SUN STONE INGINEERING INDURIES P.LTD.,JAIPUR vs. PCTI-2, JAIPUR

The learned counsel for the assessee has stated at bar that the additional ground being a legal ground based on the facts available on record. Placing reliance on the judgment of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. (1998) 229 ITR 383 contended that the additional ground being legal in nature be addmited.

The ld. DR has no objection to the additional ground which is interlinked with the ground no. 1 as per the appeal memo accordingly, the additional ground of the assessee is hereby admitted for adjudication on merits. 6. Briefly the facts as per records are that the assessment u/s 143(3) of the Act was completed by the AO dated 05.11.2018 in the case of the assessee. The ld. PCIT has considered the order to be erroneous and prejudicial to the interest 4 Sun Stone Engineering Industries P. Ltd. of the Revenue. In view of the lack of the enquiry on the part of the Assessing Officer in respect of the unsecured loans taken from two persons namely, Sh. C.S. Saboo and Smt. Manju Saboo of Rs. 55,00,000/- and Rs. 6,00,000/- respectively. The ld. PCIT has held that the unsecured loans of Rs. 66,00,000/- obtained by the assessee during the year, has not been verified by the AO by way of obtaining confirmations and conducted enquiry so as to identified by the creditors, their creditworthiness and genuineness of the transactions with reference to the source of money at that time and verification thereof. The PCIT observed that the AO has accepted that these unsecured loans in mechanically manner thereby it has resulted in error in the order passed by the AO. The ld. PCIT has further stated that the assessee has failed to file any explanation in respect of aforesaid unsecured loans in compliance to the show cause notice and accordingly, he has passed the order u/s 263 of the Act based on material available on record ex-parte qua the assessee. The ld. PCIT derived the supports from the following judgments as under:- • Malabar Industrial Limited vs. CIT 243 ITR. • TTK LIG Ltd. vs. ACIT(Mad) 51 DTR 228. • ARvee International vs. Addl. CIT (ITAT, Mum) 101 ITD 495. • CIT vs. Nagesh Knitwears Pvt. Ltd. 345 ITR 135 (Delhi H.C.). • Gee Vee Enterprises v. Additional Commissioner of Income-tax (1975) 99 ITR 375. • CIT vs. Raisons Industries Ltd. 288 ITR 322 (SC). • Seshasayee Paper & Boards Ltd. (2000) 242 ITR 490 (Mad H.C.).

The learned counsel for the assessee has submitted before us that the revisionary powers u/s 263 of the Act could be exercised within two years from 5 Sun Stone Engineering Industries P. Ltd. the end of the financial year in which the assessment was completed in terms of section 263(2). Accordingly, in the presence case, the revision proceedings u/s 263 are becoming time barred on 31/03/2021 and that the revision proceedings were instituted by issue of notice by ld. PCIT (PB 3-4) as late as on 24/03/2021 as it is evident from page 1 of the order of ld. PCIT. The ld. Counsel for the assessee argued that out of the 877 days available for exercising the revisionary powers however, the ld. PCIT has instituted of the revisionary proceeding after mentioned of 870 days lapse, when 7 days were left from completing the revisionary proceedings. He has further submitted that the assessee company on the date of hearing i.e. 26/03.2021 (3:31PM) filed request for adjournment through e-mail at 2:05 on (PB-1) and claimed that the said adjournment was successfully submitted as is evident from the e-mail received by the assessee company from department (PB-2). He has challenged that the ld. PCIT didn’t care to refer to the request of adjournment and in a rush to complete the proceedings with the legal time frame available, passed the order on 31/03/2021. The ld. Counsel for the assessee stated that the observation of ld. PCIT at para no. 7, mentioned that no submission filed by the assessee company is factually incorrect and he passed the order ex-parte qua the assessee. The order is void ab initio and does not deserve a second inning because of the following submission which are reproduced as under:-

The ld. DR supported the order passed by the Pr. CIT u/s 263 of the Act. He submitted before us that mandate u/s 263 of the Act does not provide specific time limit within the period for exercising of revisionary powers u/s 263 of the Act. He argued that institution of the 8 Sun Stone Engineering Industries P. Ltd. revisionary proceedings by way of issuing notice u/s 263 of the Act just before 7 days before completing the revisionary proceedings does not vitiate the valid proceedings undertaken by the ld. AR u/s 263 of the Act and that the assessee has been given enough opportunity of being heard. He emphasized that merely filed an adjournment application through e-mail and requesting 10 days time without given valid reasons for seeking adjournment, amounts to non-compliance and avoiding of the proceedings particularly when battery of leading professional is engaged by the assessee to look after the accounts and legal matter. At the same time, he strongly object to the contention of the assessee in the request to quash the revisionary proceedings in toto by holding the action of the PCIT arbitrary in violation of principles of natural justice. However, the ld. DR has submitted that the assessee’s case may be remanded back to the ld. PCIT to be heard afresh after granting sufficient opportunity of being heard to the assessee on account of the principles of natural justice as above.

We heard both the sides, perused the material on record, impugned order and citations. Admittedly, the PCIT has passed order u/s 263 of the Act exparte qua the assessee. It is not disputed that the assessee company on the date of hearing i.e. 26/03.2021 (3:31PM) filed request for adjournment through e-mail at 2:05 (PB-1) and claimed that the said adjournment was successfully submitted as is evident from the e-mail received by the assessee company from department (PB-2). The ld. Counsel for the assessee contended that the observation of ld. PCIT at para no. 7, mentioned that no submission filed by the assessee company is factually incorrect and he passed the order ex-parte qua the

That the mandate u/s 263 of the Act does not provide specific time limit of period within which the PCIT is required to issue notice under the revisionary proceeding’s u/s 263 of the Act. The Ld. CIT(DR) argued that institution of the revisionary proceedings by way of issuing notice u/s 263 of the Act just before 7 days before completing the revisionary proceedings does not vitiate the valid proceedings undertaken by the ld. AR u/s 263 of the Act and that the assessee has been given enough opportunity of being heard. He emphasized that merely filing an adjournment application through e-mail and requesting 10 days’ time without given valid reasons for seeking adjournment, amounts to non-compliance and avoiding of the proceedings particularly when battery of leading professional is engaged by the assessee to look after the accounts and legal matter. He strongly objected the contention of the assessee to quash the revisionary proceedings in toto by holding the action of the PCIT arbitrary in violation of principles of natural justice.

In view of the principles of natural justice, assessee’s case is required to be remanded back to the ld. PCIT to be heard afresh after granting sufficient opportunity of being heard to the assessee to adjuvate the matter afresh after considering the written submission filed through e-mail and would be filed in the fresh proceedings. However, we are not convinced with the contention of the Ld. AR that the order u/s 10 Sun Stone Engineering Industries P. Ltd. 263 of the act passed ex-parte qua the assessee is void ab initio and does not deserve a second innings in view of principles of natural justice because it was the assessee who failed to file necessary details as required by the ld. PCIT and filing an adjournment application by e- mail at the last hour tantamount to avoiding the proceedings deliberately. The other argument advanced on behalf of the appellant that opportunities were not given to the appellant assessee, before the order passed u/s 263 and hence, merely because the impugned revisionary order was passed prior to the expiration of deadline prescribed for preferring a response, the same would not result in violation of principles of natural justice - is, equally, untenable. The reason is that once the assessee was issued a notice, as required in law, it was obliged to give an opportunity to the petitioner to file its objections. With the issuance of the notice the assessee firmed up its position as to how it wishes to move further in the matter. Notices issued prior to this stage are inquisitorial in nature. These are issued to ferret information and make inquiries with the object to, inter alia, ensure that whether the Assessment order passed by the AO was erroneous or prejudicious to the interest of error within the meaning of provisions of section 263 of the Act. The citation referred by the Ld. AR are distinguishable on peculiar facts of the present case.

In the above view, we are of the considered opinion that it is fit case to be restored to the PCIT to adjudicate the matter afresh after granting adequate opportunity of being heard. The assessee is directed to cooperate in the fresh proceeding before the Ld. PCIT.