DCIT, CIRCLE - 12(1), KOLKATA , KOLKATA V. M/S. MERINO INDUSTRIES LIMITED , KOLKATA

ITA 174/KOL/2019

AI Insights

The case involves cross-appeals by the assessee, M/s Merino Industries Ltd, and the revenue against the order of the Commissioner of Income Tax (Appeals)-4, Kolkata. The primary issues revolved around the addition of Rs 90,10,000 as deemed dividend under section 2(22)(e) of the Income Tax Act and the denial of deduction under section 80IA. The Tribunal found that the financial transactions between the assessee and its subsidiary were in the nature of current account transactions and not loans, thus not attracting the provisions of section 2(22)(e). Additionally, the Tribunal allowed the deduction under section 80IA based on the market value of electricity, aligning with the Supreme Court's precedent.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472682 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs. Jindal Steel & Power Ltd, Shree Krishna Gyanodya Flour Mills Pvt. Ltd. vs. PCIT, Bombay Oil Industries Ltd. vs. DCIT, Pradip Kumar Malhotra vs. CIT, Maya Debi Bansal vs. CIT, Sunil Kapoor vs. CIT, M/s The Hooghly Mills Co. Ltd. vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Revised return; Business expenditure; Question of law; Deemed dividend; Rule of consistency; Peak credit; Commercial expediency; Period of limitation; Validity of assessment; Time period of passing order
• Section: 148; 144; 143(3); 143(2); 119; 250; 139(1); 43; 13; 10; 139(4); 2(22)(e); 115JB; 80IA; 139(5); 20; 2(22)

Judgement Text

" आयकर अपीलȣय अͬधकरण, कोलकाता पीठ ‘, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Before Shri Sanjay Garg, Judicial Member and Shri Sanjay Awasthi, Accountant Member I.T.A No.174/Kol/2019 Assessment year: 2014-15 DCIT, Circle-12(1), Kolkata…………………….................................……Revenue vs. M/s Merino Industries Ltd.…………....................................……...…..…..Assessee 5, Alexandra Court, 60/1, Chowringhee Road, Kolkata – 700020. [PAN: AAACC9186C] I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd …………………….…….......................…… Assessee 5, Alexandra Court, 60/1, Chowringhee Road, Kolkata – 700020. [PAN: AAACC9186C] vs. DCIT, Circle-12(1), Kolkata.…….................................……....…........….. Revenue Appearances by: Shri Shyam Sundar Jha, AR, appeared on behalf of the assessee. Shri Prakash Nath Barnwal, CIT-DR, appeared on behalf of the Revenue. Date of concluding the hearing : December 12, 2024 Date of pronouncing the order : February 06, 2025 आदेश / ORDER संजय गग[, ÛयाǓयक सदèय ɮवारा / Per Sanjay Garg, Judicial Member: The captioned are cross-appeals, one by the assessee and the other by the revenue against the common order dated 09.10.2018 of the Commissioner of Income Tax (Appeals)-4, Kolkata [hereinafter referred to as the ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). Since the facts and issued involved in both the appeals are identical and both the appeals are arising out of the same I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 2 order of the ld. CIT(A), therefore, these have been heard together and are being disposed of by this common order. 2. The assessee in its appeal bearing ITA No.292/Kol/2018 has taken the following grounds of appeal: “1. The Ld. Commissioner of Income Tax (A) erred in supporting and simply confirmed the addition of Rs 90100000 on presumption that the fresh loan taken by Merino Industries Limited after repayment therefore the higher pick balance of loan account should be considered as deemed dividend in the hand of the assessee for the financial transaction between the assessee and its subsidiary company. 2. On the fact and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) did not justify in confirming the addition of Rs 90100000 under section 2(22) (e) out of the total addition of Rs.393410000 made by the Ld. Assessing Officer whereas the actual nature of the financial transaction between holding and subsidiary company was during the normal course of business in view of commercial expediency as the transaction which was actually on current account basis and there are also several transactions between the assessee and its subsidiary company and some occasions, the assessee has taken financial assistance from its subsidiary company and similarly on the some occasion the assessee has given financial assistance to its subsidiary company and the account for the financial transaction was squared up fully at the end the financial year mutually. 3. For that the Ld. Commissioner of Income Tax (A) erred in invoking of section 2(22) (e) of the Act on the ground that the higher pick balance should be considered as deemed dividend for the transaction which is not in nature of loan & advances. The learned CIT(A) ignored to consider fully that repayment of loan was made completely during the sort period of time when fund available in the hands of the assessee and also the assesse provided the fund to the subsidiary company in several occasions in view of commercial expediency and itssubsidiary company made full payment during the sort period consequently the opening and closing balance of the ledger account between holding & subsidiary companies showing NIL balances. 4. The learned Commissioner of Income Tax (Appeals) erred in not considering the revised return filed by the assesse claiming deduction under section 801A of the Income Tax Act, 1961. 5. The learned Commissioner of Income Tax (Appeals) erred in not declaring the assessment as bad in law as the learned Assessing Officer did not accept the revised return filed by the assesse. I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 3 6. That the Ld. Commissioner of Income Tax (A) erred in ignoring to allow the deduction under section 801A (4) (IV) in spite of accepting eligibility of the assesse for deduction u/s 801A (4) (iv) of the Act. 7. For that the learned Commissioner of Income Tax (Appeals) is not justified to ignore the deduction claimed by the assessee as the calculation on market value available in the hand of the assessee as also it was provided during the course of the assessment but the CIT(A) fully ignored. 8. For that the learned Commissioner of Income Tax (Appeals) is wholly unjustified in mentioning in the order that the assessee did not claim the deduction on the basis of the market value.AS regards the computation of deduction amount on the basis of the market rate, the matter was well explained to the Assessing Officer in the course of assessment that such calculation is calculated properly on the basis of the submitted documents but the Assessing Officer did not raise any query further and the same matter was also convinced to the CIT(A) but he ignored to consider in his order. 9. The learned Commissioner of Income Tax (Appeals) ought to have calculated the deduction on the basis of calculation available of the assesse on the market value and to give instruction to the Assessing Officer to adopt the basis for allowing deduction for the eligible undertaking under section 801A (4) (iv) of the Act but the CIT(A) ignored to give specific order for determination of the deduction amount. 10. For that the learned Commissioner of Income Tax (Appeals) is not justified to ignore the deduction claimed by the assessee in the revised return of income tax. 11. For that the learned Commissioner of Income Tax (Appeals) is wholly unjustified for not giving the specific amount of deduction and he did not require any specific calculation from the assesse. 12. That the Appellant craves leave to add, alter or abrogate any grounds of appeal at the time of hearing.” 2.1 The assessee has taken the following additional grounds of appeal: “1. That on the facts and circumstances of the case and in law, The hon'ble CIT(A) has erred both in facts and laws, in not considering to allow the Focus Market Scheme (FMS) of Rs. 86,72,177/- as non-taxable income which was not considered by the Learned Assessing Officer during the course of assessment ignoring the fact as the central government granted such incentive subsidy to enhance Indian export potential in the International market. The exemption of the Incentive subsidy of Rs. 86,72,177/- may kindly be allowed. 2. That on the facts and circumstances of the case and in law, The hon'ble CIT(A) has erred in not considering to allow education cess of Rs. 26,21,359/- as business expenditure which was ignored by the Learned Assessing Officer during assessment to allow as an allowable business I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 4 expenditure. The education cess may kindly be allowed as an allowable business expenditure.” 3. Whereas, the revenue in its appeal bearing ITA No.174/Kol/2019 has taken the following grounds of appeal “i.. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred by restricting the additions made u/s.2(22)(e) of the Act to Rs.9,01,00,000/- instead of total loan receipt of Rs. 39,34,10,000/-, ii. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that as per section 2(22)(e) of the Act, the total loans received by the assessee company is covered in the ambit of provision of section 2(22)(e) of the I. T. Act. iii. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that section 2(22)(e) of the Act, does not state to take higher peak balance of loan amount as deemed dividend in the hands of the assessee company. (iv) That on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred by overlooking the provisions of Sec.2(22)(e) of the Act which applies in case of the assessee. v. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred by not appreciating the facts that the case of the assessee company falls under all conditions mentioned in section 2(22)(c) of the Act. (vi) The appellant craves leave to add/alter/modify the grounds of appeal.” Legal Issue relating to the validity of Assessment Order : The assessee vide Ground No.5 of the appeal has taken the legal ground and pleaded that that the assessment order dated 26.12.2016 passed u/s 143(3) of the Act is bad in law, therefore, the same is liable to be quashed. Since, the aforesaid legal issue taken by the assessee hits at the very validity of the assessment order, hence, the same is taken up first for adjudication. 4. The ld. counsel for the assessee has contended that the assessment order in question is null and void because the Assessing I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 5 Officer has passed the impugned assessment order in respect of original return of income filed by the assessee, whereas, the assessee had filed revised return of income within the limitation period prescribed under the Act, however, the Assessing Officer failed to consider the revised return of income and even did not issue notice u/s 143(2) of the Act in respect of the revised return of income. Therefore, the assessment order passed in respect of earlier return of income was bad in law and not sustainable. The ld. AR of the assessee in this respect has made the following submissions: “1. Matter related to the Assessment order which is null and void under the law because of not considering the revised return filed by the Assessee within the stipulated due date under section 139(5)of the Income Tax Act 1961. (A). The Learned Assessing officer considered the original return which was filed by the assessee on 1st December 2014(i.e. on Monday which was a working day). The due date for filing of the original return was 30th November 2014 (i.e. on Sunday which was a closed day ).The assesee filed the original return on the following day being 01 sf December 2014 It is settled position of law that when due date falls on a date which happens to be a holiday, the due compliance made on the immediately following working day will be sufficient compliance with the due date. This is referred from the provision of section 10 of The General Clauses Act. We attached herewith the relevant copy of the aforesaid section 10 for your kind reference. Vide page No \"1\" of the additional paper book. We also attached the order u/s 119 dated 26th September.2014 under which the due date was 30-11-2014 for filling the original return of tax. Vide Para no 6 of page 2 of the order as attached with our additional paper book. Vide Page 2 to 4 of the Additional Paper book. (B). We attached the judicial pronouncement by the honourable ITAT, Ahmedabad in case of Priyal Kaushal Shah, Ahmedabad VS Income Tax Officer,Ward-3(2)(9), dtd. 15th March, 2023 in which the ITAT held recently on the same matter and allowed the compliance within the due date which was compiled by the deportment on following day from the day of the holiday . Kindly refer to the Para No. 4 Page No. 2 of the attached order which is related to the fact of the case and Para No 9-of Page 4 related to the decision as delivered by the ITAT in this case. The ITAT held that the compliance made on the next day of the holiday is within the due date asper section 10 of the General Clause Act. Vide the I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 6 attached judicial pronouncement with our additional paper book - Page No 5 to 9. (C ) Your appellant filed the revised return on 31st March 2016 which was within the due date. Vide the page 10 & 1 1 of the acknowledgement of the original and revised return as attached herewith in our additional paper book. The Ld. Assessing officer observed and mentioned wrongly that the assessee has not filed the revised return. Kindly refer to the relevant Page No.8 of the assessment order as we highlighted the related portion of the Assessment order and attached with our additional paper book. Vide Page No-12 . The CIT(A) also ignored our revised return and mentioned wrongly in the para 6. 1 . 1 of his order that If no claim has been made regarding 80IA of income u/s 139(1) / 139(5). The relevant portion of the para 6.1.1 of the CIT(A)'s order is attached herewith our additional paper books- Vide Page No -13 We argued before your honour that the assessment order is null and void because the assessing officer didn't consider our revised return as filed by your appellant company within the due date. It is settled law that the original return as filed earlier cannot form the basis of assessment whereas the revised return is filed. It is also to be noted that once the revised return is filed by the assessee, the original return must be taken to have been withdrawn and to have been substituted by a fresh return for the purpose of assessment. We attached herewith the judicial pronouncement of Hyderabad ITAT in Shri Ashok Reddy Cheruvu Vs. Dy. Commissioner of Income Tax-1, International Taxation, Hyderabad dtd. 26th March, 2021. Kindly refer to para 4-Page No. 5 which related to the ground no 21 and the para no 10-(6 )of page no.12 and also para no 10 of page no 13 of the judicial pronouncement. We highlighted the portion of the decision for your kind reference and attached with our additional paper books under page No 14 to 26. The Hyderabad ITAT held that the assessment is null and void if the assessment order is not based on the revised return. (D). Your kind attention is also invited to the decision of Hon'ble High court Calcutta in the case of Maya Debi Bansal Vs. Commissioner of Income Tax. Where the High Court held that assessment order is invalid under the law in case the assessment order was not based the proper return as filed by assessee. Kindly refer to the para no. 2 -Page No. 1 and Para No. -14 Page No. 5 of the respective judgement. The judgment is attached herewith our additional paper books - Page no 27 to 31 . We also referred to the decision of the apex court in the case of Asst. Commr of IT & Anr. vs M/s Hotel Blue moon in which the Apex Court held that the noncompliance of mandatory provision is attracted to the assessment order void and null. Kindly refer to Para no 4 of page no 2 and para 18 of page no 7 of the I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 7 judicial judgment. We attached the judicial judgment with our additional paper book page no 32 to 38 Keeping view of the above, it is very clear apparently that our revised return is ignored by the Ld A.O as well as by the CIT(A) therefore the assessment order which is to declared null and void because the assessment order is not based on the valid return of tax.” 5. The ld. DR however has submitted that the assessee had filed original return on 01.12.2014, whereas, the due date for filing the original return was 30.09.2014, therefore, the return filed by the assessee u/s 139(1) of the Act was beyond the limitation period and as such the same could not have been taken on record. Therefore, the assessment order passed by the Assessing Officer is required to be treated as an order passed u/s 144 of the Act as best judgment assessment order. He has further submitted that since the assessee’s original return was time-barred, therefore, the revised return was also invalid and therefore, the Assessing Officer has rightly ignored the same. He has further submitted that even in case of no return, there was no requirement of issuing of notice u/s 143(2) of the Act, therefore, the aforesaid peal taken by the assessee regarding the validity of the assessment is not tenable. 6. On the other hand, the ld. counsel for the assessee has invited our attention to page 2 of the paper-book which is a copy of the order dated 26.09.2014 passed u/s 119 of the Act by CBDT vide which the due date for furnishing the return of income was extended from 30.09.2014 to 30.11.2014 for assessment year 2014-15 for all purposes of Act. The ld. counsel has further placed reliance on section 10 of the General Clauses Act to submit that it is settled proposition of law that when due date falls on a date which happens to be a holiday, the due compliance can be made on the following working day and in that case, the due date will be the last working day and not the holiday. He in this respect has relied upon various case laws, the reference of which has been given in his I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 8 written submissions as reproduced above. He therefore has submitt4ed that since 30.11.2014 was a Govt. holiday, hence the return filed on the next working day i.e. on 01.12.2014 was within the prescribed limitation period and further that the Assessing officer had accepted the same and did not reject it on the ground of limitation. The ld. counsel has further submitted that the revised return was filed by the assessee u/s 139(4) of the Act on 31.03.2016 which was also within the due date. That the Assessing Officer failed to take note of the revised return filed by the assessee. The Assessing Officer did not issue notice u/s 143(2) of the Act in respect of revised return, which was held by the Hon’ble Supreme Court in the case of ‘ACIT vs. Hotel Blue Moon’ reported in 321 ITR 362 (SC) is a sine qua non for the Assessing Officer to assume jurisdiction to frame the assessment. He has submitted that since no notice was issued by the Assessing Officer u/s 143(2) of the Act in respect of revised return filed by the assessee and the Assessing Officer has totally failed to take note of the revised return, therefore, the assessment order passed by the Assessing Officer in respect of original/earlier return of income was not valid order and the same is liable to be quashed on this score alone. He in this respect has relied upon various case laws including the decision of Hyderabad Bench of the Tribunal in the case of Shri Ashok Reddy Cheruvu vs. DCIT (supra) and of the Hon’ble Calcutta High Court in the case of Maya Debi Bansal vs. CIT (supra). 7. We have considered the rival contentions and gone through the record. The ld. AR of the assessee has duly demonstrated that the CBDT vide its order passed u/s 119 of the Act had extended the due date of filing of the return to 30.11.2014., the day falling on 30.11.2012 being a Sunday and closed day, therefore, as per section 10 of the General Clauses Act, the due date will be the next working day and the assessee duly filed the return of income on the next working day on 01.12.2024, and hence the same is to be treated as duly filed during the prescribed I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 9 period of limitation. The Ld. Counsel for the assessee in this respect has relied upon various case laws including the decision of Ahmedabad Bench of the Tribunal in Priyal Kaushal Shah vs. ITO (supra). Therefore, the contention of the ld. DR that the present case is required to be treated as case of ‘no return’ is not tenable, hence rejected. 7.1. Further, in this case, admittedly, the assessee had filed revised return of income, within the prescribed period/due date. Therefore, in view of the decisions of the Hyderabad Bench of the Tribunal in the case of “Shri Ashok Reddy Cheruvu vs. DCIT” (supra), wherein, the Coordinate Bench of the Tribunal, while further relying upon the decision of the Coordinate Madras Bench of the Tribunal in ITA No.22/Mds/2016 & CO No.56/Mds/2016 in the case of “M/s Yes & Yes Hitech Premier Homes India Pvt. Ltd. vs. ITO” dated 19.06.2017 has categorically held that the Assessing Officer was required to issue fresh notice u/s 143(2) of the Act after filing of revised return of income and that the previous notice issued on the basis of original return of income will not hold the field. The relevant part of the order of the Coordinate Hyderabad Bench of the Tribunal (supra) is reproduced as under: “7. We have given our thoughtful consideration to rival hearings qua assessee's petition dt.18.02.2021 seeking to raise the impugned additional grounds. It is not in dispute that he had canvassed the corresponding substantive ground Nos.7 to 9 before the CIT(A) to the very effect. It is thus clear that the impugned issue duly emanates form the lower appellate order not requiring any afresh factual examination. Coupled with this, learned co-ordinate bench decision in ITA No.22/Mds/2016 & CO No.56/Mds/2016 M/s. Yes & Yes Hitech Premier Homes India Pvt. Ltd. Vs. ITO Dt.19.06.2017; after considering honourbale apex court judgment in NTPC Ltd Vs. CIT (supra), holds that we can very well entertain such a pure question of law provided the relevant facts are already on record so as to determine the correct tax liability of an assessee. We adopt very reasoning to admit the assessee's foregoing additional grounds. 8. We stay back in the assessee's additional grounds going to the root of the matter and notice that the CIT(A) has dealt with this issue of validity of impugned assessment as under : I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 10 \" 7. The grounds of appeal no.7 to 9 relate to the validity of the scrutiny assessment order passed u/s. 143(3) of the IT. Act. 7.1 The original return of income was filed on 04.07.2014 and the same was selected for scrutiny assessment. Later, revised return of Income was filed on 16.11.2015. Even if the revised return of income is a valid return, the scrutiny assessment proceedings, initiated by duly serving the necessary notices u/s.143(2) and 142(1), with reference to the original return of income, continue to be valid and such legal proceedings will have to be taken to their logical conclusion. There is nothing in law which states that the pending proceedings, in respect of the original return, shall abate or will automatically get invalidated with the filing of the revised return, by the appellant. If the argument of the appellant is accepted, then, the same will lead to an absurd proposition and to defeat the pending legal proceedings, all that the assessee will have to do is to file a revised return and say that the revised return has substituted the original return and, therefore, the pending scrutiny assessment proceedings initiated, on the basis of the original return, no longer survive. 7.2 As the revised return is filed within the due date and valid, it completely substitutes the original return filed u/s.139(1). The meaning of this is that both the returns merge and the proceedings set in motion, on the basis of the original return, will have to be taken forward. As the proceedings are initiated, in accordance with the law, and on the basis of the original return (filed by the appellant), no prejudice is caused to the appellant. 7.3 The decision in the case of Himgiri Foods Limited, cited by the appellant, is not applicable to the facts in the case of the appellant. In that case, issue relates to intimation ul s. 143(1)(a) and processing of the revised return of the income. The decision in the case of Mangalore Chemicals and fertilizers Limited actually goes against the argument of the appellant. The revised return has to be taken into account for the purpose of making assessment. There is no dispute on this. But, it has not been said that the legal proceedings, validly initiated with reference to the original return, will get invalidated with the filing of the revised return of income. The enabling provision of sec. 139(5) provides an opportunity to the assessee to file revised return if the assessee discovers any omission or any wrong statement in the original return filed vi]«. 139(1). Having utilized such opportunity, the appellant cannot turn back and argue that the scrutiny assessment proceedings, initiated on the basis of the original return, do not survive. 7.4 Similarly, the other decisions in the cases of Niranjan Lal Ram Chandra and Machine Tool Corporation of India Limited, cited by the appellant, do not support the argument made by the appellant. Nowhere it is said that the validly initiated pending legal proceedings, on the basis of the original return, will die a natural death with the filing of the revised return. I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 11 7.5 As the scrutiny assessment proceedings were already pending (based on original return), there was no legal requirement to once again initiate the proceedings, separately, with reference to the revised return. Legally, the AO was required to logically conclude the pending scrutiny assessment proceedings. Also, to treat the revised return as a valid return and consider the same for the purpose of making assessment. Both of these have been done. 7.6 In view of the discussion made, as above, the grounds of appeal no.7 to 9 are dismissed.\" 9. Mr. Pandey vehemently supported the CIT(A) order findings under challenge that Section 143(2) of the Act notice had been duly issued to the assessee well before the filing of his revised Return dt.16.11.2015 and therefore, the said earlier notice validates the impugned assessment. And also that Section 143(2) proviso applies case of a return filed u/s. 139(1) of the Act and not qua a revised return u/s. 139(5) of the Act. 10. We have given our thoughtful consideration to rival pleadings against and in support of the correctness of the impugned assessment. We make it clear that there is no dispute between the parties about the assessee having filed the original return on 4.7.2014 followed by Section 143(2) notice, revised return dt.16.11.2015 and the subsequent section 143(2) notice dt.18.11.2016; respectively, in seriatum. Mr. Pandey fails to dispute that the Assessing Officer notice u/s. 143(2) dt.18.11.2016 turns out to be beyond the statutory period of six months from the end of the financial year in view of the revised return dt.16.11.2015. This period of six months has to be counted from 31.03.2016 therefore. We go by this analogy and find that this latter section 143(2) notice dt.18.11.2016 is not a valid notice since issued beyond the said period of six months. Now coming to the next important question as to whether the Assessing Officer must issue afresh section 143(2) notice; going by the assessee or by the earlier notice issued before the assessee's revised return dt.16.11.2015 shall continue to hold the field, we find that the same is no more res integra as per learned co-ordinate bench's decision (supra) is no more res integra as per learned co-ordinate bench's decision (supra) as under : \" 3. It was fairly agreed by the Ld.AR that in the Cross Objection No.56/Mds/2016, the same was in support of the order of the Ld.CIT(A). It was further submitted by the Ld.AR that the assessee is in the business of construction of multi storied buildings and sale of ITA Nos.1560 & 1597/Hyd/2019 plots. It was a submission that the AY 2012-13 was the first year of business of the assessee. It was a submission that the assessee had filed original return of income u/s.139(1) on 13.09.2012. There was a survey u/s.133A on 02.11.2012. The assessee had filed a revised return u/s.139(5) on 30.11.2012 disclosing an income of Rs.5,67,630/-. It was a further submission that subsequently the second revised return was filed by the assessee on 26.02.2014 declaring Nil income. It was a submission that the AO had issued notice u/s.143(2) on 12.09.2013 in response to the return filed by I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 12 the assessee on 30.11.2012. It was a submission that no notice u/s.143(2) was issued by the AO in respect of the revised return filed on 26.02.2014. It was a submission that once revised return was filed the earlier returns stands effaced. It was a submission that as no notice u/s.143(2) had been issued in respect of the return filed on 26.02.2014, the assessment was liable to be annulled. It was a submission that the assessment was getting time barred on 31.03.2015. It was a further submission that the factum of non-issuance of notice u/s.143(2) was also brought to the attention of the AO vide letter dated 27.03.2015 in response to the show cause notice issued by the AO dated 23.03.2015. It was submitted by the Ld.AR that in the Assessment Order, the AO recognized the existence of the revised return filed on 26.02.2014 by e-filing at Page No.4 Para No.6 of the Assessment Order. It was a further submission that at Page No.33 Para No.14, the AO considered the objection of the assessee in respect of non-issuance of notice u/s.143(2). It was a submission that the AO did not reject the revised return filed by the assessee on 26.02.2014 but has considered the data disclosed in the revised return filed on 26.02.2014 but had rejected on merits, the results admitted and the method of accountancy adopted in the said return. It was a submission that the notice u/s.143(2) having not been issued in respect of the return filed on 26.02.2014, the assessment was liable to be annulled. 4. In reply, Ld. DR submitted that the assessee had objected to the non-issuance of notice u/s.143(2) only on 27.03.2015 which is also extracted by the AO in Page No.27 of this order. It was a further submission that the assessee having been granted substantial opportunities as has been extracted by the AO in Page No.6 of this Order, it was a submission that the assessment was liable to be upheld. 5. We have considered the rival submissions. Admittedly, the last revised return filed by the assessee on 26.02.2014. This was admittedly a valid revised return. The AO has also not rejected the revised return. The assessee has also given his Explanation for filing the said revised return. In fact, after the said revised return was filed, notice u/s.142(1) has been issued on 10.12.2014 and show cause notice have been issued on 23.12.2014 and on 12.03.2015. In response to the show cause notice issued by the AO on 23.03.2015, intimating the assessee to provide his response by 27.03.2015, the assessee has intimated that the notice u/s.143(2) has not been issued on the assessee within the prescribed time. In fact, before the show cause notice being issued by the AO, the assessee never had an opportunity to intimate the AO that notice u/s.143(2) had not been issued. A perusal of the provisions of Sec.143(2) shows that the said notice is not assessment year ITA Nos.1560 & 1597/Hyd/2019 specific but it is return specific. Its time limit is computed from the end of the financial year in which the return is furnished. It is mandatory for I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 13 the issuance of notice u/s.143(2) in the event that the AO proposes to make assessment u/s.143(3). In the present case, the AO having not issued notice u/s.143(2) in respect of a valid revised return filed on 26.02.2014 and more so, the said return have not been treated as invalid, the consequential assessment is bad in law, in view of the principles laid down in the Hon'ble Supreme Court in the case of ACIT vs. Hotel Blue Moon reported in 321 ITR 362 (SC). Further, in view of the position in law that if a revised return is filed u/s.139(5) and if such return is a valid return then the assessment can be completed only on the basis of such revised return as has been held by the Hon'ble High Court of Orissa in the case of Orissa Rural Housing Development Corporation Ltd. reported in 343 ITR 316, the assessment is liable to be annulled. 6. In these circumstances, as notice u/s.143(2) has not been issued in respect of the valid revised return filed by the assessee u/s.139(5) on 26.02.2014, the consequential Assessment Order u/s.143(3) dated 30.03.2014 for the AY 2012-13, in the case of the assessee is bad in law and stands annulled. 7. In the result, the appeal filed by the assessee in ITA No.22/Mds/2016 is stands allowed, the appeal filed by the Revenue in ITA No.351/Mds/2016 is stands dismissed and the CO No.56/Mds/2016 filed by the assessee is stands dismissed.\" Learned co-ordinate bench has held in other words that such an issuance of fresh section 143(2) notice is a condition precedent going by the honourable apex court land mark decision in Hotel Blue Moon case (supra). We adopt the very reasoning mutatis mutandis to accept the assessee's additional substantive grounds 20 to 25. The impugned assessment stands annulled therefore. Ordered accordingly. All other rival pleadings in assessee's and Revenue's cross appeals on merit are rendered infructuous as the necessary corollary. 10. The assessee's appeal ITA 1560/Hyd/2019 is allowed and Revenue's cross appeal ITA 1597/Hyd/2019 is dismissed. A copy of this order be placed in respective case files.” 8. Even the issue is covered by the decision of the Jurisdictional Calcutta High Court in the case of “Maya Debi Bansal vs. CIT” (supra) wherein, the assessee had filed the return in a wrong form i.e. Form no.2 in response to notice issued u/s 148 of the Act instead of prescribed form applicable in the year under consideration. The ACC held that the assessment order passed u/s 143(3) on the basis of a return not filed in proper form was invalid and the assessment made thereon was void ab initio and hence, the assessment for the year under consideration was I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 14 cancelled. However, it was directed that the ITO may proceed on the basis of fact that the assessee did not file return in response to notice u/s 148 of the Act. The matter travelled to the ITAT, the ITAT held that the assessment order could not be annulled. That since the return was not filed in the proper form hence, the same could not be taken cognizance of and the assessment order be treated as passed u/s 144 of the Act as best judgment assessment and not u/s 143(3) of the Act. On further appeal, the Hon’ble Calcutta High Court set aside the order of the Tribunal and upheld the order of the ACC holding that the assessment order passed by the Assessing Officer was bad in law. Now, in the facts and circumstances of the present case, it is not a case where the assessee had not filed original return of income. However, the case is that pursuant to filing of revised return of income, the Assessing Officer was supposed to take cognizance of revised return of income and the assessment order passed by the Assessing Officer in respect of original return of income neither can be treated as an order passed u/s 144 of the Act nor the same could be held to be a valid order as the same has not been passed in respect of valid/revised return of income filed by the assessee. Therefore, this legal issue is decided in favour of the assessee and against the revenue. The assessment order passed by the Assessing Officer is hereby quashed. 9. However, at the instance of the parties, we also proceed to decide the issues on merits also. Issue of Deemed Dividend: 10. All the Grounds of the revenue’s appeal and Grounds No. 1 to 3 of the assessee’s appeal pertain to issue of deemed dividend u/s 2(22)(e) of the Act. The assessee is aggrieved by the action of the ld. CIT(A) in I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 15 sustaining the addition to the extent of Rs.9,01,00,000/- out of the total addition made by the Assessing Officer of Rs.39,34,10,000/- whereas, the revenue is aggrieved from the action of the ld. CIT(A) in deleting the remaining part of the addition. 11. Brief facts relevant to the issue are that the assessee is a private limited company engaged in the business of manufacturing of laminates, panel products, furniture, potato flakes and also engaged in agro products. During the assessment year 2014-15, the assessee company filed its return of income declaring total income at Rs.36,06,90,830/- under normal provision of the Act. The company had computed book profit u/s 115JB at Rs.21,01,31,281/-. During the assessment year, the assessee company claimed deduction u/s 80IA of the Act for generation of steam energy. The return was selected for scrutiny and notice u/s 143(2) was issued on 07.09.2015. The Assessing Officer noted from the investment schedule of the assessee company that the assessee company was holding 74.65% shares of M/s Merino Panel Products Limited i.e. subsidiary company. Further, from the loan schedule of the assessee company, it was also evident that the assessee company had received a sum of Rs.39,34,10,000/- as loan from the said subsidiary company. The above fact also corroborated from the Clause No.31(a) of the tax audit report of the assessee company where loan from subsidiary had been duly disclosed. The Assessing Officer applied the provisions of section 2(22)(e) of the Act and treated the said loan as deemed dividend and made the addition of the said amount in the hands of the assessee. 12. Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the ld. CIT(A). It was pleaded before the ld. CIT(A) that the transaction of exchange of loan amounts, i.e. taking and giving back of the funds, between the assessee and its subsidiary were done in the normal course of business and out of commercial expediency. The loan account was mutually closed and squared up at I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 16 the end of the financial year. That the transactions were in the shape of current account where out of business expediency, both the parties from time to time had taken financial help from each other during the course of business, and at the end of the year the accounts were squared up and therefore, the aforesaid transaction would not fall within the ambit of section 2(22)(e) of the Act. The ld. CIT(A) after considering the submissions and explanations of the assessee observed that in view of the specific provision of section 2(22)(e) of the Act, once the loan has been granted by the subsidiary company to its holding company, the provisions of section 2(22)(e) of the Act get triggered. He however observed that though as per the various case laws, there was an exception to the applicability of this rule if the loan was granted in the ordinary course of business. He further observed from the case laws that the Courts and Tribunal have enlarged the scope of exception from “ordinary course of business” to “normal/day to day course of business” or “cases where commercial expediency remain present”. He however observed that in his understanding, the said overstretching was not justified and held that the provisions of section 2(22)(e) being deeming provisions should be strictly interpreted. He, therefore, rejected the contention of the assessee that the loan was given and taken in the normal course of business and out of commercial expediency only on the ground that he was not convinced with the proposition of law settled on this issue by his higher judicial forums including by the decisions of various High Courts and Tribunal. He also rejected the contention of the assessee that since the interest was also paid on the said loan, therefore, this was a pure commercial transaction. He, however, observed that the loan was given by the subsidiary company to the assessee company throughout the year and at regular intervals and the said loan was also repaid from time to time by the assessee company to the subsidiary company and thereafter again fresh loan was taken. He considering the aforesaid facts held that it would not be justified to tax on entire loan of I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 17 Rs.39,00,00,000/- as deemed dividend in the hands of the assessee company because at no point of time, the assessee company had outstanding debt of the full amount of Rs.39,00,00,000/-. He, therefore, restricted the addition to higher peak balance of the loan amount during the year and made addition to the extent of the Rs.9,01,00,000/- which was the higher peak balance during the year on a given dated on 29.01.2013. The relevant part of the order of the ld. CIT(A), for the sake of ready reference, is reproduced as under: “2.3.3. The Ld. AR of the appellant company placed reliance on certain decisions to support its contention that loan given in ordinary course of business falls outside the ambit of provision of deemed dividend. I have gone through all the decisions and found that reliance on all these decisions are misplaced. either because of difference of facts or issue involved in each particular case. The above decisions does not assist appellant case for following reasons (discussed for each decision separately):  In CIT -vs. M/s Malayala Manorama Co. Ltd (Supra) the subsidiary of assessee company deposited a sum of Rs. 60 lakhs for payment of necessary clearance expenses at port as deposit, no loan advances given by the assessee company to its subsidiary company. In this case. the business of the assessee company and subsidiary company is interrelated because assessee is a book publisher and the subsidiary distributes those books in middle east. The books and magazines first transported from Kerala to Mumbai and from there shipped to Middle east region. For clearance of the goods, assessee use to incur considerable expense at custom stations out of its own pocket. To facilitate this, the subsidiary gave a deposit to the parent The revenue treated this deposit as deemed dividend and taxed it accordingly. In this background, the court held that this deposit cannot be treated as loan or advance and further this sum has been given out of normal course of business and therefore falls outside the scope of deemed dividend. The fact in the appellant case is totally different as in this case there is no correlation between the loan taken by the appellant company and its dealing with the subsidiary. The AR of the appellant did not cite a single linkage or produced a single piece of evidence to prove that loan was given in ordinary course of business. Hence, this judgement is not applicable.  In the case of M/s Sree Krishna Gyanodya Flour Mills Pvt. Ltd. -vs. PCIT (Supra)the assessee company held substantial beneficial interest in SVPL. The assessee company has taken loan form its subsidiary company (i.e. SVPL) of Rs. 14.26 crores. The AO treated the same as loan and advances and held it to be as deemed dividend u/s 2(22)(e). However, in this case it is observed that the assessee company maintained regular account from where it is clearly visible that the I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 18 assessee has taken loan/advance from SVPL, correspondingly, on many occasions it has given advance to SVPL. Thus there was a change of balance shown by the assessee. Therefore, it cannot be termed as advance taken by the assessee because the flow of transactions is not only from the subsidiary to holding but also vice versa, which is not similar to the present case. Therefore, this judgement is not in support of the appellant company.  In the case of Sunil Kapoor -vs.- CIT (Supra)the assessee is an individual hold more than 60% shares in M/s Kapoor Imaging Pvt. Ltd. (for short 'KIPL'). The assessee had taken loans and advances on various dates form KIPL amounting to Rs. 76.86 lakhs. On 31.03.2009 the balance still due after certain repayments was Rs. 39.32 lakhs. Since the Individual has substantial Interest in the company the Ld. AO held it to be deemed dividend u/s Sec. 2(22) (e). The CIT(A) as well as ITAT held that the two separate accounts, i.e. one for loan taken from the company. viz., KIPL and one for loan given, are to be considered as two separate accounts and hence cannot be merged, and treated the same as deemed dividend. However, the High Court held that the amount received by the assessee from the company should be set off with the amount paid by the assessee to the company and hence, only the balance amount is to be considered as deemed dividend and chargeable to tax. In the present case, the AR does not produce any material which demonstrates that the appellant company owes something to the subsidiary or there was debtor creditor relation between the two. Therefore, this judgement is not in support of the appellant company.  In the case of M/s The Hooghly Mills Co. Ltd. -vs- DCIT (Supra)the assessee company is a substantial shareholder of M/s Hooghly Mills Project Ltd. In this case, the assessee company had taken a loan from its subsidiary company of Rs. 5.59 crores which the Ld. AO treated as deemed dividend since it was not apparent from the record whether there was the business transaction between two companies. However, the Hon'ble ITAT found that sufficient evidence was available to the Ld. AO at the time of assessment proving that business transaction existed between two companies. Further, it was observed that the loan advance by the company to shareholder in compensation of shareholder mortgaging his immovable property for enabling company to secure bank loan. Here, it is clear that both the parties are benefited from the transaction. And if the transaction is mutual by which both parties are benefited, then Sec. 2(22)(e) will not attract. Therefore, the decision was given in favour of the assessee. But coming to the present case only the appellant company is benefited by such transaction. Therefore, this case is also not applicable in favour of the appellant company. 2.3.4. In view of the specific provision of sec. 2[22] (e) and above mentioned judicial precedent it is amply clear that once the conditions specified in said sections are satisfied than the advance/loan has to be taxed as deemed dividend in the hands of the recipient. The only limitation or reprieve available to the recipient of the loan is that the above loan was I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 19 granted by the lender company in the ordinary course of business. The Legislature in its wisdom has given only one circumstances or exception under which said loan or advanced cannot be taxed deemed dividend. This exception of loan given in ordinary course of business provided in the statute to protect the assessee's from genuine hardship from taking loan from any finance or NBFCS companies which also might be its related concern. Otherwise, any loan or advance given partake the colour of deemed dividend. 2.3.5. I have gone through the cases cited by the AR of the appellant and also examined various cases on the subject on my own. On careful examination of those cases it appears that Courts and Tribunals had enlarged the scope of the exception from \"Ordinary course of business\" to \"Normal/Day to Day course of business\" or cases where commercial expediency remain present. In my understanding, the said overstretching is not justified as provision of deemed dividend is a deeming provision and it cannot be stretched and needs to be strictly interpreted. Once, loan has been advanced, and the lender company is not in money lending business than the provision, of deemed dividend triggers. The fact it is repaid or it is given out of commercial expediency is totally irrelevant for deciding the issue. 2.3.6. One more point that is crucial here is that, even the cases cited or available in public domain suggest that if there is quid pro quo between the lender and borrower than deemed dividend may not apply. However gratuitous loan given for sole benefit of the borrower because of its shareholding will not assist the case of the borrower. In the present case the AR of the appellant did not file any written submission or reply and merely cited some case laws. In spite of giving several opportunities no submission or argument submitted. When pointed out to the AR to show as to how. there is a quid pro quo in this transaction involved. He merely repeated his point that this is in the normal course of business but how he not elaborated. Also on the query as to whether MPPL I.e. subsidiary can give similar type of gratuitous loan to a non- shareholder or to an unrelated party remain unanswered. This clearly suggest that the loan given in the present case is a gratuitous one which is in no way related to the business of any of the party. The appellant company used this loan for the furtherance of its business. Therefore, this is nothing but a classic case of deemed dividend. 2.3.7. I would also like to add here that the assessee has itself submitted two different ledger accounts viz. one relating to loan taken from the subsidiary and other relating to purchase and sale made to/from subsidiary. Maintenance of two separate ledger account itself indicates that this loan transaction is separate and different from the normal purchase and sale transaction carried on by the appellant company. Additionally, on perusal of the ledger balances it is evident that at most of the time the appellant had credit balance in the loan account i.e. loan taken was higher which itself suggest that the said loan was given for appellant sole benefit. The above facts clearly demonstrate that this loan I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 20 transaction is purely in the nature of deemed dividend and not a loan or advance granted during normal course of business. 2.3.8 One of the contention raised by the AR of the appellant company is that the assessee has paid interest on the said loan received from the subsidiary and therefore this is a pure commercial transaction. The above submission of the AR does not impress me as the provision of Sec. 2(22) (e) is very clear in this regard. Once the loan is granted and other conditions are fulfilled the provision of Sec. 2(22) (e) triggers. The fact that interest is paid on said loan is immaterial in deciding the taxability. The above view finds support from the decision of Calcutta HC in NandlalKanoria -vs.- CIT reported in [TS-5254-HC- 1979-CAL) where the Hon'ble Court has categorically held that payment of interest does not mean that loan does not confer any benefit to the borrower, therefore, the fact that interest is paid is not a relevant criterion to decide the taxability of deemed dividend. 2.3.9 I would also like to add that during the course of proceeding the AR submitted extract of leger of loan account. From the said loan account, it is evident that loan was given to the appellant company throughout the year and at regular interval the said loan also repaid by the appellant company and thereafter again fresh loon given. Therefore, considering the said fact of this case, in my view, it will not be justified to fax entire loan of Rs. 39 Crs. as deemed dividend in the hands of the appellant company. This is because of the fact that at no point of time the appellant company had received full fund of Rs. 39 Crs. from the subsidiary. Loans were paid at regular interval. Therefore, it seems higher peak balance of loan amount should be considered as deemed dividend in the hands of the appellant company. From The said ledger it is evident that on 29-01-2013, the peak balance was Rs. 9,01,00,000/-. The addition of this sum seems to be logical if we see the intent of the provision which is to tax deemed dividend in the guise of loans and advance. The maximum amount lent by the subsidiary at any given point of time can be said to be deemed dividend. The addition of entire sum of Rs. 39,00,00,000/- ignoring the repayments does not seem to be correct approach. 2.3.10 In view of the above discussion, I am upholding the addition made by the AO to the extent of Rs. 9.01.00,000/- and delete the balance addition. Hence, this ground is partly allowed in favour of the appellant company.” 13. Contesting the above findings given by the Ld. CIT(A), the ld. AR of the assessee has made the following written submissions on this issue: (A). We argued the case before your honour that the financial transactions between the Holding and Subsidiary Company is out of the purview of Section 2(22)(e) the Income Tax Act,1961. The I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 21 financial transaction between your appellant company and its subsidiary company was for running business under current account transaction which is reflected in the attached transactional ledgers. In which the financial transactions were taking place at the several occasion during the financial year whereas in some occasions balance is zero. The appellant company as well as the subsidiary company already passed the resolution in the Board of Directors for such transaction which was for financial or accommodation under the current for fulfilling the business need for the company. We attached the respective resolution (Minutes of the Meeting) in the additional paper book in page no 39 & 40. Your appellant company has taken money under the current account from the subsidiary company, namely M/s Merino panel Products Limited which is now amalgamated with your appellant company as per order of NCLT, Bench, Kolkata. It is also to be noted that your appellant company provided money also to subsidiary company on some occasions for which the separate ledger is attached with our additional book as already filed. We attached again herewith the above-mentioned transactional ledger account for kind reference. Vide page 41 to 45 . The Transactions between both companies under current account which is absolutely for maintaining the need of business under the running transactions during the financial year. It is also to be noted importantly that balance of the running transaction is squared off fully at the end of the financial year in the books of appellant company as well as Subsidiary company. (B). The department of Income tax has taken stands and cleared the disputed matter of the deemed dividend after taking into consideration the actual nature of the financial transactions between your appellant company and its subsidiary in the remand matter of A.Y 2013-14, The department of Income Tax held in the remand report that transaction between Your appellant company, Merino Industries Limited and its Subsidiary company, Merino Panel Products Limited is not coming under the ambit of section 2 (22) (e) of the Income Tax Act,1961. Therefore, the deemed dividend is not applicable in the hand of Merino Industries Limited. Kindly vide the page no 7 of the highlighted portion of the remand report as attached herewith for your kind consideration. Vide Page no 46 to 58 of our additional paper book (C) Your kind attention is invited to the order of CIT(A) where the Honourable CIT(A) observed to make addition of Rs 9,01,00,000/- only out of the total transaction on assumption basis for considering the pick balance under the ledger account of the financial I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 22 accommodation between your appellant company and its subsidiary. Your honour is requested to vide our ledger account as attached in our paper book under page no 16 to 20 ( page No 41 to 45 with our additional paper book) where it is apparently showing the financial transactions are in nature of current account which taken place on several occasions and reflecting the zero balance at several times during the financial year. The ledger of the financial transactions is also fully squared off at the end of the financial year as the account is in current account nature for running financial transaction in fulfilling the business need and exigency. We mention here that where the nature of transactions, all in same nature, but the Ld CIT(A) considered the pick balance as the financial transaction in nature under the preview of deemed dividend. It is very well accepted by the CIT(A) that transactions as reflected in the ledger which is out of the preview of deemed dividend. It is now very clear that the CIT(A) erred in allowing the addition of Rs 90100000 from the same category and same nature of transactions. The department is to follow the consistency policy as the deemed dividend which was not applied previously on the same matter of transactions. The addition of Rs 90100000 which was held by the CIT(A) on assumption and mechanical basis for deemed dividend is to be deleted in the interest of justice. (D) Your honour is requested to kindly refer to the decision of the ITAT of Bench \"B\", Kolkata in the matter of MIS Sree Krishna Gyanodya Flour Mills Pvt. Ltd. Vs. Pr. Commissioner of Income Tax, Central, Kolkata-2 in which the Hon'ble bench \"B\" Kolkata squarely covered and held that the transactions which represents as several occasions as taken place during the financial year which is in nature of current account transactions therefore deemed divided is not applicable. We again attached herewith the above judicial pronouncement Vide page No - 59 to 64. Your kind attention is also invited to the decision of ITAT bench \"B\" Delhi M/s Exotica Housing and Infrastructure Company Pvt. Ltd. Vs. Income Tax Officer Ward- 8(4),New Delhi , in which it is decided that the financial transactions between holding and subsidiary company is not under preview of deemed dividend as the financial transactions taken place in several occasions during the financial year and balance at the end of the year is zero. Kindly refer to the page No 65 to 78 with our additional paper book. In our case, it -is also reflected in the ledger which is clearly showing the transaction are purely temporarily financial accommodation for the business purpose as taken place at several occasion during the financial year. In such cases, section 2 (22)(e) would not be attracted. It is also to be noted that where the I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 23 transaction between holding and subsidiary is not in nature of loan the decision of Smt Tarulata Shaym v. CIT is not applicable at all. In our cases it is also to be noted importantly that the outstanding balance of same ledger is zero at the end of the financial year in such cases applicability of deemed dividend is zero. We also invited the judicial pronouncement of Madras High court in the case of Sunil Kappor V Commissioner of Income tax in which the Honourable high court mentioned that deemed dividend is not applicable where balance at the end of the financial year is zero because of repayment during the year is to be considered by the A.O. (E) It is also to be noted that the deeming provision of section 2 (22) (e) is not to be given wider meaning to apply which is totally against the law and justice where the financial transaction is in the nature of current account. It is very clear that where the transaction between your appellant company and its subsidiary company is not in nature of loan then it is to be considered the such financial transactions out of the preview of the section 2 (22 )(e). In our cases, the discussion of applicability of any clause of deeming provision of the deemed dividend u/s section 2(22)(e) `1does not apply at all. (F). Your honour is requested to kindly vide the stand of department of Income Tax where it is established that the deemed dividend is not applicable on such financial transactions between your appellant company and its subsidiaries company. The remand report is also attached herewith for your kind reference. We rely on the remand report and with the stand as established by the department of Income Tax in the remand report. Your honour is requested to kindly consider the financial transaction between your appellant company and its subsidiary company as financial accommodation in nature of current account and out of the applicability of deemed dividend u/s 2 (22)(e) on the basis of :- i). Board's Resolutions of Both Companies of Your appellant company and its subsidiary company as attached herewith ii) Remand report of the department of Income Tax as attached herewith I ii) Judicial pronounce of the Houn arable Bench- B, Kolkata in case of M/S Sree Krishna Gyanodya Flour Mills Pvt. Ltd. Vs. Pr. Commissioner of Income Tax, Central-2 and Bench “A” of Kolkata in case of ITO vs. Smt. Gaytri Chakraborty as attached herewith from 79 to 84 with our additional paper book.” I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 24 14. The ld. counsel for the assessee has further placed reliance upon the remand report of the Assessing Officer in the case of the assessee for assessment year 2013-14 on the same issue of deemed dividend, wherein, the Assessing Officer while relying upon various case laws and also considering that in the assessee’s own case for earlier assessment years during A.Ys 2010-11 and 2011-12, the then Assessing Officer had not made any additions on account of deemed dividend u/s 2(22)(e) of the Act though, there were similar type of loan transactions between subsidiaries and assessee company and it was demonstrated that there was a systematic practice of loan transaction between subsidiaries and assessee which were in normal course of business. The Assessing Officer, therefore, has recommended in his report that the provisions of deemed dividend were not applicable in the case of the assessee. The relevant part of the remand report dated 10.05.2023 of the Assessing Officer is reproduced as under: “In view of the above, the following points are need to be highlighted; 1. The assessee company availed unsecured financial accommodation for working capital and other operational needs with M/s. Merino Panel Products Limited and the assessee company stated that the transaction is purely in nature of current account for business requirement which gave benefits to both the companies. The financial transaction to / from is in the ordinary course of business. 1. The assessee company had undertaken loan transaction with M/s. Merino Panel Products Limited, and M/s. Merino Panel Products holds directly 74.65% of the latter concern. 1. As per section 2(22)(e), the loan can be treated as deemed dividend, however, in the Act, there is no provisions made for such current account transaction. Because transactions related to financial accommodations between the companies happened during several occasions as per requirement of the companies. 1. The assessee company has relied on various case laws in support of his claim. In the case of M/s Budhia Agencies Pvt Ltd, Sri Vinay Lr Jalan's, OP Jalan & Associates Consultants LLP v DCIT Circle 1 Ranchi ITA No 61/Ran/2018 dated 16-09-2020 and others I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 25 references: It was decided that where a company meets its business exigencies of fund requirements by borrowing from its group concerns, such transaction cannot attract provisions of deemed dividend under section 2(22)(e) of the Income Tax Act, 1961. 1. The assessee company also submitted assessment orders of various previous AY's wherein assessment u/s 143(3) of the IT Act, 1961 was duly completed. The assessee submitted that similar financial transactions were undertaken by the assessee company with its subsidiary company and all the relevant documents were duly submitted before the AO. Furthermore, no such disallowance u/s 2(22)(e) was made in those orders and the department had duly accepted the said transactions as financial transactions for the benefit of both the company since they were in the nature of current account and completely in commercial expediency. The assessee company emphasised on the stand of the department in the earlier year on the said issue and further submitted various case laws with regard to The Principle of Consistency which should be followed in the instant case. Reliance was placed on the judgements of Hon'ble Apex Court in the case of pronounced by Hon'ble Apex Court in the case of Radhasoami Satsang vs. Commissioner of Income-Tax, (1992) 193 ITR (SC) 321&Godrej & Boyce Manufacturing Company Limited -vs.-DCIT & Anr (2017) 394 ITR 0449 (SC). In view of the above, in the assessee's own case assessments during the AY- 2010-11 and AY-2011-12, the then AO has not made any additions on account of 2(22)(e), though there were loan accommodation transaction between the subsidiaries companies Merino Panel Products limited and Merino Industries Limited, the assessee submitted Assessment Orders or AY-2010-11 and AY-2011-12 and board resolutions agreeing unsecured financial accommodations between the subsidiaries which shows there is a consistent practice of financial transaction(loan accommodation between the subsidiaries are in general course of business Therefore, deemed dividend is not applicable in such cases of transactions.” 15. For the Assessment year under consideration also, there is no denial of fact that the transactions between the assessee and its subsidiary company was like that of a current account. It is noticed that from time to time the assessee and its subsidiaries had given and taken loan from each other as per the business needs and the loans were squared up at the end of the year. The transactions were continuous and running as per business needs and expediency. The issue is covered by the various decisions including the decision of the Coordinate Kolkata Bench of the Tribunal in the case of “Shree Krishna Gyanodya Flour Mills Pvt. Ltd. vs. PCIT” in ITA No.1008/Kol/2016 dated 14.02.2018, I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 26 wherein, the Tribunal further relying upon the decision of the Mumbai Bench of the Tribunal in the case of “Bombay Oil Industries Ltd. vs. DCIT” reported in [2009] 28 SOT 383 (Bom) and also on the decision of the Jurisdictional Calcutta High Court in the case of “Pradip Kumar Malhotra vs. CIT” 338 ITR 538(Cal), has held that where the loan transactions are in the normal course of business and out of business expediency and are representing current account transaction, in such type of transactions, the provisions of section 2(22)(e) would not be attracted. The relevant part of the order of the Coordinate Bench of the Tribunal in the case of “Shree Krishna Gyanodya Flour Mills Pvt. Ltd. vs. PCIT” (supra) is reproduced as under: The purpose of Section 2(22)(e) of the Act is to tax the benefit extended by private limited company to its shareholders holding shares not less than 10% as beneficial owner of shares (not being shares entitled to a fixed rate of dividend income). There is no dispute with regard to shareholding of the assessee. Now coming to the amount of advance taken by assessee, we note that assessee has not only taken loan / advance from SVPL, but also it has sometime given advance to SVPL. Thus, there was change in the balance shown by assessee. Thus, it cannot be termed as advance taken by assessee as it was fluctuating during the year. In holding so, we find support and guidance from the order of co-ordinate Bench of this Tribunal in the case of Bombay Oil Industries Ltd. vs. DCIT reported in [2009] 28 SOT 383 (Bom), wherein it was held as under:- “From the above it is clear there is distinction between deposits viz- a-vis loans/advances. Section 2(22)(e) enacts a deeming fiction whereby the scope and ambit of the word dividend has been enlarged to bring within its sweep certain payments made by a company as per the situations enumerated in the section. Such a deeming fiction would not be given a wider meaning than hat it purports to do. The provisions would necessarily be accorded strict interpretation and the ambit of the fiction would not be pressed beyond its true limits. The requisite condition for invoking Section 2(22)(e) of the Act is that payment must be by way of loan or advances. Since there is a clear distinction between the inter- corporate deposits viz-a-vz loans/advances, according to us the authorities below were not right in treating the same as deemed dividend u/. 2(22)(e) of the Act” [emphasis supplied] Similarly, we also support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of Pradip Kumar Malhotra v. CIT 338 ITR 538 (Cal) wherein the Hon'ble High Court held as under:- I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 27 “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 share (not being share 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 further consideration which is beneficial to the company received from such a share-holder, in such case, such advance or loan cannot be said to be deemed dividend within the meaning of the Act. thus, gratuitous loan or advance given by a company to those clauses of shareholders would come within the purview of section 2(22) but not cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder.” [emphasis supplied] From the foregoing discussion, there remains no doubt that the transactions between assessee and SVPL is representing current account transactions. Therefore, the provision of Section 2(22)(e) of the Act cannot be attracted to such transactions. Keeping in view the above discussions, and also bearing in mind the entire facts of the case, we deem it fit and proper to uphold the grievance of the assessee and quash the impugned revision order as devoid of jurisdiction. The assessee gets the relief, accordingly.” 15.1 Moreover, in this case, in the immediately preceding assessment year, vide remand report dated 10.05.2023 which is subsequent to the date of impugned order of the ld. CIT(A) [09.10.2018], the Assessing Officer after duly examining the nature of the transaction has observed that such type of transactions were being carried out between the assessee and its subsidiaries continuously or consistently and in the earlier assessment years also and that the nature of the transactions was like of current account and therefore, has concluded that the provisions of section 2(22)(e) of the Act are not applicable in the hands of the assessee. The facts of the present case for the present year are same and identical. The Hon’ble Jurisdictional Calcutta High Court in the case of “PCIT vs. Bhagirathi Tie Up Pvt. Ltd.” in ITAT/52/2021 IA NO: GA/1/2021 & ITAT/52/2021 IA NO: GA/2/2021 dated 11th April 2021, has held that the Tribunal has rightly taken note of the legal position that the revenue has no locus standi to file the appeal against its own findings in the remand report. The Jurisdictional High Court has also in I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 28 this respect taken note that the Tribunal while holding so has relied upon the decision of the Madras High Court in the case of “Smt. B. Jayalakshmi v. Assistant Commissioner of Income-tax, Salary Circle-II, Chennai” [2018] 96 taxmann.com 486 (Madras) and further another decision of the Coordinate bench of the Tribunal in the case of “D.C.I.T, Central Circle-1(4), Kolkata vs. M/s. Shraddha Tower Pvt. Ltd.”, 2018(10) TMI 1405. In the case in hand, since the Assessing Officer has thoroughly examined the nature of the transactions done by the assessee which have been done regularly and consistently and has noted that the same being in the ordinary course of business and out of commercial expediency and the account between the assessee and its subsidiary was in the nature of current account and further since the issue is squarely covered by the decision of the various High Courts/Tribunal decisions, therefore, in view of the above discussion, the addition made/confirmed by the lower authorities u/s 2(22)(e) of the Act is not sustainable in this case and the same is accordingly ordered to be deleted. In view of the above observations, Ground Nos.1 to 3 of the assessee’s appeal are hereby allowed, whereas, the appeal of the revenue is hereby dismissed. Issue relating to claim of deduction u/s 80IA of the Act - 16. The assessee vide its Ground No.4, 6 to 11 has contested the action of the lower authorities in not allowing the deduction claimed by the assessee u/s 80IA of the Act. 17. The assessee company claimed deduction of Rs.3,85,61,826/- for its steam generation unit from the boiler plant U-I located at Hapur. During the assessment proceedings, the assessee duly explained about its eligibility to claim the said deduction which contention was even not disputed by the Assessing Officer. However, the Assessing Officer noticed that the assessee had not claimed the said deduction in return of income I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 29 and also observed that the assessee has computed the deduction by simply applying 15% mark-up on the cost of production. He, therefore, disallowed the deduction claimed by the assessee. 18. In first appeal, the ld. CIT(A), though, observed that the reliance of the Assessing Officer on the decision of the Hon’ble Supreme Court in the case of Goetze India Ltd. Reported in 284 ITR 323 to hold that since the said claim was not in the return of income hence, such claim cannot be made during assessment proceedings, was misplaced. He, however, observed that as per the provisions of section 80A(5) of the Act, the assessee otherwise was required to make such claim in the return of income. He, however, held that otherwise there was no dispute relating to the eligibility of the assessee to claim such deduction. He also held that the computation of deduction by simply adding of 15% mark-up to the cost of producing the scheme was not correct. He further held that there was a specific provision of section 80IA(8) of the Act which provided that any deduction under this section shall be computed by applying the market value to the goods or supplied from power undertaking to the plywood division. He, however, observed that since the assessee had not computed the deduction as per market rate and simply applied mark-up of 15% by bypassing the relevant provisions of section 80IA. He upheld the disallowance of deduction. 19. Before us, the ld. Counsel for the assessee has made the following submissions on this issue: “3. Matter related to deduction claimed under section 80-1A of the Act: (A) We argued the case before your honour on the matter of claiming of deduction under section 80IA(4) (iv) of the income tax Act.1961. The Ld A.O ignored our claim of deduction because the assessee company did not claim the deduction in the original return. The Ld A.O mentioned in his order \"the assessee had not claimed the deduction in the original return of Income, nor any revised Return was filed in this regard. It is apparently clear that Ld A.O accepted our return filed on 01-12-2014 as original return u/s 139(1) but he ignored the revised filed by your appellant on 31-03-2016. I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 30 (B) It is to be noted at the outset that our return as filed on 01-12-2014 which is within due date u/s 139(1) as the Ld A.O accepted and mentioned that the assessee is eligible to revise the return u/s 13915). Kindly refer to the page no 8 of the assessment order as we highlighted the portion. (C) The Ld A.O mentioned wrongly that the assessee did not file the revised return as your appellant had filed the revised return within due date on 31- 03-2016 and claimed deduction u/s 801A. The copy of original return and revised return as attached herewith. Vide Page No-10 10 11 with our additional paper book. The ignorance of our valid revised return by the Ld Assessing Officer is attracted & invited to invalid the assessment order as we argued during hearing and also mentioned herein above under clause no-1. (D) Your honour is requested to vide the para no 6.1.1 of the order of CIT(A) in which the CIT(A) mentioned that \"No claim has been made regarding 801A in Return of Income u/s 139(1)/139(5)\" It is very clear that the CIT(A) also ignored our revised return as filed u/s 139(5) and mentioned the above fact which is wrong. (E) Your honour is requested to vide the para no 6.1.2 of page no 15 of the CIT(A)'s order in which our eligibility is ascertained. The CIT(A) mentioned the right fact of claiming deduction on the market value basis not based on 15% mark up on cost of production of energy. (F) The department of Income tax accepted in the remand report for consideration of the claim of deduction u/s 801A based on market value for The A.Y 2013-14. Kindly vide the para no 3 of page 9 of the remand report. We attached the relevant part of the remand report with our additional paper books in page no- 85 (G) Your honour is requested to kindly refer to the recent judgment by the Supreme court in the case of CIT VS Jindal Steal & power Ltd did 06-12-2023 vide the para no 30-Page no 43 and 44 of the judgment as attached in our paper book under the Page no 149 to 150. The apex court ascertained that the claim of deduction u/s 801A is to be calculated based on market value as per the rate of energy paid by customer to the electricity board. Your honour is requested to kindly vide our calculation of deduction amount based on market value in accordance with the observation of the CIT(A) as well as in accordance with judgment of the apex court. The calculation is attached herewith vide-page No-86 with our additional paper book. We also attached herewith the relevant part of the judgment of the supreme court- Vide page 87 & 87A with our additional paper book. (H)Your honour is requested to refer also the judicial pronouncement of the ITAT, Bench- C of Kolkata in DCIT, Circle (10) (2) Kolkata vs Balrampur Chini Mills Ltd in which the honourable Bench held that the claim of deduction is to be allowed u/s 80IA on the basis of the market value of energy as paid by the assessee to the electricity board. We already attached the decision of the ITAT, Kolkata with our paper books. The relevant part of the order is attached for your immediate reference with our additional paper book. Vide- 88 to 89 (I) It is to be noted that there is no dispute by the department for our eligibility and cost of production for claiming deduction Section 801A(4) (iv). The dispute as raised by the Ld A.O & Ld CIT(A) which is related to claiming of deduction in the return of tax. The second dispute was related to the computation of notional profit for claiming of deduction. Your honour is requested to kindly consider our revised Return of income tax I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 31 u/s 139(5) and allow the calculation of deduction u/s 801A as per line of judgement of the Supreme court and in the line of the order of the ITAT Bench-C Kolkata. The CIT(A) also agreed and recommended to allow the deduction in our case based on market rate. We attached herewith the calculation of deduction u/s 80IA based on market rate for your kind consideration. 20. The ld. Counsel has duly demonstrated that the deduction u/s 80IA was duly claimed in the revised return. As observed above, both the lower authorities failed to take note of the revised return filed by the assessee. Therefore, the denial of deduction on this ground was not justified. So far as the computation of deduction is concerned, the issue is squarely covered by various decisions of the higher courts including the decision of the Hon’ble Supreme Court in the case of CIT vs. M/s Jindal Steel & Power Ltd. in Civil Appeal No.13771 of 2015 vide order dated 06.12.2013, wherein, the Hon’ble Supreme Court has held as under: 30. Thus on a careful consideration, we are of the view that the market value of the power supplied by the State Electricity Board to the industrial consumers should be construed to be the market value of electricity. It should not be compared with the rate of power sold to or supplied to the State Electricity Board since the rate of power to a supplier cannot be the market rate of power sold to a consumer in the open market. The State Electricity Board’s rate when it supplies power to the consumers have to be taken as the market value for computing the deduction under Section 80-IA of the Act. 31. That being the position, we hold that the Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market i.e., the price charged by the State Electricity Board while supplying electricity to the industrial consumers. Therefore, the High Court was fully justified in deciding the appeal against the revenue.” 21. The ld. CIT(A) has also given the findings on the above lines and the revenue has not taken any ground in its appeal on the above findings of the ld. CIT(A). Even the Ld. Assessing Officer in the remand report for I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 32 assessment year 2013-14 on the same issue has given the following observations: “3. During the remand proceedings the assessee company submitted a copy of computation of 801A @market Price. And calculated the same @ Rs. 9,91,15,486/- The assessee submitted the calculation sheet on the basis of market price as paid by the assessee to Paschimanchal Viyut Vitran Nigam Ltd., Uttar Pradesh, which is based on the evidences than markup basis. In this regards, the cost of production which is calculated on the basis of cost sheet of steam production, it is estimated that 4 Kg of steam is required to produce one unit of electricity therefore the cost of one unit of electricity is calculated (4 KgXRs. 1.17) because cost of steam of 1 Kg is Rs. 1.17 as per cost sheet. As far as the market price is concerned which is considered as actually paid by the assessee average of Rs. 6.58 per unit to the electricity board, namely Paschimanchal Viyut Vitran Nigam Ltd. As per calculation on the basis of market value of electricity, the deduction amount of Rs. 9,91,15,486/- Submitted and claimed by the assessee. … It is therefore concluded that the claim of the assessee is acceptable.” 22. Now, the question remains as to what will be the actual quantum of deduction admissible to the assessee for the year under consideration. The ld. Counsel in this respect has given the following computation chart: Statement showing the calculation of deduction under section 80-IA (4)(iv) For the Assessment year 2014-15( Fy 2013-14) ______________________________________________________________________________ Total Steam produced during the year -213778450 Kg. Estimation: Steam required for generate one unit of Power - 4 Kg. Total units of Power distributed: Total Steam/Steam qty. per unit of power-213778450 Kg./4 Kg. = 53444613 Units of Power Rate Consider = Rs.7.58 per unit as paid by us to UP State Electricity Board Particulars of Claim of Deduction Under Section 80IA Amount (Rs.) Notional Revenue Generated (53444613 Units x Rs. 7.58) Less: Cost of Energy Profit on generation of Energy: Deduction Amount under Section 80LA 40,51,10,167.00 25,70,78,000.00 14,80,32,167.00 Our Claim of Deduction 80IA on the basis of Market Price of Energy :- Rs. 148032167 I.T.A No.174/Kol/2019 & I.T.A No.292/Kol/2019 Assessment year: 2014-15 M/s Merino Industries Ltd 33 23. The aforesaid computation is subjected to the verification of rates by the Assessing Officer. It is therefore directed that the Assessing Officer will verify the rates charged by the Electricity Board to other industrial undertakings as claimed above by the assessee and accordingly allow the deduction u/s 80IA of the Act to the assessee. Ground No.4, 6 to 11 of the assessee’s appeal stands allowed. 24. Though the assessee has taken two additional grounds of appeal, however, the same have not been pressed during the course of arguments. The additional grounds of appeal of the assessee are, therefore, dismissed. 25. No other ground raised or pressed by any of the parties. 26. In the result, the appeal of the revenue is hereby dismissed. Assessment order is quashed as discussed above. The appeal of the assessee is treated as partly allowed on merits. Kolkata, the 6th February, 2025. Sd/- Sd/- [Sanjay Awasthi] [Sanjay Garg] लेखा सदèय /Accountant Member ÛयाǓयक सदèय /Judicial Member Dated: 06.02.2025. RS Copy of the order forwarded to: 1. DCIT, Circle-12(1), Kolkata 2. M/s Merino Industries Ltd 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches "