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Judgment
This bunch of fourteen appeals have been preferred by the assessee as well as by the Revenue against separate orders all dated 18.09.2025 of the ld. Commissioner of Income Tax(Appeals)-24, New Deli, arising out of assessment orders dated 21.04.2025 15.04.2025, 09.04.2025, 28.03.2025 and 23.04.2025 passed u/s 143(3) of the Income Tax Act, 1961 pertaining to Assessment Years 2018-19, 2019-20, 2020-21, 2021-22, 2022-23, 2023-24 and 2024-25, respectively. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
As the appeal of the assessee and the cross appeals of the Revenue are concerning identical issues spread over AYs 2018-19 to 2024-25, we have heard all the appeal together and for the purposes of convenience, adjudicated the same by way of this common order. We will first take the appeals of the assessee.
ITA Nos.5853, 5854, 5855, 5856, 5857, 5858 and 5859/Del/2025
[Assessment Years: 2018-19, 2019-20, 2020-21, 2021-22, 2022-23, 2023-24 and 2024-25]
As per brief facts of the case, a search and seizure operation was conducted on 20.09.2023 upon one Vestige Marketing Pvt. Ltd. (VMPL). The assessee holds 23% shareholding alongwith two other shareholders namely Shri Gautam Bali and Shri Deepak Sood having 60% and 17% shareholding respectively. The Revenue authorities had made additions in the case of VMPL making disallowance out of purchase expenses by casting doubt on their genuineness. The Assessing Officer further held that 80% of the amounts against the aforesaid alleged bogus purchases were received back by the promoters and made corresponding additions in the ratio of individual shareholding of the promoters. In appeal, the ld. CIT(A) allowed substantial relief qua additions made in VMPL. It also reduced the addition under section 2(22)(e) of the Act. The assessee and the Revenue are in appeal contesting the relief accorded by ld. CIT(A).
The ld. Counsel for the assessee vehemently argued against application of section 2(22)(e) of the Act. It was submitted that the impugned statute is a deeming fiction wherein amounts paid by a company to its shareholders are deemed as shareholders income and that in the absence of otherwise, the said section cannot be invoked. The appellant assessee invited our attention to the ratio laid down by Hon’ble Apex Court in the case of Mother India Refrigeration Industries 155 ITR 711 holding that legal fictions are created only for some different purposes and they must be limited to that purpose only and should not be extended beyond that legitimate field.
The ld. Counsel further drew our attention to the fact that appeals involving identical issues in the case of two other promoters/ shareholders namely Sh. Gautam Bali and Sh. Deepak Sood have already been decided by Hon'ble ITAT (ITA No. 5860 to 5873, 7894 to 7900, 7868 to 7874/DEL/2025). It was submitted that this Tribunal has held that there was no basis for addition as deemed dividend u/s 2(22)(e) of the Act. The Hon'ble ITAT accordingly allowed the issue in favour of the assesse. The
relevant findings of Hon'ble ITAT is reproduced as under: -
“….3. It transpires at the outset during the course of hearing with the able assistance coming from both these assessees as well as the department that there arises the identical sole substantive ground for the tribunal's apt adjudication i.e correctness of the learned lower authorities addition making Section 2(22)(e) deemed dividend addition in the taxpayers' hands; in assessment orders) as partly upheld in the lower appellate discussion.
4.We are further informed that both these assessees Shri Gautam Bali and Shri Deepak Sood hold 60 and 17% stake; respectively, in a company namely M/s. Vestige Marketing Private Limited. And that the Assessing Officer ("AO') had framed assessment in the said company's case disallowing its purchases claim of Rs. 8, 86,36,574/- as bogus ones u/s 37 of the Act in the "lead" A.Y. 2018-19. He thereafter treated 80% of the said disallowance amount; coming to Rs. 7,09,09,259/-as cash generated from the alleged bogus purchases as representing dividend distributed by the company to both these directors/ shareholders. The CIT(A) lower appellate discussion on the other hand appears to have relied upon his quantum order in the said company's cases) wherein he had partly upheld the aforesaid bogus purchases addition to conclude that the crossponding 80% of the remaining addition amount would now be added as deemed dividend in these twin assessees hands.
5.It is in this factual backdrop that both these assessees are aggrieved against the lower authority's action treating the foregoing bogus purchases disallowance as deemed dividends added in their hands whereas the Revenue's case is that we ought to uphold the same in entirety.
6.We have given our thoughtful consideration to the rival submissions of both these assessees as well as the Revenues respective stands. We find no merit in the Revenue's arguments justifying impugned deemed dividend addition. This is for the precise reason that Section 2(22)(e) of the Act itself makes it clear that the same gets attracted in an instance of "any payment by a company i.e. "M/s. Vestige Marketing Pvt. Ltd.", by way of advance or loan to a shareholder". We wish to reiterate here that there is no material in the records indicating M/s. Vestige Marketing Private Limited to have actually made any such payment of advance(s) or loan to both these directors/ promoters. It is thus a case wherein the learned departmental authorities have proceeded on mere assumptions and presumptions to hold that the aforesaid bogus purchases disallowance as dividend distribution which is not sustainable in light of Commissioner v. M/s. Dilip Kumar and Company (2018) 9 SCC 1 (SC) propounding stricter interpretation of a fiscal statute. With thus accept both these assessees' sole identical substantive ground directed against the impugned Section 2(22) (e) addition of deemed dividend addition which is deleted in entirety. The Revenue's stand supporting the same is declined in very terms. 7. No other ground or argument has been pressed before us. 8. To sum up, both these assessee's seven appeals each ITA No. 5860 to 5873/Del./2025 are allowed and the Revenue's as many cross appeals ITA Nos. 7868 to 7874/Del./2025 and 7894 to 7900/Del./2025; are dismissed in foregoing terms. A copy of this common order placed in the respectively case files…”
Per contra, the ld. DR placed reliance upon the orders of the lower authorities.
We have heard rival submission in the light of material placed on record. We have noted that the facts of the present case are identical to those in the case of other promoters namely Shri Bali and Shri Sood (supra). The Revenue could not point out any distinguishment of facts. Accordingly, in respectful compliance to the order of this Tribunal in ITA No. 5860 to 5873, 7894 to 7900, 7868 to 7874/DEL/2025 (supra) and for the purposes of the consistency, we set-aside the order of the ld. CIT(A) and direct the ld. AO to delete the impugned addition made under section 2(22)(e). The appeals of the assessee in ITA Nos.5853, 5854, 5855, 5856, 5857, 5858 and 5859/Del/2025 are therefore allowed.
ITA Nos.7859, 7860, 7861, 7862, 7863, 7864 and 7865/Del/2025 [Assessment Years: 2018-19, 2019-20, 2020-21, 2021-22, 2022-23, 2023- 24 and 2024-25]
As we have allowed the appeals of the assessee in ITA Nos.5853, 5854, 5855, 5856, 5857, 5858 and 5859/Del/2025, the appeals of the Revenue in ITA Nos.7859, 7860, 7861, 7862, 7863, 7864 and 7865/Del/2025 are dismissed.
Finally, all the appeals of the assessee are allowed and appeals of the Revenue are dismissed.