2021 (4) TMI 399 - AT - Income Tax

Tribunal orders re-assessment under Income Tax Act, emphasizing fair hearing

Balbir Singh Kohli Versus ITO Ward-14 (4) New Delhi

The Tribunal remanded the case to the Assessing Officer for proper verification and re-assessment after considering all evidence regarding the addition ... Deemed dividend u/s 2 (22) (e) - HELD THAT:- From the perusal of the documents it can be seen that the assessee has received ₹ 2 lacs on 27/1/201 as refund of loan outstanding as on 1/4/2010 at ₹ 8,23,000/-. Balance of ₹ 2 lacs is an excess payment by mistake from Kohli State Pvt. Ltd. as per the submissions of the assessee before the Assessing Officer as well as before the CIT(A). The contention of the Ld. AR that the said amount was recovered on 31/10/2011 by recovering ₹ 5 lacs from the assessee was never examined either by the Assessing Officer as well as by the CIT(A) from the statement of account of the assessee, and there is no clear finding on that account by both the Revenue Authorities. Therefore it will be appropriate to remand back the entire issues to the file of the Assessing Officer for proper verification and after taking cognizance of all the evidences including statement of account, the Assessing Officer may pass appropriate order according to the provisions of law. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Appeal of the assessee is partly allowed for statistical purpose. Issues:1. Addition of Rs. 2,00,000 under section 2(22)(e) of the Income Tax Act, 19612. Treatment of advance of Rs. 2,00,000 as dividend3. Assessment of accumulated profit for determining deemed dividend4. Appeal against the CIT(A) orderIssue 1: Addition under section 2(22)(e) of the Income Tax Act, 1961The appellant contested the addition of Rs. 2,00,000 by the Assessing Officer (A.O) under section 2(22)(e) of the Income Tax Act, 1961. The appellant argued that the conditions for applying the proviso of 2(22)(e) were not satisfied and that the advance should not be treated as income. The A.O. observed that the amount received was deemed to be income of the director of the company as per Section 2(22)(e). The appellant explained that the excess amount received was recovered later, but this aspect was not examined by the A.O. or the CIT(A). Consequently, the Tribunal remanded the issue to the A.O. for proper verification and ordered a re-assessment after considering all evidence.Issue 2: Treatment of advance as dividendThe A.O. treated the advance of Rs. 2,00,000 as dividend in the hands of the appellant under section 2(22)(e). The appellant argued that the amount was a refund of a loan given earlier and should not be considered as dividend. The Tribunal noted that the recovery of the excess amount was not examined by the Revenue Authorities and ordered a re-assessment by the A.O. after proper verification.Issue 3: Assessment of accumulated profitThe A.O. determined the accumulated profit of the company for assessing deemed dividend. The appellant contested the assessment, stating that the accumulated profit should be taken as on the first day of the financial year or the maximum accumulated as on the day of the advance. However, the Tribunal did not provide a specific ruling on this issue as the matter was remanded back to the A.O. for re-assessment.Issue 4: Appeal against CIT(A) orderThe appellant filed an appeal against the CIT(A)'s order, which confirmed the addition made by the A.O. The Tribunal partially allowed the appeal for statistical purposes, remanding the issues back to the A.O. for proper verification and assessment in accordance with the law. The Tribunal emphasized the need for the assessee to be given a fair opportunity of hearing during the re-assessment process.In conclusion, the Tribunal's judgment in this case focused on the proper verification and assessment of the issues related to the addition under section 2(22)(e), treatment of the advance as dividend, and the assessment of accumulated profit. The Tribunal ordered a re-assessment by the A.O. considering all evidence and following the principles of natural justice.