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

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ITA 2093/MUM/2021Status: DisposedITAT Mumbai18 May 2022AY 2015-164 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the orders passed by the CPC under sections 143(1) and 154 were unsustainable due to a violation of the principles of natural justice, as no opportunity of hearing was provided to the assessee.

What were the facts?

The assessee trust claimed a TDS refund, which was restricted by the CPC during processing under section 143(1) without notice. A subsequent rectification petition under section 154 was also dismissed ex-parte by the CPC.

What were the issues?

Whether the orders passed by the CPC restricting TDS refund and dismissing the rectification petition without affording an opportunity of hearing to the assessee are valid.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “ SMC”, MUMBAI

Before: SHRI VIKAS AWASTHY & SHRI S.RIFAUR RAHMAN

Hearing: 18/05/2022Pronounced: 18/05/2022

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.

Ms. Sonali Godbole appearing on behalf of the assessee submitted that the assessee is a Trust. The assessee filed its return of income for assessment year 2015-16 declaring surplus of Rs.2,03,757/- and claimed credit of tax deducted at source (TDS) Rs.7,78,313/-. The assessee in return of income claimed refund of aforesaid TDS. The return of the assessee was processed under section 143(1) of the Income Tax Act, 1961 [in short ‘the Act’] accepting the returned income, however, the TDS refund claimed by the assessee was restricted to Rs.17,828/-. The aforesaid adjustment was made by the Central Processing Centre (CPC), Bangalore while processing the return under section. 143(1) of the Act without issuing any notice/affording any opportunity of hearing to the assessee. The assessee filed rectification petition under section. 154 of the Act. The same was dismissed by CPC vide order dated 07/01/2020 without notice to the assessee. Aggrieved by the dismissal of rectification petition, the assessee filed appeal before the CIT(A) inter-alia assailing suo-motu adjustment of TDS without giving any notice to the assessee in proceedings under section 154 of the Act. The CIT(A) dismissed the appeal of assessee, in toto hence, the present appeal.

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.

3.

Shri Shri Anil Gupta representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee.

4.

Both sides heard, orders of authorities below examined. The short point in present appeal for consideration before us is, whether the order under section 154 of the Act passed by CPC/Assessing Officer without notice to the assessee would render the order unsustainable in eye of law.

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.

5.

In the result, appeal by assessee is allowed. Order pronounced in the open court on Wednesday the 18th day of May, 2022.

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