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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ : NEW DELHI
Before: SHRI N.K. SAINI & SHRI KULDIP SINGH
Date of Hearing : 12.07.2016 Date of Order : 18.07.2016
O R D E R
PER KULDIP SINGH, JUDICIAL MEMBER :
The Appellant, Shri Vinod Kumar Rajpaul, Prop. Viraj Estates (hereinafter referred to as ‘the assessee’) by filing the present appeal sought to set aside the impugned order dated 11.11.2013 passed by the Commissioner of Income-tax (Appeals)- XXI, New Delhi qua the assessment year 2007-08 on the grounds inter alia that :-
“1. Ld. Assessing Officer has passed Assessment Order which is erroneous, is against the provisions of Income Tax Act, 1961 and is also against facts and circumstances of the case, therefore is illegal and bad in law.
The Lower Authorities have grossly erred in making addition of Rs.21,75,000/- u/s 2(22)(e) of the Income Tax Act, 1961 without adjusting the already paid amount by the assessee to the payee company, which is against the law of natural justice and is bad in law.
3. The Lower Authorities have grossly erred in invoking section 2(22)(e) of the Income Tax Act, 1961 without considering facts and circumstances of the case.
4. The Assessee reserves to make any addition, deletion or alternation to the grounds of appeal
before its disposal.”
2. Briefly stated the facts of this case are : pursuant to the notices issued under section 142(1) and 143(2) of the Income-tax Act, 1961 (for short ‘the Act’) during the scrutiny proceedings, Shri Sandeep Kumar, CA/AR of the assessee put in appearance, filed necessary details and also discussed the case. Assessee is into the business of trading and development of real estate and has also earned income from housing property, capital goods and other sources. From the scrutiny of credit entries account no.CCSDL- 5/2000 maintained with Corporation Bank, it is noticed that there is an entry dated 31.05.2006 from M/s. Divya Vidhi Homes Pvt. Ltd. amounting to Rs.21,75,000/- which was squared up during the year under consideration. This amount was advance/loan given to assessee by M/s. Divya Vidhi Homes Pvt. Ltd. squared up during the year. Assessee was called upon to furnish balance sheet of M/s. Divya Vidhi Homes Pvt. Ltd. from which it was noticed that the company had Rs.27,70,698/- and Rs.38,23,748/- as accumulated profit in reserve and surplus of liabilities side in balance sheet as on 31.03.2006 and as on 31.03.2007 respectively indicating substantial interest of the assessee in M/s. Divya Vidhi Homes Pvt. Ltd. as Director. Assessee was called upon to explain as to why provisions contained u/s 2(22)(e) be not invoked and the loan/advance taken from M/s. Divya Vidhi Homes Pvt. Ltd. be treated as deemed income in the interest of assessee. Assessee furnished reply that M/s. Divya Vidhi Homes Pvt. Ltd. had not advanced any loan to the assessee rather had refunded only share application money which was given in excess by mistake and was subsequently adjusted. Finding the explanation furnished by the assessee not tenable, AO made an addition of Rs.21,75,000/- on account of deemed dividend in the hands of assessee and assessed the total income at Rs.2,75,91,130/-.
Assessee carried the matter before the ld. CIT (A) by filing an appeal who has dismissed the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Ld. AR for the assessee challenging the impugned order contended inter alia that the assessee has made total contribution of Rs.92,40,000/- on account of share application money which was refunded to the assessee during the current year due to non- issuance of shares; that M/s. Divya Vidhi Homes Pvt. Ltd. had wrongly issued a cheque of Rs.21,75,000/- in the name of M/s.
Viraj Estates, which was returned to the company, but has been wrongly treated as refund of the share application money by the lower revenue authorities; that at the most excess amount of Rs.3,35,000/- (Rs.21,75,000/- minus Rs.18,40,000/-) may be treated as deemed dividend as the assessee had opening share application money of Rs.18,40,000/-. However, on the other hand, ld. DR relied upon the orders passed by the lower revenue authorities.
Undisputedly, assessee is a Director having substantial interest in M/s. Divya Vidhi Homes Pvt. Ltd. that assessee has opening balance of share application money of Rs.18,40,000/- in M/s. Divya Vidhi Homes Pvt. Ltd. and further contributed Rs.74,00,000/- as share application in the company; that assessee has received an amount of Rs.21,75,000/- from the company on 31.05.2006 credited in the account of M/s. Viraj Estates but same was returned by M/s. Viraj Estates on 05.02,.2007.
In the backdrop of the aforesaid facts and circumstances of the case, the sole question arises for determination in this case is :-
“as to whether M/s. Divya Vidhi Homes Pvt. Ltd. has advanced loan of Rs.21,75,000/- to the assessee and has been rightly treated as deemed dividend in the hands of assessee by the AO by invoking provisions contained u/s 2(22)(e) of the Act.”
Bare perusal of the copy of ledger account and share application money account of assessee in the books of M/s. Divya Vidhi Homes Pvt. Ltd., available at page 12 of the paper book, goes to prove that the assessee has opening balance of Rs.18,40,000/- on account of share application money in M/s.
Divya Vidhi Homes Pvt. Ltd. and in total contributed Rs.92,40,000/- as share application money in M/s. Divya Vidhi Homes Pvt. Ltd. during the year under assessment which is shown to have been refunded to him due to non-allotting of the shares of the assessee.
AO has invoked the provisions contained u/s 2(22)(e) of the Act merely on the ground that in the share application account in the books of M/s. Divya Vidhi Homes Pvt. Ltd., there is no such amount of Rs.21,75,000/- on account of share application money either received from the assessee or payment to the assessee and thus treated the same as deemed dividend u/s 2(22)(e). No doubt, the assessee has maintained two accounts : one share application money account and another loan account vis-à-vis M/s. Divya Vidhi Homes Pvt. Ltd. but when these facts are examined in the light of the fact that M/s. Viraj Estates is the proprietorship concern of Shri Vinod Kumar Rajpaul, assessee, both are one and the same entity for business transaction and when books of account has not been disputed by the AO, it cannot be said that the amount of Rs.21,75,000/- has been received by the assessee as deemed dividend.
Moreover, perusal of the ledger account of share application money of assessee maintained by M/s. Divya Vidhi Homes Pvt. Ltd. goes to prove that the assessee was having opening balance of Rs.18,40,000/- and thereafter he has contributed Rs.74,00,000/- as share application money which was undisputedly returned to him on account of non-allotment of the share meaning thereby amount of Rs.18,40,000/- of assessee was lying available with M/s. Divya Vidhi Homes Pvt. Ltd. and as such out of amount of Rs.21,75,000/- received by the assessee on 31.05.2006 and returned on 05.02.2007 to M/s. Divya Vidhi Homes Pvt. Ltd., at the most amount of Rs.3,35,000/- can be treated as deemed dividend. This fact has been admitted by the assessee during the course of argument and has not been controverted by ld. DR for the revenue. 11. So, when the assessee had deposited Rs.18,40,000/- as share application money in M/s. Divya Vidhi Homes Pvt. Ltd. as on 31.03.2006 but was paid Rs.21,75,000/- by the company, out of which Rs.3,35,000/- was in excess, the entire amount cannot be treated as deemed dividend merely because of the fact that assessee has maintained two accounts who has otherwise placed before the AO statement of combined account which has not been disputed by the AO. Consequently, question framed to adjudicate the controversy at hand is partly answered in favour of the assessee. 12. So in view of what has been discussed above, we are of the considered view that when the assessee was paid amount of Rs.21,75,000/- as against share application money of Rs.18,40,000/- the excess amount of Rs.3,35,000/- is ordered to be treated as deemed dividend. So, the present appeal filed by the assessee is partly allowed. Order pronounced in open court on this 18th day of July, 2016. Sd/- sd/- (N.K. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 18th day of July, 2016/TS