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2013 (6) TMI 751 - AT - Income TaxRevision u/s 263 - Deemed dividend under Section 2(22)(e) - whether the loans/advances given to the shareholders in the earlier years which are assessable as 'deemed dividend' in the hands of the respective shareholders in the past years, should be reduced from the surplus while determining the 'accumulated profits' in the hands of the company during the year under consideration? - Held that:- The advances or loans made in earlier years to the shareholders need to be reduced from the 'accumulated profits', for computing the 'accumulated profits' for current year, irrespective of whether the prior loans were assessed as 'deemed dividend' under Section 2(22)(e) of the Act or not. Accordingly, the 'accumulated profits' as on 31.03.2002 of the company was ₹ 1,94,62,774/- and the loans/advances on even date to the shareholders holding in excess of 10% voting power was ₹ 3,73,65,065/- and in this manner, it was submitted that there was no 'accumulated profits' as on 31.03.2002. The aforesaid proposition has been accepted by the Assessing Officer in the assessment order dated 12.06.2007 inasmuch as the Assessing Officer considered only the profits that accrued during the period from 01.04.2002 to 31.03.2003 amounting to ₹ 2,61,19,957/- for the purposes of computing the amount assessable under Section 2(22)(e) of the Act. In our considered opinion, the Assessing Officer made no mistake in excluding the sum of ₹ 1,94,62,774/- while determining the 'accumulated profits' for the purposes of computing the amount assessable under Section 2(22)(e) of the Act, Commissioner has differed with the legal position accepted by the Assessing Officer without any justifiable reason. In fact, it would be in fitness to things to observe that the view adopted by the Assessing Officer on the aforesaid aspect was a possible view which is supported by judicial pronouncements and the Commissioner has not found it erroneous on the basis of any contrary judgment or legal position. Notably, the invoking of Section 263 of the Act can be justified only where the Commissioner is able to establish that the order passed by the Assessing Officer is erroneous in the eye of law so as to cause prejudice to the interest of the Revenue. In the present case, where the Assessing Officer has adopted a possible view, based on legal precedents, and the Commissioner is denuded from exercising his power under Section 263 of the Act.
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