TaxTMI 
TaxTMI 
2016 (10) TMI 542
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....hearing the assessee, the Assessing Officer assessed the income. Subsequently the ld. CIT by way of an order dated 25.03.2013 enhanced the income and assessed the same at Rs. 1,05,87,423/-. In the process, the ld. CIT added deemed dividend to a tune of Rs. 95,70,953/-, which was the unsecured loan given by M/s. Mascot Woodcraft Pvt. Ltd. Challenging the same, the assessee carried the matter in appeal before the Tribunal on the following grounds:- (1) For that on the facts of the case, the order passed u/s 263 by the ld. CIT-XIII, Kolkata is completely arbitrary, unjustified and illegal. (2) For that on the facts of the case, the ld. CIT-XIII, Kolkata was wrong in passing the order u/s 263 without considering the facts that the AO has considered all the points raised by the ld. CIT-XIII, Kolkata in the notice u/s 263, therefore, the order passed by the ld. CIT-XIII, Kolkata u/s 263 is completely arbitrary, unjustified and illegal. (3) For that on the facts of the case, the ld. CIT-XIII, Kolkata was wrong in adding Rs. 95,70,953/- u/s 2(22)(e) as deemed dividned which was duly considered by the AO at the time of assessment, therefore, the direction given by....
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....available on record. In so far as the sworn statement of the deponent to the effect that their former counsel, i.e. Mr. P.K. Sarkar, FCA, could not give proper guidance due to his lack of knowledge with the matter relating to the Income Tax Appellate Tribunal, and after engaging Mr. Balaram Sardar, deponent, Smt. Kamala Saha, partner of the assessee-firm, had fallen sick due to Tumor in Uterus and Arthritis and was admitted in Hospital and as such, the delay occurred, is concerned absolutely there is no dispute as to the correctness of this statement. In above cited decision, incompetency of the Chartered Accountant in giving proper advice was considered as sufficient cause. Hon'ble Supreme Court in the case of Collector Land Acquisition - vs.- Mst. Katiji & Others reported in 1987 AIR 1353 laid down the following guidelines for evaluating the applications for condonation of such delay:- Guidelines laid down by the Hon'ble Supreme Court in the case of Collector Land Acquisition -vs.- Katiji & Others: " The legislature has conferred the power to condone delay by enacting Section 5 of the Indian Limitation Act of 1963 in order to enable the Courts to do substanti....
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....002 (104) ECR 609 laid down the following guidelines:- " 11 . Rules of l imitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. The law of l imitation fixes a life span for such legal remedy for the redress of the legal injury so suffered. Time is precious and wasted time would never revisit. During the efflux of time, newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a lifespan must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. The law of limitation is thus founded on public policy. It is enshrined in the maxim ' interest reipublicae up sit finislitium' ( it is for the general welfare that a period be put to litigation). Rules of l imitation are not meant to destroy the rights of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy mu....
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....be deemed as dividend. The reason given by the ld. CIT is that the two partners of the assessee- firm, namely Mrs. Kamala Saha and Mr. Asim Kumar Saha Mondal, were holding 60% and 40% of shares respectively in the assessee-firm. Mrs. Kamala Saha's shareholding in M/s. Saha & Sarkar Saw Mill Pvt. Ltd. was at 6.18% and in M/s. Mascot Woodcrafts Pvt. Ltd. at 11.67%, whereas Mr. Asim Kumar Saha Mondal was holding 6.57% of shares in Mascot Woodcrafts Pvt. Limited and as such any loan or advance given by M/s. Mascot Woodcraft Pvt. Limited in the hands of the person with shares of 10% or more shall be deemed to be the dividend. On this premises, the ld. CIT proceeded to add Rs. 95,70,953/-. 9. The assessee is challenging this finding by contending that the deemed dividend, if any, is taxable in the hands of the person, who is the shareholder of the lender Company and not in the hands of the persons or entities other than the shareholder. Fact remains in this matter is that M/s. Birendra Kumar Saha is not the shareholder of M/s. Mascot Woodcrafts Pvt. Ltd., but it is only Smt. Kamala Saha, who is the shareholder, and ultimately deemed dividend can be assessed arising out of the loans ad....
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....r or the concern(non-shareholder). The provisions are ambiguous. It is therefore necessary to examine the intention behind enacting the provisions of Sec.2(22)(e) of the Act. 35. The intention behind enacting provisions of section 2(22)(e) are that closely held companies (i.e. companies in which public are not substantially interested), which are controlled by a group of members, even though the company has accumulated profits would not distribute such profit as dividend because if so distributed the dividend income would became taxable in the hands of the shareholders. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have substantial interest or make any payment on behalf of or for the individual benefit of such shareholder. In such an event, by the deeming provisions such payment by the company is treated as dividend. The intention behind the provisions of section 2(22)(e) is to tax dividend in the hands of shareholder. The deeming provisions as it applies to the case of loans or advances by a company to a concern in which it's shareholder has substantial intere....