Section 2(22)(e) of the income tax Act, 1961 read with article 226 of the Constitution of India — Deemed Dividend — Once it is held on fact that, the advance was on trading account, then no occasion to apply under Section 2(22)(e) can arise.[2019] 52 ITCD 011 (BOM)
Facts: This Petition under Article 226 of the Constitution of India, challenges the notice dated 17th May, 2019 issued under Section 148 of the Income Tax Act, 1961 (the Act). The impugned notice seeks to re-open the Assessment for Assessment Year 2013-14. The reasons recorded in support of the impugned notice is that, the Petitioner held substantial shareholding in one – M/s. D. P. Vora Securities Pvt. Ltd., (M/s. D. P. Vora) and one M/s. Touchstone Capital Market Services Pvt. Ltd., (M/s. Touchstone). In the previous year relevant to the Assessment Year- 2013- 14, M/s. D. P. Vora received a loan of ' 5.68 Crores from M/s. Touchstone. Therefore, the reasons in support states that, this loan is in the nature of deemed dividend, covered by Section 2(22)(e) of the Act. This issue was admittedly not considered earlier, as no scrutiny Assessment was done under Section 143(3) of the Act but only an Intimation under Section 143(1) was sent to the Petitioner.
Held, that the petitioner had in its objection pointed out that for the same Assessment Year i.e. Assessment Year 2013-14, the Revenue has sought to tax some loan received from M/s. D.P. Vora from M/s. Touchstone under Section 2(22)(e) of the Act. The Tribunal by an order dated 24th April, 2017 held that the amount received by M/s. D.P. Vora from M/s. Touchstone was in the nature of business transaction so as to meet its trading activities. Thus, not hit by Section 2(22)(e). The reasons in support of the impugned notice seeks to tax the same transaction as deemed dividend. Prima facie, once it is held on fact that, the advance was on trading account, then no occasion to apply under Section 2(22)(e) of the Act, can arise, as held by the Delhi High Court in CIT v/s. Creative Dyeing and Printing P. Ltd., 318 ITR 476. In the above view, there shall be an interim stay to the impugned notice dated 17th May, 2019 till the final disposal of this Petition.