ACIT, NEW DELHI vs. M/S. BENTEX CONTROL & SWITCH GEAR CO., NEW DELHI

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the Asst Commissioner Of Income Tax, Circle - 50 (1), New Delhi in Commissioner Of Income Tax (Appeals) – 17, New Delhi dated 04/05/2016 for Assessment Year 2012 – 13 where the addition made by the learned AO in the hands of the assessee of Rs. 29500000/– u/s 2 (22) (e) of the Act is deleted by the learned CIT(A). The learned AO has raised in fact 5 grounds of appeal however all of them are revolving around the addition of Rs 29500000/–.

2. The brief facts of the case shows that assessee is a partnership firm having 4 partners engaged in the business of manufacturing and sale and purchase of electrical goods such as electrical meter, multiple circuit board and other electrical goods. The assessee filed its return of income declaring total income of INR 4029610/- on 31/1/2013. The case of the assessee was picked up for the scrutiny and it was found by the learned assessing officer that assessee has shown to have received unsecured loan of substantial amount from M/s. Karan Technofab Ltd in which partner Mr.

Kapil Chopra & Mr. Satish Chopra of the assessee firm are directors. The learned AO noted that assessee firm has received a loan of Rs. 295,00,000/- from the above company. The learned AO further enquired about the shareholding pattern of the above lender company as well as the audited balance sheet along with all its annexure. Based on this he found that assessee firm has substantial interest in the above company and according to the balance sheet as on 31/3/2011 the reserve and surpluses amounted to INR 35,341,000/-. Therefore the learned assessing officer noted that assessee has received a loan from the above company as an advance of rupees Rs. 2,95,00,000/- and the transaction is squarely covered u/s 2 (22) (e) of the Income Tax Act. Therefore the AO issued the show cause notice to the assessee to explain that why the above income should not be considered as deemed dividend income of the assessee under the above provisions. The assessee submitted that Assessee Company is neither a registered shareholder of any of the company not the beneficial owner of the shares of the said company. However it was admitted that the partners of the assessee firm do have substantial interest in all these 5 companies. With respect to the deposit of Rs. 295,00,000/- from the said company nothing further was submitted. Therefore the learned assessing officer on the perusal of the explanation given by the assessee held that the loans and advances given by the company in which the public are not substantially interested and at the time of giving of the loan the lender company was having Rs. 3,53,41,000/- as reserves and surplus. Further, he noted that the partners of the assessee firm are directors in the lender company and both the partners are having substantial interest 30% in the assessee firm. Therefore the learned Assessing Officer applied the provisions of Section 2 (22) (e) of the Income Tax Act and made the addition of Rs. 295,00,000/- as deemed dividend in the hands of the assessee. Consequently the order u/s 143 (3) of the Act was passed on 20/03/2015 where the returned income of the assessee of INR 5029610/- was assessed at INR 35807960/–.