TMI Blog2017 (8) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... y militate against the basic principle of preponderance of human probabilities, and rather, as a matter of fact goes to prove to the hilt that the said claim of the assessee is the brain child of an afterthought, which was guided by an ulterior motive of avoiding assessing of the aforesaid amount as a ‘deemed dividend’ in the hands of the assessee. We find ourselves to be in agreement with the observations of the CIT(A), and are of the considered view that neither the contentions raised by the assessee before the lower authorities nor the ‘material’ available on record, supports the claim of the assessee that the amount of ₹ 17,50,000/- (supra) was received by him as an advance for an anticipated sale of land by him to the company. We thus in light of our aforesaid observations uphold the order of the CIT(A). - Decided against assessee. - I.T.A. No. 1580/Mum/2013 - - - Dated:- 11-8-2017 - SHRI G.S. PANNU, AM AND SHRI RAVISH SOOD, JM For The Appellant : Written Submissions For The Respondent : Shri Durga Dutt, D.R. ORDER PER RAVISH SOOD, JUDICIAL MEMBER The present appeal filed by the assessee is directed against the order passed by the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land to the company, therefore, the same having been received pursuant to a commercial transaction thus could not be assessed as deemed dividend under Sec. 2(22)(e). The assessee further submitted before the A.O that as somewhere in the year 2009 the aforesaid agricultural land of the assessee was compulsorily acquired by the government, therefore, for the said reason the deal with the company could not fructify. The assessee further submitted that as the amount received by him was an advance in anticipation of sale of land in the ordinary course of business, therefore, the same could not be characterized as deemed dividend u/s. 2(22)(e). The assessee placed on record of the A.O the copy of the resolution passed by the board of directors of the company ratifying the aforesaid transaction of purchase of land, along with the copy of the balance sheet and Profit and loss account of the company for the year under consideration. The assessee further submitted before the A.O that as both the parties, viz. the assessee and the company were known to each other, therefore, for the said reason the agreement to sell was not got registered with the registrar, as the same was not man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares holding not less than ten percent of the voting power. The amount received by the assessee cannot be said to be a trade advance under a business agreement coupled with certain obligations to be complied with and, therefore, could be regarded to be a payment by a company by way of -advance or loan to a shareholder, and, therefore, same could be assessed to tax in the hands of assessee under section 2(22) (e) for the reasons given below:- 1. The company had paid a substantial amount as purchase consideration to the appellant. Under the provisions of section 2(47) of the I.T. Act read with section 53A of the Transfer of Property Act, when the sale agreement taken place and substantial consideration is paid, the company's books must show the transaction of property. However, no such transaction is shown in the books of the company. Hence giving a colour of trade transaction to a pure and simple transaction of loan or advance is nothing but an afterthought. 2. The Meeting of the Board to ratify the transaction was taken place on 22/05/2002 whereas the Minutes were signed on 10/07/2002, when there are only two directors in the company and the appellant is a dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( iv) If a good and marketable title is not made out and first party's title is not clear, the first party shall refund the money paid as advance immediately on receiving written communication from the second party. If the first party does not refund the advance amount immediately on receiving the written communication, then the first party shall be liable to pay interest at 1% per month for the period of delay and the second party shall proceed legally to recover the same. ( v) if the first party fails or neglects to complete the sale after a good and marketable title is made out as aforesaid or otherwise to carry out any one or more of his obligations on his part as hereunder provided or required by law, the second party shall be at liberty to enforce the specific performance of the agreement by institution of legal proceedings or at his option may sue the first party for recovery of money paid as advance along with interest/costs and other reliefs. ( vi) if the first party fails to get the land converted for reasons beyond his control or because of changes in the legislation, then the Second party is at liberty to cancel the agreement and get the refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his traded property. Therefore, in the circumstances the advances received by the assessee from his company can no way be cal led a trade advance or commercial transact ion. Such transact ions squarely fall within the ambit of the provision of section 2(22)(e) of the I.T. Act. 9. The appellant has not brought out any reason on record to prove that he was in a financial crunch as not to return the money to the company. One of the clauses of the agreement (supra) says that if the First Party (appellant) fails to get land converted for reasons beyond his control or because of changes in the legislation, then the Second Party (company) is at liberty to cancel the agreement and get the refund of money paid as advance to the First Party within a reasonable time (six months). The facts of the case clearly reveal that the assessee neither paid the advance received from his company nor the company cancel the agreement and got refund within the stipulated period. On the other hand, the appellant continued to hold the advance from the date of agreement in 2003 till 2010. 10. Now adverting to the decision relied upon in the written submission, it is stated that they were rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits, after considering the Written submissions (supra) filed by the assessee and hearing the respondent. The assessee in his written submissions dated 17.05.2017 had assailed the validity of the reassessment proceedings, as well as submitted that no addition on merits was called for in his hands. The main thrust of the assessee in his written submissions is that in the absence of any new material coming into the possession of the A.O subsequent to the framing of original assessment in his hands u/s. 143(1), the initiation of reassessment proceedings on the basis of change of opinion was not sustainable. The assessee in support of his contention had relied on the following cases:- (i) Titanor Components Ltd. Vs. ACIT (2012) 343 ITR 183 (Bom). (ii) General Insurance Corporation India Vs. DCIT (2012) 342 ITR 27 (Bom). (iii) Motilal R. Todi Vs. ACIT (ITA No. 2910/Mum/2013, dated 22.09.2015) (ITAT, Mumbai) (iv) Aipita Marketing (P) Ltd. Vs. ITO (2008) 21 SOT 302 (ITAT, Mumbai) The assessee thus on the basis of his aforesaid submissions had averred that in the absence of any new material , the reassessment proceedings initiated in his case u/s. 147 being devoid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of the original assessment proceedings. We however are afraid that such a proposition cannot be stretched to take within its sweep a case where the return of income filed by an assessee, as is the case before us, had merely been processed u/s. 143(1). We are of the considered view that issuance of an intimation u/s. 143(1) only involves a summary processing of the return of income, therefore, there arises no occasion for formation of an opinion on the part of the A.O while processing the return of income, as a result whereof, a subsequent issuance of a notice u/s. 148 cannot be assailed on the ground that the same is based on a change of opinion . We find that the issue as to whether or not, the processing of a return u/s. 143(1)(a) can be construed as an assessment, and would have to clear the test of change of opinion for valid assumption of jurisdiction by an A.O for reassessing the income of the assessee u/s 147 of the Act , had been looked into by the Hon ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd, (2007) 291 ITR 500 (SC). The Hon ble Supreme Court deliberating on the issue under consideration had concluded that as an intima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troduced by the Finance (No. 2) Act of 1991 an intimation sent to the assessee under s. 143(1)(a) was deemed to be an order for the purposes of s. 246 between 1st June, 1994, to 31st May, 1999, and under s. 264 between 1st Oct., 1991, and 31st May, 1999. It is to be noted that the expressions intimation and assessment order have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes the computation of income , sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the taxpayer . In the scheme of things, as noted above, the intimation under s. 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under s. 143(1)(a) as it stood prior to 1st April, 1989, the AO had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be reopened. We further find that in the case of Titanor Components Ltd. (supra) , the issue before the Hon ble High Court was in respect of the scope and gamut of the first proviso of Section 147. That it was in the context of the said issue before the Hon ble High Court that it was observed that the assessment framed in the hands of the assessee u/s. 143(3) could only be reopened after a period of 4 years, if the conditions prescribed by the proviso to Section 147 were satisfied. It was thus in the backdrop of the aforesaid facts that the Hon ble High Court being of the view that as the assessment in the case of the assessee before them was framed u/s. 143(3), and the latter had not flouted either of the conditions prescribed in the first proviso of Section 147, therefore, the reopening of the assessment could not be upheld. We find that as observed by us hereinabove, the reassessment proceedings in the case of the present assessee were preceded by an intimation u/s. 143(1), therefore, the facts of the case being distinguishable as against those before the Hon ble High Court, would thus not be of any assistance to the assessee. We are of the considered view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding more than 10% of the shares, may not be assessed as deemed dividend u/s. 2(22)(e) in his hands had submitted that as the said amount was an advance received by him as per the terms of the Agreement to Sell , dated 29.06.2002, executed between him and the company, in respect of an anticipated sale of agricultural land to the company, therefore, the same not being a simpliciter advance, thus, could not be assessed as deemed dividend u/s. 2(22)(e). We find that the aforesaid claim of the assessee had been deliberated upon at length by the CIT(A), wherein the latter embarking upon the various facets of the contentions of the assessee had dislodged the same by observing that there were serious infirmities, contradictions and lapses in the said claim of the assessee, which thus could not be accepted. 9. We have given a thoughtful consideration to the facts of the case and find ourselves to be in agreement with the view taken by the CIT(A) that there are a number of loose ends in the contentions which were raised by the assessee in order to impress upon the lower authorities that the amount of ₹ 17,50,000/-(supra) received by him by way of an Advance in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, going by the principal of preponderance of human probabilities the aforesaid facts raises serious doubts as regards the authenticity of the aforesaid document and the transaction referred therein. (iv) That a perusal of the contents of the impugned agreement to sell , dated 29.06.2002, reveals that the assessee remained under an obligation to take necessary steps to convert the land admeasuring 30.380 acres for industrial purposes and obtain the necessary permissions which were necessary for completion of the sale transaction. However, nothing was placed on record in respect of the same by the assessee before the lower authorities. Thus in the backdrop of the contention raised by the assessee before the lower authorities that he had received an amount of ₹ 17,50,000/-(supra) by way of an advance against the anticipated sale of his agricultural land to the company, it is beyond comprehension as to how the latter would despite parting with such substantial purchase consideration in favour of the assessee would had permitted the aforesaid inaction on the part of the assessee, as the same was indispensably required to facilitate the sale transaction to fructify. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re unable to comprehend as to why the assessee instead of immediately refunding the amount to the company, rather chose to retain it for years at stretch. We though are not oblivious of the fact that there is no material on record which could go to suggest about the genuineness of the transaction as canvassed by the assessee before the lower authorities, but rather, even if what had been canvassed by the assessee is to be accepted to be true, then also as observed by us hereinabove, after the acquisition of the land by the government, the advance received by the assessee thereafter no more retained the color and character as that of an amount received in lieu of a commercial transaction, and the failure on his part to immediately refund the same sufficed the requirement for characterization of the said amount as a simple advance, which thus even on the said count would bring the aforesaid transaction within the sweep of Section 2(22)(e). (ix) That though the impugned agreement to sell contemplated that if the assessee would fail to get the land converted for reasons beyond his control or because of changes in the legislation, then the company remained at a liberty to cancel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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