TMI Blog2020 (3) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... ff the objections raised by the assessee. It is clearly against the decision in the case of GKN Driveshafts (India) Ltd vrs. ITO [ 2002 (11) TMI 7 - SUPREME COURT] Respectfully following the above decision, we are inclined to accept the submission of Ld. AR and we hold that AO has not disposed off the objections prior to completion of the assessment. Hence, assessment order passed by the AO is not proper, accordingly quashed. Decided in favour of assessee - I.T.A. No. 3803 to 3806/Mum/2018 - - - Dated:- 8-1-2020 - Shri S. Rifaur Rahman, AM And Shri Ram Lal Negi, JM For the Appellant : Shri P. J. Pardiwala/Shri Nitesh Joshi, ARs For the Respondent : Ms. Kavita Kaushik, DR ORDER PER S. RIFAUR RAHMAN (ACCOUNTANTMEMBER): The present four (4) Appeals have been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-28, Mumbai, in short Ld. CIT(A) dated 27.03.2018 for AY 2007-08 2008-09 respectively. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed of by this consolidated order. Firstly, we are taking ITA No. 3803 3805/Mum/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der by contesting the fact that reasons for reopening stated in the assessment order is received from JCIT(OSD), whereas the fact that advances that were taken from M/s Business India Publication Ltd and other information relevant for the charges u/s 2(22)(e) of the Act were in the record of the AO at the time of framing of original assessment order u/s 143(3) of the Act. In order to initiate proceeding u/s 147 of the Act, provision in respect of reopening of assessment is less than 4 years and AO is required to demonstrate that some new material has come into his possession for reopening of the assessment by relying on the decision of the jurisdictional High Court. After considering the submissions, Ld. CIT(A) dismissed the ground challenging the reopening of assessment with the following observations:- 4.1 I find that re-opening is within 4 years and though original assessment was completed u/s.143(3) on 31.12.2009, the only charges that can vitiate re-assessment is if assessee establishes change of opinion . A perusal of REASON TO BELIEVE shows that there was receipt of information from external source about B.I.P.L advancing loan to Business India (the assessee).That cruci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice the reasons for reopening of assessment as received from JCIT(OSD) and the reasons were relating to deemed dividend u/s 2(22)(e) of the Act and the reasons for reopening were placed at page no. 4 of the paper book. Further, he brought to our notice at page no. 5 of the paper book in which, assessee has filed objections before AO in reference to reasons for reopening of assessment, however he submitted that the above objections was not disposed off by the AO before completing the assessment order as held in the case of GKN Driveshafts (India) Ltd vrs. ITO (259 ITR 19) (SC). 10. Ld. AR further submitted that as per the reasons recorded by the AO, AO has applied the provision of section 2(22)(e) of the Act and taxed in the hands of the assessee, whereas as held in the case of Bhaumik Colour Pvt. Ltd 313 ITR (AT) 146(Mum)(SB) and Universal Medicare Pvt Ltd 324 ITR 263 (Bom), wherein it was held that deemed dividend u/s 2(22)(e) of the Act can be charged in the hands of the shareholders, not in the hands of the beneficiary. He further submitted that it clearly indicates that AO has not applied his mind considering the above said judicial precedents that the deemed dividend can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. He brought to our notice the financial figures referred by AO in the assessment order itself is different than the reasons for reopening the assessment. In this regard, he submitted that AO has no application of mind and further he relied upon the decision of Hon ble Gujrat High Court in the case of Vithalbhai G. Prajapati v. ITO ( 2018) 404 ITR 732 ( Guj) (HC). He further submitted that similar view was also expressed in the case of Ingram Micro (India)Exports Pvt. Ltd. vrs DCIT (2017) 78 taxman.com 140 (Bom). 12. On the grounds of appeal, he submitted that even after Ld. CIT(A) has deleted the additions of deemed dividend and made observations that deemed dividend can be applied in the hands of the shareholders, not in the hands of the beneficiaries. However, he directed the AO to initiate the proceedings against the shareholders who is having beneficiary interest by making u/s 150(1) of the Act. He submitted that since assessee was mainly contesting the reopening of assessment, the other grounds are academic in nature. He further submitted that in case bench decides against the ground no. 1, then the bench may adjudicate the other grounds of appeal. 13. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding of Mr. Ashok Advani in the Business India Publication Ltd and assessee has received advance from the company. Considering the fact that Mr. Ashok Advani holds more than 10% of share and having substantial interest in the assessee s business, the provision of section 2(22)(e) of the Act are attracted. By mere application of section 2(22)(e) of the Act may not be sufficient, but AO has to investigate and substantiate that the advances received by the beneficiary are in the nature of business advance or other advance and whether the chargeability of the provisions in the hands of the beneficiary or in the hands of the shareholders. We notice that AO has not applied his mind whether the chargeability of deemed dividend are attracted in the hands of the assessee or not, were not properly investigated and proceeded with the information received from JCIT(OSD) office. It is a duty of the AO to apply his mind and record satisfaction of escapement of income. Without clear satisfaction, AO cannot initiate re-assessment proceeding. Further, assessee has raised the objections before the AO, as soon as it received reasons for reopening of the assessment and the same has to be disposed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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