Sanjay Digambar Malve, Nashik V. Assistant Commissioner of Income-tax, Circle - 1, Nashik

ITA 1496/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8019 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Salary income; Earning of tax free income; Deemed dividend; Rule 8D
• Section: 143(3); 2(22)(e); 14A; 64

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.1496/PUN/2017 / ASSESSMENT YEAR : 2013-14 SHRI SANJAY DIGAMBAR MALVE, PLOT NO.2, SUVARNAMUDRA BUNGALOW, MATE NURSERY ROAD, SAVARKAR NAGAR, NASHIK 422 013. PAN : AFTPM5169A. . / APPELLANT V/S THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE 1, NASHIK. . / RESPONDENT ASSESSEE BY : SHRI SANKET JOSHI. REVENUE BY : SHRI S.P. WALIMBE / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 1, NASHIK DATED 23.0 3.2017 FOR THE ASSESSMENT YEAR 2013-14. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RE CORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SALARY, INCOME FROM PROFESSION AND OTHER SOURCES. ASSESSEE ELECTRONICALL Y FILED HIS RETURN OF INCOME FOR A.Y. 2013-14 ON 15.11.2013 DECLARING TO TAL / DATE OF HEARING : 08.01.2020 / DATE OF PRONOUNCEMENT: 10.01.2020 2 INCOME OF RS.2,27,13,060/-. THE CASE WAS SELECTED FOR SCRUT INY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT V IDE ORDER DATED 02.03.2016 AND THE TOTAL INCOME WAS DETERMINED AT RS.2,27,13,060/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 23.03.2017 D ISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF L D.CIT(A), ASSESSEE IS NOW IN APEPAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : DISALLOWANCE U/S 14A R.W.R. 8D 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,51,677/- MADE BY THE A.O. U/S 14A R.W.R. 8D OF THE INCOME TAX RULES WITHOUT APPRECIATING THAT THE SAID DISALLOWAN CE WAS NOT WARRANTED ON FACTS OF THE CASE. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE AS SESSEE HAD NOT EARNED ANY EXEMPT INCOME IN RESPECT OF THE MAJOR TA X FREE INVESTMENTS AND HENCE, THESE INVESTMENTS OUGHT TO H AVE BEEN EXCLUDED WHILE COMPUTING THE AVERAGE INVESTMENTS FO R THE PURPOSE OF DETERMINING THE DISALLOWANCE U/S 14A R.W.R. 8D(2 )(II) AND 8D(2)(III) OF THE INCOME TAX RULES. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.1,82,945/- U/S 14A R.W.S. 8D(2)(II) IN RESPECT OF PROPORTIONAT E INTEREST EXPENDITURE INCURRED FOR EARNING EXEMPT IN COME WITHOUT APPRECIATING THAT THE INTEREST FREE OWN FUNDS AVAIL ABLE WITH THE ASSESSEE TO THE TUNE OF RS.7.79 CRS. WERE FAR MORE THAN THE TAX FREE INVESTMENTS MADE BY THE ASSESSEE AND IN THE ABSENCE OF ANY NEXUS BETWEEN BORROWED FUNDS AND TAX FREE INVESTMENTS, IT COULD BE SAFELY PRESUMED THAT THE TAX FREE INVESTMENTS WERE SOURCED OUT OF OWN FUNDS AND THEREFORE, THERE WAS NO REASON TO MAK E ANY DISALLOWANCE U/R 8D(2)(II) OF THE INCOME TAX RULES. ADDITION U/S 2(22)(E) 4. THE LEARNED CIT(A) ERRED IN HOLDING THAT ADVANCES R ECEIVED BY THE ASSESSEE INDIVIDUAL FROM THE COMPANY, MS. KAMAL INF RABUILD PVT. LTD., SHOULD BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF RS.29,84,581 1- I.E. TO THE EXTENT OF THE ACCUMULATED RESERVES OF THE COMPANY AS ON 31.03.2013 AND THEREBY CONFIRMING THE ADDITION OF RS.3,87,996/- OVER AND ABOVE THE ADDITION U/S 2(22)(E) OF RS.25,96,585/- SUO MOTO MADE BY THE ASSESSEE AT THE TIME OF FILING RET URN 4.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT FOR T HE PURPOSES OF COMPUTING THE ADDITION U/S 2(22)(E), THE OPENING BALANCE OF ACCUMULATED PROFITS OF THE COMPANY AS ON 01.04.2012 SHOULD HAVE BEEN CONSIDERED AND NOT THE CLOSING BALANCE OF ACCU MULATED PROFITS AS ON 31.03.2013 AND THEREFORE, THE ADDITION U/S 2(22)(E) OF RS.3,87,996/- MADE BY THE A.O. WAS NOT JUSTIFIED. 3 4.2 WITHOUT PREJUDICE TO THE ABOVE GROUND, THE ASSESS EE SUBMITS THAT WHILE COMPUTING THE ADDITION U/S 2(22)( E) FOR THIS YEAR, THE AMOUNT TREATED AS DEEMED DIVIDEND IN THE EARLIER YEARS SHO ULD HAVE BEEN REDUCED FROM THE ACCUMULATED PROFITS OF THE COMPANY AND THERE WAS NO REASON TO MAKE ANY ADDITION OFRS.3,87,996/- IN THIS YEAR. ADDITIONAL LEGAL CLAIM 5. THE ASSESSEE SUBMITS THAT WHILE COMPUTING THE SUO-M OTO ADDITION U/S 2(22)(E) AT THE TIME OF FILING RETURN, THE ASSESSEE HAD WRONGLY CONSIDERED THE AMOUNT OF CLOSING ACCUMULATED PROFIT S OF THE COMPANY AS ON 31.03.2013 AS AGAINST THE OPENING BAL ANCE OF ACCUMULATED PROFITS OF THE COMPANY AS ON 01.04.2012 AND HENCE, THE AMOUNT OF DEEMED DIVIDEND OF RS.25,96,585/- WAS WRONGLY OFFERED TO TAX AS DEEMED DIVIDEND U/S 2(22)( E) AND THEREFORE, IT IS PRAYED THAT THE A.O MAY PLEASE BE DIRECTED TO ASSES S THE CORRECT TOTAL INCOME AFTER COMPUTING THE ADDITION U/S 2(22)(E) IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 6. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE ASSESSEE SUBMITS THAT WHILE COMPUTING THE ADDITION U/S 2(22)(E) FOR THIS YEAR, THE AMOUNT TREATED AS DEEMED DIVIDEND IN THE EARLIER YEARS SHO ULD HAVE BEEN REDUCED FROM THE ACCUMULATED PROFITS OF THE COMPANY AND ONLY THE BALANCE AMOUNT OF ACCUMULATED PROFITS OF THE COMPAN Y SHOULD HAVE BEEN TREATED AS DEEMED DIVIDEND U/S 2(22)( E) AND THEREFORE, IT IS PRAYED THAT THE A.O MAY PLEASE BE DIRECTED TO ASSES S THE CORRECT TOTAL INCOME AFTER COMPUTING THE ADDITION U/S 2(22)( E) IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 7. THE ASSESSEE PRAYS THAT THE ABOVE CLAIMS ARE PURELY LEGAL IN NATURE AND ALL THE RELEVANT FACTS REGARDING THE SAME ARE A LREADY ON RECORD AND HENCE, IN VIEW OF THE RATIO LAID DOWN BY HON'BL E BOMBAY HIGH COURT IN THE CASE OF CIT V. PRUTHVI BROKERS AND SHA REHOLDERS P. LTD. [349 ITR 336], IT IS PRAYED THAT THE ABOVE GRO UNDS MAY PLEASE BE ADMITTED AND THE SAME MAY BE ADJUDICATED ON MERI TS. ADDITION U/S 23 ON ACCOUNT OF DEEMED RENT- 8. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,21,800/- MADE BY THE A.O. U/S 23 BY ESTIMATING THE DEEMED RENT IN RESPECT OF THE FLAT OWNED BY THE ASSESSEE AT PUN E WITHOUT APPRECIATING THAT THE SAID ADDITION WAS NOT JUSTIFI ED. 9. WITHOUT PREJUDICE TO THE ABOVE CONTENTION, THE ASSE SSEE SUBMITS THAT THE DEEMED RENT ESTIMATED BY THE A.O. IS ON A HIGHER SIDE AND THE A.O. MAY BE DIRECTED TO ADOPT THE MUNICIPAL RAT ABLE VALUE AS DEEMED RENT IN VIEW OF THE RATIO LAID DOWN BY HON'B LE BOMBAY HIGH COURT IN THE CASE OF SMT. SMITABEN N. AMBANI V . CWT [323 ITR 104] AND CIT V. TIP TOP TYPOGRAPHY [368 ITR 330 (BOM)]. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT HE DOE S NOT WISH TO PRESS GROUND NOS.1, 2, 4.2, 6, 8 AND 9. IN VIEW OF THE A FORESAID SUBMISSION, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 4. GROUND NO.3 IS WITH RESPECT TO DISALLOWANCE U/S 14A OF THE ACT. 4 4.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOT ICED THAT ASSESSEE HAD INVESTMENTS AMOUNTING TO RS.1.82 CRORES AS ON 31.03.2013 AND HAD CLAIMED INTEREST EXPENDITURE OF RS.23,71 ,500/-. AO WAS THEREFORE OF THE VIEW THAT ASSESSEE WAS UTILIZING INTEREST BEARING FUNDS TO MAINTAIN INVESTMENTS. THE ASSESSEE WAS THEREFORE ASKED TO EXPLAIN AS TO WHY THE DISALLOWANCE U/S 14A R.W. RULE 8D NOT BE MADE, TO WHICH THE ASSESSEE MADE SUBMISSIONS WHICH WE RE NOT FOUND ACCEPTABLE TO THE AO. AO THEREAFTER BY FOLLOWING THE METHODOLOGY PRESCRIBED UNDER RULE 8D OF I.T. RULES WORKED OUT THE DISALLOWANCE UNDER SEC.14A OF THE ACT AT RS.2,51,677/- AND DISALLOWE D THE SAME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIE D THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER POINTING TO THE COPY OF THE BALAN CE-SHEET AS ON 31.03.2013 WHICH WAS PLACED IN THE PAPER BOOK SUBMITTE D THAT THE INTEREST FREE FUNDS IN THE CAPITAL ACCOUNT OF THE ASSESSE E IS TO THE TUNE OF RS.7.78 CRORES AS AGAINST THE INVESTMENTS OF RS.1.37 CRO RES MEANING THEREBY THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE A SSESSEE ARE FAR MORE THAN THE INVESTMENTS AND IN VIEW OF THE DECISION OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC VS. DCIT REPORTED IN 383 ITR 529, NO DISALLOWANCE OF INTEREST IS CALLED FOR. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF AO AND LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESP ECT TO DISALLOWANCE MADE U/S 14A R.W. RULE 8D OF THE ACT. BEFORE US, IT IS ASSESSEES CONTENTION THAT THE AVAILABILITY OF INTEREST FREE FUNDS IN THE 5 FORM OF CAPITAL IS RS.7.78 CRORES WHICH IS FAR MORE THAN THE INVESTMENTS IN SHARES AND MUTUAL FUNDS OF RS.1.37 CRORES M EANING THEREBY THAT THE AVAILABILITY OF INTEREST FREE FUNDS ARE MOR E THAN THE INVESTMENTS. WE FIND THAT HONBLE BOMBAY HIGH COURT IN TH E CASE OF HDFC VS. DCIT REPORTED IN (2016) 383 ITR 529 (BOM) HAS HE LD THAT WHEN INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE IN EXCESS OF INVESTMENTS AND THEN THE INVESTMENTS ARE PRESUMED TO BE OUT OF INTEREST FREE FUNDS. THE RELEVANT OBSERVATIONS OF THE HON BLE BOMBAY HIGH COURT ARE AS UNDER : 15. IT IS CLEAR THAT FOR THE FIRST TIME IN THE CAS E OF HDFC BANK LTD. (SUPRA) THAT THIS COURT TOOK A VIEW THAT THE PRESUM PTION WHICH HAS BEEN LAID DOWN IN RELIANCE UTILITIES AND POWER LTD. (SUP RA) WITH REGARD TO INVESTMENT IN TAX FREE SECURITIES COMING OUT OF ASS ESSEES OWN FUNDS IN CASE THE SAME ARE IN EXCESS OF THE INVESTMENTS MADE IN THE SECURITIES (NOTWITHSTANDING THE FACT THAT THE ASSESSEE CONCERN ED MAY ALSO HAVE TAKEN SOME FUNDS ON INTEREST) APPLIES, WHEN APPLYIN G SECTION 14A OF THE ACT. THUS, THE DECISION OF THIS COURT IN HDFC BANK LTD.(SUPRA) FOR THE FIRST TIME ON 23RD JULY, 2014 HAS SETTLED THE ISSUE BY HOLDING THAT THE TEST OF PRESUMPTION AS HELD BY THIS COURT IN RELIAN CE UTILITIES AND POWER LTD. (SUPRA) WHILE CONSIDERING SECTION 36(1)(III) O F THE ACT WOULD APPLY WHILE CONSIDERING THE APPLICATION OF SECTION 14A OF THE ACT. THE AFORESAID DECISION OF THIS COURT IN HDFC BANK LTD. (SUPRA) ON THE ABOVE ISSUE HAS ALSO BEEN ACCEPTED BY THE REVENUE INASMUC H AS EVEN THOUGH THEY HAVE FILED AN APPEAL TO THE SUPREME COURT AGAI NST THAT ORDER ON THE OTHER ISSUE THEREIN, VIZ., BROKEN PERIOD INTERE ST, NO APPEAL HAS BEEN PREFERRED BY THE REVENUE ON THE ISSUE OF INVOKING T HE PRINCIPLES LAID DOWN IN RELIANCE UTILITIES AND POWER LTD. (SUPRA) I N ITS APPLICATION TO SECTION 14A OF THE ACT. THEREFORE, THE ISSUE WHICH AROSE FOR CONSIDERATION BEFORE THE TRIBUNAL HAD NOT BEEN DECI DED BY THIS COURT IN GODREJ AND BOYCE MANUFACTURING CO. LTD. (SUPRA). IT AROSE AND WAS SO DECIDED FOR THE FIRST TIME BY THIS COURT IN HDFC BA NK LTD. (SUPRA). THUS, THERE IS NO CONFLICT AS SOUGHT TO BE MADE OUT BY TH E IMPUGNED ORDER. THUS, IMPUGNED ORDER HAS PROCEEDED ON A FUNDAMENTAL LY ERRONEOUS BASIS AS THE RATIO DECIDENDI OF THE ORDER IN GODREJ AND BOYCE MANUFACTURING CO. LTD. (SUPRA) HAD NOTHING TO DO WI TH THE REST OF PRESUMPTION CANVASSED BY THE PETITIONER BEFORE THE TRIBUNAL ON THE BASIS OF THE RATIO OF THE DECISION OF THIS COURT IN HDFC BANK LTD. (SUPRA). 16. AT THE HEARING MR. SURESH KUMAR, LEARNED COUNSE L FOR THE REVENUE URGED THAT ON THE FACTS OF THIS CASE NO FAULT CAN B E FOUND WITH THE ORDER OF THE TRIBUNAL. IT IS SUBMITTED THAT, THE PETITION ER WAS NOT ABLE TO ESTABLISH BEFORE THE ASSESSING OFFICER AND THE CIT( A) THAT THE AMOUNTS INVESTED IN THE INTEREST FREE SECURITIES CAME OUT O F INTEREST FREE FUNDS AVAILABLE WITH THE PETITIONER. IN THAT VIEW OF THE MATTER, IT IS SUBMITTED BY HIM THAT THE ORDER OF THIS COURT IN HDFC BANK LT D.(SUPRA) WOULD NOT APPLY TO THE FACTS OF THE PRESENT CASE. WE ARE UNAB LE TO UNDERSTAND THE ABOVE SUBMISSION. THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER ON 22ND DECEMBER, 2010 UNDER SECTION 143(3) OF THE ACT. THE CIT(A) PASSED AN ORDER ON 21ST NOVEMBER, 2011 DISMISSING T HE PETITIONERS 6 APPEAL. ON BOTH THE DATES, WHEN THE ORDERS WERE PAS SED BY THE ASSESSING OFFICER AND CIT(A), THE AUTHORITIES DID N OT HAVE THE BENEFIT OF THE ORDER OF THIS COURT IN HDFC BANK LTD. (SUPRA) R ENDERED ON 23RD JULY, 2014. ONCE THE ISSUE IS SETTLED BY THE DECISI ON OF THIS COURT IN HDFC BANK LTD. (SUPRA), THERE IS NOW NO NEED FOR TH E ASSESSEE TO ESTABLISH WITH EVIDENCE THAT THE AMOUNTS WHICH HAS BEEN INVESTED IN THE TAX FREE SECURITIES HAVE COME OUT OF INTEREST F REE FUNDS AVAILABLE WITH IT. THIS IS BECAUSE ONCE THE ASSESSEE IS POSSE SSED OF INTEREST FREE FUNDS SUFFICIENT TO MAKE THE INVESTMENT IN TAX FREE SECURITIES, IT IS PRESUMED THAT IT HAS BEEN PAID FOR OUT OF THE INTER EST FREE FUNDS. CONSEQUENTLY, WE DO NOT FIND ANY MERIT IN THE ABOVE SUBMISSION MADE AT THE HEARING ON BEHALF OF THE REVENUE. 7. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BINDIN G DECISION IN ITS SUPPORT. IN VIEW OF ALL THESE FACTS AND FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC VS. DCIT (S UPRA), WE ARE OF THE VIEW THAT NO DISALLOWANCE OF INTEREST UNDER RULE 8D(2)(II) IS CALLED FOR. THUS, THE GROUND OF THE ASSESSEE IS ALLOWED. 8. GROUND NOS.4, 4.1, 5 AND 6 ARE CONSIDERED TOGETHER. 8.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOT ICED THAT ASSESSEE WAS A MAJOR SHAREHOLDER IN M/S. KAMAL INFRABUILD PVT. LTD., (KIPL) FROM WHICH THE ASSESSEE HAD RECEIVED LOAN AND AS PER THE BOOKS OF ACCOUNTS, THE ASSESSEE HAD RECEIVED RS.83,77,846/- FR OM KIPL. AO WAS OF THE VIEW THAT SINCE THE AMOUNT WAS ADVANCED TO SHAREHOLDER BY CLOSELY HELD COMPANY FROM THE ACCUMULATED PROFITS, PROV ISIONS OF SEC.2(22)(E) OF THE ACT BECOME APPLICABLE. THE ASSESSEE WA S THEREFORE ASKED TO EXPLAIN AS TO WHY THE AMOUNTS RECEIVED BY THE ASSESSEE NOT BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT TO WHICH ASSESSEE INTER-ALIA SUBMITTED THAT ASSESSEE HAS ALREADY CONSIDERED THE AMOUNT OF RS.25,96,585/- AS DEEMED DIVIDEND WHICH WAS 8 7% OF THE ACCUMULATED PROFITS. IT WAS THEREFORE SUBMITTED THAT NO FURTHER ADDITION IS CALLED FOR. THE SUBMISSIONS OF THE ASSESSEE WER E NOT FOUND ACCEPTABLE TO THE AO. AO WAS OF THE VIEW THAT SINCE TH E RESERVES OF M/S. KAMAL INFRA BUILD PVT. LTD., AS ON 31.03.2013 WAS TO THE EXTENT 7 OF RS.29,84,581/-, THE ENTIRE AMOUNT SHOULD BE CONSIDERED AS DEEMED DIVIDEND. HE ACCORDINGLY TREATED THE DIFFERENTIAL AMOUNT O F RS.3,87,996/- (RS.29,84,581/- - RS.25,96,585/-) AS DEEMED DIVIDE ND INCOME U/S 2(22)(E) OF THE ACT. AGGRIEVED BY THE ORDER OF A O, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 9. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE OPENING BALA NCE OF ACCUMULATED RESERVES OF M/S. KAMAL INFRA BUILD PVT. LTD., A S ON 31.03.2012 WAS RS.13,61,710/- AND THE BALANCE AS ON 31.03 .2013 WAS RS.29,84,581/-. HE SUBMITTED THAT WHILE COMPUTING THE INCOME ASSESSEE, HAD CONSIDERED THE CLOSING BALANCE OF ACCUMULA TED PROFITS AS ON 31.03.2014 OF RS.29,84,581/- AND SINCE ASSESSEE WAS HOLDING 87% SHARES IN IT, HE CONSIDERED 87% OF SUCH ACCUMULATED PROFITS OF AMOUNTING TO RS.25,96,585/- WHICH WAS OFFERED TO TAX U/S 2(22)(E) OF THE ACT. 10. HE FURTHER SUBMITTED THAT FOR COMPUTING THE QUANTUM OF ACCUMULATED PROFITS OF THE LENDER COMPANY FOR THE PURPOSE OF SEC.2(22)(E) OF THE ACT, THE OPENING BALANCE OF THE RESERVES OF LENDING COMPANY AT THE STARTING OF THE YEAR IS TO BE CONSIDERED AND THE CURRENT YEAR PROFITS HAS TO BE EXCLUDED AND FOR THIS PROPOSITION HE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.B. STOCK HOLDING PVT. LTD., (2015) 64 TAXMANN.COM 138 (GUJ) AN D THE DECISION OF PUNE TRIBUNAL IN THE CASE OF SMT. CHHAYA VALMI K NIKHADE VS. ACIT IN ITA NO.1743/PUN/2014 DATED 07.06.2019 (HE ALS O PLACED ON RECORD THE COPY OF THE AFORESAID DECISION). IN SUPPOR T OF HIS CONTENTION OF THE RESERVES, HE POINTED TO THE COPY OF TH E AUDITED 8 BALANCE-SHEET IN THE PAPER BOOK. HE THEREAFTER SUBMITT ED THAT IF THE OPENING BALANCE OF THE RESERVES IS CONSIDERED, THEN THE QUANTUM OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT WOULD WORK OUT TO RS.13,61,710/- AS AGAINST THE AMOUNT OF RS.25,96,585/- TH AT WAS OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME. HE THER EAFTER SUBMITTED THAT DUE TO MISINTERPRETATION OF THE LEGAL PROVI SION, THE ASSESSEE HAD OFFERED A HIGHER PRICE AMOUNT OF RS.25,96,58 5/- AS DEEMED DIVIDEND IN THE RETURN OF INCOME FILED BY THE ASSESS EE. HE THEREAFTER SUBMITTED THAT WHERE THE AMOUNT IS NOT LIABLE TO TAX THEN THE SAME CANNOT BE ASSESSED TO TAX BECAUSE THE SAME HAS BEEN WRONGLY OFFERED TO TAX BY THE ASSESSEE IN THE RETUR N OF INCOME. HE THEREFORE SUBMITTED THAT THE AO BE DIRECTED TO GRANT RE LIEF OF THE EXCESS AMOUNT OF DEEMED DIVIDEND OFFERED TO TAX BY THE ASSESSEE . LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESP ECT TO TAXABILITY U/S 2(22)(E) OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSE SSEE IS LIABLE FOR THE TAXATION OF DEEMED DIVIDEND AND ASSESSEE HAS SUO -MOTO OFFERED RS.25,96,585/- AS DEEMED DIVIDEND U/S 2(22)((E) OF THE ACT IN T HE RETURN OF INCOME FILED BY THE ASSESSEE. THE DEEMED DIVIDEN D WAS WORKED OUT BY THE ASSESSEE ON THE BASIS OF RESERVES AND SURPLUS OF THE LENDER COMPANY AS ON 31.03.2013. BEFORE US, IT IS ASS ESSEES SUBMISSION THAT THE COMPUTATION OF DEEMED DIVIDEND U/S 2(2 2)(E) OF THE ACT IS TO BE WORKED OUT ON THE BASIS OF OPENING BALA NCE OF RESERVES AS ON 01.04.2012 AND NOT AS PER THE CLOSING BALANCE OF RESERVES AS ON 31.03.2013. WE FIND FORCE IN THE SUBMISSION OF LD.A.R. IN VIEW OF THE FACT THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.B. STOCK HOLDING PVT. LTD., (SUPRA) HAS HELD THAT WHILE DETERMINING TH E AMOUNT 9 OF DEEMED DIVIDEND UNDER EXPLANATION 2 TO SEC.2(22)(E) OF THE ACT, THE CURRENT PROFIT IS NOT TO BE INCLUDED AS PART OF ACCUMULATE D PROFIT. THE AFORESAID DECISION OF HONBLE GUJARAT HIGH COURT HAS ALSO B EEN FOLLOWED BY THE PUNE TRIBUNAL IN THE CASE OF SMT. CHHAYA VA LMIK NIKHADE VS. ACIT (SUPRA). BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. IN SUCH A SITUAT ION, WE ARE OF THE VIEW THAT WORKING OF THE DEEMED DIVIDEND U/S 2(22)(E) O F THE ACT IS TO BE WORKED OUT ON THE BASIS OF THE OPENING BALANCE O F THE ACCUMULATED RESERVES OF THE LENDER COMPANY. FURTHER, IT IS ASSESSEES CONTENTION THAT THE HIGHER AMOUNT OF DEEMED DIVIDEND HA S BEEN OFFERED BY THE ASSESSEE DUE TO MIS-INTERPRETATION OF THE LEGAL POSITION. THE AFORESAID CONTENTION OF THE ASSESSEE HAS NOT BEEN C ONTROVERTED BY THE REVENUE. IT IS A SETTLED PROPOSITION OF LAW THAT NO TAX CAN BE LEVIED OR RECOVERED WITHOUT AUTHORITY OF LAW FOR WHICH REFE RENCE CAN BE MADE TO THE DECISION OF HONBLE APEX COURT IN THE CASE O F CIT VS. SHELLY PRODUCTS AND ANOTHER AS NOTED BY THE HONBLE D ELHI HIGH COURT IN THE CASE OF VIJAY GUPTA VS. CIT AND ANOTHER REPORTE D IN (2017) 291 CTR 517 WHEREIN IT WAS OBSERVED THAT IF AN ASSESSEE BY MISTAKE OR INADVERTENCE OR ON ACCOUNT OF IGNORANCE INCLUDED IN HIS I NCOME ANY AMOUNT WHICH IS EXEMPTED FROM PAYMENT OF INCOME TAX OR IS NOT INCOME WITHIN THE CONTEMPLATION OF LAW, THE ASSESSEE MAY B RING THE SAME TO THE NOTICE OF THE ASSESSING AUTHORITY WHICH IF SAT ISFIED MAY GRANT THE ASSESSEE NECESSARY RELIEF AND REFUND THE TA X PAID IN EXCESS, IF ANY. CONSIDERING THE TOTALITY OF THE FACTS AND IN VIEW OF THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT THE DEEMED DIVIDEND U/ S 2(22)(E) OF THE ACT BE WORKED OUT ON THE BASIS OF THE OPENING BALAN CE OF KIPL AS ON 01.04.2012. WE THUS DIRECT ACCORDINGLY. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 10 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- ( PARTHA SARATHI CHAUDHURY ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 10 TH JANUARY, 2020. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A) 1, NASHIK. PR.CIT-1, NASHIK. '#$ %%&',) &', / DR, ITAT, A PUNE; $-.// GUARD FILE. / BY ORDER , / / TRUE COPY / / 012%3&4 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.