TMI Blog1997 (10) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts were maintained in respect of the Hosur unit and separate profit and loss account and balance sheet prepared and filed. As on 31-10-1983, the total investment in the Hosur unit was Rs. 1,33,28,905. It had a paid-up capital and reserves amounting to Rs. 3,21,03,136 as on 31-10-1983. Therefore, according to the assessee, the investment in the Hosur unit was made out of capital and reserves. A sum of Rs. 57,67,400 had been specifically borrowed for the Hosur unit which had been separately shown. The same procedure had been followed in all the subsequent years. The interest attributable to Hosur unit had been charged to that unit and claimed against its profits. Since the company had sufficient capital and reserves at the inception of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H and 80-I made by the Assessing Officer was erroneous and prejudicial to the interests of revenue as the allocation of interest payment on borrowals between the Bangalore unit and Hosur unit of the company was not proportionate to the loan outstanding against the respective units. Hence, the CIT found that the assessment so made was liable to be revised. According to the CIT, as a result of such inequitable allocation of interest payments, the profit of the Hosur unit had been inflated and thereby the assessee had become entitled to a higher amount of deduction under sections 80HH and 80-I of the IT Act, which would not have been the case, had the interest been properly allocated having regard to the loan outstanding in respect of each uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of revenue. Your objections, if any, to the proposed action may be filed in this office on or before...... you are also given an opportunity of hearing in person, or through your authorised representative, in this regard, by me, at my office on...... at........" According to the learned representative of the assessee, the notice issued as above is invalid. Hence, the order passed on the basis of the above notice, without giving an opportunity to the assessee of being heard, is a nullity. It is also pointed out that the assessee replied to the notice dated 25-2-1991 by its letter dated 28-2-1991 objecting to the proposed action of the CIT under section 263. Still the assessee was not given an opportunity of being heard. Without hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Nursing Das the Hon'ble Supreme Court, it is held that an order passed violating the principles of natural justice is a nullity. It is further held: "(ii) that the earlier order passed by the Settlement Commission on August 24, 1977, was a nullity because it was made in violation of the principles of natural justice; (iii) that, therefore, the application for settlement was still pending when the amendment made by the Finance Act, 1979, came into effect ; and that amendment being procedural, the amended section 245D would given the proceedings and the Commission would have the power to overrule the objections of the Commissioner; (iv) that the appellant was entitled to be heard on the Commissioner's objections; (v) that, on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that oral hearing was not required to be given. This had definitely prejudiced the case of the petitioner. Moreover, the Commissioner of Income-tax had given a direction to the Income-tax Officer to pass the order of rectification. This left no option to the Income tax Officer. This would also vitiate the principles of natural justice. The order of the Commissioner of Income-tax was not valid and was liable to be quashed." As stated earlier, the notice under section 263 does not bear the date of hearing. We, therefore, hold that the order passed by the CIT under section 263 is a nullity and is liable to be cancelled. 6. Coming to the merits, the assessee has already shown the accounts in respect of Hosur unit and Bangalore unit in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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