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TMI Blog2023 (3) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied. 3. The Learned CIT(A) ought to have appreciated that in the absence of any advances/loans or funding by the Company to the Appellant demarcating a financial relationship with respect to the purchase of the property, the provisions of Section 2(22)(e) of the Act would be inapplicable. 4. The Learned CIT(A) failed to appreciate that the transaction involving purchase of property by the Appellant and Mrs.V. Padma was effected by her out of her own personal funds thereby being a 'personal transaction' and that the Appellant did not derive any individual benefit from any financial 'commercial transaction' with the Company warranting invocation of the provisions of Section 2(22)(e) of the Act. 5. The Learned CIT(A)'s order is bad in law inasmuch as it is in stark contravention of the letter and spirit of Section 2(22)(e) of the Act as well as the CBDT Circular No. 19/2017 dated 12.06.2017. 6. For the aforesaid grounds and for other grounds to be raised at the time of hearing, the order of CIT(A)may be set aside and justice be rendered. 3. The brief facts of the case are that the assessee had filed return of income for the AY 2015-16 on 14.08.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expediency for the company in the transaction of purchase of property for its Director and main shareholder. 5. The confirmation letters given by P.Vaidyanathan (HUF) and P.Vaidyanathan (SHUF) also says that the sum of Rs.1,5741,600/- and Rs.42,87,200 and Rs. were PROVIDED by these HUFs. 6. Even assuming but not accepting the assessee's contentions that the amounts advanced by the company were repaid, still it has to be treated as deemed dividend. Hon'ble Supreme Court in the case of P Sarada (229 ITR 444) has held that the loan or advance taken from the company may have been ultimately repaid or adjusted but that will not alter the fact that the assessee in the eye of law had received dividend from the company during the relevant accounting period. The same view was earlier expressed by the Hon'ble Supreme Court in the case of Tarulata Shyam in 108 ITR 345, wherein the Apex Court held that deemed dividend is applicable even in cases where there is no balance outstanding on the year end. 7. The accumulated profit as on 31.03.201.5 in the books of the company M/s.Integrated Er1terprises India Private Ltd., is Rs. 29.62 crore excluding the general reserve of Rs.25 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted only as an ESCROW agent. 6.3 Ground No.3. Section 2 (22) (e) is applicable only when a company gives advances to or benefit a shareholder having more than 10 percent stake and the recipient is a shareholder. This is purely a personal property purchase transaction of a normal person out of their own personal funds and using Integrated as a facilitator to make timely payment of instalments to the builder. Adjudication: For the reasons stated for Ground No.2, this ground is dismissed. 6.4 Ground No 4. The AO had developed a preconceived mind of applying section 2(22)(e) even by 11th November once she came to know on the basis of information given by the appellant that the name appearing in the property document is a substantial shareholder of an unlisted company and therefore did not apply her mind to go through the full facts and explanations given and also the circumstances where the provisions of section 2(22)(e) should be applied. This can be easily verified by the frequency and tone of letters or mails sent on 11th, 16th, 22nd and 27th December. Even the details called for in the last mail dated 27th were submitted on 29th December, i.e., within two days even though no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that whatever amount paid by the company has been subsequently re-paid by family members through Smt.V.Padma's Savings Bank A/c maintained with M/s.CUBL bearing A/c No.001001000030654 and said repayment has been made either on the same day or within a short period i.e. less than one month that too exact amount paid by the company without leaving any balance. Therefore, the AO & the Ld.CIT(A) is completely erred in invoking provisions of Sec.2(22)(e) of the Act. 6. The Ld.DR, on the other hand, supporting the order of the Ld.CIT(A), submitted that there is no dispute with regard to the fact that M/s.IEIL has paid amount to M/s.Chaitanya Builders on behalf of the assessee. Although, the amount paid by the company has been subsequently re-paid by the assessee or his family members, but facts remain that the moment loan or advance taken from the company, provisions of Sec.2(22)(e) of the Act, does come into operation, even if such payment has been ultimately repaid or adjusted as held by the Hon'ble Supreme Court in the case of P.Sarada v. CIT reported in [1997] 229 ITR 444 (SC). The AO & the Ld.CIT(A) after considering relevant facts has rightly concluded that provisions of Sec.2(22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tever amount paid by M/s.IEIL to M/s.Chaitanya Builders has been subsequently re-paid by Smt.V.Padma, mother of the assessee from her bank account either on the same day or on or before 30 days from the date of payment by the company without there being any outstanding balance in the name of the assessee in the books of accounts of the company. For example, M/s.IEIL has paid a sum of Rs.26,27,664/- on 27.06.2014 to M/s.Chaitanya Builders. The family members including Smt.V.Padma mother of the assessee has re-paid a sum of Rs.26,27,664/- to M/s.IEIL on 01.07.2014. Similarly, M/s.IEIL has paid a sum of Rs.56,81,184/- on 09.10.2014 to M/s.Chaitanya Builders and said amount has been re-paid by Smt.V.Padma from her Savings bank a/c No.30654 maintained with M/s.CUBL on 30.10.2014. Likewise, each amount paid by M/s.IEIL has been subsequently re-paid by Smt.V.Padma and other family members either on the same day or within one month from the date of payment. From the above, it is very clear that company has paid to M/s.Chaitanya Builders on behalf of the assessee for purchase of property as a stop gap arrangement and the same has been subsequently re-paid by the assessee and his mother out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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