1 IN THE HIGH COURT OF BOMBAY AT GOA. Writ Petition NO. 858 OF 2010. 1 M/s Britto Amusement Pvt. Ltd, a Company incorporated under the Companies Act, 1956 (Act 1 of 1956), having its registered Office at 184/189, Machado Cove, Vainguinim, Dona Paula-Goa. 2 Dr. William Britto, Managing Director, M/s Britto Amusement Pvt. Ltd, having its registered Office at 184/189, Machado Cove, Vainguinim, Dona Paula-Goa. ....... Petitioners. Versus 1 The Assistant Commissioner of Income Tax, Central Circle, having office at Pundalik Niwas, Rua- de-Ourem, Panaji-Goa. 2 The Commissioner of Income Tax, Central Circle, having office at Pundalik Niwas, Rua- de-Ourem, Panaji-Goa. ........ Respondents. Mr. M. S. Sonak, Advocate with Mr. P. S. Rao,Advocate for the 2 Petitioners. Ms. A. Dessai, Advocate for the Respondents. Coram:- S. C. DHARMADHIKARI & F. M. REIS, JJ. Date:- 6 th April, 2011. P.C.:- This Writ Petition filed under Article 226 of Constitution of India challenges the Notice dated 30.3.2010 and two orders dated 1.12.2010 and 21.12.2010. 2. The Petitioner No. 1 is a private limited company and Petitioner No. 2 is its Managing Director. 3. It is the case of the Petitioners that they had duly filed their Income Tax Returns for the Assessment year 2003-04 but they were surprised to receive the notice dated 30.3.2010, purportedly issued under Section 148 of the Income Tax Act, 1961, wherein first Respondent stated that he has reason to believe that income in respect of which the Petitioners were assessable to tax have escaped assessment within the meaning of Section 147 of the Act and therefore they propose to assess/reassess the income for this Assessment year. The Petitioners requested the first Respondent to furnish the reasons for re-opening the 3 assessment and the reasons were furnished by communication dated 25.5.2010. Thereafter, the Petitioners addressed objections dated 28.6.2010 and questioned the basis for re-opening the assessment. It is the case of the Respondents that during the financial year 2002-2003, M/s Goa Golf Club Private Limited is alleged to have advanced to the first Petitioner a loan to the extent of Rs.1.50 crores and since M/s Goa Golf Club Private Limited has shareholding of 48% approximately in M/s Britto Amusements Private Limited, the advances to the extent of Rs. 1.50 crores constitute “Deemed Dividend” within the meaning of Section 2(22) (e) of the Income Tax Act, 1961. 4. The case of the Petitioners was that payment came to be made by M/s Goa Golf Club Private Limited to the Petitioner No. 1 in partial settlement of amounts for providing various services and facilities by Petitioner No. 1 to M/s Goa Golf Club Private Limited. It is stated that the total charges payable are to the tune of Rs. 2.23 crores and amount was duly debited to the account of M/s Goa Golf Club Private Limited by Petitioner No.1 in its books of accounts maintained for the said year. As such, there was no question of treating the amount as advance/loan. It is the case of the Petitioners that Respondents scrutinized the account of M/s Goa Golf Club Private Limited for the relevant year but in such scrutiny the Respondents issued an Order under 4 Section 143(3) read with Section 263 of Income Tax Act, 1961, without disallowing any expenses under Section 4(A) (2) (b) thereof. 5. Therefore, there were ample opportunities to find out the genuineness of the transaction in such exercise. The belated reopening of the assessment is not maintainable. It was further contended that Petitioner No.1 does not hold any share in M/s Goa Golf Club Private Limited, on the contrary it is M/s Goa Golf Club Private Limited which is a shareholder of Petitioner No.1. In such circumstances deemed dividend is a concept contemplating consideration Advance/loan in the hands of share holders. The receiptent in this case namely Petitioner No.1 is not the share holder of M/s Goa Golf Club Private Limited. Therefore, there is absolutely no question of treating alleged advance/loan as deemed dividend and reliance came to be placed on the judgment of this Court in the case of Anil Radhakrishna Wani Vs. Income Tax Officer & others reported in 2010(3) ITR564. 6. In such circumstances they have challenged the basis and the reasons for the re-opening of the assessment for the concerned assessment year. 7. The first Respondent having not been satisfied with this 5 challenge, decided to proceed and in accordance with the notice, passed an order dated 1.12.2010 which is impugned in the petition on several grounds. 8. Ordinarily, there was no occasion for this Court to consider any of the contentions raised as Petitioners have preferred an Appeal. They admit that they have filed an Appeal to the appellate authority. It is not their case that remedy of appeal is not efficacious, however, all that has been urged is that it is filed without prejudice to the rights of the Petitioners and merely because appeal is filed it cannot be said that the present petition is not maintainable. Reliance in that behalf is placed on the decision in the case of Anil Radhakrihna Wani Vs. Income Tax Officer and others, (2010) 323 ITR 564(Bom). While it is true that Division Bench held that mere filing of appeal would not prevent the assessee from invoking writ jurisdiction of this Court under Article 226 of the Constitution of India nor the petition could be held to be not maintainable because appeal has been preferred without prejudice to the rights and contentions of the Petitioners. 9. However, applicability of this principle would depend on facts and circumstances of each case. Even if the Writ Petition can be filed, the limits of the said jurisdiction are clear. If there are disputed 6 questions of fact which can duly be resolved by alternate remedies, this Court would refuse to interfere. The individual facts is the deciding factor. In the case before the Division Bench, the Petitioner who was an Advocate, was partner of a law firm, retired therefrom on 30.9.2002. Upon his retirement he set up practice independently and as a partner of another firm. The money that he was entitled to receive on retirement from his earlier law firm was paid to him in installments. A sum of Rs. 17,01,562 was received in the relevant assessment year. The Petitioner therein filed the returns for that assessment year. The return was processed. Scrutiny was also undertaken and notice was given to re- open the assessment on 31.3.2009. The assessment in question was for the year 2003-04. Therefore, the first contention that was raised was after a lapse of 6 years, the assessment is sought to be re-opened and therefore the exercise of re-opening it after a period of 4 years by itself would enable the Petitioners to succeed. Alternatively, it was contended that the amount was paid to the Petitioner on his retirement in consideration of a renunciation of his right to freely practice and thereafter he had continued practice. In such circumstances and when it was found that bank summary and capital account disclosed particulars on the basis of admitted fact and particularly the condition precedent having not been satisfied, that the petition was held to be maintainable and it ultimately succeeded. 7 10. In the case before us this is not the factual position. Here, the grounds for reopening the assessment have been furnished to the Petitioners. They were questioned and thereafter an order has been passed on 1.12.2010, copy of which is at page 72. There is a speaking order and it was concluded prima facie that the assessee concern has common directors. It is having substantial interest in M/s Goa Golf Club Private Limited and a beneficial shareholder with more than 10% voting rights in a company from which it has received loans/advances. It is for such purpose that the amount was treated as deemed dividend. The factual basis upon which Mr. Sonak would like to question the exercise is firstly that there was a scrutiny already undertaken and nothing objectionable was found in the same and particularly he placed reliance upon the order made in that behalf. Secondly, he submits that Section 2(22) (e) may be attracted, yet, the amount has been paid to the Petitioner No.1, which is not a share holder of M/s Goa Golf Club Private Limited. 11. Learned Counsel appearing for the Respondents on the other hand submits that for the purpose of scrutiny and whether this provision is attracted or not, the officer has to go into factual aspects and record the findings. He has recorded a finding that there is reason to 8 believe that income has escaped the assessment during the assessment period in scrutiny under section 143 (3) and 263 of the Income Tax Act, 1961. The assessee has not brought to the notice of the assessing officer that there are common directors and shareholders who have substantial interest with more than 10% voting rights in a company, from which the Petitioner no.1 has received loan and advances. 12. Prima facie, the Authority proceeded on the basis that both entities are private limited companies and second Petitioner and his wife have a substantial interest therein. Whether the interest is substantial or not and to what extent and whether in the facts and circumstances of the case, Section 2(22) (e) is attracted or not, is a matter which cannot be decided on affidavits. The Petitioners have admittedly filed an appeal. It is not as if that mere filing of appeal has persuaded us not to exercise writ jurisdiction. In the peculiar facts and circumstances of the case, Petitioners have ample opportunities to satisfy the Appellate Authority on both grounds which have been raised and argued. We have not concluded their case on both counts. It is in peculiar facts of this case, that the reliance on Anil Radhakrishna Wani (supra) is misplaced. In the decision reported in (2007) 4 SCC 327, Commissioner of Income Tax, Calcutta V/s Mukundray Shah in para 16 the Hon'ble Supreme Court held thus:- 9 “The above two judgments indicate that the question as to whether the payment made by the company is for the benefit of the assessee is a question of fact. In this case, the Tribunal has concluded that the payment routed through MKF and MKI was for the benefit of the assessee. This was a finding of fact. It was not perverse. Therefore, the High Court should not have interfered with the said finding. Further, the above two judgments lay down that the concept of deemed dividend under Section 2(22)(e) of the Act postulates two factors, namely, whether payment is a loan and whether on the date of payment there existed “accumulated profits”. These two factors have to be co- related. This correlation has been done by the Tribunal coupled with the fact that all withdrawals were debited in the capital account of the firm leading to the debit balance of Rs.8.18 crores. The High Court has erred in disturbing the findings of fact.” 13. In such circumstances, we are of the view that factual inquiry should be held which alone, in this case, assists in resolving the controversy. As far as all other decisions are concerned, the principles therein, whether will be attracted in the present case, is once again a matter left to be decided by the Appellate Authority who has been approached by the Petitioners. On the basis of material produced before the Authority, it will render a finding as to whether the reliance on these 10 decisions in these facts is misplaced or not. We have no doubt in our mind that the contentions which are raised and the grounds taken in the petition would be considered by Appellate Authority under the Act. We have no doubt in our mind that Appellate Authority would apply its independent mind to all submissions. We are not inclined to exercise writ jurisdiction in this case as factual disputes cannot be resolved in our limited jurisdiction and that Appeal is a efficacious remedy in this case. Writ Petition is therefore dismissed. No costs. S. C. DHARMADHIKARI, J. F. M. REIS, J. vn*