By TIOL News Service

NEW DELHI, NOV 27, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether when Assessee has failed to point out any query raised by AO in original assessment proceedings which can substantiate that AO has formed an opinion on impugned issue, such a case cannot be viewed as 'change of opinion'. YES is the answer.

Facts of the case:

The Assessee is engaged in providing education by running an educational institute in the name and style of 'GD Goenka World Institute', by offering courses of study of foreign university to the students in India. It had filed the return declaring income of Rs.81,82,765/- which was accepted after making certain disallowances. Subsequently, on receipt of information from another AO, the AO of present assessee initiated reassessment proceedings by way of recording reasons to believe that income escaped assessment and issued notice u/s 148. The assessment u/s 147 was therefore passed after making addition of Rs.1,12,05,965/- u/s 2(22)(e), with the observation that assessee had received loans and advances of Rs.1,21,25,956/- from 'M/s. GD Goenka Tourism Corporation Limited', which was liable to be assessed as deemed dividend u/s 2(22)(e) in the hands of assessee. On appeal, the CIT(A) upheld the validity of reassessment, however deleted the addition on merit.

Tribunal held that,

++ we find that the AR has assailed the reassessment proceeding, firstly, on the ground that assessment was reopened on the direction of the superior authority. In the opinion of this Tribunal, the allegation of AR are absolutely incorrect. He has nowhere brought that the Addl. CIT has issued any direction for reopening of assessment. On the contrary, in the reasons recorded, the AO has made source of the information as assessment order in the case of M/s G.D. Goenka Tourism Corporation Limited. Merely transferring an information by the Addl. CIT in the capacity of an AO of M/s G.D. Goenka Tourism Corporation Limited, cannot be termed as direction issued by the Additional CIT to the AO and, therefore, this contention of AR that AO has recorded reasons to believe on the direction of the superior authority, is rejected. Further, the AR raised the issue that AO has not applied his mind while reopening the assessment. We do not agree with such contention of the AR. On perusal of the reasons recorded, it is clear that AO has noted the quantum of payment as also the accumulated profits in the hands of the company and thereafter recorded satisfaction that income escaped the assessment. Hence, the reasons have been recorded after due application of mind. The third ground of assailing the reassessment proceeding was that the reopening was based on change of opinion. We find that in the original assessment, the AO has not framed any opinion as to the loans in advance from M/s. GD Goenka Tourism Corporation Limited was not in the nature of deemed dividend. The AR could not point out any query raised by AO in original assessment proceedings which could substantiate that the AO formed an opinion on the issue of deemed dividend u/s 2(22)(e). The AR has also not brought to notice whether all the requisites conditions for making the loans and advances liable for deemed dividend u/s 2(22)(e) were fully disclosed to the AO. In the circumstances, the contention of AR that reopening was based on change of opinion, cannot be accepted;

++ according to AO, advances made in the course of bonafide trade transactions are covered by section 2(22)(e). The AO held that the payment received by the assessee from M/s. G.D. Goenka Tourism Corporation Limited fulfilled all the condition of section 2(22)(e) and further observed that only exception for not treating the payment as deemed dividend is that such payment made by the company in ordinary course of business and whether lending of money is substantial part of the business. The AO held that money lending is not substantial part of the business of G.D. Goenka Tourism Corporation Limited. The AO therefore held the loans in advance of Rs.1,21,25,956/- received during the year under consideration from M/s. G.D. Goenka Tourism Corporation Limited as deemed dividend in the hands of the assessee. The CIT(A) however deleted the addition in view of the decision of Bombay High Court in the case of CIT Vs. Parley Plastic Limited - 2010-TIOL-792-HC-MUM-IT. The High Court held that the legislature had deliberately used the word "substantial" instead of using the word "major" and/or specifying any percentage of business or profit to be coming under the lending business of the lending the money for the purpose of clause (ii) of section 2(22). The DR did not bring any contrary decision of the jurisdictional High Court or Supreme Court. In view of above facts and circumstances, we do not find any infirmity in the finding of CIT(A) on the issue in dispute and accordingly, we uphold the same.

(See 2017-TIOL-1638-ITAT-DEL)