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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI S. RIFAUR RAHMAN & SHRI SUNIL KUMAR SINGH
ORDER PER : SUNIL KUMAR SINGH, JUDICIAL MEMBER:
Assessee has preferred this appeal against the order dated 31.03.2022 passed by the Principal Commissioner of Income Tax-1, Agra, u/s 263 of Income Tax Act, 1961 (hereinafter referred to an ‘Act’), wherein Ld. PCIT has cancelled the assessment order dated 16.12.2019 passed u/s. 143(3) of the Act, holding the assessment order as erroneous in so far as it is prejudicial to the interest of the revenue and directed the assessing officer to pass order a fresh, de novo.
The brief facts state that the appellant Assessee is a company engaged in the business of construction and development of residential real estate. The Assessee e-filed its return of income on 01.11.2017, declaring total income of Rs. 3,42,61,300/-. The return was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS for the examination of sales turnover/receipts, share application money, income from real estate business and cash deposit during demonetization period. Statutory notices u/s 143(2) and 142(1) of the Act along with detailed questionnaire, were issued and served upon the assessee. Assessee e-filed its reply along with documentary evidence.
After examination of assessee’s e-submissions, Ld. assessing officer, vide assessment order dated 16.12.2019, assessed total income at Rs.
3,48,07,230/- and also initiated penalty proceedings u/s 270A of the Act for under reporting /misreporting of particulars of Income.
The PCIT-1, Agra noted several discrepancies in the assessment order dated 16.12.2019 and issued notice dated 24.03.2022 u/s. 263 of the Act, seeking assessee’s response on certain points for the year under consideration. The substantial points are extracted as under :
“………………………………………
(i). Cash deposit during demonetization period – the significant amount of income was found as undisclosed 2 | P a g e after online verification by the then Assessing Officer after examining assessee’s response. The Assessing Officer did neither examine this issue nor raised any query nor sought any explanation from the assessee. This made Ld. PCIT to raise a serious question mark on the assessment process. (ii). Income from real estate business – No specific inquiry/verification regarding the closing stock was done by the assessing officer. The assessee’s balance sheet as on 31.03.2017, showing the inventories at Rs. 87,24,54,588.15 as work-in-progress as against the inventories on 31.03.2016 at Rs.81,76,21,981.04 as work-in-progress, was neither inquired nor verified. (iii). Huge amount of Rs.222,22,17,252.49 as advance outstanding from customers - Assessing Officer failed to make further inquiry due to assessee’s improper reply, specifically with respect to address, PAN, Bank Account details and confirmed copy of Account from the persons from whom the advances has been claimed. (iv). Advance given by the Assessee Company – AO failed to make inquiry in respect of details of the 25 parties, such as Bank Account details, and confirmed copy of Account etc. (v). Unsecured Loan – Assessing Officer failed to inquire in respect of Assessee’s balance sheet, as assessee denied from taking any unsecured loan in its reply dated 06.11.2019, whereas according to ledger account, Shri Anil Agrawal (Director), was given interest amounting to Rs. 10,984.83/- on unsecured loan. (vi). Payments to related parties towards salaries, interest, rent, royalties etc. – Assessing Officer made no further inquiry in respect of details of 21 parties, as the 3 | P a g e payment of Rs. 10,8,06,314/- has not been compared to the market rate or other comparable cases.
(vii). List of possessions and copies of Sale Deeds - Assessing officer failed to make further inquiry in respect of actual total number or list of possessions and sale deeds.
………………………….”
After considering assessee’s partial reply dated 26.03.2022 and final reply dated 29.03.2022, Ld. PCIT was not satisfied with assessee’s response and passed the impugned order dated 31.03.2022
Aggrieved, Assessee has preferred this appeal on the following grounds:-
“1. “That the Ld. PCIT-
1. 1. Agra has erred in law as well as on facts and circumstances of the case in exercising his jurisdiction u/s 263 of the Income Tax Act 1961.
2. That the legal position and facts of the case has not been properly considered by Ld. PCIT-1, Agra. Thus, cancellation of assessment u/s 143(3) and direction for fresh assessment is wholly unjustified and out-of jurisdiction.
3. That he further erred _in holding that the order passed by the assessing officer is erroneous and prejudicial to the interest of Revenue while the assessing officer had made the detailed scrutiny and considered all replies filed by Assessee as is evidenced from the note sheet of assessing officer and queries raised by him and replies filed by assessee during assessment.
4. That he further erred in not considering the submissions and documents put forward by assessee before him objecting the exercise of jurisdiction u/s 263 and has rejected Assessee's point wise detailed explanations against each issue raised in the notice u/s 263 by passing 4 | P a g e order very summarily with a single line remark “the reply of the Assessee has been found to be grossly unsatisfactory, not responding to the queries raised in the notices issued." [Vide Para 5 of sec 263 Order]. Such type of single line remark in the order indicates that the order is passed in a mechanical way without "Application of mind".
That he further erred in law by not providing us the sufficient opportunity to submit our replies and explanations against the notices issued u/s 263. The Sec 263 notice was dated 24.03.2022 but it was posted on 25.03.2022 and the compliance date was fixed at 26.03.2022. When adjournment request was filed with partial reply on 26.03.2022, the next date fixed was 29.03.2022 at 02:00 p.m. and the notice for the same was dated 28.03.2022 but was emailed on 28.03.2022 at 23:28 p.m. which is effectively 29.03.2022. Hence, Assessee was required to submit the response within 4 hours (if measured from office opening time) which is very short period and is almost next to impossible. Even then, the assessee managed to file the detailed and point wise reply.
That the order is quite arbitrary and proceedings of sec 263 is liable to be quashed.
That the approach of PCIT-I, Agra is totally illegal, perverse and is bad in law and is against the facts and evidences on record.
That for the reasons discussed above and to be argued at the time of hearing, appellant pray for relief. ………………….”
Perused records. Heard Ld. Representative for the assessee and Ld. CIT (DR) for the revenue.
At the very outset, we notice that on the basis of all the grounds raised under appeal, assessee has mainly raised two grievances against the impugned order dated 31.03.2022 passed u/s. 263 of the Act. One is 5 | P a g e that very short period was provided to the assessee after issuance of notice dated 24.03.2022, whereof, the assessee was compelled to file part of reply dated 26.03.2022 and remaining full reply dated 29.03.2022 in response to the notice issued by learned PCIT under the revisional powers u/s. 263 of the Act. The assessee, however, managed to file the point-wise detailed reply despite such a short period. Secondly, assessee has put much emphasis on the fact that the impugned order is non- speaking passed in a mechanical manner without application of mind.
Per contra, Ld. CIT(DR) has submitted that since the assessee submitted full reply before Ld. PCIT, hence, the principles of natural justice have been complied. Further as regards the impugned order being non-speaking, Ld. CIT(DR) submitted, the matter may be restored to Ld.
PCIT with appropriate directions.
It is worthy to refer the main/relevant/operating part of the impugned order, which is as under :
“………………………………..
In response to the above Notice u/s 263, the Assessee submitted his partial reply letter dated 26.03.2022 and requested for adjournment which was granted and the case was listed for hearing on 29.03.2022 The assessee furnished another reply on 29.03.2022, both the replies filed by the Assessee have been considered.
The Assessee was issued Notice under Section 263 on 29.03.2022, which was duly served. In response, the Assessee has submitted its reply as above. The same was duly examined. Based on examination of the submission of the Assessee, facts of the 6 | P a g e
case, documentary evidences produced, past assessment orders and material information available, the reply of the Assessee has been found to be grossly unsatisfactory, not responding to the queries raised in the notice issued. I have carefully examined the material available on the record and find that the Order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue and hence suitable order under section 263 is to be passed. In view of the COVID pandemic and resultant economic and health hardships being faced by a lot of persons, considerate view is being taken in this case, despite the total non-compliance in proceedings u/s 263 of Income-tax Act, 1961, where the scope of actions include not just that of cancelling the assessment and directing a fresh assessment, but also modifying the assessment and even passing an Order enhancing the assessment. After careful consideration of the material available on the record, it is found that the Order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, therefore the Assessment Order passed u/s 143(3) dated 16.12.2019 by the Assessing Officer, i.e., DCIT. Circle 2(1)(1). Agra is hereby cancelled, with the directions to the Assessing Officer to pass a fresh order, de novo, and after affording reasonable opportunity of being heard to the Assessее.”
We notice that assessee has filed copy of his partial reply dated 26.03.2022, vide pages (14 to 17) and copy of full reply dated 29.03.2022, vide pages (18-32) of assessee’s paper book, whichare said to have been submitted before PCIT-1, Agra. The assessee, vide partial reply dated 26.03.2022, submitted his explanation before ld. PCIT in respect of the unsecured loan stated in para 3(v) above. The assessee, vide, remaining full reply dated 29.03.2022, submitted point-wise detailed response/explanation for rest of the queries raised by the Ld. PCIT-1, Agra in the notice u/s. 263 of the Act. Assessee’s replies/explanations do 7 | P a g e not find any place in the impugned order. Ld. PCIT, while passing revisional order u/s. 263 of the Act, has simply observed that assessee’s reply and documentary evidence and the material information available at his disposal, were examined and found grossly unsatisfactory without making any point-wise discussion with reference to assessee’s specific point-wise response. The impugned order is unreasoned and non- speaking.
It is an established principle of law that an order passed by a quasi judicial authority has to be speaking and reasoned one. The reason is the soul of an order passed even by a quasi judicial authority. The impugned order dated 31.03.2022 passed by the Ld. PCIT-1, Agra is cryptic and perfunctory, non-speaking and unreasoned. The impugned order does not demonstrate any application of mind. It is desirable that even administrative orders should be supported by reasons (State of Himanchal Pradesh v. Mustaq Ahmed, 2007 (58) ACC 382 (SC). The orders being supported by reason is a sign of good governance. Failure to give reasons amounts to denial of justice (State of Rajasthan vs. Rohitas & Ors, 2008 (61) ACC 678 (SC). The reason is the life of law. It is that filament that injects soul to the judgment. Absence of analysis not only evinces non-application of mind but mummifies the core spirit of the order.
(U. Manjunath Rao v. U Chandrashekhar, 2017 (6) Supreme 19). 8 | P a g e
In M/s. Kranti Associates Pvt. Ltd. &Anr. v. Masood Ahmed Khan & Ors., (2010) 9 SCC 496, Hon’ble Supreme Court, while dealing with the requirement of passing a reasoned order by an authority whether administrative, quasi judicial or judicial has, vide para 51 laid down the following propositions :
“a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially. b. A quasi-judicial authority must record reasons in support of its conclusions. c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well. d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power. e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies. g. Reasons facilitate the process of judicial review by superior Courts. h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice. i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been 9 | P a g e objectively considered. This is important for sustaining the litigants' faith in the justice delivery system. j. Insistence on reason is a requirement for both judicial accountability and transparency. k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism. l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber-stamp reasons' is not to be equated with a valid decision making process. m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737). n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions". o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process".
In view of the aforesaid legal position, the impugned order dated 31.03.2022 passed by Ld. PCIT-1, Agra cannot at all be said to be an order passed by a quasi judicial authority in the eye of law, as the impugned order dated 31.03.2022 is non speaking and unreasoned. That 10 | P a g e apart, learned PCIT has very hurriedly initiated the proceedings u/s. 263 of the Act by issuance of notice dated 24.03.2022, seeking assessee’s response by 26.03.2022 and lastly by 29.03.2022. It appears that learned PCIT has hurriedly passed this order due to the fact that the period of two years from the end of financial year, in which the order dated 16.12.2019, sought to be revised, was expiring on 31.03.2022 as per section 263(2) of the Act. It is often said that ‘the justice hurried is justice buried’. The impugned order dated 31.03.2022 passed u/s. 263 of the Act being unreasoned and non-speaking under law, cannot be sustained. The impugned order dated 31.03.2022 passed u/s. 263 of the Act is, accordingly, set aside. The matter is restored back to the file of ld. PCIT for passing ‘speaking’ and ‘reasoned’ order after taking assessee’s point- wise responses dated 26.03.2022 and 29.03.2022 into consideration.
Needless to say that learned PCIT shall ensure sufficient opportunity of hearing to the assessee before passing the order afresh. The appeal is thus liable to be allowed for statistical purposes.
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open court on 27.10.2025.
Sd/- Sd/- (S. RIFAUR RAHMAN) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27.10.2025 *aks/- 11 | P a g e