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2016 (9) TMI 256 - ITAT DELHI

2016 (9) TMI 256 - ITAT DELHI - [2016] 51 ITR (Trib) 330 - Revision u/s 263 - addition u/s 2(22)(e) - deemed dividend - Held that:- It is not the Departmentís case that no information regarding the loan/advance was called for by the AO. That relevant details and documents were furnished by the assessee during the assessment proceedings and forms part of the record. Hence, no inference can be drawn that the AO has not examined the issue although he has not expressed it in as many terms as may be .....

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of section 263 of the Act. Once the issue of loan/advance was considered and examined by the Assessing Officer, Ld. Commissioner cannot set aside the order without recording a contrary finding. This will be contrary to Section 263 of the Act. Therefore, in view of the factual matrix of the case and respectfully following the ratio of the various judicial pronouncements as discussed above, we are of the considered opinion that the impugned action of the Ld. CIT u/s 263 of the Act was patently ill .....

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Income Tax (Central)-III, New Delhi for AY 2007-08. 2. The facts of the case are that the original return of income was filed on 31/07/2007 declaring an income of ₹ 8,35,640/-. Subsequently, action u/s 132 of the Income Tax Act, 1961 was taken in the Dawat Group of Cases including the assessee on 10/02/2009. Notice u/s 153A was issued for AY 2007-08 being one of the six assessment years preceding the assessment year relevant to the previous year in which the search was conducted. In respo .....

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2A) was conducted in which the special auditor had pointed out that during the financial year 2006-07, relevant to the AY 2007-08, the assessee held 14.57% shares of LT Foods Ltd. and that during this period M/s LT Foods Ltd. was not a company in which the public were substantially interested. The Show Cause Notice stated that as per the special auditor s report, during AY 2007-08, LT Foods Ltd. had advanced a loan of ₹ 1,74,000/- to the assessee on various dates and the assessee was requi .....

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i.e. the assessee for its safe custody and the said cash is returned to the Company as and when so needed by the Company. It was also submitted that these transactions were done in the normal course of business for the purpose administration of business affairs of the Company and accordingly, did not qualify to be treated as deemed dividend. However, the Ld. CIT did not accept the assessee s contention and held that it was not disputed that the assessee was the beneficial shareholder in LT Foods .....

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to the interest of the Revenue. The issue was restored to the file of the AO to decide the issue afresh. 3. Aggrieved the assessee is now in appeal before the ITAT and has raised the following grounds of appeal: 1. That the notice issued under section 263 of the Income Tax Act, 1961 and the order passed under that section are illegal, bad in law and without jurisdiction. 2. That the order under section 263 of the Income Tax Act, 1961 is bad in law and without jurisdiction as the CIT has failed .....

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f the revenue, on the ground that the special audit report in the case of L T Foods Limited is not considered by the Assessing Officer, Whereas the said report of the Special Auditor was given much after the completion of Assessment in the case of the Appellant. 4. That the Commissioner of Income Tax has in view of the facts and circumstances of the case has failed to appreciate that special audit report was obtained in the case of L T Foods Limited and not in the case of assessee. Hence it cann .....

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cts and circumstances of the case the order of the Commissioner of Income Tax is unjust, illegal and bad in law because the amount given by the company for safe custody to its director / senior employees is neither a loan nor an advance and as such the provisions of section 2(22)(e) are not applicable. 7. That the Commissioner of Income Tax has ignored the fact that keeping of cash with the Director / Senior Employees is a normal business practice being followed for the last many years and the A .....

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ionnaire was issued to the assessee during the course of assessment and a question with reference to loans /dividend was specifically asked and as such it cannot be a case of lack of enquiry. 10. That the Commissioner of Income Tax failed to appreciate the fact that the view taken by the Assessing Officer is a possible view and as such there is no legal infirmity in the order and is beyond the purview of section 263. 11. That all the facts and circumstances of the case and the material available .....

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O since it was never a part of the record of the assessee. It was also submitted that the report of the special auditor was received much after the completion of the assessment of the assessee and hence it was impossible for the AO to have considered the same. The Ld. AR also submitted that the amount given by a Company for the safe custody of cash to its Directors or senior employees is neither a loan nor an advance so as to come within the purview of Sec. 2(22)(e) of the Act. It was further su .....

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010, wherein the relevant question appears at Sl. No. 13. He also drew attention to page 28 of the PB, wherein at Sl. No. 18 the details of loans have been provided to the AO during the assessment proceedings. The Ld. AR submitted that in view of his submissions the impugned order u/s 263 was not at all maintainable and was hence liable to be quashed. He also drew our attention to pages 62 & 63 of the PB which is a copy of the account of Mr. Ashok Arora in the books of LT Foods Ltd. to highl .....

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that 263 proceedings had been initiated legally in the case of the assessee and the impugned loan/advance clearly attracted the provisions of section 2(22)(e) of the Act and since there was an evident lack of enquiry on part of the AO, the findings of the Ld. CIT ought to be upheld. 6. We have heard the rival submissions and perused the records. The provisions of section 263 read as under: "263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and .....

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reiterate the governing principles laid down by the Hon ble Courts with regard to the exercise of power by the Commissioner under the provisions of Section 263 of the Act. The power of suo moto revision exercisable by the Commissioner is undoubtedly supervisory in nature. The opening words of Section 263 empower the Commissioner to call for and examine the record of any proceedings under the Act. A bare reading of Section 263 also makes it clear that the Commissioner has to be satisfied of twin .....

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sion "erroneous", a Division Bench of the Hon ble Bombay High Court in CIT vs. Gabriel India Ltd., (1993) 203 ITR 108 (Bombay), held with reference to Black's Law Dictionary that an "erroneous judgment" means "one rendered according to course and practice of Court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles" and thus it is clear that an order cannot be terms as "erroneous" unless it is not in accor .....

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r cannot be the subject matter of revision because the second requirement also must be fulfilled. There must be material on record to show that tax which was lawfully exigible has not been imposed [See Gabriel India Ltd. (supra)]. However, the expression "prejudicial to the interest of the revenue", as held by the Hon ble Supreme Court in the Malabar Industrial Co. Ltd.'s case, is not an expression of art and is not defined in the Act and, therefore, must be understood in its ordin .....

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h as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized." Thus, the Commissioner's exercise of revisional jurisdiction under the provisions of Section 263 cannot be based on whims or caprice. It is trite law that it is a quasi judicial power hedged in with limitation and not an unbridled and unchartered arbitrary power. The exercise of the power is limited to cases where the Commissioner on examining the .....

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. It is only in cases of "lack of inquiry" that the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and passing orders thereon. In Gabriel India Ltd. (supra), it was expressly observed:- "The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law tha .....

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in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualized where the Income-tax Officer .....

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ould not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasijudicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. x x x x There must be some prima facie material on record to show that tax which was lawfully exigible has n .....

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rest of the revenue, will not suffice. The exercise of the power being quasijudicial in nature, the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income- tax Officer was not only erroneous but was prejudicial to the interest of the revenue. Thus, while the AO is not called upon to write an elabor .....

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Officer had completed the assessment after considering and the facts but the commissioner revised the assessment order on the ground that the Assessing Officer had not made proper enquiries, the Tribunal was held justified in reversing the order of the commissioner and restoring that of the assessing officer. Commissioner cannot re-examine accounts and substitute his judgment for that of the Assessing Officer. An order cannot be termed as erroneous unless it is not in accordance with law. If ass .....

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rcumstances of the case and determines the income either by making the accounts or by making some estimates himself. The commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer was on lower side and, left to the commissioner, he would have estimated the income at a higher figure that the one determined by the Assessing Officer. That would not vest the Commissioner with the power to re-examine the accounts and determine the income himself at a higher f .....

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onclusion, such a conclusion cannot be considered erroneous simply because the commissioner does not feel satisfied with the conclusion. It may be that in the opinion of the commissioner, the order in question is prejudicial to the interests of the revenue. But that by itself would not be enough to vest the commissioner with the powers of suo motu revision because the first requirement, namely, that the order is erroneous, is lacking. 13. The Hon ble Delhi High Court in CIT vs. Sunbeam Auto Ltd .....

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ifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed r .....

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