Desai Homes P.Ltd, Aluva V. DCIT, Aluva

ITA 122/COCH/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65053 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 24-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: A S NARAYANAMURTHY
• Keywords: Principle of natural justice; Deemed dividend
• Section: 263; 10

Judgement Text

1 ITA NO. 132/COCH/2012 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 132/COCH/2012 (ASSESSMENT YEAR 2007-08) M/S N.K. MOHAMMED ALI & BROS VS A.C.I.T., CIR.1(1) CHEROOTY ROAD KOZHIKODE CALICUT PAN : AACRN9210H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.S. NARAYANAMURTHY RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 12-12-2012 DATE OF PRONOUNCEMENT : 21-12-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE TAXPAYER IS DIRECTED AGAINST TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER U/S 263 OF THE ACT FOR THE ASSESSMENT YEAR 2007-08. 2 ITA NO. 132/COCH/2012 2. SHRI A.S. NARAYANAMURTHY, THE LD.REPRESENTATIVE FOR THE TAXPAYER SUBMITTED THAT THE ASSESSING OFFICER HAD CALLED FOR ALL THE DETAILS WITH REGARD TO ADVANCE RECEIVED BY THE TAXPAYER FIRM FRO M VARIOUS SISTER CONCERNS. REFERRING TO THE PAPER BOOK, THE LD.REPR ESENTATIVE SUBMITTED THAT THE TAXPAYER HAD SUBMITTED AN EXPLANATION ON 0 3-12-2009 WITH THE ASSESSING OFFICER WITH REGARD TO THE AMOUNT RECEIVE D FROM KODANDARAM ROLLER FLOUR MILLS PRIVATE LTD. THE TAXPAYER HAS A LSO SUBMITTED EXPLANATION ON 13-10-2009 BEFORE THE ASSESSING OFFICER SAYING T HAT NO LOAN WAS RECEIVED FROM ANY OF THE COMPANIES EXCEPT FROM SKYLINE BUILD ERS. THE TAXPAYER HAS ALSO EXPLAINED THE SHAREHOLDING PATTERN OF THE PART NERS BEFORE THE ASSESSING OFFICER. AFTER CONSIDERING ALL THE EXPLA NATIONS OF THE TAXPAYER THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION WITH RE GARD TO THE DEEMED DIVIDEND. THE LD.REPRESENTATIVE FILED A COPY OF TH E ORDER IN THE TAXPAYERS OWN CASE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO. 653/COCH/2010 ORDER DATED 10/08/2012 AND SUBMITTED THAT ON IDENTICAL CI RCUMSTANCES, THE MATTER WAS REMANDED BACK TO THE FILE OF THE ASSESSI NG OFFICER FOR RECONSIDERATION. REFERRING TO THE ORDER OF THIS TR IBUNAL IN THE CASE OF M/S HARRISONS MALAYALAM LTD IN ITA NO.257/COCH/2010 ORD ER DATED 29-06-2012 THE LD.REPRESENTATIVE SUBMITTED THAT WHEN THE ASSES SING OFFICER HAS CALLED 3 ITA NO. 132/COCH/2012 FOR ALL THE DETAILS AND FOUND THAT NO ADDITION WAS REQUIRED, THE ADMINISTRATIVE COMMISSIONER CANNOT EXERCISE HIS POW ERS U/S 263 OF THE INCOME-TAX ACT. ACCORDING TO THE LD.REPRESENTATIVE , THE ASSESSING OFFICER HAD APPLIED HIS MIND WHILE PASSING THE ASSESSMENT O RDER. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT WHEN THERE WAS AN ENQUIRY BY THE ASSESSING OFFICER, EVEN THE SAID ENQUIRY IS INADEQU ATE, IT CANNOT BE A REASON TO EXERCISE JURISDICTION U/S 263 OF THE INCOME-TAX A CT, 1961. 3. ON THE CONTRARY, SMT. VIJAYAPRABHA, THE LD.DR SUB MITTED THAT ADMITTEDLY, THE TAXPAYER RECEIVED ADVANCE / LOAN FR OM SISTER COMPANIES AND CONCERNS. THE ASSESSING OFFICER HAS NOT MADE A NY PROPER VERIFICATION. THE ASSESSMENT ORDER DOES NOT DISCLOSE ANYTHING ABO UT THE EXAMINATION OF THE DETAILS SAID TO BE FILED BY THE TAXPAYER. ACCO RDING TO THE LD.DR, THE ASSESSMENT ORDER DOES NOT SHOW ANYTHING ABOUT THE C ONSIDERATION OF THE MATERIAL SAID TO BE FILED BY THE TAXPAYER. THEREFO RE, THE ADMINISTRATIVE COMMISSIONER HAS RIGHTLY EXERCISED HIS JURISDICTION U/S 263 OF THE INCOME- TAX ACT. 4 ITA NO. 132/COCH/2012 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ADMI NISTRATIVE COMMISSIONER FOUND THAT FROM THE STATEMENT OF ACCOU NTS OF M/S PARRISONS ROLLER FLOUR MILLS PVT LTD A CREDIT ENTRY OF RS.2,4 5,14,000 WAS MADE IN THE NAME OF BOYCE RUBBER. IN THE CASE OF PARRISONS AGR O TECH PVT LTD THE OPENING CREDIT BALANCE AMOUNTED TO RS. 3.43 CRORES AND OUT OF PURCHASES MADE ALMOST DAILY AMOUNTING TO RS. 3,58,52,835 FROM 5.4.2006 TO 31.3.2007. THE TAXPAYER ADJUSTED ONLY RS.17,55,791. THE ADMINISTRATIVE COMMISSIONER FOUND THAT THE PARTNERS OF THE TAXPAYE R FIRM ARE ALSO DIRECTORS OF THE GROUP COMPANIES FROM WHICH THE ADV ANCE / LOAN WAS SAID TO BE RECEIVED BY THE FIRM. SIMILAR KIND OF FACILI TIES WAS NOT ALLOWED TO OTHER COMPANIES / CONCERNS. THE CONTENTION OF THE TAXPAYER THAT THE DEEMED DIVIDEND IS TO BE ASSESSED ONLY IN THE HANDS OF THE SHAREHOLDERS WAS REJECTED BY THE COMMISSIONER ON THE GROUND THAT THE PARTNERS OF THE FIRM ARE DIRECTORS AND SHAREHOLDERS OF RESPECTIVE C OMPANIES. HOWEVER, IT IS NOT KNOWN WHETHER THE PARTNERS OF THE TAXPAYER FIRM WERE HOLDING THE SHARES OF OTHER COMPANIES IN THE INDIVIDUAL CAPACIT Y OR ON BEHALF OF THE PARTNERSHIP FIRM. EVEN THE ADMINISTRATIVE COMMISSI ONER HAS NOT EXAMINED 5 ITA NO. 132/COCH/2012 WHETHER THE SHARES ARE HELD IN THE INDIVIDUAL CAPAC ITY OF THE PARTNERS OF THE FIRM OR ON BEHALF OF THE PARTNERSHIP FIRM. 5. FROM THE MATERIAL AVAILABLE ON RECORD IT APPEARS THAT THE ASSESSING OFFICER HAS CALLED FOR CERTAIN DETAILS WITH REGARD TO LOANS / ADVANCES SAID TO BE RECEIVED FROM THE TAXPAYER FIRM. HOWEVER, THE D ETAILS CALLED FOR BY THE ASSESSING OFFICER WERE NOT CONSIDERED AND THE CONSI DERATION IS NOT REFLECTED IN THE ASSESSMENT ORDER. THE ASSESSMENT ORDER BEIN G A QUASI JUDICIAL ORDER, THE APPLICATION OF MIND BY THE ASSESSING OFFICER SH ALL BE REFLECTED IN THE ASSESSMENT ORDER ITSELF. THE VERY PURPOSE OF PROVI DING APPEAL / REVISIONAL JURISDICTION UNDER THE INCOME-TAX ACT WOULD BE DEFEA TED IF THE ASSESSING OFFICER HAS NOT RECORDED THE REASONS FOR ARRIVING A T THE CONCLUSION ONE WAY OR THE OTHER. THEREFORE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT MERE CALLING FOR THE DETAILS MAY NOT BE SUFFICIENT. THE DETAILS CALLED FOR BY THE ASSESSING OFFICER NEEDS TO BE CONSIDERED BY THE ASSESSING OFFICER AND THE APPLICATION OF MIND SHALL BE REFLECTED IN THE A SSESSMENT ORDER ITSELF. IN OTHER WORDS, THE DECISION FOR A PARTICULAR ADDITION SHALL BE REFLECTED IN THE ASSESSMENT ORDER ITSELF. 6 ITA NO. 132/COCH/2012 6. WE FIND THAT THE PUNJAB & HARYANA HIGH COURT HAD AN OCCASION TO EXAMINE THIS ISSUE IN COMMISSIONER OF INCOME-TAX VS SUNIL KUMAR GOEL (2005) 274 ITR 53 (P&H) AND AFTER CONSIDERING THE JU DGMENT OF THE APEX COURT IN MUKHERJEE (S.N.) VS UOI (1990) AIR 1990 SC 1984 HAS OBSERVED AS FOLLOWS: IN S.N. MUKHERJEE V. UNION OF INDIA, AIR 1990 SC 1 984, A CONSTITUTION BENCH OF THE SUPREME COURT DISCUSSED T HE DEVELOPMENT OF LAW ON THIS SUBJECT IN INDIA, AUSTRAL IA, CANADA, ENGLAND AND THE UNITED STATES OF AMERICA AND AFTER MAKING REFERENCE TO A LARGE NUMBER OF JUDICIAL PRECEDENTS, THEIR LORDSHIPS CULLED OUT THE FOLLOWING PROPOSITIONS (PA GE 1995): THE DECISIONS OF THIS COURT REFERRED TO ABOVE IND ICATE THAT WITH REGARD TO THE REQUIREMENT TO RECORD REASO NS THE APPROACH OF THIS COURT IS MORE IN LINE WITH THAT OF THE AMERICAN COURTS. AN IMPORTANT CONSIDERATION WHICH HAS WEIGH ED WITH THE COURT FOR HOLDING THAT AN ADMINISTRATIVE AUTHOR ITY EXERCISING QUASI-JUDICIAL FUNCTIONS MUST RECORD THE REASONS FOR ITS DECISION, IS THAT SUCH A DECISION IS SUBJECT TO THE APPELLATE JURISDICTION OF THIS COURT UNDER ARTICLE 136 OF THE CONSTITUTION AS WELL AS THE SUPERVISORY JURISDICTION OF THE HIGH COURTS UNDER ARTICLE 227 OF THE CONSTITUTION AND THAT THE REASON S, IF RECORDED, WOULD ENABLE THIS COURT OR THE HIGH COURT S TO EFFECTIVELY EXERCISE THE APPELLATE OR SUPERVISORY P OWER. BUT THIS IS NOT THE SOLE CONSIDERATION. THE OTHER CONS IDERATIONS WHICH HAVE ALSO WEIGHED WITH THE COURT IN TAKING TH IS VIEW ARE THAT THE REQUIREMENT OF RECORDING REASONS WOULD (I) GUARANTEE CONSIDERATION BY THE AUTHORITY; (II) INTRODUCE CLAR ITY IN THE DECISIONS; AND (III) MINIMIZE CHANCES OF ARBITRARIN ESS IN DECISION MAKING. IN THIS REGARD A DISTINCTION HAS BEEN DRAW N BETWEEN ORDINARY COURTS OF LAW AND TRIBUNALS AND AUTHORITIE S EXERCISING JUDICIAL FUNCTIONS ON THE GROUND THAT A JUDGE IS TRAI NED TO LOOK AT THINGS OBJECTIVELY UNINFLUENCED BY CONSIDERATIONS OF POLICY 7 ITA NO. 132/COCH/2012 OR EXPEDIENCY WHEREAS AN EXECUTIVE OFFICER GENERALL Y LOOKS AT THINGS FROM THE STAND POINT OF POLICY AND EXPEDIENC Y. REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDI CIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE O F ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AUTHORI TY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT AN ADMINIST RATIVE AUTHORITY MUST RECORD REASONS FOR ITS DECISION, ARE OF NO LESS SIGNIFICANCE. THESE CONSIDERATIONS SHOW THAT THE R ECORDED OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVICES A S ALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OF ARBITRARINE SS AND ENSURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECI SION-MAKING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIO NS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH A RE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPIN ION, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOV ERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI- JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT WHETHER THE DECISION IS SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. I T MAY, HOWEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORATE AS IN THE DECISION OF A COUR T OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PA RTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE A UTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTROVERS Y. THE NEED FOR RECORDING OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLATE OR REV ISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GI VE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUTHORITY AG REES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE. IN TESTEELS LTD V. N.M. DESAI (1970) 37 FJR 7; AIR 1970 GUJ 1, A FULL BENCH OF THE GUJARAT HIGH COURT HAS MAD E AN EXTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJECT AN D WE CAN 8 ITA NO. 132/COCH/2012 DO NO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIO NS MADE IN THE DECISION. THE SAME ARE (HEADNOTE OF AIR 1970 ( GUJ)): THE NECESSITY OF GIVING REASONS FLOWS AS A NECESS ARY COROLLARY FROM THE RULE OF LAW WHICH CONSTITUTES ON E OF THE BASIC PRINCIPLES OF THE INDIAN CONSTITUTIONAL SET-U P. THE ADMINISTRATIVE AUTHORITIES HAVING A DUTY TO ACT JUDI CIALLY CANNOT THEREFORE DECIDE ON CONSIDERATIONS OF POLICY OR EXP EDIENCY. THEY MUST DECIDE THE MATTER SOLELY ON THE FACTS OF THE PARTICULAR CASE, SOLELY ON THE MATERIAL BEFORE THEM AND APART FROM ANY EXTRANEOUS CONSIDERATIONS BY APPLYING PRE- EXISTING LEGAL NORMS TO FACTUAL SITUATIONS. NOW THE NECESSI TY OF GIVING REASONS IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVA NCE OF THE DUTY TO ACT JUDICIALLY. IT INTRODUCES CLARITY, CHEC KS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERAT IONS AND EXCLUDES OR, AT ANY RATE, MINIMIZES ARBITRARINESS I N THE DECISION-MAKING PROCESS. ANOTHER REASON WHICH COMPELS MAKING OF SUCH AN ORD ER IS BASED ON THE POWER OF JUDICIAL REVIEW WHICH IS PO SSESSED BY THE HIGH COURT UNDER ARTICLE 226 AND THE SUPREME CO URT UNDER ARTICLE 32 OF THE CONSTITUTION. THESE COURTS HAVE THE POWER UNDER THE SAID PROVISIONS TO QUASH BY CERTIORARI A QUASI-JUDICIAL ORDER MADE BY AN ADMINISTRATIVE OFFICER AND THIS PO WER OF REVIEW CAN BE EFFECTIVELY EXERCISED ONLY IF THE ORD ER IS A SPEAKING ORDER. IN THE ABSENCE OF ANY REASONS IN S UPPORT OF THE ORDER, THE SAID COURTS CANNOT EXAMINE THE CORRE CTNESS OF THE ORDER UNDER REVIEW. THE HIGH COURT AND THE SUP REME COURT WOULD BE POWERLESS TO INTERFERE SO AS TO KEEP THE ADMINISTRATIVE OFFICER WITHIN THE LIMITS OF THE LAW . THE RESULT WOULD BE THAT THE POWER OF JUDICIAL REVIEW WOULD BE STULTIFIED AND NO REDRESS BEING AVAILABLE TO THE CITIZEN, THER E WOULD BE INSIDIOUS ENCOURAGEMENT TO ARBITRARINESS AND CAPRIC E. IF THIS REQUIREMENT IS INSISTED UPON, THEN, THEY WILL BE SU BJECT TO JUDICIAL SCRUTINY AND CORRECTION. 9 ITA NO. 132/COCH/2012 IF THE ORDER PASSED BY THE TRIBUNAL IS SCRUTINIZED IN THE LIGHT OF THE AFOREMENTIONED PROPOSITION OF LAW, WE DO NOT FIND ANY DIFFICULTY IN SETTING ASIDE THE SAME ON THE GRO UND OF VIOLATION OF THE RULES OF NATURAL JUSTICE. THE FLOW ERY LANGUAGE USED BY THE TRIBUNAL TO JUSTIFY ITS ACCEPTANCE OF TH E RESPONDENTS PLEA THAT HE DID NOT KNOW THE LAW DOES NOT WARRANT OUR AFFIRMATION. IN OUR OPINION, THE TRIBU NAL WAS DUTY BOUND TO RECORD TANGIBLE AND COGENT REASONS FOR UPS ETTING WELL REASONED ORDERS PASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS). IT SHOULD HA VE DIRECTED ITS ATTENTION TO THE LANGUAGE OF SECTION 2 71D AND 271E OF THE ACT IN CONJUNCTION WITH OTHER PROVISIONS OF THE SAME FAMILY AND THEN DECIDED BY A REASONED ORDER WH ETHER THE RESPONDENT HAD BEEN ABLE TO MAKE OUT A CASE FOR DELETING THE PENALTY. THE ORDER PASSED BY THE TRIBUNAL SHOU LD HAVE CLEARLY REFLECTED THE APPLICATION OF MIND BY THE LE ARNED MEMBERS. 6.1 THE APEX COURT ALSO HAD AN OCCASION TO CONSIDER THIS ISSUE IN TOYOTA MOTOR CORPORATION VS COMMISSIONER OF INCOME-TAX (20 08) 306 ITR 52 (SC). THE APEX COURT HAS OBSERVED AS FOLLOWS AT PAGE 53 O F THE ITR: WE ARE NOT INCLINED TO INTERFERE WITH THE IMPUGNE D ORDER OF THE HIGH COURT. THE HIGH COURT HAS HELD T HAT THE ASSESSING OFFICER HAD DISPOSED OF THE PROCEEDINGS S TATING THE PENALTY PROCEEDINGS INITIATED IN THIS CASE UNDER SE CTION 271C READ WITH SECTION 274 OF THE INCOME-TAX ACT, 1961 A RE HEREBY DROPPED. ACCORDINGLY TO THE HIGH COURT, THERE WAS NO BASIS INDICATED FOR DROPPING THE PROCEEDINGS. THE TRIBUN AL REFERRED TO CERTAIN ASPECTS AND HELD THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (IN S HORT, THE I.T. ACT) WAS IMPERMISSIBLE WHEN CONSIDERED IN THE BACKGROUND OF THE MATERIALS PURPORTEDLY PLACED BY T HE ASSESSEE BEFORE THE ASSESSING OFFICER. WHAT THE HI GH COURT HAS DONE IS TO REQUIRE THE ASSESSING OFFICER TO PAS S A REASONED 10 ITA NO. 132/COCH/2012 ORDER. THE HIGH COURT WAS OF THE VIEW THAT THE TRI BUNAL COULD NOT HAVE SUBSTITUTED ITS OWN REASONINGS WHICH WERE REQUIRED TO BE RECORDED BY THE ASSESSING OFFICER. ACCORDING TO THE ASSESSEE, ALL RELEVANT ASPECTS WERE PLACED FOR CONS IDERATION AND IF THE OFFICER DID NOT RECORD REASONS, THE ASSE SSEE CANNOT BE FAULTED. WE DO NOT THINK IT NECESSARY TO INTERFERE AT THIS STAGE. IT GOES WITHOUT SAYING THAT WHEN THE MATTER BE TAKEN U P BY THE ASSESSING OFFICER ON REMAND, IT SHALL BE HIS DUTY T O TAKE INTO ACCOUNT ALL THE RELEVANT ASPECTS INCLUDING THE MATE RIALS, IF ANY, ALREADY PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER. 7. IN VIEW OF THE ABOVE IT IS INCUMBENT UPON THE AS SESSING OFFICER TO RECORD REASONS AFTER CONSIDERING THE MATERIALS AVAI LABLE ON RECORD. THE APPLICATION OF MIND SHALL ALSO BE REFLECTED IN THE ASSESSMENT ORDER ITSELF. IN THE PRESENT CASE, EVEN THOUGH THE ASSESSING OFFICER HAS CALLED FOR THE DETAILS, THE SAME WAS NOT CONSIDERED AND THE CONSID ERATION OF THOSE DETAILS IS NOT REFLECTED IN THE ASSESSMENT ORDER. THEREFOR E, IT IS NOT CORRECT TO SAY THAT THE ASSESSING OFFICER HAS CONSIDERED ALL THE M ATERIALS FILED BY THE TAXPAYER. 8. WE HAVE ALSO CAREFULLY GONE THROUGH THE ORDER OF THIS TRIBUNAL IN THE CASE OF M/S HARRISONS MALAYALAM LTD IN ITA NO.257/C OCH/2010 ORDER DATED 29-06-2012. THIS TRIBUNAL AFTER CONSIDERING THE JUD GMENT OF BOMBAY HIGH COURT IN THE CASE OF GABRIEL INDIA LTD (1993) 203 I TR 108 (BOM) FOUND THAT 11 ITA NO. 132/COCH/2012 WHEN THERE WAS AN ENQUIRY AND EVEN IT WAS FOUND INA DEQUATE WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER OF INCOME- TAX TO PASS ORDER U/S 263 OF THE INCOME-TAX ACT. HOWEVER, THE EARLIER BE NCH OF THIS TRIBUNAL HAD NO OCCASION TO CONSIDER THE JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SUNIL KUMAR GOEL (SUPRA) AND IN THE CASE OF TOYOTA MOTOR CORPORATION (SUPRA). THEREFORE, MERE ENQUIRY IS NO T SUFFICIENT. THE ENQUIRY AND APPLICATION OF MIND SHALL BE REFLECTED IN THE A SSESSMENT ORDER. THEN ONLY, THE APPELLATE / REVISIONAL AUTHORITIES COULD APPRECIATE THE REASONS FOR ARRIVING AT A PARTICULAR CONCLUSION BY THE ASSESSIN G OFFICER. MOREOVER RECORDING SUCH REASONS WOULD ENSURE FAIRNESS IN THE DECISION MAKING PROCESS. 9. IN VIEW OF THE ABOVE, WE ARE UNABLE TO ACCEPT TH E CONTENTION OF THE LD.REPRESENTATIVE THAT MERE CALLING FOR THE DETAILS BY THE ASSESSING OFFICER WOULD SUFFICE TO HOLD THAT THE ASSESSING OFFICER HA S APPLIED HIS MIND. AS ALREADY MENTIONED, THE APPLICATION OF MIND SHALL BE REFLECTED IN THE ASSESSMENT ORDER ITSELF AND NOT IN ANY OTHER FORM. IT IS WELL SETTLED PRINCIPLES OF LAW THAT REASON FOR A PARTICULAR DECI SION IN A JUDICIAL OR QUASI JUDICIAL ORDER SHOULD FIND IN THE IMPUGNED ORDER ITS ELF AND THE REASONS CANNOT BE SUBSTITUTED BY FILING AFFIDAVIT OR DOCUME NTS IN THE APPELLATE / 12 ITA NO. 132/COCH/2012 REVISIONAL JURISDICTION. IN THE ABSENCE OF ANY REA SONS IN THE IMPUGNED ORDER IT CANNOT BE SAID THAT THE ASSESSING OFFICER APPLIED HIS MIND TO THE MATERIALS AVAILABLE ON RECORD. 9. NOW COMING TO THE MERIT OF THE MATTER, THE TAXPA YER, A PARTNERSHIP FIRM HAS RECEIVED ADVANCES / LOANS FROM SISTER CONC ERN AND ASSOCIATE COMPANIES. IT IS NOT KNOWN WHETHER THE PARTNERSHIP FIRM IS HOLDING ANY SHARES IN THE COMPANIES / CONCERNS THROUGH THE PART NERS. IT IS NOT KNOWN WHETHER THE ADVANCES / LOANS SAID TO BE RECEIVED BY THE PARTNERSHIP FIRM WAS USED BY THE PARTNERSHIP FIRM OR IT WAS INDIRECT LY GIVEN TO THE PARTNERS OF THE FIRM. FOR THE ASSESSMENT YEAR 2006-07 IN I. T.A. NO.653/COCH/2010 (ORDER DATED 10-08-2012) THIS TRIBUNAL, AFTER REFER RING TO THE DECISION OF THE SPECIAL BENCH IN A.C.I.T. VS BHAUMIK COLOUR (P) LTD 313 ITR (AT) 146 FOUND THAT THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE TAXPAYER FIRM HOLDS ANY SHARES THROUGH ANY ONE OF THE PARTNERS. ACCORDINGLY THE MATTER WAS REMANDED BACK TO THE FILE OF THE ASSESSING OFFI CER FOR RECONSIDERATION FOR THE ASSESSMENT YEAR 2006-07. IN THIS CASE ALSO , THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE TAXPAYER FIRM WAS HOLDING ANY SHARES IN THE RESPECTIVE COMPANIES / CONCERNS THROUGH ANY ONE OF ITS PARTNERS. THIS FACT NEEDS TO BE VERIFIED. WE FIND THAT THE APEX COURT IN THE CASE OF 13 ITA NO. 132/COCH/2012 COMMISSIONER OF INCOME-TAX VS MUKUNDRAY K SHAH (200 7) 290 ITR 433 (SC) HAD AN OCCASION TO EXAMINE THE ISSUE OF ADVANCE OF FUNDS BY A COMPANY TO THE PARTNERSHIP FIRM. THOUGH THE PARTNERSHIP FIRM WAS NOT THE SHAREHOLDER OF THE COMPANY IT WAS FOUND ULTIMATELY THAT THE MON EY ADVANCED BY THE COMPANY WAS USED BY THE PARTNERS OF THE FIRM WHO WA S SHAREHOLDERS IN THE COMPANY FOR INVESTING IN RBI RELIEF BOND. THEREFOR E, THE APEX COURT FOUND THAT THE MONEY WAS ADVANCED TO THE FIRM FOR THE BEN EFIT OF THE SHAREHOLDERS; THEREFORE, THE SHAREHOLDERS ARE LIABL E TO PAY TAX AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THIS JUDGMENT WAS ALSO NOT CONSIDERED BY THE ASSESSING OFFICER AS WELL AS THE ADMINISTRATIVE COMMISSIONER. ULTIMATELY, THE DEEMED DIVIDEND HAS TO BE ASSESSED IN THE HANDS OF SHAREHOLDER EVEN THOUGH ADVANCE WAS MADE TO THIRD P ARTIES FOR THE BENEFIT OF THE SHARE HOLDERS. THEREFORE, AS OBSERVED EARLI ER, IT IS NECESSARY TO ASCERTAIN WHETHER THE PRESENT TAXPAYER BEFORE THIS TRIBUNAL IS HOLDING ANY SHARE THROUGH THE PARTNERS OR NOT. SINCE THESE FAC TS WERE NOT ASCERTAINED BY THE LOWER AUTHORITIES, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE MATTER NEEDS TO BE EXAMINED. ACCORDINGLY, WHILE CO NFIRMING THE ORDER OF THE ADMINISTRATIVE COMMISSIONER, WE DIRECT THE ASSE SSING OFFICER TO RE- EXAMINE THE ISSUE AS DIRECTED BY THE TRIBUNAL FOR T HE ASSESSMENT YEAR 2006- 14 ITA NO. 132/COCH/2012 07 IN I.T.A. NO.653/COCH/2010 AFTER CONSIDERING THE JUDGMENT OF THE APEX COURT IN THE CASE OF MUKUNDRAY K SHAH (SUPRA) AND T HE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF BHAUM IK COLOUR (P) LTD (SUPRA). WE MAKE IT CLEAR THAT IF THE TAXPAYER PARTNERSHIP F IRM IS NOT HOLDING ANY SHARES THROUGH ANY OF THE PARTNERS, THEN THERE CANN OT BE ANY ASSESSMENT AS DEEMED DIVIDEND. IN OTHER WORDS, THE DEEMED DIV IDEND SHALL BE ASSESSED IN THE HANDS OF THE SHAREHOLDERS EVEN THOU GH IT WAS PAID TO THE OTHER PARTIES FOR THE BENEFIT OF THE SHAREHOLDERS. 10. WITH THE ABOVE OBSERVATIONS, THE APPEAL OF THE TAXPAYER IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DECEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 21 ST DECEMBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT BY ORDER 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH