Empee Holdings Ltd., CHENNAI v. DCIT, CHENNAI

ITA 1503/CHNY/2014 | 2005-2006
Pronouncement Date: 07-11-2019 | Result: Dismissed

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Expert Summary: Any transaction in respect of which assessee has not furnished any details and neither Assessing officer has not examine such issue during the course of original assessment proceedings, the Reopening us 147 is justified.

Appeal Details

RSA Number 150321714 RSA 2014
Assessee PAN AABCE5490N
Bench Chennai
Appeal Number ITA 1503/CHNY/2014
Duration Of Justice 5 year(s) 5 month(s) 4 day(s)
Appellant Empee Holdings Ltd., CHENNAI
Respondent DCIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-11-2019
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 07-11-2019
Last Hearing Date 09-01-2019
First Hearing Date 09-01-2019
Assessment Year 2005-2006
Appeal Filed On 02-06-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI $ ( BEFORE SHRI GEORGE MATHAN JUDICIAL MEMBER AND SHRI RAMIT KOCHAR ACCOUNTANT MEMBER ./ ITA NO.1503/CHNY/2014 /ASSESSMENT YEAR: 2005-06 M/S.EMPEE HOLDINGS LTD. C/O. SHRI S.SRIDHAR ADVOCATES NEW NO.14 OLD NO.82 FLAT NO.5 1 ST AVENUE INDIRA NAGAR ADYAR CHENNAI-600 020. V . THE DY. COMMISSIONER OF INCOME TAX COMPANY CIRCLE-II (1) CHENNAI. [PAN: AABCE 5490 N ] ( * /APPELLANT) ( + * /RESPONDENT) * - / APPELLANT BY : MR. S.SRIDHAR ADV. + * - /RESPONDENT BY : MS.SUMATHI VENKATRAMAN DCIT - /DATE OF HEARING : 09.10.2019 - /DATE OF PRONOUNCEMENT : 07.11.2019 / O R D E R PER RAMIT KOCHAR ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST APPELLATE ORDER DATED 07.03.2014 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II CHENNAI (HEREINAFTER CALLED THE CIT( A)) IN ITA NO.1419/13-14 FOR ASSESSMENT YEAR(AY) 2005-06 THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM ASSESSMENT ORDER DATED 16.12.2011 PASSED BY LEARNED ASSESSING OFFICE R ( HEREINAFTER CALLED ITA NO.1503/CHNY/2014 :- 2 -: THE AO) U/S 143(3) READ WITH SECTION 147 OF THE INCOME-TAX ACT 1961( HEREINAFTER CALLED THE ACT) FOR AY 2005-06. 2. THE GROUNDS OF APPEAL RAISED BY ASSESSEE IN MEM O OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI (HE REINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) II CHENNAI -600 034 DATED 07.03.2014 IN I.T.A.NO.1419/2013-14 FOR THE ABOVE MENTIONED ASSES SMENT YEAR IS CONTRARY TO LAW FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE ASSUMP TION OF JURISDICTION U/S 147 OF THE ACT AND ERRED CONSEQUENTLY IN CONFIRMING THE RE-ASSESSMENT FRAMED U/S 143(3) R/W SECTION 147 OF THE ACT WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE ORDER OF RE-ASSESSMENT UNDER CONSIDERATION WAS PASSED OUT OF TIME INVALID PASSED WITHOUT JURISDI CTION AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW. 4. THE CIT (APPEALS) ERRED IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX RS.5 45 76 988/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFI CATION. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT HAD NO APPLICATION TO THE FACTS OF THE CASE AND OUGHT TO H AVE APPRECIATED THAT TRANSACTIONS FOR BUSINESS PURPOSE BASED ON COMMERCIAL EXIGENCIES WOULD NOT FA LL WITHIN THE PURVIEW OF SECTION 2(22)(E) OF THE ACT THUS VITIATING HIS ACTION IN RELATION THERETO. 6. THE CIT (APPEALS) WENT WRONG IN RECORDING THE FI NDINGS IN THIS REGARD IN PARA 4.2.3 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFIC ATION. 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE THE PASSING OF THE IMPUGNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOUL D BE NULLITY IN LAW. 8. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GR OUNDS/ARGUMENTS AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME FOR IMPUGNED AY: 2005-06 ON 31.10.2005 RETUR NING A LOSS OF ` 4 98 660/-. THE ASSESSMENT WAS FRAMED BY AO U/S.14 3(3) OF THE 1961 ACT ON 17.12.2007 ASSESSING THE INCOME OF THE ASSES SEE AT ` 1 73 640/-. THE AO LATER OBSERVED THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND A NOTICE U/S.148 WAS ISSUE D BY THE AO TO THE ASSESSEE ON 31.03.2010. THE ASSESSEE IN RESPONSE T O AFORESAID NOTICE ISSUED BY AO U/S.148 OF THE 1961 ACT SUBMITTED BEF ORE AO TO TREAT RETURN OF INCOME ORIGINALLY FILED ON 31.10.2005 AS RETURN OF INCOME FILED IN ITA NO.1503/CHNY/2014 :- 3 -: PURSUANCE TO NOTICE DATED 31.03.2010 ISSUED U/S.148 OF THE 1961 ACT. THUS IT IS AN ADMITTED POSITION BETWEEN RIVAL PART IES THAT ASSESSMENT WAS ORIGINALLY FRAMED BY AO U/S.143(3) OF THE ACT AND S ECONDLY IT IS ALSO AN ADMITTED POSITION THAT NOTICE U/S.148 WAS ISSUED BY AO TO THE ASSESSEE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YE AR AND HENCE PROVISO TO SECTION 147 IS NOT APPLICABLE. THE MAIN REASON FOR RE-OPENING OF THE CONCLUDED ASSESSMENT WAS THAT THE ASSESSEE HELD 29 67 606 SHARES IN ITS SUBSIDIARY COMPANY M/S EMPEE DISTILLERIES LTD IN WH ICH IT HELD 41.78% SHAREHOLDING OF THE AFORESAID SUBSIDIARY COMPANY. T HE AFORESAID SUBSIDIARY COMPANY HAD ACCUMULATED PROFITS TO THE T UNE OF ` 6 69 15 506/- AND ASSESSEE COMPANY HAD TAKEN A LOAN OF `5 45 76 988/- FROM ITS AFORESAID SUBSIDIARY COMPANY WHICH IN THE OPINION OF THE AO H AD INFRINGED PROVISIONS OF SECTION 2(22)(E) OF THE 1961 ACT. TH E ASSESSEE WAS ASKED BY AO TO EXPLAIN AS TO WHY PROVISIONS OF SEC.2(22)( E) OF THE 1961 ACT BE NOT INVOKED AND THE SAID LOAN/ADVANCE OF `5 45 76 988/- RECEIVED BY ASSESSEE FROM ITS SUBSIDIARY COMPANY NAMELY M/S EMP EE DISTILLERIES LIMITED BE NOT TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE AND ACCORDINGLY BROUGHT TO INCOME-TAX. THE ASSESSE E SUBMITTED BEFORE THE AO AS UNDER: 'THE TRANSACTION BETWEEN THE ASSESSEE AND M/S.EMPEE DISTILLERIES LTD. IS FOR THE PURPOSE OF BUSINESS AND TO PROMOTE MUTUAL BUSINESS INTEREST. SUCH COMME RCIAL TRANSACTIONS ARE OUTSIDE THE PURVIEW OF THE SAID DEEMING PROVISIONS OF THE ACT. EVEN ON THE OTH ER FACET AND BASED ON THE JUDICIAL PRECEDENTS IT I S SUBMITTED THAT THE COMMERCIAL TRANSACTION BETWEEN T HE GROUP COMPANIES WOULD BE THE OUTSIDE SCOPE OF THE DEEMING PROVISIONS UNDER CONSIDERATION. THE VARIOUS CONDITIONS ENVISAGED FOR APPLYING THE DEEMING PROVISIONS U/S.2(22)(E) OF THE ACT ARE NOT CUMULATIVELY SATISFIED AND COMPLIED WITH ON THE FACTS OF THE PRESENT CASE AND HENCE THE ASSESSMENT OF DEEMED DIVIDEND IS WRONG INCORRECT UNJUSTIFIED ERRONEOUS AND NOT SUSTAINABLE BOTH ON FACTS AND IN LAW. THE LOAN OR ADVANCE SHOULD BE UNDERSTOOD WITH REFERENCE TO THE BENEFIT DERIVED TH ERE FROM BY THE REGISTERED SHARE HOLDER AND NOT WITH REFERENCE TO THE NORMAL COMMERCIAL TRANSACTION BETWEEN TWO COMPANIES'. ITA NO.1503/CHNY/2014 :- 4 -: IN NUT SHELL THE ASSESSEE SUBMITTED BEFORE THE AO THAT THESE ARE COMMERCIAL TRANSACTIONS BETWEEN ASSESSEE AND M/S. E MPEE DISTILLERIES LIMITED FOR THE PURPOSES OF BUSINESS AND TO PROMOTE MUTUAL BUSINESS INTEREST AND HENCE DEEMING FICTION OF PROVISIONS OF SEC.2(22)(E) OF THE 1961 ACT ARE NOT ATTRACTED. 3.2 THE AO ON THE OTHER HAND REFERRED TO PROVISION S OF SECTION 2(22)(E) OF THE 1961 ACT AND HELD THAT PROVISION OF SECTION 2(22)(E) OF THE 1961 ACT ARE CLEARLY APPLICABLE AND SAID SUM IS CHARGEAB LE TO INCOME-TAX IN THE HANDS OF THE ASSESSEE BECAUSE THE SAID SUBSIDIARY C OMPANY OF THE ASSESSEE NAMELY M/S EMPEE DISTILLERIES LIMITED POS SESSED ACCUMULATED PROFITS WHICH ARE UTILIZED TO RELEASE THIS AMOUNT T O ASSESSEE AS LOAN/ADVANCE INSTEAD OF PAYING THE SAME AS DIVIDEND AND THUS NOT PAYING TAXES ON DISTRIBUTION OF ACCUMULATED PROFITS WHICH WERE DISTRIBUTED BY SAID M/S EMPEE DISTILLERIES LIMITED TO ASSESSEE AS LOAN/ ADVANCES VIDE ASSESSMENT ORDER DATED 16.12.2011 PASSED BY THE AO U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT. 4. THE ASSESSEE BEING AGGRIEVED BY AN ASSESSMENT OR DER DATED 16.12.2011 PASSED BY AO U/S 143(3) READ WITH SECTIO N 147 OF THE 1961 ACT FILED FIRST APPEAL BEFORE LD.CIT(A) AND CHALLEN GED THE ADDITIONS MADE BY AO BOTH ON LEGAL GROUNDS CHALLENGING THE RE-OPEN ING OF THE ASSESSMENT U/S.147 OF THE ACT AND ALSO CHALLENGING THE ADDITIO NS MADE ON MERITS BY INVOKING PROVISIONS OF SECTION 2(22)(E) OF THE 1961 ACT BY BRINING TO TAX LOANS/ADVANCES RECEIVED BY ASSESSEE FROM ITS AFORES AID SUBSIDIARY ITA NO.1503/CHNY/2014 :- 5 -: COMPANY TO THE TUNE OF ` 5 45 76 988/- . THE LD.CIT(A) WAS PLEASED TO DISMISS THE APPEAL OF THE ASSESSEE ON BOTH THE GROU NDS. WHILE DISMISSING APPEAL OF THE ASSESSEE ON LEGAL GROUND CHALLENGING INVOCATION OF PROVISIONS OF SECTION 147 OF THE 1961 ACT THE LEA RNED CIT(A) REFERS TO THE PROVISIONS OF THE SECTION 147 OF THE 1961 ACT A ND OBSERVED THAT IF THERE IS AN ASSESSABLE INCOME FOR ANY AY WHICH WAS NOT BROUGHT TO TAX WILL CONSTITUTE REASON FOR RE-OPENING OF THE CONCLU DED ASSESSMENT U/S 147 OF THE ACT. THE LEARNED CIT(A) REFERRED TO EXPLANAT ION 2 TO SECTION 147 OF THE 1961 ACT AND HELD THAT IN CASE WHERE SCRUTINY A SSESSMENT HAS BEEN FRAMED U/S 143(3) OF THE 1961 ACT AND THERE IS AN UNDERASSESSMENT OF THE TAXABLE INCOME OR ASSESSING THE INCOME AT TOO LOW A RATE OR GRANTING OF EXCESSIVE RELIEF OR GRANTING/COMPUTATION OF EX CESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE SHALL CONSTITUTE VALID REASONS FOR REOPENING OF THE CONCLUDED ASSESSMENT B Y INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT. THE LEARNED CIT(A) OBSERVED THAT IN THE PRESENT CASE THE ASSESSEE HAS DURING THE PREVIOUS YEAR RELEVANT TO IMPUGNED AY HAD RECEIVED CERTAIN LOANS/ADVANCES FRO M A SUBSIDIARY COMPANY IN WHICH ASSESSEE HELD 41.78% OF THE SHARES WHICH CONSTITUTES DEEMED DIVIDEND WITHIN PROVISIONS OF SECTION 2(22)( E) OF THE 1961 ACT. IT WAS OBSERVED BY LEARNED CIT(A) THAT THESE DETAILS W ERE NEITHER AVAILABLE TO AO AT THE TIME OF ORIGINAL ASSESSMENT NOR ASSESS EE FURNISHED THESE DETAILS BEFORE THE AO. IT WAS OBSERVED BY LEARNED C IT(A) THAT AO DID NOT FORM ANY OPINION ON THIS ISSUE OF CHARGEABILITY OF SAID LOANS AND ADVANCES RECEIVED BY ASSESSEE FROM ITS SUBSIDIARY DURING THE YEAR AS INCOME IN THE ITA NO.1503/CHNY/2014 :- 6 -: HANDS OF THE ASSESSEE AS DEEMED DIVIDEND U/S 2(22)( E) OF THE 1961 ACT AND HENCE THERE IS NO QUESTION OF CHANGE OF OPINION BY THE AO. THE LEARNED CIT(A) OBSERVED THAT REOPENING IS DONE WITH IN FOUR YEARS FROM THE END OF ASSESSMENT YEAR AND HENCE PROVISO TO SECTION 147 OF THE 1961 ACT IS NOT APPLICABLE. THE LEARNED CIT(A) OBSERVED THAT INCOME OF THE ASSESSEE WAS UNDER-ASSESSED AND THIS IS THE INFORMA TION WHICH CAME TO POSSESSION OF THE AO AS TO ESCAPEMENT OF INCOME CHA RGEABLE TO TAX AND THUS REOPENING OF THE CONCLUDED ASSESSMENT BY INVOK ING PROVISIONS OF SECTION 147 OF THE 1961 ACT WAS UPHELD BY LEARNED C IT(A) VIDE APPELLATE ORDER DATED 07.03.2014 PASSED BY LEARNED CIT(A). 4.2 THE LEARNED CIT(A) ALSO UPHELD THE ADDITIONS M ADE BY THE AO ON MERITS IN BRINING TO TAX AN AMOUNT OF ` 5 45 76 988/- RECEIVED BY ASSESSEE FROM ITS SUBSIDIARY COMPANY AS LOAN/ADVANC E DURING PREVIOUS YEAR RELEVANT TO IMPUGNED AY AS DEEMED DIVIDEND U/ S 2(22)(E) OF THE 1961 ACT. THE LEARNED CIT(A) OBSERVED THAT ASSESSE E HELD 41.78% OF SHARES IN ITS SUBSIDIARY COMPANY NAMELY M/S EMPEE D ISTILLERIES LIMITED AND ACCUMULATED PROFITS AVAILABLE WITH SAID SUBSIDI ARY COMPANY NAMELY M/S EMPEE DISTILLERIES LIMITED WERE TO THE TUNE OF ` 6 69 15 506/-. THUS LOANS/ADVANCES RECEIVED BY ASSESSEE FROM SAID M/S E MPEE DISTILLERIES LIMITED TO THE TUNE OF ` 5 45 76 988/- DURING PREVIOUS YEAR RELEVANT TO IMPUGNED AY WAS UPHELD TO BE DEEMED DIVIDEND U/S 2( 22)(E) BY LEARNED CIT(A). THE ASSESSEE HOWEVER CLAIMED BEFORE LEARNE D CIT(A) THAT THIS AMOUNT RECEIVED BY ASSESSEE FROM M/S EMPEE DISTILLE RIES LIMITED WAS NOT ITA NO.1503/CHNY/2014 :- 7 -: LOANS/ADVANCES AND THE AFORESAID AMOUNT WAS RECEIVE D FOR BUSINESS PURPOSES AND BASED ON COMMERCIAL EXPEDIENCY THE PR OVISIONS OF SECTION 2(22)(E) OF THE 1961 ACT ARE NOT ATTRACTED. THE ASS ESSEE SUBMITTED THAT IF AT ALL THIS RECEIPT OF LOAN/ADVANCE FROM SUBSIDIARY COMPANY IS TO BE TREATED AS HIT BY PROVISIONS OF SECTION 2(22)(E) OF THE 1961 ACT THEN REVALUATION RESERVES OF PROFIT FROM SALE OF ASSETS AT PALAKKAD HAS TO BE EXCLUDED WHICH PRESENTLY FORMS PART OF GENERAL RES ERVES. THE ASSESSEE SUBMITTED BEFORE LEARNED CIT(A) THAT ACTUAL PROFITS WHICH ARE SHOWN IN PROFIT AND LOSS APPROPRIATION ACCOUNT ARE TO THE TUNE OF ` 48.95 LACS WHICH ARE ONLY TO BE CONSIDERED FOR COMPUTING ACCUM ULATED PROFITS WHILE INVOKING PROVISIONS OF SECTION 2(22)(E) OF THE 1961 ACT. IT WAS OBSERVED BY LD.CIT(A) THAT NO EVIDENCE HAS BEEN BROUGHT ON R ECORD BY ASSESSEE TO PROVE THAT THERE IS ANY BUSINESS EXPEDIENCY TO TAK E LOANS/ADVANCE FROM ITS SUBSIDIARY COMPANY NAMELY M/S EMPEE DISTILLERIE S LTD. AND MERE BALD STATEMENTS ARE MADE THAT THESE ARE BUSINESS TRANSAC TIONS WITHOUT ANY COGENT REASONS/JUSTIFICATION. THE LD CIT(A) OBSERVE D THAT THERE ARE NO BUSINESS TRANSACTIONS BETWEEN ASSESSEE AND SAID M/S EMPEE DISTILLERIES LIMITED. THE LEARNED CIT(A) FURTHER OBSERVED THAT A LL TRANSACTIONS BETWEEN ASSESSEE AND SAID M/S EMPEE DISTILLERIES LIMITED AR E ON ACCOUNT OF RECEIPT AND PAYMENT OF MONEY AND THERE ARE NO BUSINESS TRAN SACTIONS . THE LEARNED CIT(A) OBSERVED THAT ONUS IS ON ASSESSEE TO PROVE THAT THERE WERE BUSINESS EXPEDIENCY IN THESE TRANSACTIONS AND IT WA S FOR ASSESSEE TO PROVE THROUGH COGENT EVIDENCES AS TO NATURE OF TRANSACTI ON BETWEEN ASSESSEE AND SAID M/S EMPEE DISTILLERIES LIMITED. THE LEARNE D CIT(A) OBSERVED THAT ITA NO.1503/CHNY/2014 :- 8 -: ASSESSEE HAS NOT FURNISHED ANY SUCH DETAILS OR COMP ELLING CONDITIONS BEFORE M/S EMPEE DISTILLERIES LIMITED WHILE MAKING THESE PAYMENTS TO THE ASSESSEE AND HENCE ASSESSEE CLAIM OF BUSINESS EXPE DIENCY IN RECEIVING THESE AMOUNTS FROM ITS SUBSIDIARY COMPANY NAMELY M/ S EMPEE DISTILLERIES LIMITED STOOD REJECTED BY LEARNED CIT(A). THUS LE ARNED CIT(A) UPHELD THE ASSESSMENT ORDER PASSED BY THE AO BY CONFIRMING THE ADDITIONS MADE ON MERITS BY INVOKING PROVISIONS OF SECTION 2(22)(E ) OF THE 1961 ACT . WITH RESPECT TO CLAIM OF THE ASSESSEE THAT IF AT AL L PROVISIONS OF SECTION 2(22)(E) OF THE 1961 ACT ARE TO BE INVOKED THEN IN THAT CONDITION ONLY AMOUNT OF ` 48.95 LACS CAN BE BROUGHT TO TAX WHICH STOOD CREDI TED IN THE HEAD PROFIT AND LOSS APPROPRIATION ACCOUNT UNDER THE HEAD RESERVES AND SURPLUS AND AMOUNT OF REVALUATION RESERVES ARISING OUT OF SALE OF PALAKKAD UNIT CANNOT BE BROUGHT TO TAX THE LEARNED CIT(A) WAS PLEASED TO RESTORE THE MATTER TO THE FILE OF THE AO FOR VERIFI CATION WITH FURTHER DIRECTION THAT SECTION 2(22)(E) CONTEMPLATES ACCUMU LATED PROFITS WHICH MEANS NOT ONLY PROFITS DERIVED FROM BUSINESS ACTIV ITY BUT ALSO INCLUDES ALL OTHER PROFITS INCLUDING CAPITAL GAINS ON SALE OF AS SETS ETC. AND HENCE ADDITIONS AS WERE MADE BY AO BY INVOKING PROVISIONS OF SECTION 2(22)(E) OF THE 1961 ACT WERE CONFIRMED BY LEARNED CIT(A) SU BJECT TO VERIFICATION BY THE AO OF ACTUAL ACCUMULATED PROFITS IN THE HAND S OF M/S EMPEE DISTILLERIES LIMITED VIDE APPELLATE ORDER DATED 07 .03.2014 PASSED BY LEARNED CIT(A). ITA NO.1503/CHNY/2014 :- 9 -: 5. BEING AGGRIEVED BY DECISION OF LEARNED CIT(A) T HE ASSESSEE FILED SECOND APPEAL WITH TRIBUNAL. THE LEARNED COUNSEL FO R ASSESSEE OPENED ARGUMENT AND SUBMITTED THAT ASSESSEE IS CHALLENGING RE-OPENING OF THE CONCLUDED ASSESSMENT BY REVENUE BY INVOKING PROVIS IONS OF SECTION 147 OF THE 1961 ACT. THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT RETURN OF INCOME WAS ORIGINALLY FILED ON 31.10.2005 FOR IMPUGNED AY AND ASSESSMENT WAS ORIGINALLY FRAMED BY AO U/S.143(3) O F THE ACT VIDE ASSESSMENT ORDER DATED 17.12.2007. IT WAS SUBMITTED THAT RE-OPENING OF CONCLUDED ASSESSMENT WAS DONE BY AO U/S 147 OF THE 1961 ACT BY ISSUING NOTICES U/S 148 ON 31.03.2010 WHICH IS WITHIN 4 YEA RS FROM THE END OF THE ASSESSMENT YEAR AND RE-ASSESSMENT WAS FINALLY FRAME D BY AO VIDE ASSESSMENT ORDER DATED 16.12.2011 PASSED U/S.143(3) R.W.S.147 OF THE 1961 ACT. IT WAS SUBMITTED BY LEARNED COUNSEL FOR T HE ASSESSEE THAT NO TANGIBLE MATERIAL CAME IN POSSESSION OF THE AO TO INVOKE PROVISIONS OF SEC.147 OF THE 1961 ACT. THE LD.COUNSEL FOR ASSESS EE RELIED UPON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F M/S.TENZING MATCH WORKS SIVAKASI V. DCIT IN TAX CASE (APPEAL) NO.702 OF 2009 DATED 11.07.2019. THE LEARNED COUNSEL FOR THE ASSESSEE A LSO RELIED UPON DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F TANMAC INDIA V. DCIT REPORTED IN [2017] 78 TAXMANN.COM 155 (MADRAS) . HE ALSO RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. V. ITO [2003] 259 ITR 19(SC). THE LEA RNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON EXPLANATION 2 TO SECTION 14 7 OF THE 1961 ACT. IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE T HAT ASSESSEE IS ITA NO.1503/CHNY/2014 :- 10 -: HOLDING COMPANY OF M/S EMPEE DISTILLERIES LTD. . TH ESE ARE TRANSACTIONS BETWEEN GROUP COMPANIES AND BY VIRTUE OF TRANSACTIO NS BETWEEN HOLDING COMPANY AND SUBSIDIARY COMPANY THESE ARE ITSELF TO BE CATEGORIZED AS BUSINESS TRANSACTIONS. IT WAS FAIRLY SUBMITTED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THESE TRANSACTIONS WERE NOT SCRUTINIZ ED BY AO DURING THE COURSE OF ORIGINAL ASSESSMENT BUT THESE TRANSACTIO NS WERE SCRUTINIZED IN RE-ASSESSMENT PROCEEDINGS CONDUCTED BY AO U/S 147/1 48 OF THE 1961 ACT WHICH PROCEEDINGS ARE NOW UNDER CHALLENGE BEFORE TH IS TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTEN TION TO PARA NO.4.2.1 OF THE APPELLATE ORDER PASSED BY LEARNED CIT(A) AND SUBMITTED THAT THESE ARE BUSINESS TRANSACTIONS BETWEEN GROUP COMPANIES G OVERNED BY COMMERCIAL EXPEDIENCY. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON CBDT CIRCULAR NO.19/2017 [F.NO.279/MISC./140/2 015/ITJ] DATED 12.06.2017. 5.2 THE LD.DR ON THE OTHER HAND SUBMITTED THAT RE-O PENING OF THE CONCLUDED ASSESSMENT BY INVOKING PROVISIONS OF SECT ION 147/148 OF THE 1961 ACT WAS DONE WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND PROVISO TO SECTION 147 OF THE 1961 ACT IS NOT A PPLICABLE. IT WAS SUBMITTED THAT THIS ISSUE WAS NOT EXAMINED BY THE A O IN THE ORIGINAL ASSESSMENT . IT WAS SUBMITTED BY LEARNED DR THAT IN COME HAS BEEN BROUGHT TO TAX BY INVOKING PROVISIONS OF SEC.2(22)( E) OF THE ACT AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESEE AND THE ASSESSEE COULD NOT EXPLAIN/SHOW COMMERCIAL EXPEDIENCY IN THESE TRANSAC TIONS OF GRANTING ITA NO.1503/CHNY/2014 :- 11 -: LOAN BY SUBSIDIARY COMPANY NAMELY M/S. EMPEE DISTI LLERIES LIMITED TO THE ASSESSEE. THE LEARNED DR WOULD SUBMIT THAT ONLY BAL D STATEMENTS ARE MADE THAT THESE TRANSACTIONS BETWEEN ASSESSEE AND S AID M/S EMPEE DISTILLERIES LIMITED WERE GOVERNED BY COMMERCIAL EX PEDIENCY BUT NO COGENT MATERIAL/EXPLANATIONS ARE SUBMITTED TO PROVE THAT THESE WERE BUSINESS TRANSACTIONS AND THERE WAS INFACT COMMERC IAL EXPEDIENCY WHICH GOVERNED THE EXECUTION OF THESE TRANSACTIONS . OU R ATTENTION WAS DRAWN BY LEARNED DR TO PARA NO.4.2.3 OF THE APPELLATE ORD ER PASSED BY LD.CIT(A). THE LEARNED DR WOULD RELY ON DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF UNITED SPIRITS LTD. V. DC IT REPORTED IN [2018] 90 TAXMANN.COM 86 (KARNATAKA). 5.3 THE LD.AR SUBMITTED IN REJOINDER THAT IT IS A C ASE OF TRANSACTIONS BETWEEN HOLDING COMPANY AND SUBSIDIARY COMPANY WHI CH ITSELF SHOWS THAT THESE TRANSACTIONS ARE GOVERNED BY COMMERCIAL EXPEDIENCY AND HENCE THERE IS NO NEED TO GO FURTHER TO PROVE THAT THESE ARE BUSINESS TRANSACTIONS GOVERNED BY COMMERCIAL EXPEDIENCY . 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD INCLUDING CITED CASE LAWS. WE HAVE OBSERVED THAT ASSESSEE HAS FILED RETURN OF INCOME ORIGINALLY WITH REVENUE FOR IMPUGN ED AY: 2005-06 ON 31.10.2005. THE SAID RETURN OF INCOME WAS SELECTED BY REVENUE FOR FRAMING SCRUTINY ASSESSMENT U/S.143(3) R.W.S.143(2) OF 1961 ACT WHICH ASSESSMENT WAS FRAMED BY AO ON 17.12.2007. THE ASS ESSEES ASSESSMENT WAS RE-OPENED BY AO U/S.147 OF THE 1961 ACT BY ISSUING ITA NO.1503/CHNY/2014 :- 12 -: NOTICE DATED 31.03.2010 U/S.148 OF THE ACT TO THE ASSESSEE. IT IS AN ADMITTED POSITION BETWEEN RIVAL PARTIES THAT ORIGIN ALLY SCRUTINY ASSESSMENT WAS FRAMED BY REVENUE U/S 143(3) OF THE 1961 ACT AN D ALSO THAT THE SAID REOPENING OF CONCLUDED ASSESSMENT BY INVOKING PROVI SIONS OF SECTION 147 WAS DONE BY REVENUE WITHIN 4 YEARS FROM THE END OF THE ASSESSMENT YEAR AND HENCE PROVISO TO SEC.147 IS NOT APPLICABLE. THE PROVISO TO SECTION 147 OF THE 1961 ACT READS AS UNDER: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR NO ACTION SH ALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTIO N (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. THUS AS COULD BE SEEN FROM THE AFORESAID PROVISO THAT IT INTER-ALIA PROVIDES THAT WHERE AN ASSESSMENT HAS BEEN ORIGINAL LY FRAMED U/S 143(3) OF THE 1961 ACT NO ACTION CAN BE TAKEN AGAINST THE ASSESSEE U/S 147 OF THE 1961 ACT AFTER EXPIRY OF FOUR YEARS FROM THE EN D OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF FA ILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERI AL FACTS NECESSARY FOR FRAMING ASSESSMENT FOR THAT ASSESSMENT YEAR. THUS EVEN IF THERE IS A COMPLETE DISCLOSURE THEN ALSO THE AO SHALL BE ENTIT LED TO INVOKE PROVISIONS OF SECTION 147 OF THE 1961 ACT FOR REOPENING OF THE CONCLUDED ASSESSMENT WITHIN FOUR YEARS FROM END OF THE RELEVANT ASSESSME NT YEAR PROVIDED OTHER INGREDIENTS FOR REOPENING OF THE CONCLUDED AS SESSEE AS ARE ENSHRINED U/S 147/148 OF THE 1961 ACT ARE FULFILLED . PRESENT IS A CASE ITA NO.1503/CHNY/2014 :- 13 -: BEFORE US WHEREIN ORIGINALLY ASSESSMENT WAS FRAMED BY REVENUE U/S 143(3) OF THE 1961 ACT AND REOPENING WAS DONE WITHI N FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND HENCE AFORESAID PROV ISO SHALL HAVE NO APPLICABILITY . 6.2 THE FIRST EXPLANATION TO SECTION 147 OF THE 19 61 ACT PROVIDES THAT PRODUCTION BEFORE AO OF A ACCOUNT BOOKS OR OTHER EV IDENCE FROM WHICH MATERIAL EVIDENCE WITH DUE DILIGENCE COULD HAVE BEE N DISCOVERED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN MEANING OF THE FOREGOING PROVISO AND IF THERE IS AN TANGIBLE INCRI MINATING MATERIAL / INFORMATION WITH AO EVEN IF EMANATING FROM THE RECO RDS BEFORE THE AO WHICH LEADS TO AO HAVING REASONS TO BELIEVE THAT IN COME OF THE ASSESSEE HAS ESCAPED ASSESSMENT THE AO SHALL BE JUSTIFIED I N INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT .THE EXPLANATION 1 IS R EPRODUCED HEREUNDER: EXPLANATION 1.PRODUCTION BEFORE THE ASSESSING OFF ICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGEN CE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOR EGOING PROVISO. THUS MERELY BECAUSE BOOKS OF ACCOUNTS WERE PRODUCE D BY ASSESSEE BEFORE THE AO DURING COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND FROM SUCH ACCOUNTS WHILE FRAMING ORIGINAL SCRUTINY ASSES SMENT U/S 143(3) THE AO COULD HAVE FOUND OUT WITH DUE DILIGENCE THAT THE RE ARE TRANSACTIONS BETWEEN ASSESSEE AND ITS SUBSIDIARY WHICH HAD INFRI NGED PROVISIONS OF SECTION 2(22)(E) OF THE 1961 ACT WILL NOT BE A BAR FOR AO TO VALIDLY PROCEED TO INVOKE PROVISIONS OF SECTION 147 OF THE 1961 ACT PROVIDED OTHER INGREDIENTS FOR INVOKING PROVISIONS OF SECTIO N 147 OF THE 1961 ACT ITA NO.1503/CHNY/2014 :- 14 -: ARE FULFILLED. IT IS AN ADMITTED POSITION BETWEEN R IVAL PARTIES THAT THE AO DID NOT ENQUIRE ABOUT THESE LOAN/ADVANCE TRANSACTIO NS BETWEEN ASSESSEE AND ITS SUBSIDIARY COMPANY M/S EMPEE DISTILLERIES L IMITED DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS CONDUCTED BY THE AO U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT AND ADMITTEDLY THE ASSESSEE DID NOT FURNISH DETAILS OF TRANSACTIONS BE TWEEN ITSELF AND M/S EMPEE DISTILLERIES LIMITED BEFORE AO DURING THE COU RSE OF ORIGINAL ASSESSMENT PROCEEDINGS. THUS THE AO DID NOT FORM A NY OPINION ON CHARGEABILITY TO TAX OF THE SAID LOANS AND ADVANCES RECEIVED BY ASSESSEE FROM ITS SUBSIDIARY COMPANY M/S EMPEE DISTILLERIES LIMITED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE 1961 ACT DURING THE CO URSE OF ORIGINAL ASSESSMENT FRAMED BY IT AND HENCE THERE IS NO QUEST ION OF ANY CHANGE OF OPINION BY THE AO WHILE REOPENING CONCLUDED ASSESSM ENT BY INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT 6.3 THE SECOND EXPLANATION TO SECTION 147 OF THE 19 61 ACT CLEARLY STIPULATES VIDE CLAUSE (C)(I) TO SECOND EXPLANATION THAT WHEREIN ORIGINALLY ASSESSMENT WAS FRAMED U/S 143(3) OF THE 1961 ACT BUT INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED THE AO SHALL HAVE POWERS TO INVOKE PROVISIONS OF SECTION 147 OF THE 1961 ACT FO R REOPENING THE CONCLUDED ASSESSMENT AS SAID UNDER-ASSESSMENT SHALL BE DEEMED TO BE A CASE WHEREIN INCOME OF TAX-PAYER HAS ESCAPED ASSESS MENT .THE SECOND EXPLANATION TO SECTION 147 OF THE 1961 ACT IS REPRO DUCED HEREUNDER: EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION T HE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT NA MELY : ITA NO.1503/CHNY/2014 :- 15 -: (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED B Y THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUN T WHICH IS NOT CHARGEABLE TO INCOME- TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICE R THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS DEDUCTION AL LOWANCE OR RELIEF IN THE RETURN ; (C) WHERE AN ASSESSMENT HAS BEEN MADE BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER -ASSESSED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LO W A RATE ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT O F EXCESSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED.] 6.4 THUS FOR INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT THE AO SHALL HAVE REASONS TO BELIEVE THAT INCOME CHARGEABL E TO INCOME-TAX HAS ESCAPED ASSESSMENT AND THERE SHOULD BE TANGIBLE INC RIMINATING MATERIAL BEFORE AO HAVING LIVE LINK AND NEXUS WITH FORMATION OF BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN INSTAN T CASE BEFORE US IT IS AN ADMITTED POSITION THAT ORIGINAL SCRUTINY ASSESSM ENT WAS FRAMED BY REVENUE U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT AND REOPENING OF THE CONCLUDED ASSESSMENT WAS SOUGHT TO BE DONE BY REVENUE BY INVOCATION OF PROVISIONS OF SECTION 147 OF THE 1961 ACT WITHIN FOUR YEARS FROM END OF THE RELEVANT ASSESSMENT YEAR AND HENCE PROVISO TO SECTION 147 OF THE 1961 ACT IS NOT APPLICABLE TO IN STANCE CASE BEFORE US. THUS IF ANY TANGIBLE INCRIMINATING MATERIAL COME T O POSSESSION OF THE AO WHICH PRIMA-FACIE REFLECT ESCAPEMENT OF INCOME CHAR GEABLE TO TAX COULD BE A BASIS FOR AO TO HAVE REASONS TO BELIEVE THAT INCO ME CHARGEABLE TO TAX HAS ESCAPED INCOME AND THEN TO INITIATE REOPENING P ROCEEDINGS U/S 147/148 OF THE 1961 ACT. AT THIS STAGE FOR INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT TO INITIATE REASSESSMENT PROCEE DINGS WHAT IS REQUIRED IS A PRIMA-FACIE VIEW THAT INCOME CHARGEABLE TO TAX OF THE ASSESSEE HAS ITA NO.1503/CHNY/2014 :- 16 -: ESCAPED ASSESSMENT BASED ON TANGIBLE INCRIMINATING MATERIAL IN POSSESSION OF THE AO HAVING LIVE LINK/NEXUS WITH FO RMATION OF BELIEF THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT. THUS AT THE STAGE OF INVOCATION OF PROVISION OF SECTION 147 OF THE 1961 ACT FOR INITIATING REOPENING OF THE CONCLUDED ASSESSMENT WH AT IS REQUIRED IS PRIMA FACIE MATERIAL TO SHOW INCOME HAS ESCAPED ASSESSMEN T AND NOT CONCLUSIVE PROOF WITH EVIDENCE THAT INCOME CHARGEABLE TO TAX OF THE ASSESSEE HAS ESCAPED ASSESSMENT. THE COURTS CANNOT GO INTO SUFFI CIENCY OR CORRECTNESS OF THE MATERIAL BEFORE UPHOLDING INVOCATION OF PROV ISIONS FOR INITIATING REOPENING OF CONCLUDED ASSESSMENT U/S 147 OF THE 19 61 ACT. THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAYMOND WOO LEN MILLS LIMITED V. ITO REPORTED IN (1999) 236 ITR 34(SC) IS RELEVANT WHEREIN HONBLE SUPREME COURT HELD AS UNDER: IN THIS CASE WE DO NOT HAVE TO GIVE A FINAL DECIS ION AS TO WHETHER THERE IS SUPPRESSION OF MATERIAL FACTS BY THE ASSESSEE OR NOT. WE HAVE ONLY TO SEE WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPAR TMENT COULD REOPEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE. WE ARE OF THE VIEW THAT THE COURT CANNOT STRIKE DOWN THE R EOPENING OF THE CASE IN THE FACTS OF THIS CASE. IT WILL BE OPEN TO THE ASSESSEE TO PROVE THAT THE ASSUMPTION OF FACTS MADE IN THE NOTICE WAS ERRONEOUS. THE ASSESSEE MAY ALSO PROVE THAT NO NEW FACTS CAME TO THE KNOWLEDGE OF THE INCOME-TAX OFFICER AFTER COMPLETION OF THE ASSESSME NT PROCEEDING. WE ARE NOT EXPRESSING ANY OPINION ON THE MERITS OF THE CASE. THE QUESTIONS OF FACT AND LAW ARE LEFT OPEN TO BE INVESTIGATED AND DECIDED BY THE ASSESSING AUTHORITY . THE APPELLANT WILL BE ENTITLED TO TAKE ALL THE POINTS BEFORE THE ASSESSING AUTHORITY. THE APPE ALS ARE DISMISSED. THERE WILL BE NO ORDER AS TO COSTS. 6.5 AT THIS STAGE IT WILL BE RELEVANT TO REFER TO D ECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK B ROKERS PRIVATE LIMITED REPORTED IN (2007) 291 ITR 500(SC) WHEREIN HONBL E SUPREME COURT DEALT WITH AMENDED PROVISIONS OF SECTION 147 OF THE 1961 ACT AND HELD AS UNDER: 16. SECTION 147 AUTHORISES AND PERMITS THE ASSESSING O FFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEV E THAT INCOME FOR ANY ASSESSMENT ITA NO.1503/CHNY/2014 :- 17 -: YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN T HE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSME NT IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESS MENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE A SSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUE R WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENT RAL PROVINCES MANGANESE ORE CO. LTD. V. ITO [1991] 191 ITR 662 FOR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILMEN T OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS AT THE INITIATION STAGE WHAT IS REQUIRED IS 'REASON TO BELIEVE' BUT NOT THE ESTABLISHED FACT OF ESCAPEMEN T OF INCOME. AT THE STAGE OF ISSUE OF NOTICE THE ONLY QUESTION IS WHETHER THERE WAS R ELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BEL IEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCER N AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OF FICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND C OAL CO. (P.) LTD. [1996] 217 ITR 597 (SC) ; RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC) . 17. THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM 1-4-1989 AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFEREN T FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISION S OF SECTION 147 SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDICTION UNDER SECTION 147(A) TWO CONDITIONS WERE REQUIRED T O BE SATISFIED FIRSTLY THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCAPED ASSESSMENT A ND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THE SE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFI CER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE T HAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURISDICTION TO REOPEN THE AS SESSMENT. IT IS HOWEVER TO BE NOTED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF THE PROVISO TO SECTION 147. THE CASE AT HAND IS COV ERED BY THE MAIN PROVISION AND NOT THE PROVISO. 18. SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULF ILLED THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDING UNDER SECTION 147 AND F AILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERL ESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143( 1) HAD BEEN ISSUED. 6.6 IT IS ALSO PERTINENT TO MENTION AT THIS STAGE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RABO INDIA FINANCE LIMITED V. DCIT REPORTED IN (2013) 356 ITR 200(BOM.) WHEREIN HONB LE BOMBAY HIGH COURT ELABORATELY DISCUSSED CONDITIONS REQUIRED FO R REOPENING OF THE CONCLUDED ASSESSMENT BY INVOKING PROVISIONS OF SECT ION 147 OF THE 1961 ACT WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YE AR AND OBSERVED THAT REOPENING BASED ON TANGIBLE MATERIAL FOUND DURING T HE COURSE OF ASSESSMENT PROCEEDINGS OF SUBSEQUENT YEAR LEADING TO A PRIMA FACIE BELIEF THAT INCOME CHARGEABLE TO TAX FOR EARLIER AY S HAVE ESCAPED ITA NO.1503/CHNY/2014 :- 18 -: ASSESSMENT COULD BE BASIS FOR REOPENING OF CONCLUDE D ASSESSMENT FOR EARLIER AYS WHEREIN HONBLE BOMBAY HIGH COURT HEL D AS UNDER: 4. IN THE PRESENT CASE THE ASSESSMENT IS SOUGHT TO B E REOPENED WITHIN A PERIOD OF FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR. W HERE AN ASSESSMENT IS SOUGHT TO BE REOPENED BEYOND A PERIOD OF FOUR YEARS THE PROVISO TO SECTION 147 STIPULATES AS A JURISDICTIONAL REQUIREMENT THAT THERE MUST BE A FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THAT ASSESSMENT YEAR. SUCH A REQUIREMENT WHICH THE PROVISO TO SECTION 147 STIP ULATES IN RESPECT OF A REOPENING BEYOND A PERIOD OF FOUR YEARS IS EVIDENTLY NOT EXTRAPOLATED TO A SITUATION WHERE AS IN THE PRESENT CASE THE REOPENING IS WITHIN A PERIOD OF FOUR YEARS. WHE RE A REOPENING OF AN ASSESSMENT UNDER SECTION 148 TAKES PLACE WITHIN A PERIOD OF FOUR YEA RS THE TEST THAT HAS BEEN LAID DOWN BY THE SUPREME COURT IN THE CIT V. KELVINATOR OF INDIA LTD . [2010] 320 ITR 561/187 TAXMAN 312 IS WHETHER THE ASSESSING OFFICER HAD TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME FROM ASSESSMENT. THE SUPREME C OURT HAS HELD THAT THE 'REASON TO BELIEVE' THAT ANY INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT CANNOT BE FOUNDED ON A MERE CHANGE OF OPINION. THE POWER TO REASSESS IS NO T IN THE NATURE OF A POWER TO REVIEW. HENCE THE TRUE TEST TO BE APPLIED WHERE A REOPENI NG TAKES PLACE WITHIN A PERIOD OF FOUR YEARS AS IN THE PRESENT CASE IS WHETHER THERE EXI STS TANGIBLE MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS PROCEEDED TO REOPEN THE A SSESSMENT. THAT DETERMINATION HAS TO BE MADE ON THE BASIS OF THE REASONS WHICH ARE DISCLOSE D TO THE ASSESSEE. FOR IT IS THOSE REASONS WHICH FORM THE FOUNDATION OF THE ACTION OF THE ASSE SSING OFFICER AND FORM THE BASIS ON WHICH THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT IS FO RMED. HINDUSTAN LEVER LTD V. R.B. WADKAR ASSTT. CIT [2004] 268 ITR 332/137 TAXMAN 479 (BOM.) . 5. THE JUDGMENTS OF THE SUPREME COURT ON THE SUBJECT CONTAIN A CLEAR ELABORATION OF PRINCIPLE IN WHICH IT HAS BEEN HELD THAT AN ASSESSING OFFICER ACTS WITHIN JURISDICTION IN REOPENING AN ASSESSMENT ON THE BASIS OF INFORMATION WHICH COMES TO HIM AFTER THE ORIGINAL ASSESSMENT AND DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR A SUBSEQUENT ASSESSMENT YEAR. THIS PRINCIPLE WAS LAID DOWN IN A JUDGMENT OF THE SUPREM E COURT IN KALYANJI MAVJI & CO. V. CIT [1976] 102 ITR 287 WHILE CONSTRUING THE EXPRESSION 'INFORMATION' IN S ECTION 34(1)(B) OF THE INCOME TAX ACT 1961. A SIMILAR PRIN CIPLE OF LAW WAS ENUNCIATED IN A SUBSEQUENT DECISION OF THE SUPREME COURT IN CLAGGET T BRACHI CO. LTD. V. CIT [1989] 177 ITR 409/44 TAXMAN 86 WHERE THE INCOME TAX OFFICER CAME TO REALISE THAT INCOME HAD ESCAPED ASSESSMENT FOR TWO ASSESSMENT YEARS WHEN HE WAS IN THE PROCESS OF MAKING AN ASSESSMENT FOR A SUBSEQUENT ASSESSMENT YEAR. WHILE MAKING THAT ASSESSMENT HE CAME TO KNOW FROM THE DOCUMENTS PERTAINING TO THAT ASSESSME NT THAT THE OVERHEAD EXPENSES RELATED TO THE ENTIRE BUSINESS INCLUDING THE BUSINESS AS CO MMISSION AGENTS AND WERE NOT CONFINED TO THE BUSINESS OF PURCHASE AND SALE. THE SUPREME COUR T HELD THAT IT IS TRUE THAT THIS INFORMATION COULD HAVE BEEN ACQUIRED BY THE INCOME-TAX OFFICER IF HE HAD EXERCISED DUE DILIGENCE AT THE TIME OF THE ORIGINAL ASSESSMENT ITSELF. THE REOPENI NG OF THE ASSESSMENT WAS UPHELD ON THE BASIS OF INFORMATION WHICH CAME INTO THE POSSESSION OF THE ASSESSING OFFICER WHEN TAKING ASSESSMENT PROCEEDINGS FOR THE SUBSEQUENT YEAR. 6. IN RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC) AN ASSESSMENT WAS SOUGHT TO BE REOPENED AND THE REASONS RECORDED FOR REOPENI NG UNDER SECTION 147(A) OF THE INCOME TAX ACT 1961 SHOWED THAT ACCORDING TO THE REVENUE T HE ASSESSEE WAS CHARGING TO ITS PROFIT AND LOSS ACCOUNT FISCAL DUTIES PAID DURING THE YEA R AS WELL AS LABOUR CHARGES POWER FUEL WAGES CHEMICALS ETC. HOWEVER WHILE VALUING ITS CL OSING STOCK THE ELEMENTS OF FISCAL DUTY AND OTHER DIRECT MANUFACTURING COSTS WERE NOT INCLUDED AS A RESULT OF WHICH THERE WAS AN UNDERVALUATION OF INVENTORIES AND UNDERSTATEMENT OF PROFITS. THIS INFORMATION WAS OBTAINED BY THE REVENUE IN AN ASSESSMENT PROCEEDING OF A SUBSEQ UENT ASSESSMENT YEAR. WHILE UPHOLDING THE REOPENING THE SUPREME COURT OBSERVED AS FOLLOW S : 'IN THIS CASE WE DO NOT HAVE TO GIVE A FINAL DECIS ION AS TO WHETHER THERE IS SUPPRESSION OF MATERIAL FACTS BY THE ASSESSEE OR NO T. WE HAVE ONLY TO SEE WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE. WE ARE OF THE VIEW THAT T HE COURT CANNOT STRIKE DOWN THE REOPENING OF THE CASE IN THE FACTS OF THIS CASE. IT WILL BE OPEN TO THE ASSESSEE TO PROVE THAT THE ASSUMPTION OF FACTS MADE IN THE NOTI CE WAS ERRONEOUS. THE ASSESSEE MAY ALSO PROVE THAT NO NEW FACTS CAME TO THE KNOWLE DGE OF THE INCOME-TAX OFFICER AFTER COMPLETION OF THE ASSESSMENT PROCEEDING. WE A RE NOT EXPRESSING ANY OPINION ON THE MERITS OF THE CASE. THE QUESTIONS OF FACT AN D LAW ARE LEFT OPEN TO BE INVESTIGATED AND DECIDED BY THE ASSESSING AUTHORITY . THE APPELLANT WILL BE ENTITLED TO TAKE ALL THE POINTS BEFORE THE ASSESSING AUTHORITY. THE APPEALS ARE DISMISSED.' ITA NO.1503/CHNY/2014 :- 19 -: 7. A SIMILAR PRINCIPLE OF LAW HAS BEEN LAID DOWN IN A JUDGMENT OF A DIVISION BENCH OF THE MADRAS HIGH COURT IN VIRUDHUNAGAR CO-OPERATIVE MILK SUPPLY SOCIETY LTD V. CIT [1990] 183 ITR 545/[1989] 46 TAXMAN 13 AND IN A JUDGMENT OF A DIVISION BENCH OF THE PUNJA B AND HARYANA HIGH COURT IN ROPAR DISTRICT CO-OPERATIVE M ILK PRODUCERS UNION LTD. V. CIT [2009] 311 ITR 42/[2007] 165 TAXMAN 477 (PUNJ & HAR.) IN A MORE RECENT JUDGMENT A DIVISION BENCH OF THE DELHI HIGH COURT IN DIWAKAR ENGINEERS LTD. V. ITO [2010] 329 ITR 28/187 TAXMAN 327 HELD THAT WHERE MATERIALS HAD COME TO LIGHT DURING THE ASSESSMENT OF A SUBSEQUENT ASSESSMENT YEAR THAT WOULD NOT CONSTITU TE A MERE CHANGE OF OPINION BUT COULD SUSTAIN A NOTICE OF REOPENING. 8. IN ASSTT. CIT V. RAJESH JHAVERI STOCK BROKERS (P.) LTD. [2007] 291 ITR 500/161 TAXMAN 316 (SC) THE SUPREME COURT HAS HELD THAT THE EXPRESSION 'RE ASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN A CAUSE OR JUSTIFICATION AND IF THE ASSESSING OFFICER HAS CAUSE OR A JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ES CAPED ASSESSMENT HE CAN BE SAID TO HAVE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T. THAT EXPRESSION THE SUPREME COURT HELD CANNOT BE READ TO MEAN THAT THE ASSESSING OFFI CER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE ON CONCLUSION. AT THE STAGE OF A NOTICE UNDER SECTION 148 THE FINAL OUTCOME OF THE PROCEEDINGS IS NOT RELEVANT AND AT T HE STAGE OF INITIATION WHAT IS REQUIRED IS A REASON TO BELIEVE BUT NOT AN ESTABLISHED FACT OF T HE ESCAPEMENT OF INCOME. AT THE STAGE OF THE ISSUANCE OF A NOTICE THE ONLY QUESTION IS WHET HER THERE WAS RELEVANT MATERIAL ON THE BASIS OF WHICH A REASONABLE PERSON COULD HAVE FORMED A RE QUISITE BELIEF AND WHETHER THE MATERIALS COULD CONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME I S NOT A CONCERN AT THAT STAGE. THE SUPREME COURT HAS ALSO CAUTIONED THAT AT THE STAGE OF THE ISSUANCE OF A NOTICE UNDER SECTION 148 IT IS NOT NECESSARY THAT THE MATERIAL MUST BE EXTENSIVE AND DETAILED SINCE THERE IS A DIFFERENCE IN THE MATERIAL FOR THE PURPOSE OF INITI ATION AND THAT REQUIRED FOR SUCCESSFULLY COMPLETING A REASSESSMENT. 6.7 THE DECISION OF HONBLE BOMBAY HIGH COURT IN TH E CASE OF EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED V. AD DL. CIT REPORTED IN (2013) 350 ITR 651(BOM) IS ALSO RELEVANT. 6.8 THE ASSESSEE HAS RELIED UPON DECISION OF HONBL E MADRAS HIGH COURT IN THE CASE OF TANMAC INDIA(SUPRA) THIS CASE WAS DEC IDED BY HONBLE JURISDICTIONAL HIGH COURT ON FACTS OF THAT CASE WHI CH ARE DISTINGUISHABLE AS TO PRESENT CASE BEFORE US AS IN THAT CASE RETURN OF INCOME WAS PROCESSED U/S 143(1)(A) IN THE YEAR 1998 WHEN THERE WAS MANUA L PROCESSING OF THE RETURNS AND THUS WHILE PROCESSING THE RETURN THE COURT OBSERVED THAT THE AO MUST HAVE GONE THROUGH THE RETURN OF INCOME AND ITS ENCLOSURE WHILE ELECTRONIC PROCESSING OF RETURN OF INCOME ONL Y CAME IN 2003 WAS THE OBSERVATION OF THE HONBLE HIGH COURT. WE ARE CONCE RNED WITH AY: 2005- 06 WHEREIN ELECTRONIC PROCESSING OF RETURNS WAS UND ERTAKEN. SECONDLY HONBLE HIGH COURT OBSERVED THAT AO HAS REOPENED TH E ASSESSMENT BASED ITA NO.1503/CHNY/2014 :- 20 -: ON SAME STALE MATERIAL WHICH WAS AVAILABLE WITH THE AO WHILE PROCESSING OF RETURN OF INCOME U/S 143(1)(A) AND THERE WAS NO TANGIBLE MATERIAL AVAILABLE WITH AO TO HAVE PRIMA FACIE REASON TO BEL IEVE THAT INCOME OF THE TAX-PAYER HAS ESCAPED ASSESSMENT. THIRDLY THE PART NER OF THE TAX-PAYER FIRM RETIRED FROM THE ASSESSEE FIRM IN THAT CASE AN D THE SAME PERSON ALSO RETIRED FROM TWO OTHER PARTNERSHIP FIRMS AS PARTNER AND ASSESSMENT IN CASE OF BOTH THE FIRMS WERE MADE BY REVENUE U/S 143 (3) OF THE 1961 ACT WHILE LATER ON PROVISIONS OF SECTION 148 OF THE 196 1 ACT WERE INVOKED BY REVENUE AND IN BOTH THESE CASES THE TRIBUNAL HELD THAT THE REVENUE LACKS JURISDICTION TO REOPEN CONCLUDED ASSESSMENT A ND REOPENING WAS HELD TO BE BAD IN LAW BY TRIBUNAL. 6.9 THE ASSESSEE HAD ALSO RELIED UPON JUDGMENT OF H ONBLE MADRAS HIGH COURT IN CASE OF TENZING MATCH WORKS V. DCIT IN TAX CASE(APPEAL) NO 702 VIDE JUDGMENT DATED 11.07.2019 TO CONTEND THAT REOPENING IS BAD IN LAW. IN THIS CASE REOPENING OF THE CONCLUDED ASSES SMENT BY INVOKING PROVISIONS OF SECTION 147 OF THE 1961 ACT WAS DONE AFTER FOUR YEARS FROM THE END OF RELEVANT AY :2001-02 BY ISSUANCE OF NO TICE DATED 22.11.2006 U/S 148 OF THE 1961 ACT AND HENCE PROVISO TO SECTIO N 147 IS APPLICABLE AND REOPENING CAN BE VALIDLY DONE IN SUCH CASES ONL Y WHEN THERE IS AN FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRU LY AND FULLY MATERIAL ALL MATERIAL FACTS IN THE RETURN OF INCOME FILED WITH T HE REVENUE WHICH ARE NECESSARY FOR FRAMING ASSESSMENT FOR THAT ASSESSME NT YEAR. HOWEVER IN THE INSTANT CASE BEFORE US THE REOPENING IS DONE WITHIN FOUR YEARS FROM ITA NO.1503/CHNY/2014 :- 21 -: THE END OF ASSESSMENT YEAR AND PROVISO TO SECTION 1 47 OF THE 1961 ACT IS NOT APPLICABLE. THUS THIS CASE IS DISTINGUISHABLE. 6.10 THE ASSESSEE HAS ALSO RELIED UPON DECISION OF HONBLE SUPREME COURT IN THE CASE OF GKN DRIVE SHAFT(SUPRA) EVEN ON BEIN G ASKED BY THE BENCH THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT DEMO NSTRATE WHETHER THE ASSESSEE ASKED FOR REASONS FOR REOPENING OF THE CON CLUDED ASSESSMENT OR OBJECTED TO REOPENING OF THE CONCLUDED ASSESSMENT B EFORE THE AO AS THE ASSESSEE ALSO CHOSE NOT TO FILE ANY PAPER BOOK WITH THE TRIBUNAL. 6.11 IN THE INSTANT CASE BEFORE US THE AO IS IN PO SSESSION OF TANGIBLE INCRIMINATING MATERIAL THAT ASSESSEE HAD RECEIVED L OANS/ADVANCES FROM ITS SUBSIDIARY COMPANY NAMELY M/S EMPEE DISTILLERIES LI MITED TO THE TUNE OF RS ` 5 45 76 988/- IN WHICH ASSESSEE HELD 41.78% SHARES AND THE SAID SUBSIDIARY COMPANY POSSESSED ACCUMULATED PROFITS TO THE TUNE OF ` 6 69 15 506/- DURING YEAR UNDER CONSIDERATION T HUS THE ASSESSEE HAS INFRINGED PROVISIONS OF SECTION 2(22)(E) OF THE 196 1 ACT. THE ASSESSEE ON ITS PART HAS NOT INCLUDED IN ITS RETURN OF INCOME THE AFORESAID AMOUNT AS DEEMED DIVIDEND AS ITS INCOME CHARGEABLE TO TAX BEI NG HIT BY PROVISION OF SECTION 2(22)(E) OF THE 1961 ACT . THE AO MIGHT HA VE RECEIVED AFORESAID TANGIBLE INFORMATION AS TO ESCAPEMENT OF INCOME CHA RGEABLE TO TAX FROM RECORDS ITSELF BEFORE IT BUT THE SAME IS VALID FOR INVOCATION OF PROVISIONS OF SECTION 147 OF THE 1961 ACT AS THERE IS NO ESTOPPEL AGAINST LAW MORE-SO PROVISIONS OF SECTION 147 ARE INVOKED WITHIN FOUR Y EARS FROM THE END OF ASSESSMENT YEAR AND PROVISO TO SECTION 147 OF THE 1 961 ACT IS NOT ITA NO.1503/CHNY/2014 :- 22 -: APPLICABLE . THUS IN OUR CONSIDERED VIEW THE AO H AS RIGHTLY INVOKED PROVISIONS OF SECTION 147 OF THE 1961 ACT IN REOPEN ING THE CONCLUDED ASSESSMENT AND WE UPHOLD REOPENING OF THE CONCLUDED ASSESSMENT BY THE AO ON LEGAL GROUND.WE ORDER ACCORDINGLY 6.12 ON MERITS WE HAVE OBSERVED THAT THE ASSESSEE HAD RECEIVED LOANS/ADVANCES FROM ITS SUBSIDIARY COMPANY M/S EMPE E DISTILLERIES LIMITED TO THE TUNE OF ` 5 45 76 988/- DURING THE YEAR UNDER CONSIDERATION IN WHICH SUBSIDIARY COMPANY THE ASSESSEE HELD 41.7 8% OF SHAREHOLDING OF THAT COMPANY M/S EMPEE DISTILLERIES LTD.. THE S AID SUBSIDIARY COMPANY POSSESSED ACCUMULATED PROFITS TO THE TUNE OF ` 6 69 15 506/- WHICH IS FAR IN EXCESS OF LOANS/ADVANCES GRANTED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION . PROVISIONS OF SECTION 2(22)(E) OF T HE 1961 ACT CREATES A DEEMING FICTION WHEREIN IT PROVIDES INTER-ALIA T HAT ANY PAYMENTS OF LOANS AND ADVANCES BY A COMPANY NOT BEING A COMPANY IN W HICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED TO A SHAREHOLDER BEING A P ERSON WHO IS BENEFICIAL OWNER OF SHARES HOLDING NOT LESS THAN 10% OF THE VO TING POWER TO THE EXTENT TO WHICH THE COMPANY POSSESS ACCUMULATED PRO FITS SHALL BE DEEMED TO BE DIVIDEND AND CHARGEABLE TO TAX IN THE HANDS O F SHAREHOLDER. THE PURPOSE AND INTENT BEHIND THE ENACTMENT OF THIS PRO VISION IS TO CURB DISTRIBUTION OF ACCUMULATED PROFITS BY CLOSELY HELD COMPANIES TO ITS SHAREHOLDERS HOLDING SHAREHOLDING IN EXCESS OF PRES CRIBED PERCENTAGE WITHOUT PAYMENT OF INCOME-TAX IN THE GUISE OF LOANS /ADVANCES TO EVADE TAXES. DISTRIBUTION OF DIVIDEND IS SUBJECT TO PAYME NT OF DIVIDEND ITA NO.1503/CHNY/2014 :- 23 -: DISTRIBUTION TAX AS ALSO IT IS ALSO TAXABLE IN CERT AIN SITUATIONS IN THE HANDS OF RECIPIENTS. THE SAID SECTION 2(22) OF THE 1961 ACT IS REPRODUCED HEREUNDER: (22) 83-84 DIVIDEND 85 INCLUDES *** *** (E) ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) 88 [MADE AFTER THE 31ST DAY OF MAY 1987 BY WAY OF ADVA NCE OR LOAN TO A SHAREHOLDER 89 BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER OR TO ANY C ONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTN ER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID C ONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHAL F OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS 87 ; BUT DIVIDEND DOES NOT INCLUDE (I) *** [(IA) *** (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER [OR THE SAID CONCERN] BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY ; (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART O F ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVI DEND WITHIN THE MEANING OF SUB-CLAUSE (E) TO THE EXTENT TO WHICH IT IS SO SET OFF; [(IV) ANY PAYMENT MADE BY A COMPANY ON PURCHASE O F ITS OWN SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PROVISIONS OF SECTION 77A 94 OF THE COMPANIES ACT 1956 (1 OF 1956); (V) ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERGER BY THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE DEMERGED COMPANY (WHETHER OR NOT THERE IS A REDUCTION OF CAPITAL IN THE DEMERGED COMPANY).] EXPLANATION 1.THE EXPRESSION AC CUMULATED PROFITS WHEREVER IT OCCURS IN THIS CLAUSE SHALL NOT INCLUDE CAPITAL GAINS ARISING BEFORE THE 1ST DAY OF APRIL 1946 OR AFTER THE 31ST DAY OF MARCH 1948 AND BEFORE THE 1ST D AY OF APRIL 1956. EXPLANATION 2.THE EXPRESSION AC CUMULATED PROFITS IN SUB-CLAUSES (A) (B) (D) AND (E) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO T HE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB-CLAUSES AND IN SUB-CL AUSE (C) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP T O THE DATE OF LIQUIDATION [BUT SHALL NOT WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISITI ON OF ITS UNDERTAKING BY THE GOVERNMENT OR A CORPORATI ON OWNED OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE INCLUDE ANY PROF ITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEA RS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE]. [EXPLANATION 3.FOR THE PURPOSES OF THIS CLAUSE (A) CONCERN MEANS A HINDU UNDIVIDED FAMILY OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY ; (B) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTI AL INTEREST IN A CONCERN OTHER THAN A COMPANY IF HE I S AT ANY TIME DURING THE PREVIOUS YEAR BENEFICIALLY E NTITLED TO NOT LESS THAN TWENTY PER CENT OF THE INCOME OF SUCH C ONCERN ;] 6.13 IT IS NOT THE CASE OF THE ASSESSEE THAT PAYMEN T OF LOAN/ADVANCES WERE MADE BY SAID SUBSIDIARY COMPANY NAMELY M/S EMP EE DISTILLERIES LIMITED TO ASSESSEE IN ITS ORDINARY COURSE OF BUSIN ESS AND COVERED BY EXCLUSION TO THE DIVIDEND UNDER SECTION 2(22) OF THE 1961 ACT. THE ASSESSEE HAS STRENUOUSLY ARGUED THAT THE PAYMENT OF LOAN/ADVANCES WERE MADE BY ASSESSEES SUBSIDIARY COMPANY NAMELY M/S EM PEE DISTILLERIES LIMITED TO ASSESSEE FOR BUSINESS PURPOSES GOVERNED BY BUSINESS ITA NO.1503/CHNY/2014 :- 24 -: EXPEDIENCY BUT WHAT IS THE BUSINESS PURPOSES AND/OR BUSINESS EXPEDIENCY IN GRANTING THESE LOANS/ADVANCES ARE NOT BROUGHT ON RECORD BY THE ASSESSEE EVEN BEFORE US. MERELY BALD STATEMENTS ARE MADE TO THIS EFFECT THAT THESE TRANSACTIONS BETWEEN ASSESSEE AND ITS SU BSIDIARY COMPANY NAMELY M/S EMPEE DISTILLERIES LIMITED WERE GOVERNED BY BUSINESS EXPEDIENCY/BUSINESS PURPOSES AND NO COGENT MATERIAL /EVIDENCES ARE BROUGHT ON RECORD TO SUBSTANTIATE THE COMMERCIAL EX PEDIENCY OR BUSINESS PURPOSES FOR WHICH LOANS/ADVANCES WERE GRANTED. MER ELY STATING THAT IT IS A TRANSACTION BETWEEN SUBSIDIARY COMPANY AND HOLDIN G COMPANY WHICH AUTOMATICALLY LEADS TO PRESUMPTION THAT THESE ARE C OMMERCIAL TRANSACTIONS FOR BUSINESS PURPOSES IS NOT SUFFICIENT AS IT IS ON LY FOR SUCH PURPOSES TO CURB THIS MENACE OF TRANSFER OF ACCUMULATED PROFITS IN THE GARB OF ADVANCES/LOANS TO SHAREHOLDERS HOLDING SHARES ABOVE THRESHOLD LIMITS BY A CLOSELY HELD COMPANY INSTEAD OF DISTRIBUTING DIVIDE ND AFTER PAYING TAXES THIS PROVISIONS OF SECTION 2(22)(E) WAS BROUGHT INT O STATUTE .THE ONUS WAS ON ASSESSEE TO DEMONSTRATE BY COGENT EVIDENCES THAT THESE RECEIPT OF LOAN/ADVANCES DURING THE YEAR UNDER CONSIDERATION F ROM ITS SUBSIDIARY COMPANY WAS FOR BUSINESS PURPOSES GOVERNED BY COMME RCIAL EXPEDIENCY WHICH EXCEPT FROM MAKING BALD STATEMENTS BY ASSESSE E EVEN BEFORE US NO EVIDENCE WHATSOEVER IS BROUGHT ON RECORD BY THE ASSESSEE. IT IS ALSO AN ADMITTED POSITION THAT THE AO DID NOT MADE ANY ENQU IRY DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AS TO THESE TRAN SACTIONS BETWEEN ASSESSEE AND ITS AFORESAID SUBSIDIARY COMPANY NOR DID ASSESSEE PLACED ANY MATERIAL BEFORE THE AO DURING THE COURSE OF ORI GINAL ASSESSMENT ITA NO.1503/CHNY/2014 :- 25 -: PROCEEDINGS CONDUCTED BY THE AO U/S 143(3) READ WIT H SECTION 143(2) OF THE 1961 ACT ON THIS ISSUE . THUS NO MATERIAL/EVID ENCE IS BROUGHT ON RECORD TO PROVE THAT AO MADE ENQUIRIES DURING THE C OURSE OF ORIGINAL ASSESSMENT PROCEEDINGS ON THIS ISSUE. THUS THERE I S NO QUESTION OF CHANGE OF OPINION AS NO OPINION WAS FORMED BY AO DU RING COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS ON THIS ISSUE. THE REOPENING IN THE INSTANT CASE IS SOUGHT TO BE DONE WITHIN FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR AND PROVISO TO SECTION 147 IS NOT APPLICABLE. IT WILL BE RELEVANT TO PRODUCE DECISION OF HONBLE GUJ ARAT HIGH COURT IN THE CASE OF CHUNIBHAI RANCHHODBHAI DALWADI V. ACIT REPO RTED IN (2016) 388 ITR 130(GUJ.) WHEREIN HONBLE GUJARAT HIGH COURT HELD AS UNDER: 7. REGARDING THE VALIDITY OF REASSESSMENT PROCEEDINGS WE MAY RECALL THE ASSESSING OFFICER IN HIS REASONS HAD STATED THAT THE ASSESSEE HAD SOLD IMMOV ABLE PROPERTY VIDE SALE DEED DATED APRIL 19 2006. THE SALE VALUE DECLARED WAS RS. 87.71 LAKHS ( ROUNDED OFF). HOWEVER THE SALE DEED WAS REGISTERED WITH THE SUB-REGISTRAR NADIAD ON APRIL 19 2006 ON WHICH REGISTRATION CHARGE OF RS. 1.32 LAKHS (ROUNDED OFF) AND STAMP DUTY OF RS. 11.92 LAK HS (ROUNDED OFF) WAS PAID. HE THEREFORE NOTED THAT AS PER THE STAMP DUTY SALE VALUE DETERMINED BY THE STAMP AUTHORITIES WOULD COME TO RS. 2.12 CRORES (ROUNDED OFF). HE THEREFORE INVOKED SECTION 50C AN D DESIRED TO TREAT THE DIFFERENCE OF RS. 1.25 CRORE S (ROUNDED OFF) BY WAY OF DEEMED LONG TERM CAPITAL GA INS. HE THEREFORE RECORDED THE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX TO THE EXTENT OF RS. 1.25 CRORES HAD ESCAPED ASSESSMENT. WE DO NOT FIND THAT THE ASSESSING OFFICER LACKED JURISDICTION TO REOPEN THE ASSESSMENT. IT APPEARS THAT THE ASSESSEE HAD DECLARED THE SALE CONSIDERATION OF THE LAND IN QUESTION AS RS. 87.71 LAKHS WHERE AS HAD ACCEPTED THE STAMP VALUATION WHICH WOULD COME TO RS . 2.12 CRORES CONSIDERING THE STAMP DUTY OF RS. 11.92 LAKHS AFFIXED ON THE SALE DEED. IT WAS IN THI S BACKGROUND THE ASSESSING OFFICER INVOKED SECTION 50C OF THE ACT TREATING THE DIFFERENCE AS DEEMED LO NG-TERM CAPITAL GAINS. WHEN THESE FACTS WERE NOT ON RECORD WHEN THE SALE DEED WAS NOT ON RECORD DUR ING THE ORIGINAL ASSESSMENT THIS CERTAINLY IS A CASE WHERE THE ASSESSEE FAILED TO DISCLOSE TRULY AN D FULLY MATERIAL FACTS NECESSARY FOR ASSESSMENT. IN THE ORDER DATED MARCH 25 2015 THE ASSESSING OFFIC ER WHILE DISPOSING OF THE OBJECTIONS OF THE PETITIONER MADE THE FOLLOWING OBSERVATIONS : 'THE REGISTERED AGREEMENT (BANAKAT) AS CLAIMED BY Y OU AND REFERRED TO NOW NOWHERE INDICATES THAT THE LAND IN QUESTION WAS AGRICULTURA L LAND IT ONLY GIVES THE REVENUE SURVEY DETAILS. EVEN DURING THE ASSESSMENT PROCEEDINGS NO SUBMISSION HAS BEEN MADE TO INDICATE THAT THE LAND IN QUESTION WAS AGRICULTURE LAND. YOU HAVE SUBMITTED 7/ 12 EXTRACTS ALONG WITH THIS LETTER DATED MARCH 23 2015. THE BANAKAT AS SU BMITTED DURING THE ASSESSMENT PROCEEDINGS SPECIFICALLY CONTAINS THAT THE LAND IN QUESTION WAS AGREED TO BE SOLD AT RS. 87 71 765 OUT OF WHICH AN AMOUNT OF RS. 17 87 454 R ECEIVED AS BANAKAT AND THE ASSESSEE WOULD NOT CLAIM ANYTHING MORE THAN THE AGREED CONSI DERATION. HOWEVER IT IS TO BRING TO YOUR NOTICE THE TERMS AS MENTIONED IN THE BANAKAT PAGE 4 PARA 2 THAT THE POSSESSION OF THE LAND AGREED TO BE SOLD WOULD NOT BE GIVEN TO THE PURCHAS ERS TILL THE FINAL REGISTRATION IS COMPLETE IN THE ABOVE BACKGROUND AND THE CIRCUMSTANCES AS ME NTIONED IN DETAIL AS ABOVE IT IS CLEAR THAT AT THE POINT OF TIME WHEN THE SALE DEED WAS RE GISTERED THE LAND IN QUESTION WAS NON- AGRICULTURAL LAND (WHICH WAS DULY CONVERTED BY PAYI NG THE NECESSARY CONVERSION CHARGES BY THE PURCHASERS) AND ACCORDINGLY AS PER THE TERMS OF THE REGISTERED BANAKAT THE POSSESSION OF THE NON-AGRICULTURAL LAND WAS GIVEN TO THE PURCHASE RS THUS COMPLETING THE SALE AND TRANSFER OF THE LAND. HENCE THE LAND IN QUESTION PURCHASED WAS NON-AGRICULTURAL LAND AND ACCORDINGLY THE STAMP REGISTERING AUTHORITY HAD RIGHTLY APPLIED THE RATES FOR NON-AGRICULTURAL LAND AT THE TIME OF EXECUTION OF THE SALE DEED. IN VIEW OF THE ABOVE THE STAMP RATES CHARGED BY THE ITA NO.1503/CHNY/2014 :- 26 -: STAMP AUTHORITY WAS FOR NON-AGRICULTURAL LAND AND T HE SUB REGISTRAR ACCORDINGLY WORKED OUT THE DOCUMENT VALUE AS RS. 2.12 86 400. THUS. FROM T HE ABOVE IT BECOMES AMPLY CLEAR THAT YOU HAVE SOLD NON-AGRICULTURAL LAND WHEREAS YOU HAV E PAID CAPITAL GAINS ON AGRICULTURE LAND. THE REGISTRATION OF BANAKAT APPEARS ONLY TO CIRCUMV ENT THE DUE PROCESS OF LAW TO PAY CAPITAL GAINS ON NON-AGRICULTURAL LAND. BY REGISTERING THE BANAKAT WITHOUT RELEASING THE POSSESSION OF THE LAND TO THE PURCHASERS YOU HAVE IN FACT RETAIN ED ALL THE INCUMBENT RIGHTS ON THE SAID LAND. IT APPEARS THAT BY ASKING THE PURCHASERS TO CONVERT THE SAID LAND INTO NON-AGRICULTURAL LAND YOU HAVE TRIED TO AVOID INCURRING THE COST OF TAKIN G NON-AGRICULTURAL PERMISSION. ANOTHER PERTINENT POINT TO MENTION IN THIS SALE TRANSACTION IS THAT THE PURCHASERS ARE A CHARITABLE TRUST AND AGRICULTURAL LAND AS CLAIMED BY YOU COULD NOT B E PURCHASED BY THEM. THUS THE LAND. IN QUESTION HAD TO BE COMPULSORILY AN NON-AGRICULTURAL LAND FOR THE PURCHASERS TO TAKE POSSESSION OF THE SAME. IN VIEW OF THE SAME THE ABOVE TRANSAC TION OF SALE AND TRANSFER OF THE LAND AS MENTIONED BY YOU IS NON-AGRICULTURAL LAND ONLY AND STAMP DUTY RATES HAVE RIGHTLY BEEN APPLIED ACCORDINGLY. THEREFORE THE CAPITAL GAINS O N THE LAND SALE IS AS MENTIONED IN THE REASONS FOR REOPENING THE ASSESSMENT PROCEEDINGS.' 8. UNDISPUTEDLY THIS ISSUE WAS NEVER EXAMINED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. FURTHER AS NOTED NECESSAR Y AND RELEVANT INFORMATION WAS NOT PLACED BY THE ASSESSEE DURING SUCH PROCEEDINGS. REOPENING WITHIN FOUR YEARS WAS THEREFORE PERMISSIBLE. REGARDING THE QUESTION OF INVALIDITY OR IMPROPER NOTICE SUCH A CONTENTION HAS NOT BEEN TAKEN IN THE PETITION. REASSESSMENT HAS ALREADY BEEN FRAMED. WE LEAVE IT F OR THE PETITIONER TO RAISE THE SAME IN APPELLATE PROCEEDINGS IF SO ADVISED. SUCH CONTENTION IS THER EFORE NOT EXAMINED IN THE PRESENT PROCEEDINGS 6.14 FURTHER THE ASSESSEE HAS CONTENDED THAT PROFI TS ON SALE OF PALAKKAD UNITS WHICH FORMED PART OF GENERAL RESERVES CANNO T BE CONSIDERED FOR MAKING ADDITIONS U/S 2(22)(E) OF THE 1961 ACT WE A RE AFRAID THAT THIS CONTENTION OF THE ASSESSEE IS FALLACIOUS AS THE INT ENT AND PURPOSE OF SECTION 2(22)(E) OF THE 1961 ACT IS TO CURB THE MEN ACE OF DISTRIBUTION OF ACCUMULATED PROFITS BY A CLOSELY HELD COMPANY IN WH ICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED BY WAY OF LOANS AND ADVANC ES TO ITS SHAREHOLDERS HOLDING SHARES ABOVE THRESHOLD LIMITS INSTEAD OF DI STRIBUTING SAID ACCUMULATED PROFITS BY WAY OF DIVIDEND WHICH ARE SU BJECT TO TAX BY WAY OF DIVIDEND DISTRIBUTION TAX OR CHARGEABLE TO TAX IN T HE HANDS OF RECIPIENTS IN CERTAIN CASES. THUS THIS CONTENTION OF THE ASSESSE E LACKS MERIT AND IS HEREBY REJECTED. OUR VIEW IS SUPPORTED BY DEFINITIO N OF ACCUMULATED PROFITS WHICH IS DEFINED IN SECTION 2(22)(E) OF THE 1961 AC T ITSELF IN EXPLANATION 1 AND 2 AS UNDER: EXPLANATION 1.THE EXPRESSION ACCUMULATED PROFITS WHEREVER IT OCCURS IN THIS CLAUSE SHALL NOT INCLUDE CAPITAL GAINS ARISING BEFORE THE 1ST DA Y OF APRIL 1946 OR AFTER THE 31ST DAY OF MARCH 1948 AND BEFORE THE 1ST DAY OF APRIL 1956. EXPLANATION 2.THE EXPRESSION ACCUMULATED PROFITS IN SUB-CLAUSES (A) (B) (D) AND (E) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN ITA NO.1503/CHNY/2014 :- 27 -: THOSE SUB-CLAUSES AND IN SUB-CLAUSE (C) SHALL INCL UDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF LIQUIDATION 95 [BUT SHALL NOT WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUI- SITION OF ITS UNDERTAKING BY THE GOVERNMENT OR A CO RPORATION OWNED OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORC E INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATEL Y PRECEDING THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE]. 6.15 THUS CLEARLY CAPITAL GAINS EXCEPT ARISING B EFORE 01 ST APRIL 1946 OR AFTER 31 ST MARCH 1948 AND BEFORE 1 ST APRIL 1956 ALL OTHER CAPITAL GAINS ARE TO BE INCLUDED. THUS WE HOLD THAT PROFIT ON SALE OF PROFITS ON SALE OF PALAKKAD UNIT SHALL BE INCLUDED WHILE COMP UTING ACCUMULATED PROFITS FOR MAKING DISALLOWANCE U/S 2(22)(E) OF THE 1961 ACT UNLESS IT FALLS INTO EXCEPTION AS PROVIDED UNDER EXPLANATION 1 TO S ECTION 2(22)(E) OF THE 1961 ACT. THUS WE DIRECT AO TO VERIFY THIS LIMITED POINT AS TO WHETHER CAPITAL GAINS ON SALE OF PALAKKAD UNIT FALLS IN THE EXEMPTED PERIOD PER EXPLANATION 1 TO SECTION 2(22)(E) OF THE 1961 ACT O R NOT AND THEN TO BRING TO TAX SAID AMOUNT IN THE HANDS OF THE ASSESSEE U/S 2(22)(E) OF THE 1961 ACT. THUS ON OUR CONSIDERED VIEW THE ASSESSEE DOE S NOT HAVE ANY CASE ON MERIT TOO . THE ASSESSEE FAILS IN THIS APPEAL. W E ORDER ACCORDINGLY. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 1503 / CHNY/2014 FOR AY: 2005-06 STANDS DISMISSED. ORDER PRONOUNCED ON THE 07 TH NOVEMBER 2019 IN CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( $ ) ( RAMIT KOCHAR ) /ACCOUNTANT MEMBER /CHENNAI 2 /DATED: 07 TH NOVEMBER 2019. TLN ITA NO.1503/CHNY/2014 :- 28 -: - +$3 43 /COPY TO: 1. * /APPELLANT 4. 5 /CIT 2. + * /RESPONDENT 5. 3 + /DR 3. 5 ( ) /CIT(A) 6. /GF