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2016 (7) TMI 902 - AT - Income TaxRevision u/s 263 - deemed dividend addition u/s 2(22) - Held that:- From the foregoing discussion we find that all the disclosures regarding the sales and purchases of jute materials were available before the AO at the time of assessment. The transaction has been duly reported by the assessee in the tax audit report as required u/s 40A(2)(b) of the Act. There was no adverse remark in the tax audit report. After considering the material information placed before us, we are of the considered view that AO was in possession of sufficient information about the aforesaid transaction. Accordingly he formed the opinion that the transaction is in the nature of current account and out of the purview of the provisions of section 2(22)(e) of the Act. Section 2(22)( e) of the Act covers only such situations, where the shareholder alone benefits from the loan. In the instant case the company benefits from the said transaction, it will take the character of a commercial transaction and hence will not qualify to be dividend. Now it can be said that sec. 2(22)(e) of the Act covers only those transactions which benefit the shareholder alone and results in no benefit to the company. On the other hand, if the transaction is mutual by which both sides are benefited, it is undoubtedly outside the purview of provisions of sec. 2(22)(e) of the Act. From the above, it is clear that the loan account differs from current account and the provisions of section 2(22)( e) of the Act, being a deeming section, cannot be applied to current account. In such circumstances, the order of the ld. CIT under section 263 of the Act is not sustainable in law. Payment of gratuity - Held that:- From the facts of the case, we find that AO has given a very clear finding that claim of gratuity was not made in assessee’s books of account but it was claimed separately in the computation of income which was not allowed by AO while framing original assessment order. So in the instant case, we find that the question for the deduction on account of gratuity in the computation of total income does not arise. Disallowance under section 14A - Held that:- In our view of the fat that some enquiry was made is sufficient to debar the authorities from exercising the powers u/s 263 of the Act. The Tribunal was accordingly justified in setting aside the order passed u/s 263 of the Act. We do not find any substantial question of law arising for consideration the appeal is accordingly dismissed. In the case on hand, the AO has made an addition by invoking the provision of section 14A of the Act after making the necessary enquiry. The instant case is duly covered with the decision of Hon’ble Allahabad High Court M/s Ashok Handloom Factory Pvt. Ltd. (2016 (3) TMI 650 - ALLAHABAD HIGH COURT ) wherein held that it is settled law that the commissioner of income tax can exercise his jurisdiction u/s 263 of the Act only in cases where no enquiry is made by the Assessing Officer, therefore relying on the same, we reverse the order of Ld. CIT for u/s 263 of the Act. - Decided in favour of assessee
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