JHV Steels Ltd. Vs DCIT (ITAT Kolkata)
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the assessee’s appeal against the revision order passed under Section 263 of the Income Tax Act for Assessment Year 2016-17. At the outset, the Tribunal condoned an 11-day delay in filing the appeal after accepting the explanation that the delay occurred due to the tax consultant’s father’s illness.
The dispute arose after the Principal Commissioner of Income Tax (PCIT) revised an assessment completed under Section 153A, holding that the Assessing Officer (AO) had failed to examine whether an unsecured loan of ₹6.07 crore received from Welcome Distilleries Private Limited was taxable as deemed dividend under Section 2(22)(e). The PCIT also observed that the AO had not verified an alleged bogus liability of ₹1.22 crore relating to Darsh Developers Private Limited and, therefore, set aside the assessment for fresh examination.
Before the Tribunal, the assessee contended that the loan received from Welcome Distilleries Private Limited could not be treated as deemed dividend because the assessee company itself was not a shareholder in the lending company. The assessee relied upon an earlier decision of the Coordinate Bench involving identical facts.
The Tribunal noted that the facts were identical to the earlier Coordinate Bench decision. It observed that Shri Heera Lal Jaiswal was the common shareholder in both companies, holding shares in the assessee company as well as in Welcome Distilleries Private Limited. However, the assessee company itself was not a shareholder of the lending company. Therefore, any deemed dividend, if applicable, could arise only in the hands of the common shareholder and not in the hands of the borrower company. The Tribunal held that the Assessing Officer’s order on this issue was neither erroneous nor prejudicial to the interests of the Revenue and reversed the PCIT’s findings on the deemed dividend issue. The Tribunal also observed that the decisions relied upon by the PCIT were distinguishable on facts.
