2014 (6) TMI 145 - AT - Income Tax

Rectification of order Deemed dividend in the hands of partners u/s 2(22)(e) of the Act - Held that - directions were given by the Tribunal in pursuance to the admission made by the assessee before CIT(A) - The relevant extract of the order of CIT(A), the assessee had conceded that the deemed dividend is taxable in the hands of the shareholders - The assessee has explained that only the partners of the appellant firm are shareholders in the company (EEPL) and not the appellant firm itself - deemed dividend can be assessee only in the hands of a person who is a shareholder of the lender company and not in the hands of the borrowing concern in which such shareholder is member or partner having substantial interest Relying upon ACIT V. Bhaumik Colour (P) Ltd., 2008 (11) TMI 273 - ITAT BOMBAY-E the amount cannot be treated as deemed dividend u/s.2(22)(e) in the hands of the appellant - It is not the case where the Tribunal has made observations on its own - The directions against which the assessee is aggrieved are based on the admission of the assessee before the CIT(A) - there is no error as alleged by the assessee in the order of the Tribunal Decided against Assessee.

Summary

Issues:
1. Rectification of order regarding taxation of deemed dividend in the hands of partners.
2. Jurisdictional error by the Tribunal in directing the Assessing Officer to tax deemed income in the hands of partners.
3. Dismissal of the Miscellaneous Petition by the Tribunal.

Issue 1: Rectification of order regarding taxation of deemed dividend in the hands of partners:
The assessee filed a Miscellaneous Petition seeking rectification of the Tribunal's order directing the taxation of deemed dividend in the hands of partners. The assessee argued that the Tribunal had exceeded its jurisdiction by making such a direction. The assessee contended that the Tribunal's direction was not based on the subject matter of the appeal and was a legal mistake. The Tribunal upheld the directions based on the admission made by the assessee before the CIT(Appeals) regarding the taxation of deemed dividend in the hands of shareholders. The Tribunal concluded that there was no error in its order, as the directions were founded on the assessee's admission.

Issue 2: Jurisdictional error by the Tribunal in directing the Assessing Officer to tax deemed income in the hands of partners:
The assessee argued that the Tribunal had committed a jurisdictional error by instructing the Assessing Officer to tax deemed income in the hands of partners who were not part of the appeal. The Tribunal, however, based its directions on the admission made by the assessee before the CIT(Appeals) where it was acknowledged that deemed dividend is taxable in the hands of shareholders. The Tribunal emphasized that the directions were not arbitrary but were rooted in the assessee's own submissions. The Tribunal dismissed the contention of the assessee regarding the jurisdictional error and upheld its order.

Issue 3: Dismissal of the Miscellaneous Petition by the Tribunal:
After hearing both sides, the Tribunal dismissed the Miscellaneous Petition filed by the assessee, stating that there was no error in its order. The Tribunal clarified that the directions given were based on the assessee's admission before the CIT(Appeals) and were not made independently by the Tribunal. The Tribunal emphasized that the Assessing Officer should examine the facts of the case while giving effect to the order. The Tribunal concluded that the Miscellaneous Petition lacked merit and was therefore dismissed.

In conclusion, the Tribunal upheld its order directing the taxation of deemed dividend in the hands of partners based on the assessee's admission before the CIT(Appeals). The Tribunal dismissed the contention of the assessee regarding jurisdictional error and found no fault in its directions. The Assessing Officer was advised to proceed in accordance with the law while implementing the Tribunal's order.