SETH PESOTNJI DAVAR CHARITABLE TRUST,MUMBAI vs. ITO (EXEMPTIONS)2(3), MUMBAI

This appeal by the assessee is directed against an ex-parte order of Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi [in short 'the CIT(A) ’] dated 30/09/2021, for the assessment year 2015-16.

2.1 The ld.Authorized Representative of the assessee submitted that the Assessing Officer /CPC even in proceedings under section. 143(1) could not have restricted TDS refund claimed by the assessee without affording opportunity of hearing to the assessee. Non-granting of opportunity is against the principles of natural justice. The assessee had no option but to file rectification petition under section 154 of the Act, which was also rejected by the CPC in an unilateral proceedings. The CIT(A) has failed to adjudicate ground raised by the assessee assailing order on rectification petition under section 154 of the Act, without giving any notice to the assessee.

4.1 The assessee had filed return of income and claimed refund of TDS Rs.7,78,313/-. The return of assessee was processed under section. 143(1) of the Act by CPC and the refund claimed by assessee on account of TDS was restricted to Rs.17,828/-. The assessee filed rectification petition under section 154 of the Act however, the same was rejected without issuing notice or seeking any clarification from the assessee. Ostensibly no notice was served on the assessee at time of processing the return of income under section 143(1) of the Act or while deciding the application of assessee under section 154 of the Act. It is a cardinal principle of natural justice that opportunity of hearing/ to make submissions must be granted before making any adjustment which results in either increasing tax liability or reducing a refund claim. Even if the assessment is made under section 143(1) of the Act, CPC/Assessing Officer is under obligation to intimate the assessee of such adjustment proposed to be made. The notice has to be given either in writing or in electronic mode. The provisions of section 154(3) of the Act mandates that a reasonable opportunity of hearing shall be allowed to the assessee where an amendment has the effect of enhancing the assessment or reducing a refund or otherwise increasing the tax liability. In the present case we find that no notice was given to the assessee. The ld.Departmental Representative was given opportunity to place on record copy of notice if any served on the assessee before passing the order under section 154 of the Act, however, the ld.Departmental Representative expressed his inability to trace any notice served on the assessee. Thus, in the light of the facts we are of considered view that there was absolute violation of principle of natural justice and the provisions of section 154(3) of the Act in not giving notice to the assessee and a reasonable opportunity of hearing before dismissing the application under section 154 of the Act in an unilateral action by the CPC/AO. Consequently, impugned order is set-aside and appeal of the assessee is allowed.