TaxTMI 
TaxTMI 
2020 (11) TMI 704
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....e facts that, the provision of 2 (22)(e) is applicable in a case to a person who is " holding not less that 10 % of voting power", in our case the AO has s imply made addition on the ground that the assessee is having 40 % share holding and therefore, the condition mentioned in the section is not fulfilled and therefore, on merits, the addition is required to be deleted. 2. That, the lower authority has erred on facts as well as law in not appreciating the facts that, even as per the balance sheet of the company for FY 2012 - 13,there is no such advance appeared to the assessee and therefore, the provision of sec. 2 (22)(e) is not applicable and therefore, the addition is liable to be deleted." 4. The prayer for admission of additional grounds noted above which are not set forth in memorandum of appeal are being admitted for adjudication in terms of Rule 11 of Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised are primarily legal in nature towards applicability of the provisions of Section 2(22)(e) of the Act in the facts of the case and for such objections, the relevant facts are stated to be emanating from records. 5. When the matter was call....
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....be regarded as chargeable income per se. The only issue thus is taxability of income equivalent to purchase price of property. In the context, the learned AR pointed out that in response to the notice under s.148 of the Act, the assessee has filed a return of income on 28.04.2016 declaring total income of Rs. 2,58,110/-. The assessment was thereafter completed under s.143(3) of the Act r.w.s. 147 of the Act vide order dated 06.12.2016. With reference to the aforesaid assessment order, it was pointed out on behalf of the assessee that although the allegation was on account of escapement equivalent to purchase of immovable property worth Rs. 1,72,00,000/- (assessable under s.69 of the Act) and contract receipt of Rs. 47,539/- (assessable under s.28 of the Act), no additions have been made on both counts in terms of recorded reasons. The AO has, in the instant case, traversed beyond the scope of the reasons recorded and invoked deeming provisions of Section 2(22)(e) of the Act without finding any escapement on either counts allegedly escaped as per the reasons recorded. The learned AR thus submitted that the AO has thus assessed an altogether different genre of income of fictional nat....
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....he AO has not brought any material on record to establish that the assessee herein holds voting power of 10% or more per se in the lender company. On the point when inquired by the bench, however, it was admitted on behalf of the assessee that the assessee holds equity shares to the extent of 40% of shares in the lender company. Hence, while dealing with the other objections separately, we do not see any merit in the aforesaid objection raised by way of additional ground. The primary onus lay upon the assessee to establish that the assessee does not hold the voting power beyond the stipulated threshold limit in the same proportion as equity shares for which burden was sought to be wrongly shifted upon the AO. We thus do not see any merit in the additional ground raised on this score and hence dismiss the same at this stage itself. 6.4 Moving further on merits, it was submitted by the learned AR for the assessee that the ledger account of the assessee in the books lender company, namely, Rotycan Turbotech Pvt. Ltd. would show that the lender company had lent money and shown outstanding from the assessee only to the extent of Rs. 13,94,427/- and no fresh money has been advanced to t....
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....on of mind by the JCIT is far from true merely on account of the consolidated approval memo. The learned DR thereafter referred to the appellate order passed by the CIT(A) and submitted that the re-assessment proceedings under s.147 of the Act was also challenged before the CIT(A) but however the ground was dismissed by the CIT(A) as the assessee has not furnished any submissions in the first appellate proceedings. It was thus contended that the Tribunal should not entertain the legal ground where the assessee has bypassed the first appellate proceedings on the issue. The learned DR next contended that the AO was within its statutory right to assess income under the provisions of Section 2(22)(e) of the Act in the course of the assessment proceedings to the notice under s.148 of the Act in the circumstances existing in the case. Adverting to the merits, it was contended that the money aggregating to Rs. 1,72,00,000/- was paid by the lender company to one Mr. Alderin Raphel Fenandies but however, the purchase of the property was made by the shareholder and therefore, the provisions of Section 2(22)(e) of the Act would come into play notwithstanding the fact that the lender company h....
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....scapement, even a non-filer of return of income cannot be forced to file a return with the aid of Section 147 of the Act. The remedy to revenue probably lies in S. 142(1) to ask the non filers to file their return in appropriate cases with no stringent requirements similar to S. 147 attached. 8.3 In this backdrop, we firstly observe that reasons were recorded in writing (supra) which formed the basis for purported belief towards alleged escapement of chargeable income. In response to the notice issued under s.148 of the Act, the assessee filed return of income. The assessment was carried out under s.143(3) of the Act r.w.s 147 of the Act as a consequence of action under s.147/s.148 of the Act. As per the reasons recorded, it is ostensible that the AO observed that no return had been filed by the assessee despite purchase of immovable property worth Rs. 1,72,00,000/- and contract receipt of Rs. 47,539/-. The AO thus presumed that income equivalent to aggregate of purchase price of immovable property and contract receipts (below threshold limit and thus not chargeable) has escaped assessment. As a corollary, the AO questioned the omission attributable to source of investment in the ....
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....fferent ground by invoking deeming fictions of Section 2(22)(e) of the Act de hors the cause of action manifested under s. 148(2) of the Act. This view finds support from plethora of decision including the decision of Hon'ble Supreme Court in Ram Bai v. CIT (1999) 236 ITR 696 (SC); Hindustan Lever Ltd. (2004) 268 ITR 332 (Bom.), East Coast Commercial Co. Ltd. v. ITO (1981) 128 ITR 326 (Cal.). Hence, the additions made by the AO towards deemed income under s.2(22)(e) of the Act, being extraneous to reasons recorded, requires to be struck down on this score itself. 9. Adverting further, there is yet another reason to impugn the action of AO. It is an admitted position that the assessment proceedings in the instant case came into motion owing to issuance of notice under s.148 of the Act for which certain reasons were recorded as noted earlier. The reasons so recorded were sent by AO for formation of 'satisfaction' and approval thereon by JCIT under s.151 of the Act. We notice from the approval memo dated 25.01.2016 given by the JCIT which notes the name of the assessee alongwith many other assessees and grants a consolidated approval for action under s.147 of the Act by stating 'your....
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....aw to initiate the impugned re-assessment proceedings under s.147 of the Act on the basis of consolidated approval granted by the superior authority under the umbrella of Section 151 of the Act for several assesses in a combined approval memo dated 25.01.2016 (i) when such memo is stoically silent on disseminating any 'satisfaction' whatsoever for the purposes of approval so granted and when (ii) no process for formation of purported satisfaction, if any, towards alleged 'reasons to believe' of AO qua the assessee was found discernible in such consolidated approval. 9.4 Courts have taken a nuanced view and time and again held that the satisfaction of the superior authorities are not empty formalities and such approval cannot be given mechanically or perfunctorily without application of mind to the facts and material placed before him. The Hon'ble Supreme Court in Chhugamal Rajpal vs. S. P. Chaliha (1971) 79 ITR 603 (SC) has set aside the action of the superior authority as satisfaction was found to be arrived mechanically and a mere pretense where the superior authority merely expressed his satisfaction as 'yes' on the note forwarded to him by the AO for reopening a case. Applicat....