2017 (5) TMI 1413 - AT - Income Tax

Addition of deemed dividend to the extent of reserves and surplus u/s 2(22)(e) - Held that - We find that the accounts / documents stated by the Ld. Counsel of the assessee have not been looked into by the AO. The said documents have been cursorily examined by the Ld. CIT(A). These accounts/ documents have a definite bearing on the facts in the instant case. In view of the above, the order of Ld. CIT(A) is set aside and the same is restored to the file of the AO to make an assessment as per the provisions of the Act after giving reasonable opportunity of being heard to the assessee. The assessee is directed to file the details before the AO. Appeal of assessee allowed for statistical purposes.

Issues:
- Addition of deemed dividend u/s 2(22)(e)
- Consideration of different transactions as loans
- Demand of Income-tax
- Direction to delete the addition of deemed dividend

Analysis:

1. Addition of Deemed Dividend u/s 2(22)(e):
The case involved an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals) concerning the addition of deemed dividend under section 2(22)(e) of the Income Tax Act, 1961. The Assessing Officer (AO) added an amount to the assessee's total income as deemed dividend due to the presence of reserves and surplus in the balance sheet of the company. The AO considered the amount as deemed dividend under section 2(22)(e) based on the ledger entries showing excess payments received by the assessee. The AO's decision was challenged in the appeal.

2. Consideration of Different Transactions as Loans:
The assessee contended that the AO erred in treating three separate transactions, namely unsecured loan, land MoU account, and car lease account, as a single loan for the purpose of deeming it as dividend under section 2(22)(e). The assessee argued that these transactions were distinct and should not have been consolidated as a loan. The Tribunal noted that these different transactions were not adequately examined by the AO or the Commissioner of Income Tax (Appeals), directing the AO to reassess the case after considering the details provided by the assessee.

3. Demand of Income-tax:
The AO had demanded an income tax amount from the assessee, leading to the appeal before the Tribunal. The grounds of appeal included challenges to the addition made as deemed dividend and the demand for income tax. The Tribunal's decision to set aside the order of the Commissioner of Income Tax (Appeals) and restore the case to the AO for reassessment implied a reevaluation of the income tax demand in light of the revised assessment.

4. Direction to Delete the Addition of Deemed Dividend:
One of the specific pleas made by the appellant was to direct the assessing officer to delete the addition of deemed dividend under section 2(22)(e). The Tribunal's decision to allow the appeal for statistical purposes indicated a favorable outcome for the assessee in terms of this particular request, although the broader reassessment by the AO was ordered for a comprehensive review of the case.

In conclusion, the judgment by the Appellate Tribunal ITAT Mumbai addressed multiple issues raised by the assessee regarding the addition of deemed dividend, treatment of different transactions, income tax demand, and specific directions for the deletion of the deemed dividend addition. The decision to remand the case to the AO for a fresh assessment highlighted the need for a more detailed examination of the facts and documents presented by the assessee, emphasizing procedural fairness and thorough consideration of all relevant aspects.

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