2022 (8) TMI 1210 - AT - Income Tax

Validity of the revision order passed by the PCIT u/s. 263 - gross violation of the principles of natural justice by not affording a reasonable opportunity of being heard to the assessee - HELD THAT - We find that the PCIT had granted only one opportunity of hearing to the assessee to explain as to why the power of revision cannot be exercised and posted the matter for hearing on 26.3.2020 i.e. during which the lock down was imposed nation-wide on account of Pandemic Covid 19 situation. Further more, the order of the revision was passed on 30.03.2020; on the date faling within the period of Covid 19 lock down imposed. Thus it is clear that the PCIT had granted unreasonable short time to respond to the show cause notice and posted the matter for hearing during complete lock down period. We are at loss to understand as to how the learned PCIT could pass the order when the nation was under complete lock down i.e. on 30.03.2020. We also fail to understand as to how the PCIT failed to understand that an assessee could not respond to the show cause notice during the lock down period. The order passed by the PCIT is in gross violation of principles of natural justice and we are considered opinion that the assessee was prevented from responding to the show cause notice for sufficient reasonable cause, therefore, we set aside the order of the revision passed by the learned PCIT and direct the learned PCIT to pass fresh order after giving reasonable opportunity of hearing to the assessee. Appeal of the assessee stands partly allowed for statistical purposes.

Summary

Issues:
Validity of Revision Order Passed by PCIT under Section 263 of the Act

Analysis:
The appeal was filed against the order of the Principal Commissioner of Income Tax (Appeals) for the Assessment Year 2015-16. The grounds raised by the assessee included challenges to the validity of the order passed by the PCIT under Section 263 of the Act. The PCIT found that the assessee had incurred expenses in cash in violation of section 40A(3) and made donations that required disallowance, which were not examined by the Assessing Officer. The PCIT issued a show cause notice on 20.03.2020, and subsequently passed an order on 30.03.2020 setting aside the assessment order and directing a redo of the assessment. The assessee contended that the PCIT violated principles of natural justice by not providing a reasonable opportunity to be heard, especially during the nationwide lockdown due to the Covid-19 pandemic.

The PCIT granted only one opportunity for the assessee to explain, which was during the lockdown period. The Tribunal found that the PCIT's actions were in violation of natural justice principles, as the assessee was unable to respond to the show cause notice due to the lockdown. The Tribunal set aside the PCIT's order and directed a fresh order to be passed after affording a reasonable opportunity of hearing to the assessee. The appeal was partly allowed for statistical purposes.

In conclusion, the Tribunal found that the PCIT's order under Section 263 of the Act was invalid due to the violation of natural justice principles, particularly during the Covid-19 lockdown period. The Tribunal emphasized the importance of providing a reasonable opportunity for the assessee to be heard before passing such orders, and directed a fresh order to be passed after considering the assessee's submissions.