2021 (10) TMI 1470 - AT - Income Tax

Revision Order Under Section 263 Invalid Without Giving Assessee Opportunity to Be Heard, Violates Natural Justice

The ITAT Raipur held that the revision order passed under section 263 was invalid as the Assessing Officer failed to provide the assessee an opportunity ... Revision u/s 263 - As the Assessee has not complied with the notice, the ld. Commissioner passed the impugned order - violation of the principles of natural justice Assessee argued for non-providing of an opportunity of being heard to the Assessee and passing of the impugned order u/sec. 263 of the Act in hasty manner without following the principles of natural justice and hence bad in law. HELD THAT:- As per section 263 of the Act, ld. Pr.CIT or Commissioner is empowered to call for and examine the record or any proceedings under the Act if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the Assessee an opportunity of being heard and secondly after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment, Hon'ble Apex Court in the case of CIT Vs. Amitabh Bachchan [2016 (5) TMI 493 - SUPREME COURT] has held that what is contemplated by Section 263 is an opportunity of hearing to be afforded to the Assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. In the landmark case of “Maneka Gandhi vs. Union of India‟ [1978 (1) TMI 161 - SUPREME COURT] it has been held by Constitution Bench of the Hon’ble Apex Court that the law and procedure must be fair, just and reasonable. The doctrine ensures a fair hearing and fair justice to both the parties. Under this doctrine, both the parties have the right to speak. The aim of this principle is to give an opportunity to the parties to defend themselves. In any case it is one of the fundamental principles of natural justice that no person can be condemned unheard i.e. audi alteram partem and the impugned revision order was thus passed in violation of the principles of natural justice as the Assessee had no opportunity on the ground which is ultimately decided against him. See TATA CHEMICALS LIMITED [2011 (6) TMI 815 - ITAT MUMBAI] In overall effect, the impugned order has violated the principles of natural justice which is essence of fair trial, thus the same is quashed. ISSUES: Whether the revisional authority under section 263 of the Income Tax Act, 1961, is required to provide a proper and reasonable opportunity of being heard before passing an order.Whether failure to provide such opportunity renders the revisional order invalid or legally fragile.Whether, in case of non-providing of opportunity of hearing, the matter can be remanded back to the revisional authority for fresh decision after providing opportunity. RULINGS / HOLDINGS: The revisional authority under section 263 of the Act must provide the Assessee an opportunity of being heard before passing any order; failure to do so violates the principles of natural justice.Failure to give an opportunity of hearing renders the revisional order 'legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice.'Where the opportunity of hearing was not provided and the time limit for passing the revisional order has expired, the revisional order is null and void and cannot be revived by remanding the matter back for fresh decision. RATIONALE: The Court applied the statutory framework of section 263 of the Income Tax Act, 1961, which empowers the Principal Commissioner or Commissioner to revise an order if it is 'erroneous insofar as it is prejudicial to the interests of the revenue' but only 'after giving the Assessee an opportunity of being heard.'Precedents from the Hon'ble Apex Court, including CIT vs. Amitabh Bachchan, emphasize that the requirement of hearing is a fundamental principle of natural justice and failure to comply renders the order legally fragile.The doctrine of natural justice, particularly the principle of audi alteram partem, was reaffirmed citing Maneka Gandhi vs. Union of India, establishing that 'the law and procedure must be fair, just and reasonable' and that 'no person can be condemned unheard.'Coordinate benches' decisions were relied upon to hold that an order passed without providing reasonable opportunity is null and void, and if the statutory time limit has expired, remand for fresh hearing is not permissible.The Court found that the notice for hearing was digitally signed on the very date of hearing and thus was illusory, depriving the Assessee of a reasonable opportunity, violating the essence of natural justice.