PFA
Addition for Deemed Dividend confirmed – Advance against property contention not valid in absence of supporting
Sri Sardar Iqbal Singh vs. JCIT (ITAT Hyderabad), ITA No. 349/Hyd/2014, Date of pronouncement- 18-02-2015
Briefly the facts relating to this issue are, during assessment proceeding, AO noticed that assessee is also a director in M/s Euro Construction Pvt. Ltd. and during the year under consideration, assessee has received a total amount of Rs. 45 lakhs on different dates as loan/advance from the said company. AO further observed that on examining the receipts and payments account submitted by assessee, it was found that loan taken from the company was utilized for assessee's personal purposes like investing in M/s Mirra Packaging and others. He further found that as assessee is holding shares of 95.249% and the company had also accumulated profits during the year, the amount given as loan/advance to assessee have to be treated as deemed dividend u/s 2(22)(e) of the Act. Accordingly, he issued a notice to assessee to explain. In response to the show cause notice, it was submitted by assessee that the amount received from the company was not in the nature of loan/advance, but, is actually towards purchase ofproperty in the name of the company which did not materialize. AO, however, disbelieved the explanation of assessee in absence of supporting evidence. AO observed that as all the conditions of section 2(22)(e) are satisfied, the amount of Rs. 45 lakh received by assessee from M/s Euro Construction Pvt. Ltd. has to be treated as deemed dividend u/s 2(22)(e) and accordingly made the addition. Though, assessee challenged the addition made in appeal before ld. CIT(A), but, ld. CIT(A) also confirmed the addition made by accepting the view expressed by AO.
Ld. AR, reiterating the submissions made before the departmental authorities, submitted before us that the amount received from the company is not in the nature of loan/advance, but, for the purpose of investing in properties on behalf of the company. When the deal did not materialize, assessee refunded back the money to company. Therefore, the amount received not being in the nature of loan/advance, provisions of section 2(22)(e) is not attracted. Ld. AR submitted that this is only a running account with the company. Further, ld. AR referring to the account copy of assessee in the books of account of the company as well as company's account in the books of assessee, submitted that if at all the amount received from the company is to be treated as deemed dividend, then, repayments made by assessee also has to be set off.
The ld. DR, on the other hand, submitted that not only before AO, but, also before ld. CIT(A), assessee could not substantiate its claim that the amount received from the company was towards purchase of land on behalf of the company. Therefore, assessee's claim that the amount received is not in the nature of loan/advance cannot be accepted. It was submitted, as the amount received satisfied all the conditions of section 2(22)(e), addition made was justified.
We have considered the submissions of the parties as well as perused the materials on record and the orders of revenue authorities. There is no dispute to the fact that assessee on different dates during the relevant FY has received an amount of Rs. 45 lakh from M/s Euro Constructions Pvt. Ltd. wherein assessee is the Managing Director and majority shareholder. It is also not disputed that the said company is a company wherein public are not substantially interested. It is also a fact on record that during the year the company had accumulated profits. Therefore, all the conditions of section 2(22)(e) are satisfied. Though, assessee has claimed that the amount received was not in the nature of loan/advance, but, towards purchase of land in the name of company, however, assessee has not produced even a single evidence to justify the aforesaid claim. No specific evidence to show that any agreement was entered into for purchase of property or any advance was paid has been brought on record by assessee. In these circumstances, assessee's claim that the amount received was not in the nature of loan/advance cannot be accepted. However, as can be seen from assessee's account in the books of M/s Euro Construction Pvt. Ltd. there is a credit balance of Rs. 7,55,896.50 in February, 2009. Therefore, assessee deserves to get credit for the said amount by setting it off against total advance of Rs. 45 lakh. In the aforesaid view of the matter, we direct AO to reduce the amount of Rs. 7,55,896.50 from the total loan/advance of Rs. 45 lakh and treat the balance amount as deemed dividend u/s 2(22)(e) of the Act. These grounds are partly allowed
- See more at: Addition for Deemed Dividend confirmed - Advance against property contention not valid in absence of supporting
S. 68 No Addition if Assessee discharges initial onus casted on him
ITO vs. Parth Mehrotra (ITAT Delhi), I.T.A. No. 3333/Del/2011, Date-18th February, 2015
Assessee had declared an income by filing its return. The said return was selected for scrutiny through CASS on the basis of AIR. Assessment u/s 144 was made, resulting in an addition of Rs. 28,50,000/- as the assessee was found to have failed to explain the source of investment.
In appeal before the first appellate authority the assessee explained that investments had been sourced partly out of the redemption amount of Rs. 19,09,029/- of Birla Sun Life Mutual Fund and partly out of loans of Rs. 17,00,000/- from close friends and relations.
The CIT(A) forwarded these submissions and facts to the AO and a remand report was invited. Considering the same, the CIT(A) after hearing the assessee deleted the additions made. Aggrieved by this, Revenue is in appeal before the Tribunal.
We have heard the rival submissions and perused the material available on record. It is seen that qua the amounts of Rs. 8 lacs as loan from Shri Ajay Sood father-in-law of assessee's sister and Rs. 2.5 lac each from Shri Satish Vohra and his wife we find that considering the nature of evidences placed by the assessee on record which have not been rebutted we find that the revenue's arguments have no merits. It is further seen that the factum of loan from Ms. Bhamti Mehrotra the assessee's sister who was married in November 2008 the arguments that it was returned by incurring expenditure on her marriage in November 2008 cannot be doubted. The material fact is that the loan was advanced by her. Similarly we find merit in the arguments of Ld. AR who while addressing ground 4 raised by the revenue has contended that the factum of redemption of Birla Sun Life Mutual Fund is not doubted by the revenue and the ground itself suggest that the grievance is based only to the fact that whether it was short term capital gain or long termcapital gain:
Thus the factum of redemption stands accepted and has not rebutted before us. Considering the peculiar facts and circumstances we find that the said ground of the revenue also does not have any merit. In view of the above mentioned peculiar facts and circumstances of the case, we find ourselves in agreement with the following findings of the CIT(A) recorded in para 15 to 18 and hold that the departmental appeal, being devoid of merit deserves to be dismissed. The relevant findings are reproduced herein :-
"15. I have considered the submissions of the appellant and the documentary evidence in respect of the said issues. The purchases of Birla Sun Life Mutual Fund had been clearly proved in the previous year ending on 31st March, 2004 for Rs. 17,65,000/- as per the statements issued by Birla Sun Life Mutual Fund copies whereof were filed before the Assessing Officer. The same had been redeemed for Rs. 19,09,029/- on 1.4.2004 as per the copy of statement issued by the said Mutual Fund. The proceeds of the said Mutual Fund were reflected in the Bank account of the appellant of HSBC Bank on 1.4.2004. The purchase and redemption of the said Mutual Fund stand clearly proved with the help of the statements issued by the Birla Sun Life Mutual Fund. It appears that the Assessing Officer has not considered the said statements nor the Bank account of the appellant on this account. He proceeded wrongly in assuming that the proceeds of the said Mutual Fund of Rs. 19,09,029/- were not bonafide. The stand of the Assessing Officer is apparently contrary to the statements issued by the said Mutual Fund. In view of the said statements issued by the Mutual Fund I am of the opinion that the proceeds of the said Mutual Fund of Rs. 19,09,029/- stand fully proved.
16. I have considered the statements filed by S/Shri Ajay Sood, Satish Vohra and his wife Smt. Rohini Vohra in response to the requisitions issued by the Assessing Officer under section 133(6) of the Income Tax Act. Their statements clearly proved the advance of the said loans to the appellant and the repayment thereof within a few days. The loans and the repayments thereof by means of account payee cheques stand proved from the two Bank accounts of the appellant. In the light of the said documents, it could not be made out that the said loans were not bonafide. I am, therefore, of the view that the said loans were bonafide.
17. So far as the loan from Ms. Bhamti Mehrotra (nee Bhamti Sood) is concerned, the said loan had been received by means of account payee cheque and the same had been utilized at the time of here marriage in November, 2008. The requisition had been issued to her at the old address without appreciating that she was married in November, 2008 and has been residing thereafter with her husband in USA. The Assessing Officer did not require the appellant to furnish the latest whereabouts of his sister. In these circumstances, it could not be made out that the said loan was not bonafide.
18. The appellant has submitted that he had received the redemption amount of Rs. 19,09,029/- in respect of Birla Sun Life Mutual Fund on 1.4.2004. Further he had received loans of Rs. 17,00,000 from ShriAjay Sood, Ms. Bhamti Mehrotra (nee Bhamti Sood), Shri Satish Vohra and his wife Smt. RohiniVohra, all of which stand proved as mentioned hereinabove. The appellant submitted that out of the said total amount of Rs. 36,09,029/- (Rs. 19,09,029 + Rs. 17,00,000), he had made investment of Rs. 28,50,000 in the Mutual Funds in the month of April, 2004. Thus the investments of Rs. 28,50,000 in the Mutual Funds stand proved out of the redemption amount of Birla Sun Life Mutual Fund and the said loans. The addition of Rs. 28,50,000, therefore, cannot be sustained. The same is, therefore, deleted."
In the result appeal of the revenue is dismissed
Furnishing of audit report is directory and not mandatoryby CA Sandeep Kanoi |
Finding of the AO that in the absence of audit report, the enhanced claim is not maintainable over looks this factual position. It is undisputed that audit report for the enhanced claim had been furnished during the impugned 153A assessment proceedings along with Profit and Loss account and Balance sheet duly certified by the Accountant. No adverse observations have been made vis-à-vis the said audit report/ financial statement.
PFA
Furnishing of audit report is directory and not mandatory
DCIT vs. M/s Surya Merchants Ltd. (ITAT Delhi), ITA Nos. 4309 to 4313/Del/2013, Dated- 18.02.2015
The issue in hand relates to allowability of enhanced claim of deduction of Rs.18,43,552/- u/s 80IB of the Act. It is an admitted position that the assessee is eligible for claim of reduction u/s 80IB of the Act, in as much as deduction claimed of Rs.41,83,813/- stand allowed during the original assessment and the impugned assessment too. However in the return filed in response to notice u/s 153A of the Act, the said claim has been enhanced by Rs,18,43,552/- on account of additional income declared in the return. It is also a matter of record and an undisputed position that the said additional income relates to the eligible projects of Avant Grade, Vaishali as is evident from the inspector's report maintained in the assessment order in Page 6 at Para 10. In such circumstances the AO turned down the claim on the ground that the audit report had not been furnished in respect of the enhanced claim of reduction u/s 80IB (13) read with section 80IA(7) of the Act at the time of furnishing of original return u/s 139(1) of the Act. In our opinion, the said reason of the AO is devoid of any merit for the reason that the income in respect of which enhanced deduction has been claimed has only been declared for the first time in the return furnished in response to notice u/s 153A of the Act. Thus the finding of the AO that in the absence of audit report, the enhanced claim is not maintainable over looks this factual position. It is undisputed that audit report for the enhanced claim had been furnished during the impugned 153A assessment proceedings along with Profit and Loss account and Balance sheet duly certified by the Accountant. No adverse observations have been made vis-à-vis the said audit report/ financial statement. Also the Hon'ble Delhi High Court in the case of Contimeters Electrical Pvt. Ltd 317 ITR 249 (Del) has held that furnishing of audit report is directory and not mandatory. The relevant finding of the Hon'ble Court is as under:-
"that the Tribunal had arrived at the correct conclusion that the requirement of filing of audit report along with the return was not mandatory but directory and that if the audit report was filed at any time before the framing of the assessment, the requirement of section 80-IA(7) would be met."
Similar view has been expressed by the jurisdictional High Court in the case of ACIT Vs. Murlidhara Prasad 118 ITR 393 (All) where it was held that filing of declaration before assessment is sufficient. Furthermore, the statutory position for claim of deduction is linked to the profits of the eligible profit. In other words, when the profits of the eligible project have increased then the consequential statutory impact will be on the amount of deduction u/s 80IB. so when the profits increase, the deduction/ incentive envisaged u/s 80IB increases. On one hand when the revenue has accepted the increase in profit though surfaced due to the search, the impact of the said increase in profit has to be also on the deduction allowable under Section 80IB of the Act, more particularly when the mandate on AO u/s 153A is to compute the total income of assessee. In the light of the aforesaid distinguishable facts, the ratio of Jai Steel cited (supra) by the revenue is of no help to the department. In that case, the deduction claimed by the assessee was not in the original return at all and it was made for the first time u/s 153A, which is not the case in hand. It may reemphasized that the assessee's claim was not a new claim but it was only an enhanced claim which is statutorily linked to the eligible profits which get enhanced as result of search. Therefore we do not find any legal infirmity on the finding of the ld CIT(A) and so confirm the same. We also concur with the conclusion of the ld CIT(A) in Page 11, page 3.18 wherein it is observed that if the disallowance u/s 40A(3) is directly relatable to the profit of the eligible projects, then the deduction u/s 80IB be accordingly recomputed, subject to verification of the records including the seized records. In the result the grounds raised by the revenue for Assessment Year 2005-06 stands dismissed.
- See more at: Furnishing of audit report is directory and not mandatory
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