Point of Law: Assessee’s objections raised against the reopening proceedings are not acceptable as the case warrants scrutiny on the same lines. Accordingly, the objections so raised are hereby disposed off accordingly

JUDGMENT :

J.B.PARDIWALA, J.

1. Rule, returnable forthwith. Ms.Mauna Bhatt, the learned Standing Counsel, waives service of notice of rule for and on behalf of the respondent.

2. By this Writ Application under Article 226 of the Constitution of India, the writ-applicant has prayed for the following reliefs:

“(a) quash and set aside the impugned notice at Annexure-’A’ to this Petition;

(b) pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the notice at Annexure-’A’ to this petition and stay further proceedings for assessment for A.Y.2013-14;

(c) any other and further relief deemed just and proper be granted in the interest of justice;”

3. The facts giving rise to this Writ Application may be summarized as under:

(3.1) The writ-applicant filed his return of income for the Assessment Year 2013-14 on 30th July, 2013, disclosing the total income at Rs.29,72,118/-. The revised return of income was filed on 26th February, 2014, disclosing the income at Rs.29,72,118/-.

(3.2) Thereafter, the case of the writ-applicant was selected for scrutiny assessment and notices dated 23.6.2015, 6.8.2015 and 18.8.2015 respectively under section 142(1) of the Income Tax Act, 1961 (For short “the Act, 1961”) were issued calling upon the writ applicant to furnish the proof of claims under Chapter-VI of the Act, 1961 with regard to the donation made to the Gujarat Cancer Society and also to furnish a copy of the ledger accounts of Hiramoti Texchem Pvt. Ltd. and Helios & Matherson IT Ltd. regarding the interest paid on capital. The writ-applicant submitted his replies dated 1.7.2015, 17.8.2015 and 1.9.2015 respectively.

(3.3) The Assessing Officer passed the assessment order dated 15.10.2015 accepting the returned income. Thereafter, notice under section 148 of the Act, 1961 dated 28.3.2018 came to be issued for reopening calling upon the assessee to show cause why the reassessment should not be carried out as the Assessing Officer had reasons to believe that income had escaped assessment for the assessment year 2013-2014 within the meaning of section 147 of the Act, 1961.

(3.4) The reasons recorded by the Assessing Officer, under Section 148(2) of the Act, are as under:

“Reasons recorded u/s. 148(2) of the I.T.Act

The return of income was filed on 30.07.2013 declaring total income of Rs.29,72,118/-. Thereafter, the case was selected for scrutiny and order u/s. 143(3) of the Act was passed on 15.10.2015 assessing the total income at Rs.29,72,118/-.

On verification of the record, the assessee had received and repaid loan from and to Hiramoti Tex Chem P. Ltd. From the records it is observed that the assessee was having 34% shareholding in the Company. From the ledger account of Sh.Amrish H. Parikh in the books of company Hiramoti Tex Chem P. Ltd. it is seen that as on 01.04.2012 the assessee was having credit balance of Rs.9,54,058/- in the books of company. However, on 03.09.2012, there was a debit balance of Rs.64,59,942/-. As the assessee fulfills all the conditions laid down in section 2(22)(e) of the Act, therefore, Rs.64,59,942/- was required to be treated as deemeed dividend in the hands of assessee. But as per provisions of section 2(22)(e) of the Act, amounts to the extent of accumulated profits are treated as deemed dividend. Therefore, following calculations are done:

1. The accumulated profits of company Hiramoti Tex Chem P. Ltd as on 01.04.2012 was Rs.44,65,899/-.

2. Profit of current year- Rs.13,90,434/-.

3. Total turnover upto 03.09.2012-Rs.20,25,30,046/- (including tax as per VAT return).

4. Total turnover for full year- Rs.46,29,94,607/-(including tax)

5. Profit of company as on 03.09.2012 (Rs.13,90,434 x 20,25,30,046/ 46,29,94,607)=Rs.6,08,225/-.

Hence, total accumulated profit of company as on 03.09.2012 was Rs.50,74,123/- (44,65,899 + 6,08,225). Therefore, Rs.50,74,123/- was required to be taxed as deemed divided in the hands of assessee which was not done.

Further, on verification of the assessment