Sh. Aman Sharma, New Delhi V. ACIT, Faridabad

ITA 7026/DEL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5423 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Assessee Lawyers: RAJESH ARORA
• Keywords: Search and seizure; Deemed dividend
• Section: 143(3); 153A; 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A.NO. 7026 /DEL/20 1 4 AY: 2007 - 08 SH. AMAN SHARMA, C-25, GREATER KAILASH ENCLAVE-I, NEW DELHI VS. ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, FARIDABAD (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. RAJESH ARORA, CA DEPARTMENT BY : S HRI RAVI KANT GUPTA, SR. DR ORDER ORDER ORDER ORDER PER H.S. SIDHU, JM PER H.S. SIDHU, JM PER H.S. SIDHU, JM PER H.S. SIDHU, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 27.10.2014 OF THE LD. CIT(A),(CENTRAL), GURGAON PER TAINING TO ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE IN UPHOLDING ITS REOPENING U/S. 147 AND FURTHER UPHOLDING THE VALIDITY OF NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 WHICH IS BEYOND 2 JURISDICTION, VOID AB INITIO AND NEEDS TO BE QUASHED. 2. THE LD. CIT(A) HAS ERRED IN IGNORING ASSESSEES CONTENTION REGARDING NON DISPOSAL OF OBJECTIONS BY THE AO WHICH WERE RAISED BY THE ASSESSEE DURING THE ASSESSMENT YEAR AGAINST THE REOPENING OF CASE WHICH IS HIGHLY ARBITRARY, UNJUSTIFIED AND UNCALLED FOR. 3. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE IN UPHOLDING THE ADDITION U/S. 2(22)(E) OF RS. 18,00,000/- WHICH IS HIGHLY UNJUSTIFIED, UNCALLED FOR AND BAD IN LAW. 4. THE ASSESSEE CRAVES THE RIGHT TO ADD, AMEND OR MODIFY ANY GROUND OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT SEARCH AND SEIZURE OPERATION WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE ASSE SSEE ON 29.4.2008. NOTICE U/S. 153A(1)(A) OF THE ACT WAS ISSUED TO THE ASSESS EE ON 31.8.2009. IN RESPONSE TO THIS NOTICE RETURN DECLARING INCOME OF RS. 65,95 ,150/- WAS FILED ON 14.5.2010. ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED O N 24.12.2010 AT AN INCOME OF RS. 65,95,150/-. LATER ON IT WAS NOTICED THAT M/S GP AND COMPANY (P) 3 LTD., A COMPANY IN WHICH ASSESSEE IS A SUBSTANTIAL SHARE HOLDER HAS RAISED LOAN OF RS. 36,00,000/- FROM M/S SVS PROPMART (P) LTD. THE ASSESSEE IS HAVING MORE THAN 20% SHAREHOLDING IN BOTH THE COMPANIES. FURTHER IT IS ALSO SEEN THAT ACCUMULATED PROFIT OF PAYER COMPANY ARE ALSO POSITI VE. MOREOVER THE LOAN HAS NOT BEEN ADVANCED IN THE ORDINARY COURSE OF BUSINES S. THEREFORE FROM THE ABOVE FACTS, IT IS CLEAR THAT ALL THE CONDITIONS LAID DOW N IN SECTION 2(22)(E) OF THE ACT ARE CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE. HOW EVER, IN THIS CASE THERE ARE TWO SHAREHOLDERS SH. AMAN SHARMA AND SH. VIPIN SHAR MA WHO ARE HOLDING MORE THAN 20% SHARE HOLDING IN BOTH THE COMPANIES. HENC E, 50% OF THE LOAN OF RS. 36,00,000/- SHOULD BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE BEING A SUBSTANTIAL SHAREHOLDER. PROCEED INGS U/S. 147 OF THE ACT WERE INITIATED AND THE CASE WAS REOPENED AFTER OBTA INING APPROVAL FROM THE LD. COMMISSIONER OF INCOME TAX (CENTRAL), GURGAON. NOT ICE US. 148 OF THE ACT WAS ISSUED ON 14.3.2013 WHICH WAS DULY SERVED UPON THE ASSESSEE. IN RESPONSE THERETO, THE ASSESSEE STATED THAT RETURN FILED ON 1 4.5.2010 MAY BE TREATED AS HAVING BEEN FILED IN RESPONSE TO THE AFORESAID NOTI CE. THEREAFTER, A NOTICE U/S. 143(2) OF THE ACT WAS ALSO ISSUED AND ON 27.9.2013 THE AR OF THE ASSESSEE APPEARED AND FILED WRITTEN SUBMISSIONS. AFTER CONS IDERING THE SAID WRITTEN SUBMISSION, THE AO MADE THE ADDITION OF RS. 18 LAC S AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 83,95,150/- VIDE ORDER DATED 30 .9.2013 PASSED U/S. 4 147/143(3) OF THE ACT. AGAINST THE ASSESSMENT ORDER , THE ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 27.10.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED WI TH THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. DURING THE HEARING, LEARNED A.R. OF THE ASSESSEE SH. RAJESH ARORA, CA APPEARED AND STATED THAT THE ASSESEES CASE WAS R EOPENED BY ISSUING NOTICE U/S. 148 OF THE ACT ON 14.3.2013 (PB-17). IT WAS FURTHER STATED THAT ASSESSEE FILED DETAILED OBJECTIONS (PB-23-46) AGAINST THE NOTICE O F REASSESSMENT UNDER SECTION 147 OF THE ACT AND AO WITHOUT DISPOSING OF THE OBJE CTIONS FILED BY THE ASSESSEE, PASSED THE ASSESSMENT ORDER U/S. 147 OF THE ACT DAT ED 30.9.2013 THEREBY MAKING AN ADDITION OF RS. 18 LACS ON ACCOUNT OF DEE MED DIVIDEND U/S. 2(22)(E) OF THE ACT. HE FURTHER STATED THAT OBJECTIONS WERE FILED BY THE ASSESSEE AGAINST THE NOTICE U/S. 147 OF THE ACT, THEN THE AO IS BOUN D TO DISPOSE OF THE SAID OBJECTIONS BY A COMPREHENSIVE ORDER. FOR THIS ARGU MENT, HE PLACED RELIANCE UPON THE DECISION OF THE HONBLE GUJARAT HIGH COUR T IN THE CASE OF VISHWANATH ENGINEERS VS. ACIT (2013) 352 ITR 549 WHEREIN THE H ONBLE HIGH COURT HAS RELIED ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF GKN DRIVESHAFTS VS ITO REPORTED IN 259 ITR 19. IN VIEW OF ABOVE, HE RE QUESTED THAT RE-ASSESSMENT MAY BE QUASHED. 5 4. ON THE CONTRARY, THE LEARNED SR. DR, SH. RAVI KANT GUPTA, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND OBJECTED TO THE ABOVE ARGUMENT OF LD. AR OF THE ASSESSEE. HE STATED THAT AO HAD ISSUED NOTICE U/S. 148 OF THE ACT ON 14.3.2013 WHICH WAS DULY SERVED UPON THE ASSESSEE. THE ASSESSEE VIDE LETTER DATED 15.4.2013 HAS STATED THAT RETURN FILED ON 14 .5.2010 MAY BE TREATED AS HAVING BEEN FILED IN RESPONSE AFORESAID NOTICE. HE FURTHER STATED THAT ON 27.9.2013 THE AR OF THE ASSESSEE APPEARED AND FILED WRITTEN SUBMISSION WHICH WERE DULY EXAMINED AND WERE NOT ACCEPTABLE TO THE A O ON THE REASONS GIVEN AT PAGE NO. 4 OF THE ASSESSMENT ORDER, HENCE, HE RI GHTLY MADE THE ADDITION OF RS. 18 LACS. HE FURTHER STATED THAT LD. CIT(A) HAS RIGHTLY OBSERVED THAT THE ASSESEE RELIED UPON THE APEX COURT DECISION IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. VS. ITO (SUPRA) TO CONTENT THAT AO DID NOT DISPOSE THE OBJECTIONS RAISED BY THE ASSESSEE TO THE ISSUANCE OF NOTICE BY WAY OF SPEAKI NG ORDER. HOWEVER, IT HAS BEEN HELD IN THE CASE OF ITO VS. SMT. GURINDER KAUR (2006) 102 ITD 189 (DEL) THE TRIBUNAL HELD THAT NON- COMMUNICATION OF REASONS IS NOT FATAL IN THE LIGHT OF THE DECISION OF THE APEX COURT IN S. NARAYANAPPA VS. CI T (1967) 36 ITR 219 (SC). HE FURTHER STATED THAT THIS CASE RENDERED BY A BE NCH OF THREE JUDGES WHICH WAS NOT BROUGHT TO THE NOTICE OF SUPREME COURT IN THE C ASE OF GKN DRIVESHAFT (INDIA) LTD. THE ISSUE OF NOTICE U/S. 148 WAS THEREFORE RIG HTLY HELD TO BE VALID, WHICH NEEDS NOT INTERFERENCE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE C ASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 147/148 OF THE INCOME TAX AC T,1961 WHEREIN THE ADDITION OF RS. 18,00,000 WAS MADE ON ACCOUNT OF DE EMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. THE ASSESSEE HAS FILED AN APPEAL BEFORE THE LD. CIT(A), WHO UPHELD THE ADDITION OF RS. 18,00,000. WE FURTHER NOTE THAT IN THIS CASE A SEARCH DATED 01.06.2006 WAS CARRIED OUT IN T HE CASE OF THE ASSESSEE BY 6 VIRTUE OF WHICH ITS CASES WERE COVERED UNDER SECTIO N 153A OF THE ACT IN RESPECT OF AY 2001-02 TO 2007-08. ANOTHER SEARCH OPERATIONS DA TED 29.04.2008 TOOK PLACE IN THE PREMISES-OF 'SPAZE GROUP' INCLUDING TH E RESIDENTIAL PREMISES OF THE ASSESSEE, DUE TO WHICH ITS PENDING ASSESSMENTS PROC EEDINGS UNDER SECTION 153A OF THE ACT IN RESPECT OF AY 2003-04 TO AY 2007-08 A BATED BY OPERATION OF THE 2ND PROVISO TO SECTION 153A OF THE ACT. CONSEQUENT THERETO, THE RETURN OF INCOME FOR AY 2007-08 WAS FILED BY THE ASSESSEE ON 14.05.2 010 AT AN INCOME OF RS. 65,95,150/ - IN RESPONSE TO NOTICE DATED 31.08.2009 ISSUED, UNDER SECTION 153A OF THE ACT. THE ASSESSMENT UNDER SECTION 153A( I)(B) OF THE ACT WAS COMPLETED VIDE ORDER DATED 24.12.2010 AT RETURNED I NCOME OF RS. 65,95,150/-, THEREBY MAKING NO ADDITIONS IN THE SAID ASSESSMENT. 5.1 FURTHER, THE CASE OF THE ASSESSEE REOPENED BY I SSUING NOTICE UNDER SECTION 148 OF THE ACT ON 14.03.2013 [P.B.L7]. IN THE REASO NS OF REOPENING [P.B.L8] THE AO HAS RECORDED THAT M/ S G.P. & COMPANY PVT. LTD. HAS RAISED A LOAN OF RS. 36,00,000 FROM M/S SVS PROPMART PVT. LTD., IN WHICH THE ASSESSEE AND HIS BROTHER SH. AMAN SHARMA ARE HAVING MORE THAN 20% SH AREHOLDING IN THE COMPANIES. THE AO STATED THAT SH. AMAN SHARMA AND S H. VIPIN SHARMA (ASSESSEE) ARE HOLDING MORE THAN 20% SHAREHOLDING I N BOTH THE COMPANIES, HENCE, RS. 18,00,000 (BEING 50% OF THE LOAN OF RS. 36,00,000) SHOULD BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE APPE LLANT BEING A SUBSTANTIAL SHAREHOLDER. THEREAFTER, THE ASSESSMENT UNDER SECTI ON 147 OF THE ACT WAS COMPLETED AT AN ASSESSED INCOME OF RS. 83,95,150, T HEREBY MAKING AN ADDITION OF RS. 18,00,000 ON ACCOUNT OF DEEMED DIVIDEND UNDE R SECTION 2(22)(E) OF THE ACT. IN RESPECT TO THE ABOVE ADDITION, THE APPELLAN T FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN THE SAID ADDITION WAS UPHELD BY THE LD. CIT(A) VIDE ORDER DATED 27.10.2014. ON BEING AGGRIEVED BY THE ORDER OF LD.CIT (A), THE ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING 7 GROUNDS AND ARGUED THE GROUND NO. 2 REGARDING NON-D ISPOSAL OF OBJECTIONS BY THE AO WHICH WERE RAISED BY THE ASSESSEE DURING THE ASSESSMENT YEAR AGAINST THE REOPENING OF CASE WHICH IS HIGHLY ARBITRARY, UN JUSTIFIED AND UNCALLED FOR. WITH REGARD TO THIS GROUND, WE FIND THAT THE CASE O F THE ASSESEE WAS REOPENED BY ISSUING NOTICE U/S. 148 OF THE ACT ON 14.3.2013 (PB-17) AND IN RESPONSE TO THE SAME, THE ASSESSEE HAS FILED DETAILED OBJECTIONS (PB-23-46) AGAINST THE NOTICE OF REASSESSMENT UNDER SECTION 147 OF THE ACT AND AO WITHOUT DISPOSING OF THE OBJECTIONS FILED BY THE ASSESSEE, PASSED THE ASSESS MENT ORDER U/S. 147 OF THE ACT DATED 30.9.2013 THEREBY MAKING AN ADDITION OF RS. 1 8 LACS ON ACCOUNT OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. WE NOTE T HAT IT IS SETTLED LAW THAT IN CASE THE OBJECTIONS WERE FILED BY THE ASSESSEE AGA INST THE NOTICE U/S. 147 OF THE ACT, THEN THE AO IS BOUND TO DISPOSE OF THE SAID O BJECTIONS BY A COMPREHENSIVE ORDER, BUT IN THIS CASE THE AO HAS NOT DONE THIS, W HICH IS AGAINST THE MANDATE OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF VISHWANATH ENGINEERS VS. ACIT (2013) 352 ITR 549 WHEREIN, THE HONBLE HIGH COURT HAS RELIED ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF GKN DRIVESHAFTS VS ITO REPORTED IN 259 ITR 19. WE FIND THAT THE APEX COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. V. ITO [2003] 259 ITR 19/ [2002] 125 HAS OBSERVED AS UNDER:- 19. APART FROM THE AFORESAID FACT, IN CASE OF GKN DRIOESHAFTS (INDIA) LTD. (SUPRA), THE SUPREME COURT HAS CLEARLY LAID DOWN THE LAW THAT THE ASSESSING OFFICER IS BOUND TO DISCLOSE THE REASON OF REASSESSMENT WITHIN REASONABLE TIME AND ON RECEIPT OF THE REASONS, THE ASSESSEE IS ENTITLED TO RAISE OBJECTION AND IF ANY SUCH OBJECTION IS FILED, THE SAME MUST BE DISPOSED OF BY A SPEAKING O RDER BEFORE PROCEEDING TO REASSESS IN TERMS OF THE NOTICE EARLI ER GIVEN. 8 20. IN THE CASE BEFORE US, IN SPITE OF REPEATED REM INDERS BY THE ASSESSEE EVEN POINTING OUT THE ABOVE LAW LAID DOWN BY THE SUPREME COURT, THE ASSESSING OFFICER FAILED TO DISP OSE OF THE SAID OBJECTIONS AND INSTEAD OF THAT, STRAIGHTAWAY PASSED THE ORDER OF REASSESSMENT. 21. THUS, WE FIND THAT THE ASSESSING OFFICER ACTED WITHOUT JURISDICTION IN INITIATING THE PROCEEDINGS FOR REAS SESSMENT IN SPITE OF NON-EXISTENCE OF THE REQUIRED CONDITIONS SPECIFIED UNDER THE ACT- AND EVEN DID NOT CARE TO FOLLOW THE NORMS LAID DOWN BY THE SUPREME COURT IN THE ABOVE DECISION BY NOT DISPOSIN G OF THE OBJECTIONS BEFORE PASSING THE ORDER OF REASSESSMENT .' 5.2 IN VIEW OF THE BINDING DECISION OF THE HON'BLE SUPREME COURT, AS AFORESAID, THE RE-ASSESSMENT CANNOT BE SUSTAINED. A S OBSERVED HEREIN ABOVE THOUGH THE DETAILED OBJECTIONS WERE RAISED AGAINST REOPENING OF THE ASSESSMENT, THE AO DID NOT DISPOSE OF THE SAME TILL THE CONCLU SION OF RE-ASSESSMENT PROCEEDINGS AND PASSED ORDER UNDER SECTION 147 OF T HE ACT. 5.3 IN THE INSTANT CASE, LD. CIT(A) AT PARA 2 OF P AGE NO.9 OF THE ORDER HAS MADE AN ATTEMPT TO DISTINGUISH THE DECISION OF HON' BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. BY PLACING REL IANCE ON THE DECISION OF ITO VS. SMT. GURINDER KAUR (2006) 102 ITD 189 (DEL ITAT ) IN WHICH IT WAS HELD THAT NON-COMMUNICATION OF REASONS IS NOT FATAL. HOWEVER, LD. CIT(A) HAS BEEN MISLED BY THE SAID DECISION SINCE THE SAID JUDGMENT IS NOT APPLICABLE TO THE PRESENT FACTS OF THE CASE. THE ASSESSEE HAS NOT CONTESTED THE NON -COMMUNICATION OF REASONS BY THE AO BUT HAS CHALLENGED THE ACTION OF AO IN N OT DISPOSING OFF OBJECTIONS OF THE ASSESSEE WHICH IS MANDATED BY THE HON'BLE SUPRE ME COURT DECISION IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. 9 5.4 KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS EXPLAINED ABOVE AND RESPECTFULLY FOLLOWING THE PRECEDENT, AS AFORESAID, WE ARE OF THE CONSIDERED VIEW THAT AO IS UNDER A MANDATE TO DISPO SE OF SUCH OBJECTIONS BEFORE PROCEEDING WITH THE ASSESSMENT BY PASSING A SPEAKING ORDER, WHICH HAS NOT BEEN DONE BY HIM, THEREFORE, THE REASSESSMENT U NDER SECTION 147 CANNOT BE SUSTAINED AND HENCE, WE QUASH THE REASSESSMENT ORDE R AND ALLOW THE GROUND NO. 2 RAISED BY THE ASSESSEE. SINCE WE HAVE ALREADY QUASHED THE REASSESSMENT ORDER, THERE IS NO NEED TO ADJUDICATE THE OTHER GRO UNDS ON MERITS BEING ACADEMIC. 6. IN RESULT, THE APPEAL FILED BY ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON 26/04/2018. S SS SD DD D/ // /- -- - S SS SD DD D/ // /- -- - (L.P. SAHU) (L.P. SAHU) (L.P. SAHU) (L.P. SAHU) [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE: 26/04/2018 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES