TMI Blog2020 (2) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... f the legal position. The aforesaid contention of the assessee has not been controverted by the Revenue. It is a settled proposition of law that no tax can be levied or recovered without authority of law for which reference can be made to the decision of Hon ble Apex Court in the case of CIT Vs. Shelly Products [ 2003 (5) TMI 4 - SUPREME COURT] and Vijay Gupta Vs. CIT and another [ 2016 (3) TMI 977 - DELHI HIGH COURT] wherein it was observed that if an assessee by mistake or inadvertence or on account of ignorance included in his income any amount which is exempted from payment of income tax or is not income within the contemplation of law, the assessee may bring the same to the notice of the assessing authority which if satisfied may grant the assessee necessary relief and refund the tax paid in excess, if any. Considering the totality of the facts and in view of the aforesaid decisions, we are of the view that the deemed dividend u/s 2(22)(e) of the Act be worked out on the basis of the opening balance of KIPL as on 01.04.2012. We thus direct accordingly. Thus, the grounds of the assessee are allowed. - ITA No.1496/PUN/2017 - - - Dated:- 10-1-2020 - Shri Anil Chaturvedi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) erred in holding that advances received by the assessee individual from the company, Ms. Kamal Infrabuild Pvt. Ltd., should be treated as deemed dividend u/s 2(22)(e) in the hands of the assessee to the extent of ₹ 29,84,5811- i.e. to the extent of the accumulated reserves of the company as on 31.03.2013 and thereby confirming the addition of ₹ 3,87,996/- over and above the addition u/s 2(22)(e) of ₹ 25,96,585/- suo moto made by the assessee at the time of filing return 4.1 The learned CIT(A) failed to appreciate that for the purposes of computing the addition u/s 2(22)(e), the opening balance of accumulated profits of the company as on 01.04.2012 should have been considered and not the closing balance of accumulated profits as on 31.03.2013 and therefore, the addition u/s 2(22)(e) of ₹ 3,87,996/- made by the A.O. was not justified. 4.2 Without prejudice to the above ground, the assessee submits that while computing the addition u/s 2(22)( e) for this year, the amount treated as deemed dividend in the earlier years should have been reduced from the accumulated profits of the company and there was no reason to make any addition ofS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he does not wish to press ground Nos.1, 2, 4.2, 6, 8 and 9. In view of the aforesaid submission, these grounds are dismissed as not pressed. 4. Ground No.3 is with respect to disallowance u/s 14A of the Act. 4.1. During the course of assessment proceedings AO noticed that assessee had investments amounting to ₹ 1.82 crores as on 31.03.2013 and had claimed interest expenditure of ₹ 23,71,500/-. AO was therefore of the view that assessee was utilizing interest bearing funds to maintain investments. The assessee was therefore asked to explain as to why the disallowance u/s 14A r.w. Rule 8D not be made, to which the assessee made submissions which were not found acceptable to the AO. AO thereafter by following the methodology prescribed under Rule 8D of I.T. Rules worked out the disallowance under Sec.14A of the Act at ₹ 2,51,677/- and disallowed the same. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who upheld the order of AO. Aggrieved by the order of Ld.CIT(A), assessee is now before us. 5. Before us, Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A) and further pointing to the copy of the Balance-Sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal to the Supreme Court against that order on the other issue therein, viz., broken period interest, no appeal has been preferred by the Revenue on the issue of invoking the principles laid down in Reliance Utilities and Power Ltd. (Supra) in its application to Section 14A of the Act. Therefore, the issue which arose for consideration before the Tribunal had not been decided by this Court in Godrej and Boyce Manufacturing Co. Ltd. (Supra). It arose and was so decided for the first time by this Court in HDFC Bank Ltd. (Supra). Thus, there is no conflict as sought to be made out by the impugned order. Thus, impugned order has proceeded on a fundamentally erroneous basis as the ratio decidendi of the order in Godrej and Boyce manufacturing Co. Ltd. (Supra) had nothing to do with the rest of presumption canvassed by the petitioner before the Tribunal on the basis of the ratio of the decision of this Court in HDFC Bank Ltd. (Supra). 16. At the hearing Mr. Suresh Kumar, Learned Counsel for the Revenue urged that on the facts of this case no fault can be found with the order of the Tribunal. It is submitted that, the petitioner was not able to establish before the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready considered the amount of ₹ 25,96,585/- as deemed dividend which was 87% of the accumulated profits. It was therefore submitted that no further addition is called for. The submissions of the assessee were not found acceptable to the AO. AO was of the view that since the reserves of M/s. Kamal Infra Build Pvt. Ltd., as on 31.03.2013 was to the extent of ₹ 29,84,581/-, the entire amount should be considered as deemed dividend. He accordingly treated the differential amount of ₹ 3,87,996/- (₹ 29,84,581/- - ₹ 25,96,585/-) as deemed dividend income u/s 2(22)(e) of the Act. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who upheld the order of AO. Aggrieved by the order of Ld.CIT(A), assessee is now before us. 9. Before us, Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A) and further submitted that the opening balance of accumulated reserves of M/s. Kamal Infra Build Pvt. Ltd., as on 31.03.2012 was ₹ 13,61,710/- and the balance as on 31.03.2013 was ₹ 29,84,581/-. He submitted that while computing the income assessee, had considered the closing balance of accumulated profits as on 31.03.2014 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us, it is assessee s submission that the computation of deemed dividend u/s 2(22)(e) of the Act is to be worked out on the basis of opening balance of reserves as on 01.04.2012 and not as per the closing balance of reserves as on 31.03.2013. We find force in the submission of Ld.A.R. in view of the fact that Hon ble Gujarat High Court in the case of CIT Vs. M.B. Stock Holding Pvt. Ltd., (supra) has held that while determining the amount of deemed dividend under Explanation 2 to Sec.2(22)(e) of the Act, the current profit is not to be included as part of accumulated profit. The aforesaid decision of Hon ble Gujarat High Court has also been followed by the Pune Tribunal in the case of Smt. Chhaya Valmik Nikhade Vs. ACIT (supra). Before us, Revenue has not placed any contrary binding decision in its support. In such a situation, we are of the view that working of the deemed dividend u/s 2(22)(e) of the Act is to be worked out on the basis of the opening balance of the accumulated reserves of the lender company. Further, it is assessee s contention that the higher amount of deemed dividend has been offered by the assessee due to mis-interpretation of the legal position. The afor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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