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TMI Blog2022 (4) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bombay High Court in the case of CIT vs Universal Medicare (P) Ltd [ 2010 (3) TMI 323 - BOMBAY HIGH COURT] Following the law laid down in Murlidhar Bhagwan Das [ 1964 (1) TMI 5 - SUPREME COURT] and Rajinder Nath [ 1979 (8) TMI 3 - SUPREME COURT] the aforesaid observations cannot be called a direction based upon which the impugned notices can be sustained. Whether there is any finding in the order dated 16.01.2013 made by CIT (Appeals) based upon which issuance of the impugned notices could be sustained? - It is apparent that the respondent has invoked the provisions of Section 150 of the IT Act for issuing the impugned notices. This invocation was in turn based on an order dated 16.01.2013 made by CIT (Appeals). This order dated 16.01.2013 contains no direction as contemplated by Section 150 of the IT Act. Even assuming that this order dated 16.01.2013 contains a finding affecting the petitioners, it is apparent that such a finding came to be recorded without granting the petitioners any opportunity of being heard. Such finding, therefore, was not only in breach of principles of natural justice and fair play, but also contrary to Explanation 3 to Section 153 of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopen the completed assessment for the assessment year 2010-2011 on the alleged ground that the income chargeable to tax for the said assessment year has escaped assessment within the meaning of Section 147 of the IT Act. The petitioner in Writ Petition No.72/2015 is the wife of the petitioner in Writ Petition No.500/2014. Both the petitioners are entitled to the benefit of the provisions of Section 5A of the IT Act concerning the apportionment of income between spouses governed by the Portuguese Civil Code about which, there is no dispute. 5. On 30.07.2010, the petitioner filed income tax returns for the assessment year 2010-2011. The same was processed under Section 143(1) and notices under Sections 143(2) and 142(1) dated 22.06.2011 were served on the petitioners. The assessment was completed as evidenced by the assessment order dated 26.12.2011 made by the Assessing Officer (AO). 6. On 27.12.2011, the AO made another assessment order concerning the assessee company - Dinar Tarcar Resources (India) Private Ltd. (DTRPL) of which both the petitioners are Directors/shareholders. In this assessment order, an amount of 23,76,49,580/- that was advanced to ₹ the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that neither of the petitioners was noticed nor heard by CIT (Appeals) and, therefore, findings, if any, could not have been made the basis for reopening the assessment. He submitted that any reliance upon such alleged finding would not only contravene the principles of natural justice and fair play but would amount to an express breach of explanation 3 of Section 153(3) of the IT Act. For all these reasons, Mr. Pangam submitted that the impugned notices are without jurisdiction and warrant interference. 12. Mr. Pangam submitted that, in any case, the entire material considering the transactions of advance and so-called deemed dividends were before the AO, who made the assessment order dated 26.12.2011, just a day before he made the assessment order dated 27.12.2011, in respect of DTRPL. He submits that this was not a case of any suppression of facts or material and no such case is even allowed against the petitioners. He, therefore, submitted that the AO, based on the very same material could not have simply changed his opinion and based upon such a changed opinion seek to reopen the completed assessment. He submitted that this is an additional reason to interfere wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions may be dismissed. 17. The rival contentions now fall for our determination. 18. As far as Ms. Linhares's contentions about the distinction in the facts in the two petitions are concerned, we find ourselves unable to accept the same. True, in the impugned notice dated 10.03.2014 or in the reasons furnished to the petitioner in Writ Petition No.72/2015, there is no express reference to the provisions of Section 150 of the IT Act. However, if the reasons are perused then it is quite apparent that the impugned notice is entirely based on an order dated 16.01.2013 issued by CIT (Appeals). The material on record also establishes that the AO, based upon this very order dated 16.01.2013, had applied to the Commissioner for invocation of the revisional jurisdiction. However, the Deputy Commissioner had refused to invoke the revisional jurisdiction on the ground that the AO had remedies to reopen the assessment even in the case of the petitioner in Writ Petition No.72/2015 by resorting to the provisions of Section 150 of the IT Act. 19. Therefore, the mere absence of specific reference to the provisions of Section 150 of the IT Act in the notice impugned in Writ Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and reassessments. Explanation 3 to this Section provides that : Where, by an order [referred to in clause (ii) of sub-section (3)] any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed. Emphasis supplied. 23. Therefore, the conjoint reading of Section 150 and explanation 3 to Section 153 would mean that to sustain a reassessment in terms of Section 150 of the IT Act, the respondent needs to satisfy two conditions amongst others:- (a) The assessment or reassessment or recomputation must be in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceedings under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law; and (b) The finding or direction contained in the order referred to above mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, In view of the decision, In the case of CIT vs Universal Medicare (P) Ltd (2010) 190 Taxman 144 (Bom) by the Bombay High Court, which is the Jurisdictional High Court In respect of cases of Panaji Goa, this issue needs to be re-examined. The High Court of Bombay in coming to a conclusion has relied on the decision of Special Bench of ITAT in the case of and Bhaumik Color Pvt Ltd (217 SOT 270 (Mum SB)], which has been upheld by the High Court of Mumbai and also Hon'ble Rajasthan High Court in the case of Hotel Hilltop (313 ITR 116) and Ankitech P. Ltd (340 ITR 14(Del) holding that deemed dividend can be assessed only In the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder and also that the expression shareholder referred to in section 2(22)(e) refers to both a registered shareholder and a beneficial shareholder. 22. This has also been followed by the Hon'ble ITAT, Panaji (which is the jurisdictional Tribunal in respect of cases pertaining to Panaji) in the case of M/s Britto Amusements Pvt Ltd (supra). Accordingly, it was held that deemed dividends cannot be taxed in the hands of a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment of a particular year. The Court gave an instance where the Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that income does not belong to the relevant year. He may incidentally find that the income belongs to another year, but that is not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. 29. The Court in the context of the expression direction held that the same cannot be construed in a vacuum, but must be collated to the directions that the Appellate Assistant Commissioner can give under Section 31. Under that Section, he can give directions, inter alia, under Section 31(3)(b),(c), or (e) or Section 31(4). The expression direction in the proviso can only refer to the directions that the Appellate Assistant Commissioner or other Tribunals can issue under the powers conferred on him or them under the respective sections. 30. Therefore, the expression finding as well as the expression direction can be given full mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be described as a direction. The discussion on this issue is to be found in paragraph 13 which reads as follows: - 13. It is also not possible to say that the order of the Appellate Assistant Commissioner contains a direction that the excess should be assessed in the hands of the co-owners. What is a direction for the purposes of Section 153(3)(ii) of the Act has already been discussed. In any event, whatever else it may amount to, on its very terms the observation that the Income Tax Officer is free to take action to assess the excess in the hands of the co-owners cannot be described as a direction. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and discretion of the Income Tax Officer whether or not to take action it cannot, in our opinion, be described as a direction. 34. The Court also found that the finding in the AAC's order based upon which the assessee's returns were sought to be reassessed was recorded without giving the assessee an opportunity of being heard. The contention that the assessees were nothing but the partners in the partnership firm in whose case the AAC had ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings were recorded by the CIT (Appeals) in the order dated 16.01.2013. Ms. Linhares, however, contended that since the petitioners were nothing but the directors and shareholders in DTRPL, the opportunity of hearing granted to DTRPL should be deemed to include the opportunity of hearing to the petitioners herein as well. In support of this contention, she relied on Hungerford Investment Trust Ltd. (supra). 40. According to us, an almost identical contention was raised on behalf of the Revenue in Rajinder Nath (supra) and the same was turned down by the Hon'ble Supreme Court. There, an order was made by the AAC in a matter concerning the partnership firm. The AAC finally concluded that the income ought to have been taxed in the hands of the individual partners. Based on such findings, the Revenue sought to reopen the assessment of returns filed by the individual partners. The individual partners resisted, inter alia, by pointing out that the finding recorded by the AAC was without granting them an opportunity of being heard. This resistance was ultimately upheld by the Court by holding that it is one thing for the partners of a firm to be required to explain the source of r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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