2018 (9) TMI 278 - AT - Income Tax

Deemed dividend by invoking the provisions of section 2(22)(e) - accumulated profits - Held that - A categorical finding has been given by CIT(A) that the conditions laid down in section 2(22)(e) of IT Act to treat the amount of loan given by a company M/s. Favorich Mark Pvt. Ltd. to the assessee as deemed dividend are satisfied. In view of this factual position, we find no reason to interfere in the order of CIT(A).- Decided against assessee.

Summary

Issues:
1. Addition of deemed dividend under Section 2(22)(e) of the IT Act.
2. Liability to pay interest under Sections 234A and 234B of the IT Act.

Analysis:

Issue 1: Addition of Deemed Dividend under Section 2(22)(e) of the IT Act
The appeal was filed against the order of the ld. CIT(A)-3, Bangalore for Assessment Year 2014-15. The grounds raised by the assessee challenged the order passed by the Assessing Officer and CIT(A), specifically regarding the addition of ?1,16,80,000 as deemed dividend under Section 2(22)(e) of the IT Act. The appellant contended that the provisions of Section 2(22)(e) were not applicable to the case. Despite opportunities, the appellant did not provide written submissions or attend the proceedings. The CIT(A) confirmed the addition as deemed dividend, stating that the conditions under Section 2(22)(e) were satisfied. The CIT(A) held that the source of the loan was irrelevant as long as accumulated profits existed in the company's balance sheet. The Tribunal, after considering the submissions and orders, upheld the decision of the CIT(A) and dismissed the appeal, stating that there was no reason to interfere with the findings.

Issue 2: Liability to Pay Interest under Sections 234A and 234B of the IT Act
The appellant also denied the liability to pay interest under Sections 234A and 234B of the IT Act, contending that the interest was levied erroneously and should be deleted. However, the judgment did not provide detailed analysis or discussion regarding this issue. The Tribunal's decision focused primarily on the deemed dividend addition under Section 2(22)(e) of the IT Act. Therefore, the Tribunal's decision did not address the appellant's denial of interest liability under Sections 234A and 234B of the IT Act. The appeal was dismissed solely based on the deemed dividend issue, and no specific ruling was provided regarding the interest liability denial by the appellant.

In conclusion, the Tribunal upheld the addition of deemed dividend under Section 2(22)(e) of the IT Act, as confirmed by the CIT(A), and dismissed the appeal filed by the assessee. The judgment did not delve into the appellant's denial of interest liability under Sections 234A and 234B of the IT Act, focusing primarily on the deemed dividend issue.