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INCOME TAX APPELLATE TRIBUNAL, “ C” BENCH, KOLKATA

ITA No. 898/Kol/2012 A.Y 2008-09
ITO (Appellant) vs. Anup Mittal (Respondent)
Date of Judgment : 17-02-2016

ORDER

SHRI M.BALAGANESH, AM

This appeal of the revenue arise out of the order of the Learned CIT(A)-XVI, Kolkata in Appeal No. 42/CIT(A)-XVI/IT/29(4)/10-11 dated 14-09-2011 for the assessment year 2008-09 against the order of assessment framed by the Learned AO u/s. 143(3) of the Income Tax Act 1961 (hereinafter referred to as the ‘Act’).

2. The only issue to be decided in this appeal of the revenue is as to whether the addition could be made towards deemed dividend u/s. 2(22)(e) of the Act in the facts and circumstances of the case.

3. The brief facts of this issue are that the assessee is an individual. He is also a shareholder in M/s. Midas Yarn Processor Ltd. A sum of Rs. 1,25,00,000/- was credited in the bank account of the assessee on 28-09-2007 as amounts received from the said company. The assessee explained that he had neither drawn any money from the concern in which he is a shareholder nor the said company had made any payment to the assessee.

The assessee also explained that the mistake was committed by the banker by wrongly crediting the assessee’s account by way of transfer of funds from one account to the bank account of assessee. The assessee has also explained that the banker had duly rectified the said mistake by re-transferring the said funds from assessee’s account to the account of the said company on 1/10/2007 for which the assessee was directed to issue a cheque in favour of the said company. In view of these facts, the assessee pleaded that the provisions of section 2(22)(e) of the Act cannot be invoked in the facts and circumstances of the case. However, the ld.AO proceeded to make an addition u/s. 2(22) (e) of the Act to the tune of Rs. 73,01,312/- on the basis of effective balance outstanding on the date of transaction. On 1st appeal, the ld. CIT(A) had deleted the entire addition made on this count. Aggrieved, the revenue is in appeal before us on the following grounds:-

1. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that Midas Yarn Processor Ltd. did not give loan or advance of Rs.1,25,22,222/- to the assessee as on 28/09/2007 which caused the addition of Rs.73,01,312/- in this case u/s 2(22)(e) of the I Tax Act'61. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that that the transfer of an amount of Rs.1,25,00,000/- in assessee's bank account from the bank account of the company was nothing but a wrong entry made by the bank which was subsequently claimed to have been reversed since the amount of reversal was found to be made by the assessee by issue of cheque and as per rule of banking operation any erroneous entry by the bank is reversed by the bank itself and issuance of cheque by the party is no more required. 3. That the appellant craves leave to add, alter, modify ,include or delete any of the grounds of appeal .

4. We have heard the rival submissions and perused the material available on record including the paper book filed before us. The facts of the case as stated hereinabove remain undisputed and hence the same are not reiterated herein for the sake of brevity. We find that the ledger account of the assessee as appearing in the books of M/s. Midas Yarn Processors Ltd that this transaction of Rs. 1,25,00,000/- was not at all reflected in the books of the company as amounts paid to the assessee as loan or advance or otherwise. We also find lot of force in the arguments of the ld.AR of the assessee that the banker made a mistake by wrongly crediting the assessee’s account on 28-09-2007, which was on Friday and such mistake was duly rectified on immediate succeeding working day that was on 1/10/2007 due to regular bank holidays by the banker. The ld.AR also placed his reliance on the certificate issued by the banker in this regard, which is enclosed at page 14 of the assessee’s paper book. It is pertinent to re-produce the same at this juncture:-

“PUNJAB NATIONAL BANK
POPULAR HOUSE
ASHRAMROAD
AHMEDADABD
079-26585106/26583223/26583223(Fax)

Mr. Anup Mittal                                                                                                        22.12.2010
I B River View Appartment
Near Dinesh Hall
Ashram Road Ahmedabad

Dear Sir,

Reg: Your letter dated 11.12.2010

This is in reference to your letter dated 11.12.2010 enclosing there with a copy of the notice dated 09.12.2010 received by you from Income Tax Department in respect to your assessment case.

In the above connection, we would like to inform, that due to oversight an amount of Rs.l,25,00,000/- was transferred on 28.09.2007 to your saving account No. 0960000100178183 from a/c no. 0960008700002097.

The above mistake came to our knowledge on 30.09.2007, but this day being a holiday on account of half yearly closing, the entry of Rs. l,25,00,000/- was reversed on 01.10.2007 from the saving account no. 0960000100178183 to a/c no. 0960008700002097.

Yours sincerely,

Sd/-

Chief Manager/Chief Manager
Ashram Road Branch,  AHMEDABAD
Punjab National Bank ”

We also find lot of force in the arguments of the ld.AR that the cheque of Rs.1,25,00,000/- was issued in favour of the company on 1/10/2007 at the instance of the banker. We also find from the said certificate as reproduced herein above that the banker had committed a mistake wrongly and duly rectified the same on 1/10/2007. We find lot of force in the arguments that the provisions of section 2(22)(e) would be applicable only when the payment made in the form of loan/advance to a shareholder. In the instant case, he argued that no payment was actually effected by the said company to the assessee being shareholder nor was it reflected in the books of account of the said company. In view of this fact, we hold that the said company did not give any loan/advance to the assessee being shareholder by invoking the provisions of section 2(22)(e) of the Act. Accordingly, we find no infirmity in the impugned order of the ld. CIT(A) in doing so. We uphold the same. The grounds raised by the revenue are dismissed.

6. In the result, the appeal of the revenue is dismissed as stated above.

THIS ORDER IS PRONOUNCED IN OPEN COURT ON 17-02-2016

( N. V. Vasudevan, Judicial Member ) (M. Balaganesh, Accountant Member)

 

Deemed Dividend 2(22)(e)-Amount wrongly debited to directors account by mistake of the bank and reversed subsequently not deemed dividend | 21-02-2016 |