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Whether on the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the addition of Rs. 12,24,72,654/- made by the Assessing Officer under section 2(22)(e) of the Income-tax Act by holding that the assessee was not having beneficial interest in the advance recipient Company after 8-5-2012 particularly when no prudential man will transfer its share without receiving the full sale consideration thereof?

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Section 2(22) of the Income-tax Act, 1961—Deemed dividend—For raising an irrebuttable presumption, the first set of facts which are deemed to be conclusive proof of the other, i.e. regarding the advancement of loan to shareholder or to the concern in which such a share holder has substantial interest has to be proved strictly and beyond reasonable doubt and such first limb of the facts cannot be assumed or presumed merely on the basis of suspicion, howsoever strong it may be.

Facts: Revenue in this has challenged the action of the CIT(A) in deleting the additions made by the Assessing Officer into the income of the assessee of deemed dividend u/s 2(22) (e).

Held, that , the Revenue could not establish beyond doubt that the assessee was having substantial interest in CCNPL on the date of advancement of loan by CCNPL to JCTPL. CIT(A) has specifically observed that as per the annual return filed with the Registrar of Companies, which is a legal and valid document as per law, the assessee was holder of only one share in CCPNL and the other shares stood transferred to the JCTPL. The Ld. CIT(A) has noted that it is the mere suspicion of the AO that the assessee was having substantial share holding in the CCNPL on the date of transaction. To apply a deeming fiction, the first set of facts is to be proved beyond doubt and the deeming fiction cannot be applied on the basis of assumption, presumption or suspicion about the first set of facts. Since, the revenue could not rebut the stated facts beyond reasonable doubt, hence, CIT(A), has rightly declined to apply the deeming provisions of section 2(22) (e). Moreover, it has also been observed by the Ld. CIT(A) that in the subsequent assessment years AY 2014-15 and even AY 2015-16, in the scrutiny assessments carried out u/s 143(3) of the Act, the AO has accepted the very transaction of shares effected in May 2012.In the result, the appeal of the Revenue is hereby dismissed. - ASSTT. CIT V/s GURDEEP SINGH - [2020] 26 ITCD Online 139 (ITAT-CHANDIGARH)