SHIVA KANT MISHRA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE appellant is an individual by status and is a doctor by profession, running a clinic. The appellant alleges that he was filing his return regularly. For the asst. yr. 2002 -03 the appellant filed his return under s. 139(1) of the IT Act (hereinafter referred to as the "Act") disclosing an income of Rs. 7,20,377. In the return the appellant disclosed an income of Rs. 35,85,930 under the head "Long -term capital gains" arising from sale of shares. In this return, the appellant claimed exemption under s. 54F on the income shown under the head "Long -term capital gains" indicating that the amount was invested in the construction of a house. Before the return could be processed, a search and seizure operation was carried out under s. 132 of the Act at the appellant's residence and business premises. Based on this search operation, block assessment proceedings under s. 158BC was initiated for the block period commencing from the asst. yr. 1997 -98 till the date of the search, i.e., 14th Dec., 2002. The block assessment proceedings covered the asst. yr. 2002 -03 in which extensive query on the sale of shares and purchases of shares was inquired and discussed. The assessing authority passed an assessment order dt. 28th Sept., 2004 holding that the whole transaction was a sham transaction with regard to the claim of long -term capital gains and that it was merely an entry for claiming false exemption under s. 54F of the Act. The AO, accordingly, held that the amount of Rs. 36,60,072 was undisclosed income and added the same to the income of the assessee for the asst. yr. 2002 -03. Aggrieved by the block assessment order dt. 28th Sept., 2004 the appellant filed an appeal, which was allowed by an order dt. 28th April, 2006. The appellate authority held that the amount of Rs. 36,60,072 could not be added as an undisclosed income of the assessee as it was not based on the material seized during the course of search and seizure operation under s. 132 of the Act and, therefore, the said amount was liable to be deleted. The Revenue, being aggrieved by the appellate order dt. 28th April, 2006, preferred an appeal which was dismissed by the Tribunal by an order dt. 23rd May, 2008. The Department did not pursue the matter thereafter before the higher forum and, consequently, the order passed by the Tribunal attained finality.

(2.) AFTER the completion of the block assessment order dt. 28th Sept., 2004 the AO issued a notice dt. 30th March, 2005 under s. 148 of the Act reopening the assessment proceedings for the asst. yr. 2002 -03 on the sole ground that the assessee received an amount of Rs. 1,65,000 from M/s. Shivani Hospital (P) Ltd., which was liable to be assessed in the hands of the appellant as deemed dividend under s. 2(22)(e) of the Act. Based on the aforesaid notice issued under s. 148 of the Act reassessment, an order under s. 147 of the Act was passed on 27th March, 2006. In this reassessment order, the AO made the additional dividend of Rs. 1,65,000 under the head "deemed dividend" on account of advance received from M/s. Shivani Hospitals (P) Ltd. The AO further added an amount of Rs. 36,60,072 on account of the sale of shares. While adding the said amount, the AO in its order held that this issue with regard to the long -term capital gains was examined in detail in the block assessment order where an addition of Rs. 36,60,072 was made. However, in order to protect the interest of the Revenue, this addition of Rs. 36,60,072 was again being made on a "protective basis".

(3.) AGGRIEVED by the order of the appellate authority, the Revenue preferred an appeal before the Tribunal. The Tribunal by its order dt. 23rd Jan., 2015 allowed the appeal and set aside the order of the appellate authority and directed the appellate authority to redecide the matter afresh in the light of the observations made therein. The Tribunal held that once assessment is reopened on a particular issue and addition is made thereon, other issues which surface during the course of assessment proceeding can also be examined and addition could be made accordingly. The Tribunal held, that the assessment was reopened on the issue of deemed dividend and during the course of reassessment proceeding, the AO had examined the issue on long -term capital gains and the claim of exemption under s. 54F, which was within the permissible jurisdiction of the AO to examine and pass orders. The Tribunal held that there was no infirmity in the action of the AO.