TMI Blog2019 (9) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... r seeks to rely upon certain additional information which appears to transcend the bonafides of the transactions. It was thus incumbent upon the PCIT to undertake a minimal inquiry himself with regard to the claim of bonafides before remanding the matter back to the AO. Most significantly, in the instant case, as noted above, the matter has been remanded to actually carry out the conclusions already drawn by the PCIT unilaterally which conclusions gives the infallible impression of it being absolute and rigid. PCIT has thus actually foreclosed the matter without opportunity. Therefore, the whole exercise of remanding the matter back to the AO is only a pretense and an empty formality. Such act of the PCIT thus cannot be endorsed when seen in entirety. The contentions of the assessee on palpable illegality in the order passed u/s 263 of the Act merits acceptance. 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 any effective opportunity despite specific request is an order passed in blatant transgression of natural justice (ii) The Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us 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.CIT was not justified in exercising revisionary powers under s.263 of the Act and thereby 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 ₹ 1,50,69,856/- derived by 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, declaring total income at ₹ 18,22,490/-. The assessee inter alia claimed exemption under s.10(38) of the Act on account of long term capital gains of ₹ 1,50,69,856/- on sales of shares. The return filed by 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 by the assessee was duly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 transaction 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 is a mandate of section 263 of the Act. Till such time I request your 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 purchase transaction was made from a recognized broker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Detail of bank account held by me is as under: Name of the bank and branch Type of A/c. A/c. No. Union Bank of IndiaBapunagar Saving 454802010573856 Mehsana Nagrik Sahkari BankBapunagar Saving 3014 Copy of bank pass books ore bank books are submitted herewith. 5. In respect of long term capital gain from share Transactions, I am submitting following details a. Copy of ledger account of share transactions b. Copy of sales 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 submission dated 23-07-2015, I submitted my demat statements reflecting the said scrip. (Copy enclosed). viii) It is pertinent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove on record, drop the proceedings initiated u/s.263 of the Act and oblige. 3.4 The PCIT, however, was not impressed by 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 whereby 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 by the assessee except collecting customary documents like contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice dated 27.02.2018, a written reply was promptly filed within a week s time on 05.03.2018. By the aforesaid reply, it was pointed out to the PCIT that the show cause notice issued is nondescript and do not reveal the basis for making serious averments against the assessee. The PCIT was accordingly requested to supply 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 specifically 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 opportunity of being heard as mandated under s.263 of the Act will not be fulfilled. While doing so, it was also pointed out to the PCIT 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 expressly denied the allegations made by the PCIT on la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adverse conclusion has already been drawn. In the light of categorical assertions made by the PCIT, the conclusion is forgone against the assessee and the AO was left with no discretion but to toe the conclusion already drawn by the PCIT without any demur. The whole exercise therefore has grievously injured the assessee and has resulted in irreparable miscarriage of justice. It was thus concluded that such order is a nullity 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 30th 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 opportunity 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 nullity. Para Nos. 9 10 of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 lawfully 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 underlying 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 any inquiry to demonstrate the alleged error or mistake made by the AO as held so assertively 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 the light of the relevant material placed before him against a specific query. It was thus contended that viewed from any angle the rivisional action of the PCIT laying blame on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner. The assessee has also alleged that the show cause notice itself is vague and nondescript without any reference to any 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 by the PCIT is not focused on the issue with desired objectivity and the same is cryptic and unintelligible. The assessee thus reserved its right to submit proper reply on addressing reddressal of the points raised in interim reply by the PCIT. No correspondence has been exchanged thereafter. The whole action is marred by lack of opportunity. 6.2 We notice from the case records that only a solitary notice was issued to giving opportunity to the assessee to discuss as to why action under s.263 of the Act should not be undertaken. As noted, the assessee in its immediate reply has pointed out lack of clarity in the show cause notice on vital aspects and sought the particulars thereof alongwith requisite material for proper reply and submitted that the present reply should be treated as interim reply with a caveat to make further submissions on obtainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sequence of events that the action of the Revisional Commissioner is in negation of overriding principles of natural justice which were explicitly required to be followed while exercising authority under s.263 of the Act. Section 263 of the Act expressly provides for giving an opportunity of being heard to the assessee before passing revisional order. Such opportunity 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 suitably defend his position. Needless to say, the opportunity to be given to the assessee must be real, effective and realistic. A notional opportunity would tantamount to a mere empty formality and would naturally not meet the express intent of law. The Revisional CIT has chosen to remain silent on the contents of interim reply filed by the assessee. As quipped on behalf of assessee, the vagueness and ambiguity in the show cause notice has defeated the right of reasonable opportunity of the assessee to effectively defend its case. Thus, allegation of show cause notice being illusory is somewhat stark. The basic canons of natural justice are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remit the matter 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 same 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. While subject matter of revision may have been the same as in the show cause notice, the ground on which revision was sought to be done in the show cause notice is materially different than the ground on which revision powers arc actually exercised. As such, assessee had no opportunity to defend on the ground which is ultimately decided against him. It is well settled legal position, as we have seen in the erudite discussions in Maxpack decision (supra), 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 fundamental principles of natural justice that no person can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets it aside, the impugned order becomes null and void. (Nb. Khan Abbas Khan vs. State of Gujarat 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 liberty to do whatever action he can take in accordance with the law, but we cannot give life to a null and void order by remitting 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 learned Commissioner has only directed fresh decision of the Assessing Officer on merits a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne renders the revisional order null and void. 6.8 We however also peep into another line of defense on behalf of the assessee. The assessee has admittedly filed the primary evidence in the course of the assessment. The PCIT however seeks to rely upon certain additional information which appears to transcend the bonafides of the transactions. It was thus incumbent upon the PCIT to undertake a minimal inquiry himself with regard to the claim of bonafides before remanding the matter back to the AO. 6.9 Most significantly, in the instant case, as noted above, the matter has been remanded to actually carry out the conclusions already drawn by the PCIT unilaterally which conclusions gives the infallible impression of it being absolute and rigid. The PCIT has thus actually foreclosed the matter without opportunity. Therefore, the whole exercise of remanding the matter back to the AO is only a pretense and an empty formality. Such act of the PCIT thus cannot be endorsed when seen in entirety. The contentions of the assessee on palpable illegality in the order passed under s.263 of the Act merits acceptance. 6.10 To sum up, the revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X
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