TaxTMI 
TaxTMI 
2016 (11) TMI 1296
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....incriminating documents/materials pertaining to the assessee was found and seized. Consequent to search, the case was notified to Central circle and accordingly, notice u/s 153A of the Act was issued requiring assessee to file return of income for six assessment years, immediately preceding the assessment year in which search was conducted. In the mean time, the assessee has filed return of income for the assessment years 2005-06 to 2011-12 on 21.11.2012. The case has been taken up for scrutiny and accordingly, notices u/s 143(2) & 142(1) of the Act along with questionnaire were issued. In response to the notices, the authorized representative of the assessee appeared from time to time and produced books of accounts, other documents, etc. 3. During the course of assessment proceedings, the A.O. noticed that the assessee has received loans and advances from M/s. Sampath Vinayaka Steels Pvt. Ltd., a company in which the assessee is Managing Director holding more than 30% share capital. Since, the transaction between the assessee and company is in the nature of deemed dividend within the meaning of section 2(22)(e) of the Act, the A.O. issued show cause notice and asked to explain th....
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....s are complied with. The A.O. further held that the provisions of section 2(22)(e) of the Act, clearly spelled out conditions under which circumstances the deemed dividend is arising. Since, all the above conditions are satisfied, the transaction between the assessee and the company is treated as deemed dividend in the hands of assessee. In support of his arguments, relied upon the decision of Hon'ble Supreme Court, in the case of Smt. T. Sarada Vs. CIT. 5. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the A.O. The assessee has taken a legal plea before the CIT(A) and argued that the assessment order passed by the A.O. u/s 143(3) r.w.s. 153A of the Act, for the assessment year 2005-06 to 2009-10 were not pending on the date of search, as such despite the provisions of section 153A of the Act are applicable, additions cannot be made when there is no incriminating material in respect of such assessments which are not pending. The assessee further submitted that as per the provisions of section 153A of the Act, the A.O. by virtue of the abatement clothed in the said provision ....
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.... relied upon the decision of ITAT, special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 137 ITD 287 and also the Delhi High Court decision in the case of CIT Vs. A.K. Bhatia reported in 211 Taxman 453. 7. The CIT(A) after considering the explanations furnished by the assessee, held that the assessing officer is not justified in making addition u/s 2(22)(e) of the Act, towards deemed dividend in the absence of incriminating material found during the course of search. The CIT(A), further, held that it is also noted that in a very recent decision dated 30.1.2014 in ITA Nos.5518 to 5524/Del/2012 in the case of ACIT Vs. Sh. Manoj Narayan, the Delhi bench of ITAT held that in 153A/C assessments, additions cannot be made unless they are based on incriminating materials. Even, the Hon'ble jurisdictional High Court, in their order dated 12.7.2013 in ITA Nos.266/Hyd/2013, in the case of M/s. Hyderabad House Pvt. Ltd. upheld the decision of ITAT, Hyderabad bench, wherein it is held that computation of undisclosed income u/s 153A/C of the Act, must be with reference to incriminating material found as a result of search. As observed by the Hon'ble ITAT, Mumbai Bench in ....
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....ions of section 153A of the Act and such re-opening is not depending upon existence or otherwise of any undisclosed income. The Ld. D.R. drew our attention to the decision of A.T. Rayudu Vs. CIT, in ITA Nos.313 to 319/Vizag/2014 and submitted that in the case of un- abated assessments, the assessing officer can determine the total income by clubbing the income already assessed and undisclosed income found during the course of search and the basis for ascertaining such undisclosed income is the books of accounts or other documents not produced in the course of original assessment, but found in the course of search and also undisclosed income or undisclosed property discovered in the course of search. 10. The Ld. D.R. further argued that as regards the additions towards deemed dividend u/s 2(22)(e) of the Act, the transaction between the assessee and his company is clearly coming within the meaning of deemed dividend, as the assessee has taken loans and advances from his company and the company is having accumulated profit as on the date of such loan and advances. Though the assessee has mortgaged his property for the purpose of obtaining credit facilities for his company, this alon....
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....ed the materials available on record and gone through the orders of the authorities below. The factual matrix of the case is that there was a search action u/s 132 of the Act. Consequent to the search, the assessee case was centralized and accordingly, notice u/s 153A of the Act was issued requiring assessee to file return for 6 assessment years immediately preceding the assessment year in which search is conducted. The assessee filed returns in response to notice u/s 153A of the Act. The A.O. completed the assessment u/s 143(3) r.w.s. 153A of the Act and made additions towards deemed dividend under the provisions of section 2(22)(e) of the Act. The A.O. was of the opinion that transactions between the assessee and his company is coming within the definition of deemed dividend under the provisions of section 2(22)(e) of the Act. It is the contention of the assessee that the assessment order passed by the A.O. u/s 143(3) r.w.s. 153A of the Act, for the assessment years 2005-06 to 2009-10 is null and void as the A.O. has made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials. The assessee further contended that as per section 153A of the Ac....
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....Consequent to search action u/s 132 of the Act, the assessee case has been centralized and accordingly fresh assessment proceedings have been initiated by issuing notice u/s 153A/153C of the Act for the six assessment years immediately preceding the assessment year in which search was conducted. The assessee has filed revised returns in response to notice u/s 153A of the Act and admitted the additional income disclosed during the course of search. The case has been selected for scrutiny. During the course of assessment proceedings, the assessee was asked to produce books of accounts and relevant bills & vouchers in support of expenditure claimed. In response, the assessee filed written submission and stated that the books of accounts are not available and hence cannot be furnished. Therefore, the A.O. issued a show cause notice and asked to explain why the net profit from the business shall not be estimated. In response to show cause notice, the assessee has filed a written reply and contended that the income for the assessment year 2004-05, 2005-06 and 2007-08 cannot be tinkered with, as there was no incriminating material found during the course of search for the above assessment....
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....ted and completed assessments, the natural meaning assigned to it should be given to interpret the provisions in such a way that which shall not cause undue hardship to the tax payers. The provisions of section 153A of the Act explained the procedure of assessments, abated assessments and the manner in which the assessment should be framed, which was further supported by circular no.7 of 2003 issued by the CBDT. When the law has explained the position of abated assessments, then the same way the completed assessment should be treated so as to understand that those assessments are reached finality and which cannot be tinkered with unless there was a seized document. Therefore, we are of the considered opinion that where search is initiated, all pending assessments are merge into one and only one assessment for each assessment year shall be made separately on the basis of findings of search and other material existing or brought on record by the A.O. In respect of non abated or completed assessments, the assessment will be made on the basis of books of accounts or other relevant documents found during the course of search, but not produced in the course of original assessment. 22. ....
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....ing Officer tried to reagitate the assessments. According to us, the learned Tribunal has rightly held that the Assessing Officer has no jurisdiction to reagitate the assessments which were already completed and subsisting. We therefore do not find any element of law to be decided in this appeal. Hence, the appeal is dismissed. There will be no order as to costs." 25. The assessee has relied upon the coordinate bench decision of ITAT, Visakhapatnam in the case of A.T. Rayudu in ITA No.373 to 379/Vizag/2014. The coordinate bench, under similar circumstances held the issue in favour of the assessee. The relevant portion is reproduced hereunder: "22. In this regard, it is also pertinent to refer to the following observations made by the Special bench in the case of All Cargo Global logistics Ltd (supra):- "57 (f) In the case of Parashuram Pottery works co. Ltd Vs. ITO (106 JTR 57)(SC), it has been mentioned in the last paragraph of the judgment that the court has to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repos....
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....income should be determined by the assessing officer by combining the income already assessed/disclosed in the return of income and the undisclosed income, if any, found during the course of search proceeding. Even otherwise, it is settled proposition of law that the assessee is entitled to take support of the decision in his favour, when two contradictory views have been expressed by the High Courts. In the instant case the Hon'ble jurisdictional High Court comes to the support of the assessee in respect of the legal proposition in addition to the decision rendered by the Hon'ble Bombay High Court. Accordingly, we find merit in the contentions of the assessee on the legal issue." 26. Considering the facts and circumstances of the case and also respectfully following the coordinate bench decision in the case of All Cargo Logistics Pvt. Ltd. (supra), we are of the opinion that the A.O. has made reassessment u/s 153A/153C of the Act on the basis of information/material available in the return of income, without referring to any seized material. Therefore, following the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act....
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....er passed u/s 143(3) r.w.s. 153A of the Act, towards deemed dividend under the provisions of section 2(22)(e) of the Act. We further observed that the additions made by the A.O., towards deemed dividend is not based on any incriminating material found during the course of search. The A.O. made additions based on the regular books of accounts maintained by the assessee. Therefore, we are of the view that the A.O. is not correct in making additions towards deemed dividend u/s 2(22)(e) of the Act, in the assessment made u/s 143(3) r.w.s. 153A of the Act. This view was supported by the decision of ITAT, Mumbai Bench in the case of ACIT Vs. Pradip Industries Pvt. Ltd. reported in 141 ITD 151, wherein the coordinate bench of this Tribunal, observed that even where there is no pending proceedings and no incriminating material has been found, the assessing officer is still required to pass an order u/s 153A of the Act, despite the fact that the assessed income will be remaining the same as that was originally assessed income, since there was no incriminating material. Therefore, we direct the A.O. to delete the additions made towards deemed dividend u/s 2(22)(e) of the Act, for the A.Y. 20....
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....he appellant of the sanction letters from various banks supports this contention and the details of the mortgage loans taken from various banks along with sanction letters and the properties provided by the appellant as collateral security to obtain loans from the said banks is tabulated below. Date of sanction Name of the bank Name of the borrower Credit facility (Rs.) Property mortgaged 23.3.2004 State Bank of Hyderabad, Siripuram junction, Vizag M/s. Sampath Vinayak Steels Pvt. Ltd. 30 lakhs Agricultural land 10.2.2006 State Bank of Hyderabad, Siripuram junction, Vizag M/s. Sampath Vinayak Steels Pvt. Ltd. 100 lakhs 4 storyed building on 555 sq.yds situated at Rajendranagar, Vizag in the name of (a) Hari Prasad Bhararia (b) Shivlal Bhararia (brothers) Renewal State Bank of Hyderabad, Siripuram junction, Vizag M/s. Sampath Vinayak Steels Pvt. Ltd. 100 lakhs 4 storyed building on 555 sq.yds situated at Rajendranagar, Vizag in the name of (a) Hari Prasad Bhararia (b) Shivlal Bhararia (brothers) 7.11.2007 The Dhanalakshmi Bank, VIP Road, VizaG M/s. Sampath Vinayak Steels Pvt. Ltd. 150 lakhs (1) 4 storyed building on 555 sq.yds. situated at Rajendranag....
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....hin the meaning of the Act. Thus, gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of section 2(22) but not cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. The assessee had substantial shareholding in a private company. The assessee permitted his immovable property to be mortgaged to the bank for enabling the company to take the benefit of loan and in spite of request of the assessee, the company was unable to release the property from mortgage. Consequently, the board of directors of the company passed a resolution authorizing the assessee to obtain from the company interest free deposit up to Rs. 50 lakhs as and when required. During the previous year relevant to the assessment year 1999-2000, the assessee obtained from the company a sum of Rs. 20,75,000 by way of security deposit. Out of the amount, a sum of Rs. 20 lakhs was subsequently returned by the assessee to the company. In the assessment made for 1999¬2000 the Assessing Officer added the sum of Rs. 20,75, 000 as deemed dividend. This was upheld by the Tribunal. On appeal to the High Court....