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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’, NEW DELHI
Before: SH. I.C. SUDHIR & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: These two appeals by the Revenue are directed against common order dated 11/07/2012 of the learned Commissioner of Income-tax (Appeals), Central, Jaipur for assessment years 2008-09 and 2009-10 respectively. The issues raised in both the appeals are identical and, therefore, these appeals were heard together and disposed off by this consolidated order for convenience.
AY: 2008-09 2. First we take up for assessment year 2008- 09. The grounds raised in the appeal are reproduced as under:
(i) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the additions made of Rs. 16.71 lacs, Rs 40.23 lacs and Rs 11.00 Cr on account of deemed dividend u/s 2(22)(e) of the I.T. Act only on the basis of payment being made in ordinary course of business when the other condition required of payer company being involved in normal business of money lending not satisfied in the case of the assessee so that the assessee can escape from the ambit of sec.2(22)(e) of the I.T. Act? (ii) Whether on the facts and circumstances of the case, the Id. CIT(A) was right in deleting the addition made u/s 2(22)(e) of the I.T. Act when the additional evidence produced by the assessee was not produced at the time of assessment proceedings inspite of ample opportunities given by the A.O. to assessee and also that the A.O. in his remanded report had vehemently opposed the admission of additional evidence at the stage appeals? (iii) Whether on the facts and circumstances of the case, the Id. CIT (A) erred in deleting the addition made u/s 2(22)(e)of the I.T. Act only on the basis of remand report sent by the A.O. and by not giving his reasoning for deleting the said additions especially when the A.O. in his remand report has opposed the relief sought by the assessee? (iv) Whether on the facts and circumstances of the case, the Id. CIT(A) erred in deleting the addition of Rs. 16.71 lacs wherein payment was made by M/s Mangalam to M/s Matrial Buildcon Pvt. Ltd., and that both the companies in which the assessee was a substantial shareholder were under scrutiny before the same A.O. and yet the assessee failed to produced the additional evidence which was subsequently produced during the appellate proceedings? (v) Whether on the facts and circumstances of the case, the Id. CIT(A) erred deleting the additions made u/s 2(22) (e) of the I.T. Act when all the basic conditions required for application of provisions of section 2(22) (e) of the I.T. Act were satisfied in the case of the assessee and which has not been negated by the Id. CIT (A) also in his order? (vi) That the Appellant craves leaves to add, alter, modify or amend all or any of the grounds of appeal either before or at the time of hearing of appeal.
The facts in brief of the case are that in the case of the assessee, a search action under section 132 of the Income-tax Act, 1961 (in short “the Act”) was carried out on 17.09.2008 at the premises of the assessee. Consequently, notice under section 153A of the Act was issued on 28/04/2010 and served upon the assessee. In response, the assessee filed return of income on 28/09/2010 declaring total income of Rs. 42,99,530/-. Notices under section 143(2) and 142(1) of the Act were issued and served upon the assessee. In assessment completed under section 143(3) r.w.s. 153A of the Act on 28/12/2010, the learned Assessing Officer (AO) made additions for deemed dividend under section 2(22)(e) of the Act, amounting to Rs.16,71,302/-; Rs.40,23,050/- and Rs.11,00,00,000/- alongwith other additions. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who allowed relief to the assessee on the issue of deemed dividend. Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above.
In the grounds raised, the Revenue is aggrieved with the action of the Ld. CIT(A) in deleting the additions made by the Assessing Officer for deemed dividend. The facts in respect of the threes amounts held as deemed dividends as culled out from the order of the lower authorities are as under:
(a) Amount of Rs.16,71,302/- as deemed dividend: (i) The Assessing Officer observed from the confirmations filed in the assessment proceedings in the case of M/s. Martial Buildcon (P) Ltd. (In short “Martial”) that M/s. Manglam Multiplex Private Limited (in short “Manglam”) had paid Rs.13.30 crores to M/s. ‘Martial’ during March, 2008 on various dates, which was paid back by M/s. ‘Martial’ on 26/03/2008.
(ii) The detail of shareholding of Sh. Basant Bansal and Sh. Roop Bansal (i.e. the assessee) in above two companies was noted as under: name of the Martial Buildcon private Mangla multiplex private shareholder limited limited Basant Bansal 34% 74% Roop Bansal 33% 12%
(iii) The learned AO observed that Sh. Basant Bansal and Sh. Roop Bansal each had more than 10% shares in M/s. ‘Manglam’, which has given loan and each had more than 20% shares of M/s ‘Martial’, which had received the advance. (iv) M/s ‘Manglam’, which had extended the advance, had accumulated profit amounting to Rs.2,28,38,532/-as on 31/03/2008. (v) According to the learned AO, all the conditions of deemed dividend u/s 2(22)(e) of the Act were satisfied in the transaction and, thus, he proposed as why advance to the extent of accumulated profit i.e. Rs.2,28,38,532/- might not be considered as deemed dividend in the hands of Sh. Basant Bansal and Sh. Roop Bansal (i.e. the assessee) in equal proportion. (vi) Before the learned AO, the assessee contended that the accumulative profit of Rs.2,28,38,532/- included an amount of Rs.1,96,00,000/- as share premium account and which was not available for any distribution being in the nature of share capital reserve. Further, it was contended that M/s. ‘Manglam’ was having land purchase transaction with M/s. Martial, which could not be completed and the money was received back on cancellation of the deal and thus money received was under normal business transaction in the ordinary course of business and it was outside the purview of section 2 (22) (e) of the Act. (vii) The Assessing Officer accepted the contention of the assessee regarding the share premium reserve of Rs.1,96,00,000/- as not part of accumulated profit of Rs.2,28,38,532/- and thus held the Sh. Basant Bansal and Sh. Roop Bansal (the assessee) were liable for deemed dividend for the balance amount of Rs.33,44,604/-. Regarding another contention that money was given by M/s. ‘Manglam’ for land purchase from M/s ‘Martial’, the Assessing Officer observed that the during the scrutiny proceedings of M/s. ‘Manglam’ and M/s. ‘Martial’ for relevant year, no agreement to sale entered into between these two parties was filed before the Assessing Officer of those companies.. (viii) In view of above, the Ld. AO held that amount advanced by M/s ‘Manglam’ to M/s. ‘Martial’ was not on account of any specific business transaction between the two and accordingly considered the advance amount to the extent of accumulated profit of Rs.33,42,604/- as deemed dividend in the hands of the assessee and Sh. Basant Bansal and thus, one half of Rs.33,42,604/- i.e. 16,71,302/- was added as income of the assessee.
(b) Amount of Rs.40,23,050/- as deemed dividend.
(i) From the confirmations filed during the course of assessment proceeding in the case of M/s ‘Martial’, the learned AO observed that M/s. B&B Mercantile Private Limited (In short ‘B & B’) had paid Rs.80,46,100/- to M/s ‘Martial’ on 4/02/2008, which was paid back by M/s. ‘Martial’ on 25/03/2008. (ii) The ld. AO also noted the shareholding held by sh. Basant Bansal and Sh. Roop Bansal (i.e. the assessee) in above two companies as under: name of the Martial Buildcon private B&B Mercantile private shareholder limited limited Basant Bansal 34% 50% Roop Bansal 33% 50%
(iii) The ld. AO observed that Sh. Basant Bansal and Sh. Roop Bansal each had more than 10% shares in M/s. B&B, which has given the loan or advance and each had more than 20% shares of M/s ‘Martial’, which had received the advance. (iv) In view of above, the ld. AO was of the opinion that amount of Rs.80,46,100/-paid by M/s ‘B&B’ to M/s. ‘Martial’ was amounted to deemed dividend in the hands of Sh. Basant Bansal and Sh. Roop Bansal( i.e. the assessee) in equal proportion in terms of 2(22)(e) of the Act. (v) The assessee submitted that that accumulated profit in the hands of M/s ‘B&B’ was consisted of surplus arising out of sale of Rural agriculture land, which was equivalent to a capital receipt not liable to tax and thus cannot be considered for distribution as deemed dividend. Further it was contended that M/s ‘Martial’ was having consolidation cum development agreement with M/s ‘B&B’, which was cancelled later on and thus the money was received-back under the normal business transaction.
(vi) The ld. AO rejected the contention that surplus out of sale of agricultural land could not be considered for accumulated profit for the purpose of section 2(22)(e) of the Act on the ground that there was no such statutory bar under the law. Regarding another contention of the assessee, the Ld. AO held that the documents submitted by the assessee could not prove that the amount was advanced by M/s ‘B&B’ to M/s. ‘Martial’ in connection with any consolidation come development agreement. (vii) In view of above, the Ld. AO held that the amount of Rs.80,46,100/- advanced by M/s ‘B&B’ to M/s ‘Martial’ was deemed dividend in the hands of the assessee and Sh. Basant Bansal and accordingly, added one half of Rs.80,46,100/- i.e. Rs.40,23,050/- as income of the assessee.
(C) Addition of Rs.11,00,00,000/- as deemed dividend:
(i) During scrutiny proceedings of M/s Marigold Merchandise (P) Ltd. (in short ‘Marigold’), from the related party disclosures reported in the financial statement, the ld. AO observed that it has advanced Rs.11,00,00,000/- to M/s. Nova Realtor Private Limited (in short ‘Nova’) as on 31/03/2008. (ii) The ld. AO also noted the shareholding held by Sh. Roop Bansal ( i.e. the assessee) in above two companies as under: name of the Marigold merchandise Nova Realtor shareholder private limited private limited Roop Bansal 90% 50% (iii) The ld. AO observed that Sh. Roop Bansal ( i.e . the assessee) had more than 10% shares in M/s. ‘Marigold’, which has given the loan or advance and had more than 20% shares of M/s ‘Nova’, which had received the advance. (iv) The ld. AO further observed that the accumulated profit of M/s ‘Marigold’ as on 31/03/2008 was Rs.38,01,14,730/- (v) In view of the above, the ld. AO was of the opinion that amount of Rs.11 crores paid by M/s. ‘Marigold’ to M/s ‘Nova’ was amounted to deemed dividend in the hands of the assessee i.e. Roop Bansal in terms of section 2(22)(e) of the Act. (vi) The assessee contended that alleged amount of Rs.38,01,14,730/- as accumulated profit of M/s. ‘Marigold’ as on 31/03/2008 included an amount of Rs. 85 lakhs being share premium account, which is in the nature of share capital reserve and not available for distribution as deemed dividend. Further the assessee contended that M/s ‘Marigold’ was having business transaction for development-cum-consolidation of land with M/s ‘Nova’ and, thus, the money was received under normal business transaction. (vii) The ld. AO rejected the contention of the assessee on the ground that the assessee failed to file any joint-venture agreement between the two companies and accordingly held the amount of Rs.11 crore advanced by M/s. ‘Marigold’ to M/s ‘Nova’ as deemed dividend in the hands of the assessee in terms of section 2(22)(e) of the Act.
In support of the contention, that the transaction in question between the parties was business and commercial transaction, the assessee submitted following documents as additional evidences before the ld. Commissioner of Income-tax (Appeals) [in short ‘the CIT(A)]:
“a) An Agreement to sale between M/s. Maglam Multiplex Pvt. Ltd. (“Manglam”) and M/s. Martial Buildcon Pvt. Ltd. (“Martial) dated 04.02.2008. b) an MOU between M/s. Marigold Merchandise Pvt. (“Marigold”) and M/s. Nova Realtor Pvt. Ltd. (“Nova”) dated 26.03.2008. c) an MOU between M/s. B&B Mercantile Pvt. Ltd. (“B&B”) and M/s. Martila Buildcon Pvt. Ltd. (“Martial”) dated 25.01.2008. d) a balance sheet as on 31.03.2008 of M/s. Nova Realtors Pvt. Ltd. (“Nova”)”
The Ld. CIT(A) forwarded above documents to the ld. AO calling for a remand report. In the remand report, the Ld. AO opposed admission of the additional evidences, however, submitted his comments on the merit of additional evidences also.
Before the ld. CIT(A), the assessee submitted that it was under bonafide belief that the details/explanations so submitted to the ld. AO during assessment proceedings were accepted by him and no further query was raised even though enough time was available for the same, thus, according to the assessee no sufficient opportunity was provided by the Assessing Officer for submitting the agreements/MOUs during assessment proceeding. In view of the submissions, the ld. CIT(A) admitted the additional evidences filed with assessee keeping in view the various decisions cited in the impugned order. 7.1 As regards the merit of the addition, the Ld. CIT(A) observed that the present Assessing Officer after examining the evidences, did not give any adverse comments in the remand report on the claim of the assessee that the transaction was a business transaction, and thus not covered under section 2(22)(e) of the Act. The Ld. CIT(A) in the case of first two amounts of deemed dividend, followed his order in the case of Sh. Basant Bansal and deleted the additions of Rs.16,71,302/- and Rs.40,23,050/- respectively. In respect of addition of Rs.11 crore as deemed dividend, the Ld. CIT(A) observed that the present Assessing Officer in remand report had not given any adverse comment on the claim of the assessee and effectively accepted the argument of the assessee on merit. The Ld. CIT(A) also observed that in the audited accounts of M/s. ‘Marigold’, the amount of Rs. 11 crore was disclosed under the schedule- 5: “loans and advances” as advance against property and it was disclosed under the heading “related party transactions”. Considering the facts, the Ld. CIT(A) deleted the addition of Rs. 11 crore as deemed dividend in the hands of the assessee.
Before us, the Ld. CIT(DR) addressing various grounds submitted that all the grounds revolve around the three additions of the deemed dividend and therefore she argued all the grounds together, which was not opposed by the Ld. counsel of the assessee also. The Ld. CIT (DR) submitted that the Ld. CIT-A has not given any reasoning in the decision except relying upon the comment of the Assessing Officer in the remand report. She submitted that the Assessing Officer in the remand proceeding did not carry out any enquiry in respect of the agreements or MOUs submitted by the assessee. He also did not examine performance or part performance by the parties in furtherance of the contract as stated in the agreement/memorandum of understanding, responsibility of the party who terminated the agreement and compensation to other party etc. issues. She submitted that even the genuineness of the agreements or memorandum of understanding was not examined by the Assessing Officer. She contended that, if the Assessing Officer had not carried out any enquiries on said agreement/memorandum of understanding, the Ld. CIT(A) was required to be examine the additional evidences for justification of business connection between the parties. The Ld. CIT(A)
could not close his eyes and accepted whatever was forwarded by the Assessing Officer in the remand report. The Ld. CIT(DR) submitted that in view of no enquiries done in respect of additional evidences, the matter might be restored to the file of the Assessing Officer for deciding afresh the issue of deemed dividend and business connection between the parties.
On the other hand, the Ld. counsel of the assessee relied on the finding of the Ld. CIT(A) and submitted that in case of first two additions of deemed dividend of Rs. 16.71 lakhs and Rs. 40.23 lakhs, the Ld. CIT(A) has relied on the decision in the case of Sh. Basant Bansal and which has been upheld by the Tribunal, Jaipur bench in and 611/JP/2012. A copy of the decision was also provided to the Ld. CIT(DR). Accordingly, he submitted that issue in dispute is squarely covered in the favour of the assessee. He further submitted that Ld. CIT(A) forwarded the additional evidences to the Assessing Officer calling for a remand report, and, thus, due opportunity was granted to the Assessing Officer for commenting on the merit of the additional evidences. If the Assessing Officer has failed to point out any defect in the additional evidences or raise any adverse observation, the Ld. CIT-A could not be faulted and he has taken a judicious decision in the facts and circumstances of the case. Accordingly, prayed that the decision of the Ld. CIT(A) might be upheld.
We have heard the rival submission and perused the relevant material on record. We find that additions for deemed dividend of Rs.16,71,302/- and Rs.40,23,050/- were also made by the Assessing Officer in the hands of another shareholder i.e. Sh. Basant Bansal, in whose case also conditions of section 2(22)(e) of the Act were satisfied. The Ld. CIT(A), while deleting these two amounts of deemed dividend relied on his decision in the case of assessee’s brother Sh. Basant Bansal. The relevant part of the decision of the Ld. CIT-A is reproduced as under:
“8.6 The similar issue came up for consideration in the case of appellant’s brother Sh. Basant Bansal wherein out of Rs. 33,42,604/- treated to be added as deemed dividend by the AO, half of this amount being Rs. 16,71,302/- was added in the hands of Sh. Basant Bansal. Considering the facts, evidence on record, remand report of AO and the legal position, in the appeal of assessee’s brother Shri Basant Bansal, I have decided the issue in favour of Sh. Basant Bansal in appeal No. 914/10-11 A.Y. 2008-09 vide order dated 30.03.2012 (at ground no. 5). 8.7 Considering the material available on record, remand report of the AO, wherein the present AO has not given any adverse comment on the claim of the AR that the amount given was not in the nature of ‘loan’ and/or ‘advance’ as envisaged in section 2(22)(e) and was given purely in pursuance to a commercial transaction, and considering the legal position on the issue under consideration, the amount given is held to be not covered as declined dividend. Therefore, the addition of: Rs. 16,71,302/- is hereby deleted. 8.8 Second addition of Rs. 40,23,050/- u/s 2(22)(e) was made by the A.O. in the case of Sh. Roop Bansal and Sh. Basant Bansal on the similar reasoning rejecting the claim of the appellant that the said transaction was not a loan hut was a business transaction. However, after examination of additional evidence being MOU between M/s. B&B and M/s. Martial by the present A.O., the present AO has not made any adverse comment on this claim of the appellant in the remand report. AO has also mentioned that even in the case of M/s. Martial which was under scrutiny, no adverse inference was drawn by the then AO in regard to these payments. 8.9 Moreover, the similar issue has also been discussed in case of appeal of assessee’s brother Sri Basant Bansal, wherein half of the amount was added in the income as deemed dividend. Considering the facts, remand report and legal position, 1 have decided the issue in favour of Sh. Basant Bansal in appeal No. 914/10-11 A.Y. 2008-09 vide order dated 30.03.2012 (at ground no. 5). 8.10 Considering the material available on record, remand report of the AO, wherein the present AO has not given any adverse comment on the claim of the AR that the amount given was not in the nature of ‘loan’ and/or ‘advance’ as envisaged in section 2(22)(e) and was given purely in pursuance to a commercial transaction, and considering the legal position on the issue under consideration, the amount "given is held to he not covered as deemed dividend. Therefore, the addition of Rs. 40,23,050/- is hereby deleted.”
10.1 The coordinate bench of the Tribunal in the case of Sh. Basant Bansal (supra) upheld the finding of the Ld. CIT(A) with following observations:
“6. We have heard the rival contentions of both the parties and perused the material on record. The learned CIT(A) thoroughly examined the issue in detail after admitted the additional evidence and calling the remand report from the Assessing Officer. He held that these transactions made between the companies for business purposes, which does not form part of loan and advances as envisages in Section 2(22)(e) of the Act. The ld. DR has not controverted the findings given by the learned CIT(A). The case laws relied upon by the A.R. are squarely applicable on the case of assessee, therefore, we do not find any reasons to intervene in the order of learned CIT(A). Accordingly, we uphold the order of learned CIT(A).”
10.2 The Tribunal has also reproduced the finding of the Ld. CIT(A) in the case of Sh. Basant Bansal as under:
"4.10 I have considered the submission of ld. A.R., remand report of present A.O., counter comments and further submissions as well as material available on record. In the remand report, after examination of the additional evidences, the A.O. has not made any adverse comments on the argument of the A.R. that the transactions between (i) M/s Misty & M/s Martial, (ii) M/s Mangaiam and M/s Martial and (Hi)M/s B.B. Mercantile and M/s Martial are not of lender and borrower which are covered u/s 2(22)(e) and are rather commercial business transactions. In brief, A.O. has not objected to the argument of A.R. that M/s Misty entered into agreement with M/s Martial for purchase of 100 kanais of land at agreed consideration of Rs. 40 crores against which a sum of Rs. 8 crore was given as intiai payment by m/s Misty to M/s Martial and thus it was not an Ladvance within the meaning of section 2(22)9e) but was initial payment for purchase of land. Similarly the A.O. has also not made any adverse comments, after considering the additional evidence in the form of agreement, on the argument of the A.R. that M/s Mangaiam made initial payment of Rs. 8.4 crore for purchase of 100 kanais of land for total consideration of Rs. 42 crores as per the agreement filed (wherein as Rs. 33.42 lakhs was the accumulated profit of M/s Mangalam, Rs. 16.71 lakhs was added in the hands of both the assessees. 4.11 Similarly after examination of additional evidence being an MOU between M/s B.B. and M/s Martial by the the A.O. has not made any adverse comments on the argument of A. R. regarding payment being furtherance . of business transaction as per the MOU between the two A.O. has also mentioned that the case Martial was under scrutiny and no adverse inference was drawn by the then A.O. in regard to these payments.
4.12 Considering the facts and in the circumstances of the case as discussed hereinabove, material available on record including the additional evidence and also the remand report of the A.O., it is held that none of these three payments namely (i)payment made by M/s Misty to M/s Martial (leading to addition of Rs. 13,76,629/-), (ii) payment made by M/s Mangalam to M/s martial (leading to addition of Rs.16,71,302/- in the case of Shri Basant Bansal and Shri Roop Bansal both) and (iii) payment made by M/s B.B. to M/s Martial (leading to addition of Rs. 40,23,050/- in each of the case of Basant Bansal and Shri Roop Bansal) can be treated to be covered U/s 2(22)9e) of the Act in view of the various judicial pronouncements as discussed while deciding the similar issue in A. Y. 2007-08 as above. Accordingly, additions of Rs. 13,76,629/-, Rs.16,71,302/- and Rs.40,23,050/- made in A.Y. 2008-09 are hereby deleted.
10.3 Since in the case of Sh. Basant Bansal additions of deemed dividend of Rs.16,71,302/- and Rs.40,23,050/- were made on the basis of same loan or advance transactions between the companies, which are basis of additions in the case of the assessee. Thus, respectfully following the decision of the coordinate bench of Tribunal in the case of Sh. Basant Bansal (supra), we uphold the finding of the Ld. CIT(A) in respect of the additions of deemed dividend of Rs.16,71,302/- and Rs.40,23,050/- made by the ld. AO. 10.4 In respect of addition of deemed dividend of Rs. 11 crore, the Ld. CIT(A) has observed as under:
“8.11 Regarding the addition of Rs.11,00,00,000/- in the hand of Sh. Roop Bansal, the A.O. considered this transaction also as a ‘loan’ that too the loan which is covered u/s 2(22)(e) after rejecting the argument of the appellant of the transaction being not a business transaction as appellant failed to file supporting evidence (MOL or agreement). Therefore AO treated the amount of Rs. 11,00,00,000/-, to the extent o; accumulated profit as “deemed dividend” and added the same u/s 2(22)(e) of Income Tax Act, 1961. 8.12 Now during the appellate proceedings, the AR of the appellant company filed the MOU between the M/s B&B and M/s Martial as additional evidence which has been admitted by the undersigned and same was sent to the AO for his comments. After examination of additional evidence being MOU between M/s. B&B and M/s. Martial by the present A.O., the present AO has not made any adverse comment in the remand report on the claim of the appellant that the transaction is business transaction and same is not the loan of the nature to be treated as deemed dividend covered u/s 2(22)(e) of the IT Act. AO has also mentioned that even in the case of M/s. Martial which was under scrutiny, no adverse inference was drawn by the then AO in regard to these payments. 8.13 Since the present AO has not given any adverse comment on the claim of the appellant in his remand report and has effectively accepted the claim/ argument of the appellant on merits (only objecting to admission of additional evidence, which has been suitably dealt by me in the present order), it leads to straight away deletion of the addition made by the then AO without further discussion on the issue. It is just to add that MOU between M/s. Nova and M/s. Marigold shows that M/s. Nova had applied for a licence for development of an IT Park before the Director, Town and Country Planning, Government of Haryana. For this purpose, M/s. Nova approached M/s. Marigold with a proposal seeking initial funding to meet its immediate liabilities in relation to filing of the application and offered M/s. Marigold to join as a partner. In the audited accounts of M/s. Marigold an amount of Rs. 11 Crores stands disclosed under the Schedule 5: “Loans and Advances” as advance against property and the same is disclosed under the heading, ‘Related Party Transactions’. It is not in dispute that this balance sheet has been filed in the assessment of M/s. Marigold. Further, an amount of Rs. 11 Crores received from M/s. Marigold is also reflected in the Balance Sheet of M/s. Nova drawn as on 31.03.2008 under Schedule D: Sundry Creditors as advance against party. These facts are not disputed in the remand report. 8.14 Following judicial pronouncements support the appellant’s case that a commercial transaction is not hit by provisions of section 2(22)(e) of Income Tax Act, 1961: (i) CIT vs. Creative Dyeing and Printing P. Ltd (2009) 318 ITR 476 (Del), (ii) CIT vs. Ambassador Travels Pvt. Ltd (2009) 318 ITR 376 (Del) (m) CIT vs. Raj Kumar (2009) 318 ITR 462(Del), (iv) Pradeep Kumar Malhotra vs. CIT (2011) 338 ITR 538(Cal), and (v) ACIT Vs. Sunil Chopra 002 ITR (Trib.) 469 (Del.) 8.15 Considering the facts and the circumstances of the case as discussed above, material available on record, including the additional evidence and also the remand report of the AO., it is held that the payment made by M/s. Marigold to M/s. Nova (leading to addition of Rs. 11,00,00,000/- in the hands of Mr. Roop Bansal) cannot be treated to be covered u/s 2(22)(e) of the Act. Accordingly, addition of Rs.11,00,00,000/- is hereby deleted.”
10.5 Thus, we find that Ld. CIT-A concluded that the transaction in question was a commercial transaction, which is not hit by the provisions of section 2(22)(e) of the Act. While concluding that the transaction in question was a commercial transaction, the Ld. CIT-A has relied on the remand report of the Assessing Officer. The Ld. CIT-A has mentioned that the present Assessing Officer has not given any adverse comment on the claim of the assessee. Facts of the transaction of loan/advance of Rs. 11 crore by M/s ‘Merry Gold’ to M/s ‘Nova’ are identical to facts of transaction of loan/advances discussed by the Tribunal in the case of Sh. Basant Bansal (supra), wherein the Tribunal has upheld the finding of the Ld. CIT-A, that the transactions are commercial in nature and cannot be considered as loan or advances for the purpose of 2(22)(e) of the Act. Thus, respectfully, following the finding of the Tribunal in the case of Sh. Basant Bansal (supra), we uphold the finding of the Ld. CIT-A that transaction in question between M/s ‘Merry Gold’ and M/s ‘Nova’ was a commercial transaction, not hit by the provisions of section 2(22)(e) of the Act. Accordingly, ground No. 1, 3, 4 and 5 of the appeal are dismissed.
As regarding the ground No. 2, challenging the admission of additional evidences under Rule 46A of the Income Tax Rules, 1962 is concerned, we find that the Ld. CIT(A) forwarded all the additional evidences for comments of the Assessing Officer, who objected admission of the additional evidences and given comments on the merit also. As far as admission of additional evidences is concerned the Ld. CIT-A after having noted legal position in view of the decision cited in the impugned order, decided the issue as under:
“11. Coming back to the objection of the Assessing Officer to the admission of additional evidence, it is submitted that the objection is technical, inasmuch as, it is not in dispute that 70 cases of the group were simultaneously going on and the accounts / tax personnel’s were working overtime to meet the deadline of placing all the documents on record. It is not uncommon that in such circumstances, the Assessing Officer gives priority to certain cases and other cases are left to be completed just before the limitation. The Appellant was under the bonafide belief that all the requisite informations/details called for have submitted since no further queries were raised by the ACIT in these cases. Assessee has submitted the required informations on 6ih December’2011. However, the assessment was completed only on 28th December’2011 just before the limitation was to expire.
12. It is important to note here that the Assessing Officer has not made any adverse comment as to the genuineness and relevance of the additional evidence. On the contrary, the Assessing Officer having examined the additional evidence has found the same to be appropriate and relevant. In paragraph 16 onwards, the Appellant has explained the purpose and relevance of additional evidence in respect of each addition / disallowance. It may inasmuch as, the veracity of the evidence has not been doubted.
13. In the background of aforesaid legal position, it is submitted that additional evidence deserves to be admitted.”
11.1 Before us, the Ld. counsel of assessee relied on the decision of the Tribunal, Delhi benches in the case of Sh. Manoj Narain Aggarwal in to 5524/Del/2012 and submitted that finding of the Ld. CIT(A) on the issue in dispute is in agreement with the direction of the Hon’ble High Court in the case of CIT Vs. Manish Buildwell Private Limited in ITA No. 928/11 dated 15/11/2011. The relevant part of the decision in the case of Sh. Manoj Narain Agrawal (supra) is reproduced as under:
“9.2 Apropos CIT(A)’s action of admitting the additional evidence, in our considered view, in the given facts and circumstances the action is fully justified. AO has submitted the remand report on both counts Lg. admission thereof and on merits. Manish buildwell case was much earlier pronounced. In these circumstances AO should have requested Id. CIT(A) to first decide the admissibility of additional evidence and then to call remand report on merits. Having filed remand report on both counts, it does not behold on revenue now to take a technical plea in this behalf more so when Manish Buildwell case was already reported before the submission of remand report by AO. Ld. CIT(A)s reliance on Delhi High Court judgments on the cases of Text Hundred India and Virgin securities (supra) is well placed and reinforces our view. Consequently revenue ground on admission of additional evidence is dismissed.” 11.2 In our opinion, the Ld. CIT(A) has admitted the additional evidence after examining the circumstances under which those evidences could not be filed before the Assessing Officer. The Ld. CIT-A has recorded the reasons in writing for admission of those evidences and allowed a reasonable opportunity to the Assessing Officer to examine those evidences, and thus Ld. CIT-A has complied the procedure laid down in Rule 46A of Income Tax Rules. We do not find any violation of Rule 46A of the Income Tax Rules in admitting those evidences and accordingly we dismiss ground No. 2 of the appeal .
Ground No. 6 of the appeal being general in nature we are not required to adjudicate upon.
In the result, appeal of the Revenue is dismissed. /Del/2012 for AY 2009-10
In the year under consideration, also the issue of three amounts of deemed dividend is involved.
(a) Deemed dividend amounting to Rs.20,25,00,000/-
(i) In the course of scrutiny proceedings in the case of M/s Marigold Merchandise Private Limited (in short ‘Marigold’), the ld. AO observed payment of Rs.20.25 crores to M/s Zenith Realtech Private Limited. (in short ‘Zenith’) on 7/03/2009. (ii) The ld. AO noted that the assessee was holding 99% shares of M/s ‘Marigold’ and 50% shares of M/s ‘Zenith’ during the financial year 2008-09 i.e. financial year corresponding to the assessment year in consideration. (iii) According to the ld. AO, the assessee held more than 10% of shares in M/s ‘Marigold’, which has given the loan/advance and the assessee also held more than 20% shares of M/s ‘Zenith’, which has received the loan/advance. (iv) The ld. AO further noted accumulated profit of M/s. ‘Marigold’ as on 31/03/2009 at Rs.36,46,89,763/- (v) In view of above, the Ld. AO was of the opinion that the loan/advance satisfied all the conditions of deemed dividend in terms of section 2(22)(e) of the Act. (vi) The assessee contended before the Ld. AO that the assessee was not the substantial shareholder in M/s ‘Zenith’ during the relevant year. It was also contended that accumulated profit of M/s. ‘Marigold’ included an amount of Rs. 85 lakh as share premium account, which was not available for distribution of profits to shareholders. (vii) The ld. AO did not accept the contentions of the assessee that it was not shareholder during the relevant year and accordingly the ld. AO held the amount of Rs. 20.25 crores as deemed dividend in the hands of the assessee (viii) Before the Ld. CIT(A), the assessee submitted additional evidences in the form of annual return of M/s ‘Zenith’ for financial year 2008-09 filed with the registrar of companies in form No. 20B under section 159 of the companies Act, 1956 on 06/11/2009. The additional evidence was forwarded to the Assessing Officer for comments. In the remand report the Assessing Officer verified that the assessee became shareholder of M/s ‘Zenith’ on 08/09/2009 i.e. which falls in the financial year 2009-10 corresponding to assessment year 2010-11 and thus the assessee was not shareholder of the said company during relevant year.
(ix) The Ld. CIT(A) in view of examination of the documents/evidences held that the requisite condition of the assessee being a shareholder in the recipient company as required in terms of section 2(22) (e) of the Act, was not met and accordingly deleted the addition.
(b) Addition of Rs.1,10,00,000/- as deemed dividend;
(i) the ld. AO observed that M/s ‘Marigold’ had paid Rs.1.10 crores to M/s Mikado Realtors Private Limited (in short ‘Mikado’) in April 2008, which was repaid back later on. (ii) According to the learned ld. AO, the assessee satisfied the requisite shareholdings in both the companies and M/s ‘Marigold’ was having accumulated profit more than the amount advanced to M/s ‘Mikado’. (iii) According to the ld. AO the amount advanced to the assessee M/s. ‘Mikado’ satisfied all the condition of deemed dividend is in the hands of the assessee. (iv) Before the ld. AO Assessing Officer, the assessee contended that Ms. ‘Marigold’ and M/s. ‘Mikado’ were having a business relationship and money in question was received under normal business transactions. It was also contended that the accumulated profit of M/s ‘Marigold’ included share premium amount and exempted income, which was not available for distribution of dividend. (v) The ld. AO was not satisfied with the submission of the assessee and added the amount of Rs. 1.10 crores as deemed dividend. (vi) Before the Ld. CIT(A), the assessee submitted a copy of an agreement to sale between M/s ‘Mikado’ and M/s
‘Marigold’ dated 03/04/2008, which was forwarded to the Assessing Officer calling for his comments. The Assessing Officer forwarded his comments on the said additional evidence that that total sale consideration was of Rs. 5.50 crores and against which M/s ‘Marigold’ has paid an amount of Rs.1.10 crores to M/s ‘Mikado’. The Assessing Officer did not observe any adverse comments in respect of the transaction. (vii) The Ld. CIT(A) relying on the observation of the Assessing Officer on additional evidence, accepted the claim of the assessee that it was a business transactions and accordingly, the addition of Rs. 1.10 crore as deemed dividend in the hands of the assessee, was deleted.
(C) Addition of Rs. 3, 62, 772/-as deemed dividend.
(i) The ld. AO observed that M/s ‘Mikado’ had paid Rs.1.7 crores to M/s Orange Spa Hotels and Resort Private Limited (in short M/s ‘Orange’) and both the assessee and his brother Sh. Basant Bansal fulfilled the conditions of required shareholdings in both the companies in terms of section 2(22)(e) of the Act. The ld. AO also observed net profit of Rs 7.25 lakhs as on 31/03/2009 in case of M/s ‘Mikado’, the entity who provided loans/advance. According to the ld. AO, the transaction satisfied all the conditions of deemed dividend . (ii) The assessee submitted that M/s ‘Mikado did not have any accumulated profits and there for the provisions of deemed dividend were not applicable .
(iii) The ld. AO, however, held that all the conditions of deemed dividend were satisfied and accordingly 50% of the amount to the extent of net profit, which worked out to Rs.3,62,772/- was held as deemed dividend in the hand of assessee and balance 50% amounting to Rs. 3, 62, 772 in the hand of Sh. Basant Bansal. (iv) Before the Ld. CIT(A), the assessee submitted that M/s ‘Mikado’ had accumulated losses of Rs. 1.47 crores at the beginning of the financial year 2008-09 and after making profit of Rs 7.25 Lacs during the year, still there was a accumulated loss of Rs. 1.41 crores at the end of the year and thus one of the the condition of section 2(22)(e) of the Act of having accumulated profit was not satisfied. The Ld. AO in the remand report made no adverse comment in respect of the factual position of the accumulated loss. (v) The Ld. CIT(A) after considering the remand report deleted the addition.
In the grounds no. 1, 3 & 4, the Revenue has agitated the relief allowed by the Ld. CIT(A) against the three additions made for deemed dividend by the Assessing Officer.
15.1 Before us, the Ld. CIT(DR) relying on the order of the Assessing Officer submitted that arguments made by her in the assessment year 2008-09, applied to the year under consideration also.
15.2 The Ld. counsel of the assessee, on the other hand, relied on the finding of the Ld. CIT-A and accordingly prayed for upholding the same.
15.3 We have heard the rival submissions and perused the relevant material on record. As far as addition of deemed dividend of Rs.20.25 crores is concerned, the Ld. CIT-A has allowed the relief on the ground that the assessee was not holding substantial shareholding in M/s. ‘Zenith’ as on the date of loan transaction and, therefore, one of the conditions of section 2(22)(e) of the Act was not met. The finding of the Ld. CIT(A) is reproduced as under:
“12.5 I have considered the submission of learned A.R., remand report of the AO, counter comments of AR and have perused the material on record. The addition of Rs.20,25,00,000/- was made in the case of Sh. Roop Bansal u/s 2(22)(e) considering that he is having more than 20% shareholding in the company M/s. Zenith Realtech P. Ltd. who received the amount. However, material on record shows that Sh. Roop Bansal became the shareholder of M/s. Zenith Realtech only on 8th September, 2009 i.e. in F.Y. 2009-10 relevant to A.Y. 2010-11. This is further proved by the external evidence filed before me, namely, the copy of annual return filed with the Registrar of Company. Thus, the appellant, Sh. Roop Bansal was not a shareholder at all during the period FY 2008-09, which is relevant to the assessment year under considering. The present A.O. in the remand report, after examination of the documents/evidence has broadly mentioned the aforesaid facts and has not controverted the claim/facts given by the appellant in this regard. Accordingly, the requisite condition of the appellant being a substantial shareholder in the recipient company as defined in section 2(22)(e) is not met for treating the amount in question as ‘deemed dividend’. The addition made by the A.O. of Rs. 20,25,00,000/- is, therefore, not sustainable and is deleted.”
15.4 We find that, in the remand proceeding, the Assessing Officer himself has verified the fact of assessee not fulfilling the required shareholdings in M/s ‘Zenith’ as on the date of loan transaction. In such circumstances, when the Assessing Officer himself has verified the fact that assessee was not satisfying the condition of holding substantial shareholding in M/s ‘Zenith’, which is one of the prerequisite for invoking section 2(22)(e) of the Act, and then only ld. CIT(A) has allowed relief to the assessee, filing the appeal on the same issue is not justified on the part of the Revenue. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue of deemed dividend of Rs. 20.25 crores.
The next issue is of deemed dividend of Rs. 1.10 crores, wherein the Ld. CIT-A has again relied on the comments of the ld. AO in the remand report. The Ld. AO verified the agreement to sale between M/s ‘Mikado’ and M/s ‘Marigold’ and did not make any adverse comment on the genuineness of the agreement.
16.1 In our opinion, the Ld. CIT-A has not committed any error in accepting the observation of the ld. AO, while deleting the addition. We find that in the case of Sh Basant Bansal (supra) for assessment year 2008-09, the Tribunal has upheld deleting of deemed dividend in similar circumstances, accordingly, respectfully following the said decision of the Tribunal, we uphold the finding of the Ld. CIT-A in the instant case, in deleting the addition of deemed dividend of Rs. 1.10 crore.
The third addition of deemed dividend, which has been deleted by the Ld. CIT-A is of Rs.3,62,774/-. The Ld. CIT-A deleted the addition on the ground that on the date of loan transaction M/s ‘Mikado’ i.e the company who gave loan was not having accumulated profit and thus one of the condition of section 2(22)(e) of the Act was not satisfied.
17.1 We find that this fact of M/s ‘Mikado’ not having accumulated profit at the time of giving loan to M/s ‘Orange’ has been duly verified by the Assessing Officer in remand proceedings and the Ld. CIT(A) has allowed relief relying on the factual verification made in remand report. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute. Once the fact of M/s ‘Mikado’ having accumulated losses of Rs. 1.47 crores at the beginning of the year and losses of Rs. 1.41 crores at the end of the year has been verified by the Assessing Officer, then, one of the required condition of section 2(22)(e) of the Act is not fulfilled and thus, we uphold the finding of the Ld. CIT(A) in deleting the deemed dividend of Rs.3,62,774/-. Thus, all the relevant grounds no. 1, 3 & 4 are dismissed.
In ground No. 2 the Revenue has challenged admission of additional evidences by the Ld. CIT-A. This issue is identical to the issue raised in ground No. 2 for assessment year 2008-09 in the case of the assessee, which we have already decided in para 11.2 of this order. Accordingly, the ground No. 2 of the appeal is dismissed.
In the result, appeal of the Revenue is dismissed.
To sum up, both the appeals of the Revenue are dismissed.
The decision is pronounced in the open court on 28th April, 2017.