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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
PER BENCH:
These 12 appeals by two different assessees, namely Shri Ramasamy Natarajan in ITA Nos.201 to 207/CHNY/2021 and Shri Jayarman Muthureddiar in ITA Nos.208 to 212/CHNY/2021 are arising out of different orders of the Commissioner of Income Tax (Appeals)-19, Chennai in ITA Nos.771 to 777/19-20 and 843 to 847/2019-20, of even date 25.03.2021. The assessments were framed by the ACIT, Central Circle -1, Trichy for the assessment years 2012-13 to 2018-19 in the case of Shri Ramasamy Natarajan and for assessment years 2014-15 to 2018-19 in the case of Shri Jayaraman Muthureddiar, all u/s.143(3) r.w.s. 153C of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide orders of even date 23.12.2019.
At the outset, it is noticed that these appeals by both the assessees are barred by limitation by 23 days. The assessees have received the impugned appellate order on 25.03.2021 and appeal was to be filed on or before 24.05.2021 but actually it was filed on 16.06.2021 thereby there was a delay of 23 days. The ld.counsel for the assessees stated that this delay is due to pandemic period of Covid 19 and subsequent events and the Hon’ble Supreme Court
3 ITA Nos. 201 to 212/Chny/2021 in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. Since the Hon’ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeals.
The first common issue in all these 12 appeals of both the assessees is as regards to the orders of CIT(A) and orders of AO, committing grave errors in violating the principles of natural justice and completing the assessments within ‘26 days’ from the date of issuance of notices u/s.153C of the Act for calling of returns of income. The facts are exactly identical in all the twelve appeals of assessee on this very issue of violation of principles of natural justice as the assessment and consequent appellate order is emanating out of search conducted u/s.132 of the Act on M/s. Dhanalakshmi Srinivasan Charitable and Educational Trust on 15.02.2018. The issue raised is exactly identical in all the twelve appeals, hence we will take the facts and grounds of appeal from assessment year 2012-13 in ITA No.201/CHNY/2021 in the case of
4 ITA Nos. 201 to 212/Chny/2021 Shri Ramasamy Natarjan and will decide the main issue. The relevant ground read as under:- 1. Principles of Natural Justice: 1.1 The action of CIT(A) in disposing of the appeal without adverting to the detailed submissions of the Assessee in a proper perspective is bad in law and is in gross violation of principles of Natural Justice. 1.2 The CIT(A) ought to have noted that the Assessment has been rushed through in haste denying a fair opportunity. 1.3 The CIT(A) ought to have seen that the assessment proceedings having been completed in haste without providing adequate opportunity to represent the case; the assessment is liable to be set aside.
Briefly stated facts are that the assessee Shree Ramasamy Natarajan, is an individual. A search u/s.132 of the Act was conducted by the Income-Tax Department in the group cases of m/s. Dhanalakshmi Srinivasan Charitable and Educational Trust including assessee on 15.02.2018. According to Revenue, during the course of search, incriminating material relating to assessee was found and statement u/s.132(4) of the Act was recorded from two responsible persons of these concerns. Consequent to search conducted on 15.02.2018, notice u/s.153C of the Act was issued on 05.09.2019 by the AO to the assessee. In response to notice u/s.153C of the Act, the assessee e-filed return of income on 17.10.2019. Notice u/s.143(2) was issued on 143(2) of the Act on 22.10.2019. A show cause notice proposing to make certain additions for the relevant assessment year 2012-13 was issued on
5 ITA Nos. 201 to 212/Chny/2021 06.11.2019 based on seized material and assessee was requested to file his objections to the show cause notice on or before 18.11.2019. The assessee vide letter dated 18.11.2019 sought adjournment for one week and the AO granted adjournment vide letter dated 20.11.2019. The assessee filed his objections vide letter dated 28.11.2019. Subsequently, the assessment was completed u/s.143(3) r.w.s. 153C of the Act vide order dated 23.12.2019, ex-parte. The assessee challenged the assessment order before CIT(A) and the CIT(A) passed appellate order in ITA No.771/2019-20 vide order dated 25.03.2021 confirming the additions.
Now before us, the ld.counsel for the assessee filed the dates and events and chronology of orders passed, notice issued, etc., which reads as under:- # Date Event 1. 15.02.2018 Search conducted u/s.132 of the Act. 2. 20.08.2019 Centralization of the case with the ACIT, Central Circle- 2, Trichy 3. 05.09.2019 Notice u/s.153C of the Act issued by the ACIT, Central Circle-2, Trichy 4. 17.10.2019 ROI e-filed by Petitioner in response to the 153C notice. 5. 22.10.2019 Notice u/s.143(2) issued by the ACIT, Central Circle-1, Trichy 6. 06.11.2019 Show-cause notice proposing to make additions by ACIT, Central Circle-1, Trichy. 7. 07.11.2019 Transfer of case from ACIT, Central Circle-2 to the ACIT, Central Circle-1, Trichy.
6 ITA Nos. 201 to 212/Chny/2021 8. 18.11.2019 Adjournment letter filed by the Appellant in response to above Show cause notice. 9. 28.11.2019 Objections filed by the Appellant to the additions proposed within ACIT, Central Circle-1, Trichy 10. 23.12.2019 Impugned order passed by AO u/s.143(3) r.w.s. 153C issued by the Department.
4.1 The ld.counsel for the assessee before us stated that from the date of notice issued u/s.153C of the Act dated 05.09.2019 and date of finalization of assessment u/s.143(3) r.w.s. 153C of the Act dated 23.12.2019, the time available was only 108 days and even in between the assessee’s jurisdiction was transferred from ACIT, Central Circle-2 to ACIT, Central Cirlce-1, Trichy vide letter dated 07.11.2019. The first proposed show-cause notice proposing to make additions by ACIT, Central Circle-1, Trichy is dated 06.11.2019 and in which voluminous details were asked for. Thus 07.11.2019 was the starting point of making assessment for which assessee asked adjournment vide letter dated 18.11.2019 and assessee finally filed objections to the proposed addition on 28.11.2019. The ld.counsel stated that the satisfaction note recorded by the AO and the AO of the search party has not furnished any satisfaction note to the assessee so that he can take objection to the same. Further, the sworn statement recorded of Shri P.Mani and Ms.R. Ezhilarasi was not confronted to the assessee or no opportunity of cross examination was provided despite the
7 ITA Nos. 201 to 212/Chny/2021 fact that these two sworn statements recorded during the course of search form basis for making these additions. The ld.counsel stated that in this case also, the fact is that the time limit for completion of assessment u/s.153C of the Act was available with the concerned AO upto 31.12.2020 but the AO completed assessment under compulsion on or before 31.12.2019 due to compulsion in term of letter written by PCIT in the case of Shree Basaveshwar Sugars Ltd., in which the Tribunal have already taken a decision and restored the matter back to the file of the AO by relying on the decision of Hon’ble Madras High Court in the case of B.Kubendran vs. DCIT [2021] 126 taxmann.com 107 (Madras), wherein the Hon’ble Madras High Court after discussing the facts in elaborate has set aside the assessment. The Tribunal in the case of Shree Basaveshwar Sugars Ltd., in ITA Nos.1005 to 1010 & 1017/Chny/2022 considered this aspect and held as under:- 4.2 The ld.counsel stated that exactly on identical facts, Hon’ble High Court of Madras in the case of B.Kubendran vs. DCIT [2021] 126 taxmann.com 107 (Madras) wherein the Hon’ble High Court has discussed the facts that the time allowed in this case was two months and this fact is recorded by Hon’ble High Court in para 25 & 26 as under:- 25. On the question of adherence to the principles of natural justice, the relevant sequence of dates and events is that a notice under Section 153C was issued on 25.10.2019 in regard to a search conducted in 2017. Unfortunately neither the affidavit filed in support of the writ petitions nor the impugned orders of assessment anywhere mention the date of search and it was only in the course of the submissions made orally that the date of search was noted by me as 07.11.2017. The limitation for completion of assessments would be the
8 ITA Nos. 201 to 212/Chny/2021 31st of December, 2019. The impugned orders state that centralization of the assessments took place only on 24.09.2019 and pursuant to the centralization, notices under Section 153C were issued on 25.10.2019, leaving barely a period of a little over two months for completion of six search assessments. 26. The notice under Section 153C called upon the petitioner to file returns within a period of 8 days from service of the notice and the returns have been filed on 07.12.2019, in all cases, beyond the period granted by the respondent. On the same date a questionnaire under Section 142(1) has been issued calling for various particulars in response to which the petitioner has filed replies dated 13.12.2019 furnishing some of the particulars sought. The impugned orders have come to be passed on 30.12.2019 without further reference to the petitioner.
The Hon’ble High Court then set aside the assessment by observing in para 31 to 35 as under:- 31. The impugned order has come to be passed on 30.12.2019 without further reference to the petitioner. In this case as well, I am of the view that the assessments have certainly been completed in haste. When the search has been completed on 07.04.2017, there was no necessity to have waited till 20.09.2019 for centralization, and issue notices under Section 153C only on 25.10.2019. Any delay on the part of the petitioner in responding to the notices appears insignificant in the face of the enormous delay by the Income Tax Department in taking stock of the search material, centralizing the cases and issuing the notices in time, particularly, since it is their case that the assessment get time barred on 31.12.2020. 32. The petitioner has, for AY 2015~16 and AY 2016~17, specifically sought more time to make his submissions on the merits of the matter, relating to alleged undisclosed income from quarrying operations and seigniorage fee. The respondent officer has, in making additions as aforesaid, simply ignored this request. 33. As regards the question of valuation by the investigating officer, Revenue relies on the provision of Section 132(9D) that reads as follows: -132(9D) The authorised officer may, during the course of the search or seizure or within a period of sixty days from the date on which the last of the authorisations for search was executed, make a reference to a Valuation Officer referred to in section 142A, who shall estimate the fair market value of the property in the manner provided under that
9 ITA Nos. 201 to 212/Chny/2021 section and submit a report of the estimate to the said officer within a period of sixty days from the date of receipt of such reference.- 34. The Investigating officer is thus, empowered to refer an issue to valuation even during the process of search. However, such report has to be put to the assessee and his full and complete response sought prior to using the same against him. This has not been done in the present case. Thus, while the reference to valuation is in order, the decision making process is flawed and in violation of the principles of natural justice. 35. There is no explanation set forth in counter or at the time of hearing to explain why the assessment had been taken up for completion, at the very fag end of limitation and for this reason, I believe I would have been justified, had I annulled the assessments, as a second innings is not to be granted to the department, merely as a matter of rote. However, and solely as a matter of prudence, I set aside the assessments with a direction to the respondent to issue notices afresh, hear the petitioner and pass orders of assessments within a period of eight (8) weeks from today, with sufficient time being given to the petitioner to putforth his submissions on merits.
When these facts were confronted to ld.CIT-DR, he started arguing on merits of the case that these are all these are agreed additions and completion of assessment is just merely a formality. He argued that in any eventuality the matter has to sent back, if the bench desire so, to the file of the CIT(A) because under challenge is the order of CIT(A). At this point, the ld.counsel for the assessee drew our attention to another decision of Hon’ble High Court of madras in the case of V. Tillainatesan vs. ACIT, [2021] 133 taxmann.com 131 wherein the Hon’ble High Court has considered this aspect as to whom the matter has to be sent and who has violated the principles of natural justice. The Hon’ble High Court considered this issue in para 10 & 11 as under:- 10. The other question, which may arise, is whether the opportunity, which can be afforded to the appellant-assessee by the Appellate Authority, would be sufficient? In this regard, we are guided by the decision of the Hon-ble Supreme Court in Tin Box Company vs. Commissioner of Income-tax reported in [2001] 116 Taxman 491 (SC). In the said decision, the Hon-ble Supreme Court held that opportunity of hearing by the Appellate Authority or the Tribunal or the Court can be of no substitute to that of the opportunity that will be provided by the Assessing Officer, at the first instance. 11. Thus, we are of the clear view that the assessment order calls for interference. In the result, the Writ Appeal is allowed and the order passed in the Writ Petition is set aside and consequently, the Writ
10 ITA Nos. 201 to 212/Chny/2021 Petition is allowed and the assessment order dated 19.04.2021 is quashed and the matter is remanded to the respondent or the appropriate authority for fresh assessment. The said authority shall provide reasonable opportunity and grant sufficient time to the appellant-assessee to produce all records, that may be required for completing the assessment and thereafter, after inviting additional objections, if any, which the appellant-assessee may desire to submit, the assessment may be done afresh and in accordance with law. No costs. Consequently, connected Miscellaneous Petition is closed.
In view of the above, the ld.counsel stated that in the present appeals also opportunity of being heard was violated by AO and agreed by appellate authority. The CIT(A) cannot be substituted to that of the opportunity that will be provided by the AO at the first instance. The ld.counsel stated that the adjudicating authority is the first authority before him entire facts are to be narrated and to be verified, which is the starting point where the principles of natural justice are clearly violated. Hence, he requested that the assessment orders and the orders of CIT(A) be set aside and matter be remanded back to the file of the AO for fresh adjudication in term of law.
After hearing rival contentions and going through the facts of the case, first of all we have gone through the communication received from PCIT dated 04.12.2019, wherein PCIT informed assessee that the assessment proceedings is getting time barred on 31.12.2019 and he informed the AO also. Once the PCIT has given his view that assessment is getting time barred on 31.12.2019, the AO was under pressure to complete the scrutiny / search assessment but actually the time barring was 31.12.2020 in the present assessment years. It means that the Department from the beginning was under wrong notion that the assessments will get time barred by 31.12.2019. From the chronology of events, it is clear that search was conducted in the group cases on 15.02.2018 and notification for centralization with the present PCIT charge was notified only on 15.11.2019 that means the Department took atleast 1 year & 9 months and Department was sleeping over search material during the entire period. Thereafter the AO issued notice u/s.153C of the Act only on 28.11.2019 calling for returns of income to be filed within "7" days. The assessee intimated the PCIT that assessments are getting barred by limitation by 31.12.2020 but PCIT was under wrong notion that the assessments were getting time barred on 31.12.2019 and same was communicated to the AO also by the PCIT. Accordingly the AO issued notice u/s. 142(1) of the Act for calling of returns of income to be filed within "5" days vide notice dated 11.12.2019. Subsequently vide dated 13.12.2019, show cause notice proposing certain additions was issued by the AO. Consequently the assessee filed return of income in response to notice u/s. 153C of the Act on 20.12.2019 i.e., within
11 ITA Nos. 201 to 212/Chny/2021 30 days of the notice issued on 28.11.2019. The assessee filed objections vide dated 21.12.2019 against the proposed addition by the AO. The AO framed assessment u/s. 144 r.w.s. 153C of the Act vide order dated 25.12.2019. We noted that the AO merely allowed 21 days from the issuance of notice u/s.153C of the Act for calling of return of income till date of finalization of assessment order ex-parte u/s.144r.w.s. 153C of the Act dated 25.12.2019.
6.1 Going by the entirety of facts as narrated above that the Hon'ble High Court of Madras in the case of Shri B. Kubendran, supra has considered identical facts, rather the facts before us are worse than what was before the Hon'ble Madras High Court and the Hon'ble Madras High Court has set aside the assessments with a direction to the respondents to issue fresh notice and hear the petitioner and pass the assessment order on merits. In our view there is gross violation of natural justice in the present case before us but as the principle laid down by Hon'ble Madras High Court, we set aside the orders of the lower authorities i.e., the AO and the CIT(A) and remand the matter back to the file of the AO to issue fresh notice for framing of assessment and hear the assessee by allowing reasonable opportunity of being heard, to file the details and evidences. The AO will frame the assessment after considering the facts in entirety and will adjudicate the issue on merits. In view of the above, we set aside the orders of AO and the CIT(A) in all these seven assessment years and remand them back to the file of the AO for fresh adjudication in term of the above.
We noted that the facts and circumstances are exactly identical and these 12 appeals of two different assessees are also arising out of the same search conducted in the group cases of M/s. Dhanalakshmi Srinivasan Charitable and Education Trust on 15.02.2018. In entirety of facts and taking a consistent view as is taken in Shree Basaveshwar Sugars Ltd., supra, we set aside the assessment orders and the orders of CIT(A) in these 12 appeals and remand the matter back to the file of the AO, who will adjudicate the issue after allowing reasonable opportunity of being heard to the
12 ITA Nos. 201 to 212/Chny/2021 assessee and will provide all the seized material including the satisfaction note as well as sworn statements recorded which form the basis of assessment. In term of the above, all these appeals are set aside to the file of the AO and allowed for statistical purposes.
In the result, the appeals filed by the assessees in ITA Nos.201 to 212/CHNY/2021 are allowed for statistical purposes.
Order pronounced in the open court on 18th January, 2023 at Chennai.
Sd/- Sd/- (महावीर ससह ) (मनोज कुमार अग्रवाल) (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपाध्यक्ष /VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनांक/Dated, the 18th January, 2023 RSR आदेश की प्रधतधलधप अग्रेधषत/Copy to: 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3. आयकरआयुक्त (अपील)/CIT(A) 4. आयकरआयुक्त /CIT 5. धवभागीय प्रधतधनधध/DR 6. गार्ा फाईल/GF.