Principal Commissioner Of Income Tax, Central, Kolkata-2 v. M/S. Suprabha Industries Limited

Form No. IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE PRESENT: THE HON’BLE JUSTICE T.S. SIVAGNANAMAndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA IA NO: GA/2/2021 in ITAT/11/2021 PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL, KOLKATA-2VERSUS M/S. SUPRABHA INDUSTRIES LIMITED For the appellant: Mr. P. K. Bhowmick, Adv., Mr. Soumen Bhattacharjee, Adv. For the respondent: Mr. Anil Kumar Dugar, Adv., Mr. Rajarshi Chatterjee, Adv. Heard on : January 18, 2022. Judgement on : January 18, 2022. T.S. SIVAGNANAM, J. :This appeal by the revenue filed under Section 260A of the Income Tax Act, 1961 [the Act, in brevity] isdirected against the order dated 03.05.2019 passed by the Income TaxAppellate Tribunal, “A” Bench, Kolkata [the Tribunal] in ITAno.541/Kol/2018 for the assessment year 2012-13. The revenue has raised the following substantial questions oflaw for our consideration: a.Whether the learned Tribunal has committed substantialerror 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 theloan amounts in question received by the assessee duringthe year under consideration from other group companies ?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 theloan amounts in question received by the assessee duringthe year under consideration from other group companies ? b.Whether the learned Tribunal has committed substantialerror 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 Officerin original assessment order passed under section153A/143[3] of the Income Tax Act, 1961, erroneously notadded income being deemed dividend under section 2[22][e]of Income Tax Act, 1961 chargeable to tax without makingany enquiry and verification whatsoever which rendered theassessment order erroneous so as to prejudicial to theinterest of the revenue ?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 Officerin original assessment order passed under section153A/143[3] of the Income Tax Act, 1961, erroneously notadded income being deemed dividend under section 2[22][e]of Income Tax Act, 1961 chargeable to tax without makingany enquiry and verification whatsoever which rendered theassessment order erroneous so as to prejudicial to theinterest of the revenue ? c.Whether the learned Tribunal has committed substantialerror 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 AssessingOfficer has not only made the enquiry or verification asrequired but a conscious decision was taken by him thatsection 2[22][e] of the Income Tax Act, 1961 is not applicableerror 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 AssessingOfficer has not only made the enquiry or verification asrequired but a conscious decision was taken by him thatsection 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 standingcounsel appearing for the appellant and Mr. Dugar, learned counselappearing for the respondent/assessee. to the loan transaction which is arbitrarily, unreasonaable and perverse ? We have heard Mr. P. K. Bhowmick, learned senior standingcounsel appearing for the appellant and Mr. Dugar, learned counselappearing for the respondent/assessee. Two issues arise for consideration. Firstly, whether thePrincipal Commissioner of Income Tax, Central-2, Kolkata wasjustified in invoking his power under Section 263 of the Act andsetting aside the order of assessment passed by the Assessing Officerunder section 153A read with Section 143(3) dated 30.03.2016. Thesecond issue is whether Section 2(22)(e) of the Act could have beeninvoked by the PCIT and directed the Assessing Officer to re-do theassessment by applying the said provision and cause necessaryexamination of the issue and re-computed the assessee’s income. Sofar as the second issue is concerned, on going through the orderpassed by the Tribunal, we find that the revenue has not disputed thelegal position that Section 2(22)(e) of the Act would be whollyinapplicable in the loan transaction and the question of deemeddividend arising therefrom does not arise, specially when on facts theassessee’s case was that a sum of Rs.40 lakhs was availed as anunsecured loan and the interest was also paid. In paragraph 7 of theimpugned order the Tribunal recorded the stand taken by the revenueaccepting the legal position. However, the argument of the revenuewas that the Assessing Officer while completing the assessment didnot take note of the legal position in a proper manner and no enquiry was conducted. This argument was rejected by the Tribunal. We findon facts that the relevant documentary evidence was called for by theAssessing Officer during the course of assessment proceeding and thesame were furnished by the assessee. The details of shareholdersholding more than 10% shares in the assessee-company was alsocalled for by the Assessing Officer, which was furnished by theassessee. In the tax audit report filed by the assessee along with thereturn of income, the unsecured loan of Rs.40 lakhs received by theassessee during the year under consideration from M/s. VijayshreeIndustries Pvt. Ltd. and squared off in the year itself was recorded andeven interest paid thereon was shown in the tax audit report in thedetails of payments made to related persons as specified underSection 40A(2)(b). Thus, the assessee was able to demonstrate beforethe Tribunal that all relevant records were available in the file of theAssessing Officer and he rightly applied the legal position and grantedrelief to the assessee. These aspects were examined by the Tribunaland it was found that there was no justification for invoking the powerunder Section 263 of the Act. Furthermore, the Tribunal noted thatthe Assessing Officer has taken a conscious decision bearing in mindthe legal position that section 2(22)(e) of the Act was not applicable tothe loan amount of Rs.40 lakhs received by the assessee.Thus, we findthat the Tribunal rightly allowed the appeal filed by the assessee andgranted relief. The said decision of the Tribunal, therefore, does notcall for any interference. In the result, the appeal filed by the revenueis dismissed and the substantial questions of law are answered against the revenue. The application, IA No.GA/2/2021 for stay alsostands dismissed. No costs. (T.S. SIVAGNANAM, J.) I agree. (HIRANMAY BHATTACHARYYA, J.) pkd/S.PalAR(CR)