TaxTMI 
TaxTMI 
2021 (8) TMI 868
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....rn already filed should be treated as return filed in response to notice u/s 148 of the Act. The assessee also asked for the reasons recorded for reopening of the assessment which were duly provided to the assessee. 4. After receiving reasons recorded for reopening of the assessment, the assessee filed his objection challenging the validity of issuance of notice u/s 148 of the Act on account of the following grounds:- a) The statutory requirements u/s 151 of the Act has not been made by the AO by not taking approval of the CIT before issuance of notice u/s 148 of the Act. b) The reasons are recorded after issue of notice u/s 148 of the Act. c) The facts not disclosed by the assessee are not stated in the reasons so recorded. d) The onus lies on the Revenue to prove that there has been failure on the part of the assessee to fully and truly disclose all material particulars necessary for his assessment. e) Action u/s 148 of the Act on the direction of the CIT(A) is illegal. f) The AO has not applied his mind to the direction of the CIT(A) and has simply gone by the satisfaction of the ACIT, Circle-2, Jammu and CIT(A), Jammu. He....
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....present the case. Such request is beyond the scope of the appellate proceeding and does not constitute a relief that can be sought u/s 246 of the Act. Hence, this request is not entertained. 5.6.5 From the correspondence of the appellant with the AO, it is seen that the appellant did not believe that the order dated 20/03/2014 could have been received by the AO by 28/03/2014, i.e. the day of issue of notice u/s 148 of the Act. The appellant's apprehensions ted that the reasons have been recorded after the issue of notice u/s 148 of the Act is unfounded and is without valid basis. Communication process in the present day does not take much time. The presumption that the officers concerned would have taken time to go through 47 pages is a mere speculation. What-is material is that the AO had information, which farmed the basis of his belief that income of the appellant has escaped assessment for the relevant year. Based on the same that recorded seasons to re-open the assessment. He has independently applied his mind, and not on the basis of directions of CIT(A), Jammu. The Hon'ble ITAT has directed to delete the observation of the CIT(A), Jammu in respect of appella....
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....ad incomplete information as indicated in the reasons, which could have led the AO to have reasons to suspect, but, not reasons to believe. However, the reasons recorded by the AO do not show that he merely suspected that income has escaped assessment. Rather, the AO was fully aware about the exact quantum of income that has escaped assessment and why this amount was taxable in the hands of the appellant. Hence, the reason recorded was 'reason to believe' not based merely on any suspicion. 5.6.10 Thus, the grounds challenging the validity of the notice issued u/sl48 are not valid. The claim that the case law relied upon by the AO was not relevant is not correct. As has been discussed above, the information received by the AO from the CIT (A) did not constitute a direction and the AO had duly applied his mind before issue of the notice u/s 148 of the Act. These grounds are rejected." 7. Similarly, he dismissed the grounds raised by the assessee on merit by observing as under:- "5.7.5 The issues that need to be examined are:- (1) Whether the amount was an Inter-corporate Deposit and different from unsecured loan. (2) Whether ICD is beyond th....
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....pellant has claimed that the transaction has not benefited the appellant Sh. Anil Nanda. Details of actual utilization of the funds has been furnished to show that no part was received, or utilized by Sh. Anil Nanda. In this regard it is pertinent to note that the appellant Sh. Anil Nanda held substantial interest in both the companies. The issue of taxability of the receipt in the hands of the common share-holder, holding substantial interest has been examined in detail by the Hon'ble Delhi High Court in the case M/s Ankitech Pvt.Ltd. This decision shows that the transaction provides indirect benefit to the common share-holder holding substantial interest in both companies. 5.7.9 The transaction of loan/advance between the two companies are definitely not in the course of business, because neither of the company is engaged in the business of lending of money. The fact that a loan was given does not per se make it a business transaction. Hence, provision of section 2(22)(e) are clearly applicable. 5.8 Provision relating to deemed dividend u/s 2(22) (e) of the Act has been examined in detail by the Hon'ble Delhi High Court in the case of M/s Ankitech Pvt. L....
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....of such shareholder. In such an event, by the deeming provisions, such payment by the company is treated as dividend. The intention behind the provisions of Section 2(22)(e) of the Act is to tax dividend in the hands of shareholders. The deeming provisions as it applies to the case of loans or advances by a company to a concern in which its shareholder has substantial interest, is based on the presumption that the loans or advances would ultimately be made available to the shareholders of the company giving the loan or advance. 25. Further, it is an admitted case that under normal circumstances, such a loan or advance given to the shareholders or to a concern, would not qualify as dividend. It has been made so by legal fiction created under Section 2(22)(e) of the Act. We have to keep in mind that this legal provision relates to - dividend. Thus, by a deeming provision, it is the definition of dividend which is enlarged. Legal fiction does not extend to - shareholder. When we keep in mind this aspect, the conclusion would be obvious, viz., loan or advance given under the conditions specified under .Section 2(22.}(e) of the Act would also be treated as dividend. The fiction....
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.... that the conditions stipulated in Section 2(22)(e) of the Act treating the loan and advance as deemed dividend are established in these cases. Therefore, it would always be open to the Revenue to take corrective measure by treating this dividend income at the hands of the shareholders and tax them accordingly. As otherwise, it would amount to escapement of income at the hands of those shareholders." (emphasis supplied) Thus, the Hon'ble Court had decreed that the dividend income deemed u/s 2(22) (e) must be brought to tax in the hands of the shareholders and there should be no escapement of income from their hands. Respectfully following the decision of the Hon'ble Delhi High Court, I hold that the loan received by the appellant is deemed dividend in his hands u/s 2 (22) (e) of the Act. 5.9 After due consideration of the facts it is held that the AO has rightly made the addition invoking the provision of section 2(22) (e) of the I.T. Act and treating the amount of Rs. 18.75 crore as deemed dividend in the hands of the appellant Sh. Anil Nanda." 8. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising....
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....rest must be set aside and quashed as unsustainable both on facts and in law. 8. The CIT(A) ought to have dealt with all the factual and legal submissions and objections of the appellant and ought to have followed the binding decisions of the Courts and Tribunals placed before him but has unfortunately not done so and has thus passed the impugned order erroneously solely to cause hardship and harassment to the appellant for which the impugned order is liable to be vacated. 9. The CIT(A) has by the impugned order demonstrated his clear bias and prejudice against the appellant and has passed the same by disregarding the correct factual and legal position and by not following the binding precedents for which also the impugned order cannot be sustained. 10. The authorities below also erred in ignoring the fact that based on an incorrect observation/order of the Commissioner of Appeal in the case of another assessee, the assessment of the appellant could not have been reopened and the entire action for reopening of the assessment earlier made by the A O after thorough verification of facts and law, could not have been superseded by the impugned reassessment pr....
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....ide ITA No.305/Asr/2014, order dated 23rd March, 2016, for A.Y. 2007-08, drew the attention of the Bench to para 31 of the order and submitted that the Tribunal has deleted all the observations/directions of the CIT(A) relating to Shri Anil Nanda. Therefore, the reopening of the assessment on the basis of observations/directions of the CIT(A), Jammu does not survive. He accordingly submitted that once the basis for reopening of the assessment does not exist, notice u/s 148 is ex facie illegal, arbitrary and without jurisdiction. Therefore, all subsequent proceedings are also illegal. 10. In his second plank of argument, the ld. Counsel submitted that there are certain factual errors in the proforma of the notice where the AO while answering the question No.8 under clause, "whether the assessment is proposed to be made for the first time? If the reply is in affirmative, please state" has mentioned, "yes, for the first time" which is patently wrong. He submitted that the AO himself has admitted in the assessment order that return of income for A.Y. 2007-08 was filed by the assessee on 13th July, 2007 declaring total income at Rs. 8,25,64,675/-. This shows that there is complete no....
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....lude "deposit." He submitted that the legislature in its wisdom did not include the word "deposit" in this section while in other sections like section 13(1)(d)(i), the word "deposit" has been used as against "loan" in section 13(2)(a). Thus, the two terms have been used differently by the legislature. 13. The ld. Counsel for the assessee submitted that the balance sheet of M/s GI Power Corporation Ltd. clearly indicates that it has received inter-corporate deposit from M/s Joint Investment Pvt. Ltd. and not loan or advance. He submitted that in the balance sheet Schedule IV, the inter corporate deposit is placed under the head 'Unsecured loan' because there is no other head in the balance sheet where it can be grouped. He submitted that Schedule VI of the Companies Act, 1956 prescribes the proforma in which a company is required to prepare its balance sheet. He submitted that under the head "Unsecured loan" besides the loan, all other deposits including fixed deposits are to be included. Therefore, as per the prescribed proforma under Companies Act, 1956 for the balance sheet, there is no option with the assessee, but, to group the inter-corporate deposit under the head "Unsecu....
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.... ICD Cannot be treated as loan 20 28-42 4 CIT vs Atul Engineering Udyog ITA No.223 of 2011 Date of order- 26/09/201.4. Allahabad High Court Deposit is different from loan and advances 2^nd Las 43-47 5 CIT vs Shaan Finance (P) Ltd (1998) 231 ITR 308(SC) Date of order 20/03/1998 ________ Supreme Court of India Term "Deposit "is different 48-53 6 Nandlal Kanoria vs CIT Equivalent citationsl980 122 ITR 405 Cal Date of order- 29/03/1979 Calcutta High Court 54-61 7 Seamist Properties Pvt. Ltd. vs Ito (2005) 95 TTJ Mum 201 ITAT, MUMBAI Which material fact were not discussed by assesse 21 62-67 8 CIT vs Gupta Abhushan Pvt. Ltd ita no. 1079/2008,ITA 913/2008 & ITA 908/2008 Date of order-22/10/2008 Delhi High Court Mere reason to suspect cannot be equal with reason to believe 5 68-70 9 CIT vs Universal Medicare Private ITA NO. 2264 of 2009 Date of order 22/0.3/2010 . _ _ Bombay High Court Money was not advance for the benefit of the assessee is not Dividend. 71-75 10 Usha international 147 change opinion ITA NO. 2026/2010 Date of order-21/09/2012....
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....7. ITAT DELHI Section 151-Commission Acted Mechanically 7 and 8 314-344 24 ACIT V KMS ASSOCIATES PVT LTD- ITAT Delhi ITA 4927/Del/2017 Date of Order: 09/05/2018 ITAT DELHI Application of mind by AO himself is required for reopening the assessment and approval by CIT mechanically is illegal. 345-381 25 Bombay Oil Industries Ltd. vs Deputy Commissioner of... Equivalent citations 2002 82 ITD 626 Mum Date of Order: 15.11.2000 ITAT MUMBAI 382-391 26 Commissioner Of Income Tax vs Subrata Roy ITA No. 398/2010 Date of Order 17/03/2015 Delhi High Court Business Transaction 392-405 27 Global Signal 147 W.P.(C) 747/2014 Date of Order 17/10/2014 Delhi High Court Reopening after 4 years- AO not specifically indicated as to which material facts were not disclosed by assessee - Notice u/s 148 liable 406-416 28 Circular-19 2017 trade Advance not Deemed Dividend Trade Advance is not deemed Dividend 417-418 29 G I Power Corporation Ltd,, New ... vs Assessee I.T.A No. 305(Asr)/2014 Date of Order 23/03/2016 ITAT Amritsar ICD is different fro....
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....assessment of the assessee u/s 147 of the IT Act after recording the reasons which have been reproduced at page 2 of this order. We find, after receipt of notice u/s 148, the assessee filed a letter dated 30th April, 2014 received by the AO on 8th May, 2014 stating that the return already filed may be treated as the return in response to notice u/s 148 and has also asked for the reasons which were duly provided by the AO to the assessee. The assessee filed objections to such reopening which were disposed of by the AO by passing a speaking order. The AO, thereafter, proceeded to complete the assessment and rejecting the various explanations given by the assessee, made addition of Rs. 18.75 crore u/s 2(22)(e) of the Act. We find the ld. CIT(A) upheld the order of the AO, the reasons of which are already reproduced in the preceding paragraphs. 16. It is the submission of the ld. Counsel that the initiation of reassessment proceedings are not in accordance with the law, since: (i) such reopening was done at the direction of the CIT(A), Jammu; (ii) the AO has not applied his mind and such reopening was on borrowed satisfaction; (iii) the PCIT had given his approval in a mechanical ma....
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.... CIT(A), Jammu, J&K vide letter bearing No. CIT(A)/J&K/JAMU/2013-14/3307 dated 20.03.2014 by Fax on 24.03.2014 to the CIT-XV, Delhi, which was sent to the DCIT-44(1), New Delhi and also from the ACIT, Circle-2, Jammu vide letter F.No: ACIT/Cir- 2/JAMU/2013-14 dated 24.03.2014 by Fax dated 25.03.2014 to the DCIT, Circle-44(1), New Delhi, that in the case of M/s G.I. Power Corporation Ltd, it was found that M/s G.I. Power Corporation had taken a sum of Rs. 18.75 crore as unsecured loan from the group company M/s Joint Investment Pvt. Ltd, having a common share holding and Sh. Anil Nanda who has substantial interest in both the payer and the payee company holding 65.6 % of M/s Joint Investment Pvt. Ltd. and 27.90% shareholding of M/s G.I. Power Corporation Ltd as on 31.03.2007." 18. Even otherwise also the provisions of section 150 read as under:- "150. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act....
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....IT(A) being in accordance with the law, the grounds raised by the assessee on this issue are dismissed. 19. Coming to the merit of the case, as stated earlier, the assessee, Shri Anil Nanda was holding substantial shareholding in both these companies, i.e., 65.6% share in M/s Joint Investment Pvt. Ltd. and 27.90% share in M/s GI Power Corporation Ltd. as on 31st July, 2007. We find, the amount of Rs. 18.75 crore had been shown under the grouping unsecured loans by both these companies in their balance sheets. Further, while arguing the case of GI Power Corporation Ltd. before the CIT(A), Jammu, the said assessee itself had accepted that it had received loan from M/s Joint Investment Pvt. Ltd. Therefore, we do not find any force in the arguments of the ld. Counsel for the assessee that these are ICDs as per the resolutions and correspondences, etc., since the two concerns are closely related to each other and the transactions are not at arm's length. It is within their exclusive knowledge as to why they have treated the same as ICDs and argued before CIT(A) Jammu in the case of GI Power Corporation Ltd., as loan. Therefore, the argument of the ld. Counsel that provisions of secti....