2018 (1) TMI 1114 - HC - Income Tax

Reopening of assessment - deemed dividend addition u/s 2(22)(e)- Held that - AO had during the assessment proceedings, leading to the order dated 14th February, 1996 under Section 143(3) of the Act had examined the very issue of deemed dividend in respect of loans taken from M/s. A.T.C. Clearing and Shipping (P) Ltd. On complete inquiry, the Assessing Officer in his assessment order dated 14th February, 1996 after a detailed discussion on the issue, added ₹ 8.17 lakhs as deemed dividend under Section 2(22)(e) of the Act. This on the basis of loans taken from M/s. A.T.C. Clearing and Shipping (P) Ltd. The reasons as recorded now seeks to take a different view (change of opinion) on the same material on which the original assessment order dated 14th February, 1996 was passed after due consideration to hold that income chargeable to tax has escaped assessment. Thus the impugned notice is completely without jurisdiction as it is based purely on a change of opinion - Decided in favour of assessee.

Summary

Issues:
Challenge to Notice under Article 226 of the Constitution of India for reopening assessment for Assessment Year 1994-95 based on deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961.

Analysis:
1. The petition challenges the Notice dated 10th August, 1998, seeking to reopen the assessment for Assessment Year 1994-95 under Article 226 of the Constitution of India. The Assessing Officer added an amount as deemed dividend under Section 2(22)(e) of the Act during the original assessment, resulting in a total taxable income of &8377; 14.90 lakhs.

2. The reasons recorded for reopening the assessment highlighted that the Assessing Officer considered only the credit balance in the account, leading to under-assessment. The petitioners argued that the impugned notice was without jurisdiction, as it was based on a change of opinion regarding the same material already considered during the original assessment.

3. The petitioners contended that the impugned notice, issued within four years from the end of the relevant assessment year, was in respect of an assessment done under Section 143(3) of the Act. The court referred to the Apex Court's decision in Commissioner of Income Tax Vs. Kelvinator of India Ltd., emphasizing the importance of having tangible material to justify reopening an assessment.

4. The court found that the Assessing Officer had already examined the issue of deemed dividend during the original assessment proceedings, resulting in the addition of &8377; 8.17 lakhs under Section 2(22)(e) of the Act. The reasons recorded for reopening did not present any new tangible material that was not previously available and examined during the initial assessment.

5. Consequently, the court held that the impugned notice was devoid of jurisdiction as it was solely based on a change of opinion, attempting to review the original assessment order. The court quashed and set aside the Notice dated 10th August, 1998 issued under Section 148 of the Act, ruling in favor of the petitioners.