PAVAN MORARKA Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) Since identical issues are involved in both petitions, facts from Writ Petition No.602 of 2014 in the case of Mr. Pavan Murarka (petitioner) are referred to hereunder :

(2.) On 29/7/2006 petitioner filed return of income for Assessment Year 2006-2007. An assessment order dtd. 25/11/2008 came to be passed under Sec. 143(3) of the Income Tax Act, 1961 (the said Act). In the meanwhile, an assessment order dtd. 20/6/2008 under Sec. 143(3) of the said Act came to be passed in the case of P&A holding that the amount advanced by LTC on behalf of Shivum to P&A constituted dividend in the hands of P&A under Sec. 2(22)(e) of the said Act.

(3.) On 17/2/2009 Commissioner of Income Tax (Appeals) [CIT(A)] decided P&A 's appeal against the Revenue holding that addition under Sec. 2(22)(e) cannot be made in the hands of P&A since P&A was not a shareholder of Shivum. The other contentions of P&A challenging the correctness of the treatment of the amounts advanced as dividend were not adjudicated. The view of CIT(A) was not accepted by the Department and an appeal was filed by them before the Income Tax Appellate Tribunal (ITAT) contending that an addition under Sec. 2(22)(e) was required to be made in the hands of P&A. The ITAT dismissed Revenue 's appeal and held that the addition under Sec. 2(22)(e) can only be made in the hands of the shareholder and since P&A was not the shareholder, addition in its hands could not be sustained, thus deciding the issue against Revenue.