2023 (5) TMI 961 - AT - Income Tax

Revision u/s 263 - selection of case under scrutiny was unsecured loans from the persons who have not filed their returns of income - HELD THAT - PCIT has given a general direction to the Assessing Officer to frame entire assessment order again, whereas PCIT in his revision order raised the specific issue to examine the unsecured loan by the AO. Hence the direction given to the Assessing Officer is not in accordance with the specific issue identified by ld PCIT. Therefore, we note that ld PCIT has not provided adequate opportunity to the assessee to file relevant material evidences and documents before him during the revision proceedings and hence the revision order u/s 263 of the Act was passed by ld PCIT in hurry. PCIT has directed the AO to frame the entire assessment afresh which is not acceptable, as the issue identified by ld PCIT was unsecured loan, and direction would have been given by ld PCIT only for examination of unsecured loan. As in case M.S.Gill vs The Chief Election Commission 1977 (12) TMI 138 - SUPREME COURT held The dichotomy between administrative and quasi-judicial function vis- -vis the doctrine of natural justice is presumably obsolescent after Kraipak (A.K. Kraipak vs UOI 1969 (4) TMI 103 - SUPREME COURT which makes the water-shed in the application of natural justice to administrative proceedings. The rules of natural justice are rooted in all legal systems and are not any new theology. They are manifested in the twin principles of nemo judex in parte sua (no person shall be a judge in his own case) and audi alterem partem (the right to be heard). It has been pointed out that the aim of natural justice is to secure justice. Considering the above facts, we note that assessee has not given sufficient opportunity of being heard and could not plead his case successfully before the ld. PCIT, hence it is a violation of principle of natural justice. We note that it is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Set aside the order of the ld. PCIT and remit the matter back to the file of the ld. PCIT to adjudicate the issue afresh on merits - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
The judgment involves challenges to an order passed under section 263 of the Income Tax Act, 1961 for assessment year 2014-15. The issues raised include the initiation of proceedings under section 263, violation of natural justice, the genuineness of unsecured loans, adequacy of inquiry by the Assessing Officer, and the correctness of the assessment order.

Initiation of Proceedings under Section 263:
The assessee challenged the initiation of proceedings under section 263, arguing that the Commissioner of Income Tax erred in assuming jurisdiction and violated the principles of natural justice by not specifying the grounds for initiating action. The contention was that the order under section 263 was merely a 'change in opinion' and the original assessment order was not erroneous.

Genuineness of Unsecured Loans:
The Principal Commissioner of Income Tax observed that unsecured loans obtained by the assessee from parties who had not filed income tax returns raised concerns about their genuineness. The assessee failed to provide necessary documents and details during the assessment proceedings, leading to the conclusion that the loans were not genuine. The Commissioner set aside the assessment order and directed a re-computation of the total income after disallowing wrong claims made by the assessee.

Adequacy of Inquiry by Assessing Officer:
The counsel for the assessee argued that the Assessing Officer had adequately examined the issues raised by the Commissioner, and the order passed was not erroneous. However, the Revenue contended that the assessment order lacked details on the examination of the issues, supporting the Commissioner's decision to set it aside.

Violation of Natural Justice and Remand:
The tribunal noted that the assessee was not given sufficient opportunity to present material evidence before the Principal Commissioner during the revision proceedings. The direction to the Assessing Officer to frame the entire assessment afresh was deemed inappropriate, as the specific issue identified was regarding unsecured loans. Citing the principles of natural justice, the tribunal set aside the order and remitted the matter back to the Principal Commissioner for a fresh adjudication on merits.

Conclusion:
The tribunal allowed the appeal for statistical purposes, emphasizing the importance of providing a fair opportunity for the assessee to be heard and contest the case effectively. The judgment highlighted the need for adherence to principles of natural justice and fair play in such proceedings, ultimately remitting the matter back for a fresh adjudication.