TMI Blog2019 (5) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... n amounts in question as alleged by the Principal CIT and the revision under section 263 by the ld. Principal was not called for. AO is not only expected to be aware of such legal position but is also duty-bound to apply the same while completing the assessments, especially when it is propounded by PRADIP KUMAR MALHOTRA VERSUS COMMISSIONER OF INCOME-TAX, WEST BENGAL-V [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT] . In the present case, AO thus had not only made the enquiry or verification as required in the facts of the case to ascertain the applicability of section 2(22)(e) to the loan amounts received by the assessee from the other group companies, but a conscious decision was also taken by him keeping in view the legal position that section 2(22)(e) was not applicable to the loan amounts in question received by the assessee during the years under consideration from the other Group Companies. There was thus no error in the orders of the AO for the years under consideration passed u/s 153A/143(3) as alleged by the Principal CIT and the revision of the same under section 263 by the ld. Principal CIT was not called for. In that view of the matter, we set aside the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (22)(e) of the Act and there was an error in the orders of the Assessing Officer passed under section 153A/143(3) in not making any enquiries/verification in respect of the said loans so as to consider the applicability of section 2(22)(e). He accordingly issued notices under section 263 requiring the assessee to show-cause as to why remedial action should not be taken by exercising the powers under section 263 to revise the orders passed by the Assessing Officer under section 153A/143(3) for all the five years under consideration. 3. In reply to the show-cause notices issued by the ld. Principal CIT under section 263, a written submission was filed by the assessee vide letter dated 24.11.2017 stating, inter alia, as under:- With respect to your query regarding implication of section 2(22)(e) of the Income Tax Act, 1961 with respect to loan transactions entered into with M/s Govind Promoters Pvt. Ltd. we would like to stole that M/s Govind Promoters Pvt. Ltd. being Non-Banking Financial Company is out of the purview of the above mentioned section since the company advances loan in its ordinary course of business and lending of money is substantial pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld like to place reliance on a recent case of DCIT vs. Sindhu Holdings Ltd. ITA No.2766 (Delhi) of 2012) (A.Y. 2008-09) (29.01.2016) where it has been held by the Hon'ble Delhi ITAT that - moreover, the fender companies are NBFC which are also excluded from the said deeming provision, therefore, we do not find any merit in this ground of appeal and we uphold the ld. CIT (A)'s order and dismiss this ground. We would like to further submit that the said company had duly charged interest on the loan given and thus such transaction should be treated as being entered during the normal course of business. Copy of loan confirmation is enclosed herewith for your kind perusal. Hence, the said loan transaction should not be considered as deemed dividend and chargeable in the hands of the assessee company. In support of our contention we would like to submit that the Hon'ble Kolkata High Court in the case of Pradip Kumar Malhotra v CIT (2011) 338 ITR 538 held that for gratuitous loan or advances given by a company to those classes of shareholders would come within the purview of section 2(22) (e) but not to the clauses where loan or advances is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee. He also invited our attention to the relevant Annexure of the Tax Audit Report submitted by the assessee alongwith its returns of income for all the five years under consideration to point out that the loan amounts in question taken by the assessee from other Group concerns during the years under consideration and squared off during the said years itself were duly reflected therein. He also pointed out that the full particulars of persons who were beneficial owners of equity shares of the assessee-Company holding more than 10% shares were called for by the Assessing Officer during the course of assessment proceedings and the same were duly furnished by the assessee. He submitted that the assessee-company during the years under consideration had paid interest on the loans in question taken from the other Group Compmanies and the same was duly shown in the relevant Annexure of the Tax Audit report showing payments to related persons specified in section 40A(2)(b) of the Act. He contended that all the relevant details thus were furnished by the assessee in the Tax Audit Reports filed alongwith the returns of income as well as during the course of assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the legal position pointed out by the ld. Counsel for the assessee by relying, inter alia, on the decision of the Hon ble Calcutta High Court in the case of Pradip Kumar Malhotra (supra), the ld. D.R. contended that there is nothing to show that the Assessing Officer has taken into consideration this legal position while passing the order under section 153A/143(3). He contended that the enquiry or verification on the issue of applicability of section 2(22)(e) as required in the facts and circumstances of the case thus was not made by the Assessing Officer while passing the orders under section 153A/143(3) and such lack of enquiry or verification made the said orders erroneous as well as prejudicial to the interest of revenue warranting revision under section 263 as rightly done by the ld. Principal CIT. 6. We have considered the rival submissions and also perused the relevant material available on record. As demonstrated by the ld. Counsel for the assessee on the basis of relevant documentary evidence placed in the paper book, the details of unsecured loans taken during the years under consideration by the assessee-company from the other Group Companies were calle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on thus could not be treated as deemed dividend under section 2(22)(e) even on this ground as rightly contended by the ld. Counsel for the assessee. At the time of hearing before the Tribunal, the ld. D.R. has not disputed this legal position cited by the ld. Counsel for the assessee in support of the assessee s case that section 2(22)(e) was not applicable to the loan amounts in question received by the assessee-company from the other Group Companies. He, however, has contended that there is nothing on record to show that this legal position was specifically considered by the Assessing Officer while completing the assessments under section 153A/143(3) of the Act. We are unable to accept this contention of the ld. D.R. In our opinion, the Assessing Officer is not only expected to be aware of such legal position but is also duty-bound to apply the same while completing the assessments, especially when it is propounded by the Hon ble Jurisdictional High Court. In the present case, the Assessing Officer thus had not only made the enquiry or verification as required in the facts of the case to ascertain the applicability of section 2(22)(e) to the loan amounts received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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