DCIT, CHENNAI vs. JOHN BOSCO PETERS, CHENNAI

आदेश / O R D E R

PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

This is an appeal filed by the Revenue against the Order dated 25.11.2013 of Commissioner of Income Tax (Appeals)-II, Chennai, in for the AY 2007-08.

ITA No.794/Mds/2014 :- 2 -:

2.0 All the grounds of the appeal are related to the disallowance of Rs.35.63 lakhs taxed as deemed dividend u/s.2(22)(e) of Income Tax Act (in short ‘the Act’). During the course of assessment proceedings, the Assessing Officer (in short ‘AO’) found that M/s.JBP Trade Link Pvt. Ltd., has given substantial loan/advance to Shri John Bosco Peters (Prop: Jhon Bosco Peters & Co) who is holding 99.96% of shares in M/s.JBP Trade link Pvt. Ltd. M/s.JBP is a company in which the public are not substantially invested and having accumulated profits of Rs.1,38,60,632/- as on 31.03.2007. Therefore, the amount of loan/advance given by the company to the assessee amounting to Rs.62,32,959/- was added by the AO as deemed dividend u/s.2(22)(e) of Act.

3.0 Aggrieved by the order of the AO, the assessee went on appeal before the Learned Commissioner of Income Tax (Appeals) (hereinafter referred to as ‘Ld.CIT(A)’) and the Ld.CIT(A) deleted the addition of Rs.34,65,900/- stating that the amount was immediately transferred to M/s.JBK Trade Pvt. Ltd. 4.0 Aggrieved by the order of the Ld.CIT(A), the Revenue is on appeal before us. During the appeal, the Learned Departmental Representative (hereinafter referred to as ‘Ld.DR’) argued that even though the assessee explained that the amount was received directly from the clients to the proprietary concern of the assesse, there is no evidence to show that the funds were not retained by the assessee and it was actually transferred or ITA No.794/Mds/2014 :- 3 -: paid by the assessee to the company. The assessee has received loan of Rs.62,32,959/- and the Ld.CIT(A) is not correct in deleting the addition of Rs.34,65,900/- without having proper evidence. According to the Ld.DR, the entire amount of Rs.62.31 lakhs required to be confirmed in the hands of the assessee. On the other hand, the Ld.AR supported the orders of the Ld.CIT(A).

5.0 We heard the rival submissions and perused the material placed before us.

The company M/s.JBP Trade Pvt. Ltd., has given a loan/advance of Rs.62.31 lakhs to to Shri John Bosco Peters (Prop: Jhon Bosco Peters & Co.) Which was brought to tax by the AO as deemed dividend u/s.2(22)(e) of the Act. However, it was submitted by the assessee that a sum of Rs.54,65,900/- was received by the assessee directly from the clients of the company M/s.JBP Trade Links Pvt. Ltd., which in turn remitted to the company. The Ld.CIT(A) deleted the addition and given a clear findings in Para 4.2.3 which is extracted as under:

“4.2.3 From the perusal of the above ledger extracts furnished by the assessee, it could clearly be seen that some of the debits in the assessee’s account in the books of M/s.JBP Trade Link P Ltd (the company) are not the actual payments by the company to the assessee. Some of the debits are the amounts directly received by the assessee from certain clients of the M/s.JBP Trade Link P Ltd, which in-turn were remitted to the company. As per the assessee, the amounts were erroneously received by the assessee (Shri John Bosco Peters) from the clients (M/s. G.A. Mass Leder BV, Germany) of the company i.e. the clients directly remitted the amounts in the name of M/s.John Bosco Peters & Co, the proprietary concern of the assessee. Hence, the assessee immediately i.e. on the same date(s), transferred the said amounts to M/s.JBP Trade Link P Ltd (the company). Since these amounts are passed on through the assessee’s proprietary concern, the amounts are shown as debited into the account of the assessee in the books of the ITA No.794/Mds/2014 :- 4 -: company and then credited on the same day as the amounts are transferred to the company. The details of the amounts so received by the assessee from M/s.G.A. Mass Leder BV, Germany and in-turn transferred to M/s.JBP Trade Link P Ltd during the year are: Amounts received from M/s.G.A. Mass Leder BV. Germany and their payments to M/s. JBP Trade Link P Ltd:

Amounts received from Amounts paid to M/s.JBP M/s.G.A.Mass Leder MV trade Link P. Ltd. Date Amount (Rs.) Date Amount (Rs.) 22.05.2006 11,30,000.00 22.05.2006 11,30,000.00 21.08.2006 10,99,501.30 21.08.2006 10,50,000.00 12.10.2006 8,65,887.05 14.10.2006 8,65,900.00 13.01.2007 4,68,238.80 13.01.2007 4,20,000.00 Total 35,63,627.15 Total 34,65,900.00

Thus, out of the amounts of Rs.35,63,627/- received from M/s.G.A. Mass Leder MV, Germany, an amount of Rs.34,65,900/- was immediately transferred on the same date to M/s.JBP Trade Link P. Ltd. Therefore, out of the amounts of Rs.35,63,627/- received from M/s.G.A. Mass Leder BV, Germany, the assessee retained of Rs.99,727/- alone is to be considered for the purpose of sec.2(22)(e) of the Act. In other words, out of the total amounts shown as debits of Rs.62,31,959/- into the assessee’s account in the books of the company, the above amount of Rs.34,65,900/- is to be excluded”.

6.0 The Revenue contested that there was no evidence to prove that the said amount was actually paid by the assessee on the same dates to the company. The fact whether the said sum was actually paid by the assessee or not required to be verified at the end of the AO. Therefore, we remit the matter back to the file of AO for a limited purpose of verification of the transfer of funds by the assessee to M/s.JBP Trade Links Pvt. Ltd., on the same date or not and decide the issue afresh on merits.

ITA No.794/Mds/2014 :- 5 -:

7.0 In the result, the appeal of the Revenue is allowed for statistical purposes.

Order pronounced in the Open Court on 15th March, 2017, at Chennai.