribunal dated 29.06.2012 raising following questions for our consideration:- [A] Whether the Appellate Tribunal has substantially erred on facts and in law in deleting the addition of Rs. 27,66,022/- made on account of deemed dividend, u/s. 2(22)(e) of the Act? [B] Whether the order of the Appellate Tribunal is not perverse in as much as it failed to take cognizance of the fact that at the time of search action, the assessee failed to disclose the existence of any trust and the assessee, in the statement recorded by DDIT(Inv), Baroda on 19.03.2009 even agreed to pay taxes on the deemed dividend u/s. 2 (22)(e) of the I.T.Act? 2. Though two separate questions have been framed, issue is single namely of the decision of the Assessing Officer to tax a certain income in the hands of the respondentassessee as a deemed dividend under Section 2 (22) (e) of the Income Tax Act, 1961 ( the Act for short). 3. For the assessment year 2006-07, the Assessing Officer inquired with the assessee regarding the assessee s share holding in a company namely M/s. Amod Stampings Pvt. Ltd. (hereinafter to be referred to as the said company ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king following observations: 11.1 In the light of the above legal discussion, we have examined the facts of the case. The area of dispute is the existence of a declaration of trust claimed to be executed on 6/11/2005. Undisputedly, search was conducted on 11/02/2009. Revenue s main objection is that on the date of search the said document was not recovered. However, the vehement contention of the assessee is that this documents has duly been executed on a stamp paper of Rs. 100/- on 16/11/2005. Further, it has also been strongly contested that the said document was duly notarized by a notary, who has authenticated its execution. Rather it was alleged that no attempt was made by the Revenue to negate the validity of the said document. Revenue Department could have examined the veracity of the said document by investigating the records of the stamp vendor, as also the said notary. A legal document which is executed in the presence of a duly authorised person, i.e. notary, an appointed legal entity by Government of India, has to be acknowledged and to be accepted as true and correct unless and until proved otherwise. From the side of the assessee, it was strongly contested that to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Settlors shall act as the First Trustees, unless and until other persons are appointed as the Trustees in accordance with the Declaration and the respective Settlor shall continue to hold the part of the Settled Assets in their name, but shall not have any beneficial interest in the said asset shall stand vested in the beneficiaries in accordance with this Declaration; 11.3 After the search, Dy. Commissioner of Investigation has also enquired about this issue and vide submission dated 22/04/2009, the assessee has furnished the complete details of the said declaration. In respect of few other queries, explanation of the assessee was that in the absence of any other transaction or earning or NIL income, there was no necessity to open a bank account. Further, about the registration of the shares, it was explained that as per section 153 of the Companies Act,1956, a company is not permitted to include the name of the Trust in the register because trusts are not required to be entered in the register. Due to this reason, the name which was earlier noted as shareholders remained the same, however through a Board meeting it was resolved to acknowledge the change in the vesting of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en. He submitted that the assessee had never conceded to surrender such income for tax. He drew our attention to the communication dated 19.03.2009 in this respect. 11. Section 2 (22)(e) of the Act makes a deeming provision for treating any payment by a company under certain circumstances as a dividend such provision reads as under: (22) dividend includes- (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereinafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay tax on such deemed dividend. The trust-deed was not registered or acted upon by creating a bank account or carrying on any activity by the trust. The Tribunal, on the other hand, was influenced by the other factors namely that the trust deed was created on a stamp paper in the year 2005 i.e. nearly four years before the date of the search; that the same was duly notarized. The department did not carry out any inquiries with the notary public to establish the non-genuineness of the trust deed. The Tribunal also took into account other facts, such as that the Companies Act would not permit transfer of the shares in the name of the trust; that there was no dividend declared by the Company and that the Trust, therefore, did not receive any income so as either to open a bank account or to file a return. Equally importantly the mere fact that the trust deed was not found at the time of search and that later on the assessee agreed to surrender tax on such dividend income did not convince the Tribunal. We have ourselves perused the said letter dated 19.03.2009. In such letter the assessee had stated that he had agreed to take such a stand to avoid any litigation. He however held a beli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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