LAKSHMI MENDALU NARAYAN RAO NAIDU ,MUMBAI vs. NATIONAL FACELESS ASSESSMENT CENTRE (NFAC), DELHI

The assessee has challenged the addition /disallowance made u/s. 69C, 2(22)(e) and 56(2)(vii) of the Act in the assessment years 2011-12 to 2013-14 respectively. The assessee has also raised an additional ground in A.Y. 2013-14. As all these cases pertain to the same assessee, though on different grounds, we hereby pass a consolidated order. relating to AY 2011-12. The issue contested in this appeal is related to the addition of Rs.15.00 lakhs made by the AO, which related to advance received by the assessee from M/s Advance Technologies Ltd, which was considered by the AO as accommodation entry. We notice that the assessing officer has passed the assessment order u/s 144 of the Act to the best of his judgement. Before Ld CIT(A), the assessee filed details relating to advances and also confirmation obtained from M/s Advance Technologies Ltd. However, he rejected the same by observing that the same will not serve any purpose, meaning thereby, the Ld CIT(A) has not given proper reasoning for rejecting the documents filed by the assessee. Further, the Ld CIT(A) did not call for remand report from the AO in respect of the documents filed by the assessee, which is usually done.

We shall now take up the appeal filed for AY 2012-13. The assessee is challenging the addition of Rs.14,85,000/- made as deemed dividend u/s 2(22)(e) of the Act.

We heard the parties on this issue and perused the record. We notice that the AO has invoked the provisions of sec. 2(22)(e) of the Act only for the reason that the assessee is a director in M/s Buddheshwar Estates P Ltd. However, we notice that the provisions of sec.2(22)(e) of the Act would get attracted only when the assessee is holding substantial interest in the closely held company as a shareholder, i.e., the provisions are not attracted on the basis of holding of directorship. Admittedly, the shareholding pattern of above said company at the time of taking of advance by the assessee was not examined by the AO, which would have determined the applicability of sec.2(22)(e) of the Act.

We shall now take up the appeal filed for AY 2013-14. In this year, the assessee is challenging the addition made u/s 56(2)(vii) of the Act. During the year relevant to AY 2013-14, the assessee has purchased a flat for Rs.1.25 crores, whose stamp duty value was Rs.1,50,22,500/-. Hence the AO added the difference amount of RS.25,22,500/- as deemed income u/s 50C of the Act. In the appellate proceedings, the assessee submitted that there are certain deficiencies in the property and hence she could purchase the property at a price lower than the stamp duty value. Accordingly, she pleaded that the issue of valuation of property may be referred to the Departmental Valuation Officer (DVO) as contemplated in sec.50C of the Act. However, the Ld CIT(A) took support of valuation of flat in the same society as reported in the internet and rejected the above said request of the assessee.

Further, the Ld CIT(A) asked the assessee to furnish the details of sources for purchase of property. Though the assessee furnished the same, yet the Ld CIT(A) rejected them and accordingly held that the assessee did not have proper sources for purchase of property at Rs.1.25 crores. Accordingly, he enhanced the assessment by Rs.1.25 crores.

We further notice that the Ld CIT(A) did not call for remand report from the AO with regard to the sources explained by the assessee. Accordingly, we are of the view that this issue requires fresh examination at the end of the AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for both the issues, viz., addition made u/s 50C and u/s sec.56(2)(vii) afresh. We also direct the assessee to fully co-operate with the AO for expeditious completion of assessment proceedings.

In the result, all the three appeals of the assessee are treated as allowed.