9911796707
TMI Blog2011 (1) TMI 1160X X X X Extracts X X X X X X X X Extracts X X X X ..... as the AO was satisfied that these assessees were served with notice requiring them to furnish the returns under cl. (i) of sub-s. (1) of s. 142, setting forth their total income including undisclosed income for the block period. It is in pursuance of said notice, the assessees filed their returns. The said returns were assessed and assessment orders came to be passed. Consequently, the assessees paid the tax, which was found due by them. 4. On a perusal of the return of income filed by M/s DTDC Ltd., pertaining to the asst. yr. 1995-96, it was noticed by the AO that the said company had advanced an amount of Rs. 6,60,000 to each of the assessees on 28th March, 1995 and. the same was reflected in the balance sheet of M/s DTDC Ltd., under the head "Loans and advances". In total an amount of Rs. 39,60,000 was found to be shown as advance for purchase of land under the heading "Loans and advances" which includes Rs. 6,60,000 paid to each of the assessees/directors. Therefore, proceedings were initiated under s. 147 for reassessment of the income escaping assessment. The assessees filed their statement of objections contending that the issue of deemed dividend was discussed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel for the appellants assailing the impugned order contended as under:- (a) There is no bar under the Act for initiation of proceedings under s. 147, after the block assessment is done. (b) It is not a case of change of opinion by the AO. It is a case of income escaping assessment. Therefore, the case squarely falls under s. 147 and the order passed by the AO is legal and valid. (c) Admittedly, these assessees are directors in the company holding more than 10 per cent of the shares and therefore, any amount including the loan given to them by the company out of the accumulated profits, constitutes deemed dividend and is liable to tax. 9. Therefore the order passed by the AO as affirmed by the appellate authority is valid and legal and the Tribunal committed a serious error in interfering with the said order. 10. Per contra, the learned counsel appearing for the assessees, submitted that no returns had been filed initially. In pursuance of the notice issued under s. 158BC, returns were filed. Block assessment was done. It is not open to the AO to reopen the assessment under s. 147 of the Act. Secondly, he contended that in the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the power to assess or reassess such income. There is no prohibition under the Act for reopening of an assessment done under Chapter XIV-B. Therefore, we do not find any substance in the contention of the assessees that the proceedings under s. 147 are not attracted to cases of assessment under Chapter XIV-B. Therefore the first substantial question of law is answered in favour of the Revenue and against the assessees. Point No. 2:- 14. The contention of the assessees is that, when proceedings were initiated under Chapter XIV-B of the Act, in the course of the said proceedings, the assessees were served with a notice dt. 5th Aug., 1999 wherein it was categorically stated that from the records it is seen that the assessees have drawn money from the company and have utilised the same for personal use. Their explanation on this as to why it should not be treated as deemed dividend should reach their office within the stipulated time. Therefore, it is clear that the notice was specific in calling upon them to show-cause as to why the undisclosed income should not be treated as deemed dividend. In reply to the same, they have given the particulars and they have also spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the AOs to make a back assessment but in s. 147 of the Act (w.e.f. 1st April, 1989), they are given a go-by and only one condition has remained viz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989 power to reopen is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe' falling which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of 'mere change of opinion', which cannot per se be reason to reopen." In coming to the said conclusion, the apex Court relied on the Circular No. 549, dt. 31st Oct., 1989 [(1990) 82 CTR (St) 1] which reads as under:- "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in s. 147:- A number of representations were received against the omission of the words 'reason to believe' from s. 147 and their substitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t matters or knowledge of fresh facts which were not present at the time of the original assessment; (4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law. If these conditions are satisfied then the ITO would have complete jurisdiction to reopen the original assessment. It is obvious that where the ITO gets no subsequent information, but merely proceeds to reopen the original assessment without any fresh facts or materials or without any enquiry into the materials which form part of the original assessment, s. 34(1)(b) would have no application." 18. The apex Court in the case of Maharaj Kumar Kamal Singh vs. CIT (1959) 35 ITR 1 (SC) dealing with the reassessment under s. 34(1)(b), held as under:- "Even if the assessee has submitted a return of his income, cases may well occur where the whole of the income has not been assessed and such part of the income has not been assessed can well be regarded as having escaped assessment. In the present case, the rents received by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the various reasons stated earlier he can, as soon as he realizes his mistake, issue a notice under s. 34(1)(b) after completing the assessment." 20. From the aforesaid judgments it is clear that, though the word 'opinion' is deleted and is now substituted by the words 'reason to believe', the concept of change of opinion is not obliterated w.e.f. 1st April, 1989 after substitution of s. 147 of the IT Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987. However, where in the original assessment the income liable to tax has escaped assessment due to oversight and in advertance or a mistake committed by the ITO, the ITO has the jurisdiction to reopen the original assessment. It is not necessary that for such reopening of such assessment the information is to be derived from external source of any kind or disclosure of new and important matters subsequent to the original assessment. Even if the information is obtained from the record of the original assessment after a proper investigation from the materials on record or the facts disclosed thereby or from any enquiry or research into facts or law, reassessment is permissible. Income may escape assessment as a result of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company. Therefore, in the facts of the case, we are satisfied that the AO was justified in initiating proceedings under s. 147 of the Act for reopening the assessment to bring to tax income that has escaped assessment. Therefore, the second substantial question of law is answered in favour of the Revenue and against the assessee. 23. The payment of tax on deemed dividend would arise if the payment is made out of the accumulated profit of the company. The assessee contends the accumulated profit of the company as on 1st April, 2004 was only Rs. 6,32,414 and therefore the payment of Rs. 39,60,000 cannot be construed as payment of a loan out of the accumulated profit, which is liable to tax. In fact, though the AO as well as the first appellate authority have held that the accumulated profit as per the books of account was Rs. 58,51,675 out of which Rs. 39,60,000 is paid, the Tribunal has not gone into the said question. In other words, the Tribunal did not decide the appeal on merits. It set aside the orders of the AO as well as that of the first appellate authority on the ground of an erroneous exercise of jurisdiction and the change of opinion, which was found fault ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
