Issue examined under original assessment proceeding: Whether re-opening in such case is justified – 2
- The Assessee had filed a return showing total income at Rs. 1.48 crores. A notice under section 143(2) was issued to the Assessee. After calling for extensive details by various notices and the Assessee replying to those notices, the Assessing Officer passed an assessment order dated under section 143(3) of the Act.
- After a gap of more than four years, the Assessee received a notice dated 27.03.2015 under section 148 of the Income Tax Act. The reasons for issuing of notice under section 148 included issue pertaining to the issue of deemed dividend under section 2(22)(e) which had already been examined by the Assessing Officer during the original assessment proceedings concluded under section 143(3) of the Income Tax Act.
- The impugned notice was issued on 27.03.2015, which was clearly beyond the period of four years from the end of the relevant assessment year. Moreover, assessment for the assessment year under consideration was made under section 143(3) of the Act. Therefore, in the light of the first proviso to section 147 of the Act, no action could have been taken under the section unless any income chargeable to tax had escaped assessment for such assessment year by reason of the failure on the part of the Assessee to disclose fully and truly all material facts necessary for his assessment.
- The Assessee had also disclosed the extent of his shareholding in the loan giver as well as loan receiver companies. The reopening of assessment was on the premise that the Assessee did not disclose the transactions between the loan giver company in which he had shareholding not less than 10 per cent of the voting power and the loan receiver concerns in which he had a substantial interest. When the amount received by the two concerns from the loan giver company was neither received by the Assessee nor was it for the benefit of the Assessee, such amount could not be considered as deemed dividend in the hands of the Assessee. Consequently, no income accrued to the Assessee from such transactions.
- In the absence of any finding having been recorded by the Assessing Officer that any income had accrued in favour of the Assessee, it was not possible to say that there was any obligation cast upon him to disclose such transactions. Under the circumstances, in the absence of any failure on the part of the Assessee to disclose fully and truly all material facts necessary for his assessment, the reopening of assessment beyond a period of four years from the relevant assessment was without authority of law and liable to be quashed.