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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SHRI S.V. MEHROTRA & SMT. BEENA A. PILLAI
O R D E R PER S.V. MEHROTRA, V.P. :
This is an appeal filed by the Revenue against the order dated 18.02.2014 passed by the Commissioner of Income Tax (Appeals)-XXVII, New Delhi, u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”), relating to assessment year 2009-10.
Brief facts of the case are that the assessee had filed return of income declaring total income at Rs.20,41,860/-. The Assessing Officer required the assessee to file the percentage of shareholding of the assessee in books of account of M/s Mansarovar Flour Mills (P) Ltd. and also required the assessee to explain the nature of each such payment made by the company to the assessee and also to submit the financial statements i.e. Profit & Loss Account and Balance Sheet of this company for assessment years 2008-09 and 2009-10.
He observed that the perusal of Balance Sheet showed that M/s Mansarovar Flour Mills (P) Ltd. was enjoying accumulated profits of Rs.44 lakhs (approximately) and was continuously making payments to the assessee who was owing more than 10% shareholding in the said company. Accordingly, the Assessing Officer made an addition at Rs.44,53,765/- u/s 2(22)(e) of the Act.
Before ld. CIT(A), the assessee had made submissions on which ld. CIT(A) has observed as under :-
“5. During the appellate proceedings, appellant filed additional evidence under Rule 46A stating that his shareholding along with his HUF and wife is only 9.16% and therefore, provisions of section 2(22)(e) is not applicable in the case of the appellant. This was forwarded to the A.O. for his remand report and the remand report was submitted on 05.12.20l3. When the remand report was given to the appellant's AR for rejoinder, it was submitted that the list of the shareholders of M/s Mansarovar Roller Flour Mills (P) Ltd. with their respective shares was filed before the A.O. on 05.12.2009 itself during assessment proceedings and this evidence clearly indicates that the appellant's shareholding was only 9.16% and not more than 10% as mentioned in the assessment order. Therefore, I am of the view that the list of shareholders was not additional evidence as it was already submitted during assessment proceedings. The only additional information furnished during the appellate proceedings is that the appellant shareholding is only 9.16% as the assessment order only says that the appellant's shareholding is more than 10% without specifying the exact percentage of shareholding. In view of the above, it is not necessary to admit the additional evidence filed during the appellate proceedings as per Rule 46A(2) of the I.T. Rules.”
Thereafter, ld. CIT(A) concluded in para 7 as under :-
“7. Ground No.2 is against the addition of Rs.44,53,765/- as deemed dividend u/s 2(22)(e) of the I.T. Act. The A.O. is of the view that the appellant holds more than 10% of the shareholding in M/s Mansarovar Roller Flour Mills (P) Ltd. while the appellant states that his shareholding is only 9.16% and therefore, provisions of deemed dividend under section 2(22)(e) is not applicable in the case of the appellant. The A.O. in the assessment order is silent regarding the actual shareholding of the appellant in M/s Mansarovar Roller Flour (P) Ltd. and there is no mention about the number of shares of the amount invested. Further even in the remand report the A.O. maintains his silence regard the actual shareholding of the appellant in M/s Mansarovar Roller Flour (P) Ltd. in spite of specific directions issued by me to verify the information regarding the actual shareholding of the appellant. Since the evidence available clearly indicates that appellant’s shareholding in M/s Mansarovar Roller Flour (P) Ltd. is less than 10% deeming provisions of section 2(22)(e) is not applicable in the case of the appellant. Thus, the addition of Rs.44,53,765/- made by the A.O. u/s 2(22)(e) is deleted and ground no.2 is allowed.”
Nothing has been brought on record by the Department to controvert the finding of ld. CIT(A) that the assessee’s shareholding was only 9.16% in M/s Mansarovar Roller Flour (P) Ltd. and, therefore, the provisions of section 2(22)(e) were not applicable. We, therefore, do not find any reason to interfere with the order of ld. CIT(A).
In the result, the appeal of the Department is dismissed. Order pronounced in the open court on this 12th day of April, 2017.