2023 (8) TMI 830 - HC - Income Tax

Revision u/s 263 - Denial of natural justice - assessee has not submitted any reply in response to the notice u/s 263 - HELD THAT - The respondent authority is trying to blow hot cold at the same time. Whereas, in paragraph no. 4 of the impugned order, it has been mentioned that no reply has been submitted by the petitioner, to the contrary, in paragraph no. 5 of the impugned order, it has been mentioned that the assessee has submitted its reply. Neither in the impugned order, nor in the counter affidavit filed before this Court, any reference of the reply submitted by the assessee, as alleged in the paragraph no. 5 of the impugned, has been made. On the pointed query as to whether reply, as referred to in paragraph no. 5 of the impugned order, has been submitted, he categorically refers Annexure No. CA 5 to the counter affidavit and submits that the reply has been submitted by the assessee in the proceedings u/s 142(1) which was considered. The said submission, on the face of it, has no legs to stand on, as the instant proceedings and the impugned order have been passed pursuant to the notice u/s 263. Once the respondent authority himself records that no response has been filed in pursuance of the notice u/s 263 of the Income Tax Act dated 27.03.2022, a contrary finding, as recorded in paragraph no. 5 of the impugned order, cannot be accepted in the eyes of law. Notice u/s 263 was prepared and uploaded/sent on 28.03.2022 and the same was received on the date fixed, i.e., 29.03.2022 and the impugned order dated 31.03.2022 has been passed in gross violation of the principles of natural justice. There is an apparent violation of the principles of natural justice, as no opportunity was given to the petitioner for defending or presenting its case, the impugned order cannot be sustained in the eyes of law in view of the law laid down by the Apex Court in Whirlpool Corporation v. Registrar of Trade Marks Mumbai 1998 (10) TMI 510 - SUPREME COURT . The impugned order does not refer any finding as enumerated in Explanation II of section 263 of the Income Tax Act to suggest that the assessment order was prejudicial to the interest of the Revenue in view of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT and therefore, on this count also, the impugned order cannot be sustained in the eyes of law. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves a challenge to the cancellation of an assessment order under the Income Tax Act, specifically under section 263, on the grounds of being prejudicial to the interest of the Revenue. The issues revolve around the legality of the proceedings, natural justice principles, and the sufficiency of evidence and findings in the impugned order.

Details of the Judgment:

Challenge to Order Cancellation:
The petitioner, engaged in the business of gold bars and ornaments, challenged the cancellation of the assessment order dated 22.12.2019 by respondent no. 1. The cancellation was based on the assertion that the original order was erroneous and prejudicial to the Revenue's interest. The petitioner contended that the proceedings were initiated on a change of opinion without proper inquiry or opportunity for the assessee to be heard.

Procedural Irregularities:
The petitioner raised concerns about the lack of natural justice in the proceedings. It was argued that the notice under section 263 was issued on 27.03.2022, received by the petitioner on the date fixed for reply, and an adjournment application was promptly submitted. However, the impugned order was passed on 31.03.2022, without considering the adjournment request. Discrepancies in the order sheets and signatures further cast doubt on the validity of the proceedings.

Contradictory Findings in the Impugned Order:
The judgment highlighted contradictions within the impugned order. Paragraph 4 stated that no reply was submitted by the assessee, while paragraph 5 mentioned the submission of a reply after examination. The court noted that the respondent authority failed to provide evidence of the alleged reply, undermining the credibility of the findings and the decision-making process.

Violation of Natural Justice Principles:
The court emphasized the violation of natural justice principles due to the lack of opportunity for the petitioner to defend or present its case adequately. Citing precedent, the court ruled that the impugned order could not be sustained. Additionally, the impugned order failed to provide findings as required by the Income Tax Act, rendering it unsustainable in the eyes of the law.

Quashing of the Impugned Order:
In light of the procedural irregularities, contradictions, and violations of natural justice, the court quashed the impugned order dated 31.03.2022. The writ petition was allowed with a cost imposed on the respondent, to be deposited with the Allahabad High Court Legal Services Committee. The respondents were directed to recover the cost from the erring officer, with a follow-up listing scheduled after three months for compliance verification.