2020 (12) TMI 651 - AT - Income Tax

Deemed dividend u/s. 2(22)(e) - HELD THAT - A protective basis by the A O clearly amounts to a double addition and therefore, is unfair and unreasonable, which deserves to be deleted does not require any interference and hence the Revenue's above appeals are dismissed.

Summary

Issues:
- Appeal against common orders of CIT(A) for assessment years 2012-13
- Addition of deemed dividend u/s. 2(22)(e) in the hands of the firm and partners
- Protective assessment made by AO on the partners
- Contestation of additions before the High Court
- Consideration of double addition

Analysis:
1. The appeals were filed against the CIT(A)'s orders for assessment years 2012-13. The issue revolved around the addition of deemed dividend u/s. 2(22)(e) in the hands of the firm and its partners.

2. The firm, M/s. Subhavarsha Infotech, transferred funds to partners and a third party. The CIT(A) deleted the addition of funds transferred to the third party but confirmed the addition for partners. The ITAT upheld the addition in the firm's hands. The partners contested the protective assessment made by the AO, arguing against double addition.

3. The CIT(A) considered the ITAT's decision and the ongoing appeal by the firm in the High Court. The CIT(A) concluded that further addition in the partners' hands would amount to a double addition, which was unfair and unreasonable. Therefore, the deemed dividend addition in the partners' hands was deleted.

4. The ITAT reviewed the case law and upheld the CIT(A)'s decision regarding the double addition issue. The firm had accepted part of the ITAT's decision, making the addition in the partners' hands unjustified. The ongoing appeal by the firm further supported the deletion of the partners' addition.

5. Consequently, the Revenue's appeals were dismissed, affirming the deletion of the deemed dividend addition in the partners' hands. The decision was based on the principle of avoiding double additions and ensuring fairness in the assessment process.