Mr. Anil Arora vs. Pr. Commissioner Of Income Tax

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE SHEEL NAGU & HON’BLE SHRI JUSTICE VIRENDER SINGH INCOME TAX APPEAL No. 49 of 2018

BETWEEN:- MR. ANIL ARORA, B-5 SHUBHALAY PEARL,

HOSHANGABAD

ROAD, BHOPAL (MADHYA PRADESH) .....APPELLANT (BY SHRI MUKESH AGRAWAL & SHRI AYUSH GUPTA -ADVOCATES) AND PR. COMMISSIONER OF INCOME TAX AAYKAR BHAWAN, HOSHANGABAD ROAD, BHOPAL (MADHYA PRADESH) .....RESPONDENT (RESPONDENT BY SHRI SANJAY LAL - ADVOCATE) ----------------------------------------------------------------------------------------- Reserved on : 18.01.2023 Pronounced on : 27.03.2023 ---------------------------------------------------------------------------------------- - 2 - This appeal having been heard and reserved for orders, coming on for pronouncement this day, Hon’ble Shri Justice Sheel Nagu pronounced the following: ORDER Present appeal filed by assessee u/S.260-A of the Income Tax Act, 1961 (for brevity “I.T.Act”) assails final order dated 08.09.2017 (Annexure A/6) passed in ITA.No.772/Ind/2016 by Income Tax Appellate Tribunal Indore Bench, Indore qua assessment year 2007-08 to the extent the appeal of appellant/assessee was partly dismissed.. 2. Learned counsel for rival parties were heard on the question of admission. 3. The substantial question of law proposed by the appellant is as follows:- “Whether accumulated profits determined u/S.2(22)(e) of I.T. Act would only include the business profits of the company as on 1st April of the financial year and not the business profits accruing thereafter since the financial year’s business profits accrue only on 31st March i.e. at the end of the year and do not accrue day to day and thus the current financial year’s business profits are not to be included while calculating accumulated profits of the year and only the opening balance as on 1st April has to be considered as accumulated profit ? 4. Facts giving rise to present appeal are that appellant/assessee is an individual having income from salary and business. The Revenue noticed in the assessment proceeding in the case of M/s. Surewin Marketing Pvt. - 3 - Ltd. that the assessee company has extended loan of Rs.41,44,109/- to Gulmohar Traders. M/s. Surewin Marketing Pvt. Ltd. was having reserve and surplus amount of Rs.22,59,970/- consisting of opening balance of Rs.12,29,565/- and profit during the year amounting to Rs.10,30,404/-. Pertinently, Gulmohar Traders and M/s. Surewin Marketing Pvt. Ltd. which are in the same business, therefore, amounts standing as closing balance in their account ought not be seen as advance given but as outstanding against the day to day business transactions. Thus, the Revenue found that transactions are not in the nature of loan. The appellant/assessee accepted in his reply that Anil Arora is partner of Gulmohar Traders to the extent of 25% and is a shareholder in M/s. Surewin Marketing Pvt. Ltd. to the extent of 50%. In this background the Revenue held that appellant/assessee was having interest in the company and also in the firm and, therefore, provisions of Section 2(22)(e) of I.T. Act are attracted giving rise to the concept of deemed dividend on advance given. The Assessing Officer further found the balance sheet to reflect reserve and surplus amount of Rs. 12,29,565/- whereas an advance amount of Rs.41,44,109/- and, therefore, Assessing Officer restricted the deemed dividend to the tune of reserve surplus only at Rs.12,29,565/- and the same was added u/S.2(22)(e) of I.T. Act. 5. The Tribunal after evaluating the evidence and material on record found that indisputably the provisions of deemed dividend are attracted. However, it was found that the dispute lies with respect to quantum thereof. The Tribunal on the basis of record found that the advances shown - 4 - as payments on behalf of assessee towards license fee are also not in the nature of deemed dividend payment made directly to the third party on behalf of assessee. Therefore, the Tribunal found that addition of Rs.14,60,000/- being deemed dividend being in hand is taxable, qua the relevant assessment year. Conclusively, the Tribunal confirmed the addition of Rs.14,60,000/- but deleted addition of Rs.7,99,969/-. 5.1 On the basis of aforesaid facts, the impugned findings were rendered by the Tribunal by partly allowing the appeal of appellant/assessee. 6. After having gone through the record and having heard learned counsel for rival parties, we are of the considered view that entire findings of the Tribunal are factual in nature, which do not give rise to any question of law much less substantial. 7. Accordingly, proposed substantial question of law is not made out in the absence of which this Court declines admission to this appeal. Conclusively, present appeal stands dismissed in limine by declining admission. (SHEEL NAGU) (VIRENDER SINGH) JUDGE JUDGE mohsin Digitally signed by MOHAMMED MOHSIN QURESHI Date: 2023.03.31 16:14:51 +05'30'