Income Tax Appellate Tribunal - Chandigarh
Gspirzada,Huf, Chandigarh vs Pr.Cit-1, Chandigarh on 25 November, 2021
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ"ए"च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH "A" CHANDIGARH ी संजय गग , या यक सद य एवं ीमती अ नपण ू ा ग&ु ता, लेखा सद य BEFORE: SH. SANJAY GARG, JUDICIAL MEMBER & SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 48/CHD/2021 नधा रण वष / Assessment Year : 2016-17 G.S.Pirzada, HUF Versus The PCIT-1, House No. 59, Sector-4, Chandigarh Chandigarh.
थायी लेखा सं./PAN NO: AADHG7242R अपीलाथ /Appellant यथ /Respondent नधा रती क ओर से/Assessee by : ShriParikshitAggarwal, CA राज व क ओर से/ Revenue by : Smt. C. Chandrakanta, CIT सन ु वाई क तार$ख/Date of Hearing : 26.08.2021 उदघोषणा क तार$ख/Date of Pronouncement : 25.11.2021 VIRTUAL HEARING आदे श/Order PER ANNAPURNA GUPTA, AC COUNTANT MEMBER:
The present appeal has been preferred by the assessee against the order dated 23.03.2021 of the Principal Commissioner of Income Tax, Chandigarh ( hereinafter r e f e r r e d t o a s ' P C I T' ) e x e r c i s i n g h i s r e v i s i o n a r y j u r i s d i c t i o n u/s 26 3 of the I ncome Tax Act, 19 61 ( hereinaf ter re ferred to as 'the Act') for 2016-17 assessment year.
ITA -48/CHD/2021 A.Y. 2016-17 Page 2 of 13
2. As transpires from the order of the PCIT in challenge before us, the order passed by the AO in the present case u/s 143(3) of the Act accepting the returned income of the assessee was found to be erroneous and pre-judicial to the interest of the Revenue for the reason that the PCIT found from the documents on record that the agriculture income returned by the assessee of Rs. 72,63,570/- was doubtful and to the extent of Rs. 21,61,820/- could not be considered as agriculture income of the assessee. He, therefore, was of the view that considering the documents filed by the assessee in support of the income returned by him, the same were not sufficient to establish the claim of the assessee vis- à-vis the agriculture income and the AO ought to have made deeper inquiry re garding the same before accepting the returned income of the assessee. Th e P C I T , a c c o r d i n g l y , s e t aside the order passed by the AO directing him to pass a fresh order for making necessary enquiries on the issue relating to agriculture incomereturned by the asse ssee.
3. Th e assessee has challe nged the aforesai d order be fore us raising the following grounds :
1. That on law, facts & circumstances of the case, the Worthy Pr. CIT has grossly erred assuming jurisdiction u/s 263 even when :
1.1 The original assessment order passed u/s 143(3) did not satisfy the twin conditions of being an 'erroneous order' and'prejudicial to the interest of revenue'.
ITA -48/CHD/2021 A.Y. 2016-17 Page 3 of 13 1.2 The Worthy Pr. CIT has erred in setting aside the assessment order u/s 143(3) and in directing the AO to make assessment afresh on the ground that AO had not conducted worthwhile enquiries during the assessment proceeding even when the AO had conducted thorough enquiries and also most importantly the Pr. CIT failed to carry our any enquiry himself and also failed to demonstrate which most necessary enquiry the Ld. AO failed to carry out. 1.3 The Worthy Pr. CIT failed to appreciate that inadequate inquiry does not amount to lack of inquiry so as to assume valid jurisdiction u/s 263. 1.4 The Worthy Pr. CIT has erred in holding that the agricultural income declared by the appellant has been accepted by the Ld. AO without making worthwhile enquiries even when necessary enquiry was conducted by the Ld. AO and enough material was on record of Ld. AO to accept the said agricultural income.
1.5 The Worthy Pr. CIT has erred in passing the impugned order ex-parte u/s 263 even when a detailed & comprehensive reply was e-filed by the appellant on the day of hearing itself and having failed to consider the same, this shows the prejudiced and biased mind of the respondent and therefore, the impugned order u/s 263 deserves to be quashed.
1.6 The Worthy Pr. CIT issued show cause notice u/s 263 which was duly e-replied by the appellant but the same was not considered before passing the impugned order u/s 263 on the very same date of hearing and even no heed was paid to the prayer of the assessee to recall the order u/s 263 and hence the impugned order u/s 263 deserves to be quashed.
1.7 The Worthy Pr. CIT has conducted the impugned proceedings u/s 263 in extreme haste and without affording reasonable opportunity of being heard to the appellant.
2. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.
4. Th e fir st argumen t raise d b y the assesse e before us w as that the impugned order of the ld. PCIT needed to be set aside since it had been passed in gross violation of the principles of natural justice without giving the assessee adequate opportunity of hearing and without considering the reply filed by the assessee to it. That the l d. PCI T h ad exercised his powers u/s 263 of the Act in gross violation of the principles of natural justice enunciated in the Section ITA -48/CHD/2021 A.Y. 2016-17 Page 4 of 13 itself requiring the PCIT to pass the order after affording due opportunity of hearing and after making necessary enquiries. In support of this contention, he relied on various case laws as under :
1. 'Sona Builders vs. UOI (SC),251 ITR 197
2. M/s BrollyDealcom LLP vs. ITO (Cal. Trib .)ITA No. 1543/2013
3. JayanthiNathrarajan vs. ACIT (Mad. HC) 401 ITR 215
4. TulsiTracom Private Limited vs. CIT (Del. High Court)161 DTR 148
5. CIT vsGirdharilal (Raj. HC)147 ITR 379
6. Pr.ClTvs. Delhi Airport Metro Express Pvt. Ltd. (Del. HC)398 ITR 8
7. Smt. LilaChaudhary vs. CIT (Gauh. HC)289 ITR 226
8. Anita Rani vs. Pr. CIT (Del. Trib)ITA No. 2388, 2389 &2390/2017
9. Amira Enterprises Ltd. vs. Pr. CIT (Del. Trib.)ITA No. 3206/2017
5. Th e ld. DR, however, has contended that due opportunity was afforded to the assessee and alternatively has stated that the issue may be sent back to the PCIT at best if it is considered that adequate opportunity was not afforded to the assessee and the order should not be set aside for this reason as contended by the ld. counsel for the assessee.
6. We have heard both the parties. The fac ts pointe d out by the ld. counsel for the assessee to bring out the contention that adequate opportunity of hearing was not afforded to him and which facts have not been disputed by the Revenue also are that the impugned assessment year in the present case is assessment year 2016-17. The ITA -48/CHD/2021 A.Y. 2016-17 Page 5 of 13 assessment order passed u/s 143(3) sought to be revised was dated 31.10.2018. As per Section 263 sub-section (2) the limitation to revise this order expired on completion of two years from the end of the Financial Year in which the order sought to be revised was passed i.e. 31.03.2020 but on account of the pandemic of Covid-2019 occurring in the month of February-March, 2020, this limitation was extended by the CBDT by one year and accordingly, the order u/s 263 in the present case could be passed upto 31.03.2021. There is no dispute vis-à-vis these facts. The first Show Cause Notice assuming jurisdiction u/s 263 of the Act was issue d to the assessee dated 16.03.2021 via I TBA P ortal . No physical notice was issued to the assessee. As per the said notice, the assessee was to respond to the same on 19.03.2021. Since the assessee failed to respond to this n otice, another noti ce was issue d th rough the I TBA Portal on 19.03.2021fixing the case on 23.03.2021 on which date the order u/s 263 was passed. The se f acts emanate from the order of the PCIT itself. Th e ld. counsel for the assessee has placed the copies of these notices before us dated 16.03.2021 and 19.03.2021 in his Paper Book filed before us at page No. 1 to 2 and 3 to 4 respectively. He has further contended that in response to the second notice dated 19.03.2021 asking the assessee to respond to the ITA -48/CHD/2021 A.Y. 2016-17 Page 6 of 13 same on 23.03.2021, due reply was filed by the assessee explaining the reason for not complying with the first notice being that since it was uploaded on the portal only, he was not aware of the same and his counsel who was dealing with his tax matter was unwell and the notice did not come to his knowledge also. That eve n the asse ssee was unwell for the past the past three months due to severe head injury and w as ad mi tted in h ospital for the s ame . D ue re ply to the queries raised in the Show Cause Notice was also filed and it was also pointed out in the said letter that since the limitation for passing the order was expiring on 31.03.2021, the issuance of notice in the last 15 days, that too without giving sufficient time to respond to the same was not reasonable opportunity of hearing being granted to the assessee. The said letter w as p laced at Paper Book page No. 5 to 15 before us. Copy of acknowledgement from the I T Portal to the afore said reply filed by the assessee was placed at Paper Book page No. 16 to 17 and at Paper Book page No. 18 copy of screen shot from the IT Portal in respect of filing of reply on 23.03.2021 was fled. At Paper Book page No. 19 was placed a copy of e-mail dated 23.03.2021 which was also sent to the PCIT indicating the reply to the Show Cause Notice filed on 23.03.2021. At Paper Book page No. 20, 21 and 22 were filed copy of reque st letters to the PCIT for ITA -48/CHD/2021 A.Y. 2016-17 Page 7 of 13 recalling of the order filed the very next day itself i.e on 24/03/21 since the re ply had not been considered despite having been filed during official hours itself on the specified date and also copy of the e-mail sent to the Ld.PCIT the same day attaching the said letter.
7. Basis the aforesaid facts, the pleading of the ld. counsel for the assessee is that the proceedings u/s 263 of the Act were initiated just 15 days before the limitation for passing order was to expire and the assessee was not even given adequate opportunity to respond since the first notice was issued on 16.03.2021 asking the assessee to respond on 19.03.2021 , giving a period of 4 days to respond which included two non-working days i.e. Saturday and Sunday in between, literally tantamounting to give only two days to the assessee to collect information and respond to the queries raised. That the next notice also hardly afforded any opportunity to the assessee again giving a time period of only four days. That despite the same, the assessee responded to the said notice within whatever available time and also apprised the PCIT of the reason for non responding to the first notice and also that adequate opportunity ought to have granted to him in the present proceedings. He pointed out that despite the reply filed by the assessee on ITA -48/CHD/2021 A.Y. 2016-17 Page 8 of 13 the I TBA P ortal an d e-mail sent to the PCI T in for min g hi m of the reply filed, the PCIT still chose to ignore the same and passed the order, thus denying both adequate opportunity of he aring to the assessee and also not considering the reply filed by the assessee before passing the revisionary order.
8. Th e aforestated facts have n ot been di sp uted b y the Revenue and we see no reason but to agree with the ld. counsel for the assessee in the backdrop of the aforestated facts that not only was the assessee denied opportunity of hearing in the present case but also that order was passed without considering the reply filed by the assessee. Undoubtedly the present proceedings were initiated just 15 days before the expiry of limitation to pass the order u/s 263 of the Act and the two notices given to the assessee for he aring afforded very short period of time to reply. That the first one given only two days time to reply and the second one four d ays ti me . F ur ther despite the i nadequate time given to the assessee to respond, , we find that the assessee still managed to file a reply to the Ld.PCI T and even pointed out the reason for not complying with the first notice. But apparently for no reason, his reply was not even considered by the Ld. PCIT when the facts before us clearly demonstrate that they were filed on the I TBA Por tal on the spe ci fied d ate ITA -48/CHD/2021 A.Y. 2016-17 Page 9 of 13 and even the PCI T was intimated of the reply filed on the s a i d d a t e . Th e R e v e n u e h a s n o t c o n t r o v e r t e d t h e s e f a c t s before us. So for some apparent reason, the PCIT simply chose to ignore the reply filed by the assessee and went ahead to pass the order u/s 263 of the Act on the very same d a te ,i.e 2 3/0 3 /2 0 21 .
The impugned order, we hold,has not only has been passed in gross violation of the principles of natural justice but is a lso in viola tion of the procedure la id d own u /s 2 63 of the Act which specifically requires the authorities to pass the order u/s 263 after affording due opportunity of hearing to the as sessee and after mak ing such enquiry as is dee me d ne cessary. In the present case, the Ld.PCIT has neither afforded adequate opportunity of hearing to the assessee but by not taking note of the reply, he has not even made ne cessary enquiries in the present case before passing the impugned or der. The order passed, therefore, is in gross violation of the principles of natural justice and in view of the various decisions cited by the ld. counsel for the assessee before us, the only recourse is to set aside the same.
8.1 Th e Hon'ble Apex Court in the case of Sona Bui lders (supra) has held that where there was gross breach of the ITA -48/CHD/2021 A.Y. 2016-17 Page 10 of 13 principles of natural justice, the matter could not be remanded back to the appropriate authority. In the said case, the notice of hearing gave only 5 days time to the parties to respond which included the week end. Same was found to be inade quate by the Hon'ble Supreme Court. It was also noticed by the Hon'ble court that the allegation leveled on the assessee was not supported with any d ocume nt so as to e nable him to respond to the s ame . In such circumstances, it was held that there was gross breach of the principles of natural justice on account of inadequate ti me given to resp ond an d also on account of the fact that the assessee was not confronted with documents so as to respond to the same and the Apex Court, therefore, considering the statutory limit within which the appropriate authority was to act in the said case and noting his failure to act in conformity with the principles of natural justice he ld that the matter could not be remanded to the appropriate authority and must be set aside. 8.2 In the case of Tuls i Tracom Pvt. Ltd. (supra), the assessee was found to have never been issued or served any notice u/s 263 of the Act. The H on'ble High Cour t hel d that the Commissioner who had issued order u/s 263 ought to have been fully satisfied that adequate opportunity had been ITA -48/CHD/2021 A.Y. 2016-17 Page 11 of 13 given to the assessee to controvert the facts stated in the notice u/s 263 of the Act and to explain the situation concerning such facts and considering the limitation for the passing of order u/s 263, the Hon'ble Court he ld that no useful purpose would be served in giving opportunity of hearing to the assessee at this stage again. Th e order passed by the CIT was, therefore, set aside in the facts of the said case.
8.3 In the case of Gurdharilal (supra), the Hon'ble High Court again noticed that the assessee was not put to notice of the proceedings u/s 263 of the Act since the notice served on the assessee was returned back with postal endorsement " l e f t wi t h o u t a d d r e s s " and the notice issued to one holding the Power of Attorney in relation to his assessment and appellate proceedings was found to be not proper service of notice since the said person was not authorized to represent the assessee in the impugned proceedings. Th e Hon'ble Court held that the service of notice on the said person, there fore, d id not me et the re qu ire ments of opp ortunity of being heard as conte mplated by Section 263 and the order passed by the PCIT was set aside.
8.4 In the case of Anita Rani (supra) the order passed by the Ld. PCI T was set aside again for the reason that notice ITA -48/CHD/2021 A.Y. 2016-17 Page 12 of 13 u/s 263 was not served on the assessee, therefore, denying him due opportunity of hearing.
9. In view of the above, we have no hesitation, therefore, in holding that the impugned order passed in the present case is in gross violation of the principles of natural justice having been passed in haste without giving adequate opportunity of he aring to the assessee and without even dealing with and considering reply filed by the assessee and the order, therefore, needs to be set aside.
10.Since we have set aside the order of the PCI T, the grounds raised by the assessee on the merits of the case need no adjudication being rendered academic in nature. 1 1 . Th e a p p e a l o f t h e a s s e s s e e , i s t h e r e f o r e , a l l o w e d i n a b o v e terms.
Sd/- Sd/-
(संजय गग ) (अ नपण
ू ा ग&ु ता)
(SANJAY GARG) (ANNAPURNA GUPTA)
या यक सद य/ Judicial Memberलेखा सद य/ Accountant Member "Poonam"
ITA -48/CHD/2021 A.Y. 2016-17 Page 13 of 13 आदे शक त*ल+पअ,े+षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकरआयु-त/ CIT
4. आयकरआय-
ु त (अपील)/ The CIT(A)
5. +वभागीय त न0ध, आयकरअपील$यआ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायकपंजीकार/ Assistant Registrar