2017 (11) TMI 579 - HC - Income Tax

Reopening of assessment - Deemed dividend u/s 2(22)(e) - Held that - Since the assessment order has already been done and pursuant to the interim order passed by this Court, the petitioner is on appeal before the Commissioner, it is appropriate for the petitioner to pursue such appeal remedy, since the Commissioner, being the fact finding authority, would be able to appreciate/reappreciate the factual position and take note of the legal position. It is needless to state that the Commissioner (Appeals), while deciding the appeal, first decide the question as to whether the reopening of the assessment and assumption of jurisdiction under Section 147 of the Income Tax Act was justified or was it erroneous as done on the factual matrix.

Summary

Issues:
1. Rejection of objections for reopening assessment for Assessment Years 1999-2000 and 2000-01
2. Barred by limitation
3. Appeal before the Commissioner of Income Tax (Appeals-11)
4. Legal and factual contentions raised
5. Primary contention challenging the reopening
6. Interpretation of Section 2(22)(e)
7. Consideration of judgments
8. Jurisdiction under Section 147 of the Income Tax Act

The petitioner filed a writ petition seeking to quash the order rejecting objections for reopening assessment for the Assessment Years 1999-2000 and 2000-01, arguing that the reopening is barred by limitation. The Court granted an interim order allowing assessment proceedings to continue but withholding implementation until a stay petition is resolved. The petitioner appealed to the Commissioner of Income Tax (Appeals-11) challenging the assessment order. The respondent contended that all issues raised in the writ petition were also argued before the appellate authority, including legal and factual contentions.

The Court directed the appellate authority to consider all issues raised by the petitioner, emphasizing the primary contention that the reopening was erroneous as the assessing officer lacked reason to believe income had escaped assessment. The petitioner argued that Section 2(22)(e) did not apply since the assessee company was not a registered shareholder in the lender company, citing relevant judgments. Referring to a Tribunal decision, the petitioner claimed that not being registered as the beneficial owner exempted them from taxation under Section 2(22)(e).

It was deemed appropriate for the petitioner to pursue the appeal remedy before the Commissioner (Appeals) to allow for a comprehensive review of both factual and legal aspects. The Court disposed of the writ petition by directing the Commissioner (Appeals) to consider the appeal, specifically assessing the justification for the reopening before addressing other issues. The assessment made pursuant to the reopening was ordered to be kept in abeyance until the Commissioner (Appeals) issued a decision. No costs were awarded in this judgment.