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Income Tax Appellate Tribunal, BANGALORE BENCH-SMC “ A ”
Before: SHRI VIJAY PAL RAO
This appeal by the assessee is directed against the order dt.16.08.2016 of Commissioner of Income Tax (Appeals) for the Assessment Year 2006-07.
The assessee has raised the following grounds :
6. Without prejudice, the addition is excessive, arbitrary and unreasonable and liable to be deleted in toto.
7. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.”
3. The only issue arises in this appeal is regarding addition made by the Assessing Officer on account of deemed dividend of Rs.2,08,250 under Section 2(22)(e) of the Income Tax Act, 1961 (in short 'the Act').
4. The Assessing Officer has noted that a sum of Rs.2,08,250 was received by the assessee as loan from the company M/s. Paramount Corporate Network Limited in which the assessee is having a substantial interest and is also a Director. For want of necessary details and explanation, the Assessing Officer added the said amount of Rs.2,08,250 as deemed dividend under Section 2(22)(e) of the Act. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) and filed the relevant record to explain that this amount was not in the nature of loan or advance but this is only a reimbursement of expenditure incurred by the assessee in respect of the business of the said company. The CIT (Appeals) did not accept the explanation of the assessee and confirmed the addition made by the Assessing Officer.
Before the Tribunal, the assessee has submitted the ledger account in the books of account of the company and submitted that the opening balance itself
Rs.3 lakhs and therefore the said balance in the ledger account is taken into consideration then there will be no outstanding balance towards the assessee. He has further contended that this is a running account of the assessee from which the assessee is incurring the expenses for advertisement, salary at various outlets of this company at different locations and therefore the assessee is incurring the expenses on behalf of the company and receiving the amount from the company as reimbursement of the expenses. Thus this balance cannot be classified as loan or other advances but it was only for the business of the company during the normal course of the business of the company. In support of his contention, he has relied upon the decision of Jaipur ITAT Bench in the case of K.G. Petrochem Ltd. Vs. ACIT 176 TTJ 1 as well as decision of Visakhapatnam ITAT Bench in the case of M. Amareswara Rao Vs. DCIT dt.8.1.2015 in to 310/Vizag/2011. Thus the learned Authorised Representative has submitted that though the relevant record could not be filed in time before the Assessing Officer however all the relevant records and details were filed before the CIT (Appeals) but the same were not considered by the CIT (Appeals).
On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below and submitted that despite the Assessing Officer, the assessee failed to submit the relevant record before the Assessing Officer. Thus the Assessing Officer is justified in making the addition.
Having considered the rival submissions as well as the relevant material on record, it is noted that the Assessing Officer has made the addition of Rs.2,08,250 under Section 2(22)(e) of the Act for want of the necessary details and explanation. The assessee filed the relevant record before the CIT (Appeals) including the ledger account of the assessee as well as the ledger accounts of other expenses of the company M/s. Paramount Corporate Network Limited. It is apparent that this amount of Rs.2,08,231 represents the debit balance in the ledger account of the assessee which was taken by the Assessing Officer as a loan to the assessee without considering all relevant entries throughout the year. The entries in the accounts clearly shows that it is a running account containing all the expenditure incurred by the assessee in respect of the business expenditure of the company and corresponding amounts were received from the company to meet the said expenditure. Thus keeping in view of the overall facts and entries of the accounts prima facie it appears that this balance is nothing but an amount received by the assessee for the purpose of business expenditure of the company in a normal course of business activity. Since the authorities below have not considered the relevant record therefore in the facts and circumstances of the case and in the interest of justice this issue is set aside to the record of the Assessing Officer for limited purpose of verifying the ledger account filed by the assessee in the paper book from page Nos.1 to 48 and then decide the issue by considering the decisions as relied upon by the learned Authorised Representative.
In the result, the appeal of the assessee is allowed for statistical purpose.