The DCIT, Gandhinagar Circle, Gandhinagar V. Shri Jayantibhai S Patel, Ahmedbad

ITA 1093/AHD/2019

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1158 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-06-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 27-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; Change of opinion
• Section: 148; 139; 143(3); 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 1093/Ahd/2019 ( नधा रण वष / Assess ment Ye ars : 2 010-11) Dy .C IT Ga nd hin ag ar C irc le , Ga nd hin ag ar बनाम/ V s . Sh ri Jay a nt ib h ai S . P at el 48, S ha nk ar S oc iet y, Pa rt - 1, Ah me da ba d, G uj ara t - 38 24 24 थायी लेखा सं./जीआइआर सं./P A N / G IR N o . : A D G P P 8 4 6 5 R (Appellant) . . (Respondent) अपीलाथ ओर से /Appellant by : Shri Atul Pandey, Sr. DR यथ क ओर से/Respondent by : Shri M. K. Patel, AR D a t e o f H e a r i n g 24/06/2024 D a t e o f P r o n o u n c e m e n t 05/07/2024 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: The present appeal is filed b y the Re venue against the order of the Commissioner of Inco me Tax (Appeals), Gandhinagar, (in short ‘the CI T(A) ’) dated 02.04.2019 for the Assessment Year 2010-11. 2. This appeal is against third round of assess ment co mpl eted under Section 143(3) r.w.s. 147 of the Inco me Tax Act, 1961 (hereinafter referred to as ‘the Act’) in this case. The brief f acts of the case are that the r eturn of inco me f or A.Y.2010-11 was filed b y ITA No.1093/Ahd/2019 (DCIT vs. Shri Jayantibhai S Patel) A.Y.– 2010-11 - 2 – the assessee on 30.03.2011 declaring total inco me of Rs.10,45,850/-. The first assess men t order was passed u/s 143(3) on 25.01.2013 wherein the addition of Rs.53,442/- was made. Thereafter , the c a se was reopened under Section 147 of the Act and the re-assess ment was co mpleted under Section 143(3) r.w.s. 147 of the Act on 17.03.2016 at total inco me at Rs .17,50,300/-. The case was once again reopened on 31.03.2017 on the ground that the assessee h ad obtained loan of Rs.3 ,08,90,000/- fro m Shri Rang Infrastructure Pvt. Ltd., a co mpany in which the assessee was a Director. It transpired that the assessee was holding more than 10% shares o f this co mp an y. Therefore, the loan given b y the Co mpan y to the assessee was to be treated as dee me d dividend under Section 2(22)(e) of the Act. The second re-assess ment was co mpleted under Section 143(3) r.w.s. 147 of the Act on 22.12.2017 at total income of Rs.3 ,26,40,300/-. Aggrieved with this order, the assessee had preferre d an appeal befor e the First Appellate Authority which was deci ded vide the i mpugned order and the ld. CIT( A) had restricted the addition on account of dee med dividend under Section 2(22)(e) of the Act to the extent of accu mulated profit of the compa ny. Now, the Rev enue is in appeal before us. 3. The following grounds have been taken by the Revenue in this appeal: “ i ) Wh e t h e r , t h e L d . C o m m i s s i o n e r o f I n c o m e - T a x ( a p pe a l s ) h a s e r r e d i n l a w a n d o n f a c t s i n r e s t r i c t i n g t h e d i s a l lo w a n c e o f R s . 3 , 0 8 , 9 0 , 0 0 0 / - m a d e b y t h e A D o n a c c o u n t o f d e e m ed ITA No.1093/Ahd/2019 (DCIT vs. Shri Jayantibhai S Patel) A.Y.– 2010-11 - 3 – d i v i d e n d t o t h e e x t e n t o f a c c u m u l a t e d p r o f i t o f M / s S h r i R a n g I n f r a s t r u c t u r e f o r A . Y . 2 0 1 0 - 1 1 i . e . R s . 1 0 3 , 1 8 , 1 4 3 / -. i i ) O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e , t h e L d . C o m m i s s i o n e r o f I n c o m e - T a x ( a p p e a l s ) o u g h t t o h a v e up h e l d t h e o r d e r o f t h e A s s e s s i n g O f f i c e r . i i i ) I t i s , t h e r e f o r e p r a y e d t h a t t h e o r d e r o f t h e L d . C o m m i s s i o n e r o f I n c o m e - t a x ( A p p e a l s ) m a y b e s e t a s i d e a n d t h a t of t h e A s s e s s i n g O f f i c e r b e r e s t o r e d . i v ) T h e a p p e l l a n t p r a y s f o r l e a v e , t o a m e n d o r a l te r a n y g r o u n d o r a d d a n e w g r o u n d w h i c h m a y b e n e c e s s a r y . ” 4. In the course of hearing, an application under Rule 27 of the ITAT Rules was made b y the assessee and the following ground was raised: “ T h a t t h e l e a r n e d C I T (A ) h a s g r i e v o u s l y e r r e d i n c on f i r m i n g t h e r e - o p e n i n g o f a s s e s s m e n t u / s 1 4 7 o f t h e A c t , w h e r e a s , i t o u g h t t o h a v e b e e n h e l d a s i n v a l i d , a s r e - o p e n i n g i s b e y o n d 4 y e ar s a n d o r i g i n a l a s s e s s m e n t w a s f r a m e d u / s 1 4 3 ( 3 ) , t h e n a g a i n o r d e r i s p a s s e d u / s 1 4 3 ( 3 ) r w s 1 4 7 a n d t h i s i s t h e s e c o n d r e - o p e n i n g of a s s e s s m e n t , w h i c h i s i n v a l i d a s p e r P r o v i s o t o s e c t i o n 1 4 7 o f th e A c t . " 5. It is found that no C O was filed b y t he assessee against the appeal preferred by the Revenue. As per Rule 27 of I TAT Rules, the respondent, even though he ma y not have appealed, ma y support the order appealed against on an y of the grounds decided against him. It is f ound that the assessee had taken a leg al ground before the Ld. CI T(A) on the issue of invoking the provision of Section 147 of the Act which was dec ided against the assessee b y the Ld. CI T( A). The ground taken b y the assessee in Rule 27 pertains to reopening of the assessment under Section 147 of the Act. Since, this ground was decided against the assessee by the ITA No.1093/Ahd/2019 (DCIT vs. Shri Jayantibhai S Patel) A.Y.– 2010-11 - 4 – Ld. CIT(A) , the assessee is entitled to raise this ground before us in ter ms of provision of Rule 27 of the I TAT Rules. Ac cordingly, the ground as raised by the assessee under Rule 27 is ad mitted. Further, as the ground of the assessee goes to the root of jurisdiction of the AO, we dee m it proper to adjudicate this ground first. 6. Shri M. K. Patel, Ld. Counsel for the assessee submitted that the second reopening of the cas e was be yond four ye ars and, therefore, the First Proviso of Section 147 of the Act was applicable in this case. This P roviso stipulated that no reopening can be done after the expiry of 4 years unless any inco me chargeable to tax has escaped assessment b y reason of failure on the part of the as sessee to disclose full y and truly a ll material facts. The Ld. AR contended that there was no failure on the part of the assessee to disclose fully and truly an y mate rial facts and, therefore, the assumption of jurisdiction by the AO under Section 147 of the Act was not correct. He has drawn our attention to the reasons as recorded by the AO and submitted that the AO also did not record any failure on the part of the assessee in the reasons as recorded b y him. The Ld. AR f urther sub mitted that the Ld. CIT( A) had err ed in dismissing the legal ground as raised by the assessee. The Ld. CIT( A) had onl y c onsidered the sufficiency of infor mation and the issue of change of opinion on the part of the AO but the basic question of there being no failure on the part of the assessee was n ot exa mined b y hi m. ITA No.1093/Ahd/2019 (DCIT vs. Shri Jayantibhai S Patel) A.Y.– 2010-11 - 5 – 7. Per contra, Shri At ul Pandey, Sr. DR strongly supported the orders of the AO a nd the Ld. CI T(A) . He explained that the case was reopened on the basis of specific infor mation received by the AO regarding escape ment of dee med dividend under Section 2(22)(e) of the Act, on the basis of which, the AO had rightly assumed the jurisdiction under Section 147 of the Act . He further submitted that the assessee had not disclosed the dee med dividend under Section 2(22)(e) of the Act in his return. Therefore, there was a failure on the part of the assessee to disclose fully and truly all the mater ial facts. 8. We have carefull y considered the rival submissions. There is no dispute to the fact that the matter was exa mined twice b y the AO in the original and the re-assess ment. This is the second reopening of the c ase carried out aft er co mpletion of 4 years fro m the end of the a ssessment order . There fore, the Proviso of Section 147 of the Act was squarely applicable to the second reopening. The sa id proviso is found to be as under: Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure 76 on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts 76 necessary for his assessment, for that assessment year: 9. As per this proviso, the AO cannot assume jurisdiction under Section 147 of the Act after e xpiry of four year s until and unless it is de monstrated that any in co me chargeable t o tax had ITA No.1093/Ahd/2019 (DCIT vs. Shri Jayantibhai S Patel) A.Y.– 2010-11 - 6 – escaped assessme nt by reason of failure on the part of the assessee to disclose fully and trul y all material facts . In fact, such default of the assessee has to be specificall y recor ded in his satisfaction/reason while reopening the case under Sec tion 147 of the Act. The Reve nue has filed a paper book containing 1 to 100 pages and the reason as recorded by the AO is found to be as under: “ I n t h i s c a s e , a s e s s s e e f i l e d i t s r e t u r n o f i n c o m e f o r A . Y . 2 0 1 0 - 1 1 o n 3 0 / 0 3 / 2 0 1 1 d e c l a r i n g i n c o m e o f R s . 1 0 , 4 5 , 8 5 0 / - . T h e s a m e w a s a s s e s s e d u / s . 1 4 3 ( 3 ) a t R s . 1 0 , 9 9 , 3 0 0 / - o n 2 5 / 0 1 / 2 01 3 . A s s e s s m e n t w a s r e o p e n e d a n d o r d e r u / s . 1 4 3 / 3 ) r . w . s . 1 4 7 w a s pa s s e d o n 1 7 / 0 3 / 2 0 1 6 a t R s . 1 7 , 5 0 , 3 0 0 / - . D u r i n g t h e c o u r s e o f a s s e s s m e n t p r o c e e d i n g s i n t h e c a s e o f S h r i R a n g I n f r a s t r u c t u r e P v t . L t d A . Y . 2 0 1 0 - 1 1 . I t w a s ob s e r v e d t h a t t h e a s s e s s e e h a s g i v e n l o a n o f R s . 3 , 0 8 , 9 0 , 0 0 0 / - t o S h ri J a y a n t i b h a i S . P a t e l ( P A N : - A D G P P B 4 6 5 R ) w h o i s h a v i n g R s . 4 , 9 9 , 4 0 0/ s h a r e o u t o f R s . 1 0 , 0 0 , 0 0 0 / - s h a r e s L e . m o r e t h a n 1 0 % s h a r e ho l d i n g i n t h e c o m p a n y . T h e b a l a n c e s h e e t o f t h e a s s e s s e e s h o w s r es e r v e o f R s . 9 , 3 2 , 4 8 , 5 5 0 / - . T h e r e f o r e I h a v e r e a s o n s t o b e l i e v e t h a t t h e l o a n s g i v e n t o S h r i J a y a n t i b h a i S . P a t e l i s t o b e t r e a t e d a s d e e m e d d i v i d e n d a s p r o v i d e d u / s . 2 ( 2 2 ) ( e ) o f t h e a c t . ” 10. It is found from the above re ason that no specific satisfaction was r ecorded by the AO that there was a failure on the part of the as sessee to disclose full y and truly a ll material facts. In the absence of an y specific mention of such failure of the assessee, we h ave to next exa mi ne whether an y su ch failure can be made out fr o m the records as available. The loa n taken by the assessee from Shri Rang Infrastructure Pvt. Ltd. was alread y disclosed in the accounts of the assessee. ITA No.1093/Ahd/2019 (DCIT vs. Shri Jayantibhai S Patel) A.Y.– 2010-11 - 7 – 11. The Ld . CI T( A) h as observed that the balance sheet of the assessee did not reflect the na me of this compan y for giving the loan to the assessee, but, the figures of unsecured and secured loans were menti oned and that there were no details available either in the return of inco me and acc o mpanied docume nts and in the details furnished during the course of assess ment o r first re- assessment procee dings. There is no require ment to disclose the na me of the parties fro m who m loan is taken in the balance sheet but only cu mulative figure of loan appears therein. Fur ther, there is also no require ment to file details of all the persons fro m who m loan was obtained along with the return of inco me . These details can be furnished by the assessee only if the AO ma kes specific query in this regard in the course of assessment. Neither the AO nor the CIT( A) have made out in case that the details of loan was called for fro m th e assessee in the c ourse of original or reopened proceeding, but it was not furnished b y the assessee. If the AO doesn’t ask for details in respect of l oans appearing in the balance sheet, there was no occasion for the assessee to furnish these details. As per the nor m of assess me nt, the details of unsecured loan is invariably called for in the a ssessment proceed ing along with the confirmation. The AO has not brought out any default of the assessee in this respect either i n the original or i n the first reopened proceeding. Therefore , t he fact that ther e was an y default on the part of the assessee in furnishing the required infor mation is not evident fro m the reason of the AO as well as fro m the order of t he Ld. CI T(A) . ITA No.1093/Ahd/2019 (DCIT vs. Shri Jayantibhai S Patel) A.Y.– 2010-11 - 8 – 12. The Ld. CI T( A) has upheld the reopening on the ground that there was a ne w infor mation available with the AO to r eopen the case. That b y itself is not sufficient to reopen the case be yond 4 years. It must be first established that there was a failure on the part of the assessee to disclose fully and truly all material facts and such failure has not been established either by the AO or b y the Ld. C IT( A) . As regarding the issue of dee med di vidend on which the second reopening was done, there can be fail ure on the part of the assessee onl y when there is require ment as per law to disclose the dee me d dividend in the r eturn of inco me or in the tax audit report and which has not been co mplied. It is found that there was no require ment to declar e an y dee med dividend under Section 2(22)(e) of the Act in the ITR or in the Tax Audit Report for this yea r. Th ese require ments were introduced in the ITR For m and in the Tax Audit Rep ort much later. Under the circu mstances, the assessee cannot b e charged with an y failure to disclose fully or tr uly all material fa cts. 13. It was explained b y the assessee that account wit h the co mpan y was in t he nature of curre nt account and as per finding recorded by the Ld. CIT( A) , there were 35 transactions during the ye ar. It was s pecifically noted by the Ld. CI T( A) that there was opening debit balance of Rs.10 ,22,085/- and closing debit balance of Rs.13,43,075/- in the ledger account of the co mp an y. Considering these facts, the Ld. CI T(A) had given the following specific finding: ITA No.1093/Ahd/2019 (DCIT vs. Shri Jayantibhai S Patel) A.Y.– 2010-11 - 9 – “ 5 . 3 I h a v e c o n s i d e r e d t h e a b o v e - r e f e r r e d l a t e s t d ec i s i o n t h r o w i n g l i g h t o n t h e i s s u e . S i n c e i n t h e c a s e o f t h e a p p e l la n t , t h e r e w a s c l o s i n g c r e d i t b a l a n c e o f R s . 1 3 , 4 3 , 0 7 5 / - a s o n 3 1 .0 3 . 2 0 1 0 w h i c h i s t h e a m o u n t o f l o a n t a k e n f r o m t h e c o m p a n y w h i c h r e ma i n e d t o b e s e t t l e d , t h i s a m o u n t o n l y c a n b e t a k e n a s D e e m e d D iv i d e n d f o r t h e a s s e s s m e n t y e a r u n d e r c o n s i d e r a t i o n . F u r t h e r , t h e in t e r e s t o f R s . 3 , 6 1 , 2 8 9 / - c a n n o t b e c o n s i d e r e d t o b e l o a n o r a dv a n c e a n d i f t h i s a m o u n t i s r e d u c e d , t h e n t h e o u t s t a n d i n g l o a n w o u l d b e o f R s . 9 , 8 1 , 7 8 6 / - o n l y . S i n c e t h e A . O . h a s n o t v e r i f i e d a s t o w h a t w a s t h e a c c u m u l a t e d p r o f i t i n t h e b a l a n c e - s h e e t a s o n 31 . 0 3 . 2 0 1 0 b u t r e f e r r e d t o o n l y r e s e r v e s t o t h e t u n e o f R s . 9 , 3 2 , 4 8, 5 5 0 / - i n t h e l a s t p a r a g r a p h o f t h e a s s e s s m e n t o r d e r w i t h o u t s u b s t a n t ia t i n g t h i s f i g u r e b y o b t a i n i n g t h e c o p y o f t h e P r o f i t & L o s s A c c o u n t a n d t h e b a l a n c e - s h e e t f o r t h e a s s e s s m e n t y e a r u n d e r c o n s i d e r a t i o n . T h e r e f o r e , t h e A . O . i s d i r e c t e d t o v e r i f y f r o m t h e c a s e - r e c o r d s o f M / s S h r e e R a n g I n f r a P v t . L t d . a n d t o r e s t r i c t t h e d e e m e d d i v i d e n d t o t h e e x t e n t o f a c c u m u l a t e d p r o f i t , i f f o u n d t o b e l e s s t h a n t h i s am o u n t . ” 14. It is, thus, clear fr o m the above reas oning of the Ld. C IT( A) that the transaction of the assessee with Shri Rang Inf rastructure Pvt. Ltd. was in the nature of curr ent account transaction and the entire cu mulative credit of Rs.3,08,90,000/- could not have been held as deemed dividend, as done by the AO. In fact, the Ld. CIT( A) had taken the closing balance of Rs.13,43,075/- onl y as dee med dividend and the ground taken b y the Reven ue that the dee med dividend was restricted to Rs.1,03,18,143/- is not found correct. As per direction of the Ld. CI T( A) , onl y the closing credit balance of Rs.13,43,075/- was required to be verified with reference to a ccumulated profit of t he co mpan y. 15. In view of the above facts, we are of the considered opinion that there was no failure on the part of the assessee to disclose fully and trul y all the material facts and, ther efore, the jurisdiction of the AO under Secti on 147 of the Act was not ITA No.1093/Ahd/2019 (DCIT vs. Shri Jayantibhai S Patel) A.Y.– 2010-11 - 10 – correctl y assu med. The fact of an y failure on the part of the assessee was neither brought out by t he AO nor was evident fro m the record, which was essential for r eopening the case beyond 4 years. There fore, t he reopening done by the AO was incorrect and not in accordance with the 1 s t Proviso to Section 147 of the Act. Therefore, the ground as taken by the assessee is allowed and the reopening of the case under Section 147 of the Act is quashed. 16. As the legal ground taken by the assessee is allowed, we do not deem it nece ssary to exa mine the grounds raised by the Revenue on meri ts. There fore, all the grounds taken b y the Revenue are re ject ed. 17. In the result, appeal preferred b y the Revenue is dismi ssed. This Order pronounced on 05/07/2024 Sd/- Sd/- (T.R. SENTHIL KUMAR) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 05/07/2024 S. K. SINHA True Copy आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. "वभागीय &त&न ध, आयकर अपील)य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड/ फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad