Law:

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Section 2(22)(e), read with section 4, of the Income-tax Act, 1961 - Deemed dividend - Assessment year 1972-73 - A company, of which assessee was managing director, advanced Rs. 1 lakh to him as imprest or temporary loan - ITO added this amount to his income by invoking section 2(22)(e) - Tribunal upheld ITO's action observing that even if liabilities subsisting on date of payment were to be taken into account, there would still be sufficient surplus to advance said loan - Whether in view of aforesaid finding of fact, not specifically challenged by assessee in a reference under section 256(1), Tribunal was justified in holding that said sum was taxable as deemed income within meaning of section 2(22)(e) - Held, yes FACTS The assessee was a managing director of a company which advanced a sum of Rs. 1 lakh to him describing it as imprest or temporary loan. The ITO added this amount to his income by invoking section 2(22)(e). His appeals to the AAC and then to the Tribunal were dismissed. The Tribunal also observed that in computing accumulated profits, the liabilities had been taken into account. This finding of the Tribunal had not been challenged by the assessee by way of a specific reference on this point. On reference: HELD The Tribunal's finding that even if the liabilities subsisting on the date of payment were to be taken into account, there was still sufficient surplus to advance the loan of Rs. 1,00,000, was a finding of fact. This finding had not been challenged by way of a specific question under section 256(1). It is well settled that a finding of fact of the Tribunal can only be challenged in a reference under section 256 by raising a specific question. The assessee should have framed a specific question as to whether the a foresaid finding of fact was based on no evidence or had been reached after ignoring relevant evidence, but no such question had been framed under section 256(1) by the assessee. Hence, in view of the said finding of fact, the Tribunal was justified in holding that the impugned amount was taxable as deemed income under section 2(22)(e). JUDGMENT Katju, J. - The following question has been referred to us by the Tribunal, Delhi…

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