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Facts
The assessee's original assessment was completed, and subsequently, the AO reopened the case under Section 148, treating reimbursements received from two companies as deemed dividends under Section 2(22)(e). The assessee contended these were reimbursements for expenses incurred on behalf of the companies.
Held
The Tribunal noted that while some reimbursements might be genuine, a portion treated as a closing debit balance in one company's ledger was considered a loan/advance and thus deemed dividend. The matter was set aside and remitted to the AO for proper verification.
Key Issues
Whether the amounts received by the assessee from related companies were in the nature of reimbursements for expenses or loans/advances taxable as deemed dividends under Section 2(22)(e). Whether the reassessment proceedings were validly initiated.
Sections Cited
147, 148, 143(3), 2(22)(e), 271(1)(c), 234A, 234B, 234C, 254
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘E’: NEW DELHI
Before: SHRI YOGESH KUMAR U.S. & SHRI AVDHESH KUMAR MISHRA
A.Y. 2012-13 Mithlesh Kumar Tripathi Income Tax Officer, D-9, Oberoi Apartments, Ward 27(4), Majnu Ka Tilla, New Delhi-54, Vs. New Delhi PAN: ABUPT3610Q (Appellant) (Respondent) Appellant by Ms. Tanya, Advocate Respondent by Ms. Amisha S. Gupt, CIT (DR) Date of Hearing 20/08/2025 Date of Pronouncement 22/08/2025 ORDER
PER AVDHESH KUMAR MISHRA, AM
This appeal for the Assessment Year (‘AY’) 2012-13 filed by the assessee is directed against the order dated 13.08.2024 passed by the Commissioner of Income Tax (Appeals), NFAC, New Delhi [‘CIT (A)’].
Following grounds are raised in this appeal: -
1. Validity of Reassessment Proceedings: 1.1 That the learned Commissioner of Income Tax (Appeals) [CIT(A)] and Assessing Officer (AO) erred in law and on facts in upholding the reassessment proceedings initiated under Section 147 read with Section 148 of the Income Tax Act, 1961, without valid reasons. 1.2 The original assessment was completed under Section 143(3), and there were no tangible grounds for reopening the case. Therefore, the Mithlesh Kumar Tripathi reassessment proceedings are invalid, and the resulting order is liable to be quashed.
2. Procedural Irregularities: 2.1 That the CIT(A) erred in law by confirming the assessment under Section 147/148 without proper reasons, ignoring the procedural requirements. The reassessment notice was issued despite the absence of any failure on the appellant's part to disclose material facts fully and truly. As a result, the entire assessment proceedings are bad in law and void ab initio.
Improper Characterization of Transactions: 3.1 That the CIT(A) and AO incorrectly treated the reimbursements received from Anupam Chempharma Pvt. Ltd. and Yashita Finance Pvt. Ltd. amounting to Rs.1,60,022 and Rs.30,28,000, respectively, as loans or advances, thereby invoking the provisions of Section 2(22) (e) of the Act. These amounts were reimbursements of expenses incurred by the appellant on behalf of the companies, and hence, do not fall within the ambit of "deemed dividends."
Ignoring Circulars and Precedents: 4.1 That the learned CIT(A) failed to appreciate the applicability of Circular No. 19/2017 dated 12 June 2017, which clarifies that trade advances or commercial transactions are not covered within the ambit of Section 2(22) (e). 4.2 The amounts received by the appellant were commercial in nature, as they pertained to reimbursement of taxes, insurance premiums, and other business expenses incurred on behalf of the companies.
5. Failure to Consider Documentary Evidence: That the CIT(A) erred in upholding the AO's assessment by disregarding the documentary evidence provided by the appellant. These documents clearly substantiated that the transactions were reimbursements for legitimate business expenses and not loans or advances.
6. Penalty Proceedings: That the initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, by the AO is without basis. There was no concealment of income or furnishing of inaccurate Mithlesh Kumar Tripathi particulars by the appellant, and thus, the penalty proceedings should be dropped.
7. Erroneous Levy of Interest: That the CIT(A) erred in confirming the levy of interest under Sections 234A, 234B, and 234C of the Act. The interest has been imposed without considering the facts of the case and is not justified. That the above grounds of appeal
are without prejudice to each other. That the appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal.”
3. The relevant facts giving rise to this appeal are that the appellant assessee’s original assessment was completed under section 143(3) of the Income Tax Act, 1961 (‘Act’) by making addition of Rs.3,00,000/- to the returned income. Subsequently, the Assessing Officer (‘AO’) reopened the case under section 148 of the Act on the reasoning that the assessee, a shareholder of 79.87 % in Anupam Chempharma Pvt. Ltd. (ACPL), had taken loans/advances from the said company, which according to the provisions of section 2(22)(e) of the Act was income being deemed dividend. The assessee filed submissions mentioning that the amount received from ACPL and Yashita Finance Private Limited amounting to Rs.15,73,770/- and Rs.30,28,000/- respectively were in fact for reimbursement of expenses incurred by the appellant assessee. Hence, the provisions of section 2(22)(e) of the Act do not apply in his case. However, the AO was not satisfied with submissions of the assessee and thus, he taxed the sum of Rs.46,01,770/- (Rs.15,73,770/- plus Rs.30,28,000/-). Aggrieved the “4.1 The order of assessment u/s 147 r.w.s. 143(3) was passed for the AY 2012-13 in the case of the appellant on 23.12.2019 arriving at a taxable income of Rs.59,55,230/- as against the income determined in the earlier order u/s 143(3) dated 30.03.2015 of Rs.13,53,460/- by making an addition of Rs.46,01,770/-. This addition is an account of treatment given to the amount received by the appellant during the year from M/s. Anupam Chempharma Pvt. Ltd. and M/s. Yashita Finance Pvt. Ltd. of Rs.15,73,770/- and Rs.30,28,000/-, which was treated by the Assessing Officer to be deemed dividend u/s 2(22)(e) and thus brought to tax. 4.2 During the course of assessment proceedings, the appellant had provided enough and sufficient evidences to impress that the amounts received were actually reimbursement of expenses incurred by the appellant on behalf of those companies and not in the nature of loans and advances. Therefore, the appellant objected to the action on part of the AO to invoke the provisions of section 2(22)(e). However, on the finding that such expenses could have been directly incurred by these companies from their own bank accounts, the contention of the appellant was not accepted and the addition of Rs.46,01,770/- was made in the order passed. 4.3 Aggrieved by the said addition, the appellant had preferred an appeal and in the SoF and GoA objected both on procedure and merits, in the addition made. Subsequently in response to the notice issued u/s 250, elaborate written submission was made and the evidence that were submitted before the Assessing Officer were resubmitted for consideration. The same were carefully examined. 4.4 It is a fact that the appellant had received the sums of money during the FY 2011-12 from the said companies in which the appellant holds more than 10% percent stake. This particular information had emanated, when one of the companies was subject to scrutiny and therefore the consequent reopening proceedings, is valid as per the provisions of the act and therefore the grounds of appeal that contests Mithlesh Kumar Tripathi on the procedural infirmity in reopening the assessment is found to be illogical and hence dismissed. 4.5 The conditions and parameters laid down u/s 2(22)(e) with regard to the percentage of holding and the status of the companies to be private limited companies, are fully complied. Therefore, the only aspect requires verification is whether the amount received during the year, partakes the character of loans and advances or otherwise. If it were mere reimbursement of expenses as stated by the appellant, the same is outside the purview of taxation u/s 2(22)(e). 4.6 To affirm the same, in the paper book comprising 364 pages, the appellant had provided copies of ledger folio of the appellant as appearing in the books of the company for the FY 2011-12 and also the proof of expenditure incurred by the appellant on behalf of the companies towards remittance of statutory dues, taxes, insurance premium etc. which were carefully examined. 4.7 As per the entries in the ledger folio of the appellant as appearing in the books of the company M/s. Anupam Chempharma Pvt. Ltd. for the FY 2011-12, the opening debit balance is Rs.21,50,000/- and the closing debit balance is Rs.23,10,022/-. The entries in the ledger folio and the supporting evidences impress that a sum of Rs. 14,13,748/- has been reimbursed by the company, when the appellant had remitted income tax, service tax etc. on behalf of the company. Therefore, this sum of Rs. 14,13,748/- is proven to be not in the nature of loan or advances and therefore the same is outside the purview of deemed dividend taxation u/s 2(22)(e). 4.8 However, at the same time it is found that the appellant has received a sum of Rs.1,60,022/-, in excess of the expenditure incurred on behalf of the company, which has resulted in the increase in debit balance to such extent during the year. Therefore, the addition uls 2(22)(e) that relates to transactions with M/s. Anupam Chempharma Pvt. Ltd., is upheld. Accordingly, the corresponding ground of appeal is partly allowed. 4.9 In respect of the other company M/s. Yashita Finance Pvt. Ltd., as per the ledger folio of the appellant as appearing in the books of the company for the FY 2011-12, the opening is a credit balance of Rs.1,82,72,000/- and the closing value is a debit balance of Mithlesh Kumar Tripathi Rs.30,28,000/-, The entries in the ledger folio and the supporting documentation impress that certain portion of the amounts lent by the company to the appellant relates to expenses incurred by the appellant relates to advance tax payment incurred on behalf of the company. 4.10 However, the closing debit balance is Rs.30,28,000/-, proves that this sum of Rs.30,28,000/- represents the payments made in excess of opening credit balance and other expenses incurred by the appellant on behalf of the company and therefore, it certainly gets characterized as a receipt in the nature of loans and advances and therefore, the action on part of the Assessing Officer to consider the same and tax it as deemed dividend u/s 2(22)(e) is upheld. Accordingly, the corresponding ground of appeal of the appellant is dismissed.
5. As a result, the grounds of appeal of the appellant are partly allowed.”
4. At the outset, the Ld. Counsel drew our attention to the decision of the Tribunal in assessee’s own case of AY 2013-14 and 2014-15 in the & 3288/Del/2018, wherein the similar issue was dealt in. He prayed for remanding the matter to the AO for proper verification and doing needful thereafter accordingly. To which, the Ld. CIT-DR seemed in agreement.
The condonation of delay in filing this appeal is on the record. It had been stated that the assessee did not receive the order vide email or postal service or otherwise. There was no knowledge of the order until the assessee logged into the e-filing portal. So, the delay was not due to any negligence or lack of due diligence and took longer time to file this appeal. The delay was not an extra ordinary as it was 18 days. There is no dispute that under section 254 of the Act, the Tribunal may pass such orders as it Mithlesh Kumar Tripathi thinks fit. We are of the considered view that there was no malafide or deliberate delay in filing this appeal. In the interest of substantial justice, the delay in filing this appeal deserves to be condoned and this appeal be decided on merit. We do not see any prejudice which will be caused to the Revenue in deciding this appeal on merit. In case of HL Malhotra & Company Pvt. Ltd. Vs DCIT, Circle-12, New Delhi (ITA No. 211/2020 & CM Appeals 32045-32047/2020 dated 22nd December, 2020), the Hon’ble Delhi High Court has held that in absence of anything malafide or deliberate delay as a dilatory tactic, the Court should normally condone the delay as the intent is always to promote substantial justice following the Hon’ble Supreme Court decisions in the case of Collector, Land Acquisition, Anantnag & Anr. Vs Mst. Katiji and others (1987) 2 SCC 107 and N. Balakrishnan Vs M. Krishnamurthy 1998 (7) SCC 123.
The explanation of the appellant assessee therefore, becomes relevant to determine whether the same reflects sufficient and reasonable cause on his part in not presenting this appeal within the prescribed time. In case of Collector, Land Acquisition vs MST Katiji (Supra), the Hon'ble Supreme Court has held that the expression ‘Sufficient Cause’ employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner to sub-serves the ends of justice that being the life-purpose of the existence of the institution of Courts. It was further held by the Hon’ble Supreme Court that such liberal approach is adopted on one of the principles that refusing to condone delay can result in a 7 Mithlesh Kumar Tripathi meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. Another principle laid down by the Hon’ble Supreme Court is that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. It was also held by the Hon’ble Supreme Court that there is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of malafides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. In the instant case, applying the same principles, we find that there is no culpable negligence or malafide on the part of the assessee in delayed filing of this appeal and he does not stand to benefit by resorting to such delay. Therefore, in the factual matrix of the present case, we find that there exists sufficient and reasonable cause for condoning the delay in filing this appeal as held by the Hon’ble Supreme Court, where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserved to be preferred.
In light of aforesaid discussions, in exercise of powers under section 254 of the Act, we hereby condone the delay in filing this appeal as we are
We have heard both the parties and have perused the material available on the record. In the interest of justice and considering all the afore-stated observations including the Tribunal’s order in assessee’s own case in the & 3288/Del/2018, we are of the considered view that the appellant assessee deserves reasonable opportunity of being heard on the issue of deemed dividend under section 2(22)(e) of the Act. In view thereof, without offering any comment on merit of the case, we deem it fit to set aside the impugned order and remit the issue of deemed dividend under section 2(22)(e) of the Act back to the file of the AO for proper verification and doing needful accordingly. In view of the contention of the Ld. Counsel that the AO has not yet given effect the Tribunal’s order in assessee’s own case in the & 3288/Del/2018 (order dated 17.10.2018), we are of the view that the effect of this order has to be given within the six months excluding the time taken beyond two months in aggregate by the assessee from the receipt of this order by the AO and the appellant assessee. Ordered accordingly.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in open Court on 22nd August, 2025.