C/SCA/15992/2015 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 15992 of 2015 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE G.R.UDHWANI 1 Whether Reporters of Local Papers may be allowed to No see judgment ? 2 To be referred to Reporter or not ? No 3 Whether their Lordships wish to see fair copy of No judgment ? 4 Whether this case involves substantial question of law No as to interpretation of Constitution of India or any order made thereunder ? JAYESH T KOTAK Versus DEPUTY COMMISSIONER OF INCOME TAX Appearance: MR MANISH J SHAH(1320) for Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for Respondent(s) No. 1 CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE G.R.UDHWANI Date : 26/03/2020 ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. Rule. Mrs. Mauna Bhatt, learned Senior Standing Counsel waives service of notice of Rule on behalf of respondent. 2. By this petition under article 226 of Constitution of Page 1 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT India, petitioner has challenged notice dated 27.03.2015 issued by respondent under section 148 of Income Tax Act, 1961 (hereinafter referred to as 'the Act') seeking to reopen assessment of petitioner for assessment year 2008-2009 as well as orders at Annexure 'T' and 'V' to petition whereby respondent has rejected objections raised by petitioner to reopening of assessment. 3. facts as averred in petition are that petitioner is individual and is assessed as such. For assessment year 2008-2009, petitioner filed his return of income showing total income at Rs.1,48,89,810/- as per statement of income annexed along with return of income. petitioner had also filed audit report in Form No.3CB and 3CD before Assessing Officer. Thereafter, petitioner received noticed dated 16.09.2010 issued under section 142(1) of Act, calling upon petitioner to furnish certain details. petitioner furnished such details through his Chartered Accountant by reply dated 14.10.2010. further notice dated 19.10.2010 came to be issued under section 142(1) of Act calling for further information from petitioner. notice dated 19.10.2010 issued under section 143(2) of Act was received by petitioner, whereby petitioner was called upon to attend respondent's office. It is case of petitioner that he supplied details which were called for by respondent by his letters dated 18.11.2010 and 26.11.2010. In response to said notices, petitioner filed his reply dated 02.12.2010 annexing in all 7 exhibits with said reply. By letter dated 27.12.2012, petitioner furnished some further details which were called for by Page 2 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT respondents during assessment proceedings under section 143(3) of Act. After calling for extensive details by various notices and petitioner replying to those notices, respondent passed assessment order dated 28.12.2010 under section 143(3) of Act, wherein, six additions came to be made. petitioner challenged assessment order before Commissioner of Income Tax (Appeals), who passed order dated 26.09.2011. 3.1 Now, after gap of more than four years, petitioner has received notice dated 27.03.2015 under section 148 of Act, whereby, respondent wants to reopen assessment for assessment year 2008-2009. 3.2 In response to notice under section 148 of Act, petitioner gave his reply dated 16.04.2015 making certain legal submissions and requested respondent to provide reasons recorded for reopening assessment. By further letter dated 04.05.2015, petitioner, once again, requested for copy of reasons recorded and also requested respondent to take original return filed by him under section 139 of Act as return filed in response to notice under section 148 of Act. By letter dated 18.05.2015, respondent furnished reasons recorded. respondent called upon petitioner to file copy of return instead of relying on previously filed return and so petitioner filed same return once again electronically and mentioned said fact in letter submitted to Department on 04.06.2015. Thereafter, by letter dated 13.07.2015, petitioner submitted his objections. petitioner filed further objections vide letter dated 27.07.2015 Page 3 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT making certain points on merits as well as reiterating fact that petitioner had disclosed fully and truly all material facts for purpose of assessment under section 143(3) of Act. It is case of petitioner that he had filed all primary documents which were statutorily required to be filed along with return of income and had also filed all documents that were called for during course of scrutiny assessment. petitioner pointed out that Assessing Officer, while carrying out scrutiny assessment, had examined issue of deemed dividend under section 2(22)(e) of Act. 3.3 By order dated 11.09.2015, respondent disposed of objections raised by petitioner vide letter dated 13.07.2015. Furthermore, by letter dated 11.09.2015, respondent called upon petitioner to explain as to why loans extended by M/s. J. P. Infrastructure Pvt. Ltd. (now known as J. P. Iscon Limited) to its sister concern amounting to Rs.12.61 crores should not be treated as deemed dividend under section 2(22)(e) of Act as petitioner was holding 27.49% of shares in M/s. M/s. J. P. Iscon Ltd and called upon petitioner to reply query within time specified thereunder. petitioner responded by letter dated 23.09.2015, bringing to notice of respondent that he had missed out in dealing with his objections dated 27.07.2015, wherein, this very issue was dealt with and reply to query in letter dated 11.09.2015 was already addressed in petitioner's objections dated 27.07.2015. Thereafter, respondent, by letter dated 23.09.2015, disposed of petitioner's objections dated 27.07.2015. Being aggrieved, petitioner has filed present petition. Page 4 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT 3A. In response to averments made in petition, respondent has filed affidavit-in-reply; petitioner has filed rejoinder thereto and respondent has filed sur- rejoinder to rejoinder filed by petitioner. 4. Mr. J. P. Shah, Senior Advocate, learned counsel for petitioner invited attention of court to assessment order made under section 143(3) of Act for assessment year under consideration, to submit that specific questions on section 2(22)(e) of Act have been asked and issue has been gone into and has been specifically addressed. It was submitted that issue having already been gone into at time of scrutiny assessment, it is not permissible for Assessing Officer to reopen assessment in respect of same issue. attention of court was invited to Accounting Standard (AS) 18, which relates to Related Party Disclosures to point out that council has decided to make AS 18 mandatory only to enterprises mentioned therein and not to all enterprises. It was pointed out that two categories of enterprises are mentioned therein out of which (i) which relates to enterprises whose equity or debt securities are listed on recognised stock exchange etc. is not applicable to petitioner who is individual, whereas (ii) relates to all other commercial, industrial and business reporting enterprises, whose turnover for accounting period exceeds Rs.50 crores. It was pointed out that gross total income of petitioner is only Rs.1.48 crores and hence, he does not fall under second category of enterprises also. It was submitted that therefore, there was no specific requirement for petitioner to disclose such transaction. Page 5 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT 4.1 Reference was made to decision of Supreme Court in Commissioner of Income Tax v. Mukundray K. Shah, (2007) 290 ITR 433 SC, wherein, Court has held thus: 11. xxxxxxxThe companies having accumulated profits and companies in which substantial voting power lies in hands of person other than public (controlled companies) are required to distribute accumulated profits as dividends to shareholders. In such companies, controlling group can do what it likes with management of company, its affairs and its profits. It is for this group to decide whether profits should be distributed as dividends or not. declaration of dividend is entirely within discretion of this group. Therefore, legislature realised that though funds were available with company in form of profits, controlling group refused to distribute accumulated profits as dividends to shareholders but adopted device of advancing said profits by way of loan to one of its shareholders so as to avoid payment of tax on accumulated profits. This was main reason for enacting Section 2(22)(e) of Act. 12. xxxxxxx It is not in dispute that assessee had more than 10% of voting power in MKSEPL during block period. It is not in dispute that assessee had substantial interest of about 16% in MKF. It is not in dispute that three companies were controlled companies. There is one more point which needs to be mentioned. timing of so-called repayments by company to MKF and MKI and immediate withdrawal of funds by assessee-cum-Director-cum- shareholder-cum-partner and timing of investment in purchase of bonds were around same time. Moreover, in MKSEPL assessee is not only shareholder having more than 10% of total voting power, he is also Director of that company. said company is also partner in MKF and MKI which explains why amount of Rs 5.99 crores was routed by splitting said amount into two parts of Rs 2.79 crores and Rs 3.20 crores. In present case, most important aspect, which has not been considered by High Court, was that withdrawal of money by assessee from his capital account, in books of MKI, during Financial Year 1999-2000 led to debit balance of Rs 8.18 crores as on 31-3-2000. To this extent, finding given by AO and by Tribunal remains unchallenged. Lastly, on maintainability of block assessment, we are of view that Department was right in assessing said amount as deemed dividend in hands of assessee under Section 2(22)(e) of Act. impugned assessment order was passed under Section 158-BC. That assessment originated on account of search conducted under Section 132(1) of Act. In that search Page 6 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT diary ML-20 was identified. That identification was starting point of connected enquiries resulting in detection of undisclosed income of Rs 5.99 crores. In other words, undisclosed income, in nature of deemed dividend, did not arise from any scrutiny proceedings, tax evasion petitions, surveys, information received from external agency, etc. undisclosed income was detected by AO wholly and exclusively as result of search and, therefore, Department was right in invoking provisions of Chapter XIV-B. There is one more aspect in this regard. From facts, indicated above, Department has established sort of circular trading in this case. One of important features of circular trading is to route funds through conduits. In such cases picture emerges only after seeing cash-flow statements. In present case, ML-20 made AO to hold enquiries and in that enquiry cash-flow statement emerged, therefore, Department was right in invoking provisions of Chapter XIV-B in present case. five payments had direct correlation with Rs 5.99 crores paid by MKSEPL to MKF and MKI and payments by said two firms to assessee who used said money to buy 9% RBI Relief Bonds. Therefore, said payment by company through two firms was for benefit of assessee. Therefore, said funds were not repayment of loans, they were for purchase of 9% RBI Relief Bonds by respondent. 16. above two judgments indicate that question as to whether payment made by company is for benefit of assessee is question of fact. In this case, Tribunal has concluded that payment routed through MKF and MKI was for benefit of assessee. This was finding of fact. It was not perverse. Therefore, High Court should not have interfered with said finding. Further, above two judgments lay down that concept of deemed dividend under Section 2(22)(e) of Act postulates two factors, namely, whether payment is loan and whether on date of payment there existed accumulated profits . These two factors have to be correlated. This correlation has been done by Tribunal coupled with fact that all withdrawals were debited in capital account of firm leading to debit balance of Rs 8.18 crores. High Court has erred in disturbing findings of fact. 4.2 It was submitted that thus as laid down in above decision for purpose of invoking section 2(22)(e) of Act, two factors are postulated. Firstly, whether payment is loan, in other words whether petitioner has received some benefit; and secondly, whether on date of payment there existed accumulated profits in concern which advanced loan. It was submitted that in facts of present case, Page 7 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT there is no allegation that any benefit has accrued to petitioner and as there is no benefit to petitioner, there is no question to taxing him. It was submitted that if controlling holder is not benefitted, section 2(22)(e) of Act would not apply. It was further submitted that Supreme Court, in above decision, has held that receiving of benefit is sine qua non for application of section 2(22)(e) of Act. Such amount may be received either directly or money may be received through concerns in which assessee had interest. 4.3 Attention was invited to objections dated 13.07.2015 raised by petitioner against reopening of assessment, to submit that specific contention had been raised that petitioner has not received single rupee as loans and advances, either from loan giver company, that is, M/s. J. P. Infrastructure Pvt. Ltd. or loan taker companies, that is, Gujarat Mall Management Company Pvt. Ltd. or Aryan Arcade Pvt. Ltd., and hence, there was no question of any deemed dividend in hands of petitioner. However, Assessing Officer has not given any reply to contention that no benefit has travelled to assessee. It was urged that very basis that income has escaped assessment is fallacious inasmuch as when there is no income, there is no question of escapement. 4.4 learned counsel submitted that in this case, two essential ingredients for invoking section 2(22)(e) of Act are missing: (i) that lending company has accumulated profits; and (ii) that loan has been advanced to concerns for benefit of assessee. It was submitted that section 2(22)(e) contains deeming provision and hence, it must be Page 8 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT strictly construed and that court should adopt practical approach. 4.5 Adverting to reasons recorded, it was submitted that reasons do not state that any loan or advance has been received by petitioner or any benefit has been received; there is no allegation that income of dividend has been earned by petitioner; and there is no allegation that M/s. J. P. Infrastructure Pvt. Ltd. has accumulated profits; and hence, in absence of those overriding considerations, notice under section 148 of Act must fail. 4.6 Referring to objections raised against reopening of assessment, it was submitted that in objections, petitioner has stated that he has not received single rupee from two loanees, which has not been dealt with in order disposing of objections; it was also contended that loan was given for purpose of business, and hence, there is no question of dividend, however, these two objections have not been dealt with. 4.7 It was urged that return is filed electronically and it is not possible to load any further details other than that which are provided in form. It was submitted that basic requirement for invoking section 2(22)(e) of Act is that petitioner should have received benefit of moneys parted with by company in which he is substantial shareholder. Whereas in present case, petitioner has not received any benefit and consequently, there is no income, there is nothing to disclose. Page 9 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT 4.8 Reliance was placed by decision of this court in case of Viren Surendra Shah v. Assistant Commissioner of Income Tax, (2015) 63 Taxman.com 104 (Gujarat), wherein, court referred to decision of this court in Niko Resources Ltd. v. ADIT, [2014] 51 Taxmann.com 568, wherein it has been held that once all primary facts are before Assessing Officer, no further assistance is required by way of disclosure. All inferences of facts and legal inference need to be drawn by Assessing Officer. It is not for anyone to guide Assessing Officer in respect of inference factual or legal which is required to be drawn by him alone. Once case of assessee is covered by first proviso to section 147 of Act, re-assessment proceedings beyond period of four years from end of relevant assessment year would be without any jurisdiction and bad in law, if all material facts are furnished and there remained no omission or failure on part of assessee to disclose fully and truly all material facts. It was further held that onus on assessee is to reveal primary facts and to draw inferential facts would be responsibility of Assessing Officer. Once having revealed from record that assessee disclosed full and complete facts and on scrutiny, at time of original assessment all those details are examined, no change of opinion is permissible merely because there was some error earlier on part of Assessing Officer himself or because he choose not to opine on issue and even when he changes his mind and interprets material or law otherwise then what was done by him. Applying above decision to facts of case before it, court found that there was no failure on part of assessee to disclose truly and fully all material facts necessary to assessment with Page 10 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT respect to deemed dividend under section 2(22)(e) of Act and hence, initiation of impugned re-assessment proceedings, which were beyond period of four years was not permissible 4.9 Reliance was also placed upon decision of this Court in CIT v. Alfa ICA, (India ) Ltd., (2013) 217 Taxman 129 (Gujarat), wherein, court has held that where there is no failure on part of assessee to disclose fully and truly all material facts, merely because claim was not previously processed during scrutiny assessment or that such claim was legally not sustainable, would not vest jurisdiction in Assessing Officer to reopen assessment beyond period of four years from end of relevant assessment year. It was contended that impugned notice under section 148 of Act having been issued after period of more than four years from end of relevant assessment year, in absence of any failure on part of petitioner to disclose fully and truly all material facts, assumption of jurisdiction on part of Assessing Officer lacks validity. 4.10 It was, accordingly, urged that on reasons recorded, Assessing Officer could not have formed belief that income chargeable to tax has escaped assessment and hence, Assessing Officer is not justified in invoking provisions of section 147 of Act and that in absence of any failure on part of petitioner to disclose fully and truly all material facts necessary for his assessment, reopening of assessment beyond period of four years from end of relevant assessment year is not permissible in law. Page 11 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT 5. Mr. M. R. Bhatt, Senior Advocate, learned counsel for respondent submitted that section 2(22)(e) of Act contemplates loan or interest to concern wherein, shareholder has interest. Referring to reasons recorded, it was pointed out that it is admitted position that assessee is individual whose shareholding is more than 10 per cent of voting power in three companies. It was submitted that second table referred in reasons recorded has been disclosed in return on income filed by assessee, but table showing loans given by M/s. J. P. Infrastructure Pvt. Ltd. to Gujarat Mall Management Company Pvt. Ltd. and Aryan Arcade Pvt. Ltd. has not been disclosed. 5.1 It was submitted that clarification called for by Assessing Officer during course of scrutiny assessment in relation to deemed dividend under section 2(22)(e) of Act was in respect of different parties, namely Palitana Sugar Mills Pvt. Ltd. and Shiva Agency Pvt. Ltd. Attention was invited to paragraph 7.1 of assessment order made under section 143(3) of Act, to submit that this transaction was not gone into at stage of assessment. It was submitted that while petitioner had given details of direct loans received by him, no details were given with regards to subject transactions. Therefore, in respect of transactions in question which are also under section 2(22)(e) of Act, petitioner has remained silent. 5.2 It was submitted that inquiry at original stage was in respect of different parties, whereas, reopening of assessment is on basis of information received from DCIT, Page 12 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT TDS circle, Ahmedabad to effect that unsecured loans have been given by M/s. J. P. Infrastructure Pvt. Ltd. to Gujarat Mall Management Company Pvt. Ltd. and Aryan Arcade Pvt. Ltd. and shareholding of petitioner in all three companies exceeds 10% of shares. 5.3 Reference was made to decision of this Court in case of Dishman Pharmaceuticals and Chemicals Ltd. v. Deputy Commissioner of Income Tax (supra). Attention was invited to paragraph 6 of said decision to submit that arguments of revenue in this case are similar. It was pointed out that one of arguments raised on behalf of assessee in said case was that format of filing return did not require such information to be given, which contention has been repelled by court. 5.4 As regards contention of learned advocate for petitioner that amount given by M/s. J. P. Infrastructure Pvt. Ltd. to Gujarat Malls Management Pvt. Ltd. and Aryan Arcade Pvt. Ltd. were inter-corporate deposits. It was submitted that in this case, entire transaction was not disclosed. Consequently, in absence of nature of transaction being disclosed, there was no question of considering whether or not payments were in nature of inter-corporate deposits. 5.5 Insofar as decision of this Court in case of Viren Sureshchandra Shah (supra) is concerned, it was submitted that in case of private limited company, control is with few persons and director who holds more than 10% shares, would be aware of transaction with related company. It was contended that what is required to be Page 13 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT considered is whether case falls under section 2(22)(e) of Act, which is in affirmative; whether assessee was required to disclose transaction, which also would be in affirmative. It was submitted that fact which is material fact is relevant for purpose of assessment and is, therefore, required to be stated and not stating thereof amounts to non disclosure of relevant facts. 5.6 It was submitted that formation of opinion by Assessing Officer is being examined at threshold, which is in context of section 2(22)(e) of Act, which says that when 'A' company gives loan to 'B' company and 'C' company in whom assessee has specific interest, such amount is deemed dividend in case of assessee and next aspect as to whether assessee had received money or not, will have to be evaluated at assessment stage. At stage of formation of opinion all that Assessing Officer has to do is to be satisfied that basic requirements of section 2(22)(e) of Act are fulfilled. If assessee is in position to point out that no benefit has been received, assessment will fail. But, at this stage of proceedings, reasons do not have to go beyond section. No finding is necessary at this stage in reasons. It was also contended that at stage of formation of opinion, Assessing Officer does not have to say that there are accumulated profits. It was submitted that while decision of Supreme Court in Commissioner of Income Tax v. Mukundray K. Shah (supra) would be applicable, it would be evaluated at next stage during course of assessment. 5.7 Reliance was placed upon decision of Delhi High Page 14 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT Court in Honda Seil Power Products Ltd. v. Deputy Commissioner of Income Tax, (2012) 340 ITR 53, wherein, Court held thus: 10. Thus, petitioner has accepted and admitted that he had not given details with regard to proportionate expenses relatable to tax free or exempt income, which were claimed as deduction under cumulative head "expenditure". It is pleaded and stated that petitioner was not required to disclose said fact as when they had filed return, Section 14A was not in statute book. Sequitor, there was no omission and failure on part of assessee-petitioner to make full and true disclosure. term "failure" on part of assessee is not restricted only to income-tax return and columns of income-tax return or tax audit report. This is first stage. said expression "failure to fully and truly disclose material facts" also relate to stage of assessment proceedings, second stage. There can be omission and failure on part of assessee to disclose fully and truly material facts during course of assessment proceedings. This can happen when assessee does not disclose or furnish to Assessing Officer complete and correct information and details it is required and under obligation to disclose. Burden is on assessee to make full and true disclosure. 12. law postulates duty on every assessee to disclose fully and truly all material facts for its assessment. disclosure must be full and true. Material facts are those facts which if taken into accounts they would have adverse affect on assessee by higher assessment of income than one actually made. They should be proximate and not have any remote bearing on assessment. Omission to disclose may be deliberate or inadvertent. This is not relevant, provided there is omission or failure on part of assessee. latter confers jurisdiction to reopen assessment 15. It is clear from aforesaid paragraph petitioner has accepted that "material particular" Page 15 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT referred to in first proviso not only refers to details in Return but also explanations and details furnished during course of assessment. petitioner had not stated anything or given factual matrix to justify and state that material facts had been fully and truly disclosed in assessment proceedings and there was no omission or failure on part of petitioner. Explanation to section 147 stipulates that mere production of books of accounts or other evidence is not sufficient. (Refer paragraph 11 above wherein judgment in Consolidated Photo and Finvest Ltd. (supra) has been quoted). Therefore merely because material lies imbedded in material or evidence, which Assessing Officer could have uncovered but did not uncover is not good ground to deny or strike down notice for reassessment. Whether Assessing Officer could have found truth but he did not, does not preclude Assessing Officer from exercising power of re- assessment to bring to tax escaped income. 16. There was omission and failure on part of petitioner to point out expenses incurred relatable to tax free/exempt income which prima facie have been claimed as deduction in income and expenditure account. There was, therefore, omission and failure on part of petitioner to disclose fully and truly material facts. 5.8 It was submitted that, therefore, term 'failure' on part of assessee is not restricted only to income tax return of columns in income tax return or tax audit report. There could be omission on part of assessee to disclose fully and truly all material facts during course of assessment proceedings. This can happen when assessee does not disclose or furnish to Assessing Officer complete and correct information and details that it is required and under obligation to disclose. It was submitted that petitioner has failed to discharge burden cast upon him of making full and true disclosure, and hence, Assessing Officer is wholly justified in reopening of assessment under Page 16 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT section 147 of Act. It was urged that petition being devoid of merits, deserves to be dismissed. 6. In rejoinder, Mr. M. J. Shah, learned advocate for petitioner submitted that in case of Dishman Pharmaceuticals and Chemicals Ltd. v. Deputy Commissioner of Income Tax (supra), transaction was made by company itself and percentile of share was not given. It was submitted that petitioner is required to state percentage of shares which he has duly disclosed and that, insofar as loans given by M/s. J. P. Infrastructure Pvt. Ltd. to Gujarat Malls Management Company Pvt. Ltd. and Aryan Arcade Pvt. Ltd. are concerned, since no amount has been received by petitioner from amount given to two concerns, petitioner may not be aware of transaction between two companies. It was submitted that this case is not identical to case of Dishman Pharmaceuticals and Chemicals Ltd. v. Deputy Commissioner of Income Tax (supra). In said case, primary facts were not disclosed; whereas, in this case, percentage of shares has been disclosed and hence, primary facts have been disclosed. It was submitted that once primary facts are disclosed, what question would arise is for Assessing Officer to ask. In support of such submission, reliance was placed upon decision of this Court in case of Niko Resources Ltd. v. ACIT, (2015) 229 Taxman 86, wherein, court has held that once all primary facts are before assessing authority, no further assistance is required by way of disclosure. All inferences of facts and legal inference need to be drawn by Assessing Officer. It is not for anyone to guide Assessing Officer in respect of Page 17 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT inference factual or legal , which requires to be drawn by him alone. It was submitted that in case of Dishman Pharmaceuticals and Chemicals Ltd. v. Deputy Commissioner of Income Tax (supra) facts were gross and basic requirements of section 2(22)(e) of Act were not satisfied. 6.1 It was pointed out that in case of Dishman Pharmaceuticals and Chemicals Ltd. v. Deputy Commissioner of Income Tax (supra), shareholding of assessee was not disclosed; whereas, in this case, transactions in question are between company 'A' and company 'B and company and company C and petitioner is D who only has substantial shares in three companies. It was submitted that onus upon petitioner was to disclose his shareholding in three companies and he has duly disclosed his percentile of shareholding in those parties. Since no part of amount given by M/s. J. P. Infrastructure Pvt. Ltd. to Gujarat Malls Management Company Pvt. Ltd. and Aryan Arcade Pvt. Ltd. has travelled to petitioner, there was no obligation upon petitioner to disclose such fact. It was submitted that in Dishman Pharmaceuticals and Chemicals Ltd. v. Deputy Commissioner of Income Tax (supra), transaction was between petitioner and party; and hence, court held that it was bound to disclose percentile holding which was primary fact. It was contended that, therefore, ratio of decision of this court in case of Dishman Pharmaceuticals and Chemicals Ltd. v. Deputy Commissioner of Income Tax (supra) will not apply in this case. Page 18 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT 6.2 Reference was made to paragraphs 9.1, 11 and 12 of decision of this court in Dishman Pharmaceuticals and Chemicals Ltd. v. Deputy Commissioner of Income Tax (supra) to submit that in facts of said case it could not be ascertained as to what was shareholding of petitioner. Thus, primary fact was missing, which is distinction between that case and this case. 6.3 Referring to decision of this Court in case of Viren Sureshchandra Shah (supra), it was submitted that section 2(22)(e) of Act envisages disclosure qua those parties. Primary facts which are required to be given have been provided by petitioner, what questions are to be asked by Assessing Officer is not for assessee to tell. According to learned counsel, facts of present case are identical to facts to case of Viren Sureshchandra Shah (supra). 6.4 It was submitted that in objections, it was contended that section 2(22)(e) of Act would not be applicable as there is divergence of views. Only if loan is for benefit of shareholder, section 2(22)(e) of Act would apply. It was submitted that these were inter-corporate deposits between two companies which are covered by judgment and order dated 18th July, 2012 passed by this court in case of Commissioner of Income-tax v. Daisy Packers Pvt. Ltd. rendered in Tax Appeal No.212 of 2010. It was submitted that if issue is covered by decision of Gujarat High Court, impugned notice under section 148 of Act would fail. Page 19 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT 6.5 It as submitted that section 2(22)(e) of Act creates fiction by which certain receipts or part thereof are treated as dividend for purpose of levy of income tax. Under Company law, company can pay dividend out of profits for current or past year. definition ensures that any distribution or payment referred to therein out of accumulated profits, howsoever made, is brought to tax. Section 2(22)(e) of Act requires determination of two factors: (i) whether payment is loan etc.; and (ii) whether on date when payment is made, thereby, were accumulated profits. It was submitted that loan advanced to such shareholder can be deemed to be dividend only to extent to which, it is shown that company possesses accumulated profits on date of of loan etc. Whereas, in reasons recorded for reopening assessment, Assessing Officer has not recorded any satisfaction that M/s J.P. Infrastructure Ltd. has any accumulated profits, in absence of which basic requirement for invoking section 2(22)(e) of Act is not satisfied. Hence, on reasons recorded, Assessing Officer could not have formed belief that income chargeable to tax has escaped assessment. 6.6 In conclusion, it was submitted that in absence of failure on part of petitioner to disclose fully and truly all material facts necessary for his assessment, reopening of assessment beyond period of four years from end of relevant assessment year is without authority of law. Moreover, even on merits, on reasons recorded, Assessing Officer could not have formed belief that income chargeable to tax has escaped assessment. It was accordingly urged that petition deserves to be allowed quashing and Page 20 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT setting aside impugned notice under section 148 of Act. 7. In backdrop of facts and contentions noted hereinabove, reference may first be made to reasons recorded for reopening assessment, which read as under: Reasons recorded u/s. 148(2) of I.T. Act In this case return of income for A.Y. 2008-09 declaring income of Rs.1,48,89,810/- was filed on 30.09.2008. Assessment u/s. 143(3) of Act was finalized on determining total income at Rs.2,02,55,060/- after making addition on various counts. As per information received from DCIT, TDS Circle, Ahmedabad it is noted that unsecured loans have been extended by M/s. J. P. Infrastructure Ltd. (Now Known as J. P. Iscon Ltd.) to various sister concerns during F.Y. 2007-08. Sr. Name of Group Unsecured loan Amount paid on No. Company extended by behalf of Group M/s. J. P. company by M/s. Infrastructure J. P. Infrastructure Pvt. Ltd. Pvt. Ltd. 1 Gujarat Mall 14650000 5097719 Management Co. Pvt. Ltd. 5 Aryan Arcade 6120000 121008426 Pvt. Ltd. Total 20770000 126106145 On verification of assessment record, it is seen that during year under consideration assessee is shareholder and is holding beneficial interest by holding equity shares in various companies as follows: Sr. Name of Group Company Shareholding percentage No. 1 J. P. Infrastructure Pvt. 27.49% Ltd. Page 21 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT Sr. Name of Group Company Shareholding percentage No. 2 Gujarat Mall Management 50.00% Co. Pvt. Ltd. 3 Aryan Arcade Pvt. Ltd. 29.00% perusal of assessment records for A.Y. 2008- 09 shows that no such Disclosure has been made by assessee with regard to above mentioned related party transactions. As per provisions of section 2(22)(e) of Income Tax Act, 1961 unsecured loans extended by M/s. J. P. Infrastructure Pvt. Ltd. to its related concerns should be treated as deemed dividend in hands of shareholder and taxed accordingly. In view of above, I am of opinion that Rs.14,68,76,145/- of income has escaped assessment for A.Y. 2008-09 and this is fit case for reassessment by invoking provisions of section 147 of Income Tax Act, 1961." 7.1 Against reasons recorded, petitioner, inter alia, raised following objections: (1) Four years from end of relevant assessment year have passed and there is no failure to disclose fully and truly all material facts relevant for assessment, reopening of assessment is void ab intio. (2) On reasons recorded there is no reason to believe that income chargeable to tax has escaped assessment. (i) There is no provision in section 2(22)(ee) to tax deemed dividends in hands of shareholder if amount has not been received by assessee shareholder. Page 22 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT (ii) audited financial statements contain various investment details and hence he has fully and truly disclosed investments in his books of account. He has also disclosed relevant details called for during course of assessment proceedings (iii) He is shareholder of JPIL but no loan or advance has been given to him and hence first limb of section 2(22)(e) is not applicable. Though he is shareholder of loan receiver companies, he has not received any loans or advances even from those companies. Hence, second limb read with third limb of section 2(22)(e) is also not applicable. (iv) third limb of section 2(22)(e) has quantification aspect and is based on principle that amount which needs to be taxed as deemed dividend is amount which has ultimately been made available to concerned shareholder. Hence, in case where funds are advanced by company to concern which in turn are advanced to concerned shareholder, then only second and third limb of section 2(22)(e) need to be invoked simultaneously so as to work out amount of deemed dividend. Since no amount has been advanced to him, second limb read with third limb would not be applicable. (v) amount that has been received is not loans and advances but ICD received for purpose of Page 23 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT business and ICD does not fall within purview of loans and advances. (vi) There is no provision under section 2(22)(e) to consider payments made by company on behalf of another company as deemed dividend. (vii) All primary documents which are statutorily required to be filed along with return of income and also documents called for during course of assessment proceedings for year under consideration have been provided and disclosed by him. Assessing Officer has made certain additions of deemed divided under section 2(22)(e) which shows that Assessing Officer has verified aspect of deemed dividend also. 7.2 Thereafter, petitioner raised further objections dated 273.07.2015, against reopening of assessment and order rejecting objections inter alia stating that similar notices have been issued on similar questions and similar issues and hence, there cannot be any assessment and taxability on same account. By order dated 23.09.2015, said objections have already been disposed of. 7.3 On behalf of petitioner, it has been contended that no loan or advances has been given by M/s. J. P. Infrastructure Pvt. Ltd. to two concerns and that, what is given is by way of inter-corporate deposits in normal course of business which would have attracted provisions of section 2(22)(e) of Act. However, at this stage, while considering Page 24 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT validity of notice under section 148 of Act, this court would not go into nature of advance, more so, when there is nothing on record to indicate as to whether payment is made by way of loan or advance or inter-corporate deposit. 7.4 main contention raised on behalf of petitioner is that he had disclosed all primary facts and that, there was no onus cast upon him to disclose payment made by M/s. J. P. Infrastructure Pvt. Ltd. to two concerns namely Gujarat Malls Management Pvt. Ltd. and Aryan Arcade Pvt. Ltd in which petitioner had shareholding of more than 10 per cent of voting power. It has been contended that once primary facts have been placed before Assessing Officer, it cannot be said that petitioner has failed to disclose any material facts relevant for purpose of his assessment for assessment year under consideration and hence, reopening of assessment beyond period of four years from end of relevant assessment year, is without authority of law. 7.5 For purpose of testing above arguments, what would be required to be examined is as to what was nature of obligation cast upon petitioner insofar as disclosure of transactions in question is concerned. It would, therefore, be apposite to refer to decision of Supreme Court in Commissioner of Income Tax v. Mukundray K. Shah (supra). In said decision court had placed reliance upon decision of Madras High Court in case of Commissioner of Income-tax v. Alagusundaram Chettiar, [1977] 109 ITR 508, wherein it was held that word payment in section 2(22)(e) of Act means act of Page 25 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT paying and, therefore, in that case it was held that payment by company to Karuppiah Chettiar was for benefit of assessee, Managing Director of company, L. Alaugusunsaram Chettiar, and was therefore assessable as dividend in hands of assessee. It was held further that basic test to be applied in such cases is not whether loan given is benefit but whether payment made by company to Karuppiah Chettiar was for benefit of assessee who was managing director of paying company. Applying said decision to facts of case before it, Supreme Court held thus: Applying above test to facts of present case, we are of view that Tribunal was right in holding, on examination of cash-flow statement, that MKSEPL had made payments to MKF and MKI for benefit of assessee which enabled assessee to buy 9% RBI Relief Bonds in Financial Year 1999-2000. It is in this sense that Tribunal was right in holding that two firms were used as conduits by assessee. It is not in dispute that assessee had more than 10% of voting power in MKSEPL during block period. It is not in dispute that assessee had substantial interest of about 16% in MKF. It is not in dispute that three companies were controlled companies. There is one more point which needs to be mentioned. timing of so-called repayments by company to MKF and MKI and immediate withdrawal of funds by assessee-cum-Director-cum-shareholder-cum-partner and timing of investment in purchase of bonds were around same time. Moreover, in MKSEPL assessee is not only shareholder having more than 10% of total voting power, he is also Director of that company. said company is also partner in MKF and MKI which explains why amount of Rs 5.99 crores was routed by splitting said amount into two parts of Rs 2.79 crores and Rs 3.20 crores. In present case, most important aspect, which has not been considered by High Court, was that withdrawal of money by assessee from his capital account, in books of MKI, during Financial Year 1999-2000 led to debit balance of Rs 8.18 crores as on 31-3-2000. To this extent, finding given by AO and by Tribunal remains unchallenged. Lastly, on maintainability of block assessment, we are of view that Department was right in assessing said amount as deemed dividend in hands of assessee under Section 2(22)(e) of Act. impugned assessment Page 26 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT order was passed under Section 158-BC. That assessment originated on account of search conducted under Section 132(1) of Act. In that search diary ML-20 was identified. That identification was starting point of connected enquiries resulting in detection of undisclosed income of Rs 5.99 crores. In other words, undisclosed income, in nature of deemed dividend, did not arise from any scrutiny proceedings, tax evasion petitions, surveys, information received from external agency, etc. undisclosed income was detected by AO wholly and exclusively as result of search and, therefore, Department was right in invoking provisions of Chapter XIV-B. There is one more aspect in this regard. From facts, indicated above, Department has established sort of circular trading in this case. One of important features of circular trading is to route funds through conduits. In such cases picture emerges only after seeing cash-flow statements. In present case, ML-20 made AO to hold enquiries and in that enquiry cash-flow statement emerged, therefore, Department was right in invoking provisions of Chapter XIV-B in present case. five payments had direct correlation with Rs 5.99 crores paid by MKSEPL to MKF and MKI and payments by said two firms to assessee who used said money to buy 9% RBI Relief Bonds. Therefore, said payment by company through two firms was for benefit of assessee. Therefore, said funds were not repayment of loans, they were for purchase of 9% RBI Relief Bonds by respondent. 7.6 Court further held referred to decision of Calcutta High Court in Nandlal Kanoria v. CIT, [1980] 122 ITR 405 and Bombay High Court in CIT v. P.K. Badiani, [1070] 76 ITR 369, and held thus: 16. above two judgments indicate that question as to whether payment made by company is for benefit of assessee is question of fact. In this case, Tribunal has concluded that payment routed through MKF and MKI was for benefit of assessee. This was finding of fact. It was not perverse. Therefore, High Court should not have interfered with said finding. Further, above two judgments lay down that concept of deemed dividend under Section 2(22)(e) of Act postulates two factors, namely, whether payment is loan and whether on date of payment there existed accumulated profits . These two factors have to be correlated. This correlation has been done by Tribunal coupled with fact that all withdrawals were debited in capital account of firm leading to Page 27 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT debit balance of Rs 8.18 crores. High Court has erred in disturbing findings of fact. 7.7 Thus, Supreme Court in above decision has recorded that there were findings of fact to establish that payment made by loan giver company in which assessee had substantial interest to two concerns in which assessee had substantial interest had been travelled to assessee. court found that two concerns to whom loans were given were used as conduit and that payment made by loan giver company through two concerns were for benefit of assessee. 7.8 Section 2(22)(e) of Act as it stood at relevant time and to extent same is relevant for present purpose reads thus: (22) dividend includes- (e) any payment made by company, not being company in which public are substantially interested, of any sum by way of advance or loan to shareholder, being person who is beneficial owner of shares (not being shares entitled to fixed rate of dividend whether with or without right to participate in profits) holding not less than 10% of voting power, or to any concern in which such shareholder is member or partner and in which he has substantial interest, or any payment by any such company on behalf of or for individual benefit of any such shareholder, to extent to which company in either case possesses accumulated profits to be dividend. 7.9 Thus, under section 2(22)(e) of Act, if person who is beneficial owner of shares holding not less than 10 % of voting power in company as described therein, and such Page 28 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT company makes any payment: (i) to shareholder; or (ii) to any concern in which such shareholder is member or partner and in which he has substantial interest; or (iii) on behalf of or for individual benefit of any such shareholder; then, to extent to which company in either case possesses accumulated profits, same shall be deemed to be dividend. 7.10 Thus, section 2(22)(e) envisages payment by way of loan or advance in any of three modes provided therein to be deemed dividend in hands of concerned shareholder to extent of accumulated profits of loan giver company. As held in above decision, concept of deemed dividend under section 2(22)(e) of Act postulates two factors, namely, whether payment is loan and whether, on date of payment there existed accumulated profits and that these two factors have to be co-related. 7.11 Examining facts of case in light of above legal and statutory position, this case relates to second mode of payment envisaged under clause (e) of section 2(22) viz. to any concern in which such shareholder is member or partner and in which he has substantial interest. From reasons recorded it emerges that according to Assessing Officer unsecured loans have been extended by M/s JP Infrastructure Limited to its sister concerns, viz. Gujarat Mall Management Co. Pvt. Ltd. and Aryan Arcade Pvt. Ltd. and that petitioner held 27.49% shares in M/s JP Infrastructure Page 29 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT Limited; 50% shares in Gujarat Mall Management Co. Pvt. Ltd.; and 29% shares in Aryan Arcade Pvt. Ltd., which according to him had to be treated as deemed dividend in hands of shareholder and taxed accordingly. As is apparent on plain reading of reasons recorded, while Assessing Officer has information that M/s JP Infrastructure Limited has advanced unsecured loans as referred to therein to its sister concerns, viz. Gujarat Mall Management Co. Pvt. Ltd. and Aryan Arcade Pvt. Ltd., there is no information to effect that such payment was made for benefit of petitioner. Except for fact that loan giver company in which petitioner had shareholding in excess of 10 per cent of voting power, had given loans and advances as referred to therein to two concerns in which petitioner had substantial interest, reasons are totally silent as regards any benefit having been obtained by petitioner from said loan transactions. It is not case of respondent that even if no amount has travelled to petitioner, he would still be liable to be taxed for said transactions merely by dint of fact that two concerns in which he had substantial interest had received loans from company in which he had shareholding exceeding 10 per cent of voting power. According to respondent, question as to whether or not amount had travelled to petitioner is matter to be decided at stage of evaluation at during course of re-assessment proceedings. Evidently, therefore, Assessing Officer has not recorded any satisfaction that amount paid by M/s JP Infrastructure Limited to its sister concerns, viz. Gujarat Mall Management Co. Pvt. Ltd. and Aryan Arcade Pvt. Ltd. had been paid for benefit of petitioner. In opinion of this court, in light of decision of Supreme Page 30 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT Court in Mukundray K. Shah (supra), any payment made by company in which shareholder has shareholding exceeding 10 per cent of voting power to any concern in which such shareholder has substantial interest, would be deemed to be dividend in his hands if any benefit from such transaction has been received by such shareholder. intention of legislature is to tax funds ultimately received by shareholder holding more than 10% voting power in company, which have been routed through different modes/concerns. What needs to be taxed as deemed dividend is amount ultimately used for benefit of shareholder. It is not case of Assessing Officer in reasons recorded for reopening assessment that petitioner has received any amount as holder of substantial shares from loan giver company or loan receiver company. Therefore, in absence of any benefit having been received by petitioner, there was no obligation cast upon him to disclose such transactions. 7.12 Besides, as pointed out by learned counsel for petitioner, council has decided to make Accounting Standard (AS) 18, which relates to Related Party Disclosures mandatory only to enterprises mentioned therein and not to all enterprises. two categories of enterprises are mentioned therein are (i) enterprises whose equity or debt securities are listed on recognised stock exchange etc. and (ii) all other commercial, industrial and business reporting enterprises, whose turnover for accounting period exceeds Rs.50 crores. In facts of this case, petitioner being individual does not fall in first category; and since his gross total income is only Rs.1.48 crores, he also does not fall under Page 31 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT second category of enterprises. Therefore, also there does not appear to be any specific requirement for petitioner to disclose such transaction. In aforesaid premises, this court is of view that on reasons recorded by Assessing Officer, he could not have formed belief that income chargeable to tax has escaped assessment. 7.13 If contention of learned counsel for respondent that fact as to whether petitioner has benefitted from transaction or not is matter to be decided at stage of evaluation of material during course of re-assessment were to be accepted, it would amount to allowing Assessing Officer to make fishing inquiry to ascertain as to whether or not any income has escaped assessment. For purpose of invoking section 147 of Act, Assessing Officer has to form belief that income chargeable to tax has escaped assessment and not that income chargeable to tax may have escaped assessment. 7.14 Another aspect of matter is that in this case assessment year is 2008-09 and impugned notice has been issued on 27.03.2015, which is clearly beyond period of four years from end of relevant assessment year. Moreover, assessment for assessment year under consideration has been made under section 143(3) of Act. Therefore, in light of first proviso to section 147 of Act no action can be taken under section unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to disclose fully and truly all material facts necessary for his assessment. question that then arises for consideration is whether Page 32 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT there was any such failure on part of petitioner to disclose fully and truly all material facts necessary for this assessment for assessment under consideration. On behalf of respondent it has been contended that while petitioner has shown extent of his shareholding in three concerns in which he had substantial interest as shown in first table in reasons recorded, he had failed to disclose loans advanced by M/s JP Infrastructure Limited to Gujarat Mall Management Co. Pvt. Ltd. and Aryan Arcade Pvt. Ltd. In opinion of this court, unless petitioner had received any benefit from loan transactions referred to in reasons recorded, there was no obligation cast upon him to disclose same. Furthermore, as rightly submitted by learned counsel for petitioner, transactions in question being between independent entities, petitioner may not even be aware of such transactions if they were not for his benefit. 7.15 As discussed earlier clause (e) of section 2(22) of Act, postulates two factors, firstly, whether payment by company in which shareholding of assessee is more than 10 per cent of voting power is loan; and whether on date of payment there existed accumulated profits . In facts of present case, reasons recorded do not say that petitioner has received any loan from loan giver company, nor do they say amount advanced by loan giver company to two concerns in which petitioner had substantial interest, was out of accumulated profits of that company. Therefore, in absence of either of two factors being satisfied in reasons recorded, it is clear that reopening of assessment is without due application of mind on Page 33 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT part of Assessing Officer. 7.16 It has also been contended on behalf of petitioner that format for income tax return does not provide for disclosure of such details; whereas on behalf of respondent strong reliance has been placed on decision of this court in Dishman Pharmaceuticals and Chemicals Limited v. Deputy Commissioner of Income Tax (supra) for purpose of demonstrating that similar contention raised therein has been repelled by this court. It may, therefore, be necessary to refer to facts of case in Dishman Pharmaceuticals and Chemicals Limited (supra). In that case Assessing Officer had recorded that during assessment proceedings of assessment year 2006-07, it was seen that amounts given by SDBL to assessee were in nature of loan transactions on which section 2(22)(e) was clearly applicable. Since there was opening balance of Rs.2,91,10,000/- in books of SDPL in case of assessee for assessment year 2006-07, assessee was asked to produce accounts of earlier years. On perusal of accounts of assessee it was seen that assessee held 22.3% shareholdings in M/s Schutz Dishman Biotech Limited [SDBL]. Apart from business transactions, it was seen that [as per information available on records], SDBL had also given loans to assessee. On perusal of accounts for assessment year 2003-04 (the assessment year under consideration) it was found that assessee company had taken loans of Rs.2,03,50,000/- from SDPL. This court observed that if payment by Company to assessee fulfills conditions laid down in clause (e) of section 2(22) of Act, same has to be treated as deemed dividend of Page 34 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT assessee for that year, in which such payment is made. Thus, if petitioner was holding shares of not less than 10 per cent of voting power in SDBL, such payment of Rs.2,03.50,000/0 for relevant year would be treated as deemed dividend . fact necessary to ascertain whether such payment could be treated as deemed dividend under section 2(22)(e) was whether assessee was holding share of not less than 10 per cent of voting power in SDBL. court found that from return submitted by assessee and documents produced along with such returns, no where can it be ascertained as to what was share holding in terms of voting power of assessee-company in SDBL. While assessee had disclosed number of shares it held in SDBL, extent of its holding in SDBL, namely that it was more than 10% of voting power was not disclosed. It is in this backdrop that court held that petitioner-Company had failed to truly and fully disclose all material facts. 7.17 Thus, it is evident that in facts of said case: (i) petitioner company had obtained loan from company in which it had shareholding not less than 10 per cent of voting power. While loan was disclosed and number of shares held in loan giver company was disclosed, extent of petitioner s shareholding in said company, which is relevant fact for purpose of computation of deemed dividend under section 2(22)(e) of Act, had not been disclosed. In facts of present case, it is not case of Assessing Officer that petitioner has received any loan from loan giver company or that loans advanced by loan giver company in which petitioner had shareholding of not less than 10% of voting power to Page 35 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT two concerns in which petitioner had substantial interest was for benefit of petitioner. petitioner had also disclosed extent of his shareholding in loan giver as well as loan receiver companies. reopening of assessment is founded on premise that petitioner did not disclose transactions between loan giver company in which he had shareholding not less than 10 per cent of voting power and loan receiver concerns in which he had substantial interest. However, as discussed earlier, when amount received by two concerns from loan giver company was neither received by petitioner nor was it for benefit of petitioner, such amount cannot be considered as deemed dividend in hands of petitioner, and consequently no income accrued to petitioner from such transactions. In absence of any finding having been recorded by Assessing Officer that any income had accrued in favour of petitioner, it is not possible to say that there was any obligation cast upon him to disclose such transactions. Under circumstances, in absence of any failure on part of petitioner to disclose fully and truly all material facts necessary for his assessment, reopening of assessment beyond period of four years from relevant assessment is without authority of law. 7.18 On behalf of respondent reliance has been placed by learned counsel on decision of Delhi High Court in Honda Siel Power Products Limited v. Deputy Commissioner of Income Tax (supra), wherein court has held that term failure on part of assessee is not restricted only to income-tax return and columns of income-tax return or tax audit report. This is first Page 36 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 C/SCA/15992/2015 JUDGMENT stage. said expression failure to fully and truly disclose material facts also relate to stage of assessment proceedings, second stage. There can be omission and failure on part of assessee to disclose fully and truly material facts during course of assessment proceedings. This can happen when assessee does not disclose or furnish to Assessing Officer complete and correct information and details it is required and under obligation to disclose. Burden is on assessee of make full and true disclosure. While there can be no quarrel with above proposition of law, as discussed hereinabove, on facts, this court has found that there was no such obligation on part of petitioner to disclose transactions between M/s JP Infrastructure Limited and Gujarat Mall Management Co. Pvt Ltd and Aryan Arcade Pvt. Ltd. as he had not received any benefit from such transaction. aforesaid decision therefore, does not further case of respondent. 8. For foregoing reasons, petition succeeds and is accordingly allowed. impugned notice dated 27.03.2015 issued by respondent under section 148 of Income Tax Act, 1961 reopening assessment of petitioner for assessment year 2008-09, as well as all proceedings pursuant thereto are hereby quashed and set aside. Rule is made absolute accordingly, with no order as to costs. (HARSHA DEVANI, J) (G.R.UDHWANI, J) Z.G. SHAIKH Page 37 of 37 Downloaded on : Fri Mar 27 11:19:05 IST 2020 Jayesh T Kotak v. Deputy Commissioner of Income-tax