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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAINI, AM
O R D E R
Per Dr. Arjun Lal Saini, AM:
1. The captioned appeal filed by the Assessee pertaining to Assessment Year 2011-2012, is directed against the order passed by ld. Pr.Commissioner of Income Tax, Kolkata-3, under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 14.01.2016.
Brief facts of the case qua the assessee are that the assessee filed its return of income for assessment year 2011-12 on dated 28/09/2011 declaring total income at Rs.2,13,73,564/-. The assessee has income from stock broking/trading and investment. Assessment U/s 143(3) was completed on dated 18.03.2014 but later on the Commissioner of Income Tax exercised has jurisdiction U/s 263 of the I.T. Act. The commissioner of Income Tax found that the assessee company had received an amount of Rs.5,75,00,0000/- as loan from Jet Age Finance Pvt.Ltd., a closely held company. Sri Harshavardhan Himatsingka was holding and Jet Age Finance Pvt. Ltd. respectively during the period relevant to the A.Y.2010-11. As per provisions, loan amount was required to be treated as deemed dividend U/s 2(22) (e) of the Act. However, the loan amount of Rs.5,75,00,000/- was not treated as deemed dividend income as per provisions of section 2(22) (e) of the Act. As per section 2(22) (e) of the Income Tax Act,1961, dividend includes any payment by a company in which the public are not substantially interested, of any sum, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares holding not less than 10% of the voting power, or to any concern in which such shareholder is member or partner and in which he has a substantial interest. The wrongful act on the part of the AO on the point above has made the assessment order erroneous and prejudicial to the interest of Revenue, therefore, the assessment order passed U/s 143(3) dated 18.03.2014 was thus erroneous and prejudicial to the interest of Revenue.
Aggrieved from the order of ld CIT U/s 263 of the Act, the assessee is in appeal before us and has taken the following grounds of appeal:
That on the facts and circumstances of the case and the material evidences on record the action of the Ld. ClT to initiate revision proceedings u/s 263 of the I.T. Act is bad in law.
2. That on the facts and circumstances of the case, revision proceedings initiated by the Ld.ClT in exercise of his powers u/s 263 of the I.T. Act to treat the order passed by the Assessing Officer u/s 143(3) of the I.T. Act to be erroneous and prejudicial to the interest of revenue is incorrect in law. 3. That on the facts and in the circumstances of the case the action of the Ld CIT to hold that the provisions of section 3 M/s Jet Age Securities Pvt. Ltd. 2(22)(e) is applicable in the case of the assessee is erroneous and bad in law. 4. That on the facts and in the circumstances of the case the action of the Learned CIT in passing order u/s 263 of the IT Act by directing the Assessing Officer to frame the assessment de novo is bad in law. 5. That the order of the Learned CIT u/s 263 of the IT Act setting aside the assessment framed u/s 143(3) and directing to be framed de novo is bad in law.
Ld. AR for the assessee has submitted before us that the assessee has objected to the issue of notice u/s. 263 of the Act, for the reason that loan was not provided to beneficial shareholder therefore, provision of Sec. 2(22)(e) is not applicable.
That is, the assessee ( M/s Jet Age Securities (P) Ltd.) is not a shareholder/beneficial shareholder in the Jet Age Finance Pvt. Ltd, from whom the assessee company took loan. If the assessee company, ( M/s Jet Age Securities (P) Ltd.) and another company, M/s Jet Age Finance Pvt. Ltd provided loan to Sri Harshavardhan Himatsingka, then the said loan may be deemed dividend U/s 2 (22) (e) of the Act in the hands of Sri Harshavardhan Himatsingka.
Ld. DR for the Revenue has also primarily relied on the findings of the AO which we have already noted in our earlier para and is not being repeated for the sake of brevity.
Having heard the rival submissions, perused the material on record, we are of the view that there is merit in the submissions of ld. AR for the assessee, as the proposition canvassed by ld. AR for the assessee are supported by the facts narrated by him above. As the ld AR for the 4 M/s Jet Age Securities Pvt. Ltd. assessee pointed out that the assessee ( M/s Jet Age Securities (P) Ltd.) is not a shareholder/beneficial shareholder in the Jet Age Finance Pvt. Ltd, from whom the assessee company took loan therefore the provisions of section 2(22) (e) do not applicable at all. In the instant case, the assessee company had received an amount of Rs.5,75,00,0000/- as loan from Jet Age Finance Pvt Ltd, and the assessee company is not a beneficial shareholder in Jet Age Finance Pvt Ltd, therefore the provisions of section 2(22) (e) does not apply to the assessee company. Therefore, considering the factual position explained above, we are of the view that ld CIT has wrongly exercised his jurisdiction under section 263 of the Act, because in the instant case the order made by the Assessing Officer U/s 143(3) is neither erroneous nor prejudicial to the interest of revenue. Accordingly, we set aside/ cancel the order passed by ld CIT U/s 263 of the I.T.Act.
In the result, appeal filed by the assessee, is allowed. Order pronounced in the open court on this 22/03/2017.