K.G.Lakshmipathy & Co., CHENNAI V. DCIT, CHENNAI

ITA 343/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3996 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R RAJESWARI
• Assessee Lawyers: G BASKAR
• Keywords: Tangible material; Difference of opinion; Deemed dividend; Revised return; Change of opinion

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , ! . , ' BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER , AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.343/MDS/2016 /ASSESSMENT YEAR: 2007-08 M/S.K.G.LAKSHMIPATHY & CO., NO.1-C, GILDENDEEN PALACE, 813, P.H.ROAD, KILPAUK, CHENNAI-600 010. VS. THE DY. COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-XIII, 121, NUNGAMBAKKAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI-600 034. [PAN: AAAFK 0749 G ] ( & /APPELLANT) ( '(& /RESPONDENT) & ) / APPELLANT BY : SHRI G.BASKAR, ADV. '(& ) /RESPONDENT BY : SMT. R. RAJESWARI, JCIT ) /DATE OF HEARING : 12.07.2017 ) /DATE OF PRONOUNCEMENT : 12.07.2017 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.343/MDS/2016 IS AN APPEAL FILED BY THE ASSE SSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-13, C HENNAI, IN ITA NO.17/CIT(A)-12/2007-08 DATED 14.12.2015 FOR THE AY 2007-08. ITA NO.343/MDS/2016 :- 2 -: 2. SMT. R. RAJESWARI, JCIT, REPRESENTED ON BEHALF O F THE REVENUE AND SHRI G.BASKAR, ADV., REPRESENTED ON BEHALF OF THE A SSESSEE. 3. IT WAS SUBMITTED BY THE LD.AR THAT FOR THE RELEV ANT ASSESSMENT YEAR, THE ASSESSEE HAD FILED ITS RETURN OF INCOME O RIGINALLY ON 31.10.2007 AND REVISED RETURN ON 02.01.2008. THE ASSESSMENT O F 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 DEVELO PMENT. IT WAS A SUBMISSION THAT THE NOTICE U/S.148 CAME TO BE ISSUE D ON 08.03.2013. THE LD.AR DREW OUR ATTENTION TO THE REASONS RECORDED FO R 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 VISHNU LAKSHMI MILLS PRIVATE LIMITED FOR THE FY 2006-07 RELEVANT TO THE A.Y 2007-08. SHRI K.G. L AKSHMIPATHI, THE CHAIRMAN OF VISHNULAKSHMI MILLS PRIVATE LIMITED IS ALSO A PARTN ER 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. DURI NG THE COURSE OF ASSESSMENT U/S.143(3), THE ASSESSEE HAS NOT DISCLOSED WHOLLY, F ULLY 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 ASSES SMENT. 4. IT WAS A SUBMISSION THAT THE RE-OPENING HAS BEEN DONE BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR AND CONSEQUENTLY IN THE ABSENCE OF ANY FRESH MATERIAL W HICH HAS COME TO THE POSSESSION OF THE AO, THE RE-OPENING WAS INVALID IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S.KELVIN ATOR 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 LAKS HMI MILLS PVT. LTD. AND IT WAS ONLY PARTNERS OF THE ASSESSEES 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 UND ER DEEMED DIVIDEND. 5. IN REPLY, THE LD.DR SUBMITTED THAT THE LD.CIT(A) HAS UPHELD THE RE- OPENING. IT WAS A SUBMISSION THAT AS THERE WAS ESC APEMENT OF INCOME IN THE HANDS OF THE FIRM UNDER THE GUISE OF DEEMED DIV IDEND, THE RE-OPENING WAS LIABLE TO BE UPHELD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE REASONS RECORDED SHOW THAT THE AO AFTER RE-EXAMINATION OF T HE 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 TH AT THE ASSESSEE HAS NOT DISCLOSED WHOLLY, FULLY AND TRULY ALL MATERIAL FACT S NECESSARY FOR THE ASSESSEES ASSESSMENT IN THE COURSE OF THE ORIGINAL ASSESSMENT U/S.143(3). FROM THE ABOVE FACTS, IT BECOMES EVIDE NT THAT THE AO WAS WELL AWARE THAT THE ASSESSEE WAS NEITHER THE SHAREH OLDER NOR WAS HAVING ANY BENEFICIAL INTEREST IN M/S.VISHNU LAKSHMI MILLS PVT. LTD. FURTHER, THE AO HAS SPECIFICALLY MENTIONED THAT AS SEEN FROM TH E RECORDS WHICH MEANS THAT THERE IS NO FRESH EVIDENCE OR INFORMATIO N AVAILABLE WITH THE AO ITA NO.343/MDS/2016 :- 4 -: WHICH HAS DRAWN THE AOS ATTENTION IN RESPECT OF TH E ISSUE OF DEEMED DIVIDEND, THAT IS ESCAPED ASSESSMENT IN THE HANDS O F THE ASSESSEE. A PERUSAL OF THE REASONS ALSO DOES NOT SHOW AS TO WHA T IS THE FACT THAT THE ASSESSEE HAS NOT WHOLLY, FULLY AND TRULY NOT DISCLO SED IN THE COURSE OF THE ORIGINAL ASSESSMENT. WITH THIS IN MIND, A PERUSAL OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S.KELVINATOR OF INDIA LTD. REPORTED IN 320 ITR 561 SHOWS THAT THE HONBLE 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 AFTE R 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 FORMA TION OF THE BELIEF. APPLYING THE PRINCIPLES LAID DOWN BY THE HONBLE S UPREME COURT IN THE CASE OF M/S.KELVINATOR OF INDIA LTD. REFERRED T O SUPRA SHOWS THAT IN THE REASONS RECORDED, THERE IS NO REFERENCE TO ANY TANG IBLE MATERIAL BY THE AO MUCH LESS THE REASONS HAVE LINK WITH THE FORMATION OF BELIEF. 7. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY TH E HONBLE SUPREME COURT IN THE CASE OF M/S.KELVINATOR OF INDIA LTD. R EFERRED TO SUPRA, AS THERE IS NO TANGIBLE MATERIAL AVAILABLE WITH THE AO AS SE EN 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 -: 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 12, 201 7, AT CHENNAI. SD/- SD/- ( . ) ( A. MOHAN ALANKAMONY ) ! /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) ! /JUDICIAL MEMBER /CHENNAI, 1 /DATED: JULY 12, 2017. TLN ) '23 43 /COPY TO: 1. & /APPELLANT 4. 5 /CIT 2. '(& /RESPONDENT 5. 3 ' /DR 3. 5 ( ) /CIT(A) 6. /GF