Appellant: Balbir Singh Kohli
Respondent: ITO Ward 14(4), New Delhi
Assessment Year: 2011-12
Filed On: 2019-06-24
Order Type: Final Tribunal Order
Date of Order: 2021-04-08
Pronounced On: 2021-04-08
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 30/04/2019 passed by CIT(A)-5, New Delhi for the assessment year 2011-12.
1. That in view and circumstances of the case, the Ld. CIT(A) was not justified in confirming an addition of Rs. 2,00,000 which was added by the Ld. A.O by taking an action u/s 2(22)(e) of the Income Tax Act, 1961.
2. That the proviso of 2(22)(e) securely applies where the conditions are satisfied in this respect. It cannot be added only to the assumption of Reserve & Surplus.
1. That the learned A.O. was not justified in taking the “Reserve & Surplus” as Rs. 9,64,48,707/-, the accumulated profit is to be taken as on the first day of the financial year i.e., 01/04/2010 or the maximum accumulated as on the day of the advance/transaction held.
2. That the learned A.O. has erred in taking Rs. 2,00,000 as advance and further he was not justified in treating it as a dividend in the hands of the appellant.
As per information received from ITO Ward 5(3), New Delhi, the Assessing Officer observed that during assessment proceedings u/s 143(3) of the Income Tax Act, 1961, in the case of M/s Kohli Estate Pvt. Ltd. for Assessment Year 2011-12, Shri Balbir Singh Kohli held more than 15% equity of the company. The Assessing Officer further observed that M/s Kohli Estate Pvt. Ltd. had shown a loss and advance to Director, Shri Balbir Singh amounting to Rs. 2 lac and the assessee company accumulated profit to the extent of Rs. 9,64,48,707.67/-. No business transaction with Shri Balbir Singh Kohli was declared by the said company other than an amount of Rs. 2 lac which is taxable in the hands of Shri Balbir Singh Kohli as deemed dividend u/s 2(22)(e) of the Act. The Assessing Officer observed that after perusal of Shri Balbir Singh Kohli, it has shown only income from other sources as interest income. The said company contested the assessment order of Assessment Year 2011-12 of the company wherein it was held that the payments made to the Director of the Company, Shri Balbir Singh Kohli of Rs. 2 lac is deemed to be in the income of the Director of the Company as per Section 2(22)(e) before CIT(A) in the case of the company. The said company has not contested the observation of the Assessing Officer regarding deemed dividend taxable in the hands of Shri Balbir Singh Kohli. Accordingly, notice u/s 148 of the Act was issued on 29/3/2018. The assessee filed a reply to the said notice and submitted that the assessee received Rs. 2 lacs on 27/1/2011 as a refund of the loss outstanding as on 1/4/2010 as Rs. 8,23,000/-. The balance of Rs. 2 lacs is an excess payment by mistake from Kohli Estates Pvt. Ltd. and the same is recovered on 31/10/2011 by recovering Rs. 5 lac from the assessee. Hence, the excess amount received by the assessee is by mistake and the same is recovered from the assessee. The Assessing Officer, after considering the reply of the assessee, made an addition of Rs. 2 lacs u/s 2(22)(e) and assessed the total income at Rs. 20,74,527/-.
Being aggrieved by the assessment order, the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted through written submissions that the assessee is a regular taxpayer since long. In this year, a sum of Rs. 2,00,000 was wrongly added by the A.O. as deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961. The background of Rs. 2,00,000 paid to the assessee on 27/01/2011 by KOHLI ESTATES (P) LTD. is as follows:
(a) The Assessee paid a sum of Rs. 8,23,000 to KOHLI ESTATES (P) LTD. as an unsecured loan during F.Y. 2005-2006 as interest-free financial help to the company.
(b) On 27/01/2011, KOHLI ESTATES (P) LTD. refunded Rs. 2,00,000 out of the total loan of Rs. 8,23,000 paid to the company by the assessee in F.Y. 2005-2006.
(c) On 28/03/2011, a sum of Rs. 8,23,000 was wrongly refunded to the assessee instead of Rs. 6,23,000 of his own loan given to KOHLI ESTATES (P) LTD. Hence, Rs. 2,00,000 was an excess payment by mistake. There was no intention of KOHLI ESTATES (P) LTD. to make an excess payment. This mistake is neither intentional nor willful but accidental. The excess refund of the loan is the only reason for the debit balance of Rs. 2,00,000.
From the above facts, it was found that the refund of Rs. 2,00,000 on 27/01/2011 should be treated as a refund out of the total loan outstanding of Rs. 8,23,000. Now, the A.O. converted the refund of the loan of Rs. 2,00,000 as deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961. We enclose the copy of the loan account of the assessee in the books of accounts of KOHLI ESTATES (P) LTD. After the close of the year 2010-2011, again a sum of Rs. 7,00,000 was paid by the assessee to KOHLI ESTATES PVT LTD. as financial help during F.Y. 2011-2012. Hence, there is no benefit to the assessee by receiving an excess payment of Rs. 2,00,000 which was refunded to KOHLI ESTATES (P) LTD. in the subsequent year.
The Ld. DR relied upon the assessment order and the order of the CIT(A).
We have heard both parties and perused the material available on record. From the perusal of the documents, it can be seen that the assessee received Rs. 2 lacs on 27/01/2011 as a refund of the loan outstanding as on 01/04/2010 at Rs. 8,23,000. The balance of Rs. 2 lacs is an excess payment by mistake from Kohli State Pvt. Ltd. as per the submissions of the assessee before the Assessing Officer as well as before the CIT(A). The contention of the Ld. AR that the said amount was recovered on 31/10/2011 by recovering Rs. 5 lacs from the assessee was never examined either by the Assessing Officer or the CIT(A) from the statement of account of the assessee, and there is no clear finding on that account by both the Revenue Authorities. Therefore, it will be appropriate to remand back the entire issue to the file of the Assessing Officer for proper verification and after taking cognizance of all the evidences including the statement of account, the Assessing Officer may pass an appropriate order according to the provisions of law. Needless to say, the assessee be given the opportunity of hearing by following the principles of natural justice.
In result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the Open Court on this 08th Day of April, 2021.
Sd/-
(G. S. PANNU)
VICE PRESIDENT
Sd/-
(SUCHITRA KAMBLE)
JUDICIAL MEMBER
Dated: 08/04/2021
R. Naheed
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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