2018 (1) TMI 541 - AT - Income Tax

Deemed dividend u/s 2(22)(e) - Held that - Assessing Officer had not examined the question whether assessee had given the same collateral security for loans raised by the assessee from SIDBI and State Bank of Hyderabad and how far the claim was correct. Much more facts have to be brought on record before the question whether the loans taken by the assessee could be deemed as dividend can be properly addressed. Considering these circumstances, it is of the opinion that issue requires a fresh look by the ld. Assessing Officer. Thus set aside the orders of the lower authorities and remit the issue regarding addition u/s.2(22) (e) of the Act back to the file of the ld. Assessing Officer for consideration afresh in accordance with law. In the result, appeal of the assessee is allowed for statistical purpose.

Summary

Issues:
Appeal against addition under Sec.2(22)(e) of the Income Tax Act, 1961 - Delay in filing appeal - Justification for delay - Application of Sec.2(22)(e) - Loans received from a company - Collateral security and personal guarantee - Interpretation of quid pro quo transactions - Board resolution authorizing withdrawals - Examination of collateral security for loans - Fresh consideration by Assessing Officer.

Analysis:
The appeal was filed against an addition under Sec.2(22)(e) of the Income Tax Act, 1961, concerning loans received by the assessee from a company where he held shares. The delay in filing the appeal was condoned due to justified reasons. The Assessing Officer noted that the company had not availed credit facilities despite collateral security and personal guarantee provided by the assessee. The assessee argued that the loans were for business purposes and relied on precedents to support his case.

The Commissioner of Income Tax (Appeals) confirmed an addition of B14,50,116/- out of the total amount. The authorized representative challenged this decision, emphasizing the commercial nature of transactions and the business expediency behind the loans. The Departmental Representative supported the lower authorities' decision, questioning the applicability of precedents and the absence of a board resolution on record.

Upon review, the Tribunal observed discrepancies in the assessment, highlighting the lack of clarity on collateral security for loans from different sources and the absence of specified limits for fund withdrawals by the assessee. The Tribunal found the issue required a fresh examination by the Assessing Officer to determine if the loans could be deemed as dividends under Sec.2(22)(e) of the Act. Consequently, the Tribunal set aside the previous orders and remitted the matter for reevaluation in accordance with the law.

In conclusion, the appeal was allowed for statistical purposes, emphasizing the need for a comprehensive reassessment by the Assessing Officer to address the complexities surrounding the loans received by the assessee and the application of Sec.2(22)(e) of the Income Tax Act, 1961.