COMPUCOM SOFTWARE LIMITED,JAIPUR vs. PRINCIPAL COMMISSIONER OF INCOME TAX,JAIPUR-2, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’B’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM deys’k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 153/JP/2022 fu/kZkj.k o"kZ@Assessment Year :2017-18 cuke Compucom Software Ltd., Principal Commissioner of Vs. IT-14-15, EPIP Sitapura Income Tax-2, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACG 5818 P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Rajeev Sogani (CA) jktLo dh vksj ls@ Revenue by : Sh. Sanjay Dhariwal (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 21/06/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 31/08/2022 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, A.M. This appeal is filed by the assessee aggrieved from the order of the Pr. Commissioner of Income Tax, PCIT, Jaipur-2 [ Here in after referred as Ld. Pr. CIT ] for the assessment year 2017-18 dated 27.03.2022 which in turn arises from the order passed by the assessing officer passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 17.12.2019. marched this appeal on the following grounds; “1. In the facts and circumstances of the case and in law, ld. PCIT has erred in passing the order u/s 263 without affording adequate opportunity of being heard as envisaged under section 263, to the assessee company. The action is also contrary to the principles of Natural Justice. The action of ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. The order deserves to be quashed due to blatant violation of the principles of Natural Justice.

3. The assessee company craves its rights to add, amend or alter any of the grounds on or before the hearing.”

3. The fact as culled out from the records is that the assessee company is a public limited company engaged in the business activities in developing and exporting of software in domestic and foreign markets, providing compute education projects in Government Sector, generating of electricity through wind power and other activities. The assessee Company, for the A.Y. 2017-18, filed its return of income on 28/11/2017 declaring a total income of Rs. 10,91,09,310/-. The Case of the company was selected for complete scrutiny on the reason of abnormal increase in cash deposits and huge cash receipts. The assessment, u/s 143(3), assessed at Rs. 11,16,98,890/- and this way the assessment was completed after making disallowance u/s. 14A and 36(1)(va) of the Act.

4. After culmination of the assessment proceedings, the Pr.

CIT called for the assessment records of the assessee. It was observed by the ld. Pr. CIT that the company has claimed bad debts of Rs 15.98 crores in profit and loss account. Giving justification for allowability of this claim, it was explained by the assessee that it had provided services/material to various DEOs of Rajasthan Govt in past, which have not made payments against bills raised for services provided to them and therefore, pending debts older than April 2014 have been written off. A list of such debts has been filed. Copies of relevant ledger accounts of the debtors have also been filed along with a chart of pending amounts in the registers of the company in the name of various debtors. On observation of the ledger accounts and the entries in register reveals a different picture in respect of bad debts. The assessee has written off not written off the relevant entries in the registers showing pending amount to be received from the concerned debtors. As such the basic and primary records of entries of the company i.e. the registers having details of pending amounts are still showing the full amounts of debts without any write off or reduction of debts. He has also extracted the details and made a chart in this order. The ld. Pr. CIT on further examination of the details observed that (1) In primary records of the company, i.e. registers of debts, it is not reducing or writing off the bad debts. The assessee is claiming bad debts since last few years without crediting the relevant entries in its primary records.

(2) All the DEOs are the Govt. authorities and therefore the debts representing Govt. dues cannot be prima facie irrecoverable or doubtful and writing off such Govt. debts is not genuine and justified. Nothing is there, on record, to show as to how and on what terms the Govt. debt will be treated as not recoverable and bad.

DEOs (Churu, Jhunjhunu and SGNR) and they are also making payments against the bills, current as well as outstanding.

(4) The bad debt is claim in the name of Dy. Chief Engineer

RDPCC for Rs. 15,76,933/- though the said debtor is regularly making payments against the bills raised for power supply and has even may payments of more than the bills raised in current years.

The above clearly shows that AO has not verified this issue properly and not applied his mind to the facts. The bad debts claims have not been verified properly and application of law on the issue has not been properly made.

4.1 The ld. Pr. CIT further observed that the assessee has made delayed payments of PF/ESI contributions of employees as reflected in audit report form 3CD and the AO has disallowed Rs. 16,76,566/- u/s 36(1)(va) r.w.s. section 2(24)(x) of the Act, for such delayed payments, but has not disallowed the following payments:

No reply to the show cause notice issued has been filed by the assessee and therefore, the order was passed after considering the material available on record. The ld. Pr. CIT has thus, based on the facts on record hold a view that the AO while framing the assessment have not verified the issue of allowability of bad debts claimed by the assessee to a logical end and he has thus, observed that the debts have actually not been written off in the primary accounts of the company maintained in the form of register of debts and thus, the claim of bad debts not allowable.

On the issue of disallowance u/s 36(1)(va) of the I.T. Act, the provisions of section are clear that deduction under this section is been credited to the employees account in the relevant fund or funds on or before the “due date”. In explanation to section 36(1)(va) of the I.T. Act, meaning of “due date” is also clarified. In the case of the assessee the details available on record clearly shown that certain amounts falling under section 36(1)(va) r.w.s.

2(24)(x) of the I.T. Act, were deposited beyond the prescribed due dates and were not allowable. The Assessing Officer failed to examine the facts of the case and apply the cored provisions of law. Based on these observations the ld. Pr. CIT find that the revisionary powers can be exercised and hold the view that the order passed by ld. AO is erroneous and prejudicial to the interest of revenue and thus, “set aside” the order of the A.O with a direction to re-decide the issue afresh and reframe the assessment. While doing so he relied upon the decision of Hon’ble Apex Court in the case of Malabar Industrial Limited Vs. CIT.

8. The ld. AR of the assessee submitted reply in response to their grounds of appeal and the same is extracted here in below:

“1. The assessment in this case, u/s 143(3), was completed on 17/12/2019 by DCIT, Circle- 6, Jaipur.

2. The revisionary powers u/s 263 could be exercised within two years from the end of the financial year in which assessment was completed in terms of section 263(2).

9 Compucom Software Limited vs. Pr. CIT-2, Jaipur Instituted on 12/03/2022 from the order of ACIT/DCIT CIR-6, JPR dated 17/12/2019 5. Thus, it is evident that out of the 834 days available for exercising the revisionary powers (from 18/12/2019 to 31/03/2022) the case was instituted after the lapse of 814 days when only 19 days were left for completing the revisionary proceedings.

6. The assessee Company on the date of hearing i.e. 21/03/2022 filed request for adjournment on the Income Tax Portal [PB 1]. The said adjournment was successfully submitted as is evident from the screenshot attached [PB 1].

No. reply to the show-cause notice issued under section 263, has been received from the assessee company, therefore the order is being passed after considering the material available on record.

8.1 Natural justice implies fairness, reasonableness, equity and equality. It has a very wide application in administrative discretion which aims to prevent arbitrariness and injustice towards the citizens with an act of administrative authorities. Decisions which violate the principles of natural justice shall stand null and void.

8.2 Natural justice can be defined as a fundamental procedural rule that helps in keeping the Rule of Law in place (upholds Rule of Law and justice). It helps in translating the Rule of Law into practice and seeks to ensure that justice is actually done. It further ensures that this principle is not modified as per the whims and fancies of man.

8.3 It seeks to achieve the following:

10 Compucom Software Limited vs. Pr. CIT-2, Jaipur a) Objective hearing b) Decisions made on objective evidence c) Protection of persons from subjective inclination of the judge (Rule against bias) In India, principles of natural justice are firmly rooted and guaranteed under the Article 14 & 21 of the Constitution. The major objective of these principles are that they aid to avert miscarriage of justice by safeguarding rights of an individual. They further ensure that a judgment by the appropriate authority is just, fair and reasonable. 8.4 Principles of Natural Justice are mainly based on the following two principles:

• Nemo Judex in causa sua – no one should be made a judge in his own cause • Audi alteram partem – no one should be condemned unheard

8.5 Audi Alteram Partem

8.5.i. It means “hear the other side” or “let the other side be heard as well”. This is the second most fundamental rule of natural justice that says no one should be condemned unheard. In circumstances where a person against whom any action is sought to be taken and his right or interest is being affected, shall be given an equal opportunity of being heard and defend himself.

8.5.ii. It gives right to the party to respond to the evidence against them and to choose legal representative of their own choice. The principles of natural justice form a fundamental fair procedure among the parties during a dispute. It is the duty of every person or body exercising judicial or quasi-judicial functions to act in good faith and to listen fairly to both the sides before passing any order.

8.5.iii In case if the Legislature specifically authorizes an administrative authority to proceed without giving an opportunity of being heard, then except in case of recognised exceptions, the law would be violative of the principles of fair hearing which is now read into Articles 14 and 21 of the Constitution. The sole purpose of rule of fair hearing was to avoid the failure of justice. Therefore, decisions which violate the principle of Audi Alteram Partem such can be quashed by court.

9 The rule that no decision should be given against a party without giving an opportunity to be heard is emphatically embodied in section 263(1) itself which states “......after giving the assessee an opportunity of being heard”.

10 Moreover, Article 265 declares that no tax shall be levied or collected, except by the authority of law. Therefore, Article 265 read with Article 14 of the Constitution of India guaranteeing the right to equality. In this scenario, it is important that orders and decisions of the Income Tax Authorities are taken not only in compliance with the provisions of the law but also following the principles of natural justice.

11 Courts, at all levels, have shown serious concern whenever Principles of Natural Justice are violated. Such orders are held to be void ab initio and no second inning is allowed. Reliance is placed on the following judicial pronouncements:

11.1 In Maneka Gandhi vs Union of India, 1978 AIR 597 dated 25 January, 1978 the passport of the petitioner was impounded by the Government of India in public interest. No opportunity was afforded to the petitioner before taking the impugned action. The Supreme Court held that the order was violative of principles of Natural justice.

11.2 Hon'ble Supreme Court in the case of Nawabkhan Abbaskhan vs The State Of Gujarat, 1974 AIR 1471 on 19 February, 1974 has adopted the following legal proposition and held that an order which infringed a fundamental freedom passed in violation of the audi alteram partem rule was a 'nullity. A determination is no determination if it is contrary to the constitutional mandate of Art.

19. On this footing the externment order was of no effect and its violation was no offence. Any order made without hearing the party affected is void and ineffectual to bind parties from the beginning if the injury is to a constitutionally guaranteed right. May be that in ordinary legislation or at common law a Tribunal having Jurisdiction and failing to hear the parties may commit an illegality which may render the proceedings voidable when a direct attack was made thereon by way of appeal, revision or review, but nullity is the consequence of unconstitutionality and so the order of an administrative authority charged with the duty of complying with natural justice in the exercise of power before restricting the fundamental right of a citizen is void ab initio and of no legal efficacy.

12 Compucom Software Limited vs. Pr. CIT-2, Jaipur The duty to hear menacles his jurisdictional exercise and any act Is, in its inception, void except when performed in accordance with the conditions laid down in regard to hearing. An order which is void may be directly and collaterally challenged in legal proceedings. An order is null and void if the statute clothing the administrative tribunal with power conditions it with the obligation to hear, expressly or by implication. Beyond doubt an order which infringes a fundamental freedom passed in violation of the audi alteram partem rule is a nullity. When a competent court holds such official act or order invalid, or sets it aside, it operates from nativity, that is, the impugned act or order was never valid. The Supreme Court held thus (CLC 1-14): “Where hearing is obligated by a statute which affects the fundamental right of a citizen, the duty to give the hearing sounds in constitutional requirement and failure to comply with such a duty is fatal. May be that in ordinary legislation or at common law a Tribunal, having jurisdiction and failing to hear the parties, may commit an illegality which may render the proceedings voidable when a direct attack is made thereon by way of appeal, revision or review, but nullity is the consequence of unconstitutionality and so without going into the larger issue and its plural divisions, we may roundly conclude that the order of an administrative authority charged with the, duty of complying with natural justice in the exercise of power before res- tricting the fundamental right of a citizen is void and ab initio of no legal efficacy. The duty to hear manacles his jurisdictional exercise and any act is, in its inception, void except when performed in accordance with the conditions laid down in regard to hearing. May be, this is a radical approach, but the alternative is a travesty of constitutional guarantees.” (CLC 10-11) 11.3 Hon’ble Allahabad High court in the case of Jagannath Prasad Bhargava vs Lala Nathimal And Ors., AIR 1943 All 17 on 31 July, 1942 wherein it held as under (CLC 15-16): "We consider we are bound to follow the very obvious legal principle that there should be no decision against a person who has not had an opportunity of being heard upon the point which is to be decided." (CLC 16) 11.4 Hon’ble ITAT Cuttack Bench in M/S. Jaydurga Minerals, Cuttack vs. CIT Cuttack on 10 August, 2020, ITA No. 276/CTK/2015 relied

13 Compucom Software Limited vs. Pr. CIT-2, Jaipur upon the Allahabad High Court judgment (Supra) to hold as under (CLC 17-29): “13. After hearing the submissions of both the sides and perusing the order of Pr. CIT at last para of page No.2, we find that the Pr. CIT has issued show cause notice u/s.263 of the Act on 20.03.2015 requiring the assessee to furnish the clarification by 27.03.2015 and thereafter the Pr. CIT passed the order on 30.03.2015 stating that he was constrained to dispose off the revision proceedings on or before the end of the relevant financial year. It is clear that the Pr. CIT has provided opportunity to the assessee on 27.03.2015 for appearing before him, which, in our opinion, causes denial of opportunity under the principles of natural justice. Before us, ld. AR submitted that the assessee stays in Joda which is near about 275 kms from Cuttack and the notice received on 23.03.2015, therefore, the assessee had no sufficient time to contact his local lawyer, who is staying at Barbil and the Counsel to appear before the Pr. CIT, Cuttack is staying at Cuttack. When the authorized representative of the assessee appeared before the Pr.CIT, the order u/s.263 of the Act was already passed. It is trite that right to fair hearing is a guaranteed right of an assessee and granting of effective opportunity is a sin qua non in Section 263 of the Act for unsetting a statutory order. It was the duty of the Pr. CIT to provide the assessee an effective opportunity to enable it to substantiate its claim. In any case, it is one of the fundamental principles of natural justice that no person can be condemned unheard i,e. audi alteram partem, and the impugned revision order was thus passed in violation of the principles of natural justice in absence of any effective/reasonable opportunity of hearing provided to the assessee. To support our view, reliance can be placed on the decision of the Division Bench judgment of the Hon'ble Allahabad High Court in the case of Jagannath Prasad Bhargava V. Lala Nathimal, AIR 1943 All. 17, wherein the Hon'ble High Court Court has held as under:- "It is very obvious legal principle that there should be no decision against a person who has not had an opportunity of being heard upon the point which is to be decided." It is mandatory to apply the principles irrespective of the fact as to whether there is any statutory provision or not. In the present case, we find that the assessee was not afforded opportunity, much less the sufficient opportunity to give reply to the show cause notice. Therefore, it is clear that the Pr. CIT in a hurriedly manner without affording 14 Compucom Software Limited vs. Pr. CIT-2, Jaipur opportunity of hearing to assessee had passed impugned order by violating principle of audi alteram partem. In view of above factual position as well as the judicial pronouncements cited supra, we are of the opinion that the Pr.CIT has committed a gross error in not providing any effective/reasonable opportunity of being heard to the assessee before passing the order. Accordingly, we quash the revisional proceedings framed u/s.263 of the Act by the Pr. CIT and allow grounds No.2, 3 & 4 of the appeal of the assessee.” (CLC 27-28) 11.5 Hon’ble Madhya Pradesh High Court in its recent decision of Raju @ Pushpendra Bhadoriya v. Collector/ District Magistrate Indore & Ors. In W.P. No. 21686 of 2021 dated 24 November, 2021 held as under: (CLC 30-36): “12. In view of the aforesaid discussion, it is apparent that by not providing the petitioner sufficient time to produce the orders of acquittal in the cases in which he was already acquitted, the principles of natural justice have been clearly violated and in such peculiar circumstances, even if the petitioner has not availed the remedy of appeal, this Court is of the considered opinion that this petition under Article 226 of the Constitution of India is maintainable. In the considered opinion of this court, had an opportunity to produce the copies of acquittal orders passed in favour of the petitioner been given to him by the District Magistrate, the result of the outcome could have been different.

13. So far as the contention that the order of externment cannot be passed in respect of other adjoining district is concerned, this court is not required to dwell upon the same as the impugned order is liable to be quashed on the ground of violation of principles of natural justice.

15 Compucom Software Limited vs. Pr. CIT-2, Jaipur justice to both the parties. Under this doctrine, both the parties have the right to speak. The aim of this principle is to give an opportunity to the parties to defend themselves. Before the court, both the parties are equal and are entitlement of equal opportunity to represent them. If the order is passed by the authority without providing the reasonable opportunity of being heard to the person affected by it adversely will be invalid.” (CLC 40) “12. The coordinate benches at Ahmadabad and Mumbai tribunal in the aforesaid cases of Smt. Shardaben B. Patel (supra) and Tata Chemicals Limited (supra) respectively, dealt with the situation to the effect as well, where the proper opportunity of being heard was not given to the Assessee, in that eventuality, whether at this stage the case can be remanded to the Pr.CIT for decision afresh. The coordinate benches of the tribunal clearly held that we cannot give life to the null and void order by remitting it back to the Pr.CIT for giving an opportunity for passing fresh order after giving the Assessee an opportunity of hearing, where the time limit for passing of such order has already been expired and therefore we cannot extend the same by directing him.” (CLC 41) “13. It is trite to say that every person has the right to speak and be heard when allegations are being put against him or her. No One can be inflicted with an adverse order without being afforded a minimum opportunity of hearing. If no opportunity has been given to the party effected, then it shall amount to violation of the principles of natural justice, which embedded in latin words “Audi Alteram Partem” which means „hear the other side�, or „no man should be condemned un-heard� or „both the sides must be heard before passing any order�. The principle of Audi Alteram Partem is the basic concept of the principle of natural justice and has not evolved from the constitution but evolved through civilization and mankind and is the concept of common law, which implies fairness, reasonableness, equality and equity. In India, the principles of natural justice are the grounds of Article 14 and 21 of the Constitution.” (CLC 41-42) “On the aforesaid analyzations and considerations and following the mandates of the Hon'ble Apex Court, in the case of Amitabh Bachchan (supra) wherein it was held that failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation

16 Compucom Software Limited vs. Pr. CIT-2, Jaipur of principles of natural justice and in the case of „Maneka Gandhi vs. Union of India (supra)� wherein it was held that if the order is passed by the authority without providing the reasonable opportunity of being heard to the person affected by it adversely will be invalid, the question of remanding the case to the file of Ld. PCIT as prayed for by the Ld. DR, at this juncture at all does not arise as held by co-ordinate Benches as well in the aforesaid cases.

In overall effect, the impugned order has violated the principles of natural justice which is essence of fair trial, thus the same is quashed.

15. As we have quashed the impugned order on legal point, hence there is no need to decide the factual grounds.” (CLC 42- 43)

12 Apart from second round of avoidable compliances and unnecessary harassment, the assessee Company also suffers pecuniary losses for no fault of its and such losses result into gain to the Revenue i.e. the offender.

13 Distinction between an "illegality" and a "nullity" should be considered before allowing the Revenue a second innings. If the Courts allow the Revenue to do fresh assessments in all set aside cases, they would, in effect, be granting them a licence to contravene the principles of natural justice. The provisions requiring them to follow principles of natural justice would become redundant.

14 The order passed in gross violation of Principles of Natural Justice is “void on its face” and “transparently invalid”. Such an order, as a matter of ordinary common sense, is a still born child which had Died at Birth. Such an order will amount to never have legally existed. Beyond doubt, an order which infringes a fundamental freedom passed in violation of the Audi Alteram Partem rule is a nullity. The order is a nullity from its very inception and a “non-est order”.

15 A determination is a no determination if it’s contrary to the Principles of Audi Alteram Partem. Based on the above, it is prayed that no second inning should be allowed by setting aside order and remanding the matter to the ld.

17 Compucom Software Limited vs. Pr. CIT-2, Jaipur PCIT. This is because if an assessment order is quashed and, thereafter, is restored to the Assessing Officer for fresh assessment, it will amount to granting him a licence to continue to contravene the principles of natural justice. Knowing fully well that no adverse consequences would follow, and a second inning will be available, the Revenue Officer, may consciously and contemptuously disregard the well-established principles of natural justice and develop a reckless attitude towards jurisprudence. GROUND NO. 2: Wrong assumption of jurisdiction u/s 263 Ld. PCIT has found the order to be erroneous and prejudicial to the interest of revenue in respect of the following two matters: A. Bad Debts of Rs. 15.98 crores

B. PF/ ESI Contribution of Employees Rs. 4,13,759/-

A1. Ld. PCIT, at page 5 of her order, has given the following four reasons for categorising the order to be erroneous and prejudicial to the interest of revenue:

A2. The only requirement prescribed u/s 36(1)(vii) is that the amount should be written off as irrecoverable in the accounts of the assesee for the previous year.

18 Compucom Software Limited vs. Pr. CIT-2, Jaipur A3. Before the ld. AO, in the course of assessment proceedings, ledger accounts of all the debtors were submitted wherein bad debt, in the respective accounts, was clearly “written off”.

A4. In the audited financial statements also, in the Profit and Loss Account, the total amount of Rs. 15.98 crores is shown as bad debts written off [PB 110].

A5. Ld. PCIT has misdirected herself in referring to the memorandum details maintained by the assessee Company for its own internal MIS purposes. Since AO had required the bill wise details of the amounts debited to the respective parties, to ensure compliance of section 36(2)(i), the extracts from memorandum data were furnished wherein bill details were mentioned. It is submitted that in the books of accounts, which are used for preparing the audited financial statements, the bad debts amounts are clearly written off. The financial statements are not prepared on the basis of memorandum data kept by the Company for its internal MIS purposes. The said memorandum data is also not part of the books of account. In the Tax Audit Report, the books of account maintained and verified by the auditor, as reported in clause 11 do not mention the said memorandum records [PB 130-131].

A6. Ld. PCIT has also mentioned that the government dues cannot be prima facie irrecoverable. Writing off such government debts is not genuine and justified. In section 36(1)(vii) there is no restriction that the debts due from government cannot be written off as bad debts. It is also submitted that bad debts is not solely on the basis of insolvency of the debtor. Even a solvent debtor may decide not to pay the dues for any genuine/ non-genuine reason. If an assessee, in his business wisdom, finds that a particular sum, for any reason whatsoever, is not recoverable, even if the said amount is due from the government, it can be written off. Government dues become bad, for business entities, for various procedural and bureaucratic issues.

A7. Ld. PCIT has also misdirected herself in observing that debts have been written off in case of some of DEOs which have regular current transactions. There is no restriction, under the law, that if subsequent transactions are being done the earlier bad debts will not be allowed. Each transaction constitutes a separate debt and the same

A8. Ld. PCIT in respect of Dy. Chief Engineer RDPPC for Rs. 15,76,933/ has observed that though the said debtor is regularly making payments for power sold and has even made payments more than the bills raised in current year. It is submitted that the assessee Company is also in the business of power generation through wind mills. The power is regularly sold to Dy. Chief Engineer RDPPC. The pending amount of certain bills which were not likely to be recovered amounting to Rs. 15,76,933/- were written off as bad debts. These are some portions of certain bills. No adverse inference, in respect of bad debt claim, can be drawn even if the debtor is making payments of subsequent bills or the recovery during the year is more than the bills raised during the year as the recovery during the year also pertains to the opening amount recoverable. It is submitted that in this account opening recovery was to the tune of Rs. 65,35,686/- [PB 80].

A9. Ld. PCIT has lost sight of the amendment made in section 36(1)(vii) by Direct Tax Laws (Amendment), 1987 w.e.f. 01/04/1989. By the said amendment the earlier wordings “any debt, or part thereof, which is established to have become a bad debt in the previous year” have been substituted by the wordings “any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee”. The ld. AO was aware of this vital change in the law wherein establishing the debt to be bad is not necessitated and only write off, as irrecoverable, is necessary.

A10. Ld. PCIT has also lost sight of the law contained in section 41(1) wherein if any part of the debt written off is recovered subsequently the same is brought to tax in the year of recovery. All these bad debts, if at all recovered in future, will be offered for tax by the Company. Needless to mention that all recoveries from Government would be through banking channel only.

A11. It is further submitted that in earlier years also the bad debts have been allowed to the assessee Company on the basis of similar way of write off in the respective ledger accounts as under: a. Assessment Year 2013-14 order u/s 143(3) dated 28/03/2016 by ACIT Circle 6 Jaipur. Bad debts Rs. 9.68 Crores.

A12. The Order of ld. AO can be called erroneous only if he has adopted a stand which is not at all possible under the law. On the contrary, ld. AO had adopted the course which is absolutely in accordance with the law and the judicial precedents laid down in this regard. Reliance is placed on the following judicial pronouncement of the Hon’ble Supreme Court:

T.R.F. Limited v. Commissioner of Income Tax, Ranchi in Civil Appeal No. 5293 of 2003 (CLC 45-48):

“This position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee.” (CLC 46)

A13. Ld. PCIT had tried to substitute her view point over the stand taken by the ld. AO. No such substitution of view is permissible in 263 proceedings. Reliance is placed on the judgment of the Hon’ble Supreme Court in the case of CIT v. Max India Ltd., [2007] 295 ITR 282 (SC) wherein the Court held as under (CLC 49- 53):

“2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (Supra) this Court has taken the view that the phrase “prejudicial to the interest of the revenue” under section 263 has to be read in conjunction with the expression “erroneous” order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when the Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law.” (CLC 52)

A14. In view of the above, ld. AO after examining the details submitted vide letter dated 24/09/2019 and 06/11/2019 allowed the B. PF/ ESI Contribution of Employees Rs. 4,13,759/-

B1. Another reason for holding the order of the ld. AO to be erroneous is the fact of not disallowing a sum of Rs. 4,13,759/- in respect of PF/ ESI Contribution of Employees. It is submitted that ld. AO has duly considered this issue in para 4 page 3 of the order and has disallowed a sum of Rs. 16,76,566/-. However, as per the Tax Audit Report one line item amounting to Rs. 4,13,759/- has been missed by the ld. AO [PB 129-134].

B2. It is not the case that ld. AO has not examined the issue or has adopted a wrong stand on the issue. Missing one line item is only a mistake apparent on record which can be rectified u/s 154. Such mistake apparent on record for which remedy is available in the law u/s 154 cannot justify the assumption of revision jurisdiction u/s 263.

B3. Section 263 and section 154 are mutually exclusive. For one small mistake apparent on record setting aside the assessment order by recourse to revisionary jurisdiction would be contrary to the intent and purpose of section 263.

B4. Revisionary jurisdiction is not meant to be assumed for enforcing the assessment again and again for small issues. It is submitted that the work of assessment cannot be completed with surgical precision. Reliance is placed on the judgment of the jurisdictional High Court in the case of CIT vs Ganpat Ram Bishnoi- 296 ITR 292 (Raj) wherein it was held that jurisdiction u/s 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again (CLC 54- 57).

B5. Hon’ble ITAT, Jaipur Bench, in the case of Annu Agrotech Private Limited, apropos assumption of jurisdiction under section 263 by the ld. PCIT, laid down the following ratio:

“Section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO.”

22 Compucom Software Limited vs. Pr. CIT-2, Jaipur “Ld. PCIT cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well- accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce response in and set at rest judicial and quasi- judicial controversies as it must in other spheres of human activity.”

In view of the above, there is no error in the order of the ld. AO least any prejudice to the interest of revenue. The ground of appeal deserves to be allowed. ”

9. In addition to the above written submission the ld. AR of the assessee has filed a detailed paper book of relied upon evidence of 134 pages consisting of various notices and replied filed along with the audited accounts. The ld. AR of the assessee has also placed reliance on the following judicial decisions: • Hon’ble Supreme Court in case Nawabkhan Abbaskhan vs. The State of Gujarat [1974 AIR 1471] • Hon’ble Allahabad High Court in case of Jagannath Prasad Bhargava vs. Lala Nathimal and ors. [AIR 1943 All 17] • Hon’ble ITAT, Cuttack Bench, in case of M/s Jaydurga Minerals, Cuttack vs. CIT Cuttack in • Hon’ble Madhya Pradesh High Court in case of Raju @ Pushpendra Bhadoriya v. Collector/District Magistrate Indore & Ors. In W.P. No. 21686 of 2021. • Hon’ble ITAT, Raipur Bench, in case of Dee Vee Projects Ltd. vs. Pr. CIT, Raipur-1 in ITA No. 27/RPR/2021 • Hon’ble Supreme Court in case of T.R.F. Limited vs. Commissioner of Income Tax, Ranchi in Civil Appeal No. 5293 of 2003 • Hon’ble Supreme Court in case of CIT v. Max India Ltd., [2007 295 ITR 282] • Hon’ble Rajasthan High Court in case of CIT v. Ganpat Ram Bishnoi [296 ITR 292] the action of Pr. CIT in not granting an opportunity of being heard before passing an order against the assessee. The ld. AR of the assessee submitted that out of 834 days available for exercising the revisionary power the case was instituted after the lapse of 814 days when only 19 days left for completing the revisionary proceedings. In the notice of hearing only 9 days’ time is given to file the reply. Even the adjournment application filed is not acknowledged in the order passed. Therefore, the order passed violates the principles of natural justice. The ld. AR of the assessee has relied upon the various judicial decisions on this issue as referred here in above.

11. On the other hand, the ld. DR stated that the assessee was given an opportunity but at the far end of the date of hearing not submitted their submission and only on the date of hearing asking for another date. Therefore, the benefit of non-prosecution may not be contended by the assessee as they have not submitted any details related to the issue raised. The assessee failed to prove the reason behind not submitting the details and the adjournment was regards, the not finding reference in the order since the request was made online the same may not be put up before Pr. CIT and that is why the same is not finding any reference in the order.

Thus, the assessee was given as much as 9 days to file their defense reply. Thus, inaction of the assessee may not be benefited and adversely affect the revenue. As the assessee is not coming with clinch hands and in advance preparation of his case and even, they have not filed any part of the submission before Pr. CIT in response to the show cause notice. In light of these facts the ground no 1 of the assessee has no merit and this ground is required to be dismissed. As regards the second ground the ld. DR argued that the in real terms the debts have been written of or not is not clear from the details placed on record and written of debt is precondition in the act, as this condition is not met with based on the record as the record are not clear with respect to the subsidiary ledger produced in the assessment record. As regards the disallowance of amount u/s. 36(1(va) remained to be made the assessee has moved the application under section 154 of the Act after the proceeding initiated under section 263 of the Act and 25 Compucom Software Limited vs. Pr. CIT-2, Jaipur therefore, the contention cannot be considered as bona fide action on the part of the assessee. As regards Ground No. 2, the ld. DR filed a detailed paper book of case laws compilation in support, of his contention. The decisions so relied are listed as under: • Commissioner of Income-tax v Bhawal Synthetics (India), Udaipur [2017] 81 taxmann.com 478 (Rajasthan) • Commissioner of Income-tax, Nagpur v. Ballarpur Industries Ltd. [2017] 85 taxmann.com 10 (Bombay) • Commissioner of Income-tax, Mumbai v. Amitabh Bachchan [2016] 69 taxmann.com 170 (SC) • Commissioner of Income-tax v. Jawahar Bhattacharjee [2012] 24 taxmann.com 215 (Gauhati) • Rajmandir Estates (P.) Ltd. v. Principal Commissioner of Income-tax, Kolkata III, Kolkata [2016] 70 taxmann.com 124 (Calcutta) • P.V. Sreenijinv.Commissioner of Income- tax (Central) [2014] 47 taxmann.com 61 (Kerala) • Kirtidevi S. Tejwaniv. Principal Commissioner of Income-tax 22 Mumbai [2020] 116 taxmann.com 965 (Mumbai - Trib.) • Vedanta Ltd.v.Commissioner of Income Tax [2021] 124 taxmann.com 435 (Bombay) • Principal Commissioner of Income Tax, Panajiv.Zuari Maroc Phosphates Ltd [2021] 126 taxmann.com 170 (Bombay) • Jalgaon People's Co-op Bank Ltd. v. Principal Commissioner of Income Tax - 2, Nashik [2021] 127 taxmann.com 243 (Pune - Trib.).

Alternatively, on the other hand, though the Ld. DR supported the impugned order, but alternatively prayed that in case of reversal of the impugned order, the case may be remanded to the file of Ld. Commissioner for decision afresh. material available on record and decisions relied upon by both the parties to drive home to their contentions so raised before us. The assessee vide ground no. 1 raised the issue that no proper and reasonable opportunity of being heard was provided to the Assessee before passing the impugned order. As the controversy goes to the root of the case therefore, we are inclined to entertain this ground first. The foremost controversy raised by the Assessee relates to non-providing of an opportunity of being heard to the Assessee and passing of the impugned order u/sec. 263 of the Act hurriedly without following the procedural provided in the law and clearly violating the principles of natural justice and hence bad in law. We find force in the arguments of the ld. AR of the assessee for the ground no. 1 raised by him, that out of 834 days available for exercising the revisionary power the case was instituted after the lapse of 814 days when only 19 days left for completing the revisionary proceedings. In the notice only 9 days’ time was given and even the adjournment application has not been dealt with while passing the order by ld. Pr. CIT. The ld. AR submitted that there is a clear violation of principles of natural justice and Constitution. He further relied upon the provision of section 263 itself which states that the order be passed after giving the assessee an opportunity of being heard. The ld. AR of the assessee relied on the judgment of Supreme court in the case of Maneka Gandhi Vs. UOI 1978 AIR 597 and decision in the cae of Nawabkhan Abbaskhan Vs The state of Gujarat 1974 AIR 1471 where in the apex court held that an order which infringed a fundamental freedom passed in violation of the audi alteram partem rule was a 'nullity. A determination is no determination if it is contrary to the constitutional mandate of Art.

27/RPR/2021 having similar set of facts. The relevant part of the decision is extracted here in below for the sake of brevity:

13. It is trite to say that every person has the right to speak and be heard when allegations are being put against him or her. No One can be inflicted with an adverse order without being afforded a minimum opportunity of hearing. If no opportunity has been given to the party effected, then it shall amount to violation of the principles of natural justice, which embedded in latin words “Audi Alteram Partem” which means „hear the other side�, or „no man should be condemned un- heard� or „both the sides must be heard before passing any order�. The principle of Audi Alteram Partem is the basic concept of the principle of natural justice and has not evolved from the constitution but evolved through civilization and mankind and is the concept of common law, which implies fairness, reasonableness, equality and equity. In India, the principles of natural justice are the grounds of Article 14 and 21 of the Constitution.

14. Now coming to the instant case as it is not in dispute that notice dated 25/03/2021 was signed and issued only on 25/03/2021 by the Ld. PCIT, while fixing the date of hearing on next day i.e. 26/03/2021 at 1.00 PM and the impugned order was passed on the very next day i.e. 27/03/2021 while sidelining the adjournment application dated 26/03/2021 filed by the Assessee (page No.11 of the paper book), which clearly reflects that the notice issued on dated 25/03/2021 fixing the date of hearing on 26/03/2021 was illusory and farce in nature and had no essence of principles of natural justice, thus goes to show that no reasonable opportunity of being heard was afforded to the Assessee before passing the adverse order against it. On the aforesaid analyzations and considerations and following the mandates of the Hon'ble Apex Court, in the case of Amitabh Bachchan (supra) wherein it was held that failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice and in the 29 Compucom Software Limited vs. Pr. CIT-2, Jaipur case of „Maneka Gandhi vs. Union of India (supra)� wherein it was held that if the order is passed by the authority without providing the reasonable opportunity of being heard to the person affected by it adversely will be invalid, the question of remanding the case to the file of Ld. PCIT as prayed for by the Ld. DR, at this juncture at all does not arise as held by co-ordinate Benches as well in the aforesaid cases. In overall effect, the impugned order has violated the principles of natural justice which is essence of fair trial, thus the same is quashed.

14. As we set aside quashed the impugned order on legal ground no. 1, with a direction to pass the order after affording proper opportunity of being heard there is no need to decide the factual ground no 2 raised by the assessee.

In the result the appeal of the assessee is allowed for statistical purposes.