TaxTMI 
TaxTMI 
2026 (8) TMI 293
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....e settled legal precedent on the interpretation and applicability of provision of Section 2(22)(e) of the Act, the assessment order has been passed. He has pointed out that the decision of Delhi High Court in the case of Commissioner of Income Tax Vs. Ankitech (P.) Ltd, 340 ITR 14 (Del.) and the decision of this Court in the case of Commissioner of Income Tax Vs. Daisy Packers P. Ltd, (2014) 220 Taxman 331 (Guj.),though referred in the objection taken by the petitioner, the same were totally ignored and hence the petitioner is constrained to file the present writ petition instead of availing the remedy of filing an appeal under Section 246A of the Act. FACTS OF THE CASE 3. For the A.Y 2012-13 the petitioner filed its return of income declaring total income of Rs. 1,64,59,510/-. The case of the petitioner was selected for scrutiny assessment and accordingly the Notice dated 23.09.2013 under Section 143(2) of the Act came to be issued. Thereafter, the petitioner was asked to furnish the computation of total income along with audited Balance Sheet and Audit Report. The petitioner submitted the same, and after threadbare assessment of all the materials supplied by the petitioner ....
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...., unless it is established that the petitioner has withheld any tangible material affecting assessment of return of income from the Revenue. It is submitted that during the original scrutiny assessment, the petitioner had disclosed all the details by furnishing computation of total income along with audited Balance Sheet and Audit Report, and accordingly, the assessment order under Section 143(3) of the Act was passed. It is contended that the transactions of the petitioner-Company and the shareholder company namely Pushpak Realities (P.) Ltd to the tune of 4.60% would not fall within the ambit of the provision of Section 2(22)(e) of the Act. Since all the tangible materials were available before the Assessing Officer, hence, the petitioner was not supposed to explain the same. 5. While pointing out the objections raised by the petitioner in the communication dated 17.10.2019, it is contended that the issue with regard to the deemed dividend within the meaning of Section 2(22)(e) of the Act, cannot be made a basis for reopening the assessment which has been explained by the petitioner. Moreover, it is contended in the objection that the petitioner is not a registered shareholder....
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....nt writ petition. The Supreme Court in the case of Chhabil Dass (supra) on which reliance is placed by the respondent clarifies thus: "19. Thus, while it can be said that this Court has recognized some exceptions to the rule of alternative remedy, i.e., where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition laid down in Thansingh Nathmal case, Titagarh Paper Mills case and other similar judgments that the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation." Thus, there are exception av....
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....ilure by the assessee to fully and truly disclose all material fact. We find there is no failure on the part of the petitioner in disclosing the material facts in the scrutiny assessment. The petitioner had disclosed its share holding pattern and also of Amber Enclave (P.) Ltd., on the demand of the assessing officer. The Assessing Officer has ascertained the applicability of provision of Section 2(22)(e) of the Act. Hence, the re-opening which is de hors the statutory provisions calls for interference by this Court, in exercise of power under Article 226 of the Constitution of India. (f) Finally, this Court while passing the order dated 26.12.2019, had stayed the operation of the impugned order dated 10.12.2019. By now more than seven years have passed and, since then no attempts have been made by the Revenue to vacate the interim relief or to hear the writ petition, the petitioner cannot be relegated to avail the alternative remedy, unless the issue was left open. 8. We may at this stage, refer to the judgment of the Delhi High Court in the case of Ankitech (P.) Ltd (supra), wherein, the Delhi High Court, while examining the provision of Section 2(22) (e) of the Act h....
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....s: "24. The intention behind enacting provisions of Section 2(22)(e) is that closely held companies (i.e. companies in which public are not substantially interested), which are controlled by a group of members, even though the company has accumulated profits would not distribute such profit as dividend because if so distributed the dividend income would become taxable in the hands of the shareholders. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have substantial interest or make any payment on behalf of or for the individual benefit of such shareholder. In such an event, by the deeming provisions, such payment by the company is treated as dividend. The intention behind the provisions of Section 2(22)(e) of the Act is to tax dividend in the hands of shareholders. The deeming provisions as it applies to the case of loans or advances by a company to a concern in which its shareholder has substantial interest, is based on the presumption that the loans or advances would ultimately be made available to the shareholders of the company giving the loan or advance. ....
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....ccumulated profits, and finally, the payment of loan or advance is not in course of ordinary business activities. These aspects do not apply to the case of the petitioner. It is not denied by the revenue that the Pushpak Realities (P.) Ltd., is having only 4.60% shareholding in the petitioner-company, which is less than 20% as prescribed under the statute. 10. We reiterate the observations made by the Delhi High Court, wherein, it is held that the intention of the legislature behind enacting the provision of Section 2(22)(e) of the Act is that closely held companies (i.e. companies in which public are not substantially interested), which are controlled by a group of members, even though the company has accumulated profits would not distribute such profit as dividend, because if so distributed, the dividend income would become taxable in the hands of the shareholders and instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern, in which such shareholders have a substantial interest or make any payment on behalf of or for the individual benefit of such shareholders and in such an event, by deeming provisio....