TMI Blog2024 (10) TMI 1565X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that the provisions of Section 2(22)(e) of the Act only apply to actual cash payments, not journal entries, HELD THAT:- The subsequent hearings revealed that the addition of deemed dividend was based on the advances from MSPL, which were presented as mere journal entries, suggesting that no actual loan had been received. During these proceedings before us, it emerged that the explanation concerning the journal entry had already been presented to PCIT in earlier proceedings u/s 263 as noted that the AO had not adequately examined the issue in the original assessment, rendering the order erroneous and prejudicial to revenue interests. Consequently, the AO was directed to revisit the matter. We observe that the assessee had also reiterat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-5, (in short Ld. CIT(A) ), Ahmedabad vide order dated 15.07.2019 passed for A.Y. 2013-14. 2. The Assessee has taken the following grounds of appeal:- 1.1 The order passed u/s 250 passed on 15-7-2019 for A.Y.2013-14 by CIT(A)- 5, A'bad upholding the addition of Rs. 25,93,812/- as deemed dividend u/s. 2(22)(e) and Rs. 20,000/- towards house property income is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant. 2.1 The Ld. CIT(A) has grievously erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of March 31, 2013. This situation, as per the Assessing Officer fell under the purview of Section 2(22)(e) of the Income Tax Act, which defines deemed dividends. The AO held that any payment made by a company, particularly one not substantially held by the public, to a substantial shareholder or a concern in which that shareholder has a significant interest, should be treated as deemed dividend to the extent of the company's accumulated profits. The Assessing Officer held that assessee, a substantial shareholder in Private Ltd company namely Mahavir Submersibles Pvt. Ltd. (MSPL a company in which public are not substantially interested) has received the loan of Rs, 65,22,947/- Therefore, the payment to the extent of accumulated profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmersible P. Ltd. (MSPL), which qualified as deemed dividends due to the assessee's substantial shareholding in the assessee company. The Counsel for the assessee submitted before us that the funds purportedly advanced by MSPL did not originate from the company itself. Instead, the directors and shareholders of MSPL, including the assessee, had taken a bank loan to purchase property, with the loan disbursed in the names of the individual Directors rather than the company. To support this argument, the Counsel for the assessee submitted copies of the ledger accounts and bank loan documents, which indicated that the financial transactions were only recorded in MSPL s books as journal entries. The counsel for the assessee requested the Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar that the AO and CIT(A) had not verified or considered the appellant's explanation adequately during their assessments, especially when the assessee has all throughout contended that the advance was recorded as a journal entry. However, this aspect / submission was omitted to be considered by the AO / CIT(A). 6. Accordingly, in view of the above, since the contention of the assessee has all throughout been that no sum was received by the assessee, but a mere journal entry was passed and therefore there is no occasion to invoke the provisions of section 2(22)(e) of the Act has not been examined or verified by the Revenue Authorities, we are of the considered view that the order passed by Ld. CIT(Appeals) is liable to be set aside in ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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