TMI Blog2023 (1) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... an opening balance of accumulated profits in the balance sheet of M/s. RDPL. Though the assessee company has taken a plea that alleged loan has been taken for commercial expediency during the year and are in the nature of business transaction and interest paid thereon. However, the exception which the assessee has been referring provided under section 2(22)(e) applies in the case where lending of money is a substantial part of the business of the company. Before us no document what so ever has been filed in relation to M/s. RDPL, which could indicate that lending of money is a substantial part of business of M/s. RDPL. We notice that the assessee has referred to the judgment of the Hon ble Jurisdictional Calcutta High Court in the case of Pradip Kumar Malhotra [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT] . Perusal of the said judgment indicates that the same is not applicable on the facts of the instant case and is distinguishable. In the case o f Pradip Kumar Malhotra (supra) the facts were that the assessee was owner of a property, which was used as a collateral security by the company for taking a loan and assessee received credit/loan against the property held with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case the ld. Pr.elT should have found that loan taken was interest bearing as such proviso of section 2(22(e) does not attract. 3. Briefly stated the facts as culled out from records are that the assessee is a limited company. Loss of Rs. 11,05,76,125/- declared in the e-return for the AY 2017-18 filed on 02-11-2017. The said return was revised on 20-06-2018 declaring total loss of Rs. 10,93,58,019/-. Case selected for scrutiny followed by serving of valid notices u/s. 143(2) 142(1) of the Act. The assessment u/s. 143(3) of the Act completed on 10-12-2019 assessing income at Rs. 10,65,19,384/- after making disallowance u/s. 14A of the Act of Rs.27,03,900/- and disallowance u/s. 2(24)(x) r.w.s 36(1)(va) of the Act of Rs. 1,34,735/-. Subsequently, the assessment records were called for by the ld.PCIT and after examining of the same the ld. PCIT observed that assessee has received loan sum of Rs. 4,66,69,103/- from M/s. Rosedala Developers P.Ltd (In short, M/s. RDPL). The ld. PCIT also observed that M/s. RDPL is a company where public is not substantially interested and assessee company is holding 12.32% of its equity shares. Ld. PCIT also observed that Provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting is to be bad in law and liable to be quashed/cancelled since ld. PCIT erred in invoking the jurisdiction u/s. 263 of the Act. From perusal of the show cause notice, we notice that the only issue referred by the ld. PCIT is regarding the applicability of provisions of section 2(22)(e)( e ) of the Act on the loans and advances of Rs. 4,66,69,103/- received from M/s. Rosedala Developers Pvt. Ltd ( in short RDPL ) It is not in dispute that the assessee company holds 12.32% equity shares of M/s. RDPL and there is opening balance of accumulated profits in the balance sheet of M/s. RDPL. The ld. PCIT has observed that the ld. AO has not conducted any enquiry and provisions of section 2(22) ( e ) of the Act are squarely applicable and to the extent of accumulated profits for the financial year under consideration, if less than the alleged loan received by the assessee from M/s. RDPL, then to that extent addition needs to be made towards deemed dividend income in the hands of the assessee u/s. 2(22)(e) of the Act. 8. Now before examining the facts of the case, we will go through the provisions of section 263 of the Act. 9. Section 263 :- -Revision by the Principal Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer 92 [or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the* Principal Commissioner or Commissioner under this subsection shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 94 [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal 95 [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en a plea that alleged loan has been taken for commercial expediency during the year and are in the nature of business transaction and interest paid thereon. However, the exception which the assessee has been referring provided under section 2(22)(e) of the Act applies in the case where lending of money is a substantial part of the business of the company. Before us no document what so ever has been filed in relation to M/s. RDPL, which could indicate that lending of money is a substantial part of business of M/s. RDPL. 12. Further, we notice that the assessee has referred to the judgment of the Hon ble Jurisdictional Calcutta High Court in the case of Pradip Kumar Malhotra (supra). Perusal of the said judgment indicates that the same is not applicable on the facts of the instant case and is distinguishable. In the case o f Pradip Kumar Malhotra (supra) the facts were that the assessee was owner of a property, which was used as a collateral security by the company for taking a loan and assessee received credit/loan against the property held with the company. However, in the instant case the facts are not the same and it is purely a case where the assessee is holding 12.22% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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