R.N. Khemka Enterprises Private Ltd. Vs PCIT (ITAT Delhi)
ITAT Delhi held that a solitary opportunity of one day to respond to show cause notice is in negation of overriding principles of natural justice accordingly revisionary order passed u/s 263 is liable to be quashed and set aside.
Facts-
The assessee filed its ROI claiming bad debt of Rs.2,28,12,685/- as deduction u/s. 36(2) of the Act. The ROI filed by the assessee was selected under scrutiny and specific queries towards claim of deduction were raised by AO vide notices issued u/s. 142(1) of the Act. AO was eventually satisfied with the compliance of the conditions stipulated u/s. 36(1)(vii) r.w. Section 36(2) of the Act and thus assessed the income of the assessee without any adjustment on this score.
Thereafter, the Pr.CIT in exercise of its revisionary powers issued show cause notice dated 23.03.2022 u/s. 263 of the Act requiring the assessee to show cause as to why the impugned assessment order so framed u/s. 143(3) of the Act should not be modified/set aside on the ground that such order is erroneous insofar as prejudicial to the interest of the revenue. It was essentially alleged that assessee is not eligible for deduction towards bad debts u/s. 36(1)(vii) r.w. Section 36(2) of the Act where the debts written off do not arise from business transactions and were not part of the business transaction. The debts were alleged to be loans and advances in the balance sheet unconnected to the business of the assessee.
Post reply from the assessee, the original assessment was set aside and AO was directed to pass a fresh assessment in terms of directions in the revisional order.
Aggrieved by the action of the Pr.CIT, the assessee is in appeal before the Tribunal adjudicating supervisory jurisdiction usurped by the Pr.CIT u/s. 263 of the Act.
Conclusion-
A solitary opportunity of one day was given to the assessee to respond to the show cause notice to the satisfaction of the Pr. CIT. Needless to say, the Pr.CIT was expected to provide reasonable opportunity to the assessee. One day opportunity, by no means, can be said to be any effective opportunity. Such act of the Pr.CIT has virtually incapacitated the assessee to explain its case. Such lackadaisical action of the Pr.CIT is in negation of overriding principles of natural justice inbuilt in the power conferred under Section 263 itself. Needless to say, the opportunity to be given to the assessee must be real and effective, realistic and not mere notional or an empty formality. An opportunity to answer to show cause is not a gift but an absolute right which cannot be bypassed. The revisionary power exercised was in absolute infringement of Section 263 of the Act. We however do not want to expand with this aspect of the matter any further for the reason that the claim of the assessee, in any case, is justifiable on merits as discernible from the record available before the Department. The Assessment order, can not, at least, be labelled as ‘erroneous’ in the circumstances.
