TaxTMI 
TaxTMI 
2026 (5) TMI 1268
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....s 14A of the Act. 1.1 Thereafter, the assessee approached the ITAT where through order dated 23.03.2023 in ITA No.1298/Del/2019, the matter of deemed dividend was remanded back to the file of Ld. AO with observations that the Ld. AO must consider the Hon'ble Kolkata High Court's judgment in the case of Pradip Kumar Malhotra reported in 338 ITR 538 (Kol), while undertaking the fresh assessment. It was also observed that there is no Estoppel against law and statute on the finding of Ld. CIT(A) that since the assessee had agreed to the addition made as deemed dividend, there was no scope for any appeal against the same. There is an interesting background to this observation which deserves to be briefly mentioned. In the first-round proceedings before the Ld. AO it was found that one M/s Shaka Properties Pvt. Limited had advanced an amount of Rs. 1,50,00,000/- to the assessee company. This M/s Shaka Properties admittedly held 49.30% shares in the assessee company and the assessee also held 50.01% share in M/s Shaka Properties. On being issued with a show cause notice dated 12.12.2017 the assessee submitted its response vide letter dated 22.12.2017 through which it was admitted that ....
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....n the line of lending of money or lending of money was substantial part of the business of the company M/s Shaka Properties Pvt. Ltd. to avail the exception as carved out in the definition of dividend mentioned at 2(22)(e)(ii) of the Act. Considering the entirety of facts, circumstances and material on record and looking into preponderance of probabilities here the appellant has miserably failed to explain its claim. In this condition, the addition of the amount of Rs. 1,50,00,000/- which was treated by the AO as deemed dividend u/s 2(22)(e) in the hands of the assessee are factually and legally correct and the same is upheld and the plea of the appellant on this issue are dismissed being devoid of any merits." 1.3 Further aggrieved, the assessee has filed the present appeal with the following grounds of appeal: - 1. "That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the Tribunal appeal effect order passed by the AO, dated 28.03.2025 which was passed not following the instruction and finding of the Tribunal in ITA No.1298/Del/2023, order dated 23/03/2023 and without appreciating the fact that the loan taken from M/s Shaka Propert....
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....or without a right to participate in profits) holding not less than 10 per cent of the voting power; but if such loan or advance is given to such share holder as a consequence of any further consideration which is beneficial to the company received from such a shareholder; in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. Thus, for gratuitous loan or advance given by the company to those classes of shareholders would come within the purview of section 2(22) but not to the cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. [Para 10] In the instant case, the assessee permitted his property to be mortgaged to the bank for enabling the company to take the benefit of loan and in spite of request of the assessee, the company was unable to release the property from the mortgage. In such a situation, for retaining the benefit of loan availed from the bank if decision was taken to give advance to the assessee such decision was not to give gratuitous advance to its shareholder but to protect the business interest of the company. [Para 11] Therefore, the author....
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....ubject, being the case of Smt. Tarulata Shyam [108 ITR 345 (SC)]. Both the sides mentioned that neither the Hon'ble Calcutta High Court nor the Hon'ble Allahabad High Court cases being relied on by either side had occasion to consider the case of Smt. Taulata Shyam (supra). Furthermore, the admitted fact here is that the assessee had purportedly accepted that the provisions of "deemed dividend" applied to his case and had promptly deposited the taxes due on the impugned amount. This aspect has been dealt with by the ITAT in the first-round order (supra) by saying that there cannot be any estoppel on law. Since the focus of controversy has now shifted on whether a loan which is repaid in due course would qualify as "deemed dividend" or not, hence, the issue of the assessee agreeing to an addition and thereafter resiling from that position to claim, on the strength of a case law [Pradip Kumar Malhotra (supra)] that the amount in question could not be considered as "deemed dividend", is a little difficult to understand. In this regard mention must be made of the case of Deep Kukreti reported in 371 ITR 257 (Uttarakhand) where the legal position on the subject of any grievance survivin....
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....assessee's case is that his statement has been wrongly recorded or that be in under a mistaken belief of fact or law, that he should make an application for rectification to the authority which passed the order based upon that statement. Until rectification is made, an appeal is not competent." 11. No doubt, in the case of Gauri Sahai Ghisa Ram v. CIT [1979] 120 ITR 338/2 Taxman 245 a Division Bench of the Allahabad High Court took the view that an appeal could be maintained despite a concession made by the assessee. It is interesting to notice the facts of the said case. There, the firm was filing its return on the basis of the accounting year being Dussehra to Dussehra. A partner died. The succeeding firm adopted the financial year as the accounting year. The assessment was made on the basis of the assessee's concession. The court took the view that separate assessments should have been made on the old firm up to the previous year and for the period prior to the death of the partner and the single assessment for the entire period could not be made. It is, in the said context, that the court took the view that the contention of the revenue that no appeal lies agai....
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....oerced into making such concession, which case also the appellants do not have in these cases, the order of the appellate authority, as affirmed by the Tribunal, that the appellants cannot be treated as aggrieved persons is not liable to be interfered with. la such circumstances, we are of the view that the appellants have not made out a case for interference with the order of the Commissioner of Income Tax, as affirmed by the Tribunal. 17. The learned counsel for the appellants drew our attention to the judgment of the Apex Court in the case of Bhau Ram v. Baij Nath Singh AIR 1961 SC 1327. That was a case, where the court took the view that a vendee, who had filed an appeal by special leave to the Supreme Court against a pre-emption decree passed against him, is not precluded from proceeding with the appeal merely because he had wit court below after the grant of special leave to appeal. The court, inter alia, took the view that, in the absence of some withdrawn the pre-emption price deposited by the pre-emptor in the statutory provision or of a well recognized principle of equity, no one can be deprived of his legal rights, including a statutory right of appeal. We may o....
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.... peculiar fact, of a quid pro quo between the assessee and the lender company. This unique fact is certainly not before us also. Once the two case laws relied on behalf of either of the sides cannot help in deciding the issue at hand then we have to turn to the Hon'ble Supreme Court who has already rendered a binding judgment in the case of Smt. Tarulata Shyam (supra). Unfortunately, this case has not been cited at the Bar before either the Hon'ble Calcutta High Court or even the Hon'ble Allahabad High Court. For the sake of reference some extracts from Smt. Tarulata Shyam case (supra) deserve to be placed on record: - "It is noteworthy that at least in one material aspect the Indian law is different from that under section 108(1) of the Commonwealth Act as explained and interpreted by the Board in the case mentioned above. Under section 108, the raising is noteworthy that at least in one material aspect the Indian law is different from that under section 108(1) of the of the fiction is dependent upon a positive finding recorded by the Commissioner of Income-tax that the payment to the adjudication of the income-tax authorities Parliament has itself in the exercise of its ....
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....in the ordinary course of its business. In other words, this provision would not apply to cases where the company winch advances a loan to its shareholder carries on the business of money-lending itself, and the last condition is that the loan must have remained outstanding at the commencement of the shareholder's previous year in relation to the assessment year 1955-56." (Emphasis supplied). The first four conditions factually exist in the instant case. The last condition is not applicable because it was a transitory provision applicable to the assessment year 1955-56 only, while are concerned with the assessment year 1957-58, and the previous year is the calendar year 1956. There is no dispute that the company is a controlled (private limited) company in which the public are not substantially interested within the meaning of section 23A. Further, the assessee is admittedly a shareholder and managing director of that company. It is also beyond controversy that at all material times, the company possessed "accumulated profits" in excess of the amount which the assessee-shareholder was paid during the previous year. The Income-tax Officer found that on January 1, 1956, ....
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....sections 2(6A)(e) and 12(18) were inserted by the Finance Act, 1955, Parliament must have been aware of the provision contained in section 108 of the Commonwealth Act. In spite of such awareness, Parliament has not thought it fit to borrow whole hog what i section 108(1) of the Commonwealth Act. So far as the last limb of section 108(1) is concerned our Parliament imported what is said in only a very restricted version, and incorporated the same as the "fifth condition" in sub-section (18) of section 12 to the effect, that the "payment deemed as dividend shall be treated as a dividend received by him in the previous year relevant to the assessment year ending on the 31st day of March, 1956, if such loan or advance remains outstanding on the last day of such previous year". The word "such" prefixed to the "previous year" shows that the application of this clause is confined to the assessment year ending on March 31, 1956. In the instant case we are not concerned with the assessment year ending March 31, 1956. This highlights the fact that the legislature has deliberately not made the subsistence of the loan or advance, or its being outstanding on the last date of the previous year r....