D.B.Prakash Chand Jain, CHENNAI v. ACIT, CHENNAI

CO 197/CHNY/2009 | 2004-2005
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 19721723 RSA 2009
Assessee PAN AAWPS6945G
Bench Chennai
Appeal Number CO 197/CHNY/2009
Duration Of Justice 1 year(s) 8 month(s) 4 day(s)
Appellant D.B.Prakash Chand Jain, CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Cross Objection
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-07-2011
Date Of Final Hearing 26-07-2011
Next Hearing Date 26-07-2011
Assessment Year 2004-2005
Appeal Filed On 24-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI (BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER) .. I.T.A. NOS. 1629 & 1630/MDS/2009 ASSESSMENT YEARS : 2003-04 & 2004-05 THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(2) CHENNAI 600 034. (APPELLANT) V. SMT. SURAJ KUMARI JAIN 46 DEWAN RAMA ROAD PURASAWALKAM CHENNAI 600 084. PAN : AAWPS6945G (RESPONDENT) C.O. NOS. 193 & 194/MDS/2009 (IN I.T.A. NOS. 1629 & 1630/MDS/2009) ASSESSMENT YEARS : 2003-04 & 2004-05 SMT. SURAJ KUMARI JAIN 46 DEWAN RAMA ROAD PURASAWALKAM CHENNAI84. (CROSS OBJECTOR) V. THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(2) CHENNAI 600 034. (RESPONDENT) I.T.A. NO. 488/MDS/2010 ASSESSMENT YEAR : 2003-04 SMT. SURAJ KUMARI JAIN 46 DEWAN RAMA ROAD PURASAWALKAM CHENNAI84. (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(2) CHENNAI 600 034. (RESPONDENT) I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 2 I.T.A. NOS. 1631 1632 & 1633/MDS/2009 ASSESSMENT YEARS : 2002-03 2003-04 & 2004-05 THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(2) CHENNAI 600 034. (APPELLANT) V. SHRI D.B. PRAKASH CHAND JAIN 46 DEWAN RAMA ROAD PURASAWALKAM CHENNAI 600 084. PAN : AAIPP3249G (RESPONDENT) C.O. NOS. 195 196 & 197/MDS/2009 (IN I.T.A. NOS. 1631 1632 & 1633/MDS/2009) ASSESSMENT YEARS : 2002-03 2003-04 & 2004-05 SHRI D.B. PRAKASH CHAND JAIN 46 DEWAN RAMA ROAD PURASAWALKAM CHENNAI84. (CROSS OBJECTOR) V. THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(2) CHENNAI 600 034. (RESPONDENT) I.T.A. NOS. 1640 & 1641/MDS/2009 ASSESSMENT YEARS : 2003-04 & 2004-05 THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(2) CHENNAI 600 034. (APPELLANT) V. SHRI MUKESH KUMAR JAIN 46 DEWAN RAMA ROAD PURASAWALKAM CHENNAI 600 084. PAN : AAJPM5477E (RESPONDENT) I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 3 C.O. NOS. 198 & 199/MDS/2009 (IN I.T.A. NOS. 1640 & 1641/MDS/2009) ASSESSMENT YEARS : 2003-04 & 2004-05 SHRI MUKESH KUMAR JAIN 46 DEWAN RAMA ROAD PURASAWALKAM CHENNAI84. (CROSS OBJECTOR) V. THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(2) CHENNAI 600 034. (RESPONDENT) I.T.A. NOS. 486 & 487/MDS/2010 ASSESSMENT YEARS : 2003-04 & 2004-05 SHRI MUKESH KUMAR JAIN 46 DEWAN RAMA ROAD PURASAWALKAM CHENNAI84. (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(2) CHENNAI 600 034. (RESPONDENT) REVENUE BY : SHRI K.E.B. RANGARAJAN JUNIOR STANDING COUNSEL RESPONDENT BY : SHRI T. B ANUSEKAR O R D E R PER BENCH : THESE ARE APPEALS AND CROSS-OBJECTIONS RELATING TO ASSESSEES SMT. SURAJ KUMARI JAIN SHRI D.B. PRAKASH CHAND AND SHRI MUKESH KUMAR JAIN FOR VARIOUS ASSESSMENT YEARS. SINCE TH E FACTUAL I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 4 SCENARIO GIVING RISE TO THE APPEALS AND CROSS-OBJEC TIONS ARE MORE OR LESS SIMILAR THE APPEALS AND CROSS-OBJECTIONS ARE DEALT WITH THROUGH THIS CONSOLIDATED ORDER. 2. APPEALS AND CROSS-OBJECTIONS SMT. SURAJ KUMARI J AIN ARE TAKEN UP FIRST FOR DISPOSAL. 3. OUT OF THE FIVE APPEALS TWO ARE CROSS-OBJECTION S OF THE ASSESSEE RELATING TO ASSESSMENT YEARS 2003-04 AND 2 004-05 AND TWO ARE APPEALS OF THE REVENUE RELATING TO SAME ASSESSM ENT YEARS. ONE APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF COMM ISSIONER OF INCOME TAX CHENNAI-III UNDER SECTION 263 OF INCOM E-TAX ACT 1961 (IN SHORT THE ACT) FOR ASSESSMENT YEAR 2003-04. CROSS-OBJECTIONS OF THE ASSESSEE FOR ASSESSMENT YEARS 2003-04 AND 2004- 05 HAVE SIMILAR GROUNDS AND ASSAIL JURISDICTION OF THE A.O. TO DO THE ASSESSMENTS AS WELL AS REOPENING DONE FOR RESPECTIV E ASSESSMENT YEARS. SINCE THESE GO TO THE ROOT OF THE MATTER T HE CROSS-OBJECTIONS ARE DECIDED FIRST. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 5 4. AS MENTIONED ABOVE THE GROUNDS RAISED VIDE THE CROSS- OBJECTIONS FOR BOTH THE ASSESSMENT YEARS ARE SIMILA R. TWO ISSUES ARE RAISED IN THESE CROSS-OBJECTIONS. FIRST ONE IS THA T THE ORIGINAL NOTICE HAVING BEEN ISSUED BY ITO COMPANY CIRCLE IV(2) TH E COMPLETION OF ASSESSMENTS BY ANOTHER NAMELY ITO COMPANY CIRCLE V(2) WAS INVALID SINCE THE LATTER ASSESSING OFFICER WAS NOT HAVING JURISDICTION OVER THE ASSESSEE. LEARNED A.R. IN SUPPORT OF HIS CONTENTION THAT THE ASSESSING OFFICER DID NOT HAVE JURISDICTION TO DO A SSESSMENT OVER THE ASSESSEE CALLED OUR ATTENTION TO A LETTER DATED 2. 9.2005 FROM DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE III(4) S TATING THAT JURISDICTION OF THE ASSESSEE LAY WITH ITO WARD XIV (2). HOWEVER AS PER THE LEARNED A.R. NOTICE UNDER SECTION 148 OF T HE ACT FOR BOTH THE IMPUGNED ASSESSMENT YEARS WAS ISSUED BY ITO COMPA NY CIRCLE IV(2) ON 19.12.2006. LEARNED A.R. POINTED OUT THAT REASONS FOR REOPENING THE ASSESSMENTS WERE ALSO GIVEN BY THE SA ME ASSESSING OFFICER ON 26.2.2007. HOWEVER AS PER THE LEARNED A.R. THE ASSESSMENT WAS NEVERTHELESS COMPLETED BY ITO COMPA NY CIRCLE V(2) FOR BOTH THESE ASSESSMENT YEARS AND ORDERS UND ER SECTION I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 6 143(3) READ WITH SECTION 147 OF THE ACT WERE ISSUED ON 26.12.2007. AS PER THE LEARNED A.R. THE ASSESSEE WAS ALREADY I NFORMED BY DCIT CENTRAL CIRCLE III(4) AS EARLY AS ON 2.9.2005 THAT JURISDICTION IN HER CASE LAY WITH ITO WARD XIV(2). NEVERTHELESS NOTI CES WERE ISSUED BY ANOTHER OFFICER AND ASSESSMENTS COMPLETED BY YET ANOTHER OFFICER. THEREFORE ACCORDING TO HIM ASSESSMENTS HAVING BEE N DONE BY A NON-JURISDICTIONAL OFFICER WERE VOID. 5. PER CONTRA THE LEARNED D.R. SUBMITTED THAT SECT ION 292B OF THE ACT CAME TO THE AID OF THE REVENUE. SINCE ASSESSEE HAD NOT ONLY CO- OPERATED WITH THE PROCEEDINGS BUT THE NOTICES AND ALL OTHER PROCEEDINGS WERE IN SUBSTANCE AND SPIRIT IN ACCORDA NCE WITH LAW. FURTHER ACCORDING TO HIM UNDER SECTION (3) OF SEC TION 124 OF THE ACT ASSESSEE OUGHT HAVE OBJECTED TO THE JURISDICTION BE FORE THE CONCERNED ASSESSING OFFICER WITHIN ONE MONTH FROM T HE NOTICE UNDER SECTION 142(1) AND HAVING NOT DONE SO IT COULD NOT AT THIS STAGE RAISE UP THIS ISSUE REGARDING JURISDICTION. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 7 6. IN REPLY LEARNED A.R. SUBMITTED THAT ASSESSEE H AD VIDE HER LETTER DATED 27 TH NOVEMBER 2007 TO THE ITO COMPANY CIRCLE V(2) BROUGHT TO HIS ATTENTION THAT HE WAS NOT HAVING JUR ISDICTION TO ASSESS THE ASSESSEE. THEREFORE ACCORDING TO HIM OBJECTI ONS WERE PLACED BY THE ASSESSEE BEFORE THE CONCERNED ASSESSING OFFI CER. LEARNED A.R. ALSO SUBMITTED THAT SECTION 292B WOULD NOT HEL P THE REVENUE IN THIS RESPECT SINCE THE NOTICES WERE ISSUED AND ASS ESSMENT DONE BY AN OFFICER WHO WERE NOT HAVING JURISDICTION OVER T HE ASSESSEE THEREFORE IT COULD NOT BE CONSIDERED AS DONE IN A MANNER THAT WAS IN SUBSTANCE AND EFFECT CONFORMITY WITH AND ACCORDING TO THE INTEND AND PURPOSE OF THE ACT. 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. THERE IS NO DISPUTE THAT ASSESSEE HAD RECEIVED A LE TTER FROM DCIT CENTRAL CIRCLE III(4) CHENNAI ON 2.9.2005 THAT JU RISDICTION OVER HER CASE LAY WITH ITO WARD XIV(2) CHENNAI. THERE IS ALSO NO DISPUTE THAT SUBSEQUENT NOTICE UNDER SECTION 148 DATED 19.1 2.2006 WAS ISSUED BY A DIFFERENT ITO NAMELY ITO COMPANY CIR CLE IV(2). THERE IS ALSO NO DISPUTE THAT ASSESSEE CO-OPERATED AND AP PEARED BEFORE I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 8 THE SAID ITO DURING THE COURSE OF RE-ASSESSMENT PRO CEEDINGS. ASSESSEE HAD ALSO BROUGHT TO THE NOTICE OF ITO COM PANY CIRCLE V(2) ON 27 TH NOVEMBER 2007 THAT JURISDICTION ON HER CASE LAY W ITH ITO WARD XIV(2). NO DOUBT WE DO ACCEPT THE CONTENTION OF LEARNED A.R. THAT SECTION 292B DOES NOT HAVE ANY IMPLICATION IN THE GIVEN SCENARIO SINCE THE QUESTION IS REGARDING JURISDICTION OF THE CONCERNED OFFICER TO ISSUE NOTICE AND TO MAKE AN ASSESSMENT AND IT HAS N OTHING TO DO WITH THE SPIRIT AND INTEND OF THE ACT. NEVERTHELESS IT IS IMPORTANT TO HAVE A LOOK AT SUB-SECTION (3) OF SECTION 124 WHICH IS ALS O VERY RELEVANT IN THIS REGARD. THE SAID SUB-SECTION RUNS AS UNDER:- (3) NO PERSON SHALL BE ENTITLED TO CALL IN QUESTI ON THE JURISDICTION OF AN ASSESSING OFFICER ( A ) WHERE HE HAS MADE A RETURN 50 [UNDER SUB-SECTION (1) OF SECTION 115WD OR] UNDER SUB-SECTION (1) OF SECTION 139 AFTER THE EXPIRY OF ONE MONTH FROM THE DATE ON WHICH HE WAS SERVED WITH A N OTICE UNDER SUB- SECTION (1) OF SECTION 142 OR 50 [SUB-SECTION (2) OF SECTION 115WE OR] SUB- SECTION (2) OF SECTION 143 OR AFTER THE COMPLETION OF THE ASSESSMENT WHICHEVER IS EARLIER; ( B ) WHERE HE HAS MADE NO SUCH RETURN AFTER THE EXPIR Y OF THE TIME ALLOWED BY THE NOTICE UNDER 51 [SUB-SECTION (2) OF SECTION 115WD OR SUB- SECTION (1) OF SECTION 142 OR UNDER SUB-SECTION (1) OF SECTION 115WH OR UNDER SECTION 148 FOR THE MAKING OF THE RETURN OR BY THE NOTICE UNDE R THE FIRST PROVISO TO SECTION 115WF OR UNDER THE FIRST PROVISO TO SECTION 144 ] TO SHOW CAUSE WHY THE ASSESSMENT SHOULD NOT BE COMPLET ED TO THE BEST OF THE JUDGMENT OF THE ASSESSING OFFICER WHICHEVER IS EARLIER. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 9 THERE IS NO DISPUTE THAT IN PURSUANCE OF NOTICES UN DER SECTION 148 OF THE ACT ISSUED BY ITO COMPANY CIRCLE IV(2) ASSESS EE HAD VIDE HER LETTER DATED 5 TH FEBRUARY 2007 (PLACED AT PAPER-BOOK PAGE 8) AS WE LL AS LETTER DATED 20 TH DECEMBER 2006 (PLACED AT PAPER-BOOK PAGE 7) AND ALSO LETTER DATED 6 TH FEBRUARY 2007 (PLACED AT PAPER-BOOK PAGE 9) REQUESTED THE ASSESSING OFFICER TO CONSIDER HER RETURNS EARLIER FILED FOR THE RESPECTIVE ASSESSMENT YEARS TO BE RE TURNS FILED IN PURSUANCE OF THE NOTICE UNDER SECTION 148 OF THE AC T. THUS WITHOUT DOUBT ASSESSEE HAD PARTICIPATED IN THE PROCEEDINGS BEFORE ITO COMPANY CIRCLE IV(2). ONCE ASSESSEE HAD FILED A RE TURN VIDE SUB- SECTION (3) OF SECTION 124 OF THE ACT HE OR SHE CO ULD NOT QUESTION THE JURISDICTION OF THE ASSESSING OFFICER UNLESS OBJECT IONS IN THIS REGARD WERE FILED BEFORE EXPIRY OF ONE MONTH FROM THE DATE ON WHICH HE OR SHE WAS SERVED WITH A NOTICE UNDER SUB-SECTION (1) OF SECTION 142 OF THE ACT. HERE ADMITTEDLY ASSESSEE HERSELF STATED THAT NOTICE UNDER SECTION 142(1) OF THE ACT WAS ISSUED BY ITO COMPAN Y CIRCLE IV(2) ON 19.12.2006 (SEQUENCE OF EVENTS SUBMITTED BY ASSE SSEE) AND OBJECTIONS IF IT CAN BE CALLED SO WERE FILED BY T HE ASSESSEE (PLACED AT I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 10 PAPER-BOOK PAGE 24) ON 27 TH NOVEMBER 2007. THUS THE LETTER FILED BY THE ASSESSEE WAS MORE THAN ELEVEN MONTHS AFTER T HE DATE OF ISSUE OF NOTICE UNDER SECTION 142(1) OF THE ACT. EVEN IN THIS PARTICULAR LETTER FILED ON 27 TH NOVEMBER 2007 ASSESSEE HAD JUST INFORMED THE ASSESSING OFFICER REGARDING JURISDICTION OF THE ASS ESSEE BEING WITH ITO WARD XIV(2) AND THIS BY ITSELF COULD NOT BE CO NSIDERED AS RAISING OF AN OBJECTION. RELEVANT PARA 10 OF LETTER DATED 27 TH NOVEMBER 2007 IS REPRODUCED HEREUNDER:- I ALSO WISH TO INFORM YOU THAT VIDE LETTER DATED 02/ 09/2005 FROM THE OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE III(4) CHENNAI I WAS INFORMED THA T THE JURISDICTION OF MY CASE LIES WITH THE INCOME TAX OF FICER WARD XIV(2) CHENNAI WITH EFFECT FROM 01/09/2005. WE ARE THEREFORE OF THE OPINION THAT THE ASSESSEE DID NOT CALL INTO QUESTION THE JURISDICTION OF ASSESSING OFFICER WHO HAD PROCEEDED WITH THE ASSESSMENT AND/OR COMPLETED THE ASSESSMENT WITH IN THE PROPER TIME FRAME ALLOWED UNDER SECTION 124(3) OF THE ACT. THIS BEING SO ASSESSEE CANNOT BE ALLOWED TO TAKE UP THIS ISSUE NO W. GROUNDS ASSAILING JURISDICTION OF THE A.O. TO DO THE ASSESS MENT IS DISMISSED. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 11 8. THE NEXT ISSUE TAKEN UP BY THE ASSESSEE IN HER C ROSS- OBJECTIONS IS THAT THE REOPENING ITSELF WAS BAD IN LAW. ACCORDING TO ASSESSEE THE OBJECTIONS RAISED BY HER ON THE REASO NS REQUIRED FOR REOPENING WERE NOT DISPOSED THROUGH A SEPARATE ORDE R AND THEREFORE THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CA SE OF ALLANA COLD STORAGE LTD. V. ITO (287 ITR 1) WAS NOT COMPLIED WI TH. THE ISSUE REGARDING OBJECTION AND REOPENING WAS DEALT BY THE CIT(APPEALS) AT PARA 5 OF HIS ORDER AS UNDER:- 5. THE ASSESSEE HAS OBJECTED TO THE INITIATION OF REASSESSMENT PROCEEDINGS ON THE GROUND THAT THE ASS ESSING OFFICER DID NOT HAVE THE REQUISITE JURISDICTION AND HAD NOT COMPILED WITH THE STATUTORY REQUIREMENTS OF LAW TO I NITIATE SUCH REASSESSMENT PROCEEDINGS. IT IS HOWEVER SEEN THAT THE RETURNS OF INCOME UNDER CONSIDERATION HAD ONLY BEEN PROCESSE D AND NO ASSESSMENT HAD BEEN MADE FOR ANY OF THE TWO ASSESSME NT YEARS PRESENTLY UNDER CONSIDERATION. BOTH THE REASSESSMEN T PROCEEDINGS WERE INITIATED WITHIN THE PERIOD OF FOU R YEARS FROM THE END OF EACH OF THE RELEVANT ASSESSMENT YEARS. L OANS HAVING BEEN GIVEN BY THE COMPANY TO THE ASSESSEE THE ASSES SING OFFICER LEGITIMATELY HAD A PRIMA FACIE REASON TO BE LIEVE THAT INCOMES CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. REASONS FOR REOPENING WERE COMMUNICATED TO THE ASSESSEE AND HER OBJECTIONS WERE ALSO DEALT BY THE ASSESSING OFFICER. ON THESE FACTS THE REOPENING OF ASSESSMENT OF BOTH THESE ASSESSMENT YEA RS IS HELD TO BE VALID AND THE ASSESSEES APPEALS QUESTIONING THE JURISDICTION FOR REOPENING ARE HEREBY DISMISSED FOR BOTH THESE AS SESSMENT I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 12 YEARS. IN COMING TO THE CONCLUSION RELIANCE IS PLAC ED ON APEX COURT DECISION IN THE CASE OF COMMISSIONER OF INCOM E TAX VS. RAJESH JHAVERI STOCK BROKERS PRIVATE LTD. [291 ITR 500 ]. 9. NOW BEFORE US LEARNED A.R. SUBMITTED THAT THE R EASONS THOUGH COMMUNICATED TO THE ASSESSEE THE OBJECTIONS RAISED BY HER WERE NOT DEALT BY THE LD. A.O. SEPARATELY BUT DEALT WITH O NLY IN THE ASSESSMENT ORDER. THEREFORE ACCORDING TO HIM THE RE-ASSESSM ENT WAS BAD IN LAW. FURTHER ACCORDING TO HIM REASON CITED FOR T HE REOPENING WAS NOT RELEVANT. 10. PER CONTRA THE LEARNED D.R. SUPPORTED THE ORDE R OF LD. CIT(APPEALS). 11. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. ORIGINAL RETURN AS MENTIONED BY LD. CIT(APPEALS) WAS ONLY PROCESSED UNDER SECTION 143(1) OF THE ACT AND THE R EOPENING WAS DONE WITHIN FOUR YEARS. THE REASON INTIMATED BY TH E ASSESSING OFFICER TO THE ASSESSEE IS CLEAR FROM HIS LETTERS D ATED 26.2.2007 PLACED AT PAPER-BOOK PAGE 10 TO 12. THAT FOR ASSES SMENT YEAR 2003- 04 IS REPRODUCED HEREUNDER:- I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 13 THE ASSESSEE IS A DIRECTOR OF M/S PRAKASH GOLD PALA CE (P) LTD. (ERSTWHILE M/S ABHILASHA INTERNATIONAL PVT. LTD.) A ND HAVE SUBSTANTIAL INTEREST IN THE COMPANY. THE COMPANY OU T OF THE ACCUMULATED RESERVES AND SURPLUS OF ` 6 71 38 172/- HAS DISTRIBUTED A SUM OF ` 44 91 589/- AS ADVANCE TO THE ASSESSEE DURING THE ASSESSMENT YEAR 2003-04. THE DISTRIBUTI ON OF THE ADVANCE IS SUBJECT TO TAX U/S 2(22)(E) OF THE INCOM E TAX IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND. NO DIVID END TAX HAS BEEN PAID BY THE ASSESSEE TOWARDS THE ADVANCE RECEIV ED. BUT FOR THE VARIANCE IN AMOUNTS THE REASON STATED FOR ASSESSMENT YEAR 2004-05 WAS ALSO VERY SIMILAR. THERE IS NO DI SPUTE THAT ORIGINAL RETURN WAS SUBJECT ONLY TO A PROCESSING UNDER SECTI ON 143(1) OF THE ACT. THEREFORE THE ABOVE REASON IN OUR OPINION IS MORE THAN SUFFICIENT TO RESORT TO A REOPENING IN VIEW OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF ACIT V. RAJESH JHAVERI ST OCK BROKERS P. LTD. (291 ITR 500). IRRESPECTIVE OF THE FACT WHETH ER THE ASSESSING OFFICER HAD SEPARATELY DEALT WITH THE OBJECTIONS RA ISED BY THE ASSESSEE OR NOT THE REASONS CITED BY THE A.O. WAS Q UITE RELEVANT AND SATISFIED THE CONDITION FOR THE REOPENING. WE THE REFORE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD. 12. THE GROUNDS ASSAILING THE REOPENING STAND DISM ISSED. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 14 13. IN THE RESULT BOTH THE CROSS-OBJECTIONS OF THE ASSESSEE ARE DISMISSED. 14. NOW WE TAKE UP THE APPEALS OF THE REVENUE FOR R ESPECTIVE ASSESSMENT YEARS IN I.T.A. NO. 1629 & 1630/MDS/200 9. 15. AS ALREADY MENTIONED THE RETURNS FOR THESE ASS ESSMENT YEARS WERE ORIGINALLY PROCESSED UNDER SECTION 143(1) OF T HE ACT AND LATER REOPENED FOR A REASON THAT APPLICABILITY OF SECTION 2(22)(E) OF THE ACT ON THE ADVANCE RECEIVED BY THE ASSESSEE FROM M/S PR AKASH GOLD PALACE (P) LTD. WAS NOT CONSIDERED. ASSESSEE WAS A DIRECTOR OF A COMPANY CALLED M/S PRAKASH GOLD PALACE (P) LTD. EA RLIER KNOWN AS ABHILASHA INTERNATIONAL PVT. LTD. ASSESSEE HELD 2 86 155 SHARES OF THAT COMPANY OUT OF WHICH 2 LAKHS SHARES WERE TRA NSFERRED ON 22.12.2001 TO HER MINOR GRANDSON LAKSHYA MUTHA. A SSESSING OFFICER WAS OF THE OPINION THAT ADVANCE OF ` 44 91 589/- RECEIVED BY THE ASSESSEE IN PREVIOUS YEAR ENDED ON 31.3.2003 AN D ` 25 85 420/- RECEIVED DURING PREVIOUS YEAR ENDED ON 31.3.2004 F ROM M/S PRAKASH GOLD PALACE (P) LTD. WERE TO BE TREATED AS DEEMED D IVIDEND IN HER I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 15 HANDS UNDER SECTION 2(22)(E) OF THE ACT SINCE ASSE SSEES SHARE HOLDING IN THE SAID COMPANY EXCEEDED 10% OF THE VOT ING POWER. ASSESSEE WAS PUT ON NOTICE IN THIS REGARD. REPLY O F THE ASSESSEE WAS THAT OUT OF TOTAL SHARES 2 86 155 SHE HAD ALRE ADY TRANSFERRED 2 LAKH SHARES TO HER MINOR GRANDSON AS EARLY AS 22.12 .2001. THEREFORE ACCORDING TO ASSESSEE SHE WAS HOLDING O NLY 4.75% OR IN OTHER WORDS MUCH LESS THAN 10% OF THE TOTAL SHARES OF PRAKASH GOLD PALACE (P) LTD. AS AT THE BEGINNING AS WELL AS THE END OF THE RELEVANT PREVIOUS YEARS. IT WAS ARGUED BY THE ASSESSEE THAT SECTION 2(22)(E) OF THE ACT HAD NO APPLICABILITY ON THE ADVANCE RECE IVED BY HER FROM THE SAID COMPANY. HOWEVER THE A.O. WAS NOT APPREC IATIVE OF THESE CONTENTIONS. ACCORDING TO HIM THOUGH ASSESSEE HAD TRANSFERRED MORE THAN 90% OF HER SHARES TO HER MINOR GRANDSON HER OWN TRIAL BALANCE CLEARLY SHOWED THAT SHE WAS HERSELF HOLDING THE SHARES IN DIFFERENT NAMES I.E. IN HER OWN NAME AND IN HER GR ANDSONS NAME. THEREFORE ACCORDING TO A.O. THE GRANDSON BEING MI NOR THE ASSESSEE WAS TO BE TAKEN AS HOLDING SHARES BY HERSE LF. FURTHER AS PER A.O. THE COMPANIES ACT 1956 DID NOT ALLOW MIN OR TO BE A I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 16 REGISTERED SHAREHOLDER. RELIANCE WAS ALSO PLACED O N SECTION 94 OF THE ACT WHICH BROUGHT WITHIN THE PURVIEW OF TAXATI ON CERTAIN TYPE TRANSFERS OR SALE OF SECURITIES AND ALSO SECTION 64 (1A) OF THE ACT WHICH STIPULATED CLUBBING OF INCOME OF MINOR WITH H IS OR HER PARENT. AS PER A.O. SECTION 2(22)(E) OF THE ACT CLEARLY SP ECIFIED THAT A SHAREHOLDER WHO WAS BENEFICIARY ALSO FELL WITHIN TH E PURVIEW OF THE DEEMING PROVISION. HE ALSO RELIED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF MCDOWELL & CO. LTD. V. CTO (15 4 ITR 148) FOR TAKING A VIEW THAT THE TRANSFER OF SHARES BY THE AS SESSEE TO HER MINOR GRANDSON WAS A COLOURABLE DEVICE AND COULD NOT BE T AKEN COGNIZANCE OF. SINCE THE COMPANY CONCERNED HAD SUBSTANTIAL RE SERVE THE ASSESSING OFFICER TOOK THE ADVANCE TAKEN BY THE ASS ESSEE FROM THE COMPANY FOR THE ABOVE TWO ASSESSMENT YEARS AS DEEME D DIVIDEND AS PER SECTION 2(22)(E) OF THE ACT. 16. ASSESSEE AGGRIEVED BY THE ABOVE DECISION MOVED IN APPEAL BEFORE LD. CIT(APPEALS). LD. CIT(APPEALS) WAS OF T HE OPINION THAT SECTION 2(22)(E) OF THE ACT WAS A DEEMING PROVISION AND HENCE HAD TO BE GIVEN A STRICT INTERPRETATION AS HELD BY HON' BLE APEX COURT IN THE I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 17 CASE OF CIT V. C.P. SARATHY MUDALIAR (83 ITR 170). AS PER LD. CIT(APPEALS) THE FACTS WEE NOT IN DISPUTE BUT AC CORDING TO HIM A SHAREHOLDER AS MENTIONED IN SECTION 2(22)(E) OF T HE ACT AFTER THE AMENDMENT MADE ON 1.4.1988 HAD TO BE THE BENEFICIA RY OF THE SHARES TO BE ROPED IN UNDER SECTION 2(22)(E). ACCO RDING TO LD. CIT(APPEALS) ASSESSEE HAD TRANSFERRED TWO LAKHS SH ARES TO HER MINOR GRANDSON AND THEREFORE THE BENEFIT OF SAID S HARES WAS TO BE RECEIVED BY THE SAID MINOR GRANDSON AND NOT BY THE ASSESSEE. HENCE IRRESPECTIVE OF THE POSITION SHOWN BY THE AS SESSEE IN HER OWN BALANCE SHEET THE FACT WAS THAT ASSESSEE WAS NOT H OLDING BENEFICIARY INTEREST IN THE SHARES TRANSFERRED BY H ER TO HER MINOR GRANDSON. WHEN THIS HOLDING WAS DEDUCTED THERE WA S NO DISPUTE THAT ASSESSEE WAS HOLDING ONLY LESS THAN 10% OF THE VOTING POWER OF M/S PRAKASH GOLD PALACE (P) LTD. LD. CIT(APPEALS) ALSO NOTED THAT SECTION 94 OF THE ACT HAD NO RELEVANCE BECAUSE IT D EALT WITH SALE OF SECURITIES AND SECTION 64 ALSO HAD NO RELEVANCE BEC AUSE IT DEALT WITH CLUBBING OF MINORS INCOME WITH PARENT CONCERNED. HE THEREFORE HELD THAT ASSESSEE WAS NOT A BENEFICIARY SHAREHOLDE R HAVING MORE I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 18 THAN 10% VOTING POWER AND HENCE SECTION 2(22)(E) O F THE ACT COULD NOT BE APPLIED. HE DELETED THE ADDITION MADE FOR D EEMED DIVIDEND FOR BOTH THE YEARS. 17. NOW BEFORE US LEARNED D.R. STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS) SUBMITTED THAT TRANSFER OF SHARES BY THE ASSESSEE IN SUCH A MANNER THAT HER VOTING POWER IN THE COMPANY WENT BELOW 10% COULD NOT BE CONSIDERED SINCE THE TRANSFEREE W AS ONLY A MINOR. ACCORDING TO LEARNED D.R. ASSESSEE HAD PERSONALLY SHOWN THE SHARE HOLDING IN HER BALANCE SHEET AS HER OWN AND FOR TH IS RELIANCE WAS PLACED ON PAPER-BOOK PAGE 7 FILED BY HIM. AS PER T HE LEARNED D.R. IN THE BALANCE SHEET FOR THE RESPECTIVE PREVIOUS YE ARS ASSESSEE HAD SHOWN AS HER OWN THE SHARE CAPITAL HELD IN PRAKASH GOLD PALACE (P) LTD. BY HERSELF AS WELL AS HER GRANDSHON. LEARNED D.R. POINTED OUT THAT LETTER FILED BY THE ASSESSEE ON 13 TH DECEMBER 2007 BEFORE THE ASSESSING OFFICER PLACED AT HIS PAPER-BOOK PAGE 2 TO 4 CLEARLY SHOWED THAT THE AMOUNT OF ` 45 LAKHS TAKEN BY THE ASSESSEE AS ADVANCE FROM M/S PRAKASH GOLD PALACE (P) LTD. WAS U SED BY HER FOR MAKING INVESTMENT IN ONE M/S ITCOT LTD. AND THEREFO RE WHOLE OF THE I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 19 BENEFIT WAS ENJOYED BY THE ASSESSEE HERSELF. THIS INVESTMENT MADE BY THE ASSESSEE WAS SHOWN BY HER IN HER OWN BALANCE SHEET AS PER THE LEARNED D.R. ACCORDING TO HIM TRANSFER MADE B Y THE ASSESSEE TO HER GRAND DAUGHTER COULD NOT BE CONSIDERED FOR RECK ONING THE THRESHOLD LIMIT OF SHARES FOR THE PURPOSE OF APPLYI NG OF SECTION 2(22)(E) OF THE ACT. RELYING ON THE DECISION OF HO N'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. T.P.S.H. SOKKALAL (236 ITR 981) LEARNED D.R. ARGUED THAT WHEN THE SHARES WERE HELD IN THE NAME OF THE GUARDIAN THE GUARDIAN ALONE WAS THE SHAREHOLDE R AND THE GUARDIAN COULD EXERCISE THE VOTING RIGHT BELONGING TO THE MINOR. HENCE AS PER THE LEARNED D.R. BY VIRTUE OF DECISI ON OF JURISDICTIONAL HIGH COURT DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT COULD BE CONSIDERED IN THE HANDS OF SUCH ASSESSEE WHO WAS THE GUARDIAN OF A MINOR. RELIANCE WAS ALSO PLACED ON THE DECISI ON OF DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF MOHAN ANAND (82 ITD 708) IN THIS REGARD. 18. PER CONTRA THE LEARNED A.R. SUBMITTED THAT ADM ITTEDLY ASSESSEE HAD TRANSFERRED MORE THAN 90% OF SHARES TO HER GRAND I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 20 DAUGHTER MUCH PRIOR TO RELEVANT PREVIOUS YEARS. AS PER LEARNED A.R. THE TRANSFER OF SHARES WAS DONE ON 22.12.2001 AND T HE TRANSFER WAS PROPERLY INTIMATED TO REGISTRAR OF COMPANIES AND EN TERED IN THE RELEVANT REGISTER OF THE COMPANY. ALL THESE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER. LEARNED A.R. SUBM ITTED THAT ASSESSEE COULD NOT HAVE CONTEMPLATED THAT SHE WOULD BE TAKING AN ADVANCE FOR THE PURPOSE OF INVESTING IN M/S ITCOT L TD. DURING THE RELEVANT PREVIOUS YEAR 2002-03 AND 2003-04 AS EARLY AS 22.12.2001. HENCE ACCORDING TO HIM THERE WAS NO COLOURABLE EX ERCISE SO AS TO AVOID TAX BY THE ASSESSEE. FURTHER AS PER LEARNED A.R. COMPANIES ACT 1956 DID NOT PROHIBIT SHARE HOLDING BY A MINOR AND MINOR COULD ALWAYS BE A BENEFICIARY THOUGH HE/SHE COULD NOT BE REGISTERED AS A SHAREHOLDER. ACCORDING TO HIM REVENUE HAD NOT DIS PUTED THE TRANSFER OF SHARES MADE BY THE ASSESSEE TO HER GRAN DSON AND THE FACT THAT SUCH TRANSFER HAD BROUGHT HER OWN HOLDING MUCH LESS THAN 10%. ACCORDING TO HIM ASSESSEE TO BE LIABLE FOR DEEMED DIVIDEND HE OR SHE NOT ONLY HAD TO BE A REGISTERED SHAREHOLDER BU T ALSO HAD TO BE THE BENEFICIARY THEREON. THIS POSITION ACCORDING TO HIM WAS CLEARLY I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 21 LAID DOWN BY SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT V. BHAUMIK COLOUR (P) LTD. (118 ITD 1). IN SO FAR AS RELIANCE PLACED BY THE LEARNED D.R. ON THE DECISION OF HON'BLE JURISDI CTIONAL HIGH COURT IN THE CASE OF T.P.S.H. SOKKALAL (SUPRA) LEARNED A .R. SUBMITTED THAT THE SAID DECISION RELATED TO ASSESSMENT YEAR 1973-7 4 AND THERE WERE SUBSEQUENT AMENDMENTS IN SECTION 2(22)(E) THEREOF. ACCORDING TO HIM SECTION AS IT STOOD WHEN THE JURISDICTIONAL HI GH COURT WAS CONSIDERING THE ISSUE THERE WAS NO ROOM FOR AN INT ERPRETATION THAT ASSESSEE SHOULD BE BOTH BENEFICIAL AS WELL AS REGIS TERED SHAREHOLDER FOR APPLYING OF SECTION 2(22)(E) OF THE ACT. ACCOR DING TO HIM THE POSITION HAD SUBSTANTIALLY CHANGED BY VIRTUE OF AME NDMENTS TO SECTION 2(22)(E) BY FINANCE ACT 1987 WITH EFFECT F ROM 1.4.1988. LEARNED A.R. FURTHER POINTED OUT THAT SPECIAL BENCH HAD CONSIDERED THE EFFECT OF SUCH AMENDMENTS AND CAME TO A CONCLUS ION THAT ONLY A REGISTERED AS WELL AS A BENEFICIAL SHAREHOLDER COUL D BE CONSIDERED FOR ASSESSMENT OF DEEMED DIVIDEND ON ADVANCES AND LOANS RECEIVED. RELYING ON THE DECISION OF HON'BLE ALLAHABAD HIGH C OURT IN THE CASE OF CIT V. RAJ KUMAR SINGH & CO. (295 ITR 9) LEARNE D A.R. SUBMITTED I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 22 THAT THEIR LORDSHIP AFTER CONSIDERING THE AMENDED PROVISION SETTLED THE ISSUE OF BENEFICIAL OWNERSHIP OF SHARES IN FAVO UR OF THE ASSESSEE. 19. IN REPLY LEARNED D.R. PLACING RELIANCE ON AN O RDER OF THIS TRIBUNAL IN THE CASE OF SHRI HARIDASS MENON V. ACIT IN I.T.A. NO. 1620/MDS/2006 DATED 11 TH JUNE 2010 SUBMITTED THAT IN CASES WHERE A FAMILY MEMBER OF THE ASSESSEE HIMSELF WAS HOLDING THE SHARES OF A COMPANY IT WAS REQUIRED TO LIFT CORPORATE VEIL AND SEE WHETHER THE BENEFITS WERE RECEIVED BY THE FAMILY AS A WHOLE ON THE ADVANCE RECEIVED BY THE ASSESSEE. ACCORDING TO HIM SHARE HOLDING OF THE FAMILY MEMBERS ALTOGETHER IF CONSIDERED EXCEEDED 10 % VOTING POWER LIMIT SPECIFIED IN SECTION 2(22)(E) OF THE ACT. 20. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. FACTS ARE NOT DISPUTED. PRIOR TO 22.12.2001 ASSES SEE HELD SHARES HAVING MORE THAN 10% OF THE VOTING POWER OF M/S PRA KASH GOLD PALACE (P) LTD. EARLIER KNOWN AS ABHILASHA INTERNA TIONAL PVT. LTD. BY EFFECTING TRANSFERS TO HER MINOR GRAND-CHILD HER S HAREHOLDING HAD I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 23 COME DOWN SUBSTANTIALLY AND HER VOTING POWER IN THE SAID COMPANY WENT BELOW 10%. THERE IS ALSO NO DISPUTE THAT TRAN SFERS OF THE SHARES WERE EFFECTED BY PROPER ENTRIES ON THE SHARE CERTIFICATES AND RETURNS WERE FILED IN THIS REGARD BEFORE THE REGIST RAR OF COMPANIES. THERE IS ALSO NO DISPUTE THAT THE TRANSFER OF SHARE S WERE EFFECTED PRIOR TO THE RELEVANT PREVIOUS YEARS. THERE IS GOOD MERI T IN THE CONTENTION OF THE ASSESSEE THAT TRANSFER MADE BY THE ASSESSEE TO HER GRAND- CHILD COULD NOT HAVE BEEN DONE IN CONTEMPLATION OF RECEIVING AN ADVANCE FROM M/S PRAKASH GOLD PALACE (P) LTD. WE C ANNOT SAY THAT IT WAS A COLOURABLE DEVICE ADOPTED BY THE ASSESSEE TO EVADE TAX PAYMENT. SINCE SECTION 2(22)(E) OF THE ACT AS OFT EN HELD BY VARIOUS COURTS IS A DEEMING PROVISION FICTIONALLY CONVERT ING ADVANCES AND LOANS TAKEN TO DIVIDEND IT REQUIRES A STRICT INTER PRETATION. WHEN THE RULES OF STRICT INTERPRETATION ARE TO BE APPLIED TO A PARTICULAR PROVISION THE QUESTION OF ADOPTION OF COLOURABLE DEVICE CANNO T BE APPLIED WITH THE SAME GUTSO AS WITH OTHER PROVISIONS. APPLICATI ON OF PRINCIPLE OF COLOURABLE EXERCISE TO SUCH FICTIONAL PROVISION WO ULD NOT BE FAIR IN OUR OPINION UNLESS A VERY STRONG CASE IN THIS REGA RD IS MADE OUT BY I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 24 THE REVENUE. REVENUE MIGHT HAVE HAD A CASE IF A TR ANSFER OF SHARES WERE EFFECTED BY THE ASSESSEE AFTER THE RECEIPT OF THE ADVANCE. BUT AS SUCH THIS WAS NOT DONE SO. NO DOUBT BY VIRTUE OF THIS TRANSFER ASSESSEES NAME DID NOT GET EFFACED FROM THE REGIST ER OF SHAREHOLDERS OF M/S PRAKASH GOLD PALACE (P) LTD. N EVERTHELESS AS A RESULT OF SUCH TRANSFER BENEFIT OF SUCH SHARES WHA TEVER IT MIGHT BE WOULD ULTIMATELY ENSUE TO THE GRAND-CHILD OF THE AS SESSEE. WHEN THE BENEFIT WAS WITH THE GRAND-CHILD WE CANNOT SAY ASS ESSEE WAS A BENEFICIARY OF THE HOLDING. A BENEFICIAL HOLDER ME ANS A PERSON WHO IS ENJOYING BENEFITS FROM THE HOLDING AND THIS ADMITTE DLY WAS NOT THE ASSESSEE IN SO FAR AS THE TRANSFERRED SHARES WERE C ONCERNED. IN OUR OPINION THE DECISION OF SPECIAL BENCH OF THIS TRIB UNAL IN BHAUMIK COLOUR (P) LTD. (SUPRA) IS VERY RELEVANT IN THIS RE GARD. THE QUESTION RAISED BEFORE THE SPECIAL BENCH WAS AS UNDER:- (1) WHETHER DEEMED DIVIDEND UNDER S. 2(22)(E) OF THE I. T. ACT 1961 CAN BE ASSESSED IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER OF THE LENDER? (2) WHETHER THE WORDS SUCH SHAREHOLDER OCCURRING IN S . 2(22)(E) REFER TO A SHAREHOLDER WHO IS BOTH REGIST ERED SHAREHOLDER AND THE BENEFICIAL SHAREHOLDER? I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 25 THE ANSWER GIVEN IS CLEAR FROM PARA 24 THEREOF WHIC H IS REPRODUCED HEREUNDER:- 24. THE EXPRESSION SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES REFERRED TO IN THE FIRS T LIMB OF S. 2(22)(E) REFERS TO BOTH A REGISTERED SHAREHOLDER AN D BENEFICIAL SHAREHOLDER. IF A PERSON IS A REGISTERED SHAREHOLD ER BUT NOT THE BENEFICIAL THEN THE PROVISION OF S. 2(22)(E) WILL N OT APPLY. SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER BU T NOT A REGISTERED SHAREHOLDER THEN ALSO THE FIRST LIMB OF PROVISIONS OF S. 2(22)(E) WILL NOT APPLY. THUS IT IS ABSOLUTELY CLEAR THAT FOR BEING HELD LI ABLE FOR DEEMED DIVIDEND ASSESSEE HAS TO BE BOTH REGISTERED AS WEL L AS BENEFICIAL SHAREHOLDER. ASSESSEE HERE WAS NOT SO. THUS ASSE SSEE GETS OUT OF THE DEEMING PROVISION AS CONTAINED IN SECTION 2(22) (E) AT THE THRESHOLD ITSELF. IN OUR OPINION HOW THE ASSESSEE UTILIZED THE ADVANCE RECEIVED FROM M/S PRAKASH GOLD PALACE (P) L TD. HARDLY HAS ANY RELEVANCE ONCE APPLICABILITY OF SECTION 2(22)( E) OF THE ACT IS RULED OUT. AS FAR AS THE DECISION OF HON'BLE JURIS DICTIONAL HIGH COURT IN THE CASE OF T.P.S.H. SOKKALAL (SUPRA) RELIED ON BY THE LEARNED D.R. IS CONCERNED INTERPRETATION THERE INVOLVED SECTION 2(22)(E) OF THE ACT AS IT STOOD PRIOR TO THE AMENDMENT DONE TO THE SAID SECTION BY I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 26 FINANCE ACT 1987 WITH EFFECT FROM 1.4.1988. THEIR LORDSHIP WAS CONCERNED WITH AN ASSESSMENT FOR ASSESSMENT YEAR 19 73-74. IN FACT IN THE DECISION OF SPECIAL BENCH IN THE CASE OF BHA UMIK COLOUR (P) LTD. (SUPRA) THE HISTORY OF THE PROVISION STARTING FROM 1922 ACT HAS BEEN TRACED VIVIDLY AND IT WAS AFTER AN ANALYSIS TH EREOF THAT THE SPECIAL BENCH HELD PRESENT PROVISIONS AFTER AMENDME NTS TO HAVE APPLICATION ONLY IF SHARES WERE HELD BOTH AS BENEFI CIAL AS WELL AS REGISTERED SHAREHOLDER. AS FOR THE RELIANCE PLACED BY LEARNED D.R. ON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI HARIDASS MENON (SUPRA) THERE THE TOTAL SHAREHOLDIN G OF THE COMPANY WAS FULLY HELD BY ASSESSEE AND HIS WIFE. LIFTING O F CORPORATE VEIL WAS INVITED SINCE THERE WERE NO OTHER SHAREHOLDERS EXCE PT THE ASSESSEE AND HIS WIFE AND DEEMED DIVIDEND WAS INITIALLY RETU RNED BY THE ASSESSEE IN THE RETURN FILED IN PURSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT. WE ARE OF THE OPINION THAT THIS DECISI ON OF THE TRIBUNAL WOULD NOT BE OF ANY APPLICATION ON FACTS HERE. THE TRANSFER OF SHARES HERE WERE EFFECTED PRIOR TO RELEVANT PREVIOUS YEARS AND THERE WERE A NUMBER OF SHAREHOLDERS IN M/S PRAKASH GOLD PALACE ( P) LTD. IT WAS I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 27 NOT A MAKE-BELIEVE SET-UP LIKE A COMPANY WHERE ONLY AN ASSESSEE AND HIS/HER SPOUSE WERE THE SHAREHOLDERS. LIFTING OF CORPORATE VEIL IS AN EXCEPTIONAL MEASURE AND DEFINITELY NOT WARRANTED IN THE CIRCUMSTANCES HERE. AS FOR THE DECISION OF DELHI B ENCH OF THIS TRIBUNAL IN THE CASE OF MOHAN ANAND (SUPRA) THE SH ARES WERE ACQUIRED BY MINOR SONS OF THE ASSESSEE CONCERNED OU T OF FOREIGN CREDITS RECEIVED BY THEM WHERE THE GENUINENESS OF SUCH CREDITS WAS NOT ESTABLISHED. HERE THERE IS NO CASE FOR THE RE VENUE THAT THERE WERE ANY FOREIGN CREDITS OR FUNDS RECEIVED BY THE G RAND-CHILD OF THE ASSESSEE CONCERNED. EVEN OTHERWISE THE SAID DECIS ION WAS RENDERED MUCH PRIOR TO THE DECISION OF SPECIAL BENC H IN THE CASE OF BHAUMIK COLOUR (P) LTD. (SUPRA) AND THEREFORE WOUL D BE HARDLY OF ANY RELEVANCE. WE ARE THEREFORE OF THE OPINION T HAT LD. CIT(APPEALS) WAS JUSTIFIED IN DELETING THE ADDITIONS MADE FOR DE EMED DIVIDEND FOR BOTH THE ASSESSMENT YEARS. WE DO NOT FIND ANY REAS ON TO INTERFERE WITH THE ORDER OF LD. CIT(APPEALS). 21. IN THE RESULT BOTH THE APPEALS OF THE REVENUE STAND DISMISSED. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 28 22. NOW WE TAKE UP APPEAL OF THE ASSESSEE IN I.T.A. NO. 488/MDS/2010. IN THIS APPEAL ASSESSEE ASSAILS THE ORDER DATED 15.3.2010 OF COMMISSIONER OF INCOME TAX CHENNAI-II I CHENNAI PASSED UNDER SECTION 263 OF THE ACT FOR ASSESSMENT YEAR 2003-04. AS PER THE ASSESSEE THERE WAS NOTHING ERRONEOUS OR PREJUDICIAL IN THE ORDER OF THE ASSESSING OFFICER WHICH WARRANTED INVOCATION OF REVISIONAL POWER UNDER SECTION 263 OF THE ACT. 23. SHORT FACTS APROPOS ARE THAT ON THE ASSESSMENT DONE OF THE ASSESSEE UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT ON 26.12.2007 LD. CIT ISSUED A SHOW-CAUSE NOTICE UNDE R SECTION 263 OF THE ACT ON 3.3.2010 CITING FOLLOWING REASONS:- THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASSESSM ENT YEAR 2003-04 ON 31.03.2004 ADMITTING AN INCOME OF R S.78 640/- AND AGRICULTURAL INCOME OF RS.54 810/-. THE RETURN WAS SCRUTINIZED AND THE ASSESSMENT WAS COMPLETED U/S.14 3(3) 5.W.S. 147 ON 26.12.2007 ON A TOTAL INCOME OF RS.45 70 230 /- AND AGRICULTURAL INCOME OF RS.54 810/-. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT U/S.143(3) R.W.S. 147 HAD NOT CONSIDERED THE FOLLOW ING FACTS BECAUSE OF WHICH THE ASSESSMENT HAS BEEN RENDERED E RRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REV ENUE. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 29 1. TO VERIFY THE AGRICULTURAL INCOME AMOUNTING TO RS.54 810/-. 2. INVESTMENT OF RS.45 LAKHS MADE IN ITCOT LTD. 3. NOT ADMITTED ANY NOTIONAL INCOME FROM BOMBAY AND CALCUTTA PROPERTY. IN THIS CONNECTION YOU ARE HEREBY GIVEN SHOW CAUSE N OTICE AS TO WHY DIRECTION SHOULD NOT BE GIVEN TO REVISE THE I MPUGNED ORDER U/S.263 OF THE INCOME TAX ACT 1961 ON THE ABOVE IS SUE. IF NO REPLY IS RECEIVED IT WILL BE PRESUMED THAT YOU HAVE NO OBJECTION IN REVISING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 ON THE PROPOSED LINES. 24. SUBMISSION OF THE ASSESSEE BEFORE LD. CIT WAS T HAT IT HAD CHALLENGED THE REOPENING DONE BY THE A.O. FOR THE I MPUGNED ASSESSMENT YEAR. ACCORDING TO THE ASSESSEE THE MA TTER HAD TO BE KEPT IN ABEYANCE TILL THE OUTCOME OF THE APPEAL OF THE ASSESSEE. HOWEVER LD. CIT WAS OF THE OPINION THAT ASSESSEE H AD NOTHING TO SAY ABOUT THE ISSUES RAISED AGAINST HER IN THE NOTICE D ATED 3.3.2010. ACCORDING TO HIM ASSESSEE HAD MADE SUBSTANTIAL INV ESTMENT IN M/S ITCOT LTD. AND ASSESSING OFFICER HAD COMPLETED THE ASSESSMENT WITHOUT MAKING ANY ENQUIRIES IN THIS REGARD. HE T HEREFORE SET ASIDE THE ORDER OF ASSESSMENT AND REQUIRED THE A.O. TO MA KE A FRESH ASSESSMENT AFTER MAKING SPECIFIC ENQUIRIES ON THE ISSUES MENTIONED BY HIM IN THE SHOW-CAUSE NOTICE. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 30 25. NOW BEFORE US LEARNED A.R. ASSAILING THE ORDE R OF LD. CIT SUBMITTED THAT INVESTMENT OF ` 45 LAKHS IN M/S ITCOT LTD. WAS A SUBJECT MATTER OF ADDITION UNDER SECTION 2(22)(E) O F THE ACT BY THE ASSESSING OFFICER. THEREFORE ACCORDING TO HIM TH E ASSESSING OFFICER HAD MADE PROPER ENQUIRIES AND FOUND THAT THE SAID I NVESTMENT HAD COME OUT OF ADVANCE TAKEN BY THE ASSESSEE FROM M/S PRAKASH GOLD PALACE (P) LTD. HENCE LEARNED A.R. SUBMITTED THAT LD. CIT WAS ABSOLUTELY WRONG IN COMING TO A CONCLUSION THAT THE ASSESSING OFFICER HAD NOT MADE ANY ENQUIRIES. WITH REGARD TO AGRICUL TURAL INCOME LEARNED A.R. SUBMITTED THAT DETAILS IN THIS REGARD WERE ALSO ASKED BY THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND WERE PROVIDED. ACCORDING TO HIM I T WAS MENTIONED BY THE ASSESSEE THAT SHE HAD AGRICULTURAL LAND AT V EDAL VILLAGE IN HER LETTER DATED 13 TH DECEMBER 2007 TO THE ASSESSING OFFICER PLACED AT DEPARTMENT PAPER-BOOK PAGES 2 TO 4. DETAILS OF THE PROPERTY AT BOMBAY AND CALCUTTA WERE ALSO GIVEN TO THE ASSESSIN G OFFICER IN THE SAID LETTER. THEREFORE ACCORDING TO HIM ASSESSIN G OFFICER HAD PROPERLY CONSIDERED THESE ISSUES AND COMPLETED THE ASSESSMENT. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 31 THERE WAS NOTHING TO CONSIDER SUCH ASSESSMENT AS ER RONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 26. PER CONTRA LEARNED D.R. SUBMITTED THAT ASSESSE E NEVER GAVE THE DETAILS OF THE INVESTMENT WHICH WAS MADE IN M/S ITCOT LTD. ACCORDING TO HIM ASSESSEE HAD NOT GIVEN DETAILS OF AGRICULTURAL INCOME OR THE EXTENT OF HOLDING OF THE PROPERTY. R ELYING ON THE BALANCE SHEET FILED BY THE ASSESSEE LEARNED D.R. P OINTED OUT THAT PROPERTY AT VEDAL VILLAGE WAS VALUED AT ` 55 897.20 AND ON SUCH A PROPERTY AGRICULTURAL INCOME OF ` 54 810/- WAS SHOWN. THEREFORE ACCORDING TO HIM THERE WAS CLEAR NON-APPLICATION O F MIND BY THE A.O. ON THESE ISSUES AND INVOCATION OF REVISIONAL POWER UNDER SECTION 263 OF THE ACT WAS APPROPRIATELY DONE BY LD. CIT. 27. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. IN SO FAR AS AGRICULTURAL INCOME OF ` 54 810/- WAS CONCERNED ASSESSEE HAD GIVEN ONLY THE LOCATION OF PROPERTY AND NATURE OF CROPS AS RICE AND VEGETABLE. IT IS ALSO TRUE THAT VALUE OF VEDAL VILLAGE PROPERTY WAS SHOWN BY THE ASSESSEE AS 55 897.20 ONLY. ASSESSING OFFICER I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 32 ACCEPTED THE REPLY GIVEN BY THE ASSESSEE VIDE HER L ETTER DATED 13 TH DECEMBER 2007 WITHOUT MAKING ANY ENQUIRY. INCOME FROM PROPERTY BEING ALMOST IN THE VICINITY OF THE VALUE OF THE PR OPERTY ITSELF IN OUR OPINION IT SHOULD HAVE CAUGHT THE ATTENTION OF THE A.O. AND HE SHOULD HAVE MADE MORE ENQUIRES. THIS WAS NOT DONE. SIMIL ARLY ON NOTIONAL INCOME OF MUMBAI AND CALCUTTA PROPERTY ALSO THERE WAS NO PROPER ANSWER GIVEN BY THE ASSESSEE NOR ANY ENQUIRIES DONE BY THE A.O. HOWEVER WITH REGARD TO INVESTMENT OF ` 45 LAKHS MADE BY THE ASSESSEE IN M/S ITCOT LTD. ASSESSING OFFICER CONSI DERED IT TO BE DEEMED DIVIDEND THE AMOUNT HAVING BEEN RECEIVED BY THE ASSESSEE FROM M/S PRAKASH GOLD PALACE (P) LTD. THE ACCOUNT S TATEMENT WHEREIN THE ADVANCE RECEIVED BY THE ASSESSEE THROUG H BANK FROM THE SAID COMPANY AND INVESTMENT MADE BY THE ASSESSEE I N M/S ITCOT LTD. WERE REFLECTED IN THE RELEVANT BANK STATEMENT FILED BY THE LEARNED A.R. IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDIN GS. THUS ASSESSEE HAD CLEARLY SHOWN THE DETAILS OF THE SOURC E OF ` 45 LAKHS THAT SHE HAD INVESTED IN M/S ITCOT LTD. ASSESSEE C OULD NOT GIVE ANY INFORMATION REGARDING THE PURPOSE OF INVESTMENT IN ITCOT LTD. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 33 EXCEPT STATING THAT IT WAS GIVEN BIDDING FOR PROPER TY. HOWEVER THE QUESTION REGARDING THE SOURCE OF INVESTMENT WAS DEF INITELY PROVIDED AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS AND CONSIDERED IN THE ASSESSMENT. WE CANNOT SAY A.O. HAD NOT APPLIED HIS MIND HERE. THERE WAS NO ERROR IN THIS REGARD MUCH LESS ANY THA T COULD BE TERMED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HE NCE IN SO FAR AS THE ISSUE RELATING TO INVESTMENT OF ` 45 LAKHS IN ITCOT LTD. IS CONCERNED WE ARE OF THE OPINION THAT THERE WAS NO ERROR IN TH E ORDER OF ASSESSING OFFICER WHICH WAS PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. IN SO FAR AS OTHER TWO ISSUES NAMELY AG RICULTURAL INCOME OF ` 54 810/- AND NOTIONAL INCOME FROM MUMBAI AND CALCU TTA PROPERTY THERE WAS NO ENQUIRY MADE BY THE ASSESSING OFFICER AT THE ASSESSMENT STAGE. HENCE WE CAN SAY THERE WAS ERRO R WHICH WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THES E TWO ITEMS. WE THEREFORE UPHOLD THE ORDER OF LD. CIT UNDER SECTIO N 263 IN SO FAR AS IT RELATE TO AGRICULTURAL INCOME AND NOTIONAL INCOME F ROM MUMBAI AND CALCUTTA PROPERTY WHEREAS QUASH HIS ORDER SO FAR AS IT RELATES TO INVESTMENT OF ` 45 LAKHS MADE IN ITCOT LTD. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 34 28. IN THE RESULT APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED. 29. NOW WE TAKE UP THE CROSS-OBJECTIONS OF THE ASSE SSEE SHRI D.B. PRAKASH CHAND JAIN IN C.O. NOS. 195 196 & 197/MDS/ 2009. THESE CROSS-OBJECTIONS GO TO THE ROOT OF THE ASSESSMENTS FOR THE RESPECTIVE ASSESSMENT YEAR. 30. TWO ISSUES ARE RAISED IN THESE CROSS-OBJECTIONS . FIRST IS THAT ASSESSING OFFICER WAS NOT HAVING JURISDICTION TO DO AN ASSESSMENT ON THE ASSESSEE AND SECOND IS THAT THE REOPENINGS DONE WERE BAD IN LAW. BOTH THESE ISSUES ARE SIMILAR TO THE ISSUES R AISED BY THE ASSESSEE SMT. SURAJ KUMARI JAIN IN HER CROSS-OBJEC TIONS IN C.O. NOS. 193 AND 194/MDS/2009. THE FACTUAL SITUATION W ERE ALSO SAME. WE HAVE HELD AT PARAS 7 & 11 ABOVE THAT OBJECTION O F THE ASSESSEE ON BOTH THESE ISSUES ARE WITHOUT ANY MERIT. FOR TH E SAME REASONS AS MENTIONED AT PARAS 7 & 11 ABOVE WE DISMISS THE CRO SS-OBJECTIONS OF THE ASSESSEE HERE ALSO. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 35 31. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR AS SESSMENT YEARS IN I.T.A. NOS. 1631 1632 & 1633/MDS/2009 IN RESPECT OF THE ASSESSEE SHRI D.B. PRAKASH CHAND JAIN. 32. AS IN THE CASE OF SMT. SURAJ KUMARI JAIN ASSES SEE HERE WAS ALSO A SHAREHOLDER HOLDING SHARES IN EXCESS OF 10% OF VOTING POWER IN M/S PRAKASH GOLD PALACE (P) LTD. ON 22.12.2001 ASSESSEE HAD TRANSFERRED SUBSTANTIAL QUANTUM FROM HIS SHARES TO HIS MINOR GRAND DAUGHTER HARDIKA. THROUGH SUCH TRANSFER THE SHAR E HOLDING OF THE ASSESSEE CAME DOWN BELOW 10% OF THE VOTING POWER IN M/S PRAKASH GOLD PALACE (P) LTD. FACTUAL SITUATION IS THUS VER Y SIMILAR TO THAT OF SMT. SURAJ KUMARI JAIN FOR ASSESSMENT YEAR 2003-04 AND ASSESSMENT YEAR 2004-05. THE APPEALS OF THE REVENU E IN THE CASE OF SMT. SURAJ KUMARI JAIN IN I.T.A. NOS. 1629 & 163 0/MDS/2009 FOR ASSESSMENT YEARS 2003-04 AND 2004-05 HAVE BEEN DISM ISSED BY US AFTER CONSIDERING THE ISSUES RAISED IN THIS REGARD. HOWEVER THERE IS A SLIGHT CHANGE IN THE FACTUAL SCENARIO IN SO FAR AS THIS ASSESSEE D B PRAKASH CHAND JAIN IS CONCERNED FOR ASSM. YEAR 2002 -03. THE DIFFERENCE HERE IS THAT THE TRANSFER OF SHARES WAS EFFECTED BY THE I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 36 ASSESSEE ON 22-12-2001 WHICH FALLS WITHIN THE CURR ENCY OF THE PREVIOUS YEAR RELEVANT FOR ASSM YEAR 2002-03. HENCE THE QUESTION PROPS UP AS TO WHETHER THE TRANSFER COULD BE TERMED AS A COLOURABLE EXERCISE FOR GETTING OUT OF THE CLUTCHES OF SECTIO N 2(22)(E) SINCE ASSESSEE HAD TAKEN AN ADVANCE OF RS 14 98 328/- FRO M PRAKASH GOLD PALACE PVT LTD. DURING THE RELEVANT PREVIOUS YEAR. IN OUR OPINION THE QUESTION OF COLOURABLE EXERCISE WOULD NOT ARISE IN THE INSTANT TRANSFER SINCE THERE WERE NO SERIES OF TRANSACTION S BUT ONLY ONE TRANSFER. WHEN A PERSON TRANSFERS HIS ASSET TO A CH ILD OR GRANDCHILD THE QUESTION OF ANY COMMERCIAL INTENTION CANNOT BE FASTENED TO SUCH A TRANSACTION. IT MAY HAVE NO RELEVANCE FOR THERE MIGHT BE MYRIAD OF REASONS FOR EFFECTING SUCH A TRANSFER. IT CANNOT BE SEEN AS AN ACT DONE WITH THE ONLY INTENTION OF REDUCING TAX LIABIL ITY ESPECIALLY OF A NATURE ARISING FROM A DEEMING PROVISION. WHERE SUCH TRANSFERS ARE WITHOUT CONSIDERATION CLUBBING PROVISIONS HAVE BEE N BUILT INTO THE ACT FOR PREVENTING LOSS OF TAX. SUCH CLUBBING PROVISION WHICH ITSELF ARE DEEMING SECTIONS CANNOT BE SO EXTENDED TO BRING WIT HIN ITS FOLD ANOTHER DEEMING SECTION LIKE 2(22)(E) FOR ROPING I N A PERSON WITHIN I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 37 THE CLUTCHES OF DEEMED DIVIDEND DESPITE TRANSFER O F SHARES EFFECTED BY HIM. THERE IS NO CASE FOR THE REVENUE HERE THAT THE ADVANCE FROM THE COMPANY WAS TAKEN BY THE ASSESSEE BEFORE 22-12- 2001 WHEN THE ASSESSEE EFFECTED THE TRANSFER TO HIS MINOR CHI LD/GRANDCHILD. HENCE AS ON THE DATE WHEN ASSESSEE RECEIVED THE ADV ANCE HE WAS NOT HOLDING MORE THAN 10% OF THE VOTING RIGHTS IN T HE CONCERNED COMPANY. THEREFORE IN OUR OPINION THE CHANGE IN FAC T SITUATION WILL NOT AFFECT THE OUTCOME OF THE CASE IN ANY WAY. FOR THES E AND OTHER REASONS DISCUSSED AT PARA 20 ABOVE IN RELATION TO THE REVENUE APPEALS IN THE CASE OF SMT SURAJ KUMARI JAIN WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LD CIT(A ) IN ANY OF THE YEARS INVOLVED. ASSESSEE NOT BEING THE BENEFICIAL AS WEL L AS REGISTERED SHAREHOLDER HAVING VOTING POWER IN EXCESS OF 10% IN M/S PRAKASH GOLD PALACE (P) LTD. COULD NOT BE FASTENED WITH LIA BILITY UNDER SECTION 2(22)(E) OF THE ACT CONSIDERING THE ADVANCE TAKEN BY HIM FROM THE SAID COMPANY AS DEEMED DIVIDEND. 33. IN THE RESULT APPEALS OF THE REVENUE FOR ALL T HESE YEARS STAND DISMISSED. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 38 34. NOW WE TAKE UP THE APPEALS AND CROSS-OBJECTIONS IN THE CASE OF ASSESSEE SHRI MUKESH KUMAR JAIN. 35. THE CROSS-OBJECTIONS IN THE CASE OF SHRI MUKESH KUMAR JAIN IN C.O. NOS. 198 & 199/MDS/2009 GO TO THE ROOT OF THE ASSESSMENT. 36. TWO ISSUES ARE RAISED IN THESE CROSS-OBJECTIONS . FIRST IS THAT ASSESSING OFFICER WAS NOT HAVING JURISDICTION TO DO AN ASSESSMENT ON THE ASSESSEE AND SECOND IS THAT REOPENINGS DONE WER E BAD IN LAW. BOTH THESE ISSUES ARE SIMILAR TO THE ISSUES RAISED BY THE ASSESSEE SMT. SURAJ KUMARI JAIN IN HER CROSS-OBJECTIONS IN C.O. NOS. 193 AND 194/MDS/2009. THE FACTUAL SITUATIONS WERE ALSO SAM E. WE HAVE HELD AT PARAS 7 & 11 ABOVE THAT OBJECTIONS OF THE ASSESS EE ON BOTH THESE ISSUES ARE WITHOUT MERITS. FOR THE SAME REASON AS MENTIONED AT PARAS 7 & 11 WE DISMISS THE CROSS-OBJECTIONS OF TH E ASSESSEE HERE ALSO. 37. NOW WE TAKE UP APPEALS OF THE REVENUE IN I.T.A. NOS. 1640 & 1641/MDS/2009 OF SHRI MUKESH KUMAR JAIN. AS IN THE CASE OF OTHER I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 39 TWO ASSESSEES SHRI MUKESH KUMAR JAIN ALSO HOLDING MORE THAN 90% OF THE VOTING POWER IN M/S PRAKASH GOLD PALACE (P) LTD. HAD TRANSFERRED ON 22.12.2001 SUBSTANTIAL QUANTUM OF HI S SHARES TO HIS MINOR SON. BY VIRTUE OF THIS HIS HOLDING WAS REDU CED BELOW 10% OF VOTING POWER THEREIN. THE FACTUAL SITUATION IS VER Y SIMILAR TO THAT IN THE CASE OF SMT. SURAJ KUMARI JAIN. WE HAVE ALREAD Y HELD IN THE REVENUES APPEALS IN THE CASE OF SMT. SURAJ KUMARI JAIN IN I.T.A. NOS. 1629 & 1630/MDS/2009 THAT ONLY A REGISTERED AS WELL AS BENEFICIAL SHAREHOLDER COULD BE CONSIDERED FOR A DE EMED DIVIDEND ADDITION TAKING AN ADVANCE RECEIVED AS DEEMED DIVID END. FOR THE SAME REASON MENTIONED IN PARA 20 ABOVE WE HOLD THA T ASSESSEE COULD NOT HAVE BEEN CONSIDERED AS A RECIPIENT OF DE EMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. THEREFORE APPE ALS OF THE REVENUE FOR BOTH THE ASSESSMENT YEARS STAND DISMISSED. 38. THIS LEAVES US WITH APPEALS OF THE ASSESSEE IN I.T.A. NOS. 486 & 487/MDS/2010. THROUGH BOTH THE APPEALS ASSESSEE ASSAILS INVOCATION OF REVISIONAL POWER BY LD. CIT UNDER SEC TION 263 OF THE ACT FOR RESPECTIVE ASSESSMENT YEARS. LD. CIT HAD ISSUE D NOTICE TO THE I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 40 ASSESSEE UNDER SECTION 263 OF THE ACT CITING THE FO LLOWING REASON AND REQUIRED HIM TO SHOW CAUSE REASON WHY THE ASSESSMEN T SHOULD NOT BE SET ASIDE:- FOR ASSESSMENT YEAR 2003-04: THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASS T. YEAR 2003-04 ON 05.04.2004 ADMITTING AN INCOME OF RS.91 670/- AND AGRICULTURAL INCOME OF RS.57 255/-. THE RETURN WAS SCRUTINIZED AND THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 ON 26.12.2007 ON A TOTAL INCOME OF RS.46 31 262/- AND AGRICULTURAL INCOME OF RS.57 255/-. THE ASSESSEE IS DIRECTOR OF M/S PRAKASH GOLD PALACE (P) LTD. (FORMERLY KNOWN AS M/S ABHILASHA INTERNATIONAL P. LT D.). THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U /S 143(3) R.W.S. 147 HAD NOT EXAMINED THE FOLLOWING ASPECTS W HICH IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF REVENUE. 1. TO VERIFY THE AGRICULTURAL INCOME AMOUNTING TO RS.57 255/- 2. INVESTMENT OF RS.45 LAKHS MADE IN ITCOT LTD. IN THIS CONNECTION YOU ARE HEREBY GIVEN SHOW-CAUSE N OTICE AS TO WHY DIRECTION SHOULD NOT BE GIVEN TO REVISE T HE IMPUGNED ORDER U/S 263 OF THE INCOME-TAX ACT 1961 ON THE AB OVE ISSUE. IF NO REPLY IS RECEIVED IT WILL BE PRESUMED THAT YOU HAVE NO OBJECTION IN REVISING THE ASSESSMENT FOR THE ASST. YEAR 2003-04 ON THE PROPOSED LINES. FOR ASSESSMENT YEAR 2004-05: I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 41 THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASS T. YEAR 2004-05 ON 27.10.2004 ADMITTING AN INCOME OF RS.249 0/- AND AGRICULTURAL INCOME OF RS.2 488/-. THE RETURN WAS SCRUTINIZED AND THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 ON 26.12.2007 ON A TOTAL INCOME OF RS.48 13 950/- AND AGRICULTURAL INCOME OF RS.57 255/-. THE ASSESSEE IS DIRECTOR OF M/S PRAKASH GOLD PALACE (P) LTD. (FORMERLY KNOWN AS M/S ABHILASH A INTERNATIONAL P. LTD.). THE ASSESSING OFFICER WHIL E COMPLETING THE ASSESSMENT U/S 143(3) R.W.S. 147 HAD NOT EXAMIN ED THE FOLLOWING ASPECTS WHICH IS ERRONEOUS IN SO FAR AS I T IS PREJUDICIAL TO THE INTERESTS OF REVENUE. 1. TO VERIFY THE AGRICULTURAL INCOME AMOUNTING TO RS.62 613/- 2. INVESTMENT OF RS.45 LAKHS MADE IN ITCOT LTD. 3. SALE OF AGRICULTURAL LAND AMOUNTING TO RS.29 867/- HAS NOT BEEN OFFERED 4. CLAIM OF DEDUCTION U/S 80D AMOUNTING TO RS.8294/-. IN THIS CONNECTION YOU ARE HEREBY GIVEN SHOW-CAUSE NOTICE AS TO WHY DIRECTION SHOULD NOT BE GIVEN TO REVISE TH E IMPUGNED ORDER U/S 263 OF THE INCOME-TAX ACT 1961 ON THE AB OVE ISSUE. IF NO REPLY IS RECEIVED IT WILL BE PRESUMED THAT YOU HAVE NO OBJECTION IN REVISING THE ASSESSMENT FOR THE ASST. YEAR 2004-05 ON THE PROPOSED LINES. 39. WITH REGARD TO THE INVESTMENT MADE BY THE ASSES SEE IN ITCOT LTD. WE HAVE ALREADY HELD THAT ASSESSING OFFICER H AD MADE PROPER ENQUIRIES AND ASSESSEE HAD GIVEN DETAILED REPLIES D URING THE COURSE OF ASSESSMENT IN THE CASE OF SMT. SURAJ KUMARI JAI N AT PARA 27 SUPRA. THE ASSESSING OFFICER AFTER DUE APPLICATION OF MIND HAD I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 42 COME TO A CONCLUSION THAT THE INVESTMENT MADE BY TH E ASSESSEE WAS OUT OF ADVANCE RECEIVED BY HIM FROM M/S PRAKASH GOL D PALACE (P) LTD. AND SUCH ADVANCE WAS CONSIDERED FOR ADDITION U NDER SECTION 2(22)(E) OF THE ACT. THIS BEING THE CASE WE ARE O F THE OPINION THAT THE ASSESSING OFFICER HAD MADE PROPER ENQUIRIES AND THERE WAS NO ERROR WHATSOEVER IN THE ORDER OF THE A.O. IN SO FAR AS INVESTMENT IN M/S ITCOT LTD. WAS CONCERNED. IN ANY CASE FOR ASS ESSMENT YEAR 2004-05 THERE WAS NO ADDITIONAL INVESTMENT WHATSOE VER MADE BY THE ASSESSEE IN M/S ITCOT LTD. BUT ONLY REPAYMENT RECEI VED BY THE ASSESSEE FROM THE SAID COMPANY. HOWEVER WITH REGA RD AGRICULTURAL INCOME THE ASSESSING OFFICER HAD NOT MADE ANY PROP ER ENQUIRY ON THE DETAILS FURNISHED BY THE ASSESSEE. ASSESSEE HA D NOT GIVEN THE EXTENT OF THE HOLDING OR ANY EVIDENCE FOR THE RECEI PT OF AGRICULTURAL INCOME. SIMILARLY FOR SALE OF AGRICULTURAL LAND ONE OF ISSUES RAISED BY LD. CIT FOR ASSESSMENT YEAR 2004-05 ALSO THERE WAS NO ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT. THE LEARNED A.R. COULD NOT PLACE ANY E VIDENCE BEFORE US THAT ASSESSEE HAD GIVEN FULL PARTICULARS WITH RE GARD TO SALE OF I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 43 AGRICULTURAL LAND. IN SO FAR AS CLAIM OF DEDUCTION UNDER SECTION 80D FOR ASSESSMENT YEAR 2004-05 IS CONCERNED IT IS AN ADMITTED POSITION THAT THE ASSESSEE HAD GIVEN EVIDENCE FOR SUCH DEDUC TION ALONG WITH THE RETURN OF INCOME AND THIS DEFINITELY WOULD HAVE BEEN CONSIDERED BY THE A.O. WHILE GIVING SUCH DEDUCTION. 40. IN A NUTSHELL WE HOLD THAT THE ORDERS OF LD. C IT FOR BOTH THE ASSESSMENT YEARS IN SO FAR AS IT RELATES TO INVEST MENT IN M/S ITCOT LTD. WAS NOT WARRANTED. HOWEVER IN SO FAR AS THE ASPECT OF AGRICULTURAL INCOME AND SALE OF AGRICULTURAL LAND I S CONCERNED THE ASSESSING OFFICER WAS SILENT AND NO PROPER ENQUIRIE S HAVING BEEN DONE THE ORDER UNDER SECTION 263 WAS JUSTIFIED. V IS--VIS CLAIM OF DEDUCTION UNDER SECTION 80D OF THE ACT THE ASSESSI NG OFFICER GAVE SUCH A DEDUCTION AFTER CONSIDERING THE EVIDENCE FIL ED BY THE ASSESSEE ALONG WITH RETURN AND THEREFORE IT CANNOT BE CONSI DERED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. T HEREFORE WE UPHOLD THE ORDER OF LD. CIT IN SO FAR AS IT RELATES TO ASP ECTS OTHER THAN INVESTMENT IN M/S ITCOT LTD. AND CLAIM OF DEDUCTION UNDER SECTION 80D OF THE ACT ARE CONCERNED. ORDERED ACCORDINGLY. I.T.A. NOS. 1629 TO 1633/MDS/09 C.O. NOS. 193 TO 199/MDS/09 I.T.A. NO. 486 TO 488/MDS/10 I.T.A. NOS. 1640 & 1641/MDS/09 44 41. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 42. TO SUMMARISE THE RESULTS APPEALS OF THE REVENU E IN I.T.A. NOS. 1629 1630 1631 1632 1633 1640 & 1641/MDS/ 2009 AS WELL AS CROSS-OBJECTIONS OF THE ASSESSEE IN C.O. NOS. 19 3 194 195 196 197 198 & 199/MDS/2009 ARE DISMISSED WHEREAS APP EALS OF THE ASSESSEES IN I.T.A. NOS. 486 487 AND 488/MDS/2010 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 29 TH JULY 2011. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 29 TH JULY 2011. KRI. COPY TO: ASSESSEE/ASSESSING OFFICER/CIT(A)-V CHEN NAI-34/ CIT CHENNAI-III CHENNAI/D.R./GUARD FILE