Typographical Error in Share Valuation Report will not attract Addition: ITAT remits matter back to AO [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled that typographical error in the share valuation report will not attract addition and remitted the matter back to AO.

Sh. Jeetan Nagpal & Ms Pallavi appeared on behalf of the appellant and Sh. Umesh Takyar appeared on behalf of the respondent

The assessee engaged in the business of dealing in the investment of shares, securities, bonds, units of mutual funds etc where they e-filed return of income for the assessment year 2014-15 declaring income of (-) Rs. 1,73,75,273/- on 27.09.2014.

 The Assessing Officer (AO) found that the assessee had received Rs. 2,47,26,000/- from M/s Sara SAE Pvt. Ltd. (SSPL) as loans. From the share valuation report of the company (SSPL), the AO observed that the assessee firm was holding 9.38% of shares in SSPL through its partner Mr V.K. Dhawan and another 9.29% of shares in the same company through the other partner Mr C. Kumar. 

The AO enquired about why the loan received from SSPL was not treated as deemed dividend u/s 2(22)(e) of the Income-tax Act, 1961 and the assessee replied that both the conditionsu/s 2(22)(e) are to be seen in isolation and not conjunctively as a composite entity. Mr C. Kumar was a shareholder in an individual capacity in SSPL and M/s Sara Investments (the firm) was the shareholder in SSPL as a separate legal entity. The two are not relatable.

It was further stated that provisions of Section 2(22)(e) are not attracted to the case of the assessee for the reason that the impugned amount was not a loan or advance but was meant as an investment as it was the business of the assessee

 The assessee failed to provide any evidence to prove that the partners have made payment for the purchase of shares in their capacities. The valuation report submitted by the appellant shows that the appellant is holding 9.38% of shares in SSPL through its partner Mr VK Dhawan and another 9.29% of the shares in the same company through the other partner Mr C. Kumar. The Tribunal observed that the assessee contended that typographical error crept into the valuation report of SSPL then the impugned addition will not arise.

Shri G S Pannu, president and Ms Astha Chandra, judicial member ordered to restore the matter to the file of the AO to consider the contentions of the assessee afresh and the appeal of the assessee was allowed for statistical purposes.  

To Read the full text of the Order CLICK HERE

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