AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 466
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....the principles of Natural Justice. The action of ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. The order deserves to be quashed due to blatant violation of the principles of Natural Justice. 2. In the facts and circumstances of the case and in law, the ld. PCIT has erred in assuming jurisdiction u/s 263 when the order of the ld. AO is neither erroneous nor prejudicial to the interest of the revenue. The action of the ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263. 3. The assessee company craves its rights to add, amend or alter any of the grounds on or before the hearing." 3. The fact as culled out from the records is that the assessee company is a public limited company engaged in the business activities in developing and exporting of software in domestic and foreign markets, providing compute education projects in Government Sector, generating of electricity through wind power and other activities. The assessee Company, for the A.Y. 2017-18, filed its return of income on 28/11/2017 declaring a total income of Rs. 10,91,09,310/-. T....
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....ns are being made with some of the DEOs (Churu, Jhunjhunu and SGNR) and they are also making payments against the bills, current as well as outstanding. (4) The bad debt is claim in the name of Dy. Chief Engineer RDPCC for Rs. 15,76,933/- though the said debtor is regularly making payments against the bills raised for power supply and has even may payments of more than the bills raised in current years. The above clearly shows that AO has not verified this issue properly and not applied his mind to the facts. The bad debts claims have not been verified properly and application of law on the issue has not been properly made. 4.1 The ld. Pr. CIT further observed that the assessee has made delayed payments of PF/ESI contributions of employees as reflected in audit report form 3CD and the AO has disallowed Rs. 16,76,566/- u/s 36(1)(va) r.w.s. section 2(24)(x) of the Act, for such delayed payments, but has not disallowed the following payments: Provident fund employee contributions Due date of deposit Actual date of deposit PF Rs. 413759 15.01.2017 20.01.2017 5. In the backdrop of his aforesaid conviction, the Pr. CIT issued a show cause notice u/s. 2....
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....seeking to review the order passed by him in the garb of the revisional powers vested with him under Sec.263 of the Act. Not only that he was not given sufficient opportunity of being heard to represent his case and thus, the order passed by Pr. CIT u/s. 263 violates the principles of natural justice. 8. The ld. AR of the assessee submitted reply in response to their grounds of appeal and the same is extracted here in below: "1. The assessment in this case, u/s 143(3), was completed on 17/12/2019 by DCIT, Circle- 6, Jaipur. 2. The revisionary powers u/s 263 could be exercised within two years from the end of the financial year in which assessment was completed in terms of section 263(2). 3. Accordingly, in the present case, the revision proceedings u/s 263 were becoming time barred on 31/03/2022. 4. The revision proceedings were instituted by issue of notice by ld. PCIT [PB 125-128] as late as on 12/03/2022 as is evident from page 1 of the order of ld. PCIT. Screenshot of the same is as under: Order u/s 263 of the Income Tax Act, 1961 Instituted on 12/03/2022 from the order of ACIT/DCIT CIR-6, JPR dated 17/12/2019 5. Thus, it....
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....miscarriage of justice by safeguarding rights of an individual. They further ensure that a judgment by the appropriate authority is just, fair and reasonable. 8.4 Principles of Natural Justice are mainly based on the following two principles: * Nemo Judex in causa sua - no one should be made a judge in his own cause * Audi alteram partem - no one should be condemned unheard 8.5 Audi Alteram Partem 8.5.i. It means "hear the other side" or "let the other side be heard as well". This is the second most fundamental rule of natural justice that says no one should be condemned unheard. In circumstances where a person against whom any action is sought to be taken and his right or interest is being affected, shall be given an equal opportunity of being heard and defend himself. 8.5.ii. It gives right to the party to respond to the evidence against them and to choose legal representative of their own choice. The principles of natural justice form a fundamental fair procedure among the parties during a dispute. It is the duty of every person or body exercising judicial or quasi-judicial functions to act in good faith and to listen fairly ....
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....s from the beginning if the injury is to a constitutionally guaranteed right. May be that in ordinary legislation or at common law a Tribunal having Jurisdiction and failing to hear the parties may commit an illegality which may render the proceedings voidable when a direct attack was made thereon by way of appeal, revision or review, but nullity is the consequence of unconstitutionality and so the order of an administrative authority charged with the duty of complying with natural justice in the exercise of power before restricting the fundamental right of a citizen is void ab initio and of no legal efficacy. The duty to hear menacles his jurisdictional exercise and any act Is, in its inception, void except when performed in accordance with the conditions laid down in regard to hearing. An order which is void may be directly and collaterally challenged in legal proceedings. An order is null and void if the statute clothing the administrative tribunal with power conditions it with the obligation to hear, expressly or by implication. Beyond doubt an order which infringes a fundamental freedom passed in violation of the audi alteram partem rule is a nullity. When a competent....
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....ant financial year. It is clear that the Pr. CIT has provided opportunity to the assessee on 27.03.2015 for appearing before him, which, in our opinion, causes denial of opportunity under the principles of natural justice. Before us, ld. AR submitted that the assessee stays in Joda which is near about 275 kms from Cuttack and the notice received on 23.03.2015, therefore, the assessee had no sufficient time to contact his local lawyer, who is staying at Barbil and the Counsel to appear before the Pr. CIT, Cuttack is staying at Cuttack. When the authorized representative of the assessee appeared before the Pr.CIT, the order u/s.263 of the Act was already passed. It is trite that right to fair hearing is a guaranteed right of an assessee and granting of effective opportunity is a sin qua non in Section 263 of the Act for unsetting a statutory order. It was the duty of the Pr. CIT to provide the assessee an effective opportunity to enable it to substantiate its claim. 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 n....
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..... So far as the contention that the order of externment cannot be passed in respect of other adjoining district is concerned, this court is not required to dwell upon the same as the impugned order is liable to be quashed on the ground of violation of principles of natural justice. 14. In such circumstances, the petition stands allowed and the impugned order dated 17.09.2021 is hereby quashed." (CLC 35- 36) 11.6 Hon'ble ITAT Raipur Bench in Dee Vee Projects Ltd. vs. Pr. CIT, Raipur-1 on 11 October, 2021, ITA No. 27/RPR/2021 held as under (CLC 37-44): "9. In the landmark case of "Maneka Gandhi vs. Union of Indiaı (1978 AIR 597), it has been held by Constitution Bench of the Honıble 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. Before the court, both the parties are equal and are entitlement of equal opportunity to represent them. If the order is passed by the authority without providing the reasona....
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....eing heard to the person affected by it adversely will be invalid, the question of remanding the case to the file of Ld. PCIT as prayed for by the Ld. DR, at this juncture at all does not arise as held by co-ordinate Benches as well in the aforesaid cases. In overall effect, the impugned order has violated the principles of natural justice which is essence of fair trial, thus the same is quashed. 15. As we have quashed the impugned order on legal point, hence there is no need to decide the factual grounds." (CLC 42- 43) 12 Apart from second round of avoidable compliances and unnecessary harassment, the assessee Company also suffers pecuniary losses for no fault of its and such losses result into gain to the Revenue i.e. the offender. 13 Distinction between an "illegality" and a "nullity" should be considered before allowing the Revenue a second innings. If the Courts allow the Revenue to do fresh assessments in all set aside cases, they would, in effect, be granting them a licence to contravene the principles of natural justice. The provisions requiring them to follow principles of natural justice would become redundant. 14 The order pas....
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....e bill wise details of the amounts debited to the respective parties, to ensure compliance of section 36(2)(i), the extracts from memorandum data were furnished wherein bill details were mentioned. It is submitted that in the books of accounts, which are used for preparing the audited financial statements, the bad debts amounts are clearly written off. The financial statements are not prepared on the basis of memorandum data kept by the Company for its internal MIS purposes. The said memorandum data is also not part of the books of account. In the Tax Audit Report, the books of account maintained and verified by the auditor, as reported in clause 11 do not mention the said memorandum records [PB 130-131]. A6. Ld. PCIT has also mentioned that the government dues cannot be prima facie irrecoverable. Writing off such government debts is not genuine and justified. In section 36(1)(vii) there is no restriction that the debts due from government cannot be written off as bad debts. It is also submitted that bad debts is not solely on the basis of insolvency of the debtor. Even a solvent debtor may decide not to pay the dues for any genuine/ non-genuine reason. If an assessee, in ....
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....he same is brought to tax in the year of recovery. All these bad debts, if at all recovered in future, will be offered for tax by the Company. Needless to mention that all recoveries from Government would be through banking channel only. A11. It is further submitted that in earlier years also the bad debts have been allowed to the assessee Company on the basis of similar way of write off in the respective ledger accounts as under: a. Assessment Year 2013-14 order u/s 143(3) dated 28/03/2016 by ACIT Circle 6 Jaipur. Bad debts Rs. 9.68 Crores. b. Assessment Year 2014-15 order u/s 143(3) 15/12/2016 by ACIT Circle 6 Jaipur. Bad Debts Rs. 7.42 Crores. A12. The Order of ld. AO can be called erroneous only if he has adopted a stand which is not at all possible under the law. On the contrary, ld. AO had adopted the course which is absolutely in accordance with the law and the judicial precedents laid down in this regard. Reliance is placed on the following judicial pronouncement of the Hon'ble Supreme Court: T.R.F. Limited v. Commissioner of Income Tax, Ranchi in Civil Appeal No. 5293 of 2003 (CLC 45-48): "This position in law is well-s....
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.... 154. Such mistake apparent on record for which remedy is available in the law u/s 154 cannot justify the assumption of revision jurisdiction u/s 263. B3. Section 263 and section 154 are mutually exclusive. For one small mistake apparent on record setting aside the assessment order by recourse to revisionary jurisdiction would be contrary to the intent and purpose of section 263. B4. Revisionary jurisdiction is not meant to be assumed for enforcing the assessment again and again for small issues. It is submitted that the work of assessment cannot be completed with surgical precision. Reliance is placed on the judgment of the jurisdictional High Court in the case of CIT vs Ganpat Ram Bishnoi- 296 ITR 292 (Raj) wherein it was held that jurisdiction u/s 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again (CLC 54- 57). B5. Hon'ble ITAT, Jaipur Bench, in the case of Annu Agrotech Private Limited, ITA No. 09/JP/2021, apropos assumption of jurisdiction under section 263 by the ld. PCIT, laid down the following ratio: "Section 263 cannot be invoked to correct each and every type of mistake or error com....
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.... reply. Even the adjournment application filed is not acknowledged in the order passed. Therefore, the order passed violates the principles of natural justice. The ld. AR of the assessee has relied upon the various judicial decisions on this issue as referred here in above. 11. On the other hand, the ld. DR stated that the assessee was given an opportunity but at the far end of the date of hearing not submitted their submission and only on the date of hearing asking for another date. Therefore, the benefit of non-prosecution may not be contended by the assessee as they have not submitted any details related to the issue raised. The assessee failed to prove the reason behind not submitting the details and the adjournment was taken online at the fag end when the time is going to expire. As regards, the not finding reference in the order since the request was made online the same may not be put up before Pr. CIT and that is why the same is not finding any reference in the order. Thus, the assessee was given as much as 9 days to file their defense reply. Thus, inaction of the assessee may not be benefited and adversely affect the revenue. As the assessee is not coming with clinch ha....
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....ded to the file of Ld. Commissioner for decision afresh. 12. We have heard the rival contentions and perused the material available on record and decisions relied upon by both the parties to drive home to their contentions so raised before us. The assessee vide ground no. 1 raised the issue that no proper and reasonable opportunity of being heard was provided to the Assessee before passing the impugned order. As the controversy goes to the root of the case therefore, we are inclined to entertain this ground first. The foremost controversy raised by the Assessee relates to non-providing of an opportunity of being heard to the Assessee and passing of the impugned order u/sec. 263 of the Act hurriedly without following the procedural provided in the law and clearly violating the principles of natural justice and hence bad in law. We find force in the arguments of the ld. AR of the assessee for the ground no. 1 raised by him, that out of 834 days available for exercising the revisionary power the case was instituted after the lapse of 814 days when only 19 days left for completing the revisionary proceedings. In the notice only 9 days' time was given and even the adjournment applica....
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....305; or "both the sides must be heard before passing any orderı. The principle of Audi Alteram Partem is the basic concept of the principle of natural justice and has not evolved from the constitution but evolved through civilization and mankind and is the concept of common law, which implies fairness, reasonableness, equality and equity. In India, the principles of natural justice are the grounds of Article 14 and 21 of the Constitution. 14. Now coming to the instant case as it is not in dispute that notice dated 25/03/2021 was signed and issued only on 25/03/2021 by the Ld. PCIT, while fixing the date of hearing on next day i.e. 26/03/2021 at 1.00 PM and the impugned order was passed on the very next day i.e. 27/03/2021 while sidelining the adjournment application dated 26/03/2021 filed by the Assessee (page No.11 of the paper book), which clearly reflects that the notice issued on dated 25/03/2021 fixing the date of hearing on 26/03/2021 was illusory and farce in nature and had no essence of principles of natural justice, thus goes to show that no reasonable opportunity of being heard was afforded to the Assessee before passing the adverse order against it. On the afores....