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TMI Blog2023 (12) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a delay of 315 days. However, we have noted that due to the Covid-19 pandemic, the limitation prescribed for filing appeals was extended till further orders by the Hon'ble Supreme Court vide its order dated 23/03/2020 in Suo Moto Writ Petition (Civil) No.(s) 3/2020. And the same was ultimately extended upto 28th February 2022 in M.A No.21 of 2022 dated 10th January 2022. This period of extension given by the Supreme Court is therefore to be excluded for the purpose of limitation in filing appeal before the various authorities. Therefore, considering the same, the delay in filing present appeal attributed to the COVID period from 23rd March, 2020 till 31st March, 2021, when the appeal was filed before us, is to be excluded for the purpose of quantifying the period of delay. Keeping in view the above extended period of limitation by the Hon'ble Supreme Court, the impugned delay of 315 is condoned, and we proceed to dispose of the appeal of the assessee on merit. 4. The grounds raised are as under: 1. The Learned Pr. Commissioner of Income Tax grossly erred in setting aside the order of AO holding that the order passed by the AO is erroneous and prejudicial to the interests of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2015-16, it has been noticed as under:- 1) The assessee is a company carrying on the business in trading of commodities through MCX and NCDEX and incurred heavy losses as per the profit & loss account filed. It filed the return of income declaring current year's loss of Rs. 33,78,626/-on 30.10.2015. 2) The case was selected for limited scrutiny purpose and to verify the following specific issues:- i) Large increase in the unsecured loans ii) Low income in comparison to high loans / advances / investment in shares. 3) The Assessing Officer has made a disallowance of Rs. 41,044/- by invoking the provisions of section 14A of the Act in respect expenses incurred in relation to earning of exempt income and by adopting the formula as provided in Rule 8D of the IT. Rules, 1962. 4) On careful perusal of the case-records called for from the Assessing Officer, it is noticed that the assessee-company is engaged in the business of trading in commodities through recognized stock exchanges. The assessee-company is a private limited company in which the public is not substantially interested. 5) It had made loan transactions with a company MAP Ltd.(PAN AAICM0132C) and from pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act were not applicable for loan transactions entered into by the assessee and received from MAP Ltd. during the impugned year. The ld.Pr.CIT, however, was not convinced with the explanation of the assessee. He analyzed all facts pertaining to the impugned issue, pointing out lucidly how the assessee qualified on every parameter for invocation of section 2(22)(e) of the Act on account of loan received during the year from MAP Ltd. He gave a detailed factual finding in this regard from para 3 to para-3.8 of his order, and finding the assessee to fulfill all parameters required for invoking section 2(22)(e) of the Act, he directed the AO to tax deemed dividend income of Rs. 57,43,916/- ,being the extent of accumulated profit in the case of MAP Ltd, in the hands of the assessee as per the provisions of the section 2(22)(e) of the Act. Further, he found that the assessee had also received loans from another company MAP Cotton P.Ltd. which also qualified as deemed dividend in terms of provisions of section 2(22)(e) of the Act. Accordingly, he directed the AO to tax the loans received by the assessee from the MAP Cotton P.Ltd. of Rs. 27,92,236/- to the extent of accumulated profit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 2.3 of the ld.Pr.CIT's order at sub-para 3 to 5 as under: 3) The revision of the assessment was to be made only if the assessment order passed by the A.O. was erroneous and prejudicial to the interest of revenue as contemplated in section 263 of the Act. 4) The very basis on which the revision is sought to be made is incorrect. The MAP limited had issued 19672 shares to the assessee in the financial year 2012-13 which constituted 20.51% of the shareholding and 10.25% of the voting rights. The shares were issued with differential voting rights (DVR)^fo the assessee on 08.12.2012 so as to comply with the then prevailing regularity requirement. After this allotment, the assessee was owning 10.25% of voting rights. In support of this contention, the assessee company has also filed a copy of resolution passed by MAP Ltd. 5) It has been further stated that there was a second issue of shares by MAP Ltd. during F. Yrs 2013-14 and 2014-15 and the assessee-company had acquired 12878 shares further in MAP Ltd. in F.Y.2014-15 and there was total holding of 32550 shares in MAP Ltd. which was equivalent to 13.25% of shareholding and 6.63% of voting rights. Thus, the assessee company was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of dividend (whether with or without a right to participate in profit) holding not less than ten percent of the voting power ? Yes. The assessee-company is a beneficial share owner of shares which are not entitled to a fixed rate of dividend whether with or without a right to participate in profit holding not less than ten percent of the voting power. As per the details furnished, the voting power of the Assessee-company has been shown at 13.25% ith 32550 shares held by it during the previous year ending on 31.03.2015. 11. Therefore, we find that the ld.Pr.CIT found the assessee to fulfill all parameters of section 2(22)(e) of the Act based on incorrect appreciation of the facts which were already there before him and noted by him. Therefore, since as per the finding of the ld.Pr.CIT himself, the assessee's beneficial ownership of the shares in MAP Ltd. alongwith voting power fall below the criteria specified for invocation of section 2(22)(e) of the Act, the said section was not applicable to the facts of the present case. Therefore, finding of error by the ld.Pr.CIT in the assessment order for non-invocation of section 2(22)(e) of the Act on the loans received by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. That accordingly, in para-4 of the order, he noted that since the assessee was not confronted with this error in the show cause notice issued to it under section 263 of the Act, he accordingly directed the AO to afford fresh opportunity of hearing to the assessee, and thereafter decide the issue. The relevant part-4 is reproduced as under: "4.0 In view of the above detailed discussion, the A.O. is directed to tax deemed dividend income of Rs. 57,43,916/- being the accumulated profit in the case of MAP Limited and of Rs. 27,92,236/- being the accumulated profit in the case of MAP Cotton Pvt. Ltd. totaling to Rs. 85,36,152/- as per the provisions of section 2(22)(e) of the Act. So far as the taxing of the deemed dividend income of Rs. 27,92,236/- is concerned, the A.O. shall afford a fresh opportunity of being heard to the assessee so as to meet the principles of natural justice for the reason that in the show cause notice u/s 263 of the Act, the said issue had been remained to be mentioned." 14. It is evident, therefore, that this finding of error by the ld.Pr.CIT with regard to the loans received from MAP Cotton P.Ltd. qualifying as deemed dividend under section 2(22)(e) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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