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TMI Blog2023 (1) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... not established by the AO. Hon'ble ITAT is requested to reverse the order of CIT(A) / NFAC on this account as reopening of assessment is after 4 yrs from stipulated date in the Act and allow the ground." 2 The CIT(A) NFAC has erred on the facts and in the circumstances of the case, in as much as upholding the reassessment order passed by the Assessing Officer u/s 143(3) rws 147 of the IT Act dated 09.12.2019 assessing total income at Rs,3,46,93,780/- as against returned income of Rs. 1,85,690/-,which was requested to be held as a in law as the same was liable to be quashed and cancelled as the assessment order was passed without considering the version of Appellant that the basic condition to assume the jurisdiction u/s 2(22)(e) is not existing as the accumulative profits on 31/03/2011 are (-) Rs. 74,80,633/- as per audited accounts. Hon'ble ITAT is requested to reverse the order of CIT(A)/ NFAC on this account and allow the ground." 3 "On the facts and in the circumstances of the case, the CIT(A)/NFAC has failed to appreciate that there is no individual benefit derived and also there is no avoidance of dividend distribution tax (DDT) on the same therefore the object of introd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the opinion that no adjudication is required. So, ground no. 4, 5, 6 & 7 are dismissed. 4. Ground no. 3 is against the merit of the action of the Ld. CIT(A)/NFAC in upholding the action of the AO making an addition of Rs. 3,46,93,780/- u/s 2(22)(e) of the Income Tax Act, 1961 (hereinafter "the Act") when the accumulative profits as on 31.03.2011 was minus/loss of Rs. 74,80,633/-. 5. Brief facts the AO noted in this regard are that the assessee had filed return of income for AY. 2012-13 on 28.07.2012 declaring total income of Rs. 1,85,690/- and current years loss of Rs. 12,92,885/-. Later on, the case of the assessee was re-opened for the reason which has been reproduced by the AO at page no. 1 & 2 of the re-assessment order u/s 147/143(3) of the Act dated 09.12.2019. The AO noted in the re-assessment order that the assessee has received an amount of Rs. 16.19 crores from M/s. Sony Mony Developers Pvt. Ltd. in which the assessee is director and 50% shareholder of the said company. According to the AO, the loan taken by the assessee from M/s. Sony Mony Developers Pvt. Ltd. would attract Section 2(22)(e) of the Act (deemed dividend). After considering the submission of assessee, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits accrue to the assessee directly from the business the question whether they accrue de die, in diem or at the close of the year of account has at best an academic significance, but when upon ascertainment of profits the right of a person to a share therein is determined, the question assumes practical importance, for it is only on the right to receive profits or income, profits accrue to that person. If there is no right, no profits will be deemed to have accrued ..... " 7. And the Ld. AR relied on the decision in CIT vs. M. B. Stockholding Pvt. Ltd., wherein the Hon'ble Gujarat High Court observed as under: - "CIT vs. M. B. Stockholding Pvt. Ltd., 2015-TIOL 1139-HC-AHM ++ while determining the amount of deemed dividend under Explanation 2 to Section 2(22)(e) of the Act, the current profit was not required to be included to be part of accumulated profit. As such, as observed by the Tribunal, the issue is already settled by the Supreme Court against the Revenue in the case of Associated Banking Corporation of Ind. Ltd. V Is. Commissioner of Income-Tax, Bombay reported in (1965) Vo1.56 ITR 1 (SC) by which, the view taken that the profit accrues when the books of account ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt Ltd has transferred funds of Rs. 16.19 crores to the account of Assessee; and M/s Sony Mony Electronics Ltd has received fund transfers of Rs. 19.08 crores from Mr. Ramesh P Shah (Assessee). And that M/s. Sony Mony Developers Pvt. Ltd. from which the assessee took loan of Rs. 16.19 crores, had accumulated profit of Rs. 3.41 crores as on 31.03.2012. Therefore, in the facts of the case, sec 2(22)(e) are applicable and after issuance of Show cause notice and finding no response from the assessee, and taking note of the fact that in M/s. Sony Mony Developers Ltd, the assessee/ Ramesh P Shah had 50% shareholding and was Director of it, the AO in his order added the Deemed income u/s 2(22)(e) of Rs. 3,41,96,270/- as per balance sheet dated 31.03.2012. According to Ld. DR "Accumulated profits" mean commercial profits and not profits as assessed for income--tax purposes. From accumulated profits all "disbursements legitimately attributable to it by way of expenses, development, dividends and deemed dividends" must be reduced. And she relied upon the following case laws: - Hon'ble Supreme Court in the case of P.K. Badiani vs CIT 105 ITR 642 (SC) has held that the term profits appearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2(22)(e) of the Act which defines the expression accumulated profit as under:- Explanation 2:- The expression "accumulated profits" in sub clauses (a),(b),(d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those clauses, and in sub clause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place". 12. The Ahmedabad bench of Tribunal in the case of M/s M.B. Stock Holdings (P) Ltd Vs ACIT (2003) 84 ITD 542] took note of the Hon'ble Supreme Court decision in the case of CIT Vs. Asokbhai Chimanbhai (1965)(56 ITR 42) wherein it was held that the profits do not accrue from day to day or even from month to month and have to be ascertained by a comparison of assets at two stated points. It was further held that unless the right to profits comes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l summarized the principles of sec. 2(22)(e) as under:- (i) That for purposes of s. 2(22)(e), the accumulated profits are to be worked out upto the date of each payment/advancement of loan. (ii)That there is a distinction between the "accumulated profits" of business and the current year's profits of business. (iii) That profits of business accrue at the end of the previous year. (iv) That loan or advance treated as deemed income up to the date of fresh loan is to be reduced from accumulated profits. (v) That the repayment of loan during the same year is not to be deducted from the accumulated profits. Thus, it has been held that the accumulated profits do not include current year's business profit, since it accrues only at the end of the year. 14. We note that the Revenue has challenged the aforesaid Tribunal order before the Hon'ble High Court of Gujarat (CIT Vs. M. B. Stockholding (P) Ltd. Tax Appeal No. 772 of 2007) by order dated 23.04.2015 reported in (2015) 64 taxmann.com 138 the Hon'ble High Court considered the following substantial question of law and as under: - "(A) Whether the Appellate Tribunal is right in law and on facts in setting aside the order of the CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be the fate even if the matter is remitted either to the learned Tribunal or to the Assessing Officer to consider the issue on merits afresh. Therefore, we ourselves have considered the issue with respect to the main issue on merits whether the Assessing Officer was justified in including the current profit to be part of accumulated profit while determining the amount of deemed dividend under Section 2(22) (e) of the Act. 4.1 Having heard M Rs. Bhatt, learned advocate appearing on behalf of the Revenue and considering the provisions of Section 2(22)(e) of the Act, more particularly, Explanation 2 to Section 2(22)(e) of the Act, it cannot be said that the learned Tribunal has committed any error in directing the Assessing Officer not to include the current profit to be part of accumulated profit while determining the amount of deemed dividend under Section 2(22)(e) of the Act. While determining the amount of deemed dividend under Explanation 2 to Section 2(22)(e) of the Act, the current profit was not required to be included to be part of accumulated profit. As such, as observed by the learned Tribunal, the issue is already settled by the Hon'ble Supreme Court against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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