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2022 (9) TMI 466 - AT - Income TaxRevision u/s 263 by CIT - Denial of natural justice - assessee argued non-providing of an opportunity of being heard to the Assessee and passing of the impugned order u/sec. 263 hurriedly without following the procedural provided in the law and clearly violating the principles of natural justice - HELD THAT - On the aforesaid analyzations and considerations and following the mandates of the Hon'ble Apex Court, in the case of Amitabh Bachchan 2016 (5) TMI 493 - SUPREME COURT wherein it was held that 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 and in the case of Maneka Gandhi vs. Union of India 1978 (1) TMI 161 - SUPREME COURT wherein it was held that if the order is passed by the authority without providing the reasonable opportunity of being 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. We are of the considered view that the order passed by the Pr. CIT violates the principles of natural justice and in terms of the request made by the ld. DR we set-aside the order of PCIT with a direction to pass the order after giving sufficient opportunity of being heard. Thus, the ground no. 1 raised by the assessee is allowed for statistical purposes.
Issues Involved:
1. Violation of principles of natural justice. 2. Erroneous and prejudicial to the interest of revenue under Section 263 regarding bad debts. 3. Erroneous and prejudicial to the interest of revenue under Section 263 regarding PF/ESI contributions. Issue-wise Detailed Analysis: 1. Violation of Principles of Natural Justice: The assessee contended that the Pr. CIT passed the order under Section 263 without affording adequate opportunity of being heard, violating the principles of natural justice. The Pr. CIT issued a notice on 12.03.2022, asking the assessee to comply by 21.03.2022. The assessee filed an online adjournment request on 21.03.2022, but the order was passed on 27.03.2022 without acknowledging the adjournment request. The Tribunal found merit in the assessee's argument, noting that the Pr. CIT issued the notice after 814 days out of the available 834 days, leaving only 19 days for compliance. The Tribunal highlighted that the order was passed in a rush, violating the principles of natural justice and fundamental rights under Articles 14 and 21 of the Constitution. The Tribunal relied on various judicial precedents, including the Supreme Court's decisions in Maneka Gandhi vs. UOI and Nawabkhan Abbaskhan vs. The State of Gujarat, which emphasized the necessity of fair hearing. Consequently, the Tribunal set aside the Pr. CIT's order with a direction to pass a new order after giving the assessee a proper opportunity to be heard. 2. Erroneous and Prejudicial to the Interest of Revenue Regarding Bad Debts: The Pr. CIT observed that the assessee claimed bad debts of Rs. 15.98 crores without writing off the relevant entries in the primary records (registers of debts). The Pr. CIT noted that the debts were not genuinely irrecoverable, especially since they were government dues. The assessee argued that the bad debts were written off in the ledger accounts and reflected in the audited financial statements. The Tribunal noted that the Pr. CIT misdirected herself by referring to internal memorandum details, which were not part of the official books of accounts. The Tribunal emphasized that the only requirement under Section 36(1)(vii) is that the amount should be written off as irrecoverable in the accounts. The Tribunal also highlighted that the AO had examined the details during the assessment proceedings and allowed the deduction. The Tribunal relied on the Supreme Court's decision in T.R.F. Limited v. Commissioner of Income Tax, which clarified that post-1989, it is sufficient if the bad debt is written off as irrecoverable in the accounts. The Tribunal found no error in the AO's order regarding the bad debts and noted that the Pr. CIT was trying to substitute her viewpoint over the AO's decision, which is not permissible under Section 263. 3. Erroneous and Prejudicial to the Interest of Revenue Regarding PF/ESI Contributions: The Pr. CIT observed that the AO disallowed Rs. 16,76,566/- under Section 36(1)(va) but missed disallowing Rs. 4,13,759/- for delayed payments of PF/ESI contributions. The assessee argued that the AO had considered the issue and the missed amount was a mistake apparent on record, rectifiable under Section 154. The Tribunal noted that the AO had examined the issue and the missed amount was a minor mistake. The Tribunal emphasized that Section 263 and Section 154 are mutually exclusive, and revisionary jurisdiction under Section 263 should not be invoked for minor mistakes apparent on record. The Tribunal relied on the Rajasthan High Court's decision in CIT vs. Ganpat Ram Bishnoi, which held that Section 263 cannot be invoked for minor issues or short enquiries. The Tribunal found no error in the AO's order regarding the PF/ESI contributions and noted that the Pr. CIT's action was not justified. Conclusion: The Tribunal set aside the Pr. CIT's order on the grounds of violation of principles of natural justice and directed the Pr. CIT to pass a new order after giving the assessee a proper opportunity to be heard. The Tribunal did not find any error in the AO's order regarding the bad debts and PF/ESI contributions. The appeal of the assessee was allowed for statistical purposes.
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