2018 (8) TMI 920 - HC - Income Tax

Deemed dividend u/s 2(22)(e) - ITAT refused to decide the issue with regard to the claim of the appellants for deemed dividend because it was raised at the appellate stage - Held that - After considering the entire facts of the case, we are of the opinion that legal issue can be raised at any point of time - Order of the ITAT quashed and set aside - Matter restored before ITAT - Decided in favor of assessee.

Summary

Issues:
Common issue in Income-tax appeals regarding the refusal of the Income-tax Appellate Tribunal to decide on the claim of deemed dividend under section 2(22)(e) of the Income-tax Act, 1961.

Analysis:
The appeals filed by the assessees challenged the order of the Income-tax Appellate Tribunal, Jodhpur Bench, which dismissed their appeals. The appellants raised a question of law regarding their right under section 2(22)(e) of the Income-tax Act, 1961. The Tribunal refused to decide this issue as it was raised at the appellate stage. The appellants referred to a Supreme Court judgment emphasizing that when a question of law arises from facts not on record in the assessment proceedings, it should be allowed to be raised and decided by the Tribunal to assess the correctness of the tax liability of an assessee.

The respondent argued that the Tribunal had provided detailed reasons in its judgment and had rightly refused to decide on the fresh issue raised by the appellants. However, the High Court, after considering the facts and the legal position, referred to the Supreme Court's ruling in the National Thermal Power Co. Ltd. case. The Court highlighted that the Tribunal has the jurisdiction to examine a question of law arising from facts found by the authorities below, impacting the tax liability of the assessee. Consequently, the Court allowed both appeals, quashed the Tribunal's order, and remitted the cases back to the Tribunal for deciding the legal issue raised by the appellants within two months from the date of receiving the order's certified copy.