MODERN INSULATORS LIMITED,ABU ROAD vs. DY. COMMISSIONER OF INCOME -TAX CIRCLE 6 JAIPUR, JAIPUR

Apropos ground no. the appellant challenged the order of the Ld. CIT (A) that the learned CIT-A has erred in relying upon various cases without providing any opportunity to assessee to give his explanation thereto. The action of the learned CIT-A is against the principles of natural justice and his order deserved to be cancelled.

the ld. CIT appeal while rejecting the claim of the appellant observed that reliefs or concessions to be granted can only be communicated by the Central Government. On behalf of the Central Govemment, it would be the CBDT which would engage either the BIFR or the AAIFR, depending on where the case of the sick industrial company was pending; and as between the two authorities i.e., CBDT and the BIFR or the AAIFR and the CBDT, the nodal agency deputed to coordinate the aspect of grant of financial concessions or financial assistance to be given to a sick industrial company would be Director General of Income Tax (Admn.). He mentioned the judgement of the Hon'ble High Court wherein it was held that it was required upon the BIFR to serve DRS upon Director General of Income Tax

The Ld. CIT(A) further discussed that the appellant has not claimed that the approval has been granted by the CBDT. The appellant has also not applied for approval of the CBDT as the appellant has not submitted anything on the issue. Appellant has in general and vague terms claimed that the approval of the CBDT is nowhere required and the said contention is found to be devoid of merit. The controversy referred in the earlier order of Ld. CIT(A) as referred in the order of Hon’ble ITAT and the appeal filed by the CBDT as referred by the Ld. AO pertain to effective date of arnalgamation. The issue regarding consent of the Govt. of India / CBDT is not adjudicated earlier in the case of the appellant and because of which the appellant has preferred appeal on the issue. There is nothing on record regarding approval by the CBDT. The appellant has also shown complete unawareness of the same and the appellant has challenged this Assessment Year: 2015-16 requirement which indicates that the consent/ approval is not granted which would disentitle the appellant from claiming the losses. In case, considering the facts and circumstances of the present case, there is no compliance of the principles held in the above referred judgements of the Delhi High Court and the circulars issued by CBDT then the benefit of losses of sick company cannot be given to the appellant and the need to restrict the same to protective addition does not arise. Accordingly, the Id. AO is directed to take necessary actions following the judgement of Honble Delhi High Court in in WP(C) No. 7592/2009.

The ld. AR has made multiple arguments before the bench but he could not rebut the observation of the ld. CIT(A) that the issue regarding consent of the Govt. of India / CBDT is not adjudicated earlier in the case of the appellant and because of which the appellant has preferred appeal ; that there was nothing on record regarding approval by the CBDT; that the appellant has also shown complete unawareness of the same and the appellant has challenged this requirement which indicates that the consent/ approval is not granted which would disentitle the appellant from claiming the losses. In our view, the appellant is required to rebut the ration and the principles held in the judgements of the Hon’ble Delhi High Court (Supra)

However, in view of principles of natural justice the CIT(A) ought to have granted sufficient opportunity of being heard to the appellant assessee and issued a show cause notice on rejection of its claim by distinguishing the judgements relied upon in defence for the of the benefit of losses and set off of carry forward of said losses of the sick industry/company.

The Hon’ble Delhi High Court in the case of “Bharat Aluminium Company Ltd. vs. Union of India”, (Supra) has held as under:

This Court is further of the view that a quasi-judicial body must normally grant a personal hearing as no assessee or litigant should get a feeling that he never got an opportunity or was deprived of an opportunity to clarify the doubts of the assessing officer/decision maker. After all confidence and faith of the public in the justness of the decision making process which has serious civil consequences is very important and that too in an authority/forum that is the first point of contact between the assessee and the Income-tax Department. The identity of the assessing officer can be hidden/protected while granting personal hearing by either creating a blank screen or by decreasing the pixel/density/resolution.

Consequently, this Court is of the view that the word "may" in Section 144B(viii) should be read as "must" or "shall" and requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory. THE CLASSIFICATION MADE BY THE RESPONDENTS/REVENUE BY WAY OF A CIRCULAR DATED 23RD NOVEMBER, 2020 IS NOT LEGALLY SUSTAINABLE. AN ASSESSEE HAS A VESTED RIGHT TO PERSONAL HEARING AND THE SAME HAS TO BE GIVEN, IF AN ASSESSEE ASKS FOR IT. 23. The argument of the respondent/Revenue that personal hearing would be allowed only in such cases which involve disputed questions of fact is untenable as cases involving issues of law would also require a personal hearing. This Court is of the view that the Assessment Year: 2015-16 classification made by the respondents/Revenue by way of the Circular dated 23rd November, 2020 is not legally sustainable as the classification between fact and law is not founded on intelligible differentia and the said differentia has no rational relation to the object sought to be achieved by Section 144B of the Act.

Also, if the argument of the respondent/Revenue is accepted, then this Court while hearing an appeal under section 260A (which only involves a substantial question of law) would not be obliged in law to grant a personal hearing to the counsel for the Revenue! 25. Consequently, this Court is of the opinion that an assessee has a vested right to personal hearing and the same has to be given, if an assessee asks for it. The right to personal hearing cannot depend upon the facts of each case.

In the present case, the assessee could have placed evidences either before the AO or the first appellate authority, if he has been provided adequate opportunity of being heard. In view of the principles of natural justice, we consider it deem fit to restore back the matter to the file of the Ld. CIT (A) to adjudicate the matter afresh after considering the written submission and evidences filed on record and may be filed before him during the fresh proceedings after granting sufficient opportunity of being heard to the assesse with a direction that the Ld. CIT(A) shall issue a Show Cause Notice rebutting the contention and distinguishing the case law relied by the appellant and thereafter pass a reasoned order in accordance with law. At the same time the appellant assessee is directed to corporate in the fresh proceedings before the CIT appeal. Accordingly, the matter is remanded back to the file of the learned CIT appeal.

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