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TMI Blog2017 (10) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... he loan/advance to have been given by three companies, in which companies, according to Ld. Pr. CIT, the assessee had more than 10% shareholding. The Ld. Counsel drew our attention to the order passed by the AO giving effect to the impugned order of Pr. CIT passed u/s. 263 of the Act which is placed at pages 71 to 73 of the paper book. The Ld. Counsel drew our attention to page no. 72 of the paper book wherein the AO has stated that while during the assessment proceedings giving effect to 263 order, despite him giving notice to the assessee, the Ld. AR of the assessee did not turn up before him, so he was constrained to pass the order without hearing the Ld. AR. From a perusal of the order we understand that other than the written submission of the Ld. AR Shri Ravi Tulsiyan, no other averments were taken into consideration while passing the order while giving effect to the order passed u/s. 263 of the Act. Nevertheless, the AO in the said order clearly upheld the contention of the assessee in respect to two companies i.e. in respect of M/s. SKG Flour Mills and M/s. Jagadhatri Tracon Pvt. Ltd. and made no addition u/s. 2(22)(e) of the Act. Only in respect of the transaction of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llection. There were thus transactions on each side creating independent obligations on the other, and both sets of transactions were entered in the same account. The deposits made by the appellant were not merely complete or partial discharges of its obligations to the respondent. There were shifting balances; on many occasions the balance was in favour of the appellant and on many other occasions, the balance was in favour of the respondent. There were reciprocal demands between the parties, and the account was mutual." 3. The Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotra Vs. CIT 338 ITR 538 (Cal) wherein the Hon'ble High Court has held as under: "The phrase "by way of advance or loan" appearing in sub-clause (e) of section 2(22) of the Income-tax Act, 1961, must be construed to mean those advances or loans which a shareholder enjoys simply on account of being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent. of the voting power; but if such loan or advance is given to such shareholder as a consequence of any fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purview of provisions of sec. 2(22)(e) of the Act. From the above, it is clear that the loan account differs from current account and the provisions of section 2(22}(e} of the Act, being a deeming section, cannot be applied to current account. In such circumstances, we delete the addition and this common issue of assessee's appeals is allowed." 6. Further, we note that there is no interest element has been charged on the amounts owed by the assessee to M/s. Subhchintak Vancom Pvt. Ltd., so in the facts and circumstances of the case, the assessee by giving and taking financial assistance from each other, i.e. between the assessee and M/s. Subhchintak Vancom Pvt. Ltd. wherein both the parties were benefited and such transaction between them were nothing but commercial transactions and, therefore, cannot be termed as dividend attributable to the shareholder. From the above discussion it can be said that sec. 2(22)(e) of the Act covers only those transactions which benefited the shareholder alone and resultantly no benefit to the company M/s. Subhchintak Vancom Pvt. Ltd. On the other hand, if the transaction is mutual wherein both the sides are benefitted, it is undoubtedly outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly that the order of the AO is erroneous in so far as it is prejudicial to the interest of the revenue. In case, where the AO has taken a plausible view on a point of law or fact the Ld. Pr. CIT cannot exercise the jurisdiction u/s. 263 of the Act. In this case, we note that Pr. CIT found fault with the assessee on three counts. Firstly, the Pr. CIT found fault with the transactions between M/s. SKG Flour Mills Pvt. Ltd. and secondly, found fault with M/s. Jagadhatri Tracon (P) Ltd., which was apparently on a wrong assumption of facts which fact was evident from the order of AO passed while giving effect to the impugned order of Pr. CIT and, therefore, the original order of the AO cannot be termed as erroneous. Third fault as per the Pr. CIT was in respect to the transaction between assessee M/s. Subhchintak Vancom Pvt. Ltd., we note that the entire records were before the AO and the AO has taken a plausible view as per the law laid by the Hon'ble Supreme Court's and High court's order in Kesari Chand Jaisukh Lal Vs. Shillong Banking Corporation Ltd. 1965 AIR 1711 and Pradip Kumar Malhotra, (supra) respectively. Thus, the view of the AO in respect to the transaction cannot be held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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