TaxTMI 
TaxTMI 
2014 (7) TMI 714
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....he date of search. 3. Briefly stated the facts of the case are that the assessee was subjected to search and seizure action on 15.11.2007. Notices u/s 153A were issued requiring the assessee to file returns of total income for the relevant six assessment years. In so far as the assessment year 2002-03 is concerned, the assessee filed his return on 19.1.2009 declaring total income of Rs. 12,42,740/-. The assessment was finally completed on total income of Rs. 68,31,740/-, which inter alia included an addition of Rs. 3.89 lakh on account of deemed dividend u/s 2(22)(e) of the Act. Thereafter, the assessee filed rectification application u/s 154 against such assessment alleging that the accumulated profits of the payer companies were less than the amount of loan or advance given to the recipient companies. The AO got convinced with such application and reduced the addition under this section to Rs. 37,162. The facts of the other two assessment years are mutatis mutandis similar qua the additions made u/s 2(22)(e) of the Act. The assessee took similar legal ground before the ld. CIT(A) as well, who chose to dismiss the same by observing that sec. 153A of the Act authorizes the Assessi....
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....he total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : ..............' 6. A careful perusal of the above provision brings to light that where a search is initiated u/s 132 of the Act etc., the A.O shall issue a notice requiring the person searched etc. to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Once such returns are filed, the Assessing Officer has to assess or reassess the total income of such six assessment years. The decisive words used in the provisions are to 'assessee or reassess the total income'. Thus, it is manifest that a duty has been cast on the Assessing Officer to determine the 'total income' of the assessee for such six assessmen....
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....behalf of the Revenue for the reason that if both the pending and completed assessment were to be taken on same pedestal, then there was no need to enshrine second proviso to sec. 153A(1) providing that the pending assessments within the period of six assessment years shall abate. The Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) dealt with a situation in which some incriminating material was found in respect of a non-pending assessment. It was in that background that the Hon'ble High Court held that sec. 153A applies if incriminating material is found even if assessments are completed. The question as to whether any addition can be made in respect of completed assessments when no incriminating material was found, was apparently left open. However, we find that there are sufficient indirect hints given by the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra) about not making of any addition in respect of an assessment year for which the assessment is already completed unless some incriminating material is found during the course of search. This can be seen from the following observations of the Hon'ble High Court :- "20. A question may arise as ....
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....material is found in respect of such assessment years for which the assessment is not pending, then the 'total income' would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In the other scenario of the assessments pending on the date of search which would abate in terms of second proviso to sec. 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. In fact, this is the position which follows when we read the judgment of the Hon'ble Delhi High Court in Anil Kumar Bhatia (supra) in juxtaposition to the special bench order in the case of All Cargo Global Logistics Ltd.(supra). The other judgment relied by the ld. DR in the case of Madugulu Venu (supra) also talks about the need for making fresh assessment in respect of the assessment years for which the assessments are not pending on the date of search but does not set out the scope of such assessment, which is the issue before use. 10. Adverting to the facts of the instant case for the assessment year 2002-03, we find that the dispute in the present appeal is....
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....registered shareholder, who is Mr. Kabul Chawla, the present assessee. The said companies contended in their respective first appeals that the provisions of deemed dividend were not attracted in their cases and the addition should be considered only in the hands of the registered shareholder. The ld. CIT(A) ordered for the deletion of such additions in the hands of the companies. In the present proceedings, the assessee changed the stand by arguing that the additions were not called for even in his hands. Not convinced, the Assessing Officer made additions u/s 2(22)(e) of the Act in the hands of the assessee on substantive basis. The ld. CIT(A) noticed that Shri Kabul Chawla, the present assessee, is beneficial owner having more than 20% of the voting right in both the payer as well as the recipient companies. The ld. AR relied on the judgment of the Hon'ble jurisdictional High Court in the case of CIT Vs Ankitech Pvt. Ltd. (2011) 11 Taxmann.com 100 (Del) to contend before the ld. CIT(A) that no addition could be made in the hands of the assessee. The ld. CIT(A) observed that the Hon'ble High Court in this case has held that if money is advanced to a concern by a company where ther....
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....(a) to (e). Clause (a) encompasses the definition of `dividend' as is understood in common parlance, being any distribution by a company of accumulated profits , whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company. Next three clauses deal with any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form; any distribution made to the shareholders of a company on its liquidation; and any distribution to its shareholders by a company on the reduction of its capital. These four clauses from (a) to (d) clearly refer to the direct distribution of profits made by the company to its shareholders in different circumstances. Then comes clause (e), which does not deal with the direct distribution of profit to its shareholders but with the amount indirectly reaching the shareholders by way of advance or loan or otherwise through some indirect payment. At this juncture, it will be relevant to note down the prescription of clause (e) of section 2(22) of the Act, as under :- `(e) any payment by a company, not being a company in which the pub....
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....dividend in the hands of the shareholder. It is further paramount to note that as the above three categories are complement by the word `or', the falling of a case in one of such categories brings it within the definition of deemed dividend u/s 2(22)(e). We are not concerned with the first category. 16. The second category deals with the giving of advance or loan by a company to any `concern' in which such shareholder is a member or partner and in which he has substantial interest. The term `such shareholder' as used in the second category draws reference from the first category, being a person who is the beneficial owner of shares holding not less than ten per cent of the voting power. Explanation 3(a) to sec. 2(22)(e) defines the term 'concern' to mean: 'a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company'. From the above definition of the term 'concern', it is clear that a `company' is also included within its ambit. Coming back to the second category and by reading it in the light of the definition of the term 'concern', it can be seen that any payment made by the company of any sum by way of advance or loan to any company (co....
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....f or for the individual benefit of any such shareholder. He emphasized on the word `or' employed between the first and second; and second and third categories of this provision. A case was made out that even though the amount falls under the second category, it should not be deemed as dividend unless it specifically falls in the third category as well. To put it simply, the contention was that even if a case falls in the second category, it cannot be deemed as dividend in the hands of shareholder unless it is shown that the loan or advance given to the said concern was for the benefit of the registered shareholder. Bolstering his point of view in this light, he stated that there can be no presumption that the amount of such loan or advance received by the concerns was handed over to the assessee-shareholder. As the Revenue had not shown that the amount of loan or advance received by the recipient companies did actually pass over to the assessee, the provisions of section 2(22)(e) were claimed to be not applicable. 20. We are not persuaded with this line of argument. To the extent it was argued that the word `or' used between these categories should mean that all the categories are....