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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI R. C. SHARMA, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Bharath Janarthanan Department by: Shri V. Justin (DR) सुनवाईकीतारीख / Date of Hearing: 02.01.2018 घोषणाकीतारीख /Date of Pronouncement:. 19.03.2018 आदेश / O R D E R
PER AMARJIT SINGH, JM:
This is an appeal filed by the assessee against the order dated 30.10.2015 passed by the Commissioner of Income Tax (Central)-9, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2010-11.
The assessee has raised the following grounds:- “1. The order of the Learned Commissioner of Income-tax (Appeals) and that of the Assessing Officer is contrary to the facts and circumstances of the case and is against the principles of equity and natural justice.
ITA. No. 340/M/2016 A.Y. 2010-11 Validity of re-assessment 2. The Learned Commissioner of Income-tax (Appeals) has erred in upholding validity of the reassessment under section 147 of the Income-tax Act, 1961, 3. The Learned Commissioner of Income-tax (Appeals) has erred in not quashing the order under section 143(3} r.w.s 147 of the Act, when in fact, no notice under section 143(2] was issued within the prescribed time limit, which is mandatory, 4. The Learned Commissioner of Income-tax (Appeals) has erred in upholding the order of the Assessing Officer, when in fact, the reasons for reopening the assessment, as recorded by the Assessing Officer, was not served on the assesse, which is mandatory and thereby, rendering the entire proceedings invalid.
The Learned. Commissioner of Income-tax (Appeals) has erred in upholding the order of the Assessing Officer on the ground that the assessee had cooperated in the assessment proceedings, when in fact, mere participation in the assessment proceedings by the assessee does not give jurisdiction to the assessing officer which he does not otherwise have. Deemed dividend under section 2(22)(e) - Rs.l,70,l3,928/- The Learned Commissioner of Income-tax (Appeals) has erred in upholding the addition made under section 2(22)(e) of the Income- tax Act The Learned Commissioner of Income-tax (Appeals} has erred in upholding the addition made under section 2(22)(e) without considering the fact that there are payments from the company in the year under consideration which are repayments of loans taken by the company from the assessee and therefore, such amounts cannot be considered as a loan or advance under section 2(22)(e) of the Act. The Learned Commissioner of Income-tax (Appeals) has erred in upholding the addition made under section 2(22)(e) of the Act without considering the fact that the opening balance as on 1/4/2009 should have been excluded for the purpose of computation of addition under section 2(22)(c) of the Act, The Learned Commissioner of Income-tax (Appeals) has erred in upholding the addition made under section 2(22)(e)f when infact, the assessing officer did not compute the accumulated profits as on the date of loan and therefore, the conditions under section 2(22)(e) are not satisfied^ A.Y. 2010-11 The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal
before or during the course of hearing.”
3. The brief facts of the case are that the assessee filed his return of income on 02.10.2010 for the A.Y. 2010-11 declaring total income to the tune of Rs.4,72,620/-. The return was processed u/s 143(1) of the Act accepting the returned income. The scrutiny assessment in the case of M/s. Dani Share & Stock Pvt. Ltd. for the A.Y. 2010-11 was completed in this charge and it was observed that the company has advanced loan of Rs.1,70,13,928/- to one of its director Shri Saurab B Dani who was 83% shareholder of the assessee company. As such the provisions of deemed dividend u/s 2(22)(e) of the Act are applicable and loan of Rs.1,70,13,928/- was assessed as deemed dividend in the hands of shareholder i.e. Shri Saurabh B. Dani. The case was reopened and notice u/s 148 of the I.T. Act, 1961 was issued on 25.03.2013 which was also served upon the assessee. The assessee asked for reasons for reopening. The reasons were provided to the assessee which is hereby mentioned below as under: - “This is a case based on information received from the office of DCIT-4(1), Mumbai on 06.11.2012 the information in this case is related to loan of Rs.1,70,13,928/- advanced to assessee Shri Saurabh B. Dani from M/s. Dani Dare and Stock pvt. Ltd. where the assessee is one of its directors and who is 83% shareholders of M/as. Dani Share & Stock Pvt. Ltd. and the same is invoking the provisions of section 2(22)(e) of the I.T. Act, 1961. In view of the above, I have reason to believe that the there is a escapement of income in the hands of the assessee for A.Y.2009-10. In order to frame assessment in its proper A.Y. 2010-11 perspective and to bring to tax appropriate income of the assessee. It is, therefore, necessary to reopen the case u/s147 of the I.T. Act, 1961 and notice u/s 148 of the Income Tax Act, 1961 is therefore issued.”
4. After the reply of the assessee, the interest free loan taken by the assessee from M/s. Dani Shares & Stock Pvt. Ltd. to the tune of Rs.1,70,13,928/- was treated as income of the assessee u/s 2(22)(e) of the Act and the total income of the assessee was assessed to the tune of Rs.1,74,86,545/-. The assessee was not satisfied, therefore, the assessee filed an appeal before the CIT(A) who confirmed the order of the AO, therefore, the assessee has filed the present appeal before us. ISSUE NOs.1 to 5:- 5. Under these issues the Ld. Representative of the assessee has challenged the validity of reassessment u/s 143(3) of the Act on account non-issuance of notice u/s 143(2) of the Act. At the very outset, the Ld. Representative of the assessee has argued that the no notice u/s 143(2) of the Act was issued and served upon the assessee and this fact has been confirmed by the Assessing Officer in view of his remand report dated 06.01.2015, therefore, the proceeding u/s 143(3) of the Act is not justifiable and is liable to be set aside in view of the decision of the assessee’s own case in dated 07.10.2016. However, on the other hand, the Ld. Representative of the Department has refuted the said contentions. On appraisal of the finding of the CIT(A), we observed that the CIT(A) has asked the ITA. No. 340/M/2016 A.Y. 2010-11 remand report from AO who submitted his remand report on 06.01.2015. The remand report is hereby reproduced below as under: - “4.1 A copy of the additional grounds has been forwarded to the AO for comments and remand report received by the AO on 06.01.2015 which reads as under: - “Ground No. 2 and 3 of the appeal relate to the fact that the amount given to the appellate by M/s. Dani Shares and Stock P. ltd. is by way of advances or loans u/s 2(22)(e) of the Act or not. It is hereby submitted that the assessee was in receipt of loans and advances from M/s. Dani shares and Stock P. Ltd. in which he is holding 83% (more than 10%) of shareholding and voting power in the company. Further no interest has been paid or charges in such account. The assessee has not given any specific explanation regarding the purpose of the same. Hence, the transaction should be considered as loans and advances u/s 2(22)(e) of the Act. Also it is hereby submitted that the submission of the assessee was gone through and not found to be acceptable. From the perusal of record, it appears that the notice u/s 143(2) was not served upon the assessee. However, notice u/s 142(1) dated 04.09.2013 and notice u/s 148 dated 25.03.2013 was duly served upon the assessee. Also during the scrutiny proceedings, the assessee did not raise any objection on the non-receipt of notice u/s 143(2) of the Act. The reason for re-opening were recorded by the AO from whom the case was transferred to this charge but the same appears not to be served upon the assessee.”
In view of the said report, the factual position is not in dispute because notice u/s 143(2) of the Act was not issued and was not served upon the assessee. The matter of controversy has been adjudicated by the ITAT in the assessee’s own case in dated 07.10.2016. The finding of the said order (supra) is hereby reproduced below as under: - “5. We have considered rival contentions and carefully gone through the orders of the authorities below as well as remand ITA. No. 340/M/2016 A.Y. 2010-11 report issued by the AO wherein AO has clearly accepted the fact that no notice under Section 143(2) was issued, however, he supported the order passed under Section 143(3) read with Section 147 by observing that assessee has not objected the same during the course of assessment proceedings. The failure by the AO to issue notice under Section 143(2) is fatal to the order of the reassessment as per verdict of Hon’ble Delhi High Court in the case of Jai Shiv Shankar Traders (supra), Hon’ble Chandigarh High Court in case of Sanjeev Aggarwal further clarified the position with regard to introduction of provisions under Section 292BB and the assessment framed without issue of 143(2) notice and observed as under:- “From the bare perusal of the above section, we see that a deeming fiction has been created by this section. In case, an assessee cooperates during the assessment even if no notice has been served on him, it is deemed to be served upon him in time as per the provisions of the Act. The provisions of this 3 Saurabh Bankimchandra Dani section is deemed to be served upon him in time as per the provisions of the Act. The provisions of this section clearly laid down the circumstances under which the deeming fiction has to come into force. These conditions have been stated to be as (a), (b) and (c), which talks about the situation where the notice was not served upon the assessee or not served upon him in time or served upon him in an improper manner respectively. Therefore, we see that section talks about only the situation where the assessee raises the issue of nonservice of a notice and still cooperates with the Department. Otherwise also, we are of the opinion that issuance of statutory notice cannot be dispensed with by the cooperation of the assessee. Since this notice forms the basis for Assessing Officer to assume jurisdiction under respective sections. Reliance placed by the learned counsel for the assessee on the judgment of the Punjab & Haryana High Court in the case of Cebon India Ltd (supra) is not out of place, whereby it has been very categorically held that absence of a statutory notice cannot be held to be curable under Section 292BB of the Act.”
ITA. No. 340/M/2016 A.Y. 2010-11