SAHIR SAMI KHATIB Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) By these two appeals filed under Sec. 260A of the Income Tax Act, 1961 (for short the "I. T. Act, 1961"), the appellant - assessee challenges two separate orders of the Income Tax Appellate Tribunal, E-Bench, Mumbai (for short the "ITAT"), by which the ITAT allowed the appeals filed by the revenue and restored the order of the Assessing Officer (for short the "A.O."). Both these appeals relate to the Assessment Year (for short "A.Y.") 2007-08. Income Tax Appeal No. 722 of 2015 has been filed by one Sahir Sami Khatib and Income Tax Appeal No. 724 of 2015 has been filed by one Sarosh Sami Khatib. Both these appeals are almost identical, and therefore, are being disposed of by this common Order and Judgment. Considering that the facts are almost identical, for the sake of convenience, we shall refer to the facts in Income Tax Appeal No. 722 of 2015.

(2.) The appellant - assessee is a shareholder in a company known as M/s Medley Laboratories Pvt. Ltd. (for short "M/s MLPL") and M/s Oryx Fisheries Pvt. Ltd. (for short "M/s OFPL"). The appellant holds 15% equity shares in m/s MLPL and 45% equity shares in M/s OFPL. During the A.Y. 2007-08, M/s MLPL (lender) had given a loan / advance of Rs. 91,85,874/- to its sister concern M/s OFPL (borrower). The appellant filed his return of income for A.Y. 2007-08 on 31.07.2007 declaring a total income of Rs. 20,24,512.00. Considering that the appellant was a registered as well as a beneficial shareholder of both M/s MLPL and M/s OFPL, relying on the decision of the ITAT in the case of ACIT Vs. Bhaumik Colours Pvt. Ltd. (313 ITR 146) the A.O. treated this loan (along with interest) of Rs. 99,86,874/- as a deemed dividend under Sec. 2(22)(e) of the I. T. Act, 1961 in the hands of the appellant on a protective basis. The reason why the same was done on a protective basis was because this loan in question was also treated as a deemed dividend in the hands of the borrower company (M/s OFPL) and assessed as such on a substantive basis.

(3.) Being aggrieved by the order of the A.O., the appellant - assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [for short "CIT(A)"] who deleted the addition made under Sec. 2(22)(e) of the I. T. Act, 1961, on the ground that the loan was not received by the assessee but by M/s OFPL. The CIT(A) was further of the view that this addition of deemed dividend was already made on a substantive basis in the hands of M/s OFPL. For all these reasons, the CIT(A) set aside the order of the A.O.