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TMI Blog2021 (5) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, undoubtedly, the impugned order is vitiated in law, but the question is what are the implications of this failure on the part of the learned Commissioner. While one can understand anxiety of the assessee to bring an end to the dispute at this forum itself, we are of the considered view that the right course of action will be to send the matter back to the file of the Commissioner for giving an opportunity of hearing to the assessee, on the point on which the impugned revision is actually done in the present case, and thus afford an opportunity to the assessee explain the circumstances surrounding this issue, as may be considered relevant by the assessee. Commissioner will also consider whether the rate of foreign exchange conversion, as pointed out by the assessee and as accepted by the Assessing Officer, is indeed in order, and, if so, whether the subject assessment order can indeed be said to erroneous and prejudicial to the interest of the assessee. In other words, before deciding the matter afresh in the remanded proceedings, learned Commissioner must take a categorical call on this factual aspect, now that it has been pointed out, and in case the stand of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent rectification order, be held as bad in law. WITHOUT PREJUDICE TO GROUND NO. I AND II ABOVE, GROUND NO. Ill: IMPUGNED ORDER PASSED BY INVOKING PROVISIONS OF SECTION 263 OF THE ACT IS BAD IN LAW: 1. On the facts and circumstances of the case and in law, the ld. Pr. CIT erred in invoking the provisions of section 263 of the Act and setting aside the assessment order and directing the AO to pass a fresh order after examination of the facts of the case. 2. Ld. Pr. CIT, inter alia, failed to appreciate that: i. Provision of section 263 of the Act cannot be invoked where an issue is subject matter of appeal before the Hon'ble CIT(A) ii. Provision of section 263 of the Act cannot be invoked where an order which has been the subject matter of the proceedings before Hon'ble Dispute Resolution Panel ( DRP ); iii. the pre-requisites for invoking provisions of section 263 of an order being erroneous in so far as is prejudicial to the interest of the revenue are not satisfied in the facts of the present case; iv. the impugned order is based on the directions of the DRP in subsequent year without any application of mind and on factually incorrect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y engaged in the business of pharmaceuticals. The scrutiny assessment in this case was completed on 13th November 2016, determining a taxable income at Rs (-) 268,01,35,553 and book profit under section 115 JB of ₹ 107,24,76,500. On 17th July 2018, however, t he learned Principal Commissioner of Income Tax required the assessee to show cause as to why the said assessment not be subjected to revision proceedings under section 263. The show cause notice, inter alia, stated as follows: 2. In this regard on a perusal of the records, it is seen that while passing the assessment order, the Assessing Officer has failed to carry out enquiries as warranted by the facts and circumstances of the case and that the assessment has been completed without examining all the aspects which were required to be looked into for arriving at the correct taxable income of the assessee. It is found that even though there were clear indications that something was amiss yet the AO did not cause the necessary verification. The omissions which render the assessment order as erroneous and prejudicial to the interest of revenue are as under: 2.1 The assesse company has reduced an amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ningful inquiry as warranted by the facts of the present case and allowing without causing necessary enquiries the claims of the assessee. The AO's failure to take cognizance of the legal implication of the transaction would render the assessment order being erroneous and prejudicial to the interest of revenue in terms of section 263 of the Act. 5 in view of the above, I propose to suitably revise the assessment order passed by the AO u/s 263 of the IT. Act. 1961. Accordingly you are hereby requested to appear before me at above address on 30/07/2018 at 11:00 A.M. to present your case and to explain why the said order u/s 143(3) rws 144C(13) dated 13.11.2016 should not be revised u/s 263 of the I.T, Act, 1961. If you do not wish to avail of this opportunity of being heard in person or through authorized representative you may file in writing your response on or before the said date which will be considered before any such order is made under the section referred above. If nothing is heard from you by the said date, necessary order will be passed ex-parte on the basis of material available on record without giving further opportunity to you, which may please be noted. 5. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed March 29, 2019 under section 263 was directly received on April 2, 2019. I hereby affirm that whatever is stated above is true to best of my knowledge and belief. 6. While on this aspect of the matter, for the sake of completeness, it may be added that the aforesaid affidavit was put to the learned Departmental Representative, and when he was directed to comment upon the same, he filed a counter affidavit of the learned Principal Commissioner of Income Tax. This affidavit states, inter alia, as follows: 1. I say that I am an Officer of the Indian Revenue Service, presently posted as Director General (Investigation) Jaipur. 2. I say that while discharging my duties as Pr. CIT -7, Mumbai, my office had issued a notice under Section 263 of the Income tax Act, 1961 to M/s Piramal Enterprises Limited dated July 16, 2018 for the Assessment year 2012-13 stating that the assessment order passed by the Assessing Officer was erroneous to the extent of calculation of the forex gain on the sale consideration receivable from Abbott, amounting to ₹ 309.51 cr. 3. I say that during the personal hearing accorded to the assessee, the breakup of the gain and working of the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This ratio is laid down by the Apex Court in the case of Commissioner v/s Jai Prakash Singh [1996] 85 taxman 407(SC). Accordingly, if the Hon Tribunal takes this view, then the order u/s. 263 need to be set aside back to the CIT with a direction to give an opportunity of being heard to the assessee and pass a fresh order. 6. Learned Principal Commissioner, subsequent to the said hearing, proceed to pass the impugned revision order on a different aspect, as is evident from the operative portion of the impugned revision order, as follows: 3.2 The arguments of the assessee have been considered but are not found to be acceptable. The facts of the case are that the assessee signed a Business Transfer Agreement with Abbott Healthcare Pvt. Ltd. to transfer its Domestic Formulation Business on a Slump Sale Basis . The total consideration initially agreed at ₹ 3,72,00,00,000/- was subsequently elevated by ₹ 8,00,00,000/- vide Amendment No.1 dated 8.9.2010 to the original agreement. The new consideration arrived at Indian Rupee equivalent of USD 380,00,00,000. Out of this, the assessee received an upfront sum Indian Rupee equivalent of USD 220,00,00,000 and the balance Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The same was discounted at 55.295 rupees per dollar. As per the findings of DRP for AY 2013-14, the cost of acquisition on Abbott Receivable was 46.680 rupees per USD. Therefore, there was a gain of ₹ 8.609 rupees per USD which comes to ₹ 344.36 crores which is apparently taxable in the hands of the assessee for AY 2012.13 4. In view of the above discussion, it is held that the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue. The assessment order is therefore set aside to the file of the AO with directions to verify the transactions of discounting of Abbott Receivables during AY 2012-13, so that if the consequent gain for the said AY is found to be fully or partly not offered for taxation, the same could be considered for bringing to taxation. 7. Aggrieved by the revision order so passed by the learned Principal Commissioner, the assessee is in appeal before us. 8. One of the points that Shri Mistry, learned senior counsel, has vehemently canvassed before us is that the issue on which learned Principal Commissioner has passed the impugned revision order is an issue which did not even come up for consideration be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se submissions. The stand of the learned Commissioner is that even if the assessee is not given an opportunity of hearing by the learned Commissioner on a particular point, even though the jurisdiction to exercise powers under section 263 was lawfully assumed, the matter is required to be remitted back to the learned Principal Commissioner for taking a fresh call, after providing a reasonable opportunity of hearing to the assessee. In a note filed before us, learned Departmental Representative has submitted as follows: On the issue of violation of principles of natural justice 1. Though the issue of discounting transaction of Abbott Receivables with Axis Bank was not specifically mentioned in the notice u/s 263, the discounting transaction forms part of the break up of ₹ 309,51,25,000/- which was reduced from business income in the computation of income which was the subject matter for issue of notice u/s 263. This being so, it cannot be said that the action of the Ld. PCIT in setting aside the assessment order with directions to the AO to verify the discounting of Abbott Receivables is on a completely different basis as against the reasons mentioned in the notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, while setting aside order of commissioner passed under section 263 on the ground of procedural irregularity, is duty bound to direct commissioner to pass fresh order after following statutory procedure. In CIT vs Electro House(1971) 82 ITR 824 (SC), the Hon'ble Supreme Court held that breach of the principles of natural justice might affect the legality of the order made but that did not affect the jurisdiction of the Commissioner u/s 263. The same view has been reiterated in the case of CIT vs Amitabh Bachchan, 384 ITR 200 (SC). 5. It is accordingly submitted that the impugned order u/s 263 may be set aside and restored back to the PCIT with the direction to pass fresh order after giving opportunity of being heard to the assessee. For this proposition, reliance is also placed on the following judicial decisions: (i) CIT v National Taj Traders [1979] 2 Taxman 546 (SC) Head Notes: Section 33B(1), (2) and (4) of the Indian Income-tax Act, 1922 [Corresponding to section 263(1) (2) and section 254 of the Income-tax Act, 1961] - Revision -Appellate Tribunal - Powers of-To made assessment for assessment years 1958-59 and 1959-60 in status of URF -Commissioner cancel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, on facts, there was no proper opportunity to assessee to show cause why an order against assessee be not passed by Commissioner under section 263(1) - Held, yes - Whether breach of principles of natural justice might affect legality of order but not Commissioner's jurisdiction - Held, yes - Whether, therefore, exercise of jurisdiction by Commissioner under section 263(1) was valid and his order was not void ab initio - Held, yes - Whether since Tribunal's finding that order of Commissioner was void ab initio was not justified, it was not right in refusing to direct Commissioner to pass an order under section 263(1) afresh after giving due opportunity to assessee - Held, yes (iv) Smt. Anantkuverba v Commissioner of Wealth-tax[1993] 201ITR 42 (Gujarat) Head Notes: Section 25 of the Wealth-Tax Act, 1957 - Revision by Commissioner - Assessment years 1972-73 to 1975-76 - Whether no notice is required to be issued by Commissioner before assuming jurisdiction to proceed under section 25(2) - Held, yes - Whether, however, in such a case, Tribunal undoubtedly has jurisdiction to remand matter to Commissioner and to direct him to dispose of proceedings under section 25( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not given any opportunity of hearing to the assessee on the precise point on which the powers of revision exercised, and, to borrow the words of Hon ble Supreme Court in the case of Amitabh Bachan (supra), there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the finalization of the decision . To this extent, undoubtedly, the impugned order is vitiated in law, but the question is what are the implications of this failure on the part of the learned Commissioner. We find that so far as the question as to whether, in the absence of an opportunity of hearing having been given on the points on which powers of revision under section 263 are exercised, the matter can be sent back to the file of the Commissioner, for adjudication de novo after giving an opportunity of hearing to the assessee, is concerned, this issue stands concluded against the assessee by Hon ble Madras Court in the case V Raju (supra) wherein Their Lordships ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mature and inappropriate. However, once the assessee has raised the matter on merits, we may briefly deal with this aspect as well. That takes us to the factual issue raised by the learned counsel with respect to the correct US dollar conversion rate to be adopted for computing the gains on discounting. There indeed seems to be an error in adopting the conversion rate inasmuch as the learned Commissioner simply seems to have adopted the rate relevant for the assessment year 2013-14, as mentioned in the DRP order, for the present assessment year as well. While one can understand anxiety of the assessee to bring an end to the dispute at this forum itself, we are of the considered view that the right course of action will be to send the matter back to the file of the Commissioner for giving an opportunity of hearing to the assessee, on the point on which the impugned revision is actually done in the present case, and thus afford an opportunity to the assessee explain the circumstances surrounding this issue, as may be considered relevant by the assessee. While doing so, learned Commissioner will also consider whether the rate of foreign exchange conversion, as pointed out by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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