9911796707
TMI Blog2024 (8) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and give a reasonable opportunity of being heard to the assessee and this is clearly set out under 154 of the Act. If this procedure of issuing notice and giving reasonable opportunity of being heard is not followed any further exercise will be nonest and the order itself becomes void ab initio. Thus we hold that the 154 order passed by the CPC was without issuing any prior notice/intimation granting an opportunity of being heard to the assessee and therefore is in violation of the mandate as provided in sub-section (3) of section 154 of the Act. Thus, the rectification order of CPC is bad in law. Diversified views on issue - As observed that as on the date of passing the order u/s 154 there were divergent views on the issue of disallowance u/s 36(1)(va) of the Act which were paid before due date u/s 139(1) of the Act. As on the date of passing rectification order the jurisdictional High Court in the case of CIT Vs. AIMIL Ltd. [ 2009 (12) TMI 38 - DELHI HIGH COURT] was in favour of the assessee, wherein the Hon ble High Court held that the contributions to PF/ESI paid before the due date u/s 139(1) of the Act are allowable as deduction. Therefore, the issue of disallowance u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(va) of the Act. Ld. Counsel submits that assessee filed a rectification application u/s 154 against order dated 08/04/2019 passed by CPC to accept the returned income and delete the disallowance made u/s 36(1)(va) of the Act. Ld. Counsel submits that on 15/06/2019 the CPC passed order u/s 154 of the Act making disallowance of Rs. 1,80,95,758/- u/s 36(1)(va) of the Act without making any changes to the earlier rectification order dated 08/04/2019. 4. Ld. Counsel for the assessee submits that the CPC suo moto made disallowance u/s 36(1)(va) of the Act which resulted into increase in the tax liability and the CPC did not issue any prior notice/intimation granting an opportunity of being heard to the assessee as mandated under sub-section (3) of section 154 of the Act. Therefore, it is submitted that making adjustment/disallowance in the 154 order without giving any prior intimation/opportunity to the assessee is contrary to the express mandate of section 154(3) of the Act and, therefore, the same is bad in law. The Ld. Counsel for the assessee placed reliance on the decision of the coordinate bench of the Delhi Tribunal in the case of ACIT Vs. Humboldt Wedag Pvt. Ltd. ITA No. 1057 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of High Courts existing on the date of grant of relief to the assessee, Assessing Officer is not justified in withdrawing such relief by way of rectification based on subsequent decision of the Hon ble Supreme Court. 8. The Ld. Counsel further referring to the grounds of appeal submits that out of the total disallowance of Rs. 1,80,75,758/- made by the CPC, to the extent of Rs. 97,54,041/- pertains to employers contribution to PF/ESI which was paid within due date u/s 139(1) and hence the same was allowable u/s 43B of the Act. Therefore, it is submitted that disallowance to the extent of Rs. 97,54,041/- is apparently unjustified. 9. On the other hand, the Ld. DR strongly supported the orders of the authorities below. 10. Heard rival submissions, perused the orders of the authorities below. It is the submission of the Ld. Counsel that before passing rectification order u/s 154 of the Act the CPC-Bangluru did not issue any prior notice/intimation granting an opportunity of being heard to the assessee as mandated under sub-section (3) of section 154 of the Act. During the course of hearing the Ld. DR requested for some time to verify as to whether any prior notice was issued to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re will be an increased tax liability on the assessee. The Hon'ble Apex Court in the case of Chockalingam Meyyappan Vs. CIT reported in (1963) 48 ITR 34 is precisely holding that principle of natural justice has to be followed by the authorities. As per Section 154(3) of the Act amendment/rectification which has the effect of enhancement of an assessment or reducing a refund or otherwise increasing the liability of the assessee shall not be made unless the authority concerned gives notice to the assessee of its intention to do so. Therefore, it is obligatory under the statute to issue notice by the tax authority to give a reasonable opportunity of being heard to the Assessee. This is clearly set out u/s 154 of the Income Tax Act and it has to be followed by the tax authorities at the initial stages. If this procedure of issuing the notice and giving reasonable opportunity of being heard is not followed, any further exercise will be non est. Therefore, the order itself becomes void ab initio. In the circumstances, we have no other option to set aside the impugned rectification order as being void ab initio. 15.1 As we have already set aside the impugned rectification order as be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice to the assessee and grant reasonable opportunity of hearing before the order of rectification is passed. The said provision has to be read in a manner where it means that, in the event of any order which has a detrimental effect upon the assessee in those circumstances firstly a notice and secondly a reasonable opportunity of hearing becomes mandatory. 9. Learned Senior Standing Counsel, appearing for the Income Tax Department, for the respondents, however contended that the 1st respondent later on came to know about the carrying forward of the loss by the petitioners. This, according to him, in terms of Section 79 of the Income Tax Act, 1961 was not permissible, because there was a substantial change in shareholding pattern. When this error was detected, the respondent-Department has invoked the powers under Section 154 (2) of the Act. According to him, since it was the power which was conferred under Sub-Section (2), there was no requirement for the compliance as is envisaged under Sub- Section (3). He further contended that by way of the impugned order, there is no change in the tax liability upon the petitioner neither is in any manner the tax liability getting enhanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities concerned for rectification of a mistake. It also provides for the circumstances and the situations when the rectification can be carried out. Further, when we read Sub-Section (3) of Section 154 of the Act in continuation, it would clearly give an indication of the rectification to be done only after a reasonable opportunity of hearing being provided to the assessee. 12. Taking into consideration the submissions made by the learned Senior Standing Counsel, appearing for the Income Tax Department, for the respondents, it would be relevant at this juncture to take note of the contents of the counter-affidavit filed by the 1st respondent, relevant portion of which is reproduced as under: 12. In reply to the averments made in para no.9 of the writ petition, it is submitted that the respondent No.1 passed the rectification order u/s 154 with suo moto as there is a mistake apparent from record which did not require any show cause notice issued to the petitioner. Further, it is noticed that the order passed u/s 154 dated 27.03.2023 now only noticed by the respondent No.1 that it is gone to the petitioner without digital signature. 13. As has been discussed in the precedi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
