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TMI Blog2011 (7) TMI 1345X X X X Extracts X X X X X X X X Extracts X X X X ..... venue relating to same assessment years. One appeal of the assessee is against the order of Commissioner of Income Tax, Chennai-III, under Section 263 of Income-tax Act, 1961 (in short the Act ) for assessment year 2003-04. Cross-objections of the assessee for assessment years 2003-04 and 2004-05 have similar grounds and assail jurisdiction of the A.O. to do the assessments as well as reopening done for respective assessment years. Since these go to the root of the matter, the cross-objections are decided first. 4. As mentioned above, the grounds raised vide the cross- objections for both the assessment years are similar. Two issues are raised in these cross-objections. First one is that the original notice having been issued by ITO, Company Circle IV(2), the completion of assessments by another, namely, ITO, Company Circle V(2) was invalid since the latter Assessing Officer was not having jurisdiction over the assessee. Learned A.R. in support of his contention that the Assessing Officer did not have jurisdiction to do assessment over the assessee, called our attention to a letter dated 2.9.2005 from Deputy Commissioner of Income Tax, Central Circle III(4) stating that jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction over her case lay with ITO, Ward XIV(2), Chennai. There is also no dispute that subsequent notice under Section 148 dated 19.12.2006 was issued by a different ITO, namely, ITO, Company Circle IV(2). There is also no dispute that assessee co-operated and appeared before the said ITO during the course of re-assessment proceedings. Assessee had also brought to the notice of ITO, Company Circle V(2) on 27th November, 2007 that jurisdiction on her case lay with ITO, Ward XIV(2). No doubt, we do accept the contention of learned A.R. that Section 292B does not have any implication in the given scenario since the question is regarding jurisdiction of the concerned officer to issue notice and to make an assessment and it has nothing to do with the spirit and intend of the Act. Nevertheless, it is important to have a look at sub-section (3) of Section 124 which is also very relevant in this regard. The said sub-section runs as under:- (3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer- (a) where he has made a return 50[under sub-section (1) of section 115WD or] under sub-section (1) of section 139, after the expiry of one month from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 27th November, 2007 is reproduced hereunder:- I also wish to inform you that vide letter dated 02/09/2005 from the office of the Deputy Commissioner of Income Tax, Central Circle III(4), Chennai I was informed that the jurisdiction of my case lies with the Income Tax Officer, Ward XIV(2), Chennai with effect from 01/09/2005. We are, therefore, of the opinion that the assessee did not call into question the jurisdiction of Assessing Officer who had proceeded with the assessment and/or completed the assessment within the proper time frame allowed under Section 124(3) of the Act. This being so, assessee cannot be allowed to take up this issue now. Grounds assailing jurisdiction of the A.O. to do the assessment is dismissed. 8. The next issue taken up by the assessee in her cross- objections is that the reopening itself was bad in law. According to assessee, the objections raised by her on the reasons required for reopening were not disposed through a separate order and therefore, the decision of Hon'ble Bombay High Court in the case of Allana Cold Storage Ltd. v. ITO (287 ITR 1) was not complied with. The issue regarding objection and reopening was dealt by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rplus of ` 6,71,38,172/- has distributed a sum of ` 44,91,589/- as advance to the assessee during the Assessment Year 2003-04. The distribution of the advance is subject to tax U/s 2(22)(e) of the Income tax in the hands of the assessee as deemed dividend. No dividend tax has been paid by the assessee towards the advance received. But, for the variance in amounts, the reason stated for assessment year 2004-05 was also very similar. There is no dispute that original return was subject only to a processing under Section 143(1) of the Act. Therefore, the above reason, in our opinion, is more than sufficient to resort to a reopening, in view of the decision of Hon'ble Apex Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (291 ITR 500). Irrespective of the fact whether the Assessing Officer had separately dealt with the objections raised by the assessee or not the reasons cited by the A.O. was quite relevant and satisfied the condition for the reopening. We, therefore, do not find any merit in the grounds raised by the assessee in this regard. 12. The grounds assailing the reopening stand dismissed. 13. In the result, both the cross-objections of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of income of minor with his or her parent. As per A.O., Section 2(22)(e) of the Act clearly specified that a shareholder who was beneficiary also fell within the purview of the deeming provision. He also relied on the decision of Hon'ble Apex Court in the case of McDowell Co. Ltd. v. CTO (154 ITR 148) for taking a view that the transfer of shares by the assessee to her minor grandson was a colourable device and could not be taken cognizance of. Since the company concerned had substantial reserve, the Assessing Officer took the advance taken by the assessee from the company for the above two assessment years as deemed dividend as per Section 2(22)(e) of the Act. 16. Assessee aggrieved by the above decision, moved in appeal before ld. CIT(Appeals). Ld. CIT(Appeals) was of the opinion that Section 2(22)(e) of the Act was a deeming provision and hence had to be given a strict interpretation as held by Hon'ble Apex Court in the case of CIT v. C.P. Sarathy Mudaliar (83 ITR 170). As per ld. CIT(Appeals), the facts wee not in dispute, but, according to him, a shareholder as mentioned in Section 2(22)(e) of the Act, after the amendment made on 1.4.1988, had to be the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of Section 2(22)(e) of the Act. Relying on the decision of Hon'ble jurisdictional High Court in the case of CIT v. T.P.S.H. Sokkalal (236 ITR 981), learned D.R. argued that when the shares were held in the name of the guardian, the guardian alone was the shareholder and the guardian could exercise the voting right belonging to the minor. Hence, as per the learned D.R., by virtue of decision of jurisdictional High Court, deemed dividend under Section 2(22)(e) of the Act could be considered in the hands of such assessee who was the guardian of a minor. Reliance was also placed on the decision of Delhi Bench of this Tribunal in the case of Mohan Anand (82 ITD 708) in this regard. 18. Per contra, the learned A.R. submitted that admittedly, assessee had transferred more than 90% of shares to her grand daughter much prior to relevant previous years. As per learned A.R., the transfer of shares was done on 22.12.2001 and the transfer was properly intimated to Registrar of Companies and entered in the relevant register of the company. All these facts were brought to the notice of the Assessing Officer. Learned A.R. submitted that assessee could not have contemplated that she would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee himself was holding the shares of a company, it was required to lift corporate veil and see whether the benefits were received by the family as a whole on the advance received by the assessee. According to him, share holding of the family members altogether if considered exceeded 10% voting power limit specified in Section 2(22)(e) of the Act. 20. We have perused the orders and heard the rival contentions. Facts are not disputed. Prior to 22.12.2001, assessee held shares having more than 10% of the voting power of M/s Prakash Gold Palace (P) Ltd., earlier known as Abhilasha International Pvt. Ltd. By effecting transfers to her minor grand-child, her shareholding had come down substantially and her voting power in the said company went below 10%. There is also no dispute that transfers of the shares were effected by proper entries on the share certificates and returns were filed in this regard before the Registrar of Companies. There is also no dispute that the transfer of shares were effected prior to the relevant previous years. There is good merit in the contention of the assessee that transfer made by the assessee to her grand- child could not have been done in conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t not a registered shareholder then also the first limb of provisions of s. 2(22)(e) will not apply. Thus, it is absolutely clear that for being held liable for deemed dividend, assessee has to be both registered as well as beneficial shareholder. Assessee here was not so. Thus, assessee gets out of the deeming provision as contained in Section 2(22)(e) at the threshold itself. In our opinion, how the assessee utilized the advance received from M/s Prakash Gold Palace (P) Ltd. hardly has any relevance, once applicability of Section 2(22)(e) of the Act is ruled out. As far as the decision of Hon'ble jurisdictional High Court in the case of T.P.S.H. Sokkalal (supra) relied on by the learned D.R. is concerned, interpretation there involved Section 2(22)(e) of the Act as it stood prior to the amendment done to the said Section by Finance Act, 1987 with effect from 1.4.1988. Their Lordship was concerned with an assessment for assessment year 1973-74. In fact, in the decision of Special Bench in the case of Bhaumik Colour (P) Ltd. (supra), the history of the provision starting from 1922 Act has been traced vividly and it was after an analysis thereof that the Special Bench held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts apropos are that on the assessment done of the assessee under Section 143(3) read with Section 147 of the Act on 26.12.2007, ld. CIT issued a show-cause notice under Section 263 of the Act on 3.3.2010 citing following reasons:- The assessee filed his return of income for Assessment Year 2003-04 on 31.03.2004 admitting an income of ₹ 78,640/- and agricultural income of ₹ 54,810/-. The return was scrutinized and the assessment was completed u/s.143(3) 5.w.s. 147 on 26.12.2007 on a total income of ₹ 45,70,230/- and agricultural income of ₹ 54,810/-. The Assessing Officer while completing the assessment u/s.143(3) r.w.s. 147 had not considered the following facts because of which the assessment has been rendered erroneous in so far as it is prejudicial to the interests of Revenue. 1. to verify the agricultural income amounting to ₹ 54,810/-. 2. Investment of ₹ 45 lakhs made in ITCOT Ltd., 3. not admitted any notional income from Bombay and Calcutta property. In this connection, you are hereby given show cause notice as to why direction should not be given to revise the impugned order u/s.263 of the Income Tax Act, 1961 on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of agricultural income or the extent of holding of the property. Relying on the balance sheet filed by the assessee, learned D.R. pointed out that property at Vedal Village was valued at ` 55,897.20 and on such a property agricultural income of ` 54,810/- was shown. Therefore, according to him, there was clear non-application of mind by the A.O. on these issues and invocation of revisional power under Section 263 of the Act was appropriately done by ld. CIT. 27. We have perused the orders and heard the rival contentions. In so far as agricultural income of ` 54,810/- was concerned, assessee had given only the location of property and nature of crops as rice and vegetable. It is also true that value of Vedal Village property was shown by the assessee as 55,897.20 only. Assessing Officer accepted the reply given by the assessee vide her letter dated 13th December, 2007 without making any enquiry. Income from property being almost in the vicinity of the value of the property itself, in our opinion, it should have caught the attention of the A.O. and he should have made more enquires. This was not done. Similarly, on notional income of Mumbai and Calcutta property also, there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and second is that the reopenings done were bad in law. Both these issues are similar to the issues raised by the assessee Smt. Suraj Kumari Jain in her cross-objections in C.O. Nos. 193 and 194/Mds/2009. The factual situation were also same. We have held at paras 7 11 above that objection of the assessee on both these issues are without any merit. For the same reasons as mentioned at paras 7 11 above, we dismiss the cross-objections of the assessee here also. 31. Now we take up the appeal of the Revenue for assessment years in I.T.A. Nos. 1631, 1632 1633/Mds/2009 in respect of the assessee Shri D.B. Prakash Chand Jain. 32. As in the case of Smt. Suraj Kumari Jain, assessee here was also a shareholder holding shares in excess of 10% of voting power in M/s Prakash Gold Palace (P) Ltd. On 22.12.2001, assessee had transferred substantial quantum from his shares to his minor grand daughter, Hardika. Through such transfer, the share holding of the assessee came down below 10% of the voting power in M/s Prakash Gold Palace (P) Ltd. Factual situation is thus very similar to that of Smt. Suraj Kumari Jain for assessment year 2003-04 and assessment year 2004-05. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee not being the beneficial as well as registered shareholder having voting power in excess of 10% in M/s Prakash Gold Palace (P) Ltd. could not be fastened with liability under Section 2(22)(e) of the Act, considering the advance taken by him from the said company as deemed dividend. 33. In the result, appeals of the Revenue for all these years stand dismissed. 34. Now we take up the appeals and cross-objections in the case of assessee Shri Mukesh Kumar Jain. 35. The cross-objections in the case of Shri Mukesh Kumar Jain in C.O. Nos. 198 199/Mds/2009 go to the root of the assessment. 36. Two issues are raised in these cross-objections. First is that Assessing Officer was not having jurisdiction to do an assessment on the assessee and second is that reopenings done were bad in law. Both these issues are similar to the issues raised by the assessee Smt. Suraj Kumari Jain in her cross-objections in C.O. Nos. 193 and 194/Mds/2009. The factual situations were also same. We have held at paras 7 11 above that objections of the assessee on both these issues are without merits. For the same reason, as mentioned at paras 7 11, we dismiss the cross-objections of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order u/s 263 of the Income-tax Act, 1961 on the above issue. If no reply is received, it will be presumed that you have no objection in revising the assessment for the Asst. Year 2003-04 on the proposed lines. For assessment year 2004-05: The assessee filed his return of income for the Asst. Year 2004-05 on 27.10.2004 admitting an income of ₹ 2490/- and agricultural income of ₹ 2,488/-. The return was scrutinized and the assessment was completed u/s 143(3) r.w.s. 147 on 26.12.2007 on a total income of ₹ 48,13,950/- and agricultural income of ₹ 57,255/-. The assessee is Director of M/s Prakash Gold Palace (P) Ltd. (formerly known as M/s Abhilasha International P. Ltd.). The Assessing Officer while completing the assessment u/s 143(3) r.w.s. 147 had not examined the following aspects which is erroneous in so far as it is prejudicial to the interests of Revenue. 1. to verify the agricultural income amounting to ₹ 62,613/- 2. Investment of ₹ 45 lakhs made in ITCOT Ltd. 3. sale of agricultural land amounting to ₹ 29,867/- has not been offered 4. claim of deduction u/s 80D amounting to ₹ 8294/-. In this co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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