M/s. The Hooghly Mills Co. Ltd., Kolkata V. DCIT, CC-VII, Kolkata, Kolkata

ITA 547/KOL/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4467 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT SUBHRA BISWAS
• Assessee Lawyers: S JHAJHARIA
• Keywords: Business income; Retrospective amendment; Question of law; Deemed dividend
• Section: 43B; 143(3); 142(1); 14A; 115JB; 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 547 / KOL / 2011 ASSESSMENT YEAR :2006-07 M/S THE HOOGHLY MILLS CO. LTD. C/O, SALARPURIA JAJODIA & CO. 7, C.R. AVENUE, KOLKATA-700 072 [ PAN NO.AAACT 9780 F ] V/S . DCIT, CENTRAL CIRCLE-VII, 18, RABINDRA SARANI, KOLKATA-700 001 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI S.JHAJHARIA, FCA & SHRI SUJOY SEN, ADVOCATE /BY RESPONDENT SHRI RAJAT SUBHRA BISWAS, CIT-DR /DATE OF HEARING 11-05-2016 /DATE OF PRONOUNCEMENT 15-07-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA DATED 01.03.2011. A SSESSMENT WAS FRAMED BY DCIT,CC-VII, KOLKATA U/S 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 31.1 2.2008 FOR ASSESSMENT YEAR 2006-07. GROUNDS RAISED BY ASSESSEE PER ITS APPEAL ARE AS UNDER:- 1. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUM STANCES THE ORDER MADE BY THE CIT, CENTRAL - I IS WHOLLY BAD, ILLEGAL, UNJUST IFIED AND UNCALLED FOR BOTH ON POINTS OF LAW AS WELL AS FACTS AND IN VIEW OF THE F ACTS AND IN THE CIRCUMSTANCES THE ORDER OF THE AO BEING NOT AT ALL ERRONEOUS IN A S MUCH AS PREJUDICIAL TO THE INTEREST OF REVENUE AND THE AO HAVING TAKEN ONE OF THE POSSIBLE VIEWS, SUCH ORDER U/S 263 IS LIABLE TO QUASHED I CANCELLED AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES IT MAY KINDLY BE HELD ACCORDINGLY . ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 2 2. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES IT HAVING BEEN EXPLAINED TO THE CIT IN COURSE OF PROCEEDINGS U/S 2 63 THAT RS. 5,58,93,0001- WAS NEVER RECEIVED BY THE APPELLANT BY WAY OF LOANS AND ADVANCES AND THE ENTIRE AMOUNT REPRESENTED PURCHASES AND SALES OF GO ODS, PROVISIONS OF SEC. 2(22)(E) WERE NOT AT ALL APPLICABLE AND THE ORDER O F THE AO BEING NOT AT ALL ERRONEOUS IN AS MUCH AS PREJUDICIAL TO THE INTERES T OF REVENUE ON THIS GROUND, THE CIT IS WHOLLY UNJUSTIFIED IN SETTING ASIDE THE ORDER OF THE AO ON THIS ISSUE AND FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUM STANCES SUCH ACTION OF THE CIT MAY KINDLY BE DELETED. 3. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES THE CIT HAVING ISSUED THE NOTICE U/S 263 IN CONNECTION WITH ALLOWABILITY OF CLAIM FOR GRATUITY LIABILITY AMOUNTING TO RS. 4,19,58,203/- NOT DEBITED IN THE B OOKS OF A/CS. AND THE MATTER HAVING BEEN EXPLAINED IN DETAIL THAT SUCH AM OUNT WAS NEVER DEBITED IN THE P&L ALC. BUT HAD BEEN CLAIMED IN COMPUTATION OF INCOME AND HENCE QUESTION OF DISALLOWANCE DID NOT ARISE, THE CIT EX CEEDED HIS JURISDICTION BY MAKING REFERENCE TO RS. 3,85,60,6901- WHICH WAS NOT THE SUBJECT MATTER OF HIS SHOW-CAUSE NOTICE U/S 263 AND HENCE THE ORDER OF TH E CIT IN THIS REGARD AND ON THIS ISSUE IS WHOLLY BAD, ILLEGAL, UNJUSTIFI ED AND UNCALLED FOR AND IN ANY CASE THE ORDER OF THE CIT ON THIS ISSUE IS WHOLLY W RONG. (A) AS REGARDS APPLICABILITY FOR PROVISIONS OF SEC. 2(24)(X) READ WITH SEC. 36(1) (VA) FOR RS. 64,96,988/-, THE MATTER HAVE BEE N EXPLAINED IN DETAIL TO THE CIT IN COURSE OF PROCEEDINGS U/S 263 THAT SU CH PAYMENT BEING IN ACCORDANCE WITH DIRECTIONS OF HON'BLE KOLKATA HI GH COURT AND THE SAME HAVING BEEN FULLY HELD AS ALLOWABLE IN DIFFERE NT APPEALS FOR A. Y S 2004-05 & 2005~06, THE ORDER OF THE AO ON THIS ACCO UNT CANNOT BE SAID TO BE ERRONEOUS IN AS MUCH AS PREJUDICIAL TO T HE INTEREST OF REVENUE AND IN ANY CASE THE AO HAVING TAKEN ONE OF THE POSSIBLE VIEWS ON THE BASIS OF THE ORDERS OF THE APPELLATE A UTHORITY IN THE CASE OF YOUR PETITIONER ITSELF, PROVISIONS OF SEC. 263 WERE NOT AT ALL APPLICABLE AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES T HE ORDER OF THE CIT U/S 263 ON THIS ACCOUNT IS LIABLE TO BE SET ASIDE. (B) FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUM STANCES THE CIT IS WHOLLY UNJUSTIFIED IN HOLDING THAT THE ORDER OF THE AO IS ERRONEOUS IN AS MUCH AS PREJUDICIAL TO THE INTEREST OF REVENUE IN C ONNECTION WITH DISALLOWANCE U/S 14A AND SUCH FINDING OF THE CIT IN ORDER U/S 263 IS WHOLLY BAD, ILLEGAL, UNJUSTIFIED AND UNCALLED FOR A ND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES THE ORDER OF THE AO CANNOT BE SAID TO BE ERRONEOUS IN AS MUCH AS PREJUDICIAL TO THE INTEREST OF REVENUE ON THIS ACCOUNT AND IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES THE SAID FINDING OF THE CIT MAY KINDLY BE DELETED. 4. FOR THAT WITHOUT PREJUDICE AND EVEN OTHERWISE TH E CIT IS WHOLLY UNJUSTIFIED IN SETTING ASIDE THE ENTIRE ORDER OF THE AO HOLDING THE ENTIRE ORDER OF THE AO AS ERRONEOUS IN AS MUCH AS PREJUDICIAL TO THE INTER EST OF REVENUE AND IN TERMS OF SEC. 263 AND IN TERMS OF SHOW-CAUSE NOTICE SUCH DIRECTION OF THE CIT IS ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 3 WHOLLY BAD, ILLEGAL, UNJUSTIFIED AND UNCALLED FOR A ND HENCE MAY KINDLY BE EXPUNGED. 5. FOR THAT YOUR PETITIONER CRAVES THE RIGHT TO PUT ADDITIONAL GROUNDS AND/OR TO ALTER/AMEND/MODIFY THE PRESENT GROUNDS AT THE TIME OF HEARING OR BEFORE THE DATE OF HEARING. 2. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUND WH ICH IS REPRODUCED BELOW:- ADDITIONAL GROUNDS OF APPEAL 1. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES THE ORDER OF THE AO IN RESPECT OF GRATUITY LIABILITY OF RS.4,19,97,4 64/- HAVING MERGE WITH THE ORDER OF CIT(A), C-I, KOLKATA IN HIS ORDER DATED 28.01.2011 IN APPEAL NO. 430/CIT(A), CI/CC-VII/08-09 RELATING TO ASSESSMENT YEAR 2006-07, NO VALID JURISDICTION ON THE ISSUE OF GRAT UITY LIABILITY AND PARTICULARLY AND PARTICULARLY N RESPECT OF GRATUITY LIABILITY OF RS.4,19,97,464/- LIED WITH CIT, C-I U/S 263 AND HIS ORDER US. 263 DATED 01.03.2011 ON THIS ISSUE, IS, THEREFORE WHOLL Y BAD, ILLEGAL AND UNCALLED FOR AND IN VIEW OF THE FACTS AND CIRCUMSTA NCES IS LIABLE TO QUASHED / CANCELLED AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES IT MAY KINDLY BE HELD ACCORDINGLY. SHRI S. JHAJHARIA AND SHRI SUJOY SEN LD AUTHORIZED REPRESENTATIVES APPEARED ON BEHALF OF ASSESSEE AND SHRI RAJAT SUBHR A BISWAS, LD DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF R EVENUE. 3. SOLE ISSUE RAISED BY ASSESSEE IN ALL THE INTERCO NNECTED GROUNDS ARE THAT LD. CIT(A) ERRED IN HOLDING THE ORDER OF ASSESSING OFFICER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 4. THE FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRES ENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF JUTE GOODS OF DIFFERENT VARIETIES. THE ASSESSEE FOR THE YEAR HAS FILED ITS RETURN DECLARING LOSS OF 1,64,32,570/-. THEREAFTER A NOTICE U/S. 143(2) R.W .S. 142(1) OF THE ACT WAS ISSUED FOR MAKING THE SCRUTINY ASSESSMENT. THE ASSE SSMENT WAS COMPLETED BY AO AFTER MAKING CERTAIN ADDITIONS / DISALLOWANCE S TO THE TOTAL INCOME OF ASSESSEE. HOWEVER, LD CIT U/S. 263 OPINED THAT CER TAIN ASPECTS IN THE ASSESSMENT PROCEEDINGS HAVE NOT BEEN EXAMINED BY AO WHILE FRAMING ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 4 ASSESSMENT U/S. 143(3) OF THE ACT. ACCORDINGLY THE LD. CIT UNDER SECTION 263 OF THE ACT ISSUED NOTICE UPON ASSESSEE TO CLARIFY T HE FOLLOWING FACTS OF THE CASE :- I) ASSESSEE BEING SUBSTANTIAL SHAREHOLDERS OF THE C OMPANY NAMELY, M/S HOOGHLY MILLS PROJECTS LTD. (MHMPL FOR SHORT) HAS T AKEN ADVANCE FOR A SUM OF 5,58,93,000/- WHICH CLEARLY ATTRACTS THE PROVISION OF SEC. 2(22)(E) OF THE ACT. II) GRATUITY EXPENSES FOR AN AMOUNT OF 4,19,58,203/- WAS DEBITED IN THE PROFIT AND LOSS A/C BUT THE SAME WAS NOT DISALLOWED IN THE COMPUTATION OF INCOME ALTHOUGH THE ASSESSEE ADDED BACK THE SAME IN ITS COMPUTATION OF INCOME. III) ASSESSEE DID NOT MAKE THE PAYMENT OF EMPLOYEES CONTRIBUTION ON OR BEFORE THE DUE DATE AS PER SEC. 36(I)IVA) OF THE AC T FOR AN AMOUNT OF RS. 64,96,988.00 WHICH WAS NOT DISALLOWED BY AO. IV) INTEREST BEARING FUNDS WERE DIVERTED BY MAKING INVESTMENT IN SHARES AND NO PROPORTIONATE DISALLOWANCE WAS MADE IN THE T OTAL INCOME OF THE ASSESSEE EXCEPT FOR A SUM OF 25,000/-. THE EXPENSES WHICH ARE DISALLOWABLE U/S. 14A OF THE ACT SHOULD HAVE BEEN A DDED IN THE COMPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT. IN COMPLIANCE TO NOTICE, IT WAS SUBMITTED THAT THE ASSESSEE AND MHMPL ARE IN THE JUTE MANUFACTURING BUSINESS AND OWNED FIVE JUTE MILLS WHICH ARE SITUATED IN STATE OF WEST BENGAL AND ANDHRA PRADESH. THERE ARE MAINLY AND PURELY COMMERCIAL BUSINESS TRANSACTIONS IN THE DAY-TO-DAY BUSINESS ACTIVITIES OF THE ASSESSEE. BOTH THE COMPANIES PURCHASED / SUPPLIED J UTE BAGS, RAW JUTE, STORES ETC., TO EACH OTHER. AS SUCH, THERE WAS NO L OAN TRANSACTIONS BETWEEN THE AFORESAID COMPANIES AND THEREFORE THE TRANSACTI ONS AS DISCUSSED ABOVE ARE OUT OF THE PURVIEW OF SEC. 2(22)(E) OF THE ACT. 4.1 REGARDING THE GRATUITY LIABILITY, IT WAS SUBMIT TED THAT THE EXPENSE FOR THE GRATUITY OF 4,19,58,203/- WAS NEVER CLAIMED IN ITS PROFIT AND LOSS A/C. SUCH ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 5 CLAIM WAS MADE ONLY IN THE COMPUTATION OF INCOME. A CCORDINGLY, THE AO HAS DISALLOWED THE SAME BY HOLDING THAT SUCH LIABILITY HAS NOT BEEN PROVIDED IN ITS BOOKS OF ACCOUNT, SO NOT ELIGIBLE FOR DEDUCTION. TH EREFORE THE QUESTION OF HOLDING THAT ORDER PASSED BY AO IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF DEDUCTION OF GRATUITY LIABILI TY DOES NOT ARISE. 4.2 REGARDING DEDUCTION ON ACCOUNT OF EMPLOYEE CONT RIBUTION, IT WAS SUBMITTED THAT THE AO HAS ALLOWED THE DEDUCTION IN PURSUANCE OF DIRECTION GIVEN BY THE HON'BLE JURISDICTIONAL HIGH COURT AND AFTER OBTAINING ALL THE DETAILS AND PARTICULARS. ON SIMILAR FACTS THE RELIEF WAS GI VEN TO THE ASSESSEE IN THE AY 2004-05 IN ITS OWN CASE BY THE LD. CIT(A). SIMILARL Y THE PROCEEDINGS WERE DROPPED BY THE HONBLE ITAT AGAINST THE ORDER PASSE D UNDER SECTION 263 OF THE ACT IN ITS OWN CASE FOR THE ASSESSMENT YEAR 200 5-06. THEREFORE, ON THIS ACCOUNT THE ORDER OF AO CANNOT BE HELD ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF REVENUE. 4.3 REGARDING THE PROVISION OF SEC. 115JB IN RELATI ON TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT THE ASSESSEE SUBMITTED THA T THE INVESTMENT WAS MADE IN THE SHARE LONG BACK AND OUT OF ITS OWN CAPI TAL AND RESERVE. THE INSTANT CASE IS FOR THE ASSESSMENT YEAR 2006-07 AND RULE 8D CAME INTO EFFECT FROM AY 2008-09, SO NO DISALLOWANCE IS WARRANTED. T HE ASSESSEE HAS NOT INCURRED ANY EXPENSES IN CONNECTION WITH THE EXEMPT ED INCOME AS DIVIDEND WARRANTS ARE AUTOMATICALLY TRANSFERRED THROUGH ECS, NO NEED TO MAINTAIN PHYSICAL RECORDS. THEREFORE, THE DISALLOWANCE U/S 1 4A CANNOT BE MADE. 5. HOWEVER, LD. CIT(A) REJECTED THE ARGUMENT OF ASS ESSEE AND HELD THAT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF THE FOLLOWING REASONS :- 1) REGARDING THE PROVISION OF SEC.2(22)(E) OF THE A CT, IT WAS NOT APPARENT FROM THE RECORD WHETHER THERE WAS THE BUSINESS TRAN SACTIONS BETWEEN ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 6 ASSESSEE AND MHMPL IN RELATION TO PURCHASES AND SAL ES OF JUTE GOODS. THE NAME OF THE COMPANY I.E. MHMPL WAS NOT APPEARIN G IN THE AUDITED ACCOUNTS OF THE COMPANY. 2) REGARDING GRATUITY LIABILITY, LD. CIT(A) OBSERVE D THAT THE AO STARTED COMPUTATION OF INCOME OF ASSESSEE WITH NET PROFIT A S PER ITS PROFIT AND LOSS A/C AND DID NOT DISALLOW THE CLAIM OF DEDUCTIO N MADE BY ASSESSEE FOR RS. 3,85,60,690.00 BY DEBITING PROFIT AND LOSS ACCOUNT. 3) REGARDING THE EMPLOYEES CONTRIBUTION, THERE IS N O DECISION OF HON'BLE HIGH COURT/ SUPREME COURT IS AVAILABLE IN FAVOUR OF THE ASSESSEE, THEREFORE, IT MAY NOT BE ALLOWABLE AS DEDUCTION. BE SIDES THERE IS SPECIFIC PROVISION FOR NOT ALLOWING THE DEDUCTION A S PER SECTION 2(24)(X) READ WITH SECTION 36(1)(VA) OF THE ACT. 4) REGARDING THE DISALLOWANCE U/S. 14A OF THE ACT, THE INVESTMENT HAS BEEN MADE TO THE TUNE OF 2423.97 LAKHS WHEREAS SHARE CAPITAL AND RESERVED ARE OF 793.80 LAKHS AND 1139.69 LAKHS. THEREFORE THE LOAN BEARING FUND HAD BEEN UTILIZED FOR MAKING SUCH INVE STMENT. IN VIEW OF ABOVE, LD CIT(A) HAS HELD THAT ASSESSME NT U/S 143(3) OF THE ACT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF RE VENUE. HENCE, SET ASIDE THE ORDER OF AO U/S 263 OF THE ACT WITH A DIRECTION TO FRAME THE ASSESSMENT DE NOVO IN THE LIGHT OF AFORESAID DISCUSSION. 6. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSE SSEE IS IN APPEAL BEFORE US. THE LD. AR BEFORE FILED TWO SETS OF PAPE R BOOKS COMPRISING (A) PAGES 1 TO 73 AND (B) 1 TO 135 RESPECTIVELY. LD. AR DREW OUR ATTENTION ON PAGES 31 AND 32 OF THE 1 ST PAPER BOOK WHEREIN THE BUSINESS TRANSACTIONS BETWEEN ASSESSEE AND MHMPL WERE PLACED FOR THE YEAR ENDED 31.03.2004 AND FOR THE YEAR ENDED 31.03.2005 RESPECTIVELY. HE FURTHER SUBMITTED THAT NECESSARY DETAILS WAS FILED AT THE TIME OF ORIGINAL ASSESSMENT ALONG WITH THE ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 7 SAMPLE PURCHASE BILLS OF JUTE MATERIAL FROM THE MHM PL AMOUNTING TO RS. 13,39,26,825.00 AND ALSO BANK STATEMENT REFLECTING THE PAYMENTS MADE TO THE PARTY. THIS FACT WAS BROUGHT TO THE NOTICE OF THE A O AT THE TIME OF ASSESSMENT. THE SUBMISSION OF THE ASSESSEE AT THE TIME OF ORIGI NAL ASSESSMENT IS PLACED ON PAGE 13 OF THE 1 ST PAPER BOOK. HE ALSO DREW OUR ATTENTION AT PAGE 108 OF THE 2 ND PAPER BOOK, WHEREIN THE PAYMENT MADE TO THE SPECIF IED PERSON U/S 40A(2)(B) OF THE ACT WAS ALSO RECORDED. THE AO WHIL E FRAMING ORIGINAL ASSESSMENT DID NOT RAISE ANY QUERY AFTER CONSIDERIN G THE NATURE OF TRANSACTIONS BETWEEN ASSESSEE AND MHMPL. ON THE OTHER HAND, LD DR BEFORE US SUBMITTED THAT T HERE IS NO WHISPER IN THE ASSESSMENT ORDER REGARDING THE TRANSACTIONS ENTERED BETWEEN ASSESSEE AND MHMPL. THEREFORE IT NEEDS TO BE RESTORED BACK TO TH E FILE OF AO FOR FURTHER VERIFICATION. 7. NOW COMING TO SECOND ISSUE WHICH IS REGARDING TH E PAYMENT OF GRATUITY, BEFORE US LD. AR SUBMITTED THE GRATUITY AMOUNT WAS NOT CLAIMED IN THE BOOKS OF ACCOUNTS AND THE FINDING OF THE AO IS VERY CLEAR ON THIS ISSUE. IT WAS CLAIMED UNDER THE COMPUTATION OF INCOME AND IT WAS NOT ALLOWED BY AO. THE LD. AR FURTHER STATED THAT NECESSARY DETAILS WITH R EGARD TO THE GRATUITY WERE FURNISHED AT THE TIME OF FRAMING ORIGINAL ASSESSMEN T. LD AR ALSO SUBMITTED THAT THE ISSUE ON GRATUITY LIABILITY HAS ALSO BEEN DECIDED BY LD. CIT(A) IN ITS APPELLATE ORDER NO. 430/CIT(A),C-I/CC7/08-09 RELATI NG TO AY 2006-07 IN HIS ORDER DATED 28.01.2011, SO THE ORDER OF AO GOT MERG ED WITH THE ORDER OF LD. CIT(A) THEN THE ISSUE WITH REGARD TO GRATUITY AS RA ISED BY LD. CIT(A) U/S 263 OF THE ACT IS WHOLLY BAD, ILLEGAL AND UNCALLED FOR AND THEREFORE LIABLE TO BE QUASHED. BEFORE US LD. DR VEHEMENTLY RELIED ON THE ORDER OF LD. CIT PASSED UNDER SECTION 263 OF THE ACT. ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 8 REGARDING THIRD ISSUE WITH REGARD TO EMPLOYEES CONT RIBUTION, LD. AR BEFORE US SUBMITTED THAT THE JUDGMENT OF HON'BLE SUPREME COUR T HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE IN THE CASE OF CIT VS. VINAY CEMENT LTD. (2007) 273 CTR 208 (SC) AND THEREFORE THE ORDER OF AO CANNOT B E HELD ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ON THE CONT RARY,LD. DR VEHEMENTLY RELIED ON THE ORDER OF LD. CIT PASSED UNDER SECTION 263 OF THE ACT. REGARDING THE LAST ISSUE OF PROPORTIONATE DISALLOWA NCE ON INTEREST AMOUNT OF 25,000/-, THE LD. AR SUBMITTED THAT THE ISSUE HAS B EEN DULY DISCUSSED AND CONSIDERED BY AO WHILE FRAMING THE ASSESSMENT ORDER . THE ASSESSEE DURING THE YEAR HAS EARNED INTEREST INCOME ONLY FOR AN AMO UNT OF 5,78,384/-. THE AO AFTER CONSIDERING THE SUBMISSION OF ASSESSEE HAS DISALLOWED A SUM OF 25,000/- ONLY. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LD. CIT(A). 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED MATERIA LS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION WE FIND THAT ALL THE DISCLOSURES REGARDING THE SALES AND PURCHASES OF JUTE MATERIALS WERE AVAILABLE BEFORE THE AO AT THE TIME OF ASSESSMENT. THE TRANSACTION HAS B EEN DULY REPORTED BY THE ASSESSEE IN THE TAX AUDIT REPORT AS REQUIRED U/S 40 A(2)(B) OF THE ACT. THERE WAS NO ADVERSE REMARK IN THE TAX AUDIT REPORT. AFTE R CONSIDERING THE MATERIAL INFORMATION PLACED BEFORE US, WE ARE OF THE CONSIDE RED VIEW THAT AO WAS IN POSSESSION OF SUFFICIENT INFORMATION ABOUT THE AFOR ESAID TRANSACTION. ACCORDINGLY HE FORMED THE OPINION THAT THE TRANSACT ION IS IN THE NATURE OF CURRENT ACCOUNT AND OUT OF THE PURVIEW OF THE PROVI SIONS OF SECTION 2(22)(E) OF THE ACT. IN THIS CONNECTION, WE ARE PUTTING OUR REL IANCE IN CASE PRADIP KUMAR MALHOTRA VS. CIT WHERE BY THE HONBLE HIGH COURT OF CALCUTTA (2012) 246 CTR 0493 : (2011) 64 DTR 0378 : (2011) 338 ITR 0538 : (2011) 203 TAXMAN 0110 HELD : THE PHRASE 'BY WAY OF ADVANCE OR LOAN' APPEARING I N SUB-CL. (E) OF CL. (2) OF S. 2 MUST BE CONSTRUED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHARE HOLDER ENJOYS FOR SIMPLY ON ACCOUNT OF BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE O F DIVIDEND WHETHER WITH OR ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 9 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 B ENEFICIAL TO THE COMPANY RECEIVED FROM SUCH A SHAREHOLDER, IN SUCH CASE, SUC H ADVANCE OR LOAN CANNOT BE SAID TO A DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. THUS, GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAREHOLDERS WOULD COME WITHIN THE PURVIEW OF S. 2(22) BUT NOT THE CAS ES WHERE THE LOAN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRE D UPON THE COMPANY BY SUCH SHAREHOLDER. IN THE PRESENT CASE THE ASSESSEE PERMITTED HIS PROPERTY TO BE MORTGAGED TO THE BANK FOR ENABLING THE COMPANY T O TAKE THE BENEFIT OF LOAN AND IN SPITE OF REQUEST OF THE ASSESSEE, THE COMPAN Y IS UNABLE TO RELEASE THE PROPERTY FROM THE MORTGAGE. IN SUCH A SITUATION, FO R RETAINING THE BENEFIT OF LOAN AVAILED FROM THE BANK IF DECISION IS TAKEN TO GIVE ADVANCE TO THE ASSESSEE SUCH DECISION IS NOT TO GIVE GRATUITOUS AD VANCE TO ITS SHAREHOLDER BUT TO PROTECT THE BUSINESS INTEREST OF THE COMPANY . AUTHORITIES BELOW ERRED IN LAW IN TREATING THE ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE BY WAY OF COMPENSATION TO THE ASSESSEE FOR KEEPING HIS PROPER TY AS MORTGAGE ON BEHALF OF THE COMPANY TO REAP THE BENEFIT OF LOAN AS DEEME D DIVIDEND WITHIN THE MEANING OF S. 2(22)(E).CIT VS. CREATIVE DYEING & P RINTING (P) LTD. (2010) 229 CTR (DEL) 250 : (2009) 30 DTR (DEL) 143 : (2009 ) 318 ITR 476 (DEL) AND CIT VS. NAGINDAS M. KAPADIA (1989) 75 CTR (BOM) 161 : (1989) 177 ITR 393 (BOM) RELIED ON. LOAN ADVANCED BY COMPANY TO SHAREHOLDER IN COMPENSA TION OF SHAREHOLDER MORTGAGING HIS IMMOVABLE PROPERTY FOR ENABLING COMP ANY TO SECURE BANK LOAN CANNOT BE TREATED AS DEEMED DIVIDEND UNDER S. 2(22) (E). COMMISSIONER OF INCOME TAX VS. CREATIVE DYEING & PRINTING (P) LTD. WHEREBY THE HONBLE HIGH COURT OF DELHI (2010) 229 CTR 0250 : (2009) 30 DTR 0143 : (2009) 318 ITR 0476 : (2009) 184 TAXMAN 0483 HAS HELD : THE FINDING OF FACTS, ARRIVED AT BY THE TRIBUNAL I S THAT THE TRANSACTION IN QUESTION WAS A BUSINESS TRANSACTION AND WHICH TRANSACTION WO ULD HAVE BENEFITED BOTH THE ASSESSEE COMPANY AND PE LTD. IN FACT, THE COUNSEL F OR THE APPELLANT HAS CONCEDED THAT THE AMOUNT IS IN FACT NOT A LOAN BUT ONLY AN A DVANCE BECAUSE THE AMOUNT PAID TO THE ASSESSEE COMPANY WOULD BE ADJUSTED AGAI NST THE ENTITLEMENT OF MONEYS OF THE ASSESSEE COMPANY PAYABLE BY PE LTD. I N THE SUBSEQUENT YEARS. THE CONTENTION THAT SINCE PE LTD. IS NOT INTO THE B USINESS OF LENDING OF MONEY, THE PAYMENTS MADE BY IT TO THE ASSESSEE COMPANY WOULD B E COVERED BY S. 2(22)(E)(II) AND CONSEQUENTLY PAYMENTS EVEN FOR BUS INESS TRANSACTIONS WOULD BE A DEEMED DIVIDEND IS NOT ACCEPTABLE. THE PROVISION OF S. 2(22)(E)(II) IS BASICALLY IN THE NATURE OF AN EXPLANATION. THAT CANNOT HOWEVE R, HAVE BEARING ON INTERPRETATION OF THE MAIN PROVISION OF S. 2(22)(E) AND ONCE IT IS HELD THAT THE BUSINESS TRANSACTIONS DO NOT FALL WITHIN S. 2(22)(E ), ONE NEED NOT TO GO FURTHER TO S. 2(22)(E)(II). THE PROVISION OF S. 2(22)(E)(II) G IVES AN EXAMPLE ONLY OF ONE OF THE SITUATIONS WHERE THE LOAN/ADVANCE WILL NOT BE TREAT ED AS A DEEMED DIVIDEND, BUT THATS ALL. THE SAME CANNOT BE EXPANDED FURTHER TO TAKE AWAY THE BASIC MEANING, INTENT AND PURPORT OF THE MAIN PART OF S. 2(22)(E). THIS INTERPRETATION IS IN ACCORDANCE WITH THE LEGISLATIVE INTENTION OF INTROD UCING S. 2(22)(E). THEREFORE, THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE AMOUNTS AD VANCED FOR BUSINESS TRANSACTION BETWEEN THE PARTIES, NAMELY, THE ASSESS EE COMPANY AND PE LTD. WAS NOT SUCH TO FALL WITHIN THE DEFINITION OF DEEMED DI VIDEND UNDER S. 2(22)(E).CIT ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 10 VS. RAJ KUMAR (2009) 23 DTR (DEL) 304 : (2009) 181 TAXMAN 155 (DEL) FOLLOWED. AMOUNT ADVANCED TO THE ASSESSEE COMPANY BY ANOTHER COMPANY HAVING COMMON DIRECTORS NOT BEING A LOAN BUT AN ADVANCE F OR BUSI NESS TRANSACTION WHICH IS TO BE ADJUSTED AGAINST THE MONEYS PAYABLE BY THE LATTER T O THE ASSESSEE COMPANY IN THE SUBSEQUENT YEARS, SAME DID NOT FALL WITHIN THE DEFINITION OF DEEMED DIVIDEND UNDER S. 2(22)(E). HERE IN THE PRESENT CASE, FROM THE FACTS NARRATED A BOVE, IT IS CLEAR THAT BOTH THE PARTIES ARE BENEFICIARY OF THE TRANSACTION BEIN G CURRENT ACCOUNT OF THE ABOVE TRANSACTIONS. SO AS PER THE LEGAL PROPOSITION DECIDED BY HON'BLE JURISDICTIONAL HIGH COURT, IT IS CLEAR THAT SECTION 2(22)(E) OF THE ACT WAS INSERTED TO BRING WITHIN THE PURVIEW OF TAXATION THOSE AMOUN TS WHICH ARE ACTUALLY A DISTRIBUTION OF PROFITS BUT ARE DISBURSED AS A LOAN SO THAT TAX THEREON CAN BE AVOIDED. IT IS PERTINENT TO NOTE HERE THAT WHEN DIV IDENDS ARE DECLARED BY A COMPANY, IT IS SOLELY THE SHAREHOLDERS WHO BENEFIT FROM THE TRANSACTION. NO BENEFITS ACCRUE TO THE COMPANY BY WAY OF DIVIDEND D ISTRIBUTION. THUS, SECTION 2(22)( E) OF THE ACT COVERS ONLY SUCH SITUATIONS, W HERE THE SHAREHOLDER ALONE BENEFITS FROM THE LOAN. IN THE INSTANT CASE THE COM PANY BENEFITS FROM THE SAID TRANSACTION, IT WILL TAKE THE CHARACTER OF A COMMER CIAL TRANSACTION AND HENCE WILL NOT QUALIFY TO BE DIVIDEND. NOW IT CAN BE SAID THAT SEC. 2(22)(E) OF THE ACT COVERS ONLY THOSE TRANSACTIONS WHICH BENEFIT THE SH AREHOLDER ALONE AND RESULTS IN NO BENEFIT TO THE COMPANY. ON THE OTHER HAND, IF THE TRANSACTION IS MUTUAL BY WHICH BOTH SIDES ARE BENEFITED, IT IS UNDOUBTEDLY O UTSIDE THE PURVIEW OF PROVISIONS OF SEC. 2(22)(E) OF THE ACT. FROM THE AB OVE, IT IS CLEAR THAT THE LOAN ACCOUNT DIFFERS FROM CURRENT ACCOUNT AND THE PROVIS IONS OF SECTION 2(22)( E) OF THE ACT, BEING A DEEMING SECTION, CANNOT BE APPLIED TO CURRENT ACCOUNT. IN SUCH CIRCUMSTANCES, THE ORDER OF THE LD. CIT UNDER SECTION 263 OF THE ACT IS NOT SUSTAINABLE IN LAW. 9. NOW COMING TO SECOND ISSUE WHICH IS REGARDING TH E PAYMENT OF GRATUITY, FROM THE FOREGOING DISCUSSION, WE FIND THAT LD. CIT HELD THAT ORDER OF AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E ON ACCOUNT OF DEDUCTION ALLOWED BY AO WITH REGARD THE CLAIM MADE BY ASSESSE E FOR GRATUITY. FROM THE ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 11 FACTS OF THE CASE, WE FIND THAT AO HAS GIVEN A VERY CLEAR FINDING THAT CLAIM OF GRATUITY WAS NOT MADE IN ASSESSEES BOOKS OF ACCOUN T BUT IT WAS CLAIMED SEPARATELY IN THE COMPUTATION OF INCOME WHICH WAS N OT ALLOWED BY AO WHILE FRAMING ORIGINAL ASSESSMENT ORDER. SO IN THE INSTAN T CASE, WE FIND THAT THE QUESTION FOR THE DEDUCTION ON ACCOUNT OF GRATUITY I N THE COMPUTATION OF TOTAL INCOME DOES NOT ARISE. BESIDES THIS, WE ALSO FIND L OT OF FORCE IN THE ARGUMENT ADVANCED BY LD. AR BEFORE US THAT THE ORDER OF AO H AS BEEN MERGED WITH THE APPELLATE ORDER OF LD. CIT(A) APPEAL NO. 430/CC-VII /CIT(A), C-1/08-09 AY 2006-07 WHICH IS PLACED ON RECORD AT PAGES 127 TO 1 35 OF THE 2ND PAPER BOOK. IN THIS CONNECTION WE RELY IN THE JUDGMENT OF HONB LE HIGH COURT OF BOMBAY IN THE CASE OF RITZ LTD. & ANR. VS. UNION OF INDIA & ORS. (1990) 83 CTR 0177 : (1990) 184 ITR 0599 : (1990) 5 1 TAXMAN 0320 WHERE IT WAS HELD THAT ONCE AN ORDER OF ASSESSMENT IS SUBJECT MATTER OF AP PEAL, THE WHOLE OF IT MERGES IN THAT OF THE APPELLATE ORDER. THUS, THE ON LY QUESTION THAT REQUIRES CONSIDERATION IS WHETHER THE RETROSPECTIVE AMENDMEN T OF S. 263 OVERRIDES OR NULLIFIES THE EFFECT OF THOSE JUDGMENTS.CIT VS. P. MUNCHERJI & CO. (1987) 63 CTR (BOM) 338 : (1987) 167 ITR 671 (BOM) : TC57R.43 2#1 AND CIT VS. SMT. A.S. NARENDRAKUMARI BASAHEBA OF RAJKOT (1988) 74 CTR (BOM) 56 : (1989) 176 ITR 515 (BOM) : TC57R.436 FOLLOWED AS A FIRST IMPRESSION EXPLN. (C), AS IT STANDS WITH OUT ANYTHING MORE, APPEARS TO SUPPORT THE REVENUE'S SUBMISSION THAT EXPLN. (C) WA S APPLICABLE IN THE PRESENT CASE ALSO. ON CAREFULLY EXAMINING THE PROVI SIONS OF THE EXPLN. (C), HOWEVER, THE POSITION IS OTHERWISE. BEFORE ITS AMEN DMENT BY THE FINANCE ACT, 1989, EXPLN. (C) INSERTED BY THE FINANCE ACT, 1988, WAS THEN EVIDENTLY PROSPECTIVE W.E.F 1ST JUNE, 1988. IN THE PRESENT CA SE THE APPEALS HAVING BEEN NOT ONLY FILED BUT ALSO DISPOSED OF BEFORE THAT DAT E, THIS EXPLANATION WOULD HAVE NO EFFECT WHATSOEVER. COMING THEN TO THE AMEND MENT OF THE EXPLANATION IN 1989 WITH RETROSPECTIVE EFFECT FROM 1ST JUNE, 19 88, IT IS SEEN THAT ON THE FACE OF IT THERE IS SOME CONTRADICTION. THE INSERTI ON OF WORDS 'FILED ON OR BEFORE OR AFTER THE 1ST JUNE, 1988' AND 'AND SHALL BE DEEM ED ALWAYS TO HAVE EXTENDED' AT TWO PLACES IN THE EXPLANATION MAY SUPP ORT THE DEPARTMENT'S CONTENTION ON THE FACE OF IT THAT AFTER THE AMENDME NT IN 1989 EXPLN. (C) MEANS THAT TO THE EXTENT MATTERS HAVE NOT BEEN CONSIDERED AND DECIDED IN APPEAL THE CIT WILL ALWAYS HAVE JURISDICTION TO REVISE THE ORD ER OF ASSESSMENT UNDER S. 263 SUBJECT TO OTHER CONDITIONS. THE QUESTION, HOWE VER, IS IF THAT WAS SO WHY DID THE LEGISLATURE NOT STOP AT THAT AND WENT FURTH ER TO SAY THAT INSERTION OF THESE WORDS THOUGH FACTUALLY IN 1989 WAS WITH RETRO SPECTIVE EFFECT FROM 1ST JUNE, 1988, THE DATE ON AND FROM WHICH EXPLN. (C) I TSELF WAS INSERTED BY THE FINANCE ACT, 1988. EXPLN. (C) REQUIRES TO BE CONSTR UCTED HARMONIOUSLY. THE ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 12 INSERTION OF WORDS AT TWO PLACES AS WELL AS THE FAC T THAT INSERTION IS MADE RETROSPECTIVE FROM THE DATE ON WHICH THE EXPLANATIO N ITSELF WAS INSERTED CAN ALL BE GIVEN PROPER MEANING IF IT IS HELD THAT THES E WORDS ARE TO BE READ IN THE EXPLANATION RIGHT FROM THE DATE THE EXPLANATION ITS ELF WAS INSERTED. THUS, ONLY IN CASES WHERE ACTION UNDER S. 263 IS TAKEN AFTER 1 ST JUNE, 1988, THE MERGER OF ASSESSMENT ORDER WILL BE TREATED AS CONFINED TO ISSUES ACTUALLY CONSIDERED AND DECIDED IN APPEAL IN TERMS OF THE EXPLN. (C). T HE CONSTRUCTION PLACED HEREIN IS BASED ON SOUND LOGIC, NAMELY, IRRESPECTIV E OF THE LANGUAGE IN WHICH THE AMENDING PROVISIONS ARE COUCHED, THE AMENDMENT CANNOT BE RETROSPECTIVE WITH EFFECT FROM A DATE EARLIER TO TH E DATE ON WHICH THE PROVISION SOUGHT TO BE AMENDED ITSELF WAS BROUGHT ON THE STAT UTE BOOK. ONLY IN CASES WHERE ACTION UNDER S. 263 IS TAKEN AF TER 1ST JUNE, 1988, THE MERGER OF ASSESSMENT ORDER WILL BE TREATED AS CONFI NED TO ISSUES ACTUALLY CONSIDERED AND DECIDED IN APPEAL IN TERMS OF THE EX PLN. (C). IN VIEW OF THE ABOVE AFTER RELYING ON THE ABOVE JUD GMENT WE FIND THAT ORDER OF AO CANNOT BE HELD TO ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE. HENCE THE IMPUGNED ORDER PASSED BY THE LD. CIT UNDE R SECTION 263 OF THE ACT IS NOT SUSTAINABLE IN LAW AND THEREFORE WE SET ASID E. 10. AT THE OUTSET WE FIND THAT THE ISSUE WITH REGAR D TO EMPLOYEES CONTRIBUTION IS ALREADY COVERED BY THE JUDGMENT OF HON'BLE HIGH COURT OF RAJASTHAN IN FAVOUR OF ASSESSEE IN THE CASE OF COMM ISSIONER OF INCOME TAX VS. UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LTD. (2014) 265 CTR 0059 (RAJ) : (2014) 98 DTR (RAJ) 0109 : (2014) 366 ITR 163 (RAJ) THE HEAD NOTES READS AS UNDER BUSINESS INCOMEDISALLOWANCEVALIDITY OF DELETION ASSESSEE, ENGAGED IN BUSINESS OF DAIRY PRODUCT, PROCESSING AND MARKETING OF MILK AND MILK PRODUCT AND CATTLE FEED ETC, FILED ITS RETURN OF INCOMEAO NOTI CED THAT, ASSESSEE HAD DEPOSITED PAYMENT OF RS. 14,60,412 IN PF FUND AND RS.973 IN E SI FUND WITH DELAY, AND THEREFORE, ADDED SAID AMOUNT TO INCOME OF ASSESSEE AS PER PROVISIONS OF S 36(1)(VA) READ WITH S 2(24)(X)CIT(A), VIDE ITS APP ELLATE ORDER AFTER NOTICING CERTAIN JUDGMENTS CONCLUDED THAT, WHERE PAYMENTS ON ACCOUNT OF CONTRIBUTION TO PF, ESI ETC. ARE MADE WITHIN DUE DATE OF FILING RET URN, SUCH DEDUCTIONS ARE ALLOWABLECIT(A) ACCORDINGLY DELETED DISALLOWANCE M ADE BY AOITAT UPHELD ORDER PASSED BY CIT(A)HELD, SUPREME COURT IN CIT V . VINAY CEMENT LTD. HAD OBSERVED IN A SIMILAR MATTER THAT ASSESSEE IS ENTI TLED TO CLAIM THE BENEFIT U/S 43B WHERE HE HAD CONTRIBUTED TO PROVIDENT FUND BEFORE F ILING OF RETURN AND THAT IN THE INSTANT CASE THEY WERE CONCERNED WITH THE LAW AS IT STOOD PRIOR TO THE AMENDMENT OF S 43BIN VIEW OF SETTLED LEGAL POSITION, APPEAL PREFERRED BY REVENUE IS DISMISSED. ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 13 IT WAS HELD AS UNDER SUPREME COURT IN CIT V. VINAY CEMENT LTD. [2009] 3 13 ITR (ST.) 1 HAD OBSERVED THAT IN SUCH CIRCUMSTANCES, ASSESSEE WAS ENTITLED T O CLAIM THE BENEFIT IN SECTION 43B FOR THAT PERIOD PARTICULARLY IN VIEW OF FACT TH AT HE HAD CONTRIBUTED TO PROVIDENT FUND BEFORE FILING OF RETURN. FOLLOWING O BSERVATIONS OF HON'BLE SUPREME COURT IN VINAY CEMENT (SUPRA), THE DELHI HIGH COURT IN CIT V. AIMIL LTD. HAS ALSO HELD THAT, IN SO FAR AS THE INCOME-TAX ACT IS CONCE RNED, ASSESSEE CAN GET BENEFIT, IF ACTUAL PAYMENT IS MADE BEFORE RETURN IS FILED, A S PER PRINCIPLE LAID DOWN BY SUPREME COURT IN VINAY CEMENT (2009) 313 ITR (ST.) 1. IN VIEW OF SETTLED LEGAL POSITION, APPEAL PREFERRED BY REVENUE HAS NO SUBSTA NCE AND SAME IS, THEREFORE, DISMISSED. IN VIEW OF ABOVE THE ORDER OF AO CANNOT BE HELD ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE THE IMPUGNED ORDER P ASSED BY THE LD. CIT UNDER SECTION 263 OF THE ACT IS NOT SUSTAINABLE IN LAW AND THEREFORE WE SET ASIDE. 11. NOW COMING TO THE LAST ISSUE OF DISALLOWANCE UN DER SECTION 14A OF THE ACT FOR RS. 25,000/-, WE FIND THAT THE ISSUE HAS BE EN DULY DISCUSSED AND CONSIDERED BY AO WHILE FRAMING ORIGINAL ASSESSMENT ORDER. THE ASSESSEE DURING THE YEAR HAS EARNED INTEREST INCOME ONLY FOR AN AMOUNT OF 5,78,384/-. THE AO AFTER CONSIDERING THE SUBMISSION OF ASSESSEE HAS DISALLOWED A SUM OF 25,000/- ONLY. WE FURTHER FIND THAT THE ISSUE HAS B EEN ALREADY COVERED BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. M/S ASHOK HANDLOOM FACTORY PVT. LTD. IN ITA NO. 19 OF 2016 DATED 01.02.2016 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT IT IS SETTLED LAW THAT THE COMMISSIONER OF INCOME TAX CAN EXERCIS E HIS JURISDICTION U/S 263 OF THE ACT ONLY IN CASES WHERE NO ENQUIRY IS MADE B Y THE ASSESSING OFFICER. IN THE INSTANT CASE, IT IS ADMITTED BY THE INCOME TAX DEPARTMENT THAT THE ASSESSING OFFICER HAD MADE SOME ENQUIRIES THOUGH AC CORDING TO THEM IT WAS NOT A PROPER ENQUIRY. IN OUR VIEW OF THE FAT THAT S OME ENQUIRY WAS MADE IS SUFFICIENT TO DEBAR THE AUTHORITIES FROM EXERCISING THE POWERS U/S 263 OF THE ACT. THE TRIBUNAL WAS ACCORDINGLY JUSTIFIED IN SETT ING ASIDE THE ORDER PASSED U/S 263 OF THE ACT. WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW ARISING FOR CONSIDERATION THE APPEAL IS ACCORDINGLY DISMISSED. IN THE CASE ON HAND, THE ITA NO.547/KOL/2011 A.Y.2006-07 M/S THE HOOGHLY MILLS CO.LTD. V. DCIT, CC-VII, KOL. PAGE 14 AO HAS MADE AN ADDITION BY INVOKING THE PROVISION O F SECTION 14A OF THE ACT AFTER MAKING THE NECESSARY ENQUIRY. THE INSTANT CAS E IS DULY COVERED WITH THE DECISION OF HONBLE ALLAHABAD HIGH COURT M/S ASHOK HANDLOOM FACTORY PVT. LTD. (SUPRA) AS DISCUSSED ABOVE, THEREFORE RELYING ON T HE SAME, WE REVERSE THE ORDER OF LD. CIT FOR U/S 263 OF THE ACT. IN VIE W OF ABOVE, WE UPHOLD THAT ORDER PASSED BY AO IS NEITHER ERRONEOUS NOR PREJUDI CIAL TO THE INTEREST OF REVENUE. HENCE, WE QUASH THE ORDER PASSED BY LD. CI T(A) AND GROUND RAISED BY ASSESSEE IS ALLOWED. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 15/ 07/2016 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP $!% &- 15 / 07 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S THE HOOGHLY MILLS CO.LTD. C/O SALARP URIA JAJODIA & CO. 7, C.R. AVENU E, KOLKATA-700 072 2. /RESPONDENT-DCIT, CC-VII, 18, RABINDRA SARANI, KOLK ATA-700 072 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,