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Gujarat Mall Management Company Private Limited Versus Income Tax Officer - Ward 2 (1) (1)

2017 (8) TMI 292 - GUJARAT HIGH COURT

Reopening of assessment - reliance on subsequent decision of Supreme Court - deemed dividend addition under Section 2(22)(e) - notice issued beyond a period of four years - Held that:- Notice for reopening of the assessment having been issued beyond a period of four years from the end of relevant assessment year, the failure on part of the assessee to disclose truly and fully all material facts becomes relevant. As noted, in this context, the Revenue’s stand is that the assessee did not disclose .....

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er disclosing its share holding pattern to enable the Assessing Officer to examine the applicability of Section 2(22)(e) of the Act. If the Assessing Officer desired to scrutinize this aspect of the matter it was always open for him to call upon the assessee to provide for such details as and when necessary. - Revenue heavily relies on the judgement of the Supreme Court in case of Gopal and Sons (2017 (1) TMI 331 - SUPREME COURT) which was delivered long after the assessee filed its return; .....

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sessment beyond a period of four years based on subsequent decision of Supreme Court was not valid.In the result, only on this ground, the impugned notice is set aside. - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 16590 of 2015 - Dated:- 1-8-2017 - MR. AKIL KURESHI AND BIREN VAISHNAV, JJ. For The Petitioner : Mr Jp Shah, Senior Counsel With Mr Manish J Shah, Advocate For The Respondent : Mr Manish Bhatt, Senior Counsel with Mrs Mauna M Bhatt, Advocate ORAL JUDGMENT (PER : HON .....

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dit report contained a declaration that the company had taken a loan from another company namely J.P. Infrastructure Pvt. Ltd. to the tune of ₹ 215.16 lakhs during the financial year under consideration. The return of the petitioner was taken in scrutiny. The Assessing Officer passed an order of assessment under Section 143(3) of the Act. On 02.12.2010, loss of the company was reduced to ₹ 53.20 lakhs. To reopen such assessment, the Assessing Officer issued impugned notice on 25.03.2 .....

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,223/- from J P Infrastructure Pvt. Ltd. which include ₹ 1,65,66,504/- from J P Infrastructure Pvt. Ltd. in addition to ₹ 9,97,881/- received from J P Infrastructure Pvt. Ltd.(Rajkot Mall) and ₹ 41,59,838/- from J P Infrastructure Pvt. Ltd. (Surat Mall). On perusal of the return of income audited accounts of the company for the year under consideration, it is seen that no information regarding share holding pattern has been declared and disclosed by assessee company. However, i .....

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e reserves stood at ₹ 7,38,54,215/- in additon to general reserve pf ₹ 3,91,64,000/-. In view of the above, the provisions of section 2(22)(e) are applicable and the amount of ₹ 2,17,24,223/- is liable to be taxed in the hands of assessee company u/s 2(22)(e) of the Act. In view of the above, I have reason to believe that income chargeable to tax has escaped assessment on account of allowance of excess deduction as well as income chargeable to tax escaping assessment and this i .....

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iginal assessment was framed after scrutiny. The reasons recorded by the Assessing Officer referred to one ground namely that of the deemed dividend under Section 2(22)(e) of the Act. According to the Assessing Officer, the assessee company had received loan of ₹ 2.17 crores from J.P. Infrastructure. The assessee company had subscribed share capital of ₹ 1 lakh which was held equally by Shri Jatin Gupta and Shri Jayesh Kotak. These two individuals were also holding beneficial interes .....

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nformation regarding the share holding pattern of the Assessing Officer was not disclosed. Thus, according to him, the primary facts necessary for assessment were not disclosed by the assessee. 4. Learned counsel for the petitioner submitted that there was no failure on part of the assessee to truly disclose all material facts. Reopening of assessment beyond a period of four years was, therefore, not permissible. Even otherwise, the reasons lacked validity. He submitted that with the aid of Sect .....

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uctomelt P. Ltd. reported in [2017] 394 ITR 50 (Guj) and an unreported decision in the case of Pr. Commissioner of Income Tax - Vadodara-1 vs. M/s. Amigo Brushes (P) Ltd rendered in Tax Appeal No. 213 of 2016. He further submitted that the decision of Supreme Court in case of Gopal and Sons (HUF) vs. Commissioner of Income-Tax reported in [2017] 391 ITR 1 (SC) does not overrule the judgements of Delhi High Court and this court cited above. In any case, the Assessing Officer cannot place reliance .....

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ITR 587 and this court judgement in case of Austin Engineering Co. Ltd vs. Joint Commissioner of Income -Tax reported in [2009] 312 ITR 70. 5. On the other hand, on behalf of the department, learned counsel Shri Bhatt opposed the petition contending that the Assessing Officer has recorded proper reasons for issuing notice for reopening. The assessee had not disclosed the share holding pattern in the company. It was later on noticed that two individuals, Shri Gupta and Shri Kotak held 50% shares .....

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s court cited by the petitioner in case of Daisy Packers (P.) Ltd. (supra) was not available when the assessee filed the return and which return was processed by the Assessing Officer. 6. As per Section 2(22)(e) of the Act any payment by a company by way of advance or loan to its share holders under certain circumstances is a deemed dividend. This definition of a deemed dividend was extended to include any such payment by a company in form of a loan or advance to any concern in which such share .....

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at any time during the previous year beneficially entitled to not less than twenty per cent of the income of such concern. 7. It is on the basis of such statutory provisions that the Revenue contends that Shri Gupta and Shri Kotak are beneficial owners of shares of J.P. Infrastructure carrying more than the prescribed per cent of voting power. These two gentlemen also have substantial interest in the assessee company since they hold 50% shares each of the said company. The assessee company ther .....

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mpany. Under such circumstances, the court held that the loan cannot be taxed in the hands of the assessee company as the concept of deemed dividend cannot be extended to a non share holder. This view was followed by our high court in case of Daisy Packers (supra), in case of Mahavir Inductomelt (supra) and also in case of M/s. Amigo Brushes (supra). These decisions, therefore, adopt a consistent guideline that even with the aid of Section 2(22)(e) of the Act, loan or advance by a lender company .....

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plicability of Section 2(22)(e) of the Act arose. The Supreme Court upheld the view of the High Court that the Karta held substantial interest in the HUF and was entitled to not less than 20% of the income. It was observed as under: 16. In the instant case, the payment in question is made to the assessee which is a HUF. Shares are held by Shri. Gopal Kumar Sanei, who is Karta of this HUF. The said Karta is, undoubtedly, the member of HUF. He also has substantial interest in the assessee/HUF, bei .....

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ct would apply. It was observed as under: 17. It is also found as a fact, from the audited annual return of the Company filed with ROC that the money towards share holding in the Company was given by the assessee/HUF. Though, the share certificates were issued in the name of the Karta, Shri Gopal Kumar Sanei, but in the annual returns, it is the HUF which was shown as registered and beneficial shareholder. In any case, it cannot be doubted that it is the beneficial shareholder. Even if we presum .....

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UF itself is not the registered shareholder, the provisions of deemed dividend are not attracted. For this reason, judgment in C.P. Sarathy Mudaliar 1972 SCR 1076, relied upon by the learned counsel for the appellant, will have no application. That was a judgment rendered in the context of Section 2(6-A) (e) of the Income Tax Act, 1922 wherein there was no provision like Explanation 3. 11. This decision of the Supreme Court in case of Gopal and Sons (supra) undoubtedly brings in an entirely new .....

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ly overrules all these judgements is a question we are not inclined to go into in the present petition and leave it open to be decided in an appropriate case. 12. This is so because on a limited question of non disclosure of material facts we are not inclined to hold in favour of the petitioner assessee. Notice for reopening of the assessment having been issued beyond a period of four years from the end of relevant assessment year, the failure on part of the assessee to disclose truly and fully .....

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r issued the notice for reopening of assessment by recording reasons. Neither the Assessing Officer nor the assessee therefore had the benefit of the judgement of the Supreme Court to guide in the context of either making necessary disclosures, in assessing the assessee s income or to reopen the assessment. It is true that the judgements of the High Court in case of Ankitech P. Ltd. (Supra) and later judgement of this Court in case of Daisy Packers (supra) and others were also rendered after the .....

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