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TMI Blog2020 (9) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... all form part of the AO s reason to believe escapement of income to that extent, which is not so in the present case, and for which we have also perused the reasons recorded for the issue of notice u/s. 148(1), reproduced at para 2 (page 1) of the assessment order, forming part of the Tribunal s record. Why, a discrepancy in the assessee s accounts would result in a corresponding difference in its account with the party issuing the TDS certificate/s? We, accordingly, have, in the facts and circumstances of the case, little doubt that the assessment proceedings, though initiated by reason of a revenue audit objection, the same was not accepted by the AO inasmuch as he was not personally satisfied therewith. The terms of clause 10(c) of the Board circular clearly state of the revenue audit objection having been accepted by the Department. We are conscious that the words accepted by the Department , the import of which is surely wider, cannot be equated with the personal satisfaction of the AO issuing notice u/s. 148(1), in the absence of which, as found, as indeed in the instant case, the proceedings in Larsen Toubro Ltd . [ 2017 (3) TMI 1064 - SUPREME COURT] were struck d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M: This is a set of four Miscellaneous Petitions by the Revenue under section 254(2) of the Income Tax Act, 1961 ( the Act hereinafter) directed against the Order dated 23/08/2019 by the Tribunal, dismissing, among 92 others, the captioned appeals (and the corresponding Cross Objections (COs) by the Assessee-respondents) as withdrawn/not pressed. The appeals relate to assessment years (AYs.) 2008-09 2009-10, even as in the context of the case; the law remaining unchanged, the same is of no particular significance. The cases of both the sides being largely the same, the petitions were heard together, and are being disposed of per a common, consolidated order for the sake of convenience. For the purpose of writing this order though the lead case is taken as MA No. 3/Jab/2020, with reference to which the petitions were argued. The specific facts of each case, to the extent relevant, are noted and discussed separately. 2.1 The claim of the Revenue per its instant Miscellaneous Applications ( MAs for short) is that its captioned appeals have been wrongly dismissed as withdrawn/ not pressed per the impugned order inasmuch as, though the tax effect thereof is admittedly belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the personal satisfaction of the assessing authority, but on the direction of the audit party (para 29) . The same would equally apply to the present case as the LAR clearly states that, in reply to the audit objection, the AO clarified the correct figure of commission, confirming his working. 2.3 The ld. Departmental Representative (DR) would, in rejoinder, state that the very fact that the notice u/s.148(1) in the case of Anurag Shrivastava was finally issued by the AO, recording the reasons for his belief as to the escapement of income, only implies that the audit objection was finally accepted by him. He, on being specifically asked, while confirming the absence of any audit objection in the cases covered by MA Nos. 6 7/Jab/2020, would though submit that the reassessment proceedings initiated in these cases was only on the basis of the information provided by the assessees in other, related cases, i.e., MA Nos. 5 4/Jab/2020 respectively, wherein the impugned assessments were pursuant to an audit objection. That is to say, he would argue, but for the said audit objection/s, there would be no reassessment in these two cases, so that the same must necessarily be regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, seriously violating the principles of natural justice. In fact, given the short time frame in which the appeals were fixed, even the notices were not sent to the parties; the list/s itself being finalized only a couple of days prior to the date of their listing. The ITAT Bar and the office of the Departmental Representatives were intimated of the posting, conveying the lists on being finalized on 20/8/2020, on 22/8/2020, i.e., the revised lists. A fair hearing itself demands adequate notice, and by convention four weeks time is given by the Tribunal. Why, the order dated 14/8/2019 in ITO v. Dinesh Madhavlal Patel Ors . by the Ahmedabad Bench of the Tribunal, a common order dismissing, like-wise, 628 appeals, reproduced at para 5 (pages 9 to 15) of the impugned order, itself, vide para 1 thereof, notes that individual notices to the parties were dispensed with in light of the discussions with the Principal Chief Commissioner of Income Tax (Gujarat) and the representatives of the ITAT Bar Association. The arguments raised before the Tribunal in the said appeals, as a reading of the same would clarify, were on the legal aspects of the matter, viz. the applicability of the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 11 of the Circular. Similarly, it may be that a CO/s bears an independent ground/s, raised for adjudication. Accordingly, liberty is hereby granted to the parties to, where so, move the Tribunal in this regard, in which case it shall, where satisfied on merits, recall an appeal/s or, as the case may be, a CO/s, for being heard on merits. Further, the recall of an appeal would be accompanied by the recall of the assessee s corresponding CO, if any, dismissed along with. Needless to add, the Tribunal shall, while doing so, which shall be per a speaking order, grant an opportunity of hearing to the other side. ( emphasis, ours ) Similar liberty, it may be noted, was also provided by the Tribunal in Dinesh Madhavlal Patel (supra) vide para 8 thereof while summarily dismissing 628 appeals, making it clear that either owing to wrong computation of tax effect or owing to such cases being covered by the permissible exceptions, or for any other reason, the Tribunal shall take remedial steps in this regard. Where, then, one may ask, is the scope for raising any objection by the Revenue, which forms the basis of the assessee s case, or at least the preliminary objection to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms part of the Tribunal s record. The same, reproduced hereinbefore in its relevant part, clearly states that the instant appeal is being filed by the Revenue despite it being a low tax-effect matter in view of cl.10(c) of circular 3/2018. Section 268A, introduced by Finance Act, 2008, w.r.e.f. 01/4/1999, reads as under: 268A. (1) The Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing of appeal or application for reference by any income-tax authority under the provisions of this Chapter. (2) Where, in pursuance of the orders, instructions or directions issued under subsection (1), an income-tax authority has not filed any appeal or application for reference on any issue in the case of an assessee for any assessment year, it shall not preclude such authority from filing an appeal or application for reference on the same issue in the case of- ( a ) the same assessee for any other assessment year; or ( b ) any other assessee for the same or any other assessment year. (3) Notwithstanding that no appeal or application for reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in doubt, or in order to satisfy itself, or as a matter of abundant caution, require the Revenue to place on record the copy of the revenue audit objection, or make such other inquiry or verification in the matter as deemed fit and proper, i.e., to ascertain if the appeals were indeed excepted or not. We have already stated of the absence of the due process of hearing while disposing these appeals by the Tribunal, so that there was no question of either any objection being raised by the Revenue, or calling for any substantiation therefrom by the Tribunal. In fact, an examination of the authorization memos u/s. 253(2), which accompany Form 36 and, thus, form part of the Tribunal s record, by it s Registry while fixing the appeals where the tax-effect was lower than the monetary limit specified, would itself have precluded the listing of such appeals in the first instance as these were, at least prima facie , excepted by the Board circular. No regard to the terms of the Board circular, apart from the tax-effect involved, was made by the Tribunal while listing the appeals, as the same would require perusing the record, or otherwise hearing the parties on the applicability or othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause, which, even otherwise, though desirable, is not an essential element/ingredient of an authorization memo u/s. 253(2). As such, even the absence of a reference to the excepting clause therein would not per se preclude the Revenue to raise an objection before an appellate authority in its respect, claiming exclusion under a particular clause of the relevant circular/s. We are in this supported, apart from the principles of natural justice, by the decision in Concord Pharmaceuticals Ltd . (supra). Of course, the onus in such a case, given the prima facie applicability of the circular, to satisfy the court/tribunal as to the non-applicability of the circular, and thus of s. 268A, would be on the Revenue. In fact, in the context of the argument advanced, i.e., of the objection having not been raised in the GoA, so that it becomes only a mode of bringing the basis for filing an appeal to the notice of the Tribunal, it becomes irrelevant whether the same is through GoA or AM, and thus, of no consequence. Rather, it would be incorrect to term it as an objection , the same being excluded under the circular itself, terms of which have to be complied with, so that the Revenue, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same to the notice of the appellate forums, intimating their withdrawal or non-pressing thereof. It is this identification that took precedence with the Tribunal. Perhaps anxious to arrive at the actual amount locked in tax litigation before it, it embarked on the said exercise, as part of a responsive judiciary, which also explains the departure from the established norms of judicial hearing. We have already observed that it, in doing so, acted with circumspection, providing liberty to the parties in case of any error or omission in dismissing an appeal/CO thus, balancing thus the need for retaining only maintainable tax litigation on its records, with the paramount concern for not causing any prejudice. In fact, the arguments emanating from both the sides in the instant cases, with the assessee bringing on record material, also relying on case law in the support of its case, itself emphasizes, if any was required, the need for hearing the parties before issuing any opinion, even as the same does not exclude mistake or omission, removal of which, therefore, the law provides. No Court or Tribunal can, by its action or non-action, cause prejudice to any party before it, is a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceedings would thus relate back to the stage of hearing of the Revenue s appeal/s by the Tribunal, i.e., restore status ante . This only would meet the ends of justice. The parties are, therefore, entitled to place on record material in support of their claims/case. The import of our finding is that the instant proceedings would not be, in any manner, fettered by s.254(2), barring all debatable issues as well as admission of new material, and that the parties are at liberty to raise objections or advance arguments as they may do in a regular appeal. It is for this reason that reference to LAR (duly attested by Sri A.P. Srivastava, Advocate, the ld. counsel for the assessee), as well as to the decision in Larsen Toubro Ltd . (supra), was not objected to by the Bench during hearing; rather, it indicating that due regard to the said decision shall have to be given. True, the reliance on case law, inasmuch and to the extent it declares the law as it always was, is in any case not barred by s.254(2), but the same shall be relevant, or assume relevance, only when the relevant facts are proved, which may require bringing material on record, precluded by s. 254(2). Coming back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificates, comparing the same with the books of account of the assessee. The assessee s reply to the AO is on PB pg. 5, resolving the apparent difference (₹ 2,54,280), which was accepted by the AO, as indicated by his reply as referred to in LAR (emphasized through italics). There is no dispute as to the nature of receipt, but only to the arithmetical accuracy of its accounts, doubted with reference to the TDS certificate/s, which stands duly clarified. It is, therefore, abundantly clear that the AO was satisfied with the assessee s reply (to the audit objection) as to there being no escapement of income, yet proceeded to issue notice u/s. 148(1), so that the same was only due to the non-acceptance of his reply by the audit party, i.e., at its insistence. It would be a different matter, we may add, if and where the audit party had, per its report, pointed out the mistake/error in the AO s reply/working, in which the case it could not be said as a fact that the audit objection did not obtain, and that the assessment proceedings were initiated despite the non-acceptance of the audit objection by the Department. In such a case, it is the audit objection, as finally obtains, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reassessment in the cases of the HUFs were only pursuant to the information provided by the assessees (in M.A. Nos. 4 5), in proceedings initiated consequent to an audit objection in their cases, that the sums for the purchase of property by them were sourced from their respective HUFs, and whose returns for the relevant year did not reflect the same. This only would take the matter to its logical end. 6.2 The primary facts are not in dispute, i.e., that there is no audit objection per se in these cases. The issue therefore is if the same can, or rather are, yet to be regarded as covered u/c.10(c). This gives rise to a very interesting and pertinent issue, i.e., the interpretation of the relevant clause of the Board s circular issued u/s. 268A(1) r/w s. 268A(5) of the Act. Reference here is drawn to cl.10(c) (at para 4.1). 6.3 At the outset, we note that the arguments advanced emphasize, once again, the primary need for proper hearing. Two, the issue involving an interpretative exercise, would under normal circumstances be precluded u/s. 254(2), resulting in a possible injustice inasmuch as the parties were in the first instance not provided proper opportunity of hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to other cases where the audit objection is either applied or becomes applicable or has relevance. That would be straining the clear terms of the circular. The underlining of facts by the ld. DR during hearing only emphasize equity. Considerations of equity, however, have little bearing while interpreting a tax statute, which is to be strictly construed. It may be argued that para 10 specifies exceptions to the broad exemption class identified by the circular, i.e., where the tax-effect falls below the specified monetary limit, being the threshold limit for filing appeals/references by the Revenue before a higher appellate forum. Being an exception to an exception, the same is to be broadly construed, i.e., purposively, if the general exception category is to be strictly identified. Now, the purpose of the exception being, clearly, to exclude (from the general exception category) cases covered by the audit objection, the instant appeals would also stand to be so excepted. This is as the reassessment proceedings in these cases arise only on account of the audit objection, but for which there would not have been any such assessment. After all, where was the need to issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly inconsistent with the facts of the case. We have considered the matter in considerable detail as the rule of strict interpretation does not rule out applicability of reasonable construction to give effect to the purpose or intent of the provision ( Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585(SC)). We are again conscious that we have in MA No. 3/Jab/2020 held clause 10(c) as not applicable even on the terms thereof even as notice u/s.148(1) was issued, implying acceptance of the audit objection by the Revenue. However, the same was only on the basis of a finding of fact by us, based on uncontroverted evidence, that the audit objection was indeed not accepted, nor the reason/s for non-acceptance, as advanced by the Assessing Officer, controverted, so as to then say that the issue of notice u/s. 148(1) resulted due to his acceptance of the audit objection, and which was therefore held by us as on account of insistence of the audit party. We also noted that it was only due to proceedings arising by the very terms of the impugned order, restoring status ante , that new materials (viz. LAR) were admitted, allowing arguments involving contentious issues. We also noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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