Pr.CIT-1, Chandigarh V. G.S. Pirzada, HUF, Chandigarh

MA 9/CHANDI/2022

AI Insights

The case revolves around a dispute concerning the assessment order for the Assessment Year 2016-17, initially completed under section 143(3) of the Income Tax Act, 1961. The Principal Commissioner of Income Tax (Pr. CIT-1), Chandigarh, later set aside this order under section 263, citing it as erroneous and prejudicial to the interests of the revenue due to lack of proper enquiries. The assessee appealed this decision to the ITAT, which found that the Pr. CIT had violated the principles of natural justice by not providing adequate opportunity of hearing and not considering the assessee's reply before passing the order under section 263. The Revenue's subsequent Miscellaneous Application sought to challenge the ITAT's decision, but was dismissed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135475 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-08-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-08-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 29-05-2022
• Other Referred Cases: Sona Builders vs. UOI (SC), M/s BrollyDealcom LLP vs. ITO (Cal. Trib.), Jayanthi Nathrarajan vs. ACIT (Mad. HC), Tulsi Tracom Private Limited vs. CIT (Del. High Court), CIT vs Girdharilal (Raj. HC), Pr. CIT vs. Delhi Airport Metro Express Pvt. Ltd. (Del. HC), Smt. Lila Chaudhary vs. CIT (Gauh. HC), Anita Rani vs. Pr. CIT (Del. Trib.), Amira Enterprises Ltd. vs. Pr. CIT (Del. Trib.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Principle of natural justice; Set aside
• Section: 263; 143(3); 254(2); 22

Judgement Text

आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “ए” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH ᮰ी आकाश दीप जैन, उपा᭟यᭃ एवं ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM Miscellaneous Application No. 9/Chd/2022 In (आयकर अपील सं./ ITA NO. 48/Chd/2021 िनधाᭅरण वषᭅ / Assessment Year : 2016-17 The Pr. CIT-1 Aaykar Bhawan, Sector 17-E, Chandigarh-160017 बनाम G.S. Pirzada, HUF C/o Parikshit Aggarwal, C.A H.No. 1238, Sector-22-B, Chandigarh-160022 ᭭थायी लेखा सं./PAN NO: AADHG7242R अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Parikshit Aggarwal, C.A राज᭭व कᳱ ओर से/ Revenue by : Smt. Amanpreet Kaur, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 25/08/2023 उदघोषणा कᳱ तारीख/Date of Pronouncement : 28/08/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : The present miscellaneous application has been filed by the Revenue under section 254(2) of the Act, against the order passed by the Coordinate Bench dt. 25/11/2021 in ITA No. 48/Chd/2021 for Assessment Year 2016-17. 2. In the said Miscellaneous Application, it has been stated as under: “Brief facts of the case are that assessment in this case was completed u/s 143(3) of the Income Tax Act, 1961 vide order dated 31.10.2018 and returned income of Rs. 24,550/- + agricultural income of Rs. 72,63,570/.- was accepted as such. Subsequently proceedings u/s 263 of the Act were initiated in this case by the Pr. CIT-1, Chandigarh and the assessment completed vide order dated 31.10.2018 u/s 143(3) was set-aside vide order dated 23.03.2021 passed u/s 263 of the Act to the file of AO, by holding that assessment order passed is not only erroneous but it is also prejudicial to the interests of the revenue as assessment has been completed without making proper enquiries. Aggrieved with the order passed u/s 263 by Pr. CIT-1, Chandigarh, the assessee filed an appeal before the Hon'ble ITAT, Chandigarh. The Hon'ble ITAT, Bench "A", Chandigarh vide its order in ITA No. 48/CHD/2021 dated 25.11.2021 has allowed 2 the appeal of the assessee and set aside the order of Pr. CIT on the ground that the impugned order passed in the case is in gross violation of the principles of natural justice, having been passed in haste without giving adequate opportunity of hearing to the assesse, observing as under: "...that not only was the assessee denied opportunity of hearing in the present case but also that order was passed without considering the reply filed by the assesse. Undoubtedly the present proceedings were initiated just 15 days before the expiry of limitation to pass the order u/s 263 of the Act and the two notices given to the assessee for hearing afforded very short period of time to reply. That the first one given only two days time to reply and the second one four days time. Further despite the inadequate time given to the assessee to respond, we find that the assesse still managed to file a reply to the Ld. PCIT and even pointed out the reason for not complying with the first notice. But apparently for no reason, his reply was not even considered by the Ld. PCIT when the facts before us clearly demonstrate that they were filed on the ITBA Portal on the specified date and even the PCIT was intimated of the reply filed on the said date. The Revenue has not controverted these facts before us. So for some apparent reason, the PCIT simply chose to ignore the reply filed by the assesse and went ahead to pass the order u/s 263 of the Act on the very same date, i.e 23/03/2021. The impugned order, we hold has not only has been passed in gross violation of the principles of natural justice but is also in violation of the procedure laid down u/s 263 of the Act which specifically requires the authorities to pass the order u/s 263 after affording due opportunity of hearing to the assessee and after making such enquiry as is deemed necessary. In the present case, the Ld. PCIT has neither afforded adequate opportunity of hearing to the assesse but by not taking note of the reply, he has not even made necessary enquiries in the present case before passing the impugned order. The order passed, therefore, is in gross violation of the principles of natural justice and in view of the various decisions cited by the Id. counsel for the assessee before us, the only recourse is to set aside the same." The contention of the assessee that an opportunity of being heard was not allowed by the Pr. Commissioner of Income Tax-1, Chandigarh and his reply was not taken into cognizance before passing the said order u/s 263 of the Act, does not hold ground is evident from in the facts and the time line of events enumerated below :- 1. A show cause notice was issued to the assessee vide DIN & Notice No. ITBA/REV/F/REV1/2020-21/1031535697(1) dated 16.03.2021, fixing the case on 19.03.2021 at 11.00AM. In response to the notice, no response was received and no adjournment was sought by the assessee. 2. Thereafter, in the interest of natural justice, another opportunity was allowed to the assesse by the PCIT-1, Chandigarh by issuing a notice for hearing on 19.03.2021, through ITBA Portal, fixing the case for final hearing on 23.03.2021 at 11.00AM. It was specifically mentioned in the notice itself that this opportunity is last and final opportunity, which was served upon the assessee, electronically, on the same date. 3 3. Again, by the said date and time, no one appeared on the behalf of the assesse nor any request for further adjournment of the case was received manually or through ITBA Portal/email, on 23.03.2021 by 11.00 AM (which was the time given to the assesse to file his reply). 4. Thus, the O/o the PCIT-1, Chandigarh had already given ample time to the assessee to file his reply, but the assessee never responded in any manner despite specifically informing him that the opportunity given for 23.03.2021 at 11.00AM is the last and final opportunity. 5. The Pr. CIT-1, Chandigarh passed an order under section 263 of the Income Tax Act, 1961 at 1.49 PM on 23.03.2021, which was duly served upon the assessee on same date at 2.02 PM. The time stamps are clearly visible on the ITBA Portal. 6. On perusal of the email records of this office, it has been observed that the assessee had filed a single reply through email on 23.03.2021 at 4.17PM i.e. more than 2 hours after the service of order under section 263 of the Income Tax Act. Given the facts above, the observations of the Hon'ble ITAT that the impugned order passed is in gross violation of the principles of natural justice, having passed in haste without giving adequate opportunity of hearing to the assessee and without even dealing with and considering the reply filed by the assessee is not correct as the said order was passed after giving ample opportunities to the assesse through multiple notices. Further, as there is a multitude of Jime_barring tasks to be completed in the month of March, the order was passed after giving two opportunities to the assessee, as mentioned above. Moreover, the observations of the Hon'ble ITAT that the reply of the assessee was not considered while deciding the revision proceedings is also not correct as the assessee had not filed any reply till the date and time given in the final opportunity notice i.e. by 11.00 AM on 23.03.2021. This fact is clearly ascertainable from the official portal and the email of the O/o PCIT-1, Chandgiarh. The assessee has filed his reply only after the passing and service of the order under section 263 to him, which was passed approximately 3 hours after the time mentioned in the notice u/s 263. Therefore, the reply filed by the assessee at 4.17PM on 23.03.2021 was not available to the PCIT at the time of passing of order. Therefore, there arose no question of considering the same. As regards the observation of the Hon'ble ITAT that the assesses's contention of filing a reply was not countered by the DR, it is humbly submitted that apparently the DR was not asked to gather the correct facts regarding the timeline on passing of the order vis-a-vis the reply of the assessee from the O/o the PCIT-1, Chandigarh. It may not be out of place to infer that the assessee was deliberately delaying the filing of reply in order to delay the proceedings and that his reply at 04.17PM on 23.03.2021 was only prompted by the service of the order u/s 263, apparently to take a plea in the appellate proceedings. Therefore, it is prayed that the Ld. ITAT may take the above facts into consideration, and adjudicated the issue on merits, or allow the PCIT-1, Chandigarh to pass a fresh order u/s 263 after allowing the assesse another opportunity of presenting the facts of its case. Keeping in view the above facts as discussed above, the Hon'ble ITAT is requested to kindly consider this letter as an M.A. to the ITA No. 48/CHD/2021 dated 25.11.2021 for adjudicating the issue on merits of the case. 4 The ground of appeal of this M.A. is as under:- (i) The Hon'ble ITAT has erred in not discussing the issue on merits. (ii) The Hon'ble ITAT has erred in holding that the impugned order passed in the present case is in gross violation of the principles of natural justice having been passed in haste without giving adequate opportunity of hearing to the assessee and without even dealing with and considering reply filed by the assessee in view of facts discussed in misc. application. 3. In this regard, both the parties were heard and the case records were perused including the order passed by the Coordinate Bench dt. 25/11/2021 and the relevant findings of the Coordinate Bench are at para 4 to 10 which read as under: “4. The first argument raised by the assessee before us was that the impugned order of the ld. PCIT needed to be set aside since it had been passed in gross violation of the principles of natural justice without giving the assessee adequate opportunity of hearing and without conside ring the reply filed by the assessee to it. That the ld.PCIT had exercised his powers u/s 263 of the Act in gross violation of the principles of natural justice enunciated in the Section itself requiring the PCIT to pass the order after affording due opportunity of hearing and after making necessary enquiries. In support of this contention, he relied on various case laws as under : 1. 'Sona Builders vs. UOI (SC),251 ITR 197 2. M/s BrollyDealcom LLP vs. ITO (Cal. Trib.)ITA No. 1543/2013 3. JayanthiNathrarajan vs. ACIT (Mad. HC) 401 ITR 215 4. TulsiTracom Private Limited vs. CIT (Del. High Court)161 DTR 148 5. CIT vsGirdharilal (Raj. HC)147 ITR 379 6. Pr.ClTvs. Delhi Airport Metro Express Pvt. Ltd. (Del. HC)398 ITR 8 7. Smt. LilaChaudhary vs. CIT (Gauh. HC)289 ITR 226 8. Anita Rani vs. Pr. CIT (Del. Trib)ITA No. 2388, 2389 &2390/2017 9. Amira Enterprises Ltd. vs. Pr. CIT (Del. Trib.)ITA No. 3206/2017 5. The ld. DR, however, has contended that due opportunity was afforded to the assessee and alternatively has stated that the issue may be sent back to the PCIT at best if it is considered that adequate opportunity was not afforded to the 5 assessee and the order should not be set aside for this reason as contended by the ld. counsel for the assessee. 6. We have heard both the parties. The facts pointed out by the ld. counsel for the assessee to bring out the contention that adequate opportunity of hearing was not afforded to him and which facts have not been disputed by the Revenue also are that the impugned assessment year in the present case is assessment year 2016-17. The assessment order passed u/s 143(3) sought to be revised was dated 31.10.2018. As per Section 263 sub-section (2) the limitation to revise this order expired on completion of two years from the end of the Financial Year in which the order sought to be revised was passed i.e. 31.03.2020 but on account of the pandemic of Covid-2019 occurring in the month of February- March, 2020, this limitation was extended by the CBDT by one year and accordingly, the order u / s 26 3 in the present case could be passed up t o 31 .0 3 .2021. There is no dispute vis-à-vis these facts. The first Show Cause Notice assuming jurisdiction u/s 263 of the Act was issued to the assessee dated 16 .0 3 .2 02 1 via ITBA Portal. No physical notice was issued to the assessee. As per the said notice, the assessee was to respond to the same on 19 .03 .2 021. Since the assessee failed to respond to this notice, another notice was issued through the ITBA Portal on 19 .03 .2021fixing the case on 23 .03 .2 021 on which date the order u / s 263 was passed. These facts emanate from the order of the PCIT itself. The ld. counsel for the assessee has placed the copies of these notices before us dated 16.03.2021 and 19.03.2021 in his Paper Book filed before us at page No. 1 to 2 and 3 to 4 respectively. He has further contended that in response to the second notice dated 19.03.2021 asking the assessee to respond to the same on 23.03.2021, due reply was filed by the assessee explaining the reason for not complying with the fi rst notice being that since it was uploaded on the portal only, he was not aware of the same and his counsel who was dealing with his tax matter was unwell and the notice did not come to his knowledge also. That even the assessee was unwell for the past the past three months due to severe head injury and was admitted in hospital for the same. Due reply to the queries raised in the Show Cause Notice was also filed and it was also pointed out in the said letter that since the limitation for passing the order was expiring on 31.03.2021, the issuance of notice in the last 15 days, that too without giving sufficient time to respond to the same was not reasonable opportunity of hearing being granted to the assessee. The said letter was placed at Paper Book page No. 5 to 15 before us. Copy of acknowledgement from the I T Portal to the aforesaid reply filed by the assessee was placed at Paper Book page No. 16 to 17 and at Paper Book page No. 18 copy of screen shot from the IT Portal in respect of filing of reply on 23.03.2021 was fled. At Paper Book page No. 19 was placed a copy of e-mail dated 23.03.2021 which was also sent to the PCIT indicating the reply to the Show Cause Notice filed on 23.03.2021. At Paper Book page No. 20, 21 and 22 were filed copy of request letters to the PCIT for recalling of the order filed the very next day itself i.e on 24/03/21 since the reply had not been considered despite having been filed during official hours itself on the specified date and also copy of the e- mail sent to the Ld.PCIT the same day attaching the said letter. 7. Basis the aforesaid facts, the pleading of the ld. counsel for the assessee is that the proceedings u/s 263 of the Act were initiated just 15 days before the limitation for passing order was to expire and the assessee was not even given adequate opportunity to respond since the first notice was issued on 16.03.2021 asking the assessee to respond on 19.03.2021 , giving a period of 4 days to 6 respond which included two non-working days i.e. Saturday and Sunday in between, literally tantamounting to give only two days to the assessee to collect information and respond to the queries raised. That the next notice also hardly afforded any opportunity to the assessee again giving a time per iod of only four days.That despite the same, the assessee responded to the said notice within whatever available time and also apprised the PCIT of the reason for non responding to the first notice and also that adequate opportunity ought to have granted to him in the present proceedings. He pointed out that despite the reply filed by the assessee on the ITBA Portal and e-mail sent to the PCIT informing him of the reply filed, the PCIT still chose to ignore the same and passed the order, thus denying both adequate opportunity of hearing to the assessee and also not considering the reply filed by the assessee before passing the revisionary order. 8. The aforestated facts have not been disputed by the Revenue and we see no reason but to agree with the ld. counsel for the assessee in the backdrop of the aforestated facts that not only was the assessee denied opportunity of hearing in the present case but also that order was passed without considering the reply filed by the assessee. Undoubtedly the present proceedings were initiated just 15 days before the expiry of limitation to pass the order u/s 263 of the Act and the two notices given to the assessee for hearing afforded very short period of time to reply . That the first one given only two days time to reply and the second one four days time. Further despite the inadequate time given to the assessee to respond, , we find that the assessee still managed to file a reply to the Ld.PCIT and even pointed out the reason for not complying with the first notice. But apparently for no reason, his reply was not even considered by the Ld. PCIT when the facts before us clearly demonstrate that they were filed on the ITBA Portal on the specified date and even the PCIT was intimated of the reply filed on the said date. The Revenue has not controverted these facts before us. So for some apparent reason, the PCIT s imply chose to ignore the reply filed by the assessee and went ahead to pass the order u/s 263 of the Act on the very same date ,i.e 23/03/2021. The impugned order, we hold, has not only has been passed in gross violation of the principles of natural justice but is also in violation of the procedure laid down u/s 263 of the Act which specifically requires the authorities to pass the order u/s 263 after affording due opportunity of hearing to the assessee and after making such enquiry as is deemed necessary. In the present case, the Ld.PCIT has neither afforded adequate opportunity of hearing to the assessee but by not taking note of the reply, he has not even made necessary enquiries in the present case before passing the impugned order.The order passed, therefore, is in gross violation of the principles of natural justice and in view of the various decisions cited by the ld. counsel for the assessee before us, the only recourse is to set aside the same. 8.1 The Hon'ble Apex Court in the case of Sona Builders (supra) has held that where there was gross breach of the principles of natural justice, the matter could not be remanded back to the appropriate authority. In the said case, the notice of hearing gave only 5 days time to the parties to respond which included the week end. Same was found to be inadequate by the Hon'ble Supreme Court. It was also noticed by the Hon’ble court that the allegation leveled on the assessee was not supported with any document so as to enable him to respond to the same . In such circumstances, it was held that there was gross breach of the 7 principles of natural justice on account of inadequate time given to respond and also on account of the fact that the assessee was not confronted with documents so as to respond to the same and the Apex Court, therefore, considering the statutory limit within which the appropriate authority was to act in the said case and noting hi s failure to act in conformity with the principles of natural justice held that the matter could not be remanded to the appropriate authority and must be set aside. 8.2 In the case of TulsiTracom Pvt. Ltd. (supra), the assessee was found to have never been issued or served any notice u/s 263 of the Act. The Hon'ble High Court held that the Commissioner who had issued order u/s 263 ought to have been fully satisfied that adequate opportunity had been given to the assessee to controvert the facts stated in the notice u/s 263 of the Act and to explain the situation concerning such facts and considering the limitation for the passing of order u/s 263, the Hon'ble Court held that no useful purpose would be served in giving opportunity of hearing to the assessee at this stage again. The order passed by the CIT was, therefore, set aside in the facts of the said case. 8.3 In the case of Gurdharilal (supra), the Hon'ble High Court again noticed that the assessee was not put to notice of the proceedings u/s 263 of the Act since the notice served on the assessee was returned back with postal endorsement “ lef t without address” and the notice issued to one holding the Power of Attorney in relation to his assessment and appellate proceedings was found to be not proper service of notice since the said person was not authorized to represent the assessee in the impugned proceedings. The Hon'ble Court held that the service of notice on the said person, therefore, did not meet the requirements of opportunity of being heard as contemplated by Section 263 and the order passed by the PCIT was set aside. 8.4 In the case of Anita Rani (supra) the order passed by the Ld. PCIT was set aside again for the reason that notice u/s 263 was not served on the assessee, therefore, denying him due opportunity of hearing. 9. In view of the above, we have no hesitation, therefore, in holding that the impugned order passed in the present case is in gross violation of the principles of natural justice having been passed in haste without giving adequate opportunity of hearing to the assessee and without even dealing with and considering reply filed by the assessee and the order, therefore, needs to be set aside. 10. Since we have set aside the order of the PCIT, the grounds raised by the assessee on the merits of the case need no adjudication being rendered academic in nature. 4. In light of the above, we find that in the garb of misc. application under section 254(2) of the Act, the Revenue is seeking review of the detailed well reasoned order passed by the Coordinate Bench allowing the appeal of the assessee holding that the assessee was denied the opportunity of hearing as well as the fact that submissions filed by the assessee were not considered. On 8 merits as well, the Coordinate Bench has held that it would be an academic exercise having set-aside the order passed by the ld PCIT on account of gross violation of principle of natural justice. We therefore find that there is no mistake which is apparent on record. Where the Revenue is still aggrieved with the order passed by the Coordinate Bench, the statue has provided appropriate legal remedy by way of appeal before the Hon’ble High Court and which can be availed, where so advised, as per law. However, as far as Tribunal is concerned, we cannot sit in judgment against the decision of the Coordinate Bench and carry out the review as sought by the Revenue through this misc. application. We therefore do not find any legal and justifiable basis to act on the said application which is clearly beyond the limited scope of rectification as contemplated under section 254(2) of the Act. 5. In the result, Misc. Application filed by the Revenue is dismissed. Order pronounced in the open Court on 28/08/2023 Sd/- Sd/- आकाश दीप जैन िवᮓम ᳲसह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा᭟यᭃ / VICE PRESIDENT लेखा सद᭭य/ ACCOUNTANT MEMBER AG Date: 28/08/2023 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant / 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar