DY. COMMISSIONER OF INCOME TAX , CIRCLE-3(1), HYDERABAD vs. SAKET ENGINEERS PRIVATE LIMITED , HYDERABAD

PER S.S. GODARA, J.M. :

This Revenue’s appeal for A.Y. 2014-15 arises from the

Commissioner of Income Tax (Appeals) – 3, Hyderabad’s order

dt.27.08.2018 passed in Case No.0406/DCIT-3(1)/Hyd/CIT(A)-

3/2016-17 involving proceedings under Section 143(3) of Income

Tax Act, 1961 [in short, ‘the Act’].

ITA No.2101/Hyd/2018

Heard both the parties. Case files perused.

“1. The Ld. CIT(A) erred both in law and on facts of the case.

2 The Ld. CIT(A) erred in holding that the assessment was bad in law ignoring the fact that the hearing which took place after the date of order has no bearing on the order passed

2.1 The Ld. CIT(A) ought to have appreciated the fact that the AO has not utilized the information submitted by the assesse subsequent date from the date of order and the outcome oof the hearing becomes infructuous in the light of the fact that the order was already passed.

the CIT(A) detailed discussion quashing the assessment herein

dated 27.12.2016 as bad in law as under :

“VI) During the course of appeal proceedings, the appellant pressed additional grounds of appeal. This was remanded to the Assessing Officer for report. The Assessing Officer i.e., DCIT, Circle-3(1), Hyderabad vide letter dated 20-11-2017 which was forwarded by the Addl. CIT, Range-3, Hyderabad vide letter received on 23-11-2017 stated that the Remand Report would be submitted after receipt of the assessment records from the vigilance authorities at Chennai. Subsequently, vide letter dated 08-02-2018, the Assessing Officer i.e.,

ITA No.2101/Hyd/2018

DCIT, Circle-3(1), Hyderabad forwarded the Remand Report which was forwarded through the Addl.CIT, Range-3, Hyderabad vide letter received on 09-02-2018. The Remand Report of the Assessing Officer i.e., DCIT, Circle-3(1), Hyderabad are extracted below :

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VII) The comments of the Addl. Commissioner of Income Tax, Range-3, Hyderabad on the remand report sent by the Assessing Officer i.e., DCIT, Circ1e3(1), Hyderabad are extracted below:

VIII) Copy of the remand report sent to this office by the AO i.e. the DCIT, Circ1e-3(1), Hyderabad was sent to the appellant (along with the forwarding letter of the Addl. CIT, Range-3, Hyderabad addressed to this office) as per the principles of natural justice and equity. Copies of these two reports are extracted supra. Along with the reply to the remand report, the appellant made the following submissions:-

PRAYER FOR PERMISSION FOR WITHDRAWAL OF GROUND OF APPEAL UNDER GROUND E. READING AS UNDER

ITA No.2101/Hyd/2018

Learned assessing officer erred to treat the other income Rs 32.51 lakhs separately despite the fact that other income forms part of business income and deserves to be dealt as part of business income but should not have taken separately The appellant craves to pray for permission to withdraw this ground of appeal E. This prayer is made since the appellant realised its mistake. as that this income of Rs 32.51 lakhs offered by the appellant, under the head Income from other sources and therefore it is unfair and erroneous to raise a ground of appeal to redress as a grievance. The appellant regrets for the inconvenience caused and prays for withdrawal of ground of appeal. PRAYER The appellant withdraws ground of appeal under "E", permission may kindly be granted. Further, the comments of the appellant in appeal, with reference to the remand report of the AO and the comments of Addl. CIT, Range-3, Hyderabad are as follows : The appellant was granted an opportunity to furnish comments on the I Remand Report submitted by Additional Commissioner of Income Tax, Circle 3 vide letter dated 09.02.2018 and Remand Report letter dated 08.02.2018 of the assessing officer, Dy. Commissioner of Income Tax, Circle 3(1). The appellant respectfully submits the following comments. A. kind attention of learned CIT (Appeals) is invited to para 4 of the remand report dated 08.02.18 of the assessing officer as well as the assessment order issued. The assessment order notes the date of The assessee or the learned AR shall now appear before the learned CIT (A) on or before 31/07/2021 with all the cogent supportive material at his own risk and responsibility to be followed by three effective opportunities of hearing. hearing as 26.12.2016 while para 4 of the remand report specifically recognizes the date of The assessee or the learned AR shall now appear before the learned CIT (A) on or before 31/07/2021 with all the cogent supportive material at his own risk and responsibility to be followed by three effective opportunities of hearing as 30.12.2016. B. Similarly learned Additional Commissioner of Income Tax in para 4 also noted that there was a hearing on 30.12.2016. The appellant's objections are vindicated by the averments of assessing officer as well as Additional Commissioner of Income Tax, that the last date of hearing was 30.12.2016 and the allegations that assessee did not I' furnish information is far from truth, The appellant begs to pray to consider this situation of overlooking the information and hearing

ITA No.2101/Hyd/2018

date of 30.12.2016 that were conveniently ignored while passing the order applying Section 145(3) read with Section 14~ of tile Income Tax Act, 1961 which is against all canons of law. The appellant humbly prays to quash the orders since the orders were passed without completing the hearing and are against principles of natural justice and equity. C. The appellant in the grounds of appeal A and B and in written submissions placed before the Honorable CIT (Appeals), prayed that orders passed by assessing officer deserve to be annulled as the orders were disposed without concluding the hearing, denying the appellant a right of opportunity of hearing, willfully overlooking the information on record which is highly illegal, improper and contrary to all canons of law. D. The appellant has also submitted judicial pronouncements, that are un 'form m their verdict that orders passed without affording a proper opportunity of hearing are bad in law and deserved to be quashed. E. The appellant begs to consider its prayers made in grounds of appeal and written submissions to quash the illegal orders. IX) Ground Nos. A and B in appeal relates to the legality and factual matrix of the assessment proceedings. It is seen that the assessment order was passed by the Assessing Officer on 27-12-2016. The hearings as per the assessment order were held on 09-12-2016,23-12- 2016 and 26-12-2016. The additional evidence and other details were remanded to the Assessing Officer. It was reported by the Assessing Officer vide report dated 08-02-2018 that the hearings were conducted on 09-02-2016,23-12-2016,26-12-2016 and 30-12-2016. The Assessing Officer stated in para-4 of the remand report dated 08-02- 2018 as follows: 4. The assessee has submitted additional evidence in support of the book results. An opportunity was given to the assessee and the submitted. The details of additional evidence as placed before the CIT(A)-3, Hyderabad. A perusal of the assessment record shows that hearings in this case were conducted on 09-02-2016, 23-12-2016, 26.12.2016 & 30-12.2016. Assessment was completed u/ s.143(3) vide order dated 27.12.2016. the assessee vide reply dated 26.12.2016 has submitted details of large expenses, share premium, large value of sale consideration, details of TDs and vide reply dated 30.12.2016 has submitted details of advertisement expenses & commission expenses, details of revenue from operations, details of closing stock and its valuation, details of purchases, details of TDS deducted u/ s.192. In the additional evidence, besides the above mentioned details, the assessee has further submitted statement of net realizable values comparison of operative results for AY 2013-14

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& 2014-15, computation of revenue as per Percentage Completion Method and the details of actual sales in project SRIYAM & Pranaam and has submitted that the loss of Rs. 6. 05 Cr in SRIY AM project and Rs.14.26 Cr in PRANAAM project be allowed." The Addl.CIT, Range-3, Hyderabad (while forwarding the remand report of the Assessing Officer vide letter dated 09-02-2018) stated in para-4 and 5 of the forwarding letter as follows : “4. During the appeal proceedings before the Ld. CIT{A)-3, Hyderabad, the assessee has submitted additional evidence which includes details of revenue from operations (project wise break up), details of advertisement expenses & commission expenses, details of closing stock and valuation and other such details. During scrutiny assessment proceedings, the assessee submitted details of share premium receipt, details of expenses claimed and other such details on 26.12.2016. Further, during the hearing held on 30.12. 1, further details regarding the advertisement and commission expenses, break up of revenue from operation, details of projects, details of TDS deduction etc. were submitted. 5. It has been reported by the Assessing Officer and it is also evident from the assessment record that the assessment was completed on 27.12.2016 and that some of the details filed by the assessee during the scrutiny assessment were not considered by the Assessing Officer. 6. In view of the above, the additional evidence submitted by the appellant accepted and considered accordingly." The remand report of the Assessing Officer i.e., DCIT, Circle-3(1), Hyderabad along with the forwarding comments of the Addl. CIT, Range-3, Hyderabad were sent to the appellant M/s. Saket Engineers Private Limited for comments in accordance with principles of natural justice and equity. The appellant while replying to the contents of the remand report stated with reference to grounds A and B as follows : “A. Kind attention of learned CIT(Appeals) is invited to para 4 of the remand report dated 08.02.18 of the assessing officer as well as the assessment order issued. The assessment order notes the date of last hearing as 26.12.2016 while para 4 of the remand report specifically recognizes the date of last hearing as 30-12-2016. B. Similarly learned Additional Commissioner of Income Tax in para 4 also noted that there was a hearing on 30.12.2016. The appellant's objections are vindicated by the averments of assessing officer as well as Additional Commissioner of Income Tax, that the last date of hearing was 30.12.2016 and the allegations that assessee did not furnish information is far from truth. The appellant begs to pray to consider this situation of overlooking the information and hearing

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date of 30.12.2016 that were conveniently ignored while passing the order applying Section 145(3) read with Section 144 of the Income Tax Act, 1961 which is against all canons of law. The appellant humbly prays to quash the orders since the orders were passed without completing the hearing and are against principles of natural justice and equity. " It is seen from the Assessing Officer's and also on the Addl. CIT’s remand reports that assessment order was passed on 27-12- 2016. A further hearing was held in assessment on 30-12-2016 which was noted in both the assessing officer's remand report and also the Addl. CIT, Range-3, Hyderabad forwarding report. Apparently, the assessment order of the AO was passed u/s.143(3) and Subsequently for the same assessment year, a hearing was held on 30-12-2016. The appellant in the comments to the remand report also brought to note that the assessment order was passed on 27.12.2016 while the hearing was held on 30-12-2016. Considering the facts, issues and circumstances of the instant case, it is held that the assessment is bad in law. Hence. Grounds No. A and B in appeal are allowed and the assessment is held to be void abintio. Considering that the assessment has been held as void abintio, the remaining grounds of appeal are academic in nature”.

grounds that the CIT(A) has erred in law and on facts in quashing

the Assessing Officer regular assessment dt.27.12.2016 as an

invalid one thereby holding that the latter authority had in face

heard the assessee post facto framing the above assessment.

CIT(A) has gone by the Assessing Officer’s remand report itself filed

on 09.02.2018 that the assessee had been heard on 30.12.2016

regarding various issues of advertisement and commission

expenses, break up of revenue from operations, details of projects

ITA No.2101/Hyd/2018 and TDS deductions etc. Mr. Jitendra Kumar vehemently

contended that the Revenue as well as the Assessing Officer are

estopped from filing the instant appeal since they ought not to be

hold as aggrieved parties in view of the favourable remand report

and case law CIT Vs. DM. Purnesh (2020) 426 ITR 169 (Kar) and

Smt. Jayalakshmi Vs. ACIT (2018) 96 taxmann.com 486 (Mad).

Learned counsel reiterated the fact that the Assessing Officer had

not afforded adequate opportunities of hearing to assess from

before framing regular assessment on 27.12.2016 which makes it’s

a perfect instance of violation of principles of natural justice not

liable to be sustained in law.

Both the parties have filed their respective paper books. The

Revenue’s letter dated 28.05.2021 has placed on record all the

assessment notings as well as annexures and other documents

whereas the assessee had filed its compilation running to 30

pages, respectively.

construction, property development and civil contract business. It

electronically filed its return on 30.11.2014 declaring total income

of Rs.12,746,020/-. The Assessing Officer thereafter issued

ITA No.2101/Hyd/2018 Sec.143(2) notice dt.28.08.2015 followed by his regular

assessment framed on 27.12.2016 interalia regulating books of

accounts u/s 145(3) of the Act thereby estimating 15% of the

assessee’s gross turnover of Rs.1,35,32,28,849/- coming to

Rs.20,29,84,327/- as business income.

books as well as estimation of income. The CIT(A) has quashed

the impugned assessment as not sustainable in law for want of

adequate opportunity during the scrutiny and on the basis of the

favourable remand report coming from the assessing authority’s

side.

pleadings qua correctness of CIT(A) under challenge. We find no

reason to agree with the assessee’s stand. A perusal of assessment

notings sufficiently indicates that the assessee’s authorised

representative had put in his first appearance on 15.09.2015

followed by subsequent opportunities / notings dated 17.06.2016,

24.06.2016 (questionnaire issued), 08.07.2016, 01.12.2016

(Section.142(1) notice along with questionnaire), 09.12.2016

(questionnaire handed over to AR with detailed enquiry),

ITA No.2101/Hyd/2018 23.12.2016 (comprehensive discussion), 26.12.2016 and

27.12.2016 [framing of Section.143(3) assessment]; respectively.

The Assessing Officer recorded the assessee’s presence through its

authorized representative and rejected the books followed by

estimation of income @ 15% of the gross sales.

factual backdrop is as to whether the impugned assessment

dt.27.12.2016 is an invalid one because of the fact that the AO

had allegedly heard the assessee on 30.12.2016 or after his

Section.143(3) assessment; as the case may be or notings. Our

answer to this question is against the assessee and in favour of the

department. We wish to make it clear Sec.136 of the Act stipulates

that proceedings before the income tax authorities are judicial

proceedings within the meaning of Sec.193 and 228 and for the

purpose of Sec.196 of the Indian Penal Code (45 of 1860) and every

income tax authority is deemed to be Civil Court and ….. And that

Sec 114(e) of the Indian Evidence Act, 1872 also provides that a

Court may presume “(e) That judicial and official acts have been

regularly performed”. We presume in these facts and that even if

it is taken that the Assessing Officer had granted hearing to the

ITA No.2101/Hyd/2018 assessee on 30.12.2016 after framing his sec.143(3) assessment

on 27.12.2016, the same is hit by the legal maxim “functus officio”

in light of hon’ble apex Court’s decision in SBI Vs. S.N. Goyal

(2009) SCC 92 that “It is true that once an authority exercising

quasi judicial power takes a final decision, it cannot review its

decision unless the relevant statute or rules permit such review.

But the question is to at what such an authority become functus

officio in regard to an order made by him. P. Ramnatha Aiyar’s

Advanced Law Lexicon (3rd Edition) Volume 2 PP 1946-47) gives

the following illustrative definition of the term “function officio” :

Thus a judge, when he has decided a question brought before him

is functus officio, and cannot review his own decision. Black’s Law

Dictionary (6th Edition Page 673) gives its meaning as follows :

“Having fulfilled the function, discharged the office, or

accomplished the purpose, and therefore of no further force or

authority”.

the Assessing Officer herein had very well framed his assessment

on 27.12.2016 and recorded his order sheet to this effect and said

assessment order was issued by post, all the subsequent

ITA No.2101/Hyd/2018 developments at his end; including the hearing the assessee on

30.12.2016 as per assessee’s stand without taking recourse to the

remedy available i.e., Sec.148 or 154 of the Act providing for re-

opening and rectification, carries no significance in law. The same

therefore could not form the sole basis for getting the impugned

assessment itself quashed as bad in the eyes of law. We thus

decline the assessee’s arguments placing reliance on the foregoing

assessment notings in view of the “functus officio” principle. We

are further of the opinion that the foregoing twin judicial

precedents dealt with purely factual issues requiring verification

in remand proceedings than raising pure legal question before us.

The same stand distinguished therefore. The CIT(A)’s findings

under challenge quashing the impugned assessment are reversed

accordingly. However, since the learned CIT(A) has not adjudicated

upon the merits of the issue (supra), we direct him to decide the

assessee’s lower appeal within three effective opportunities of

hearing. Ordered accordingly.

ITA No.2101/Hyd/2018

Order pronounced on 15th day of September, 2021. Sd/- Sd/- Sd/- (L.P. SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, dt 15.09.2021.

*TYNM