Case Law Details
Kapil N. Shah Vs. ITO (ITAT Mumbai)
ITAT hels that impugned ‘agreement to sell’ projected by the assessee to justify his claim that the amount of Rs. 17,50,000 (supra) was received by him from the company in lieu of a transaction of an anticipated sale of land by him to the company, which however could not fructify on account of compulsory acquisition of the land by the government is merely an arrangement tailored by the assessee with the sole intent to wriggle out of the ramifications of having received the aforesaid amount from the company, which as per law was liable to be assessed as ‘deemed dividend’ under section 2(22)(e) in his hands.
We find ourselves to be in absolute agreement with the observations of the Commissioner (Appeals) that the claim raised by the assessee and the contentions raised in context thereto have serious loose ends which clearly militate against the basic principle of preponderance of human probabilities, and rather, as a matter of fact goes to prove to the hilt that the said claim of the assessee is the brain child of an afterthought, which was guided by an ulterior motive of avoiding assessing of the aforesaid amount as a ‘deemed dividend’ in the hands of the assessee.
We though are of the considered view that the very fact that the ‘agreement to sell’, dated 29-6-2002 which in itself being unregistered would have no existence in the eyes of law, coupled with the fact that the same was found to have been executed on a ‘Stamp paper’ of the value of Rs. 50 which was found to be issued on 11-1-2000, i.e. more than 2 years prior to the date of the impugned ‘agreement of sell, viz. 29-6-2002, between the assessee and the company, and was not found to have been issued in the name of either of the aforesaid parties, viz, the assessee or the company/or director/secretary of the company, but in the name of a third party who was a stranger to the impugned transaction, would in itself had sufficed establishing of the falsity of the aforesaid claim of the assessee, but we have further proceeded with the various facets relatable to the issue under consideration, with the purpose to unfold the sequence of false claims which had been raised by the assessee before the lower authorities.
We find ourselves to be in agreement with the observations of the Commissioner (Appeals), and are of the considered view that neither the contentions raised by the assessee before the lower authorities nor the ‘material’ available on record, supports the claim of the assessee that the amount of Rs. 17,50,000 (supra) was received by him as an advance for an anticipated sale of land by him to the company. We thus in light of our aforesaid observations uphold the order of the Commissioner (Appeals).
Full Text of the ITAT Order is as follows:-
The present appeal filed by the assessee is directed against the order passed by the Commissioner (Appeals)-23, Mumbai, dated 19-12-2012, which in itself arises from the order passed by the assessing officer under section 143 (3) row with section 148 of the Income Tax Act, 1961 (in short ‘the Act’), dated 24-12-2010. The assessee assailing the order of the Commissioner (Appeals) had raised the following grounds of appeal before us:–
“(1) The Learned Commissioner (Appeals) has erred in confirming the action of the Assessing Officer in reopening validity complete assessment beyond a period of 4 years without properly appreciating the facts of the case and in law.
(2) Without prejudice to the above:
Learned Commissioner (Appeals) has erred in confirming the addition of Rs. 17,50,000 made as deemed dividend under section 2(22)(e) of the Income Tax Act, 1961 on irrelevant consideration assumption and presumption.
(3) The appellant craves leave to add, amend, alter and or vary any of the grounds at the time or before the hearing of this appeal.
(4) The appellant therefore prays that action of the Assessing Officer in re-open the completed assessment by invoking provisions of section 147 may please be held as illegal/unjustified and/or alternatively addition of Rs. 17,50,000 made by the Assessing Officer and confirmed by the Learned Commissioner (Appeals) may please be deleted”.
2. Briefly stated, the facts of the case are that the assessee who is engaged in the business of trading in shares and derivatives had filed his return of income on 18-2-2005, declaring total income at Rs. 1,10,075. The case of the assessee was reopened under section 147 of the ‘Act’, for the reason that he being the director of a company, viz. M/s. Simplex Solution Pvt. Ltd. (hereinafter referred to as ‘Company’) holding more than 10% of the shares, had during the year under consideration received an amount of Rs. 17,50,000 from the company, which as per the assessing officer was liable to be assessed as ‘deemed dividend’ under section 2(22)(e) in the hands of the assessee.
3. That during the course of the assessment proceedings the assessing officer called upon the assessee to explain as to why the amount of Rs. 17,50,000 (supra) received by him from the company may not be assessed as ‘deemed dividend’ in his hands under section 2(22)(e). The assessee submitted before the assessing officer that as the aforesaid amount was received by him in lieu of an ‘Agreement to sell’, dated 29-6-2002 executed between him and the company, as per which the assessee was to sell his ‘agricultural land’ to the company, therefore, the same having been received pursuant to a commercial transaction thus could not be assessed as ‘deemed dividend’ under section 2(22)(e). The assessee further submitted before the assessing officer that as somewhere in the year 2009 the aforesaid agricultural land of the assessee was compulsorily acquired by the government, therefore, for the said reason the deal with the company could not fructify. The assessee further submitted that as the amount received by him was an advance in anticipation of sale of land in the ordinary course of business, therefore, the same could not be characterized as ‘deemed dividend’ under section 2(22)(e). The assessee placed on record of the assessing officer the copy of the resolution passed by the board of directors of the company ratifying the aforesaid transaction of purchase of land, along with the copy of the ‘balance sheet’ and ‘Profit and loss account’ of the company for the year under consideration. The assessee further submitted before the assessing officer that as both the parties, viz. the assessee and the company were known to each other, therefore, for the said reason the ‘agreement to sell’ was not got registered with the registrar, as the same was not mandatory.
4. That after deliberating on the contentions of the assessee in the backdrop of the facts of the case, the assessing officer held a conviction that as the ‘agreement to sell’ had not been registered with any authority, therefore, the authenticity of the claim of the assessee as regards the anticipated sale transaction remained under serious doubts. The assessing officer further being of the view that as the advancing of money for purchase of agricultural land was not the business of the company, therefore, the contention of the assessee that the amount had been advanced in the ordinary course of its business could not be accepted. The assessing officer not finding favour with the contentions of the assessee, thus, holding a conviction that the claim of the assessee suffered from serious infirmities and as such could not be summarily accepted, therefore, assessed the amount of Rs. 17,50,000 (supra) as the ‘deemed dividend’ in the hands of the assessee.
5. The assessee being aggrieved with the order of the assessing officer carried the matter in appeal before the Commissioner (Appeals). That during the course of the appellate proceedings the assessee tried to impress upon the Commissioner (Appeals) that as the amount of Rs. 17,50,000 (supra) received by him was by way of an advance towards anticipation of sale of agricultural land owned by him to the company, which was evidenced by the ‘agreement to sell’, dated 29-6-2002 executed between the aforesaid parties, therefore, the same being a receipt in lieu of a commercial transaction could not be assessed as ‘deemed dividend’ in his hands. The assessee in support of the proposition canvassed by him that an amount received by a shareholder pursuant to a commercial transaction falls beyond the sweep of ‘deemed dividend’ contemplated under section 2(22)(e), relied on a host of judicial pronouncements. The Commissioner (Appeals) after deliberating on the contentions of the assessee in the backdrop of the facts of the case, however, did not find favour with the same, and observed as under:–
“ 3.3.4 The entire transaction of receipt of advance of Rs. 17.35 lac by the appellant from the company is a pure and simple case of the money received by the appellant by way of advance or loan within the meaning of clause (e) of subsection 22 of section 2 of the Income Tax Act which a share holder enjoys for simply on account of being a person who is the registered as well as the beneficial owner of shares holding not less than ten percent of the voting power. The amount received by the assessee cannot be said to be a trade advance under a business agreement coupled with certain obligations to be complied with and, therefore, could be regarded to be a payment by a company by way of -advance or loan to a shareholder, and, therefore, same could be assessed to tax in the hands of assessee under section 2(22) (e) for the reasons given below:–
1. The company had paid a substantial amount as purchase consideration to the appellant. Under the provisions of section 2(47) of the Income Tax Act read with section 53A of the Transfer of Property Act, when the sale agreement taken place and substantial consideration is paid, the company’s books must show the transaction of property. However, no such transaction is shown in the books of the company. Hence giving a colour of trade transaction to a pure and simple transaction of loan or advance is nothing but an afterthought.
2. The Meeting of the Board to ratify the transaction was taken place on 22-5-2002 whereas the Minutes were signed on 10-7-2002, when there are only two directors in the company and the appellant is a director as well as a chairman of the company.
3. The agreement of sale is dated 29-6-2002 on a stamp paper of the value of Rs. 50 which has no details of the date of issue, name of vendor etc. on the face of it. On the reverse side of this stamp duty paper the date of issue is 11-1-2000 i.e. more than two years prior to the date of agreement of sale between the appellant and the company for the impugned sale of land. This stamp paper was issued in some other name and not in the name of either the appellant company or the appellant or other director/secretary of the company. This document is, thus, clearly appears to have been made to give a colour of trade advance to the otherwise a genuine transaction of loan or advance to the appellant.
4. The appellant has claimed to have received an amount of Rs. 17,35,000 during the year 2003-04 as advance against sale of his agriculture land to the company. However, the assessee has not explained as to what measures were taken by him in terms of Clause 10 of the sale agreement dated 29-6-2002 to convert the above land of 30.380 acres for industrial purposes and other permission necessary for completion, of sale.
5. The structure of the agreement between the appellant and the company and the conditions laid down therein are arranged in such a manner that they are discernable to have been drafted for the mutual benefit of both parties, and more particularly in order that the appellant get rid of the provisions of deemed dividends. Certain clauses of the agreement are reproduced below to bring home this point:–
“(i) The second party has this day paid to the first party (appellant) the sum of Rs. 4,00,000 by way of advance and the second party (company) has agreed to pay in installments at mutuality agreed internals, and balance of the purchase money of Rs. 10,00,000 would be paid at the time of execution of absolute sale deed. Simultaneously, with the execution of this agreement the first party shall to the second party all the little deeds.
(ii) The sale shall be the complied within a reasonable period from the date of the agreement.
(iii) The first party hereby agrees to convent the above land of 30.380 for industrial purpose. The fees paid towards conversion would be reimbursed by the Second party to the First party after the conversion in completed.
(iv) If a good and marketable title is not made out and first party’s title is not clear, the first party shall refund the money paid as advance immediately on receiving written communication from the second party. If the first party does not refund the advance amount immediately on receiving the written communication, then the first party shall be liable to pay interest at 1% per month for the period of delay and the second party shall proceed legally to recover the same.
(v) if the first party fails or neglects to complete the sale after a good and marketable title is made out as aforesaid or otherwise to carry out any one or more of his obligations on his part as here under provided or required by law, the second party shall be at liberty to enforce the specific performance of the agreement by institution of legal proceedings or at his option may sue the first party for recovery of money paid as advance along with interest/costs and other reliefs.
(vi) if the first party fails to get the land converted for reasons beyond his control or because of changes in the legislation, then the Second party is at liberty to cancel the agreement and get the refund of money paid as advance to the First party within a reasonable time (six months) subjects to the termination of the agreement and in such case, the first party shall not pay any interest to the second party.
(vii) On the title being made good and marketable, the second party fails to complete the purchase within the time aforesaid, Rs. 5,00,000 (Rupees Five lakh only) shall be forfeited from the paid advance amount and the first party shall refund the balance amount to the second party within one week from the completion of the aforesaid time in the agreement”.
6. In spite of the specific query raised as to why the deal was not materialized, the appellant came up with a lame excuse that his agricultural property was acquired by the Naya Raipur Development Authority. The appellant, however, miserably failed to explain as to why the land was not sold to the company or the advance was not demanded by the company until the year 2008 when for the first time the appellant made a declaration for adequate compensation against the compulsory acquisition of his land before the Competent Authority.
7. The matter with regard to the misrepresentation of the facts and the reason for delay in making payment of advance received from the company does not end here. Even after the compensation against the land received by the assessee in the year 2008-09, the appellant made the part payment to the company in 2008 Rs. 3,35,000 and substantial payment of Rs. 14,00,000 was made in the year 2010.
8. When the appellant contended that he could not sell his land to the company due to the acquisition of the said land by the Government, then in a common parlance the trade advance received from the company ceased to exist as a commercial agreement and the assessee was immediately liable to return the amount. In the circumstances it is incomprehensible as to why the advance was not returned immediately to the company. It cannot be said that the appellant could heard the murmurs of the land acquisition matters only in 2008. The appellant being highly educated, well connected and belonging to the upper strata of the society was supposed to know well in advance that his land was going to be acquired. More so, in the instance case, the advances received were repaid in 2008 and 2010 much after the actual date of acquisition by the Government of his traded property. Therefore, in the circumstances the advances received by the assessee from his company can no way be cal led a trade advance or commercial transact ion. Such transact ions squarely fall within the ambit of the provision of section 2(22)(e) of the Income Tax Act.
9. The appellant has not brought out any reason on record to prove that he was in a financial crunch as not to return the money to the company. One of the clauses of the agreement (supra) says that if the First Party (appellant) fails to get land converted for reasons beyond his control or because of changes in the legislation, then the Second Party (company) is at liberty to cancel the agreement and get the refund of money paid as advance to the First Party within a reasonable time (six months). The facts of the case clearly reveal that the assessee neither paid the advance received from his company nor the company cancel the agreement and got refund within the stipulated period. On the other hand, the appellant continued to hold the advance from the date of agreement in 2003 till 2010.
10. Now adverting to the decision relied upon in the written submission, it is stated that they were rendered on the facts of their own. The learned Authorized Representative did not demonstrate as to how these decisions are applicable in the facts and circumstances of instant case. After perusing these decisions, I am of the opinion that the decisions relied upon are rendered in the facts of their own and the ratio laid down in these decisions is not germane to the issue before me. Therefore, I am of the opinion that the reliance on the decisions is totally misplaced.
11. In view of the facts and circumstances of the case as discussed above and also in view of the following that:–
(i) the appellant is a Chairman/Director with other person of his family as the Director;
(ii) the agreement for sale stipulating that the amount received against sale of property in terms of agreement dated 18-9-2003, and the handing over of the property was to be done within six months if the appellant fails to get the land converted for reasons beyond his control or because of changes in the legislation;
(iii) the factual matrix that the property continued to be reflected in the balance sheet of the appellant after more than five years of the agreement;
(iv) the appellant nor the company honored the condition of forfeiture the amount Rs. 5 lac nor the appellant refunded the balance amount as stipulated in the agreement; the Assessing Officer has rightly recorded that the appellant’s case is not covered by the exception of deemed dividend as contemplated under section 2(22)(e). He has rightly held this transactions as sham and treated them as deemed dividend to the assessee under section 2(22)(e). This ground of appeal is dismiss”.
The Commissioner (Appeals) thus in the backdrop of his aforesaid observations concluded that the amount of Rs. 17,50,000 (supra) received by the assessee was clearly in the nature of a loan/advance received by him from the company, which had rightly been assessed as ‘deemed dividend’ by the assessing officer under section 2(22)(e) of the ‘Act’, thus dismissed the appeal of the assessee.
6. The assessee being aggrieved with the order of the Commissioner (Appeals), upholding the addition of Rs. 17,50,000 (supra) made by the assessing officer under section 2(22)(e) had carried the matter in appeal before us. The assessee had filed a letter dated 17-5-2017 requesting that the appeal may be disposed of after considering his ‘Written submissions’, dated 13-6-2016. We thus proceed with and dispose of the appeal on merits, after considering the ‘Written submissions’ (supra) filed by the assessee and hearing the respondent. The assessee in his ‘written submissions’ dated 17-5-2017 had assailed the validity of the reassessment proceedings, as well as submitted that no addition on merits was called for in his hands. The main thrust of the assessee in his ‘written submissions’ is that in the absence of any new material coming into the possession of the assessing officer subsequent to the framing of original assessment in his hands under section 143(1), the initiation of reassessment proceedings on the basis of ‘change of opinion’ was not sustainable. The assessee in support of his contention had relied on the following cases:–
(i) Titanor Components Ltd. v. ACIT (2012) 343 ITR 183 (Bom).
(ii) General Insurance Corporation India v. DCIT (2012) 342 ITR 27 (Bom).
(iii) Motilal R. Todi v. ACIT (ITA No. 2910/Mum/2013, dated 22-9-2015) (ITAT, Mumbai)
(iv) Aipita Marketing (P) Ltd. v. ITO (2008) 21 SOT 302 (ITAT, Mumbai)
The assessee thus on the basis of his aforesaid submissions had averred that in the absence of any new ‘material’, the reassessment proceedings initiated in his case under section 147 being devoid of any force of law, were thus liable to be vacated. Alternatively, the assessee had submitted that as the amount of Rs. 17,50,000 received by him from the company viz. M/s. Simplex Solution Pvt. Ltd. was by way of an advance for sale of land by him to the company, therefore, the lower authorities had erred in assessing the same as ‘dividend income’ under section 2(22)(e) of ‘Act’. The assessee had further submitted that the details of sum of Rs. 17,50,000 had neither been given in the assessment order or in the order of the Commissioner (Appeals). Per contra, the learned Departmental Representatives (for short D.R) had relied on the orders of the lower authorities and averred that the amount of Rs. 17,50,000 (supra) received by the assessee from the company, viz. M/s Simplex Solution Pvt. Ltd. in which he had substantial interest, had rightly been assessed by the assessing officer as ‘deemed dividend’ under section 2(22)(e) which thereafter had been upheld by the Commissioner (Appeals). It was thus submitted by the learned Departmental Representative that the appeal of the assessee being devoid of any merit was thus liable to be dismissed.
7. We have perused the contentions raised by the assessee in his ‘written submissions’ and heard the learned Departmental Representative, perused the orders of the lower authorities and the material available on record. We find that the main thrust of the assessee in his averments raised before us in respect of the validity of reassessment proceedings is that the assessing officer in the absence of any ‘fresh material’ coming into his possession after the passing of the order under section 143(1) had thus exceeded his jurisdiction by initiating reassessment proceedings on the basis of a mere ‘change of opinion’. We have given a thoughtful consideration to the aforesaid submissions of the assessee and are unable to find ourselves as being in agreement with the same. We though are not oblivious of the fact that an assessing officer cannot assume jurisdiction initiate reassessment proceedings on the basis of a ‘change of opinion’, but then the same presupposes the formation of an ‘opinion’ by the assessing officer in the course of the earlier proceedings. The proposition advanced by the assessee would undoubtedly hold good in a case where original assessment had been framed under section 143(3), and thereafter the assessing officer without being in possession of any ‘fresh material’ forms a different opinion on the same set of material which was there before him in the course of the original assessment proceedings. We however are afraid that such a proposition cannot be stretched to take within its sweep a case where the ‘return of income’ filed by an assessee, as is the case before us, had merely been processed under section 143(1). We are of the considered view that issuance of an intimation under section 143(1) only involves a summary processing of the return of income, therefore, there arises no occasion for formation of an opinion on the part of the assessing officer while processing the return of income, as a result whereof, a subsequent issuance of a notice under section 148 cannot be assailed on the ground that the same is based on a ‘change of opinion’. We find that the issue as to whether or not, the processing of a return under section 143(1)(a) can be construed as an assessment, and would have to clear the test of ‘change of opinion’ for valid assumption of jurisdiction by an assessing officer for reassessing the income of the assessee under section 147 of the ‘Act’, had been looked into by the Hon’ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd, (2007) 291 ITR 500 (SC). The Hon’ble Supreme Court deliberating on the issue under consideration had concluded that as an intimation under section 143(1)(a) cannot be held to be an assessment, therefore, no question of ‘change of opinion’ would arise where the same is thereafter subjected to reassessment under section 147, and had observed as under:
“13. One thing further to be noticed is that intimation under section 143(1)(a) is given without prejudice to the provisions of section 143(2). Though technically the intimation issued was deemed to be a demand notice issued under section 156, that did not per se preclude the right of the assessing officer to proceed under section 143(2). That right is preserved and is not taken away. Between the period from 1-4-1989 to 31-3-1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from 1-4-1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till 1-6-1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between 1-4-1998 and 31-5-1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word “intimation” as substituted for “assessment” that two different concepts emerged. While making an assessment, the assessing officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the assessing officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the assessing officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the assessing officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No. 2) Act of 1991 with effect from 1-10-1991, and subsequently w.e.f. 1st June, 1994, by the Finance Act, 1994, and ultimately omitted with effect from 1-6-1999, by the Explanation as introduced by the Finance (No. 2) Act of 1991 an intimation sent to the assessee under section 143(1)(a) was deemed to be an order for the purposes of section 246 between 1-6-1994, to 31-5-1999, and under section 264 between 1-10-1991, and 31-5-1999. It is to be noted that the expressions “intimation” and “assessment order” have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes “the computation of income”, sometimes “the determination of the amount of tax payable” and sometimes “the whole procedure laid down in the Act for imposing liability upon the taxpayer”. In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(1)(a) as it stood prior to 1-4-1989, the assessing officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the CBDT spell out the intent of the legislature, i.e., to minimize the Departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K. Jain, J.) in Apogee International Ltd. v. Union of India (1996) 220 ITR 248 (Del). It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1-6-1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any assessing officer, but mostly by ministerial staff. Can it be said that any “assessment” is done by them ? The reply is an emphatic “no”. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise”.
We further find that the reliance placed by the assessee on the judgments of the Hon’ble High Court of Bombay in the case of General Insurance Corporation of India (supra) and Titanor Components Ltd. (supra) are distinguishable on facts and would not assist the case of the assessee. We find that in the case of General Insurance Corporation India (supra) the facts involved were that the assessing officer while framing the assessment under section 143(3), had after applying his mind to the claim of the assessee in respect of certain exemptions under section 10. Thereafter, in the absence of any ‘fresh material’ the assessing officer being of the view that the exemptions under section 10 had wrongly been allowed to the assessee initiated reassessment proceedings. That it was in the backdrop of the aforesaid facts that the Hon’ble High Court held that the aforesaid action on the part of the assessing officer was clearly a case of ‘change of opinion’, and in the absence of any ‘fresh material the assessment could not be reopened. We further find that in the case of Titanor Components Ltd. (supra), the issue before the Hon’ble High Court was in respect of the scope and gamut of the first proviso of Section 147. That it was in the context of the said issue before the Hon’ble High Court that it was observed that the assessment framed in the hands of the assessee under section 143(3) could only be reopened after a period of 4 years, if the conditions prescribed by the proviso to Section 147 were satisfied. It was thus in the backdrop of the aforesaid facts that the Hon’ble High Court being of the view that as the assessment in the case of the assessee before them was framed under section 143(3), and the latter had not flouted either of the conditions prescribed in the first proviso of Section 147, therefore, the reopening of the assessment could not be upheld. We find that as observed by us hereinabove, the reassessment proceedings in the case of the present assessee were preceded by an intimation under section 143(1), therefore, the facts of the case being distinguishable as against those before the Hon’ble High Court, would thus not be of any assistance to the assessee. We are of the considered view that though the assessee had relied on the orders of the coordinate benches of the Tribunal, but as the issue involved in the case before us is squarely covered by the judgment of Hon’ble Supreme Court in the case of Rajesh Jhaveri (supra), therefore, the orders of the lower authorities holding to the contrary will have to give way to the judgment of the Hon’ble Apex Court. However, even otherwise we find that as observed by the Commissioner (Appeals), a coordinate bench of the Tribunal in the case of Mearsk Global Service Centre (India) (P) Ltd., (2011) 16 taxmann.com 47, following the aforesaid judgment of the Hon’ble Apex Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd., (supra) had held that where a return of income had been processed under section 143(1), a subsequent initiation of reassessment proceedings in the absence of any ‘fresh material’ cannot be characterized as proceedings embarked upon on the basis of a ‘change of opinion’. We further find that the assessee had also stated that as copy of the ‘reasons to believe’ were not made available to him, therefore, in light of the judgment of the Hon’ble Supreme Court in the case of GKN Driveshaft (India) Ltd. v. ITO (ORS) (259 ITR 19), the reassessment proceedings framed were liable to be struck down on account of the said legal infirmity itself. We though are not oblivious of the settled position of law that where an assessee after complying with the terms of a notice issued under section 148 seeks a copy of the ‘reasons to believe’, thereupon, the assessing officer remains under a statutory obligation to make available a copy of the same before proceeding with the reassessment proceedings. We further find that in the case of the present assessee there is nothing available on record from where it could be gathered that any request for obtaining the copy of the reasons to believe was made before the assessing officer. We thus in light of our aforesaid observations are unable to accept the aforesaid contention of the assessee and uphold the validity of the reassessment proceedings initiated by the assessing officer under section 147. The Ground of appeal No. 1 raised by the assessee is dismissed.
8. We further find from a perusal of the records that the assessee on being called upon by the assessing officer to put forth an explanation as to why the amount of Rs. 17,50,000 (supra) received by him from M/s. Simplex Solution Pvt. Ltd., i.e. a company in which he was holding more than 10% of the shares, may not be assessed as ‘deemed dividend’ under section 2(22)(e) in his hands had submitted that as the said amount was an advance received by him as per the terms of the ‘Agreement to Sell’, dated 29-6-2002, executed between him and the company, in respect of an anticipated sale of agricultural land to the company, therefore, the same not being a simpliciter advance, thus, could not be assessed as ‘deemed dividend’ under section 2(22)(e). We find that the aforesaid claim of the assessee had been deliberated upon at length by the Commissioner (Appeals), wherein the latter embarking upon the various facets of the contentions of the assessee had dislodged the same by observing that there were serious infirmities, contradictions and lapses in the said claim of the assessee, which thus could not be accepted.
9. We have given a thoughtful consideration to the facts of the case and find ourselves to be in agreement with the view taken by the Commissioner (Appeals) that there are a number of loose ends in the contentions which were raised by the assessee in order to impress upon the lower authorities that the amount of Rs. 17,50,000 (supra) received by him by way of an ‘Advance’ in respect of the anticipated sale of land by him to the company. The infirmities in the contentions raised by the assessee before the lower authorities, as gathered from the ‘records’, are briefly dealt with and culled out as under:-
(i) That the very fact that the ‘Agreement to sell’, dated 29-6-2002 was found to be unregistered in itself does cast serious doubts as regards the authenticity of the said document and the transaction claimed to be evidenced thereof. The aforesaid doubts are further supplemented beyond any scope of doubt from the very fact that the ‘Stamp paper’ of the value of Rs. 50 on which the impugned ‘agreement to sell’ had been executed, did neither bear the date of issue nor the name of vendor on the very face of it. That on the reverse side of the ‘Stamp paper’ the date of issue was mentioned as 11-1-2000, i.e. more than 2 years prior to the date of execution of the ‘agreement to sell’, viz. 29-6-2002. Still further, it emerged that the said stamp paper was not issued either in the name of the assessee or the company or any of the director/secretary of the company, but was found to be in the name of a third party who was a stranger to the transaction under consideration. Thus the genuineness and veracity of the aforesaid ‘agreement to sell’ can be well gathered beyond any scope of doubt on a bare perusal of the aforesaid facts, which can safely be held to be a bogus document which was prepared with the sole intent to characterize the advance of Rs. 17,50,000 (supra) received by the assessee from the company, as an advance received in lieu of an agreement to sell in respect of the aforesaid land.
(ii) The fact that no transaction in respect of the property under consideration was reflected in the ‘books of account’ of the company, further fortifies the fact that the assessee in order to characterize a pure and simple transaction of loan or advance received by him from the company, as that of a commercial transaction, had thus came with the aforesaid cooked up story.
(iii) The meeting of the board of directors of the company in order to ratify the transaction is stated to have taken place on 22-5-2002, however, the minutes are found to have been signed on 10-7-2002. Thus, in the backdrop of the fact that there were only two directors in the company and the assessee was a director as well as the chairman of the company, therefore, going by the principal of preponderance of human probabilities the aforesaid facts raises serious doubts as regards the authenticity of the aforesaid document and the transaction referred therein.
(iv) That a perusal of the contents of the impugned ‘agreement to sell’, dated 29-6-2002, reveals that the assessee remained under an obligation to take necessary steps to convert the land ad measuring 30.380 acres for industrial purposes and obtain the necessary permissions which were necessary for completion of the sale transaction. However, nothing was placed on record in respect of the same by the assessee before the lower authorities. Thus in the backdrop of the contention raised by the assessee before the lower authorities that he had received an amount of Rs. 17,50,000 (supra) by way of an advance against the anticipated sale of his agricultural land to the company, it is beyond comprehension as to how the latter would despite parting with such substantial purchase consideration in favour of the assessee would had permitted the aforesaid inaction on the part of the assessee, as the same was indispensably required to facilitate the sale transaction to fructify.
(v) The terms of the agreement and the manner in which the same had been drafted as had been deliberated upon by the Commissioner (Appeals) at length in his order, therein dealing with the various facets of the contents of the said ‘agreement to sell’ does not inspire any confidence as regards the authenticity of the document and the contents thereof, but rather on the contrary clearly reveals that the same had been executed with the mala fide intent to get rid of the rigors of the provisions of ‘deemed dividend’ in the hands of the assessee.
(vi) That the explanation of the assessee that the sale transaction did not fructify because the agricultural property under consideration was compulsorily acquired by the government organization, viz. Naya Raipur Development Authority, cannot be accepted, because if that would had been so, then the company would had clearly called upon the assessee to refund the advance. We however find from the records that the company did not call for the refund of the money until the year 2008, when for the first time the assessee made a declaration for adequate compensation against the compulsory acquisition of his land before the competent authority.
(vii) That the misrepresentation of the facts by the assessee further draws force from the fact that even after the assessee was in receipt of compensation in the year 2008-09, only an amount of Rs. 3,35,000 was refunded out of the aforesaid advance of Rs. 17,50,000 (supra) to the company in the year 2008, while for the major amount of Rs. 14,00,000 is stated to have been refunded only in the year 2010. It is beyond comprehension as to how the company despite being well aware of the fact that the sale agreement was not to fructify in future, as the land had been acquired by the Government, would however even thereafter allow its substantial amounts to remain with the assessee for years at stretch.
(viii) That as after the acquisition of the agricultural land of the assessee by the government there remained no occasion for the assessee to have proceeded with the sale transaction in favour of the company, therefore, the ‘trade advance’ received by the assessee from the company lost the color as that of an amount received by him pursuant to a commercial transaction, thus making it obligatory on the part of the assessee to immediately refund the same amount to the company. We are unable to comprehend as to why the assessee instead of immediately refunding the amount to the company, rather chose to retain it for years at stretch. We though are not oblivious of the fact that there is no ‘material’ on record which could go to suggest about the genuineness of the transaction as canvassed by the assessee before the lower authorities, but rather, even if what had been canvassed by the assessee is to be accepted to be true, then also as observed by us hereinabove, after the acquisition of the land by the government, the advance received by the assessee thereafter no more retained the color and character as that of an amount received in lieu of a commercial transaction, and the failure on his part to immediately refund the same sufficed the requirement for characterization of the said amount as a simple advance, which thus even on the said count would bring the aforesaid transaction within the sweep of Section 2(22)(e).
(ix) That though the impugned ‘agreement to sell’ contemplated that if the assessee would fail to get the land converted for reasons beyond his control or because of changes in the legislation, then the company remained at a liberty to cancel the agreement and get the refund of the money paid as advance to the assessee within a reasonable period of 6 months. We however find that despite the aforesaid obligation cast upon the assessee to refund the amount to the company, the latter had in a whimsical manner held back the said amount till the year 2010, which is beyond comprehension and as such cannot be accepted.
10. We thus in the backdrop of our aforesaid observations have a strong conviction that the impugned ‘agreement to sell’ projected by the assessee to justify his claim that the amount of Rs. 17,50,000 (supra) was received by him from the company in lieu of a transaction of an anticipated sale of land by him to the company, which however could not fructify on account of compulsory acquisition of the land by the government is merely an arrangement tailored by the assessee with the sole intent to wriggle out of the ramifications of having received the aforesaid amount from the company, which as per law was liable to be assessed as ‘deemed dividend’ under section 2(22)(e) in his hands. We find ourselves to be in absolute agreement with the observations of the Commissioner (Appeals) that the claim raised by the assessee and the contentions raised in context thereto have serious loose ends which clearly militate against the basic principle of preponderance of human probabilities, and rather, as a matter of fact goes to prove to the hilt that the said claim of the assessee is the brain child of an afterthought, which was guided by an ulterior motive of avoiding assessing of the aforesaid amount as a ‘deemed dividend’ in the hands of the assessee. We though are of the considered view that the very fact that the ‘agreement to sell’, dated 29-6-2002 which in itself being unregistered would have no existence in the eyes of law, coupled with the fact that the same was found to have been executed on a ‘Stamp paper’ of the value of Rs. 50 which was found to be issued on 11-1-2000, i.e. more than 2 years prior to the date of the impugned ‘agreement of sell, viz. 29-6-2002, between the assessee and the company, and was not found to have been issued in the name of either of the aforesaid parties, viz, the assessee or the company/or director/secretary of the company, but in the name of a third party who was a stranger to the impugned transaction, would in itself had sufficed establishing of the falsity of the aforesaid claim of the assessee, but we have further proceeded with the various facets relatable to the issue under consideration, with the purpose to unfold the sequence of false claims which had been raised by the assessee before the lower authorities. We find ourselves to be in agreement with the observations of the Commissioner (Appeals), and are of the considered view that neither the contentions raised by the assessee before the lower authorities nor the ‘material’ available on record, supports the claim of the assessee that the amount of Rs. 17,50,000 (supra) was received by him as an advance for an anticipated sale of land by him to the company. We thus in light of our aforesaid observations uphold the order of the Commissioner (Appeals).
The appeal of the assessee is dismissed.
Author Bio
