TaxTMI 
TaxTMI 
2017 (8) TMI 1186
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.... appellant craves leave to add, amend, alter and or vary any of the grounds at the time or before the hearing of this appeal. (4) The appellant therefore prays that action of the Assessing Officer in re-open the completed assessment by invoking provisions of section 147 may please be held as illegal/unjustified and/or alternatively addition of Rs. 17,50,000/-made by the Assessing Officer and confirmed by the Learned CIT(A) may please be deleted". 2. Briefly stated, the facts of the case are that the assessee who is engaged in the business of trading in shares and derivatives had filed his return of income on 18.02.2005, declaring total income at Rs. 1,10,075/-. The case of the assessee was reopened u/s. 147 of the 'Act', for the reason that he being the director of a company, viz. M/s. Simplex Solution Pvt. Ltd. (hereinafter referred to as 'Company') holding more than 10% of the shares, had during the year under consideration received an amount of Rs. 17,50,000/- from the company, which as per the A.O was liable to be assessed as 'deemed dividend' under Sec. 2(22)(e) in the hands of the assessee. 3. That during the course of the assessment proceedings the A.O. called upon the....
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....ot be summarily accepted, therefore, assessed the amount of Rs. 17,50,000/-(supra) as the 'deemed dividend' in the hands of the assessee. 5. The assessee being aggrieved with the order of the A.O carried the matter in appeal before the CIT(A). That during the course of the appellate proceedings the assessee tried to impress upon the CIT(A) that as the amount of Rs. 17,50,000/-(supra) received by him was by way of an advance towards anticipation of sale of agricultural land owned by him to the company, which was evidenced by the 'agreement to sell', dated 29.06.2002 executed between the aforesaid parties, therefore, the same being a receipt in lieu of a commercial transaction could not be assessed as 'deemed dividend' in his hands. The assessee in support of the proposition canvassed by him that an amount received by a shareholder pursuant to a commercial transaction falls beyond the sweep of 'deemed dividend' contemplated under Sec. 2(22)(e), relied on a host of judicial pronouncements. The CIT(A) after deliberating on the contentions of the assessee in the backdrop of the facts of the case, however, did not find favour with the same, and observed as under:- " 3 . 3 . 4 The enti....
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....00/- during the year 2003-04 as advance against sale of his agriculture land to the company. However, the assessee has not explained as to what measures were taken by him in terms of Clause 10 of the sale agreement dated 29/06/2002 to convert the above land of 30.380 acres for industrial purposes and other permission necessary for completion, of sale. 5. The structure of the agreement between the appellant and the company and the conditions laid down therein are arranged in such a manner that they are discernable to have been drafted for the mutual benefit of both parties, and more particularly in order that the appellant get rid of the provisions of deemed dividends. Certain clauses of the agreement are reproduced below to bring home this point:- "(i) The second party has this day paid to the first party (appellant) the sum of Rs. 4,00,000/- by way of advance and the second party (company) has agreed to pay in installments at mutuality agreed internals, and balance of the purchase money of Rs. 10,00,000/- would be paid at the time of execution of absolute sale deed. Simultaneously, with the execution of this agreement the first party shall to the second party all the little ....
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.... or the advance was not demanded by the company until the year 2008 when for the first time the appellant made a declaration for adequate compensation against the compulsory acquisition of his land before the Competent Authority. 7. The matter with regard to the misrepresentation of the facts and the reason for delay in making payment of advance received from the company does not end here. Even after the compensation against the land received by the assessee in the year 2008-09, the appellant made the part payment to the company in 2008 Rs. 3,35,000/- and substantial payment of Rs. 14,00,000 was made in the year 2010. 8. When the appellant contended that he could not sell his land to the company due to the acquisition of the said land by the Government, then in a common parlance the trade advance received from the company ceased to exist as a commercial agreement and the assessee was immediately liable to return the amount. In the circumstances it is incomprehensible as to why the advance was not returned immediately to the company. It cannot be said that the appellant could heard the murmurs of the land acquisition matters only in 2008. The appellant being highly educated, w....
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....is control or because of changes in the legislation; (iii) the factual matrix that the property continued to be reflected in the balance sheet of the appellant after more than five years of the agreement; (iv) the appellant nor the company honoured the condition of forfeiture the amount Rs. 5 lac nor the appellant refunded the balance amount as stipulated in the agreement; the Assessing Officer has rightly recorded that the appellant's case is not covered by the exception of deemed dividend as contemplated u/s 2(22)(e). He has rightly held this transactions as sham and treated them as deemed dividend to the assessee u/s 2(22)(e). This ground of appeal is dismiss". The CIT(A) thus in the backdrop of his aforesaid observations concluded that the amount of Rs. 17,50,000/- (supra) received by the assessee was clearly in the nature of a loan/advance received by him from the company, which had rightly been assessed as 'deemed dividend' by the A.O u/s. 2(22)(e) of the 'Act', thus dismissed the appeal of the assessee. 6. The assessee being aggrieved with the order of the CIT(A), upholding the addition of Rs. 17,50,000/-(supra) made by the A.O u/s. 2(22)(e) had carried the matt....
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....D.R that the appeal of the assessee being devoid of any merit was thus liable to be dismissed. 7. We have perused the contentions raised by the assessee in his 'written submissions' and heard the ld. Departmental Representative, perused the orders of the lower authorities and the material available on record. We find that the main thrust of the assessee in his averments raised before us in respect of the validity of reassessment proceedings is that the A.O in the absence of any 'fresh material' coming into his possession after the passing of the order u/s. 143(1) had thus exceeded his jurisdiction by initiating reassessment proceedings on the basis of a mere 'change of opinion'. We have given a thoughtful consideration to the aforesaid submissions of the assessee and are unable to find ourselves as being in agreement with the same. We though are not oblivious of the fact that an A.O cannot assume jurisdiction initiate reassessment proceedings on the basis of a 'change of opinion', but then the same presupposes the formation of an 'opinion' by the A.O in the course of the earlier proceedings. The proposition advanced by the assessee would undoubtedly hold good in a case where origi....
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....tive till 1st June, 1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to s. 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between 1st April, 1998 and 31st May, 1999, sending of an intimation under s. 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word "intimation" as substituted for "assessment" that two different concepts emerged. While making an assessment, the AO is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to s. 143(1)(a), no addition which is impermissible by the information given in the return could be made by the AO. The reason is that under s. 143(1)(a) no opportunity is granted to the assessee and the AO proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under s. 143(1)(a) indicates that the AO has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to s. 143 by the Finance....
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....aking machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under s. 143(1)(a), the question of change of opinion, as contended, does not arise". We further find that the reliance placed by the assessee on the judgments of the Hon'ble High Court of Bombay in the case of General Insurance Corporation of India (supra) and Titanor Components Ltd. (supra) are distinguishable on facts and would not assist the case of the assessee. We find that in the case of General Insurance Corporation India (supra) the facts involved were that the A.O while framing the assessment u/s 143(3), had after applying his mind to the claim of the assessee in respect of certain exemptions u/s. 10. Thereafter, in the absence of any 'fresh material' the A.O being of the view that the exemptions u/s. 10 had wrongly been allowed to the assessee initiated reassessment proceedings. That it was in the backdrop of the aforesaid facts that the Hon'ble High Court held that the aforesaid action on the part of the A.O was....
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....eme Court in the case of GKN Driveshaft (India) Ltd. Vs. ITO (ORS) (259 ITR 19), the reassessment proceedings framed were liable to be struck down on account of the said legal infirmity itself. We though are not oblivious of the settled position of law that where an assessee after complying with the terms of a notice issued u/s. 148 seeks a copy of the 'reasons to believe', thereupon, the A.O remains under a statutory obligation to make available a copy of the same before proceeding with the reassessment proceedings. We further find that in the case of the present assessee there is nothing available on record from where it could be gathered that any request for obtaining the copy of the reasons to believe was made before the A.O. We thus in light of our aforesaid observations are unable to accept the aforesaid contention of the assessee and uphold the validity of the reassessment proceedings initiated by the A.O u/s. 147. The Ground of appeal No. 1 raised by the assessee is dismissed. 8. We further find from a perusal of the records that the assessee on being called upon by the A.O to put forth an explanation as to why the amount of Rs. 17,50,000/-(supra) received by him from M/s.....
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....y who was a stranger to the transaction under consideration. Thus the genuineness and veracity of the aforesaid 'agreement to sell' can be well gathered beyond any scope of doubt on a bare perusal of the aforesaid facts, which can safely be held to be a bogus document which was prepared with the sole intent to characterize the advance of Rs. 17,50,000/-(supra) received by the assessee from the company, as an advance received in lieu of an agreement to sell in respect of the aforesaid land. (ii) The fact that no transaction in respect of the property under consideration was reflected in the 'books of account' of the company, further fortifies the fact that the assessee in order to characterize a pure and simple transaction of loan or advance received by him from the company, as that of a commercial transaction, had thus came with the aforesaid cooked up story. (iii) The meeting of the board of directors of the company in order to ratify the transaction is stated to have taken place on 22.05.2002, however, the minutes are found to have been signed on 10.07.2002. Thus, in the backdrop of the fact that there were only two directors in the company and the assessee was a director as ....
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....nt authority. (vii) That the misrepresentation of the facts by the assessee further draws force from the fact that even after the assessee was in receipt of compensation in the year 2008-09, only an amount of Rs. 3,35,000/- was refunded out of the aforesaid advance of Rs. 17,50,000/- (supra) to the company in the year 2008, while for the major amount of Rs. 14,00,000/-is stated to have been refunded only in the year 2010. It is beyond comprehension as to how the company despite being well aware of the fact that the sale agreement was not to fructify in future, as the land had been acquired by the Government, would however even thereafter allow its substantial amounts to remain with the assessee for years at stretch. (viii) That as after the acquisition of the agricultural land of the assessee by the government there remained no occasion for the assessee to have proceeded with the sale transaction in favour of the company, therefore, the 'trade advance' received by the assessee from the company lost the color as that of an amount received by him pursuant to a commercial transaction, thus making it obligatory on the part of the assessee to immediately refund the same amount to th....