MODERN INSULATORS LIMITED,ABU ROAD vs. DY. COMMISSIONER OF INCOME -TAX CIRCLE 6 JAIPUR, JAIPUR
Facts
The appeal was filed by Modern Insulators Ltd. against the order of the CIT(A) for AY 2015-16. The assessee claimed set off of losses from an amalgamated sick company, M/s Modern Terry Towels Ltd. The CIT(A) disallowed this claim, citing lack of consent from the CBDT and principles of natural justice.
Held
The Tribunal noted that the CIT(A) had not provided the assessee with an adequate opportunity to be heard or to present their case. The ITAT held that the principles of natural justice were violated and that the matter needed to be re-adjudicated.
Key Issues
Whether the CIT(A) erred in denying the set-off of losses without providing an adequate opportunity of being heard and whether the principles of natural justice were followed.
Sections Cited
Section 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES, “B” JAIPUR
Before: SH. SANDEP GOSAIN & DR. M. L. MEENA
Per Dr. M. L. Meena, AM:
The captioned appeal is filed by the assessee against the order of the
Ld. Commissioner of Income Tax Appeal-4, Jaipur [hereinafter referred to
2 I.T.A. No. 713/JPR/2023 Assessment Year: 2015-16 as “the CIT appeal”)] dated 26.09.2023 in respect of Assessment Year
2015-16.
The appellant has taken the following grounds of appeal:
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.
2 That the learned CIT-A has erred in holding that the issue regarding consent of Govt. of India /CBDT is not adjudicated earlier in case of the appellant and if the consent / approval is not granted, it would disentitle the appellant from claiming the losses of M/s Modern Terry Towels Ltd. which was amalgamated with assessee company with effect from 01.01.2008. The said finding is illegal & unjustified.
3 That the learned CIT-'A' has erred in not following the orders of ITAT Jaipur Bench in assessee's case for earlier years and not allowing benefit of set off of current year's loss & brought forward business losses & depreciation of M/s Modern Terry Towels Ltd. in spite of the fact that amalgamation of M/s Modern Terry Towel Ltd. with assessee was duly approved by BIFR. The action of learned CIT'A' in not allowing benefit of set off of current year's loss & brought forward business losses & depreciation of M/s Modern Terry Towels Ltd amounting to Rs.11,97,19,742/- is illegal & unjustified.
4 That the learned CIT-'A' has erred in holding that in case, considering the facts and circumstance of the present case, there is no compliance of the principles held in the referred judgement of the Hon 'ble 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 & directing the Assessing Officer to take necessary actions following the judgement of the Hon’able Delhi High Court in WP(C) No.
3 I.T.A. No. 713/JPR/2023 Assessment Year: 2015-16 7592/2009 and in Mewar Sugar Mills Ltd. v. Chairman, Central Board of Direct Taxes & Anr. 1998 VI AD(DELHI) 309 and also as per the CBDT Circulars. The said action is illegal & unjustified.
5 That the learned CIT-IA' has erred in confirming disallowance of Rs. 22,81,168/- towards late deposit of employees contribution to PF. The said action is illegal and unjustified.
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
4 I.T.A. No. 713/JPR/2023 Assessment Year: 2015-16 (Admn.) and the Secretary, CBDT. Hon 'ble Division Bench of Delhi High Court in WP(C) No.6674/2001 titled as Government of India (Department of
Revenue) Vs, Appellate Authority Por Industrial and Financial Reconstruction and Ors. vide its judgment dated 18.032002 has held that before consent is sought, the DRS should quantify the extent of reliefs and
concessions to be provided to a sick industrial company. This view has been reiterated by Hon 'ble Delhi High Court in WP(C) No. 7592/2009.
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
5 I.T.A. No. 713/JPR/2023 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)
6 I.T.A. No. 713/JPR/2023 Assessment Year: 2015-16 and the circulars issued by CBDT to avail the benefit of losses of sick
company.
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. 22. 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
7 I.T.A. No. 713/JPR/2023 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. 24. 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.
8 I.T.A. No. 713/JPR/2023 Assessment Year: 2015-16 10. Before parting with it is pertinent to mention that the bench has not
expressed any view on the merits of the case and therefore, the learned
CIT appeal shall be at liberty to adjudicate the grounds of appeal afresh on
the facts and merits of the case as per law.
In the result, the appeal of the assessee is allowed for statistical
purposes.
Order pronounced in open court as on 10.04.2024
Sd/- Sd/- (Sandeep Gosain) (Dr. M. L. Meena) Judicial Member Accountant Member *DOC* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The ld. CIT (4) The ld. CIT(A) (5) The DR, I.T.A.T., Jaipur (6) Guard File By Order, Asstt. Registrar
9 I.T.A. No. 713/JPR/2023 Assessment Year: 2015-16
Date Initial 1. Draft dictated on 15.02.24 Sr.PS/PS 2. Draft placed before author 03.04.24 Sr.PS/PS 3. Draft proposed & placed before the JM/AM Second Member 4. Draft discussed/approved by JM/AM Second Member 5. Approved Draft comes to the Sr. Sr.PS/PS P.S./P.S. 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order
