DCIT Vs Sudhir Dhingra (ITAT Delhi)
According to the case of revenue, there was loan or advance from M/s Orient Craft Ltd. (OCL) to the appellant, whereas the case of the assessee was that there was no loan or advance received by the assessee, much less from M/s Orient Craft Ltd. and further, for that matter, no loan was received by the assessee from M/s Olympus Realtors P. Ltd. and hence there was no question of any deemed dividend to be assessed in his hands.
Here again in this year’s facts also we find that, there is no loan or advance received by the assessee from M/s Orient Crafts Ltd. It is seen that even as per the case of the A.O. made in the assessment order, the loan or advance has been received by the assessee from M/s SKA Enterprises which was a partnership firm and where the assessee was one of the partners. Therefore, as per the admitted case of the A.O., such loan or advance having not been received by the assessee from a closely held company, i.e. from Orient Craft Ltd. or Olympus Realters P Ltd. cannot be treated as dividend u/s 2(22)(e), since the first ingredient of section 2(22)(e) itself is not met in this case. As per the case of made out by Ld. A.O. in the assessment order, amount in question has not been received by the assessee from M/s Orient Craft Ltd. Rather it is seen that CIT (A) has recorded a finding at para 7.1.2 (a) of the appeal order that Orient Craft P Ltd. had not given advance to M/s Super Connection India P. Ltd during the year under appeal. It is important to submit that there is no appeal filed by the revenue against such finding of fact recorded by CIT (A). As noted above several times that advance was not given by M/s Orient Craft Ltd. to M/s Super Connection India P. Ltd during the year under appeal. In any case, the said M/s Super Connection India P Ltd. has been held by us as an independent and unrelated company in our order for A.Y. 2010-11 to A.Y. 2013-14 passed separately in ITA No. 6356 to 6359/Del/2018 in the case of Mr. Sudhir Dhingra. Therefore, when M/s Super Connection India P. Ltd. which was an independent assessee and has been assessed to tax and when no advance has admittedly been given by M/s Orient Craft Ltd. to M/s Super Connection India P. Ltd. during the year under appeal, how can it be assumed or held that the assessee received any loans and advance from M/s Orient Craft Ltd. After all the corporate identity and character & an independent status as an independent assessee and that too unrelated to the assessee that M/s Super Connection India P. Ltd. enjoys, such status cannot be permitted to be breached, more so when M/s Super Connection India P. Ltd. is an independent assessee, in which there was no control of any of the shareholders of M/s Orient Craft Ltd. Therefore, there was no question of treating any amount as deemed dividend u/s 2(22(e) in the hands of the assessee in the background of the facts of the present case and in the light of the finding recorded by the first appellate authority as to the nature of the advance given by Orient Craft Ltd. to Super Connection India P Ltd. It is also noticed that CIT(A) has recorded a finding in para 7.1.2 (b) of the appeal order against which revenue is not in appeal that during the year under consideration that no fresh advance was given by M/s Super Connections India P. Ltd. to M/s Olympus Realtors P. Ltd during the year under appeal. Therefore, when there was specific finding that no advance was given by M/s Super Connection India P. Ltd. to M/s Olympus Realtors P. Ltd. during the year under appeal, where was the question of saying in the same breath that assessee received the advance and that too from M/s Orient Craft P. Ltd. and/or Olympus Realters P Ltd.& where was the question of applying the deeming fiction of section 2(22)(e) in the hands of the assessee. Therefore, for this reason also we uphold the order of Ld. CIT (A) in the case of the assessee. Further, there was no loan or advance given by M/s Olympus Realtors P. Ltd. to M/s SKA Enterprises. Assessee was also partner in M/s SKA Enterprises and withdrew the amount as partner. In our considered opinion, such amount so withdrawn by the assessee in the capacity of the partner of the said firm cannot be covered within the meaning of deemed dividend under section 2(22)(e) of the Income Tax Act. Even CIT(A) in para 7.1.2(c) of the appeal order has recorded a factual finding that M/s Olympus Realtors P. Ltd. has made investment in M/s SKA Enterprises amounting to Rs. 39,90,40,000/-. Therefore, when investment was made by M/s Olympus Realtors P. Ltd. in M/s SKA Enterprises and assessee as partner has withdrawn amount from the partnership firm namely M/s SKA Enterprises in which assessee was one of the partners, there was no question of treating such amount received by the assessee as loan or advance that too from M/s Orient Craft Ltd. and / or from M/s Olympus Realtors P. Ltd. A.O. has disregarded the nature of payment made by each entity to the other entity regarding which the factual findings recorded by CIT(A) in his order have attained finality in the absence of any rebuttal or any appeal preferred by Revenue. Ld. AO has disregarded also the effect of legal character of all the entities more so when there was nothing adverse found in the assessments of these entities. Therefore, we hold that there is no question of treating the amount withdrawn by the assessee as partner from the partnership firm namely M/s SKA Enterprises in the nature of loan and advance and treat it as deemed dividend under section 2(22)(e) of the Income Tax Act. None of the ingredients of section 2(22)(e) stand satisfied in the instant case.
