T.S. Sivagnanam, J
This appeal by the revenue filed under Section 260A of the Income Tax Act, 1961 [the Act, in brevity] is directed against the order dated 03.05.2019
passed by the Income Tax Appellate Tribunal, “A†Bench, Kolkata [the Tribunal] in ITA no.541/Kol/2018 for the assessment year 2012-13.
The revenue has raised the following substantial questions of law for our consideration:
a. Whether the learned Tribunal has committed substantial error in law in setting aside the order passed by Pr. CIT, Central-2, Kolkata under section
263 of the Income Tax Act, 1961 holding that section 2[22][e] was not applicable to the loan amounts in question received by the assessee during the
year under consideration from other group companies ?
b. Whether the learned Tribunal has committed substantial error in law in setting aside the order passed by Pr. CIT, Central-2, Kolkata under section
263 of the Income Tax Act, 1961 completely ignoring the facts that the Assessing Officer in original assessment order passed under section
153A/143[3] of the Income Tax Act, 1961, erroneously not added income being deemed dividend under section 2[22][e] of Income Tax Act, 1961
chargeable to tax without making any enquiry and verification whatsoever which rendered the assessment order erroneous so as to prejudicial to the
interest of the revenue ?
c. Whether the learned Tribunal has committed substantial error in law in setting aside the order passed by Pr. CIT, Central-2, Kolkata under section
263 of the Income Tax Act, 1961 on account of its purported finding that the Assessing Officer has not only made the enquiry or verification as
required but a conscious decision was taken by him that section 2[22][e] of the Income Tax Act, 1961 is not applicable to the loan transaction which is
arbitrarily, unreasonaable and perverse ?
We have heard Mr. P. K. Bhowmick, learned senior standing counsel appearing for the appellant and Mr. Dugar, learned counsel appearing for the
respondent/assessee.
Two issues arise for consideration. Firstly, whether the Principal Commissioner of Income Tax, Central-2, Kolkata [PCIT] was justified in invoking his
power under Section 263 of the Act and setting aside the order of assessment passed by the Assessing Officer under section 153A read with Section
143(3) dated 30.03.2016. The second issue is whether Section 2(22)(e) of the Act could have been invoked by the PCIT and directed the Assessing
Officer to re-do the assessment by applying the said provision and cause necessary examination of the issue and re-computed the assessee’s
income. So far as the second issue is concerned, on going through the order passed by the Tribunal, we find that the revenue has not disputed the legal
position that Section 2(22)(e) of the Act would be wholly inapplicable in the loan transaction and the question of deemed dividend arising therefrom
does not arise, specially when on facts the assessee’s case was that a sum of Rs.40 lakhs was availed as an unsecured loan and the interest was
also paid. In paragraph 7 of the impugned order the Tribunal recorded the stand taken by the revenue accepting the legal position. However, the
argument of the revenue was that the Assessing Officer while completing the assessment did not take note of the legal position in a proper manner
and no enquiry was conducted. This argument was rejected by the Tribunal. We find on facts that the relevant documentary evidence was called for
by the Assessing Officer during the course of assessment proceeding and the same were furnished by the assessee. The details of shareholders
holding more than 10% shares in the assessee-company was also called for by the Assessing Officer, which was furnished by the assessee. In the tax
audit report filed by the assessee along with the return of income, the unsecured loan of Rs.40 lakhs received by the assessee during the year under
consideration from M/s. Vijayshree Industries Pvt. Ltd. and squared off in the year itself was recorded and even interest paid thereon was shown in
the tax audit report in the details of payments made to related persons as specified under Section 40A(2)(b). Thus, the assessee was able to
demonstrate before the Tribunal that all relevant records were available in the file of the Assessing Officer and he rightly applied the legal position and
granted relief to the assessee. These aspects were examined by the Tribunal and it was found that there was no justification for invoking the power
under Section 263 of the Act. Furthermore, the Tribunal noted that the Assessing Officer has taken a conscious decision bearing in mind the legal
position that section 2(22)(e) of the Act was not applicable to the loan amount of Rs.40 lakhs received by the assessee.Thus, we find that the Tribunal
rightly allowed the appeal filed by the assessee and granted relief. The said decision of the Tribunal, therefore, does not call for any interference. In
the result, the appeal filed by the revenue is dismissed and the substantial questions of law are answered against the revenue. The application, IA
No.GA/2/2021 for stay also stands dismissed.
No costs.
