Income Tax Appellate Tribunal - Ahmedabad
Smt. Shardaben B. Patel, Ahmedabad vs Pr. Cit, Ahmedabad-5,, Ahmedabad on 25 September, 2019
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'A' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 1026/Ahd/2018 ( नधा रण वष / Assessment Year : 2013-14) Smt. Shardaben B. Patel बनाम/ Pr. Commissioner of D-85, Shaktidhar Society, Vs. Income Tax-5 India Colony Road, 1st Floor, Narayan Bapunagar, Ahmedabad - Chambers, Near Patang 380024 Hotel, Ahmedabad -
380009 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : ABCPP5208J (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri Vijay Mehta, A.R. यथ क ओर से / Shri O. P. Vaishnav, CIT.DR Respondent by :
सन ु वाई क तार ख / Date of 09/08/2019 Hearing घोषणा क तार ख /Date of 25/09/2019 Pronouncement आदे श/O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the assessee impugning the revisional order dated 21.03.2018 passed b y the Principal Commissioner of Income Tax, Ahmedabad-5 ('PCIT' in short) under S. 263 of the Income Tax Act, 1961 (the Act) in connection with the assessment order passed b y the AO under s.143(3) of the Act dated 24.07.2015 for AY. 2013-14.
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2. The grounds of appeal raised b y the assessee read as under:
"1. The Learned Principal Commissioner of Income Tax (Pr . CI T) erred in law and in facts of the case in setting asi de the assessment order u/s 143(3) dated 24.07.2015 to the file of the AO and in directing him to frame an order de-novo.
2. The Ld. Pr . CIT err ed in law and on facts of the case in not providing the proper opportunity of being heard to the appellant and thus in violating the principles of natural justice, before passing the order u/s 263 of the Income Tax Act."
3. As per the grounds of appeal, the essential grievance of the assessee is that in the facts and circumstances of the case, the Pr.C IT was not justified in exercising revisionary powers under s.263 of the Act and thereb y setting aside the assessment order passed under s.143(3) of the Act with a direction to the AO to frame assessment afresh after proper examination, inquiry and verification with reference to long term capital gains of Rs.1,50,69,856/- derived b y the assessee. To adjudicate the grievance of the assessee, it would be pertinent to take note of the relevant facts.
3.1 The assessee filed her return of income for AY 2013-14, declarin g total income at Rs.18,22,490/-. The assessee inter alia claimed ex emption under s.10(38) of the Act on account of long term capital gains o f Rs.1,50,69,856/- on sales of shares. The return filed b y the assessee was subjected to scrutiny assessment and assessment order was framed under s.143(3) of the Act dated 24.07.2015 wherein the capital gains so declared b y the assessee was dul y accepted without an y disturbance. The assessment so framed b y the AO under s.143(3) of the Act was however could not met approval of the PCIT, who invoked supervisionary jurisdiction provided under s.263 of the Act and sought to modify the impugned order passed b y the AO. A show cause notice dated 27.02.2018 was accordingl y issued in this regard alleging the aforesaid assessment order to be erroneous and prejudicial to the interest of the Revenue. The relevant portion of the show cause notice is reproduced hereunder:
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"During the course of search proceedings detection of over 500 Cr. has been made on the basi s of off market purchase of shares in both t he scrip KGN Industries Ltd and KGN Enterprise Lt d. wherein the sale proceeds of shares were not br ought through Stock Exchange. On verification, it is noticed that the assessee has booked bogus long term capital gain by transition in the shares of M/s. KGN Enterprises to the tune of Rs. 1,50,69,856/-. At the time of assessment, t his information of fr audulent transaction was on records of the AO but during the course of assessment proceedings, the AO has not verified or conducted any inquiry in respect of the share transactions in respect of the bogus claim LTCG and completed the assess ment."
3.2 As per the show cause notice reproduced above, the PC IT essentiall y observed that the assessee has booked bogus long term capital gains in the share of KGN Enterprise Ltd. for which requisite inquiry was not carried out b y the AO while completing the assessment.
3.3 In response to the show cause notice, the assessee filed written repl y which is reproduced in para 4 of the Revisional order impugned herein.
The same read as under:
"4. In response to the above notice, the assessee filed written submission on 05/03/2018. In its reply the assessee has mentioned that the assessment order should not considered as erroneous and prejudicial to the interest of the revenue and consequentl y the same should not be set- aside u/ 263 of the Act or to be framed de-Novo after complete proper enquiries and verification. The reply given to the AO is repr oduced as under-
i) It is mentioned in your captioned show cause notice that, during the course of search proceedings detection of over 500cr has been made on the basis of off market purchase of shares in both the scrip KGN industries Ltd and KGN Enterprise Ltd wherein the sale proceeds of shares were not brought through stock exchange. In response to the same, I humbly submit that it is not clear from the show cause notice as to on whom the search was carried and how my sale transaction is being finked to it. 1 therefore request you good self to supply me following details:
a. Where and in whose search was conducted?
b. Statement recorded of the concerned person during
the search.
c What are the seized materials of search?
d. What is the outcome in their search case?
e. How is my trans action alleged to be not genuine?
I humbly request that till full details are provided to me, no proper opportunity of being heard is considered to be given to me which i s a mandate of section 263 of the Act. Till such time I request your I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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good self to treat my reply as an interim reply and I should be allowed to make further submissions based on details provided to me. Further, it is very crucial to note that my purchas e transacti on was made from a recognized broker and the sale transactions through recognized stock exchange "NSE" as against the allegation of sale not being any stock exchange as mentioned in your show cause notice.
(ii) Your attention is drawn to the provisions of section 263 of the Act which is reproduced as under:
"The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is er roneous in so for as it is prejudicial to the interest of the revenue, he may, after gi ving the assessee on opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, Including on order enhancing or modifying the assess ment, or cancelling the assessment and dir ect a fresh assess ment . "
Therefore, the pre requisite for applying the provisions of section 263 of the Act are not present in my case which is explained as under.
iii) You have mentioned in your show cause notice at para 2(i), "On verification, it is noticed that the assessee has booked bogus long term gain by trading in the s hares of M/s. KGN Enterprises to the tune of Rs.1,50,69,856/-. During the course of assessment proceedings, the AO has not verified the share transactions i n respect of the bogus cl aim of LTCG. "
iv) I hereby, deny t he observation made by you as above.
v) In this connection, I quote the questionnaire (copy enclosed) issued by the AO enclosed wi th notice u/s. 142(1) of the Act dated 12-06-
2015, which at question no. 7 specifically called from me as under:
"The details of dem at account, purchase/sale of shares and securities account with supporting evidences."
vi) In response to the same, I furnished the details called for vide my submission (copy enclosed) dated 08-07-2015, wherein at point no. 3-5, 1 have submitted complete details of the capital gains made by me amounting to Rs. 1,50,69,856/-. The details submitted by me vide this submission is reproduced as below:
"3. I am furnishing herewith a copy of income-tax return, computation of income, profit and loss account, balance sheet and capital account.
4. Detail of bank account held by me is as under:
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Na m e o f th e b a n k a n d b r a n ch Typ e o f A /c. No .
A /c.
Un io n Bank of I n d ia - S a vin g 454802010573856
Bapunagar
Meh sa n a Na g ri k S a h ka ri B a n k- S a vin g 3014
Bapunagar
Copy of bank pass books ore bank books are submitted herewith.
5. In respect of long term capital gain from share Transactions, I am s ubmitting following det ails a. Copy of ledger account of share transactions b. Copy of s ales bills-12 bills c. Copy of debit note, delivery note, confirmation end ledger account from Vijay Bhagwandas & Co. for purchase of shares of KGN Enterprise d. Copy of ledger account from India Infoline Ltd."
vii) Further, vide submiss ion dated 23-07-2015, I submitted my demat statements reflecting the said scrip. (Copy enclosed).
viii) It is pertinent to clarify that, the purchases were made through Vijay Bhagwandas & Co, the registered stock broker under SEBI. Details of purchases made thr ough the broker and proper confirmation from the stock broker were duly submitted to AO as reflected in point 6(c) above. I am submitting herewith annexur e reflecting sale and purchase of the said s hares for your good self s reference and recor d.
ix) These shares were held in demat account and were subsequentl y sold in National Stock Exchange (" NSE" ) through India Infoiine Ltd. The details thereof were duly submitted to AO as reflected in point 6(d) above.
x) The entire transaction was reflected in the bank statement submitted to the AO as reflected in point 4 above.
xi) Therefore, it gets confirmed that full details regarding purchase/sale of shar es were called for by the AO and were dul y submitted by me. The AO scrutinized all the details and supporting evidences submitted by me and only after being fully Satisfied, he accepted the claim of long term capital gains amounting to Rs . 1,50,69,856/-.
xii) In view of the above your honour's remar k in para 2(i ) for your show cause notice dated 27-02-2018 that the AO has not verified the said transaction and therefore the asses sment order u/s. 143(3) of the Act dated 24-07-2015 is erroneous and prejudicial to the interest of the revenue, thereby liable to be set aside, is not correct.
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xiii) The AO is not empowered to apply his mind on the same issue agai n
and again especially when the particular issue has been thoroughly examined and after proper verification the assessee's ciaimeTias been accepted.
xiv) In view of the above submission, it is humbly submitted that t he order passed u/s. 143(3) of the Act dated 24-07-2015 is not erroneous in so far as it is not prejudicial to the interests of the revenue.
xv) Therefore, no proceeding u/.s 263 of the Act should be initiated in my case since the AO's order u/s. 143(3) of the Act dated 24-07- 2015 does not require any modification.
xvi) Without prejudice to above, if your honour come to a conclusion for any reason to proceed ahead with the matter, you are requested to verify/examine my clai m of capital gains once again now.
xvii) Kindly place the above on record, drop the proceedings initiated u/s.263 of the Act and oblige."
3.4 The PC IT, however, was not impressed b y the pleadings of the assessee. The PCIT in broader terms, observed in the revisional order that information was received from Investigation Wing with reference to search in the case of Glob Eco Logistics Group of Ahmedabad whereb y it was discovered that assessee is one of beneficiaries of bogus long terms capital gain in the shares of KGN Enterprise Ltd. The information was made available to the AO on 01.07.2015 before the conclusion of assessment. The AO however has failed to make any verification and investigation in this case. In the light of information available as per the report of the Investigation Wing, the PCIT thereafter referred to the contents of the report and observed that as per the report, the assessee in connivance with the brokers has abused the process for laundering her undisclosed income in the garb of long term capital gain. It was observed that the AO has not conducted requisite inquiry in respect of such long term capital gains reported b y the assessee except collecting customary documents like contract notes and calculation of long term capital gains etc. It was alleged that the AO has failed to make an y inquiry as to whether the compan y namel y KGN Enterprise Ltd. possesses an y economic and financial substance to justify the phenomenal rise in the share price and consequent capital gains. The PCIT thus essentiall y noted that the AO has not I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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ventured into an y inquiry in respect of impugned transactions and completed assessment under s.143(3) of the Act mechanicall y and perfunctoril y. The PCIT accordingly set aside and cancelled the assessment order and directed the AO to look into the factual aspects and finalize the assessment after giving reasonable opportunit y to the assessee and pass afresh assessment order in accordance with law.
4. Aggrieved b y the revisional directions of the PCIT seeking to nullify the assessment order passed b y AO in exercise of power under s.263 of the Act, the assessee preferred appeal before the Tribunal.
5. The learned AR for the assessee reiterated various submissions made earlier before the PCIT as noted in its order and pointed out that the jurisdiction assumed b y the PCIT is without sanction of law and the revisional order passed thereon is unsustainable in law. The learned AR for the assessee made two fold objections of proceedings carried out under s.263 of the Act; (i) the assessment order is neither erroneous nor prejudicial to the interest of the Revenue & (ii) the revisional order passed b y the PCIT is in gross valuation of principles of natural justice and thus not tenable in law. Moving further, the learned AR for the assessee submitted that all documents pertaining to the transactions giving rise to the purchase and sale of shares in the possession of assessee were provided to the AO in the course of the assessment proceedings. On receipt of such documents, it is the prerogative of the AO to determine the extent of the inquiry thereon. The observation of PCIT is in the realm of inference without reference to an y falsit y in the documents filed.
5.1 The learned AR thereafter adverted to serious lapse b y the PCIT while setting aside the original assessment order b y holding it as erroneous in so far as prejudicial to the interest of the Revenue is contemplated under s.263 of the Act. The learned AR referred to the revisional order and submitted that in pursuance of the show cause notice dated 27.02.2018, a written repl y was promptl y filed within a week's time on 05.03.2018. By the aforesaid repl y, it was pointed out to the PCIT that the show cause I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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notice issued is nondescript and do not reveal the basis for making serious averments against the assessee. The PCIT was accordingly requested to suppl y certain details regarding the name of the person who are searched, the statement of the person searched, seized material found in search and outcome of the search incriminating the assessee in some manner. Delving further, the learned AR pointed out that it was specificall y submitted to the PCIT that in the absence of material, it will not be possible to meet the show cause notice and the object of granting proper opportunit y of being heard as mandated under s.263 of the Act will not be fulfilled. Whil e doing so, it was also pointed out to the PC IT that purchase/sale transactions were made through recognized broker on the platform of the stock exchange as against the allegation of the sale not recorded in the stock exchange platform.
5.2 The learned AR pointed out that the assessee expressl y denied the allegations made by the PCIT on lack of enquiry and referred to the questionnaire issued by the AO alongwith notice under s. 143(1) dated 12.06.2015 wherein specific inquiry was made on the issue reads as under:
"The details of demat account, purchase/sale of shares and securities account with supporting evidences."
It was submitted that in response to the aforesaid query, the assessee has filed relevant evidence vide submission dated 08.07.2015. The demat statement reflecting the scrip in question was also provided. The shares were held in demat account and entire accounts were reflected in the bank statement submitted to the AO which is not in dispute. It was thus contended that observations made in the show cause notice that the AO has not verified the said transactions as wholl y incorrect. Our attention was thereafter adverted to para (xvi) of the repl y as noted in para 5 of th e revisional order seeking verification of the claim of the long term capital gain at the end of the PC IT himself before drawing an y adverse conclusion.
5.3 It was thereafter vociferousl y submitted that the PC IT did not choose to respond to the material asked to support the non-descript show cause nor I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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did an y further correspondence with the assessee while taking a drastic step of setting aside a statutory order. It was pointed out that the PCIT merel y disagreed with the contents of the repl y of the assessee filed in pursuance of solitary show cause and came to his own conclusions and that too in unequivocal terms. It was pointed out that PCIT himself has observed and concluded that the assessee has abused the process in connivance of the brokers and laundered his own undisclosed income overlooking all replies made and all questions raised. The revisional order was passed on 21.03.2018 i.e. within a span of less than one month from the date of issuance of solitary notice and a singular repl y thereon of interim nature b y the assessee as narrated. The learned AR thus pointed out that the text and tenor of the order of the PCIT make it undoubtedl y clear that the PC IT himself has reached to an adverse conclusion without an y opportunit y and without confronting material in possession in this regard. It was submitted that the act of setting aside the original order and returning the matter back to the AO for further inquiry is onl y an empt y formalit y and a farce where the adverse conclusion has alread y been drawn. In the light of categorical assertions made b y the PCIT, the conclusion is forgone against the assessee and the AO was left with no discretion but to toe the conclusion alread y drawn b y the PCIT without an y demur. The whole exercise therefore has grievousl y injured the assessee and has resulted in irreparable miscarriage of justice. It was thus concluded that such order is a nullit y in the eye of law.
5.4 The learned AR in this regard referred to the decision of the co- ordinate bench of Tribunal in the case of Tata Chemicals Limited vs. DCIT ITA No. 3127/Mum/10 order dated 30 t h June, 2011 for the proposition that if the ground of revision is not mentioned (similar to the obscure reasoning in the instant case) in the show cause notice, it cannot be made the basis of order for the reason that the assessee would have no opportunit y to meet the point. The learned AR in the context submitted that the co-ordinate bench had held that in the circumstances as existing in the present case, the infringement of fundamental principles of natural justice would result in the revisional order to be nullit y. Para Nos. 9 & 10 of the order of the co- I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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ordinate bench was referred to buttress the plea of the order resulting in the nullit y for such serious breach.
5.5 A reference was made to the decision of the Hon'ble Supreme Court in the case of M/s. Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata Civil Appeal No. 4228 of 2006 judgment dated 02.09.2015 to contend that when the ratio of the decision is applied, a serious flaw in not allowing the assessee to access the basis of show cause notice when particularl y disputed, would lead to action of the PCIT wholl y untenable and without authority of law.
5.6 It was reiterated that no material was confronted to the assessee despite specific request and the order was passed hurriedly without an y opportunit y based on a nondescript show cause notice and giving unilateral conclusive finding against the assessee thereb y totall y curtailing the statutory discretion of the AO. Such act of the PC IT is not in consonance with authoritative judicial pronouncement made in this regard. A reference was made to yet another decision of the Hon'ble Supreme Court in CIT vs. Amitabh Bachchan (2016) 384 ITR 200 (SC) to contend that opportunit y to the assessee to be heard on all issues is mandatory and conclusions drawn adverse to the assessee in the order of revision on issues not mentioned in the notice is impermissible. It was contended that the satisfaction to exercise jurisdiction under s.263 of the Act is available subject to the strict observance of principle of natural justice which is ingrained in the requirement of the Section itself.
5.7 Dwelling further, the learned AR submitted that the breach of principle of natural justice can t ypically happen in two ways; (i) the competent authorit y passes order without giving reasonable opportunit y to deal with the points raised and facts in issue or (ii) passes order without revealing the facts itself despite having inquired into b y the assessee. The case of the assessee falls in the second category of breach which is far more stringent and has outrightl y deprived the assessee of her right to make I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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an y effective representation to defend her case as contemplated in th e provisions of Section 263 of the Act.
5.8 Mounting his defense further, the learned AR thereafter referred to the decision of the Hon'ble Delhi High Court in the case of ITO vs D. G. Housing Project Ltd. (2012) 343 ITR 329 (Del) and contended that the Revisional Commissioner cannot remit the matter for a fresh decision to the AO to conduct further inquiries without making some minimal inquiry himself and come to some prima facie conclusion that tax which was lawfull y exigible has not been imposed. In the instant case, the consideration of Revisional Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interest of the Revenue is not based on underl ying material to implicate the assessee in some manner. Despite being inquired, the PCIT has not allowed the assessee to participate in the process of inquiry before him nor has the PCIT made an y inquiry to demonstrate the alleged error or mistake made b y the AO as held so assertivel y in the revisional order. The learned AR next contended that the present case at best can be dubbed as the case of inadequate investigation or inquiry and not a case of total lack of inquiry per se in th e light of the relevant material placed before him against a specific query. It was thus contended that viewed from an y angle the rivisional action of the PCIT laying blame on the doorstep of assessee is not justified.
5.9 The learned DR, on the other hand, relied upon the order of the PC IT submitted that a standard questionnaire putting few lines with respect to the transactions of capital gain in question would not give rise to an inference of an inquiry contemplated in law that has to be carried out. It was contended that subsequent to the receipt of Investigation Report on 01.07.2015 no inquiry was made b y the AO in connection with the issue in question and therefore the order of the AO clearl y suffers from gross lack of inquiry rendering it erroneous in so far as prejudicial to the interest of the Revenue. The learned DR also submitted that the matter was set aside to the AO and thus no serious prejudice has been caused to the assessee. It I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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was thus contended that no interference with the revisional order of th e PCIT is called for.
6. We have carefull y considered the rival submissions. The assessee has challenged the assumption of revisionary jurisdiction under s.263 of the Act as well as made imputations on the serious lapse in abiding b y express mandate of opportunit y to assessee, while setting aside statutory order of the lower authorities. The assessee has delineated on aspects of principles of natural justice at length and has essentiall y contended that such gross neglect in providing effective opportunit y and serious transgression of principles of natural justice tantamount to illegalit y and consequentl y the revisional order setting aside the assessment order passed b y AO is not sustainable in law.
6.1 Having regard to the length y and ardent defense on behalf of the assessee, we consider it expedient to delineate on the impact of palpable flaw in following the principles of natural justice allegedl y committed b y the Revisional Commissioner. It is the case of the assessee that a solitary show cause notice was issued b y the Revisional Commissioner on 27.02.2018 seeking to displace the assessment order passed by the AO under s.143(3) of the Act in exercise of its statutory functions. The assessee filed a reply thereto within a week's time strongl y objecting to the averments made in the show cause notice and asked for the relevant background material to derive an understanding on the allegations made in the show cause notice to enable it to defend its case in an effective manner. The assessee has also alleged that the show cause notice itself is vague and nondescript without an y reference to an y objective information or material for making an allegation adverse to the assessee. It is thus the case of the assessee that the solitary show cause notice issued b y the PCIT is not focused on the issue with desired objectivit y and the same is cryptic and unintelligible. The assessee thus reserved its right to submit proper repl y on addressing reddressal of the points raised in interim repl y b y the PCIT. No correspondence has been exchanged thereafter. The whole action is marred b y lack of opportunit y.
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issued to giving opportunit y to the assessee to discuss as to wh y action under s.263 of the Act should not be undertaken. As noted, the assessee in its immediate repl y has pointed out lack of clarit y in the show cause notice on vital aspects and sought the particulars thereof alongwith requisite material for proper repl y and submitted that the present repl y should be treated as interim repl y with a caveat to make further submissions on obtaining requisite details as mentioned in the repl y. It is also noticed that the assessee has also pointed out factual incorrectness in the assertions made in the show cause notice viz. the allegation of sales not being through stock exchange is incorrect.
6.3 We also notice that the assessee has also demonstrated that all primary documents in relation to the long term capital gains were dul y provided to the AO without an y demur which reflected the occurrence of transactions in normal course on the platform of the stock ex change. The Revisional Commissioner however has jettisoned all the contentions of the assessee raised as per its interim reply but remained silent as to wh y further opportunit y is not required and wh y the material called for cannot be supplied for effective representation. As noticed, the PCIT heavil y relied on certain information received from Investigation Wing in the search proceedings in the case of a third part y. The details of informatio n received were not provided to the assessee at all at an y stage of the proceedings. As per para 8 of the revisional order, the PCIT has relied upon the so-called information purportedl y received with which no-one is priv y to. The whole action is thus self-virtuous and repugnant. Significantl y, the PCIT has concluded in unequivocal terms and with a degree of finalit y that the assessee in connivance with the brokers has abused the process for laundering her undisclosed income in the garb of bogus long term capital gains. The assertions made in the revisional order against the assessee clearl y forecloses the case against the assessee with finalit y leaving no scope with the AO to appl y his own mind, while directing him to make all inquiries and investigations. The direction to AO make inquiries is ostensibl y an empt y formalit y leaving no libert y with AO I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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to think differentl y. The result is thus a foregone conclusion. The direction to make enquiry clearl y lacks purpose. Except the solitary correspondence, there is no reference to an y other opportunit y. The whole process has begun with show cause notice and culminated with a hurried revisional order in about a month's time based on one correspondence of incomplete and shallow nature.
6.4 In this backdrop, we need to ascertain the justification in the action of the PCIT.
6.5 It is ostensible from the sequence of events that the action of the Revisional Commissioner is in negation of overriding principles of natural justice which were explicitl y required to be followed while exercising authorit y under s.263 of the Act. Section 263 of the Act expressl y provides for giving an opportunit y of being heard to the assessee before passing revisional order. Such opportunit y thus has serious connotations in the context of revisional jurisdiction. The object is obvious, it is meant to enable the assessee to understand what is weighed against him to suitabl y defend his position. Needless to say, the opportunit y to be given to the assessee must be real, effective and realistic. A notional opportunit y would tantamount to a mere empt y formalit y and would naturall y not meet the express intent of law. The Revisional CIT has chosen to remain silent on the contents of interim repl y filed b y the assessee. As quipped on behalf of assessee, the vagueness and ambiguit y in the show cause notice has defeated the right of reasonable opportunit y of the assessee to effectivel y defend its case. Thus, allegation of show cause notice being illusory is somewhat stark. The basic canons of natural justice are found to be dispensed with.
6.6 It is trite that the right to fair hearing is a guaranteed right of an assessee. Every person before authority exercising adjudicatory powers has a right to know the evidence to be used against him. The suppl y of documents relied upon would, in our view, be necessary to set the law in motion. It is difficult to comprehend full facts from the show cause notice I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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and consequentl y insistence for suppl y of relevant information possessed b y the revisional authorit y cannot be regarded as unreasonable insistence. The letter of law in Section 263 of the Act is express and founded on the principles of natural justice, which in the present case is scantl y fulfilled. The action of the Revisional Commissioner was continued in violation of this cardinal requirement. The assessee is sought to be visited with the civil consequences on the basis of s ymbolic compliance of the requirement. The context holds the key while examining the extent to which the violation of natural justice has impacted the other side. A granting of effective opportunity is a sin qua non in Section 263 of the Act for unsetting a statutory order. It is the duty of the Revisional Commissioner to provide the assessee an effective opportunit y to enable it to disengage the truth from wrongs instead of taking an eas y course of rejecting the repl y in its entirel y solel y on the ground that same is not acceptable. At this juncture, it would be pertinent to quote the observations of the co- ordinate bench in Tata Chemicals Limited vs. DCIT ITA No. 3127/Mum/1 0 order dated 30 t h June, 2011 as extracted below:
"9. In the case of Synergy Enterprises Solutions Pvt Ltd Vs DCI T (I TA No 2076/Mum/2010; order dated 31" March 2011] , a coordinate bench had an occasion to deal with a materially identical situation. As held in this decision, following Maxpack Investments 13 SOT 67 (Del), G.K. Kabra 211 ITR 336 (AP) and Jagadhri Electric Supply 140 ITR 490 (P &H), if a ground of revision is not mentioned in the show-caus e notice, it cannot be made the basis of the order for the reason that the assessee would have had no opportunity to meet the point . While learned Departmental Repres entative does not dispute this position and that decision of the coordi nate bench s quarely covers the issue, he ur ges us to at best remit the matt er to the file of the CIT so as the assessee can be given an opportunity to meet the point on which revision powers are exercised, even though, according to the learned Departmental Representative, strictly speaking even this partial relief is not due to the assesse because subject matter of the revision has remained the s ame as was set out in the notice, i.e. deduction under section 80 IA in respect of notional sale of steam. We are unable to see any legally sustainable merits in the stand of the learned Departmental Representative. Whil e subject matter of revision may have been t he same as in the s how cause notice, the ground on which revision was s ought to be done in t he show cause notice is mater ially different than t he ground on which revision powers arc actually exercised. As such, as sessee had no opport unity to defend on the ground which is ultimately decided against him. It is well settled legal position, as we have seen in the erudite discuss ions in Maxpack decision (s upra), that revision powers can not be exercised on a ground which has not been put to the assessee. In any case, it is one of the I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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fundamental principl es of natural justi ce that no pers on can be condemned unhear d i,e audi alterant partem, and the impugned revision order was thus passed in violation of the pr inciples of natural jus tice. As for the plea that the matter should be remi tted to the file of the learned Commissioner for aff ording the assessee an opportunity of hear ing, we find what is in challenge before us is the revision order passed by the learned Commissioner , and, as we have noted above, the said order is legally unsustainable in law, and quashed accordingly. As observed by a Special Bench of this Tribunal in the case of Colonizers Vs. ACIT (41 1TD SB 57), the violation of principles of justice, as has happened in this case, results in an order being rendered null and void. The Special Bench has, inter alia, observed as follows:
As it has been discuss ed in the earlier paragraph there are plethor a of cases holding that violation of principles of natural justice makes the decision void as in every other case ultra vires. The rules of natural justice operate as implied mandatory requirement, non-observance of which amounts to arbitrariness and discrimination. The pr inciples of natural jus tice have been elevated to the status of fundamental rights guaranteed in the Constitution of India as is evident from the decision of the Full Bench of the Hon'ble Supreme Court in the case of Union of India vs. Tulsiram Patel & Ors. reported in AIR 1985 SC1416 at 1469, holding that the principle of natur al justice have thus come to be recognised as being a pan of the guarantee contained in Article 14 of t he Constitution of India because of the new and dynami c interpretation given by the Supreme Court to the concept of equality which is the subject-matter of that Article and that violation of principles of natural justice by a State action is a violation of Article 14, A quasi-judicial or administrative decision rendered or an order made in violation of t he rule of audi alteram partem is null and void and the order made in such a case can be struck down as inval id on that score alone (Maneka Gandhi vs. Union of India AIR 1978 SC 597; Gangadharan Pillai vs. ACE D (1978) 8 CTR (Ker ) 352 : (1980) 126 I TR 356 (Ker ) at pp. 365 to
367). In other words, the order which infringes the fundamental principle, passed in violation of audi alteram partem r ule, is a nullity. When a competent Court or author ity holds such an order as invalid or sets it aside, the impugned order becomes null and void. (Nb. Khan Abbas Khan vs. State of Guj arat AIR 1974 SC 1471 at 1479).
10. Once we come to the conclusion that the impugned order is null and void, it is not for us to advise the Commissioner as to what should he do. He is always at libert y to do whatever acti on he can take in accordance with the law, but we cannot give life to a null and void order by r emitting it back to the learned Commissioner for giving an opportunity of passing the fresh order after giving the assessee an opportunity of hearing. In case, it is possible for the Commissioner to pass a fresh order at this stage, in accordance with the scheme of the Act, he can very well do so, but in case the time limit for passing such order has already expired, we cannot extend the same by directing him to pass the order afresh after giving an opportunity of hearing to the assessee. As for learned Departmental Representative's suggestion that no real prejudice is caused to the legitimate interests of the assessee since by way of impugned order I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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learned Commissioner has only directed fresh decision of the Assessing Officer on merits and in accordance with the law, all we can say i s that if we are to uphold such a contention, we will have bury the concept of finality of assessment deep and ignore the statutory limitations on the powers of the revenue authorities to tinker with the assessments altogether. Learned Departmental Repres entative's argument is thus clearly contrary to the scheme of the Act. For all these reasons, we reject the submissions of the Departmental Representatives, and quash the impugned revision or der on the ground that the revision is done on a ground other than the ground set out in the show cause not ice. The assessee gets the relief accordingly. However, as we have quas hed the impugned revision order on the technical gr ound set out above, we see no need to deal with the merits of other arguments raised by the assessee."
The co-ordinate bench has thus concluded that such lack of opportunit y would render the revisional order a nullit y and accordingl y quashed the revisional order.
6.7 To reiterate, the grounds for revision in the show cause notice is vague and opportunity given to the assessee is effectivel y no opportunit y despite express request. The action of the Revisional Commissioner in violation of the express mandate of Section 263 of the Act cannot thus be countenanced. A question may momentaril y arise that the gaffes in following principles of natural justice is onl y a procedural irregularit y and therefore matter should be restored to the file of the PCIT to restart the proceedings from the place where the irregularit y has occurred. We are not inclined to agree. The opportunit y was specificall y sought but denied. The breach of sacrosanct opportunit y expressly enjoined b y the legislature in Section 263 of the Act is fundamental and goes to the root of the issue. It is not open to proceed to frame the revisional order b y overriding express intent of law. Such flaw is fatal which seeks to ensue civil consequences and effects the rights of the assessee in a completed matter. The provisions of Section 263 of the Act expressl y enjoin providing opportunit y. The assessee had on its part has exercised its right to seek background information to enable it to file an informed defense. The dissuasion of such categorical request renders the action of the Revisional Commissioner incompetent in law. The total absence of opportunit y alone renders the revisional order null and void.
I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
P a t e l v s . P r . C I T ] A. Y . 2 0 1 3 - 1 4 - 18 - 6.8 We however also peep into another line of defense on behalf of the assessee. The assessee has admittedl y filed the primary evidence in the course of the assessment. The PC IT however seeks to rel y upon certain
additional information which appears to transcend the bonafides of th e transactions. It was thus incumbent upon the PC IT to undertake a minimal inquiry himself with regard to the claim of bonafides before remanding the matter back to the AO.
6.9 Most significantl y, in the instant case, as noted above, the matter has been remanded to actuall y carry out the conclusions alread y drawn b y th e PCIT unilaterall y which conclusions gives the infallible impression of it being absolute and rigid. The PCIT has thus actuall y foreclosed the matter without opportunit y. Therefore, the whole exercise of remanding the matter back to the AO is onl y a pretense and an empt y formalit y. Such act of the PCIT thus cannot be endorsed when seen in entiret y. The contentions of the assessee on palpable illegalit y in the order passed under s.263 of the Act merits acceptance.
6.10 To sum up, the revisional action under Section 263 of the Act in unsustainable in law on two counts; (i) A revisional action which began with a nondescript notice and culminated in revisional order without an y effective opportunity despite specific request is an order passed in blatant transgression of natural justice & (ii) The Revisional CIT made an unflinching and adverse conclusion in the league of finalit y (without granting an y opportunit y) and closed the door for the assessee before the AO while setting aside the order of AO. The enquiry or investigation set in motion in the proceedings before the AO in pursuance to the revisional order is clearl y a pretense and an empt y formalit y. The AO was effectivel y asked to obduratel y adhere to the pre-conceived observations made in the revisional order of ex parte nature. Such directions are clearl y unsustainable.
6.11 Hence, in view of the fatal error committed towards lack of effective opportunit y and conclusive averments made in the revisional order, I T A N o . 1 0 2 6 / Ah d / 1 8 [ S m t . S h a r d a b e n B .
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consequential action of setting aside the assessment order is a nullit y. Such revisional order thus deserves to merge in void and disappear. Hence, we thus do not consider it necessary to dwell upon other aspects of the maintainabilit y of revisional order. We may however hasten to add at this juncture that our observations are limited to the correctness of process of framing revisional order under s.263 of the Act and should not in an y manner be read as our expressions on merits.
6.12 The order of the Revisional Commissioner is thus vitiated and consequentl y bad in law. The impugned order under s.263 of the Act is accordingl y set aside and quashed.
7. In the result, the appeal of the assessee is allowed.
This Order pronounced in Open Court on 25/09/2019
Sd/- Sd/-
(RAJPAL YADAV) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: Dated 25/09/2019
True Copy
S. K. SINHA
आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं*धत आयकर आय,
ु त / Concerned CIT
4. आयकर आय,
ु त- अपील / CIT (A)
5. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ*धकरण, अहमदाबाद ।