Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S. S. GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Dr. A. L. Saini: The captioned appeal filed by theassessee,pertaining to Assessment Year 2013-14, is directed against an order passed by the Ld. Principal Commissioner of Income Tax-17,Kolkata, under section 263 of the Income Tax Act,1961, dated 13.02.2018.
The grievances raised by theAssessee are as follows:
“1) That, the Ld. Principal CIT on the facts and circumstances of the case and in law erred in assuming jurisdiction u/s 263 of the Act in order to impose his own views on the A.O. when the A.O. after scrutiny of the records and documents in relation to scrutiny assessment had taken a possible view.
Shri Sahadeb Paik Assessment Year: 2013-14
2) That, the Ld. Pr.CIT wrongly assumed jurisdiction u/s263 of the Act inasmuch as Explanation to section 263 inserted by Finance Act, 2015 w.e.f. 0l .06.2015 provides that the order passed without making enquiries/verification would be a ground for the Pr. CIT to invoke jurisdiction u/s263 subsequent to 01.06.2015 and not relating to A.Y. 2013-14 under consideration.
3) That, the Ld. Pr. CIT on wrong premise found alleged discrepancy of Rs.19,26,314/- in respect ofunsecured loan taken from Bostech Services P. Ltd. (BSPL) having not been considered by the A.O. inspite of the fact that interest on loan of Rs.7,26,314 and advance remuneration of Rs.12,00,000although considered in the assessee's loan ledger but the same were separately shown by BSPL inNote-11as Interest Receivable from Sahadeb Paik and Note-9 as Advance Remuneration to Directorresulting in no mismatch.
4a) That, the Ld. Pr. CIT erred in having alleged that the A.O. omitted to consider the loan of Rs.32,00,000taken from BSPL as deemed dividend u/s.2(22)(e) of the Act in spite of the fact that sum of Rs.20lakhs paid through cheque to BSPL by mistake was returned by the company by cheque on the sameday and duly reflected in the bank account and hence such transaction did not have the character ofloan and hence cannot come within the purview of section 2(22)(e) of the Act.
(b) That, the Ld. Pr. CIT further erred in directing the A.O. to treat the balance loan of Rs.12 lakhs takenfrom BSPL as deemed dividend u/s.2(22)(e) of the Act by ignoring that impugned sum was not loanbut advance remuneration to the director as duly declared in the audited accounts vide Note-9.
5a) That, the Ld. Pr. CIT on wrong premise found alleged discrepancy of Rs.1,07,336/- (Rs.7,82,336 -Rs.6,75,000) in closing balance of unsecured loan taken from Dwelling Consultants P. Ltd. (DCPL)having not been considered by the A.O. in spite of the fact that as per loan confirmation certificatethere was no such loan of Rs.6,75,000 by the assessee and, in fact, there was opening balance of Rs.7,14,836 and interest provision of Rs.67,500, leaving closing outstanding of Rs.7,82,336/-.
(b) That, therefore, the Ld. Pr. CIT erred in directing the A.O. to make addition of Rs.6,75,000/- u/s.2(22)(e) of the Act in spite of the settled position in law that opening balance of loan carriedforward from earlier years and not a fresh loan during the year is outside the scope of s.2(22)(e) of theAct and further increase in the outstanding on account ofprovision for interest is also not covered bythe said section.
Shri Sahadeb Paik Assessment Year: 2013-14
6) That, as the order of Ld. Principal C.I.T. on the above issues suffers from illegality and is devoid ofany merit, the same should be quashed and your assessee be given such relief(s) as prayed for.
7) That, the assessee craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind anyor all ofthe above grounds.”
The brief facts qua the issue are that during the assessment year under consideration the assessee was engaged in share trading and also derived income from salary. The assessee filed its return of income for the Assessment Year 2013- 14, showing total income of Rs.29,58,250/- and assessment order was framed under section 143(3) of the Act. Later, on examination of the records of the assessment proceedings, in case of the assessee for the Assessment Year 2013-14, the Pr.CIT noted that the Assessing Officer while completing the assessment u/s 143(3) of the Act, failed to examine the issue of deemed dividend on account of loan received from a company in which the assessee was substantial interested. The ld. CIT(A) also noted that the Assessing Officer also failed to examine whether the loan constituted deemed interest u/s 2(22)(e) of the Act in the hands of the assessee. The assessment order passed by the Assessing Officer was, therefore, found to be erroneous in so far as it was prejudicial to the interest of the Revenue and therefore, ldPr.CIT issued notice under section 263 of the Act stating the following reasons:
(I). As per Balance Sheet and break-up of unsecured loan taken from M/s. Bostech Services Pvt. Ltd. (BSPL), closing balance was shown at Rs.85,32,537/-, whereas as per Balance Sheet of BSPL, the same stood at Rs.66,06,223/- resulting in discrepancy of Rs.19,26,314/- not taken into consideration by the A.O.
(II)As per loan confirmation, the assessee being a Director and shareholder of 40% equity shares of BSPL received unsecured loan of Rs.32,00,000/- from BSPL, which attracts provisions of section 2(22)(e) of the Act and addition of the said amount should have been made by the A.O. u/s.2(22)(e) of the Act in assessment order and that not being done, the assessment order was prejudicial to the interest of the revenue. Page | 3
Shri Sahadeb Paik Assessment Year: 2013-14 (III) As per break-up of unsecured loan taken from M/s. Dwelling Consultants Pvt. Ltd. (DCPL), closing balance was Rs.7,82,336/- in comparison to Balance Sheet figure of DCPL of Rs.6,75,000/-, resulting in discrepancy of Rs.1,07,336/-, which was not taken into consideration by the A.O.On the above premise, the Ld. Pr. C.I.T. noted that the assessee’s case falls within the ambit of provisions of section 2(22)(e) of the Act and the A.O. did not reach the right conclusions, therefore, notice U/s 263 was issued by the Pr.CIT.
In response, the assessee filed written submissions, with documentary evidences in response to notice u/s.263 of the Act ( videpages 60 to 70 of P/B) before the ld.Pr.CIT,stating that the loan of Rs. 20,00,000/- was returned immediately on receipt and no benefit was derived by the assessee. In respect of loan of Rs. 12,00,000/- it was submitted by the assessee that it was an advance of salary.The assessee also submitted the explanation about other discrepancies noted by the Pr.CIT.
However, the ldPr.CIT rejected the contention of the assessee and held that order passed by the assessing officer was, erroneous in so far as it was prejudicial to the interest of the Revenue and therefore, he set aside the assessment order passed u/s.143(3) of the Act, dated 23.02.2016, and directed the A.O. to pass fresh assessment order.
Aggrieved by the order of the Pr.CIT under section 263 of the Act, the assessee is in appeal before us.
Ms.Bhoomija Verma, the ld Counsel for the assessee begins by pointing out before the Bench that entire details and evidences in relation to queries raised by the AO in the notice U/s 142(1) of the Act was submitted and explained by the assessee during the course of the assessment proceedings. After examining and verifying the above evidences vis-à-vis the queries made in 142(1) notices and after hearing the assessee on various dates, the Ld. A.O. as an adjudicator passed
Shri Sahadeb Paik Assessment Year: 2013-14 the assessment order u/s. 143(3) of the Act assessing the total income at Rs.29,67,490/- by making the following disallowances/ additions to the total income declared by the assessee as deemed fit after proper application of mind: STCG treated as business income Rs.6,38,683 Disallowance u/s. 14A r.w.r. 8D Rs.5,67,640 Disallowance of expenses on professional fees received Rs. 84,472 Ms.Bhoomija Verma, also stated that the allegations made in the notice under section 263 of the Act, that is, show-cause notice and the A.O.’s conducting enquiry by issuing notices u/s 142(1) of the Act on 27.05.2015 & 02.11.2015 during the course of the assessment proceeding clearly explain that the A.O. made enquiries on the issues raised in the impugned show-cause notice before framing assessment order U/s 143(3) of the Act, for the assessment year under consideration. The ld Counsel also submitted before us a chart showing the comparison between the “issues as per notice U/s 263, issued by Pr.CIT” vis-à-vis “Issues covered by notices U/s 142(1) of the Act” and explained the Bench that even if the so-called short-falls pointed out in the notice U/s 263, may not match in verbatim with the requisitions vide notices U/s 142(1), but the facts remain that during the course of the assessment proceedings and hearings before the Ld. A.O., the assessee submitted all such information and documents, which were considered before passing the impugned assessment order, thus meeting the points raised in notice U/s 263 of the Act. Therefore, order made by the AO is not erroneous.
Ms.Bhoomija Verma, further pointed out that from the show cause notice (SCN) u/s 263 of the Act, itself it is evident that the Ld. Pr. C.I.T. on perusal of the assessment records expressed his own understanding and reminded the A.O. about what should have been his decision on the basis of evidence on record while considering the unsecured loans received from associate concerns, viz., BSPL and DCPL.TheLd.Pr.C.I.T. has held the assessment order passed u/s.143(3) of the Act, iserroneous and prejudicial to the interest of the revenue solely on the specious ground that the alleged discrepancies found by him in the unsecured loans taken Page | 5
Shri Sahadeb Paik Assessment Year: 2013-14 from associate concerns were not taken into consideration by the A.O. and hence the A.O. did not reach the right conclusion on the issue of deemed dividend u/s.2(22)(e) of the Act. The Ld. Pr. C.I.T. definitely was trying to substitute his own views on the A.O. and as a matter of settled law, provisions of section 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the jurisdiction exercised by the Ld. Pr. C.I.T. U/s 263 of the Act should not be sustained.
On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the LdPr.CIT, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
We have given a careful consideration to the rival submissions and perused the material available on record, we note that during the assessment proceedings, the assessing officer called all required information by issuing notices under section 142(1) of the Act ( vide notices dated 27.05.2015 & 02.11.2015) and assessee also cooperated with the AO during the assessment proceedings and submitted all the information and documents demanded by assessing officer. The allegations made in the show-cause notice U/s 263 and the A.O.’s conducting enquiry by issuing notices u/s. 142(1) of the Act on 27.05.2015 & 02.11.2015, during the course of the assessment proceeding are summarized below whichexplain that the A.O. made enquiries on the issues raised in the impugned show-cause notice before framing assessment U/s 143(3) of the Act for the assessment year under consideration.
Issues covered by Sr. Issues as per Notice u/s. 263 issued Notices u/s. 142(1) Observation of A.O. in P/B Pages. No. by Ld. Pr. C.I.T. dated 27.05.2015 & Assessment order u/s. 143(3) 02.11.2015. Page-1 A As per Balance Sheet and break-up of 1) Point-6 of notice In response to notices, Shri 01 to 04 unsecured loan taken from M/s. dt. 27.05.15; Gautam Sikdar, AR of the Page | 6
Shri Sahadeb Paik Assessment Year: 2013-14
Bostech Services Pvt. Ltd. (BSPL), assessee appeared on various closing balance was shown at 2) Points- 2, 3 & 6 dates and filed submissions, Rs.85,32,537/-, whereas as per Balance notice dt.02.11.15 supporting relevant documents Sheet of BSPL, the same stood at which were examined in the Rs.66,06,223/-, resulting in discrepancy course of the assessment of Rs.19,26,314/- which was not taken proceeding. into consideration by the A.O. Page-2 In response A/R furnished trading and Profit & loss account, balance sheet, details of stock of shares, details of loan liabilities and interest payment. B As per loan confirmation, the assessee being a Director and shareholder of 40% equity shares of BSPL received -do- -do- 01 to 04 unsecured loan of Rs.32,00,000/- from BSPL, which attracts provisions of sec. 2(22)(e) of the Act and addition of the said amount should have been made by the A.O. u/s.2(22)(e) of the Act C As per break-up of unsecured loan taken from M/s. Dwelling Consultants Pvt. Ltd. (DCPL), closing balance was -do- -do- 01 to 04 Rs.7,82,336/- in comparison to Balance Sheet figure of DCPL of Rs.6,75,000/-, resulting in discrepancy of Rs.1,07,336/-.
From the above comparison chart, we note that even if the so-called short-falls pointed out in notice U/s 263, may not match in verbatim with the requisitions vide under section 142(1) notices, but the facts remain that during the course of the assessment proceedings and hearings before the Ld. A.O., the assessee submitted all such information and documents, which were considered before passing the impugned assessment order, therefore it meet the requirements and points raised by Pr.CIT in notice U/s 263 of the Act.We note that if a query is raised during the Shri Sahadeb Paik Assessment Year: 2013-14 course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer was reflected in the assessment order, that would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. For that we rely on the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Vikas Polymers (2012) 341 ITR 537 wherein the same ratio has been decided.
We note that according to the ld. Principal CIT, the order passed by the Assessing Officer dated 23.02.2016, which is the assessment framed u/s 143(3) of the Act, is erroneous and prejudicial to the interest of the Revenue because the Assessing Officer has not conducted proper investigation in respect of unsecured loan taken from M/s. Bostech Services Pvt. Ltd. (BSPL), closing balance was shown at Rs.85,32,537/-, whereas as per Balance Sheet of BSPL, the same stood at Rs. 66,06,223/- resulting in discrepancy of Rs.19,26,314/- ( that is, Rs.85,32,537- Rs. 66,06,223) not taken into consideration by the A.O. and the assessee being a Director and shareholder of 40% equity shares of BSPL received unsecured loan of Rs.32,00,000/- from BSPL, which attracts provisions of section 2(22)(e) of the Act and addition of the said amount should have been made by the A.O. u/s.2(22)(e) of the Act in assessment order, besides the unsecured loan taken from M/s. Dwelling Consultants Pvt. Ltd. (DCPL), closing balance was Rs.7,82,336/- in comparison to Balance Sheet figure of DCPL of Rs.6,75,000/-, resulting in discrepancy of Rs.1,07,336/-, which was not taken into consideration by the A.O.
Based on the aforesaid reasoning, the ld Principal CIT found fault with the assessment order passed by the Assessing Officer u/s 143(3), passed on 23.02.2016. The assessee has challenged in the first place, the very usurpation of jurisdiction by ld. Principal CIT to invoke his revisional powers enjoyed u/s 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is there existing before the Pr. CIT to exercise his power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT, is erroneous as well as Shri Sahadeb Paik Assessment Year: 2013-14 prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by theCIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to theinterest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”.
Taking note of the aforesaid dictum of law laid down by the Hon’ble Apex Court, let us examine whether the Assessing Officer passed order u/s 143(3) dated 23.02.2016 is erroneous as well as prejudicial to the interest of the revenue. Thefirst issue was about alleged discrepancy/mismatchof Rs.19,26,314/- in Shri Sahadeb Paik Assessment Year: 2013-14 respect of unsecured loan taken from BSPL. The assessee took interest-bearing unsecured loan of Rs.85,32,537/- from BSPL (page 16 of P/B), wherein he was Director and having 40% shareholding. However, as per BSPL’s account as on 31.03.2013, the loan paid to the assessee was shown at Rs.66,06,223/- (page 11 of P/B), resulting in mismatch to the extent of Rs.19,26,314/-. Before the Ld. Pr. C.I.T., the assessee explained that there was, in fact, no mismatch as per details/ reconciliation given below: Loan as per BSPL’s Account …Rs.66,06,223 (P/B page 11) Add: Interest on loan paid by the assessee was considered in his loan ledger, but the same was considered by BSPL in its accounts separately in Note No.11 under ‘Other Current Assets-Interest Receivable from Mr.Sahadeb Rs. 7,26,314 (P/B page 12) Add: Rs.12,00,000/- taken as Advance Remuneration from BSPL was shown by the assessee in his loan ledger, but the same was shown by BSPL separately as ‘Advance Remuneration to Director’ in Note No. 09 under ‘Long Term Loans & Advances’ Rs.12.00,000 (P/B page 13) Rs.85,32,537 (P/B page 8) Loan as per assessee’s accounts as on 31.03.2013 = From the above reconciliation explained by the assessee, to the Ld. Pr. C.I.T. with relevant ledger copy of loan account and balance sheet of BSPLetc., it is obvious that there was in fact no under-statement of closing balance of loan amount in the books of the assessee. The so-called mismatch of Rs.19,26,314/- pointed out by the Ld. Pr. C.I.T. in respect of unsecured loan taken from BSPL was only due to posting of the entries in the respective books of the parties according to their system of accounting and, therefore, it has no effect on computation of real income of the assessee. All these information and records were available before the AO while framing assessment U/s143(3) of the Act. That being so, the assessment order passed u/s.143(3) of the Act isnot erroneous so far this issue is concerned.
The second issue was with regard to application of provisions of section 2(22)(e) of the Act in respect of alleged unsecured loan of Rs.32,00,000/- taken by the assessee from BSPL during the assessment year under consideration, wherein the assessee was one of the shareholders with 40% shareholding and Director. The Page | 10
Shri Sahadeb Paik Assessment Year: 2013-14 Ld. Pr. C.I.T. found from the assessment record that the assessee received the said unsecured loan from BSPL in which public are not substantially interested and lending money was not its substantial part of business. He also observed that the said company was having accumulated profit of Rs.51,27,549/-, comprising of profit of Rs.23,65,464/- and general reserve of Rs.27,62,085/-. According toldPr.CIT, therefore, the unsecured loan received from BSPL constituted deemed dividend u/s.2(22)(e) of the Act in the hands of the assessee and thus directed the A.O. to examine the same. We note that the assessee issued a cheque of Rs.20,00,000/- on 03.04.2012 in favour of BSPL and BSPL in turn deposited the same in its bank account and, accordingly, stood credited on the same day (P/B pages 9 & 10). The company in the meantime could manage their own fund on same day, i.e. on 03.04.2012, and issued another cheque of Rs.20,00,000/- in favour of the assessee and the same was credited on the same day in the bank account of the assessee. In support of the said facts, Confirmation of Accounts of BSPL in the books of the assessee (pages 7 & 8 of P/B) and assessee’s bank statement (pages 9 & 10 of P/B) were filed before us,( same were available before AO) showing contra entries of the said amount on the same day. Resultantly, the net effect of these two transactions was nil and therefore, the repayment of Rs.20,00,000/- by BSPL to the assessee, under no circumstances, could be treated as loan. The bank statement of the assessee for the relevant period was filed before the Ld. Pr. C.I.T. which evidently demonstrated that the cheque amount of Rs.20,00,000/- issued by the assessee in favour of BSPL was first debited and the credit of the said amount was reflected in the bank statement after recording more than 14 transactions on that day. Therefore, on this count the order of the AO is not erroneous. In respect of remaining receipt of Rs.12,00,000/- from BSPL, this amount has already been considered by the Ld. Pr. C.I.T. while alleging mismatch of Rs.19,26,314/- in respect of alleged unsecured loan taken from BSPL and the same has been explained by assessee. However, to reiterate, the assessee took the said amount as Advance Salary (pages 8 & 13 of P/B) and treated the same in his account as advance. Therefore, on this count, the order of the AO is not Shri Sahadeb Paik Assessment Year: 2013-14 erroneous, for that we rely on the judgment of the Hon’ble Allahabad High Court in the case of Shyama Charan Gupta v. CIT [2011] 337 ITR 511 (All), wherein it was held that advance towards salary, which was due to the director and was credited to his account is a trade advance ordinarily made in the course of business so that such advance is not covered under section 2(22)(e) of the Act.
About the third issue which relates to break-up of unsecured loan taken from M/s. Dwelling Consultants Pvt. Ltd. (DCPL).As submitted by the assessee, closing balance was Rs.7,82,336/- in comparison to Balance Sheet figure of DCPL of Rs.6,75,000/-, resulting in discrepancy of Rs.1,07,336/-. It was submitted by the counsel that as per Notes to audited Balance Sheet of DCPL that there was unsecured advance to the assessee-director to the tune of Rs.6,75,000/- and interest of Rs.39,836/- as at 31.03.2012 (pages 51 & 53 respectively of the P/B), aggregating to Rs.7,14,836/-. Simultaneously, as per Confirmation of Accounts by DCPL in the books of the assessee for the period 01.04.2012 to 31.03.2013 (page 37 of P/B), the break-up of closing balance of Rs.7,82,336/- was thus as under:
Date Particulars Debit Date Particulars Credit Amount Amount
1 Apr Opening Balance 7,14,836.00 2012 Closing Balance 7,82,336.00 INTEREST ON 67,500.00 31 Mar LOAN 2013 7,82,336.00 7,82,336.00 Ledger copies of such transaction in the books of DCPL between 01.04.2012 to 31.03.2013 and Notes to Balance Sheet, relevant to assessment year under appeal, are placed on pages 39, 40 & 53 of the P/B, as per which the final position emerges as under:
Shri Sahadeb Paik Assessment Year: 2013-14 Opening balance of loan in F.Y. 2011-12 Rs.6,75,000 Add: Interest for F.Y. 2011-12 Rs.39,836 Interest for F.Y. 2012-13 Rs.67,500 Rs.1,07,336 Rs.7,82,336 (page 38 of P/B)
On the above analysis of loan and interest, it is established that the allegation of the Ld. Pr. C.I.T. that the assessee’s closing balance was Rs.7,82,336/- in comparison to Balance Sheet figure of DCPL of Rs.6,75,000/-, resulting in discrepancy of Rs.1,07,336/- is unfounded. In fact, during the previous year relevant to the assessment year under appeal, no loan was received by the assessee from DCPL. The discrepancy of Rs.1,07,336/- found/alleged by the Ld. Pr. C.I.T. was, in fact, the aggregate figure of interest receivable by DCPL for F.Ys. 2011-12 & 2012-13, as explained above with calculation. To reiterate, the opening balance of Rs.7,14,836/- shown by the assessee was comprised of principal loan (Rs.6,75,000) and interest (Rs.39,836) for F.Y. 2011-12 and interest provision of Rs.67,500/- shown in the accounts was for current F.Y. 2012-13 and the aggregate closing balance as on 31.03.2013 thus stood at Rs.7,82,336/-, leaving no scope to allege any discrepancy. We also note that section 2(22)(e) of the Act covers only the amount which was actually received by the assessee by way of loan or advance during the relevant previous year and not amounts received in an earlier year. Meaning thereby, the carried forward balance of the loan of the previous year (i.e. opening balance) could not be treated as deemed dividend. Simultaneously, increase in the outstanding on account of provision for interest is not covered under the purview of sec. 2(22)(e) of the Act. In the assessee`s case under consideration the said amount was coming from previous years as a carry forward balance and does not belong to the assessment year under consideration, hence by no stretch of logic this amount can be treated as deemed dividend, that is, it should not be deemed dividend. For that we rely on the decision of Hon’ble Bombay High Court in the case of CIT vs. Parle Plastics Ltd. (2011) 332 ITR 63 (Bom). In para-11 of the said judgment, their Lordships have clarified the matter by holding as under:
Shri Sahadeb Paik Assessment Year: 2013-14 “11. This shows that during the relevant previous year (financial year 1996-97), AMPL had actually lent to the assessee only a sum of Rs. 11,68,135 in two instalments, namely Rs. 6,00,000 on September 10, 1996 and Rs. 5,68,135 on March 31, 1997. The opening balance of Rs. 1,76,39,425 was not advanced by AMPL to the assessee during the relevant previous year and could, therefore, not be treated as the amount of loan or advance received by the assessee during the relevant previous year. The said amount, therefore, could not be included as the dividend (hereinafter, referred to as "the deemed dividend") under clause (e) of section 2(22) of the Act. The amount of Rs. 32,13,367 represented the provision for the interest which was to be paid by the assessee to AMPL on the old outstanding loan of Rs.1,76,39,425 and a further loan of Rs. 11,68,135 advanced during therelevant financial year. This was merely an entry regarding the provision. No interest was actually received by AMPL. This amount which was not paid by AMPL to the assessee cannot be treated as a loan/advance paid by AMPL to the assessee during the relevant previous year. The opening words "any payment" occurring in clause (e) of section 2(22) of the Act contemplates actual payment made by the company to the assessee for being treated as a dividend in computing income of the assessee. Moreover, making of a provision for an interest which the assessee would ultimately be required to pay to the lender on the money lent cannot be regarded as a payment made by the company to the assessee. As such, the amount of Rs.32,13,367 which represents only the provision made for interest which the assessee was liable to pay to AMPL by way of an interest on the outstanding amount could not be regarded as the payment made by AMPL within the meaning of clause (ii) of section 2(22)(e) of the Act. Only the amount of Rs. 11,68,135 which was actually received by the assessee as and by way of loan or advance from AMPL would fall within inclusive clause (ii) of the definition of "dividend" appearing in section 2(22)(e) of the Act.”
We are aware of the fact that the Assessing Officer’s role while framing an assessment is not only an adjudicator. The AO has a dual role to dispense with i.e. he is an investigator as well as an adjudicator; therefore, if he fails in any one of the role as afore-stated, his order will be termed as erroneous. We note that in the assessee`s case under consideration, the AO had examined the each and every detail and applied his mind very carefully in respect of every issue explained by us in the above paras, therefore,on this finding of fact by us, in above noted para Nos.10 to 14 of this order, we cannot term the assessment order passed by the AO u/s 143(3) dated 23.02.2016 as erroneous and prejudicial to the interest of the revenue.
Shri Sahadeb Paik Assessment Year: 2013-14 15.In any event, we note that the Assessing Officer has adopted one of the courses permissible in law and even if it has resulted in loss to the revenue, the said decision of the Assessing Officer cannot be treated as erroneous and prejudicial to the interest of the revenue as held by Hon’ble Supreme Court in Malabar Industries Ltd. vs. CIT (supra). Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is ‘’null’’ in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. Therefore, we quash the order of the Principal CIT dated 13.02.2018, being ab initio void.
In the result, the appeal filed by the assessee is allowed.
Order is pronounced in the open court on 16.01.2019.