Wtax/638/2022 Of M/S M.l. Chains v. The Pr. Commissioner Of Income Tax - 1 And Another

Court No. - 5 Neutral Citation No. - 2023:AHC:163882RESERVED Case :- WRIT TAX No. - 638 of 2022 Petitioner :- M/S M.L. ChainsRespondent :- The Pr. Commissioner Of Income Tax - 1 and anotherCounsel for Petitioner :- Amit MahajanCounsel for Respondent :- Gaurav Mahajan,Manu Ghildyal HON'BLE PIYUSH AGRAWAL,J. 1.Heard Shri Amit Mahajan, learned counsel for the petitioner andShri Manu Ghildyal, learned counsel for the respondents. Shri Manu Ghildyal, learned counsel for the respondents. 2.The instant writ petition has been filed challenging the order dated31.03.2022 passed by the respondent no. 1 cancelling theassessment order dated 22.12.2019 being erroneous in so far as itis prejudicial to the interest of the Revenue.31.03.2022 passed by the respondent no. 1 cancelling theassessment order dated 22.12.2019 being erroneous in so far as itis prejudicial to the interest of the Revenue. 3.The brief facts of the case are that the petitioner deals in thebusiness of gold bars and gold ornaments. On 27.02.2019, anotice under section 142(1) of the Income Tax Act was issued tothe petitioner. Thereafter, on 23.08.2019, a show cause noticeunder section 272-A(1)(d) of the Income Tax Act was issued. Thereafter, the petitioner, through its representative, appeared andsubmitted relevant documents before the authority and therespondent no. 2, after considering all the details, completed theassessment under section 143(3) of the Income Tax Act on a totalreturn income of Rs. 53,91,630/-. On 27.03.2022, a notice undersection 263 of the Act was issued to the petitioner by therespondent no. 1 on the ground that the income tax return for theAssessment Year 2017-18 was e-filed on 28.10.2017 declaringtotal income of Rs. 53,91,630/- and the case of the petitioner wasselected for scrutiny under Computer Aided Scrutiny Selection(CASS). Thereafter, by the impugned order dated 31.03.2022, thebusiness of gold bars and gold ornaments. On 27.02.2019, anotice under section 142(1) of the Income Tax Act was issued tothe petitioner. Thereafter, on 23.08.2019, a show cause noticeunder section 272-A(1)(d) of the Income Tax Act was issued. Thereafter, the petitioner, through its representative, appeared andsubmitted relevant documents before the authority and therespondent no. 2, after considering all the details, completed theassessment under section 143(3) of the Income Tax Act on a totalreturn income of Rs. 53,91,630/-. On 27.03.2022, a notice undersection 263 of the Act was issued to the petitioner by therespondent no. 1 on the ground that the income tax return for theAssessment Year 2017-18 was e-filed on 28.10.2017 declaringtotal income of Rs. 53,91,630/- and the case of the petitioner wasselected for scrutiny under Computer Aided Scrutiny Selection(CASS). Thereafter, by the impugned order dated 31.03.2022, the respondent no. 1 has cancelled the assessment order dated22.12.2019 passed by the respondent no. 2 holding that the orderpassed by the Assessing Officer is erroneous in so far as it isprejudicial to the interest of the Revenue and directed therespondent no. 2 to pass a fresh order. Hence, this petition. respondent no. 1 has cancelled the assessment order dated22.12.2019 passed by the respondent no. 2 holding that the orderpassed by the Assessing Officer is erroneous in so far as it isprejudicial to the interest of the Revenue and directed therespondent no. 2 to pass a fresh order. Hence, this petition. 4.Learned counsel for the petitioner submits that the impugnedproceedings are bad in law as the same have been initiated on thechange of opinion. He further submits that the respondent no. 1,without giving any opportunity of hearing to the assessee, haspassed the impugned order. He further submits that no inquiry ascontemplated under section 263 of the Income Tax Act wasconducted by the respondent no. 1 before passing the impugnedorder and the inquiry, if any, was conducted behind the back ofthe petitioner without any opportunity. proceedings are bad in law as the same have been initiated on thechange of opinion. He further submits that the respondent no. 1,without giving any opportunity of hearing to the assessee, haspassed the impugned order. He further submits that no inquiry ascontemplated under section 263 of the Income Tax Act wasconducted by the respondent no. 1 before passing the impugnedorder and the inquiry, if any, was conducted behind the back ofthe petitioner without any opportunity. 5.He further submits that the Department maintains online ordersheet. The signature of the Advocate shown in the manual orderorder sheet dated 30.03.2022 (Annexure No. CA-8) is entirelydifferent from the signature in the adjournment application(Annexure No. 5 to the writ petition), on the basis of which theDepartment is claiming that the petitioner's Advocate appeared on30.03.2022. sheet. The signature of the Advocate shown in the manual orderorder sheet dated 30.03.2022 (Annexure No. CA-8) is entirelydifferent from the signature in the adjournment application(Annexure No. 5 to the writ petition), on the basis of which theDepartment is claiming that the petitioner's Advocate appeared on30.03.2022. 6.He further submits that in 2[nd] proviso to section 263 of the IncomeTax Act, certain conditions have been enumerated for passing anorder under section 263 of the Income Tax Act, but none of suchconditions has been fulfilled before passing the impugned order.In the impugned order, no finding has been recorded as to how theoriginal order is prejudicial to the interest of the Revenue. Tax Act, certain conditions have been enumerated for passing anorder under section 263 of the Income Tax Act, but none of suchconditions has been fulfilled before passing the impugned order.In the impugned order, no finding has been recorded as to how theoriginal order is prejudicial to the interest of the Revenue. 7.He further submits that the notice under section 263 of the IncomeTax Act was issued on 27.03.2022, which was uploaded on thewebsite on 28.03.2022. The notice of the same was received bythe petitioner in the morning, i.e., the date fixed for submittingTax Act was issued on 27.03.2022, which was uploaded on thewebsite on 28.03.2022. The notice of the same was received bythe petitioner in the morning, i.e., the date fixed for submitting reply. Therefore, the petitioner moved an adjournmentapplication praying for one week's time for submitting reply, butwithout considering the adjournment application, the impugnedorder has been passed on 31.03.2022; wherein, paragraph nos. 4& 5 are self-contradictory. 7.He further submits that the notice under section 263 of the IncomeTax Act was issued on 27.03.2022, which was uploaded on thewebsite on 28.03.2022. The notice of the same was received bythe petitioner in the morning, i.e., the date fixed for submittingTax Act was issued on 27.03.2022, which was uploaded on thewebsite on 28.03.2022. The notice of the same was received bythe petitioner in the morning, i.e., the date fixed for submitting reply. Therefore, the petitioner moved an adjournmentapplication praying for one week's time for submitting reply, butwithout considering the adjournment application, the impugnedorder has been passed on 31.03.2022; wherein, paragraph nos. 4& 5 are self-contradictory. 8.Learned counsel for the petitioner further submits that therespondent maintains electronic order sheet (Annexure No. CA –2); wherein, no date was fixed for 30.03.2022 and without therebeing any date fixed for 30.03.2022, assertion had been made bythe respondent that the counsel appeared on 30.03.2022, that tooon a manual order sheet cannot be accepted. He further submitsthat the respondent has not brought on record any material toshow that on the adjournment application of the petitioner dated29.03.2022, the date was fixed for 30.03.2022. He furthersubmits that the impugned order has not been passed on29.03.2022, the date which was fixed no where refers that the nextdate is fixed for 30.03.2022 or 31.03.2022, nor it refers that thematter is adjourned for 31.03.2022 and therefore, the impugnedorder has been passed in gross violation of the principles ofnatural justice. He prays for allowing the writ petition. 9. Per contra, learned Standing Counsel for the Department supportsthe impugned order by submitting that full opportunity was givento the petitioner and the notice was duly served and thereafter, thepetitioner submitted its reply and after considering the reply, theimpugned order has been passed. He further submits that on thedate fixed, the reply was not submitted, but on the subsequentdate the reply was submitted and after considering the same, theimpugned order has been passed. In support of his contention, hehas relied upon the manual order sheet maintained by theDepartment (Anneuxre No. CA – 8), where the signature of thecounsel of the petitioner figures. He further submits that since theassessment order dated 22.12.2019 was prejudicial to the interest of the Revenue, therefore, the proceedings have rightly beeninitiated under section 263 of the Income Tax Act and theimpugned order has rightly been passed. He prays for dismissalof the writ petition. 10.After hearing the learned counsel for the parties, the Court hasperused the record. perused the record. of the Revenue, therefore, the proceedings have rightly beeninitiated under section 263 of the Income Tax Act and theimpugned order has rightly been passed. He prays for dismissalof the writ petition. 10.After hearing the learned counsel for the parties, the Court hasperused the record. perused the record. 11.Admittedly, the notice under section 263 of the Income Tax Actdated 27.03.2022 was prepared and the same was got approvedfor uploading on the portal. The Office of the respondent sent theinformation to the petitioner on its portal on 28.03.2022. Thepetitioner came to know about the notice on 29.03.2022 in themorning and immediately thereafter, moved an adjournmentapplication on 29.03.2022 itself. On the adjournment application,e-proceeding response acknowledgment no. 480299081300322was generated (Annexure No. – 6 to the writ petition). The factthat the adjournment was moved has not been denied by therespondent. The order sheet of the proceedings under section 263of the Income Tax Act have been filed. The copy of the computergenerated order sheet has been brought on record as AnnexureNo. CA – 2 to the counter affidavit. On perusal of the same showsthat no order was passed on 29.03.2022 either allowing theadjournment application or rejecting the same or fixing any otherdate. The order sheet only shows that an adjournment applicationwas moved on 30.03.2022. Further, the order sheet shows that on31.03.2022, the order has been passed. The impugned order doesnot reveal the fact that what happened on 29.03.2022, whether thedate was fixed for 30.03.2022 or 31.03.2022 or the judgement wasreserved on 29.03.2022. The impugned order is silent about thisfact and the manual order sheet has been brought on record asAnnexure No. CA – 8 to the counter affidavit, where handwrittenorder has been shown that the counsel for the petitioner appearedand his signature has been obtained thereon. No explanation hasdated 27.03.2022 was prepared and the same was got approvedfor uploading on the portal. The Office of the respondent sent theinformation to the petitioner on its portal on 28.03.2022. Thepetitioner came to know about the notice on 29.03.2022 in themorning and immediately thereafter, moved an adjournmentapplication on 29.03.2022 itself. On the adjournment application,e-proceeding response acknowledgment no. 480299081300322was generated (Annexure No. – 6 to the writ petition). The factthat the adjournment was moved has not been denied by therespondent. The order sheet of the proceedings under section 263of the Income Tax Act have been filed. The copy of the computergenerated order sheet has been brought on record as AnnexureNo. CA – 2 to the counter affidavit. On perusal of the same showsthat no order was passed on 29.03.2022 either allowing theadjournment application or rejecting the same or fixing any otherdate. The order sheet only shows that an adjournment applicationwas moved on 30.03.2022. Further, the order sheet shows that on31.03.2022, the order has been passed. The impugned order doesnot reveal the fact that what happened on 29.03.2022, whether thedate was fixed for 30.03.2022 or 31.03.2022 or the judgement wasreserved on 29.03.2022. The impugned order is silent about thisfact and the manual order sheet has been brought on record asAnnexure No. CA – 8 to the counter affidavit, where handwrittenorder has been shown that the counsel for the petitioner appearedand his signature has been obtained thereon. No explanation has been submitted in the impugned order or in the counter affidavitas to why and under what circumstances as well as under whichlaw, two different order sheets are being maintained. 12. been submitted in the impugned order or in the counter affidavitas to why and under what circumstances as well as under whichlaw, two different order sheets are being maintained. 12. Learned counsel for the petitioner has specifically denied thesignature on the manual order sheet and has relied on thesignature on the adjournment application (Annexure No. 5 to thewrit petition), on perusal of which creates a doubt on two count;firstly, the signature are different and secondly, there was nooccasion for adopting two different modes of maintaining ordersheet; one computer generated order sheet and other manual ordersheet. This aspect creates a serious doubt about the functioing ofthe respondent – authority. Further, in paragraph no. 4 of theimpugned order, following finding has been made:- “In response to the above Noitce u/s 263, Shri RajendraSharma, Adv. Counsel of the assess filed onlyadjournment application on dated 29.03.2022requestging that one week time kindly be allowed to theassessee but did not filed reply to the Notice u/s 263 ofthe Income Tax Act, 1961. However, in response to theabove Notice u/s 263 no reply has been submitted by theassessee to refute the findings as communicated videNotice u/s 263 having DIN & Notice No.ITBA/REV/M/REV1/2021-22/1041859754(1)dated27.03.2022”Sharma, Adv. Counsel of the assess filed onlyadjournment application on dated 29.03.2022requestging that one week time kindly be allowed to theassessee but did not filed reply to the Notice u/s 263 ofthe Income Tax Act, 1961. However, in response to theabove Notice u/s 263 no reply has been submitted by theassessee to refute the findings as communicated videNotice u/s 263 having DIN & Notice No.ITBA/REV/M/REV1/2021-22/1041859754(1)dated27.03.2022” 13.On perusal of the paragraph no. 4 of the impugned order, it clearlyshows that the assessee has not submitted any reply in response tothe notice under section 263 of the Income Tax Act dated27.03.2022. shows that the assessee has not submitted any reply in response tothe notice under section 263 of the Income Tax Act dated27.03.2022. 14.Further, in paragraph no. 5 of the impugned order, followingfinding has been recorded:-finding has been recorded:- “5. The Assessee was issued Notice under Section 263 on27.03.2022, which was dully served. In response, theAssessee has submitted its reply. The same was dulyexamined. Based on examination of the submission of theAssessee, facts of the case, documentary evidencesproduced, past assessment orders and materialinformation available, the reply of the Assessee has been found to be grossly unsatisfactory, not responding to thequeries raised in the notice issued.” 15.Perusal of paragraph no. 5 of the impugned order shows that theassessee has submitted its reply after due examination of the sameand material on record, the impugned order has been passed. assessee has submitted its reply after due examination of the sameand material on record, the impugned order has been passed. “5. The Assessee was issued Notice under Section 263 on27.03.2022, which was dully served. In response, theAssessee has submitted its reply. The same was dulyexamined. Based on examination of the submission of theAssessee, facts of the case, documentary evidencesproduced, past assessment orders and materialinformation available, the reply of the Assessee has been found to be grossly unsatisfactory, not responding to thequeries raised in the notice issued.” 15.Perusal of paragraph no. 5 of the impugned order shows that theassessee has submitted its reply after due examination of the sameand material on record, the impugned order has been passed. assessee has submitted its reply after due examination of the sameand material on record, the impugned order has been passed. 16.From the perusal of the aforesaid paragraph nos. 4 & 5 of theimpugned order, it clearly reveals that the same are self-contradictory. The respondent – authority is trying to blow hot &cold at the same time. Whereas, in paragraph no. 4 of theimpugned order, it has been mentioned that no reply has beensubmitted by the petitioner, to the contrary, in paragraph no. 5 ofthe impugned order, it has been mentioned that the assessee hassubmitted its reply. Neither in the impugned order, nor in thecounter affidavit filed before this Court, any reference of the replysubmitted by the assessee, as alleged in the paragraph no. 5 of theimpugned, has been made. impugned order, it clearly reveals that the same are self-contradictory. The respondent – authority is trying to blow hot &cold at the same time. Whereas, in paragraph no. 4 of theimpugned order, it has been mentioned that no reply has beensubmitted by the petitioner, to the contrary, in paragraph no. 5 ofthe impugned order, it has been mentioned that the assessee hassubmitted its reply. Neither in the impugned order, nor in thecounter affidavit filed before this Court, any reference of the replysubmitted by the assessee, as alleged in the paragraph no. 5 of theimpugned, has been made. 17.On the pointed query to the counsel for the respondent as towhether reply, as referred to in paragraph no. 5 of the impugnedorder, has been submitted, he categorically refers Annexure No.CA – 5 to the counter affidavit and submits that the reply has beensubmitted by the assessee in the proceedings under section 142(1)of the Income Tax Act, which was considered. The saidsubmission, on the face of it, has no legs to stand on, as the instantproceedings and the impugned order have been passed pursuant tothe notice under section 263 of the Income Tax Act. Once therespondent – authority himself records that no response has beenfiled in pursuance of the notice under section 263 of the IncomeTax Act dated 27.03.2022, a contrary finding, as recorded inparagraph no. 5 of the impugned order, cannot be accepted in theeyes of law. whether reply, as referred to in paragraph no. 5 of the impugnedorder, has been submitted, he categorically refers Annexure No.CA – 5 to the counter affidavit and submits that the reply has beensubmitted by the assessee in the proceedings under section 142(1)of the Income Tax Act, which was considered. The saidsubmission, on the face of it, has no legs to stand on, as the instantproceedings and the impugned order have been passed pursuant tothe notice under section 263 of the Income Tax Act. Once therespondent – authority himself records that no response has beenfiled in pursuance of the notice under section 263 of the IncomeTax Act dated 27.03.2022, a contrary finding, as recorded inparagraph no. 5 of the impugned order, cannot be accepted in theeyes of law. 18.Further, the notice under section 263 dated 27.03.2022 wasprepared and uploaded/sent on 28.03.2022 and the same wasprepared and uploaded/sent on 28.03.2022 and the same was received on the date fixed, i.e., 29.03.2022 and the impugnedorder dated 31.03.2022 has been passed in gross violation of theprinciples of natural justice. 18.Further, the notice under section 263 dated 27.03.2022 wasprepared and uploaded/sent on 28.03.2022 and the same wasprepared and uploaded/sent on 28.03.2022 and the same was received on the date fixed, i.e., 29.03.2022 and the impugnedorder dated 31.03.2022 has been passed in gross violation of theprinciples of natural justice. 19.Since there is an apparent violation of the principles of naturaljustice, as no opportunity was given to the petitioner fordefending or presenting its case, the impugned order cannot besustained in the eyes of law in view of the law laid down by theApex Court in Whirlpool Corporation v. Registrar of TradeMarks Mumbai [(1998) 8 SCC 1]. justice, as no opportunity was given to the petitioner fordefending or presenting its case, the impugned order cannot besustained in the eyes of law in view of the law laid down by theApex Court in Whirlpool Corporation v. Registrar of TradeMarks Mumbai [(1998) 8 SCC 1]. 20.Further, the impugned order does not refer any finding asenumerated in Explanation – II of section 263 of the Income TaxAct to suggest that the assessment order was prejudicial to theinterest of the Revenue in view of the judgement of the ApexCourt in Malabar Industrial Co. Ltd. Vs. Commissioner ofIncome Tax, (2000) 243 ITR 83 and therefore, on this count also,the impugned order cannot be sustained in the eyes of law. enumerated in Explanation – II of section 263 of the Income TaxAct to suggest that the assessment order was prejudicial to theinterest of the Revenue in view of the judgement of the ApexCourt in Malabar Industrial Co. Ltd. Vs. Commissioner ofIncome Tax, (2000) 243 ITR 83 and therefore, on this count also,the impugned order cannot be sustained in the eyes of law. 21.In view of the above, the impugned order dated 31.03.2022passed by the respondent no. 1 is hereby quashed.passed by the respondent no. 1 is hereby quashed. 22.The writ petition is allowed with a cost of Rs. 10,000/-, whichshall be deposited by the respondent concerned with theAllahabad High Court Legal Services Committee, Allahabadwithin a period of one month from today. shall be deposited by the respondent concerned with theAllahabad High Court Legal Services Committee, Allahabadwithin a period of one month from today. 23.The respondents are at liberty to recover the cost from the erringOfficer. Officer. 24.List the matter after three months in Chamber, by which time anaffidavit of compliance of deposit of cost shall be filed. affidavit of compliance of deposit of cost shall be filed. Order Date :-16/08/2023Amit Mishra