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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN, & SHRI A. MOHAN ALANKAMONY
आदेश / O R D E R
PER GEORGE MATHAN, JUDICIAL MEMBER:
Order of Commissioner of Income Tax (Appeals)-13, Chennai, in dated 14.12.2015 for the AY 2007-08.
ITA No.343/Mds/2016 :- 2 -:
Smt. R. Rajeswari, JCIT, represented on behalf of the Revenue and Shri G.Baskar, Adv., represented on behalf of the assessee.
It was submitted by the Ld.AR that for the relevant assessment year, the assessee had filed its return of income originally on 31.10.2007 and revised return on 02.01.2008. The assessment of the assessee originally came to be completed u/s.143(3) on 31.12.2009. It was a submission that the assessee is in the business of building of roads, airport run ways and was also doing building development. It was a submission that the notice u/s.148 came to be issued on 08.03.2013. The Ld.AR drew our attention to the reasons recorded for the issuance of notice u/s.148 which is as under:
"It is seen from the records that the assessee firm M/s. K.G. Lakshmipathi & Co., has received an advance of Rs.1,71,98,907/- from Vishnulakshmi Mills Private Limited for the FY 2006-07 relevant to the A.Y 2007-08. Shri K.G. Lakshmipathi, the Chairman of Vishnulakshmi Mills Private Limited is also a partner in M/s. K. G.Lakshmipathi & Co., and having substantial interest in the firm. Hence, the payment of advance of Rs.1,71,98,907/- attract the provisions u/s.2(22)(e) of the IT Act 1961 and accordingly it is to be treated as deemed dividend in the hands of the recipient. During the course of assessment u/s.143(3), the assessee has not disclosed wholly, fully and truly all material facts necessary for its assessment. Hence, I have reasons to believe the facts mentioned above that the income chargeable to tax has escaped assessment”.
It was a submission that the re-opening has been done beyond the period of four years from the end of the relevant assessment year and consequently in the absence of any fresh material which has come to the possession of the AO, the re-opening was invalid in view of the decision of the Hon’ble Supreme Court in the case of M/s.Kelvinator of India Ltd.
ITA No.343/Mds/2016 :- 3 -: reported in 320 ITR 561. It was also a submission that even on merits the assessee was not the shareholder in M/s.Vishnu Lakshmi Mills Pvt. Ltd. and it was only partners of the assessee’s firm who were the shareholders in the company M/s.Vishnu Lakshmi Mills Pvt. Ltd. It was a submission that even on merits, no addition was called for under deemed dividend.
In reply, the Ld.DR submitted that the Ld.CIT(A) has upheld the re- opening. It was a submission that as there was escapement of income in the hands of the firm under the guise of deemed dividend, the re-opening was liable to be upheld.
We have considered the rival submissions. A perusal of the reasons recorded show that the AO after re-examination of the records has found that the assessee firm has received advance from M/s.Vishnu Lakshmi Mills Pvt. Ltd. He also noticed that the Chairman of M/s.Vishnu Lakshmi Mills Pvt. Ltd., is a partner in the assessee firm and is having substantial interest in the firm. He further goes on to say that the assessee has not disclosed wholly, fully and truly all material facts necessary for the assessee’s assessment in the course of the original assessment u/s.143(3). From the above facts, it becomes evident that the AO was well aware that the assessee was neither the shareholder nor was having any beneficial interest in M/s.Vishnu Lakshmi Mills Pvt. Ltd. Further, the AO has specifically mentioned that “as seen from the records” which means that there is no fresh evidence or information available with the AO
ITA No.343/Mds/2016 :- 4 -: which has drawn the AO’s attention in respect of the issue of deemed dividend, that is escaped assessment in the hands of the assessee. A perusal of the reasons also does not show as to what is the fact that the assessee has not wholly, fully and truly not disclosed in the course of the original assessment. With this in mind, a perusal of the decision of the Hon’ble Supreme Court in the case of M/s.Kelvinator of India Ltd. reported in 320 ITR 561 shows that the Hon’ble Supreme Court has categorically held that “the concept of “change of opinion” must be treated as an in- built test to check the abuse of power. Hence after April 1, 1989, the AO has power to re-open an assessment, provided there is “tangible material” to come to the conclusion that there was escapement of the income from assessment. Reason must have a link with the formation of the belief”.
Applying the principles laid down by the Hon’ble Supreme Court in the case of M/s.Kelvinator of India Ltd. referred to supra shows that in the reasons recorded, there is no reference to any tangible material by the AO much less the reasons have link with the formation of belief.
Respectfully following the ratio laid down by the Hon’ble Supreme Court in the case of M/s.Kelvinator of India Ltd. referred to supra, as there is no tangible material available with the AO as seen from the reasons recorded, the re-opening of the assessment is held to be bad in law.
Consequently, the re-assessment as made is quashed.
ITA No.343/Mds/2016 :- 5 -:
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Open Court on July 12, 2017, at Chennai.