TaxTMI 
TaxTMI 
TaxTMI 
2021 (4) TMI 200
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....bjector denies itself liable to be assessed under section 143[3] r.w.s. 153A r.w.s. 153C of the Act under the impugned order on the ground that:- i. The search initiated in the case of the searched person is illegal and ultra vires the provisions of section 132[1][a], [b] it [c] of the Act; ii. That the search is conducted not on the basis of any prior information or material inducing any belief but purely on the suspicion and therefore, the action under section 132[2] is bad in law [224 ITR 19 [SC]] and consequent assessment under section 153A is null and void-ab-initio on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajith Jain, reported in 260 ITR 80 and consequently the order of assessment passed under section 153C of the Act is bad in law. iii. The learned authorities below has not discharged the burden of proving that there is a valid initiation of search under section 132[1][a], [b] & [c] of the Act, its execution and its completion in accordance with law to render the proceedings valid and to assume jurisdiction to make an assessment under section 153A of the Act and consequently no proceedings moreso the proceedings under sectio....
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....sessee. Consequently, Notice u/s. 153C of the Act was issued to the assessee on 27.02.2009. No response from the assessee, the file has been transferred to the present Assessing Officer i.e. DCIT, Central Circle 2(3), Bangalore. The assessee filed NIL Return of Income on 9.9.2009 in response to the notice issued on 29.07.2009 by the present Assessing Officer. Later while framing the assessment, the Assessing Officer observed that during the relevant assessment year, Shri B.M. Farookh was holding 95% shares in the assessee's firm. It was also noticed that Shri B.M. Farookh was also holding more than 50% equity share capital in Fizza Developers (FDITPL) during the relevant period. FDITPL with a closely holding company and Shri B.M. Farookh is the Managing Director of the Company. Shri B.M. Farookh had purchased about 5.74 acres of land at Pandeshwar in Mangalore for a consideration of Rs. 6,03,00,000. The property was registered through four documents as given below:- (i) 95.90 cents in the name of M/s. Fiza Developers & Inter Trade P. Ld. (ii) 2 Acres 20.10 cents also in the name of M/s. Fiza Developers & Inter Trade P. Ltd. (iii) 2 Acre 26 cents in the name of Sri B.M. Fa....
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....for the AYs 2005-06 and 2006-07 and in the hands of Sri B.M. Farookh for AYs 2005-07. The accumulated profit available after adjustment of the same is Rs. 54,372,303/-. 8. In view of the above, the amount of Rs. 4,14,57,934/- was treated as deemed dividend in the hands of the assessee firm and is brought to tax for this assessment year. 9. Aggrieved the assessee, the assessee went in appeal before the CIT (Appeals). The CIT (Appeals) confirmed the action of the Assessing Officer u/s. 153C r.w.s. 153A of the Act. Against the assessment order, the assessee filed an appeal before the CIT (Appeals) challenging on various grounds. However, the CIT (Appeals) deleted the addition made u/s. 2(22)(e) of the Act by observing that the purpose of Section 2(22)(e) is to tax the deemed dividend in the hands of shareholder and the assessee is not a shareholder in this case. He further observed that the transaction between the assessee and FDITPL is business transaction which does not attract provisions of Section 2(22)(e) of the Act. Aggrieved, the revenue is in appeal before us. 10. The ld. DR submitted that there is a clear applicability of Section 2(22)(e) of the Act. According to ld. DR, e....
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....ut in section 2(22)(e) are satisfied, such amount of loan would be liable to regarded as deemed dividend within the meaning of the said section, which is explained by High Court in para 16 of the judgment as follows:- "16. In the present case, we are concerned with the second limb of Section 2(22)(e) of the Act namely, to any concern, like the respondent assessee, in which such shareholder is a member or a partner and in which he has a substantial interest. The respondent assessee is admittedly not a shareholder of M/s. Ittina. It is not even the case of the assessee that it is a shareholder of M/s. Ittina, though, shareholders of the respondent-assessee and M/s. Ittina are common and/or members of the same family. In this backdrop when we look at the provisions contained in Section 2(22)(e) of the Act, the intendment of the Legislature is clear, which means to tax dividend in the hands of shareholders. The deeming provisions, as observed by Delhi High Court, as it applies to the case of loans/advances by a Company to a concern in which its shareholders have substantial interest, is based on the presumption that the loans or advances would ultimately be made available to the shar....