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TMI Blog2023 (7) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... owards addition made for loans and advances by invoking deeming provisions of section 2(22)(e) of the Act. Therefore, we direct the AO to delete penalty levied u/s 271(1)(c) - Appeal filed by the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer u/s 271(1)(c) of the IT Act for not reporting such income while filing return of income. Hence, the appellant prays for relief. 4. For these and other grounds that may be urged at the time of appeal hearing, the appellant prays for relief. 4. Ground No.1 and 4 are general in nature which do not require specific adjudication. 5. Ground No.2 and 3 are related to confirmation of penalty levied by the AO u/s 271(1)(c) of Rs. 6,18,000/- @100% of tax sought on the amount confirmed by the Ld.CIT(A) of Rs. 19,99,999/-. The assessee filed paper book before the Tribunal, containing written submissions and various judicial pronouncements / case laws relied upon by the assessee. With regard to ground No.2 and 3, the assessee submitted that the provisions of section 2(22)(e) of the Income Tax Act speaks about Deemed Dividend. That means the dividend which is not actually paid by the company or received by the Director, but is assumed to be dividend for the purpose of taxation under Income Tax Act. Section 271(1)(c) of the Income Tax Act, 1961 prescribes two faults or omissions which exposes the assessee to concealment penalty. These are concealment of particulars of income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heard both the parties, perused the material placed on record and gone through the orders of the lower authorities. In the instant case on hand, according to AO, the assessee has failed to offer any explanation for not disclosing loans and advances received from a company in which he was a managing director and concluded that the assessee has furnished inaccurate particulars of income, leading to concealment of income and levied penalty u/s 271(1)(c) of Rs. 6,18,000/-. The assessee contended that deeming fiction provided u/s 2(22)(e) for the purpose of making addition towards loans and advances borrowed from a company in the hands of the director cannot be extended to penalty provisions provided u/s 271(1)(c) to hold that non disclosure of deeming dividends int he return of income would amount to furnishing of inaccurate particulars of income. The assessee relied on various judicial precedents of the coordinate benches of the Tribunal (supra) where similar issue was adjudicated by the Hon'ble Benches of the Tribunal. For the sake of clarity and convenience, we extract relevant part of the order of the Mumbai Tribunal in the case of Shri P.James Vs. ACIT-12(1), Mumbai in I.T.A.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accurate particulars of income. We find force in the arguments of the assessee for the reason that deeming fiction provided u/s 2(22)(e) for making addition towards loans and advances from a closely held company in the hands of the directors cannot be considered 'as furnishing of inaccurate particulars of income, despite the assessee has disclosed borrowings from the company in its balance-sheet. We further observe that the AO has made addition for the first time in the financial year under consideration. Therefore, we are of the considered view that the explanation offered by the assessee that no penalty can be levied towards addition made by invoking deeming provisions for levying penalty appears to be bonafide. We further observe that whether the provisions of 2(22)(e) is applicable or not to a particular loan and advance from a company in the hands of the director is a debatable issue and there is a possibility of two views. The AO has 'taken a view to bring it to tax loans and advances under the provisions of section 2(22)(e) of the Income-tax Act, 1961 Such deeming fiction provided 'u/s 2(22)(e) cannot be considered as furnishing of inaccurate particulars or incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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