2022 (3) TMI 1380 - AT - Income Tax

Deemed dividend u/s 2(22)(e) - additional evidence pertains to the said transaction which according to the Ld. AR is a business transaction was not accepted by the Ld. CIT(A) - HELD THAT - Though in the present case, the additional evidence was available with the assessee he was prevented by adducing the same due to wrong interpretation of the provision. We are of the considered opinion that the assessee may be given an opportunity to be heard before the Ld. CIT(A) and the Ld. CIT(A) is directed to consider the additional evidence and adjudicate the matter in the light of those evidences produced by complying with the procedures enumerated in Rule 46(A)(3) of the Income Tax Rules 1962. Since the second ground of appeal has to be adjudicated afresh based on the additional evidence before the Ld. CIT(A), it becomes infructuous. The matter is remanded back to the Ld. CIT(A) with the above observation. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Admission of additional evidences under rule 46A of the I.T. Rules, 1962.
2. Addition of deemed dividend under section 2(22)(e) of the I.T. Act, 1961.
3. Condonation of delay in filing the appeal.

Issue 1: Admission of Additional Evidences:
The appeal was filed against the Commissioner of Income Tax (Appeals) for the Assessment Year 2014-15, challenging the non-admission of additional evidences under rule 46A of the I.T. Rules, 1962. The appellant argued that the provisions of section 2(22)(e) were not attracted in a business advance scenario, seeking to support this claim with additional evidence. The appellant contended that denial of admission of additional evidence was against the law, requesting the Tribunal to overrule this decision. The Tribunal considered the facts and legal precedents, emphasizing the importance of allowing additional evidence to be presented to support the appellant's arguments. The Tribunal directed the Commissioner of Income Tax (Appeals) to admit the additional evidence and reconsider the case based on the new evidence.

Issue 2: Addition of Deemed Dividend:
The core issue in this appeal was the addition of deemed dividend under section 2(22)(e) of the I.T. Act, 1961. The appellant, a director in two companies, contested the addition of Rs. 88,99,265 as deemed dividend, arguing that the advance made was for business purposes and not covered under section 2(22)(e). The Assessing Officer treated the loan as deemed dividend due to the appellant's shareholding in both companies. The Commissioner of Income Tax (Appeals) partially upheld the addition, reducing it to Rs. 39,23,000. The appellant sought to introduce additional evidence to support the business nature of the transaction, which was initially rejected. The Tribunal, considering legal precedents and the complexity of tax law, directed the Commissioner of Income Tax (Appeals) to allow the additional evidence and reevaluate the case based on the new information.

Issue 3: Condonation of Delay:
A secondary issue addressed by the Tribunal was the condonation of a 50-day delay in filing the appeal, attributed to Covid protocols. The Tribunal, after considering the reasons provided and the absence of objections from the Departmental Representative, decided to condone the delay. This decision allowed the appeal to be heard despite the delay in filing.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of admitting additional evidence to ensure a fair and thorough consideration of the case. The judgment highlighted the need for procedural fairness and the right of the appellant to present all relevant evidence in support of their arguments.