Issue before court:
- The main issue in both the years relates to whether transaction made in normal course of business can be treated as deemed dividend u/s 2 (22) (e) of the act.
- The another issue besides the issue above in AY 2007-08 is addition of Rs. 45,00,000/- as unexplained cash credit.
Brief Facts:
- Assesse is having shares in various companies. A search & seizure operation was carried out on 26.03.2010. During search statement of assessee was recorded.
- AO noticed certain amounts were transacted in between the companies in which assessee is having shares.
- AO classified those amounts as loans & advances and treated the same as deemed dividends u/s 2 (22) (e) of the Income-tax Act.
- While framing assessment AO also made addition on account of unexplained cash credit.
- CIT (A) not only upheld the order of assessment passed by Assessing Officer but also enhanced addition as deemed dividend in AY 2007-08.
Contention of the revenue:
- The amounts were shown as loans in the balance sheets of companies and not as trade advances given during the normal course of business. Those balance sheets were prepared by qualified auditors on the basis of thorough examination of books.
- In absence of any certificate from the auditors assessee cannot claim occurrence of any inadvertent mistake which was subsequently corrected.
- Liability of Rs. 45,00,000/- is not appearing in the balance sheet of the assessee though the money was credited in the bank account of the assessee. Also no evidence in filed by assessee in this regard.
Contention of assessee:
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