Tribunal Upholds Assessment Re-Opening for Deemed Dividend Loan, Rejects 'Change of Opinion' - Key Ruling

The Tribunal upheld the validity of re-opening the assessment for the assessment year 2003-04 based on the loan treated as deemed dividend u/s 2(22)(e) of the Act. It determined that the distinction between an intimation u/s 143(1) and an assessment order was crucial, rejecting the argument of 'change of opinion.' Additionally, the Tribunal affirmed the assessment of the loan as deemed dividend u/s 2(22)(e), dismissing the claim that it was part of ordinary money lending activities. The appeal challenging both issues was ultimately dismissed.

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Issues involved:
1. Validity of re-opening of the assessment.
2. Validity of the assessment of deemed dividend u/s. 2(22)(e) of the Act.

Validity of re-opening of the assessment:
The appeal challenged the re-opening of the assessment for the assessment year 2003-04 based on the deemed dividend u/s 2(22)(e) of the Act. The Assessing Officer (AO) reopened the assessment due to the loan advanced by the company to the assessee, which was to be assessed as deemed dividend. The assessee objected to the re-opening, claiming it was a 'change of opinion' as similar advances in earlier years were not treated as deemed dividend. The Tribunal noted the distinction between an intimation u/s 143(1) and an assessment order, emphasizing that the former does not constitute an assessment. As the original assessment completion u/s 143(3) was not shown, the Tribunal held that the question of 'change of opinion' did not arise. The Tribunal rejected the assessee's argument that past treatment of loans as non-dividend barred reassessment, citing that the principle of res judicata does not apply to income tax proceedings.

Validity of the assessment of deemed dividend u/s. 2(22)(e) of the Act:
The second issue pertained to the applicability of sec. 2(22)(e) to the loan received by the assessee from the company. The assessee argued that the loan was part of the ordinary money lending activity. However, the CIT(A) rejected this claim, stating that the loan did not align with ordinary business practices. The Board of Directors' minutes authorized the loan at a low-interest rate, which the AO deemed inconsistent with commercial money lending practices. The Tribunal concurred with the CIT(A), emphasizing that the loan was not in the ordinary course of business and upheld the assessment of the loan as deemed dividend u/s 2(22)(e) of the Act.

Conclusion:
The Tribunal dismissed the appeal, affirming the validity of the re-opening of the assessment and the assessment of the loan as deemed dividend u/s 2(22)(e) of the Act for the assessment year 2003-04.

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