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2019 Supreme(Bom) 2366
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Akil Kureshi, M.S. Sanklecha, JJ.
Hamilton Housewares Pvt. Ltd. - Appellant
Versus
Deputy Commissioner Of Income-tax - Respondent
Writ Petition No. 3491 of 2018
Decided On : 01-03-2019
Mr. S. Sriram with Mr. B.V. Jhaveri with Mr. Mayank Thosar, Advocates, for the Appellant; Mr. Sham Walve, Advocate, for the Respondent
Headnote:
Income Tax Act, 1961 - Section 143(3) and 2(22) - private limited company – Income tax - Return of income - Petitioner is a private limited company - For assessment year petitioner had filed return of income on declaring total income of Rs. 12.88 crores (rounded off) - Such return was taken in scrutiny by Assessing Officer - He passed order under section 143(3) of Income Tax Act, 1961 - To reopen such assessment, Assessing Officer issued the impugned notice- assessee Company i.e. M/s Hamilton House-ware Pvt. Ltd. is engaged in business of manufacturing & trading of steel/plastic household goods and glassware/opal ware goods - Return of income, for A.Y., was filed on, declaring a total income - Said return of income was processed under Section 143(1) of Act - Case was selected for scrutiny and assessment under section 143(3) of I.T.Act was completed on assessing total income – Held, Court may recall, counsel for petitioner had argued that Assessing Officer was acting at behest of the audit party - Such a ground was not taken in petition - However, Court had permitted petitioner to raise same in the rejoinder and provided sufficient time to revenue to respond - Being a pure question of examination of contemporaneous documents, Court had requested counsel for revenue to make available for Court perusal original file of department, which he had so done - Despite this, upon further insistence by audit party, impugned notice came to be issued - It is well settled through series of judgments that decision to reopen assessment must be on basis of belief found by Assessing Officer - It may be open for audit party to bring relevant aspect to the notice of Assessing Officer - However, thereafter it must be independent decision of Assessing Officer to reopen assessment upon formation of his belief that income chargeable to tax had escaped assessment - Reference in this respect can be made to a decision of this Court - Petition allowed and disposed of accordingly.
JUDGMENT
Akil Kureshi, J. - Petitioner has challenged a notice of reopening of assessment dated 28th March, 2018 issued by the respondent No.1 Assessing Officer to reopen the petitioner''s assessment for the assessment year 201314.
2. Brief facts are as under:
Petitioner is a private limited company. For the assessment year 201314, the petitioner had filed return of income on 26th September, 2013 declaring total income of Rs. 12.88 crores (rounded off). Such return was taken in scrutiny by the Assessing Officer. He passed order under section 143(3) of the Income Tax Act, 1961 ("the Act" for short) on 30th March, 2016. To reopen such assessment, the Assessing Officer issued the impugned notice. In order to do so, he had recorded reasons, relevant portion of which reads as under :
"1. Brief Details of the assessee:
The assessee Company i.e. M/s Hamilton House-ware Pvt. Ltd. is engaged in the business of manufacturing & trading of steel/plastic household goods and glassware/opal ware goods. The return of income, for the A.Y. 201314, was filed on 30/11/2013, declaring a total income of Rs. 12,88,15,390/-. The said return of income was processed under Section 143(1) of the Act. The case was selected for scrutiny and assessment under section 143(3) of th I.T.Act was completed on 30/03/2016, assessing the total income at Rs. 13,28,67,218/-.
2. Brief details of information collected/received by the AO :
During the period relevant to the A.Y. 201314, the assessee M/s Hamilton Houseware Pvt. Ltd. accepted a loan of Rs. 1,02,00,000/- from M/s Rupani Spinning Mills Private Limited, in which the shareholder of the assessee company, Shri Ajay D. Vaghani, was having 16% voting rights and was also having substantial interest of more than 20% in the share capital of assesse company (20.02%). Hence, all the condition mentioned in section 2(22) (e) were applicable in this case and deemed dividend to the extent of accumulated profits or loan received whichever is less was required to be taxed.
3. Analysis of information collected/received:
Perusal of the details available on records revealed that the assessee received Rs. 1.02.00. 000/as loan from M/s Rupani Spinning Mills Private Limited in which the shareholder of the assessee company, Shri Ajay D.Vaghani, was having 16% voting rights. Shri Ajay Rupani was also having substantial interest of more than 20% in the share capital of the assessee company (20.02%). Hence, the deemed dividend of Rs. 1,02,00,000/-was required to be taxed.
4. Enquiries made by the AO as sequel to information collected/received:
5. Findings of the AO:
It is seen from the above that the assessee received Rs. 1,02,00,000/- as loan from Rupani Spinning Mills Private Limited in which the shareholder (Shri Ajay D. Vaghani) was having 16% voting rights and was also having substantial interest of more than 20% in the share capital of assessee company (20.02%) . Hence, all the condition mentioned in section 2(22)(e) were applicable in this case and the assessee was liable to be taxed on the deemed dividend to the extent of accumulated profits or loan received whichever is less. Also, assessee''s case is not covered by the exception clause (ii) to Section 2(22) of the Act, as the substantial part of assessee''s business was not lending of loans but business centre income.
6. Basis of forming reason to believe and details of escapement of income:
The assessee was required to be taxed on the deemed dividend of Rs. 1.02.00. 000/- to the extent of accumulated profits or loan received whichever is less, as per section 2(22)(e) of the I.T. Act. The assessee therefore should have added back the amount of Rs. 1,02,00,000/- to its total income of the A.Y. 201314, in the Computation of Total income. As the assessee failed to do so, I have reason to believe that the assessee has failed to disclose fully and truly all material facts necessary for its assessment within the meaning of section 147 of the Act and assessee''s income to the extent
