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Facts
The assessee's case was reopened by the AO on the basis of information that an opening balance with M/s. OIMPL was in the nature of deemed dividend u/s 2(22)(e). The AO treated a portion of this balance as deemed dividend, leading to an addition. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal noted that the ledger account produced by the assessee for an earlier financial year showed an opening balance that could not be considered as loan taken in the current year. As this evidence was not available to the AO, the matter was set aside to the AO for fresh consideration.
Key Issues
Whether the opening balance with a company was a loan constituting deemed dividend under section 2(22)(e), and whether the reopening notice under section 148 was validly issued.
Sections Cited
2(22)(e), 143(3), 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI TR SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 18.09.2025 for the Assessment Year (A.Y.) 2013-14 in the proceeding u/s 143(3) r.w.s. 147 of the Income Tax Act.
The brief facts of the case are that the assessee had filed return of income for the A.Y. 2013-14 on 25.09.2013 declaring total income of Rs.38,26,620/-. The original assessment was completed u/s. 143(3) on Madhuri Pradeep Kawdiya Vs. DCIT, AY- 203-14 2 23.12.2015 at total income of Rs. 41,96,186/-. Thereafter, the case of the assessee was reopened u/s. 147 of the Act, on the basis of information received that assessee had obtained certain loan which was in the nature of deemed dividend u/s. 2(22)(e) of the Act. The re-assessment was completed u/s. 143(3) r.w.s. 147 of the Act, on 22.11.2018 at total income of Rs.1,35,87,046/- wherein an addition of Rs. 93,90,860/- was made u/s. 2(22)(e) of the Act.
Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the learned CIT(A), vide the impugned order and the appeal of the assessee was dismissed. Th
Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
1. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A has erred in confirming the opening balance of appellant amounting to Rs. 93,90,860/- as a deemed dividend u/s. 2(22)(e) of the act? 2. Whether, on facts and in circumstances of the case and in law, Ld. AO erred in issuing notice u/s. 148 of the act? Further, appellant craves leave to add, amend, alter or withdraw all or any ground of appeal.
5. Shri Divyang Shah, the Ld. AR of the assessee submitted that the assessee was a Director of M/s. Omkara Impex & Merchandise Pvt. Ltd. (hereinafter referred to as OIMPL), having 50% shareholding. He explained that the AO had reopened the case on the basis of information that the assessee had opening balance of Rs.1,20,84,285/- as on Madhuri Pradeep Kawdiya Vs. DCIT, AY- 203-14 3 01.04.2024 with M/s. OIMPL. The AO had treated the said balance as loan and considering the fact that the company had surplus of Rs. 1,92,05,627/- in the reserve account, the AO treated 50% of the reserve being Rs. 93,90,860/- as deemed dividend u/s. 2(22)(e) of the Act. The Ld. AR submitted that the addition made by the AO was based on the presumption that the opening balance of the assessee as on 01.04.2021 represented loan taken by the assessee from company during the current financial year. He explained that the opening balance was old outstanding and during the current financial year there was a transaction of Rs.4,00,000/- only with M/s. OIMPL. Therefore, the AO was not correct in treating the opening balance as on 01.04.2014 as loan taken during the current year and treating the same as deemed dividend.
Per Contra, Shri Abhijit, the Ld. Sr.-DR supported the order of the lower authorities.
We have considered submissions of the assessee. From the copy of the reason recorded by the AO brought on record, it transpires that the AO had reopened the case on the basis of opening balance of Rs.1,20,84,285/- as on 01.04.2014 in the ledger account of the assessee with M/s. OIMPL. In the course of assessment, no compliance was made by the assessee in spite of numerous opportunities and the ledger account for the current financial year was not brought on record. In the absence of any compliance on the part of the assessee, the AO had treated the entire opening balance as on 01.04.2014 as the loan taken by the assessee from the company during the current financial year. The assessee has filed a Madhuri Pradeep Kawdiya Vs. DCIT, AY- 203-14 4 copy of the ledger account for financial year 2012-13 in the paper-book in the form of additional evidence, which is as under:
It is noted from the above ledger account that the assessee had opening balance of Rs.1,20,74,900/- as on 01.04.2012 which could not have been considered as loan taken during the year. However, this evidence was not available with the AO at the time of assessment. Therefore, we deem it proper to set aside the matter to the file of the AO with a direction to allow another opportunity to the assessee to produce the ledger account of the assessee with M/s. OIMPL for the current financial year. The AO will be free to make inquiry in respect of the fresh evidences filed by the assessee as deemed fit, and thereafter he may decide the matter in accordance with the provisions of law. The ground taken by the assessee is allowed for statistical purpose.
The second ground taken by the assessee on the reopening of the case, was not seriously pressed by the Ld. AR. As the reopening was done within a period 4 years, we do not find any infirmity in the action of the AO. Accordingly, the Ground No. 2 taken by the assessee is dismissed.
In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the Court on 07/04/2026 at Ahmedabad.