2011 (12) TMI 125 - HC - Income Tax

Deemed dividend assessee received amount from its sister concern in oct 1997 claiming it to be business advance advance to another sister concern transferred to assessee by book entry - assessee discontinued business from Oct 1997 Held that - On request of assessee the matter is remanded back to the CIT(A) with a direction to him to re-consider the matter afresh in the light of the Supreme Court decision in case of Commissioner of Income Tax Vs. Mukundray K. Shah (2007 -TMI - 6556 - SUPREME Court) and without in any way being influenced either by any observation made by him in the earlier order of revision or any observation made by court in this judgment and to pass appropriate orders in accordance with law.

Summary

Issues:
1. Revision of assessment order under section 263 of the Income Tax Act.
2. Applicability of section 2(22)(e) regarding deemed dividend.
3. Proper application of law in assessing deemed dividend.

Analysis:
1. The Tax Case Appeal was filed against the order passed by the Income Tax Appellate Tribunal. The Commissioner revised the assessment order under section 263 of the Act due to the failure of the Assessing Officer to consider the applicability of section 2(22)(e) regarding deemed dividend. The Tribunal quashed the revision order, leading to the current appeal by the Revenue.

2. The case involved the receipt of a significant sum from a sister concern, which was deemed as dividend under section 2(22)(e) due to the cessation of business activities by the assessee. The Commissioner directed the Assessing Officer to tax the amount as deemed dividend. Additionally, another credit amount was identified for further investigation under the same provision.

3. The Tribunal found that the advances were business-related and not subject to section 2(22)(e) provisions. It was argued that the assessment was thorough, and no error existed to warrant revision. However, the High Court observed that the original assessment lacked proper consideration of available records, justifying the Commissioner's revision. The Court remanded the matter back to the Commissioner for a fresh review, emphasizing adherence to legal principles without prior biases.