M/S BRITTO AMUSEMENTS PVT. LTD AND ANR. vs. THE ASSISTANT COMMISIONER OF INCOM TAX AND ANR.

It is the case of the Petitioners that they had duly filed their Income Tax Returns for the Assessment year 2003-04 but they were surprised to receive the notice dated 30.3.2010, purportedly issued under Section 148 of the Income Tax Act, 1961, wherein first Respondent stated that he has reason to believe that income in respect of which the Petitioners were assessable to tax have escaped assessment within the meaning of Section 147 of the Act and therefore they propose to assess/reassess the income for this Assessment year. The Petitioners requested the first Respondent to furnish the reasons for re-opening the 3 assessment and the reasons were furnished by communication dated 25.5.2010. Thereafter, the Petitioners addressed objections dated 28.6.2010 and questioned the basis for re-opening the assessment. It is the case of the Respondents that during the financial year 2002-2003, M/s Goa Golf Club Private Limited is alleged to have advanced to the first Petitioner a loan to the extent of Rs.1.50 crores and since M/s Goa Golf Club Private Limited has shareholding of 48% approximately in M/s Britto Amusements Private Limited, the advances to the extent of Rs. 1.50 crores constitute “Deemed Dividend” within the meaning of Section 2(22) (e) of the Income Tax Act, 1961. 4. The case of the Petitioners was that payment came to be made by M/s Goa Golf Club Private Limited to the Petitioner No. 1 in partial settlement of amounts for providing various services and facilities by Petitioner No. 1 to M/s Goa Golf Club Private Limited. It is stated that the total charges payable are to the tune of Rs. 2.23 crores and amount was duly debited to the account of M/s Goa Golf Club Private Limited by Petitioner No.1 in its books of accounts maintained for the said year. As such, there was no question of treating the amount as advance/loan. It is the case of the Petitioners that Respondents scrutinized the account of M/s Goa Golf Club Private Limited for the relevant year but in such scrutiny the Respondents issued an Order under 4 Section 143(3) read with Section 263 of Income Tax Act, 1961, without disallowing any expenses under Section 4(A) (2) (b) thereof.

Therefore, there were ample opportunities to find out the genuineness of the transaction in such exercise. The belated reopening of the assessment is not maintainable. It was further contended that Petitioner No.1 does not hold any share in M/s Goa Golf Club Private Limited, on the contrary it is M/s Goa Golf Club Private Limited which is a shareholder of Petitioner No.

In the case before us this is not the factual position. Here, the grounds for reopening the assessment have been furnished to the Petitioners. They were questioned and thereafter an order has been passed on 1.12.2010, copy of which is at page 72. There is a speaking order and it was concluded prima facie that the assessee concern has common directors. It is having substantial interest in M/s Goa Golf Club Private Limited and a beneficial shareholder with more than 10% voting rights in a company from which it has received loans/advances. It is for such purpose that the amount was treated as deemed dividend. The factual basis upon which Mr. Sonak would like to question the exercise is firstly that there was a scrutiny already undertaken and nothing objectionable was found in the same and particularly he placed reliance upon the order made in that behalf. Secondly, he submits that Section 2(22) (e) may be attracted, yet, the amount has been paid to the Petitioner No.1, which is not a share holder of M/s Goa Golf Club Private Limited.

Learned Counsel appearing for the Respondents on the other hand submits that for the purpose of scrutiny and whether this provision is attracted or not, the officer has to go into factual aspects and record the findings. He has recorded a finding that there is reason to 8 believe that income has escaped the assessment during the assessment period in scrutiny under section 143 (3) and 263 of the Income Tax Act, 1961. The assessee has not brought to the notice of the assessing officer that there are common directors and shareholders who have substantial interest with more than 10% voting rights in a company, from which the Petitioner no.1 has received loan and advances.

Prima facie, the Authority proceeded on the basis that both entities are private limited companies and second Petitioner and his wife have a substantial interest therein. Whether the interest is substantial or not and to what extent and whether in the facts and circumstances of the case, Section 2(22) (e) is attracted or not, is a matter which cannot be decided on affidavits. The Petitioners have admittedly filed an appeal. It is not as if that mere filing of appeal has persuaded us not to exercise writ jurisdiction. In the peculiar facts and circumstances of the case, Petitioners have ample opportunities to satisfy the Appellate Authority on both grounds which have been raised and argued. We have not concluded their case on both counts. It is in peculiar facts of this case, that the reliance on Anil Radhakrishna Wani (supra) is misplaced. In the decision reported in (2007) 4 SCC 327, Commissioner of Income Tax, Calcutta V/s Mukundray Shah in para 16 the Hon'ble Supreme Court held thus:-

In such circumstances, we are of the view that factual inquiry should be held which alone, in this case, assists in resolving the controversy. As far as all other decisions are concerned, the principles therein, whether will be attracted in the present case, is once again a matter left to be decided by the Appellate Authority who has been approached by the Petitioners. On the basis of material produced before the Authority, it will render a finding as to whether the reliance on these