SRI MAHESH ANUMALISETTY,,VISAKHAPATNAM vs. THE PR. CIT,, VISAKHAPATNAM

PER D.S. SUNDER SINGH, Accountant Member:

These appeals filed by different assessees are directed against the

order of the Principal CIT(Central), Visakhapatnam vide order

No.Pr.CIT(C)/VSP/263/CC-2/VSP/2016-17 dated 8.3.2017 for the

assessment year 2007-08 on identical facts. Since, the facts are

identical and issues are common, they are clubbed, heard together and

disposed-off by way of this common order for the sake of convenience.

orders of revision u/s 263 of the Income Tax Act, 1961 (hereinafter

called as 'the Act'). In this case, the facts are taken from ITA

No.273/Vizag/2017 in the case of A. Mahesh. The assessee filed return

of income declaring total income of ` 49,64,520/- for the assessment

year 2007-08 on 16.5.2008. The assessee is Director in A.S. Steel

Traders and deriving salary income, house property, business income,

capital gains and other sources. A search u/s 132 of the Act was carried

out in the assessee’s case on 11.12.2012 in A.S. Steel Group.

Consequently, the assessment u/s 143(3) r.w.s. 153A of the Act was

completed by the DCIT Central Circle-2, Visakhapatnam on 31.3.2015

accepting the income returned. On verification of the assessment

records, the Principal Commissioner of Income Tax (Central), 2

ITA Nos.273 & 274/Vizag/2017 Mahesh Anumalisetty & Nagesh Anumalisetty, VSKP Visakhapatnam noticed that the assessee is 66% shareholder in A.S.

Steel Traders Pvt. Ltd. and during the previous year relevant to the

assessment year 2007-08, the company has advanced amounts of `

5,31,700/- and the accumulated profits of the company was `

2,94,081/- as on 31.3.2006. The Principal Commissioner of Income Tax

was of the view that the advance received by the assessee company

comes under the purview of deemed dividend as defined u/s 2(22)(e) of

the Act as the assessee is holding more than 10% of voting power. It

was also observed by the Principal Commissioner of Income Tax that the

Director Mr. A. Nagesh holds 34% of shares and had received advance

of ` 1,76,344/-, which also comes within the purview of deemed

dividend u/s 2(22)(e) of the Act. Both the Directors have not shown the

advances received from the company as a deemed dividend in the

return of income. Hence, the Principal Commissioner of Income Tax has

taken up the case for revision and held that the assessment order

passed by the A.O. is erroneous in as much as not examining the issue

with regard to the deemed dividend and prejudicial to the interest of the

revenue, since the deemed dividend was not brought to tax. Therefore,

the Ld. Principal Commissioner of Income Tax set aside the order passed

by the A.O. with a direction to re-do the assessment afresh after

examining the issue.

ITA Nos.273 & 274/Vizag/2017 Mahesh Anumalisetty & Nagesh Anumalisetty, VSKP 3. Aggrieved by the order of the Principal Commissioner of Income

Tax, the assessee is in appeal before this Tribunal. During the appeal

hearing, the Ld. A.R. argued that in this case the assessment were

completed u/s 143(3) r.w.s. 153A of the Act on the issues on which the

incriminating material was found during the course of search. The issue

raised by the Principal Commissioner of Income Tax with regard to the

deemed dividend is duly accounted in the books of accounts and the

same cannot be the material for revision u/s 263 of the Act in respect of

the search assessments. The issue with regard to the deemed dividend

if at all required to be examined, the same should be examined in the

regular assessment but not in the search assessments. The Ld. A.R.

relied on the decision of A. Swarna Lakshmi Vs. DCIT (Central),

Vijayawada in ITA No.207/Vizag/2011 dated 9.8.2017 of this Tribunal.

Principal Commissioner of Income Tax.

on record and gone through the orders of the authorities below. In this

case, the search assessments were completed u/s 143(3) r.w.s. 153A of

the Act by an order dated 31.3.2005 accepting the income returned.

The Commissioner of Income Tax has taken up the case for revision u/s

263 of the Act with regard to the advances given by the company to the

ITA Nos.273 & 274/Vizag/2017 Mahesh Anumalisetty & Nagesh Anumalisetty, VSKP

Directors who are holding substantial share in the companies. The

company was having sufficient resources and the issue has to be

considered as deemed dividend u/s 2 (22)(e) of the Act. However, as

per the decided case laws, the entries made in the regular books of

accounts should not be considered in search assessments unless the

assessment is incomplete. On the similar facts and circumstances, this

Tribunal in the case of A. Swarna Lakshmi relied upon by the Ld. A.R.

allowed the appeal of the assessee. For ready reference, we extract

relevant para of this Tribunal order which reads as under:

“the Clause (iv) above, the Hon Z/e High Court held that "obviously an assessment has to be made under this Section only on the basis of seized material'. In clause (v), the same is reiterated by ho/ding "In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made In clause (vii), it is stated "Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the bask of some incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be reiterated and the abated assessment or reassessment can be made" In clause (vii), it is stated "Completed assessments can be Interfered with by the AO while making the assessment under Section 153A only on the basis of some 5

ITA Nos.273 & 274/Vizag/2017 Mahesh Anumalisetty & Nagesh Anumalisetty, VSKP incriminating material unearthed during the course of search”.

Thus, in present case the issue of deemed dividend does not arie from the provisions of Sect/on 153A of the Act and there is no seized material unearthed at the relevant time. Thus it is beyond Assessing Officer's power to address the said issue in proceedings initiated under Section 143(3) read with Section 153A of the Act. The CiT was wrong in directing the examination of taxability of deemed dividend under Section 2(22)(e) of the Act, in the proceedings u/s 153A of the Act while passing order under Section 263 of the Act when the proceedings under Section 153A itself has not unearthed the said issue. Thus, the CiT do not have power under Section 263 of the Act to give its own opinion when there is no new material unearthed. The issue taken up by the CFT was not within the purview of the Assessing Officer at the inception of assessment proceedings.”

11.1 Therefore we hold that it is not permissible to revise the assessment order in the case of search assessments without referring to the incriminating material in the case of completed assessments In the instant case the assessments were unabated and there is no incrimainating material. Hence we set aside the orders of the Ld.CIT and allow the appeal of the assessee for the A.Y.2006-07 and 2007-08.

by this Tribunal, we hold that it is not permissible to revise the

assessment order in the case of search assessments without referring to

incriminating material in the case of completed assessments.

Accordingly, we set aside the order of the Ld. Principal Commissioner of

Income Tax and allow the appeals of the assessee.

The above order was pronounced in the open court on 9th Mar’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

ITA Nos.273 & 274/Vizag/2017 Mahesh Anumalisetty & Nagesh Anumalisetty, VSKP #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 09.03.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-