Tribunal quashes CIT's revision orders under Section 263 for loans scrutinized in original assessments

The Tribunal quashed the revision orders passed by the CIT under Section 263, holding that the AO had already scrutinized the loans during the original and search assessments. The CIT's revision was deemed as a change of opinion, which is not permissible. The appeals of the assessee were allowed, and the orders of the CIT were set aside.

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Issues Involved:
1. Validity of the initiation of proceedings under Section 263 of the Income-tax Act.
2. Bar of limitation in issuing the show-cause notice under Section 263.
3. Justification for the revision of assessment orders under Section 143(3) read with Section 153A.
4. Treatment of loans as deemed dividends under Section 2(22)(e).
5. Application of CBDT Circular No. 495 dated 22-09-1987.

Issue-wise Detailed Analysis:

1. Validity of the initiation of proceedings under Section 263 of the Income-tax Act:
The assessee argued that the CIT was wholly wrong and unjustified in initiating proceedings under Section 263 on 07.03.2011 and passing the order on 28.03.2011 without proper application of mind and appreciation of facts. The CIT issued a show-cause notice based on scrutiny of assessment records, noting that loans from M/s. Ajanta Rubber India Pvt. Ltd. to M/s. Makson Developers Pvt. Ltd. and M/s. Ajanta Footcare (India) Ltd. should be treated as deemed dividends under Section 2(22)(e).

2. Bar of limitation in issuing the show-cause notice under Section 263:
The assessee contended that the show-cause notice issued on 07.03.2011 was barred by limitation since the cause of action had arisen long before the completion of the search and seizure assessment under Section 143(3)/153A on 30.12.2008. The notice and subsequent order under Section 263 were claimed to be illegal and barred by limitation.

3. Justification for the revision of assessment orders under Section 143(3) read with Section 153A:
The CIT revised the assessment orders on the grounds that the Assessing Officer (AO) did not verify the issue of loans being treated as deemed dividends under Section 2(22)(e). The CIT noted that the assessee had substantial interest in the companies involved and directed the AO to revise the assessment, enhancing the assessed total income by Rs. 11,73,913/-.

4. Treatment of loans as deemed dividends under Section 2(22)(e):
The CIT treated loans given by M/s. Ajanta Rubber India Pvt. Ltd. to M/s. Makson Developers Pvt. Ltd. and M/s. Ajanta Footcare (India) Pvt. Ltd. as deemed dividends in the hands of the assessee, based on the shareholding pattern and accumulated profits of the lender company. The assessee argued that the AO had already scrutinized these details during the original and search assessments, and the CIT's revision was merely a change of opinion, which is not permissible under law.

5. Application of CBDT Circular No. 495 dated 22-09-1987:
The assessee relied on CBDT Circular No. 495, which clarifies that deemed dividend under Section 2(22)(e) should be taxed in the hands of the borrower company or concern, not the shareholder. The circular aimed to remove the rigors of Section 2(22)(e) by ensuring that shareholders who did not borrow the loan are not taxed. The Tribunal agreed with the assessee's reliance on the circular, stating that the AO could not have treated the loan as deemed dividend in the hands of the assessee.

Conclusion:
The Tribunal quashed the revision orders passed by the CIT under Section 263, holding that the AO had already scrutinized the loans during the original and search assessments. The CIT's revision was deemed as a change of opinion, which is not permissible. The appeals of the assessee were allowed, and the orders of the CIT were set aside.

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