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TMI Blog2022 (9) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... s wrongly treated advance against business transaction as deemed dividend U/s 2(22)(e). 3. Without prejudice to above, The Learned CIT(A) has made the 100% addition of advance against business transaction made by Jaya Jewellery Pvt. Ltd to Alex Jewellery Pvt. Ltd in the hands of appellant as deemed dividend U/s 2(22)(e). however appellant is holding only 50% shareholding in Jaya Jewellery Pvt. Ltd. Moreover Alex Jewellery (P) Ltd is not the share holder of Jaya Jewellery P. Ltd. 4. The Learned CIT(A) has erred in disallowing Rs. 79,24,051/- as cost of improvement of Shop B1 at Mayur Tower. However same was offered by appellant as undisclosed income before income tax settlement commission for AY 2006-07 during A.Y. 2011-12. 5. The Learned CIT(A) has erred in making disallowance of interest of Rs.1,79,996/- U/s 14A of I.T. Act, 1961. The Learned CIT(A) fail to appreciate that appellant has own sufficient interest free fund to make investment in tax free securities. 6. The Learned CIT(A) has erred in setting off the business loss of the year against capital gains instead of income from other sources. 7. The Learned CITIA) erred in charging interest U/s 234A, 234B, 234C of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the assessee in response to the various queries till the date of passing of the order, held that since assessee is shareholder in M/s Jaya Jewellery Private Limited and M/s Alex Jewellery Private Limited, therefore, provisions of section 2(22)(e) are attracted in the present case and accordingly, the payments received by way of advance or loan, as stated above, are chargeable to tax as "deemed dividend‟ under the aforesaid section. Further, since the accumulative profits in the form of "Reserves and Surplus‟ in assessee's balance sheet was only to the tune of Rs. 1,02,25,291, the addition under section 2(22)(e) of the Act was restricted to the aforesaid amount. 6. In appeal, learned CIT(A) vide impugned order dated 31/10/2019 dismissed the appeal filed by the assessee on this issue, by observing as under: "5.3 The contentions of the assessee have been duly considered. It is noted that the assessee has not made any submissions with regard to the amount treated as deemed dividend u/s. 2(22)(e) in respect of the loan given by M/s. Jaya Jewellery P. Ltd. to M/s. Alex Jewellery P. Ltd. of Rs. 91,17,824/-. Thus, it is presumed that the assessee is acceptable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited in order to drive home the point that the advances given by M/s Jaya Jewellery Private Limited were adjusted against the supplies of imitation jewellery by Sri Jaya Jewellery and M/s Alex Jewellery Private Limited. The learned AR also submitted that M/s Jaya Jewellery Private Limited had also given advances to other suppliers apart from its sister concerns during the relevant assessment year as well as in subsequent assessment years. 8. On the other hand, learned Departmental Representative ("learned DR‟) vehemently relied upon the orders passed by the lower authorities. 9. We have considered the rival submissions and perused the material available on record. As noted above, assessee is having wholesale and retail trading business of imitation jewellery. Assessee is proprietor of Sri Jaya Jewellery, which has its shops/showrooms in various cities of India. Further, M/s Jaya Jewellery Private Limited is a private limited company registered in Mumbai doing trading business of imitation and fashion jewellery. The assessee is one of the director and major shareholder, i.e. having 50% of shareholding, in the aforesaid company. The assessee is also a shareholder, having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll for or examine any other documents/detail as may be necessary for complete adjudication of this issue. As a result, grounds no. 1 - 3 raised in assessee's appeal are allowed for statistical purpose. 10. The issue arising in ground no. 4, raised in assessee's appeal, is pertaining to disallowance of Rs. 79,24,051, as cost of improvement of shop owned by the assessee. 11. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee has shown long term capital loss of Rs. 33,84,000, on sale of Shop B1, Mayur Tower. While working out the aforesaid capital loss, the assessee has, inter-alia, claimed deduction on account of income declared before the Income Tax Settlement Commission amounting to Rs. 60,00,000. Accordingly, in order to verify the allowability of deduction, the assessee was asked to provide the details of additional income declared during the course of proceedings before Income Tax Settlement Commission. The AO vide order passed under section 143(3) of the Act, in absence of any documentary evidence to support the claim that the disclosure made in the preceding years is on account of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ground no.4 of the appeal is dismissed." 13. Being aggrieved, the assessee is in appeal before us. 14. We have considered the submissions of both the sides and perused the material available on record. As per the assessee, an amount of Rs. 60,00,000 was offered for the year relevant to assessment year 2006 - 07 before the Income Tax Settlement Commission on account of unaccounted investment made in shop No. B1 at Mayur Tower, which was sold during the year under consideration for amount of Rs. 2,05,56,000. Therefore, while computing the capital gain, deduction on account of indexed cost of improvement of Rs. 79,24,051, was claimed, in respect of the said offered amount of Rs. 60,00,000, made to the Income Tax Settlement Commission. In absence of any details to demonstrate that the said disclosure of Rs. 60,00,000, before Income Tax Settlement Commission relates to the capital asset sold during the year, the lower authorities denied the relief to the assessee. Even during the hearing before us, reference was only made to the copy of order dated 22/12/2010, passed by the Income Tax Settlement Commission under section 245D(4) of the Act, wherein the total income of the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at certain expenditure must have been incurred towards making and managing the aforesaid investment and therefore, the same is not allowable under section 14A of the Act. Consequently, the AO made disallowance of Rs. 1,73,996, under section 14A of the Act read with Rule 8D of the Income Tax Rules. 17. In appeal before the learned CIT(A) assessee submitted that it has sufficient own interest free funds available at its disposal to make the said exempt investments. The learned CIT(A) vide impugned order held that in absence of balance sheet of the assessee in its individual capacity, contention that he has sufficient own interest free funds cannot be verified. Accordingly, learned CIT(A) dismissed the appeal filed by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 18. We have considered the submissions of both the sides and perused the material available on record. It was submitted by learned AR that the AO considered Rs. 25,66,752, as investment in shares, while assessee's investment in shares is only Rs. 5,66,752. We find from the balance sheet of the assessee in his individual capacity for the year ending 31/03/2014, forming part of the paper bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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