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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: SHRI SANJAY ARORA, AM & SHRI ABY T. VARKEY, JM
O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee company against the order of the Ld. PCIT, Thiruvananthapuram dated 24.03.2022 for AY. 2012-13 for AY 2015-16 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
At the outset, the Ld. AR of the assessee drew our attention to the additional grounds of appeal
preferred before us which reads as under: -
1. Without prejudice to all the above grounds, it is urged that the Principal Commissioner of Income Tax, Trivandrum ought have given sufficient and reasonable opportunities for personal hearing before passing an order under sec. 263 dated 24.03.2020 for the assessment year 2015-16 thereby depriving the appellant from presenting the case effectively and A.Ys. 2015-16 Favourite Construction Pvt. Ltd. properly. This is against the Principle of Natural justice and hence the order may be set aside for fresh disposal in accordance with law.”
3. Assailing the action of Ld. CIT(A), the Ld. AR, Shri D. S.Sreekumaran, Senior Advocate submits that even though he appeared before the Ld. PCIT on 14.02.2020 pursuant to the notice issued by the Ld. PCIT (which facts has been acknowledged by the Ld. PCIT in his impugned order), Ld. PCIT was not available in his office. And despite him waiting for him, he couldn’t meet him and therefore was unable to present the objection against the proposed revisional action u/s 263 of the Act. According to the Ld. AR, since there was no other alternative, he filed the written submission. But that was also not considered in its entirety, which omission on the part of the Ld. PCIT, according to the Ld. AR has resulted in the Ld. PCIT passing the erroneous impugned order. According to the Ld. AR, the issue that has been racked up by the Ld. PCIT u/s 263 of the Act was regarding interest free advance given by assessee to its sister concern/subsidiary company. According to the Ld. AR, the interest free advances/loan had been given in earlier years and there was no amount given as loan/advance in the relevant year under consideration i.e. AY. 2015- 16. According to the Ld. AR, even though the assessment proceedings for relevant year i.e. AY 2015-16 does not find mention about these facts while allowing the interest expenditure claimed by the assessee (in respect of advances given to the sister concern in the earlier years), that was due to the fact that first of all the AO had verified the facts relating to the interest expenditure claimed by assessee before allowing
A.Ys. 2015-16 Favourite Construction Pvt. Ltd. it; and secondly since the AO being the same Assessing Officer for the earlier two assessment years (i.e. AY. 2013-14 & AY. 2014-15) and these assessment years had undergone scrutiny u/s 143(3) of the Act wherein the AO had examined the loans/advances given to both the subsidiary/sister concerns and being satisfied with the justification/explanation given by the assessee about the commercial expediency, the AO taking note of the ratio decidendi of the Hon’ble Supreme Court in the case of SA Builders Vs. CIT (288 ITR 1) (SC) had allowed the interest expenditure of assessee for earlier years. Therefore, according to the Ld. AR, the only fault found by the Ld. PCIT is about the omission on the part of AO not enquiring/verifying about the interest expenditure claimed by assessee, even though advances have been given to two subsidiary companies free of interest. According to Ld PCIT, this omission to enquire makes the action of the AO to be erroneous as well as prejudicial to the revenue. According to the Ld. AR, even though these facts were stated in the written submission while objecting to the exercise of revisional jurisdictional, the Ld. PCIT has not discussed about the aforesaid relevant facts even though it was pleaded in the written submission and he only reproduced a gist of the written submission as acknowledged by him in the impugned order. Referring to the decision of the Hon’ble Supreme Court in the case of Radhasoami Satsang Vs. CIT (1992) 193 ITR 321 (SC), according to the Ld. AR, when the primary facts permeating in the earlier years has not changed, the department/AO ought not to have disturbed the facts on the principle of consistency and for the sake of finality of litigation/proceedings. Therefore, A.Ys. 2015-16 Favourite Construction Pvt. Ltd. according to the Ld. AR, even though he was present at the office of Ld. PCIT as per his direction on 14.02.2020, he was not able to present the aforesaid relevant facts before the Ld. PCIT which resulted in violation of natural justice. And therefore, he pleaded that the action of the Ld. PCIT is bad in law and should be set aside.
Per contra, the Ld. DR submitted that the assessee should not be given a second innings; and even though the Ld. AR could not be personally heard, the written submission was taking into account while passing the impugned order. Therefore, we should not interfere with the impugned order of the Ld. PCIT.
Having heard both the parties after perusal of the records, we note that aforesaid relevant facts stated (supra) are not repeated for the sake of brevity. But we find that on the issue which has been found fault with by Ld PCIT to invoke his revisionary jurisdiction u/s 263 of the Act, the aforesaid facts discussed regarding the earlier years are relevant in the light of Apex Court decision in the case of Radhasoami Satsang (supra) and the fact that the AO of assessee was also the same officer. We note that Ld. AR of the assessee despite attending the hearing before the Ld. PCIT, could not present the case personally before the Ld. PCIT for no fault of his; and the relevant facts stated (supra) have not been considered or dealt with by Ld. PCIT while passing the impugned order. Since the relevant facts stated (supra) has bearing in the action of AO, we are of the opinion that Ld. PCIT ought to have dealt with it, which we find he has not done. So the impugned order of Ld. PCIT suffers from the vice of non-application of mind and there is per-se Violation of Natural Justice. So for the interest of A.Ys. 2015-16 Favourite Construction Pvt. Ltd. justice and fair play, we set aside the impugned order and restore the same back to the file of Ld. PCIT and direct him to de-novo consider the relevant facts and pass order in accordance to law, un-influenced by any observations made by us (supra). Needless to say, assessee to be given an opportunity of hearing before passing the order.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 19/05/2023.