Wp/11380/2021 Of Narayanachetty Roja v. Principal Commissioner Of Income Tax

WRIT PETITION No.11380 of 2021(Taken up through video conferencing) ORDER: (Per Hon‟ble Sri Justice Joymalya Bagchi) Heard Mr.P.Rama Sharana Sharma, learned counsel appearing for the petitioner-assessee, as well as Ms.M.Kiranmayee, learned Senior standing counsel appearing for the Income Tax Department. 2. In this writ petition, challenge is made to the impugned order passed under Section 263 of the Income Tax Act, 1961, (for short, „the IT Act‟), by the respondent-Principal Commissioner of Income-Tax (Central), Visakhapatnam, wherein the Principal Commissioner directed as follows: “In view of the above, by the powers vested u/s 263, I therefore, revise the Order and direct the Assessing Officer to redo the assessment after conducting a joint meeting with the Investigation Wing as per the procedure laid down in the Instructions issued by the CBDT. It is clarified here that at the time of reassessment to be done in pursuance of this order the Assessing Officer should address only the issues which have not been taken up in the earlier assessment order so that the joint meeting should be with regard to the issues on which additions were not made though suggested by the investigation wing. There is no need to address the issues which have already been decided by the appellate authorities. Needless to say the assessee should be given proper opportunity of being heard during the assessment proceedings taken up in consequence of this order.” 3. Learned counsel for the petitioner submits that Section 263 of the IT Act provides for a pre-decisional hearing to the assessee prior to invocation of the powers by the Principal Commissioner to direct redoing of assessment. In this case, opportunity of hearing was not extended to the petitioner and the case was disposed of during the 2[nd] wave of the COVID-19 pandemic. Hence, he prays that the matter be remanded for fresh consideration after giving an opportunity of hearing to the petitioner. 4. Ms.M.Kiranmayee, learned counsel, submits that the Principal Commissioner has exercised his jurisdiction lawfully as the Assessing Officer had passed erroneous orders prejudicial to the interest of the revenue by not following the directions issued by the Central Board of Direct Taxes (CBDT), under Section 119 of the IT Act, namely, conducting a joint meeting with the investigating wing prior to assessment. It is further submitted that the assessees would be heard in the course of the assessment proceedings itself. Hence, no prejudice is caused to the assessee in this case. 5. Section 263 of the IT Act empowers the Principal Commissioner to pass orders enhancing, modifying, cancelling or directing fresh assessment, in the event he considers that an order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. However, prior to arriving at such finding, it is incumbent on the Principal Commissioner to give an opportunity of hearing to the assessee concerned. 6. The Principal Commissioner has not extended the opportunity of personal hearing or gave adjournments in the matter, in view of the prevailing pandemic conditions, and proceeded to pass the impugned order to redo the assessment. 7. In this factual backdrop, we are of the opinion that there is a clear infraction of law requiring grant of pre-decisional hearing to the assessee. 8. Ms.M.Kiranmayee, learned counsel, submits that the assessee is not prejudiced as the assessment order waa ex-facie erroneous since the Assessing Officer did not hold joint meeting with investigating wing as per the directions of the CBDT and that the assessee would get an opportunity to represent her case during assessment before the Assessing Officer. 9. We are unable to accept the contentions of Ms.M.Kiranmayee, learned counsel, for the following reasons: 7. In this factual backdrop, we are of the opinion that there is a clear infraction of law requiring grant of pre-decisional hearing to the assessee. 8. Ms.M.Kiranmayee, learned counsel, submits that the assessee is not prejudiced as the assessment order waa ex-facie erroneous since the Assessing Officer did not hold joint meeting with investigating wing as per the directions of the CBDT and that the assessee would get an opportunity to represent her case during assessment before the Assessing Officer. 9. We are unable to accept the contentions of Ms.M.Kiranmayee, learned counsel, for the following reasons: (i) Firstly, a pre-decisional hearing under Section 263 of the IT Act is envisaged before the Principal Commissioner himself before he invokes such jurisdiction and therefore failure to extend such opportunity cannot be substituted by giving an opportunity of hearing before the Assessing Officer in the course of subsequent assessment proceedings after it is re-opened. A post decisional hearing before the Assessment Officer cannot be a surrogate for a pre-decisional hearing being a superior authority i.e., the Principal Commissioner; (ii) Secondly, merits of the case per se cannot denude the right of the assessee to a hearing as envisaged under law. A personal hearing gives opportunity to the assessee to explain all issues which may have an impact on the decision itself. When the law specifically engrafts of an opportunity of being heard, the same must be followed lest such failure would render the order legally fragile on the anvil of breach of principles of natural justice. 10. In this regard it may be appropriate to refer the decision of the Hon‟ble Apex Court in Commissioner of Income Tax, Mumbai v. Amitabh Bachchan[1], wherein it has been observed as follows: “What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on 1 2016 (11) SCC 748 the ground of lack of jurisdiction but on the ground of violation of principles of natural justice.” 11. Hence, we are of the opinion that the procedure followed by the Principal Commissioner in passing the impugned order without giving an opportunity of hearing to the assessee is in clear violation of Section 263 of the IT Act and in breach of principles of natural justice. Thus, on this score alone, we allow this Writ Petition by setting-aside the impugned orders and remand the matters before the Principal Commissioner of Income-Tax (Central), Visakhapatnam, who is directed to give an opportunity of hearing to the assessee and pass appropriate orders in accordance with law. Such exercise shall be concluded within three (3) months from the date of communication of this order and the assessee shall not seek un-necessary adjournment in the matter. We further make it clear that we have not expressed any opinion with regard to merits of the case, which is kept open to be decided by the respondent-Principal Commissioner, independently and, in accordance with law. No order as to costs. As a sequel, Miscellaneous Petitions, if any, pending in this Writ Petition shall stand closed. ______________________________ JOYMALYA BAGCHI, J ______________________________ KONGARA VIJAYA LAKSHMI, J Date: 24-09-2021 Mjl MJL HON'BLE SRI JUSTICE JOYMALYA BAGCHI AND HON'BLE SMT JUSTICE KONGARA VIJAYA LAKSHMI WRIT PETITION No.11380 of 2021(Taken up through video conferencing) DATED : 24-09-2021