9911796707
TMI Blog2025 (4) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.2024. 3. The Ld. CIT(A) has erred in law as well as on facts in sustaining an addition of Rs. 44,62,938/- under section 2(22)(e) of the Income Tax Act. 4. The Appellant craves leave to take additional grounds of appeal before or at the time of hearing of the appeal and/or modify any of the above grounds." 3. Succinctly, the fact as culled out from the records is that a search & seizure operation under section 132(1) of the Act was carried out on 07.09.2017 at the various premises of 'Resonance Group, Kota' to which the assessee belongs. Several persons / premises were covered under that search and in that process cash, jewellery and other documents found and seized from some persons residence and business premises and the case of assessee was also covered by that search proceeding. Consequent to that search action, the case of the assessee was centralized to Central Circle-Kota by the Principal. Commissioner of Income-tax, Kota vide his order dated 12.10.2017. 3.1 Assessee is an individual and derives income from business or profession and other sources. As the case was covered by search operation notice u/s. 153A of the Act was issued to the assessee on 05.07.2018 requiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the group companies having similar nature of business, hence provisions of section 2(22)(e) were not applicable. Ld. AO considered the reply of the assessee but found not satisfactory and thereby he quoted the provision of section 2(22)(e) of the Act and stated that since the assessee is director in Millenium Technocrat Colonisers Pvt Ltd holding 25.93% of shares and proprietor in M/s Nav Bharat Nirman Co. and partner in Joint venture M/s Vinarma Entreprises and Nav Bharat Nirman Co., the company in which the assessee is director has provided loans to the joint venture and proprietor concern in which he is partner and proprietor himself respectively. These transaction were in violation of provision of section 2(22)(e) of the Act and to support that view ld. AO relied on the decision of CIT vs Mukundray K Shah [2007] 160 Taxman 276 (SC) considered that the loan provided by the company at Rs. 2,72,26,500/- (6,76,000 + 2,65,50,500) requires to be added in the total income of the assessee as deemed dividend as per provision of section 2(22)(e) of the Act. 4. Feeling dissatisfied with that order of assessment the assessee preferred an appeal before the ld. CIT(A) who has disposed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Assessee failed to disclose true & correct facts during the course of original assessment proceedings The appellant has stated that notice u/s 148 could not be issued on the same set of circumstances which already stood considered in the assessment completed u/s 143(3) on 31.03.2015. On perusal of the assessment order, it is observed that the issue related to deemed dividend was not examined by the AO. The information which was available with the AO was made available by the audit party in the case of other assessee. The assessee has not disclosed these facts that the concerns where he is having substantial interest received loan from the Company M/s Millenium Technocrat Colonizers Pvt. Ltd. where he is having shareholding of 25.93%. The appellant has not established the fact by way of some note to the account that though he was liable for deemed dividend but because of the reasons or legal basis the deemed dividend is not offered for taxation as per law. The assessee instead did not disclose this fact in the return of Income. Hence, the conclusion of the AO that the assessee failed to disclose true & correct fact during the course of assessment proceedings is found to be cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee it was seen that the assessee held 22.3 per cent shareholdings of SBL and for relevant year also, the assessee had taken loan from SBL; and that on that basis the Assessing Officer had reason to believe that income in the form of deemed dividend as per section 2(22)(e) had escaped assessment. Held that the fact necessary to ascertain whether payment in question could be and should be treated as 'deemed dividend under section 2(22)(e) was whether the assessee was holding shares of not less than 10 per cent of the voting power in SBL. From the return filed and the documents annexed with the retum, nowhere it could be ascertained what was the holding of the assessee-company (in terms of voting power) in SBL. If upon further inquiry by the Assessing Officer, such details could be gathered and the nature of payment received by the assessee from SBL could be ascertained, to find out whether the same should be treated as "deemed dividend under section 2(22)(e) or not, the same, would not satisfy, the requirement of fully and truly disclosing all material facts necessary for assessment, particularly viewed from the expression given in Explanation 1 to section 147, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital was held by the assessee in ITL as the balance sheet had not been filed before the Assessing Officer. Moreover, as per the Explanation to section 147, mere production before the Assessing Officer of the books of account or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the said section. Therefore, even if the balance sheet of ITL had been filed before the Assessing Officer from which necessary details could have been gathered by the Assessing Officer, this did not mean disclosure of information by the assessee within the meaning of the proviso. Since the assessee had received loan/advance from ITL, it was required to give details before the Assessing Officer at the time of original assessment that it was holding more than 10 per cent of the share capital in ITL but, it was not declaring the amount received during the year as deemed dividend because the same was a deposit and not loan/advance. This would have been the true and full disclosure of materials necessary for assessment which had not been done by the assessee. Merely because the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15JB nor formed any opinion with regard to liability to tax of assessee on book profit, assessment order was nonspeaking and cryptic and, therefore, reassessment proceedings initiated by Assessing Officer under section 147 was not based on change of opinion. The head notes of the decision is read as under- "Section 115JB, read with section 148, of the Income-tax Act, 1961-Minimum alternate tax Payment of (Reassessment) - Assessment year 2005-06-Assessing Officer issued a notice under section 147/148 to assessee to reopen assessment on ground that assessee was liable to be taxed under section 115JB and, accordingly, passed reassessment order Tribunal held that reassessment proceedings initiated by Assessing Officer was based in change of opinion It was noticed that while passing original assessment order under section 143(3) Assessing Officer was totally silent on liability of assessee to be taxed under section 115JB He neither noticed provisions of section 115JB nor formed any opinion with regard to liability to tax of assessee on book profit - Whether, in view of aforesaid, assessment order was non-speaking and cryptic and, therefore, reassessment proceedings initiated by Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le or religious trust - Exemption of income from property held under (Audit objection) - Assessment year 2016-17 Assessment of assessee-trust was completed under section 143(3) at 'Nil' income - Revenue audit party, however, objected to finalization of retum of assessee-trust at 'Nil' for reason that during year, assessee received corpus donations which were not included in income for application under section 11 On basis of revenue audit objection, Assessing Officer decided to reopen assessment of assessee by issuing notice under section 148-Whether with effect from 1-4-2022, audit objection is one of reasons for reopening assessment as per clause (ii) of Explanation 1 to section 148 Held, yes Whether therefore, where revenue audit raised an objection that assessment was not completed in accordance with provisions of Act, it could not be treated as a change of opinion because this was statutory prescription and statutory ground/reason for reopening assessment as Assessing Authority had proceeded strictly in accordance with provisions of clause (i) of Explanation 1 to section 148-Held, yes [In favour of revenue] Hon'ble High Court Of Allahabad in the case of Sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objection was material on basis of which Assessing Officer could definitely form a belief about escapement of income, even though earlier assessments were completed under section 143(3), challenge to validity of reassessment proceedings was rightly rejected by Assessing Officer. In view of above discussion, the arguments of the assessee with regard to change of opinion are found to be without any merit. It is held that the AO was justified in making verification of facts after receipt of audit objection and the AO formed his belief about escapement of income after verification of facts. The AO has acted as per the established procedure and formed his belief after verification of facts. Hence, the objections raised by the assessee are not found to be acceptable and rejected 4.7.3 Notice under section148 can be issued on mistake identified by audit and verified by the AO The issue raised by the assessee is not acceptable. It is not correct that every reassessment proceeding is initiated on noticing mistake committed by the AO in the original assessment proceedings. Some income is escaped from the assessment because of oversight also. In case of mistake also there are cases wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation to section 147(2) specifically provides that the excessive relief granted under the Act leading to escapement of chargeable income is a ground for reopening of assessment to bring to tax the escaped income. This was a clear case of the assessee claiming deduction which it was not entitled and, therefore, escapement of income was on account of the excessive relief claimed by the assessee and allowed by the officer by mistake. The assessee could not contend that there was a change of opinion on the part of the Assessing Officer. Therefore, the reassessment was valid. In the present case also, the question to be considered was whether the assessee could be the beneficiary of its own mistake by not offering the deemed dividend for tax and whether the Assessing Officer was prevented from correcting the same under section 147. This was a clear case of the assessee not offering income for taxation which it was required to offer as per provisions of Act and, therefore, escapement of income was on account of the income of deemed dividend not offered by the assessee and allowed by the officer by mistake. The assessee could not contend that there was a change of opinion on the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r provisions of section 153A of the IT Act assessment of reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this (sub-section) pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be shall abate. In view of above provision, the assessment proceedings. which was initiated as per the provision of section 147 of the Act and notice u/s 148 of the Act was issued earlier on 18.03.2017 is abated. The reopening of assessment is already held as valid in this order. Hence, the objections of the appellant are not found to be acceptable. Hon'ble Apex Court held in the Civil Appeal No. 6580 OF 2021 in the case of Principal Commissioner of Income Tax, Central-3 Versus Abhisar Buildwell P. Ltd [2023] 149 taxmann.com 399 (SC)/(2023) 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC) [24-04-2023) as under "11. As per the provisions of Section 153A, in case of a search under Section 132 of requisition under Section 132A, the AOD gets the jurisdiction to assess of reassess the Total income in respect of each assessment year falling within six assessment years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12 If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of ld. CIT(A) on the merits of the case for the addition u/s 2(22)(e): 6.6 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under- In this case, the AO noted that the assessee is director in Millenium Technocrat Colonisers Pvt Ltd holding 25.93% of shares and proprietor in M/s Nav Bharat Nirman Co. and partner in Joint venture M/s Vinarma Entreprises and Nav Bharta Niman Co. The company in which the assessee is director has provided loans to the joint venture and proprietor concern in which he is partner and proprietor himself respectively. Therefore, it is established that he has substantial interest in both of these entities and the loans provided by him are in contravention to the section 2(22)(e) of the IT Act. The reliance is placed on following case laws: CIT vs Mukundray K Shah (2007) 160 Taxman 276 (SC). Therefore the amount of loan provided by the company at Rs. 2,72,26,500/- (6,76,000 +2,65,50,500) is hereby added in total income of the assessee treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interested; (ii) such a company has given advance or loan: (iii) such payment has been made to a shareholder: and (iv) such shares hold not less than 10% of the voting power. From the facts available on record, it is evident that the company was not a company in which public was substantially interested. Further, the assessee, being shareholder, was holding shares more than 10% in the company. The company have credited loan to the proprietorship concern of the assessee and JV where the assessee is having substantial interest. Thus, the basic conditions of section 2(22)(e) of the Act are satisfied in the present case. The argument of the appellant is that amount of Rs. 6,76,000/- was advanced to the assessee firm M/s Nav Bharat Enterprises for execution of some work relating the M/s Millennium Technocrats & Colonizers P. Ltd. Therefore it is submitted that the amount was advanced to M/s Nav Bharat Enterprises is in the normal course of business of M/s Millennium Technocrats & Colonizers P. Ltd and for the purpose of business only. The arguments of the appellant are not supported by the supporting evidences that the amount advanced by the company was for business purpose. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osely held company, claimed to have received certain amount from company for purchase of land for company but failed to prove same by furnishing relevant details, such amount would come within ambit of section 2(22)(e). In the present case also the assessee failed to prove the transaction of business purpose by fumishing relevant details, such amount would come within ambit of section 2(22)(e) The head notes of the decision read as under- "Section 2(22) of the Income-tax Act, 1961- Deemed dividend (Loans) - Assessment years 2007-08 to 2009-10-Assessee, who was a shareholder and director in a closely held company having beneficial ownership of more than 10 per cent shares, had taken certain loan from company in assessment proceedings assessee submitted that loan was taken for purpose of purchase of land for company and, therefore, could not be treated as deemed dividend under section 2(22)(e) However, assessee failed to prove by furnishing relevant details in form of agreements or details of amount spent for purpose for which it was drawn and he kept on changing his arguments at each stage of proceedings - Whether loan taken by assessee was rightly considered as deemed dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place." As per the provision of Explanation 2, all the profits of the company up to the date of distribution or payment under section 2(22)(e) of the Act shall be considered as accumulated profits. Thus, [the provision of Explanation 2 to section 2(22) of the Act does not distinguish between the profit accumulated in the immediately preceding year and the current year profit, and takes within its ambit all the profits up to the date of payment. Hence, all the profits of the company up to the date of distribution or payment under section 2(22)(e) of the Act shall be considered as accumulated profits. The AO shall verify the claim of the assessee that the accumulated profits on the date of loan were only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, This ground is treated as dismissed. 8. The last Ground of Appeal is that the appellant craves to add/alter/ amend the grounds of the appeal before the final hearing is completed. 8.1 The A/R of the appellant submitted written submission during the appellate proceedings on 02.12.2022, the same is reproduced as under: "Not pressed" 8.2 The appellant has not added, altered or amended any of the above-mentioned grounds of appeal. Accordingly, such mention by the appellant in his ground is treated as general in nature, no needing any specific adjudication and is accordingly treated as disposed of. 5. Aggrieved from that order the assessee is in appeal before this tribunal challenging the finding of the ld. CIT(A) on the grounds as stated herein above in para 2. To support the various grounds raised by the assessee, ld. AR of the assessee filed detailed written submissions which reads as follows: "Briefly stated the facts of the case are that the original assessment for the relevant assessment year was completed u/s 143(3) on 31.03.2015. At the same time, the case of M/s Millenium Technocrat Colonizers Pvt. Ltd. (MTCPL for short) was also completed u/s 143(3) by ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to initiate reassessment proceedings. Since the reassessment proceedings were initiated solely on the basis of an observation made by the Internal Audit Party, it is pertinent to examine the scope and extent of such information constituting fresh tangible material. In the case of Indian & Eastern Newspaper Society v. CIT, the Supreme Court has held that an audit by the Comptroller and Auditor General of India is principally intended for the purposes of satisfying itself with regard to the sufficiency of the rules and procedures prescribed for the purpose of securing an effective check on the assessment, collection and proper allocation of revenue. The relevant Internal Audit Manuals and Circulars indicate that Audit Department should not in any way substitute itself for the Revenue authorities in the performance of their statutory duties. The relevant extract provides that:- "4. Audit does not consider it any part of its duty to pass in review the judgment exercised or the decision taken in individual cases by officers entrusted with those duties, but it must be recognised that an examination of such cases may be an important factor in judging the effectiveness of assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llocation of revenue. As per paragraph (3) of the circular issued by the Board on July 28, 1960, also an audit department should not in any way substitute itself for the Revenue authorities in the performance of their statutory duties." The Competent authority giving approval simply mentioned Yes, it is a fit case to issue notice u/s 148. He has given the approval in a mechanical way without applying his mind. He has failed to satisfactorily record his concurrence and by no prudent stretch of imagination, the expression "Yes" could be a valid approval. It is submitted that use of the expressions such as "Yes", or "Yes I am satisfied" or "Approved" or "Yes, it is a fit case to issue notice u/s 148" do not meet the requirements of law. Delhi High Court in the case of United Electrical Co. (P) Ltd. vs CIT (2012) 258 ITR 317 has held that the power vested in the Joint Commissioner to grant or not to grant approval is coupled with a duty. The Joint commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the assessing officer. The said power cannot be exercised casually and in a routine matter. In the appellant&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (2003) 259 ITR 19 (SC). In the case of Commissioner of Income Tax vs. Videsh Sanchar Nigam Ltd, the Hon'ble High Court of Bombay has held as under: "2. The finding of fact recorded by the Tribunal is that in the present case the reasons recorded for reopening of the assessment though repeatedly asked by the assessee were furnished only after completion of the assessment. The Tribunal following the judgment of this Court in the case of CIT vs. Fomento Resorts & Hotels Ltd., IT Appeal No. 71 of 2006 decided on 27th Nov., 2006, has held that though the reopening of the assessment is within three years from the end of the relevant assessment year, since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of assessment, the reassessment order cannot be upheld. Moreover, special leave petition filed by the Revenue against the decision of this Court in the case of CIT vs. Fomento Resorts & Hotels Ltd. (supra) has been dismissed by the Apex Court, vide order dt. 16th July, 2007. Similarly, in the case of Kothari Metals vs. ITO (supra) the Hon'ble High Court of Karnataka expressed opinion that proceedings for reassessment could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum by way of advance or loan to a shareholder, who is the beneficial owner of equity shares holding not less than 10% of the voting power (hereinafter referred to as 'such company' and 'such shareholder' respectively); (First limb); * Or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest; (Second limb); * Or any payment by any such company on behalf, or for the individual benefit, of any such shareholder. (Third limb). Furthermore, the term 'substantial interest' is explained in Explanation 3(b) as follows - a person shall be deemed to have substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than 20% of the income of such concern. The purpose of insertion of clause (e) to Section 6(A) in the 1922 Act was to bring within the tax net monies paid by the closely held companies to their principal shareholder in the guise of loan and advances to avoid payment of tax. Therefore, if the said background is kept in mind, it is clear that provisions of Section 2(22)(e) of 1961 Act, which is pari materia with Section 2(6A)(e) of 1922 Act, pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above facts, the addition sustained by the CIT(A) is erroneous and may kindly be deleted. Coming to the facts of the case, it is stated that M/s Millenium Technocrat Colonisers Pvt. Ltd. was formed in the year 2006. The assessee, Shri Ajay Bakliwal along with Rajendra Singh, Kiran Singh and Usha Bakliwal were the promoters/directors of this company. Shri Ajay Bakliwal is a qualified civil engineer and architect who had a long experience of 35 years in construction line. In July 2010, he associated with one Shri Ram Kishan Verma to form M/s Vinamra Enterprises & Nav Bharat Nirman Co.(JV) in July 2010. This JV got a project for construction of EWS and LIG flats under the Affordable Housing Policy of Rajasthan Government. The MOU for the said project was signed on 25 April, 2011 and construction started in June, 2011. Substantial funds were required for this project. The JV being new and the project being of Affordable Housing Scheme, the bankers of JV (BOB) were reluctant on providing loan to the firm. Millenium Technocrat Colonisers Pvt. Ltd. had taken loans from ICICI Bank, so the assessee applied for loan in his individual capacity to ICICI Bank, and the bank propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry concern) for ECS. It is also an undisputed fact that the amount received by Millenium Technocrat Colonisers Pvt. Ltd. in its bank account was transferred to Vinamra Enterprises & Nav Bharat Nirman Co.(JV) immediately. The accountant of Millenium Technocrat Colonisers Pvt. Ltd. erred in crediting and debiting the account of ICICI Bank and Vinamra Enterprises & Nav Bharat Nirman Co.(JV). seperately. He ought to have passed passed a Net entry squaring of both the accounts, at the year end. So, clearly it is not a case of a loan being provided by the Company (Millenium Technocrat Colonisers Pvt. Ltd.) to a concern (Vinamra Enterprises & Nav Bharat Nirman Co.) in which the shareholder (Ajay Bakliwal) has substantial interest. It is a clear cut case of the loan having been obtained by the assessee and utilized by him for the purpose of business of the partnership concern and the EMIs being borne by him out of his bank account. No funds of the Company (Millenium Technocrat Colonisers Pvt. Ltd.) have been diverted to Vinamra Enterprises & Nav Bharat Nirman Co. No interest is being charged to the P & L account of Millenium Technocrat Colonisers Pvt. Ltd. As such, no case for deemed divid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be sustained. To support her contention, she also filed a written submission after considering the submission of the assessee. The written submission so filed by ld. DR reads as under : "1. Introduction The present submission addresses the following grounds raised by the Appellant: 1. Ground No. 1: That the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, based on an audit objection raised by the Internal Audit Party (IAP), are invalid. 2. Ground No. 2: That the addition of Rs.44,62,938/- under Section 2(22)(e) of the Income Tax Act, treating certain transactions as deemed dividend, is erroneous. 3. Ground No. 3: That the Ld. CIT(A) erred in sustaining the said addition without duly considering the submissions made by the Appellant. The Revenue submits that the reassessment proceedings are valid, the addition made under Section 2(22)(e) is justified, and the order of the Ld. CIT(A) deserves to be upheld. 2. Validity of Reassessment Proceedings (Ground No. 1) 2.1. Basis of Reassessment The reassessment was initiated on the basis of an objection raised by the Internal Audit Party (IAP). It is submitted that: * The IAP is an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2(22)(e). * The Appellant claims that these transactions were business advances and not loans, citing errors in the company's books of accounts. * The books were audited, but no such defect is mentioned by the auditor. 3.3. Analysis of Transactions The Appellant's contention that these transactions were erroneously recorded as loans lacks merit. The following points substantiate the Revenue's stand: 1. Ownership and Substantial Interest: * The Appellant is a shareholder in M/s Millenium Technocrat Colonizers Pvt. Ltd. and holds substantial interest in M/s Vinamra Enterprises & Nav Bharat Nirman Co. (JV). * The Appellant has not provided evidence disproving his substantial interest in the entities receiving loans. 2. Entries in Books of Accounts: * The loan entries are duly recorded in the books of M/s Millenium Technocrat Colonizers Pvt. Ltd. and the recipient entities. * The claim of error by the accountant is unsupported by documentary evidence. 3. Absence of Commercial Rationale: * No business rationale has been provided for the advances. In the absence of such justification, the AO was justified in treating the amounts as deemed divide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till the completion of assessment. After filing of the return, the assessee was entitled to get a copy of the reasons recorded for reopening of the case. The Ld.CIT(A) has adjudicated on this issue on page-37 of his order. He has held that no demand for copy of reasons was made prior to completion of assessment. It was provided after the assessment, when asked for and no prejudice is caused by not providing the reasons. Your Honors, different judicial forums, time and again have reiterated that copy of reasons for reopening the case along with material relied upon by the AO has to be invariably provided to the assessee after he files his return subsequent to the notice issued u/s 148. The relevant case laws on the issue have already been mentioned in the written submission filed and therefore the same are not being reiterated. Coming on facts of the case, the actual facts are that the assessee Shri Ajay Bakliwal, had been sanctioned a loan Rs. 2,70,00,000/- by ICICI Bank Ltd. The Bank insisted that the Company, viz. Millenium Technocrat Colonizers Pvt. Ltd. along with other directors of the Company, be made the co-applicants. The Bank, though sanctioned the loan to Ajay Bakliw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver form by observing that a legal principle that prioritizes the actual substance and economic reality of transactions over their formal legal structure should be considered, which ensures that tax assessments are based on the true nature of transactions rather than their superficial characteristics. In the instant case, there is direct evidence that the loan has been taken by the assessee from the Bank and not from the Company, and substance over form should be given precedence. In view of the above facts, no case for deemed dividend in the hands of the assessee is made out. Now, coming to the loan of Rs. 6,76,000/- stated to be given by the Company to Nav Bharat Nirman Co., the balance sheet of the Company clearly shows that Unsecured loans of Rs. 50,10,388/- has been taken by the Company from Nav Bharat Nirman Co. It was not a loan taken but was a repayment made against the loan. The AO as well as the CIT(A) erred in ignoring this fact. Considering only a part of the Audit report, the addition was made and sustained. Your Honor's attention is drawn to the copy of ledger A/c of Nav Bharat Nirman Co. appearing at page-29 of the paper book, which would dispel the clouds. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The addition so made in the case was on the transaction already on record and not based on any incriminating material found in the search and therefore, considering that aspect of the material also no addition is maintainable considering the decision of the apex court that in the case of search assessment addition can only be made based on the incriminating material found. 10. We have heard the rival contentions and perused the material placed on record. The bench noted that the ground no. 1 raised by the assessee challenge the order on the legal ground and that of ground no. 2 & 3 deals with the sustaining addition of Rs. 44,62,938/- u/s. 2(22)(e) of the Act. We would like to take up ground no. 2 & 3 first. The brief facts related to the disputes are that a search & seizure operation under section 132(1) of the Act was carried out on 07.09.2017 at the various premises of 'Resonance Group, Kota' to which the assessee belongs. In this case earlier the assessee had filed his return of income u/s 139 of the Act on 30.09.2012 at the total income of Rs. 53,45,910/- and assessed u/s 143(3) at the total income of Rs. 81,36,160/- and after appeal effect u/s 250 total income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision of section 2(22)(e) of the Act. When the matter carried before the ld. CIT(A) relied upon Explanation 2, of section 2(22)(e) of the Act and stated that considering the facts of the case only the profits of the company up to the date of distribution or payment under section 2(22)(e) of the Act shall be considered as accumulated profits and accordingly he hold that the ld. AO shall verify the claim of the assessee that the accumulated profits on the date of loan were only Rs. 44,62,932/. If found correct, the addition is to be limited to that amount of Rs. 44,62,932/-. However, if the amount of accumulated profits is more than this amount then the addition is to be confirmed to the number of accumulated profits as on the date of giving loan. The remaining amount of money made by the AO is not found to be sustainable in view of the provisions of the Income Tax Act. The assessee argued that even the sustained addition to the extent of the profit of the company is required to be deleted because the assessee has received that money on account of the bank loan applied. In support of that contention the assessee submitted that a loan from ICICI Bank was obtained. Sanction letter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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