2017 (1) TMI 1723 - AT - Income Tax

Reopening of assessment u/s.147 - deemed dividend addition - Concern in which the assessee is a member beneficiary, held more than 10% of the shares of the company, the loan to the extent of accumulated profits of the company is to be treated as deemed dividend in the hands of the assessee as per the provisions of section 2(22)(e) - HELD THAT - From the recorded reasons of AO it will be seen that no new material had come to the knowledge of the Assessing Officer after processing of the return on 28.5.2008, the income chargeable to tax has escaped assessment. On the basis of the return of income filed by the assessee, subsequently, the AO came to the conclusion that the loan/advance received by the assessee from of M/s. Sherawali Rice Mills Pvt Ltd., Boudh was assessable u/s.2(22)(e) of the Act as deemed dividend -Reopening of the assessment is bad in law as it is trite law that the reopening of assessment cannot be made on the very same set of facts, which were before the Assessing Officer at the time of processing of the return as it will amount to change of opinion. See M/S ATMA RAM PROPERTIES PRIVATE LIMITED. VERSUS DCIT 2011 (11) TMI 51 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to reopening of assessment u/s.147 of the Act.

Analysis:
The appeal was filed by the assessee against the order of CIT(A)-1, Bhubaneswar, challenging the reopening of assessment made by the Assessing Officer u/s.147 of the Act for the assessment year 2007-08. The Assessing Officer observed that the assessee received a loan/advance of ?20,00,000 from a company in which the assessee held shares. The loan was considered deemed dividend u/s.2(22)(e) of the I.T. Act, leading to the reopening of the assessment. The assessee argued that the reopening was based on the same facts known to the Assessing Officer earlier and amounted to a change of opinion, citing legal precedents to support the argument.

The assessee contended that the Assessing Officer's failure to apply legal provisions could not be attributed to the assessee. Full and true disclosure of material facts was made, and any lapse in applying relevant sections was on the part of the assessing officer. The Hon’ble Delhi High Court's decision in a similar case was cited to support the argument that the error in applying a provision could have been corrected through revision but not through reassessment under Section 147 of the Act due to the limitation period.

The Departmental Representative (D.R.) conceded to the submissions made by the assessee. Considering the facts and circumstances, the Accountant Member held that the reopening of assessment by the Assessing Officer was bad in law. Consequently, the reassessment order was canceled, and the grounds of appeal of the assessee were allowed. Since the reassessment order was canceled, the other grounds of appeal of the assessee on the merits of addition were deemed infructuous and dismissed. Finally, the appeal filed by the assessee was allowed, and the order was pronounced in the open court on 05/01/2017 in the presence of the parties.