TMI Blog2022 (3) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, ld. PCIT fails to do so. So, whether the reply was noticed or remained un-noticed, the consequences are that if it was noticed, ld. PCIT failed to do what he was required to do and if it was not noticed, then he passed an order mechanically These facts when further noticed in the backdrop where the ld. PCIT after issuing the Short Cause Notice on 23.11.2020 sat over the very same information, made no efforts from any source, whatsoever to address the specific facts or the specific concerns from any other information in the public domain or made any efforts seeking information from the Investigation Wing of the Department, sat over the information for a period of almost 5 months and passed the order upsetting a statutory order which has been passed without any compunction. The said arbitrary exercise of power, we find cannot be upheld. Notwithstanding the fact that the right to be heard is very important and salient right which cannot be allowed to be trifled with. It has been noted judicially across all common law countries of the world. No decisions need be cited to quote that it is a well settled legal position that no party can be visited by an adverse order wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mind and thorough investigation and all the issues, on which the Pr. CIT has set aside the assessment, have been enquired into and dealt in by the concerned Assessment Officer. 4. That the Pr. CIT has grossly erred in invoking the explanation-2 to section 263, since the Ld. Assessing Officer has applied his mind fully to the issues taken by the Pr. CIT u/s. 263(1). 5. That the appellant company has already opted for VSV Scheme, 2020 and had filed Form 1 2 on 08.05.2020 before issuing the show cause notice u/s. 263. 6. That no opportunity had been given by the Pr. CIT(Central), Ludhiana. 2. The ld. AR inviting attention to the impugned order submitted that the assessment order dated 30.12.2018 passed u/s. 143(3) has been held to be erroneous and prejudicial to the interests of the Revenue. 2.1. Inviting attention to the impugned order it was submitted that the return was selected under CASS for completing scrutiny on specific issues for examination. This fact has been noticed by the A.O. in his order at page 1 as under: 1. Large value receipt or repayment of loans other than through banking channels. b. Large share premium received during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said purposes, it was submitted, he would first want to argue ground Nos. 5 and 6. 3. Considering the ground No. 6, ld. AR was required to submit whether he would be satisfied by an opportunity of being heard. 4. The ld. AR opposed the said suggestion. Addressing ground No. 6, it was the vehement submission of the ld. AR that the said ground is to agitate the arbitrariness and the assessee does not seek to provide another opportunity to the PCIT to relook again beyond the statutory limitation available to him. The remand back of the issue was opposed. It was submitted that the assessee has raised the ground only to show how arbitrarily the powers have been exercised. 5. Referring to the facts, it was submitted that after the issuance of the Show Cause Notice dated 23.11.2020, ld. PCIT noticed that no reply had been filed and without carrying out any enquiry at his own end or provide any further opportunity to the assessee, passed the order on 30.03.2021 on the very last day. The ld. PCIT, it was submitted, had more than 4 to 5 months time and despite this just sat with the very same information available to him which was always available on record and made no efforts whats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the ld. PCIT in para 3.1 incorrectly records that there was no response on behalf of the assessee. The information available in the Portal of the department itself and the reply placed on record is ignored. The sum total of these facts was that the time given to the assessee for responding to the detailed queries raised was only 4 or 5 days. In letter dated 23.11.2020, it was re-iterated the assessee had sought atleast 15 to 20 days' time and had also informed that the assessee had opted for 'Vivad Se Vishwas Scheme'. Form No. 3, it was submitted, had been accepted. It was his submission that it is a matter of record that no further queries were raised by the ld. PCIT from the assessee and after sitting over the issue for a period of 4 to 5 months wherein on a reading of the impugned order it is evident that no enquiries were made from anywhere else also, the ld. PCIT exercising the powers u/s. 263 proceeded to hold the assessment order as erroneous and prejudicial to the interests of the Revenue on the very last date as per the Statute. The order passed without caring to grant any further time to the assessee knowing that 3 or 4 days time was not sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that since the time allowed is very short, a time to 15 to 20 days may be granted for preparation of the reply and proof of sending the reply online have been placed at page No. 71 and the reply is at page No. 72 of the paper book. 3. However, the Ld. Pr. CIT (Central), Ludhiana without affording any other opportunity and totally ignoring the reply of the assessee in para 3.1 of his order has mentioned that since, as per the show-cause notice, neither any submission was received nor any request was made for adjournment and, he passed an order after 4 months and three days i.e. starting from 27.11.2020 to 30.03.2021. There was no communication to the assessee about any fresh date which the Ld. Pr. CIT (Central), Ludhiana ought to have given. Further, the assessee was under bona fide belief since, he had opted for VSV Scheme, 2020 with the same Pr. CIT (Central), Ludhiana and, therefore, the proceedings must have been filed. Further, the Ld. Pr. CIT (Central), Ludhiana had passed the order u/s. 263 after 4 months from the original date of hearing i.e. 27.11.2020 and had, therefore, sufficient time at his disposal for giving the reasonable opportunity and, therefore, non-givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority. The order of the Appropriate Authority is quashed.--Son a Builders Ors. vs. Union of India Am (1998) 146 CTR (Raj) 712 set aside. Conclusion: Appropriate Authority having passed the order of purchase after giving only five days' time to the parties to respond to the notice and without furnishing copy of any document relating to the sale instance, there was gross breach of the principles of natural justice on both counts and the impugned order was liable to be quashed. The copy of the judgment is placed in the paper book-II at pages 3 to 6. 4. The same is the judgment of the Hon'ble Delhi High Court in the case of Tulsi Tracom Private Limited vs. CIT reported in 161 DTR 0148 (Del) in which the similar facts where the PCIT did not given adequate opportunity to the assessee in the notice issued u/s. 263 and it was held as under: Thus, there was an outer limit in the statue u/s. 263 which was 31.03.2013 - since no useful purpose would be served in giving the opportunity to the appellant of being heard to this stage, question answered in favor of the assessee-the assessee appeal is allowed. The copy of the judgment placed in the paper boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee along with her bank statement and evidence of filing the return have been placed at page No. 10 to 12 of the paper book. iii. The copy of the account of ADVAITH Investment Ltd. in the books of the assessee along with the bank statement and evidence of filing the return have been placed at page No. 13 to 17 of the paper book. iv. The copy of the account of Interface Financial Security in the books of the assessee along with the bank statement and evidence of filing the return by the company have been placed at page No. 18 to 21 of the paper book. v. The copy of the account of Sun Shine Worldwide Limited in the books of the assessee along with the bank statement and evidence of filing the return have been placed at page No. 22 to 26 of the paper book. vi. The copy of the Form No. PAS-3 as filed under the Companies Act have been placed at page No. 28 to 34 of the paper book and relevant page is page No. 33 and 34 and also same form at page No. 35 to 40 of the paper book and relevant page is page No. 40. vii. The valuation report of shares of M/s. Fortune Metaliks Ltd. have been filed at page No. 41 to 46 of the paper book which was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. Pr. CIT (Central), Ludhiana, that the material furnished by the assessee is fabricated and is not real, is a far fence imagination and only on presumptions. 10. Similarly, in respect of unsecured loans, all such details have been submitted and except one party, the other cheques from the various parties have not been encashed and, therefore, the reliance by the Pr. CIT (Central), Ludhiana on the judgment of the Sumiti Dyal is not relevant, because when the documentary evidence on record, there cannot be any scope for presumption and surmises. The Pr. CIT (Central), Ludhiana has mentioned that enquiries and verifications should have been made and it is not a case that no enquiries have been conducted which is apparent from the above submissions. 11. From the details as stated above, it is absolutely clear that the A.O. has applied his mind to the material available and after examining the material and with due application of mind, he had formed a view and which cannot be interfered by the PCIT. Reliance is being placed in the judgment of Chandigarh Bench of the ITAT in the case of Narian Singla, copy of the same have been placed at page No. 24 to 38 of the paper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where on fact the issuance of questionnaire by the A.O. and replies received in response thereto are evident then it could be seen that the issues were considered. Quashing of the order u/s. 263 in the circumstances has been held to be justified. 5.9. In the facts of the present case also, it was submitted, on a reading of the detailed order passed by the A.O. running into 10 pages, the A.O. conscious of the fact that a complete scrutiny on account of certain major issues for examination was mandated by CASS, one of them being large value of receipt of payment of loans and large share premium received during the year carried out a detailed enquiry on account of this specific fact and also made the addition. The ld. PCIT has exercised his powers taking note of the fact that the addition made by the A.O. on account of M/s. Advaith Investment Ltd. which was subject matter of appeal before the CIT(A) for which the assessee had opted for 'Vivad Se Vishwas Scheme' was perused by him and hence he proceeded to exercise the power u/s. 263. The power exercised in the facts, it was submitted, is an abuse of the Statutory provisions. Without pointing out to any error in the order w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed. 5.13. Carrying the Bench through the detailed assessment order and referring to the documents pointed out in Paper Book-1 specifically page-2 addressing the gross sales of the assessee company for the period ended on 31.03.2016 and 31.03.2015 which reflected gross sales of ₹ 3559839407 and ₹ 4095021857. Thus, it was his submission that the assessee is not a paper company and had substantial sales. It was submitted that the assessee is a company of means wherein parties have invested. Attention was also invited to the documents filed before the A.O., the balance sheet alongwith complete annexures. Confirmed copy of account of Smt. Shweta Goyal at pages 10 to 12, confirmed copy of account of M/s. Advaith Investment Ltd. (pages 13-17), confirmed copy of account of Interface Financial Securities alongwith bank statement and evidence of filing the return (pages 18-21) and confirmed copy of account of Sun and Shine World alongwith bank statement and evidence of filing the return (pages 22-27). Copy of form No. PAS-3 under the Companies Law with regard to allotment of shares allotted at pages 28 to 40 of the Paper Book were referred to. Attention was also invited to Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at pages 71-72 of the Paper Book, it was his submission, is in fact no reply as therein he only seeks a few days' time and then sits quietly and waits till the order is passed knowing fully well that the limitation is expiring and then now before the ITAT pleads for its quashing. It was his submission that on the receipt of the Show Cause Notice, what stopped the assessee to give a reply not within a few days as directed by the PCIT but after a fortnight or any time before the passing of the order. It is not a case that Show Cause Notice has been issued to the assessee and immediately thereafter the order u/s. 263 has been passed. 6.1. In the said factual matrix, it was submitted that all the decisions relied upon by the ld. AR were distinguishable and not relevant. 6.2. It was also his submission that the mere fact that the company is having a high turnover and has the best of brains available to it and legal advice available to it, has received the Show Cause Notice can very well be expected to give a reply within a short time. As per record, no reply for almost four months was given and thus, in para 3.1 the ld. PCIT is correct in recording that no reply has been recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n considered by him on a test check basis. He expressed his surprise on the said observation submitting that he has never come across any such instance where the order requiring such issues for consideration can be passed on a test check basis. The issues have to be considered minutely and meticulously. Whatever evidences, the assessee has filed before the A.O., it was his submission is not relevant. The settled legal position thereon, it was submitted, is that the evidence was neutral. Accordingly, it was his prayer that the order may be upheld. 7. In reply, the ld. AR submitted that it is a clear case of not granting opportunity of being heard to the assessee, granting merely four days, cannot be said to be a fair exercise which is why the assessee responded by way of a letter seeking more time. The assessee therein had also brought to the notice of the PCIT the fact that the assessee has opted to settle the dispute under 'Vivad Se Vishwas Scheme'. The fact of approaching the Forum for settling the dispute was brought to the notice of the PCIT. The relevant documents at Paper Book page 3 were heavily relied upon: SL. PARTICULARS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Sumati Dayal incorrectly and instead ignoring the legal position as set out by the Apex Court in the case of Daulat Ram Chella Ram, it was submitted, is contrary to law. The conscious view taken by the A.O. and the PCIT remaining silent for four months, it was submitted, deserves to be quashed. 8. We have heard the rival submissions and perused the material available on facts. In the facts of the present case, the assessee has argued on the legality of the order passed which is stated to be an arbitrary exercise of power. The order is assailed as having been passed without caring to provide reasonable opportunity of being heard to the assessee leading to the order being passed in a mechanical manner. The assessee has also argued the appeal on merits submitting that the issue has been considered at length by the A.O. in the course of the assessment proceedings wherein specific attention has been invited to para 8 of the assessment order to show that the A.O. was conscious of the fact that the increase in share application money received by the assessee was being routed through the different companies. A pattern had been noticed that leaving a meager balance and considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had opted for 'Vivad Se Vishwas Scheme' was considered irrelevant, hence equivalent to no reply as canvassed by the ld. CIT(A). However, the fact remains that the assessee has sought time. In the said backdrop the argument of the ld. AR that the assessee remained sanguine in the belief that the reply offered is accepted and the proceedings are closed, are plausible and on the other hand, when juxtaposed with the finding in the order that no reply has been given, it clearly demonstrates a mechanical exercise of power coupled with the fact that the ld. PCIT did not even care to issue any further notice to the assessee before the passing of the order. The fact that no further opportunity was given to the assessee is a fact on record which is not disputed by the ld. CIT-DR also. It is seen that the ld. PCIT made no efforts to gather any information either from the public domain or refer to any efforts made by the Investigation Wing or any other authority to show that the order passed is an order which is erroneous and prejudicial to the interests of the Revenue. 9. We have taken into consideration the orders and the decisions relied upon by the parties. We have seen that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the ld. PCIT and considered to be not relevant, the fact that the assessee was seeking time was patently evident from the said reply itself, what stopped the ld. PCIT to give an opportunity of being heard within a reasonable time. On this glaring shortcoming on this fact patently available on the face of the record, there is no submission. Examining the claim further, we deliberate that if the ld. PCIT who knowingly gives inadequate time to the assessee to file its reply considering the reply filed irrelevant notices that the assessee is seeking time, we do not find any reason why the ld. PCIT could not grant a hearing saying that time has been granted fix a date and then pass the order after hearing the assessee. However, in the facts of the present case, ld. PCIT fails to do so. So, whether the reply was noticed or remained un-noticed, the consequences are that if it was noticed, ld. PCIT failed to do what he was required to do and if it was not noticed, then he passed an order mechanically. These facts when further noticed in the backdrop where the ld. PCIT after issuing the Short Cause Notice on 23.11.2020 sat over the very same information, made no efforts from any source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of being heard to the parties, the Court considering the statutory limit within which the Appropriate Authority, had to act and its failure to confirm to that time limit invoking the principles of natural justice, the Apex Court quashed the order and did not remand the matter back. The position of law as considered by the Hon'ble Gauhati High Court in the case of Smt. Leela Chaudhary Vs. CIT (2007) 289 ITR 226 (Gau) which mandates that the explanation offered by the assessee must be considered is also drawn support from. 12. Accordingly, considering the factual background as discussed above at length and the position of law, we deem it appropriate to quash the order passed on the legal grounds itself. Hence, the arguments advanced by the parties on merits though noticed in the order need not be adjudicated upon consequently. 13. At this stage it would be worthwhile to extract the valuable words of wisdom which their Lordships deemed it necessary to highlight. In the said decision rendered by the Apex Court in the case of CIT Vs. Amitabh Bachchan 384 ITR 200 (S.C.), no doubt considering the facts of the specific case Revision of the assessment order was held to be justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed. Such a notice is not required. What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. Reference........................................ . 13.1. Deliberating further on the mandatory procedure @ 211 in para 11, their Lordships have clearly enunciated: .....................Of course, there can be no dispute that while the C.I.T. is free to exercise hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
