N.S.NAGARAJAN,CHENNAI vs. ACIT, CHENNAI

This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-9, Chennai dated 30.11.2015 pertaining to assessment year 2012-13.

Assessee in this appeal is aggrieved with regard to partly confirming the assessment of an amount of ₹23,10,900/- as deemed dividend u/s. 2(22)(e) of the Act by the Ld.CIT(A), out of total amount of ₹28,80,999/- made by the AO.

The facts of the case are that the is an individual, engaged in the business of dealing in surgical/helath care products. During the course of assessment proceedings, the AO found from the balance sheet from the year ended 31.03.2011, the assessee had shown a sum of ₹31.73 lakhs as loan received from one M/s.Impel Healthcare P Ltd., wherein the assessee is holding substantial interest to the extent of 20% as on 31.03.2012 along with other two shareholders. On perusal of the ledger of M/s.Impel Healthcare P Ltd., it is seen that the assessee had drawn the above money on various dates and the outstanding as on 31.03.2012 was shown at ₹28,80,999/-. The assessee was asked to explain the purpose for which the above said amounts were drawn from the said company. In response, the assessee could not furnish any concrete evidences on record to substantiate the purpose for which the amounts were drawn. Hence, the AO brought to tax an amount of ₹28,80,999/- as deemed dividend under Sec.2(22)(e) of the Act in view of the loan received from M/s.Impel Healthcare P Ltd. Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). 3.1 Before the Ld.CIT(A), the assessee took a plea that it is only an amount of trading transaction. There was an outstanding liability payable to M/s.Impel Healthcare P Ltd., and it cannot be considered as deemed dividend. The Ld.CIT(A) accepted the plea of the assessee to the tune of ₹5,70,098/- and sustained the addition of ₹23,10,900/- as deemed dividend u/s. 2(22)(e) of the Act. Against the order of Ld.CIT(A), the Assessee is in appeal before us.

Before us, ld.A.R made a plea that Ld.CIT(A) is not justified in considering only an amount of ₹5,70,098/- which is on account of trading liability and balance is treated as deemed dividend in terms of Sec.2(22)(e) of the Act and pleaded that entire amount is outstanding as payable to M/s.Impel Healthcare P Ltd., only on account of trading transactions between the assessee and the party. On that reason that entire amount cannot be considered as deemed dividend in the hands of assessee. The ld.A.R pleaded that the entire amount to be deleted.

On the other hand, ld.D.R relied on the order of lower authorities.

I have heard both the parties and perused the material on record. The contention of the ld.A.R is that the amount advanced to the assessee by M/s.Impel Healthcare P Ltd., being a director of the company, not being a loan but an advance in the course of ordinary business transactions, which is to be adjusted against money’s payable by the latter to the assessee. The same did not fall within the definition of the deemed dividend under Sec.2(22)(e) of the Act as held by various Courts; example CIT vs. Rajkumar 318 ITR 462 (Delhi High Court), CIT vs. Creative Dyeing & Printing 318 ITR 476. However, the burden is on the assessee to prove that the transaction relating to the loan received from M/s.Impel Healthcare P Ltd., is on account of business transaction is to be established by the assessee by producing cogent evidence. In the present case, though the assessee made a plea before us that it is on account of business transaction between the parties, the assessee could not place necessary evidence and made a bald plea that it has already produced all the details before the Ld.CIT(A). In my opinion, the Ld.CIT(A) extracted the ledger account relating to deemed dividend at page 10-12 of his order, the each transaction is not explained by the assessee to the satisfaction of the authorities. Hence, I have no hesitation in confirming the order of lower authorities on this issue. Accordingly, the ground raised by the assessee in his appeal is dismissed.

In the result, the appeal of assessee is dismissed.