Income Tax Appellate Tribunal (ITAT), New Delhi deleted addition for deemed dividend on the ground that the transfer of amount for business purposes was made to avoid forfeiture and held that such a transfer is not loans and advances.
Assessee, Archana Sharma is an individual who electronically filed her return of income for A.Y. 2014-15 on 22.12.2014 declaring total income at Rs.18,06,090/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 12.09.2016 determining the total income at Rs. 82,11,655/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 04.12.2017 in Appeal No.477576661021016 dismissed the appeal of the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal before the Tribunal.
During the course of assessment proceedings, AO noticed that assessee had purchased a property for Rs.3,60,00,000/- for the purpose of expansion of Ganesh Hospital Pvt. Ltd. Of which the assessee was a promoter. AO noted that assessee had made aggregate payment of Rs.73,70,000/- to Shri Chander Prakash Bagai for purchase of adjacent old residential house in her own name but the payment was made through the bank account of Ganesh Hospital Pvt. Ltd.
Before AO, assessee submitted that the hospital wanted to purchase adjacent residential house for its own use but due to the area being residential, assessee was forced to purchase the house in her own name, but since the property was for the purpose of the company, the payment was made through Ganesh Hospital Pvt. Ltd. It was thus contended that the transaction does not attract the provisions of s. 2(22)(e) of the Act.
AO noted that assessee did not furnish any proof to support the claim that they had tried to get property converted for commercial use. AO was of the view that transaction attracted the provision of Section 2(22)(e) of the Act. AO thereafter, and after giving the credit of balance of assessee with the company at the time of making above payment of Rs.9,64,435/-, held the balance amount of Rs.64,05,565/- to be deemed dividend taxable as income u/s 2(22)(e) of the Act and made its addition.
The Bench consisting ofAnil Chaturvedi, Accountant Member and Astha Sharma, Judicial Member observed that “Before us, Revenue has not placed any material on record to demonstrate that the impugned transaction was a smoke screen to cover a benefit obtained by the assessee from the company in which the assessee is a shareholder.
Considering the totality of the aforesaid facts, we are of the view that the CIT(A) was not justified in upholding the addition made by AO by invoking the provisions of s. 2(22)(e) of the Act. “
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