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TMI Blog2022 (9) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... . PCIT is illegal, unjustified, arbitrary and against the facts of the case. The order deserves to be quashed due to blatant violation of the principles of Natural Justice. 2. In the facts and circumstances of the case and in law, the ld. PCIT has erred in assuming jurisdiction u/s 263 when the order of the ld. AO is neither erroneous nor prejudicial to the interest of the revenue. The action of the ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263. 3. The assessee company craves its rights to add, amend or alter any of the grounds on or before the hearing." 3. The fact as culled out from the records is that the assessee company is a public limited company engaged in the business activities in developing and exporting of software in domestic and foreign markets, providing compute education projects in Government Sector, generating of electricity through wind power and other activities. The assessee Company, for the A.Y. 2017-18, filed its return of income on 28/11/2017 declaring a total income of Rs. 10,91,09,310/-. The Case of the company was selected for complete scrutiny on the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng payments against the bills, current as well as outstanding. (4) The bad debt is claim in the name of Dy. Chief Engineer RDPCC for Rs. 15,76,933/- though the said debtor is regularly making payments against the bills raised for power supply and has even may payments of more than the bills raised in current years. The above clearly shows that AO has not verified this issue properly and not applied his mind to the facts. The bad debts claims have not been verified properly and application of law on the issue has not been properly made. 4.1 The ld. Pr. CIT further observed that the assessee has made delayed payments of PF/ESI contributions of employees as reflected in audit report form 3CD and the AO has disallowed Rs. 16,76,566/- u/s 36(1)(va) r.w.s. section 2(24)(x) of the Act, for such delayed payments, but has not disallowed the following payments: Provident fund employee contributions Due date of deposit Actual date of deposit PF Rs. 413759 15.01.2017 20.01.2017 5. In the backdrop of his aforesaid conviction, the Pr. CIT issued a show cause notice u/s. 263 of the Act dated 12.03.2022, to explain as to why the assessment order passed by the DCIT, Circle -6, Jaipur on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Not only that he was not given sufficient opportunity of being heard to represent his case and thus, the order passed by Pr. CIT u/s. 263 violates the principles of natural justice. 8. The ld. AR of the assessee submitted reply in response to their grounds of appeal and the same is extracted here in below: "1. The assessment in this case, u/s 143(3), was completed on 17/12/2019 by DCIT, Circle- 6, Jaipur. 2. The revisionary powers u/s 263 could be exercised within two years from the end of the financial year in which assessment was completed in terms of section 263(2). 3. Accordingly, in the present case, the revision proceedings u/s 263 were becoming time barred on 31/03/2022. 4. The revision proceedings were instituted by issue of notice by ld. PCIT [PB 125-128] as late as on 12/03/2022 as is evident from page 1 of the order of ld. PCIT. Screenshot of the same is as under: Order u/s 263 of the Income Tax Act, 1961 Instituted on 12/03/2022 from the order of ACIT/DCIT CIR-6, JPR dated 17/12/2019 5. Thus, it is evident that out of the 834 days available for exercising the revisionary powers (from 18/12/2019 to 31/03/2022) the case was instituted after the lapse of 814 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les: * Nemo Judex in causa sua - no one should be made a judge in his own cause * Audi alteram partem - no one should be condemned unheard 8.5 Audi Alteram Partem 8.5.i. It means "hear the other side" or "let the other side be heard as well". This is the second most fundamental rule of natural justice that says no one should be condemned unheard. In circumstances where a person against whom any action is sought to be taken and his right or interest is being affected, shall be given an equal opportunity of being heard and defend himself. 8.5.ii. It gives right to the party to respond to the evidence against them and to choose legal representative of their own choice. The principles of natural justice form a fundamental fair procedure among the parties during a dispute. It is the duty of every person or body exercising judicial or quasi-judicial functions to act in good faith and to listen fairly to both the sides before passing any order. 8.5.iii In case if the Legislature specifically authorizes an administrative authority to proceed without giving an opportunity of being heard, then except in case of recognised exceptions, the law would be violative of the principles o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or review, but nullity is the consequence of unconstitutionality and so the order of an administrative authority charged with the duty of complying with natural justice in the exercise of power before restricting the fundamental right of a citizen is void ab initio and of no legal efficacy. The duty to hear menacles his jurisdictional exercise and any act Is, in its inception, void except when performed in accordance with the conditions laid down in regard to hearing. An order which is void may be directly and collaterally challenged in legal proceedings. An order is null and void if the statute clothing the administrative tribunal with power conditions it with the obligation to hear, expressly or by implication. Beyond doubt an order which infringes a fundamental freedom passed in violation of the audi alteram partem rule is a nullity. When a competent court holds such official act or order invalid, or sets it aside, it operates from nativity, that is, the impugned act or order was never valid. The Supreme Court held thus (CLC 1-14): "Where hearing is obligated by a statute which affects the fundamental right of a citizen, the duty to give the hearing sounds in constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had no sufficient time to contact his local lawyer, who is staying at Barbil and the Counsel to appear before the Pr. CIT, Cuttack is staying at Cuttack. When the authorized representative of the assessee appeared before the Pr.CIT, the order u/s.263 of the Act was already passed. It is trite that right to fair hearing is a guaranteed right of an assessee and granting of effective opportunity is a sin qua non in Section 263 of the Act for unsetting a statutory order. It was the duty of the Pr. CIT to provide the assessee an effective opportunity to enable it to substantiate its claim. In any case, it is one of the fundamental principles of natural justice that no person can be condemned unheard i,e. audi alteram partem, and the impugned revision order was thus passed in violation of the principles of natural justice in absence of any effective/reasonable opportunity of hearing provided to the assessee. To support our view, reliance can be placed on the decision of the Division Bench judgment of the Hon'ble Allahabad High Court in the case of Jagannath Prasad Bhargava V. Lala Nathimal, AIR 1943 All. 17, wherein the Hon'ble High Court Court has held as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CLC 35- 36) 11.6 Hon'ble ITAT Raipur Bench in Dee Vee Projects Ltd. vs. Pr. CIT, Raipur-1 on 11 October, 2021, ITA No. 27/RPR/2021 held as under (CLC 37-44): "9. In the landmark case of "Maneka Gandhi vs. Union of Indiaı (1978 AIR 597), it has been held by Constitution Bench of the Honıble Apex Court that the law and procedure must be fair, just and reasonable. The doctrine ensures a fair hearing and fair justice to both the parties. Under this doctrine, both the parties have the right to speak. The aim of this principle is to give an opportunity to the parties to defend themselves. Before the court, both the parties are equal and are entitlement of equal opportunity to represent them. If the order is passed by the authority without providing the reasonable opportunity of being heard to the person affected by it adversely will be invalid." (CLC 40) "12. The coordinate benches at Ahmadabad and Mumbai tribunal in the aforesaid cases of Smt. Shardaben B. Patel (supra) and Tata Chemicals Limited (supra) respectively, dealt with the situation to the effect as well, where the proper opportunity of being heard was not given to the Assessee, in that eventuality, whether at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on legal point, hence there is no need to decide the factual grounds." (CLC 42- 43) 12 Apart from second round of avoidable compliances and unnecessary harassment, the assessee Company also suffers pecuniary losses for no fault of its and such losses result into gain to the Revenue i.e. the offender. 13 Distinction between an "illegality" and a "nullity" should be considered before allowing the Revenue a second innings. If the Courts allow the Revenue to do fresh assessments in all set aside cases, they would, in effect, be granting them a licence to contravene the principles of natural justice. The provisions requiring them to follow principles of natural justice would become redundant. 14 The order passed in gross violation of Principles of Natural Justice is "void on its face" and "transparently invalid". Such an order, as a matter of ordinary common sense, is a still born child which had Died at Birth. Such an order will amount to never have legally existed. Beyond doubt, an order which infringes a fundamental freedom passed in violation of the Audi Alteram Partem rule is a nullity. The order is a nullity from its very inception and a "non-est order". 15 A determinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Tax Audit Report, the books of account maintained and verified by the auditor, as reported in clause 11 do not mention the said memorandum records [PB 130-131]. A6. Ld. PCIT has also mentioned that the government dues cannot be prima facie irrecoverable. Writing off such government debts is not genuine and justified. In section 36(1)(vii) there is no restriction that the debts due from government cannot be written off as bad debts. It is also submitted that bad debts is not solely on the basis of insolvency of the debtor. Even a solvent debtor may decide not to pay the dues for any genuine/ non-genuine reason. If an assessee, in his business wisdom, finds that a particular sum, for any reason whatsoever, is not recoverable, even if the said amount is due from the government, it can be written off. Government dues become bad, for business entities, for various procedural and bureaucratic issues. A7. Ld. PCIT has also misdirected herself in observing that debts have been written off in case of some of DEOs which have regular current transactions. There is no restriction, under the law, that if subsequent transactions are being done the earlier bad debts will not be allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der u/s 143(3) 15/12/2016 by ACIT Circle 6 Jaipur. Bad Debts Rs. 7.42 Crores. A12. The Order of ld. AO can be called erroneous only if he has adopted a stand which is not at all possible under the law. On the contrary, ld. AO had adopted the course which is absolutely in accordance with the law and the judicial precedents laid down in this regard. Reliance is placed on the following judicial pronouncement of the Hon'ble Supreme Court: T.R.F. Limited v. Commissioner of Income Tax, Ranchi in Civil Appeal No. 5293 of 2003 (CLC 45-48): "This position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee." (CLC 46) A13. Ld. PCIT had tried to substitute her view point over the stand taken by the ld. AO. No such substitution of view is permissible in 263 proceedings. Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of CIT v. Max India Ltd., [2007] 295 ITR 282 (SC) wherein the Court held as under (CLC 49- 53): "2. At this stage we may clarify that under para 10 of the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of CIT vs Ganpat Ram Bishnoi- 296 ITR 292 (Raj) wherein it was held that jurisdiction u/s 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again (CLC 54- 57). B5. Hon'ble ITAT, Jaipur Bench, in the case of Annu Agrotech Private Limited, ITA No. 09/JP/2021, apropos assumption of jurisdiction under section 263 by the ld. PCIT, laid down the following ratio: "Section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO." "Ld. PCIT cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well- accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce response in and set at rest judicial and quasi- judicial controversies as it must in other spheres of human activity." In view of the above, there is no error in the order of the ld. AO least any prejudice to the interest of revenue. The ground of appeal deserves to be allowed. " 9. In addition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time is going to expire. As regards, the not finding reference in the order since the request was made online the same may not be put up before Pr. CIT and that is why the same is not finding any reference in the order. Thus, the assessee was given as much as 9 days to file their defense reply. Thus, inaction of the assessee may not be benefited and adversely affect the revenue. As the assessee is not coming with clinch hands and in advance preparation of his case and even, they have not filed any part of the submission before Pr. CIT in response to the show cause notice. In light of these facts the ground no 1 of the assessee has no merit and this ground is required to be dismissed. As regards the second ground the ld. DR argued that the in real terms the debts have been written of or not is not clear from the details placed on record and written of debt is precondition in the act, as this condition is not met with based on the record as the record are not clear with respect to the subsidiary ledger produced in the assessment record. As regards the disallowance of amount u/s. 36(1(va) remained to be made the assessee has moved the application under section 154 of the Act after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find force in the arguments of the ld. AR of the assessee for the ground no. 1 raised by him, that out of 834 days available for exercising the revisionary power the case was instituted after the lapse of 814 days when only 19 days left for completing the revisionary proceedings. In the notice only 9 days' time was given and even the adjournment application has not been dealt with while passing the order by ld. Pr. CIT. The ld. AR submitted that there is a clear violation of principles of natural justice and fundamental rights as guaranteed under the articles 14 & 21 of the Constitution. He further relied upon the provision of section 263 itself which states that the order be passed after giving the assessee an opportunity of being heard. The ld. AR of the assessee relied on the judgment of Supreme court in the case of Maneka Gandhi Vs. UOI 1978 AIR 597 and decision in the cae of Nawabkhan Abbaskhan Vs The state of Gujarat 1974 AIR 1471 where in the apex court held that an order which infringed a fundamental freedom passed in violation of the audi alteram partem rule was a 'nullity. A determination is no determination if it is contrary to the constitutional mandate of Art. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book), which clearly reflects that the notice issued on dated 25/03/2021 fixing the date of hearing on 26/03/2021 was illusory and farce in nature and had no essence of principles of natural justice, thus goes to show that no reasonable opportunity of being heard was afforded to the Assessee before passing the adverse order against it. On the aforesaid analyzations and considerations and following the mandates of the Hon'ble Apex Court, in the case of Amitabh Bachchan (supra) wherein it was held that 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 and in the case of "Maneka Gandhi vs. Union of India (supra)ı wherein it was held that if the order is passed by the authority without providing the reasonable opportunity of being heard to the person affected by it adversely will be invalid, the question of remanding the case to the file of Ld. PCIT as prayed for by the Ld. DR, at this juncture at all does not arise as held by co-ordinate Benches as well in the aforesaid cases. In overall effect, the impugned order has violated the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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