TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 1178
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....ortunity of being heard to the appellant and thus in violating the principles of natural justice, before passing the order u/s 263 of the Income Tax Act." 3. As per the grounds of appeal, the essential grievance of the assessee is that in the facts and circumstances of the case, the Pr.CIT was not justified in exercising revisionary powers under s.263 of the Act and thereby setting aside the assessment order passed under s.143(3) of the Act with a direction to the AO to frame assessment afresh after proper examination, inquiry and verification with reference to long term capital gains of Rs. 1,50,69,856/- derived by the assessee. To adjudicate the grievance of the assessee, it would be pertinent to take note of the relevant facts. 3.1 The assessee filed her return of income for AY 2013-14, declaring total income at Rs. 18,22,490/-. The assessee inter alia claimed exemption under s.10(38) of the Act on account of long term capital gains of Rs. 1,50,69,856/- on sales of shares. The return filed by the assessee was subjected to scrutiny assessment and assessment order was framed under s.143(3) of the Act dated 24.07.2015 wherein the capital gains so declared by the assessee was duly....
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....ceeds of shares were not brought through stock exchange. In response to the same, I humbly submit that it is not clear from the show cause notice as to on whom the search was carried and how my sale transaction is being finked to it. 1 therefore request you good self to supply me following details: a. Where and in whose search was conducted? b. Statement recorded of the concerned person during the search. c What are the seized materials of search? d. What is the outcome in their search case? e. How is my transaction alleged to be not genuine? I humbly request that till full details are provided to me, no proper opportunity of being heard is considered to be given to me which is a mandate of section 263 of the Act. Till such time I request your good self to treat my reply as an interim reply and I should be allowed to make further submissions based on details provided to me. Further, it is very crucial to note that my purchase transaction was made from a recognized broker and the sale transactions through recognized stock exchange "NSE" as against the allegation of sale not being any stock exchange as mentioned in your show cause notice. (ii) Your attention is drawn to....
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.... ledger account of share transactions b. Copy of sales bills-12 bills c. Copy of debit note, delivery note, confirmation end ledger account from Vijay Bhagwandas & Co. for purchase of shares of KGN Enterprise d. Copy of ledger account from India Infoline Ltd." vii) Further, vide submission dated 23-07-2015, I submitted my demat statements reflecting the said scrip. (Copy enclosed). viii) It is pertinent to clarify that, the purchases were made through Vijay Bhagwandas & Co, the registered stock broker under SEBI. Details of purchases made through the broker and proper confirmation from the stock broker were duly submitted to AO as reflected in point 6(c) above. I am submitting herewith annexure reflecting sale and purchase of the said shares for your good self s reference and record. ix) These shares were held in demat account and were subsequently sold in National Stock Exchange ("NSE") through India Infoiine Ltd. The details thereof were duly submitted to AO as reflected in point 6(d) above. x) The entire transaction was reflected in the bank statement submitted to the AO as reflected in point 4 above. xi) Therefore, it gets confirmed that full details regarding pur....
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....e in the garb of long term capital gain. It was observed that the AO has not conducted requisite inquiry in respect of such long term capital gains reported by the assessee except collecting customary documents like contract notes and calculation of long term capital gains etc. It was alleged that the AO has failed to make any inquiry as to whether the company namely KGN Enterprise Ltd. possesses any economic and financial substance to justify the phenomenal rise in the share price and consequent capital gains. The PCIT thus essentially noted that the AO has not ventured into any inquiry in respect of impugned transactions and completed assessment under s.143(3) of the Act mechanically and perfunctorily. The PCIT accordingly set aside and cancelled the assessment order and directed the AO to look into the factual aspects and finalize the assessment after giving reasonable opportunity to the assessee and pass afresh assessment order in accordance with law. 4. Aggrieved by the revisional directions of the PCIT seeking to nullify the assessment order passed by AO in exercise of power under s.263 of the Act, the assessee preferred appeal before the Tribunal. 5. The learned AR for the....
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....f the sale not recorded in the stock exchange platform. 5.2 The learned AR pointed out that the assessee expressly denied the allegations made by the PCIT on lack of enquiry and referred to the questionnaire issued by the AO alongwith notice under s. 143(1) dated 12.06.2015 wherein specific inquiry was made on the issue reads as under: "The details of demat account, purchase/sale of shares and securities account with supporting evidences." It was submitted that in response to the aforesaid query, the assessee has filed relevant evidence vide submission dated 08.07.2015. The demat statement reflecting the scrip in question was also provided. The shares were held in demat account and entire accounts were reflected in the bank statement submitted to the AO which is not in dispute. It was thus contended that observations made in the show cause notice that the AO has not verified the said transactions as wholly incorrect. Our attention was thereafter adverted to para (xvi) of the reply as noted in para 5 of the revisional order seeking verification of the claim of the long term capital gain at the end of the PCIT himself before drawing any adverse conclusion. 5.3 It was thereafter ....
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....atural justice would result in the revisional order to be nullity. Para Nos. 9 & 10 of the order of the co ordinate bench was referred to buttress the plea of the order resulting in the nullity for such serious breach. 5.5 A reference was made to the decision of the Hon'ble Supreme Court in the case of M/s. Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata Civil Appeal No. 4228 of 2006 judgment dated 02.09.2015 to contend that when the ratio of the decision is applied, a serious flaw in not allowing the assessee to access the basis of show cause notice when particularly disputed, would lead to action of the PCIT wholly untenable and without authority of law. 5.6 It was reiterated that no material was confronted to the assessee despite specific request and the order was passed hurriedly without any opportunity based on a nondescript show cause notice and giving unilateral conclusive finding against the assessee thereby totally curtailing the statutory discretion of the AO. Such act of the PCIT is not in consonance with authoritative judicial pronouncement made in this regard. A reference was made to yet another decision of the Hon'ble Supreme Court in CIT vs. A....
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.... laying blame on the doorstep of assessee is not justified. 5.9 The learned DR, on the other hand, relied upon the order of the PCIT submitted that a standard questionnaire putting few lines with respect to the transactions of capital gain in question would not give rise to an inference of an inquiry contemplated in law that has to be carried out. It was contended that subsequent to the receipt of Investigation Report on 01.07.2015 no inquiry was made by the AO in connection with the issue in question and therefore the order of the AO clearly suffers from gross lack of inquiry rendering it erroneous in so far as prejudicial to the interest of the Revenue. The learned DR also submitted that the matter was set aside to the AO and thus no serious prejudice has been caused to the assessee. It was thus contended that no interference with the revisional order of the PCIT is called for. 6. We have carefully considered the rival submissions. The assessee has challenged the assumption of revisionary jurisdiction under s.263 of the Act as well as made imputations on the serious lapse in abiding by express mandate of opportunity to assessee, while setting aside statutory order of the lower ....
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....see has also pointed out factual incorrectness in the assertions made in the show cause notice viz. the allegation of sales not being through stock exchange is incorrect. 6.3 We also notice that the assessee has also demonstrated that all primary documents in relation to the long term capital gains were duly provided to the AO without any demur which reflected the occurrence of transactions in normal course on the platform of the stock exchange. The Revisional Commissioner however has jettisoned all the contentions of the assessee raised as per its interim reply but remained silent as to why further opportunity is not required and why the material called for cannot be supplied for effective representation. As noticed, the PCIT heavily relied on certain information received from Investigation Wing in the search proceedings in the case of a third party. The details of information received were not provided to the assessee at all at any stage of the proceedings. As per para 8 of the revisional order, the PCIT has relied upon the so-called information purportedly received with which no-one is privy to. The whole action is thus self-virtuous and repugnant. Significantly, the PCIT has ....
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.... exercising adjudicatory powers has a right to know the evidence to be used against him. The supply of documents relied upon would, in our view, be necessary to set the law in motion. It is difficult to comprehend full facts from the show cause notice and consequently insistence for supply of relevant information possessed by the revisional authority cannot be regarded as unreasonable insistence. The letter of law in Section 263 of the Act is express and founded on the principles of natural justice, which in the present case is scantly fulfilled. The action of the Revisional Commissioner was continued in violation of this cardinal requirement. The assessee is sought to be visited with the civil consequences on the basis of symbolic compliance of the requirement. The context holds the key while examining the extent to which the violation of natural justice has impacted the other side. A granting of effective opportunity is a sin qua non in Section 263 of the Act for unsetting a statutory order. It is the duty of the Revisional Commissioner to provide the assessee an effective opportunity to enable it to disengage the truth from wrongs instead of taking an easy course of rejecting....
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....ommissioner for affording the assessee an opportunity of hearing, we find what is in challenge before us is the revision order passed by the learned Commissioner, and, as we have noted above, the said order is legally unsustainable in law, and quashed accordingly. As observed by a Special Bench of this Tribunal in the case of Colonizers Vs. ACIT (41 1TD SB 57), the violation of principles of justice, as has happened in this case, results in an order being rendered null and void. The Special Bench has, inter alia, observed as follows: As it has been discussed in the earlier paragraph there are plethora of cases holding that violation of principles of natural justice makes the decision void as in every other case ultra vires. The rules of natural justice operate as implied mandatory requirement, non-observance of which amounts to arbitrariness and discrimination. The principles of natural justice have been elevated to the status of fundamental rights guaranteed in the Constitution of India as is evident from the decision of the Full Bench of the Hon'ble Supreme Court in the case of Union of India vs. Tulsiram Patel & Ors. reported in AIR 1985 SC1416 at 1469, holding that the pr....
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....Learned Departmental Representative's argument is thus clearly contrary to the scheme of the Act. For all these reasons, we reject the submissions of the Departmental Representatives, and quash the impugned revision order on the ground that the revision is done on a ground other than the ground set out in the show cause notice. The assessee gets the relief accordingly. However, as we have quashed the impugned revision order on the technical ground set out above, we see no need to deal with the merits of other arguments raised by the assessee." The co-ordinate bench has thus concluded that such lack of opportunity would render the revisional order a nullity and accordingly quashed the revisional order. 6.7 To reiterate, the grounds for revision in the show cause notice is vague and opportunity given to the assessee is effectively no opportunity despite express request. The action of the Revisional Commissioner in violation of the express mandate of Section 263 of the Act cannot thus be countenanced. A question may momentarily arise that the gaffes in following principles of natural justice is only a procedural irregularity and therefore matter should be restored to the file of....