Tribunal upholds deemed dividend assessment for AY 2004-05, dismissing challenge to reopening. Accumulated profits considered.

The Tribunal upheld the assessment of deemed dividend for AY 2004-05, dismissed the challenge to the reopening of assessment under section 148, and affirmed the consideration of accumulated profits for determining deemed dividend. The appeal of the assessee was ultimately dismissed.

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Issues:
1. Deemed dividend under section 2(22)(e) of the Income Tax Act for AY 2004-05.
2. Reopening of assessment under section 148 of the Act after 1380 days.
3. Accumulated profits consideration for deemed dividend calculation.

Deemed Dividend (Section 2(22)(e)) for AY 2004-05:
The appeal pertains to the assessment of deemed dividend under section 2(22)(e) of the Income Tax Act for the AY 2004-05. The assessee, a 25% shareholder in a company, obtained a loan of Rs. 1,01,83,381, which was treated as deemed dividend. The CIT(A) initially deleted the addition, but ITAT directed the AO to determine accumulated profits to decide the quantum of deemed dividend. Subsequently, the AO assessed the loan amount as deemed dividend. The CIT(A) computed accumulated profits at Rs. 99,01,419, and the AO passed a consequential order assessing total income at Rs. 51,54,210. The assessee appealed against this consequential order, seeking relief of Rs. 1,01,83,381, but a relief of Rs. 52,32,671 was granted by the AO.

Reopening of Assessment under Section 148:
The assessee challenged the reopening of the assessment under section 148 after 1380 days from the end of the financial year, arguing lack of valid reasons or proof. The contention was that as the payments were made in AY 2005-06, the issue of deemed dividend should be considered for that assessment year, not AY 2004-05. However, the Tribunal found that the reopening was justified, as the AO provided valid reasons within the prescribed period, leading to the dismissal of this ground raised by the assessee.

Accumulated Profits Consideration for Deemed Dividend:
The dispute centered on the computation of accumulated profits for the purpose of determining deemed dividend under section 2(22)(e) of the Act. The AR argued that undisclosed income admitted during search operations should not be used for this calculation, citing a tribunal decision. On the other hand, the DR contended that the undisclosed income was considered in the company's financial statements, increasing accumulated profits. The Tribunal noted that the undisclosed income was included in the company's books, leading to an increase in accumulated profits. The CIT(A) rightly computed accumulated profits subject to verification of certain details. The Tribunal upheld the order of the CIT(A) and AO, dismissing the appeal.

In conclusion, the Tribunal upheld the assessment of deemed dividend for AY 2004-05, dismissed the challenge to the reopening of assessment under section 148, and affirmed the consideration of accumulated profits for determining deemed dividend. The appeal of the assessee was ultimately dismissed.

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