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2016 (3) TMI 741 - ITAT MUMBAI

2016 (3) TMI 741 - ITAT MUMBAI - TMI - Reopening of assessment - deemed dividend u/s 2(22) - Held that:- Prima facie going by the ld. Counsel's contention on merits, we find that the Assessee had no accumulated profits up till 31.3.2005 which is evident from the balance-sheet. Only the current year's reserves and surplus is ₹ 65,36,884/- which is on account of net loss carried to the balance-sheet. The Hon'ble Supreme Court in the case of CIT vs. V. Damodaran (1979 (10) TMI 5 - SUPREME Cou .....

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from the earlier years, then, the provision of deemed dividend u/s 2(22)(e) of the Act cannot be invoked for taxing the reserves and surplus or the profits of the current year. Accordingly, the addition made by the AO cannot be sustained at the threshold. - Decided in favour of assessee. - ITA No. 7379/Mum/2012 - Dated:- 15-1-2016 - Rajendra, AM And Amit Shukla, JM For the Appellant : Shri Rajiv Thakkar For the Respondent : Shri Sujit Bangar ORDER Per Amit Shukla, JM The aforesaid appeal has bee .....

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oceedings under section 147 r.w.s. 148 of the Act was validly initiated. b) Your appellant respectfully submits all the relevant details/particulars were available with the assessing officer at the time of framing of original assessment order under section 143(3) of the Act. As such, the reopening of assessment under section 147 r.w.s. 148 of the Act was not justified. c) Your appellant, therefore, prays that the assessment made under section 143(3) r.w.s. 147 of the Act be cancelled." Apar .....

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ant as deemed dividend under section 2(22)(e) of the Income-tax Act, 1961 ('the Act') by considering the accumulated profits as on 31st March 2006." 2. The facts in brief are that, the Assessee-company is engaged in the business of providing financial services. For the assessment year under appeal, the return of income was filed declaring total income of ₹ 68,177/- on 27.11.2006. The said return was selected for scrutiny and assessment order was passed u/s 143(3), vide order d .....

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vanced a loan of ₹ 5,50,00,000/- to you. M/s. Advantage Moti (I) P.Ltd. is one of the shareholders of M/s. PRTL and holding 49,99,970/- shares out of 50,00,000/- shares which comes to 99.99% share holding in M/s PRTL. M/s Pantaloon Technologies P. Ltd. had a reserve and surplus of ₹ 65,36,884 as on 31.3.2006. Therefore all the conditions stipulated in sec. 2(22)(e) have been satisfied i.e. loan or advance has been given to a shareholder holding 99.99% shares in the company and the co .....

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5,50,00,000/- needs to be taxed in the hands of M/s, Advantage Moti (I) P.Ltd. However, such addition is restricted to the extent of reserve and surplus which in this case is ₹ 65,36,884/-. In view of the same, the deemed dividend to the tune of ₹ 65,36,884/- should be taxable in the hands of the assessee company i.e. M/s. Advantage Moti (I) Pvt. Ltd. On perusal of the records, it is found that you have not offered any such income to tax. Therefore, I have reason to believe that the .....

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ll be presumed that you have no explanation to offer and the same will be added to the total income of the company and assessed accordingly." Against the said reasons recorded, the Assessee had filed its objections before the AO vide letter dt. 12.10.2011 contending that such a re-opening is invalid on the ground that it amounts to "change of opinion" and also relied upon various case laws. Besides this, it was also submitted that no new information or material has come to the not .....

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oted that on the perusal of the balance-sheet as on 31.3.2006 of M/s. PRTL Enterprises it is seen that it had 'reserves and surplus' of ₹ 65,36,884/-, therefore, the addition on account of deemed dividend should be restricted to ₹ 65,36,884/-. Accordingly, he made the addition of ₹ 65,36,884/- u/s 2(22)(e). The ld. CIT(A) too upheld the validity of the reopening u/s 147 and also the additions on merits. 3. Before us, the ld. Counsel of the Assessee submitted that during .....

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t for filing return of income for A.Y 2006-07; (b) statement of total income and (c) accounts for the year ended on 31st March, 2006 of the said company, as Annexure "G", "H" and "I" respectively." Thus, all the details were given before the AO and post-assessment no tangible material has come on record, therefore, re-opening u/s 147 for taxing the said loan as deemed dividend cannot be resorted to, as it amounts to "change of opinion". On merits, he .....

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n the decision of the Hon'ble Supreme Court in the case of CIT vs. V. Damodaran reported in [1980] 121 ITR 572 (SC), wherein the Hon'ble Supreme Court held that accumulated profits will not include current profits. Thus, on merits also no addition can be made. 4. On the other hand, the ld. DR submitted that during the course of original assessment proceedings, the AO did not examine the issue regarding the applicability of deemed dividend u/s 2(22)(e) of the Act. Thus, there was non-appl .....

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placed on record. So far as admissibility of additional ground is concerned, we find that the same is arising out of the material already on record which does not require any investigation of facts but rather goes to the very root of the issue, whether the deemed dividend in terms of section 2(22)(e) is at all applicable in the case of the Assessee or not. Therefore, the additional ground which is arising out of material already on record is being admitted for adjudication. Prima facie going by .....

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