SURBHI JAIN,GURGAON vs. ITO, GURGAON

“That the impugned order is bad in law as well as on merits.

That the impugned order and proceedings is without jurisdiction. 3. That the Ld. AO exceeded his jurisdiction in assessing deemed dividend U/s. 2 (22)(e) for Rs. 10,14,893/- in order framed U/s. 154.

At the outset, the Ld.AR for the assessee pointed out that the issue raised in the present appeal stands squarely covered in favour of the assessee by the orders of the Tribunal in the case of related person 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 Assessment Year 2011-12.

The Ld.DR for the Revenue placed reliance on the orders of the authorities below.

We have heard the rival contentions and perused the record. Briefly in the facts of the case the assessee was held to be in default u/s 2(22)(e) of the Act. The Assessing Officer in his order passed u/s 154 of the Act dated 26.12.2013 observed that the assessee was one of the two Directors in M/s.

The assessee was held to be in default and addition of Rs.10,14,893/- to the extent of accumulated profits on the date of advancing the loan was Rs.9,65,100/- (upto previous year) + Rs.49,793/- (profit during the year as per assessee’s working = Rs.10,14,893/-) and the same were added in the hands of the assessee.

The CIT(A) upheld the addition in the hands of the assessee against which the assessee is in appeal before us.

We have heard the rival contentions and perused the record. Similar issues arose before the Tribunal with regard to related concerns, wherein it was noted that though advances were made but on the same date, there were transaction of receipt and payments itself by both the parties. The Tribunal thus addressed itself as to whether such transaction is covered in the definition of deemed dividend in the hands of the assessee u/s 2(22)(e) of the Act or not. The Tribunal held the issue to be covered by the decision of Praveen Bhimsi Chheda Shivsadan vs DCIT reported in 141 TTJ 58 against which the Hon’ble Bombay High Court in the case of CIT vs Pravin Bhimsi Chheda in 48 3 taxmann.com 151 (Bombay) has dismissed the appeal of the Revenue holding that when the company got back its funds on the same day, it cannot fall into the definition of the deemed dividend.

Following the same parity of reasoning and decision of Hon’ble Bombay High Court, the issue was decided in favour of the assessee holding that where the transaction entered into by two companies were business transactions; where both the parties were engaged in similar trade and activities; then it was not hit by the provisions of section 2(22)(e) of the Act. In the facts and circumstances of the present case, the issue is similar wherein the business transaction was between two parties and the assessee had produced the bank statements during the course of hearing before us evidencing the amount being advanced and received back on the same date. In such scenario, the issue stands squarely covered by the order of Hon’ble Bombay High Court in CIT vs Pravin Bhimsi Chheda (supra). Accordingly, we find no merit in the addition in the hands of the assessee u/s 2(22)(e) of the Act and the same is deleted.

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