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TMI Blog2015 (8) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... as returned by the assessee was accepted by the Assessing Officer. Subsequently, a survey action under S.133A was carried out in the case of M/s. Aster Pvt. Ltd. on 25.1.2011. As revealed during the course of survey, the proprietary concern of the assessee, M/s. Aster Industries had actually not provided any staff services to M/s. Aster P. Ltd. In the statement recorded during the course of survey, Shri A.Srinivasa Prasad, CEO of M/s. Aster P. Ltd. and brother of the assessee admitted that there were no such staff services actually provided by M/s. Aster Industries during the year under consideration and the said concern was merely a namelender. He also agreed to offer to tax the amount claimed to be paid to M/s. Aster Industries towards providing staff services in the hands of M/s. Aster P. Ltd. and accordingly, filed a revised return of the said company, admitting such additional income. 3. On the basis of the information gathered during the course of survey carried out in the case of M/s. Aster P. Ltd., the assessment of the assessee for the year under consideration was reopened by the Assessing Officer and a notice under S.148 was issued by him on 14.3.2011 after recording th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Limited and M/s.Aster Private Limited were regular business transactions and the provisions of S.2(22)(e) therefore were not attracted. The Assessing Officer did not find merit in this objection of the assessee and rejecting the same, he made the addition on account of deemed dividend under S.2(22)(e) also in the hands of the assessee on protective basis. Accordingly, in the assessment completed under S.143(3) read with S.147 vide order dated 30.12.2011, the total income of the assessee was determined by the Assessing Officer at Rs. 5,82,92,082. 6. Against the order passed by the Assessing Officer under S.143(3) read with S.147, an appeal was preferred by the assessee before the learned CIT(A) challenging the validity of the assessment as well as disputing inter alia the addition made therein on account of deemed dividend under S.2(22)(e). On the preliminary issue challenging the validity of the reopening of the assessment, the following submissions were made on behalf of the assessee before the learned CIT(A)- "....... a) That the original assessment was completed ujs.143(3) on 12.11.2009 accepting the income returned. b) The reasons recorded by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 7. The learned CIT(A) did not find merit in the above submissions made by the assessee, and rejecting the same, he uphold the validity of the assessment made by the Assessing Officer under S.143(3) read with S.147 for the following reasons given in paragraph No.3.2 of the impugned order. "3.2. The information on record is carefully examined. The point is, whether there was a 'reason to believe' that the income had escaped assessment at the time of issue of notice u/s.148. The answer is quite apparent that during survey u/s.133A on 25.01.2011, the key individuals connected with the business of the appellant have categorically admitted that the assessee did not provide any services. Moreover, this issue was never verified in the original assessment made u/s.143(3). In the case of Consolidated Photo & Finvest Ltd. vs. ACIT 281 ITR 394 (Del), the Hon'ble High Court held that principle of change of opinion is not applicable where the Assessing Officer did not address the issue in original assessment. Hence at the time of issue of notice u/s.148, there was a valid reason for the Assessing Officer. Therefore, notice u/s.148 is valid. It is also pertinent to mention that M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inting Pvt. Ltd. 318 ITR (Del.) - CIT vs. Rajkumar 318 ITR 462 (Del.) - ACIT vs. Harshad V.Doshi (2011) 49 DTR 181 (Chennai) d) The intention behind all these transactions is not to benefit the shareholder, i.e. Smt.U.Rajani." 9. The above submissions made by the assessee did not find favour with the learned CIT(A), who confirmed the addition made by the Assessing Officer under S.2(22)(e) to the total income in the hands of the assessee, on substantive basis, for the following reasons given in paragraph No.5.5 of the impugned order. "5.5. The information on record is carefully examined. It is not in dispute that the assessee holds substantial interest in both the firms, namely, M/s.Aster Pvt. Ltd., and M/s.Aster Infrastructure Pvt. Ltd. The appellant's only submission is that the transactions between M/s.Aster Pvt. Ltd. and M/s. Aster Infrastructure Pvt. Ltd., were in the nature of regular business transactions, and there is no intention to benefit M/s.U.Rajani, the shareholder. The percentage of share holding of appellant in M/s.Aster Teleservices Pvt. Ltd., as on 31.03.206 and as on 31.03.2007 was, 38%. The percentage of shareholding in M/s.Aster Infrastructure Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer that it had come to the notice during the course of survey operations carried out under S.133A of the Act in the case of M/s.Aster Infrastructure Private Limited on 25.1.2011 that the claim of the assessee of having incurred loss in the proprietary concern of M/s. Aster Indsutry was bogus in as much as the staff services claimed to be rendered by the said proprietary concern to M/s. M/s.Aster Private Limited were not actually rendered. In his statement recorded during the course of survey, Shri A.Srinivasa Prasad, CEO of M/s. Aster P. Ltd. only admitted that the proprietary concern, M/s. Aster Industries was not only a name lender, but also surrendered additional income in the hands of M/s. Aster P. Ltd. on account of payment claimed to be made to the proprietary concern, thereby accepting it to be bogus. This entire information had come to the possession of the Assessing Officer as a result of survey carried out on 25.1.2011 in the case of M/s.Aster Private Limited, only after completing the scrutiny assessment in the case of the assessee on 12.11.2009, and since the said assessment was reopened by him on the basis of such information coming to his possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng business connections and being deeply connected for business purposes, they also extend mutual help to each other by financing for their business needs. 13. The learned counsel for the assessee also invited our attention to the statement giving the entire details of the transactions between M/s.Aster Infrastructure Private Limited and M/s.Aster Private Limited and pointed out that the said transactions reflect regular business transactions involving transfer of funds, payment of service charges, labour payments, material costs, etc. He contended that this stand taken by the assessee before the Assessing Officer as well as before the learned CIT(A), however, was not properly appreciated by them and the same was rejected without giving any valid and cogent reasons, by merely observing that there was nothing on record to support the assessee's version that the relevant transactions are regular business transactions. In this regard, he invited our attention to the relevant ledger account of M/s. Aster Infrastructure Private Limited in the books of M/s.Aster Private Limited and pointed out that the nature of transactions as well as their frequency was evident from the statement of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of the relevant transactions as business transactions on the basis of relevant supporting documentary evidence. He contended that the assessee company however has failed to discharge the onus in the present case, which has resulted in the addition under S.2(22)(e). 16. In the rejoinder, the learned counsel for the assessee submitted that the nature of relevant transactions was duly reflected in the relevant books of account and if at all, such nature is not verified either by the Assessing Officer or by the learned CIT(A) as contended by the Learned Departmental Representative, the addition made by them under S.2(22)(e) cannot be sustained. 17. We have considered the rival submissions and also perused the relevant material on record. It is observed that the nature of the relevant transactions between the M/s. Aster P. Ltd. and M/s. Aster Infrastructure P. Ltd., which are treated as deemed dividend in the hands of the assessee, was claimed to be that of regular business transactions by the assessee from the assessment stage. The Assessing Officer, however refused to look into this vital aspect and made the addition under S.2(22)(e) on account of deemed dividend in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing services to the telecom operators hires on a regular basis the services of ATPL for the purposes of installation of the towers, the other related operational and maintenance services such as diesel generator maintenance, power supply and various such ancillary activities at the leased tower sites. Thus from the above, it is seen that the company AIPL and ATPL both being sister concerns, of the same Group, have a strong business connection wherein ATPL is a vendor and a service provider to the appellant. (2). Analysing the nature of transactions between the AIPL and ATPL it is seen that in view of the day to day business connection between the two concerns, regular ongoing business transactions take place between the appellant and ATPL for the purposes of business wherein regular payments and receipts are made with respect to supply of material, towers, shelters, antenna, labour, services at the various sites. These payments/receipts are all debited/credited to the site accounts. Also payments in connection with erecting of towers, site maintenance etc involving payment of service charges, labour payments, material cost etc. are incurred between the two companies. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to supply of material, towers, shelters, labour, services at various sites etc. All these transactions were duly reflected in the running accounts maintained in the books of account. It appears that the learned CIT(A) however, has not appreciated this explanation in proper perspective and simply brushed aside the same by saying that there was no documentary evidence to support and substantiate it. 19. As rightly contended by the learned counsel for the assessee, the relevant transactions were duly recorded in the books of account regularly maintained and the nature of the said transactions was verifiable from the relevant ledger account itself. If it is the case of the Revenue that no such verification was done either by the Assessing Officer or by the learned CIT(A), it's case of applicability of S.2(22)(e) without ascertaining the nature of the relevant transactions would certainly fail. 20. At the time of hearing before us, the learned counsel for the assessee has also filed a copy of the ledger account of M/s. Aster Infrastructure P. Ltd. in the books of M/s. Aster P. Ltd. In the said running account, opening debit balance as on 1st April, 2006 was Rs. 2,08,90,132 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by another company having common directors not being a loan, but an advance for business transaction which is to be adjusted against the moneys payable by the latter to the assessee in subsequent years, does not fall within the definition of 'deemed dividend' under S.2(22)(e). It was held that the amount advanced for business transaction between parties, are not such to fall within the definition of 'deemed dividend' under S.2(22)(e). This proposition is reiterated by the Hon'ble Delhi High Court in the case of CIT V/s. Alpex Exports Pvt. Ltd. (361 ITR 297), wherein it was held that trade advances which are in the nature of money transacted to give effect to commercial transactions would not fall within the ambit of S.2(22)(e). Keeping in view the ratio of these judicial pronouncements and having regard to all the facts of the case, as discussed above, we are of the view that the relevant transactions between M/s. Aster Infrastructure P. Ltd. and M/s. Aster P. Ltd. being in the nature of business/commercial transactions, are outside the purview of S.2(22)(e) and the addition made by the Assessing Officer and confirmed by the learned CIT(A) on account of 'deemed dividend' by tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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