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TMI Blog2020 (8) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had passed impugned order by violating principle of audi alteram partem. In view of above factual position as well as the judicial pronouncements cited supra, we are of the opinion that the Pr.CIT has committed a gross error in not providing any effective/reasonable opportunity of being heard to the assessee before passing the order. Accordingly, we quash the revisional proceedings framed u/s.263 of the Act by the Pr. CIT - Decided in favour of assessee. - ITA No.276/CTK/2015 - - - Dated:- 10-8-2020 - SHRI C.M. GARG, JM And SHRI L.P. SAHU, AM Assessee by : Shri S. N. Sahu, Advocate Revenue by : Shri M. K. Gautam, CIT-DR ORDER Per L.P.Sahu, AM: The assessee has filed this appeal against the order of Pr. CIT, Cuttack, dated 30.03.2015 for the A.Y.2010-2011, on the following grounds of appeal :- 1) That the order u/s. 263 of the IT. Act, 1961 dated 30.03.2015 is illegal, arbitrary, uncalled for, unjust and against the facts on record. 2) That show cause notice issued on 20.03.2015 requiring the assessee to furnish clarification on 27.03.2015 without giving adequate opportunity to the assessee is illegal, uncalled for and against the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied because it reduces the profit of the relevant year under consideration, then it will increase the profit to that extent in the next year and ultimately the assessee will not gain. Hence, the action of the CIT is not justified. 7) That learned AO after due verification of each and every points of Balance Sheet had completed the assessment and now setting aside the said assessment directing the Assessing Officer to redo the assessment and start roving enquiries is not legal and therefore, the order u/s. 263 is not justified under law. 8) That other grounds if any will be urged at the time of hearing of appeal. 2. Subsequently, the assessee vide letter dated 10.10.2017 has filed additional grounds of appeal, which read as under :- 1) That there was no proper service of notice on the assessee as the same was neither served on the assessee nor on any person or authorized agent appointed by the assessee. Hence the service of the notice is void in ab initio and therefore the order u/s 263 consequent upon that is liable to be quashed. Case Laws Referred : a) Hind Book House Vs. ITO 274 61 (Delhi Bench) b) Prahalada Maharana Vs. ACIT 42 ITR (Trib) 35, (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the audit report i.e. Form No.3CD it has been gathered that the valuation has been done of the value of closing stock at cost/market price, whichever is lower. Accordingly, the Pr.CIT issued show cause notice on 20.03.2015 fixing the date for hearing on 27.03.2014 and the said show cause notice was served on the assessee on 23.03.2015 but the Pr. CIT noted that on the date fixed for hearing nobody was appeared before him. In absence of non-compliance of show-cause notice issued u/s.263 of the Act, the ld. Pr. CIT after relying many judgments held that the AO had not done proper enquiry and verification, which should have been done and it was the failure on the part of the AO, the order passed by him is considered to be erroneous and prejudicial to the interest of revenue. Accordingly, he set aside the order passed by the AO u/s.143(3) of the Act and directed the AO for fresh adjudication of facts and proper application of law in fresh assessment proceedings after giving reasonable opportunity of being heard to the assessee. 4. Against the above order of Pr. CIT, the assessee filed an appeal before the Income Tax Appellate Tribunal. 5. Ld. AR had also submitted his written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. The court has further observed that:- It is true that due consideration needs to be given by the Revenue to the important fact that the accounts have been audited. In the case of CIT Vs. Amit Bhai Gununtbhai, 129 ITR 573 (Guj) the Hon'ble Gujrat High Court has held that the basic principle is the same in law relating to income tax as well as in civil law namely if there is no challenge to the transaction represented by the entries then it is not open to the Revenue or other side to contend that what is shown by the entries is not the real state of affairs. It is therefore follows that when a return is furnished and accounts are submitted in support of that return is furnished and accounts are submitted in support of that return, the accounts should be taken as the basis for assessment and that an assessee cannot discard his own profit and loss account and balance sheet and more particularly the audit report in form no. 3 CD signed by a Chartered Accountant in terms of section 44AB of the I.T. Act. A tax auditor is required not only by professional ethics but also by law i.e. the legislative scheme of section 44AB(1) to be impartial and objective in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. In view of the above facts and circumstances of the case and the case laws of various High Courts and Supreme Court. The order u/s 263 is not in accordance with law. 4. Regarding under valuation of closing stock, because the method of account adopted for valuation of closing stock is consistently and regularly employed by the appellant, as reported by the Statutory Auditor, there is no scope for application of section 263(1) of the IT. Act, 1961. Case laws cited 1. Berger Paint India Ltd Vs. CIT, 188 ITR 44 (SC). 2. CIT Vs. Indo Nippon Chemicals Co. Ltd, 261 ITR 275 (SC). 5. The order u/s. 263 is not valid as it contravened (b) to explanation of section 263(1) of the IT. Act for not examining the records available at the time of examination of the issue of notice. Similarly, it lacked jurisdiction for not fulfilling the two conditions for assessment being erroneous as well as pre judicial to the interest of revenue. Case Law cited - (Please refer Pg- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whichever is lower which has been certified by the Auditor. The accounts are duly audited u/s. 44AB, the closing stock is valued on the basis of quality of material in the stock and not on generalization of market rate of purchase as alleged by the revenue. However, the same has been duly taken note in Item 11(b) of the Form 3CD report of Audit Report. Further the appellant is an old assessee maintaining regular books of accounts and the methods of account adopted for valuation of closing stock consistently and regularly followed. Therefore assuming but not admitting that even if in one year he will show less closing stock, thereby reducing the profit. Then, the same would have the effect more income in the subsequent year and the net result will be not beneficial to the assessee. Case laws cited in page 7 of the Paper Book Berger Paints, 188 ITR 44 (SC) relied upon on the point of valuation of stock - Principle - Method of accounting- Consistent in practice to be adopted. 7. There was no valid service of notice hence the orders is invalid. Case Laws : Prahallad Maharana Vs. ACIT, 42 ITR (Trib) 35 (Copy enclosed in page-12 of this paper book) followed Hind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of the assessee- 8. In the instant case the order was served on 04.04.2015 which beyond the date of limitation. An order of an authority cannot be said to be passed unless it is in someway pronounced or published or the party affected has the means of knowing it. It is not enough if the order is made, signed, and kept in the file, because such order may be liable to change at the hands of the authority who may modify it, or even destroy it, before it is made known based on subsequent information, thinking or change of opinion. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change of or modification therein. This should be done within the prescribed period through the actual service of the order may be beyond that period (Commissioner of Income-Tax Vs. Shree Narayan Chandrika Trust 212 ITR 456 (Ker) ), Secondary Board of Education Vs. ITO, 86 ITR 408 (Orissa) Shelat (BJ) Vs. State ofGujrat, AIR 1987 SC 1109. 9. No adequate opportunity given for compliance to the notices, hence the order is invalid in the interest of natural justice. The alleged notice dated 20.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e limitation prescribed under the Income Tax Act. It should be served to the assessee at the end of the financial year i.e. 31.03.2015. In support of his arguments, ld. AR relied on the following case laws :- i) National Thermal Corporation Vs. CIT, 229 ITR 383(SC) ii) Mahalaxmi Textile Mills Ltd. Vs. ITO, 66 ITR 710 (SC) 6. Ld. AR also submitted that during the course of original assessment proceedings, all the facts were submitted before the AO i.e. audited financial statements and other documents as required by him from time to time and he had accepted the profit shown by the assessee. The AO did not make any question regarding valuation of closing stock and the methods adopted by the assessee. The assessee is following consistent method adopted this year. Thereafter the AO passed the assessment order. In view of this, the order passed by the AO is not erroneous and prejudicial to the interest of revenue. Accordingly, ld AR submitted that the impugned order passed by the Pr.CIT deserves to be quashed. 7. Defending to the ld. AR s argument, ld. CITDR vehemently submitted that the order of the Pr.CIT is correct and he distinguished all the arguments of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessee on 23.03.2015. However as his counsel was based at Cuttack therefore it took time for the assessee to communicate with him. As a result, no compliance could be made before the Pr. CIT. iii.) In the additional ground of appeal filed on 27.10.2015, it has been alleged that the show-cause notice dated 20.03.2015 had been served on a wrong person who was neither the employee nor the authorized representative of the assessee. However there is a serious contradiction in the stand of the assessee. It is requested that the additional ground of appeal, being in the nature of an afterthought, is required to be rejected. iv.) No grievance is caused to the assessee as the Pr. CIT, Cuttack has directed the A.O. to pass the order afresh after giving reasonable opportunity to the assessee. v.) Reliance is placed on the decision of Hon'ble Jharkhand High Court in the case of Milan Poddar vs. CIT (24 taxmann.com 27) wherein it was held that service of any notice in terms of section 282 of the Income Tax Act through speed post by postal department is valid. It was further held that Registered post would take within its sweep not only speed post but also other mails. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has taken an additional ground in which he has challenged that the service of notice on the assessee has not been served either upon the assessee or upon any authorised person. But on perusal of the original grounds of appeal taken by the assessee i.e. in ground No.3 in which the assessee has clearly stated that the notice served upon the assessee on 23.03.2015. Further on perusal of the Doc register of the department placed by the ld. CITDR before us is dated 20.03.2015, in which the name of the assessee is appeared with the narration that show cause notice issued u/s.263 of the Act for the A.Y.2010-2011 and receipt of the postal department has also been affixed. On analysis of the original grounds and the additional ground filed by the assessee, it is clear from the attending facts that the notice was served to the assessee on 23.03.2015, which the assessee has himself accepted in ground No.3 filed with the Form No.36 before the Tribunal. Further pleading with the aid of additional ground that no proper notice was served on the assessee, cannot be accepted. Even there is no such application nor any revised grounds filed by the assessee on record substantiating that there is any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent properly, the learned CIT told that he has already passed order because of limitation and he did not receive the adjournment petition. It was further submitted by the ld. AR that the Pr.CIT was determined to pass order on or before the end of the financial year, however, he has not bothered to consider as to whether any reasonable opportunity has been provided to the assessee to represent his case, which affects the rights of an assessee. Therefore, the order passed by the Pr. CIT is unjustified and illegal and deserves to be dismissed. To support his contention, ld. AR relied on the following case laws :- i) Bernal Tiwari Vs. CIT, 173 ITR 280 (AP) ii) Panna Devi Saraogi [1970] 78 ITR 728 (Cal.) iii) Smt. Ritu Devi [2004] 271 ITR 466 (Mad) 12. Ld. DR, on the other hand, relied on the order of Pr. CIT and submitted that the opportunity of hearing was given to the assessee to furnish the clarification of the show cause notice issued on 20.03.2015 and the case was fixed on 27.03.2015, however, the assessee neither appeared nor furnished any explanation to the show cause notice. Therefore, the Pr. CIT was duty bound to pass order on or before the end of the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to apply the principles irrespective of the fact as to whether there is any statutory provision or not. In the present case, we find that the assessee was not afforded opportunity, much less the sufficient opportunity to give reply to the show cause notice. Therefore, it is clear that the Pr. CIT in a hurriedly manner without affording opportunity of hearing to assessee had passed impugned order by violating principle of audi alteram partem. In view of above factual position as well as the judicial pronouncements cited supra, we are of the opinion that the Pr.CIT has committed a gross error in not providing any effective/reasonable opportunity of being heard to the assessee before passing the order. Accordingly, we quash the revisional proceedings framed u/s.263 of the Act by the Pr. CIT and allow grounds No.2, 3 4 of the appeal of the assessee. 14. With regard to grounds No.5, 6 7, since we have already quashed the impugned revisional order passed by the Pr. CIT, therefore, the above grounds have become infructuous and the same are dismissed. 15. In the result, appeal of the assessee is allowed partly to the extent as indicated hereinabove. Order pronounced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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