TaxTMI 
TaxTMI 
2016 (2) TMI 426
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....n that view of the matter the CIT's order u/s 263 deserves to be cancelled holding it to be ab initio void. 2. For that on the facts and in the circumstances of the case, the CIT failed to appreciate that proceedings u/s 153C were confined only to items of income assessable with reference to incriminating material or information gathered from the books or documents unearthed on account of search and in the impugned case receipt of the Inter Corporate Deposit being recorded in the regular books, the CIT was unjustified in revising the order u/s 153C/143(3) on the ground being erroneous because dividend u/s 2(22)(e) was not assessed. 3. For that the appellant craves leave to file additional grounds and/ or amend or alter the grounds already taken either before or at the time of hearing of the appeal. As these additional grounds of appeal go into the root of the matter and no enquiry with regard to fact is required to be verified, we admit these additional grounds in view of the decision of the Hon'ble Apex Court in the case of NTPC Ltd vs CIT reported in 229 ITR 383 (SC). 3. The assessee has raised the following grounds of appeal including additional groun....
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....he matter the CIT was unjustified in revising the AO's order u/s 263. 6. For that on the facts and in the circumstances of the case, the loan granting company being substantially engaged in granting of loan for the purposes of earning interest, the provisions of Sec 2(22)(e) of the Act were not applicable since the case was covered by the exception provided in clause (ii) of Explanation to Sec 2(22) of the Act and in that view of the matter the CIT erred in invoking Sec 263 of the I TAct. 7. For that on the facts and in the circumstances of the case, the CIT grossly erred in holding clause (ii) of Explanation to Sec 2(22) was not applicable because the "main" and "principal" business of the loan granting company was not financing or granting of loans; ignoring and overlooking the fact that the said clause(ii) nowhere required the "main" business of the company to be loan granting and in that view of the matter the CIT erred in revising the order u/s 153C/ 143(3). 8. For that on the facts and in the circumstances of the case, the CIT erred in passing the order vi] s 263 on the ground of non application of mind and non examination of the relevant materi....
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....ld that moreover the original assessments were completed only u/s 143(1) of the Act and hence the Learned AO did not have an occasion to go into the aspect of deemed dividend. However, the Learned AO ought to have considered the same in proceedings u/s 153C of the Act which has not been done by him. Hence his order u/s 153C of the Act becomes erroneous and prejudicial to interests of the revenue by not considering the aspect of deemed dividend. Hence the objection raised by the assessee that the revision jurisdiction u/s 263 of the Act is barred by limitation was rejected by Learned CIT. Accordingly he held that the order passed by the Learned AO u/s 153C of the Act to be erroneous and prejudicial to the interests of the revenue. Aggrieved, the assessee is in appeal before us on the aforesaid grounds for all the asst years. 4.1. The Learned AR argued that the original assessments in this case were completed for the Asst Years 2007-08 to 2010-11 u/s 143(1) of the Act. He reiterated the entire factual background of the case which remain undisputed. He argued that the assessee did not hold any shares in M/s Geeta Ganesh Promoters Ltd and hence there cannot be any question of deemed....
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.... Pvt. Ltd Comparative Statement Particulars A.Y 2007-08 A.Y 2008-09 AY 2009-10 AY 2010-11 Return of income u/s. 139(1) filed on 24.08.2007 30.09.2008 24.09.2009 25.09.2010 Return of income processed & assessment u/s. 143(1) completed on 26.02.2009 - 22.03.2011 15.03.2011 Income returned Rs.7,24,871 Rs.7,84,086 Rs.17,77,148 Rs.43,80,143 Income assessed u/s. 143(1) Rs.7,24,871 Rs.7,84,086 Rs.17,74,650 Rs.43,80,140 Notice u/s. 153C issued on 26.04.2012 26.04.2012 26.04.2012 26.04.2012 Income assessed u/s. 153C Rs.7,24,871 Rs.7,84,086 Rs.19,27,246 Rs.43,80,140 5.2. Deemed Dividend could be assessed only in the hands of the shareholder and whether Deemed Dividend could be applied for inter corporate deposit received by the assessee from a lending company We find that the assessee is not a shareholder in the lending company. The Hon'ble Apex Court in the case of Rameshwarlal Sanwarmal vs CIT reported in 122 ITR 1(SC) held that in order to invoke section 2(22)(e) of the Act, it is necessary for the tax authorities to prove that the person who received the loan from a....
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....iness of GGPL and income derived from such activity was consistently assessed. However, we find in the show cause notice issued u/s 263 of the Act by the Learned CIT, it has been stated that the 'main business' of loan granting company i.e GGPL was Real Estate Development. In this regard, we find that the legislature in section 2(22) had consciously used the words 'substantial part of the business' in contradistinction to the words 'main business' or 'principal business'. We also find that the words 'substantial part of the business' is not defined in the Act which led to judicial interpretations by various judicial forums and it has been held that the expression 'substantial part of the business' is different and distinct from the words 'principal business' or 'main business' used in other places in the Act. Taking cue from provisions of section 2(22)(e) and section 2(32) of the Act , the courts and various benches of the tribunal have held that threshold of 20% can be safely applied to ascertain whether a particular business activity can be considered to be forming 'substantial part of the business'. In the instant case, as already stated supra that GGPL had deployed more than 20....
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....133,47,723 70,26,224 52.64% 31/03/2010 183,58,104 230,86,852 125.76% 5.4. Hence on facts, we hold that no addition could be made in the hands of the assessee towards deemed dividend on the following contentions :- - what is received is only an inter corporate deposit and not a loan ; - assessee is not a shareholder in GGPL and deemed dividend could be assessed only in the hands of the shareholder; and - Substantial part of business of GGPL is granting of loans , advances and inter corporate deposits in the ordinary course of business. 5.5. We also find that no incriminating materials were found during the search in respect of the issue of deemed dividend. Hence it cannot be the subject matter of addition in 153C proceedings in respect of completed assessments. We hold that when an addition could not be made as per law in section 153C proceedings, then the said order cannot be construed as erroneous warranting revision jurisdiction u/s 263 of the Act. This addition was made based on audited accounts already available with the revenue. Hence on this count also, the addition contemplated by the Learned CIT in section 263 pro....
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....riginal assessment order stood abated on initiation of proceedings under Section 153A of the Act, the AO ought to have correctly computed deduction under Section 80HHC in the assessment order passed under Section 153A read with Section 143(3) of the Income-tax Act. Accordingly, Mr. Jaiswal submitted that in the facts of the present case, the Commissioner of Income Tax was justified in invoking jurisdiction under Section 263 and the ITAT committed an error in setting aside the order passed by the C.I.T. 8. We find it difficult to accept the above contention raised on behalf of the revenue. The object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIVB of the Income-tax Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 (see 260 ITR (St) 191 at 219) was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as ' undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc....
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....s the pending assessment/reassessment proceedings which stood abated as per section 153A(1). 11. In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for the assessment year 1998-99 was finalized on 29-12-2000 and search was conducted thereafter on 3-12-2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalized on 29-12-2000. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the AO while passing the independent assessment order under Section 153A read with Section 143(3) of the I.T Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. ....
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....r requisition is made. Thus, the crucial words "search" and "requisition" appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. True it is that the assessment which has to be made in pursuance of the notice is in relation to the six years. An order will have to be made in that regard. While making the order, the income or the return of income filed for all these assessment years is to be taken into account. A reference will have to be made to the income disclosed therein. However, the scope of enquiry though not confined essentially revolves around the search or the requisition under section 132A , as the case may be. The provision deals with those cases where assessment or reassessment, if any, relating to the assessment years falling within the period of six assessment years referred to in sub-section (1) of section 153A were pending. If they were pending on the date of the initiation of the search under section 132 or making of requisition under section 132A , as the case may be, they abate. It is only pending proceedings that would abate and not where there are orders made of assessment or reassessment and w....