Reassessment annulled as reopening deemed dividend assessment in shareholder's hands. Revenue appeal dismissed.

The ITAT Mumbai upheld the CIT(A)'s decision annulling the reassessment and rejecting the Revenue's appeal. The tribunal found the reopening of assessment as bad in law, emphasizing that deemed dividend could only be assessed in the hands of the shareholder. As the assessment was invalid, there was no need to consider the appeal on merits. The Revenue's appeal was dismissed, affirming the CIT(A)'s ruling. The judgment was delivered on April 30, 2014.

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Issues:
1. Maintainability of annulling reassessment by CIT(A) upholding the assessee's challenge to reopening of assessment u/s.148.
2. Validity of reassessment based on deemed dividend u/s.2(22)(e) and subsequent appeal by Revenue.

Issue 1:
The primary issue in this case is the maintainability of annulling the reassessment by the CIT(A) and upholding the assessee's challenge to the reopening of assessment u/s.148. The assessee contested the assessment on grounds of non-maintainability of reopening and addition/disallowance to the returned income. The CIT(A) held the reopening as bad in law and consequently the assessment as bad in law. The Revenue appealed against this decision.

Analysis for Issue 1:
The ITAT Mumbai, after hearing both parties and reviewing relevant case law, found that the assessee deserved to succeed, albeit for a different reason than the CIT(A). The tribunal noted that the decision in a previous case raised a legal issue that was appealed by the Revenue before the high court. The high court clarified that deemed dividend could only be assessed in the hands of the shareholder for whose benefit the loan or advance was given. Hence, the amount in question could not be considered as the income of the recipient concern or company, leading to no escapement from assessment. The tribunal endorsed the CIT(A)'s decision, ruling the reopening of assessment as bad in law.

Issue 2:
The second issue pertains to the validity of reassessment based on deemed dividend u/s.2(22)(e) and the subsequent appeal by the Revenue. The Revenue contended that the first appellate authority did not dispose of the assessee's appeal on merits due to holding the assessment as bad in law.

Analysis for Issue 2:
The ITAT Mumbai upheld the first appellate authority's decision, stating that since the assessment was deemed bad in law, there was no need for further consideration of the appeal on merits. The tribunal found no infirmity in the first appellate authority's order in this regard.

In conclusion, the ITAT Mumbai dismissed the Revenue's appeal, emphasizing the invalidity of the reassessment and supporting the CIT(A)'s decision. The judgment was pronounced on April 30, 2014.

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