Sri M Amareswara Rao, Hyderabad V. The DCIT Cent Cir Vijayawada, Vijayawada

ITA 310/VIZ/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2134 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 24-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G GURUSWAMY
• Keywords: Principle of natural justice; Deemed dividend
• Section: 142(1); 153A; 132

Judgement Text

ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.308 TO 310/VIZAG/2011 ( / ASSESSMENT YEARS : 2007-08 TO 2009-10) M. AMARESWARA RAO, HYDERABAD VS. DCIT , CENTRAL CIRCLE , VIJAYAWADA [ PAN : ACIPM 1778P ] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI MADHUSUDHAN, AR '(& ) / RESPONDENT BY : SHRI G. GURUSWAMY, DR ) - / DATE OF HEARING : 15.12.2015 ) - / DATE OF PRONOUNCEMENT : 08.01.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE THREE APPEALS ARE FILED BY THE ASSESSEE AGAIN ST THE SEPARATE, BUT IDENTICAL ORDERS OF COMMISSIONER OF I NCOMETAX (APPEALS)I, HYDERABAD DATED 22-08-2011 AND PERTAIN TO A.Y. 2007-08, 2008-09 AND 2009-10. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 2 COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOS ED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.308/VIZAG/2011: 1. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. 1. THE ORDER OF THE LD COMMISSIONER OF INCOME TAX (APP EALS)-I, HYDERABAD IN ITA NO. 0728/CC, VIJ/CIT(A)-I/10-11, DATED 22/08/20 11 IS ERRONEOUS BOTH IN LAW AND FACTS OF THE CASE. 2. THE LD COMMISSIONER OF INCOME TAX (APPEALS)-I, HYDE RABAD OUGHT TO HAVE NOTICED THAT THE IMPUGNED ADVANCE WHICH IS SUB JECT MATTER OF DISPUTE REPRESENTED ONLY ADVANCES PAID BY THE COMPANY IN WH ICH HE IS A DIRECTOR FOR PURCHASE OF LAND AND TOWARDS OTHER EXPENSES AND DID IN FACT NOT REPRESENT LOAN OR ADVANCE FALLING WITHIN THE AMBIT OF SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961. 3. THE LD COMMISSIONER OF INCOME TAX (APPEALS)-I, HYDE RABAD OUGHT TO HAVE NOTICED THAT IT IS A WELL SETTLED LAW THAT THE WAY IN WHICH THE ENTRIES ARE MADE BY THE ASSESSEE IN THE BOOKS OF ACCOUNT IS NOT DETE RMINATIVE OF THE QUESTION WHETHER THE ASSESSEE HAS INCOME ASSESSABLE TO TAX AND GOING BY THIS CONCEPT HE SHOULD NOT HAVE SUSTAINED ADDITION U/S 2(22)(E) OF THE INCOME TAX ACT, 1961 MERELY ON THE GROUND THAT THE C OMPANY MAINTAINED SEPARATE ACCOUNTS FOR LAND ADVANCE AND OTHER LOANS AND THAT THE AMOUNT WAS NOT REFLECTED IN THE ACCOUNTS OF THE LAND ADVANCE. 4. THE LD COMMISSIONER OF INCOME TAX (APPEALS)-I, HYDE RABAD OUGHT TO HAVE NOTICED THAT THE CLAIM OF THE ASSESSEE CONTAINED IN HIS REPLY DATED 0111212010 TO THE EFFECT THAT THE IMPUGNED ADVANCE FOR PURCHAS E OF LANDS WAS SUMMARILY REJECTED BY THE ASSESSING OFFICER WITHOUT AFFORDING ANY OPPORTUNITY TO DEFEND HIS STAND AND THEREBY PATENTLY THERE WAS NON-ADHERENCE OF PRINCIPLES OF NATURAL JUSTICE AND SUCH A TECHNICAL FLAW BY ITSELF MAY MAKE THE IMPUGNED ADDITION TO BE VOID IN THE EYES OF THE LAW. 5. FOR THESE REASONS AND SUCH OTHER REASONS WHICH MAY BE RAISED DURING THE COURSE OF HEARING OF THE APPEAL, IT IS EARNESTLY PR AYED THAT THE IMPUGNED ADDITION OF RS 3,53,661/- MAY BE ORDERED TO BE DELE TED IN THE INTEREST OF EQUITY AND JUSTICE AND ALSO TO BE IN CONFORMITY WITH THE P ROVISIONS OF LAW. 2. THE ASSESSEE, BY MEMORANDUM OF ADDITIONAL GROUND S DATED 15-10-2015 HAS RAISED THE FOLLOWING ADDITIONAL GROU ND. ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 3 1. TAKING COGNIZANCE OF THE FACT AS TRANSPIRED AND EST ABLISHED BY THE AUDITED FINANCIAL STATEMENTS FORMING PART OF THE RE TURN OF INCOME FOR THE ASSESSMENT YEAR UNDER REVIEW, VIZ., AY 2008 -09 THAT THE APPELLANT HELD A PROFIT SHARING RATIO OF ONLY 20%, THE ADDITION IF AT ALL CONSIDERED NECESSARY U/S 2(22)(E) OF THE ACT, THE SAME MAY BE RESTRICTED TO 20% OF THE ACCUMULATED PROFIT OF RS. 40,15,919/- AND THERE FRO M THE CLAIM OF TELESCOPING SOUGHT FOR MAY BE CONSIDERED. 2. IT IS EARNESTLY PRAYED IN THE GROUNDS OF APPEAL ANN EXED TO FORM 36 FOR THE ASSESSMENT YEAR 2008-09 IN PARA 5, LINE 3, RS 40,15 ,919/- MAY BE REPLACED FOR RS 3,53,661/- MENTIONED WHICH IS A TYPOGRAPHICAL ER ROR. 3. THE BRIEF FACTS EXTRACTED FROM ITA.NO.308/VIZ/20 11, ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVED INCOME FROM SALAR Y, INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES. THE ASSESSEE HAS FILED HIS RETURN OF INCOME FOR THE A.Y. 2007-08 ON 23-07- 2007 DECLARING TOTAL INCOME OF RS. 30,98,669/-. A SEARCH OPERATION UNDER SEC. 132 OF THE ACT, WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF ASSESS EE AND ALSO THE GROUP CASES OF CHALAPATHI GROUP, GUNTUR ON 24-7-200 8. DURING THE COURSE OF SEARCH, IT WAS FOUND THAT THE ASSESSEE WA S A SHAREHOLDER, HOLDING 12% SHARES IN M/S CHALAPATHI ESTATES PVT LT D, HAS TAKEN LOAN AMOUNTING TO RS. 57,50,000/- WHICH WAS USED FOR INV ESTMENT IN ANOTHER COMPANY. DURING THE COURSE OF SEARCH, IT WAS FOUND THAT M/S CHALAPATHI ESTATES PVT LTD WAS A CLOSELY HELD COMPANY, IN WHIC H PUBLIC ARE NOT SUBSTANTIALLY INTERESTED AND THE COMPANY HAS ACCUMU LATED PROFITS, THEREFORE, THE LOAN DRAWN BY THE ASSESSEE IS HIT BY THE PROVISIONS OF ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 4 SECTION 2(22)(E ) OF THE ACT. WHEN THESE FACTS WERE CONFRONTED TO THE ASSESSEE, THE ASSESSEE VIDE HIS SWORN STATEMENT DAT ED 18-9-2008 HAS ACCEPTED THE SAID TRANSACTION AND ADMITTED TO DISCL OSE ADDITIONAL INCOME OF RS. 3,53,000/- AND AGREED TO FILE THE REVISED RE TURN. CONSEQUENT TO SEARCH, THE ASSESSEE CASE WAS NOTIFIED AND NOTICE U NDER SEC. 153A OF THE INCOME TAX ACT, 1961 DATED 30-11-2009 WAS ISSUE D. IN RESPONSE TO NOTICE, THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE A.Y. 2007-08 ON 30-07-2010 DECLARING TOTAL INCOME OF RS. 30,98,669/ -. THE CASE WAS SELECTED FOR SCRUTINY, ACCORDINGLY, NOTICE U/S 143( 2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICE, THE AUTHORI SED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISH ED THE DETAILS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE A.O. NOTICED THAT, DURING THE COURSE OF SEARCH OPERATION, THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME IN THE FORM OF DEEMED DIVIDEND OF RS. 3,53,000/- AND PAY TAXES. HOWEVER, THE A.O. FOUND THAT IN THE RETU RN FILED UNDER SEC. 153A OF THE ACT, FOR THE A.Y. 2007-08, NO SUCH INCO ME WAS ADMITTED. THEREFORE, ISSUED A SHOW CAUSE NOTICE AND ASKED THE ASSESSEE AS TO WHY THE SAID LOAN AMOUNT SHALL NOT BE TREATED AS DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF THE ACT. IN REPLY, THE ASSESSEE SU BMITTED THAT, BY MISTAKE, I HAVE ADMITTED THE ADDITIONAL INCOME AT T HE TIME OF SEARCH, BUT, THE LOANS ARE TAKEN FOR THE PURPOSE OF PURCHAS E OF LAND FOR THE ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 5 COMPANY, THEREFORE, THE SAME CANNOT BE TREATED AS D EEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E ) OF THE ACT. HOWEVER, THE A.O. DID NOT CONVINCED WITH THE EXPLANATION OFFERED BY T HE ASSESSEE, HELD THAT THE ASSESSEE IS HAVING BENEFICIAL OWNERSHIP OF MORE THAN 10% SHARES IN THE COMPANY AND THE COMPANY HAS ACCUMULAT ED PROFIT OF RS. 3,53,661/-, THEREFORE, THE LOAN TAKEN BY THE ASSESS EE IS HIT BY THE PROVISIONS OF SECTION 2(22)(E ) OF THE ACT. HENCE, MADE ADDITION OF RS. 3,53,661/- UNDER SEC. 2(22)(E ) OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE AS SESSEE CONTENDED THAT THE LOAN TAKEN FROM THE COMPANY REPRESENTS THE ADVANCE FOR PURCHASE OF LANDS, THEREFORE, THE A.O. WAS NOT JUST IFIED IN INVOKING THE PROVISIONS OF SECTION 2(22)( E) OF THE ACT. THE ASS ESSEE FURTHER SUBMITTED THAT THE A.O., WITHOUT APPRECIATING THE F ACTS IN RIGHT PERSPECTIVE, BRUSH ASIDE THE CLAIM OF THE ASSESSEE WITHOUT CAUSING INDEPENDENT ENQUIRY JUST RELIED UPON THE SWORN STA TEMENT GIVEN DURING THE SEARCH OPERATION. THE ASSESSEE FURTHER SUBMITTE D THAT THE ASSESSEE HAS MADE VOLUNTARY DISCLOSURE OF RS. 16,65,000, SO AS TO COVER THE INHERENT DEFICIENCIES IN THE BOOKS OF ACCOUNT MAINT AINED BY HIM, THEREFORE, THE AUTHORITIES SHOULD HAVE BEEN TELESCO PED THE SAID AMOUNT AGAINST THE ADDITION MADE TOWARDS DEEMED DIVIDEND U NDER SEC. 2(22) ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 6 (E) OF THE ACT. THE CIT (A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ADDITION MADE BY THE A.O. AG GRIEVED BY THE CIT (A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE, SUBMITTED THAT THE CIT(A) WAS ERRED IN CONFIRMING THE ADDITIO N TOWARDS DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF THE ACT. THE CIT(A) FAILED TO APPRECIATE THE FACTS CORRECTLY, AS THE ADVANCE FROM THE COMPAN Y REPRESENTS THE HOUSING LOAN TAKEN FROM THE COMPANY. THE A.R. FURTH ER SUBMITTED THAT THE ASSESSEE HAS TAKEN HOUSING LOAN FROM THE COMPAN Y WHICH WAS REPAYABLE WITH INTEREST. THE COMPANY HAS CHARGED IN TEREST ON THE LOAN FOR THE PERIOD 2008-09 AND 2009-10, THEREFORE, IT C ANNOT BE TREATED AS GRATUITOUS PAYMENTS, SO AS TO INVOKE THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE COMPANY IS HAVING A POLICY OF PROVI DING HOUSING LOAN TO ELIGIBLE EMPLOYEES AND AS A MATTER OF FACT, ONE MR. M.S. CHOUDHARY WAS GRANTED HOUSING LOAN OF RS. 3,00,000/- IN THE SAME PERIOD. SIMILARLY, THE COMPANY HAS GRANTED HOUSING LOAN TO THE ASSESSEE AS AN EMPLOYEE, BUT NOT IN THE CAPACITY OF DIRECTOR. THE A.O. HAS FAILE D TO TAKE NOTE OF THE SAID VITAL FACT AT THE TIME OF ASSESSMENT PROCEEDIN GS, SIMPLY BELIEVED THE SWORN STATEMENT AND MADE THE ADDITION. THE CIT( A) CONFIRMED THE ADDITIONS IN A ROUTINE MANNER BASED ON THE FINDINGS OF THE ASSESSING OFFICER. THE A.R. FURTHER SUBMITTED THAT THE CIT(A) WAS ERRED IN ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 7 REJECTING THE CLAIM MADE FOR TELESCOPING THE ADDITI ONAL INCOME DECLARED AGAINST THE DEEMED DIVIDEND. THE A.R. FURTHER SUBMI TTED THAT THE ASSESSEE HAS MADE VOLUNTARY DISCLOSURE OF RS. 16,65 ,000/- TO COVER UP THE INHERENT DEFICIENCIES IN THE BOOKS OF ACCOUNTS. THEREFORE, THE A.O. OUGHT TO HAVE TELESCOPED THE ADDITIONAL INCOME TO T HE INCOME VOLUNTARY DISCLOSED AT THE TIME OF SEARCH. 6. THE LEARNED AUTHORISED REPRESENTATIVE MADE AN A LTERNATIVE PLEA AND SUBMITTED THAT WITHOUT PREJUDICE TO THE CLAIM T HAT THE ADDITION TOWARDS DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF THE ACT IS NOT SUSTAINABLE IN THE HANDS OF ASSESSEE, IF AT ALL THE DIVIDEND IS TAXABLE, IT IS JUST AND REASONABLE TO CONSIDER ADDITION TO THE EXT ENT OF 20% OF THE ACCUMULATED PROFITS IN THE HANDS OF ASSESSEE AND TH E REMAINING MAY BE ORDERED TO BE ASSESSED IN THE HANDS OF OTHER FOUR S HAREHOLDERS, AS ALL THE SHAREHOLDERS HAVE TAKEN ADVANCE FROM THE COMPAN Y, THEREFORE, THE AMOUNT IS LIABLE TO BE TAXED IN THE HANDS OF ALL TH E DIRECTORS ACCORDING TO THEIR SHARE HOLDING. THEREFORE, REQUESTED TO SET AS IDE THE ASSESSMENT ORDER. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE STRONGLY SUPPORTED THE ORDER OF CIT(A). THE LD. D.R . FURTHER SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE SAID FINDING OF FACT BEFORE THE INVESTIGATION OFFICER AND AGREED TO DISCLOSE THE AD DITIONAL INCOME TO THE ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 8 EXTENT OF ACCUMULATED PROFIT UNDER SEC. 2(22)(E) OF THE ACT, HAS CHANGED HIS STAND AND COME UP WITH A EXPLANATION THAT THE I MPUGNED LOAN IS A HOUSING LOAN. THE D.R. FURTHER SUBMITTED THAT THE A DDITIONAL GROUND CANNOT BE ACCEPTED AT THIS STAGE AS THE SAME WAS NE ITHER CLAIMED BEFORE THE A.O. NOR BEFORE THE CIT(A). THEREFORE, T HE ASSESSMENT ORDER SHOULD BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE IS SHAREHOLDER AND DIRECTOR IN A CLOSELY HELD COMPANY HAVING BENEFICIAL OWNERSHIP OF MORE THAN 10% SHARES. A SEARCH OPERATI ON WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF ASSESSEE AND HIS GRO UP CASES. DURING THE COURSE OF SEARCH OPERATION, IT WAS NOTICED THAT THE ASSESSEE HAS TAKEN LOAN FROM COMPANY. WHEN THESE FACTS WERE CONFRONTED TO THE ASSESSEE, HE HAS ADMITTED IN HIS SWORN STATEMENT RECORDED UND ER SEC. 132(4) OF THE ACT AND GREED TO DECLARE ADDITIONAL INCOME TO T HE EXTENT OF ACCUMULATED PROFIT AS DEEMED DIVIDEND UNDER SEC. 2( 22)(E) OF THE ACT, HOWEVER, FAILED TO DISCLOSE IN THE RETURN FILED IN RESPONSE TO NOTICE UNDER SEC. 153A OF THE ACT. THEREFORE, THE A.O. ISSUED A SHOW CAUSE NOTICE AND ASKED HIM TO EXPLAIN, AS TO WHY THE LOAN SHALL NOT BE TREATED AS DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF THE ACT. IN RESPONSE TO NOTICE, THE ASSESSEE CLAIMED THAT THE LOANS ARE TAKEN FOR T HE PURPOSE OF ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 9 PURCHASE OF LAND FOR THE COMPANY, THEREFORE, THE SA ME CANNOT BE TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SE CTION 2(22)(E) OF THE ACT. THE A.O., HOWEVER, DID NOT ACCEPT THE EXPL ANATION, MADE ADDITION OF RS. 3,53,661/- UNDER SEC. 2(22)(E) OF T HE ACT. 9. THE FACTS WITH REGARD TO THE LOAN AND THE ACCUMU LATED PROFITS IN THE BOOKS OF ACCOUNTS OF THE COMPANY TO THE EXTENT OF RS.3,53,661/- IS NOT DISPUTED. THE ONLY DISPUTE WITH REGARD TO, WHE THER THE SAID DEBIT BALANCE IN THE NAME OF THE ASSESSEE IN THE COMPANY S BOOKS IS A LOAN OR DEPOSIT WHICH ATTRACTS PROVISIONS OF SECTION 2(22)( E) OR WHICH IS MERELY A ADVANCE IN THE NORMAL COURSE OF BUSINESS FOR THE PU RPOSE OF PURCHASE OF LAND FOR COMPANY, IS THE QUESTION BEFORE US FOR OUR CONSIDERATION. IN THIS CASE, THE A.O. INVOKED THE PROVISIONS OF SECTI ON 2(22)(E) OF THE ACT, FOR THE REASON THAT THE ASSESSEE HAS RECEIVED LOAN FROM THE COMPANY OUT OF THE ACCUMULATED PROFITS, THEREFORE IT IS TAX ABLE AS DEEMED DIVIDEND UNDER SEC. 2(22)(E). THE A.O. WAS OF THE O PINION THAT THE ASSESSEE HAS DRAWN AMOUNT FROM THE COMPANY FOR HIS PERSONAL PURPOSE WHICH IS NOTHING BUT GRATUITOUS PAYMENTS, THEREFORE , ATTRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE ASSE SSEE CONTENTION IS THAT THE COMPANY HAS GRANTED HOUSING LOAN IN THE NORMAL COURSE OF BUSINESS LIKE IN OTHER CASES, BUT NOT IN THE CAPACITY OF DIR ECTOR, THEREFORE, THE ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 10 SAME CANNOT BE TREATED AS LOAN WITHIN THE MEANING O F SEC. 2(22)(E) OF THE ACT. 10. WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 2 (22)( E) OF THE ACT. A CAREFUL STUDY OF THE ABOVE PROVISIONS MAKE I T CLEAR THAT THE LEGISLATURE WANTED TO BRING TO TAX THE AMOUNT PAID BY CLOSELY HELD COMPANIES TO THEIR PRINCIPLE SHAREHOLDERS TO AVOID DIVIDEND DISTRIBUTION TAX. THE HONBLE SUPREME COURT ALSO HELD IN THE CAS E OF NAVNEET LAL C. JHAVERI VS. K K SEN (1965) 56 ITR 198 (S.C), THAT T HE PROVISIONS OF SECTION 2(22) (E ) OF THE ACT MUST BE MADE APPLICAB LE, WHERE DIVIDEND IS PAID IN THE GUISE OF LOAN OR ADVANCE TO AVOID TAX. BUT, TO APPLY THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, A HONEST ATTEMPT IS TO BE MADE TO UNDERSTAND, WHETHER THE IMPUGNED AMOUNT IS A LOA N OR ADVANCE WITHIN THE MEANING OF SAID SECTION. IN THE PRESENT CASE ON HAND, FROM THE FINDING OF FACT BY THE A.O., IT IS CLEAR THAT T HE ASSESSEE HAS TAKEN VARIOUS LOANS FROM THE COMPANY. IT WAS ALSO AN UNDI SPUTED FACT THAT THE ASSESSEE HAS ACCEPTED THE FACTS AT THE TIME OF SEAR CH PROCEEDINGS AND AGREED TO DISCLOSE INCOME AND PAY TAX, WHICH IS EVI DENT FROM THE SWORN STATEMENT RECORDED DURING THE COURSE OF SEARCH. BUT , DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS RETRACTED HIS ADMISSION AND EXPLAINED THAT THE AMOUNT RECEIVED FROM THE COMPANY IS NOT A LOAN, BUT IT IS AN ADVANCE FOR PURCHASE OF LAND FOR COMPANY, THEREFORE, THE ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 11 PROVISIONS OF SECTION 2(22)(E) CANNOT BE APPLIED. T HOUGH, THE ASSESSEE CLAIMED TO HAVE RECEIVED THE AMOUNT IN THE NORMAL C OURSE OF BUSINESS FOR THE PURPOSE OF PURCHASE OF LAND FOR THE COMPANY , HE IS FAILED TO PROVE THE SAME BY FURNISHING RELEVANT DETAILS IN TH E FORM OF AGREEMENTS OR EVEN FAILED TO FURNISH THE DETAILS OF AMOUNT SPE NT FOR THE PURPOSE FOR WHICH IT WAS DRAWN. WE FURTHER OBSERVED THAT THE AS SESSEE KEEP ON CHANGING HIS EXPLANATION AT EACH STAGE OF PROCEEDIN GS. INITIALLY, HE HAS ADMITTED THE ACCEPTANCE OF LOAN FROM THE COMPANY, L ATER CHANGED HIS STAND BEFORE THE ASSESSING OFFICER AND EXPLAINED TH AT THE SAID AMOUNT IS NOT LOAN, BUT IT IS ONLY AN ADVANCE IN THE NORMAL C OURSE OF BUSINESS FOR THE PURPOSE OF PURCHASING LANDS FOR COMPANY. NOW, B EFORE US, HE HAS COME UP WITH YET ANOTHER ARGUMENT THAT THE SAID AMO UNT IS HOUSING LOAN GRANTED BY THE COMPANY AS AN EMPLOYEE, BUT NOT AS LOAN TO DIRECTOR. THEREFORE, WE ARE OF THE OPINION THAT, TH E ASSESSEE IS TRYING TO CIRCUMVENT THE LOAN TAKEN FROM THE COMPANY BY DIFFE RENT EXPLANATION AT DIFFERENT STAGES OF PROCEEDINGS, WHICH CANNOT BE AC CEPTED. THE A.O. HAS MADE A CATEGORICAL FINDING THAT THE COMPANY HAS MAI NTAINED SEPARATE ACCOUNTS FOR DIFFERENT TYPES OF PAYMENTS WHICH INCL UDES LAND ADVANCE, HOUSING LOAN AND LOAN. A PLAIN READING OF SECTION 2 (22)(E) OF THE ACT, MADE IT CLEAR THAT ANY PAYMENT BY A COMPANY, OF ANY SUM BY WAY OF ADVANCE OR LOAN TO A SHARE HOLDER, FOR THE INDIVIDU AL BENEFIT OF ANY SUCH ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 12 SHAREHOLDER COMES WITHIN THE AMBIT OF SEC. 2(22)(E) OF THE ACT. IN THE PRESENT CASE ON HAND, THE ASSESSEE CLAIMED THAT HE HAS TAKEN HOUSING LOAN FROM COMPANY AND THE COMPANY HAS CHARGED INTER EST ON SUCH LOAN. HOWEVER, ON PERUSAL OF LEDGER ACCOUNT COPY, WE FIND THAT NO SUCH INTEREST IS DEBITED TO ASSESSEE ACCOUNT. THE ASSESS EE HAS MERELY CLAIMS THAT THE HE HAS TAKEN HOUSING LOAN FROM THE COMPANY , BUT, FAILED TO PROVE THAT THE SAID ADVANCE IS NOTHING BUT HOUSING LOAN WITH ANY MATERIAL EVIDENCE. THEREFORE, WE ARE OF THE OPINION THAT THE LOANS AND ADVANCES ARE HIT BY THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT. THE A.O. HAS RIGHTLY HELD THAT THE LOAN TAKEN BY THE ASSESSE E IS DEEMED DIVIDEND WITHIN THE MEANING OF SEC. 2(22)(E) OF THE ACT. THE CIT(A) RIGHTLY UPHELD THE ADDITION AND HIS ORDER DOES NOT REQUIRE ANY INT ERFERENCE. 11. COMING TO THE ALTERNATIVE PLEA OF THE ASSESSEE. THE ASSESSEE CONTENTION IS THAT, HE HAS VOLUNTARILY DECLARED ADD ITIONAL INCOME OF RS. 16,65,000/- TO COVER UP ANY INHERENT DEFICIENCIES I N THE BOOKS OF ACCOUNTS. SINCE, THE A.O. DID NOT POINTED OUT ANY M ISTAKES, OTHER THAN THE DEEMED ADDITION UNDER SEC. 2(22)(E), THE ADDITI ONAL INCOME OFFERED SHOULD BE TELESCOPED AGAINST THE DEEMED ADDITION MA DE UNDER SEC. 2(22)(E). WE DO NOT FIND ANY MERITS IN THE ARGUMENTS OF THE ASSESSEE, AS THE ADDITION MADE UNDER DEEMING PROVISION IS NOT HING TO DO WITH THE INCOME OFFERED TO COVER UP THE DEFICIENCIES IN THE BOOKS OF ACCOUNTS. ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 13 INSOFAR ADDITION UNDER SEC. 2(22)(E) IS CONCERNED, THE SAID ADDITION IS MADE UNDER DEEMING PROVISION, THEREFORE, IT CANNOT BE SAID THAT THE DISCLOSURE MADE BY THE ASSESSEE BEFORE THE A.O. IS ON ACCOUNT OF DEEMED DIVIDEND. HENCE, THE CONTENTION OF THE ASSES SEE IS REJECTED. 12. NOW, COMING TO THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. THE ASSESSEE, HAS TAKEN ALTERNATIVE PLEA BY WAY OF ADDI TIONAL GROUND THAT WITHOUT PREJUDICE TO THE CLAIM THAT THE ADDITION TO WARDS DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF THE ACT IS NOT SUST AINABLE IN THE HANDS OF ASSESSEE, IF AT ALL THE DIVIDEND IS TAXABLE, IT IS REASONABLE TO CONSIDER THE DITION TO THE EXTENT OF 20% OF THE ACCUMULATED PROF ITS IN THE HANDS OF ASSESSEE AND THE REMAINING MAY BE ORDERED TO BE ASS ESSED IN THE HANDS OF OTHER FOUR SHAREHOLDERS, AS ALL THE SHAREHOLDERS HAVE TAKEN ADVANCE FROM THE COMPANY, THEREFORE, THE AMOUNT IS LIABLE T O BE TAXED IN THE HANDS OF ALL THE DIRECTORS ACCORDING TO THEIR SHARE HOLDING. WE HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND WE FIN D THAT THERE IS NO MERIT IN THE ARGUMENTS OF THE ASSESSEE. THE ASSESSE E KEEPS ON CHANGING HIS ARGUMENTS AT EACH STAGE OF PROCEEDINGS AND FROM THIS INCONSISTENT EXPLANATION OF THE ASSESSEE, WE FIND T HAT THERE IS NO BONAFIEDNESS IN THE CLAIM OF THE ASSESSEE. INITIALL Y, HE HAS CHOSEN TO DECLARE THE DEEMED DIVIDEND IN HIS HAND, LATER COME WITH DIFFERENT EXPLANATION AT DIFFERENT LEVELS. THEREFORE, WE FIND NO MERITS IN THE ITA NOS.308,309&310/VIZAG/2011 M. AMARESWARA RAO, HYDERABAD 14 ARGUMENTS OF THE ASSESSEE, ACCORDINGLY, THE ADDITIO NAL GROUND IS REJECTED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 309/VIZ/2011 & ITA NO. 310/VIZ/2011 :- 14. THE FACTS AND THE ISSUE INVOLVED IN THESE APPEA LS ARE IDENTICAL. THEREFORE, FOR THE REASONS RECORDED IN PRECEDING PA RAGRAPHS, WE DISMISS THE APPEALS FILED BY THE ASSESSEE. 15. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8 TH JAN16. SD/- SD/- ( . ) ( . . . . ) ( (( ( V. DURGA RAO ) )) ) ( G. MANJUNATHA) / // / JUDICIAL MEMBER / // / ACCOUNTANT MEMBER /VISAKHAPATNAM: 3 / DATED : 8.1.2016 VG/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT SHRI M. AMARESWARA RAO, PLOT NO.33, BHAVYA ALLURI MEADOWS, WHITEFIELDS, KONDAPUR, HYDERABAD-84. 2. '(& / THE RESPONDENT DCIT, CENTRAL CIRCLE, VIJAYAWADA 3. 5 / THE CIT (CENTRAL), HYDERABAD 4. 5 / THE CIT, VIJAYAWADA 4. 5 () / THE CIT (A), HYDERABAD 5. ' , , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY //