PRINCIPAL COMMISSIONER OF INCOME TAX 4 vs. SURESHKUMAR POPATLAL PATEL

Revenue   has   filed   this   appeal   against   the judgment of the Income Tax Appellate Tribunal dated 26.09.2017   raising   following   questions   for   our consideration: “[A] Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs.56,55,522/­ u/s. 68 of the Act? [B] Whether the Appellate Tribunal has erred in law and on facts in deleting the deletion of   addition   u/s.2(22)(e)   of   the   Act   of Rs.40,53,807/­?”

First question pertains to addition of Rs.56.55 lakhs made by the Assessing Officer under section 68 of the Income Tax Act, 1961 ('the Act' for short), which   the   Commissioner   of   Income   Tax   (Appeals) deleted, which deletion, the Tribunal has confirmed. We notice from the record that assessee had produced C/TAXAP/217/2018 ORDER necessary supporting evidence at the appellate stage before the Commissioner, after examining which, the Commissioner had made that deletion.   The Tribunal also,   after   appreciating   the   evidence   on   record, confirmed the view of the Commissioner of Income Tax (Appeals).  Entire issue is factual.  No question of law arises.

The second issue pertains to the addition made in case of the assessee by way of deemed dividend in terms of section 2(22)(e) of the Act.  The Assessing Officer   had   made   such   addition   to   the   tune   of Rs.40.53 lakhs (rounded off).  The assessee contested the entire addition arguing that section 2(22)(e) of the Act would not apply.   In the alternative, the assessee   also   contended   that   in   any   case,   such addition   could   not   exceed   Rs.29.76   lakhs   (rounded off) which was accumulated profit of the company on the relevant date.

The Commissioner of Income Tax (Appeals) granted partial relief to the assessee while rejecting the assessee's contention of non­applicability of section 2(22)(e)   of   the   Act.     He   limited   the   addition   to Rs.29.76 lakhs accepting the assessee's contention on C/TAXAP/217/2018 ORDER the accumulated profit.   The Commissioner of Income Tax   (Appeals)   thus   gave   partial   relief   to   the assessee and deleted the addition of Rs.10.76 lakhs (rounded off).

This decision of the Commissioner of Income Tax (Appeals) gave rise to two separate appeals filed by the assessee as well as the Revenue to the extent this issue was decided against the respective party. The Tribunal rejected both the appeals.

As   noted,   the   Commissioner   of   Income   Tax (Appeals)   as   well   as   the   Tribunal   accepted   the Revenue's   principal   contention   of   applicability   of section 2(22)(e) of the Act.  However, when it came to   working   out   the   additions,   partial   relief   was granted to the assessee limiting the addition to the extent of the company's accumulated profit which is flowing from the scheme of the section itself.

In the result, Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH