The ITO, Ward-1(2), Ahmedabad V. Biotech Opthalmics Pvt.Ltd., Ahmedabad

ITA 443/AHD/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1139 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PANDEY
• Keywords: Opportunity of being heard; Deemed dividend; Revised return
• Section: 143(3); 263; 144; 139

Judgement Text

I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO. : 443/AHD/11 ASSESSMENT YEAR : 2006 - 07 INCO ME TAX OFFICER WARD 1(2), AHMEDABAD .APPELLANT VS. BIOTECH OPHTHALMIC PVT L TD . RESPONDENT 401, SARTHIK II, OPP RAJPATH CLUB, S G HIGHWAY, AHMEDABAD [PAN: AACCB0328F] CO NO. 71/AHD/11 ARISING OUT OF I.T.A. NO.: 443/AHD/11 ASSESSMENT YEAR: 2006 - 07 BIOTECH OPHTHALMIC PVT LTD CROSS OBJECTOR 401, SARTHIK II, OPP RAJPATH CLUB, S G HIGHWAY, AHMEDABAD [PAN: AACCB0328F] VS. INCOME TAX OFFICER WARD 1(2), AHMEDABAD . RESPONDENT APPEARANCES BY: A K PANDEY , FOR THE APPELLANT ASSESSING OFFICER S N SOPAKAR FOR THE ASSESSE CROSS OBJE CTOR DATE OF CONCLUDING THE HEARING : AUGUST 2 6 , 201 4 DATE OF PRONOUNCING THE ORDER : AUGUST 31 ST , 2014 O R D E R PER PRAMOD KUMAR: 1. THIS APPEAL AND CROSS OBJECTION ARE DIRECTED AGAINST THE ORDER DATED 27 TH DECEMBER, 2010 PASSED BY THE CIT(A) IN THE MATTER OF ASS ESSMENT UNDER SECTION I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 2 OF 11 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2006 - 07. WE WILL DISPOSE OF THE APPEAL AND THE CROSS OBJECTION BY THIS CONSOLIDATED ORDER. 2. GRIEVANCES RAISED IN THE APPEAL IS THAT THE LEARNED CIT(A) ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS 70,57,941 MADE ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT . 3. TO ADJUDICATE ON THIS ISSUE, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF . DURING THE COURSE OF THE SCRUTINY AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSE COMPANY HAD TAKEN A LOAN OF RS 70,57,941 FROM BIOTECH VISION CARE PVT LTD. (BVCPL, IN SHORT) IT WAS ALSO NOTED THAT SHRI MEHUL P ASNANI, ONE OF THE MAJOR SHAREHOLDERS IN THE ASSESSE COMP ANY, HOLDING 40% OF ITS EQUITY, IS ALSO HOLDING 90% SHAREHOLDING IN BVCPL. THE ASSESSING OFFICER FURTHER NOTED THAT BVCPL IS HAVING ACCUMULATED PROFITS OF RS 10,15,76,665, I.E. FAR IN EXCESS OF THE LOAN ADVANCED TO THE ASSESSE. ON THESE FACTS, AND WITHOUT ANYTHING ELSE, THE ASSESSING OFFICER TREATED THE AMOUNT OF RS 70,57,941 AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. AGGRIEVED, ASSESSE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). LEARNED CIT(A) DELETED THIS ADDITION BY OBSERVING, INTER AL IA, AS FOLLOWS: APPELLANT IS NOT A SHAREHOLDER IN THE LENDER COMPANY. HOWEVER, THE ASSESSING OFFICER HAS TREATED THE SAME AS DEEMED DIVIDEND IN THE HANDS OF THE APPELLANT COMPANY. APPELLANT S MAIN OBJECTION WAS THAT IN VIEW OF THE VARIOUS DECISIONS, INC LUDING THE SPECIAL BENCH OF ITAT MUMBAI AND BOMBAY HIGH COURT REFERRED TO IN ASSESSE S SUBMISSIONS, THE ADDITION OF DEEMED DIVIDEND CAN ONLY BE MADE IN THE HANDS OF THE SHAREHOLDER. IF THE RECIPIENT OF LOAN IS NOT A SHAREHOLDER AND THE TRANSACTION IS COVER ED BY THIS PROVISION, THE ADDITION IS TO BE MADE IN I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 3 OF 11 THE HANDS OF THE SHAREHOLDER. CONSIDERING THE DECISION OF THE ITAT SPECIAL BENCH AND BOMBAY HIGH COURT, I AGREE WITH THE APPELLANT THAT THE DEEMED DIVIDEND IS TO BE MADE IN THE HANDS OF THE SHAREHOLDER ON LY. ACCORDINGLY, ASSESSING OFFICER IS DIRECTED TO REMOVE THE ADDITION IN RESPECT OF THE DEEMED DIVIDEND IN THE HANDS OF THE APPELLANT AND MAKE THE SAID ADDITION IN THE HANDS OF THE SHAREHOLDER SHRI MEHUL P ASNANI, IN VIEW OF THE DECISIONS OF THE ITAT SPECI AL BENCH AND BOMBAY HIGH COURT. 4. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE CIT(A), AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTS OF THE CASE I N THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT THERE IS NO CONTROVERSY OR DISPUTE ABOUT THE FUNDAMENTAL LEGAL POSITION THAT UNLESS THE ASSESSE IS A SHAREHOLDER IN THE COMPANY FROM WHICH THE AMOUNTS ARE RECEIVED, SUCH AMOUNTS CANNOT BE TAXE D IN HIS HANDS AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. IN THE CASE OF CIT VS DAISY PACKERS PVT LTD (JUDGMENT DATED 18 TH JULY 2012 IN TAX APPEAL NO. 212 OF 2010), HON BLE JURISDICTIONAL HIGH COURT HAS, INTER ALIA, NOTED THAT IT IS NOT NECESSAR Y TO GO INTO OTHER LEGAL ISSUES ONCE IT IS AN UNDISPUTED POSITION THAT THE ASSESSE WAS NOT SHAREHOLDER IN AMIGO BRUSHES PVT LTD , AND THAT IF THE ASSESSE COMPANY DOES NOT HOLD A SHARE IN OTHER COMPANY FROM WHICH IT HAD RECEIVED DEPOSIT, IT CANNOT BE TREAT ED TO BE A DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT . THE SAME WAS THE POSITION IN THE CASE OF ACIT VS BHAUMIK COLOURS PVT LTD [(2009) 118 ITD 1 SB (MUM)] WHEREIN A SPECIAL BENCH OF THIS TRIBUNAL CONCLUDED THAT, DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 4 OF 11 PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON O THER THAN A SHAREHOLDER AND THAT THE EXPRESSION SHAREHOLDER REFERRED TO IN S. 2(22)(E) REFERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHA REHOLDER. IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER THEN THE PROVISIONS OF S. 2(22)(E) WILL NOT APPLY. SIMILARLY, IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THEN ALSO THE PROVISIONS OF S. 2(22) (E) WILL NOT APPLY . 7. IT IS THUS CLEAR THAT BEING A REGISTERED SHAREHOLDER IS A CONDITION PRECEDENT FOR INVOKING SECTION 2(22)(E) OF THE ACT, AND THAT CONDITION IS ADMITTEDLY NOT SATISFIED. FOR THIS SHORT REASON ALONE, THE IMPUGNED ADDITIONS SHOULD HA VE BEEN DELETED BY TH E CIT(A). WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) IN THIS RESPECT AND DECLINE TO INTERFERE IN THE MATTER SO FAR AS THE RELIEF GIVEN BY THE CIT(A) IS CONCERNED. 8. IN THE RESULT, THE APPEAL IS DISMISSED. 9 . THE ASSESSE H AS ALSO MOVED A CROSS OBJECTION WHICH SEEKS TO EXPUNGE CIT(A) S DIRECTIONS TO BRING THIS DEEMED DIVIDEND T O TAX IN THE HANDS OF SHRI MEHUL P ASNANI , DIRECTOR IN ASSESSE S COMPANY. 10 . LEARNED COUNSEL SUBMITS THAT WHILE DECIDING APPEAL OF THE ASSESSE BEF ORE HIM, IT WAS NOT OPEN TO THE CIT(A) TO GIVE ADJUDICATION ON TAXABILITY OF THIS INCOME IN THE HANDS OF A PERSON OTHER THAN THIS ASSESSE. HE HAS CLEARLY EXCEEDED HIS JURISDICTION IN HOLDING THAT THE AMOUNT IN QUESTION IS TAXABLE IN THE HANDS OF SHRI MEHU L P ASNANI . HE URGES US TO EXPUNGE THESE OBSERVATIONS. IN SUPPORT OF HIS PRAYER , LEARNED COUNSEL FOR THE ASSESSE INVITES OUR ATTENTION TO A DECISION OF I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 5 OF 11 THE COORDINATE BENCH IN THE CASE OF JAGAT MINERALS PVT LTD VS DCIT AND VICE VERSA (ITA NOS 2110, 2403 A ND 2750/AHD/11; DATED 22.4.2015) WHEREBY SIMILAR REMARKS MADE BY THE CIT(A) HAVE BEEN MODIFIED. 1 1 . LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIES UPON THE STAND TAKEN BY THE CIT(A). HE SUBMITS THAT WHEN THE IMPUGNED ADDITION WAS DELETED SOLELY ON THE GROUND THAT IT WAS REQUIRED TO BE TAXED IN THE HANDS OF THE DIRECTOR CONCERNED, THE CIT(A) WAS QUITE JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO BRING IT TO TAX IN THE HANDS OF THAT DIRECTOR. 1 2 . WE HAVE HEARD THE RIVAL CONTENTIONS, PER USED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 1 3 . IN OUR CONSIDERED VIEW, IT IS IMPORTANT TO FIRST UNDERSTAND THE ROLE PLAYED BY THE FINDINGS OR DIRECTIONS OF THIS NATURE. WE ARE DEALING WITH THE ASSESSMENT YEAR 2006 - 07 AND THE ORDER OF THE C I T(A) WAS SERVED ON THE ASSESSING OFFICER ON 5 TH JANUARY 2011. OBVIOUSLY, THE ASSESSMENT MUST HAVE ATTAINED FINALITY , BY THE TIME THE ASSESSING OFFICER CAME TO KNOW OF THESE DIRECTIONS , SINCE IN TERMS OF SECTION 153(1) NO ORDER OF ASSESSMENT SHALL BE MADE UNDER SECTION 143 OR SECTION 144 AT ANY TIME AFTER THE EXPIRY OF (A) TWO YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH THE INCOME WAS FIRST ASSESSABLE; OR (B) ONE YEAR FROM THE END OF THE FINANC IAL YEAR IN WHICH A RETURN OR A REVISED RETURN RELATING TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR, IS FILED UNDER SUB - SECTION (4) OR SUB - SECTION (5) OF SECTION 139 , WHICHEVER IS LATER . NO DOUBT, UNDER SECTION 153 (2A), WHEN AN ASSESSMENT IS SET ASIDE OR CANCELLED UNDER SECTION 250, 254,263 OR 264 A FRESH ASSESSMENT, AS A RESULT OF SUCH A CANCELLATION, CAN BE FRAMED WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER UNDER I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 6 OF 11 SECTION 250 OR SECTION 254 IS RECEIVED BY THE COMMISSIONER OR THE ORDER UNDER SECTION 263 OR SECTION 264 IS PASSED BY THE COMMISSIONER . HOWEVER, THIS PROVISION COMES INTO PLAY ONLY WHEN THE ORDER PASSED UNDER SECTION 250, 254, 263 OR 264 IN THE CASE OF THE ASSESSE HI MSELF. THAT IS NOT THE SITUATION THAT WE ARE DEALING WITH AT PRESENT. 1 4 . SECTION 153 (3), DEALING WITH THE IMPACT OF THE FINDINGS OR DIRECTION GIVEN BY THE REVISIONARY, APPELLATE OR JUDICIAL AUTHORITIES, PRESCRIBES THAT THE PROVISIONS OF INTER ALIA SECTION 151(1) SHALL NOT APPLY TO THE .. ASSESSMENTS, REASSESSMENTS AND RECOMPUTATIONS WHICH MAY, SUBJECT TO THE PROVISIONS OF SUB - SECTION (2A) BE COMPLETED AT ANY TIME WHERE THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION IS MADE ON THE ASSESSE OR ANY PERSON IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN AN ORDER, UNDER SECTIONS 250, 254, 260, 262, 263 OR 264 1535 OR IN AN ORDER OF ANY COURT IN A PROCEEDING OTHERWISE THAN BY WAY OF APPEAL OR REFERENCE UNDER THIS ACT . IN O THER WORDS, WHEN EFFECT OF A FINDING OR DIRECTION OF AN REVISIONARY, APPELLATE OR JUDICIAL AUTHORITY IS TO BE GIVEN, THAT EXERCISE CAN BE CARRIED OUT ANY POINT OF TIME DE HORS THE TIME LIMITS SPECIFIED IN SECTION 153(1) . HOWEVER, EVEN THIS RELAXATION OF T IME LIMITS IS SUBJECT TO CERTAIN RIDERS, INCLUDING RIDER CONTAINED IN EXPLANATION 3 TO SECTION 153(3) WHICH PROVIDES THAT, WHERE BY A REVISIONARY, APPELLATE OR JUDICIAL ORDER OF THE ABOVE NATURE, AN INCOME IS EXCLUDED FROM THE INCOME OF ONE ASSESSE AND HEL D TO BE INCOME OF THE OTHER ASSESSEE, THE ASSESSMENT OF SUCH AN INCOME IN THE HANDS OF ANOTHER ASSESSE BE DEEMED TO BE ONE MADE IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN THE SAID ORDER, PROVIDED SUCH OTHER PERSON WAS GI VEN AN OPPORTUNITY OF BEING HEARD B EFORE THE SAID ORDER WAS PASSED (EMPHASIS BY UNDERLING SUPPLIED BY US). CLEARLY, THEREFORE, UNLESS THE PERSON IN WHOSE HAND INCOME IS DIRECTED TO BE ADDED HAS BEEN HEARD BEFORE SUCH DIRECTIONS ARE ISSUED, THE DIRECTIONS ISSUED BY THE REVISIONARY, APPELLATE OR JUDICIAL AUTHORITY ARE AN EXERCISE IN FUTILITY. THIS RIDER IS EQUALLY I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 7 OF 11 RELEVANT IN RESPECT OF REOPENING OF AN ASSESSMENT UNDER SECTION 154, AS A RESULT OF THE FINDINGS OR DIRECTIONS OF THE REVISIONARY, APPELLATE OR JU DICIAL AUTHORITIES. 1 5 . IT IS AN UNDISPUTED POSITION, ON THE FACTS OF THIS CASE, THAT SHRI MEHUL P ASNANI , IN WHOSE HANDS CIT(A) HAS DIRECTED THIS INCOME TO BE ADDED, HAS NOT BEEN GRANTED AN OPPORTUNITY OF HEARING BY THE CIT(A) BEFORE THESE DIRECTIONS W ERE ISSUED. SUCH BEING THE ADMITTED FACTS, ITS BEYOND DOUBT THAT A COMPLETED ASSESSMENT CANNOT BE DISTURBED OR REOPENED TO GIVE EFFECT TO SUCH FINDINGS OR DIRECTIONS. 1 6 . THERE IS, HOWEVER, AN EVEN MORE FUNDAMENTAL ISSUE, AND THAT ISSUE IS WHETHER THE DIRECTION THAT THE DEEMED DIVIDEND INCOME BEING BROUGHT TO TAX IN THE HANDS OF SHRI ASNANI IS A DIRECTION NECESSARY FOR THE DISPOSAL OF CASE. THIS ISSUE ASSUMES SIGNIFICANCE IN VIEW OF THE LEGAL POSITION THAT, AS HELD BY HON BLE SUPREME COURT IN THE CASE OF CIT VS RAJINDER NATH [(1979) 120 ITR 14 (SC)], AS REGARDS THE EXPRESSION 'DIRECTION' IN S. 153(3)(II) OF THE ACT, IT IS NOW WELL SETTLED THAT IT MUST BE AN EXPRESS DIRECTION NECESSARY FOR THE DISPOSAL OF THE CASE BEFORE THE AUTHORITY OR COURT. IT MUST ALSO BE A DIRECTION WHICH THE AUTHORITY OR COURT IS EMPOWERED TO GIVE WHILE DECIDING THE CASE BEFORE IT. THEIR LORDSHIPS THEN ADDED THAT THE EXPRESSIONS 'FINDING' AND 'DIRECTION' IN S. 153(3)(II) OF THE AC T MUST BE ACCORDINGLY CONFINED AND THAT SEC. 1 53(3)(II) IS NOT A PROVISION ENLARGING THE JURISDI CTION OF THE AUTHORITY OR COURT . 1 7 . AS TO WHAT CONSTITUTES AN EXPRESS DIRECTION NECESSARY FOR DISPOSAL OF A CASE , WE FIND THE FOLLOWING GUIDANCE FROM THEIR LORDSHIPS: I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 8 OF 11 TO BE A NECESSARY FINDING, IT MUST BE DIRECTLY INVOLVED IN THE DISPOSAL OF THE CASE. IT IS POSSIBLE IN CERTAIN CASES THAT IN ORDER TO RENDER A FINDING IN RESPECT OF A, A FINDING IN RESPECT OF B MAY BE CALLED FOR. FOR INSTANCE, WHERE THE FACTS SHOW THAT THE INCOME CAN BELONG EITHER TO A OR B AND NO ONE ELSE, A FINDING THAT IT BELONGS TO B OR DOES NOT BELONG TO B WOULD BE DETERMINATIVE OF THE ISSUE WHETHER IT CAN BE TAXED AS A'S INCOME. A FINDING RESPECTING B IS INTIMATELY INVOLVED AS A STEP IN THE PROCESS OF REACHING THE ULT IMATE FINDING RESPECTING A. IF, HOWEVER, THE FINDING AS TO A'S LIABILITY CAN BE DIRECTLY ARRIVED AT WITHOUT NECESSITATING A FINDING IN RESPECT OF B. THEN A FINDING MADE IN RESPECT OF B IS AN INCIDENTAL FINDING ONLY. IT IS NOT A FINDING NECESSARY FOR THE DISPOSAL OF THE CASE PERTAINING TO A. THE SAME PRINCIPLES SEEM TO APPLY WHEN THE QUESTION IS WHETHER THE INCOME UNDER ENQUIRY IS TAXABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION OR ANY OTHER ASSESSMENT YEAR. AS REGARDS THE EXPRESSION 'DIRECTION' IN S. 153(3)(II) OF THE ACT, IT IS NOW WELL SETTLED THAT IT MUST BE AN EXPRESS DIRECTION NECESSARY FOR THE DISPOSAL OF THE CASE BEFORE THE AUTHORITY OR COURT. IT MUST ALSO BE A DIRECTION WHICH THE AUTHORITY OR COURT IS EMPOWERED TO GIVE WHILE DECIDING THE CASE BEFORE IT . 18 . LET US NOW, IN THE ABOVE LIGHT, REVERT TO THE FACTS OF THE CASE BEFORE US. THE AUTHORITIES BELOW WERE DEALING WITH A DEEMING FICTION, I.E. DEEMED DIVIDEND, ABOUT AN INCOME. THE CASE OF THE ASSESSE WAS THAT THIS DEEMING FICTION OF DEEMED DIVIDEND COULD NOT BE INVOKED IN THE PRESENT CASE BECAUSE THE ASSESSE DID NOT HOLD THE SHAREHOLDINGS IN THE COMPANY WHICH HAD EXTENDED LOAN TO THE ASSESSE. THIS PLEA HAS BEEN ACCEPTED BY THE CIT(A), BUT, FOR ACCEPTING SUCH A PLEA, IT IS NOT A CONDITION PRECEDENT THAT THIS DE EMING FICTION MUST COME INTO PLAY IN THE HANDS OF SOME OTHER ASSESSE OTHER THAN THIS ASSESSE. WHETHER THE LOAN RECEIVED BY THE ASSESSE IS HELD TO BE DEEMED DIVIDEND IN THE CASE OF SOME OTHER PERSON OR NOT IS WHOLLY IRRELEVANT FOR DECIDING WHETHER OR NOT TH IS IS I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 9 OF 11 DEEMED DIVIDEND IN THE HANDS OF THIS ASSESSE OR NOT. LEARNED CIT(A) HOLDS THAT SINCE MEHUL P ASANAI IS A SHAREHOLDER IN THE SAID COMPANY, THE RECEIPT CAN BE ADDED AS DEEMED DIVIDEND IN THE HANDS OF MEHUL P ASNANI, BUT THEN WHAT HE OVERLOOKS IS THAT A LL THE CONDITIONS PRECEDENT FOR TAXING A RECEIPT AS DEEMED DIVIDEND ARE TO BE SATISFIED QUA THE ASSESSE IN WHOSE INCOME IS TO BE TAXED, AND BEING A SHAREHOLDER IS ONLY ONE SUCH PRECONDITION. LEARNED CIT(A) HAS, AS NOTED EARLIER IN THIS ORDER, OBSERVED THAT IF THE RECIPIENT OF LOAN IS NOT A SHAREHOLDER AND THE TRANSACTION IS COVERED BY THIS PROVISION, THE ADDITION IS TO BE MADE IN THE HANDS OF THE SHAREHOLDER , BUT THEN IT IS DIFFICULT TO COMPREHEND AS TO HOW ONE CAN COME TO A CONCLUSION THAT A TRANSACTION IS COVERED BY THIS PROVISION, I.E. DEEMING FICTION OF THE DEEMED DIVIDEND, WI THOUT EXAMINING THE TRANSACTION BETWEEN THE SHAREHOLDER OF THE COMPANY AND THE COMPANY IN WHICH SUCH SHARES ARE HELD. WITHOUT EVEN GIVING A FINDING ABOUT SATISFACTION OF ALL THES E CONDITIONS, LEARNED CIT(A) PROCEEDS TO HOLD THAT IT IS AN INCOME TO BE TAXED IN THE HANDS OF THE SHAREHOLDER I.E. MEHUL P ASNANI. IT IS A CLASSIC CASE OF PUTTING CART BEFORE THE HORSE AND IS WHOLLY BASED ON FALLACIOUS LOGIC. THE DIRECTION IS THUS NOT ONL Y UNNECESSARY BUT PATENTLY INCORRECT. VIEWED THUS, THE DIRECTION GIVEN BY THE CIT(A), FOR TAXABILITY OF THIS DEEMED DIVIDEND IN THE HANDS OF SHRI ASNANI , DOES NOT CONSTITUTE AN EXPRESS DIRECTION NECESSARY FOR DISPOSAL OF A CASE . NOTHING REALLY TURNS O N HIS DIRECTION, AS SUCH. EVEN IF THIS DIRECTION WAS CORRECT, LEARNED CIT(A) HAD NO BUSINESS TO GIVE SUCH A DIRECTION WITHOUT AFFORDING AN OPPORTUNITY OF HEARING TO THE AFFECTED PARTY AND THAT TOO WHEN IT WAS ABSOLUTELY NECESSARY TO DECIDE THE ISSUE IN AP PEAL BEFORE HIM. THERE IS A CERTAIN DEGREE OF RESTRAINT THAT IS EXPECTED OF THE APPELLATE AUTHORITIES IN DISCHARGE OF THEIR JUDICIAL FUNCTIONING. 1 9 . AS WE PART WITH OUR ADJUDICATION ON THIS ISSUE, WE MAY ALSO TAKE NOTE OF LEARNED DEPARTMENTAL REPRESENT ATIVE S CONTENTION THAT THE ASSESSE HAS NO LOCUS STANDI TO RAISE ANY GRIEVANCE AGAINST THESE DIRECTIONS AS HE IS NOT THE AGGRIEVED PARTY VIS - - VIS THESE DIRECTIONS. WE ARE UNABLE TO SEE ANY MERITS IN THIS PLEA EITHER. THE MANNER IN WHICH THE APPEAL HAS BE EN DECIDED BY THE CIT(A) GIVES AN I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 10 OF 11 IMPRESSION, WHICH IS A WHOLLY INAPPROPRIATE IMPRESSION AND WHICH HAS ALSO BEEN REITERATED BEFORE US BY THE LEARNED DEPARTMENTAL REPRESENTATIVE , THAT THE IMPUGNED ADDITIONS HAVE BEEN DELETED IN THE HANDS OF THE ASSESSE AS THESE ADDITIONS ARE REQUIRED TO BE MADE IN THE HANDS OF SOMEONE ELSE. THE DELETION OF THE IMPUGNED ADDITION IN THE HANDS OF THE ASSESSE COMPANY HAS BEEN THUS PROJECTED TO BE , THOUGH PERHAPS AT A SOMEWHAT SUBLIMINAL LEVEL, DEPENDENT OF THE ADDITION BEING CO NFIRMED IN THE HANDS OF THE DIRECTOR. THE DIRECTIONS GIVEN BY THE CIT(A) DO PREJUDICE INTERESTS OF THE ASSESSE INASMUCH AS THESE DIRECTIONS NOT BEING IMPLEMENTED MAY BE VIEWED AS DETRIMENTAL TO THE INTERESTS OF THE ASSESSE BUT THEN THE DIRECTIONS SUFFER FROM LEGAL INFIRMITIES , FROM GLARING PROCEDURAL FLAWS, AND ARE INCAPABLE OF BEING IMPLEMENTED ANYWAY . IN ANY CASE, SINCE THESE DIRECTIONS ARE GIVEN IN THE CASE OF THIS ASSESSE AND THE APPELLATE ORDER BY THE CIT(A) IN THE CASE OF THIS ASSESSE CANNOT BE CH ALLENGED , IN APPEAL BEFORE US, BY A THIRD PARTY, THE ONLY WAY TO PREVENT THESE DIRECTIONS REACHING THE FINALITY IS A CHALLENGE BY THIS ASSESSE HIMSELF, PARTICULARLY BECAUSE, AS IS THE SETTLED LEGAL POSITION, THE STATUTORY PROVISIONS ARE TO BE CONSTRUED UT RES MAGIS VALEAT QUAM PEREAT I.E., IN SUCH A MANNER AS TO MAKE IT WORKABLE RATHER THAN REDUNDANT . THE ASSESSE BEFORE US, THEREFORE, HAS, IN OUR CONSIDERED VIEW, LOCUS STANDI TO CHALLENGE LEGALITY OF THESE DIRECTIONS. 20 . IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE VACATE THE DIRECTIONS IN QUESTIONS. THE CROSS OBJECTION IS THUS ALLOWED. 2 1 . IN THE R ESULT, THE APPEAL IS DISMISSED AND THE CROSS OBJECTION IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST DAY OF AUGUST 2015. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 31 ST DAY OF AUGUST , 201 5 . I.T.A. NO.: 443/AHD/11 CO NO. 71/AHD/11 ASSESSMENT YE AR: 2006 - 07 PAGE 11 OF 11 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD