TaxTMI 
TaxTMI 
2018 (10) TMI 373
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat extent ? ii. Whether the Tribunal, having held for the assessment year 1999-2000 that in the case of advances, deemed dividend cannot exceed the amount of accumulated profits after adjustment of deemed dividend for the previous assessment year 1998-99, erred in not advancing the same principle for assessment year 1998-99 as well ? And iii. Whether the Department was correct in reopening assessment completed for the assessment year 1998-99 on a mere change of opinion ?" 3. We have heard Mr.T.Ramesh, learned counsel for the assessee as well as Mr.M.Swaminathan and Mrs.V.Pushpa, learned Standing Counsel for the Revenue. Substantial Question of Law No.3 : 4. First, we take up for up for consideration the third substantial question of law namely as to whether the Department was correct in reopening assessment completed for the assessment year 1998-99 on a mere change of opinion. 5. According to the learned counsel for the assessee, the reopening of the assessment was on the ground that there was no new material or information brought to the knowledge of the Assessing Officer enabling him to reopen the assessment in a valid manner and that the reopening based on the informati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Company Circle V(1), Chennai, who was the Assessing Officer of one M/s.Pallava Granite Industries India Private Limited (for brevity, the PGIIPL) stating that the said company had made advances to its sister concerns amounting to Rs. 5,64,64,418/- as on 31.3.1998, that the company had accumulated profits (surplus in profit and loss account) to the tune of Rs. 2,22,34,064/- as on 31.3.1998 and that the applicability of Section 2(22)(e) of the Act may be considered in the hands of the appellant/ assessee. 10. The Assessing Officer of the appellant pointed out that since the two partners of the assessee firm were the shareholders in the PGIIPL holding 46.35% and 43.02% respectively in the share capital of the PGIIPL and since the PGIIPL made advances to the assessee, in which, the two shareholders had substantial interest, the liability of the assessee for treating the receipt of advance from the PGIIPL as 'deemed dividend' within the meaning of Section 2(22)(e) of the Act was required to be considered for the relevant assessment years. 11. The assessee's contention was that they received advances as trade advances and also purchase of mining land by the PGIIPL from time....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Assessing Officer as well as more elaborately by the CIT (A), we find that the Assessing Officer has full justification for reopening the assessment. At this juncture, it would be relevant to take note of the following observations made by the CIT (A) while confirming the findings of the Assessing Officer that reopening of the assessment was warranted and justified : "From the details filed during the course of the assessment proceedings also, it is seen that no specific details have been furnished except the PAN and G.I.No. Of Pallava Granites Industries (India) Limited and other companies in the group. It is significant to note here that it was not stated anywhere in the statements filed at the time of assessment that both the partners are even shareholders holding substantial interest in the company, Pallava Granites Industries (India) Ltd., and also no information regarding the company possessing accumulated profits during the relevant accounting periods were given. That is, the appellant firm had not furnished complete details regarding any of the loans taken or advances received by it from the connected concerns including the company, Pallava Granites Industries (India) Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me when the scrutiny assessment was completed under Section 143(3) of the Act. 17. Furthermore, it was pointed out that though the assessee had given preliminary details in the sense that it had shown as 'unsecured loan' in the balance sheet as on 31.3.1998 the balances of advances received from the company - the PGIIPL, no further details were furnished. Neither the assessee firm nor its representative had furnished the details regarding the shareholders of the company nor the details of accumulated profits of the company nor the different accounting periods were filed at the time of original assessment. 18. The learned counsel for the assessee has vehemently contended that what was not called for could not be a reason for reopening the assessment, which would clearly show that it was a case of change of opinion. 19. We are unable to countenance the said submission on account of the factual details as recorded by the CIT (A). The version of the assessee that relevant documents were filed along with the returns was found to be incorrect. The following findings were recorded by the CIT (A) in this regard : "6.2 : The return for this assessment year was filed on 02.11.19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Assessing Officer regarding the shareholding pattern of the company or its accumulated profits, it cannot be said that the assessee disclosed all necessary materials for the assessment in this regard. It was further held that the Assessing Officer had no occasion to examine the advances received from the company from the angle of taxability of the sum under Section 2(22)(e) of the Act and that it was not a case of change of opinion. 22. On going through the above factual matrix, we are fully satisfied that the reopening of assessment was not a case of change of opinion, but it was a case where the assessee did not disclose fully and truly the material facts necessary for the assessment. In the light of the above, substantial question of law No.3 is answered against the assessee and in favour of the Revenue. Substantial Question of Law Nos.1 and 2 : 23. Both the questions overlap, as they are on the same point. 24. The contention of the assessee is that the amounts were received for the purposes of advances for the purchase of mining land and for supply of material. In other words, the assessee has contended that there was a business transaction between the assessee and the PGII....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee for the different accounting periods starting from the financial year from 1995-96 to 1998-99 were produced and that the same were also extracted in the assessment orders. 30. Therefore, it was argued that by virtue of the fact that if the advances made by the PGIIPL to its associate concerns were reduced from the accumulated profits every year, the balance of accumulated profits of the company would work out to NIL as on 31.3.1997, 31.3.1998 and 31.3.1999 and that no portion of the amounts drawn by the assessee from the company could be taxed as deemed dividend for the assessment years 1998-99 and 1999-2000. In support of such a contention, reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT Vs. G.Narasimhan (died) [reported in (1999) 236 ITR 0327]. 31. The CIT (A) elaborately discussed the factual position in the decision in the case of G.Narasimhan and then proceeded to examine as to whether the arguments made by the assessee were acceptable or not. The above argument was elaborately examined by the CIT (A) and it would suffice to note the findings recorded by the CIT (A) for the assessment year 1999-2000, which are as follows :....