SHRI ANIL NANDA,NEW DELHI vs. DCIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.3318/Del/2017 Assessment Year: 2007-08 Anil Nanda, Vs DCIT, 12-C, Friends Colony, Circle-68(1), New Delhi. New Delhi. PAN AAFPN4381A (Appellant) (Respondent) Assessee by : Shri Deepak Ostwal, CA Revenue by : Shri Satpal Gulati, CIT, DR Date of Hearing : 02.06.2021 Date of Pronouncement : 18.08.2021 ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 31st March, 2017 of the CIT(A)-32, New Delhi relating to assessment year 2007-08.

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accepting the returned income. Subsequently, the AO reopened the assessment u/s 147 of the IT Act, 1961 after recording the following reasons:-

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Accordingly, notice u/s 148 of the Act was issued to the assessee on 28th 3. March, 2014 which was duly served on the assessee. In response to the same, the assessee filed a reply dated 30th April, 2014 stating that the return 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.

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),

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Jammu. He has nowhere independently stated in the reasons that Rs.18.75 crore is a loan/advance and not inter-corporate deposit and, hence, section 2(22)(e) was attracted. g) The satisfaction of the AO is not his satisfaction, but, borrowed satisfaction. h) Further, it is a case of reason to suspect and not reason to believe.

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6.1 So far as the validity of reassessment proceedings are concerned, the ld.CIT(A) dismissed the grounds raised by the assessee on this issue by observing as under:- “5.6.3 I have carefully examined the objections raised by the appellant challenging the validity of the notice u/s 148. It is seen that similar objection had been raised before the AO. The AO had disposed these objection vide his order dated 19/02/2015 and has also reproduced the same in page 2 to 5 of the assessment order, wherein he has given detailed reasoning for not accepting the objections raised by the appellant. 5.6.4 The AR of the appellant requested that copy of fax from CIT(A), Jammu and other documents consisting of (i) certified true copy of letter from CIT(A) Jammu to CIT-XV, Delhi,(ii) Certified true copy of letter from CIT- XV to DCIT, Circle-44(l)Delhi and (iii) certified true copy, of letter from ACIT, Circle-2, Jammu to DCIT, Circle-44(1), New Delhi, may be provided to the appellant to effectively represent 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 appellant. Information received from the CIT(A) does not constitute a direction to the AO. The AO has duly applied his mind on the basis of information with him. Administratively the AO is not under the CIT(A). It is because of this reason, approval u/s 151 is required to be taken from the administrative CIT of the AO. 5.6.6. The AR of the appellant has contended that exactly which material facts had not been disclosed by the appellant has not been mentioned by the AO in the reasons and that the onus was on revenue to prove that there was failure on the part of the appellant to fully and truly disclose all material particulars necessary for assessment. It is seen that the AO in the reasons 5

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recorded u/s 147 of the Act has clearly mentioned the deemed dividend u/s 2(22) (e) of the Act amounting to Rs. 18.75 crore has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. 5.6.7 The AR of the appellant has contended that the satisfaction of the AO was borrowed satisfaction, as he had not verified the information from the records of either of the companies. He has also relied upon judicial decisions in support of his claim. However, it is pertinent to note that it is not a case where some other authority has recorded satisfaction and the AO has issued the notice mechanically. Rather, the AO has dully applied his mind, based on the information with him. 5.6.8 The presumption that the CIT has mechanically granted the permission without applying his mind on the actual material is not correct. It has been alleged that the AO has filled up a proforma and the CIT has recorded his satisfaction on the same. It is seen that the AO has given detailed reasons alongwith the proforma, in an Annexure . The letter from CIT(A), Jammu had been received by CIT-XV, Delhi, who In turn had passed on the information to the AO. Hence, the CIT- XV had duly applied his mind not only to the information received, but also to the reason for the belief by the AO, that income has escaped assessment. While the proforma is type written, the CIT has not just signed the approval, but has recorded in his own handwriting that it was a fit case for issue of notice u/s 148 of the Act. Hence, the claim of the appellant is misfounded. 5.6.9 The AR of the appellant has contended that the AO had 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.”

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“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 the preview of being considered as deemed dividend. (3) Whether the appellant derived any benefit out of the transaction, so as to be taxed by treating the amount as deemed dividend in his hands. 5.7.6 Admittedly, the appellant Sh. Anil Nanda held substantial share in both the companies, i.e. 65.6% share of M/s Joint Investment Pvt. Ltd, and 27.90% shares of M/s G.I. Power Corporation Ltd., as on 31/07/2007. The amount of Rs. 18.75 crore had been shown under the grouping unsecured loans by both the companies in their balance sheets. This issue had been discussed by the CIT(A), Jammu in the appellate order in the case of M/s G.I. Power Corporation Ltd., wherein the CIT(A) had observed that the appellant had itself accepted that it had received loan from M/s joint Investment (P) Ltd. The matter was further examined by the Hon'ble ITAT, Amritsar Bench, which has held that ICD falls under the broader term 'deposit' and therefore cannot be distinguished from loans & advances as argued by the appellant. The Hon'ble Bench dismissed the ground of the company M/s G.I. Power Corporation Ltd. that ICD was different from loans and advance. 5.7.7 The appellant has tried to distinguish that in case of a loan, the debtor approaches the creditor, whereas in case of ICD, the depositor places the deposit with the recipient. It may be true in case of an unrelated transaction, where a company with available funds may approach a needy company, through a broker or finance consultant, to place the deposit. However, in the instant case the companies are group companies. The copy of resolution dated 24/03/2006 of M/s Joint Investment Pvt. Ltd. shows that it did not deal with only this transaction in particular, but was a general resolution to 'place/ receive' Inter Corporate deposits from companies in which certain directors are interested. The transaction are between related parties and are not at arm's length. It cannot be said that the well went to the thirsty to quench his thirst. The artificial distinction attempted by the appellant is without any merit. Hence, provisions of section 2(22)(e) are equally applicable in this case, firstly, because ICD cannot be treated differently from loan and secondly, even an inter-corporate deposit cannot go beyond the purview of the rigors of this provision. 5.7.8. The AR of the appellant 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 7

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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. Ltd. 5.8.1 M/s Ankitech Pvt. Ltd. (APL) had common share holders with that of M/s Jakson Generators (P) Ltd (JGPL). M/s Ankitech Pvt. Ltd. (APL) received advance from JGPL by book entry. The AO treated this as deemed dividends However, the Hon'ble High Court affirmed the decision of the ITAT that though the amount received by the assessee (APL) by way of book entry is a deemed dividend within the meaning of Section 2(22) (e) of the Act, the same cannot be assessed in the hands of the assessee company, as it was not a share- holder in the company JGPL. A dividend cannot be paid to a non-share holder. 5.8.2 In this judgement, Hon'ble Court has analyzed the provisions of the section 2(22) (e) of the Act, in detail. Paras 23 to 26, of the judgement is reproduced as under:- “23. It is rightly pointed out by the Bombay High Court in Universal Medicare (P) Ltd. (supra) that Section 2(22)(e) of the Act is not artistically worded. Be as it may, we may reiterate that as per this provision, the following conditions are to be satisfied: (1) The payer company must be a closely held company. (2) It applies to any sum paid by way of loan or advance during the year to the following persons: (a) A shareholder holding at least 1C of voting power in the payer company. (b) A company in which such shareholder has at least 20% of the voting power. (c) A concern (other than company) in which such shareholder has at least 20% interest.

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(3) The payer company has accumulated profits on the date of any such payment and the payment is out of accumulated profits. (4) The payment of loan or advance is not in course of ordinary business activities. 24. The intention behind enacting provisions of Section 2(22)(e) is that closely held companies (i.e. companies in which public are not substantially interested), which are controlled by a group of members, even though the company has accumulated profits would not distribute such profit as dividend because if so distributed the dividend income would become taxable in the hands of the shareholders. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have substantial interest or make any payment on behalf of or for the individual benefit 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 no t 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 has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. It is a common case that any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to non-members. The second category specified under Section 2(22)(e) of the Act, viz., a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of —deeming shareholder, then the Legislature would have inserted deeming provision in respect of shareholder as well, that has not happened. Most of the arguments of the

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learned counsels for the Revenue would stand answered, once we took into the matter from this perspective. 26. In a case like this, the recipient would be a shareholder by way of deeming provision. It is not correct on the part of the Revenue to argue that if this position is taken, then the income —is not taxed at the hands of the recipient. Such an argument based on the scheme of the Act as projected by the learned counsels for the Revenue on the basis of Sections 4, 5, 8, 14 and 56 of the Act would be of no avail. Simple answer to this argument is that such loan or advance, in the first place, is not an income. Such a loan or advance has to be returned by the recipient to the company, which has given the loan or advance." 5.8.3 It may be seen that in the case of M/s Ankitech Pvt. Ltd. the fact that the company was not a shareholder in the company JGPL came in way of the deeming provision as dividend cannot be paid to non-shareholders. However, as the appellant Sh. Anil Nanda has substantial interest in both the concerns, the amount of advance received by one company from the other results in indirect benefit Sh. Anil Nanda. Hence, this amount is to be considered as deemed dividend in his hands u/s 2(22)(e) of the Act. 5.8.4 It is pertinent to reproduce the observation of the Hon'ble High Court in the judgement in the case of M/s Ankitech Pvt. Ltd.:- “30. Before we part with, some comments are to be necessarily made by us. As pointed out above, it is not in dispute 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.”

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arbitrary and without jurisdiction. Therefore, all subsequent proceedings are also illegal.

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11.1 The ld. Counsel for the assessee in his next plank of arguments, while challenging the validity of the re-assessment proceedings, submitted that the ld.CIT(A), in para 6 of the order raises a suspicion that income u/s 2(22)(e) might have escaped, but, the AO had to examine the facts to ascertain the same only when such income has escaped. He could have reasons to believe escapement, but, in the instant case, the AO did not verify the facts at all which is conclusively proved by the fact that the balance sheet of the payer and payee company clearly indicate that M/s Joint Investment Pvt. Ltd. has given ICD to M/s GI Power Corporation Ltd. He submitted that such incomplete information in the reasons recorded may lead the AO to have ‘reasons to suspect’, but, cannot lead him to have ‘reasons to believe.’ Relying on various decisions he submitted that reassessment proceedings cannot be initiated on the basis of reasons to suspect. He submitted that the various decisions relied on by the AO and CIT(A) are not applicable to the facts of the present case.

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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.

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the assessee for the ICD to M/s Joint Investment Pvt. Ltd. He accordingly submitted that it is clearly established that the assessee received the inter-corporate deposit from M/s Joint Investment Pvt. Ltd. and not loan or advance and, therefore, section 2(22)(e) is not attracted. Similarly, M/s Joint Investment Pvt. Ltd. has also shown the sum given to M/s GI Power Corporation Ltd. under the head “Current assets – Loans and Advances” in Schedule-F of its balance sheet. He accordingly submitted that since inter-corporate deposit is different from loan or advance and since section 2(22)(e) covers only loan or advance and not deposit, it cannot be invoked in the case of the assessee since the transaction pertains to inter-corporate deposit and not loan or advance. He accordingly submitted that the provisions of section 2(22)(e) are not applicable to the facts of the present case.

13.1 Referring to the decision of the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products, reported in 88 ITR 192, he submitted that when there are different interpretations, the one in favour of the assessee should be accepted. Referring to CBDT Circular No.19/2017 dated 12th June, 2017, he submitted that provisions of section 2(22)(e) are not applicable to trade advances. The ld. Counsel for the assessee also relied on the following decisions:- Sr. Page No Citation Court Issue Para No. 1 Dcit vs. p c chandra holdings ITAT, 2(22)(e) ICDS are not Loans 1-13 pvt ltd. ITA No. 1600/KOL KOLKATA and Advances. 2011, Date Of Order- 19/12/2013 2 IFB Agro ICD deemed ITAT, ICD is different from loan and 9 14-27 dividend VS JCIT ITA No. KOLKATA cannot be treated as a loan 114/Kol/2013 Date of order 17

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12/03/2 013. 3 Asstt. Cit vs Global Agencies Delhi High Deeming Fiction 2(22)(e)- 20 28-42 (P) Ltd. Equivalent citations Court Deposit, ICD Cannot be (2004) 87 TTJ Del 1086 treated as loan 4 CIT vs Atul Engineering Allahabad Deposit is different from loan 2nd 43-47 Udyog ITA No.223 of 2011 High Court and advances Las Date of order- 26/09/201.4 . 5 CIT vs Shaan Finance (P) Ltd Supreme Term "Deposit "is different 48-53 (1998) 231 ITR 308(SC) Date Court of of order 20/03/1998 ________ India 6 Nandlal Kanoria vs CIT Calcutta 54-61 Equivalent citationsl980 122 High Court ITR 405 Cal Date of order- 29/03/1979 7 Seamist Properties Pvt. Ltd. vs ITAT, Which material fact were not 62-67 21 Ito (2005) 95 TTJ Mum 201 MUMBAI discussed by assesse 8 CIT vs Gupta Abhushan Pvt. Delhi High Mere reason to suspect cannot 5 68-70 Ltd ita no. 1079/2008,ITA Court be equal with reason to believe 913/2008 & ITA 908/2008 Date of order-22/10/2008 9 CIT vs Universal Medicare Bombay Money was not advance for 71-75 Private ITA NO. 2264 of 2009 High Court the benefit of the assessee is Date of order 22/0.3/2010 . _ _ not Dividend. 10 Usha international 147 change Delhi High Assesse disclosed full 76-123 opinion ITA NO. 2026/2010 Court particulars at the time of the Date of order-21/09/2012 assessment-Sec 147 cannot be invoked 11 Transworld International Inc. Delhi High Only AO should examine the 124-132 vs Jt. Commissioner Of Income Court matter and no other higher or Tax Equivalent citations lower authority (2004)192 CTR DEL 97,113(20040 DLT865,2004(76)DRJ 626, 2005 273 ITR 242 Del Date 12 Vijendra Kumar, Bulandshahr ITAT Borrowed Satisfaction 10.8 133-151 vs Department Of Income Tax DELHI ITA No. 1202/Del/09 Date of Order 04/02/2009. 13 CIT Vs Ankitech deemed Delhi High 152-201 dividend ITA No. 462 of 2009 Court Date of Order 11/05-/2011. 14 Arjun Singh & Anr. vs Asstt. Madhya 202-221 Direction Of Income Tax Pradesh Equivalent citations (2000) 159 High Court CTR MP 53 Date of Order 23/11/1998

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15 B.R. Arora, New Delhi vs ITAT CIT(A) impugned direction as 222-230 Assessee ITA No. DELHI far as assessee is concerned 6020/Del/2012 Date of Order has no legal force and cannot 31/10/2012 be reason for reopening 16 BSE Vs. DCIT 147 reasons Bombay 231-256 Petition no. 2468 of 2011 Date High Court of order 12/06/2014 17 Central india 147 CIT sanction Delhi High Section 147 and 151 257-273 ITA No. 17/1999 Date of Order Court 28/01/2011 18 CIT vs MS Vegetables Supreme 274-277 Products Ltd Supreme Court 88 Court of ITR 192 Date of Order India 29/01/1973 19 Cit vs Shree Rajasthan Syntex Rajasthan 278-286 Limited DATE OF ORDER high court 06/05/2008. 20 Indian Oil Corporation vs Supreme 287-292 Income Tax Officer, Equivalent Court of citations: Central 1987 AIR India 1897, 1986 SCR (2)1107 Date Of order 08/05/1986 21 Acit, New Delhi vs Mrs. Seema ITAT Business Transaction is not 293-301 Devi Bansal, New Delhi ITA DELHI deemed Dividend u/s 2(22)(e) No. 6462/Del/2014 Date of Order- 1 8/07/701 8. Maveric Electronics v ITO ITAT Section 151 non application of 7 302-313 Delhi ITAT ITA No. DELHI mind by CIT for approval 22 1835/Del/2014 Date of Order: 23/01/2014 23 SUNIL AGARWAL VS ITO ITAT Section 151-Commission 7 and 314-344 Delhi ITAT ITA No. DELHI Acted Mechanically 8 988/Del/2018 Date of Order: 16/11/2017. 24 ACIT V KMS ASSOCIATES ITAT Application of mind by AO 345-381 PVT LTD- ITAT Delhi ITA DELHI himself is required for 4927/Del/2017 Date of Order: reopening the assessment and 09/05/2018 approval by CIT mechanically is illegal. 25 Bombay Oil Industries Ltd. vs ITAT 382-391 Deputy Commissioner of... MUMBAI Equivalent citations 2002 82 ITD 626 Mum Date of Order: 15.11.2000 26 Commissioner Of Income Tax Delhi High Business Transaction 392-405 vs Subrata Roy ITA No. Court 398/2010 Date of Order 17/03/2015

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27 Global Signal 147 W.P.(C) Delhi High Reopening after 4 years- AO 406-416 747/2014 Date of Order Court not specifically indicated as to 17/10/2014 which material facts were not disclosed by assessee - Notice u/s 148 liable Circular-19 2017 trade Trade Advance is not deemed 417-418 28 Advance not Deemed Dividend Dividend 29 G I Power Corporation Ltd,, ITAT ICD is different from loan and 419-435 New ... vs Assessee I.T.A No. Amritsar cannot be treated as a loan 305(Asr)/2014 Date of Order 23/03/2016 30 United Electrical Co. (P) Ltd. Delhi High Approval by Commissioner 436-444 vs Cit & Ors Equivalent Court u/s 151 must be with citations: (2002) 178 CTR Del application of his own mind 192 not mechanical 14. The ld. DR, on the other hand, heavily relied on the order of the CIT(A). Referring to the provisions of section 150 of the IT Act, he submitted that reopening can be made at any time in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceedings under this Act by way of appeal, reference or revision or by a court following proceedings under any other law. He submitted that there is no direction by the CIT(A) of Jammu and it was only an information and, therefore, the AO has validly reopened the assessment. In the reasons recorded, the AO has mentioned that the assessee has filed the return of income declaring income of Rs.8,25,64,675/-. While reopening the assessment, the AO has also considered the decision of jurisdictional High Court in the case of CIT vs. Ankitech Pvt. Ltd. Further, the AO has followed all legal requirements necessary for reopening of the assessment such as recording of reasons, obtaining of approval from the PCIT, supply of reasons to the assessee, disposal of the objections, etc., and, therefore, it cannot be said that the reopening is not in accordance with law. 20

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14.1 So far as the merit of the case is concerned, he submitted that the ld.CIT(A) has given valid reasons while sustaining the addition made by the AO. He submitted that it is not a case of trade advance, but, a loan transaction between two group concerns where the assessee is having substantial shareholding in both the concerns. The balance sheet shows loans and advances and not ICD. Since the transactions are between two closely related parties and are not at arm’s length, therefore, the arguments advanced by the ld. Counsel do not hold good. He accordingly submitted that the grounds raised by the assessee should be dismissed.

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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.

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17.1 The Hon’ble Delhi High Court in the case of CIT vs. Ankitech Pvt. Ltd.,held that if the advance is by or to a concern in which the shareholder is substantially interested, then, the shareholder is deriving an indirect advantage or benefit through such concern. Therefore, the AO, in the instant case, in our opinion, has validly reopened the assessment after due application of mind to the information received from the higher authorities.

17.2 So far as the argument of the ld. Counsel that the reopening was made on the direction of the CIT(A), Jammu is concerned, the same, in our opinion, is not correct. The CIT, Jammu had sent the information to the concerned CIT, having jurisdiction over the assessee and the concerned CIT, thereafter has sent the same to the DCIT and, therefore, there is no direction by the CIT(A), Jammu to the AO for initiation of reassessment proceedings. For the sake of convenience, we reproduce para 1 of the assessment order which makes the things clear and which reads as under:- “The return of Income was filed on 30.07.2007 declaring total income of Rs 8,25,64,675/-. The assessment u/s 143(3) of the I.T. Act was completed on 30.10.2009 at total income of Rs.8,25,64,675/- i.e at the returned income. An information was received from 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.” 23

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“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 by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub- section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.”

18.1 Similarly, Explanation 2 to section 153 reads as under:- “Explanation 2.—For the purposes of this section, where, by an order referred to in clause (i) of sub-section (6),— (a) any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order; or (b) any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, if such other person was given an opportunity of being heard before the said order was passed.”

18.2 A plain reading of the above provisions shows that notice u/s 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 by

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way of appeal, reference or revision or by a Court in any proceeding under any other law.

18.3 Since the ld.CIT(A) while deciding the validity of the reassessment proceedings has thoroughly discussed all the aspects which the ld. Counsel has raised before the Tribunal, therefore, in absence of any distinguishing features brought before us against the order of the ld.CIT(A), we uphold the same and the reassessment proceedings initiated by the AO and upheld by the CIT(A) being in accordance with the law, the grounds raised by the assessee on this issue are dismissed.

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CIT(A) Jammu in the case of GI Power Corporation Ltd., as loan. Therefore, the argument of the ld. Counsel that provisions of section 2(22)(e) are not applicable does not hold good. Further, the reliance on the CBDT Circular by the ld. Counsel is also not applicable since the said Circular relates to trade advance whereas in the instant case, it is deposit or loan and not a trade advance. Since the ld.CIT(A) while sustaining the addition has thoroughly discussed the issue and has passed a very reasoned order and has followed the decision of the Hon’ble Delhi High Court in the case of Ankitech Pvt. Ltd. (supra), therefore, we do not find any infirmity in the same. Accordingly, the order of the CIT(A) is upheld on merit of the case also.

ITA No.3318/Del/2017