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Facts
The assessee filed an appeal for Assessment Year 2017-18 against the lower authorities' decision to treat cash deposits of Rs.18,45,500/- as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961. The assessment order dated 30.12.2019 was upheld in the lower appellate proceedings.
Held
The Tribunal held that the deemed dividend addition could not be invoked because the assessee's company, M/s Skyline Constructions, had accumulated losses of Rs.2,96,342/- as of 13.11.2016. Since the company lacked accumulated profits, the deeming fiction of dividends under Section 2(22)(e) was inapplicable, and the addition was deleted.
Key Issues
Whether cash deposits could be treated as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961, when the company had accumulated losses and no accumulated profits.
Sections Cited
143(3), 2(22)(e)
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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. Satbeer Singh Godara
Asstt. Year: 2017-18 Nand Kishore Malhan, Vs DCIT, J-3, 3rd Floor, Saket, Circle-22(2), New Delhi-110017 C.R. Building, ITO, IP Esate, New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AHVPM7964R Assessee by: Sh. Salil Kapoor, Adv. & Ms. Ananya Kapoor, Adv. Revenue by : Sh. Amit Shukla, Sr. DR Date of Hearing: 23.12.2025 Date of Pronouncement: 23.12.2025 ORDER This assessee’s appeal for Assessment Year 2017-18 arises against the Addl./JCIT(A)-1, Ahemadabad’s DIN & order No.ITBA/APL/S/250/2025-26/1078966067(1) dated 28.07.2025, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”).
Heard both the parties at length. Case file perused.
The assessee/appellant herein raises his sole substantive grievance directed against both the learned lower authorities’ action treating his cash deposits of Rs.18,45,500/- as deemed dividend u/s 2(22)(e) of the Act; in assessment order dated 30.12.2019 as upheld in the lower appellate discussion.
Nand Kishore Malhan 4. Faced with this situation, learned counsel has placed on record the assessee’s company M/s Skyline Constructions’ financials indicating total accumulated losses as on 13.11.2016 amounting to Rs.2,96,342/-; and, therefore, this tribunal is of the considered view that given the fact that the above entity was not having accumulated profits, the impugned deeming fiction of dividends could not have been invoked by both the learned lower authorities. The impugned deemed dividend addition is deleted in very terms therefore.