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TMI Blog2017 (5) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of those evidences and allowed a reasonable opportunity to the Assessing Officer to examine those evidences, and thus Ld. CIT-A has complied the procedure laid down in Rule 46A of Income Tax Rules. We do not find any violation of Rule 46A of the Income Tax Rules in admitting those evidences Addition of deemed dividend - substantial shareholding in M/s. ‘Zenith’ as on the date of loan transaction - Held that:- In the remand proceeding, the Assessing Officer himself has verified the fact of assessee not fulfilling the required shareholdings in M/s ‘Zenith’ as on the date of loan transaction. In such circumstances, when the Assessing Officer himself has verified the fact that assessee was not satisfying the condition of holding substantial shareholding in M/s ‘Zenith’, which is one of the prerequisite for invoking section 2(22)(e) of the Act, and then only ld. CIT(A) has allowed relief to the assessee, filing the appeal on the same issue is not justified on the part of the Revenue. Addition of deemed dividend - Whether date of loan transaction M/s ‘Mikado’ i.e the company who gave loan was not having accumulated profit and thus one of the condition of section 2(22)(e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings inspite of ample opportunities given by the A.O. to assessee and also that the A.O. in his remanded report had vehemently opposed the admission of additional evidence at the stage appeals? (iii) Whether on the facts and circumstances of the case, the Id. CIT (A) erred in deleting the addition made u/s 2(22)(e)of the I.T. Act only on the basis of remand report sent by the A.O. and by not giving his reasoning for deleting the said additions especially when the A.O. in his remand report has opposed the relief sought by the assessee? (iv) Whether on the facts and circumstances of the case, the Id. CIT(A) erred in deleting the addition of ₹ 16.71 lacs wherein payment was made by M/s Mangalam to M/s Matrial Buildcon Pvt. Ltd., and that both the companies in which the assessee was a substantial shareholder were under scrutiny before the same A.O. and yet the assessee failed to produced the additional evidence which was subsequently produced during the appellate proceedings? (v) Whether on the facts and circumstances of the case, the Id. CIT(A) erred deleting the additions made u/s 2(22) (e) of the I.T. Act when all the basic conditions required for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Basant Bansal 34% 74% Roop Bansal 33% 12% (iii) The learned AO observed that Sh. Basant Bansal and Sh. Roop Bansal each had more than 10% shares in M/s. Manglam , which has given loan and each had more than 20% shares of M/s Martial , which had received the advance. (iv) M/s Manglam , which had extended the advance, had accumulated profit amounting to ₹ 2,28,38,532/-as on 31/03/2008. (v) According to the learned AO, all the conditions of deemed dividend u/s 2(22)(e) of the Act were satisfied in the transaction and, thus, he proposed as why advance to the extent of accumulated profit i.e. ₹ 2,28,38,532/- might not be considered as deemed dividend in the hands of Sh. Basant Bansal and Sh. Roop Bansal (i.e. the assessee) in equal proportion. (vi) Before the learned AO, the assessee contended that the accumulative profit of ₹ 2,28,38,532/- included an amount of ₹ 1,96,00,000/- as share premium account and which was not available for any distribution being in the nature of share capital reserve. Further, it was contended that M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven the loan or advance and each had more than 20% shares of M/s Martial , which had received the advance. (iv) In view of above, the ld. AO was of the opinion that amount of ₹ 80,46,100/-paid by M/s B B to M/s. Martial was amounted to deemed dividend in the hands of Sh. Basant Bansal and Sh. Roop Bansal( i.e. the assessee) in equal proportion in terms of 2(22)(e) of the Act. (v) The assessee submitted that that accumulated profit in the hands of M/s B B was consisted of surplus arising out of sale of Rural agriculture land, which was equivalent to a capital receipt not liable to tax and thus cannot be considered for distribution as deemed dividend. Further it was contended that M/s Martial was having consolidation cum development agreement with M/s B B , which was cancelled later on and thus the money was received-back under the normal business transaction. (vi) The ld. AO rejected the contention that surplus out of sale of agricultural land could not be considered for accumulated profit for the purpose of section 2(22)(e) of the Act on the ground that there was no such statutory bar under the law. Regarding another contention of the assessee, the Ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that the assessee failed to file any joint-venture agreement between the two companies and accordingly held the amount of ₹ 11 crore advanced by M/s. Marigold to M/s Nova as deemed dividend in the hands of the assessee in terms of section 2(22)(e) of the Act. 5. In support of the contention, that the transaction in question between the parties was business and commercial transaction, the assessee submitted following documents as additional evidences before the ld. Commissioner of Income-tax (Appeals) [in short the CIT(A)]: a) An Agreement to sale between M/s. Maglam Multiplex Pvt. Ltd. ( Manglam ) and M/s. Martial Buildcon Pvt. Ltd. ( Martial) dated 04.02.2008. b) an MOU between M/s. Marigold Merchandise Pvt. ( Marigold ) and M/s. Nova Realtor Pvt. Ltd. ( Nova ) dated 26.03.2008. c) an MOU between M/s. B B Mercantile Pvt. Ltd. ( B B ) and M/s. Martila Buildcon Pvt. Ltd. ( Martial ) dated 25.01.2008. d) a balance sheet as on 31.03.2008 of M/s. Nova Realtors Pvt. Ltd. ( Nova ) 6. The Ld. CIT(A) forwarded above documents to the ld. AO calling for a remand report. In the remand r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer in the remand proceeding did not carry out any enquiry in respect of the agreements or MOUs submitted by the assessee. He also did not examine performance or part performance by the parties in furtherance of the contract as stated in the agreement/memorandum of understanding, responsibility of the party who terminated the agreement and compensation to other party etc. issues. She submitted that even the genuineness of the agreements or memorandum of understanding was not examined by the Assessing Officer. She contended that, if the Assessing Officer had not carried out any enquiries on said agreement/memorandum of understanding, the Ld. CIT(A) was required to be examine the additional evidences for justification of business connection between the parties. The Ld. CIT(A) could not close his eyes and accepted whatever was forwarded by the Assessing Officer in the remand report. The Ld. CIT(DR) submitted that in view of no enquiries done in respect of additional evidences, the matter might be restored to the file of the Assessing Officer for deciding afresh the issue of deemed dividend and business connection between the parties. 9. On the other hand, the Ld. counsel of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f loan and/or advance as envisaged in section 2(22)(e) and was given purely in pursuance to a commercial transaction, and considering the legal position on the issue under consideration, the amount given is held to be not covered as declined dividend. Therefore, the addition of: ₹ 16,71,302/- is hereby deleted. 8.8 Second addition of ₹ 40,23,050/- u/s 2(22)(e) was made by the A.O. in the case of Sh. Roop Bansal and Sh. Basant Bansal on the similar reasoning rejecting the claim of the appellant that the said transaction was not a loan hut was a business transaction. However, after examination of additional evidence being MOU between M/s. B B and M/s. Martial by the present A.O., the present AO has not made any adverse comment on this claim of the appellant in the remand report. AO has also mentioned that even in the case of M/s. Martial which was under scrutiny, no adverse inference was drawn by the then AO in regard to these payments. 8.9 Moreover, the similar issue has also been discussed in case of appeal of assessee s brother Sri Basant Bansal, wherein half of the amount was added in the income as deemed dividend. Considering the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase of 100 kanais of land at agreed consideration of ₹ 40 crores against which a sum of ₹ 8 crore was given as intiai payment by m/s Misty to M/s Martial and thus it was not an Ladvance within the meaning of section 2(22)9e) but was initial payment for purchase of land. Similarly the A.O. has also not made any adverse comments, after considering the additional evidence in the form of agreement, on the argument of the A.R. that M/s Mangaiam made initial payment of ₹ 8.4 crore for purchase of 100 kanais of land for total consideration of ₹ 42 crores as per the agreement filed (wherein as ₹ 33.42 lakhs was the accumulated profit of M/s Mangalam, ₹ 16.71 lakhs was added in the hands of both the assessees. 4.11 Similarly after examination of additional evidence being an MOU between M/s B.B. and M/s Martial by the the A.O. has not made any adverse comments on the argument of A. R. regarding payment being furtherance . of business transaction as per the MOU between the two A.O. has also mentioned that the case Martial was under scrutiny and no adverse inference was drawn by the then A.O. in regard to these payments. 4.12 Considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence being MOU between M/s. B B and M/s. Martial by the present A.O., the present AO has not made any adverse comment in the remand report on the claim of the appellant that the transaction is business transaction and same is not the loan of the nature to be treated as deemed dividend covered u/s 2(22)(e) of the IT Act. AO has also mentioned that even in the case of M/s. Martial which was under scrutiny, no adverse inference was drawn by the then AO in regard to these payments. 8.13 Since the present AO has not given any adverse comment on the claim of the appellant in his remand report and has effectively accepted the claim/ argument of the appellant on merits (only objecting to admission of additional evidence, which has been suitably dealt by me in the present order), it leads to straight away deletion of the addition made by the then AO without further discussion on the issue. It is just to add that MOU between M/s. Nova and M/s. Marigold shows that M/s. Nova had applied for a licence for development of an IT Park before the Director, Town and Country Planning, Government of Haryana. For this purpose, M/s. Nova approached M/s. Marigold with a proposal seeking initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has upheld the finding of the Ld. CIT-A, that the transactions are commercial in nature and cannot be considered as loan or advances for the purpose of 2(22)(e) of the Act. Thus, respectfully, following the finding of the Tribunal in the case of Sh. Basant Bansal (supra), we uphold the finding of the Ld. CIT-A that transaction in question between M/s Merry Gold and M/s Nova was a commercial transaction, not hit by the provisions of section 2(22)(e) of the Act. Accordingly, ground No. 1, 3, 4 and 5 of the appeal are dismissed. 11. As regarding the ground No. 2, challenging the admission of additional evidences under Rule 46A of the Income Tax Rules, 1962 is concerned, we find that the Ld. CIT(A) forwarded all the additional evidences for comments of the Assessing Officer, who objected admission of the additional evidences and given comments on the merit also. As far as admission of additional evidences is concerned the Ld. CIT-A after having noted legal position in view of the decision cited in the impugned order, decided the issue as under: 11. Coming back to the objection of the Assessing Officer to the admission of additional evidence, it is submitted that the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n both counts, it does not behold on revenue now to take a technical plea in this behalf more so when Manish Buildwell case was already reported before the submission of remand report by AO. Ld. CIT(A)s reliance on Delhi High Court judgments on the cases of Text Hundred India and Virgin securities (supra) is well placed and reinforces our view. Consequently revenue ground on admission of additional evidence is dismissed. 11.2 In our opinion, the Ld. CIT(A) has admitted the additional evidence after examining the circumstances under which those evidences could not be filed before the Assessing Officer. The Ld. CIT-A has recorded the reasons in writing for admission of those evidences and allowed a reasonable opportunity to the Assessing Officer to examine those evidences, and thus Ld. CIT-A has complied the procedure laid down in Rule 46A of Income Tax Rules. We do not find any violation of Rule 46A of the Income Tax Rules in admitting those evidences and accordingly we dismiss ground No. 2 of the appeal . 12. Ground No. 6 of the appeal being general in nature we are not required to adjudicate upon. 13. In the result, appeal of the Revenue is dismissed. ITA No. 567 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) in view of examination of the documents/evidences held that the requisite condition of the assessee being a shareholder in the recipient company as required in terms of section 2(22) (e) of the Act, was not met and accordingly deleted the addition. (b) Addition of ₹ 1,10,00,000/- as deemed dividend; (i) the ld. AO observed that M/s Marigold had paid ₹ 1.10 crores to M/s Mikado Realtors Private Limited (in short Mikado ) in April 2008, which was repaid back later on. (ii) According to the learned ld. AO, the assessee satisfied the requisite shareholdings in both the companies and M/s Marigold was having accumulated profit more than the amount advanced to M/s Mikado . (iii) According to the ld. AO the amount advanced to the assessee M/s. Mikado satisfied all the condition of deemed dividend is in the hands of the assessee. (iv) Before the ld. AO Assessing Officer, the assessee contended that Ms. Marigold and M/s. Mikado were having a business relationship and money in question was received under normal business transactions. It was also contended that the accumulated profit of M/s Marigold included share premium amount and exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of the year and thus one of the the condition of section 2(22)(e) of the Act of having accumulated profit was not satisfied. The Ld. AO in the remand report made no adverse comment in respect of the factual position of the accumulated loss. (v) The Ld. CIT(A) after considering the remand report deleted the addition. 15. In the grounds no. 1, 3 4, the Revenue has agitated the relief allowed by the Ld. CIT(A) against the three additions made for deemed dividend by the Assessing Officer. 15.1 Before us, the Ld. CIT(DR) relying on the order of the Assessing Officer submitted that arguments made by her in the assessment year 2008-09, applied to the year under consideration also. 15.2 The Ld. counsel of the assessee, on the other hand, relied on the finding of the Ld. CIT-A and accordingly prayed for upholding the same. 15.3 We have heard the rival submissions and perused the relevant material on record. As far as addition of deemed dividend of ₹ 20.25 crores is concerned, the Ld. CIT-A has allowed the relief on the ground that the assessee was not holding substantial shareholding in M/s. Zenith as on the date of loan transaction and, therefore, one of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een M/s Mikado and M/s Marigold and did not make any adverse comment on the genuineness of the agreement. 16.1 In our opinion, the Ld. CIT-A has not committed any error in accepting the observation of the ld. AO, while deleting the addition. We find that in the case of Sh Basant Bansal (supra) for assessment year 2008-09, the Tribunal has upheld deleting of deemed dividend in similar circumstances, accordingly, respectfully following the said decision of the Tribunal, we uphold the finding of the Ld. CIT-A in the instant case, in deleting the addition of deemed dividend of ₹ 1.10 crore. 17. The third addition of deemed dividend, which has been deleted by the Ld. CIT-A is of ₹ 3,62,774/-. The Ld. CIT-A deleted the addition on the ground that on the date of loan transaction M/s Mikado i.e the company who gave loan was not having accumulated profit and thus one of the condition of section 2(22)(e) of the Act was not satisfied. 17.1 We find that this fact of M/s Mikado not having accumulated profit at the time of giving loan to M/s Orange has been duly verified by the Assessing Officer in remand proceedings and the Ld. CIT(A) has allowed relief relying on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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