SUN STONE INGINEERING INDURIES P.LTD., JAIPUR V. PCTI-2, JAIPUR

ITA 50/JPR/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8629 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 27-06-2021
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Principle of natural justice; Condonation of delay; Audi alteram partem
• Section: 263; 143(3); 101

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ,oa MkWa- ,e- ,y- ehuk] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & DR. M.L. MEENA, AM vk;dj vihy la-@ITA. No. 50/JP/2021 fu/kZkj.k o"kZ@Assessment Years : 2016-17 Sun Stone Engineering Industries P. Ltd., L-5-B-II, Surya House, Krishna Marg, C-Scheme, Jaipur. cuke Vs. Pr.CIT-2, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCS9144D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rajeev Sogani (C.A.) jktLo dh vksj ls@ Revenue by : Shri Avdhesh Kumar (CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 01/06/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 10/08/2022 vkns'k@ ORDER Per: Dr. M.L. Meena, A.M. Caption appeal filed by the assessee against the order dated 31.03.2021 passed by ld. Principal Commissioner of Income Tax, Jaipur-2 (hereinafter referred to as ‘PCIT’) U/s 263 of the Act in respect of assessment year 2016-17. The appellant-assessee has raised the following grounds of appeal:- “1. In the facts and circumstances of the case and in law, Ld. PCIT has erred in exercising the revisionary powers by passing the order u/s 263 of I.T. Act, 1961 setting aside the order passed u/s 143(3), dated 05.11.2018. The action of the Ld. PCIT is ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 2 illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263. 2. In the facts and circumstances of the case and in law, Ld. PCIT has erred in holding the order passed u/s 143(3) dated 05.11.2018 as erroneous and prejudicial to the interest of the revenue. The order passed u/s 263 is bad in law and therefore, the action of the ld. PCIT illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263. Dated 05.11.2018 as not erroneous and prejudicial to the interest of the revenue. 3. The assessee company craves its right to add, amend, or later any of the grounds on or before the hearing.” 2. The appellant-assessee has raised the following additional ground vide application dated 15.11.2021 which is reproduced as under:- “ In the facts and circumstances of the case and in law, ld. PCIT has erred in completing the revision proceedings without affording proper opportunity of being heard. The action of the ld. PCIT is illegal, unjustified, arbitrary and against the principles of natural justice. Relief may please be granted by quashing the revision proceedings in toto.” 3. The appeal is filed with delay of 28 days as evident from the facts on record that the assessment order U/s 263 of the IT Act was passed in the case of the appellant/assessee on 24.03.2021 which was received by the assessee on 31.03.2021 and therefore, the assessee was required to file an appeal before the Bench on or before on 29.05.2021 as per provisions of section 253(3) of the IT Act, 1961. The ld. AR of the assessee company submitted that the due to sudden second outburst of COVID-19, the State Government announced lockdown from ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 3 19.04.2021 to 03.05.2021 which was further extended till 08.06.2021, consequently the appellant assessee was prevented from filing of appeal in time. 3.1 The ld. Counsel further submitted that understanding this extraordinary situation, Hon’ble Apex Court on 27.04.2021 adjudicating in Miscellaneous Application No. 665/2021 in SMW (Civil) No. 3/2020, in re-cognizance for expansion of limitation, ordered that a period of limitation in filing of appeal, irrespective of the limitation prescribed under the general law or special laws whether condonable or not shall stand extended w.e.f. 14 th March, 2021 till further orders. He contended that taking note of Hon’ble Apex Court decision, this appeal was filed on 17.06.2021. He argued that the Covid-19 pandemic led to delay in filing the appeal and therefore, the delay was not deliberate. Accordingly, prayed for the condonation of delay of 28 days. 3.2 The ld. DR has no objection to the request of the assessee for condonation of delay, accordingly the delay in filing the appeal of 28 days is hereby condoned. 4. The learned counsel for the assessee has stated at bar that the additional ground being a legal ground based on the facts available on record. Placing reliance on the judgment of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. (1998) 229 ITR 383 contended that the additional ground being legal in nature be addmited. 5. The ld. DR has no objection to the additional ground which is interlinked with the ground no. 1 as per the appeal memo accordingly, the additional ground of the assessee is hereby admitted for adjudication on merits. 6. Briefly the facts as per records are that the assessment u/s 143(3) of the Act was completed by the AO dated 05.11.2018 in the case of the assessee. The ld. PCIT has considered the order to be erroneous and prejudicial to the interest ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 4 of the Revenue. In view of the lack of the enquiry on the part of the Assessing Officer in respect of the unsecured loans taken from two persons namely, Sh. C.S. Saboo and Smt. Manju Saboo of Rs. 55,00,000/- and Rs. 6,00,000/- respectively. The ld. PCIT has held that the unsecured loans of Rs. 66,00,000/- obtained by the assessee during the year, has not been verified by the AO by way of obtaining confirmations and conducted enquiry so as to identified by the creditors, their creditworthiness and genuineness of the transactions with reference to the source of money at that time and verification thereof. The PCIT observed that the AO has accepted that these unsecured loans in mechanically manner thereby it has resulted in error in the order passed by the AO. The ld. PCIT has further stated that the assessee has failed to file any explanation in respect of aforesaid unsecured loans in compliance to the show cause notice and accordingly, he has passed the order u/s 263 of the Act based on material available on record ex-parte qua the assessee. The ld. PCIT derived the supports from the following judgments as under:- • Malabar Industrial Limited vs. CIT 243 ITR. • TTK LIG Ltd. vs. ACIT(Mad) 51 DTR 228. • ARvee International vs. Addl. CIT (ITAT, Mum) 101 ITD 495. • CIT vs. Nagesh Knitwears Pvt. Ltd. 345 ITR 135 (Delhi H.C.). • Gee Vee Enterprises v. Additional Commissioner of Income-tax (1975) 99 ITR 375. • CIT vs. Raisons Industries Ltd. 288 ITR 322 (SC). • Seshasayee Paper & Boards Ltd. (2000) 242 ITR 490 (Mad H.C.). 7. The learned counsel for the assessee has submitted before us that the revisionary powers u/s 263 of the Act could be exercised within two years from ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 5 the end of the financial year in which the assessment was completed in terms of section 263(2). Accordingly, in the presence case, the revision proceedings u/s 263 are becoming time barred on 31/03/2021 and that the revision proceedings were instituted by issue of notice by ld. PCIT (PB 3-4) as late as on 24/03/2021 as it is evident from page 1 of the order of ld. PCIT. The ld. Counsel for the assessee argued that out of the 877 days available for exercising the revisionary powers however, the ld. PCIT has instituted of the revisionary proceeding after mentioned of 870 days lapse, when 7 days were left from completing the revisionary proceedings. He has further submitted that the assessee company on the date of hearing i.e. 26/03.2021 (3:31PM) filed request for adjournment through e-mail at 2:05 on (PB-1) and claimed that the said adjournment was successfully submitted as is evident from the e-mail received by the assessee company from department (PB-2). He has challenged that the ld. PCIT didn’t care to refer to the request of adjournment and in a rush to complete the proceedings with the legal time frame available, passed the order on 31/03/2021. The ld. Counsel for the assessee stated that the observation of ld. PCIT at para no. 7, mentioned that no submission filed by the assessee company is factually incorrect and he passed the order ex-parte qua the assessee. The order is void ab initio and does not deserve a second inning because of the following submission which are reproduced as under:- 8.5.i Natural justice implies fairness, reasonableness, equity and equality, It has a very wide application in administrative discretion which aims to prevent arbitrariness and injustice towards the citizens with an act of administrative authorities. Decisions which violate the principles of natural justice shall stand null and void. 8.5.ii Natural justice can be defined as a fundamental procedural rule that helps in keeping the Rule of Law in place (upholds Rule ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 6 of Law and justice). It helps in translating the Rule of Law into practice and seeks to ensure that justice is actually done. It further ensures that this principle is not modified as per the whims and fancies of man. 8.3 It seeks to achieve the following: a) Objective hearing b) Decisions made on objective evidence c) Protection of persons from subjective inclination of the judge (Rule against bias) In India, principles of natural justice are firmly rooted and guaranteed under the Article 14 & 21 of the Constitution. The major objective of these principles are that they aid to avert miscarriage of justice by safeguarding rights of an individual. They further ensure that a judgment by the appropriate authority is just, fair and reasonable. 8.4. Principles of Natural Justice are mainly based on the following two principles: • 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 ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 7 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 of fair hearing which is now read into Articles 14 and 21 of the Constitution. The sole purpose of rule of fair hearing was to avoid the failure of justice. Therefore, decisions which violate the principle of Audi Alteram Partem such can be quashed by court. 9. The rule that no decision should be given against a party without giving an opportunity to be heard is emphatically embodied in section 263(1) itself which states "....after giving the assessee an opportunity of being heard". 10. Moreover, Article 265 declares that no tax shall be levied or collected, except by the authority of law. Therefore, Article 265 read with Article 14 of the Constitution of India guaranteeing the right to equality. In this scenario, it is important that orders and decisions of the Income Tax Authorities are taken not only in compliance with the provisions of the law but also following the principles of natural justice. 11. Courts, at all levels, have shown serious concern whenever Principles of Natural Justice are violated. Such orders are held to be void ab initio and no second inning is allowed. Reliance is placed on the following judicial pronouncements:” 8. The ld. DR supported the order passed by the Pr. CIT u/s 263 of the Act. He submitted before us that mandate u/s 263 of the Act does not provide specific time limit within the period for exercising of revisionary powers u/s 263 of the Act. He argued that institution of the ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 8 revisionary proceedings by way of issuing notice u/s 263 of the Act just before 7 days before completing the revisionary proceedings does not vitiate the valid proceedings undertaken by the ld. AR u/s 263 of the Act and that the assessee has been given enough opportunity of being heard. He emphasized that merely filed an adjournment application through e-mail and requesting 10 days time without given valid reasons for seeking adjournment, amounts to non-compliance and avoiding of the proceedings particularly when battery of leading professional is engaged by the assessee to look after the accounts and legal matter. At the same time, he strongly object to the contention of the assessee in the request to quash the revisionary proceedings in toto by holding the action of the PCIT arbitrary in violation of principles of natural justice. However, the ld. DR has submitted that the assessee’s case may be remanded back to the ld. PCIT to be heard afresh after granting sufficient opportunity of being heard to the assessee on account of the principles of natural justice as above. 9. We heard both the sides, perused the material on record, impugned order and citations. Admittedly, the PCIT has passed order u/s 263 of the Act exparte qua the assessee. It is not disputed that the assessee company on the date of hearing i.e. 26/03.2021 (3:31PM) filed request for adjournment through e-mail at 2:05 (PB-1) and claimed that the said adjournment was successfully submitted as is evident from the e-mail received by the assessee company from department (PB-2). The ld. Counsel for the assessee contended that the observation of ld. PCIT at para no. 7, mentioned that no submission filed by the assessee company is factually incorrect and he passed the order ex-parte qua the ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 9 assessee is void ab initio and does not deserve a second innings in view of principles of natural justice. 10. That the mandate u/s 263 of the Act does not provide specific time limit of period within which the PCIT is required to issue notice under the revisionary proceeding’s u/s 263 of the Act. The Ld. CIT(DR) argued that institution of the revisionary proceedings by way of issuing notice u/s 263 of the Act just before 7 days before completing the revisionary proceedings does not vitiate the valid proceedings undertaken by the ld. AR u/s 263 of the Act and that the assessee has been given enough opportunity of being heard. He emphasized that merely filing an adjournment application through e-mail and requesting 10 days’ time without given valid reasons for seeking adjournment, amounts to non-compliance and avoiding of the proceedings particularly when battery of leading professional is engaged by the assessee to look after the accounts and legal matter. He strongly objected the contention of the assessee to quash the revisionary proceedings in toto by holding the action of the PCIT arbitrary in violation of principles of natural justice. 11. In view of the principles of natural justice, assessee’s case is required to be remanded back to the ld. PCIT to be heard afresh after granting sufficient opportunity of being heard to the assessee to adjuvate the matter afresh after considering the written submission filed through e-mail and would be filed in the fresh proceedings. However, we are not convinced with the contention of the Ld. AR that the order u/s ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 10 263 of the act passed ex-parte qua the assessee is void ab initio and does not deserve a second innings in view of principles of natural justice because it was the assessee who failed to file necessary details as required by the ld. PCIT and filing an adjournment application by e- mail at the last hour tantamount to avoiding the proceedings deliberately. The other argument advanced on behalf of the appellant that opportunities were not given to the appellant assessee, before the order passed u/s 263 and hence, merely because the impugned revisionary order was passed prior to the expiration of deadline prescribed for preferring a response, the same would not result in violation of principles of natural justice - is, equally, untenable. The reason is that once the assessee was issued a notice, as required in law, it was obliged to give an opportunity to the petitioner to file its objections. With the issuance of the notice the assessee firmed up its position as to how it wishes to move further in the matter. Notices issued prior to this stage are inquisitorial in nature. These are issued to ferret information and make inquiries with the object to, inter alia, ensure that whether the Assessment order passed by the AO was erroneous or prejudicious to the interest of error within the meaning of provisions of section 263 of the Act. The citation referred by the Ld. AR are distinguishable on peculiar facts of the present case. 12. In the above view, we are of the considered opinion that it is fit case to be restored to the PCIT to adjudicate the matter afresh after granting adequate opportunity of being heard. The assessee is directed to cooperate in the fresh proceeding before the Ld. PCIT. ITA No. 50/JP/2021 Sun Stone Engineering Industries P. Ltd. 11 13. In result, the appeal is allowed for statistical purpose. Order pronounced in the open Court on 10/08/2022. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ MkWa- ,e- ,y- ehuk ½ (Sandeep Gosain) (Dr. M.L. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 10/08/2022. *Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant Sun Stone Engineering Industries P. Ltd., Jaipur. 2. izR;FkhZ@ The Respondent- Pr.CIT-2, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 50/JP/2021} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar