Dr. K.M. Ashik Vs CIT (Kerala High Court)
Kerala High Court held that remand by the ITAT regarding additions under Section 2(22)(e) of the Income Tax Act shall be treated as an open remand. The assessee can argue non-applicability of Section 2(22)(e), and if Section 68 is considered, the assessee must be given a fair opportunity to explain cash credits.
The Kerala High Court recently disposed of appeals filed by an assessee, Dr. K.M. Ashik, challenging a direction from the Income Tax Appellate Tribunal (ITAT) concerning income additions for the assessment years 2007-08, 2011-12, and 2012-13. The matter originated when the Assessing Officer (AO) noted that the assessee, a Director of M/s. Moidu Medicare Pvt. Ltd., had received substantial amounts from the company across the three assessment periods, totaling approximately crore. The AO initially treated these amounts as “deemed dividend” under Section 2(22)(e) of the Income Tax Act, 1961, and added them to Dr. Ashik’s returned income. The assessee was unsuccessful in his appeal before the first appellate authority, leading him to escalate the matter to the ITAT.
The ITAT, in its common order dated 30.01.2018, found merit in the assessee’s stance regarding the initial section applied. The Tribunal concluded that the addition under Section 2(22)(e) was inappropriate because it could not locate the assessee’s corresponding loan account in the company’s books. However, instead of simply removing the addition, the Tribunal directed the AO to instead make the addition under Section 68 of the Act, which pertains to cash credits. The assessee subsequently challenged this specific direction from the ITAT, arguing that the Tribunal had overstepped its jurisdiction by introducing a new source of income and a new section for assessment, particularly when the Revenue (the Department) had not filed an appeal challenging the findings of the first appellate authority.
