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TMI Blog2023 (1) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax(A)-12 while passing the order u/s. 147/143(3) and u/s. 250 respectively erred in: i) Doing the exparte assessment which is unfair and assessee has been denied opportunity. ii) Confirming and Upholding the Proceedings initiated U/s 147 of the Act. iii) Not appreciating that AO has initiated the reopening proceedings on surmises and conjectures as AO was not certain, with recorded reasons, in whose hand the income has escaped assessment. iv) Upholding the addition made on account of Deemed Dividend of Rs. 9400000/-. v) Not appreciating that the loan was advanced to M/s. BTB Marketing (P) Ltd. for Business Purpose and interest was charged on the same, which has been allowed as a deduction. vi) Passing the Assessment Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arketing Pvt. Ltd., for an amount of Rs. 2,06,00,000/- on 19.08.2010 and collateral security for said loan was on the property situated at Nirvana Country South City-2, Phase II, Gurgaon and guarantors were BTB Marketing Pvt. Ltd., Mr. Rahul Singh, and Mrs. Bineeta Singh. He further stated that thereafter, loan was taken BTB Retail Pvt. Ltd. against the residential property of Shri Rahul Singh of Rs. 2,99,01,000/- on 10.02.2012 with the same collateral security. The learned counsel further explain that M/s. BTB Retail Pvt. Ltd. has shown income of Rs. 30,55,309/- from BTB Marketing Pvt. Ltd., which was reflected in the books of BTB Marketing Pvt. Ltd., also and rate of interest was 13% per annum on loan taken by BTB Marketing Pvt. Ltd., at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation by the assessee (iv) the amount has been routed in running account between the assessee and company therefore simple current account transaction between two entities i.e. assessee and company which are business commercial transaction cannot be regarded as deemed dividend income under section 2(22)(e) of the Act. (v) drawing our attention towards CBDT circular no. 19/2017 dated 12.06.2017, it was contended by the learned counsel of the assessee that the nature of commercial transaction would not fall within the ambit of word "advance" and section 2(22)(e) of the Act. (vi) the opening debth of BTB Marketing Pvt. Ltd., was of Rs. 2,02,28,592/- and opening reserves on 31.03.2012 were of Rs. 56,45,445/- and therefore no addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court relied on Delhi HC decision in Creating Dying and Printing P Ltd (318 IT 476) and Bombay HC decision in Nagindas M Kapadia (177 ITR 393). Therefore addition made by the A.O. and confirmed by the Ld. CIT(A) is not sustainable. Therefore the same may kindly be deleted. 8. On careful consideration of rival submissions first of all we may point out that before the authorities below it was contended that as per section 2(22)(e) of the Act, any loan or advance by closely held company to a shareholder having substantial interest in the company is deemed to be a dividend income subject to the certain condition. At this juncture we take respectfully cognizance of the judgement of Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee such decision is not to give gratuitous advance to its share holder but to protect the business interest of the company. 11. The view we propose to take finds support from the two decisions, one of the Bombay High Court and the other of the Delhi High Court relied upon by Mr. Khaitan as indicated earlier. 12. We, therefore, find that the authorities below erred in law in treating the advance given by the Company to the assessee by way of compensation to the assessee for keeping his property as mortgage on behalf of the company to reap the benefit of loan as deemed dividend within the meaning of Section 2(22) (e) of the Act. 13. We, consequently, set aside the order of the Tribunal below by directing the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is also not dispute that the company has paid market rate of interest by the assessee on the amount of advance and in the real sense the assessee did not drive any benefit from the funds of the company so as to attract rigour of the provision of section 2(22)(e) of the Act, it is clearly observed that the transaction of loan to which the assessee provided collateral security to M/s. BTB Marketing Pvt. Ltd., and BTB Retail Pvt. Ltd., to secure capital for expansion of company business, and the transaction was pure of commercial transaction under running account. These facts have not been controverted by the Authorities below or Ld. Sr. DR before us. Therefore, as per judgment of Hon'ble Calcutta High Court in the case Pradip Kumar Malho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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