TMI Blog2008 (5) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... sment can be reopened if the AO has reason to believe that any income chargeable to tax, has escaped assessment. But, after the 4 years, the assessment can only be reopened if it is established that income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make return u/s 139 or in response to notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Since there is no reference of section 143(1) in proviso to section 147 of the Act, the conditions laid down in proviso for reopening the assessment after 4 years, cannot be imposed for reopening the assessment framed u/s 143(1) of the Act. We, therefore, of the view that CIT(A) has rightly adjudicated the issue in the light of given facts and the judgments referred to before him. Accordingly, confirm the order of the CIT(A) on this issue. Addition in AY 1999-2000 and AY 2000-01 u/s 2(22)( e) - Deemed dividend - loan and advances - HELD THAT:- No doubt, the assessee has purchased the assets from M/s. Sinar Engineering Co. Pvt. Ltd. But, nothing was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice under section 148 was issued after the expiry of 4 years, as such, the reopening of the assessment is hit by proviso to section 148 of the Act. 2. The facts borne out from the record in this regard are that the return of income was processed under section 143(1) of the Income-tax Act and thereafter, assessment was reopened under section 147 read with section 148 of the Act, by the Assessing Officer having reason to believe that income escaped to the tune of Rs. 3,91,471 in assessment year 1999-2000 and Rs. 3,93,379 in assessment year 2000-01 as the provisions of section 2( 22 )( e ) were clearly attracted in this case. The reopening was challenged before the CIT(A) by the assessee with the submissions that return of income was accompanied with all the details and the notices issued is beyond the time-limit as per proviso to section 149 and no sanction is obtained from the higher authorities for initiation of reassessment proceedings. The assessee has made full disclosure of its transactions and amount payable to M/s. Sinar Engineering Co. Pvt. Ltd. Therefore, the proviso to section 148 is squarely applicable which bars issue of notice under section 148 after expiry of 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are imposed for reopening of the assessment under section 147 it is with regard to assessment framed under section 143(3) or under section 147 of the Act. Under section 147, if the assessments are framed within 4 years from the end of the relevant assessment year, it is immaterial whether the assessee has disclosed fully and truly all material facts necessary for his assessment. The assessment can be reopened if the Assessing Officer has reason to believe that any income chargeable to tax, has escaped assessment. But, after the 4 years, the assessment can only be reopened if it is established that income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make return under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. There is no reference of the assessment framed under section 143(1) of the Act. The reason for not making the reference of this sub-section (1) of section 143 is obvious as that while issuing intimation under section 143(1)( a ), there is no appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inar Engineering Co. Pvt. Ltd. and outstanding as on 31-3-1999. The assessee s representative was asked to explain as to why these purchase of these assets should not be treated as loans and advances received from M/s. Sinar Engineering Co. Pvt. Ltd. within the provisions of section 2( 22 )( e ) of the Income-tax Act. It was also pointed out to him that M/s. Sinar Engineering Co. Pvt. Ltd. has treated the amounts of transfer of assets as loans and advances given to the assessee-company in their books of account for assessment year 1999-2000 and the amount has not been paid during the year. The assessee s representative was further asked to explain why deemed dividend under section 2( 22 )( e ) of the Income-tax Act consisting of amount of Rs. 10,000 an amount of transfer of assets at Rs. 3,87,471 should not be taxed in the hands of the assessee as Shri Ramesh G. Chabria holds 59 shares out of 60 shares of the assessee-company and also holds 5,400 out of 5,500 shares of M/s. Sinar Engineering Co. Pvt. Ltd. which is given loan of Rs. 3,91,471 to assessee-company during the year. 7. In response thereto, the assessee has furnished a reply vide letter dated 24-7-2006 stating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the parties and after having relied upon the judgment of the various High Courts and the relevant provisions of the Act, he confirmed the additions made by the Assessing Officer. The relevant observations of the CIT(A) is extracted hereunder for the sake of reference : "3.4 I have carefully considered the above facts of the case and I am inclined to agree with the Assessing Officer s contention that in the appellant s case, provisions of section 2( 22 )( e ) are clearly applicable. On perusal of shareholding pattern, in the appellant s case and in the case of M/s. Sinar Engineering Co. Pvt. Ltd., it can be seen that there has been issue subscribe and paid-up capital of Rs. 6,000 for 60 equity shares of Rs. 100 in the assessee s case. Out of these, Shri Ramesh G. Chabria holds 59 shares. From the sale holding pattern of M/s. Sinar Engineering Co. Pvt. Ltd. that there has been issue subscribe and paid-up capital of Rs. 55,000 divided 5,500 shares of Rs. 10 each. Out of these 5,400 shares are held by Shri Ramesh G. Chabria. The confirmation from M/s. Sinar Engineering Co. Pvt. Ltd. shows opening balance of Rs. 70,000 and the loan amount of Rs. 10,000 taken during the year, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Seamist Properties (P.) Ltd. v. ITO [2005] 95 TTJ 201 (Mum.). 12. The learned DR on the other hand has submitted that assessee s case falls within section 2( 22 )( e ) of the Act as the loans and advances were given by M/s. Sinar Engineering Co. Pvt. Ltd. to the assessee and in both the companies Mr. Ramesh G. Chabria holds the majority shareholding. Since Ramesh G. Chabria is common shareholder in both the companies, assessee s case falls within the definition of section 2( 22 )( e ) of the Act. 13. We have heard the rival submissions and carefully perused the orders of the authorities below and documents placed on record. No doubt, the assessee has purchased the assets from M/s. Sinar Engineering Co. Pvt. Ltd. for a sum of Rs. 3,81,471. But, nothing was paid to them. Only a general entry was passed as on 1-4-1999. It is also evident from the record that this amount was shown as loan and advances given to the assessee-company in the books of account of M/s. Sinar Engineering Co. Pvt. Ltd. for assessment year 1999-2000 and this liability remains outstanding in the next year as on 31-3-2000. This amount was also shown in the assessee s books of account as recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncern means - a Hindu Undivided Family or a Firm or an Association of person or a body of individuals or a company. Meaning thereby, if the payments of any sum by way of advance or loan is given to company in which there is a common shareholder and that shareholder has/have the beneficial interest in both the companies. The loans and advances shall be deemed dividend under section 2( 22 )( e ) of the Act. 15. Turning to the facts of the case, undisputedly, Mr. Ramesh G. Chabria has 59 shares out of total equity shares of the assessee-company besides having a shareholding of 5,400 shares out of 5,500 equity shares of M/s. Sinar Engineering Co. Pvt. Ltd. Meaning thereby Mr. Ramesh G. Chabria has a beneficial interest in both the companies. If the legal provisions as discussed above are applied to the present facts of the case, one would find that loans and advances given by M/s. Sinar Engineering Co. Pvt. Ltd. to the assessee-company is a deemed dividend. We have also carefully examined the order of the Tribunal in the case of Seamist Properties (P.) Ltd. ( supra ), but it was rendered on different set of facts, as such ratio laid down in that case, cannot be applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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