2018 (1) TMI 990 - AT - Income Tax

Reopening of assessment - partnership firm - Deemed dividend u/s 2(22)(e) - whether to be assessed only in the hands of the partners and not in the hands of the assessee-firm - whether the Tribunal had exceeded its jurisdiction while holding deemed dividend cannot be assessed in the hands of the assessee-firm and but only in the hands of the partners of the assesseefirm, who are the beneficial shareholders of the lender company, viz., M/s.KTC Automobiles Private Limited? - Held that - If the partners of the firm are aggrieved by the reopening of the assessment in their hands, it is for the partner to challenge the same in appropriate forum. In the instant case, there is no apparent mistake in the order of the ITAT dated 30.08.2013, warranting our interference u/s 254(2) of the I.T.Act. Therefore, we see no reason to interfere with the order of the Tribunal

Summary

Issues:
- Whether deemed dividend u/s 2(22)(e) can be assessed in the hands of the assessee-firm or only in the hands of the partners of the firm who are beneficial shareholders of the lender company.

Analysis:
The case involved two Miscellaneous Applications arising from a Tribunal order regarding the deletion of addition u/s 2(22)(e) of the Income-tax Act, 1961. The Tribunal had dismissed the Revenue's appeal, stating that the deemed dividend should be assessed only in the hands of the partners, not the assessee-firm, as the partners were beneficial shareholders of the lender company. The assessee contended that the Tribunal's finding was made without examining the facts related to the partners and without fulfilling statutory requirements. The Tribunal justified its decision by emphasizing that the firm was not a shareholder of the lending company, and the funds were received for the benefit of the partners. The Tribunal's jurisdiction was questioned, but it was held that the finding was within the scope of the litigation and did not exceed its jurisdiction. The case laws cited by the assessee were deemed distinguishable, focusing on the Tribunal's powers and interpretation of relevant sections of the Income-tax Act. The Tribunal concluded that there was no need to interfere with its previous order, and thus, the Miscellaneous Petitions filed by the assessee were dismissed.

This detailed analysis highlights the key arguments, legal interpretations, and the Tribunal's reasoning behind its decision on the issue of assessing deemed dividend u/s 2(22)(e) in the hands of the assessee-firm or its partners.