TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 37
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....appeal is not maintainable. 2. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income tax (Appeals) has erred in upholding penalty order passed under Section 271(1)(c) of the Act on the alleged deemed dividend amounting to INR 55,00,000 in the hands of the Appellant. 3. On the facts and in the circumstances of the case and in law, the Learned Deputy Commissioner of Income Tax-10(2)(2), Mumbai has erred in computing the incorrect amount of penalty in the order passed under Section 271(1)(c) of the Act, by considering surcharge on the taxable income. 4. The Appellant craves leave to add, alter, amend or withdraw the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appellate hearing. 2. Briefly the facts of the case are that the assessee filed its return of income, which was selected for scrutiny and assessment proceedings were completed u/s. 143(3) of the Income Tax Act, 1961 ("the Act"), wherein the AO brought to tax a sum of Rs. 55 lakhs as deemed dividend u/s. 2(22)(e) of the Act besides an amount of Rs. 20,28,653/- on account o....
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....22)(e) of the Act, which has been dismissed by the Ld.CIT(A) being not maintainable and hence, the present appeal was also dismissed. Against the said findings, the assessee is in appeal before us. 6. During the course of hearing, the Ld.AR submitted that the assessee had originally accepted the assessment order on the ground of addition of Rs. 55 lakhs u/s 2(22)(e) of the Act as deemed dividend and contested the assessment only on the ground of mismatch of income vis-à-vis form 26AS of Rs. 20,28,653/- by filing an appeal before the Ld.CIT(A). The Ld.CIT(A) provided a substantial relief by reducing the addition of Rs. 20,83,653/- to Rs. 8,829/- only. Further, in its appeal, the assessee didn't take any ground on addition u/s. 40A(3) of Rs. 48,784/- given the quantum involved. 7. It was submitted that subsequently, when the assessment of Mr. Sam Balsara, a common shareholder in both the assessee-Company (MATES) and Madison Communications Private Limited, was reopened u/s. 147 of the Act, the same amount of Rs. 55 lakhs on account of deemed dividend was again taxed in the hands of Mr. Sam Balsara, as deemed dividend. 8. It was submitted that the assessee-company, real....
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....der who owns 72.5% and 87.38% shares in the assessee-company and MCPL respectively. Further he noticed that MCPL had accumulated profits as on 31st March 2013. In view of the above, the AO concluded that the loan received by the assessee-company from MCPL gets covered by the deeming provisions of the Section 2(22)(e) of the Act. Accordingly, an addition of Rs. 55 lakhs (in relation to loan received from MCPL) was made in the hands of the assessee-company u/s. 2(22)(e) of the Act in the captioned year. It was submitted that there were contradictory judicial precedents on the taxability of deemed dividend i.e., whether the same should be taxed in the hands of shareholder vis-a-vis the recipient company at that point in time. In light of the said contradictory judicial precedents, the assessee-company accepted the position adopted by the then AO i.e., the dividend u/s. 2(22)(e) of the Act is taxable in the hands of recipient company and accordingly, did not challenge the said issue before the Ld. CIT(A). However, the controversy on this issue was later on settled by the Hon'ble Supreme Court's decision in case of CIT v. Madhur Housing and Development Company (Civil Appeal No. ....
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....O has relied on the said Apex Court's decision in the case of CIT v. Madhur Housing and Development Company (Civil Appeal No. 3961 of 2013, dated 5th October, 2017) and has charged the very same amount of Rs. 55 lakhs to tax as deemed dividend in the common shareholder's assessment for the AY. 2013-14 (which was already taxed in the hands of the assessee-company). It was submitted that the common shareholder respectfully accepting the Hon'ble Supreme Court's decision discharged the tax liability arising due to the said addition. As can be seen from above, the same income is taxed twice Le, once in the hands of assessee-company and once in hand of the common shareholder. In view of the above facts and Hon'ble Apex Court's ruling, the deemed dividend (though not challenged) is clearly not taxable in the hands of the assessee-company and hence, prayed to delete the penalty. 13. Further, on the issue of levy of penalty on disallowance u/s 40A(3) of the Act, it was again submitted that though the assessee didn't appeal against the addition u/s. 40A(3) of Rs. 48,784/- given the quantum involved, at the same time, there is no basis for levy of penalty u/s 271(1)(c) ....
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....ersal Medicare (P) Ltd and Hon'ble Supreme Court decision in case of Madhur Housing and Development company affirming the decision of the Hon'ble Bombay High Court in case of Madhur Housing and Development Corporation and Hon'ble Delhi High Court in case of CIT vs Ankitech (P) Ltd. It was also brought to the notice of Ld.CIT(A) that basis the decision of Hon'ble Supreme Court decision in case of Madhur Housing and Development company, the AO has reopened the case of the common shareholder and brought the said amount to tax as deemed dividend in his hands. The Ld.CIT(A) has summarily rejected the submissions so made and has held that the levy of penalty is consequential in nature and since the addition has been confirmed, the levy of penalty was confirmed by him without elaborating as to how the assessee has furnished inaccurate particulars of income and the matter calls for levy of penalty and that too, on face of various decisions brought to his notice wherein it has been held that deemed dividend cannot be taxed in the hands of loan recipient entity but taxable in the hands of common shareholders having substantial interest in both entities. 17. In our considered opinion, ther....