Dishman Pharmaceuticals & Chemicals Ltd. v. Dy. CIT

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The Tax PublishersSpecial Civil Application No. 15304 of 2010 2012 TaxPub(DT) 2518 (Guj-HC) : (2013) 050 (I) ITCL 0517 : (2012) 346 ITR 0228 : (2012) 253 CTR 0306 : (2012) 077 DTR 0158 INCOME TAX ACT, 1961 --Reassessment--Full and true disclosure Validity of notice under section 147 after four years--During the assessment proceedings of the assessment year 2006-07, it is seen that the amounts given by SBL to the assessee are in the nature of loan transactions on which section 2(22) (e) was clearly applicable. Since there was a opening balance of Rs. 2,91,10,000 in the books of SDBPL in the case of the assessee the assessment year 2006-07. The assessee was asked to produce accounts of earlier years. On a perusal of the accounts of the assessee it is seen that the assessee holds 22.3 per cent, shareholdings of M/s. SDBL. Thus, the assessee has substantial interest in SDBL. Apart from business transactions, it is seen that (as per information available on records), SDBL has also given loans to the assessee. A perusal of accounts for the assessment year 2003-04 shows that the assessee-company has taken loans of Rs. 2,03,50,000 from SDBPL. Further, perusal of the balance-sheet of SDBPL for the assessment year 2003-04 reveals that there was reserve and surplus of Rs. 4,59,63,532. Accordingly, AO was reason to believe that income in the form of deemed dividend as per section 2(22)(e) of Rs. 2,03,50,000 is escaped from assessment. Held: ,/i>During the original assessment under section 1243(3) the assessee had not disclosed the fact that it was having substantial interest in Loaner company and thus due to non-disclosure of same the notice under section 148 was valid thogh issued after 4 years. The fact remains that from the return filed and the documents annexed with the return, nowhere it can be ascertained what was the holding of the assessee-company (in terms of voting power) in SDBL. If, upon further inquiry by the AO, such details could be gathered and the nature of payment received by the petitioner from SDBL could be ascertained, to find out whether the same should be treated as 'deemed dividend' under section 2(22) (e) or not, the same, would not satisfy the requirement of fully and truly disclosing all material facts necessary for assessment; particularly viewed from the expression given in Explanation 1 to section 147, which provides, inter alia, that production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within meaning of section 147. [Para 13] The reasons recorded and communicated to the assessee, in the present case, sufficiently and clearly lays down the foundation for reopening of the assessment on the ground of the assessee not ahviong truly and fully disclosed all the material facts. Income Tax Act, 1961 Section 147, Proviso Income Tax Act, 1961 Section 148 IN THE GUJARAT HIGH COURT AKIL KURESHI & MS. SONIA GOKANI JT. Dishman Pharmaceuticals & Chemicals Ltd. v. Dy. CIT Special Civil Application No. 15304 of 2010 1 March, 2011 Petitioner by : Tushar P. Hemani with Ms. Vaibhavi Parikh, SUBSCRIBE FOR FULL CONTENT

The Tax PublishersSpecial Civil Application No. 15304 of 2010
2012 TaxPub(DT) 2518 (Guj-HC) : (2013) 050 (I) ITCL 0517 : (2012) 346 ITR 0228 : (2012) 253 CTR 0306 : (2012) 077 DTR 0158

INCOME TAX ACT, 1961

--Reassessment--Full and true disclosure Validity of notice under section 147 after four years--During the assessment proceedings of the assessment year 2006-07, it is seen that the amounts given by SBL to the assessee are in the nature of loan transactions on which section 2(22) (e) was clearly applicable. Since there was a opening balance of Rs. 2,91,10,000 in the books of SDBPL in the case of the assessee the assessment year 2006-07. The assessee was asked to produce accounts of earlier years. On a perusal of the accounts of the assessee it is seen that the assessee holds 22.3 per cent, shareholdings of M/s. SDBL. Thus, the assessee has substantial interest in SDBL. Apart from business transactions, it is seen that (as per information available on records), SDBL has also given loans to the assessee. A perusal of accounts for the assessment year 2003-04 shows that the assessee-company has taken loans of Rs. 2,03,50,000 from SDBPL. Further, perusal of the balance-sheet of SDBPL for the assessment year 2003-04 reveals that there was reserve and surplus of Rs. 4,59,63,532. Accordingly, AO was reason to believe that income in the form of deemed dividend as per section 2(22)(e) of Rs. 2,03,50,000 is escaped from assessment. Held: ,/i>During the original assessment under section 1243(3) the assessee had not disclosed the fact that it was having substantial interest in Loaner company and thus due to non-disclosure of same the notice under section 148 was valid thogh issued after 4 years.

The fact remains that from the return filed and the documents annexed with the return, nowhere it can be ascertained what was the holding of the assessee-company (in terms of voting power) in SDBL. If, upon further inquiry by the AO, such details could be gathered and the nature of payment received by the petitioner from SDBL could be ascertained, to find out whether the same should be treated as 'deemed dividend' under section 2(22) (e) or not, the same, would not satisfy the requirement of fully and truly disclosing all material facts necessary for assessment; particularly viewed from the expression given in Explanation 1 to section 147, which provides, inter alia, that production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within meaning of section 147. [Para 13] The reasons recorded and communicated to the assessee, in the present case, sufficiently and clearly lays down the foundation for reopening of the assessment on the ground of the assessee not ahviong truly and fully disclosed all the material facts.

Income Tax Act, 1961 Section 147, Proviso

Income Tax Act, 1961 Section 148

IN THE GUJARAT HIGH COURT

AKIL KURESHI & MS. SONIA GOKANI JT.

Dishman Pharmaceuticals & Chemicals Ltd. v. Dy. CIT

Special Civil Application No. 15304 of 2010

1 March, 2011

Petitioner by : Tushar P. Hemani with Ms. Vaibhavi Parikh,