TaxTMI 
TaxTMI 
2021 (5) TMI 892
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....pellant prays that the impugned order passed in violation of principles of natural justice be quashed as bad in law. WITHOUT PREJUDICE TO GROUND NO. I, GROUND NO. II: IMPUGNED ORDER PASSED TO REVISE THE ASSESSMENT ORDER, WHICH WAS SUPERCEDED BY THE SUBSEQUENT RECTIFICATION ORDER, IS BAD IN LAW: 1. On the facts and circumstances of the case and in law, the Id. Pr. CIT erred in invoking the provisions of section 263 of the Act to revise the order passed u/s 143(3) r.w.s. 144C(13) of the Act dated November 29, 2016("the assessment order") without appreciating that the assessment order had merged into the order passed u/s 154 of the Act dated May 31, 2018("the rectification order"). 2. The Appellant prays that the impugned order passed to revise the assessment order, which was superseded by the subsequent rectification order, be held as bad in law. WITHOUT PREJUDICE TO GROUND NO. I AND II ABOVE, GROUND NO. Ill: IMPUGNED ORDER PASSED BY INVOKING PROVISIONS OF SECTION 263 OF THE ACT IS BAD IN LAW: 1. On the facts and circumstances of the case and in law, the ld. Pr. CIT erred in invoking the provisions of section 263 of the Act and setting aside the assessment order and directing....
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....he assignment as be set-aside or quashed. 3. The hearing in this case was first concluded just before the lockdown on account of Covid pandemic started. Before the order in this case could be finalized, one of us was hospitalized on account of Covid infection, and the other was on medical leaves, due to a fractured leg, for two months. It was in this backdrop that the matter had to be refixed for hearing, arguments were heard afresh, and the hearing was finally concluded on 11th December 2020. There is thus indeed an inordinate delay in disposal of this appeal, but this delay is on account of factors beyond our control. 4. To adjudicate on this appeal, only a very few material facts need to be taken note of. The assessee before us is a domestic company engaged in the business of pharmaceuticals. The scrutiny assessment in this case was completed on 13th November 2016, determining a taxable income at Rs (-) 268,01,35,553 and book profit under section 115 JB of Rs. 107,24,76,500. On 17th July 2018, however, t he learned Principal Commissioner of Income Tax required the assessee to show cause as to why the said assessment not be subjected to revision proceedings under section 263.....
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.... when the actual foreign exchange proceeds were received by your company, the consideration underwent an incremental change due to increase in value of Dollar in terms of Rupee. Therefore, the amount accounted in the current AY of Rs. 3,09,51,25,000/- is nothing but additional consideration received for the slump sale of the domestic formulation business. Thus, as per the provisions of the Act, the said gain should have been offered to tax. However, you have not offered the additional consideration of Rs. 309,51,25,000/- to tax and the AO also has not brought it to tax while completing the assessment u/s. 143(3) rws 144C(13) of the IT Act. 4. Thus prima-facie there is a the failure on the part of the AO to make relevant and meaningful inquiry as warranted by the facts of the present case and allowing without causing necessary enquiries the claims of the assessee. The AO's failure to take cognizance of the legal implication of the transaction would render the assessment order being erroneous and prejudicial to the interest of revenue in terms of section 263 of the Act. 5 in view of the above, I propose to suitably revise the assessment order passed by the AO u/s 263 of the I....
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....respect to the issue of taxability of the amount of Rs. 309,51,25,000/- referred to in the show cause notice dated July 17, 2018; 6. I say that in the personal hearing, the discussion was restricted to the sale of the Domestic Formulation Business to M/s Abbot Healthcare Pvt. Ltd. and why the sum of Rs. 309 crores relating to foreign exchange gain in the assessment year 2012-13, i.e. a year subsequent to the year of the transfer of domestic formulation business, be added to the assessee's income; 7. I say that no further issues or points were put to us by the PCIT or discussed during the hearing on August 9, 2018; 8. I say that no further personal hearing took place in the matter and the order dated March 29, 2019 under section 263 was directly received on April 2, 2019. I hereby affirm that whatever is stated above is true to best of my knowledge and belief. 6. While on this aspect of the matter, for the sake of completeness, it may be added that the aforesaid affidavit was put to the learned Departmental Representative, and when he was directed to comment upon the same, he filed a counter affidavit of the learned Principal Commissioner of Income Tax. This affidavit s....
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...., so that if the consequent gain for the said AY is found to be fully or partly not offered for taxation, the same could be considered for bringing to taxation. I say that, the order u/s 263 has in no way, crystallized the assessee's liability and has left the door open for him to make his submissions on the said matter before the AO and the AO is duty bound to pass a speaking order after taking the submissions of the assessee under due consideration. 7. I say that, if the Hon ITAT still believes that the opportunity of being heard was not given to the assessee, then the same is a procedural lapse AND is hence a curable defect. It per se does not make the order u/s. 263 invalid. This ratio is laid down by the Apex Court in the case of Commissioner v/s Jai Prakash Singh [1996] 85 taxman 407(SC). Accordingly, if the Hon Tribunal takes this view, then the order u/s. 263 need to be set aside back to the CIT with a direction to give an opportunity of being heard to the assessee and pass a fresh order. 6. Learned Principal Commissioner, subsequent to the said hearing, proceed to pass the impugned revision order on a different aspect, as is evident from the operative portion of the....
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....similar transaction and after analysing the facts of the case, it was held by the DRP in its order dated 29.9.2017 for AY 2013-14 that the actual gain of the assessee from the said transaction amounts to Rs. 98,28,43,1207- and accordingly the AO was directed to make an addition of Rs. 89,83,00,2787- on this amount for AY 2013-14 and the issue has been discussed in detail in para-32 to 35 of the said order. 3.5 It was further observed by DRP that similar transactions were observed to have happened during AY 2012-13 too. As per the details furnished during the period pertaining to AY 2012-13, the asssessee was to receive 400 million USD on Abbott Receivables. The same was discounted at 55.295 rupees per dollar. As per the findings of DRP for AY 2013-14, the cost of acquisition on Abbott Receivable was 46.680 rupees per USD. Therefore, there was a gain of Rs. 8.609 rupees per USD which comes to Rs. 344.36 crores which is apparently taxable in the hands of the assessee for AY 2012.13 4. In view of the above discussion, it is held that the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue. The assessment order is therefore set aside to the....
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....on the judgment of Hon'ble Punjab & Haryana High Court, in the case of CIT Vs Roadmaster Industries of India Ltd [(2013) 233 Taxman 13 (P&H)]. It was then contended that if the Commissioner was to get another opportunity for conducting hearing on the issues on which revision is done, without providing an opportunity of hearing to the assessee at the stage of first revision proceedings, it would result in a situation that the revision can be done on any ground without providing an opportunity of hearing, and such a lapse, which is jurisdictional, is made up at a later point of time. Learned Departmental Representative vehemently opposes these submissions. The stand of the learned Commissioner is that even if the assessee is not given an opportunity of hearing by the learned Commissioner on a particular point, even though the jurisdiction to exercise powers under section 263 was lawfully assumed, the matter is required to be remitted back to the learned Principal Commissioner for taking a fresh call, after providing a reasonable opportunity of hearing to the assessee. In a note filed before us, learned Departmental Representative has submitted as follows: On the issue of violation ....
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....ice to the above submissions, if it is held that opportunity of being heard was not given to the assessee, then, the same is to be treated as a procedural lapse and hence a curable defect. The Hon'ble Madras High Court in the case of V. Raju v Commissioner of Income-tax (1984) 16 Taxman 249 (Mad) has held that in view of principles of natural justice having been embedded in section 263 itself, order passed by commissioner under section 263 without giving opportunity to assessee of being heard, suffered only from procedural irregularity and could not be void ab initio and non est in law. It also held that the tribunal, while setting aside order of commissioner passed under section 263 on the ground of procedural irregularity, is duty bound to direct commissioner to pass fresh order after following statutory procedure. In CIT vs Electro House(1971) 82 ITR 824 (SC), the Hon'ble Supreme Court held that breach of the principles of natural justice might affect the legality of the order made but that did not affect the jurisdiction of the Commissioner u/s 263. The same view has been reiterated in the case of CIT vs Amitabh Bachchan, 384 ITR 200 (SC). 5. It is accordingly submitt....
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....None appeared before Commissioner on behalf of assessee - Commissioner after setting aside assessment order directed ITO to make fresh assessment -Tribunal held Commissioner's order to be void ab-initio and also refused to direct Commissioner to pass fresh order after giving assessee further opportunity of being heard - Whether no notice was required to be issued ay Commissioner before exercising jurisdiction to proceed under section 263(1) and, hence, question of its validity did not arise nor did, it affect Commissioner's jurisdiction to exercise power under section 263(1) - Held, yes - Whether however, on facts, there was no proper opportunity to assessee to show cause why an order against assessee be not passed by Commissioner under section 263(1) - Held, yes - Whether breach of principles of natural justice might affect legality of order but not Commissioner's jurisdiction - Held, yes - Whether, therefore, exercise of jurisdiction by Commissioner under section 263(1) was valid and his order was not void ab initio - Held, yes - Whether since Tribunal's finding that order of Commissioner was void ab initio was not justified, it was not right in refusing to direct....
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....he has dealt with, and addressed us at length, on several other legal and factual aspects, but, for the reasons we will set out in a short while, it is not really necessary to go into those aspects in any detail. 10. We have considered the rival submissions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 11. We find that as is evident from a perusal of the affidavits filed by the learned counsel for the assessee as also by the learned Principal Commissioner, it is clear that the learned Principal Commissioner has not given any opportunity of hearing to the assessee on the precise point on which the powers of revision exercised, and, to borrow the words of Hon'ble Supreme Court in the case of Amitabh Bachan (supra), "there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the finalization of the decision". To this extent, undoubtedly, the impugned order is v....
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....on merits, no revision is required to exercised on the issue, the Commissioner will not, once he has the benefit of hearing the assessee on merits, drop the revision proceedings. We have heard the parties on this foundational aspect, and the only fetters on the grounds on which we decide an appeal on is that we can do so only after hearing parties on the said ground. Just because an assessee prefers the matter being decided on merits by us does not bind us for a decision on merits. In any case, we are of the considered view that such a decision on merits at this stage will be premature and inappropriate. However, once the assessee has raised the matter on merits, we may briefly deal with this aspect as well. That takes us to the factual issue raised by the learned counsel with respect to the correct US dollar conversion rate to be adopted for computing the gains on discounting. There indeed seems to be an error in adopting the conversion rate inasmuch as the learned Commissioner simply seems to have adopted the rate relevant for the assessment year 2013-14, as mentioned in the DRP order, for the present assessment year as well. While one can understand anxiety of the assessee to br....