TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 526
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....bmitted that the appeal filed by the assessee was delayed by 20 months. However, it is submitted that the delay be condoned as same was unintentional and on account of misunderstanding of law and in support, a detailed affidavit of the assessee has been furnished. 4. The reasons for the delay have been explained as follows. That there was a change in consultant and when the impugned order was passed by the Commissioner under Section 263 of the Act, assessee was advised not to file an appeal against the said order and assessee was under a bona fide belief that the consequential order of the Assessing Officer under Section 143(3) read with Section 263 of the Act is only appealable before the CIT(A), and that the order passed under Section 263 of the Act cannot be separately challenged. Pursuant to the order of the Commissioner under Section 263 of the Act directing the Assessing Officer to verify the quantum of 'deemed dividend' assessable in the hands of the assessee, the Assessing Officer framed an assessment, which was challenged in appeal before the CIT(A). The CIT(A) merely relied upon on the findings of the Commissioner passed in the order under Section 263 of the Act ....
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....ch in such matters is also justified. In this background, we may examine the reasons advanced by the assessee for delay in filing of appeal before the Tribunal against the order passed by the Commissioner under Section 263 of the Act. 8. Primarily, the Commissioner set aside the assessment with a direction to the Assessing Officer to arrive at the correct available 'accumulated profits' for the purposes of considering the amount of 'deemed dividend' assessable in the hands of the assessee under Section 2(22)(e) of the Act . A perusal of the order of the Commissioner would reveal that the effect of the order was against the assessee; but the assessee misconstrued it by assuming that since the matter was remitted back to the Assessing Officer, he could agitate the consequential order to be passed by the Assessing Officer in the appeal/proceedings before the CIT(A) only. In view of the nature of the order passed by the Commissioner under Section 263 of the Act, assessee entertained a belief that as the original assessment had been set aside, there was no necessity of challenging the order of the Commissioner in appeal before the Tribunal. It was in fact after the deci....
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....e Companies Act, 1956 in which the public are not substantially interested. The assessee was found to have received a loan from the said company which stood at Rs. 1,51,06,825/- as on 31.03.2003 out of which Rs. 76,33,928/- was received during the previous year relevant to the assessment year under consideration. The assessee was owning 14% shareholding in the company and therefore, the amount of loan received from the said company was liable to be treated as a 'deemed dividend' under Section 2(22)(e) of the Act in the hands of the assessee to the extent the company possessed 'accumulated profits'. Apart from the assessee, there were three other shareholders in the company who had also received loans/advances during the year under consideration from the said company and their respective shareholding also exceeded 10%, the limit prescribed in Section 2(22)(e) of the Act in order to bring such payments within the fold of Section 2(22)(e) of the Act. The other three shareholders and the amount of loans received during the year were (i) Avinash Bhosale- Rs. 1,52,67,276/- (holding 59% shareholding); (ii) Inderkumar Jain- Rs. 76,33,928/- (holding 13% shareholding); (iii) ....
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.... the voting power in the company during the year amounted to Rs. 3,81,69,640/-, whereas the total 'accumulated profits' available was only Rs. 2,61,19,957/- and therefore, the amount assessable under Section 2(22)(e) of the Act was to be limited to the extent of the availability of accumulated profits. As the shareholding of the assessee was 14%, the corresponding share of the assessee in the accumulated profits was taken at Rs. 36,56,738/- and accordingly, out of the total loan of Rs. 76,33,928/- received by the assessee from the company during the year under consideration, only an amount of Rs. 36,56,738/-, being his share of the accumulated profits of Rs. 2,61,19,957/-was assessed under Section 2(22)(e) of the Act. The Assessing Officer accepted the said position and in addition further taxed a sum of Rs. 5,92,270/- which according to him was the share of the assessee (i.e. 14%) of the accumulated profits reflected by the 'General Reserve' appearing in the Balance sheet as on 31.03.2003 at Rs. 42,30,501/-. In this manner, the Assessing Officer taxed an amount of Rs. 42,49,008/- under Section 2(22)(e) of the Act in the hands of the assessee. 15. As per the Commis....
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....of Rs. 2,61,19,957/- taken by the Assessing Officer is on account of inclusion of the 'accumulated profits' as on 31.03.2002 (i.e. opening balance for the current year) amounting to Rs. 1,94,62,774/-. The assessee in the course of its submissions before the Assessing Officer had explained that the advances or loans made in the earlier years to the shareholders were liable to be reduced from the opening balance of 'accumulated profits' for computing the 'accumulated profits' for the current year. As per the assessee, the loans advanced to the four shareholders in question, and which fell within the purview of Section 2(22)(e) of the Act, up to the preceding assessment year of 2002-03 was Rs. 3,73,65,065/- and therefore, there were no 'accumulated profits' as on 31.03.2002 to be considered for the year under consideration. In other words, the 'accumulated profits' up to 31.03.2002 amounting to Rs. 1,94,62,774/- was to be reduced to the extent of the loans and advances made in the earlier years and after doing so, there did not remain any positive figure. 17. In this context, it is to be noted that under Section 2(22)(e) of the Act, any payment....
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.... the period from 01.04.2002 to 31.03.2003 amounting to Rs. 2,61,19,957/- for the purposes of computing the amount assessable under Section 2(22)(e) of the Act. In our considered opinion, the Assessing Officer made no mistake in excluding the sum of Rs. 1,94,62,774/- while determining the 'accumulated profits' for the purposes of computing the amount assessable under Section 2(22)(e) of the Act. The Action of the Assessing Officer, is in line with the decision of Cochin Bench of the Tribunal in the case of Gordhandas Khimji (supra). In the course of hearing, learned counsel for the assessee pointed out that the subsequent decision of Visakhapatnam Bench of the Tribunal in the case of P. Satya Prasad v. ITO (2012), ITA No.293/Vizag/2012 dated 16.11.2012 and Delhi Bench of the Tribunal in the case of A.R. Chadha & Co. India (P.) Ltd. v. Dy. CIT [2010] 133 TTJ (Delhi) 490 also support the proposition accepted by the Assessing Officer. In our considered opinion, the Commissioner has differed with the legal position accepted by the Assessing Officer without any justifiable reason. In fact, it would be in fitness to things to observe that the view adopted by the Assessing Officer ....
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....n of Rs. 29,563/- was made to the assessee shareholder and in that year the 'accumulated profits' of the company was Rs. 4,003/-. As the assessee was only interested to the extent of 25% in the shareholding of the company, the assessee canvassed that only one-fourth amount would be liable to be taxed as dividend under Section 2(6A)(e) read with Section 12(IB) of the erstwhile Indian Income-tax Act, 1922. The Hon'ble High Court referred to its earlier judgment in the case of CIT v. Bhagwat Tewari [1976] 105 ITR 62 (Cal.) and observed that ".........the entirety of the payment in the hands of the shareholder to the extent the company possesses 'accumulated profit' would be deemed to be dividend in his hands........". The Hon'ble High Court upheld the position that if a shareholder borrows money and is paid advances or loans in excess of the 'accumulated profit'; then the amount which would be treated as dividend in his hands would be limited to the extent of 'accumulated profit'. If, on the other hand, a shareholder takes advances or loans, which is less than the 'accumulated profit', then the entirety of the loan to the extent the comp....