YOGESH MEHRA,MUMBAI vs. DCIT CC 3(1), MUMBAI

This appeal is filed by the assessee against the order of Commissioner of Income-tax (A) -51, Mumbai [CIT(A)] for AY 2012-13 dated 18/11/2019 raising the following grounds of appeal:-

Brief fact of the case shows that assessee is an individual and derived income from house property, remuneration from the partnership firm and income from other sources. He filed his return of income on 11.10.2012 at Rs. 2,16,52,010/-. On 14.03.2013, search under section 132 of The Income-Tax Act, 1961 (the Act) was carried out on Wind World (India) Ltd. The assessee was also covered. It was found during the course of search that six

The learned Assessing Officer issued notice under section 153A of the Act on 28.01.2014. The assessee filed return on 11.08.2014 at Rs. 2,16,52,008/-. During the course of assessment proceedings, assessee was asked explanation on taxability of deemed dividend. Assessee submitted that [1] he is not the recipient of loan [2] Loans are business advances [3] Advances are through journal entries and therefore deemed dividend cannot be taxed in his hands. The learned Assessing Officer after considering the explanation of the assessee invoked the Provisions of Section 2(22)(e) of the Act and made addition on substantive basis in the hands of the assessee and his mother and further made additions on protective basis in the hands of 6 related concerns, who received loans. The learned Assessing Officer on 28.06.2017 passed assessment under section 143(3) read with section 153A of the Act, wherein addition of Rs. 1,60,50,281/- was made in the hands of the assessee on substantive basis.

The assessee preferred the appeal before the learned CIT(A). The learned CIT(A) rejected the contention of the

The assessee is aggrieved with that order of the learned CIT(A) and has preferred this appeal.

The assessee has challenged the order of the learned CIT(A) stating that on commercial advances and on journal entries the deemed dividend cannot be invoked. Further, as the ledger accounts were available with the learned CIT(A) it is not proper for him to direct the Assessing Officer for verification.

The learned Authorized Representative submitted that identical issue arose in case of assessee for AY 2012-13, wherein in ITA No. 1003/Mum/2020 dated 21.12.2021, the co-ordinate Bench has considered the very same issue in issue no. 1 and 2 and deleted the addition. He submitted that the co-ordinate bench further relied in that case on assessee’s own case for AY 2007-08 and 2009-10 dated 22.07.2021, wherein categorical finding of ITAT that all these advances were given out of commercial consideration and business expediency. The learned Authorized Representative submitted that this issue is not

The learned Authorised Representative further referred to the paper book containing 71 pages filed before us wherein the various ledger accounts of the companies to whom loans were given are filed, which shows that these are merely journal entries. He therefore submitted that on that count also, the addition under section 2(22)(e) of the Act cannot be made.

The learned Departmental Representative vehemently supported the order of lower authorities and stated that there is a finding of the learned CIT(A) that advances are not for the purpose of business and are not driven out of business expediency and therefore, the addition has correctly been made under section 2(22)(e) of the Act.

We have carefully considered the rival contentions and perused the order of the lower authorities. We find that in assessee’s own case for AY 2007-08 and 2009-10 in ITA No. 4006 & 4008/Mum/2019 dated 22.07.2021 [2021 (8) TMI 894 - ITAT MUMBAI] wherein vide Para No. 12, the issue is decided as under :-

Co-ordinate Bench has given categorical finding that all these loans and advances given to different companies by other companies are in the nature of loans and advances out of commercial consideration and business expediency. The co-ordinate Bench has given detailed reasons which stated that company has purchased land in the name of related companies for the purpose of setting up Wind farm and therefore, there is loan and advances in the land holder companies for business purposes. While holding so, the co-ordinate Bench also relied on several judicial precedents as well as CBDT Circular No. 19/2017 dated 12.06.2017.

The learned Departmental Representative could not show us any reason that how those decisions are not applicable in case of assessee for this year. Further, the CBDT has also taken a view vide CBDT Circular No. 19/2017 dated 12.06.2017 stating that where loans and advances are in the nature of commercial transactions, would not fall within the ambit of word ‘ advance’ in section 2(22) (e) of the Act. In view of the above facts, respectfully following the decision of co-ordinate bench in assessee’s own case for earlier years as well as circular of CBDT, we hold that the addition made of Rs. 1,60,50,281/- in the hands of the assessee on substantive basis is not sustainable. Therefore, the orders of the lower authorities are reversed and Assessing Officer is directed to delete the deemed dividend under section 2(22)(e) of the Act. Accordingly, the grounds no. 1 to 3 of the appeal are dismissed.

In the result, the appeal of the assessee is allowed.