2024 (11) TMI 1387 - HC - Income Tax

Validity of reopening of assessment - invoking the extended period of limitation - Addition of deemed dividend u/s 2(22)(e) as assessee had purchased a property and for acquiring the property assessee received entire amount from the company in which assessee holds 29% of shares - whether there was any tangible material that was available for reopening the assessment? HELD THAT - The fact that emerges from the discussion above, it is clear that a sum was sought to be added to the income of the petitioner as deemed income vide Assessment order dated 29.12.2017. The petitioner unsuccessfully challenged the same before the CIT (Appeals) who by an order dated 08.09.2022 had rejected the petitioner's Appeal. The Tribunal has now reversed the decision of the Commissioner's Appeal dated 08.09.2022 affirming the Assessment order dated 29.12.2017. The attempt of the Department is to merely includes an additional amount over and above a sum which was the subject matter of the earlier Assessment order which stands deleted. In the light of the above development and in the light of the fact that the Appeal itself has been withdrawn it has to be construed that the issue stands answered against the Revenue and in favour of the Petitioner.

Summary

Issues:
Challenge against reopening of assessment for Assessment Year 2015-2016 based on Impugned Notice/Communication dated 26.03.2021 and consequential Speaking Order dated 17.02.2022.

Analysis:
The petitioner contested the Impugned Notice/Communication dated 26.03.2021 to reopen the assessment for the Assessment Year 2015-2016. The petitioner, along with his mother, invested in a flat and the petitioner's mother contributed a portion from the sale of her shares. The petitioner argued that the invocation of Section 148 of the Income Tax Act, 1961 lacked jurisdiction. The petitioner repaid the loan amount and had previously appealed against the assessment, which was rejected by the Commissioner of Income Tax (Appeals) and later by the Income Tax Appellate Tribunal. The petitioner challenged the addition of a specific amount as "deemed income" in the earlier assessment order. The petitioner contended that there was no tangible material for invoking the extended period of limitation under Section 147 of the Act.

The respondents, represented by the Senior Standing Counsel, argued that the ITAT order did not attain finality due to low tax effect and the Department was not precluded from reopening the assessment. They highlighted a provision of the Companies Act, 2013 regarding loans to directors and questioned the repayment explanation. The petitioner's counsel countered by providing details of the accounts from which payments were made. The respondents emphasized the relevance of determining the escaped amount for reopening the assessment and challenged the ITAT order's correctness.

The court reviewed the arguments from both sides and examined the reasons communicated for reopening the assessment. It noted the previous addition of a specific amount to the petitioner's income and subsequent appeals. The court found that the Department sought to add an additional amount over the earlier assessment order, which was subsequently deleted. Considering these developments and the withdrawal of the appeal, the court concluded in favor of the petitioner, allowing the writ petition and closing the connected miscellaneous petitions.