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TMI Blog2019 (4) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... 51 lacs for the purposes of business and therefore, to that extent, the same would not be considered and reduced for the purposes of determining the deemed dividend in hands of the assessee. Further, there is a payment of ₹ 18.50 lacs made on 18.01.2010 which has been returned on the very next day on 19.01.2010 and the same appears to be a current account transaction and not to be considered for determining the deemed dividend. There is nothing on record in terms of remaining advances either for business purposes or any current account transaction. The fact that such advances have been repaid in the subsequent financial year will not provide any relaxation from the rigours of section 2(22)(e). Therefore, remaining advances to the tune of ₹ 32.45 lacs will be considered for determining deemed dividend. The AO has determined the accumulated profits at ₹ 28.35 lacs of M/s Raj Auto Wheels Private Limited which has not been disputed by the assessee. The lower of the two i.e, ₹ 28.35 lacs has thus been rightly brought to tax as deemed dividend u/s 2(22)(e) - Decided against assessee Cash deposit in his bank account maintained with the Bank of Baroda, Ajmer - HE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITA No. 614/JP/2018 - - - Dated:- 2-4-2019 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Mahendra Gargieya (Adv.) For the Revenue : Shri K C Meena (Add.CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Ajmer dated 06.02.2018 for AY 2010-11. 2. Briefly stated, the facts of case are that the assessee is a majority shareholder holding 80% equity and one of the Directors of M/s Raj Auto Wheels Pvt. Ltd., Ajmer. During the course of assessment proceedings of M/s Raj Auto Wheels Pvt. Ltd., Ajmer for AY 2010-11, the ACIT, Circle-1, Ajmer found that the said company has given an advance of ₹ 1.02 crores to the assessee during F.Y 2009-10. On receipt of the said information, the Assessing Officer recorded the reasons for reopening the assessment in the case of the assessee and after seeking necessary approval, notice u/s 148 was issued to the assessee. Subsequently, the assessee filed his objections which were disposed off by the Assessing Officer and thereafter considering the submission of the assessee, the Assessing Officer made an addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not clear. It was further submitted that even assuming that subjected amount were in the nature of loan, the net amount given was ₹ 51 lakhs only and not ₹ 1.02 crores as wrongly stated in the reasons recorded by the AO. It was accordingly submitted that the fact simpliciter that there was receipt of the amount by the assessee director from the company, does not ipso fact, convert the same into the receipt of any particular nature, what to talk of in the nature of loan or advance, without there being any other supporting facts or attributes so as to deem such receipts as dividend. It was further submitted that even the Assessing Officer was of the view that the matter require further examination, now, what is the nature of this payment whether it is Trade/Loan advances or not it can be analysed and established during the assessment proceedings where ample opportunity of being heard will be given to the assessee. In this regard, our reference was drawn to Page No. 5, Para No. 3 of the assessment order. It was submitted that the initiation of proceedings u/s 147 in view of this fact is meant/initiated with a view to make more and deeper enquiries to cover the subjecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 particular in profits) holding not less than ten percent 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 (hereafter 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 accumulated profits. In view of the provisions of section 2(22)(e) of the I.T. Act, advances of ₹ 1.02 Crores given by the company to the assessee Shri Govind Swaroop Garg is deemed dividend in his hands and the same is not offered for tax in his return of income. Therefore I have reason to believe that income of ₹ 1.02 Crores escaped assessment. Therefore it is a fit case for issue of notice u/s 148 of the Income-tax Act, 1961. 7. The reasons so recorded thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance which carries with it an obligation of repayment. Trade advance which is in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provision of section 2(22)(e) of the Act. In the facts of the present case, it was submitted that ₹ 51 lakhs was given to the assessee director for the purchase of land for construction of showroom and service station thereon. In support thereof, the assessee submitted a copy of the agreement dated 04.07.2009 before lower authorities and the said agreement affirmed the fact of giving advance of ₹ 32,45,000/- through two cheques dated 03.07.2009 and 24.07.2009 respectively. It was submitted that the agreement was duly signed by the witnesses and duly notarized. As far as contents of the agreement, the same are not in dispute. It was further submitted that the Assessing Officer has wrongly alleged that there are two different agreements and such confusion has arisen only because of the date put on the Non Judicial Stamp Paper, which was not legible but factually, there was only one agreement and the date of agreement was clearly mentioned thereon being 14.07.2009. It was further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1 crore within 6 months from the date of agreement i.e. by February, 2010. b) Due to the above, initially it was consistently argued by the assessee that the amount received was a trade advance and hence sec. 2(22)(e) is not at all applicable in his case. (see objection letter filed on 12/08/2010). c) On being specifically asked to furnish the proof of receipt of ₹ 1 crore as per the registered agreement, assessee did not say anything. This amount was expected to have received by the assessee in the month of February, 2010 as per the so called agreement. d) When assessee was confronted with the glaring discrepancies noticed in the copy of agreements furnished to the department on two different occasions i.e. on 12/3/2014 and on 26/8/2014, he again kept silent. The contradictions and discrepancies already discussed in the foregoing paras in this regard undoubtedly establishes on record that assessee has intentionally furnished fabricated records to mislead the department and tried his level best to evade the payment of legitimate tax as per the Act. e) On being pointed out the above contradictions, assessee came forward with another argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 02/01/2015, assessee came up with a formula for calculation of deemed dividend in. assessee's hands and worked out the same at ₹ 17,82,120/- as against the reserves and surplus shown in the balance sheet of the company as on 31.03.2010 at ₹ 28,35,265/-. This is also proves to be totally wrong and unacceptable. Section 2(22)(e) is unambiguous and states ..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 accumulated profits. i) So far as the accumulated profit is concerned, assessee has again disputed the same by arguing that it will further be reduced by difference of depreciation as per Company Law and as per LT law. Again this argument was also made by the assessee without apprising the facts of his case from the records of the company's balance sheet. As per the balance sheet of M/s Raj Auto Wheels (P) Ltd, the reserves and surplus as on 31.3.2009 were shown at ₹ 14,48,485/-. The profit of the company as on 31.3.2010 after claiming depreciation of ₹ 30,23,022/-as per I.T. Act was dedared at ₹ 13,86,022/-. Thus the accumulated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear will not provide any relaxation from the rigours of section 2(22)(e) of the Act. Therefore, remaining advances to the tune of ₹ 32.45 lacs will be considered for determining deemed dividend. The AO has determined the accumulated profits at ₹ 28.35 lacs of M/s Raj Auto Wheels Private Limited which has not been disputed by the assessee. The lower of the two i.e, ₹ 28.35 lacs has thus been rightly brought to tax as deemed dividend u/s 2(22)(e) of the Act. In the result, the ground no. 3 of assessee s appeal is dismissed. 13. In Ground No. 4, the assessee has challenged the addition of ₹ 7,57,000/- made by the AO on account of cash deposit in his bank account maintained with the Bank of Baroda, Ajmer. 14. Briefly stated, the facts of case are that during the course of assessment proceedings, the Assessing Officer observed that the assessee has deposited ₹ 8,67,000 in his bank account maintained with Bank of Baroda, Ajmer. The assessee submitted that the cash deposits were out of cash withdrawals made from his proprietary concern M/s Govind Garg Co and out of his capital balance with the firm. He further submitted that there was also cash lying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the assessee has contended that he was never asked to produce the cash book at first place. In view of the contradictory stand taken by both the parties, we believe that it would be just and fair that the assessee is given one more opportunity to produce the cash book of his proprietary concern M/s Govind Garg Co. before the AO. The matter is accordingly set-aside to the file of the AO to examine the same afresh. In the result, the ground is allowed for statistical purposes. 18. In Ground No. 5, the assessee has challenged the addition of ₹ 1,80,592/- on account of rental income. Briefly stated, the facts of case are that during the course of assessment proceedings, the AO observed that the assessee was in receipt of rental income of ₹ 2,57,988/- from Bank of Baroda on which TDS has also made by the Bank of Baroda u/s 194I of the Act. The assessee was asked to explain as to why he has not included the rental income from Bank of Baroda in his return of income. In response, the assessee submitted that rental income was received in the account of Govind Garg HUF since long back. However, in absence of TDS certificate, the same has not been claimed. The submission s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule of consistency, the same cannot be brought to tax in the hands of the assessee. 20. We have heard the rival contentions and perused the material available on record. It has been contended before us that the rent has been paid in HUF bank account however, by mistake, the TDS has been deducted by the Bank by quoting assessee s PAN and it has wrongly been reflected in assessee s Form 26AS. It has further been contended that HUF has shown the rental income in its return of income and the same is the position in earlier and subsequent years which is consistently been followed and accepted by the Department. In our view, mere reflection of a transaction in assessee s Form 26AS cannot be made a sole basis for bringing certain transaction to tax especially where the assessee is contending that such transaction doesn t belong to him and but belong to the HUF. However, it is for the assessee to demonstrate that such transaction doesn t belong to him especially where HUF is a related entity and the assessee has access to the records of the HUF and is being controlled by the assessee. We accordingly believe that where the HUF is the right full owner of the subject rental income and it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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