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Facts
The assessee's assessment for AY 2000-01 was reopened under Section 147, leading to additions related to an alleged deemed dividend u/s 2(22)(e) from DTCPL, unexplained old investments u/s 69, and a portion of agricultural income being treated as income from other sources. The Ld. CIT(A) partially upheld these additions.
Held
The Tribunal dismissed the legal challenge to the reassessment proceedings. However, it deleted the additions made under Section 2(22)(e) and for unexplained old investments, finding the former to be normal running account transactions and the latter not supported by current year's cash flow. The proportionate estimated addition of agricultural income was upheld.
Key Issues
Whether reassessment proceedings under Section 147 were valid; whether advances from a company constituted deemed dividend; validity of addition for unexplained old investments; and the treatment of agricultural income.
Sections Cited
143(3), 147, 250(6), 2(22)(e), 69, 148
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Income Tax Appellate Tribunal, ‘DB’, AMRITSAR BENCH, AMRITSAR
Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI UDAYAN DAS GUPTA, JM
सुनवाईकीतारीख/Date of Hearing : 02-07-2025 घोषणाकीतारीख /Date of Pronouncement : 07-08-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2000-01 arises out of an order of Ld. Commissioner of Income Tax (Appeals), Bhatinda [CIT(A)] dated 08-07-2010 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 147 of the Act on 31-12-2007. The grounds of appeal read as under:-
1. That the order passed under section 250(6) by the Learned Commissioner of Income Tax (Appeals), Bathinda in Appeal No. 214-IT-CIT(A)/BTI/07-08 dated 08.07.2010 is contrary to law and facts of the case.
2. That the Id. Commissioner of Income Tax (Appeals) gravely erred in upholding the action of the Learned Assessing Officer in initiating the proceedings under section 147 of the IT Act, 1961 which is void ab intio.
3. That in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Appeals) gravelly erred in sustaining an addition of Rs. 11,98,230/- out of total addition of Rs.21,50,000/- made by the Id. Assessing Officer by treating the said amount as deemed dividend u/s 2 (22) (e) of the Income Tax Act, 1961.
4. That the Id. Commissioner of Income Tax (Appeals) gravelly erred in sustaining the addition of Rs.48,000/- made by the Id. Assessing Officer by treating old investments as an investment from undisclosed source u/s 69 of the I.T. Act.
5. That the Id. Commissioner of Income Tax (Appeals) gravelly erred in sustaining l/3rd of addition of Rs. 287083/- made by the Id. Assessing Officer who treated the income of Rs. 287083/- out of agricultural income of Rs.18,00,000/- as income from other sources without any basis.
That the appellant craves to add, amend or alter any ground of appeal
before or at the time of hearing of appeal.
7. Any other ground that may be taken up at the time of hearing with the permission of the Hon'ble Income Tax Appellate Tribunal, Amritsar.
The assessee has filed additional grounds of appeal which read as under: -
8. That the very initiation of proceedings u/s 147 is bad in law in as much as the Learned Assessing Officer did not make any addition on the ground on which the case was reopened.
Since the additional ground is merely a legal ground and connected with ground no.2, the same is admitted.
The Ld. AR, Shri Ashwani Kumar, advanced arguments on legal grounds as well as on merits. The Ld. Sr. DR also advanced arguments. Both sides have filed written submissions which have duly been considered while adjudicating the appeal. Having heard rival submissions and upon perusal of case records, the appeal is decided as under. Assessment Proceedings 3.1 The case of the assessee was reopened and notice u/s 148 was issued to the assessee on 30-03-2007. The reasons records by Ld. AO are placed on record. In the reasons, Ld. AO alleged that funds applied during the year for Rs.71,60,653/- were from sources which were not disclosed by the assessee to the department. Further, certain loans claimed by the assessee were alleged to be non-genuine. Accordingly, the belief of escapement of income was formed by Ld. AO. The Ld. AO rejected assessee’s objections to reopening and proceeded to frame the assessment on the assessee by making certain additions. 3.2 The first addition was an addition u/s 2(22)(e) on account of loan taken by the assessee form M/s Dabwali Transport Company Pvt. Ltd. (DTCPL) for Rs.21.50 Lacs during the year. The assessee had shareholding in the said entity to the extent of 96%. The second addition was for Rs.3,99,842 on account of investment made in three properties as shown in the wealth tax returns. The same were as under: - No. Item Amount 1.* Balasar Farm House 30,462/- 2.* Share Estate Office 3,21,380/- 3. Old Investments 48,000/- Total 3,99,842/- *These two additions have already been deleted by Ld. CIT(A) and the same do not form subject matter of present appeal before us. The third addition was on account of agricultural income of Rs.18 Lacs as shown by the assessee. The net agricultural income as shown by the assessee was Rs.38.50 Lacs in support of which the assessee furnished J-Forms and other relevant evidences. However, for bi- product sale of Rs.4,14,040/-, no evidence could be furnished and accordingly, the same was added to the income of the assessee along with another estimated disallowance of Rs.2 Lacs. The assessee’s share therein @46.75% worked out to be Rs.2,87,083/- which was added to his income. Finally, the total income was assessed at Rs.32,49,450/-. Aggrieved, the assessee preferred further appeal. Appellate Proceedings 4.1 The Ld. CIT(A) dismissed the legal ground assailing reassessment proceedings as urged by the assessee. On merits of additions u/s 2(22)(e), the ledger account of DTCPL was extracted as under: - Date Particulars Vch. Type Debit Credit 01.04.1999 Opening Balance 11,08,000 01.10.1999 Dividend DTC A/c Journal 9,51,770 02.11.1999 Bank SBI Delhi Journal 1,00,000 10.12.1999 Bank PB & SIND Bank CHD 9439 Journal 3,00,000 24.12.1999 Bank PB & SIND Bank CHD 9439 Journal 3,00,000 30.12.1999 Loan Bank Of Punjab/1329 Journal 1,50,000 16.02.2000 Bank PB & SIND Bank CHD 9439 Journal 4,00,000 Bank PB & SIND Bank CHD 9439 Journal 9,00,000 9,51,770 32,58,000 23,06,230 Closing Balance 32,58,000 32,58,000 The Ld. CIT(A) held that out of Rs.21.50 Lacs, the amount of Rs.9,51,770/- Lacs was on account of dividend from DTCPL who was under a legal obligation to first set-off the dividend amount against the advances. Therefore, the impugned addition was restricted to the extent of Rs.11,98,230/-. 4.2 On the issue of old investments for Rs.0.48 Lacs, it was submitted by the assessee that no such movable asset appeared in wealth tax return for AY 1999-2000. Despite best efforts, the assessee could not ascertain the nature of this entry as no description was given in the return. Apparently, the erstwhile counsel may have enhanced the wealth to the extent of Rs.0.48 Lacs of some old movable assets which may have escaped mentioning in the return. Since the wealth was voluntarily enhanced by Rs.48,000/-, Ld. AO held the same to be unexplained investment. However, there was no such investment during the year and the same did not appear in the cash flow statement of the assessee. However, Ld. CIT(A) confirmed this addition. 4.3 The proportionate addition of Rs.2,87,083/- was reduced to Rs.50,883/ (Rs.19,717/- + Rs.31,166/-) considering appellate orders in the case of family members of the assessee group. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 5. So far as the legal ground as urged in additional grounds is concerned, we find that this legal issue stood covered against the assessee by the decision of Hon’ble Punjab & Haryana High Court in the case of Mehak Finvest (P) Ltd. (367 ITR 769). The Hon’ble Court, considering Explanation-3 to Sec.147 (inserted by the Finance (No. 2) Act, 2009, retrospectively with effect from 01-04-1989), concurred that Ld. AO was empowered to make additions even on the ground on which reassessment notice might not have been issued where during the reassessment proceedings, he concludes that some other income has escaped assessment which comes to his notice during the course of the proceedings for reassessment u/s 148 of the Act. The provision nowhere postulates or contemplates that the AO cannot make any additions on any other ground unless some addition is made on the ground on which reassessment had been initiated. Respectfully following the same, the legal ground as urged by Ld. AR stand dismissed. The Ld. AR has cited judicial decisions of other Hon’ble Courts. However, the decision of jurisdictional High Court would prevail over all such decisions.
6. On the merits of addition u/s 2(22)(e), upon perusal of ledger extract, it could be seen that the account of the assessee in DTCPL is a running account and the transactions have happened during normal course of business. It could not be said that DTCPL has made advances to the assessee of such a nature which would attract the provisions of Sec.2(22)(e). Therefore, the addition as sustained by Ld. CIT(A) in the impugned order, on this issue, stand deleted. The corresponding grounds of assessee’ appeal stand allowed. Similarly, the addition of Rs.0.48 Lacs cannot be sustained in view of the fact that the same do not form part of cash flow statement of the assessee and there is no finding by Ld. AO that any such investment was made by the assessee during this year. Therefore, the addition of Rs.0.48 Lacs also stands deleted.
The proportionate estimated addition of agricultural income is in accordance with appellate orders in the case of other family members of the assessee group. Therefore, no interference is required in the same. We order so. The corresponding ground stand dismissed. The Ld. AO is directed to re-compute the income of the assessee.
The appeal stands partly allowed in terms of our above order. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.