SRINIVASAN CHARITABLE AND EDUCATIONAL TRUST,PERAMBALUR V. ACIT, CENTRAL COIRCLE-2, , TRICHY

ITA 30/CHNY/2024

AI Insights

The case involves M/s. Srinivasan Charitable & Educational Trust, which faced multiple assessments under section 153C of the Income Tax Act, 1961, following a search operation. The AO issued notices and completed the assessments in haste, leading to appeals by the Trust. The Tribunal noted that the assessments were completed without proper adherence to the principles of natural justice, as the Trust was not given adequate time or opportunity to respond to the notices and present necessary documents. The Tribunal referenced similar cases and decisions by the Hon'ble Supreme Court and High Courts, emphasizing the need for a fair hearing and proper procedure in tax assessments.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 107011 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-08-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 05-01-2024
• Other Referred Cases: TIN Box Co. v. CIT [2001] 249 ITR 216 (SC), B.Kubendran vs. DCIT [2021] 126 taxmann.com 107 (Madras), V. Tillainatesan vs. ACIT [2021] 133 taxmann.com 131
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILAY BARAN SOM
• Assessee Lawyers: G. BASKAR; ALLOWING
• Keywords: Set aside; Opportunity of being heard; Fair market value; Principle of natural justice; Agreed addition
• Section: 144; 142(1); 153C

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ \u0001यायपीठ, चे\tई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0001ी एबी टी. वक , \u000bाियक सद\u0011 एवं एवं एवं एवं \u0001ी मनोज क ुमार अ\u0019वाल, लेखा सद\u0007 क े सम\u001d BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.28, 29, 30, 31, 55, 56 & 57/Chny/2024 िनधा\u000eरण वष\u000e/Assessment Years: 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18 M/s. Srinivasan Charitable & Educational Trust, No.274-C, Thuraiyur Road, Perambalur-621 212. Tamil Nadu. v. The ACIT, Central Circle-2, Trichy. [PAN: AAGTS 1793 N] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) आयकर अपील सं./ITA No.522/Chny/2024 िनधा\u000eरण वष\u000e/Assessment Year: 2014-15 The ACIT, Central Circle-2, Trichy. v. Srinivasan Charitable & Educational Trust, No.274-C, Thuraiyur Road, Perambalur-621 212. Tamil Nadu. [PAN: AAGTS 1793 N] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) Assessee by : Mr. G. Baskar, Advocate Department by : Mr. Nilay Baran Som, CIT सुनवाईक\u001cतारीख/Date of Hearing : 22.08.2024 घोषणाक\u001cतारीख /Date of Pronouncement : 08.11.2024 आदेश / O R DER ITA Nos.28, 29, 30, 31, 55, 56 & 57/Chny/2024 (AYs: 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18) M/s. Srinivasan Charitable & Educational Trust :: 2 :: PER ABY T. VARKEY, JM These eight (8) appeals preferred by M/s. Srinivasan Charitable & Educational Trust arising out of the order dated 29.12.2023, 02.01.2024 & 0101.2024 by the Commissioner of Income Tax (A)-19, Chennai, for AYs 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18. 2. At the outset, the Ld.AR of the assessee brought to our notice that there was gross violation of natural justice while the AO was framing the assessment u/s.153A of the Income Tax Act, 1961 (hereinafter in short ‘the Act’). According to the Ld.AR, the search was conducted u/s.132 of the Act on 15.02.2018 at the premises of M/s.Dhanalakshmi Srinivasan Charitable & Educational Trust and inter-alia, the AO on 27.02.2019, issued notice u/s.153C of the Act for AYs 2012-13 to 2017-18 and thereafter on 12.09.2019, the AO again issued notice u/s.153C and pursuant to which, return of income was filed by the assessee for AYs 2012-13 to 2017-18 and thereafter the AO issued notice u/s.143(2) on 22.10.2019 and show cause was issued by the AO on 05.11.2019, pursuant to which, the assessee filed on 27.11.2019 objection against the additions proposed. Meanwhile on 29.11.2019, the Ld.PCIT issued show cause notice for cancelling the registration u/s.12AA of the Act and according to the Ld.AR, on 18.12.2019, the Ld.PCIT without giving proper opportunity to the assessee in haste cancelled the registration u/s.12AA ITA Nos.28, 29, 30, 31, 55, 56 & 57/Chny/2024 (AYs: 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18) M/s. Srinivasan Charitable & Educational Trust :: 3 :: of the Act and the AO followed suit by hastily and without giving proper opportunity to the assessee, passed the impugned assessment order on 26.12.2019 (within ‘50’ days). And in this context, the Ld.AR brought to our notice that for passing the ibid assessment orders, there was more than a year left for expiry of the limitation/time-barring [i.e., up to 31.12.2020]. In other words, the assessment orders were made a year in advance. According to the Ld.AR, from the date-of-events stated supra it can be noticed that the assessee didn’t get proper opportunity to explain its stand or present the relevant documents which were sine qua non for correctly determining the income of assessee and prayed that one more opportunity be granted to assessee to present its side of the case before AO, so that he can frame denovo assessment and for such a proposition cited the decision the Hon’ble Supreme Court in the case of TIN Box Co. v. CIT reported in [2001] 249 ITR 216 (SC), wherein, the Hon’ble Supreme Court held that if the assessee doesn’t get proper opportunity before the AO, then the mater should be restored to the file of the AO for de novo assessment. Further, the Ld.AR also pointed out that the satisfaction note recorded by the AO for successfully usurping the jurisdiction u/s 153C of the Act has not been furnished to the assessee, despite requesting for copy of it, which omission on the part of AO prevented the assessee from raising its objection against it as per law. Further, according to the Ld.AR, the statement/materials relied upon by ITA Nos.28, 29, 30, 31, 55, 56 & 57/Chny/2024 (AYs: 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18) M/s. Srinivasan Charitable & Educational Trust :: 4 :: the AO in the assessment order has not been furnished to the assessee and no opportunity to cross examine was provided to assessee despite the assessee making such a request to the AO. Moreover, according to the Ld.AR, the AO framed the assessment in haste because he was wrongly advised by the Ld.PCIT that on 31.12.2019, the assessment u/s.153C of the Act was getting time- barred, which he showed us to be per-se wrong; and based on such wrong/mistaken belief, the AO in hurry passed impugned assessment orders an year before limitation could have been set-in i.e., by 31.12.2020. In this regard, the Ld AR brought to our notice, that this Tribunal has taken note of the aforesaid relevant facts while deciding similar pleas, in respect of identical appeals of the Shree Basaveshwar Sugars Ltd [in ITA Nos.1005 to 1010 & 1017/Chny/2022] who were covered by the same search [i.e., the search was conducted u/s.132 of the Act on 15.02.2018 at the premises of M/s.Dhanalakshmi Srinivasan Charitable & Educational Trust] wherein the Tribunal appreciated that AO failed to give proper opportunity to assessee before framing assessment orders, restored the matter back to the file of the AO for de-novo assessment by relying on the decision of Hon'ble Madras High Court in the case of B.Kubendran vs. DCIT [2021] 126 taxmann.com 107 (Madras) by holding as under:- 4.2 The Ld.counsel stated that exactly on identical facts, Hon'ble High Court of Madras in the case of B.Kubendran vs. DCIT [2021] 126 taxmann.com 107 (Madras) wherein the Hon'ble High Court has discussed the facts that the time ITA Nos.28, 29, 30, 31, 55, 56 & 57/Chny/2024 (AYs: 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18) M/s. Srinivasan Charitable & Educational Trust :: 5 :: allowed in this case was two months and this fact is recorded by Hon'ble High Court in para 25 & 26 as under- 25. On the question of adherence to the principles of natural justice. the relevant sequence of dates and events is that a notice under Section 153C was issued on 25.10.2019 in regard to a search conducted in 2017. Unfortunately neither the affidavit filed in support of the writ petitions nor the impugned orders of assessment anywhere mention the date of search and it was only in the course of the submissions made orally that the date of search was noted by me as 07.11.2017. The limitation for completion of assessments would be the 31st of December, 2019. The impugned orders state that centralization of the assessments took place only on 24.09.2019 and pursuant to the centralization, notices under Section 153C were issued on 25.10.2019, leaving barely a period of a little over two months for completion of six search assessments. 26. The notice under Section 153C called upon the petitioner to file returns within a period of 8 days from service of the notice and the returns have been filed on 07.12.2019, in all cases, beyond the period granted by the respondent. On the same date a questionnaire under Section 142(1) has been issued calling for various particulars in response to which the petitioner has filed replies dated 13.12.2019 furnishing some of the particulars sought. The impugned orders have come to be passed on 30.12.2019 without further reference to the petitioner The Hon'ble High Court then set aside the assessment by observing in para 31 to 35 as under:- 31. The impugned order has come to be passed on 30.12.2019 without further reference to the petitioner. In this case as well, I am of the view that the assessments have certainly been completed in haste. When the search has been completed on 07.04.2017, there was no necessity to have waited till 20.09.2019 for centralization, and issue notices under Section 153C only on 25.10.2019. Any delay on the part of the petitioner in responding to the notices appears insignificant in the face of the enormous delay by the Income Tax Department in taking stock of the search material, centralizing the cases and issuing the notices in time, particularly, since it is their case that the assessment get time barred on 31.12.2020. 32. The petitioner has, for AY 2015~16 and AY 2016-17, specifically sought more time to make his submissions on the merits of the matter, relating to alleged undisclosed income from quarrying operations and seigniorage fee. The respondent officer has, in making additions as aforesaid, simply ignored this request. 33. As regards the question of valuation by the investigating officer, Revenue relies on the provision of Section 132(9D) that reads as follows: -132(9D) The authorised officer may, during the course of the search or seizure or within a period of sixty days from the date on which the last of the authorisations for search was executed, make a reference to a Valuation Officer referred to in section 1424, who shall estimate the fair market value of the property in ITA Nos.28, 29, 30, 31, 55, 56 & 57/Chny/2024 (AYs: 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18) M/s. Srinivasan Charitable & Educational Trust :: 6 :: the manner provided under that section and submit a report of the estimate to the said officer within a period of sixty days from the date of receipt of such reference.- 34. The Investigating officer is thus, empowered to refer an issue to valuation even during the process of search. However, such report has to be put to the assessee and his full and complete response sought prior to using the same against him. This has not been done in the present case. Thus, while the reference to valuation is in order, the decision making process is flawed and in violation of the principles of natural justice. 35. There is no explanation set forth in counter or at the time of hearing to explain why the assessment had been taken up for completion, at the very fag end of limitation and for this reason, I believe I would have been justified, had I annulled the assessments, as a second innings is not to be granted to the department, merely as a matter of rote. However, and solely as a matter of prudence, I set aside the assessments with a direction to the respondent to issue notices afresh, hear the petitioner and pass orders of assessments within a period of eight (8) weeks from today, with sufficient time being given to the petitioner to putforth his submissions on merits. 5. When these facts were confronted to Id.CIT-DR, he started arguing on merits of the case that these are all these are agreed additions and completion of assessment is just merely a formality. He argued that in any eventuality the matter has to sent back, if the bench desire so, to the file of the CIT(A) because under challenge is the order of CIT(A). At this point, the Id.counsel for the assessee drew our attention to another decision of Hon'ble High Court of madras in the case of V. Tillainatesan vs. ACIT, [2021] 133 taxmann.com 131 wherein the Hon'ble High Court has considered this aspect as to whom the matter has to be sent and who has violated the principles of natural justice. The Hon'ble High Court considered this issue in para 10 & 11 as under:- 10. The other question, which may arise, is whether the opportunity, which can be afforded to the appellant-assessee by the Appellate Authority, would be sufficient? In this regard, we are guided by the decision of the Hon-ble Supreme Court in Tin Box Company vs. Commissioner of Income-tax reported in [2001] 116 Taxman 491 (SC). In the said decision, the Hon-ble Supreme Court held that opportunity of hearing by the Appellate Authority or the Tribunal or the Court can be of no substitute to that of the opportunity that will be provided by the Assessing Officer, at the first instance. 11. Thus, we are of the clear view that the assessment order calls for interference. In the result, the Writ Appeal is allowed and the order passed in the Writ Petition is set aside and consequently, the Writ Petition is allowed and the assessment order dated 19.04.2021 is quashed and the matter is remanded to the respondent or the appropriate authority for fresh assessment. The said authority shall provide reasonable opportunity and grant sufficient time to the appellant-assessee to produce all records, that may be required for completing the assessment and thereafter, after inviting additional objections, if any, which the appellant-assessee may desire to submit, the assessment may be done afresh and in accordance with law. No costs. Consequently, connected Miscellaneous Petition is closed. ITA Nos.28, 29, 30, 31, 55, 56 & 57/Chny/2024 (AYs: 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18) M/s. Srinivasan Charitable & Educational Trust :: 7 :: In view of the above, the ld.counsel stated that in the present appeals also opportunity of being heard was violated by AO and agreed by appellate authority. The CIT(A) cannot be substituted to that of the opportunity that will be provided by the AO at the first instance. The Id.counsel stated that the adjudicating authority is the first authority before him entire facts are to be narrated and to be verified, which is the starting point where the principles of natural justice are clearly violated. Hence, he requested that the assessment orders and the orders of CIT(A) be set aside and matter be remanded back to the file of the AO for fresh adjudication in term of law. 6. After hearing rival contentions and going through the facts of the case, first of all we have gone through the communication received from PCIT dated 04.12.2019, wherein PCIT informed assessee that the assessment proceedings is getting time barred on 31.12.2019 and he informed the AO also. Once the PCIT has given his view that assessment is getting time barred on 31.12.2019, the AO was under pressure to complete the scrutiny/ search assessment but actually the time barring was 31.12.2020 in the present assessment years. It means that the Department from the beginning was under wrong notion that the assessments will get time barred by 31.12.2019. From the chronology of events, it is clear that search was conducted in the group cases on 15.02.2018 and notification for centralization with the present PCIT charge was notified only on 15.11.2019 that means the Department took at least 1 year & 9 months and Department was sleeping over search material during the entire period. Thereafter the AO issued notice u/s. 153C of the Act only on 28.11.2019 calling for returns of income to be filed within \"7\" days. The assessee intimated the PCIT that assessments are getting barred by limitation by 31.12.2020 but PCIT was under wrong notion that the assessments were getting time barred on 31.12.2019 and same was communicated to the AO also by the PCIT. Accordingly the AO issued notice u/s. 142(1) of the Act for calling of returns of income to be filed within \"5\" days vide notice dated 11.12.2019. Subsequently vide dated 13.12.2019, show cause notice proposing certain additions was issued by the AO. Consequently the assessee filed return of income in response to notice u/s. 153C of the Act on 20.12.2019 i.e., within 30 days of the notice issued on 28.11.2019. The assessee filed objections vide dated 21.12.2019 against the proposed addition by the AO. The AO framed assessment u/s. 144 r.w.s. 153C of the Act vide order dated 25.12.2019. We noted that the AO merely allowed 21 days from the issuance of notice u/s.153C of the Act for calling of return of income till date of finalization of assessment order ex-parte u/s.144r.w.s. 153C of the Act dated 25.12.2019. 6.1 Going by the entirety of facts as narrated above that the Hon'ble High Court of Madras in the case of Shri B. Kubendran, supra has considered identical facts, rather the facts before us are worse than what was before the Hon'ble Madras High Court and the Hon'ble Madras High Court has set aside the assessments with a direction to the respondents to issue fresh notice and hear the petitioner and pass the assessment order on merits. In our view there is gross violation of natural justice in the present case before us but as the principle laid down by Hon'ble Madras High Court, we set aside the orders of the lower authorities i.e., the AO and the CIT(A) and remand the matter back to the file of the AO to issue fresh notice for framing of assessment and hear the assessee by allowing reasonable opportunity of being heard, to file the details and evidences. The AO will frame the assessment after considering the facts in entirety and will adjudicate the issue on merits. In view of the above, we set aside the orders of AO and the CIT(A) in all these seven assessment years and remand them back to the file of the AO for fresh adjudication in term of the above. ITA Nos.28, 29, 30, 31, 55, 56 & 57/Chny/2024 (AYs: 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18) M/s. Srinivasan Charitable & Educational Trust :: 8 :: 3. From the aforesaid discussion and the case law cited, we note that the present appeals are also emanating from the very same search conducted in the group of M/s. Dhanalakshmi Srinivasan Group on 15.02.2018. Taking note of the fact that first notice u/s.153C was issued by AO on 27.08.2019, followed by another notice u/s.153C of the Act on 12.09.2019 and completed the assessment in haste on 18.12.2019, without furnishing (i) satisfaction notes prepared by him (the AO) before usurping jurisdiction u/s.153C of the Act against the assessee and (ii) the non-furnishing of complete statements/materials being relied by him (the AO) to draw adverse inference against the assessee and (iii) denying opportunity to cross-examine the makers of the adverse statement against assessee, which omissions on the part of AO before framing the impugned assessment orders u/s 153C of the Act, is in gross violation of natural justice. Therefore, taking note of the fact that the appeals emanating from the ibid search being consistently sent back to the file of AO for framing of fresh assessment, hence, we set aside the impugned order of the Ld.CIT(A) and restore the assessments back to the file of the AO with a direction to de novo assess the income of the assessee after giving reasonable opportunity of hearing to the assessee and the AO shall provide all the relevant documents/seized material including the satisfaction note as well as the sworn statements recorded which the AO relies upon to frame the assessment. And the assessee is at liberty to file ITA Nos.28, 29, 30, 31, 55, 56 & 57/Chny/2024 (AYs: 2013-14, 2015-16, 2016-17, 2018-19, 2012-13, 2014-15 & 2017-18) M/s. Srinivasan Charitable & Educational Trust :: 9 :: written submissions/cross-examine and furnish relevant documents to substantiate its stand before the AO. 4. In the result, appeals filed by the assessee and appeal filed by the Revenue are allowed for statistical purposes. Order pronounced on the 08th day of November, 2024, in Chennai. Sd/- (मनोज क ुमार अ\u0019वाल) (MANOJ KUMAR AGGARWAL) लेखा सद\u0003य/ACCOUNTANT MEMBER Sd/- (एबी टी. वक ) (ABY T. VARKEY) \u0005याियक सद\u0003य/JUDICIAL MEMBER चे\tई/Chennai, !दनांक/Dated: 08th November, 2024. TLN, Sr.PS आदेश क\u001c \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ\f/Appellant 2. \r\u000eथ\f/Respondent 3. आयकरआयु\u0014/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\rितिनिध/DR 5. गाड\u001dफाईल/GF "