TaxTMI 
TaxTMI 
2024 (10) TMI 1813
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted a sum of Rs. 9,00,00,000/- on 22.03.2016 and earned a sum of Rs. 3,12,24,161/- as dividend which is an exempt income under Section 10(35) of the Act and the petitioner had also discharged the applicable tax on distributed income to unit holders. While so, on 30.06.2021, the Assistant Commissioner of Income Tax had issued a notice under Section 148 of the Act on the premise that the income chargeable to tax for the AY 2016-17 had escaped assessment. The petitioner has furnished a reply on 28.07.2021 along with required information stating that the notice is barred by limitation and there was no escaped assessment within the meaning of Section 147 of the Act. However, the respondent, vide order dated 20.07.2022 under Section 148(A)(d) of the Act, recorded her satisfaction and ordered issuance of the impugned notice dated 30.07.2022 under Section 148 of the Act for re-opening the assessment for the AY 2016-17 and called upon the petitioner to furnish the returns in the prescribed format for the said AY 2016-17 within 30 days of service of the notice. Thereafter, according to the petitioner, they made an enquiry with M/s.JM Financial Asset Management Co. Ltd. as regards the allegat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 23336600/- The 11.02.2018. COME TAX DEPARTM on 04.10.2016 AY 2016-17 return wo processed u/s 143(1) on 11.02.2018. 2 Information was received in this office that income chargeable to tax has escaped assessment in the case of M/s SPENCER AND COMPANY LIMITED (PAN AAACS4451J) for AY 2016-17. The details of the information received is as below: A survey action u/s. 133A of the I.T. Act, 1961 in the case of M/s. JM Financial Asset Management Limited ("JM Financial") situated at 7th & 8th Floor, Appa Saheb Marathe Marg, Cynergy, Prabhadevi, Mumbai was conducted by DDIT, Unit 3(1), Mumbai on 15.02.2021. In the course of survey, it was found that JM Balanced Fund- Dividend Option Regular scheme (the "Scheme") of JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus. In the process, the SEBI guidelines have been flouted by the J M Mutual Fund by classifying a portion of capital as distributable surplus and thereafter artificial payout to the investor in the form of dividend. Although dividend received by the unit holders from the equity based mutual fund is exempt from taxation u/s 10(35) of the I.T. Act, 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent's allegation that the petitioner has wrongfully claimed the said amount as dividend. 6. He would also contend that if the petitioner wrongly claimed the dividend, it is for the Department to establish the same by adducing the material evidences pertaining to the non-declaration of dividend and utilization of the amount out of resources of M/s.JM Financial Assets Management Limited. However, no such document was produced by the respondent. Merely based on the information received from the search/survey conducted by the respondent, they had arrived at a conclusion that the petitioner did not receive a sum of Rs.3,12,24,161/- as dividend, but there was escaped assessment to the extent of aforesaid amount. However, the respondent issued impugned notice under Section 148 of the IT Act, calling upon the petitioner to file their ITR along with reply, which cannot be sustained. 7. Further, he would submit that the receipt of said amount as dividend was also disclosed in the ITR filed for the Financial Year 2016- 17, while so, in total non-application of mind, the notice dated 30.07.2022 under Section148A(b) of the IT Act was issued and the impugned order dated 30.07.2022 unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....declaration of the dividend and the resources from which, the amount has been transferred during the relevant financial year. However, the Department has failed to do so and no findings have been rendered in this regard in the impugned order as well as in the impugned notice issued by the respondent. 13. Even in the relevant paragraph, which was extracted above, with regard to the information received by the Department, nothing has been disclosed in respect of receipt of amount to the extent of a sum of Rs.3,12,24,161/- by the petitioner other than the form of dividend. In such view of the matter, this Court is of the view that the impugned order as well as the impugned notice were issued by the respondent in total non-application of mind by the respondent. Further, the respondent had called upon the petitioner to furnish their ITR vide the notice dated 15.11.2021. 14. Further, an order under Section 148A(d) of the Act and a notice under Section 148 of the Act could be issued only on the basis of the information with the Assessing Officer which suggests that income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year. Explanati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e form of dividend, this Court does not find any reason to call upon the petitioner to furnish their ITR once again. Either if there is any suppression of material facts on the part of the petitioner or if any evidence was adduced by the respondent to substantiate that the aforesaid amount was not received by the petitioner other than the form of dividend, certainly it cannot be considered as escaped income. However, in the absence of such evidence, this Court is of the view that no amount, other than dividend, was received by the petitioner and the impugned order and the notice issued by the respondent, on the ground of escaped income, are baseless and cannot be sustained. 17. A similar issue came up consideration before the Bombay High Court in "Karan Maheshwari Vs. Assistant Commissioner of Income Tax" reported in 2024 (3) TMI 953, wherein, a Division Bench has taken the similar view and rendered the following judgement: "17 In the notice issued under Section 148A(b) of the Act, it is alleged that petitioner was one of the persons who claimed fictitious short term capital loss. There is nothing in the notice to indicate on what basis it is alleged that the short term....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch the Assessing Officer is required to entertain the belief before he can issue notice under Section 148 of the Act. If there is no rational or intelligible nexus between the reasons and the belief, the exercise undertaken by the Income Tax Officer can be interfered with. 19 In the notice issued under Section 148A(b) of the Act, the Assessing Officer alleges that JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus and the investors, in order to reduce their tax liability, entered into these sham transactions and received dividend and short term capital loss. These are allegations against JM Financial and do not implicate petitioner in any manner. There is nothing to indicate that petitioner had participated knowingly in a sham transaction to reduce his tax liability or to earn Gauri Gaekwad 16/17 907.WPL-37211-2022.doc dividend or book short term capital loss. Infact in the notice, in the first paragraph, it says "....... In the course of survey, it was found that JM Balanced Fund-Annual Dividend Option Regular Scheme (the Plan) of JM Financial had manipulated accounting methodology so as to artificially inflate the distribut....