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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI JOGINDER SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order against the order of Commissioner of Income Tax (Appeals) -20, Mumbai and arises out of the order u/s 143(3) of the Income Tax Act, 1961(the ‘Act’).
2. The grounds of appeal filed by the assessee read as under:-
1. The assessee is an individual, Assessing Officer erred in making addition of deemed dividend of Rs.8,19,745/-to the extent of reserves and surplus u/s 2(22)(e) of the I.T. Act, 1961.
Assessing Officer is not appreciating that three different transactions namely unsecured loan given to company, Land MOU account and Car
lease account are maintained by the assessee. That the assessing officer has consolidated all the three transactions and considered the above as loan, thus considered it as deemed dividend u/s 2(22)(e). 3. Assessing Officer erred in Demanding Income-tax of Rs.4,67,690/-. 4. Appellant plead before your honour to direct assessing officer to: Delete the addition made of Rs.8,19,745/- as deemed dividend u/s 2(22)(e).
Briefly stated, the facts of the case are that the assessee is a Director, having 24.15% shares in his company viz. Home and Beyond Pvt. Ltd. (now Shree Shakun Realty Pvt. Ltd.). The Assessing Officer (AO) on verification of the details filed by the assessee found that the assessee had received advance/ loan on various dates from his company. As per the ledger, the assessee had received Rs.57,53,607/- as on 02.03.2010 from his company and paid Rs.29,89,112/-. As on 31.03.2010 the accounts stand settled. The assessee filed before the AO the copy of agreement with M/s Shakun Realty Pvt. Ltd. wherein he had entered into MoU to transfer his land for development against the consideration of Rs. 1 crore. The assessee further stated that he had received Rs. 35 lacs as advance. The assessee stated that as the agreement was not completed due to legal hassles, the amount of Rs. 35 lacs was returned back by him to M/s Shakun Realty Pvt. Ltd. by 31.03.2013.
3.1 The AO found that the contention of the assessee that he had returned the advance received against the property to Shree Shakun Realty Pvt. Ltd. and that there was no application of section 2(22)(e) is not correct. As per the ledger of Shree Shakun Realty Pvt. Ltd. in the books of the assessee, it was seen that the assessee had received excess payments against his loans to the company/ the deposits in lieu of property.
In the balance sheet submitted with the return of income for the A.Y. 2010-11 of M/s Home and Beyond Pvt. Ltd. (i.e. Shree Shakun Realty Pvt. Ltd.), the AO noticed that there was a reserve and surplus of Rs.8,19,745/-. As per the section 2(22)(e), the deemed dividend to the extent of reserve and surplus can be added to the total income of the assessee. Accordingly, the AO added back the amount of Rs.8,19,745/- to the total income of the assessee as deemed dividend under section 2(22)(e) of the Act.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee on the following reasons:
“I find that the Assessing Officer has made addition to the extent of Rs.8,19,745/- on the ground that appellant has obtained loan from the company. Such addition to have been taken on account of MoU for development right to the property situated at Taluka Mawal Dist. Pune having Registration No. 4696 dated 22.09.1998. It is pertinent to mention that such MoU has never been honoured hence whatever amount has been taken has been refunded by the appellant. Had this MoU being right, appellant would have forfeited the advances so obtained, but same has not been done, it means only with a view to give colour of commercial transaction, such MoU has been prepared. Further, it is very surprising to note that the written down value of Honda Citi Car is of Rs.3,76,083/- whereas advances for so called lease of Car has been claimed to be of Rs.9,00,000/-. Such Car lease agreement cannot be believed. It is very obvious that with a view to give colour of commercial transaction, such self serving Car Lease Agreement has been prepared, subsequently. It is to be reiterated that no prudent businessmen can advance Rs.9,00,000/- for taking such Car of the Director on lease rent whereas the total purchase price of the is below R.9,00,000/-. Obviously, argument advanced by the Ld. A.R. is not tenable if that facts and circumstances of the case is appreciated and analyzed in its totality. Such argument is not found substantiated nor is found to stand to the test of reasoning. Therefore, in the light of such factual aspects, the finding of the Assessing Officer that there is deemed dividend because appellant is a Director of the Company having 24.15% stake of shares and has obtained loan or deposit for personal use and utility and there is a reserves and surplus in the balance of the company namely Shree Shakun Realty Pvt. Ltd., hence the addition so made is sustained”. 5. Before us, the Ld. Counsel of the assessee submitted that the Ld. CIT(A) did not appreciate the fact that the assessee had three different transactions with the company namely:
(i) Unsecured Loan Account: Unsecured Loan given to company by the assessee (Annexure I).
(ii) Commercial advance against KARLA LAND MoU Account: Trade Advance given by the company to the assessee. (Annexure II).
(iii) Commercial advance for Car lease account: Where car (Honda City) is owned by assessee and leased to the company for interest free deposit of Rs.9,00,000/- (Annexure III).
On the other hand, the Ld. DR relied on the order of the Ld. CIT(A).
We have heard the rival submissions and perused the relevant material on record. We find that the accounts / documents stated by the Ld. Counsel of the assessee as mentioned at para 5 here-in-above have not been looked into by the AO. The said documents have been cursorily examined by the Ld. CIT(A). These accounts/ documents have a definite bearing on the facts in the instant case. In view of the above, the order of Ld. CIT(A) is set aside and the same is restored to the file of the AO to make an assessment as per the provisions of the Act after giving reasonable opportunity of being heard to the assessee. The assessee is directed to file the details before the AO.
In the result, appeal is allowed for statistical purposes.
Order pronounced in the open Court on 24/04/2017