Kamlesh Jain & Sons HUF, Raipur V. Income Tax Officer-3(2), Raipur

ITA 26/RPR/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4886 (ITAT-RAIPUR)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 17-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Procedural lapse; Set aside; Audi alteram partem
• Section: 263; 143(3); 54F

Judgement Text

ITA NO.26/RPR/2021 A.Y. 2016-17 PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER A ND SHRI N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO. 26/RPR/2021 ASSESSMENT YEAR: 2016-17 KAMLESH JAIN & SONS, HUF VS. INCOME TAX OFFICER-3( 2), 10, PANCHSHEEL NAGAR, RAIPUR. RAIPUR (CG) [PAN AACHK 1133 N] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.B. DOSHI, C.A. RESPONDENT BY : SHRI P.K. MISHRA, CIT D.R. DATE OF HEARING : 30.07.2021 DATE OF PRONOUNCEMENT : 29.09.2021 O R D E R PER PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER : THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE REVISIONAL ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX (PCIT IN SHORT), RAIPUR DATED 11.12.2018 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (THE ACT IN SHORT) WHEREBY THE ASSESSMENT ORDER PASSED B Y THE ASSESSING OFFICER (A.O.) DATED 11.12.2018 UNDER SECTION 143(3) OF THE ACT CO NCERNING ASSESSMENT YEAR 2016- 17 WAS SOUGHT TO BE SET ASIDE FOR REFRAMING THE ASS ESSMENT IN TERMS OF SUPERVISORY JURISDICTION. 2. AS PER ITS GROUNDS OF APPEAL, THE ASSESSEE HAS C HALLENGED THE ASSUMPTION OF JURISDICTION BY THE PCIT UNDER SECTION 263 OF THE A CT ON THE GROUND THAT THE ASSESSMENT ORDER UNDER REVISION IS NEITHER ERRONEOU S NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. AS A COROLLARY, THE ASSESSEE HAS SOUG HT TO IMPUGN CONSEQUENT REVISIONAL ORDER PASSED BY PCIT UNDER SECTION 263 O F THE ACT. 3. BRIEFLY STATED, THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 2016-17 IN QUESTION INTER ALIA CLAIMING DEDUCTION UNDER SECTIO N 54F OF THE ACT. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED UNDER SCR UTINY AND SPECIFIC QUERIES TOWARDS CLAIM OF DEDUCTION WERE RAISED BY THE A.O. VIDE NOTICE DATED 11.10.2018 AND ITA NO.26/RPR/2021 A.Y. 2016-17 PAGE 2 OF 8 03.12.2018. THE ASSESSEE FILED ITS REPLY DATED 01. 12.2018 WHEREBY THE JUSTIFICATION FOR DEDUCTIBILITY OF CLAIM UNDER SECTION 54F WAS EX PLAINED. IT WAS POINTED OUT TO THE A.O. THAT THE ASSESSEE HAS CONSTRUCTED THE RESIDENT IAL HOUSE FOR WHICH THE CONSTRUCTION WAS COMMENCED IN THE EARLIER YEARS BEF ORE THE SALE OF THE ORIGINAL ASSET BUT HOWEVER, CONSTRUCTION WAS COMPLETED SUBSEQUENT TO THE SALE OF THE ORIGINAL ASSET WITHIN THE STIPULATED TIME PERIOD AS PROVIDED IN TH E SCHEME OF SECTION 54F OF THE ACT. THE A.O. EVENTUALLY WAS SATISFIED WITH THE COMPLIAN CE OF THE CONDITIONS STIPULATED UNDER SECTION 54F OF THE ACT AND THUS ASSESSED THE INCOME OF THE ASSESSEE WITHOUT ANY ADJUSTMENT ON THIS SCORE. 4. THEREAFTER THE PCIT IN EXERCISE OF ITS REVISIONA RY POWERS ISSUED SHOW CAUSE NOTICE DATED 10.03.2021 UNDER SECTION 263 OF THE AC T REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE IMPUGNED ASSESSMENT SO FRAMED U NDER SECTION 143(3) OF THE ACT SHOULD NOT BE MODIFIED/SET ASIDE ON THE GROUND THAT SUCH ORDER IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS ESSENTIALLY ALLEGED THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTIO N 54F OF THE ACT WHERE THE CONSTRUCTION OF THE RESIDENTIAL HOUSE HAD ALREADY C OMMENCED PRIOR TO THE SALE OF THE ORIGINAL ASSET (FOUR LAND PARCEL) AND THE CONDITION S OF SECTION 54F DOES NOT STAND SATISFIED. 5. NONE ATTENDED FOR THE ASSESSEE IN RESPONSE TO TH E SHOW CAUSE NOTICE BUT THE PCIT PROCEEDED WITH THE REVISIONAL PROCEEDINGS AND ALLEGED THAT THE A.O. HAS NOT CONDUCTED PROPER ENQUIRY WITH REFERENCE TO THE DEDU CTION CLAIMED UNDER SECTION 54F OF THE ACT. THE ORIGINAL ASSESSMENT WAS SET ASIDE ON THE ABOVE POINT AND THE A.O. WAS DIRECTED TO PASS A FRESH ASSESSMENT IN TERMS OF DIRECTIONS IN THE REVISIONAL ORDER. 6. AGGRIEVED BY THE AFORESAID ACTION OF THE PCIT, T HE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGITATING SUPERVISORY JURISDICTION USU RPED BY THE PCIT UNDER SECTION 263 OF THE ACT. 7. WHEN THE MATTER WAS CALLED FOR HEARING BEFORE TH E TRIBUNAL, THE LEARNED COUNSEL FOR THE ASSESSEE RAISED SEVERAL POINTS TO A SSAIL THE ACTION OF THE PCIT. TO BEGIN WITH, IT WAS ALLEGED THAT NO NOTICE UNDER SEC TION 263 OF THE ACT WAS RECEIVED BY THE ASSESSEE. AS REGARDS SHOW CAUSE NOTICE DATED 1 0.03.2021, THE NOTICE HAS BEEN ITA NO.26/RPR/2021 A.Y. 2016-17 PAGE 3 OF 8 PURPORTEDLY SENT ON EMAIL ID. RBDCO011@ YAHOO.CO.IN WHICH WAS NOT RECEIVED ON THE SAID ID. AT ANY TIME AND AFFIDAVIT OF THE ASSESSEE HAS BEEN FILED IN THIS REGARD. (2) A SOLITARY NOTICE DATED 10.03.2021 WAS ISSUED AND DES PITE NON-SERVICE OF NOTICE, NO FURTHER INTIMATION WAS ATTEMPTED TO BE MADE ON THE ASSESSEE WHILE PASSING REVISIONAL ORDER WITHIN TWO WEEKS I.E. ON 26.03.2021. THUS, N ON-APPEARANCE OF THE ASSESSEE IS WHOLLY ATTRIBUTABLE TO THE FAILURE ON THE PART OF T HE PCIT TO AFFORD REASONABLE OPPORTUNITY. IN THIS REGARD, IT WAS SUBMITTED THAT SUCH REVISIONARY ORDER PASSED IN HASTE WITHOUT PROVIDING OPPORTUNITY OF HEARING IS N ULL AND VOID AB INITIO. MORE SO, WHERE THE OBLIGATION TO PROVIDE OPPORTUNITY IS INBU ILT IN THE PROVISION OF SECTION 263 ITSELF AND IS A MANDATORY REQUIREMENT. RELIANCE WA S PLACED ON THE DECISIONS OF : - SMT. SHARDABEN B. PATEL VS. PR. CIT (2020), 180 I TD 328 (AHD.) - CIT VS. AMITAB BACHCHAN (2016) 384 ITR 200 (SC) - VENKAT NAICKEN TRUST VS. ITO (2000) 242 ITR 141 ( MAD) 8. TO EXPOUND THE FACTUAL POSITION, IT WAS ALSO POI NTED OUT THAT NOTICE DATED 10.03.2021 CALLING FOR HEARING ON 15.03.2021 WAS EV ENTUALLY SIGNED BY THE PCIT ON 15.03.2021 I.E. ON THE DATE OF HEARING FIXED IN THI S REGARD. INTERESTINGLY, NOTICE WAS SIGNED AT 1.49 P.M. WHEREAS THE HEARING WAS FIXED O N THE SAME DATE AT EARLIER POINT OF TIME I.E. 11.15 A.M AND HENCE EVEN IF NOTICE COULD BE SERVED, STILL SUCH NOTICE WOULD HAVE SERVED NO PURPOSE AT ALL AND WOULD AMOUNT TO N O OPPORTUNITY. NO FURTHER NOTICE WAS ISSUED THEREAFTER. IT WAS CONTENDED THAT THE OP PORTUNITY GRANTED CANNOT BE ILLUSIONARY BUT HAS TO BE REAL AND EFFECTIVE TO ENA BLE THE ASSESSEE TO DEFEND ITS CAUSE. THE PCIT HAS NEITHER ASSURED SERVICE OF NOTICE NOR HAS PROVIDED ANY OPPORTUNITY AS NARRATED SUPRA. 9. IT WAS THUS STRONGLY URGED THAT IN THE ABSENCE O F OPPORTUNITY OF HEARING, THE REVISIONAL ORDER IS REQUIRED TO BE QUASHED AT THE T HRESHOLD ON THIS GROUND ITSELF. 10. ADVERTING TO THE MERITS OF THE ISSUE RAISED IN THE SHOW CAUSE NOTICE, THE COUNSEL FOR THE ASSESSEE POINTED OUT THAT CERTAIN L AND PARCELS WERE SOLD BY THE ASSESSEE AND CAPITAL GAIN ARISING THEREON WAS SUBJE CTED TO DEDUCTION UNDER SECTION 54F OF THE ACT BY UTILISATION OF THE SALE CONSIDERA TION IN RESIDENTIAL HOUSE PROPERTY UNDER CONSTRUCTION. IT WAS SUBMITTED THAT WHILE TH E ASSESSEE HAS ALREADY STARTED THE CONSTRUCTION OF THE PROPERTY IN EARLIER YEARS BUT, HOWEVER, THE CONSTRUCTION WAS ITA NO.26/RPR/2021 A.Y. 2016-17 PAGE 4 OF 8 COMPLETED AFTER THE SALE OF LAND PARCELS (ORIGINAL ASSET) AND THUS AFTER THE ACCRUAL OF THE LONG TERM CAPITAL GAIN. THE CONSTRUCTION OF TH E RESIDENTIAL HOUSE WAS COMPLETED ON 18.06.2017 WHEREAS THE LAND PARCELS WERE SOLD IN MARCH 2016. IT WAS SUBMITTED THAT THE VERY ISSUE WAS SUBJECTED TO REQUISITE ENQU IRY BY THE A.O. VIDE NOTICE DATED 11.10.2018 AND 03.12.2018. IN THE COURSE OF THE AS SESSMENT, THE A.O. WAS EVENTUALLY SATISFIED WITH THE ELIGIBILITY OF THE DE DUCTION UNDER SECTION 54F OF THE ACT IN THE FACTUAL MATRIX POINTED OUT TO HIM. IT WAS CONT ENDED THAT THERE ARE LONG LINE OF JUDICIAL PRECEDENCE WHEREIN IT HAS BEEN HELD THAT D ATE OF COMMENCEMENT OF CONSTRUCTION IS IRRELEVANT FOR THE PURPOSE OF SECTI ON 54/54F OF THE ACT. ONCE CONSTRUCTION HAS BEEN COMPLETED AFTER THE TRANSFER OF THE ORIGINAL ASSETS WITHIN THE STIPULATED PERIOD SPECIFIED IN SECTION 54F, THE ASS ESSEE IS ENTITLED IN LAW FOR DEDUCTION UNDER SECTION 54F OF THE ACT. 11. THE LEGAL PROPOSITION IS COVERED BY :- - PR. CIT VS. AKSHAY SOBTI (2020) 423 ITR 321 (DEL) - CIT VS. BHARTI MISHRA (2014) 265 CTR 374 - DCIT VS. DR. CHALASANI MALLIKARJUNA RAO (2016) 16 1 ITD 721 (VSKP.) - ACIT VS. SUBHASH SEVARAM BHAVNANI (2012) 23 TAXMA NN.COM 94 (AHD.) - CIT VS. J.R. SUBRAMANYA BHATT (1987) 165 ITR 571 - HILL QUEEN INVESTMENT (P) LTD. VS. PR. CIT (2021) 62 CCH 70 (KOL. TRIB.) - PADAM KUMAR JAIN VS. CIT (2020) 59 CCH 209 (RANCH I) - MAGIC LANDCON LLP & ANR. VS. PR. CIT (2020) 204 T TJ 785 (DEL) - KARTHIK FINANCIAL SERVICES LTD. VS. CIT (2019) 55 CCH - ITO VS. K.C. GOPALAN (2000) 162 CTR 566 (KER.) - YATIN PRAKASH TELANG VS. ITO (2018) 171 ITD 705 ( MUM.) - MAGIC LANDCON LLP & ANR. VS. PR. CIT (2020) 204 T TJ 785 (DEL.) - PR. CIT VS. DELHI AIRPORT METRO EXPRESS P. LTD. ( 2017) 398 ITR 8 (DELHI) - MUMBAI ITAT IN NARAYANA TATU RANE VS. ITO ITA N O.2690/MUM/2016 (2016) 47 CCH 0309 (MUMB. TRIB.) - DCIT VS. KINGPIN INVESTMENT & FINANCE P. LTD. IN ITA NO.4447/MUM/2007 ORDER DATED 20.07.2016 OF A BENCH OF ITAT - MOOL CHAND MAHESH CHAND VS. CIT (1978) 115 ITR 1, 8 (ALL) - CIT VS. LATE SUNDER LAL (1974) 96 ITR 310, 314 ( ALL.) 12. THE LEARNED CIT D.R. FOR THE REVENUE, ON THE OT HER HAND, PLACED RELIANCE UPON THE REVISIONAL ORDER AND SUBMITTED IN FURTHERANCE T HAT IN THE ABSENCE OF PROPER ENQUIRY ON THE RELEVANT FACET OF SECTION 54F, ACTION OF THE A.O. WAS BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA NO.26/RPR/2021 A.Y. 2016-17 PAGE 5 OF 8 13. ON APPRAISAL OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AS WELL AS CASE LAWS REFERRED ON BEHALF OF THE ASSESSEE AS WELL AS REVEN UE, WE FIRSTLY OBSERVE THAT THE A.O. HAS CARRIED OUT THE SPECIFIC ENQUIRY WITH REGARD TO ELIGIBILITY OF DEDUCTION CLAIMED UNDER SECTION 54F OF THE ACT. ON A COROLLARY, IT CAN BE ARGUED THAT HE WAS SATISFIED ON THE PROPRIETY OF THE CLAIM IN QUESTION. SECONDLY, THE CLAIM OF THE ASSESSEE UNDER SECTION 54F TOWARDS RESIDENTIAL HOUSE PROPERTY ALREADY UNDE R CONSTRUCTION AT THE TIME OF TRANSFER OF ORIGINAL ASSET BUT THE CONSTRUCTION COM PLETED AFTER THE TRANSFER IS FOUND TO BE ELIGIBLE IN LAW BY SEVERAL JUDICIAL PRECEDENCE Q UOTED IN THE PRECEDING PARAGRAPHS. THUS, WHERE THE CASE OF THE ASSESSEE IS VINDICATED BY JUDICIAL ENDORSEMENT, ONE WOULD AT LEAST SAY THAT THE ISSUE RAISED BY THE PCI T IS NOT FREE OF ANY DEBATE. IT IS TRITE THAT WHERE THE ISSUE IS DEBATABLE, AND THE A.O. HAS TAKEN A VIEW WHICH IS PLAUSIBLE IN LAW, SUCH VIEW CANNOT BE SUBSTITUTED BY THE VIEW OF THE SUPERIOR AUTHORITY AND THE ORDER PASSED CANNOT BE BRANDED AS ERRONEOUS PER SE . THEREFORE, IN THE ABSENCE OF ANY ERROR IN THE ASSESSMENT HAVING REGARD TO THE ALLOWABILITY OF SECTION 54F, THE ENQUIRY DIRECTED BY THE PCIT ARE SUPERFLUOUS AND WI THOUT AUTHORITY OF LAW. SUCH ACTION OF THE PCIT CANNOT BE SAID TO BE WITHIN THE REALM OF REVISIONAL JURISDICTION UNDER SECTION 263 OF THE ACT. WE THUS FIND THAT THE ACTI ON OF THE PCIT IS WITHOUT AUTHORITY OF LAW BOTH AT THE TIME OF ASSUMPTION OF JURISDICTION AS WELL AS AT THE TIME OF PASSING REVISIONAL ORDER. REVISIONAL ORDER IS THUS LIABLE TO BE QUASHED ON THIS SCORE. 14. WE NOW ALSO ADVERT TO THE VEHEMENT OPPOSITION O N BEHALF OF THE ASSESSEE ON THE GROUND OF NON-ISSUANCE OF NOTICE AND ON TOTAL L ACK OF OPPORTUNITY WHILE CONCLUDING THE PROCEEDINGS UNDER SECTION 263 OF THE ACT. IT H AS BEEN DEMONSTRATED ON FACTS THAT ONLY SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE WAS F OR ATTENDANCE ON 15.03.2021 CALLING THE ASSESSEE AT EARLIER POINT OF TIME I.E. 11.15 A.M ON THE SAME DATE, WHEREAS THE NOTICE ITSELF WAS ISSUED AT 1.49 PM. WE ARE CO NSTRAINT TO OBSERVE THAT SUCH CASUAL APPROACH OF A VERY SENIOR FUNCTIONARY OF THE DEPARTMENT DOES NOT AUGUR WELL IN THE EYES OF THE PUBLIC. AS STATED IN THE BAR, NO S UCH NOTICE WAS SERVED AT ALL ON THE EMAIL ID. AS CLAIMED. NO OTHER NOTICE WAS SERVED. PALPABLY, IT IS A CASE OF TOTAL LACK OF OPPORTUNITY TO THE ASSESSEE TO DEFEND ITS CASE. A QUESTION WOULD ARISE AS TO WHETHER A FAILURE TO GIVE A REASONABLE OPPORTUNITY TO THE A SSESSEE OF BEING HEARD WAS ONLY A PROCEDURAL IRREGULARITY IN SUCH GROSS CIRCUMSTANCES AND THUS CURABLE AND DID NOT RENDER THE ORDER PASSED BY THE PCIT AB INITIO VOID AND NONEST IN LAW PER SE ? ITA NO.26/RPR/2021 A.Y. 2016-17 PAGE 6 OF 8 15. IN THE CASE OF TATA CHEMICALS LIMITED VS. DCIT, ITA NO.3127/MUM/, ORDER DATED 30.06.2011, THE CO-ORDINATE BENCH AFTER MAKIN G REFERENCE TO THE DECISION IN THE JUDGEMENT IN MANEKA GANDHI VS. UNION OF INDIA AIR 1978 SC 597 AND OTHER JUDGEMENTS OBSERVED THAT THE ORDER WHICH INFRINGES THE FUNDAMENTAL PRINCIPLE, PASSED IN VIOLATION OF AUDI ALTERAM PARTEM RULE, IS A NULLITY. WHEN A COMPETENT COURT OR AUTHORITY HOLDS SUCH AN ORDER AS INVALID OR SETS IT ASIDE, THE IMPUGNED ORDER BECOMES NULL AND VOID. ONCE IT IS CONCLUDED THAT THE ORDER IN QUESTION IS NULL AND VOID, IT IS NOT FOR THE ADJUDICATING AUTHORITY TO ADVISE THE COMMIS SIONER AS TO WHAT SHOULD HE DO. HE IS ALWAYS AT LIBERTY TO DO WHATEVER ACTION HE CAN T AKE IN ACCORDANCE WITH THE LAW, BUT A LIFE TO NULL AND VOID ORDER BY REMITTING IT BACK TO THE COMMISSIONER FOR GIVING A FRESH OPPORTUNITY OF PASSING THE ORDER AFTER GIVING THE A SSESSEE AN OPPORTUNITY OF HEARING CANNOT BE GIVEN. IN A CASE WHERE IT IS POSSIBLE FO R THE COMMISSIONER TO PASS A FRESH ORDER AT THIS STAGE IN ACCORDANCE WITH THE SCHEME O F THE ACT, HE CAN VERY WELL DO SO BUT IN CASE THE TIME LIMIT FOR PASSING SUCH ORDER H AS ALREADY EXPIRED, SUCH TIME LIMIT CANNOT BE EXTENDED BY DIRECTING HIM TO PASS THE ORD ER AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. OTHERWISE, THIS WOULD TAN TAMOUNT TO GIVE PREMIUM TO THE PERSON COMMITTING DEFAULT. THE FINALITY OF THE ASS ESSMENT CANNOT BE DISTURBED FOR THE FAILURE OF THE PCIT TO OBDURATELY ADHERE TO THE EXP LICITLY PRESCRIBED REQUIREMENT OF OPPORTUNITY TO ASSESSEE. HENCE, IN THE ABSENCE OF ANY OPPORTUNITY TO THE ASSESSEE FOR WHICH THE FAULT IS ATTRIBUTABLE SQUARELY TO THE PCIT, IS FATAL AND SUCH DEFECT BEING INCURABLE, THE REVISIONARY ORDER PASSED UNDER SECTI ON 263 OF THE ACT IS ALSO REQUIRED TO BE QUASHED INDEPENDENTLY ON THIS GROUND ALSO. 16. HENCE, LOOKING FROM ANY ANGLE, THE IMPUGNED REV ISIONAL ORDER PASSED UNDER SECTION 263 OF THE ACT IS SET ASIDE AND QUASHED. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED ON 29.09.2021 AS PER RULE 34(5) OF THE INCOME TAX APPELLATE TRIBUNAL RULES,1963. SD/- SD/- (N.K. CHOUDHRY) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY RAIPUR, THE 29 TH DAY OF SEPTEMBER, 2021 PBN/* ITA NO.26/RPR/2021 A.Y. 2016-17 PAGE 7 OF 8 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER UE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR