TMI Blog2016 (2) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... These appeals of the assessee arise out of the orders of the Learned CIT (Central), Kolkata-1 vide proceedings dated 16.3.2015 u/s 263 of the Income Tax Act, 1961 against the order of assessment u/s 153C / 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for the Asst Years 2007-08 , 2008-09 , 2009- 10 2010-11. 2. The assessee had raised additional grounds of appeal for the Asst Years 2009-10 2010-11 as below:- 1. For that on the facts and in the circumstances of the case, the CIT erred in passing the revision order u/s 263 dated 16.03.2015 even though proceedings u/s 263 had come barred by limitation prior to 01.04.2014 and in that view of the matter the CIT's order u/s 263 deserves to be cancelled holding it to be ab initio void. 2. For that on the facts and in the circumstances of the case, the CIT failed to appreciate that proceedings u/s 153C were confined only to items of income assessable with reference to incriminating material or information gathered from the books or documents unearthed on account of search and in the impugned case receipt of the Inter Corporate Deposit being recorded in the regular books, the CIT was unjustifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessment u/s 153C/143(3) was erroneous since deemed dividend u/s.2(22)(e) with reference to inter corporate deposit receipt was not assessable in the hands of the appellant, a non shareholder. 5. For that on the facts and in the circumstances of the case, there being several judgment of the high courts holding that deemed dividend u/s.22(2)(e) was not assessable unless the recipient of the loan is a shareholder of the loan granting company and the AO having followed the view expressed in these high court judgments, the order of the AO could not be considered to be; erroneous within the meaning of Sec 263 and in that view of the matter the CIT was unjustified in revising the AO's order u/s 263. 6. For that on the facts and in the circumstances of the case, the loan granting company being substantially engaged in granting of loan for the purposes of earning interest, the provisions of Sec 2(22)(e) of the Act were not applicable since the case was covered by the exception provided in clause (ii) of Explanation to Sec 2(22) of the Act and in that view of the matter the CIT erred in invoking Sec 263 of the I TAct. 7. For that on the facts and in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards section 14A of the Act. The said order was subjected to revision proceedings u/s 263 of the Act as in the opinion of the Learned CIT, the order passed by the Learned AO u/s 153C of the Act did suffer from certain irregularities by not bringing to tax the amount of deemed dividends in several assessment years. The Learned CIT held that the provisions of section 153C of the Act uses the word assess or reassess . Hence he held that the Learned AO ought to have made addition towards deemed dividend in section 153C proceedings irrespective of the existence of any incriminating materials found during the course of search. He held that moreover the original assessments were completed only u/s 143(1) of the Act and hence the Learned AO did not have an occasion to go into the aspect of deemed dividend. However, the Learned AO ought to have considered the same in proceedings u/s 153C of the Act which has not been done by him. Hence his order u/s 153C of the Act becomes erroneous and prejudicial to interests of the revenue by not considering the aspect of deemed dividend. Hence the objection raised by the assessee that the revision jurisdiction u/s 263 of the Act is barred by limita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time the case was called on for hearing , even though he was very much present in tribunal on the said date before another bench. Accordingly this case was passed over in order to wait for the arrival of Learned DR. But we find that the Learned DR after completing his cases before the other bench , chose not to present himself before us for advancing the arguments. Hence we deem it fit and appropriate to proceed further based on the arguments advanced by the Learned AR and the materials available on records. 5.1. The following chart would make us understand the factual background of the case better:- M/s. Tanuj Holdings Pvt. Ltd Comparative Statement Particulars A.Y 2007-08 A.Y 2008-09 AY 2009-10 AY 2010-11 Return of income u/s. 139(1) filed on 24.08.2007 30.09.2008 24.09.2009 25.09.2010 Return of income processed assessment u/s. 143(1) completed on 26.02.2009 - 22.03.2011 15.03.2011 Income returned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as in GGPL. In view of this common shareholding alone, the provisions of deemed dividend would not get automatically attracted. We find that the Learned AO had rightly not made any addition towards deemed dividend in the proceedings completed u/s 153C of the Act in view of this fact. The following decisions support our view in this regard:- CIT vs Sarva Equity Pvt Ltd reported in 225 Taxman 172 (Karnataka HC) CIT vs AR Magnetics (P) Ltd reported in 220 Taxman 209 (Delhi HC) CIT vs Impact Container Pvt Ltd reported in 367 ITR 346 (Bombay HC) CIT vs GTZ Securities Ltd reported in 359 ITR 345 (J K HC) CIT vs Daisy Packers (P) Ltd reported in 220 Taxman 331 (Gujarat HC) CIT vs Ankitech Pvt Ltd reported in 340 ITR 14 (Delhi HC) 5.3. Whether the lending of inter corporate deposit by GGPL could be considered as substantial part of business of GGPL We find that GGPL deployed in granting loans in excess of 20% of Net Owned Funds. It would thus be evident that granting of inter corporate deposits was ordinary business of GGPL and income derived from such activity was consistently assessed. However, we find in the show cause notice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at lending of surplus fund is not specified in the main objects of the memorandum but it is included as an ancillary object would not detract from the fact that loan was made in the ordinary course of business. Applying this judicial principle to the present case, we find that more than 50% of paid up capital and reserves of GGPL were consistently deployed in the business of granting loans and inter corporate deposits for the purpose of earning interest income, clause(ii) of section 2(22)(e) of the Act was clearly applicable and therefore any amount granted by the said company did not come within the mischief of section 2(22)(e) of the Act. The following charts would prove the facts of the case beyond doubt :- TOTAL FUND DEPLOYMENT IN M/s. GEETA GANESH PROMOTERS LIMITED (Figures shown in Rs. Crores M/s. GEETA GANESH PROMOTERS LIMITED [ Figures shown in Rupees] Year Ended Net profit Interest Interest as % of Net profit 31/03/2007 55,13,705 14,53,599 26.36% 31/03/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act were the subject matter of the proceedings under Section 153A and, therefore, the Commissioner of Income Tax could not have invoked the jurisdiction under Section 263 of the IT Act. Challenging the aforesaid order, the present appeal is filed by the revenue. 7. According to Shri Jaiswal, learned Counsel for the revenue, once the proceedings under Section 153A of the IT Act are initiated, then the original assessment/reassessment orders already passed in the assessment years covered under Section 153A stand abated and the Assessing officer is obliged to pass fresh assessment/reassessment orders and determine the total income afresh for those assessment years. In the present case, according to Mr. Jaiswal, the assessment order passed under Section 153A read with Section 143(3) of the Income- Tax Act is erroneous and prejudicial to the interests of the revenue because, firstly, the AO had only determined undisclosed income and had not determined the total income which the mandate of Section 153A of the Incometax Act. Secondly, the total computed after giving effect to the order of Commissioner of Income-tax(A) being loss which less than 30% of the book profit, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Section 153A(2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. 10. Thus on a plain reading of section 153A of the Income-tax Act, it becomes clear that on initiation of proceedings under Section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalised for those assessment years covered under Section 153A of the Act. By a circular No.8 of 2003 dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under Section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalized assessment/reassessment shall not abate. It is only because, the finalized assessments/reassessments do not abate, the appeal, revision or rectification pending against finalized assessments/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of under Section 153A, the assessments/reassessments finalised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the present case, no fault could be found with the AO in giving effect to the order of CIT(A). Consequently, the CIT could not invoke jurisdiction under Section 263 of the income-tax Act on the ground that the assessment under Section 153A read with Section 143(3) was erroneous or prejudicial to the interests of revenue. 15. In the result, the decision of the Tribunal in quashing the order of C.I.T passed under Section 263 of the I.T Act cannot be faulted. Accordingly, we see no merit in the present appeal and the same is hereby dismissed with no order as to costs. We also find that the impugned issue is also supported by the decision of the Hon ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd and All Cargo Global Logistics Ltd reported in (2015) 374 ITR 645 (Bom) vide order dated 21.4.2015, wherein the facts before the Bombay High Court and decision rendered thereon are as below :- Under section 153A of the Income-tax Act, 1961, which enables carrying out of search or exercise of power of requisition, assessment in furtherance thereof is contemplated. There is a mandate to issue notices under section 153(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial Bench of the Tribunal held that by the clear language of section 153A together with its provisos, pending assessments abated and that the Assessing Officer was required to make one assessment for each of the six years on the basis of the search and any other material existing or brought on record by the Assessing Officer, that in other cases assessments would be made on the basis of the books of account and other documents found during the search and not produced during assessment and also on any other undisclosed income or property found during the search. On the issue of deduction under section BO-IA(4) the Tribunal held that the container freight station was an inland port and its income was entitled to deduction under section 80-IA(4) . On appeals: Held, dismissing the appeals, (i) that the notice under section 153A was founded on search. If there was no incriminating material found during the search then the Tribunal was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material. If that was not found then in relation to the second phase of three years, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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