2021 (1) TMI 1313 - AT - Income Tax

ITAT sets aside CIT revision order under section 263 for denying proper hearing opportunity to assessee

Play Games 24x7 Private Limited. Versus Pr. Commissioner of Income Tax - 13, Mumbai.

The ITAT Mumbai set aside the CIT's revision order u/s 263 concerning inadequate inquiries by the AO regarding payments to players for lottery/crossword ... Revision u/s 263 - as per CIT inadequate inquiries were made by AO on payments made to players on winnings from lotteries/crossword puzzles and taxes to be withheld thereon - As argued inadequate inquiries were made by the learned AO on payments made to players on winnings from lotteries/crossword puzzles and taxes to be withheld thereon - HELD THAT:- It has been settled by the judgment of Hon'ble Supreme Court in the case of Amitabh Bachhan [2016 (5) TMI 493 - SUPREME COURT] that such an action is permissible to the Commissioner provided sufficient opportunity is given to the assessee. From the records available before us and the order of learned Commissioner, it is not discernable whether proper opportunity in this regard was given to the assessee. Now, the issue is whether this is fatal to the order of revision ? Another concomitant issue is when the learned Commissioner has not given the opportunity to the assessee and has consequently not examined the assessee’s response, should the Tribunal fill-in the gap and give a finding that the Assessing Officer has duly examined the issue on the basis of document said to have been filed before Assessing Officer. When the CIT has not examined the issue, the Tribunal should not jump ahead and examine the issue merely on the basis of document said to have been filed before the Assessing Officer without any indication as to whether the Assessing Officer has verified the correctness of the averments. That merely keeping the document on record, without carrying out necessary investigation which are per se required to verify correctness of the averment would lead to an error, in the sense that he has failed to carry out the requisite inquiry which can be rectified in revision. Accordingly, we are of the opinion that this order of Commissioner is liable to be set aside to his file for fresh consideration as directed to examine the issue afresh after giving the assessee proper opportunity of being heard. In giving the above said direction we draw support from the decision of Kapurchand Shrimal [1981 (8) TMI 2 - SUPREME COURT] for the proposition that it is the duty of the appellate authority to correct the errors in the orders of the authorities below and/or remit the matter for reconsideration unless prohibited by law. In this regard, we note that there is no provision in law prohibiting us to remit the matter back to the learned Commissioner on the facts and circumstances of the case. In our considered opinion, the above submission of the assessee’s counsel is not sustainable. We do not find that the aforesaid decision of Hon'ble Supreme Court, by any stretch of imagination, proposes that matters cannot be remanded by the ITAT to the level of Commissioner of income tax. Hence, this limb of argument of the learned counsel of the assessee is rejected. Thus we set aside this order passed under Section 263 to the file of the learned Commissione to decide the issue afresh giving the assessee proper opportunity of being heard. Appeal by the assessee stands allowed for statistical purposes. Issues Involved:1. Adequacy of inquiries by the Assessing Officer (AO) on payments made to players on winnings from lotteries/crossword puzzles and related tax withholding.2. Direction to the AO to examine payments towards Online Promotional Expenses and applicability of Chapter XVII B of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Adequacy of Inquiries by AO on Payments Made to Players on Winnings from Lotteries/Crossword Puzzles and Related Tax Withholding:The assessee challenged the order passed by the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act, 1961, which pertained to the assessment year 2015-16. The CIT concluded that the AO made inadequate inquiries regarding payments made to players on winnings from lotteries/crossword puzzles and the taxes to be withheld thereon. The assessee contended that the CIT erred in passing the order without providing sufficient opportunity for being heard, thus breaching the principles of natural justice. The CIT's reliance on the Supreme Court decision in the case of Amitabh Bachchan was also challenged on the grounds that the facts of the cases were different. The assessee argued that the AO had conducted appropriate inquiries and verifications during the assessment proceedings, and taxes were appropriately withheld where the payment exceeded the threshold of INR 10,000. The CIT’s direction to the AO to re-examine the issue without himself examining the matter and recording reasons was also contested.The Tribunal noted that the CIT observed that the assessee had paid significant amounts towards winnings from lotteries or crossword puzzles without routing these payments through the Profit & Loss Account and had failed to deduct tax on the full amount of winnings. The CIT cited various case laws to support his decision that the AO's failure to conduct proper inquiries rendered the assessment order erroneous and prejudicial to the interests of the revenue. The Tribunal found that the CIT had not provided adequate opportunity to the assessee to contest the facts, which was a serious violation of mandatory requirements. The Tribunal emphasized that the principle of natural justice must be followed, and the assessee must be given an opportunity of being heard.The Tribunal also referred to several case laws supporting the requirement of proper opportunity and concluded that the CIT’s order was not sustainable due to the lack of opportunity given to the assessee. The Tribunal set aside the CIT's order and remanded the matter back to the CIT for fresh consideration, directing the CIT to examine the issue afresh after giving the assessee proper opportunity of being heard.2. Direction to AO to Examine Payments Towards Online Promotional Expenses and Applicability of Chapter XVII B of the Act:The assessee also contested the CIT's direction to the AO to examine whether any payments were made towards Online Promotional Expenses and the applicability of provisions of Chapter XVII B of the Act. The assessee argued that this issue was not part of the show-cause notice and no inquiries were made in respect of this issue during the revision proceedings. The assessee contended that the CIT’s direction was invalid and bad in law as it was passed without providing adequate opportunity for being heard.The Tribunal noted that the CIT had directed the AO to examine whether the assessee had made any payment towards winning of lotteries or crossword puzzles and on account of Online Promotional Games during the year, and to verify whether the assessee had complied with the provisions of Chapter XVII B of the Act. The Tribunal found that the CIT had not pointed out any error in the discharge of withholding obligation and that the issue had been examined in detail by the AO during the regular assessment proceedings. The Tribunal emphasized that the CIT cannot simply set aside the matter to the AO to carry out fresh or further inquiry without himself examining the matter and recording reasons.The Tribunal concluded that the CIT’s direction to the AO to re-examine the issue was not sustainable as the CIT had not provided adequate opportunity to the assessee and had not examined the matter himself. The Tribunal set aside the CIT's order and remanded the matter back to the CIT for fresh consideration, directing the CIT to examine the issue afresh after giving the assessee proper opportunity of being heard.Conclusion:The Tribunal allowed the appeal by the assessee for statistical purposes and set aside the order passed by the CIT under Section 263 of the Act, directing the CIT to decide the issues afresh after giving the assessee proper opportunity of being heard. The Tribunal emphasized the importance of following the principles of natural justice and providing adequate opportunity to the assessee in the revision proceedings.