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TMI Blog2018 (12) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... The shareholder did not comment that this amount is not chargeable to tax in his hands, but has only stated that the above amount given by the lender to the appellant is only a business advance and therefore provisions of deemed dividend does not apply to the facts of the case. On careful analysis of the order of the learned Commissioner of income tax appeals, he has merely directed the learned assessing officer to add the said amount as deemed dividend under section 2 (22) (e) in the hands of the shareholder. No infirmity is found in the order of the learned Commissioner of income tax appeals in holding so after giving proper opportunity of hearing to the shareholder also Accordingly, for A Y 2006 – 07 we dismiss ground number 1 and all its sub grounds holding that the advances received by the appellant from the lender is liable to tax as deemed dividend in the hands of the shareholder as it is not a business advance. We also dismiss ground number 2 of the appeal, where the learned Commissioner of income tax appeals has correctly held that the aforesaid amount is chargeable to tax in the hands of the shareholder after giving proper opportunity to the shareholder and the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the qualifying shareholders cannot be determined. Viewed from this angle also the obvious interpretation of sec.2(22)(e) would be that the deemed dividends would be assessed in hands of the borrower which in this case is the assessee concern. 3. The assessee has raised the following grounds of appeal in ITA No. 3123/Del/2010 for the Assessment Year 2006-07:- 1. That the Commissioner of Income-tax (Appeals) ( CIT(A) ) erred on facts and in law in upholding the finding of the assessing officer that advances received by the appellant from M/s. Optic Electronic India Private Limited ( OEIPL ) were liable to tax as deemed dividend under Section 2(22)(e) of the Income-tax Act, 1961 ( the Act ). 1.1 That the CIT(A) erred on facts and in law in failing to appreciate that the provisions of Section 2(22)(e) of the Act were not attracted since the aforesaid amounts were received by the appellant as business advance towards construction and sale of property to OEIPL. 1.2 That the CIT(A) erred on facts and in law in leveling various false and baseless allegations against the appellant in sub-paras (i) to (xii) of para 9 of the impugned order , including that the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registrar of Companies. 3.2 That the CIT(A) erred on facts and in law in not considering the annual returns and statutory forms filed by the appellant with the Registrar of Companies on the mere technical ground that the appellant did not file application under Rule 46A of the Income-tax Rules, 1962 for admission of additional evidence, without appreciating that (a) the said evidences had been filed pursuant to enquiries made by the CIT(A), (b) the requirement of filing application under Rule 46A is a mere procedural requirement, (c) the CIT(A) made no adverse comments about the genuineness of the aforesaid additional evidences. Without prejudice 4. That the CIT(A) exceeded his jurisdiction in issuing directions to tax the aforesaid amounts in the hands of M/s Ambi Finance and Investment (P) Ltd and Mr Chetan Seth on the ground that the said parties were common shareholders of both the appellant and OEIPL. 4.1 That the CIT(A) erred on facts and in law in issuing direction with respect to M/s Ambi Finance and Investment (P) Ltd and Mr Chetan Seth, who were not assessees in appeal before the CIT(A). 4.2 That the CIT(A), in any case, erred on facts and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2006 07 was made of INR 126098087/ . The assessee preferred appeal before the learned Commissioner of income tax Appeals who found that out of the sum of INR 126098087/ outstanding in the two accounts of the appellant company with the lender company, a sum of INR 62587356 only has been received by the appellant during the year and the balance of INR 74519249/ is the brought forward balance in the above account since 1/4/2005. Hence opening balance is not taxable as not received during the year. It was further argued before him that that the above amount is not an unsecured loan but an advance given by the lender to the appellant for purchase, development and sale of office premises to lender. The learned CIT A, held that this is an afterthought and therefore the evidences produced by the assessee are not acceptable. He also gave his detailed reason for holding that above advance is an unsecured loan and not a business advance. Consequently, he held that the sum of INR 62587356 received by the appellant from the lender during assessment year 2006 07 represents unsecured loan and therefore it is covered under the provisions of section 2 (22) (e) of the act. He furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shareholders Sri Chetan Seth and Ambi finance and investment private limited proportionately in the ratio of the inter se shareholding in the payer company. Similarly, assessee as well as the revenue is aggrieved. 10. Let us 1st come to the appeal of the revenue, where the only grievances that the income should have been taxed in the hands of the assessee. The learned departmental representative vehemently supported the order of the learned assessing officer and stated that the above sum is required to be added in the hands of the assessee. 11. Learned authorised representative submitted that the issue is squarely covered in the favour of the assessee that deemed dividend is required to be taxed in the hands of the shareholder of the company and where the assessee is not a shareholder, it cannot be taxed in its hands. The assessee supported it with the decision of the honourable Delhi High Court in CIT vs. Ankitech private limited 340 ITR 14. Several other decisions of the honourable Delhi High Court, Karnataka High Court, Bombay High Court and Gujarat High Court were cited before us to support the above contentions. It was further stated that the honourable Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riment and prejudice to the case of Mr Chetan who was not a party to the present appeal before the learned Commissioner of income tax appeals. It was further stated that the findings on the merit returned by the CIT (A) may either be directed to be expunged/ deleted or it may be clarified that any findings returned by the learned Commissioner of income tax appeals on merit regarding the applicability of the provisions of deemed dividend would not in any manner prejudice the case of the shareholder. It was stated that either the finding of the learned Commissioner of income tax appeals on merit regarding the applicability of the provisions of section 2 (22) (E) of the act may be deleted/expunged and or it may be clarified that all the contentions would be open in the case of Mr Chetan , a shareholder, who is in appeal would be independently decided without in any manner being prejudiced by any adverse findings given by the learned Commissioner of income tax appeals in the present case. It was further prayed that in case ground number 1 is decided in the light of the aforesaid, the other ground raised would be rendered infructous. 16. The learned departmental representative veheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholder. No infirmity is found in the order of the learned Commissioner of income tax appeals in holding so after giving proper opportunity of hearing to the shareholder also. We also draw support from the decision of the honourable Delhi High Court dated 14/08/2018 in case of Mr Ramesh Chandra vs ACIT and Mr Sanjay Chandra vs ACIT in WPC 5684 and 5717 of 2017 where identical issue was decided and it was held that as per the express mandate of the 3rd explanation to section 153 (3) of the act unequivocally postulates that any adverse order has to be proceeded by adequate opportunity of hearing to the concerned party. In the case before us, the same opportunity has been given by the learned Commissioner of income tax appeals to the shareholder. Learned Commissioner of income tax appeals vide para number 9.2 of his order for assessment year 2006 07 has given the detailed finding giving 12 reasons that why the above amount is an unsecured loan but, not business advance given by the lender to the appellant company. Those reasons given by the learned CIT A, cannot be expunged or deleted from the order in case of the appellant as no infirmity is pointed out., They are also challen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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