2019 (3) TMI 1553 - HC - Income Tax

Power of tribunal to pass order based on oral concession by AR - Non consideration of grounds of appeal and written submission available on record - issue relates to reopening of assessment u/s 147 deemed dividend u/s 2(22)(e) - identical issue came up for consideration before the Tribunal in the Assessee's own case - HELD THAT - In the present case despite the fact that it was brought to the knowledge of the Assessing Authority by way of written submission on 9.4.2018 that an identical issue came up for consideration before the Tribunal in the Assessee own case for the Assessment Year 2011-12 wherein Tribunal had remitted the case to the Assessing Officer for fresh consideration for verifying as to whether the amount has finally moved or reached to the individual Assessee or not, the Tribunal has proceeded to record such a concession as having been made on behalf of the Assessee. No justification on the part of the learned Members of the Tribunal to record any such concession on behalf of the Assessees and make additions invoking the provision under Section 2(22)(e) of the Act in the hands of the individual Assessees viz., the shareholders of the two Companies. Unless the findings of facts are returned by the Assessing Authority on the basis of materials that the money was received by the person concerned, there was no question of taxing the same as 'deemed dividends' in the hands of the individual Assessees, who are Directors/Shareholders with substantial interest. We, therefore, cannot sustain this type of orders passed by the learned Members of the Tribunal and we are sorry to note this kind of concessions recorded unauthorisedly by the learned Members of the Tribunal. Expressing again our anguish and pain on the same, we direct that in future, if any such concession is made by any Authorised Representative on behalf of the Assessees, the Tribunal should take either an Affidavit from Assessee and the counsel on behalf of the Assessee or atleast a written endorsement made on the record of the case duly signed by them, so that no such occasion of taking a stand otherwise or contra to the alleged concession made by them, would arise before the higher Courts. Appeals of the Assessee allowed and remit the matters to the Assessing Authority for the Assessment Year 2006-2007 for deciding the same as done in the Assessment Year 2011-2012

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer to re-open assessment under Section 147 of the Income Tax Act, 1961.
2. Consideration of protective reassessment under Section 147 of the Act.

Issue 1: Jurisdiction of Assessing Officer under Section 147:

The Appeals raised questions regarding the Income Tax Appellate Tribunal's decision not to consider the Assessing Officer's jurisdiction to re-open the assessment under Section 147 of the Income Tax Act, 1961. The Tribunal's order involved the addition of a specific amount in the hands of each shareholder based on deemed dividend provisions. The Tribunal found merit in the argument that adding the same amount to both shareholders would lead to double taxation, and the provisions of Section 2(22)(e) of the Act should be applied proportionately. The Tribunal concluded that the aggregate additions in the shareholders' hands cannot exceed the total amount, hence directing a proportionate split between the shareholders.

Issue 2: Consideration of Protective Reassessment:

The Appellants contended that the Tribunal erred in converting the protective assessment into a substantive one without proper concession or pleading. The Appellants argued that the loans and advances were made between companies and not directly to the shareholders, thus should not be taxed as deemed dividends in the shareholders' hands. The High Court criticized the Tribunal for recording concessions improperly and without proper verification, citing a similar instance in another case. The Court emphasized the Tribunal's role as a fact-finding body and expressed displeasure at the unauthorized concessions recorded. The Court directed that any concessions made in the future should be supported by affidavits or written endorsements to avoid misinterpretations in higher courts.

In conclusion, the High Court allowed the Appeals, remitting the matters to the Assessing Authority for further consideration, similar to a previous case from 2011-2012. The Court highlighted the importance of proper recording of concessions by the Tribunal to avoid misinterpretations and directed wider circulation of the order for awareness among all concerned parties.