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TMI Blog2014 (6) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... e the provisions of section 147 by ignoring mandatory conditions set out in proviso to the section - the action of AO clearly amounts to review of the assessment order which is not permissible under the Act - the re-assessment proceedings initiated against the assessee in both the AYs are without jurisdiction and are thus liable to be set aside. Deemed dividend u/s 2(22)(e) of the Act – Loans received – Held that:- The assessee is having substantial interest in both the companies – assessee contended that the amounts have been advanced by CEPL to CIPL in the normal course of business - there is no question of invoking provisions of section 2(22)(e) - both the companies are in the same line of business and are complementing the business of each other - CEPL apart from the fact, it has advanced loan to CIPL is also the holding company of CIPL - It has interest in the business of its subsidiary – Relying upon Farida Holdings P. Ltd. Vs. DCIT [2012 (6) TMI 235 - ITAT CHENNAI] - where regular business transactions are carried on by an assessee in its ordinary course of business with its subsidiary, they cannot be treated as deemed dividend for the purpose of section 2(22)(e) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against the assessment orders passed u/s.143(3) r.w.s.147 of the Act for the respective AYs, the assessee preferred appeals before the CIT(Appeals). The CIT(Appeals) upheld the validity of re-assessment proceedings and confirmed the assessment in the hands of the assessee and deleted the additions made u/s.2(22)(e) in the case of CIPL for both the AYs. Now, the assessee has come in second appeal before the Tribunal assailing the findings of the CIT(Appeals) for both the AYs. 3. Shri R.Vijayaraghavan, appearing on behalf of the assessee submitted that the re-opening of assessment beyond the period of four years without valid reasons is bad in law. The ld.Counsel for the assessee submitted that the Revenue has not been able to show from records that the assessee had not disclosed fully and truly all material facts in its return of income. The ld.Counsel further contended that CEPL is not only creditor of CIPL but is also having substantial shareholding (35%) in CIPL. Both the companies are complementing each other s business and the loans have been advanced in the normal course of business. Reassessment proceedings have been initiated as a result of chage of opinion. In order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year . A close reading of proviso to section 147 of the Act makes it un-ambiguously clear that no action can be taken under the section after the expiry of four years unless income chargeable to tax has escaped assessment for the failure on the part of the assessee either to file return u/s.139 or in response to the notice issued u/s.142(1) /148 or to disclose fully and truly all material fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also been recorded that such escapement was due to the failure of the assessee to disclose fully and truly all material particulars necessary for that AY. Such recording is absolutely mandatory. Further, the Hon ble Madras High Court in the case of Fenner (India) Ltd., Vs. DCIT reported as 241 ITR 672 (Mad) has held: Whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred to in the main paragraph of section 147 would, in cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147 . Similar view has been taken by the Hon ble Delhi High Court in the case of E.I. Dupont India Pvt. Ltd and another Vs. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. The assessee is having substantial interest in both the companies. The assessee is having 90% shareholding in CEPL and 54% shareholding in CIPL. CEPL is also having 35% shareholding in CIPL. Thus, CIPL is a subsidiary of CEPL within the meaning of section 4 of the Companies Act, 1956. The ld.Counsel for the assessee has submitted that the amounts have been advanced by CEPL to CIPL in the normal course of business. Therefore, there is no question of invoking provisions of section 2(22)(e). It is not disputed that both the companies are in the same line of business and are complementing the business of each other. CEPL apart from the fact, it has advanced loan to CIPL is also the holding company of CIPL. It has interest in the business of its subsidiary. It is not the case of Revenue that the sums were advanced by CEPL to CIPL at the behest of the assessee or for the personal gains of the assessee. 10. The co-ordinate Bench of the Tribunal in the case of Farida Holdings P. Ltd., Vs. DCIT (supra) while adjudicating similar issue has held that where regular business transactions are carried on by an assessee in its ordinary course of business with its subsidiary, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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