IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VP AND SHRI PRABHASH SHANKAR, AM (Assessment Year: 2015-16 )

Tejal Ketan Shah, Income Tax Officer, 2901/2902, Estonia B Wing Ward-42(1)(5), Hiranandani, S.V. Road Poisar Opp. Mumbai Vs.

Ragulila Mall Kandivali, Mumbai- 400067 (Appellant) : (Respondent)

PAN NO. AGLPS 5568C Appellant by : Shri Rajesh Shah Respondent by : Shri Hemanshu Joshi, Sr. DR (Appellant) (Respondent)

Date of Hearing : 14.07.2025 Date of Pronouncement : 24.07.2025 O R D E R Per Saktijit Dey, VP:

This is an appeal by the assessee against order dated 25.03.2025 passed by National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2015-16.

2. The dispute in the present appeal is confined to addition of an amount of Rs.1,17,40,867/- as deemed dividend under Section (u/s.) 2(22)(e) of the Income Tax Act, 1961 (in short the ‘Act’).

3. Briefly the facts are, the assessee is a resident Individual. For the assessment year under dispute, assessee filed her return of income on 31.08.2015 declaring total income of Rs.14,70,330/-. The return so filed by the assessee was selected for scrutiny and in course of assessment proceeding, the Assessing Officer (AO) called upon the assessee to furnish various details in relation to the income offered by her. While verifying the information available on record, the AO observed that during the year under consideration, the assessee had availed following unsecured loans (i) Rs.87,50,000/- from M/s Vipul & Co. (ii) Rs.30,00,000/- M/s Mundra Developers. He further observed that these loans availed on 30.03.2015 were utilized on the very same day in giving advance for the purchase of commercial property for an amount of Rs.93,00,000/- and investment in FD for an amount of Rs.26,00,000/-. To verify the genuineness of these loan transactions, the AO carried out independent enquiry by issuing notices u/s. 133(6) of the Act to the lenders. In response to the query raised, both the lenders furnished loan confirmation, their income tax return copies, bank statement copies etc. On verification of the details furnished by the lenders, the AO noticed that the lenders had received certain amounts from a company, namely, M/s Shrikari Financial Services Pvt. Ltd. (in short ‘SFSPL’) and, in turn, had advanced those amounts as loan to the assessee. He further found that the assessee is one of the Directors of SFSPL having 50% shareholding. He further found that on the date of advancement of loan, SFSPL had accumulated profit to the extent of loan advanced to the assessee by the other two entities.

4. Thus, he was of the view that since the amount advanced as loan to the assessee by two entities originated from the payment made by the SFSPL wherein the assessee is a Director and the company had accumulated profits more than the amount of loan advanced, the loan received by the assessee is in the nature of deemed dividend u/s. 2(22)(e) of the Act. Accordingly, he issued a show cause notice to the assessee to explain why the amount should not be added at her hands. Though, the assessee objected to the proposed addition by stating that the conditions of Section 2(22)(e) are not satisfied, however, the AO did not find merit in the submissions of the assessee. Ultimately he proceeded to add the amount of Rs.1,17,40,867/- at the hands of the assessee by treating it as deemed dividend u/s.

2(22)(e) of the Act. Though, the assessee contested the aforesaid additions by filing an appeal before learned First Appellate Authority, however, she was unsuccessful.

5. Before us, learned counsel appearing for the assessee strenuously urged that the conditions of Section 2(22)(e) of the Act are not satisfied as the assessee has not received any loan advance from the company wherein, she is a Director. Learned counsel submitted, two entities from whom the assessee had received the loan are creditors to SFSPL and from their running loan account with the company they had received the amoun