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Income Tax Appellate Tribunal, BENCH “A” KOLKATA
Before: Shri Sanjay Garg & Shri Manish Borad
This appeal filed by the assessee pertaining to the A.Y. 2017-18 is directed against the order dated 24-03-2022 of ld. Principal Commissioner of Income-tax (PCIT), Kolkata-2, Kolkata.
2. The assessee has raised following grounds of appeals for Assessment Year 2017-18: 1. Bengal Shrachi Housing Development Ltd.
For that on the facts and in the circumstances of the case the order passed u/s.263 dated 24.03.2022 is bad in law as well as in facts.
For that on the facts and in the circumstances of the case the proviso of section 263 of the IT Act 1961 does not attract in this case in as much as the assessing officer has made assessment u/s.143(3) after obtaining extensive details and making proper enquiry. The order passed u/s. 143(3) dated 10.12.2019 was not erroneous in so far as it is prejudicial to the interest of revenue.
For that on the facts and in the circumstances of the case the observations of the Ld. Pr. CIT-2 of the order u/s.263 of the IT Act 1961 stating that the assessing officer did not enquired regarding proviso of section 2(22)(e) and without making enquires and/or verification during the course of assessment proceedings which he should have been made in this case is wrong and incorrect.
For that on the facts and in the circumstances of the case the Ld. Pr. CIT was wrong in stating that loans and advances given by Rosedale Developers Pvt. Ltd., the assessing officer has not enquired into and not properly verified. On a proper consideration of the facts of the case the ld. Pr.elT should have found that loan taken was interest bearing as such proviso of section 2(22(e) does not attract.
3. Briefly stated the facts as culled out from records are that the assessee is a limited company. Loss of Rs. 11,05,76,125/- declared in the e-return for the AY 2017-18 filed on 02-11-2017. The said return was revised on 20-06-2018 declaring total loss of Rs. 10,93,58,019/-. Case selected for scrutiny followed by serving of valid notices u/s. 143(2) & 142(1) of the Act. The assessment u/s. 143(3) of the Act completed on 10-12-2019 assessing income at Rs. 10,65,19,384/- after making disallowance u/s. 14A of the Act of Rs.27,03,900/- and disallowance u/s. 2(24)(x) r.w.s 36(1)(va) of the Act of Rs. 1,34,735/-. Subsequently, the assessment records were called for by the ld.PCIT and after examining of the same the ld. PCIT observed that assessee has received loan sum of 2. Bengal Shrachi Housing Development Ltd. Rs. 4,66,69,103/- from M/s. Rosedala Developers P.Ltd (In short, M/s. RDPL). The ld. PCIT also observed that M/s. RDPL is a company where public is not substantially interested and assessee company is holding 12.32% of its equity shares. Ld. PCIT also observed that Provisions of section 2(22)(e) of the Act relating to deemed dividend income are attracted in the given case since M/s. RDPL has accumulated profits at the opening of Financial Year under consideration. Based on this observation a show cause notice u/s. 263 of the Act issued to assessee and reply to the same was given on 23-02-2022. It was contended by the assessee that the loan transactions between the assessee and M/s. RDPL are not covered under the provisions of section 2(22)(e) of the Act as the loan was taken for commercial expediency and for the purpose of business. However, this submission of the assessee did not find any favour by the ld.PCIT. He held the order of the ld. AO framed u/s. 143(3) of the Act dt. 10-12-2019 as erroneous and in so far as it is prejudicial to the interest of the revenue as Ld. AO failed to examine the applicability of Sec. 2(22) ( e ) of the Act during the course of assessment proceeding. Thus, Ld. PCIT set aside the assessment order for the limited purpose of verification of the issues relating to deemed dividend under section 2(22)( e ) of the Act.
4. Aggrieved, the assessee is now in appeal before this Tribunal.
The ld. Counsel for the assessee referring to the paper book dt. 03- 11-2022 containing 52 pages stated that loan transaction between the assessee and M/s. RDPL are in the nature of commercial transaction and provisions of section 2(22)( e ) of the Act are not attracted. He further referred and relied on the judgment of the Hon’ble Jurisdictional Calcutta 3. Bengal Shrachi Housing Development Ltd. High Court in the case of Pradip Kumar Malhotra Vs. CIT, WB 338 ITR 538 (Cal) and submitted that interest has been duly charged on loan received from M/s. RDPL and there is no loss to the interest of the revenue and the impugned order has been passed in a routine manner, therefore, the same deserves to be quashed/cancelled.
On the other hand, the ld. Departmental Representative vehemently argued supporting the order of the ld.PCIT and also stated that no enquiry what so ever was conducted by the ld.AO on the issue raised in show cause notice issued by the ld. PCIT u/s. 263 of the Act.
We have heard the rival contentions and perused the records placed before us and carefully gone through the judgment referred in the case of Pradip Kumar Malhotra (supra). Revisionary proceedings u/s. 263 of the Act have been challenged before us by the assessee stating is to be bad in law and liable to be quashed/cancelled since ld. PCIT erred in invoking the jurisdiction u/s. 263 of the Act. From perusal of the show cause notice, we notice that the only issue referred by the ld. PCIT is regarding the applicability of provisions of section 2(22)(e)( e ) of the Act on the ‘loans and advances’ of Rs. 4,66,69,103/- received from M/s. Rosedala Developers Pvt. Ltd ( in short ‘RDPL’) It is not in dispute that the assessee company holds 12.32% equity shares of M/s. RDPL and there is opening balance of accumulated profits in the balance sheet of M/s. RDPL. The ld. PCIT has observed that the ld. AO has not conducted any enquiry and provisions of section 2(22) ( e ) of the Act are squarely applicable and to the extent of accumulated profits for the financial year under consideration, if less than the alleged loan received by the assessee from M/s. RDPL, then to that extent addition needs to be made towards 4. Bengal Shrachi Housing Development Ltd. deemed dividend income in the hands of the assessee u/s. 2(22)(e) of the Act.
Now before examining the facts of the case, we will go through the provisions of section 263 of the Act.
Section 263 :-
—Revision by the Principal Commissioner or Commissioner* Revision of orders prejudicial to revenue. 263. (1) The 88[Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer 89[or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 90[including,— (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988] by the Assessing Officer 91[or the Transfer Pricing Officer, as the case may be,] shall include— (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer 92[or the Transfer Pricing Officer, as the case may 5. Bengal Shrachi Housing Development Ltd. be,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; 92[(iii) an order under section 92CA by the Transfer Pricing Officer;] (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal 93[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer 92[or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the* Principal Commissioner or Commissioner under this sub- section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 94[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal 95[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 96[Explanation 3.—For the purposes of this section, "Transfer Pricing Officer" shall have the same meaning as assigned to it in the Explanation to section 92CA.]
(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.—In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.
On examination of the facts as far as applicability of section 263 of the Act is concerned, under the given facts, we find that no enquiry whatsoever has been conducted by the ld. AO on the issue raised in show cause notice u/s. 263 by the ld. PCIT. When the case of the assessee has been selected for scrutiny and all the necessary details were placed before him, but still the ld. AO has not conducted any enquiry on this issue. Even the assessee has been unable to place any detail/record/information or copy of notice u/s. 142(1) or replies thereof filed in compliance to the said notice. It indicates that the ld. AO has not conducted any enquiry on the issue nor asked the assessee to furnish necessary details. Therefore, it is a purely case of not conducting any enquiry.
As far as finding of the ld. PCIT in the impugned order is concerned, we notice that he had conducted sufficient enquiry, which is not controverted by the ld. Counsel for the assessee to the extent of the fact that assessee company holds 12.32% equity share of M/s. RDPL, loans 7. Bengal Shrachi Housing Development Ltd. and advances of Rs. 4,66,69,103/- has been received during the year and there is an opening balance of accumulated profits in the balance sheet of M/s. RDPL. Though the assessee company has taken a plea that alleged loan has been taken for commercial expediency during the year and are in the nature of business transaction and interest paid thereon. However, the exception which the assessee has been referring provided under section 2(22)(e) of the Act applies in the case where lending of money is a substantial part of the business of the company. Before us no document what so ever has been filed in relation to M/s. RDPL, which could indicate that lending of money is a substantial part of business of M/s. RDPL.
Further, we notice that the assessee has referred to the judgment of the Hon’ble Jurisdictional Calcutta High Court in the case of Pradip Kumar Malhotra (supra). Perusal of the said judgment indicates that the same is not applicable on the facts of the instant case and is distinguishable. In the case of Pradip Kumar Malhotra (supra) the facts were that the assessee was owner of a property, which was used as a collateral security by the company for taking a loan and assessee received credit/loan against the property held with the company. However, in the instant case the facts are not the same and it is purely a case where the assessee is holding 12.22% equity shares in a company having accumulated profits which has given loan to the assessee company. Therefore, under the given facts and circumstances of the case, we are of the considered view that since no enquiry has been conducted by the ld.AO on the issue raised in show cause notice u/s. 263, therefore, to this extent the assessment order is rightly held to be erroneous so far as it is prejudicial to the interest of the revenue. Therefore, we fail to find any infirmity in the impugned order of the ld.PCIT. Thus, all the grounds raised by the assessee are dismissed.
In the result, the appeal of assessee is dismissed.
Order Pronounced in the open court 02/01/2023