ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2, TRICHY, TRICHY vs. SRINIVASAN CHARITABLE AND EDUCATIONAL TRUST, PERAMBALUR

On the question of adherence to the principles of natural justice. the relevant sequence of dates and events is that a notice under Section 153C was issued on 25.10.2019 in regard to a search conducted in 2017. Unfortunately neither the affidavit filed in support of the writ petitions nor the impugned orders of assessment anywhere mention the date of search and it was only in the course of the submissions made orally that the date of search was noted by me as 07.11.2017. The limitation for completion of assessments would be the 31st of December, 2019. The impugned orders state that centralization of the assessments took place only on 24.09.2019 and pursuant to the centralization, notices under Section 153C were issued on 25.10.2019, leaving barely a period of a little over two months for completion of six search assessments.

The notice under Section 153C called upon the petitioner to file returns within a period of 8 days from service of the notice and the returns have been filed on 07.12.2019, in all cases, beyond the period granted by the respondent. On the same date a questionnaire under Section 142(1) has been issued calling for various particulars in response to which the petitioner has filed replies dated 13.12.2019 furnishing some of the particulars sought. The impugned orders have come to be passed on 30.12.2019 without further reference to the petitioner

The impugned order has come to be passed on 30.12.2019 without further reference to the petitioner. In this case as well, I am of the view that the assessments have certainly been completed in haste. When the search has been completed on 07.04.2017, there was no necessity to have waited till 20.09.2019 for centralization, and issue notices under Section 153C only on 25.10.2019. Any delay on the part of the petitioner in responding to the notices appears insignificant in the face of the enormous delay by the Income Tax Department in taking stock of the search material, centralizing the cases and issuing the notices in time, particularly, since it is their case that the assessment get time barred on 31.12.2020.

The petitioner has, for AY 2015~16 and AY 2016-17, specifically sought more time to make his submissions on the merits of the matter, relating to alleged undisclosed income from quarrying operations and seigniorage fee. The respondent officer has, in making additions as aforesaid, simply ignored this request.

As regards the question of valuation by the investigating officer, Revenue relies on the provision of Section 132(9D) that reads as follows:

The Investigating officer is thus, empowered to refer an issue to valuation even during the process of search. However, such report has to be put to the assessee and his full and complete response sought prior to using the same against him. This has not been done in the present case. Thus, while the reference to valuation is in order, the decision making process is flawed and in violation of the principles of natural justice.

There is no explanation set forth in counter or at the time of hearing to explain why the assessment had been taken up for completion, at the very fag end of limitation and for this reason, I believe I would have been justified, had I annulled the assessments, as a second innings is not to be granted to the department, merely as a matter of rote. However, and solely as a matter of prudence, I set aside the assessments with a direction to the respondent to issue notices afresh, hear the petitioner and pass orders of assessments within a period of eight (8) weeks from today, with sufficient time being given to the petitioner to putforth his submissions on merits.

When these facts were confronted to Id.CIT-DR, he started arguing on merits of the case that these are all these are agreed additions and completion of assessment is just merely a formality. He argued that in any eventuality the matter has to sent back, if the bench desire so, to the file of the CIT(A) because under challenge is the order of CIT(A). At this point, the Id.counsel for the assessee drew our attention to another decision of Hon'ble High Court of madras in the case of V. Tillainatesan vs. ACIT, [2021] 133 taxmann.com 131 wherein the Hon'ble High Court has considered this aspect as to whom the matter has to be sent and who has violated the principles of natural justice. The Hon'ble High Court considered this issue in para 10 & 11 as under:-

The other question, which may arise, is whether the opportunity, which can be afforded to the appellant-assessee by the Appellate Authority, would be sufficient? In this regard, we are guided by the decision of the Hon-ble Supreme Court in Tin Box Company vs. Commissioner of Income-tax reported in [2001] 116 Taxman 491 (SC). In the said decision, the Hon-ble Supreme Court held that opportunity of hearing by the Appellate Authority or the Tribunal or the Court can be of no substitute to that of the opportunity that will be provided by the Assessing Officer, at the first instance.

Thus, we are of the clear view that the assessment order calls for interference. In the result, the Writ Appeal is allowed and the order passed in the Writ Petition is set aside and consequently, the Writ Petition is allowed and the assessment order dated 19.04.2021 is quashed and the matter is remanded to the respondent or the appropriate authority for fresh assessment. The said authority shall provide reasonable opportunity and grant sufficient time to the appellant-assessee to produce all records, that may be required for completing the assessment and thereafter, after inviting additional objections, if any, which the appellant-assessee may desire to submit, the assessment may be done afresh and in accordance with law. No costs. Consequently, connected Miscellaneous Petition is closed.

After hearing rival contentions and going through the facts of the case, first of all we have gone through the communication received from PCIT dated 04.12.2019, wherein PCIT informed assessee that the assessment proceedings is getting time barred on 31.12.2019 and he informed the AO also. Once the PCIT has given his view that assessment is getting time barred on 31.12.2019, the AO was under pressure to complete the scrutiny/ search assessment but actually the time barring was 31.12.2020 in the present assessment years. It means that the Department from the beginning was under wrong notion that the assessments will get time barred by 31.12.2019. From the chronology of events, it is clear that search was conducted in the group cases on 15.02.2018 and notification for centralization with the present PCIT charge was notified only on 15.11.2019 that means the Department took at least 1 year & 9 months and Department was sleeping over search material during the entire period. Thereafter the AO issued notice u/s. 153C of the Act only on 28.11.2019 calling for returns of income to be filed within "7" days. The assessee intimated the PCIT that assessments are getting barred by limitation by 31.12.2020 but PCIT was under wrong notion that the assessments were getting time barred on 31.12.2019 and same was communicated to the AO also by the PCIT. Accordingly the AO issued notice u/s. 142(1) of the Act for calling of returns of income to be filed within "5" days vide notice dated 11.12.2019. Subsequently vide dated 13.12.2019, show cause notice proposing certain additions was issued by the AO. Consequently the assessee filed return of income in response to notice u/s. 153C of the Act on 20.12.2019 i.e., within 30 days of the notice issued on 28.11.2019. The assessee filed objections vide dated 21.12.2019 against the proposed addition by the AO. The AO framed assessment u/s. 144 r.w.s. 153C of the Act vide order dated 25.12.2019. We noted that the AO merely allowed 21 days from the issuance of notice u/s.153C of the Act for calling of return of income till date of finalization of assessment order ex-parte u/s.144r.w.s. 153C of the Act dated 25.12.2019.