2012 (8) TMI 273 - AT - Income Tax

Violation of principle of natural justice - no opportunity of being heard provided by CIT(A) to AO before deleting the addition - non-return of form ITNS 51 by A.O. - held that - It is not in dispute that ITNS 51 was not returned by the AO hence CIT(A) is not justified in presuming that the AO or his representative is not interested in appearing before CIT(A). It is also not in dispute that the date of hearing of the appeal is neither mentioned in ITNS 51 nor informed to the AO by a separate notice. Under these circumstances without going into the merits of the case we hold that the order passed by CIT(A) is in violation of principles of natural justice and hence we set aside the matter with a direction to him to give the AO a proper opportunity of being heard and to decide the issues before him afresh.

Summary

Issues: Violation of principles of natural justice by not providing proper opportunity of being heard to the Assessing Officer before passing the order.

Analysis:
1. Violation of Principles of Natural Justice: The appeal by the Revenue and the cross-objection of the assessee were directed against the order of the CIT(A) for the assessment year 2007-08. The Revenue disputed the order of the CIT(A) allowing relief in depreciation on the office building and in relation to the addition made by the AO on account of closing stock. Additionally, the Revenue raised a ground regarding not allowing an opportunity of hearing to the AO before passing the order. The assessee in the cross-objection supported the order of the CIT(A) granting relief to the assessee.

2. Procedural Errors: The case highlighted that the learned CIT(A) did not provide the Assessing Officer with a proper opportunity of being heard before disposing of the appeal. The procedure required the Assessing Officer to return a form (ITNS 51) with specific details, including whether they desired to be present at the hearing. However, in this instance, the form was not returned by the Assessing Officer, but the learned CIT(A) proceeded to dispose of the appeal without ensuring the Assessing Officer's interest in appearing. The absence of information on the date of the hearing of the appeal from the Assessing Officer was a crucial procedural flaw.

3. Legal Obligations: Section 250 of the Income Tax Act outlines the procedure to be followed by the Commissioner (Appeals) in disposing of appeals. It mandates that the Commissioner (Appeals) fix a day and place for the hearing, provide notice to the Appellant and the Assessing Officer, and allow the Assessing Officer to be heard in person or by an authorized representative. The proceedings before the Appellate Commissioner are quasi-judicial, emphasizing the importance of adhering to the rules of natural justice, including providing a proper opportunity of being heard to the Assessing Officer.

4. Judicial Review: The judgment concluded that the order passed by the learned CIT(A) was in violation of the principles of natural justice as the Assessing Officer was not given a fair opportunity of being heard. Despite the standard format (ITNS 51) not fully complying with the statutory mandate, the Assessing Officer should have been given a chance to confirm their interest in appearing at the hearing. The failure to inform the Assessing Officer of the date of the appeal hearing was a critical oversight leading to the violation of natural justice principles.

5. Direction for Reconsideration: The judgment set aside the matter with a direction to the learned CIT(A) to provide the Assessing Officer with a proper opportunity of being heard and to decide the issues afresh. It emphasized the importance of ensuring that both parties have a reasonable opportunity to present their case and that orders are passed in conformity with the rules of natural justice.

6. Outcome: As a result of the violation of natural justice principles, both the appeal of the Revenue and the cross-objection of the assessee were allowed for statistical purposes, indicating a procedural error that required rectification to uphold the principles of fairness and justice in the legal process.