Commissioner of Income Tax-I vs Karnataka Turned Components (P.) Ltd.

Dilip B. Bhosale, J.—This appeal under section 260A of the Income-tax Act, 1961 (for short "The Act") is directed against the order dated 12.10.2012 passed by the Income Tax Appellate Tribunal, Bangalore in ITA No. 1050/2011 whereby the Tribunal confirmed the order passed by the First Appellate Authority dated 8.8.2011. The First Appellate Authority reversed the order passed by the Assessing Officer dated 25.11.2009 in the appeal filed by the assessee. Sri. A. Shankar learned counsel for the respondent-assessee at the outset invited our attention to the judgment of this Court dated 8.1.2014 passed in Chief Commissioner of Income Tax-III Vs. Sarva Equity (P.) Ltd., and connected appeals to submit that the substantial question of law involved in this appeal is squarely covered by the said judgment. Though in the memorandum of appeal, three substantial questions of law are framed by the Revenue, learned counsel for the parties are ad idem that only the following question arise for our consideration:

"Whether the Tribunal was correct in holding that the assessee is not liable for tax under Section 2(22)(e) of the Act on the ground that assessee is not a shareholder without taking into consideration the provisions of Section 2(22)(e) of the Act?"

A similar substantial question of law was framed in ITA. No. 322/12 and connected appeals decided on 8.1.2014 and it was answered in favour of the assessee against the revenue.

Having confronted with the submission of Mr. A. Shankar, Mr. K.V. Aravind, learned counsel for Revenue fairly states that this appeal can also be disposed of in terms of the said judgment answering the above substantial question of law in favour of the assessee and against the revenue.

We Accordingly, dispose of this appeal in terms of judgment dated 8.1.2014 rendered in ITA. No. 322/12 and connected appeals and answer the aforementioned substantial question of law in favour of the assessee and against the revenue. It would be appropriate to reproduce concluding paragraphs in judgment dated 8.1.2014 which read thus:

"18. We do not find any reason to take a view other than the one taken by the Delhi and Bombay High courts in the aforementioned judgments nor could the Senior counsel appearing for the revenue persuaded us to take differing view. In the circumstances, we find no reason to interfere with the concurrent finding of facts recorded by the two authorities below namely the appellate Authority and the Tribunal. In the circumstances, we answer the question as formulated by us in favour of the respondent-assessee and against the revenue.

Before we part, we observe that it is always open to the revenue to take corrective measure, if any, by treating this as deemed income at the hands of the shareholders by following the due procedure as contemplated by law and in accordance with law. We are so observing, because otherwise it would amount to escapement of income at the hands of those shareholders."

As observed in paragraph 19, it would be open to the Revenue to take an corrective-measure, if any, by treating the loan/advance amount as deemed dividend in the hands of shareholder by following the due procedure and in accordance with law.