MAANRAJ TRADING PRIVATE LIMITED Vs. DEPUTY COMMISSIONER OF INCOME TAX
LAWS(IT)-2014-6-4
INCOME TAX APPELLATE TRIBUNAL
Decided on June 02,2014

Maanraj Trading Private Limited Appellant
VERSUS
DEPUTY COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

D.KARUNAKARA RAO,AM. - (1.) THIS is an appeal by the assessee against the order of the CIT(A) -XXVI, Mumbai dated 17.02.2009. The assessee raised various grounds on an additional ground in the appeal. One of the grounds raised by the assessee relates to the validity of the reassessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961. It is the legal contention of the assessee that the reassessment, which is made beyond the period of four years when there is no defect of disclosure from the assessee's side, is not valid.
(2.) IN the regard, at the very outset, the Ld. Counsel for the assessee mentioned before us that the assessment made u/s.143(3) of the Act on 29.03.2001 was reopened on 31.03.2005 for three reasons and the said reasons are placed at page 12 of the paper book. The Ld. Counsel brought out each of the three reasons and mentioned that the said reasons are not sustainable legally for the following reasons. The assessment is reopened either on the basis of the information already furnished by the assessee along with the return of income or during the regular assessment proceedings, or there is no escapement of income considering the similarity of tax rates (reason 2). Further, it is the submission of the Ld. Counsel that the Assessing Officer (A.O.) attended to this issue during the regular assessment proceedings and completed assessment u/s. 143(3) without making any additions. Referring to each of the issues recorded in the reasons, the Ld. Counsel brought our attention to the first issue relating to the application of the provision of section 2(22)(e) of the Act to the sum of Rs.22.63 crores. In this regard, referring to the said reason, the Ld. Counsel mentioned that the A.O. relied/referred to the Form 3CD report, which was filed by the assessee along with the return of income. It was available to the A.O. at the time of regular assessment. The Ld. Counsel mentioned that necessary opinion was found by the A.O. on the applicability of the provision of section 2(22)(e) of the Act to the said sum and opined against making addition. In this regard, the Ld. Counsel brought our attention to the entries about the shareholding of the Director's on the sister concerns and the details on substantial interest therein. The Ld. Counsel brought our attention to pages 52 and 54 of the paper book (point no. 1 and point no. 9) to support the same. A.O. did not make addition only after examining the applicability of the said provision relating to the deemed dividend to the said sum. Further, taking us through the orders of the A.O., the Ld. Counsel mentioned that there is no extraneous or tangible material gathered by the A.O. which worked as a "live wire" for facilitating reopening of the assessment validly. Considering the above, the Ld. Counsel mentioned that it is the case of "change of opinion" and there is no failure on part of the assessee to disclose any material/or facts necessary for making assessment in the return of income or in the regular assessment. Therefore on this reasoning, the first issue relating to section 2(22)(e) of the Act is misconceived. Therefore, it is the prayer of the assessee's counsel that the reassessment made on this issue should be dismissed.
(3.) ON the other hand, Smt. S. Padmaja, the ld. CIT -DR for the Revenue relied heavily on the reassessment order of the A.O. and the ld. CIT(A) and mentioned that the reassessment should be upheld. She relied on the Allahabad High Court judgment in the case of EMA India Ltd. vs. ACIT (2009) 226 CTR 659 (All) for the preposition that valid reassessment made by the A.O. is valid when there is no application of mind by the A.O. during the making of the regular assessment. We have heard both the parties on this issue and perused the orders of the Revenue Authorities and the material placed before us. After assimilating the above referred facts and arguments, we find that the arguments made out by the Ld. Counsel deserve merit on this issue. It is undisputed fact that the material/or documents filed by the assessee is the source of information for reopening by the A.O. on this issue relating to the provisions of section 2(22)(e) of the Act. There is no tangible material gathered by the A.O. which worked as a live wire for the A.O. to assume jurisdiction validly. We also find that the A.O. already enquired into this issue during the making of the regular assessment. Therefore, in our opinion, the reassessment made by the A.O. on the reasons recorded invoking the provisions of section 2(22)(e) of the Act cannot be upheld. This part of the ground is allowed.;


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