TaxTMI 
TaxTMI 
2021 (2) TMI 177
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..... 2(22)(e) of the I.T. Act, 1961. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) ought to have upheld the order of the A.O. 3. It is, therefore, prayed that the order of the Ld.CIT(A) be set aside and that of the A.O be restored to the above extent. 3. The only issue raised by the Revenue is that the learned CIT (A) erred in deleting the addition made by the AO amounting to Rs. 2,62,33,800/- on account of deemed dividend under section 2(22)(e) of the Act. 4. Briefly stated facts are that the assessee in the present case is an individual and having income from salary, rent, interest and short term capital gain. The assessee, among other companies, is a registered shareholder and carrying voting rights not less than 10% in the companies as detailed under: S. No. Name of the company % of holding 1 JP Iscon Pvt. Ltd (Formerly JP Infrastructure Pvt. Ltd.) 22 2 Gujarat Mall Management Company Pvt. Ltd. 50 3 Dev Infratrade Pvt. Ltd. 50 4.1 M/s JP Infrastructure Pvt. Ltd. in the year under consideration has advanced loan amounting for Rs.28,02,234/- and Rs. 2,34,31,566/- to Dev Infratrade Pvt. Ltd. and Gujarat mall Management Compan....
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....panies wherein the assessee has the substantial interest. 4.7 In view of the above, the AO treated the amount of Rs.2,62,33,800/- as deemed dividend under the provisions of section 2(22)(e) of the Act and added the same the total income of the assessee. 5. Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the addition made by the AO by observing as under: The AO has held that deemed dividend is always taxed in the hands of shareholders. I am agreed with the contentions of the appellant that he has not receifed any loan either from JPIL (loan given company) or from DIPL and/or from GMMCPL (loan taken companies) and Gujarat Mall Management Company Pvt. Ltd. and Devinfratrade Pvt. Ltd. are not shareholders of JPIL and further loan given by JPIL to Gujarat Mall Management Company Pvt. Ltd. and Devinfratrade Pvt. Ltd. are ultimately not been received or benefited to appellant. Hence the provision of section 2(22)e of the Act are not applicable. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx I agree with the contention of the appellant that there is no accumulated profits in the hand of JPIL. I also agree with the contention of th....
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....terest. In this regard we find pertinent to refer the provisions of section 2(22)(e) of the Act which reads as under: (22) "dividend" includes- XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXX (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits ; 9.2 A plain reading of the provisions reveals that the provisions of section 2(22)(e) of the Act will be attracted in a situation where the co....
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....(e) of the Act cannot be attracted. 9.4 Moving further, we also note that the assessee has contended before the AO that the loans has been advanced by the company, JP infrastructure to the parties as discussed above as inter corporate deposits. The relevant submission of the assessee stands as under: Without prejudice to the above submissions, it is further submitted that in the present cae, inter corporate deposits (ICD) ICD during the normal course of the business for the business transaction by one company JPIL to group companies (Gujarat Mall Mgt Company Pvt. Ltd. and Aryan Arcade Pvt. Ltd.) and where the assessee is the common shareholder in above specified companies, the same cannot be treated as deemed dividend in the hands of the assessee. 9.5 However, on perusal of the order of the assessment order, we find that the contention of the assessee has not been disputed by the AO. Similarly, the learned CIT (A) has also observed that the company has advanced money to the parties as inter corporate deposits which has not been disputed by the learned DR appeared for the revenue. 9.6 In the absence of any adverse finding from the side of the AO and the favorable finding of the....
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....ounds of cross objection. 11. The assessee in the CO has challenged the validity of the assessment framed under section 147 read with section 143(3) of the Act on the ground that there was no fresh tangible material available with the AO viz a viz there was no application of mind for arriving at the conclusion that the income of the assessee has escaped assessment. 12. The assessee, an individual, in the present case has filed return of income declaring total income at Rs. 1,11,44,950/- which was processed under Section 143(1) of the Act. Subsequently, the AO found that M/s JP Infrastructure Pvt. Ltd., in which the assessee is holding 22% registered shareholding, has extended loans to the companies namely Gujarat Mall Management Co. Pvt. Ltd. and M/s Aryan Arcade Pvt. Ltd in which the assessee has substantial interest. Therefore the AO was of the view the assessee is subject to the provisions of deemed dividend under section 2(22)(e) of the Act for the loans advanced by JP Infrastructure Pvt. Ltd. to the companies in which the assessee has substantial interest. Based on the above, the AO was of the opinion that the amount of loans as discussed above has escaped assessment and acc....
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....idity of notice issued u/s.148 of the I.T. Act stating that figures mentioned in the reason recorded is not ascertainable how it is arrived and observation of the A.O. that assessee having 22% share in Aryan Arcade Pvt. Ltd. which is factually wrong as the assessee is not holding any share in Aryan Arcad^ Pvt. Ltd. Hence the AO's believe is merely on the basis of presumption and surmises and without there being any material on record and the basic requirement of section 148 of reasons to believe fails.Having considered the fact of the case. The A.O. formed an opinion on the basis of information available with him and the reasons to believe that income has escaped assessment has already been conveyed. In this case, the original return filed was processed under section 143(1 )(a) and no assessment under section 143(3) has been made. Further in this case the notice u/s. 148 of the Act has been issued on 27/03/2015 and served on the appellant on 28/03/2015 The said notice has been issued after obtaining necessary approval of Addl.CIT, Range-3(3), Ahmedabad. Hence, notice u/s.148 is not barred by limitations. In view of above facts, it can be inferred that the A.O. was in possessi....
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....able and bad in law. (iv) It is further submitted before your honour that Ld AO merely for verification of details available on records in the form of return of income and without bringing on record any new tangible material for making inquiry has reopened the case of appellant which is also bad in law. (v) The power to reopen an assessment is conditional on the formation of a reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangible material is necessary to ensure against an arbitrary exercise of power. Ld AO nowhere mentioned in the reasons recorded that any tangible material either from assessment record or from other source has come in the notice of Ld AO for reason to believe that any income has escaped assessment. Therefore, the basic requirement of reopening of the assessment i.e. reason to believe is not fulfilled at the time of recording the reasons of reopening. 16. The learned DR before us vehemently supported the action of the authorities below. 17. We have heard the rival contentions of both the parties and perused the materials available on record. The Provisions of Section 147 of the....
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.... which he has a substantial interest-(hereafter in this clause referred to as the said concern) or nay payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case prossesses accumulated profit. (iii) The accumulated profit in the case of M/s. J.P. /scon Ltd. .(formerly known as M/s. J.P. Infrastructure Ltd.) is Rs. 7,38,54,215/-, whereas the assesse'-s share with respect to the loan given to Gujarat Mall, management Co. Pvt. Ltd. and Aryan Arcade Pvt. Ltd. comes to Rs. 2,91, 70,712/-. Hence, Rs. 2,91,70,712/- is to be required to he taxed as per provisions of Section 2(22)(e) in view explanation 2(b) of Section 147 in respect of cases where no assessment has been made but income chargeable to tax has been under slated. -. (iv) In view of the above facts, I have reason to believe that the income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for this assessment for that assessment year and income has escaped assessment to that extent of Rs. 2,91,70,712/-. Thus it i....