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Income Tax Appellate Tribunal, DELHI BENCHES : SMC-I : NEW DELHI
Before: SHRI R.S. SYAL
Assessment Year : 2010-11 Mitu Singh, Vs. DCIT, C-4/142, SDA, Circle-14(1), New Delhi. New Delhi. PAN: AUSPS8598M (Appellant) (Respondent) Assessee By : Shri Bhagwan Jha, CA Department By : Shri N.K. Bawal, Sr. DR Date of Hearing : 10.10.2016 Date of Pronouncement : 13.10.2016 ORDER This appeal filed by the assessee is directed against the order passed by the CIT(A) on 16.7.2014 in relation to the assessment year 2010-11.
The only issue raised in this appeal is the confirmation of addition of Rs.14,34,968/- made by the AO as deemed dividend u/s 2(22)(e) of the Act.
Briefly stated, the facts of the case are that during the course of assessment proceedings of M/s Peartree Enterprises Pvt. Ltd., for the assessment year 2010-11, it came to the notice of the AO that the assessee received certain sum as advance from this company, out of which a sum of Rs.14,34,968 was appearing as receivable at the end of the year. Since the assessee was having substantial shareholding within the meaning of section 2(22)(e) and the amount in question was paid to the assessee out of accumulated profits of the company, the AO called upon the assessee to explain as to why the amount be not treated as deemed dividend. The assessee submitted that the late Chairman of the company wanted the assessee to avail advance to meet certain contingencies. It was further explained that out of such advance availed after adjusting a remuneration for the year as on 31.3.2010, the outstanding balance at the end of the year stood at Rs.14,34,968/-, which was fully adjusted up to on 31.3.2013. Not convinced, the AO made addition u/s 2(22)(e). The ld.CIT(A), relying on the judgment of the Hon’ble Delhi High Court in CIT vs. Ankitech (P) Ltd. & Others (2012) 340 ITR 14 (Del), upheld the addition.
I have heard the ld. DR and perused the relevant material on record.
The assessee’s application for adjournment was rejected. Thereafter, Shri Bhagwan Jha, the authorised representative of the assessee, participated in the proceedings. On facts, it is noticed that the assessee received certain amount as advance from M/s Peartree Enterprises Pvt. Ltd., which was having accumulated profits at a higher level than the amount of advance appearing at the end of the year. The Hon’ble Delhi High Court in Ankitech (P) Ltd. (supra) has held that where the provisions of section 2(22)(e) are attracted, the addition should be made in the hands of a shareholder and not in such a company, which is shareholder in the company distributing dividend. Admittedly, the assessee received advance with outstanding balance of Rs.14.34 lac at the end of the year, which was adjusted in later years. The Hon’ble Supreme Court in Miss P. Sarda vs. CIT (1998) 229 ITR 444 (SC), has held that withdrawals made by major shareholder is dividend u/s 2(22)(e), even if such amount is adjusted later on. The facts and circumstances of the instant case are fully governed by the aforenoted two judgments. I, therefore, uphold the impugned order on this issue confirming the addition.
In the result, the appeal is dismissed.
The order pronounced in the open court on 13.10.2016.