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Income Tax Appellate Tribunal, “H” Bench, Mumbai
O R D E R Per B.R. Baskaran (AM) :-
The appeal filed by the assessee is directed against the order dated 30.12.2015 passed by the learned CIT(A)-9, Mumbai and it relates to A.Y. 2010-11. The assessee is aggrieved by the decision of the learned CIT(A) in confirming the addition relating to share application money made u/s. 68 of the I.T. Act and also in confirming the addition relating to deemed dividend.
The assessee filed its return of income declaring a total income of ` 29,540/-. The Assessing Officer noticed that the assessee has shown receipt of “share application money” of ` 21,48,000/- in the balance sheet. It was also noticed that the same was received by the assessee during the financial year 2001-02. The Assessing Officer asked the assessee as to why share application money stated above should not be assessed u/s. 68 of the Act. Since the assessee did not furnish any reply, the Assessing Officer assessed the above said sum of ` 21.48 lakhs as income of the assessee u/s. 68 of the Act.
The Assessing Officer further noticed that the Sundry debtor’s balance consisted of amount due to the assessee from the following directors:-
(a) Shri Sumit Singhania – ` 83,500/- (b) Shri Amit Singhania – ` 13,92,853/- The Assessing Officer noticed that the above said two parties are directors of the assessee-company and holds 85% shares of the company. Accordingly, he assessed the above said sums aggregating to ` 14,76,353/- as deemed dividend u/s. 2(22)(e) of the Act.
Before the learned CIT(A), the assessee submitted that it received share application money in the earlier years, i.e., a sum of ` 10.88 lakhs was received upto financial year 2001-02 and further sum of ` 10.60 lakhs was received in F.Y. 2002-03. It was further submitted that the above said share application money have been accepted in all the years upto the immediately preceding assessment year. Accordingly, it was submitted that the Assessing Officer was not justified in assessing money received in the earlier years as income u/s. 68 of the Act during the year under consideration. The learned CIT(A) took the view that the above said amount can be assessed u/s. 41(1) of the Act as the assessee has not allotted shares against share application money. Accordingly, he confirmed the addition made by the Assessing Officer.
The learned CIT(A) also confirmed the addition made u/s. 2(22)(e) of the Act by placing reliance on the decision rendered by Hon'ble Supreme Court in the case of Smt. Tarulata Shyam Vs. CIT (108 ITR 345) and Ms P. Sarda Vs. CIT (96 Taxman 11). Aggrieved by the order passed by the learned CIT(A), the assessee has filed this appeal before us.
We have heard the parties and perused the record. First issue relates to addition made u/s. 68 of the Act. There is no dispute with regard to fact that the impugned share application money was received in the financial year 2002-03 and earlier years, meaning thereby, this amount was not received by the assessee during the year under consideration. The Hon'ble Delhi High Court had an occasion to consider an identical issue in the case of CIT Vs. Usha Stud Agriculture Farms Ltd. (order dated 14.3.2008), wherein it was held that addition should not be made in respect of cash credit, if the same was received during the year under consideration. Relevant observation made by Hon'ble High Court is extracted below:-
6. Section 68 of the Act reads as under:
Cash credits Where any sum is found credited in the books of an assessed maintained for any previous year, and the assessed offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessed of that previous year.
According to this Section, any sum found credited in the books of the assessed maintained for a previous year may be charged to income tax as the income of the assessed of that previous year, if -
(i) The assessed offers no explanation about the nature of sources of such sum, or (ii) The explanation offered by him is, in the opinion of the Assessing Officer, not satisfactory.
Here, the CIT(A) has deleted the addition of Rs. 15 lacs mainly on the ground that this credit balance of Rs. 15 lacs is being reflected in the accounts of the assessed over the past four to five years or so and hence this was not a fresh credit entry of the previous year under consideration and these credit entries were already made and accounted for in the assessment years 1995-96 and 1997-98 which were introduced in the form of advance against breeding stallions owned by the assessed and thus these credit entries did not relate to the year under consideration for being considered under Section 68 of the Act.
9. Since it is a finding of fact recorded by the CIT(A) that this credit balance appearing in the accounts of the assessed, does not pertain to the year under consideration, under these circumstances, the Assessing Officer was not justified in making the impugned addition under Section 68 of the Act and as such no fault can be found with the order of the Tribunal which has endorsed the decision of the CIT(A).
The above being the position, no fault can be found with the view taken by the Tribunal.
7. In the instant case also, the Assessing Officer was not justified in law in making addition during the year under consideration, since the assessee has not received impugned share application money during the year under consideration. Accordingly, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to delete the addition made u/s. 68 of the Act.
8. Next issue relates to addition made by the Assessing Officer u/s. 2(22)(e) of the Act. A careful perusal of the provisions of section 2(22)(e) of the Act would show that cause of action u/s. 2(22)(e) of the Act shall arise in the hands of the shareholder and not in the hands of the company, which paid loan or advance to shareholder. In the instant case, the assessee-company has paid money to its shareholder as advance and hence the cause of action u/s. 2(22)(e) of the Act, if any, shall arise in the hands of the shareholders only. However, we notice that the Assessing Officer has invoked provisions of section 2(22)(e) of the Act in the hands of assessee-company, which is not in accordance with law. Accordingly, the learned CIT(A) was not justified in confirming the addition made by the Assessing Officer. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to delete the addition made u/s. 2(22)(e) of the Act.
In the result, appeal filed by the assessee is allowed. Order has been pronounced in the Court on 25.10.2018.