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TMI Blog2010 (12) TMI 1219X X X X Extracts X X X X X X X X Extracts X X X X ..... t the business of M/s, GIL, the said transactions are not covered by the exclusions provided in section 2(22)(e) of the Income-tax Act, 1961. 3. The Ld. CIT(A) further failed to appreciate that advance for the purpose of section 2(22)(e) may be even by way of transfer of goods and use of the word any payment in the context of advance/loan, signifies that each of the payments made when the payee is not already a creditor, constitutes advance [M.D. Jindal Vs. CIT 64 ITR 28 (Ca;)] and hence, the payments made even in the running account when the payee has a debit balance all along are hit by section 2(22)(e). [CIT Vs. P.K. Badiani 76 ITR 369 (Bom)]. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the reopening and the issue of notice u/s. 147 was bad in law and invalid as the reopening is on account of change of opinion by fresh application of mind on the same set of facts which is barred by proviso to section 147 and in not considering decision in the case of Bawabhai SingVs. DCIT (2001) 117 Taxman 12 (Del). 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred to interpret Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jindal Vs. CIT 64 ITR 28(Cal) and also Hon'ble Bombay High Court judgment in the case of CIT Vs. P.K. Badiani 76 ITR 269 (Bom) to submit that even the business transactions also are covered by the provisions of section 2(22)(e). It was further submitted that the exception provided under the section is only with reference to lending of money in assessee s business and since the assessee is not in the money lending activity all transactions are covered by the provisions of section 2(22)(e). It was his submission that the CIT(A) has erred in treating the transactions with the assessee company the subsidiary M/s Gujarat Insecticides Ltd. as normal commercial transactions not covered by provisions of section 2(22)(e). 5. With reference to ground Nos. 4 5 it was his submission that the deemed dividends are taxable under the head Other sources and assessee has not disclosed any income the head Other sources with reference to the transactions and so there is failure on the part of the assessee in making full and complete disclosure and accordingly provisions of section 147 are attracted. He elaborated the principles while contesting the findings of the CIT(A) on the issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Audited Accounts filed alongwith the return. Specific disclose was made of purchase of ₹ 19.89 crores in the note. As per paper book, page 17 a letter dated 14.2.2005 was issued by the AO calling upon assessee interalia to give details of sales/purchase with name of party and details of product sold/purchased. Therefore, the reassessment is based on a reappreciation of facts and circumstances already on record. Since the notice has been issued beyond the limitation period of 4 years, the appellant s case falls under proviso to s. 147 which enable the AO to reopen only if there is failure on part of the assessee to disclose fully and truly all material facts. The reasons as recorded do not indicate that income has escaped assessment on account of failure on the part of the assessee to disclose material facts. Hence there is merit in the contention of the appellant that reopening is based on change of opinion. This ground is allowed. Reliance placed on decision of the Hon'ble Bombay High Court reported in (2009) 224 CTR (Bom) 82. 8. In arriving at the above conclusion the CIT(A) also relied on the decision of the Hon'ble Bombay High Court in the case of Cartini Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absent in the present case. There is merit in the submission which has been urged on behalf of the assessee that an exceptional power has been conferred upon the revenue to reopen an assessment after a lapse of four years. The conditions which are prescribed by the statute for the exercise of such a power must be strictly fulfilled and in their absence, the exercise of power would not be sustainable in law. Though an attempt was made on behalf of the Revenue to urge that the assessee should be relegated to the ordinary remedy of an appeal against the order of the assessment, a petition under Art. 226 of the Constitution would be maintainable for questioning reopening of the assessment in a case as this where the preconditions for the exercise of the power have not been fulfilled. For the reasons aforesaid, recourse to the power under s. 147 cannot be sustained on a mere change of opinion, there being no failure on the assessee to disclose fully and truly all material facts necessary for assessment. The basic condition prescribed by the statute for the exercise of the power has not been fulfilled. 10. The principles established by the Hon'ble Bombay High Court equally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of loans. The purpose being that persons who manage such closely held companies should not arrange their affairs in a manner that they assist the shareholders in avoiding the payment of taxes by having these companies pay or distribute, what would legitimately be dividend in the hands of the shareholders' money in the form of an advance or loan. The word advance has to be read in conjunction with the word loan . Usually attributes of a loan are that it involves the positive act of lending coupled with acceptance by the other side of the money as loan : it generally carries interest and there is an obligation of repayment. On the other hand, in its widest meaning the term advance may or may not include lending. The word advance if not found in the company of or in conjunction with a word loan may or may not include the obligation of repayment. If it does, then it would be a loan. Thus, arises the conundrum as to what meaning one would attribute to the term advance . The rule of construction which answers this conundrum is noscitur a sociis. The rule has been explained both by the Privy Council in the case of Angus Robertson v. George Day [1879] 5 AC 63 by observing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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