Shri Subrata Banik, executor to the estate of Late Bithika Banik, Kolkata v. CIT, Central - III, Kolkata, Kolkata

ITA 821/KOL/2011 | 2001-2002
Pronouncement Date: 11-07-2013

Appeal Details

RSA Number 82123514 RSA 2011
Assessee PAN AEFPB9099F
Bench Kolkata
Appeal Number ITA 821/KOL/2011
Duration Of Justice 2 year(s) 1 month(s) 11 day(s)
Appellant Shri Subrata Banik, executor to the estate of Late Bithika Banik, Kolkata
Respondent CIT, Central - III, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 11-07-2013
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 11-07-2013
Assessment Year 2001-2002
Appeal Filed On 30-05-2011
Judgment Text
B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE . . . . . . . . ! /AND ' #!' ) [BEFORE SHRI N. S. SAINI AM & SHRI MAHAVIR SINGH JM] !$ !$ !$ !$ / I.T.A NOS. 821 TO 823/KOL/2011 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEARS: 2001-02 TO 200 3- 0 4 & !$ !$ !$ !$ / I.T.A NOS. 824 & 825/KOL/2011 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEARS: 2005-06 & 200 6- 0 7 SHRI SUBRATA BANIK EXECUTOR TO THE ESTATE -VS- C OMMISSIONER OF INCOME-TAX CENTRAL-III OF LATE BITHIKA BANIK. (PAN:AEFPB9099F) KOLKATA. ()* /APPELLANT ) (+ )*/ RESPONDENT ) & !$ !$ !$ !$ / I.T.A NOS. 826 TO 828/KOL/2011 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEARS: 2001-02 TO 200 3- 0 4 & !$ !$ !$ !$ / I.T.A NOS. 829 & 830/KOL/2011 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEARS: 2005-06 & 200 6- 0 7 SHRI SUBRATA BANIK -VS- COMMISSIONER OF INCOME -TAX CENTRAL-III (PAN:AECPB8509B) KOLKATA. ()* /APPELLANT ) (+ )*/ RESPONDENT ) DATE OF HEARING: 13.06.2013 DATE OF PRONOUNCEMENT: 11.07.2013 FOR THE APPELLANT: S/SHRI S. JHAJHARIA FCA & SUJOY SEN ADVOCATE FOR THE RESPONDENT: SHRI TAPAS KR. DUTTA CIT(DR) - / ORDER PER BENCH: ALL THESE APPEALS BY ASSESSEE ARE ARISING OUT OF SE PARATE ORDERS OF CIT KOLKATA PASSED U/S. 263 OF THE INCOME-TAX ACT 1961 (HEREINAFTER R EFERRED TO AS THE ACT) IN MEMO NOS. CIT C-III/KOL/263/SUBRATA BANIK./2010-11/4862 4865 4870 4875 4872 4847 4851 4854 4858 & 4861 ALL DATED 28.03.2011 RESPECTIVELY. ASSE SSMENTS WERE FRAMED SEPARATELY BY ACIT CC-II KOLKATA U/S. 153A/144 FOR ASSESSMENT YEARS 2 001-02 TO 2003-04 IN ITA NOS. 821 TO 823/K/2011 & ASSESSMENT YEARS 2005-06 & 2006-07 IN ITA NO. 824&825/K/2011 VIDE HIS ORDERS ALL DATED 31.12.2008 RESPECTIVELY AND ASSESS MENTS WERE FRAMED BY ACIT CC-II KOLKATA U/S. 153A/143(3) FOR AY 2001-02 TO 2003-04 IN ITA N OS. 826 TO 828/K/2011 & FOR AY 2005- 06 & 2006-07 IN ITA NOS. 829&830/K/2011 VIDE HIS OR DERS ALL DATED 30.12.2008 RESPECTIVELY. 2 ITA NOS.821 TO 825/K/2011 SHRI SUBRATA BANIK EXECUTOR TO THE ESTATE OF LATE BITHIKA BANK AYS: 2001-02 TO 2006-07 & ITA NOS. 826 TO 830/K/2011 SHRI SUBRATA BANIK AY 2001-02 TO TO 2006-07 2. THE ONLY ISSUE IN THESE APPEALS OF ASSESSEE IS A S REGARDS TO REVISION ORDERS PASSED U/S. 263 OF THE ACT BY CIT CENTRAL-III KOLKATA FOR REV ISING THE ASSESSMENT ORDERS PASSED U/S. 143(3) R.W.S. 153A OF THE ACT FOR INVOKING THE PROV ISIONS OF SECTION 2(22)(E) OF THE ACT TREATING LOAN AMOUNTS AS DEEMED DIVIDEND. THE ASSESSEE HAS RAISED COMMON GROUND IN ALL THESE TEN APPEALS. FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTI CAL IN ALL THESE APPEALS AND THE LEAD APPEAL BEING AY 2001-02 IN ITA NO. 826/K/2011WILL BE TAKEN UP FIRST AND THE ISSUE WILL BE DECIDED. THE GROUNDS RAISED IN ITA NO. 826/K/2011 READ AS UN DER: 1. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE HONBLE CIT WAS WHOLLY WRONG AND UNJUSTIFIED IN INITIATING THE PROC EEDING U/S 263 OF THE I. T. ACT ON 07.03.2011 AND SUBSEQUENTLY PASSING AN ORDER OF U/S 263 ON 28.03.2011 DIRECTING REVISION OF THE ORDER OF SEARCH & SEIZURE ASSESSMEN T U/S L43(3)/153A DT. 30.12.2008 WITHOUT PROPER APPLICATION OF MIND AND WITHOUT APPR ECIATION OF THE FACTS. THE NOTICE AS WELL AS THE ORDER U/S 263. BEING NOT VALID IN THE EYE OL LAW ARE LIABLE TO BE QUASHED/CANCELLED AS NONE OF THE CONDITIONS PRECED ENT FOR ASSUMPTION OF JURISDICTION U/S 263 WERE FULFILLED IN THE CASE. 2. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE HONBLE CIT WAS WHOLLY WRONG AND UNJUSTIFIED IN ISSUING THE SHOW CAUSE NOT ICE U/S 263 ON 07.03.2011 WHICH WAS BARRED BY LIMITATION SINCE THE CAUSE OF ACTION IF ANY ON THE SAME SET OF FACTS HAD ARISEN IN COURSE OF THE ORIGNAL ASSESSMENT LONG BEFORE TH E COMPLETION OF THE S & S ASSESSMENT U/S 143(3)/153A ON 30.12.2008. THE NOTICE AS WELL A S THE ORDER U/S 263 BEING ILLEGAL AND BARRED BY LIMITATION ARE LIABLE TO BE QUASHED/CANCE LLED. 3. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE HONBLE CIT WAS WHOLLY WRONG AND UNJUSTIFIED IN PASSING THE SAID ORDER U/S 263 ON 28.03.2011 FOR REVISION OF THE ORDER U/S 143(3)/153A BEFORE TAKING UP SUCH COURSE OF ACTION U/S 263 AGAINST THE EARLIER ASSESSMENT. THE ACTION OF THE HONBLE CIT WAS WHOLL Y ARBITRARY UNJUSIFIED UNCALLED FOR BAD IN LAW AND BARRED BY LIMITATION. 4. FOR THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE HONBLE CIT WAS WHOLLY WRONG AND UNJUSTIFIED IN INITIATING THE PROCEEDING U/S 263 OF THE ACT ON A MERE CHANGE OF OPINION AND SUBSEQUENTLY PASSING THE SAID ORDER U/S 263 WITHOUT CONSIDERING THE FACTS THAT THE ORDER U/S 143(3)/153A WERE COMPLETED BY TH E A.O AFTER THE DUE PROCESS OF SCRUTINY AND EXAMINATION OF THE RECORDS. 5. WITHOUT PREJUDICE TO THE GROUND NOS. 1 TO 4 ABOV E AND EVEN OTHERWISE THE HONBLE CIT WAS WHOLLY WRONG AND UNJUSTIFIED IN PASSING THE SAID ORDER U/S 263 DIRECTING THE A.O TO REVISE THE ORDER OF ASSESSMENT U/S 143(3)/153A WHICH WAS SUBSEQUENTLY REVISED U/S.154 ON 20.09.2010 AND ENHANCE THE ASSESSED TOT AL INCOME BY ADDITION OF A SUM OF RS. 11 73 913/- AS DEEMED DIVIDEND INCOME U/S 2(22)(E) OF THE ACT WITHOUT CONSIDERING THE FACT THAT SECTION 2(22)(E) WAS NOT AT ALL APPLICABL E IN THE CASE. THE ACTION OF THE HONBLE CIT WAS WHOLLY ARBITRARY. UNJUSTIFIED UNCALLED FO R AND BAD IN LAW. 3. BRIEFLY STATED FACTS ARE THAT A SEARCH AND SEIZ URE OPERATION U/S. 132 OF THE ACT WAS CONDUCTED ON BUSINESS AND RESIDENTIAL PREMISES OF T HE ASSESSEE AND HIS GROUP COMPANIES ON 06.11.2006. THE ASSESSEE IS ASSESSED WITH DCIT CEN TRAL CIRCLE-III KOLKATA. ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(1) OF THE ACT FOR THIS AY 2001-02 ON 15.01.2003 WHEREAS 3 ITA NOS.821 TO 825/K/2011 SHRI SUBRATA BANIK EXECUTOR TO THE ESTATE OF LATE BITHIKA BANK AYS: 2001-02 TO 2006-07 & ITA NOS. 826 TO 830/K/2011 SHRI SUBRATA BANIK AY 2001-02 TO TO 2006-07 ASSESSEE FILED RETURN OF INCOME ON 02.10.2001. PUR SUANT TO SEARCH NOTICE U/S. 153A OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE ON 24.08.2007 AND ASSESSEE FILED HIS RETURN OF INCOME ON 21.01.2008. ASSESSMENT U/S. 153A/143(3) OF THE ACT WAS FRAMED BY ACIT CENTRAL CIRCLE-II KOLKATA VIDE ORDER DATED 30.12.2008. SUBSEQUENTLY CIT CENTRAL-III KOLKATA ISSUED SHOW CAUSE NOTICE DATED 07.03.2011 AS UNDER: I) ON SCRUTINY OF ASSESSMENT RECORDS IT IS SEEN TH AT M/S. MAKSON DEVELOPERS PVT. LTD AND M/S AJANTA FOOTCARE (INDIA) LTD HAVE RECEIVED L OANS FROM ITS GROUP COMPANY M/S. AJANTA RUBBER INDIA PVT. LTD. DURING THE F.YR. 2000 -01 RELEVANT TO ASSESSMENT YEAR 2001-02 AMOUNTING TO RS. 5 00 000/- AND RS.25 00 00 0/- RESPECTIVELY. II) IT IS ALSO FOUND THAT OUT OF 2300 SHARES ISSUED BY M/S. AJANTA RUBBER INDIA PVT. LTD.; YOU HELD 900 SHARES. IN THE COMPANIES NAMELY M/S A JANTA FOOT CARE (INDIA) LTD AND M/S. MAKSON DEVELOPERS PVT. LTD YOU HELD MORE THAN 20% OF THE SHARE HOLDING OF THE COMPANIES. THUS YOU ARE THE PERSON HAVING SUBSTANTI AL INTEREST IN THE COMPANIES AS DEFINED U/S. 2(32) OF THE I.T ACT 1961. III) SECTION 2(22) OF THE INCOME TAX ACT L96L DEFI NES DIVIDEND. AS PER THE CLAUSE (E) OF SUB SECTION (22) OF SEC. 2 DIVIDEND INCLUDES - (E) ANY PAYMENT BY A COMPANY NOT BEING A COMPANY I N WHICH THE PUBLIC ARE SUBSTANTIALLY NTERESTED OF ANY SUM (WHETHER AS RE PRESENTNG A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AFTER THE 31ST D AY OF MAY 1987 BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER BEING A PERSON WH O IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE O F DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER OR TO ANY CONCERN IN WHICH SUCH SHARE HOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOL DER TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFIT S; IV) IT IS SEEN FROM THE RECORDS THAT THE I.T.O. WA RD-7 (1) KOLKATA HAS INFORMED THAT M/S. AJANTA RUBBER INDIA PVT. LTD. HAS ACCUMULATED PROFI T FOR DIFFERENT ASSESSMENT YEARS AS UNDER: ASSTT. YEAR ACCUMMULATED PROFITS AS PER BALANCE SHEETS 200102 RS. 82 76 749/- 200203 RS. 82 35 260/- 200304 RS. 81 89 729/- 200405 RS. 81 91 953/- 200506 RS. 92 48 568/- 200607 RS. 92 25 735/- IN VIEW OF ABOVE FACTS RS.5 00 000/- AND RS.25 00 0 00/- GIVEN BY M/S. AJANTA RUBBER INDIA PVT. LTD. TO M/S. MAKSON DEVELOPERS PVT. LTD. AND M/S. AJANTA FOOTCARE (INDIA) LTD. DURING THE ASSESSMENT YEAR 2001-02 IS REQUIRED TO BE TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE INCOME-TAX ACT 1961 IN YOUR H ANDS IN THE PROPORTION OF YOUR SHAREHOLDING IN THOSE COMPANIES. 4. THE ASSESSEE REPLIED THE SHOW CAUSE NOTICE BY FI LING A LETTER DATED 11.03.2011. THE CIT IN HIS REVISION ORDER DISCUSSED THE FACTS THAT DURI NG FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 4 ITA NOS.821 TO 825/K/2011 SHRI SUBRATA BANIK EXECUTOR TO THE ESTATE OF LATE BITHIKA BANK AYS: 2001-02 TO 2006-07 & ITA NOS. 826 TO 830/K/2011 SHRI SUBRATA BANIK AY 2001-02 TO TO 2006-07 2001-02 WHICH IS UNDER CONSIDERATION THE ASSESSEE AND LATE BITHIKA BANIK HAD SHAREHOLDING IN THE FOLLOWING COMPANIES IN THE RATIO GIVEN HEREUNDE R: NAME OF THE COMPANY TOTAL SHARES HELD BY ASSESSEE HELD BY LT. BITHIKA BANIK M/S. AJANTA RUBBER INDIA PVT. LTD. M/S. MAKSON DEVELOPERS PVT. LTD. M/S. AJANTA FOOTCARE (INDIA) PVT. LTD. 2300 OF RS.9 32 000 1500 900 OF RS.4 93 925 500 1400 OF RS.4 38 075 1000 IN VIEW OF THE ABOVE THE CIT NOTED THAT DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2001-02 AJANTA RUBBER INDIA PVT. LTD. ADVANCED A S UM OF RS.25 LAKH TO MAKSON DEVELOPERS PVT. LTD. AND RS.5 LAKH TO AJANTA FOOTCARE (INDIA) PVT. LTD. ACCORDING TO HIM THE ASSESSEE HAS SUBSTANTIAL INTEREST AS DEFINED U/S. 2(32) OF THE A CT IN ALL THE COMPANIES AS MENTIONED ABOVE BECAUSE HE CARRIES MORE THAN 20% OF THE VOTING POWE R. THE ASSESSEE IS A REGISTERED AS WELL AS BENEFICIAL OWNER OF SHARES IN THE COMPANIES MENTION ED ABOVE. ACCORDING TO HIM LOAN GIVEN BY AJANTA RUBBER INDIA PVT. LTD. TO MAKSON DEVELOPE RS PVT. LTD. AND ALSO AJANTA FOOTCARE (INDIA) PVT. LTD. IS TO BE TREATED AS DEEMED DIVIDE ND IN TERMS OF SECTION 2(22)(E) OF THE ACT. HE NOTED SINCE THERE IS ONE MORE SHAREHOLDER AND BOTH OF THEM HAVE SUBSTANTIAL INTEREST AS DEFINED U/S. 2(32) OF THE ACT IN ALL THE COMPANIES AS MENTI ONED ABOVE THE DIVIDEND IN THEIR HANDS HAS TO BE CONSIDERED ON THE BASIS OF THEIR PROPORTIONATE S HARE HOLDING IN THE LENDER COMPANY. THE ASSESSEE BEFORE CIT DURING THE ORIGINAL PROCEEDINGS REFERRED TO CLAUSE 3 OF SECTION 2(22)(E) OF THE ACT BUT CIT RELYING ON THE DECISION OF ITAT MUM BAI BENCH DECISION IN THE CASE OF ACIT VS. BHOWMICK COLOUR PVT. LTD. (2009) 118 ITD 1 (MUM .)(SB) TREATED THE LOAN GIVEN BY AJANTA RUBBER INDIA PVT. LTD. TO MAKSON DEVELOPERS PVT. LT D. AND AJANTA FOOTCARE (INDIA) PVT. LTD. AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE BY OBS ERVING IN PARA 26 & 27 AS UNDER: 26. I HAVE GONE THROUGH THE DETAILS OF LOANS GIVEN BY M/S. AJANTA RUBBER INDIA PVT LTD TO M/S MAKSON DEVELOPERS AND TO M/S AJANTA FOOTARE (INDIA) PVT. LTD. I HAVE ALSO GONE THROUGH THE DETAILS OF SHAREHOLDING OF THE ASSESSEE IN THE COMPANIES. ON THE BASIS OF THE FINANCIAL STATEMENTS FILED BY M/S. AJANTA RUBBER IN DIA PVT. LTD WORKING OF ACCUMULATED PROFITS HAS ALSO BEEN DONE. AFTER CONSIDERING ALL T HESE DETAILS AND WORKINGS COMPUTATION OF DIVIDEND AS PER THE PROVISIONS OF SECTION 2(22)( E) OF THE I.T. ACT 1961 HAS ALSO BEEN DONE. ALL THESE DETAILS AND WORKINGS ARE MADE A PAR T OF THIS ORDER AS ANNEXURE-1 ANNEXURE-2 AND ANNEXURE-3. AS PER THE WORKINGS THE AMOUNT OF DIVIDEND THAT HAS TO BE ADDED IN THE HANDS OF THE ASSESSEE IN THE ASSESSMEN T YEAR 2001-02 COMES TO RS.11 73 913/-. 27. FROM THE ABOVE DISCUSSION IT IS AMPLY CLEAR THA T THE IMPUGNED ASSESSMENT IS COMPLETED WITHOUT REQUISITE VERIFICATION ON THE ISS UE AS DISCUSSED .ABOVE. THEREFORE THE 5 ITA NOS.821 TO 825/K/2011 SHRI SUBRATA BANIK EXECUTOR TO THE ESTATE OF LATE BITHIKA BANK AYS: 2001-02 TO 2006-07 & ITA NOS. 826 TO 830/K/2011 SHRI SUBRATA BANIK AY 2001-02 TO TO 2006-07 ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTEREST OF REVENUE. THE INVOKING OF PROVISIONS OF SECTION 263 OF THE I.T. A CT HAS CORRECTLY BEEN TAKEN IN TIS CASE. ACCORDINGLY IN THE EXERCISE OF REVISIONARY POWERS U/S. 263 OF INCOME TAX ACT 1961 THE ASSESSMENT OF ASSESSMENT YEAR 2001-02 COMPLETED U/S . 153A/143(3) ON 30.12.2008 WHICH HAS SUBSEQUENTLY BEEN REVISED U/S. 154 OF THE I. T. ACT 1961 ON 20.09.2010 IS ENHANCED BY RS.11 73 913/-. THE ASSESSING OFFICER IS DIRECT ED TO REVISE THE ASSESSMENT TO THIS EXTENT AFTER AFFORDING REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THESE APPEALS RELATE TO ASSESSM ENT YEARS 2001-02 2002-03 2003-04 2005-06 AND 2006-07 AGAINST THE REVISION ORDER PASS ED BY CIT U/S. 263 OF THE ACT IN WHICH LOAN WAS ADVANCED BY AJANTA RUBBER INDIA PVT. LTD. TO MAKSON DEVELOPERS PVT. LTD. AND AJANTA FOOTCARE (INDIA) PVT. LTD. WHEREIN ASSESSEE HELD MORE THAN 10% SHARE IN LENDER COMPANY AND MORE THAN 20% IN THE BORROWER CO MPANY. SUCH LOAN ADVANCED TO THESE CONCERNS HAVE BEEN TREATED AS DEEMED DIVIDEND INCOME U/S. 2(22)(E) OF THE ACT BY REVISIONARY ORDER PASSED BY CIT U/S. 263 OF THE ACT . IT IS TO BE MENTIONED THAT NONE OF THE LOANS TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT HAS BEEN RECEIVED BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS REL IED ON BOARD CIRCULAR NO.495 DATED 22.09.1987 WHICH READS AS UNDER: 10.1 SECS. 104 TO 109 RELATE TO LEVY OF ADDITIONAL TAX ON CERTAIN CLOSELY-HELD COMPANIES (OTHER THAN THOSE IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED) F THEY FAIL TO DISTRIBUTE A SPECIFIED PERCENTAGE OF T HEIR DISTRIBUTABLE PROFITS AS DIVIDENDS. THESE PROVISIONS HAD LOST MUCH OF THEIR RELEVANCE WITH THE REDUCTION OF THE MAXIMUM MARGINAL RATE OF PERSONAL TAX TO 50 PER CENT WHICH IS LOWER THAN THE RATE FOR CORPORATION TAX ON CLOSELY-HELD COMPANIES. SECS. 104 TO 109 HAVE THEREFORE BEEN OMITTED BY THE FINANCE ACT 1987. 10.2 WITH THE DELETON OF SS. 104 TO 109 THERE WAS A LIKEHOOD OF CLOSELY-HELD COMPANIES NOT DISTRIBUTING THEIR PROFITS TO SHAREHO LDERS BY WAY OF DIVIDENDS BUT BY WAY OF LOANS OR ADVANCES SO THAT THESE ARE NOT TAXE D IN THE HANDS OF THE SHAREHOLDERS. TO FORESTALL HIS MAINPULATION SUB-CL . (E) OF CL. (22) OF S. 2 HAS BEEN SUITABLY AMENDED. UNDER THE EXISTING PROVISIONS PA YMENTS BY WAY OF LOANS OR ADVANCES TO SHAREHOLDERS HAVING SUBSTANTIAL INTERES T IN A COMPANY TO THE EXTENT TO WHICH THE COMPANY POSSESSES ACCUMULATED PROFITS IS TREATED AS DIVIDEND. THE SHAREHOLDERS HAVING SUBSTANTIAL INTEREST ARE THOSE WHO HAVE A SHAREHOLDING CARRYING NOT LESS THAN 20 PER CENT VOTING POWER AS PER THE PROVISIONS OF CL. (32) OF S. 2. THE AMENDMENT OF THE DEFINITION EXTENDS ITS A PPLICATION TO PAYMENTS MADE (I) TO A SHAREHOLDERS HOLDING NOT LESS THAN 10 PER CENT OF THE VOTING POWER OR (II) TO A CONCERN IN WHICH THE SHAREHOLDER HAS SUBSTANTIAL IN TEREST. CONCERN AS PER THE NEWLY INSERTED EXPLANATION 3(A) TO S. 2 (22) MEANS AN HUF OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDVIDUALS OR A COMPANY. A SHAREHOLDERS HAVING A SUBSTANTIAL INTEREST IN A CONCERN AS PER P ART (B) OF EXPLANATION 3 IS DEEMED TO BE ONE WHO IS BENEFICIALLY ENTITLED TO NO T LESS THAN 20 PER CENT OF THE NCOME OF SUCH CONCERN. 6 ITA NOS.821 TO 825/K/2011 SHRI SUBRATA BANIK EXECUTOR TO THE ESTATE OF LATE BITHIKA BANK AYS: 2001-02 TO 2006-07 & ITA NOS. 826 TO 830/K/2011 SHRI SUBRATA BANIK AY 2001-02 TO TO 2006-07 10.3 THE NEW PROVISION WOULD THEREFORE BE APPLICA BLE IN A CASE WHERE A SHAREHOLDER HAS 10 PER CENT OR MORE OF THE EQUITY C APITAL. FURTHER DEEMED DIVIDEND WOULD BE TAXED IN THE HANDS OF A CONCERN W HERE ALL THE FOLLOWING CONDITIONS ARE SATISFIED: (I) WHERE THE COMPANY MAKES THE PAYMENT BY WAY OF L OANS OR ADVANCES TO A CONCERN; (II) WHERE A MEMBER OR A PARTNER OF THE CONCERN HOL DS 10 PER CENT OF THE VOTING POWER IN THE COMPANY; AND (III) WHERE THE MEMBER OR PARTNER OF THE CONCERN IS ALSO BENEFICIALLY ENTITLED TO 20 PER CENT OF THE NCOME OF SUCH CONCERN. WTH A VIEW TO AVOID THE HARDSHIP IN CASES WHERE AD VANCES OR LOANS HAVE ALREADY BEEN GIVEN THE NEW PROVISIONS HAVE BEEN MADE APPLI CABLE ONLY IN CASES WHERE LOANS OR ADVANCES ARE GIVEN AFTER 3LST MAY 1987. THESE AMENDMENTS WILL APPLY N RELATION TO ASST. YR . 1988-89 AND SUBSEQUENT YEARS. FROM THE ABOVE CIRCULAR ISSUED BY CBDT IN TERMS OF SECTION 119 OF THE ACT MAKES IT ABUNDANTLY CLEAR THAT THE CIRCUMSTANCES MENTIONED I N THE ABOVE CIRCULAR THAT SUCH LOAN WILL BE TREATED AS DEEMED DIVIDEND INCOME U/S. 2(22 )(E) OF THE ACT IN THE HANDS OF BORROWER COMPANY OR CONCERNS IN WHICH THE SHAREHOLD ER IS HAVING BENEFICIAL INTEREST OF 10% IN LENDING COMPANY AND MORE THAN 20% IN THE BOR ROWER COMPANY. BUT BY THIS FINANCIAL CIRCULAR REVENUE WANTED TO REMOVE THE RIG ORS OF SECTION 2(22)(E) OF THE ACT SO THAT THE SHAREHOLDER HAS NOT TAXED WHO HAS NOT BORR OWED THE LOAN AT ALL. IN VIEW OF THE ABOVE CIRCULAR ISSUED BY CBDT ACCORDING TO ASSESSE E THE AO WHILE FRAMING ASSESSMENTS IN THESE YEARS U/S. 143(1) OR 143(3) IN SOME OF THE YEARS OR EVEN AFTER SEARCH ASSESSMENTS FRAMED U/S. 153A OF THE ACT COULD NOT HAVE TREATED THE LOAN RECEIVED BY THE BORROWER COMPANY FROM ANOTHER LENDER COMPANY WHEREI N ASSESSEE HAD HELD BENEFICIAL INTEREST OF 10% OF LENDER COMPANY AND 20% IN THE CA SE OF BORROWER COMPANY AS DEEMED DIVIDEND INCOME U/S. 2(22)(E) OF THE ACT IN THE HAN DS OF THE ASSESSEE AS SHAREHOLDER EVEN THOUGH IT MAY BE TREATED AS DEEMED DIVIDEND INCOME IN THE HANDS OF RECIPIENT COMPANY. IT WAS THE CONTENTION OF THE ASSESSEE BEFORE US THA T FROM THE ABOVE CBDT CIRCULAR THE POSITION IS CLEAR THAT THE AO COULD NOT HAVE TREATE D SUCH LOAN AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE T HE QUESTION OF ORDER OF AO PASSED U/S. 153A R.W.S. 143(3) OF THE ACT BEING ERRONEOUS INASM UCH AS PREJUDICIAL TO THE INTEREST OF REVENUE ON THIS ISSUE DOES NOT ARISE. NOW WE HAVE TO EXAMINE WHETHER THE AO HAS 7 ITA NOS.821 TO 825/K/2011 SHRI SUBRATA BANIK EXECUTOR TO THE ESTATE OF LATE BITHIKA BANK AYS: 2001-02 TO 2006-07 & ITA NOS. 826 TO 830/K/2011 SHRI SUBRATA BANIK AY 2001-02 TO TO 2006-07 FORMED AN OPINION WHILE FRAMING ASSESSMENTS U/S. 14 3(3) OR 143(1) OF THE ACT OR 153A OF THE ACT WHEN A DETAILED QUESTIONNAIRE WAS ISSUED T O THE ASSESSEE ON BOTH THE OCCASSIONS I.E. REGULAR ASSESSMENT AS WELL AS SEARCH ASSESSMEN T AND ASSESSEE REPLIED TO THE SAME. THE ASSESSEE HAS GIVEN THE DETAILS OF ASSESSMENTS FRAME D AS UNDER: ASSESSMENT YEAR DATE OF FILING OF RETURN ABATEMENT U/S. 143(3) ASSESSMENT U/S. 143(1)/143(3) MADE ON 2001-02 2002-03 2003-04 2005-06 02.10.01 25.10.02 31.10.03 29.10.05 31.03.04 31.03.05 31.03.06 SEARCH ON 06.11.06 BARRED ON 31.12.08 15.01.03 U/S. 143(1) 29.03.05 U/S. 143(3) 08.06.04 U/S. 143(1) 153A/143(3) ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THE ORIGINAL ASSESSMENTS U/S. 143(3) OR 143(1) OF THE ACT WERE COMPLETED MUCH BEFORE THE DA TE OF SEARCH AND SEIZURE AND THESE ASSESSMENTS HAVE NEVER BEEN ABATED. COMPLETE DETAIL S I.E. BALANCE SHEET P&L ACCOUNT AND AUDITED ACCOUNTS WERE AVAILABLE IN THOSE ASSESS MENTS. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT ASSESSMENTS FRAMED U/S. 1 53A OF THE ACT STAND ABATED ONLY IN RESPECT OF ASSESSMENT YEARS FOR WHICH NO ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OR 143(1) OF THE ACT. IN RESPECT TO THIS ISSUE NO INC RIMINATING PAPER REGARDING DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT HAVING BEEN FOUND DURING THE SEARCH THE QUESTION OF TREATING THE AMOUNT AS DEEMED DIVIDEND U/S. 2(22)(E ) OF THE ACT FOR THE ABOVE ASSESSMENT YEARS DURING REVISION PROCEEDINGS U/S. 263 OF THE A CT DOES NOT ARISE. 6. FROM THE ABOVE FACTS AND CIRCUMSTANCES AND THE F ACT THAT REVENUE HAS NOT OBJECTED THAT THESE DETAILS WERE NOT BEFORE THE AO DURING T HE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS EITHER U/S. 143(3) OR 143(1) AS THE CA SE MAY BE OR DURING SEARCH ASSESSMENT U/S. 153A OF THE ACT. THE DETAILS OF LOANS ADVANCE D WERE AVAILABLE BEFORE THE AO AND HE HAS EXAMINED THESE DETAILS DURING THOSE ASSESSMENTS . NO DOUBT THE AO HAS NOT EXPRESSED THE ACCEPTANCE OF THESE LOAN DETAILS IN SO MANY WOR DS IN THE ASSESSMENT ORDER OR SEARCH ASSESSMENT ORDER THAT DOES NOT MAKE ANY DIFFERENCE THAT THE AO HAS NOT GONE INTO THE DETAILS OF THESE LOANS. IN SUCH CIRCUMSTANCES THE CIT NOW IN THE REVISION ORDER PASSED U/S. 263 OF THE ACT WANTS TO CHANGE THE OPINION AND THIS IS NOT PERMISSIBLE IN LAW AS THE DICTUM OF HONBLE SUPREME COURT IN THE CASE OF MALA BAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC). HONBLE SUPREME COURT IN T HIS CASE HAS STATED THAT (FROM HEAD 8 ITA NOS.821 TO 825/K/2011 SHRI SUBRATA BANIK EXECUTOR TO THE ESTATE OF LATE BITHIKA BANK AYS: 2001-02 TO 2006-07 & ITA NOS. 826 TO 830/K/2011 SHRI SUBRATA BANIK AY 2001-02 TO TO 2006-07 NOTES) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT AP PLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN TH E SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENU E IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEAN ING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS T O LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTE D TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME-TAX OFFICER THE REVENUE IS LOS ING TAX LAWFULLY PAYABLE BY A PERSON IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF T HE REVENUE. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CO NJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVE NUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDI CIAL TO THE INTERESTS OF THE REVENUE FOR EXAMPLE WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VI EWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIO NER DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. IN SUCH FACTS AND CIRCUMSTANCES WE QUASH THE REVIS ION ORDERS IN THESE TEN APPEALS PASSED BY CIT U/S. 263 OF THE ACT AND ALLOW APPEALS OF THE ASSESSEE. 7. IN THE RESULT APPEALS OF ASSESSEE ARE ALLOWED. 8. ORDER IS PRONOUNCED IN THE OPEN COURT ON 11.07.2 013 SD/- SD/- . . . . . . . . ' ' ' ' #!' #!' #!' #!' (N. S. SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( . . . .) )) ) DATED : 11TH JULY 2013 PRONOUNCED BY /0 #12 #3 JD.(SR.P.S.) SD/- (PRAMOD KUMAR) SD/- (MAHAVIR S INGH) A.M. J.M. 9 ITA NOS.821 TO 825/K/2011 SHRI SUBRATA BANIK EXECUTOR TO THE ESTATE OF LATE BITHIKA BANK AYS: 2001-02 TO 2006-07 & ITA NOS. 826 TO 830/K/2011 SHRI SUBRATA BANIK AY 2001-02 TO TO 2006-07 - 4 +##5 65&7- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT SHRI SUBRATA BANIK EXECUTOR TO THE EST ATE OF LATE BITHIKA BANIK & SHRI SUBRATA BANIK C/O SALARPURIA JAJODIA & CO 7 C.R. AVENUE KOLKATA-700 072 2 + )* / RESPONDENT CIT CENTRAL-III KOLKATA 3 . #- ( )/ THE ACIT CC-II KOLKATA. 4. 5 <#= +# / DR KOLKATA BENCHES KOLKATA 5 +#/ TRUE COPY ->/ BY ORDER ' !2 /ASSTT. REGISTRAR .