Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B”
Before: SHRI S. RIFAUR RAHMAN, AM & SHRI RAM LAL NEGI, JM
IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, AM & SHRI RAM LAL NEGI, JM आयकरअपीलसं./ I.T.A. No. 3803 to 3806/Mum/2018 (निर्धारणवर्ा / Assessment Year: 2007-08 to 2008-09)
ACIT Circle 12(1), Business India, Nirmal, 14th floor, बिधम/ 1st floor, Aayakar Bhavan, M. K. Road, Nariman Point, Vs. Mumbai-400 020 Mumbai-400 021. स्थायीलेखासं./जीआइआरसं./PAN No. AADFB7133Q (अपीलाथी/Appellant) (प्रत्यथी / Respondent) :
अपीलाथीकीओरसे/ Appellant by : Shri P. J. Pardiwala /Shri Nitesh Joshi, ARs प्रत्यथीकीओरसे/Respondentby : Ms. Kavita Kaushik, DR सुनवाईकीतारीख/ : 14.11.2019 Date of Hearing घोषणाकीतारीख / : 08.01.2020 Date of Pronouncement आदेश / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANTMEMBER): The present four (4) Appeals have been filed by the assessee against the order of Commissioner of Income Tax
2 I.T.A. No. 3803 to 3806/Mum/2018 Business India
(Appeals)-28, Mumbai, in short ‘Ld. CIT(A)’ dated 27.03.2018 for AY 2007-08 & 2008-09 respectively.
Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed of by this consolidated order. Firstly, we are taking ITA No. 3803 & 3805/Mum/2018 for AY 2007-08 & 2008-09 filed by the assessee.
The brief facts of the case are that assessee filed its return of income on 30.10.2007 declaring total loss of Rs. 1,85,99,560/- and the assessment was completed u/s. 143(3) vide order dated 31.12.2009 determining loss at Rs. 69,37,788/-, after making addition to the tune of Rs.1,16,61,772/-. Subsequently, based on the information received from the JCIT (OSD) - (1), Mumbai, the case was reopened with the following reasons:-
"Mr. Ashok Advani holds more than 10% of the shares in M/s Business India Publications Ltd., who is assessed in the charge of JCIT (OSD) - 2(1), Mumbai. Moreover, M/s Business India Publications Ltd. has 3 I.T.A. No. 3803 to 3806/Mum/2018 Business India
advanced loans amounting to Rs.26,17,50,000/- to M/s Business India (firm) during FY 2007-08. The cumulative amount advanced as loan to M/s Business India as at 31.03.2008 is Rs.1,68,81,30,909/-. The balance of accumulated profits in the books of Business India Publications Ltd as at 31.03.2007 is Rs.12,44,54,676/- and the same as at 31.03.2008 is Rs.16,77,15,820/-. Since the loans have been advanced by a company where the shareholding of Mr. Ashok Advani exceeds 10% and the same have been advanced to the firm M/s Business India, wherein he is a partner having 95% share, the loans so advanced clearly attracts the provisions of section 2(22)(e) of the IT Act, 1961. From the above, I have reasons to believe that there is an escapement of income to the extent of Rs.12,44,54,676/-for AY 2007-08. Hence, the case is reopened."
Thereafter, notice u/s.148 was issued on 07.07.2011 and notice u/s 143(2) and 142(1) were issued and served on the assessee. As per information received from JCIT(OSD) and information available in financial statement of the assessee on record, AO observed that assessee has received Rs. 3,60,89,154/-
4 I.T.A. No. 3803 to 3806/Mum/2018 Business India
from M/s Business India Publication Ltd. during the year and considering the fact that Mr. Ashok Advani is having a share- holding of more than 10% in the said company and notice that provision of section 2(22)(e) of the Act are attracted and accordingly by relying on various case laws, he made addition of Rs. 3,60,89,154/- u/s 2(22)(e) of the Act.
Aggrieved with the above order, assessee preferred appeal before Ld. CIT(A) and filed regular and additional grounds of appeal challenging the re-assessment order by contesting the fact that reasons for reopening stated in the assessment order is received from JCIT(OSD), whereas the fact that advances that were taken from M/s Business India Publication Ltd and other information relevant for the charges u/s 2(22)(e) of the Act were in the record of the AO at the time of framing of original assessment order u/s 143(3) of the Act. In order to initiate proceeding u/s 147 of the Act, provision in respect of reopening of assessment is less than 4 years and AO is required to demonstrate that some new material has come into his possession for reopening of the assessment by relying on the decision of the 5 I.T.A. No. 3803 to 3806/Mum/2018 Business India
jurisdictional High Court. After considering the submissions, Ld. CIT(A) dismissed the ground challenging the reopening of assessment with the following observations:-
4.1 I find that re-opening is within 4 years and though original assessment was completed u/s.143(3) on 31.12.2009, the only charges that can vitiate re- assessment is if assessee establishes "change of opinion". A perusal of REASON TO BELIEVE shows that there was receipt of information from external source about B.I.P.L advancing loan to Business India (the assessee).That crucial line in the assessment order has been missed by the appellant which says that "Subsequently, based on information received from the JCIT(OSD)-2(1).Mumbai, the case was reopened by recording the following reasons...."
The disbursal was presumably from accumulated profits as to attract Section 2(22)(e). Mr. Ashok Advani is a common factor in both B.I.P.L and B.I. and has more than 10% shareholding IN BOTH. The A.O. had, in consequence of this new information, reason to believe that income to the extent of deemed dividend escaped assessment. Appellant has not been able to establish "change of opinion" in terms of law laid down in Usha Inttl. (FB) judgment 348 ITR 485 (Del.)
6 I.T.A. No. 3803 to 3806/Mum/2018 Business India
(FB). The new material is for us to see in form of information from another officer. Moreover no challenge was mounted before A.O. The ground is rejected.
Further, Ld. CIT(A) also dismissed the appeal of the assessee on merit.
Aggrieved with the above order, assessee preferred an appeal before us with the following grounds:-
On the facts and in the circumstances of the case Ld. CIT (Appeals) erred in rejecting the Ground that the re-opening of the assessment was bad in law.
On the facts and in the circumstances of the case Ld. CIT (Appeals) erred in holding that the amounts received from Business India Publications Limited was not a trade advance.
On the facts and in the circumstances of the case Ld. CIT (Appeals) erred in holding that the amounts received by the Assessee from Business India Publications Limited, is taxable as dividend in the hands of Shri Ashok Advani in his capacity as the Partner of Assessee.
7 I.T.A. No. 3803 to 3806/Mum/2018 Business India
On the facts and in the circumstances of the case Ld. CIT (Appeals) erred in giving the direction U/Sec. 150 (1) of the Act, for taxing the amounts received by the Assessee from Business India Publications Limited, in the hands of the Partner of the Assessee.
Appellant craves leave to amend or alter the existing Grounds or add further Grounds at the time of hearing.
Before us, Ld. AR of assessee challenged the reopening of assessment by bringing our notice to the relevant dates as below:-
i) Assessee has filed return of income on 30.10.2007. ii) The original assessment u/s 143(3) of the Act was completed on 31.12.2009. iii) Notice u/s 148 of the Act was issued on 07.07.2011. 9. Further he brought to our notice the reasons for reopening of assessment as received from JCIT(OSD) and the reasons were relating to deemed dividend u/s 2(22)(e) of the Act and the reasons for reopening were placed at page no. 4 of the paper
8 I.T.A. No. 3803 to 3806/Mum/2018 Business India
book. Further, he brought to our notice at page no. 5 of the paper book in which, assessee has filed objections before AO in reference to reasons for reopening of assessment, however he submitted that the above objections was not disposed off by the AO before completing the assessment order as held in the case of GKN Driveshafts (India) Ltd vrs. ITO (259 ITR 19) (SC).
Ld. AR further submitted that as per the reasons recorded by the AO, AO has applied the provision of section 2(22)(e) of the Act and taxed in the hands of the assessee, whereas as held in the case of Bhaumik Colour Pvt. Ltd 313 ITR (AT) 146(Mum)(SB) and Universal Medicare Pvt Ltd 324 ITR 263 (Bom), wherein it was held that deemed dividend u/s 2(22)(e) of the Act can be charged in the hands of the shareholders, not in the hands of the beneficiary. He further submitted that it clearly indicates that AO has not applied his mind considering the above said judicial precedents that the deemed dividend can be charged only in the hands of the shareholders. In this regard, he relied on Godrej Agrovet Ltd. Vrs. DCIT (2010) 323 ITR 97 (Bom), in which Hon’ble Jurisdictional High Court has held as under:-
9 I.T.A. No. 3803 to 3806/Mum/2018 Business India
Even after the introduction of the concept of deemed escapement of income by Explanation 2 to section 147 with effect from April 1st 1989, the belief that income had escaped assessment must be a prudent belief and not a mere change of opinion. This Court held that an assessment order passed after detailed discussion cannot be reopened within a period of four years from the end of the relevant assessment year unless the AO has reason to believe that due to some inherent defect in the assessment the income chargeable to tax has been under assessed or assessed to a lower rate or excessive relief is granted or excessive loss or depreciation allowance or any other allowance under the Act has been computed. In the subsequent judgment of the Supreme Court in CIT Vs. . Kelvinator of India Ltd. (2010) 228 CTR (SC) 488 : (2010) 34 DTK (SC) 49 : (2010) 320 ITR 561 (SC) the Supreme Court has held that wide as the power u/s. 147 is after 1st April, 1989 a mere change of opinion cannot justify the reopening of an assessment and there must be tangible material before the AO before he proceeds to exercise his powers u/s. 147. In the judgment of this Court in German Remedies this Court, while selling aside the exercise of the power, adverted to the circumstance that the very there must be tangible material before the AO before he proceeds to exercise his powers u/s. 147. 10 I.T.A. No. 3803 to 3806/Mum/2018 Business India
In the judgment of this Court in German Remedies this Court, while selling aside the exercise of the power, adverted to the circumstance that the very same issue which was sought to be agitated by the AO had been concluded by a judgment of the Tribunal for an earlier assessment year. This Court deplored the conduct of the AO in refusing to follow a binding decision of the Tribunal. The same view has been reiterated in the judgment of a Division Bench of this Court in Asteroids Trading & Investments (P) Ltd. Vs. . Dy. CIT (2009) 308 ITR 190 (Bom)
He further submitted that AO has not followed the judicial precedents and also not applied his mind on facts before issue of notice u/s 148 of the Act. Further, he brought to our notice financial information recorded in the reasons for reopening are not correct. He brought to our notice the financial figures referred by AO in the assessment order itself is different than the reasons for reopening the assessment. In this regard, he submitted that AO has no application of mind and further he relied upon the decision of Hon’ble Gujrat High Court in the case of Vithalbhai G. Prajapati v. ITO ( 2018) 404 ITR 732 ( Guj) (HC). He further submitted that similar view was also expressed in the case of 11 I.T.A. No. 3803 to 3806/Mum/2018 Business India
Ingram Micro (India)Exports Pvt. Ltd. vrs DCIT (2017) 78 taxman.com 140 (Bom).
On the grounds of appeal, he submitted that even after Ld. CIT(A) has deleted the additions of deemed dividend and made observations that deemed dividend can be applied in the hands of the shareholders, not in the hands of the beneficiaries. However, he directed the AO to initiate the proceedings against the shareholders who is having beneficiary interest by making u/s 150(1) of the Act. He submitted that since assessee was mainly contesting the reopening of assessment, the other grounds are academic in nature. He further submitted that in case bench decides against the ground no. 1, then the bench may adjudicate the other grounds of appeal.
On the other hand, Ld. DR firmly argued and supported the findings of AO and objected to the submission of Ld. AR that AO has not applied his mind. She brought to our notice findings in assessment order and submitted that AO has brought on record the provisions of section 2(22)(e) of the Act attracted in this case
12 I.T.A. No. 3803 to 3806/Mum/2018 Business India
and accordingly reopened the assessment by clearly recording the reasons for reopening, which indicates that AO has applied his mind. She further submitted that assessee is objecting before the bench that AO has not disposed all the objections before completing the assessment and assessee has raised the objections after the lapse of 2 years. She submitted that there has to be a reasonable time limit for disposal of the objections in line of the directions of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd vrs. ITO (259 ITR 19) (SC) and she further submitted that the case laws relied by Ld. AR are distinguishable to the facts of the present case. 14. In the rejoinder, Ld. AR submitted that AO has forwarded the reasons for reopening only on 10th April 2014 and immediately on 21st April 2014, assessee has filed its objections, therefore Ld. DR cannot blame that objections were filed belatedly by the assessee, even though the department itself forwarded the objections with such delay. 15. Ld. AR further submitted that assessee has filed penalty appeals in caution and since Ld. CIT(A) has dismissed the appeals on merits, the penalty itself become infructuous. He
13 I.T.A. No. 3803 to 3806/Mum/2018 Business India
further submitted that the facts involved are also similar in the appeal for AY 2008-09 and penalty was also filed with due caution.
Considered the rival submission and material placed on record, we notice from the records that Ld. CIT(A) has dismissed the ground raised by the assessee on reopening of assessment. However, he deleted the additions on merit with the findings that the deemed dividend provisions u/s 2(22)(e) of the Act can be charged only in the hands of the shareholders and not in the hands of the beneficiary. However, Ld. CIT(A) has given direction to initiate proceedings in the hands of the shareholders u/s 150(1) of the Act. Assessee is in appeal contesting the reopening of assessment and challenged the findings of Ld. CIT(A). As per the submission and record submitted before us, it clearly indicates that AO received information from JCIT(OSD) about the shareholding of Mr. Ashok Advani in the Business India Publication Ltd and assessee has received advance from the company. Considering the fact that Mr. Ashok Advani holds more than 10% of share and having substantial interest in the 14 I.T.A. No. 3803 to 3806/Mum/2018 Business India
assessee’s business, the provision of section 2(22)(e) of the Act are attracted. By mere application of section 2(22)(e) of the Act may not be sufficient, but AO has to investigate and substantiate that the advances received by the beneficiary are in the nature of business advance or other advance and whether the chargeability of the provisions in the hands of the beneficiary or in the hands of the shareholders. We notice that AO has not applied his mind whether the chargeability of deemed dividend are attracted in the hands of the assessee or not, were not properly investigated and proceeded with the information received from JCIT(OSD) office. It is a duty of the AO to apply his mind and record satisfaction of escapement of income. Without clear satisfaction, AO cannot initiate re-assessment proceeding. Further, assessee has raised the objections before the AO, as soon as it received reasons for reopening of the assessment and the same has to be disposed of by the AO before completing the re-assessment order u/s 147 of the Act. In this case, AO has miserably failed to dispose off the objections raised by the assessee. It is clearly against the decision in the case of GKN Driveshafts (India) Ltd vrs. ITO (259 ITR 19) (SC).
15 I.T.A. No. 3803 to 3806/Mum/2018 Business India
Therefore, respectfully following the above decision, we are inclined to accept the submission of Ld. AR and we hold that AO has not disposed off the objections prior to completion of the assessment. Hence, assessment order passed by the AO is not proper, accordingly quashed.
Since, we are adjudicating the ground raised by assessee on reopening of assessment, therefore the other grounds raised by the assessee stands dismissed. Accordingly appeal filed by the assessee for AY 2007-08 is partly allowed.
With regard to other appeal filed by the assessee for AY 2008-09, since the facts are similar, accordingly the appeal filed by the assessee for AY 2008-09 is also partly allowed.
With regard to other appeal filed by the assessee for AY 2007-08 & 2008-09 in respect of penalty becomes infructuous. Even though Ld. CIT(A) has allowed appeal on merit still assessee preferred to file these appeals, therefore it becomes infructuous, accordingly dismissed.
16 I.T.A. No. 3803 to 3806/Mum/2018 Business India
In the net result, the appeal filed by the assessee in ITA No. 3803 & 3805/Mum/2018 are partly allowed and appeal filed by the assessee in ITA No. 3804 & 3806/Mum/2018 stands dismissed.
Order pronounced in the open court on 8th Jan 2020. (Ram Lal Negi) (S. Rifaur Rahman) न्याययकसदस्य / Judicial Member लेखासदस्य / Accountant Member मुंबई Mumbai;यदनांकDated : 08.01.2020 Sr.PS. Dhananjay
आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant प्रत्यथी/ The Respondent 2. 3. आयकरआयुक्त(अपील) / The CIT(A) 4. आयकरआयुक्त/ CIT- concerned यवभागीयप्रयतयनयि, आयकरअपीलीयअयिकरण, मुंबई/ DR, ITAT, 5. Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER, .उि/सहधयकिंजीकधर (Dy./Asstt.