THANKAMMA OOMMEN Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This appeal is filed by the assessee against the order passed by the Income-tax Appellate Tribunal, Cochin Bench, in I.T.A. No. 688/Coch/2010 in respect of the assessment year 2003-04. The facts involved in the above case would disclose that in respect of assessment year 2003-04, proceedings were initiated by issuing notice under section 148 of the Income-tax Act, 1961, on May 12, 2008. The assessee did not file any return of income. Hence, notice was issued to the assessee under section 144 of the Income-tax Act. A reply was sent, inter alia, stating that the assessee expired on May 26, 2008, and he is represented by legal heir, who is his wife, that he had filed a return of income on August 25, 2003, which is to be treated as return for the purpose of section 148 of the Income-tax Act. Thereafter, notice under section 143(2) was issued to the assessee.

(2.) The Department had reopened the assessment for the assessment year 2003-04, inter alia, observing that M/s. Thottakkad Estates (P.) Ltd., Mannar, has advanced a loan to Sri K.C. Oommen, its managing director, amounting to Rs. 69,50,432, which is deemed dividend in the hands of the said K.C. Oommen under section 2(22)(e) of the Income-tax Act. It is observed that the deemed dividend escaped assessment and, hence, the assessment is required to be reopened.

(3.) The assessee objected to the same by contending that from 1996-97 onwards, Thottakkad Estates (P.) Ltd. was providing loans to Mannar Chit Fund, a proprietary concern of the assessee, and the returns along with relevant accounts were being filed by both the company as well as the late Sri K.C. Oommen showing the particulars of loan and other details. It is also contended that the amounts in question were advanced to M/s. Mannar Trust Fund, a proprietary concern of the assessee, as part of the money lending business of Thottakkad Estates (P.) Ltd. In fact, Thottakkad Estates Ltd. had sold their property and they have not shown any income from agricultural operations. The Assessing Officer found that the managing director of the company was the only person to whom the company advanced money and the company was fully engaged in activities like investment in shares and debentures and money-lending was not its regular activity. In the said circumstances, the aforesaid amount was considered as deemed dividend and was treated as the income of the assessee.