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TMI Blog2023 (9) TMI 1611X X X X Extracts X X X X X X X X Extracts X X X X ..... of by this common order as the facts are common and interconnected. For the sake of convenience, facts of Special Civil Application No. 1857 of 2022 are considered and the same are as under: 2.1 The petitioner is a company incorporated under the Companies Act, 1956 and regularly assessed. For the assessment year 2013-14, the petitioner submitted a return of income on 30.09.2013, declaring total income of Rs. 7,34,17,743/-. In the return of income filed for the Asst. Year 2013-14, in the details to be filled-up under the head 'Business Organization', the petitioner has disclosed the particulars of Managing Director and beneficial owners of shares not holding less than 10% of voting power at any time during previous year in the company. 2.2 In the financial statements, at Note No.17, wherein factum of granting of short term loan and advances to associate companies, which include Cygnet Enterprise Private Limited (CEPL). At Note No.31, the petitioner has disclosed related party transaction, which includes loan given to CEPL of Rs. 3,58,60,000/- and interest received from CEPL of Rs. 48,53,661/-. 2.3 The case of the petitioner was selected for scrutiny assessment by issui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax (Appeals) by filing an appeal u/s. 246A of the Act on 09.04.2021 which is pending. 2.7 Meanwhile, the petitioner has received notice under Section 148 of the Act for the assessment year 2013-14 in the cases of the petitioner, CEPL and Niraj Hutheesing who is holding 45% share in CEPL and 70% share in the petitioner company. The Assessing Officer formed a reason to believe that the accumulated amount of reserves and surplus in the balance sheet of the petitioner company is less than loan amount given to Director Mr. Apurva Ashar and CEPL. Therefore the loan amount of Rs. 38078216/- advanced by the petitioner to CEPL is required to be taxed as deemed dividend under Section 2(22)(e) of the Act. The Assessing Officer also had reason to believe that the petitioner was liable to deduct TDS from such loan and advance being deemed dividend under Section 194 of the Act at the rate of 10% of the total amount of Rs. 3,80,78,216/- and as the petitioner failed to deduct TDS amount of Rs. 38,07,822/- the same is required to be brought to tax which has escaped assessment. On similar reasons recorded in case of CEPL as well as in case of Niraj Hutheesing, the notices under Section 148 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of Rs. 4,88,40,244/- is advanced by the assessee company to its director Mr. Apurva Ashar from three associated companies in which the director, shareholders of the company had substantial interest was disclosed by the petitioner in the return of income. It was further pointed out by learned counsel Mr. Shah that in the associated company Mr. Niraj Hutheesing had substantial interest and also held more than 10% of shares. However the same cannot be covered under the provisions of Section 2(22)(e) of the Act more particularly when the proceedings initiated under the provisions of Section 201(1) by the Assessing Officer are subjudice before the CIT(A) and that the fact that the petitioner has disclosed all the relevant material facts during the course of regular assessment. 3.2 Mr. Shah would rely on the auditor's report, annexures to the auditor's report, note to the auditor's report as well as the return of income to point out that it was specifically shown therein that the percentage of shareholding of Mr. Niraj Hutheesing was 72% and disclosure regarding loans and advances granted by the petitioner company was made in Note No. 17 of the annual report to point out that the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Officer reported in 236 ITR 34; (b) Assistant Commissioner of Income-tax vs. Rajesh Jhaveri Stock Brokers P. Ltd. reported in 291 ITR 500; 5. Having considered the submissions made by learned counsel for the respective parties, here is a case where, reading the reasons recorded would indicate that the revenue has 'on verification of case records' noticed that Shri Niraj Hutheesing was having substantial interest in the assessee company. The amount of loan extended to the Director of the associate company would therefore be covered under the provisions of Section 2(22)(e). 6. Notices under sections 147 & 148 of the Act which are the subject matter of Special Civil Applications No. 1877 & 1880 of 2022 also indicate somewhat similar reasons on the question of taxing deemed dividend at the hands of individual namely Shri Niraj Hutheesing. 6.1 In the case of Special Civil Application No. 1830 of 2023 assessment orders also have subsequently been passed on 30.03.2022. In the case of P.C. Snehal Engineers (P.) Ltd. vs. Assistant Commissioner of Income-tax reported in [2023] 146 taxmann.com 54 (Gujarat) relied upon by Mr. Manish Shah, learned advocate for the petitioner, the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post- 1st April, 1989, power to re-open is much wider, However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re- open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re- assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncing Ltd. (supra), has held thus: "10. It can be clearly noted from the reasons recorded that there is no mention at all of the assessee having not disclosed fully or truly material facts which were necessary for the purpose of computing the income of the assessee. Assuming that in the notice for reopening. such wordings are not specifically mentioned and they can be supplemented either while rejecting the objections or by way of affidavit of the Assessing Officer, then also, the revenue has failed to point out as to in what manner there has been nondisclosure on the part of the assessee." 27. From the ratio that can be culled out from all these decisions, it is amply clear that the Assessing Officer, who is authorized to issue notice under section 148 of the Act for reassessment. on his having a reason to believe that income chargeable to tax had escaped assessment for any assessment year, can assess or reassess such income and also any such other income chargeable to tax, which has escaped the assessment. However, no such action is permissible after lapse of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment on account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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