In Rajesh Pagaria vs. ITO., the Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) held that the provisions of deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961 doesn’t apply to Current Account transactions.
The assessee had filed his income return declaring a total income of Rs.1.54 Lakhs. From the cash flow statement furnished by the assessee, the Assessing Officer (A.O.) found that the assessee had received a total amount of Rs. 28.96 lakhs from M/s. Anand Vinayak Coalfield Ltd. According to the A.O., the said amount received by the assessee was in the nature of loans and advances and since the provisions of section 2(22)(e) of the Income Tax Act, 1961 were applicable, he invoked the same and added the amount of Rs. 28.96 Lakhs to the total income of the assessee by treating the same as deemed dividend. On appeal, the Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the addition made by the A.O. on this issue. Thereafter, the appeal was filed before the ITAT.
The Counsel for the assessee argued that that the account with M/s. Anand Vinayak Coalfield Ltd. was in the nature of the current account and not in the nature of loans or advances. By relying on the decision of Co-ordinate Bench of this Tribunal in the case of ITO vs. Gayatri Chakraborty he contended that the provisions of section 2(22)(e) are not applicable where the relevant transactions are in the nature of current account transactions and not loans and advances.
The Departmental Representative (D.R) contended that the relevant transactions with M/s. Anand Vinayak Coalfield Ltd. was categorized by the assessee himself as loan transactions and that the assessee, therefore, cannot change his stand at that stage to claim the said transactions as current account transactions.
The bench comprising of Accountant Member P.M. Jagtap observed that the nomenclature used by the assessee to define the transaction alone could not determine the exact nature of relevant transactions and that it was required to be ascertained from the facts and records of the case.
“I, therefore, set aside the impugned order of the Ld. CIT(A) on this issue and restore the matter to the file of the A.O. for deciding the same afresh in the light of the decision of Tribunal in the case of Smt. Gayatri Chakraborty (supra) after verifying the exact nature of transactions from the relevant facts and record.” observed the member.To Read the full text of the Order CLICK HERE