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Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI
आदेश / ORDER PER SUSHMA CHOWLA,VP Both appeals filed by assessee are against order of CIT(A)-1, Gurgaon dated 01.04.2015 & 07.04.2015 relating to assessment year 2011-12 against order passed under section 201(1)/201(1A) and 271C of the Income-tax Act, 1961 (in short ‘the Act’) respectively.
& 3995/Del/2015 Assessment Year 2011-12 [Assessment Year 2011-12]
The assessee has raised following grounds of appeal:-
1. “That the impugned order is bad in law as well as on merits.
2. That the impugned order and proceedings is without jurisdiction. 3. That under the facts and circumstances of the case and in view of documents and explanation filed, the liability for TDS of Rs.1,01,489/- on deemed dividend u//s 2(22)(e) for Rs.10,14,893/- and sustained by Ld.CIT(A) deserves to be deleted in law as well as on merits. 4. That under the facts and circumstances of the case, no demand u/s 201 should have been created in view of demand created by the ITO, Ward-1(2), Gurgaon in case of Surbhi Jain. 5. That no interest 201(1A) should have been levied, without prejudice, the interest charged is excessive.”
Briefly in the facts of the case the assessee company had advance Rs.70 lakhs to its associated concerns namely Arihant Agency which was treated as deemed dividend to the extent of accumulated profits (Rs.10,14,893/-), as per provision of section 2(22)(e) of the Act. The assessee had not deducted tax at source on deemed dividend of Rs.10,14,893/- and Assessing Officer held the assessee to be in default u/s 201/201(1A) of the Act and raised demand of Rs.1,46,149/-. The CIT(A) upheld the said order of the AO against which the assessee is in appeal before us.
We have heard the rival contentions and perused the record. The assessee company had advanced the loan to its associated concern M/s.
Arihant Agencies which was then transferred to the account of Sh.Dinesh Kumar Jain and the fund was transferred back to the assessee company on the & 3995/Del/2015 Assessment Year 2011-12 same day as Director’s share capital. The explanation filed by the assessee before the CIT(A) is as under:-
“During Assessment Year 2011-12, as business was growing, there was a requirement for more funds. For increasing director capital an amount of Rs.70 Lakhs was transferred to M/s. Arihant Agencies (Prop. Firm of other director). Arihant Agencies transferred the amount to Dinesh Kumar Jain (Director of VAPL) and the funds were transferred to VAPL as director’s share capital. This amount was received in VAPL on the same date, without giving Arihant Agencies or Dinesh Kumar Jain time for any other utilization of funds. VAPL Arihant Agencies Dines Kumar Jain VAPL on same day.”
The case of the assessee before the authorities was that the aforesaid transaction was undertaken in order to raise bank loans and the assessee explained that “it had transferred the funds aggregating Rs.50,00,000/- only to M/s. Arihant Agencies on 30.04.2010 and Rs.20,00,000/- on 01.05.2010 which were received the same day in form of director’s capital. Out of available funds of Rs89,65,100.16 only Rs.70,00,000/- were outstanding in books of accounts.
The difference amount of Rs.19,65,100.16 was still lying in firm as director’s capital and profits. therefore, no part of borrowed funds was diverted in making interest free advance.”
We find that the issue of deemed dividend u/s 2(22)(e) of the Act in respect of similar transaction being made wherein the transaction of receipt and payment were on the same date itself by both the parties, arose before the Tribunal in series of cases i.e. Seema Devi Bansal in order dated 18.07.2018 relating to Assessment Year 2010-11 and Sh. Harish Kanwar in ITA No.529/Del/2017 order dated 18.10.2017 relating to 3 & 3995/Del/2015 Assessment Year 2011-12 Assessment Year 2011-12. We have also decided similar issue in Surbhi Jain vs ITO in vide order dated 14.05.2020 relating to Assessment Year 2011-12, applying the ratio laid down by Hon’ble Bombay High Court in Praveen Bhimsi Chheda Shivsadan vs DCIT reported in 141 TTJ
The Hon’ble Bombay High Court in Praveen Bhimsi Chheda Shivsadan vs DCIT (supra) held that under similar circumstances, it was not case of deemed dividend u/s 2(22)(e) of the Act.
Applying the said parity of reasoning and we hold that the assessee cannot held to be in default u/s 2(22)(e) of the Act and there is no merit in raising the demand u/s 201(1) and charging interest u/s 201(1A) of the Act.
Consequently, the AO is directed to delete the same. Thus, grounds of appeal raised by the assessee are allowed.
The assessee has raised following grounds of appeal:-
“That the impugned order is bad in law as well as on merits.
2. That the impugned order and proceedings is without jurisdiction. 3. That under the facts and circumstances of the case and in view of documents and explanation filed, the levy of penalty of Rs.1,01,489/- for non-deduction of TDS on deemed dividend u/s 2(22)(e) for Rss.10,14,893/- and sustained by Ld.CIT(A) deserves to be deleted in law as well as on merits. 4. That under the facts and circumstances of the case, no penalty should have been levied before treating the assessee as assessee in default in order passed u/s 201. 5. That without prejudice, penalty proceedings are without jurisdiction for not initiating the penalty proceedings in order passed u/s 201.
& 3995/Del/2015 Assessment Year 2011-12 9. Further penalty was levied u/s 271C of the Act for the aforesaid default u/s 201(1) of the Act. Since we have already deleted the demand raised u/s 201(1) of the Act, there is no merit in levy of penalty u/s 271(1)(c) of the Act and the same is deleted. Grounds of appeal raised by assessee are thus allowed.
In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 21st May, 2020.