DCIT, V. M/s Coastal Costruction,

ITA 1005/BANG/2013

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 9867 (ITAT-BANGALORE)
• Duration Of Justice: 7 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-01-2021
• Assessment Year: 2006-2007
• Appeal Filed On: 21-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SHARMA SHRI MUZAFFAR
• Keywords: Deemed dividend
• Section: 143(3); 153A; 2(22)(e); 153; 153C; 32; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.1005/BANG/2013 (ASSESSMENT YEAR: 2006-07) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), BANGALORE. . APPELL ANT. VS. M/S.COASTAL CONSTRUCTIONS, ZUBAIDA MANZIL, J.M. ROAD, SURATKAL, MANGALORE. RESPONDENT. PAN AAGFC 3601F C.O. NO.40/BANG/2014 (IN ITA NO.1005/BANG/2013) (ASSESSMENT YEAR: 2006-07) (BY ASSESSEE) ASSESSEE BY: SHRI NARENDRA SHARMA, ADVOCATE. REVENUE BY: SHRI MUZAFFAR HUSSAIN, CIT(D.R.) DATE OF HEARING : 15.02. 20 2 1 . DATE OF PRONOUNCEMENT : 16 .0 3 . 20 2 1 . ITA NO.1005/BANG/2013 PAGE 2 OF 12 O R D E R PER SHRI CHANDRA POOJARI, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF CIT(APPEALS), MYSORE DT.21.01.2013 FOR THE ASSESSME NT YEAR 2006-07. THE C.O. IS FILED BY THE ASSESSEE. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : THE LEARNED CIT (APPEALS) ERRED IN FACT AND IN LA W IN DELETING THE ADDITION OF RS.4,14,57,934 MADE U/S. 2(22)(E) O F THE INCOME TAX ACT. 3. IN THE C.O. OF ASSESSEE, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IN SO FAR AS IT IS AGAINST THE RESPONDENT / CROSS OBJECTOR ARE OPPOSED TO LAW, WEIGHT OF EVIDENCE, NA TURAL JUSTICE, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE RESPONDENT / CROSS OBJECTOR DENIES ITSELF LIABL E TO BE ASSESSED UNDER SECTION 143[3] R.W.S. 153 A R.W.S. 1 53 C OF THE ACT UNDER THE IMPUGNED ORDER ON THE GROUND THAT:- I. THE SEARCH INITIATED IN THE CASE OF THE SEARCHED PERSON IS ILLEGAL AND ULTRA VIRES THE PROVISIONS OF SECTION 132[1][A], [B] IT [C] OF THE ACT; II. THAT THE SEARCH IS CONDUCTED NOT ON THE BASIS OF ANY PRIOR INFORMATION OR MATERIAL INDUCING ANY BELIEF B UT PURELY ON THE SUSPICION AND THEREFORE, THE ACTION U NDER SECTION 132[2] IS BAD IN LAW [ 224 ITR 19 [SC] ] AN D CONSEQUENT ASSESSMENT UNDER SECTION 153A IS NULL AN D VOID-AB-INITO ON THE PARITY OF THE RATIO OF THE DEC ISION OF THE HON'BLE APEX COURT IN THE CASE OF AJITH JAIN, REPORTED IN 260 ITR 80 AND CONSEQUENTLY THE ORDER O F ITA NO.1005/BANG/2013 PAGE 3 OF 12 ASSESSMENT PASSED UNDER SECTION 153C OF THE ACT IS BAD IN LAW. III. THE LEARNED AUTHORITIES BELOW HAS NOT DISCHARGED THE BURDEN OF PROVING THAT THERE IS A VALID INITIATION OF SEARCH UNDER SECTION 132[1][A], [B] & [C] OF THE ACT, ITS EXECUTION AND ITS COMPLETION IN ACCORDANCE WITH LAW TO RENDER THE PROCEEDINGS VALID AND TO ASSUME JURISDIC TION TO MAKE AN ASSESSMENT UNDER SECTION 153A OF THE ACT AND CONSEQUENTLY NO PROCEEDINGS MORESO THE PROCEEDINGS UNDER SECTION 153C DO NOT HAVE LEGS TO STAND. 3. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] FA ILED TO APPRECIATE THAT THE ORDER OF ASSESSMENT PASSED BY T HE LEARNED ASSESSING OFFICER IS BAD IN LAW AS THE MANDATORY CO NDITIONS TO INVOKE THE JURISDICTION UNDER SECTION 153A OF THE INCOME-TAX ACT, 1961 DID NOT EXIST OR HAVING NOT BEEN COMPLIE D WITH AND CONSEQUENTLY THE ASSESSMENT MADE UNDER SECTION 153C OF THE ACT IS BAD IN LAW FOR WANT OF REQUISITE JURISDICTIO N. 4. WITHOUT PREJUDICE THE RESPONDENT / CROSS OBJECTOR D ENIES ITSELF LIABLE TO BE ASSESSED OVER AND ABOVE THE TOT AL INCOME REPORTED BY THE RESPONDENT / CROSS OBJECTOR OF RS. NIL UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME-TAX [APPEALS] IS JUST AND PROPER. WITHOUT PREJUDICE THE RESPONDENT / CROSS OBJECTOR DENIES ITSELF LIABLE TO WARDS THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER UNDE R THE PROVISIONS OF SECTION 2[22][E] OF THE ACT OF RS. 4, 14,57,934/- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER AS PE R THE PARITY OF REASONING OF THE DECISION OF THE HON'BLE APEX CO URT IN THE CASE OF KARANVIR SINGH 349 ITR 692, THE RESPONDENT / CROSS OBJECTOR DENIES ITSELF LIABLE TO BE CHARGED TO INTE REST UNDER SECTION 234 A FT 234 B OF THE INCOME TAX ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER THE LEVY OF INTEREST UNDER SECTION 234 A & 234 B OF THE ACT IS ALSO BAD IN LAW AS THE PERIOD, RATE, QUANTUM AND METHOD OF CALCULATION ADOPTED ITA NO.1005/BANG/2013 PAGE 4 OF 12 ON WHICH INTEREST IS LEVIED ARE ALL NOT DISCERNABLE AND ARE WRONG ON THE FACTS OF THE CASE. 7. THE RESPONDENT / CROSS OBJECTOR CRAVES LEAVE OF THI S HON'BLE TRIBUNAL TO ADD, ALTER, DELETE OR SUBSTITUTE ANY O F THE GROUNDS URGED ABOVE. 8. IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE CROSS OBJECTION, YOUR RE SPONDENT / CROSS OBJECTOR HUMBLY PRAY THAT THE CROSS OBJECTION MAY BE ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE. 4. THE FACTS OF THE CASE ARE THAT THE ACTION U/S. 1 32 OF THE ACT WAS CONDUCTED IN THE CASE OF SHRI G.M. FAROOKH AND M/S. FIZA DEVELOPERS & INTER TRADE PVT. LTD. AT 25/1, RESIDENCY ROAD, BAN GALORE ON 17.01.2008. SHRI B.M. FAROOKH IS ALSO PARTNER IN THE PRESENT AS SESSEE COMPANY WHICH IS IN THE BUSINESS OF CONSTRUCTION. THERE WAS SEIZ ED MATERIAL MARKED AS EXHIBIT-ID NO.A/FDITPL/30 PAGES 56-67 BELONGING TO THE ASSESSEE. CONSEQUENTLY, NOTICE U/S. 153C OF THE ACT WAS ISSUE D TO THE ASSESSEE ON 27.02.2009. NO RESPONSE FROM THE ASSESSEE, THE FIL E HAS BEEN TRANSFERRED TO THE PRESENT ASSESSING OFFICER I.E. DCIT, CENTRAL CIRCLE 2(3), BANGALORE. THE ASSESSEE FILED NIL RETURN OF INCOME ON 9.9.2009 IN RESPONSE TO THE NOTICE ISSUED ON 29.07.2009 BY THE PRESENT ASSESSIN G OFFICER. LATER WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER OBSER VED THAT DURING THE RELEVANT ASSESSMENT YEAR, SHRI B.M. FAROOKH WAS HOL DING 95% SHARES IN THE ASSESSEE'S FIRM. IT WAS ALSO NOTICED THAT SHRI B.M. FAROOKH WAS ALSO HOLDING MORE THAN 50% EQUITY SHARE CAPITAL IN FIZZA DEVELOPERS (FDITPL) DURING THE RELEVANT PERIOD. FDITPL WITH A CLOSELY H OLDING COMPANY AND SHRI B.M. FAROOKH IS THE MANAGING DIRECTOR OF THE COMPAN Y. SHRI B.M. FAROOKH HAD PURCHASED ABOUT 5.74 ACRES OF LAND AT PANDESHWA R IN MANGALORE FOR A CONSIDERATION OF RS.6,03,00,000. THE PROPERTY WAS REGISTERED THROUGH FOUR DOCUMENTS AS GIVEN BELOW :- ITA NO.1005/BANG/2013 PAGE 5 OF 12 (I) 95.90 CENTS IN THE NAME OF M/S. FIZA DEVELOPER S & INTER TRADE P. LD. (II) 2 ACRES 20.10 CENTS ALSO IN THE NAME OF M/S.F IZA DEVELOPERS & INTER TRADE P. LTD. (III) 2 ACRE 26 CENTS IN THE NAME OF SRI B.M. FARO OKH. (IV) 32 CENTS IN THE NAME OF SRI B.M.FAROOKH. 5. HOWEVER, THE PROPERTY AT (I) AND (II) ABOVE PURC HASED IN THE NAME OF M/S.FIZA DEVELOPERS & INTER TRADE P. LTD. WERE TRAN SFERRED TO M/S. COASTAL CONSTRUCTION FOR RECORDED CONSIDERATION OF RS.1,22, 20,000 AND RS.59,03,000 RESPECTIVELY ON 5.9.2005. THE ASSESS EE FIRM HAS NOT PAID ANY CONSIDERATION TO M/S. FIZA DEVELOPERS & INTER T RADE P. LTD. (FDITPL) ON THE DATE OF TRANSFER. SHRI B M FAROOKH IS HOLDI NG 50% EQUITY SHARE IN FDITPL AND HE I IS HAVING 95% SHARE IN M/S. COASTAL CONSTRUCTION. THE TRANSFER OF PROPERTY BY FDITPL TO THE FIRM IN WHICH SRI B M FAROOKH IS HAVING SUBSTANTIAL INTEREST IS ONLY PASSING ON A B ENEFIT FROM THE COMPANY TO SRI B M FAROOKH THROUGH HIS PARTNERSHIP FIRM. 6. THE AO NOTED THAT THE TOTAL AMOUNT OF CONSIDERAT ION PAID BY THE ASSESSEE FOR THE ABOVE PROPERTIES IS RS 3,59,40,000 /-. HOWEVER, FROM THE LEDGER ACCOUNT IT WAS NOTICED THAT THE TOTAL AMOUNT DEBITED BY THE COMPANY TO THE ASSESSEE'S ACCOUNT, WHICH APPARENTLY INCLUDE D THE EXPENDITU R ES INCURRED IN CONNECTION WITH THE TRANSFER OF THE PRO PERTY, IS RS 4,14,57,934/. ON PERUSAL OF THE RECORD HE OBSERVED THAT THE PAYME NTS TOTALLING TO 4,14,57,934/- TOWARDS THE PURCHASE OF THE PROPERTY MADE ON BEHALF OF THE ASSESSEE BY FDITPL ARE PROFITS WHICH THE COMPANY CO ULD HAVE DISTRIBUTED TO ITS SHAREHOLDERS. THE FACTS OF THE CASE CLEARLY INDICATES THAT THERE WAS A DEVICE TO CIRCUMVENT THE PROVISION OF SECTION 2(22) (E) OF THE INCOME TAX ACT, 1961. THE FUND OF FDITPL THAT WAS AVAILABLE TO BE DECLARED AS DIVIDEND WAS NOT GIVEN, BUT THE SAME WAS MADE AVAIL ABLE TO THE ASSESSEE FOR PURCHASE OF A PROPERTY IN THE NAME OF HIS PARTN ERSHIP FIRM, M/S COASTAL CONSTRUCTIONS. THEREFORE, IT CAN BE SAID THAT THE I NTENTION ON THE PART OF THE ITA NO.1005/BANG/2013 PAGE 6 OF 12 COMPANY GIVING THE LOAN IS TO PERMIT THE ASSESSEE T O UTILIZE THE ACCUMULATED PROFITS WITHOUT PAYING DIVIDEND TAX ON THE SAME. THEREFORE, THE ENTIRE AMOUNT OF RS 4,14,57.934/- WHICH INCLUDE S THE CONSIDERATION PAID FOR THE PROPERTIES AND THE EXPENDITURES INCURR ED IN CONNECTION WITH THE TRANSFER IS TO BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE FIRM. 7. IT WAS OBSERVED THAT M/S. FDITPL HAS AN ACCUMULATED PROFIT OF RS 5,42,92,303/- AS ON 31.3.2006. OUT OF THE SAME, CER TAIN AMOUNTS HAVE ALREADY BEEN SET OFF AGAINST THE DEEMED DIVIDEND CH ARGED IN THE HANDS OF M/S FOUR EF WIND POWER PVT LTD FOR THE AYS 2005-06 AND 2006-07 AND IN THE HANDS OF SRI B M FAROOKH FOR AYS 2005-07. THE ACCUMULATED PROFIT AVAILABLE AFTER ADJUSTMENT OF THE SAME IS RS 54,372 ,:303/- 8. IN VIEW OF THE ABOVE, THE AMOUNT OF RS 4,14,57,9 34/- WAS TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE FIRM A ND IS BROUGHT TO TAX FOR THIS ASSESSMENT YEAR. 9. AGGRIEVED THE ASSESSEE, THE ASSESSEE WENT IN APP EAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) CONFIRMED THE ACTIO N OF THE ASSESSING OFFICER U/S. 153C R.W.S. 153A OF THE ACT. AGAINST THE ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPEALS ) CHALLENGING ON VARIOUS GROUNDS. HOWEVER, THE CIT(APPEALS) DELETED THE ADDITION MADE U/S. 2(22)(E) OF THE ACT BY OBSERVING THAT THE PURP OSE OF SECTION 2(22)(E) IS TO TAX THE DEEMED DIVIDEND IN THE HANDS OF SHAREHOL DER AND THE ASSESSEE IS NOT A SHAREHOLDER IN THIS CASE. HE FURTHER OBSER VED THAT THE TRANSACTION BETWEEN THE ASSESSEE AND FDITPL IS BUSINESS TRANSAC TION WHICH DOES NOT ATTRACT PROVISIONS OF SECTION 2(22)(E) OF THE ACT. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. ITA NO.1005/BANG/2013 PAGE 7 OF 12 10. THE LD. DR SUBMITTED THAT THERE IS A CLEAR APPL ICABILITY OF SECTION 2(22)(E) OF THE ACT. ACCORDING TO LD.DR, EVEN THOU GH THE ASSESSEE IS NOT THE SHAREHOLDER IN FDITPL; BUT THE ASSESSEE IS HOLD ING BENEFICIAL INTEREST IN THE COMPANY AS THE M.D. SHRI B.M. FAROOKH IS HOL DING 95% SHARE IN COASTAL CONSTRUCTION. SECTION 2(22)(E) OF THE ACT IS APPLICABLE SINCE THIS IS NOT A BUSINESS TRANSACTION. 11. ON THE OTHER HAND, THE LD.AR SUBMITTED THAT THE PRESENT ASSESSEE, M/S. COASTAL CONSTRUCTIONS, IS NOT A SHAREHOLDER IN FDITPL AND ONLY THE M.D. IS THE PARTNER IN COASTAL CONSTRUCTIONS COMPAN Y. BEING SO, THE ASSESSEE COMPANY CANNOT BE TREATED AS A SHAREHOLDER RECEIVING THE DIVIDEND. FURTHER HE SUBMITTED THAT THE TRANSACTIO N BETWEEN THE ASSESSEE AND FDITPL IS A BUSINESS TRANSACTION IN THE NORMAL COURSE. HE RELIED ON THE FOLLOWING JUDGMENTS : I) CHIEF COMMISSIONER OF INCOME TAX-III VS. SARVA EQUI TY (P) LTD. 44 TAXMANN.COM 28 (KAR) II) CIT VS. MADHUR HOUSING & DEVELOPMENT CO. 93 TAXMANN.COM 502 (SC) III) BAGMANE CONSTRUCTION (P.) LTD. VS. CIT 57 TAXMANN.COM 120 (KAR). 12. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED AN D CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE FIRST ARGU MENT OF THE LD. AR IS THAT THIS IS A BUSINESS TRANSACTION BETWEEN ASSESSEE AND FDITPL ON ACCOUNT OF PURCHASE OF PROPERTY AS MENTIONED IN FACTS OF CASE AS SUCH THERE IS NO APPLICABILITY OF SECTION 2(22)(E) OF THE ACT BEING A BUSINESS TRANSACTION AND HE SUPPORTED THE ORDER OF THE CIT(APPEALS). WE HAVE GONE THROUGH THE CASE RECORDS. AS SEEN FROM THE LEDGER ACCOUNT OF T HE ASSESSEE IN THE BOOKS OF FDITPL WHICH IS REPRODUCED HEREIN, WHICH S UGGESTS THE ASSESSEE BOUGHT THE PROPERTY ON 19.9.2005 AND FOR WHICH THE ASSESSEE MADE PAYMENT ON VARIOUS DATES VIDE CHEQUE AS WELL AS BY CASH:- ITA NO.1005/BANG/2013 PAGE 8 OF 12 ITA NO.1005/BANG/2013 PAGE 9 OF 12 13. BEING SO, THERE IS MERIT IN THE ARGUMENT OF THE ASSESSEES COUNSEL THAT ASSESSEE HAS ESTABLISHED THAT IT IS A BUSINESS TRANSACTION FOR PURCHASE OF PROPERTY BELONGING TO FDITPL IN FAVOUR OF THE AS SESSEE AND SUCH BUSINESS TRANSACTIONS OUTSIDE THE PURVIEW OF SECTIO N 2(22)(E) OF THE ACT. 14. THE ALTERNATIVE ARGUMENT OF THE ASSESSEE IS THA T COSTAL CONSTRUCTION COMPANY IS NOT A SHAREHOLDER IN FDITPL. AS SUCH, SECTION 2(22)(E) OF THE ACT CANNOT BE APPLIED. FOR THIS PURPOSE, HE RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CCIT-III V. SARVA EQUITY P. LTD. 44 TAXMANN.COM 28 WHEREIN IT WAS HELD THAT IT IS ONLY WHERE A LOAN ADVANCED BY A COMPANY TO REGISTERED SHAREHOLDER AND OTHER CONDITIONS SET OUT IN SECTION 2(22)(E) ARE SATISFIED, SUCH AMOUNT OF LOAN WOULD BE LIABLE TO REGARDED AS DEEMED DIVIDEND WITHIN THE MEANING OF T HE SAID SECTION, WHICH IS EXPLAINED BY HIGH COURT IN PARA 16 OF THE JUDGME NT AS FOLLOWS:- ITA NO.1005/BANG/2013 PAGE 10 OF 12 16. IN THE PRESENT CASE, WE ARE CONCERNED WITH T HE SECOND LIMB OF SECTION 2(22)(E) OF THE ACT NAMELY, TO ANY CONCE RN, LIKE THE RESPONDENT ASSESSEE, IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST. THE RESPONDENT ASSESSEE IS ADMITTEDLY NOT A SHAREHOLDER OF M/S. IT TINA. IT IS NOT EVEN THE CASE OF THE ASSESSEE THAT IT IS A SHAREHOL DER OF M/S. ITTINA, THOUGH, SHAREHOLDERS OF THE RESPONDENT-ASSESSEE AND M/S. ITTINA ARE COMMON AND/OR MEMBERS OF THE SAME FAMILY. IN TH IS BACKDROP WHEN WE LOOK AT THE PROVISIONS CONTAINED IN SECTION 2(22)(E) OF THE ACT, THE INTENDMENT OF THE LEGISLATURE IS CLEAR , WHICH MEANS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDERS. THE D EEMING PROVISIONS, AS OBSERVED BY DELHI HIGH COURT, AS IT APPLIES TO THE CASE OF LOANS/ADVANCES BY A COMPANY TO A CONCERN IN WHICH ITS SHAREHOLDERS HAVE SUBSTANTIAL INTEREST, IS BASED ON THE PRESUMPTION THAT THE LOANS OR ADVANCES WOULD ULTIMA TELY BE MADE AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY GIVING THE LOAN OR ADVANCES. LOAN OR ADVANCE GIVEN TO THE SHAREHOLDERS OR TO A CONCERN, UNDER NORMAL CIRCUMSTANCES WOULD NOT QUALI FY AS DIVIDEND, BUT IT IS SO MADE BY LEGAL FICTION CREATE D UNDER SECTION 2(22)(E) OF THE ACT. THUS, THE DEFINITION OF DIVIDE ND HAS BEEN ENLARGED, AND THAT LOAN OR ADVANCES GIVEN UNDER THE CONDITIONS SPECIFIED UNDER THIS PROVISION WOULD ALSO BE TREATE D AS DIVIDEND. THE FICTION, HOWEVER, IS NOT TO BE EXTENDED FOR ENL ARGING THE CONCEPT OF SHAREHOLDERS. DIVIDEND IS TO BE GIVEN BY ANY COMPANY, TO ITS SHAREHOLDERS. THUS, IN THE SECOND C ATEGORY UNDER SECTION 2(22)(E) OF THE ACT, LOAN OR ADVANCES GIVEN TO A CONCERN, LIKE THE ASSESSEE IN THE PRESENT CASE, WHICH IS ADM ITTEDLY NOT A SHAREHOLDER OF THE PAYEE COMPANY, UNDER NO CIRCUMST ANCES, COULD BE TREATED AS SHAREHOLDER RECEIVING DIVIDEND. AS OB SERVED BY DELHI HIGH COURT, IF THE INTENTION OF THE LEGISLATU RE WAS TO TAX SUCH LOAN OR ADVANCE AS DEEMED DIVIDEND AT THE HAND S OF DEEMING SHAREHOLDER, THEN THE LEGISLATURE WOULD HAVE INSERT ED DEEMING PROVISION IN RESPECT OF SHAREHOLDER AS WELL. THE LE GISLATURE HAS NOT DONE SO. 15. BEING SO, IN OUR OPINION, THE CASE IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE HIGH COURT OF KARNATAKA (SUPRA) . ACCORDINGLY, WE ARE INCLINED TO DELETE THE ADDITION MADE BY THE AO. ITA NO.1005/BANG/2013 PAGE 11 OF 12 16. NOW WE WILL TAKE UP THE CO FILED BY THE ASSESSE E. IN THE CO THE ASSESSEE CHALLENGED THE INITIATION OF PROCEEDINGS U /S. 153C OF THE ACT ON THE REASON THAT INITIATION OF SEARCH IN THE CASE OF SEARCHED PERSON IS ILLEGAL AND ULTRA VIRES THE PROVISIONS OF SECTION 132(1)(A),(B) & (C) OF THE ACT AND FRAMING ASSESSMENT IS ALSO BAD IN LAW IN VIEW OF TH E JUDGMENT OF THE SUPREME COURT IN THE CASE OF AJIT JAIN REPORTED IN 260 ITR 80 (SC). 17. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. ORIGINALLY, THE ASSESSEE RAISED GROUND BEFORE THE CIT(APPEALS) AS F OLLOWS:- 1. THE ORDER OF THE LEARNED DEPUTY COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 2(3), BANGALORE IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, EQUITY, FACTS, WEIGHT OF EVIDENCE, PROBABILITIES AND CIRCUMSTANCES OF THE CASE. 2. THE ASSESSMENT IS BAD IN LAW AS THE MANDATORY C ONDITIONS TO INVOKE THE JURISDICTION U/S.153A OF THE IT ACT, 1961, DID NOT EXIST OR HAVING NOT BEEN COMPLIED WITH AND CONSEQUE NTLY THE ASSESSMENT MADE IS BAD IN LAW FOR WANT OF REQUISITE JURISDICTION. 3. THE ASSESSMENT IS FURTHER BAD IN LAW AS REASONS FOR ISSUE OF NOTICE U/S. 153A OF THE ACT HAVE NOT BEEN GIVEN AND THE APPELLANT HAS REASONS TO BELIEVE THAT THE SAME HAS NOT BEEN R ECORDED AND CONSEQUENTLY THE ASSESSMENT IS BAD IN LAW. THE APP ELLANT SUBMITS THAT MANDATORY CONDITIONS TO ASSUME JURISDICTIONS I S TO RECORD REASONS AND IN THE ABSENCE OF THE SAME THE ASSESSME NT IS BAD IN LAW AND LIABLE TO BE CANCELLED. 18. THESE GROUNDS ARE ADJUDICATED BY THE CIT(APPEAL S) IN PARA 3.1 OF HIS ORDER AS FOLLOWS :- THUS I AM OF THE CONSIDERED VIEW THAT THE ASSESSI NG OFFICER HAS ASSUMED THE JURISDICTION IN ACCORDANCE WITH LAW AND I FIND NO INFIRMITY IN SUCH ASSUMPTION OF JURISDICTION AND AL SO IN PASSING THE ORDERS U/S. 143(3) RWS 153A OF THE ACT. FURTHER , THE APPELLANT HAS NO BROUGHT ANY SPECIFIC VIOLATION OF ANY PROVIS IONS OF THE ACT, BEFORE ME. THERE, I UPHOLD THE VALIDITY OF TH E ASSESSMENT ITA NO.1005/BANG/2013 PAGE 12 OF 12 AND DISMISS THE GROUND NOS.1, 2 & 3 FOR BOTH THE YE ARS UNDER CONSIDERATION. 19. HOWEVER, BEFORE US, THE ASSESSEE RAISED A SPECI FIC GROUND THAT FRAMING ASSESSMENT U/S. 143(3) R.W.S. 153A R.W.S. 1 53C IS BAD IN LAW. BEING SO, IT IS APPROPRIATE TO REMIT THIS ISSUE TO THE FILE OF CIT(APPEALS) FOR FRESH ADJUDICATION AFTER EXAMINING THE SEIZED MATER IAL, IF ANY, AND TO DECIDE IN ACCORDANCE WITH LAW, AFTER PROVIDING ASSESSEE OP PORTUNITY OF BEING HEARD. 20. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D, WHILE THE CO BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF MARCH, 2021. SD/- SD/- ( GEORGE GEORGE K. ) ( CHANDRA POOJARI ) JUDICIAL ME MBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 16 TH MARCH, 2021. / DESAI S MURTHY / COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.