Ramesh Purshottam Modi Vs ITO (ITAT Mumbai)
Dividend from Mutual Fund Cannot be Treated as Bogus u/s 68 – Reopening Held Change of Opinion Beyond 4 Years – ₹39.53 Cr Addition Deleted – ITAT Mumbai
The assessee’s case was reopened u/s 147 based on Investigation Wing information alleging dividend stripping through JM Mutual Fund schemes. The AO treated dividend of ₹44.24 crore as fictitious and made net addition of ₹39.53 crore u/s 68 r.w.s 115BBE after allowing part of the short-term capital loss. CIT(A) upheld the reassessment and addition.
The ITAT observed that the original assessment was completed u/s 143(3) after examining mutual fund investments, dividend income and related transactions. Since reopening was made beyond four years without any failure by the assessee to disclose material facts, it amounted to mere change of opinion and violated the proviso to section 147. Further, the reasons recorded alleged fictitious capital loss, whereas the final addition was made by treating dividend as unexplained cash credit, which was beyond the scope of reopening.
On merits also, the Tribunal held that once purchase and redemption of units were accepted as genuine, dividend arising from the same investment could not be selectively treated as fictitious. Dividend received through SEBI-regulated mutual fund via banking channels cannot be taxed u/s 68 without evidence of unaccounted money. Accordingly, the reassessment proceedings were quashed and the addition of ₹39.53 crore deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
