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TMI Blog2023 (6) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(Appeals). The same is hereby affirmed. Remaining deletion of addition, CIT(Appeals) has given a finding on fact that in some cases there was an unfinished flat as per sale-deed and purchaser paid extra amount for its finishing and in some cases the amounts in the sale-deed and copy of account tally where the finished flat is being sold. Revenue has not brought any material to rebut this finding of the learned CIT(Appeals). The same is hereby affirmed. Thus, ground no. 3 of the Revenue s appeal is dismissed. Addition being the advance for the purchase of plots - AO made addition on the basis that as per IAS-11 the assessee was required to declare profits on actual sale - HELD THAT:- AO ought to have made further efforts to verify whether the payments received by the assessee are genuine. Non response from the customers would not be a definite conclusion that money was not an advance - assessee had discharged the preliminary onus by filing the addresses of the customers. Therefore, in the light of the binding precedence the impugned addition deserves to be deleted. Hence, ground no. 1 of the assessee s appeal is allowed. Deemed dividend u/s 2(22) - Treating loan to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,00,000/- as income of the assessee. Apart from that the Assessing Officer also made addition of agriculture income of Rs. 28,250/-. 3. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals), who after considering the submissions, partly allowed the appeal. Therefore the learned CIT(Appeals) confirmed the addition in respect of dividend income, difference in interest income of Rs. 4,00,000/-. Further, in respect of unsecured loans the learned CIT(Appeals) partly gave relief to the assessee. Therefore by deleted the opening balance of Rs. 1,40,35,000/- and out of the remaining addition of Rs. 50,48,800/- the learned CIT(Appeals) confirmed the addition at Rs. 13,98,800/-. The learned CIT(Appeals) also deleted the addition of Rs. 68,00,000/-. Aggrieved against this order both the assessee and the Revenue are in appeal. 4. First we take up the Revenue s appeal in ITA no. 1172/Del/2016. The Revenue has raised following grounds of appeal: 1. Whether in the facts and circumstances of the case, the Id. Commissioner of Income tax (Appeals) has erred in law and fact in deleting the addition of Rs. 68,00,000/- made by the A.O. by treating the share ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny satisfactory explanation regarding source of payment of Rs. 68,00,000/- towards share application money made by Shri Vijay Pal Yadav. 6. On the contrary, learned counsel for the assessee submitted that the learned CIT(Appeals) has examined the issue thoroughly and has given a finding that it was admitted fact in the assessment order confirmation, bank statement and ITR of the Managing Director from whom the share capital had been received was duly filed. It was further pointed out that there was no cash deposit in the bank account of the share holder, which was source of capital investment. 7. We have heard the rival contentions and perused the material available on record. We find that the learned CIT(Appeals) has given a finding on fact that the assessee has duly filed the requisite evidences and there was no cash deposit before making investment. Hence, in the light of the precedents relied upon by the learned CIT(Appeals), we do not see any good reason to interfere in the finding of the learned CIT(Appeals) and the same is affirmed. Ground nos. 1 2 of the Revenue s appeal are dismissed. 8. Ground no. 3 is against deleting the addition of Rs. 1,40,35,000/- and Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount that could have been examined was the fresh receipt of 2,50,000/- received from one customer Shri Satya Prakash Gupta the details of his form for registration of plot the copy of the receipt showing this cheque no. 221581 dated 01.08.2010 drawn on SBI Ganga Nagar Meerut has been examined along with copy of bank account from where this amount was deposited for the purchase of plot. The AO completely misread the facts and never called for or examined the specific evidence. The amount is fully explainable and no adverse inference can be drawn above the fresh receipt of 2,50,000/-. The AO also did not examine the aspect of repayment 3,75,000/-. In view of the above discussion the net loans to the extent out of opening balance cannot be considered and added in this year. 2.5 lacs received during the year is fully explained and also cannot be added to the income of the assessee. Now coming to balance amount of 50,48,800/- which was in effect Customer at credit and reflected specific payments for purchase of property which have also been added by the AO as unexplained credit u/s 68. At page no. 172 of the assessment folder there is complete party wise details of the Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Renu Rastogi 35,000 Notice received unserved from postal authorities. 06 Mrs. Shashi 4,40,000 No reply received till date. 07 Mr. V.K. Choudhary 3,91,800 No reply received till date. 08 M/s Golden Printers 40,000 No reply received till date. 09 M/s Shri Ram Building Materials 1,17,000 Notice received unserved from postal authorities. Remarks-Left 10 Mr. Naved Ahmed 1,50,000 Notice received unserved from postal authorities. Remarks- Incomplete address 11 Dr. Vikas Saini Brajveer Singh 9,50,000 No reply received till date. 12 Smt. Usha Kiran 9,00,000 Reply Received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter was examined by calling for the assessment folder on 11.12.2015. 5.4 In the submission dated 23.11.2015 the AR stated are as under: Serial no. 3 to 10 (Rs. 13,98,800/-) are amounts received from 8 persons as advance for the purchase of plots at Rajpura project. These amounts have been adjusted in the next years. They are not at the places from where they gave advance to the assessee company. The assessee has applied to the banker to find out the correct address from the banker of the depositor. The bank has been closed due the Dewali holidays and it will take more time as the matter is old and the data is transferred to the service branch. The total amount is Rs. 13,98,800/-. The assessee may be given one more opportunity as it will take about a month to trace these 8 persons. 5.5 From the perusal of the above facts it is evident that more than sufficient opportunity was provided to the appellant to bring forth all possible evidence so as to establish the bona fide of these persons who have given customer credit. The matter was remanded in 6th October, 2015 the AO sent his remand report on 27th October, 2015 and the AR filed his rejoinder on 23.11.2015. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 220 Taxman 0141]. The Head Note of the said judgment is as under:- Accounts- Sundry creditors - addition - validity - assessee engaged in manufacturing of fabric and sale had shown sundry creditors - notice sent by AO to creditors were received back - AO made addition- CIT (A) deleted addition - Tribunal confirmed deletion - held, only few creditors had not sent confirmation but fact remained that they had received payment through cheque which were dully reflected in books of accounts of assessee - AO had not verified same in books of recipients and made addition by adopting short cut method - creditworthiness and genuineness was proved beyond doubt and observes by CIT(A) and confirmed by tribunal - C1T(A) has co-terminus powers with power of A.O. - Appellate authority has all powers which original authority has, subject to condition / restriction, if any, prescribed by law as per ratio laid down in case of Jute corporation of India Ltd. vs. CIT, 187 ITR 688, 693 (SC) in present case concurrent findings were given by both by appellate authorities and in absence of any adverse material, same was confirmed . Further with regard to other three parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. Remarks left Balance payment for extra work as the deed shows flat unfinished. 02 Dr. Vandana Sharma 21,01,000 18,01,000 3,00,000 Notice received unserved from postal authorities. Remarks left. -do- 03 Miss Taru Garg 30,000 - - Notice received unserved from postal authorities. Remarks left. Opening Balance does not pertains to this year 04 Sh. Basant Kumar Rastogi 24,06,000 18,06,000 4,00,000 Notice received unserved from postal authorities. Remarks left. Balance payment for extra work as the deed shows flat unfinished. 05 Mr. Neeraj Kumar Dureja 10,00,000 - - Notice received unserved from postal authorities. Remarks left. Opening Balance does not pertains to this year 06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Total 30,80,000 Clearly the AO has on his own volition has made certain inquiry which has been clarified by the AR in his response. It is evident that in some cases there was an unfinished flat as per the sale deed and the purchaser paid extra amount for its finishing and in some cases the amounts in the sale deed and copy of account tally where the finished flat is being sold. In some cases the amount is only an opening balance which has no bearing on this year. In the case of Guru Nath placed at serial no. 10 it is noticed from the examination of assessment record that while the registry is of 26 lacs for the unfinished flat and 6 lacs have been paid by cheque by the purchaser for finishing the flat. The confirmation received by the AO is of 26 lacs only in view of these facts the AO ought to have inquired further from the creditor as the additional payment of 6 lacs is through the banking channel. In this regard the case of CIT vs. Jagdish Prasad Tewari [220 Taxman 0141], All is very relevant. Thus out of customer credit of 50,48,800/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX, APPEALS , MEERUT ERRED IN LAW BY TREATING LOAN OF RS.7,00,000/- TO A NON SHAREHOLDER AS DEEMED DIVIDEND. THE LOAN FROM PRASANDI BIOTECH PARK PVT LTD OF RS.7,00,000/- WAS A ROUTINE LOAN AND THE ASSESSEE COMPANY IS NOT A SHAREHOLDER, THUS THE ADDITION SO CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) NEEDS TO BE DELETED. 3. THE ASSESSEE RESERVES ALL RIGHTS TO ADD/MODIFY ANY OF THE GROUNDS OF APPEAL FOR THE SAKE OF JUSTICE AND REQUESTS FOR THE ACCEPTANCE OF RETURNED INCOME AS DECLARED BY THE ASSESSEE. 17. Ground no. 1 is against sustaining the addition of Rs. 13,98,000/- being the advance for the purchase of plots. Learned counsel for the assessee submitted that the Assessing Officer made addition on the basis that as per IAS-11 the assessee was required to declare profits on actual sale. He contended that IAS-11 is not applicable in the case of the assessee. He contended that the authorities below have grossly erred in making the addition. He submitted that the authorities below failed to appreciate the fact that no effort was made by the Assessing Officer or by the learned CIT(Appeals) to ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 42.69% of assessee company. In the course of assessment proceedings of Prasandi Biotech Park (P) Ltd. for A.Y. 2011-12, a sister concern of the assessee it was seen that the assessee had received a loan of Rs. 7.0 lakhs from the said company. The shareholders of Prasandi Biotech Park (P) Ltd. include Sh. Vijay Pal Yadav who holds 74.70% of its shares and also holds 42.69% of the share capital of the assessee Prasandi Builders Pvt. Ltd. Prasandi Biotech Park (P) Ltd also had adequate accumulated profits during AY 11-12 and therefore the assessee was provided opportunity vide order sheet noting dated 2.5/2/2014 to explain why the same should not be added back as deemed dividend u/s 2(22) (e). 6.1 In response the assessee filed written submission dated 14/03/2014 before the AO during assessment proceedings which is as under:- The assessee is in receipt of your letter dated 25th of February, 2014 received on 12th of March, 2014 whereby your honor want to tax an advance given by the Company Messrs Prasandi Biotech Park Pvt Ltd, Meerut to the company being Rs. 7.0 Lack on two different dates. The company Messrs Prasandi Builders Pvt Ltd is not a shareholder a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a right to participate in profits) holding not less than ten per cent 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 bene ft, of any such shareholder, to die extent to which the company in either case possesses accumulated profits 2. Therefore, the assessee's argument that M/s Prasandi Builders is not a shareholder does not hold any ground since section 2(22)(e) covers all payments made not only to a shareholder but also to any concern in which he has a substantial interest. In the instant case Sh. Vijay Pal Yadav, 74.70% shareholder in Prasandi Biotech Park (P) Ltd has a 42.69% share in Prasandi Builders (P) Ltd. Prasandi Biotech Park (P) Ltd. also had adequate accumulated profits during AY 2011-12 and therefore loans/ advances paid by Prasandi Biotech Park (P) Ltd to the assessee namely Prasandi Builders(P) Ltd fall squarely within the ambit of S2(22)(e). 3. Another objection raised by the assessee is that S2(22)(e) prohibits the taxation of any advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance on Allahabad High Court judgment in the case of Shashi Pal Agarwal v. CIT (2015) 370 ITR 720 w herein it has been held that Section 2(22) of the Income-tax Act, 1961 - Deemed dividend (Loans and advances to shareholders/Money lending business) - Assessment year 2007-08 - Assessee, holding more than 10 per cent of equity capital of two private limited companies, received loans and advances from said companies - Whether since lending of money was not part of business of lending companies and there was no organized course of activity involving dealing with anyone else except assessee, amount of loans and advances received by assessee would be treated as deemed dividend under section 2(22) - Held, yes [para 9] [In favour of revenue] The above case law is in favour of revenue and not in favour of assessee.-S Further on the issue of law is very clear. In the instant case Assessee Company had received a sum of Rs. 7 Lacs from Parsandi Biotech Private Limited as loan. Money Lending is not the business of Parsandi Biotech private Limited. Mr. Vi jay Pal Yadav is the common shareholder and also the controlling director in both the companies having substantial interest as provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares'. This expression used in section 2(22) (e), both in the 1961 Act and in the amended provisions with effect from April 1, 1988, only qualifies the word 'shareholder' and does not in any way alter the position that the shareholder has to be a registered shareholder. These provisions also do not substitute the aforesaid requirement to a requirement of merely holding a beneficial interest in the shares without being a registered holder of shares. The expression 'being' is a present participle. A participle is a word which is partly a verb and partly an adjective. In section 2(22) (e), the present participle 'being' is used to describe the noun 'shareholder7 like an adjective. The expression 'being a person who is the beneficial owner of shares' is, therefore, a further requirement before a shareholder can be said to fall within the parameters of section 2(22) (e) of the Act. In the 1961 Act, section 2(22)(e) imposes a further condition that the shareholder has also to be beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 It is clear from the above that no shareholder individually holds more than 10 per cent, shares. The following observations of the Commissioner of Income tax (Appeals) are to be taken note of : It is not disputed that the appellant holds only 1.8 per cent, shares in M/s. Teletube Electronics Ltd., the question is whether the appellant on the strength of shares of M/s. Teletube Electronics Ltd. held by M/s. CEA Consultants P. Ltd. can be said to be the beneficial owner of 10 per cent, of the voting power. It is not in dispute those shares of Teletube Electronics Ltd. held by the appellant and M/s. CEA Consultants P. Ltd. are registered in their respective names. It in turn implies that both the appellant and M/s. CEA Consultants P. Ltd. are independently exercising their voting rights. 13. Under the existing provisions of section 2(22) (e), payment made by way of advance or loan to a shareholder having 'substantial interest' in the company was treated as deemed dividend. The shareholder having substantial interest as per the provision of clause (32) of section 2 of the Act, was the one carrying not less than 20 per cent, voting power. In other words, e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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