9911796707
TMI Blog2024 (4) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the Appellant's case and in law the learned CIT (A) erred in confirming the action of learned Assessing Officer in reopening the assessment under Section 147 by issue of notice dated 29.06.2021 under Section 148 of the Act which is bad in law and without jurisdiction and is merely based on external information with which the appellant has no nexus. 2. On the facts and circumstances of the Appellant's case and in law the learned CIT (A) erred in confirming the action of Learned Assessing Officer of reopening the assessment under Section 147 by issue of notice dated 29.06.2021 under Section 148 which is merely due to change of opinion and therefore reopening is bad in law. 3. On the facts and circumstances of the Appellant's case and in law the learned CIT (A) erred in confirming the action of learned Assessing Officer in reopening the assessment under Section 147 by issue of notice dated 29.06.2021 under Section 148 , which is barred by limitation of law in view of the first proviso to Sec 147 of the Income Tax Act, 1961. 4. On the facts and circumstances of the Appellant's case and in law the learned CIT (A) erred in confirming the action of learned Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was sham transaction generated using colourable device as dividend received is not on account of appreciation of the investment but is a return of part of the capital itself hence it cannot qualify as a dividend. Thus, dividend was sham and capital loss being artificial, was not considered for treatment in accordance with normal dividend and capital loss. 06. According to AO, SEBI per circular dated March 15, 2010, had categorically held that unit premium reserve shall be treated at par with unit capital and cannot be utilized to declare the dividends and the mutual fund houses cannot distribute dividends from unit premium reserve. It can distribute only from surplus generated by realizing the gains on investments or dividends received from equity markets, which it had invested. That means it has to make investment and then make a profit to distribute. These directions of the SEBI being not followed by the mutual fund as it first artificially rigged the distribution surplus and then applied as a ratio to future or allotted units. Accordingly, by deploying unfair methods, the mutual fund houses have rigged up the distributable surplus in a planned manner. While accounting for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is more than Rs. 46 crores as well as redemption is also of Rs. 51 crores. Assessee is not at all related to the any of the fund manager named in the reasons for reopening and the assessee has purchased the said units from the market. Assessee is not aware of any of the activities mentioned in the notice. The acquisition of the units of mutual fund as well as the redemption of the investment in the scheme is based on the market review and information received from various fund managers. It was also the claim that conditions specified in section 94 (7) of the act are fulfilled by the assessee and the assessee is therefore eligible to claim exemption of dividend income as well as loss incurred on the same. 09. Learned AO disagreed with the submission made by the assessee for the reason that during the course of survey under section 133A of the act in case of JM financial asset Management Ltd on 15/2/2021 it was found that that company had manipulated accounting methodology so as to artificially inflate the distributable surplus. Further the guidelines were flouted of the regulator by the mutual fund thus the dividend received is an account of manipulated accounts by the mutual fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the letter and spirit. Merely chains of documents were created so as to impress upon that the guidelines were being followed. The statement of Mr. Suvendu Rakshit, the head of the salesteam, stated that the sales team had been passing on hints to the distributors about the prospect of dividend distribution much in advance to lure the prospective clients. This violated dividend declaration policy and there should not be any type of communication regarding probable date and amount of dividend by the mutual fund before the decision taken by the trust a company. Shri Deepen Doshi institutions sales had stated that he has never been part of any committee for deciding the dividend amount and has no role in any dividend declaration. Mrs. Diana D'Sa, the compliance head who is responsible for overseeing all the compliance as per the SEBI guidelines admitted that SOP has not been followed and documents are created to show that the semi-guidelines are followed. Thus, the AO reached at the conclusion that assessee has earned exempt dividend income of Rs. 9,942,767/- claimed as exempt income and short-term capital loss of Rs. 1,05,65,468/- is fraudulent transaction. Both are fictitious. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (214 ITR 801) and held that AO is correct in treating the dividend income of Rs. 9,942,767 as sham and a loss of Rs. 10,565,468 has fictitious. Accordingly, the appeal filed by the assessee was dismissed. 011. Assessee aggrieved with that is in appeal before us. On the issue of reopening of the assessment, it was claimed that assessee filed its return of income on 24/11/2016 and the assessment order under section 143 (3) of the act was passed on 27/12/2017. Notice for reopening of assessment was issued to the assessee under section 148 of the act on 29/6/2021, which was approved by the additional Commissioner. Further notice was issued under section 148A (b) of the act on 28/5/2022 and the order passed under section 148A (d) of the act was passed on 28/7/2022 which is approved by the principal Commissioner of income tax. Thereafter the notice under section 148 was issued on 28/7/2022 which was approved by the principal Commissioner of income tax. The learned authorized representative referred to the decision of the honourable Bombay High Court in case of Siemens financial services private limited in writ petition number 4888 of 2022 dated 25 August 2023. The various dates were t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y inside information prior to purchase. Assessee relied upon publicly available information. He produced a copy of the notice dated 13 June 2015 to show the same. Similarly, it was also shown that a notice was issued by the fund on 21 December 2015 that a dividend of Rs. 4 per unit would be issued. Based on that on 26 December 2015 such dividend was received. Subsequently assessee redeemed its unit only on 28th of March 2016. He further submitted that assessee is a regular investor in mutual fund and is holding portfolio of more than Rs. 108 crores. There is no connection between the assessee and the mutual fund or the trustees. The provisions of section 94 (7) of the act are also fulfilled and therefore the assessee is eligible to claim exemption of dividend as well as the loss incurred as a short-term capital loss. Therefore, it was submitted that neither the dividend income earned by the assessee nor short-term capital loss suffered by the assessee are sham or fictitious. 015. The learned departmental representative vehemently supported the order of the learned lower authorities. He submitted that that the statement of the employees of the mutual fund clearly shows that the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. Accordingly, respectfully following the decision of the honourable Bombay High Court we allow ground number 1 and 2 of the appeal quashing reassessment proceedings. 017. Even on the merits of the case, the facts clearly shows that assessee purchased JM balanced fund mutual fund on 17/6/2015 and the record date of dividend was 18/6/2015 as per the notice dated 13 June 2015 that a dividend of Rs. 4.75 per unit is to be declared. The assessee purchased mutual fund of Rs. 300 lakhs (11,36,316.29 units). The assessee earned dividend on 18/6/2015 of Rs. 5,397,502/-. Further on December 21, 2015, and notice was issued by the mutual fund for declaration of dividend of Rs. 4 per unit. The record date was fixed on 26 December 2015. In both the notices issued by mutual fund clearly state that "after payment of dividend, the power unit NAV of the dividend options of the scheme will fall to the extent of the payout and statutory levies (if applicable)." Therefore, naturally if anybody is selling after the dividend earned by the unitholder the redemption value will fall. Assessee sold all those mutual funds on 28/3/2016 at redemption amount of Rs. 19,434,337/-, which resulted into a short ..... X X X X Extracts X X X X X X X X Extracts X X X X
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