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TMI Blog2015 (9) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... ed addition in the hands of the assessee company has been thus projected to be, though perhaps at a somewhat subliminal level, dependent of the addition being confirmed in the hands of the director. The directions given by the CIT(A) do prejudice interests of the assessee inasmuch as these directions not being implemented may be viewed as detrimental to the interests of the assessee but then the directions suffer from legal infirmities, from glaring procedural flaws, and are incapable of being implemented anyway. In any case, since these directions are given in the case of this assessee and the appellate order by the CIT(A) in the case of this assessee cannot be challenged, in appeal before us, by a third party, the only way to prevent these directions reaching the finality is a challenge by this assessee himself, particularly because, as is the settled legal position, the statutory provisions are to be construed ut res magis valeat quam pereat i.e., in such a manner as to make it workable rather than redundant. The assessee before us, therefore, has, in our considered view, locus standi to challenge legality of these directions. Thus we vacate the directions in questions. - Decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant that the deemed dividend is to be made in the hands of the shareholder only. Accordingly, Assessing Officer is directed to remove the addition in respect of the deemed dividend in the hands of the appellant and make the said addition in the hands of the shareholder Shri Mehul P Asnani, in view of the decisions of the ITAT Special Bench and Bombay High Court. 4. The Assessing Officer is aggrieved of the relief so granted by the CIT(A), and is in appeal before us. 5. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 6. We find that there is no controversy or dispute about the fundamental legal position that unless the assessee is a shareholder in the company from which the amounts are received, such amounts cannot be taxed in his hands as deemed dividend under section 2(22)(e) of the Act. In the case of CIT v Daisy Packers Pvt Ltd (judgment dated 18th July 2012 in Tax Appeal No. 212 of 2010), Hon'ble jurisdictional High Court has, inter alia, noted that it is not necessary to go into other legal issues once it is an undisputed position that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the stand taken by the CIT(A). He submits that when the impugned addition was deleted solely on the ground that it was required to be taxed in the hands of the director concerned, the CIT(A) was quite justified in directing the Assessing Officer to bring it to tax in the hands of that director. 12. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 13. In our considered view, it is important to first understand the role played by the findings or directions of this nature. We are dealing with the assessment year 2006-07 and the order of the CIT(A) was served on the Assessing Officer on 5th January 2011. Obviously, the assessment must have attained finality, by the time the Assessing Officer came to know of these directions, since in terms of Section 153(1) no order of assessment shall be made under section 143 or section 144 at any time after the expiry of- (a) two years from the end of the assessment year in which the income was first assessable; or (b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has been heard before such directions are issued, the directions issued by the revisionary, appellate or judicial authority are an exercise in futility. This rider is equally relevant in respect of reopening of an assessment under section 154, as a result of the findings or directions of the revisionary, appellate or judicial authorities. 15. It is an undisputed position, on the facts of this case, that Shri Mehul P Asnani, in whose hands CIT(A) has directed this income to be added, has not been granted an opportunity of hearing by the CIT(A) before these directions were issued. Such being the admitted facts, its beyond doubt that a completed assessment cannot be disturbed or reopened to give effect to such findings or directions. 16. There is, however, an even more fundamental issue, and that issue is whether the direction that the deemed dividend income being brought to tax in the hands of Shri Asnani is a direction necessary for the disposal of case. This issue assumes significance in view of the legal position that, as held by Hon'ble Supreme Court in the case of CIT v. Rajinder Nath [(1979) 120 ITR 14 (SC)], As regards the expression direction in s. 153(3)(ii) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepting such a plea, it is not a condition precedent that this deeming fiction must come into play in the hands of some other assessee other than this assessee. Whether the loan received by the assessee is held to be deemed dividend in the case of some other person or not is wholly irrelevant for deciding whether or not this is deemed dividend in the hands of this assessee or not. Learned CIT(A) holds that since Mehul P Asanai is a shareholder in the said company, the receipt can be added as deemed dividend in the hands of Mehul P Asnani, but then what he overlooks is that all the conditions precedent for taxing a receipt as deemed dividend are to be satisfied qua the assessee in whose income is to be taxed, and being a shareholder is only one such precondition. Learned CIT(A) has, as noted earlier in this order, observed that If the recipient of loan is not a shareholder and the transaction is covered by this provision, the addition is to be made in the hands of the shareholder , but then it is difficult to comprehend as to how one can come to a conclusion that a transaction is covered by this provision, i.e. deeming fiction of the deemed dividend, without examining the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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