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TMI Blog2022 (9) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... at all does not arise as held by co-ordinate Benches as well in the aforesaid cases. In overall effect, the impugned order has violated the principles of natural justice which is essence of fair trial, thus the same is quashed. We are of the considered view that the order passed by the Pr. CIT violates the principles of natural justice and in terms of the request made by the ld. DR we set-aside the order of PCIT with a direction to pass the order after giving sufficient opportunity of being heard. Thus, the ground no. 1 raised by the assessee is allowed for statistical purposes. - ITA No. 153/JP/2022 - - - Dated:- 31-8-2022 - Shri Sandeep Gosain, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Sh. Rajeev Sogani (CA) For the Revenue : Sh. Sanjay Dhariwal (CIT) ORDER PER: RATHOD KAMLESH JAYANTBHAI, A.M. This appeal is filed by the assessee aggrieved from the order of the Pr. Commissioner of Income Tax, PCIT, Jaipur-2 [ Here in after referred as Ld. Pr. CIT ] for the assessment year 2017-18 dated 27.03.2022 which in turn arises from the order passed by the assessing officer passed under Section 143(3) of the Income tax Act, 1961 (in short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices provided to them and therefore, pending debts older than April 2014 have been written off. A list of such debts has been filed. Copies of relevant ledger accounts of the debtors have also been filed along with a chart of pending amounts in the registers of the company in the name of various debtors. On observation of the ledger accounts and the entries in register reveals a different picture in respect of bad debts. The assessee has written off the debts in the ledger accounts of respective debtors but has not written off the relevant entries in the registers showing pending amount to be received from the concerned debtors. As such the basic and primary records of entries of the company i.e. the registers having details of pending amounts are still showing the full amounts of debts without any write off or reduction of debts. He has also extracted the details and made a chart in this order. The ld. Pr. CIT on further examination of the details observed that (1) In primary records of the company, i.e. registers of debts, it is not reducing or writing off the bad debts. The assessee is claiming bad debts since last few years without crediting the relevant entries in its pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that the debts have actually not been written off in the primary accounts of the company maintained in the form of register of debts and thus, the claim of bad debts not allowable. On the issue of disallowance u/s 36(1)(va) of the I.T. Act, the provisions of section are clear that deduction under this section is restricted to the amount of employee s contribution which had been credited to the employees account in the relevant fund or funds on or before the due date . In explanation to section 36(1)(va) of the I.T. Act, meaning of due date is also clarified. In the case of the assessee the details available on record clearly shown that certain amounts falling under section 36(1)(va) r.w.s. 2(24)(x) of the I.T. Act, were deposited beyond the prescribed due dates and were not allowable. The Assessing Officer failed to examine the facts of the case and apply the cored provisions of law. Based on these observations the ld. Pr. CIT find that the revisionary powers can be exercised and hold the view that the order passed by ld. AO is erroneous and prejudicial to the interest of revenue and thus, set aside the order of the A.O with a direction to re-decide the issue afresh and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shot of page 6 para 2 is as under: No. reply to the show-cause notice issued under section 263, has been received from the assessee company, therefore the order is being passed after considering the material available on record. 8. In view of above factual background it is submitted that the order passed by ld. PCIT is in Blatant Violation of Principles of Natural Justice. The order is void ab initio and does not deserve a Second Inning because of the following submissions: 8.1 Natural justice implies fairness, reasonableness, equity and equality. It has a very wide application in administrative discretion which aims to prevent arbitrariness and injustice towards the citizens with an act of administrative authorities. Decisions which violate the principles of natural justice shall stand null and void. 8.2 Natural justice can be defined as a fundamental procedural rule that helps in keeping the Rule of Law in place (upholds Rule of Law and justice). It helps in translating the Rule of Law into practice and seeks to ensure that justice is actually done. It further ensures that this principle is not modified as per the whims and fancies of man. 8.3 It seeks to achieve t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law. Therefore, Article 265 read with Article 14 of the Constitution of India guaranteeing the right to equality. In this scenario, it is important that orders and decisions of the Income Tax Authorities are taken not only in compliance with the provisions of the law but also following the principles of natural justice. 11 Courts, at all levels, have shown serious concern whenever Principles of Natural Justice are violated. Such orders are held to be void ab initio and no second inning is allowed. Reliance is placed on the following judicial pronouncements: 11.1 In Maneka Gandhi vs Union of India, 1978 AIR 597 dated 25 January, 1978 the passport of the petitioner was impounded by the Government of India in public interest. No opportunity was afforded to the petitioner before taking the impugned action. The Supreme Court held that the order was violative of principles of Natural justice. 11.2 Hon'ble Supreme Court in the case of Nawabkhan Abbaskhan vs The State Of Gujarat, 1974 AIR 1471 on 19 February, 1974 has adopted the following legal proposition and held that an order which infringed a fundamental freedom passed in violation of the audi alteram partem rule was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise of power before res- tricting the fundamental right of a citizen is void and ab initio of no legal efficacy. The duty to hear manacles his jurisdictional exercise and any act is, in its inception, void except when performed in accordance with the conditions laid down in regard to hearing. May be, this is a radical approach, but the alternative is a travesty of constitutional guarantees. (CLC 10-11) 11.3 Hon ble Allahabad High court in the case of Jagannath Prasad Bhargava vs Lala Nathimal And Ors., AIR 1943 All 17 on 31 July, 1942 wherein it held as under (CLC 15-16): We consider we are bound to follow the very obvious legal principle that there should be no decision against a person who has not had an opportunity of being heard upon the point which is to be decided. (CLC 16) 11.4 Hon ble ITAT Cuttack Bench in M/S. Jaydurga Minerals, Cuttack vs. CIT Cuttack on 10 August, 2020, ITA No. 276/CTK/2015 relied upon the Allahabad High Court judgment (Supra) to hold as under (CLC 17-29): 13. After hearing the submissions of both the sides and perusing the order of Pr. CIT at last para of page No.2, we find that the Pr. CIT has issued show cause notice u/s.263 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned 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. (CLC 27-28) 11.5 Hon ble Madhya Pradesh High Court in its recent decision of Raju @ Pushpendra Bhadoriya v. Collector/ District Magistrate Indore Ors. In W.P. No. 21686 of 2021 dated 24 November, 2021 held as under: (CLC 30-36): 12. In view of the aforesaid discussion, it is apparent that by not providing the petitioner sufficient time to produce the orders of acquittal in the cases in which he was already acquitted, the principles of natural justice have been clearly violated and in such peculiar circumstances, even if the petitioner has not availed the remedy of appeal, this Court is of the considered opinion that this petition under Article 226 of the Constitution of India is maintainable. In the considered o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him or her. No One can be inflicted with an adverse order without being afforded a minimum opportunity of hearing. If no opportunity has been given to the party effected, then it shall amount to violation of the principles of natural justice, which embedded in latin words Audi Alteram Partem which means hear the other sideı, or no man should be condemned un-heardı or both the sides must be heard before passing any orderı. The principle of Audi Alteram Partem is the basic concept of the principle of natural justice and has not evolved from the constitution but evolved through civilization and mankind and is the concept of common law, which implies fairness, reasonableness, equality and equity. In India, the principles of natural justice are the grounds of Article 14 and 21 of the Constitution. (CLC 41-42) On the aforesaid analyzations and considerations and following the mandates of the Hon'ble Apex Court, in the case of Amitabh Bachchan (supra) wherein it was held that failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Officer, may consciously and contemptuously disregard the well-established principles of natural justice and develop a reckless attitude towards jurisprudence. GROUND NO. 2: Wrong assumption of jurisdiction u/s 263 Ld. PCIT has found the order to be erroneous and prejudicial to the interest of revenue in respect of the following two matters: A. Bad Debts of Rs. 15.98 crores B. PF/ ESI Contribution of Employees Rs. 4,13,759/- A1. Ld. PCIT, at page 5 of her order, has given the following four reasons for categorising the order to be erroneous and prejudicial to the interest of revenue: A2. The only requirement prescribed u/s 36(1)(vii) is that the amount should be written off as irrecoverable in the accounts of the assesee for the previous year. A3. Before the ld. AO, in the course of assessment proceedings, ledger accounts of all the debtors were submitted wherein bad debt, in the respective accounts, was clearly written off . A4. In the audited financial statements also, in the Profit and Loss Account, the total amount of Rs. 15.98 crores is shown as bad debts written off [PB 110]. A5. Ld. PCIT has misdirected herself in referring to the memorandum d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding amount of certain bills which were not likely to be recovered amounting to Rs. 15,76,933/- were written off as bad debts. These are some portions of certain bills. No adverse inference, in respect of bad debt claim, can be drawn even if the debtor is making payments of subsequent bills or the recovery during the year is more than the bills raised during the year as the recovery during the year also pertains to the opening amount recoverable. It is submitted that in this account opening recovery was to the tune of Rs. 65,35,686/- [PB 80]. A9. Ld. PCIT has lost sight of the amendment made in section 36(1)(vii) by Direct Tax Laws (Amendment), 1987 w.e.f. 01/04/1989. By the said amendment the earlier wordings any debt, or part thereof, which is established to have become a bad debt in the previous year have been substituted by the wordings any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee . The ld. AO was aware of this vital change in the law wherein establishing the debt to be bad is not necessitated and only write off, as irrecoverable, is necessary. A10. Ld. PCIT has also lost sight of the law contained in section 41(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. (CLC 52) A14. In view of the above, ld. AO after examining the details submitted vide letter dated 24/09/2019 and 06/11/2019 allowed the deduction [PB 6-15 18-82]. There is thus no error in the order of the ld. AO in this regard. B. PF/ ESI Contribution of Employees Rs. 4,13,759/- B1. Another reason for holding the order of the ld. AO to be erroneous is the fact of not disallowing a sum of Rs. 4,13,759/- in respect of PF/ ESI Contribution of Employees. It is submitted that ld. AO has duly considered this issue in para 4 page 3 of the order and has disallowed a sum of Rs. 16,76,566/-. However, as per the Tax Audit Report one line item amounting to Rs. 4,13,759/- has been missed by the ld. AO [PB 129-134]. B2. It is not the case that ld. AO has not examined the issue or has adopted a wrong stand on the issue. Missing one line item is only a mistake apparent on record which can be rectified u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cuttack Bench, in case of M/s Jaydurga Minerals, Cuttack vs. CIT Cuttack in ITA No. 276/CTK/2015 Hon ble Madhya Pradesh High Court in case of Raju @ Pushpendra Bhadoriya v. Collector/District Magistrate Indore Ors. In W.P. No. 21686 of 2021. Hon ble ITAT, Raipur Bench, in case of Dee Vee Projects Ltd. vs. Pr. CIT, Raipur-1 in ITA No. 27/RPR/2021 Hon ble Supreme Court in case of T.R.F. Limited vs. Commissioner of Income Tax, Ranchi in Civil Appeal No. 5293 of 2003 Hon ble Supreme Court in case of CIT v. Max India Ltd., [2007 295 ITR 282] Hon ble Rajasthan High Court in case of CIT v. Ganpat Ram Bishnoi [296 ITR 292] 10. Ground No. 1 raised by the assessee as aggrieved against the action of Pr. CIT in not granting an opportunity of being heard before passing an order against the assessee. The ld. AR of the assessee submitted that out of 834 days available for exercising the revisionary power the case was instituted after the lapse of 814 days when only 19 days left for completing the revisionary proceedings. In the notice of hearing only 9 days time is given to file the reply. Even the adjournment application filed is not acknowledged in the order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 10 (Bombay) Commissioner of Income-tax, Mumbai v. Amitabh Bachchan [2016] 69 taxmann.com 170 (SC) Commissioner of Income-tax v. Jawahar Bhattacharjee [2012] 24 taxmann.com 215 (Gauhati) Rajmandir Estates (P.) Ltd. v. Principal Commissioner of Income-tax, Kolkata III, Kolkata [2016] 70 taxmann.com 124 (Calcutta) P.V. Sreenijinv.Commissioner of Income- tax (Central) [2014] 47 taxmann.com 61 (Kerala) Kirtidevi S. Tejwaniv. Principal Commissioner of Income-tax 22 Mumbai [2020] 116 taxmann.com 965 (Mumbai - Trib.) Vedanta Ltd.v.Commissioner of Income Tax [2021] 124 taxmann.com 435 (Bombay) Principal Commissioner of Income Tax, Panajiv.Zuari Maroc Phosphates Ltd [2021] 126 taxmann.com 170 (Bombay) Jalgaon People's Co-op Bank Ltd. v. Principal Commissioner of Income Tax - 2, Nashik [2021] 127 taxmann.com 243 (Pune - Trib.). Alternatively, on the other hand, though the Ld. DR supported the impugned order, but alternatively prayed that in case of reversal of the impugned order, the case may be remanded to the file of Ld. Commissioner for decision afresh. 12. We have heard the rival contentions and perused the material available on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence of the adjournment application filed by the assessee and thus, it apparent that there is no spirit of principles of natural justice in the proceeding u/s. 263 of the Act and order has been passed against the assessee without following the principles of natural justice. The ld. AR relied upon the latest decision delivered by a co-ordinate bench of ITAT Raipur bench in the case of Dee Vee Projects Ltd. Vs. Pr. CIT in ITA No. 27/RPR/2021 having similar set of facts. The relevant part of the decision is extracted here in below for the sake of brevity: 13. It is trite to say that every person has the right to speak and be heard when allegations are being put against him or her. No One can be inflicted with an adverse order without being afforded a minimum opportunity of hearing. If no opportunity has been given to the party effected, then it shall amount to violation of the principles of natural justice, which embedded in latin words Audi Alteram Partem which means hear the other sideı, or no man should be condemned un-heardı or both the sides must be heard before passing any orderı. The principle of Audi Alteram Partem is the basic concept of the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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