TMI Blog2017 (4) TMI 1488X X X X Extracts X X X X X X X X Extracts X X X X ..... . As regards the assessment for A.Y. 2012-13, since the assessment was not concluded as on the date of search and it was pending therefore the regular assessment proceedings stood abated on the date of search under Section 132 of the Act. Consequently, the assessment framed under Section 153A r.w.s. 143(3) of the Act will par take the character of regular assessment and hence the Assessing Officer while making the addition is not depending on the incriminating material found during the course of search. Therefore the issue has to be decided on merits. The Assessing Officer has not disputed this fact of the huge credit balance in the account of the husband of the assessee. Further the Assessing Officer has not conducted any enquiry whether the assessee is having online payment facility in her bank and further the payment was made by BBPL as per the instruction of her husband. Therefore in view of the fact that the husband of the assessee was having more than ₹ 18 Crores in the beginning of the F.Y. and more than ₹ 26 Crores at the end of F.Y. with the BBPL. Hence, there is no actual outflow from the reserves and surplus of the BBPL due to the said payment of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 'the Act') therefore, all these appeals were clubbed for the purpose of hearing and adjudication. 2. Common issues are raised in these appeals except quantum of addition. The grounds raised in ITA Nos.118/Bang/2017 are reproduced as under : 3. Ground No.1 is general in nature and do not require any specific adjudication. 4. Ground No.2 is regarding validity of assessment under Section 153A r.w.s. 143(3) of the Act on the ground of validity of search. At the time of hearing, the learned Counsel for the assessee stated at Bar that the assessee does not press this ground and the same may be dismissed as not pressed. The learned Departmental Representative has raised no objection if Ground No.2 of the appeal is dismissed as not pressed. Accordingly, the Ground No.2 of the appeals is dismissed being not pressed. 5. Ground No.3 3(i) are regarding sustainability of addition made under Section 2(22)(e) of the Act while completing the assessment under Section 153A of the Act without any incriminating material found during the search. 6. The assessees in these two appeals are Directors of M/s. Brindavan Beverages Pvt. Ltd. (in short BBPL). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments were not pending for these three assessment years as on date of search. Thus as per the provisions of Section 132 r.w.s. 153A, the order passed by the Assessing Officer under Section 153A for these three assessment years are reassessment orders as the assessments were not abated and therefore in the absence of any incriminating material found during the course of search, the addition made by the Assessing Officer on account of deemed dividend is against the law and not sustainable. In support of his contention, he has relied upon the following decisions : i. CIT Vs. IBC Knowledge Park Pvt. Ltd. 136 DTR 65(Kar) ii. CIT Vs. Lancy Constructions 237 Taxmann 728 iii. Order dt.31.8.2016 in ITA No.1215/Mum/ in the case of Anil Mahavir Gupta Vs. ACIT. iv. CIT Vs. Suraj Dev Dada 367 ITR 78 (P H) v. Pradeep Kumar Malhotra Vs. CIT 338 ITR 538 (Cal) vi. CIT Vs. Kabul Chawla 380 ITR 573 (Del) Placing reliance on the above judgments, the learned Counsel for the assessee has submitted that the assessment under Section 153A can be made on the basis of seized material and further the addition should be strictly based on the evidence found during the course of searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has relied upon the Hon'ble jurisdictional High Court in the case of Canara Housing Development Co. Vs. DCIT 274 CTR 122 and submitted that Hon'ble High Court has held that once the assessment is reopened, the assessing authority can take note of any disclosed income earlier returned, any undisclosed income found during the search and also any other income which is not disclosed in the earlier return or which is not unearthed during the search nor found out what is the total income of each year and then pass the assessment order. Hence the ld. CIT (DR) contended that there is no fatter in the power of the Assessing Officer to assess or reassess any income which came to the notice of the Assessing Officer even if the same is not unearthed during the search. He has relied upon the impugned orders of the CIT (Appeals). 9. In a rejoinder, the learned Authorised Representative has submitted that the decision in the case of Canara Housing Development Co. Vs. DCIT (supra) has been considered by the Hon'ble jurisdictional High Court in the case of CIT Vs. IBC Knowledge Park Pvt. Ltd (supra) as well as in other subsequent decisions. 10. I have considered the rival submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition based on the seized material. 12. In the case of CIT Vs. Lancy Constructions (supra), the Hon'ble High Court has held that in the absence of any incriminating documents having been found, the same accounts of the assessee were reassessed by making further investigation which was not permissible as the same would amount to reopening of a concluded assessment without there being any additional material found at the time of search. Thus the Hon'ble High Court has observed that it would give the revenue a second opportunity to reopen the concluded assessment which is impermissible in law. The Hon'ble High Court has further observed that merely because a search is conducted in the premises of assessee would not entitle the revenue to initiate the process of reassessment for which there is a separate procedure prescribed in the statute. It is only when the conditions prescribed for reassessment are fulfilled that a concluded assessment can be reopened. In the subsequent decision in the case of CIT Vs. IBC Knowledge Park Pvt. Ltd. (supra), the Hon'ble jurisdictional High Court after considering the decision in the case of Canara Housing Development Co. Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in possession of any valuable assets, which has not been or would not be disclosed under the Act. In such a case, a search can take place. Following the search, if any books of account, other documents, any valuable assets is or are found in the possession or control of any person in the course of a search, then the books of account or other documents or valuable assets could be seized. Under Section 153A, the satisfaction regarding an inference of liability must be recorded. The Assessing Officer has to issue notice to the assessee i.e., the person searched for the purpose of assessment or reassessment of the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted. Section 153C as already noted, deals with assessment of income of any other person, when the Assessing Officer is satisfied that the books of account or documents or valuable assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to under sub-section(1) of Section 153A of the Act. In such a case, the Assessing Officer has to issue n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that the satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 158BC of the Act of the searched person. 2. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 3. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the other person is one and the same, then also he is requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed income. Thus it is clear that the Hon'ble High Court having considered the decision of Canara Housing Development Co. Vs. DCIT (surpa) and after having been understood the same has clearly laid down the principle that a concluded assessment cannot be disturbed without there being any existene of incriminating material. 13. The Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla (supra), after considering all the relevant decisions on this point has held in paras 35 to 38 as under : 35. In CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 374 ITR 645/232 Taxman 270/58 taxmann.com 78 (Bom.) the question addressed by the Bombay High Court was whether the scope of assessment under Section 153A encompasses additions, not based on any incriminating material found during the course of search? It was held that no addition could be made in respect of the assessments that had become final in the event no incriminating material was found during search. The Bombay High Court relied on the earlier decision in Murli Agro Products Ltd. (supra) and discussed the scope and ambit of the proceedings for assessment and reassessment of total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which assessments shall be made for each of the six assessment years separately; b. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. Summary of the legal position 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of six years preceeding to the relevant assessment year in which the search takes place and therefore, there will be only one assessment order in respect of each six assessment years in which both disclosed and undisclosed income would be brought to tax. In the absence of any incriminating material completed the assessment can be reiterated and the abated assessment or reassessment can be made. In case of completed assessments on the date of search, the assessment under Section 153A can be made only on the basis of some incriminating material unearthed during the course of search or requisition of document or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made open in the course of original assessment. Therefore the addition made by the Assessing Officer for the Assessment Years 2009-10 to 2011-12 towards deemed dividend under Section 2(22)(e) of the Act without any incriminating material found during the search is not sustainable under law. Hence the same is liable to be deleted. 14. As regards the assessment for A.Y. 2012-13 in ITA No.124/Bang/2017, since the assessment was not concluded as on the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he request of the assessee s husband to whom substantial amount was owed by BBPL. Subsequently, the assessee had repaid the said amount to BBPL and discharged the amount outstanding against her name. It is further contended that there was no indication on the part of the BBPL to distribute its accumulated profit as a loan or advance to the assessee so as to come in the ambit of Section 2(22)(e) of the Act. To attract the provisions of Section 2(22)(e), there has to be loan or advance given with a view to avoid payment of tax on distribution of surplus or profits of the company. In support of his contention, he has relied upon the decision of Hon'ble jurisdictional High Court in the case of Bagmane Construction Vs. CIT 119 DTR 49 (Kar). Thus the learned Authorised Representative has submitted that the Hon'ble High Court has observed that the provisions of Section 2(22)(e) are attracted only when the amount is paid with the intention to avoid payment of Dividend Distribution Tax under Section 115 O of the Act. In the case of the assessee, it was rather beneficial for the BBPL as they used the amount of the husband of the assessee which was due from the BBPL. He has also relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,30,000 has been added by the Assessing Officer as deemed dividend as the said payment was made by the BBPL to meet the liability of the assessee towards service tax and income tax. The assessee has explained before the Assessing Officer that since the service tax and income tax was to be paid online and the assessee was not having online facility in her bank account therefore she has requested her husband to pay the said amount. Since the husband of the assessee is having huge outstanding against the BBPL in his account therefore he in turn asked BBPL to make these payments of the assessee towards service tax and income tax. There is no dispute about the fact that the husband of the assessee is having a huge credit balance during all these years and particularly for the A.Y. 2011-12. The opening balance as on 1.4.2011 was ₹ 18.42 Crores and closing balance as on 31.3.2012 was ₹ 26.87 Crores. Thus it is clear that the credit balance of the husband of the assessee in the books of BBPL was increased substantially during the year and it was never reduced from the opening balance of ₹ 18.42 Crores. The details of the ledger account of the husband of the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders have substantial interest or make any payment on behalf of or for the individual benefit of such shareholder, in such an event, by the deeming provisions, such payment by the company is treated as dividend. It is so made by legal fiction created under Section 2(22)(e) of the Act. Thus, the definition of dividend has been enlarged, and that loan or advances given under the conditions specified under this provision would also be treated as dividend. Thus, for gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of section 2(22) but not to the cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. The intention behind the provisions of section 2(22)(e) of the Act is to tax dividend in the hands of shareholders. 25. It is in this background, the word any payment , by a company, by way of advances or loans, has to be interpreted. The attribute of a loan is that it is a positive act of lending money coupled with acceptance by the other side of the money as loan and generally carries interest and there is an obligation of repayment. The term advance may or ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in associating wider words with words of narrower significance is doubtful, or otherwise not clear that the present rule of construction can be usefully applied. It can also be applied where the meaning of the words of wider import is doubtful; but, where the object of the legislature in using wider words is clear and free of ambiguity, the rule of construction in question cannot be pressed into service. As has been observed by Earl of Halsbury, L.C., in Corporation of Glasgow v. Glasgow Tramway and Omnibus Co. Ltd. [(1898) AC 631 at p. 634] in dealing with the wider words used in Section 6 of Valuation of Lands (Scotland) Act, 1854, the words 'free from all expenses whatever in connection with the said tramways' appear to me to be so wide in their application that I should have thought it impossible to qualify or cut them down by their being associated with other words on the principle of their being ejusdern generis with the previous words enumerated . If the object and scope of the statute are considered there would be no difficulty in holding that the relevant words of wide import have been deliberately used by the legislature in defining industry in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y constitutes a deemed dividend. But if such a payment is made firstly not out of accumulated profits and secondly even if it is out of accumulated profits, but as trade advance as a consideration for the goods received or for purchase of a capital asset which indirectly would benefit the company advancing the loan, such advance cannot be brought within the word 'advance' used in the aforesaid provision. The trade advance which is in the nature of money transacted to give effect to commercial transactions would not fall within the ambit of the provisions of Section 2(22)(e) of the Act. The Hon'ble High Court has given emphasis to the aspect that the provisions of Section 2(22)(e) are attracted only when the intention of such advance or loan is to avoid payment of DDT under Section 115 O of the Act. Similar view has been taken by the Hon'ble Calcutta High Court in the case of Pradeep Kumar Malhotra Vs. CIT (supra). The Hon'ble Punjba Haryana High Court in the case of CIT Vs. Suraj Dev Dada (supra) has held in para 10 as under : 10. From the above, it emerges that CIT(A) and the Tribunal had concurrently recorded that the assessee had running account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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