PUKHRAJ SHREEMALJI JAIN,MUMBAI vs. ITO WARD 19(2)(4), MUMBAI
Facts
The assessee, Pukhraj Shreemalji Jain, received a loan of Rs. 10,04,41,107/- from M/s. Allied Ferromet Pvt. Ltd., in which he held a substantial shareholding. The Assessing Officer treated a portion of this loan, amounting to Rs. 44,05,577/-, as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961, due to the company's accumulated profits. The assessee's appeal to the CIT(A) was dismissed due to non-compliance.
Held
The Tribunal noted that details regarding the company's business and the nature of the transactions were not adequately filed before the lower authorities. While the assessee claimed the business was money lending and the account was an open mutual current account, these claims required further verification. Due to the lack of sufficient evidence and non-compliance, the Tribunal set aside the CIT(A)'s order.
Key Issues
Whether the loan received by the assessee from a company in which he holds substantial interest can be treated as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961, and whether the company's business was primarily money lending.
Sections Cited
2(22)(e), 143(3)
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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
PER OM PRAKASH KANT, AM
This appeal by the assessee is directed against order dated 07.05.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2016-17, raising following grounds:
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On the Facts and circumstances of the case and law the Ld. AO erred 1. On the Facts and circumstances of the case and law the Ld. AO erred 1. On the Facts and circumstances of the case and law the Ld. AO erred in making the addition of Rs. 44,05,577/ in making the addition of Rs. 44,05,577/- under section 2(22)(e) of the 2(22)(e) of the Act. 2. The Ld. AO failed to appreciate that the M/s Allied Ferromet Pvt. Ltd 2. The Ld. AO failed to appreciate that the M/s Allied Ferromet Pvt. Ltd 2. The Ld. AO failed to appreciate that the M/s Allied Ferromet Pvt. Ltd during the year under consideration had earned a substantial part of the during the year under consideration had earned a substantial part of the during the year under consideration had earned a substantial part of the profit from the money lending business, so the provision of section profit from the money lending business, so the provision of section profit from the money lending business, so the provision of section 2(22)(e) could not ap 2(22)(e) could not apply in the present case. 3. Without prejudice to the earlier grounds the Ld. AO Failed to appreciate 3. Without prejudice to the earlier grounds the Ld. AO Failed to appreciate 3. Without prejudice to the earlier grounds the Ld. AO Failed to appreciate the transaction between M/s Rico Steel and M/s Allied Ferromet Pvt. Ltd the transaction between M/s Rico Steel and M/s Allied Ferromet Pvt. Ltd the transaction between M/s Rico Steel and M/s Allied Ferromet Pvt. Ltd was a business transaction and the account was an Open Mutual was a business transaction and the account was an Open Mutual was a business transaction and the account was an Open Mutual Current Account so th Current Account so the provision of section 2(22)(e) does not apply in this e provision of section 2(22)(e) does not apply in this case. 4. Without prejudice the Ld. AO erred in treating the business transaction 4. Without prejudice the Ld. AO erred in treating the business transaction 4. Without prejudice the Ld. AO erred in treating the business transaction as a transaction of giving a loan whereas the frequency and nature of the as a transaction of giving a loan whereas the frequency and nature of the as a transaction of giving a loan whereas the frequency and nature of the transaction itself prove that it is a business transaction itself prove that it is a business transaction. 5. Without prejudice the Ld. AO failed to calculate the correct 5. Without prejudice the Ld. AO failed to calculate the correct 5. Without prejudice the Ld. AO failed to calculate the correct accumulated profit on the date when the provision of section 2(22)(e) was accumulated profit on the date when the provision of section 2(22)(e) was accumulated profit on the date when the provision of section 2(22)(e) was applied by the AO. applied by the AO. 6. On the facts and circumstances of the case and in law, the learned 6. On the facts and circumstances of the case and in law, the learned 6. On the facts and circumstances of the case and in law, the learned Commissioner of Commissioner of Income-Tax (Appeals) [in short CIT(A)] erred in Tax (Appeals) [in short CIT(A)] erred in dismissing the appeal of the appellant. dismissing the appeal of the appellant. 7. On the facts and circumstances of the case and in law, the Order 7. On the facts and circumstances of the case and in law, the Order 7. On the facts and circumstances of the case and in law, the Order dated 07.05.2024 dated 07.05.2024 passed by learned CIT(A) is violative of principles of passed by learned CIT(A) is violative of principles of natural Justice in not affo natural Justice in not affording reasonable opportunity of hearing; rding reasonable opportunity of hearing; 8. On the facts and circumstances of the case and in law, learned CIT(A) 8. On the facts and circumstances of the case and in law, learned CIT(A) 8. On the facts and circumstances of the case and in law, learned CIT(A) ought to have observed Scrupulously procedure of hearing which is an ought to have observed Scrupulously procedure of hearing which is an ought to have observed Scrupulously procedure of hearing which is an essential Component of fair and reasonable procedure while dismissing essential Component of fair and reasonable procedure while dismissing essential Component of fair and reasonable procedure while dismissing the appeal of the appellant in terms of the appeal of the appellant in terms of the National Faceless Appeal National Faceless Appeal Centre. 2. Briefly stated facts of the case are that the assessee filed Briefly stated facts of the case are that the assessee filed Briefly stated facts of the case are that the assessee filed return of income on 22.09.2016 declaring total income at return of income on 22.09.2016 declaring total income at return of income on 22.09.2016 declaring total income at Rs.10,97,760/-. The return of income filed by the assessee w . The return of income filed by the assessee was . The return of income filed by the assessee w selected for scrutiny assessment and statutory notices under the selected for scrutiny assessment and statutory notices under the selected for scrutiny assessment and statutory notices under the Income-tax Act,1961 ( in short ‘the Act’) ,1961 ( in short ‘the Act’) were issued and served were issued and served upon the assessee. During scrutiny proceedings, the Assessing upon the assessee. During scrutiny proceedings, the Assessing upon the assessee. During scrutiny proceedings, the Assessing Officer observed that the assessee was having substantial share Officer observed that the assessee was having substantial sh Officer observed that the assessee was having substantial sh
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holding in M/s Allied Ferromet Pvt. holding in M/s Allied Ferromet Pvt. Ltd. From the audit report in the audit report in Form No. 3CB, the Assessing Officer observed that assessee had he Assessing Officer observed that assessee had he Assessing Officer observed that assessee had taken a loan of Rs.10, taken a loan of Rs.10,04,41,107/- from the company M/s from the company M/s Allied Ferromet Pvt. Ltd., in which he was having substantial share in which he was having substantial share holding. The loan given by private limited company to share holder . The loan given by private limited company to share holder . The loan given by private limited company to share holder is deemed to be dividend in terms of section 2(22)(e) of the Act. is deemed to be dividend in terms of section 2(22)(e) of the Act. is deemed to be dividend in terms of section 2(22)(e) of the Act. Accordingly, the Assessing Officer issued show ccordingly, the Assessing Officer issued show cause cause notice to the assessee as why the said assessee as why the said loan amount should not be amount should not be treated as deemed dividend in terms of section 2(22)(e) of the Act. No reply was deemed dividend in terms of section 2(22)(e) of the Act. No reply was deemed dividend in terms of section 2(22)(e) of the Act. No reply was filed by the assessee in response to the show cause notice and filed by the assessee in response to the show cause notice and filed by the assessee in response to the show cause notice and therefore, the Assessing Officer therefore, the Assessing Officer, in the assessment order passed on in the assessment order passed on 29.12.2018 in terms of section 143(3) of the 29.12.2018 in terms of section 143(3) of the Act Act restricted the deemed dividend up to the accumulated profit deemed dividend up to the accumulated profit of company of company as on 31.03.2016 amounting to Rs.44,05,577/ 31.03.2016 amounting to Rs.44,05,577/-.
On further appeal, the Ld. CIT(A) issued various notices for the On further appeal, the Ld. CIT(A) issued various notices for the On further appeal, the Ld. CIT(A) issued various notices for the hearing however, no compliance was made on the part of the hearing however, no compliance was made on the part of the hearing however, no compliance was made on the part of the assessee. The relevant part of the decision of the Ld. CIT(A) is ee. The relevant part of the decision of the Ld. CIT(A) is ee. The relevant part of the decision of the Ld. CIT(A) is reproduced as under: reproduced as under:
“4. During the appellate proceedings, notices for hearing were issued on 4. During the appellate proceedings, notices for hearing were issued on 4. During the appellate proceedings, notices for hearing were issued on 23.01.2021 03.11.2022, 25.01.2023, 31.10.2023 & 01.05.2024 for 23.01.2021 03.11.2022, 25.01.2023, 31.10.2023 & 01.05.2024 for 23.01.2021 03.11.2022, 25.01.2023, 31.10.2023 & 01.05.2024 for furnishing submissions and evidences in furnishing submissions and evidences in support of grounds of appeals. support of grounds of appeals. However, appellant did not respond to any of the said notices. All these However, appellant did not respond to any of the said notices. All these However, appellant did not respond to any of the said notices. All these notices were issued through ITBA System via e notices were issued through ITBA System via e-Mail ID provided in the Mail ID provided in the ITBA Portal and successfully delivered to appellant. However, the ITBA Portal and successfully delivered to appellant. However, the ITBA Portal and successfully delivered to appellant. However, the appellant neithe appellant neither filed any submission nor made any request for r filed any submission nor made any request for adjournment.”
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3.1 In view of the non In view of the non-compliance on the part of the assessee, the compliance on the part of the assessee, the Ld. CIT(A) decided the issue in dispute ex Ld. CIT(A) decided the issue in dispute ex-parte after verification of parte after verification of the details available on record observing as under: the details available on record observing as under:
“8.3 The case of the assessee was selected for scrutiny under CASS for The case of the assessee was selected for scrutiny under CASS for The case of the assessee was selected for scrutiny under CASS for verification of unsecured loans and large squared up loans during the verification of unsecured loans and large squared up loans during the verification of unsecured loans and large squared up loans during the year. During the course of asstt proceedings, On perusal of the Audit report in During the course of asstt proceedings, On perusal of the Audit report in During the course of asstt proceedings, On perusal of the Audit report in Form No. 3CB, it was seen by the AO th 3CB, it was seen by the AO that the appellant had taken a at the appellant had taken a loan from M/s. Allied Ferromet Pvt. Ltd. to the tune of Rs. loan from M/s. Allied Ferromet Pvt. Ltd. to the tune of Rs. loan from M/s. Allied Ferromet Pvt. Ltd. to the tune of Rs. 10,04,41,107/- -. Further, from the Audit report, Column no. 23 with . Further, from the Audit report, Column no. 23 with regards to payment made to persons specified u/s. 40(2)(b) of the I.T. regards to payment made to persons specified u/s. 40(2)(b) of the I.T. regards to payment made to persons specified u/s. 40(2)(b) of the I.T. Act, it was seen that the ass Act, it was seen that the assessee is a Director in the Company and essee is a Director in the Company and paid interest to the Company and also is in receipt of remuneration from paid interest to the Company and also is in receipt of remuneration from paid interest to the Company and also is in receipt of remuneration from the Company, M/s. Allied Ferromet Pvt. Ltd. It is also seen from the the Company, M/s. Allied Ferromet Pvt. Ltd. It is also seen from the the Company, M/s. Allied Ferromet Pvt. Ltd. It is also seen from the details filed that the assessee was a Director in the Company having details filed that the assessee was a Director in the Company having details filed that the assessee was a Director in the Company having 31.75% holding in the said company and the said Company had holding in the said company and the said Company had holding in the said company and the said Company had reserves & surplus as on 31.03.2015 at Rs. 25,26,438/ reserves & surplus as on 31.03.2015 at Rs. 25,26,438/-. Further, . Further, From the copy of the return filed by the said company for A.Y. 2016 the copy of the return filed by the said company for A.Y. 2016 the copy of the return filed by the said company for A.Y. 2016-17, it was seen that it was having Surplus in the Company's accounts was seen that it was having Surplus in the Company's accounts was seen that it was having Surplus in the Company's accounts to the tune of Rs. 44,05,5771 tune of Rs. 44,05,5771-as on 31.03.2016. In the instant case, it is not as on 31.03.2016. In the instant case, it is not disputed that the amounts received by the appellate from the company, disputed that the amounts received by the appellate from the company, disputed that the amounts received by the appellate from the company, M/s. Allied Ferromet Pvt. Ltd. are unsecured M/s. Allied Ferromet Pvt. Ltd. are unsecured loans. Further, the loans. Further, the appellate was found to be the substantial appellate was found to be the substantial shareholder of the shareholder of the company as on 31.03.2015 and 31.03.2016. Further, from perusal of the as on 31.03.2015 and 31.03.2016. Further, from perusal of the as on 31.03.2015 and 31.03.2016. Further, from perusal of the Balance Sheet of the above Sheet of the above mentioned company namely M/s. Allied Ferromet company namely M/s. Allied Ferromet Pvt. Ltd., as on Ltd., as on 31.03.2016, it was observed that the said concern had 31.03.2016, it was observed that the said concern had substantial accumulated accumulated profits to the tune of Rs. 44,05,577/ profits to the tune of Rs. 44,05,577/-. As such, the provisions of Sec 2(22)(e) are squarely applicable in the case of the the provisions of Sec 2(22)(e) are squarely applicable in the case of the the provisions of Sec 2(22)(e) are squarely applicable in the case of the appellate in respect of receipts of such loans. Further, since, the appellate in respect of receipts of such loans. Further, since, the appellate in respect of receipts of such loans. Further, since, the business of the above mentioned Company is not that of money len business of the above mentioned Company is not that of money len business of the above mentioned Company is not that of money lending because (as per the return filed by the Company) and the said Company because (as per the return filed by the Company) and the said Company because (as per the return filed by the Company) and the said Company was found to be in the business of Trading and therefore, the loan given was found to be in the business of Trading and therefore, the loan given was found to be in the business of Trading and therefore, the loan given by it to the appellate does not fall within the ambit of the exemption by it to the appellate does not fall within the ambit of the exemption by it to the appellate does not fall within the ambit of the exemption provided in section 2(22). Further, s provided in section 2(22). Further, section 2(22)(e) includes within its ection 2(22)(e) includes within its scope and ambit all payments made by the company to the shareholder scope and ambit all payments made by the company to the shareholder scope and ambit all payments made by the company to the shareholder or to the concerns in which such or to the concerns in which such shareholder holds substantial interest shareholder holds substantial interest or voting power. Therefore, The provisions of Sec 2(22)(e) are clearly or voting power. Therefore, The provisions of Sec 2(22)(e) are clearly or voting power. Therefore, The provisions of Sec 2(22)(e) are clearly applicable in respect of the loan received by the appellate from the e in respect of the loan received by the appellate from the e in respect of the loan received by the appellate from the abovementioned company in which he is having substantiainterest as abovementioned company in which he is having substantiainterest as abovementioned company in which he is having substantiainterest as shareholder. Further, during the year under consideration, the appellate shareholder. Further, during the year under consideration, the appellate shareholder. Further, during the year under consideration, the appellate had taken loans and also made repayments on various date had taken loans and also made repayments on various date had taken loans and also made repayments on various dates. Therefore, the peak credit of Rs. 2,45,98,000/ peak credit of Rs. 2,45,98,000/- as on 22.01.2016 was as on 22.01.2016 was rightly considered as loan taken by the AO for the purpose of computing rightly considered as loan taken by the AO for the purpose of computing rightly considered as loan taken by the AO for the purpose of computing deemed dividend duction u/s 2(22)(e) of the Act and this amount of deemed dividend duction u/s 2(22)(e) of the Act and this amount of deemed dividend duction u/s 2(22)(e) of the Act and this amount of unsecured loan of Rs. 2,45,98,000/ unsecured loan of Rs. 2,45,98,000/- was brought to tax as deemed ht to tax as deemed dividend in the hands of the appellate as per the provisions of sec. dividend in the hands of the appellate as per the provisions of sec. dividend in the hands of the appellate as per the provisions of sec. 2(22)(e) of | T Act. However, the addition was rightly restricted to the 2(22)(e) of | T Act. However, the addition was rightly restricted to the 2(22)(e) of | T Act. However, the addition was rightly restricted to the
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Reserves & Surplus of the company, M/s. Allief Ferromet Pvt. Ltd. as on Reserves & Surplus of the company, M/s. Allief Ferromet Pvt. Ltd. as on Reserves & Surplus of the company, M/s. Allief Ferromet Pvt. Ltd. as on 31.03.2016 which stood 31.03.2016 which stood at Rs. 44,05,577. 8.4 In the Statement of facts submitted by the appellate, it has been 8.4 In the Statement of facts submitted by the appellate, it has been 8.4 In the Statement of facts submitted by the appellate, it has been claimed that he is having an open mutual current account with the said claimed that he is having an open mutual current account with the said claimed that he is having an open mutual current account with the said company in which funds are received/ paid as per requirement and company in which funds are received/ paid as per requirement and company in which funds are received/ paid as per requirement and provisions of sec 2(22)(e) are provisions of sec 2(22)(e) are not applicable in case of open mutual not applicable in case of open mutual current account. During the appeal proceedings, the appellant has been current account. During the appeal proceedings, the appellant has been current account. During the appeal proceedings, the appellant has been provided sufficient opportunities but appellant failed to submit any provided sufficient opportunities but appellant failed to submit any provided sufficient opportunities but appellant failed to submit any submission or evidence in appeal proceedings in support of grounds of submission or evidence in appeal proceedings in support of grounds of submission or evidence in appeal proceedings in support of grounds of appeal as well as statement of facts and remained non s well as statement of facts and remained non-compliant. In compliant. In view of the above facts, it is held that appellant is not interested in view of the above facts, it is held that appellant is not interested in view of the above facts, it is held that appellant is not interested in pursuing the appeal and the claims made by the appellant do not have pursuing the appeal and the claims made by the appellant do not have pursuing the appeal and the claims made by the appellant do not have any strength 9. Therefore, on the facts of the case and 9. Therefore, on the facts of the case and as per legal provisions u/s as per legal provisions u/s 2(22)(e) of the Act, I am convinced that all the conditions specified in the 2(22)(e) of the Act, I am convinced that all the conditions specified in the 2(22)(e) of the Act, I am convinced that all the conditions specified in the said section to charge the loan taken by appellate from the company, in said section to charge the loan taken by appellate from the company, in said section to charge the loan taken by appellate from the company, in which he is having specified substantial interest, as deemed dividend which he is having specified substantial interest, as deemed dividend which he is having specified substantial interest, as deemed dividend are fulfilled and therefore, I am constrained to uphold the order of the illed and therefore, I am constrained to uphold the order of the illed and therefore, I am constrained to uphold the order of the AO and accordingly all the grounds raised in the appeal are dismissed. AO and accordingly all the grounds raised in the appeal are dismissed. AO and accordingly all the grounds raised in the appeal are dismissed.” 4. We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record including the Paper Book filed by the relevant material on record including the Paper Book f relevant material on record including the Paper Book f assessee containing page 1 to 67. assessee containing page 1 to 67.
4.1 The Ld. CIT(A) has upheld the addition on merit in view of The Ld. CIT(A) has upheld the addition on merit in view of The Ld. CIT(A) has upheld the addition on merit in view of following observations : following observations :
(i) Business of the assessee was not money lending as per the (i) Business of the assessee was not money lending as per the (i) Business of the assessee was not money lending as per the return of income filed by the assessee. return of income filed by the assessee.
(ii) It was a loan transaction and the assessee was having 31.75% transaction and the assessee was having 31.75% transaction and the assessee was having 31.75% holding in the said company. holding in the said company.
(iii) Peak of the loan was on 22.01.2016 amounting to Peak of the loan was on 22.01.2016 amounting to Peak of the loan was on 22.01.2016 amounting to Rs.2,45,98,000/- but the reserve and surplus of the company M/s but the reserve and surplus of the company M/s but the reserve and surplus of the company M/s Allied Ferromet Pvt. Ltd. as on 31.03.2016 stood on Rs.44,05,577/- Allied Ferromet Pvt. Ltd. as on 31.03.2016 stood on Rs.44,05, Allied Ferromet Pvt. Ltd. as on 31.03.2016 stood on Rs.44,05,
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and therefore, though the peak of the loan amount was much more and therefore, though the peak of the loan amount was much more and therefore, though the peak of the loan amount was much more however deemed dividend was restricted to the extent of however deemed dividend was restricted to the extent of however deemed dividend was restricted to the extent of Rs.44,05,577/-.
4.2 Before us, the Ld. counsel of the assessee submitted Before us, the Ld. counsel of the assessee submitted Before us, the Ld. counsel of the assessee submitted that firstly, the substantial business of the assessee wa the substantial business of the assessee was of the money the substantial business of the assessee wa lending and in support thereof support thereof, the Ld. counsel referred to Paper the Ld. counsel referred to Paper Book page 23 wherein the bifurcation of the profit earned M/s Book page 23 wherein the bifurcation of the profit earned M/s Book page 23 wherein the bifurcation of the profit earned M/s Allied Ferromet Pvt. Ltd. is extracted as under: Allied Ferromet Pvt. Ltd. is extracted as under:
“Bifurcation of the Profit earned by M/s Allied Feromate Pvt Ltd Bifurcation of the Profit earned by M/s Allied Feromate Pvt Ltd Bifurcation of the Profit earned by M/s Allied Feromate Pvt Ltd Particulars Amount Net Profit Before Tax as per Profit & Loss Account Net Profit Before Tax as per Profit & Loss Account (After extra ordinary item which is Foreign Exchange Loss) (After extra ordinary item which is Foreign Exchange Loss) (A) 28,22,939 Interest Income as per Schedule 18 Interest Income as per Schedule 18 17,05,718 Less:- 10% Expenses 1,70,572 Interest income net which is part of Net Profit Interest income net which is (B) 15,35,146 Percentage of the Interest income of Net Profit(B*100/A) Percentage of the Interest income of Net Profit(B*100/A) 54 So interest income is substantial part of the business of the assessee as it is more than So interest income is substantial part of the business of the assessee as it is more than So interest income is substantial part of the business of the assessee as it is more than 50 of the Net Profit.” 4.3 According to the Ld. counsel for the According to the Ld. counsel for the assessee assessee, the interest income being more than the income being more than the 51% of profit turnover, therefore the of profit turnover, therefore the business of the company was of money lending. In support of business of the company was of money lending. business of the company was of money lending. contention that interest profit being more than 51%, the contention that interest profit being more than 51%, the contention that interest profit being more than 51%, the substantial business will be money lending, the as substantial business will be money lending, the assessee relied on sessee relied on the decision of the Hon’ble High Court of Bombay in the case of the decision of the Hon’ble High Court of Bombay in the case of the decision of the Hon’ble High Court of Bombay in the case of Parle Plastic Ltd. (2011) 196 Taxman 62 (Bombay) and decision of Parle Plastic Ltd. (2011) 196 Taxman 62 (Bombay) and decision of Parle Plastic Ltd. (2011) 196 Taxman 62 (Bombay) and decision of the Co-ordinate Bench of the Mumbai Tribunal in the case of ordinate Bench of the Mumbai Tribunal in the case of ordinate Bench of the Mumbai Tribunal in the case of Jayant H. Modi [2012] 28 taxmann.com 252 (Mumbai). Jayant H. Modi [2012] 28 taxmann.com 252 (Mumbai). Jayant H. Modi [2012] 28 taxmann.com 252 (Mumbai).
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4.4 Secondly, the ld counsel submitted that t Secondly, the ld counsel submitted that the he running ledger account of the assessee available on Paper Book page 61 to 66 account of the assessee available on Paper Book page 61 to 66 account of the assessee available on Paper Book page 61 to 66 indicated that assessee has given money to the company as and indicated that assessee has given money to the company as and indicated that assessee has given money to the company as and when required and same has been returned in part by the company when required and same has been returned in part by the company when required and same has been returned in part by the company and therefore, no loans have been received by the assessee and therefore, no loans have been received by the assessee and therefore, no loans have been received by the assessee and money was given for the purpose of business need of the company. money was given for the purpose of business need of the company. money was given for the purpose of business need of the company. The section 2(22)(e) of the Act cannot be invoked In respect of The section 2(22)(e) of the Act cannot be invoked In respect of The section 2(22)(e) of the Act cannot be invoked In respect of running ledger account of share holder in company, the Ld. counsel running ledger account of share holder in company, the Ld. counsel running ledger account of share holder in company, the Ld. counsel relied on the decision of the Hon’ble High Court of Punjab and relied on the decision of the Hon’ble High Court of Punjab and relied on the decision of the Hon’ble High Court of Punjab and Haryana in the case of Suraj Dev Dada [2014] 46 taxmann.com 402 Haryana in the case of Suraj Dev Dada [2014] 46 taxmann.com 402 Haryana in the case of Suraj Dev Dada [2014] 46 taxmann.com 402 (Punjab& Haryana) and decision of the Hon’ble High Court of (Punjab& Haryana) and decision of the Hon’ble High Court of (Punjab& Haryana) and decision of the Hon’ble High Court of Gujarat in the case of CIT v. Schutz Dishman Bio Tech Income-tax Gujarat in the case of CIT v. Schutz Dishman Bio Tech Income Gujarat in the case of CIT v. Schutz Dishman Bio Tech Income Appeal No. 958 of 2015. al No. 958 of 2015.
4.5 Thirdly, without prejudice ithout prejudice to above submission, to above submission, the Ld. counsel submitted that deemed dividend has to be restricted to the reserve submitted that deemed dividend has to be restricted to the reserve submitted that deemed dividend has to be restricted to the reserve and surplus as on the date of the peak credit of the loan and not to and surplus as on the date of the peak credit of the loan and not and surplus as on the date of the peak credit of the loan and not the amount of the reserve and s the reserve and surplus available at the year end. urplus available at the year end.
4.6 On the other hand, the Ld. Departmental Representative (DR) On the other hand, the Ld. Departmental Representative (DR) On the other hand, the Ld. Departmental Representative (DR) relied on the order of the lower autho relied on the order of the lower authorities.
4.7 We find that the details of business of the company M/s Allied We find that the details of business of the company M/s Allied We find that the details of business of the company M/s Allied Ferromet Pvt. Ltd. were not filed before th Ferromet Pvt. Ltd. were not filed before the lower authorities and e lower authorities and have been filed first time before us and therefore, the percentage of have been filed first time before us and therefore, the percentage of have been filed first time before us and therefore, the percentage of interest income to the total profit need verification. the total profit need verification. the total profit need verification. During the
Pukhraj Shreemalji Jain 8 ITA No. 3255/MUM/2024
course of hearing , t course of hearing , the Ld. counsel of the assessee was asked he Ld. counsel of the assessee was asked whether the assessee was having an whether the assessee was having any license issued by the RBI for y license issued by the RBI for money lending. The Ld. counsel could not give money lending. The Ld. counsel could not give any convincing reply convincing reply on the issue. Similarly, the ledger on the issue. Similarly, the ledger account of the company in the account of the company in the books of the assessee also needs books of the assessee also needs verification. Regarding the verification. Regarding the alternative claim of the asses of the assessee for restricting the addition to the see for restricting the addition to the extent of availability of the reserve and surplus as on the date of the availability of the reserve and surplus as on the date of the availability of the reserve and surplus as on the date of the peak of the loan also need to be ascertained. Since, the relevant peak of the loan also need to be ascertained. Since, the relevant peak of the loan also need to be ascertained. Since, the relevant details are not available on record and the assessee has neither details are not available on record and the assessee has neither details are not available on record and the assessee has neither filed details before the Assessing Of before the Assessing Officer nor before the Ld. CIT(A) ficer nor before the Ld. CIT(A), we feel it appropriate to set aside the order of the Ld. CIT(A) and appropriate to set aside the order of the Ld. CIT(A) and appropriate to set aside the order of the Ld. CIT(A) and restore the matter back to restore the matter back to his file for deciding afresh. The assessee file for deciding afresh. The assessee is directed to file all the details before the Ld. CIT(A) and not to take is directed to file all the details before the Ld. CIT(A) and is directed to file all the details before the Ld. CIT(A) and adjournment without any adjournment without any valid reason. The ground No valid reason. The ground Nos. 6 to 8 of the appeal are allowed whereas ground No. 1 to 5 of the appeal are the appeal are allowed whereas ground No. 1 to 5 of the appeal are the appeal are allowed whereas ground No. 1 to 5 of the appeal are allowed for statistical purposes. allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on nounced in the open Court on 27/09/2024. /09/2024. Sd/ Sd/- Sd/- Sd/ (RAJ KUMAR CHAUHAN) (RAJ KUMAR CHAUHAN (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 27/09/2024 Rahul Sharma, Sr. P.S.
Pukhraj Shreemalji Jain 9 ITA No. 3255/MUM/2024
Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai
