Commissioner of Income Tax vs Mokul Finance Ltd.

The Revenue is aggrieved by an order dated passed by the Income Tax Appellate Tribunal, Delhi Bench ''E'', New Delhi (''the Tribunal'') in ITA Nos. 3857/Del/2003, 3256/Del/2003 and CO No. 203/Del/2005 in ITA No. 3857/Del/2003 relevant for the asst. yr. 1996-97.

The only issue in this appeal is whether reassessment proceedings initiated u/s 148/147 of the IT Act, 1961 (the ''Act'') were valid in law.

The AO sought to reopen the assessment proceedings and the reasons given were as follows:

During the course of assessment proceedings for asst. yr. 1998-99 it was noticed that the assessee company received loans from M/s Mokul Overseas (P) Ltd. and M/s Mokul International Ltd. There are common directors in these three companies who are also the shareholders. The companies, which gave loans, had accumulated profits and provisions of Section 2(22)(e) were invoked.

During the asst. yr. 1996-97 also the assessee company received a loan of Rs. 1,96,68,192 from M/s Mokul Overseas (P) Ltd. which had accumulated profits of Rs. 2,22,73,533. There are common directors in these companies who are also the shareholders. I have reason to believe that deemed dividend of an amount of Rs. 1,96,68,192 has escaped assessment [done u/s 143(3)].

Notice u/s 148 be issued.

Addl. CIT/Range 5 may kindly see.

The sum and substance of the contention of the learned counsel for the Revenue was that the assessee had received loans from M/s Mokul Overseas (P) Ltd. and these loans were really in the nature of deemed dividend as defined u/s 2(22)(e) of the Act.

It was pointed out by learned counsel that the Commissioner of Income Tax (Appeals) [CIT(A)] specifically pointed out in para 8(g) of his order that details of quantum of beneficial ownership of shares by the shareholders and as also the particulars of accumulated profit possessed by M/s Mokul Overseas (P) Ltd. had not been filed.

We find from a perusal of para 13 of the order passed by the Tribunal that the original assessment was framed u/s 143(3) of the Act. The assessee was required to file the list of shareholders with the complete addresses as on 31st March, 1996, which it did; the assessee also filed confirmation dt. 29th Jan., 1998 of M/s Mokul Overseas (P) Ltd. certifying its closing balance; the confirmation given by M/s Mokul Overseas (P) Ltd. also mentions its PAN number and circle where it was assessed; the books of accounts of the assessee were produced on more than one occasion before the AO; it was also mentioned that an amount of Rs. 1,96,68,192 was received by the assessee as an unsecured loan from M/s Mokul Overseas (P) Ltd.; the tax audit report was also filed by the assessee. The Tribunal noted that the Departmental Representative was not able to point out anything to suggest which material that could have a bearing on the applicability of Section 2(22)(e) of the Act was not furnished by the assessee.

We find from a perusal of the order passed by the Tribunal that all the relevant material available with the assessee in this regard was placed before the AO and, therefore, it cannot be said that the assessee had not furnished full and true particulars of its income. We do not find any reason to discard the view taken by the Tribunal that the reassessment proceedings as well as the notice issued to the assessee for reassessment were without any justification. No substantial question of law arises. Dismissed.