Kabir Mulchandani Vs ACIT (ITAT Mumbai)
Assessee, Kabir Mulchandani, had not filed his return for AY 2000-01 within time. AO completed assessment ex parte u/s 144 determining total income at ₹3.14 crore, making additions under various heads-salary, deemed dividend u/s 2(22)(e), unexplained cash credits, unexplained expenditure, etc.
CIT(A) initially dismissed the appeal, but ITAT remanded the matter in 2007 for fresh consideration. Upon re-adjudication u/s 250 r.w.s. 254, CIT(A) partly allowed the appeal and sustained only: ₹23,21,000 as deemed dividend u/s 2(22)(e); and ₹18,75,000 as unexplained cash credit. Assessee carried the matter before ITAT.
Issue 1 – Deemed Dividend of ₹23,21,000 (u/s 2(22)(e)):
AO had treated payments received from Baron International Ltd. as loans to a substantial shareholder, invoking deemed dividend provisions. CIT(A) confirmed addition for ₹23.21 lakh.
Assessee contended that the amounts of ₹6,000 (05.04.1999), ₹23,00,000 (07.04.1999) & ₹15,000 (30.06.1999) were salary payments adjusted against salary payable of ₹32.92 lakh; thus, no loan or advance arose.
Tribunal’s Findings:
- Salary income of ₹57.60 lakh from Baron International was duly disclosed in return.
- Ledger account clearly reflected that ₹23.21 lakh was adjusted against salary due, not a fresh advance.
- Hence, there was no occasion to invoke deemed dividend provisions.
Held: Addition of ₹23,21,000 u/s 2(22)(e) deleted.
