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Income Tax Appellate Tribunal, JAIPUR BENCH ’SMC’, JAIPUR
Before: SHRI SHRI VIJAY PAL RAOvk;dj vihy la-@ITA No. 825/JP/2019
PER VIJAY PAL RAO, JM :
This appeal by the assessee is directed against the order dated 19.03.2019 of ld. CIT (Appeals)-2, Jaipur for the assessment year 2013-14. The assessee has raised the following grounds of appeal :-
“ 1. That the Assessing Authority has grossly erred in law and facts in making addition of Rs. 2,52,613/- by treating the credit balance as deemed dividend u/s 2(22)(e) of the Act and the Appellate Authority has grossly erred in sustaining the same.
2. That appellant craves leave to add, amend or alter all or any grounds of appeal and relief before or at the time of hearing of the appeal.”
The assessee is an Individual and Director/Promoter of the company M/s. G.L.
Metallica Pvt. Ltd. having 19.39% share holding in the said company. The AO noted that there was a credit balance of Rs. 2,52,613/- as on 31st March, 2013 in the company M/s. G.L. Metallica Pvt. Ltd. Since the assessee is holding more than 10% shares in the said company and the company was also having the sufficient reserve and surplus, therefore, the AO treated the advance of Rs. 2,52,613/- as deemed dividend under section 2(22)(e) of the Act. The assessee challenged the action of the AO before the ld. CIT (A) and contended that there are various transactions of receipts and repayments of the amounts reflected in the account of the assessee with the company. The amount has been provided to the assessee for making purchases for and on behalf of the company. The assessee also claimed that it was a running current account in the accounts of the company in which both debit and credit entries are there and, therefore, the provisions of section 2(22)(e) are not attracted. The assessee relied upon various decisions in support of the contention.
However, the ld. CIT (A) was not impressed with the argument of the assessee and sustained the addition made by the AO.
Before the Tribunal, the ld. A/R of the assessee has submitted that for the purpose of purchases the company has to participate in auction of material by Ordinance factories. Appellant is participating in auction throughout India on behalf of company. For carrying out purchases at the auction appellant requires money for payment of advance to suppliers and for incurring expenses etc. Thus company provides money to the appellant which is recorded in the running current account in the accounts of company. If the auction does not succeed the amount is returned back to the company and is entered in the running current account in the accounts of company. That appellant is having debit balance in the running current account of company Rs. 11,30,000/- as on 01.04.2010 with debit and credit entries, debit balance Rs. 2,30,000/- as on 31.3.2011, debit balance of Rs. 2,70,000/- as on 31.03.2012, credit balance of Rs. 2,52,613/- as on 31.03.2013 and debit balance of Rs. 5,49,870/- as on 31.03.2014 in the running current account. The ld. A/R has submitted that both the lower authorities have not properly appreciated that the amount has been provided to the Appellant for the purpose of the business of the Company and such amount does not come within the purview of loan or advance. It is submitted that Section 2(22)(e) is applicable only in cases of advance or loan provided. Amount provided to the appellant by the company is neither advance nor a loan. The amount has been provided to appellant for making purchases for and on behalf of the company. The Appellate Authority has not taken into consideration the submission of the appellant that there was running current account of appellant in the account books of the company in which both debit and credit entries are entered and, therefore, provisions of section 2(22)(e) are not attracted. Without looking into this aspect of the matter, the Appellate Authority has rejected the appeal which is liable to be set aside. The ld. A/R relied upon the following decisions
CIT vs. M/s. Creative Dyeing & Printing Pvt. Ltd. CIT vs. Suraj Devi Dada (2014) 367 ITR 78 (Pun. & Har. HC) ITO vs. Smt. Gayatri Chakraborty (2016) 45 ITR (Trib) 197 (ITAT – Kolkata) CIT vs. Raj Kumar 2009 (181 Taxman 155) CIT vs. Ambassador Travels Pvt. Ltd. 2008 (173 Taxman 407) CIT vs. Nagain Das M. Kapadia 177 ITR 393 (Bom.)
On the other hand, the ld. D/R has submitted that in the account of the assessee with the company all the entries are receipts and repayments of the money which do not reflect any business transaction carried out by the assessee on behalf of the said company. Therefore, the transaction of receiving the money from the company and the balance as on 31st March, 2013 will be treated as deemed dividend under section 2(22)(e) of the Act. He has relied upon the orders of the authorities below.
I have considered the rival submissions as well as the relevant material on record. Though in the account of the assessee with the company in the preceding year, in the year under consideration and even in the subsequent year there are various entries of receipts of amount and repayments of amount through banking channel, however, not a single entry is found at the said account representing the adjustment of amount on account of any business transaction carried out by the assessee on behalf of the company utilizing the money received from the company.
All these entries are either receipts or repayments of the amounts through banking channel and, therefore, in the absence of any business transaction reflected in the said account for utilization of the money on behalf of the company, the claim of the assessee cannot be accepted that these monies are received for business purposes.
The ld. CIT (A) has considered this issue in para 2.3 and 2.3.1 as under :-
“ 2.3. I have perused the facts of the case, the assessment order and the submissions of the appellant. It is seen that the Assessing Officer treated the net advances of Rs. 2,52,613/- to the assessee from G.L. Metallica Pvt. Ltd., in which assessee is having substantial investment as deemed dividend. The ld. Authorized Representative argued that the advances were given to the director for purposes of business and it is a current account of director. Therefore, provisions of section 2(22)(e) is not applicable. 2.3.1. On perusal of overall facts, I find that the appellant has not produced any evidence to prove that the advance is given for purpose of business. Even the account has not been adjusted subsequently through any work done on behalf of the company. Therefore, the advance received by the assessee clearly falls within definition of deemed dividend under section 2(22)(e). Accordingly, addition made by the Assessing Officer is confirmed. This ground of appeal is dismissed.”
Having regard to the facts and circumstances as well as the relevant record, I do not find any error or illegality in the impugned order of the ld. CIT (A).
In the result, the appeal of the assessee is dismissed. Order is pronounced in the open court on 03/10/2019.