Appeal partly allowed for statistical purposes, directions given for recomputation of profits.

The appeal was partially allowed for statistical purposes, with directions for the recomputation of accumulated profits excluding share premium and verification of proportionate taxation of deemed dividend based on shareholding. The Tribunal upheld the taxation of deemed dividend in the hands of the individual shareholder, dismissing the appellant's arguments against the inclusion of share premium in accumulated profits. The decision was rendered on 15th February 2017.

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Issues Involved:
1. Legality of reassessment proceedings under Section 147.
2. Applicability of deemed dividend under Section 2(22)(e).
3. Inclusion of share premium in accumulated profits for deemed dividend.
4. Proportionate taxation of deemed dividend based on shareholding.

Detailed Analysis:

Issue 1: Legality of Reassessment Proceedings under Section 147
The appellant challenged the reassessment proceedings upheld by the Commissioner of Income Tax (Appeals). However, this ground was not argued before the Tribunal and was dismissed as infructuous.

Issue 2: Applicability of Deemed Dividend under Section 2(22)(e)
The appellant argued that the Assessing Officer did not follow CBDT Circular No. 495, which specifies that deemed dividend should be taxed in the hands of the concern/firm and not in the hands of the individual shareholders. The Tribunal noted that the Jurisdictional High Court in CIT vs. Ankitech (P) Ltd. held that deemed dividend should be taxed in the hands of the shareholder and not the concern. The Tribunal concluded that the loan/advance of Rs. 50,67,980/- was correctly taxed as deemed dividend in the hands of the assessee, dismissing the appellant's grounds.

Issue 3: Inclusion of Share Premium in Accumulated Profits for Deemed Dividend
The appellant contended that the share premium should not be included in accumulated profits for the purpose of deemed dividend. The Tribunal referred to the case of Deputy Commissioner of Income Tax vs. Radheshyam Jain, which held that share premium does not partake the nature of commercial profit and thus cannot be considered as accumulated profits. The Tribunal directed the Assessing Officer to recompute the accumulated profits excluding the share premium, allowing this ground for statistical purposes.

Issue 4: Proportionate Taxation of Deemed Dividend Based on Shareholding
The appellant raised an additional ground that only 20% of the deemed dividend should be taxed in his hands, corresponding to his 20% shareholding in the firm. The Tribunal admitted this additional ground, noting it was legal in nature and did not require fresh facts. The Tribunal cited the case of Sh. Puneet Bhagat vs. Income Tax Officer, which supported proportionate taxation of deemed dividend based on shareholding. However, due to lack of specific information on other shareholders, the Tribunal remanded this issue to the Assessing Officer for verification and proper adjudication, allowing the ground for statistical purposes.

Conclusion:
The appeal was allowed in part for statistical purposes, with specific directions for recomputation of accumulated profits and verification of proportionate taxation of deemed dividend. The decision was pronounced on 15th February 2017.

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