COMMISSIONER OF INCOME TAX Vs. RINKU CHAKRABORTHY

JUDGEMENT

(1.) THE Revenue has preferred these four appeals against the order passed by the Tribunal holding that the reopening of the assessment was incorrect and consequently setting aside the reassessment order.

(2.) SINCE identical issues are involved in all these appeals, they are taken up for consideration together and disposed of by this common order as has been done by the Tribunal as well as other authorities.

(3.) ON a perusal of the return of income filed by M/s DTDC Ltd., pertaining to the asst. yr. 1995-96, it was noticed by the AO that the said company had advanced an amount of Rs. 6,60,000 to each of the assessees on 28th March, 1995 and. the same was reflected in the balance sheet of M/s DTDC Ltd., under the head "Loans and advances". In total an amount of Rs. 39,60,000 was found to be shown as advance for purchase of land under the heading "Loans and advances" which includes Rs. 6,60,000 paid to each of the assessees/directors. Therefore, proceedings were initiated under S. 147 for reassessment of the income escaping assessment. The assessees filed their statement of objections contending that the issue of deemed dividend was discussed in detail through the course of the block assessment and therefore, the reopening of an already concluded assessment on a mere change of opinion is not valid in law. The total amount of accumulated profits of the company was only Rs. 6,32,414 as on 31st March, 1994. Therefore, as the same was much less than the total advance of Rs. 39,60,000 to all the directors, the question of deemed dividend as contemplated under S. 2(22)(e) of the Act does not arise. After considering the aforesaid objections, the AO rejected the contentions. He held that the total accumulated profits as on 31st March, 1995 were Rs. 58,51,672, whereas Rs. 6,32,414 represented the opening balance of the accumulated profits as on 1st April, 1994. Therefore, as the accumulated profits were more than the advance given at the relevant point of time, S. 2(22)(e) was applicable. He further held, that though it is mentioned in the books of the company that the impugned advance was for the purchase of land, no such transaction of purchase of land took place. There is no document evidencing the payment of the aforesaid amount on 28th March, 1995 towards the proposed purchase of land. The agreement came into existence only on 21st Nov., 1995. Therefore, it was a simple advance which had no relation to any business needs of the company. Therefore, he proposed to reassess and tax the impugned advance of Rs. 6,60,000 as deemed dividend in the hands of each of the assessees.