Samir Shantilal Doshi Vs DCIT (Mumbai ITAT)
Every Advance to a Shareholder Is Not Deemed Dividend—ITAT Admits Commercial-Use & Repayment Evidence in s.2(22)(e) Dispute
Summary: The assessee, Mr. Samir Shantilal Doshi, was in appeal before the Mumbai ITAT for AY 2008-09 against the order of the CIT(A) dated 23 December 2024.
The principal dispute related to an addition made u/s 2(22)(e) by treating an advance or deposit received by the assessee from Falcon Brokerage Private Limited as deemed dividend. The assessee admittedly held 10% of the share capital of the company.
The AO treated the amount received from the company as a loan or advance falling within the mischief of s.2(22)(e). The additions were sustained by the CIT(A) on the ground that the assessee had failed to substantiate his claims and had not furnished the necessary supporting evidence before the lower authorities.
When the matter reached the ITAT, the assessee sought admission of additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963.
Advance or commercial obligation?
The assessee’s case was that the amount received from Falcon Brokerage Private Limited was not an ordinary loan advanced to a shareholder for his personal benefit. It formed part of a commercial arrangement or obligation arising under a Memorandum of Understanding dated 29 January 2007.
To establish the real nature of the transaction, the assessee sought to produce particulars showing the end use of the funds, expenditure incurred against the advance, refund of the unutilised amount & eventual repayment to the company.
These facts were material because s.2(22)(e) does not bring every payment made by a closely held company to a shareholder within the definition of deemed dividend. The character of the transaction, the circumstances in which the amount was advanced & whether the payment was made in the ordinary course of a commercial arrangement are crucial.
Additional evidence placed before ITAT
The assessee’s application under Rule 29 sought admission of three sets of documents.
The first was a statement containing details of the expenditure incurred against the advance or deposit, refund of the amount and the total advance received & repaid to the company.
The second was the ledger account of Falcon Brokerage Private Limited relating to the advance or deposit up to the date of repayment.
The third was CBDT Circular No.19/2017 dated 12 June 2017, which dealt with the treatment of commercial transactions under s.2(22)(e).
The assessee submitted that the documents were crucial because they explained the end use of the money received pursuant to the commercial obligation under the MOU and established its subsequent repayment. The evidence, according to him, went to the root of the dispute and was necessary for a fair adjudication.
Why was the evidence not filed earlier?
The assessee explained that the failure to produce the documents before the AO or CIT(A) was neither intentional nor attributable to negligence or deliberate default.
It was stated that the concerned company had suffered substantial losses and the assessee himself was suffering from cancer, owing to which he could not properly attend to the proceedings or collect and furnish the documents. The relevant records had subsequently become available.
The assessee therefore pleaded that there was sufficient & reasonable cause for the earlier non-production. Admission of the evidence would enable the Tribunal to decide the real controversy, whereas no prejudice would be caused to the Revenue since it would have a full opportunity to examine and rebut the material.
The Departmental Representative opposed the admission of additional evidence.
ITAT’s ruling
The ITAT observed that the additional evidence sought to be produced was legal in nature and went to the root of the matter. Relying upon the principles laid down by the Supreme Court in NTPC Ltd. v. CIT, 229 ITR 383, the Tribunal admitted the evidence under Rule 29.
The Tribunal also noticed that the additions made by the AO and sustained by the CIT(A) rested on the specific finding that the assessee had failed to substantiate his claims and had not furnished supporting evidence. Once the documents sought to cure that evidentiary deficiency were admitted, they necessarily required proper verification.
Accordingly, without expressing any opinion on the merits, the ITAT restored the matter to the CIT(A) for fresh adjudication.
The CIT(A) was directed to consider the additional evidence and decide the matter afresh in accordance with law after granting the assessee a reasonable opportunity of hearing. The CIT(A) was also given liberty to call for a remand report from the AO concerning the newly produced documents.
The assessee was directed to extend full cooperation, furnish all information and documents called for & ensure timely completion of the appellate proceedings.
The Tribunal expressly clarified that the remand should not be understood as expressing any view on the merits of the dispute. All issues were left open for independent adjudication by the CIT(A).
Author’s comments
The order does not delete the deemed-dividend addition. Its importance lies in recognising that evidence concerning the commercial purpose, utilisation & repayment of an advance cannot be brushed aside when determining the applicability of s.2(22)(e).
CBDT Circular No.19/2017 accepts the judicial position that trade advances arising from commercial transactions do not fall within the ambit of deemed dividend. However, merely labelling a payment as a business advance is insufficient. The assessee must establish a genuine commercial arrangement through contemporaneous agreements, ledger entries, proof of expenditure, correspondence & the complete repayment trail.
Repayment by itself does not necessarily erase the operation of s.2(22)(e) if the payment was initially a gratuitous loan to a qualifying shareholder. But repayment, read with evidence of commercial utilisation and contractual obligation, may become an important circumstance in determining the true character of the payment.
The case also demonstrates Rule 29’s corrective role: where material evidence goes to the root of the issue and its earlier non-production is satisfactorily explained, procedure should assist adjudication—not prevent it.
Cases Discussed / Relied Upon
- National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC)
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the Assessee against the order of Ld. CIT Appeals vide DIN: ITBA/NFAC/S/250/2024-25/1071457731(1) dated 23-Dec-2024 for the Assessment Year 2008-09.
2. At the very outset, we noticed that the assessee has filed an application for admission of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, contents of which are reproduced herein below:
BEFORE THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH ‘G’
I.T.A. No.: ITA 1213/MUM/2025
Assessment Year: 2008-09
IN THE MATTER OF:
Samir Shantilal Doshi
… APPLICANT / APPELLANT
VERSUS
Commissioner of Income Tax (Appeals),
… RESPONDENT
APPLICATION UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 FOR ADMISSION OF ADDITIONAL EVIDENCE
MAY IT PLEASE THE HON’BLE TRIBUNAL:
The Applicant / Appellant above-named most respectfully showeth as under:
1. Status of the Appeal: The Appellant has filed the captioned appeal against the order dated 23rd December, 2024 of CIT(A) passed by the learned Commissioner of Income Tax (A) under Section 250 of the Income Tax Act, 1961. The said appeal was heard on 24th June, 2026 and is currently pending before this Hon’ble Tribunal.
2. Nature of the Case: The primary dispute in this appeal relates to addition u/s 2(22)(e) of the Income Tax Act, 1961 towards deemed dividend for advance/deposit given by Falcon Brokerage Pvt. Ltd. where the Appellant is a shareholder exceeding 10% of its share capital.
3. Description of Additional Evidence: The Appellant seeks permission to introduce the following documents as additional evidence before this Hon’ble Tribunal:
a) Annexure A: Details of expenditure incurred against advance/deposit received and refund of the same and details of total advance/deposit received and repaid to the company.
b) Annexure B: Ledger account of Falcon Brokerage Pvt. Ltd. of the Advance / Deposit account till date of repayment.
c) Annexure C: CBDT Circular 19/2017 dated 12th June, 2017 (already referred in Paper Book)
4. Relevance of the Evidence: The aforementioned documents are crucial to the adjudication of the present appeal because it explains the end use of the funds as part of commercial obligation with the company received in terms of the MOU dated 29th January, 2007 and repayment thereof.
5. Reason for Non-Production Earlier: The Appellant was prevented by sufficient and reasonable cause from producing this evidence before the Assessing Officer or the CIT(A) because the company had incurred huge losses and the Appellant was also suffering from cancer and thus could not attend to office. The documents only became available now.
6. Bonafide Intent: The omission to adduce the said evidence earlier was neither intentional nor due to any negligence or deliberate default on the part of the Appellant but are factual details and may be considered in deciding the appeal.
7. Substantial Cause for Admission: Admission of this additional evidence constitutes a “substantial cause” under Rule 29. It is necessary to prevent a miscarriage of justice and to enable this Hon’ble Tribunal to pass a just and fair order. No prejudice will be caused to the Revenue as they will have full opportunity to examine the same.
PRAYER
In the light of the facts and circumstances stated above, it is most respectfully prayed that this Hon’ble Tribunal may be pleased to:
a) Allow the present application filed under Rule 29 of the ITAT Rules, 1963;
b) Admit the additional evidence annexed herewith as Annexure A to C on record; which are necessary and relevant for proper adjudication and the interests of justice;
c) Pass any such other order(s) as this Hon’ble Tribunal may deem fit and proper in the interest of justice as well.
AND FOR THIS ACT OF KINDNESS, THE APPLICANT SHALL EVER PRAY.
Place: Mumbai
Date: 24th June, 2026
[Signature]
Samir Shantilal Doshi
VERIFICATION
I, Samir Shantilal Doshi, [Appellant], do hereby verify that the contents of paragraphs 1 to 7 of the above application are true and correct to the best of my knowledge, information, and belief.
Verified at Mumbai on this 24th June, 2026.
[Signature]
Samir Shantilal Doshi
3. On the other hand, the Ld. DR opposed the said application for admission of additional evidence.
4. After having heard the submissions of both the parties, we find that the additional evidences sought to be filed by the assessee are legal in nature and go to the root of the matter. Therefore, following the principles laid down by the Hon’ble Supreme Court in the case of NTPC Ltd. Vs. CIT, 229 ITR 383 (SC), and considering the facts and circumstances of the present case, we deem it appropriate to allow the application filed by the assessee for admission of additional evidence.
5. Since we have allowed the assessee’s application for admission of additional evidence, considering the facts and circumstances of the case, we are of the view that the matter requires to be restored back to the file of the Ld. CIT(A) for verification and consideration of the additional evidences filed by the assessee.
6. It is pertinent to mention that both the additions made by the Assessing Officer and sustained by the Ld. CIT(A) were based on specific findings that the assessee had failed to substantiate its claims and had not furnished relevant supporting evidences before the authorities below.
8. Be that as it may, without expressing any opinion on the merits of the issues raised by the assessee, we deem it appropriate to admit the additional evidences sought to be submitted by the assessee and restore the matter to the file of the Ld. CIT(A). The Ld. CIT(A) shall take into consideration the additional evidences so filed by the assessee and decide the matter afresh in accordance with law, after providing a reasonable opportunity of being heard to the assessee.
9. The assessee is also directed to extend full cooperation in the proceedings before the Ld. CIT(A), furnish the necessary information/documents as may be called for or advised, and ensure timely completion of the appellate proceedings.
10. The Ld. CIT(A) shall also be at liberty to call for a remand report from the Assessing Officer in respect of the additional evidences submitted by the assessee.
11. Before parting, we make it clear that our decision to restore the matter back to the file of the Ld. CIT(A) shall not be construed as expressing any opinion or having any bearing on the merits of the dispute. The issues involved shall be adjudicated by the Ld. CIT(A) independently, in accordance with law.
Order pronounced in the open court on 17.08.2026.
